Judge: Christopher K. Lui, Case: 24STCV00165, Date: 2024-08-06 Tentative Ruling
Case Number: 24STCV00165 Hearing Date: August 6, 2024 Dept: 76
Plaintiff landlord alleges that Defendants
owe rent under the Lease, caused damage to the property and took personal property
from the premises that belonged to Plaintiff.
Defendants Living the Dream, New Horizons
Development, Inc., Rudy Malka and Shalom “Shay” Gonzlan demur to the First Amended
Complaint and move to strike portions thereof.
TENTATIVE RULING
Defendants Living the Dream, New
Horizons Development, Inc., Rudy Malka and Shalom “Shay” Gonzlan’s demurrer to the
First Amended Complaint is SUSTAINED with leave to amend as to the first cause of
action and without leave to amend as to the fifth cause of action, and OVERRULED
as to the second, third and fourth causes of action.
The motion to strike is GRANTED with
leave to amend as to ¶ 8 re: Joint enterprise allegations; ¶ 58 (12:1-3) that reads:
“As a direct and proximate result of the conversion of Plaintiff’s furnishings,
Plaintiff has suffered anxiety, worry, mental and emotional distress in a sum to
be determined at time of trial”; Breach of Contract – Prayer No. 2 (14:26) that
reads: “Return and accounting for all personal property placed in the care of LTD.”;
Breach of Contract – Prayer No. 3 (15:1-2) that reads: “Statutory damages up to
$600.00 for LTD’s continued malicious possession of the Property.”
The motion to strike is GRANTED with
leave to amend as to humiliation and anxiety only. As to Conversion – Prayer No.
2 (15:17) that reads: “General damages, including without limitation, for humiliation
and anxiety.”
The motion to strike is DENIED as
to ¶ 9 re: alter ego allegations; ¶ 59 (12:4-9) re: punitive damages; and Conversion
– Prayer No. 3 (15:18) that reads: “For exemplary and punitive damages.
Plaintiff
is given 30 days’ leave to amend where indicated.
ANALYSIS
Demurrer
Request For Judicial
Notice
Demurring Receiver requests that the
Court take judicial notice of the Unlawful Detainer Complaint filed in 23STCV14605,
Lu Chen v. Living the Dream, Inc. is GRANTED per Evid. Code, § 452(d)(court
records).
Meet and Confer
The Declaration of Andrew V. Jablon reflects
that Defendants’ counsel satisfied the meet and confer requirement set forth in
Civ. Proc. Code, § 430.41.
Discussion
Defendants Living the Dream, New Horizons
Development, Inc., Rudy Malka and Shalom “Shay” Gonzlan demur to the First Amended
Complaint.
1. Entire Complaint.
A. Re: Judicial Estoppel.
Defendants argue
that in the unlawful detainer complaint filed on June 23, 2023, the operative Lease
is a written Residential Lease or Month-to-Month Rental Agreement dated March 5,
2021, whereas the instant action alleges that the operative Lease is dated February
15, 2019. Defendant argues that Plaintiff is judicially estopped from relying on
the February 15, 2019 Lease, and not alleging nor attaching the March 5, 2021 Lease.
“ ‘ “Judicial estoppel precludes a party from gaining
an advantage by taking one position, and then seeking a second advantage by taking
an incompatible position. [Citations.] The doctrine's dual goals are to maintain
the integrity of the judicial system and to protect parties from opponents' unfair strategies. [Citation.]
Application of the doctrine is discretionary.” ’ [Citation.] The doctrine applies
when ‘(1) the same party has taken two positions; (2) the positions were taken in
judicial or quasi-judicial administrative proceedings; (3) the party was successful
in asserting the first position (i.e., the tribunal adopted the position or accepted
it as true); (4) the two positions are totally inconsistent; and (5) the first position
was not taken as a result of ignorance, fraud, or mistake.’ [Citations.]” (Citations
omitted.)
(People v. Castillo (2010) 49 Cal.4th
145, 155.)
Defendants have not demonstrated how
these different leases are totally inconsistent. This argument is not a persuasive
ground for demurrer.
B. Re: Joint Enterprise and Alter-Ego Allegations.
Alter ego allegations may be pled generally
and the principal factors for piercing the corporate veil—individual dominated the
affairs of the corporation, unity of interest and ownership, corporation is a mere
shell, diversion of income, inadequate capitalization, failure to issue stock and
observe corporate formalities, adherence to fiction of separate corporate existence
would work an injustice—may be alleged in conclusory terms and plaintiff may be
given an opportunity to present evidence to support these allegations. (First
Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 914-16.)
It is sufficient that
refusal to recognize unity of corporation and individual “will bring about inequitable
results” (citation omitted). All that is
required is a showing that it would be unjust to persist in recognition of the separate
entity of the corporation (Citation omitted).
(Claremont Press
Publishing Co. v. Barksdale (1960) 187 Cal.App.2d 813, 817.)
The alter ego
allegations as to LTD and individual Defendants Gozlan and Malka at ¶ 9 are sufficient
in this regard. Plaintiff need not present evidentiary support for these allegations
at the pleading stage.
As for the joint
enterprise allegations regarding LTD and New Horizon, the Court agrees that there
are insufficient allegations of a joint enterprise: “This allegation fails to state
facts sufficient to show the necessary requirements for a joint enterprise -- contract,
common purpose, and equal right of voice and control.” (Coffman v. Kennedy
(1977) 74 Cal. App. 3d 28, 32.)
As such, there
is no basis to impose liability upon New Horizon, and the demurrer to the entire
First Amended Complaint is SUSTAINED with leave to amend as to Defendant New Horizon
only.
2. First Cause of Action (Breach of Contract).
Defendants argue
that this cause of action is erroneously based on the superseded 2019 Lease, instead
of the 2021 Lease, which Plaintiff alleged was the operative Lease in the unlawful
detainer action.
Plaintiff admits
that the 2021 Lease should have been pled as the operative Lease and asks leave
to so plead.
On this basis
the demurrer to the first cause of action is SUSTAINED with leave to amend.
3. Second Cause of Action (Negligence).
Defendants argue
that a person may ordinarily not recover in tort for breach of contractual obligations.
Defendants further argue that this cause of action is barred by the economic loss
rule.
Other courts in our jurisdiction have articulated
the rule more definitively. For instance, Huang v. Garner, supra,
157 Cal. App. 3d 404 instructs, "[E]conomic
loss [is] 'marked by the loss of the benefit of the bargain for the goods purchased,
lost profits, and replacement costs for ineffective goods. Physical damage to property and personal injury, however, are not considered
to be "economic loss." ' . . ." ( Id. at p. 420, citation omitted, italics added.) In Huang, it was "undisputed . . . that the court properly
drew the line between economic and physical damages, determining the cost to repair
structural and other alleged defects which had not actually caused physical
damage to be economic damage." (Ibid., italics added.)
With regard to defects, the Huang plaintiffs presented evidence "that the plans
and specifications for the building were defective in several ways, including insufficient
fire retardation walls, insufficient shear walls and inadequate structure . . .
. Additional evidence indicated that deviation
[*618] from the building plans during
construction also contributed to faulty construction." (Huang v. Garner, supra, 157 Cal. App. 3d at p. 411.) The
plaintiffs sought recovery "for physical damages to their property
including damages to the structure caused by deflected and cracked beams and dry
rot damages to the balcony area. [They] also sought recovery of economic losses including the cost to repair firewalls, shear walls,
fire stops, and other alleged defects in the structure which had not caused actual
physical damages at the time of trial." ( Id. at pp. 419-420, italics added.) The Huang court noted, "Apparently it was agreed by the
parties that damages such as the cost to repair allegedly insufficient shear walls,
insufficient fire retardation, and defects in the structure which did not cause
actual physical damage were in fact economic damages." ( Id. at p. 420.)
Huang's definition and application of the economic loss rule, albeit in the context of a negligence theory, demonstrates
defendant is just plain wrong in contending the physical damage to plaintiffs' real property caused by defective construction
of the foundation is only "an injury to the product itself," and thus
barred by the economic loss rule of Seely. Huang does not stand alone. As we will discuss, other cases
compel the conclusion that under California
law, the physical damages to plaintiffs' property are entirely distinct from
economic losses and are thus recoverable in strict liability.
(Stearman v. Centex Homes
(2000) 78 Cal.App.4th 611, 617-618 [bold emphasis added])
(a) Everyone is responsible, not only for
the result of his or her willful acts, but also for an injury occasioned to another
by his or her want of ordinary care or skill in the management of his or her property
or person, except so far as the latter has, willfully or by want of ordinary care,
brought the injury upon himself or herself. . . .
(Civil Code § 1714(a).)
35. At all material times, Defendants owed
Landlord a duty to act reasonably and refrain from actions that would foreseeably
harm Landlord, damage the Property or personal property left in the care of Defendants
at the Property. Moreover, Landlord and
Defendants
maintained a special relationship through
Defendants’ acceptance of the responsibility to account for and preserve all
personal property left in the custody of Defendants at the Property at the time
the Lease was executed.
36. Defendants breached this duty of care
by negligently and carelessly maintaining the Property that resulted in damage
the Property.
37. Defendants breached this duty of care
by negligently and carelessly performing repairs to the Property that damaged
the Property.
38. Defendants negligently and carelessly
failed and refused to properly inventory all the personal property or preserve or
store all of the personal property of Landlord left in their care.
39. Defendants negligently and carelessly
and without the consent or approval of Landlord, used the personal property of Landlord
left in the care of Defendants, for use to furnish other properties that Defendants
had leased or subleased for short- or long-term rental to third
parties.
(1AC, ¶¶ 35 – 39 [bold
emphasis added])
These allegations
of damages to real and personal property caused by Defendants’ negligence fall outside
the economic loss rule. Moreover, even if the Lease imposed an obligation upon Defendants
not to damage Plaintiff’s real and personal property, a contractual obligation may
give rise to a negligence cause of action.
A contractual obligation may create a legal
duty the breach of which will support a tort action. (North American Chemical Co.
v. Superior Court (1997) 59 Cal. App. 4th 764, 773-776 [69 Cal. Rptr. 2d 466].)
"Contract law exists to enforce the intentions of the parties to an agreement
while tort law is designed to vindicate social policy. ( Foley v. Interactive Data
Corp. (1988) 47 Cal. 3d 654, 683 [254 Cal. Rptr. 211, 765 P.2d 373].) . . . [T]he
same wrongful act may constitute both a breach of contract and an invasion of an
interest protected by the law of torts. (3 Witkin, Cal. Procedure (4th ed. 1996)
Actions, § 139, pp. 203-204.) [P] . . . A contract to perform services gives rise
to a duty of care which requires that such services be performed in a competent
and reasonable manner. A negligent failure to do so may be [*688]
both a breach of contract and a tort. ( Perry v. Robertson (1988) 201 Cal.
App. 3d 333, 340 [247 Cal. Rptr. 74].) . . . [P] . . . In general, it has been held
that an action based on the negligent performance of contractual duties, although
involving elements of both contract and tort, is regarded as a delictual action,
since negligence is considered the gravamen of the action. (Eads v. Marks [(1952)]
39 Cal. 2d [807,] 811-812 [249 P.2d 257]; see also Distefano v. Hall (1963) 218
Cal. App. 2d 657, 678 [32 Cal. Rptr. 770].)" (Id., at pp. 774-775.)
(Michaelis v. Benavides (1997) 61 Cal.App.4th 681, 687-88.)
As
such, the second cause of action is sufficiently pled.
The demurrer
to the second cause of action is OVERRULED.
3. Third Cause
of Action (Common Counts).
Defendants claim
this is a cause of action for money had and received, then argue that rental value
is not money had or received.
However, the
third cause of action is for common counts, and does not mention the specific
common count at money had or received. The 1AC alleges at ¶¶ 44 – 47:
44. Within the past four years, Defendants
have become indebted to Plaintiff in the amount of at least $75,816.66 for the rental
value of the Property that Defendants have unlawfully possessed, and at least $40,000
for the value of personal property that they have been lost, destroyed, or damaged.
45. Defendants have failed to pay the rental
value of the Property and personal property that it has used, controlled, or transferred
to third persons.
46. At least $75,816.66 remains unpaid for
the rental value of the Property, and at least $40,000.00 for the value of personal
property despite Plaintiff’s demand, plus prejudgment interest at the maximum legal
rate per annum.
47. At least $75,816.66 per month, plus
interest, was the reasonable rental value of the Property, and at least $40,000.00
was the reasonable value of the personal property that remains unpaid.
(1AC, ¶¶ 44 – 47.)
These allegations
give rise to a cause of action for the common count of indebitatus assumpsit, i.e,
payment of money for a fully performed contract.
“It is established that when a contract has been
fully performed and nothing remains to be done under it except the payment of money
by defendant, plaintiff may declare generally in indebitatus assumpsit. (Citations
omitted.) Such count may be joined with one on the contract, and a plaintiff
is under no compulsion to elect but may submit his case to the trier of fact
for determination upon the facts, and it is the province of the trier of fact to
decide which count is supported by the evidence.
(Haggerty v. Warner
(1953) 115 Cal.App.2d 468, 474-75 [bold emphasis added].)
Here, at least
as to unpaid rental value, a common count of indebitatus assumpsit would lie in
that Plaintiff performed the contract by allowing Defendant to lease the premises,
and all that remained was the payment of money for the rental value of the property.
The demurrer
to the third cause of action is OVERRULED.
4. Fourth Cause
of Action (Conversion).
Defendants argue
that no actual furniture is identified, and Plaintiff, as assignor, does not allege
ownership of the personal property.
“Conversion is the wrongful exercise of
dominion over the property of another.” (Oakdale Village Group v. Fong (1996) 43
Cal.App.4th 539, 543 [50 Cal. Rptr. 2d 810].) Proof of conversion requires a showing
of ownership or right to possession of the property at the time of the conversion,
the defendant's conversion by a wrongful act or disposition of property rights,
and resulting damages. (Id. at pp. 543–544; Burlesci v. Petersen (1998) 68 Cal.App.4th
1062, 1066 [80 Cal. Rptr. 2d 704].)
(Avidor v. Sutter's Place, Inc. (2013) 212 Cal.App.4th 1439, 1452.)
However, Plaintiff
alleges that he is at least a co-owner of the real property, and was the owner of
all personal property left in the care of Defendants after the execution of the
Lease. (1AC, ¶¶ 1, 49.) Plaintiff alleges that his mother’s interest in the Lease
was assigned to him, but the Lease is distinct from the real property. Plaintiff
sufficiently alleges that Defendants removed the personal property worth at least
$40,000, thereby establishing dominion over it. (1AC, ¶¶ 49 -55.)
The cause of
action for conversion is sufficiently pled.
The demurrer
to the fourth cause of action is OVERRULED.
5. Fifth Cause
of Action (Unfair Competition Law).
Defendants argue
that this cause of action cannot be brought by an assignee. (Amalgamated Transit
Union, Loc. 1756, AFL-CIO v. Superior Ct. (2009) 46 Cal.4th 993, 1002.)
Defendants also
argue that damages may not be recovered under this cause of action.
Defendants also
argue that, to the extent Plaintiff seeks relief on behalf of all others similar
situated, this cause of action is improper absent class certification.
Defendants’
argument regarding standing is persuasive. Plaintiff admits he was assigned the
interest in the Lease from his mother. (1AC, ¶ 1.) Plaintiff only alleges ownership
in the real property. (Id.)
To allow a noninjured assignee of an unfair
competition claim to stand in the shoes of the original, injured claimant would
confer standing on the assignee in direct violation of the express statutory requirement
in the unfair competition law, as amended by the voters' enactment of Proposition
64, that a private action under that law be brought exclusively by a “person who
has suffered injury in fact and has lost money or property as a result of the unfair
competition.” (Bus. & Prof. Code, § 17204; see, ante, at p. 1000, fn. 2; Voter
Information Guide, Gen. Elec. (Nov. 2, 2004) official title and summary, p. 38 [Proposition
64 permits one to bring unfair competition law action “only if that individual was
actually injured by … an unfair business practice” (italics added)].) Accordingly,
we conclude that under the unfair competition law an injured employee's assignment
of rights cannot confer standing on an uninjured assignee.
(Amalgamated Transit Union, Local
1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1001-02.)
Moreover, Plaintiff
alleges damages (¶ 66). However, damages are not recoverable under B & P Code,
§ 17200:
“‘The purpose of
the UCL [citation] “is to protect both consumers and competitors by promoting fair
competition in commercial markets for goods and services. [Citation.]”’ (McKell v. Washington
Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1470 [49 Cal. Rptr. 3d 227].) ‘A
UCL action is equitable in nature; damages cannot be recovered. [Citation.] … [U]nder
the UCL, “[p]revailing plaintiffs are generally limited to injunctive relief and
restitution.”’ (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th
1134, 1144 [131 Cal. Rptr. 2d 29, 63 P.3d 937].)” (Durell v. Sharp
Healthcare (2010) 183 Cal.App.4th 1350, 1359 [108 Cal. Rptr.
3d 682] (Durell).)
(Gray v. Dignity Health
(2021) 70 Cal.App.5th 225, 236.)
Finally, Plaintiff seeks to recover injunctive
relief on behalf of others similarly situated. However:
[W]e construe the statement in section 17203,
as amended by Proposition 64, that a private party may pursue a representative action
under the unfair competition law only if the party “complies with Section 382 of
the Code of Civil Procedure” to mean that such an action must meet the requirements
for a class action. (See Fireside Bank v. Superior Court, supra, 40 Cal.4th at p.
1092, fn. 9.)
(Arias v. Superior Court (2009)
46 Cal. 4th 969, 980..)
Given the fundamental
standing issue, coupled with the other deficiencies, the demurrer to the fifth cause
of action is SUSTAINED without leave to amend.
Motion To Strike
Meet and Confer
The Declaration of Andrew V. Jablon reflects
that Defendants’ counsel satisfied the meet and confer requirement set forth in
Civ. Proc. Code, § 435.5.
Discussion
Defendants Living the Dream, New Horizons
Development, Inc., Rudy Malka and Shalom “Shay” Gonzlan move to strike the following
portions of the 1AC:
¿ ¶ 8 re: Joint enterprise allegations: GRANTED with leave to
amend. As discussed above re: the demurrer, the joint enterprise allegations
are insufficiently pled.
¿ ¶ 9 re: alter ego allegations: DENIED. As discussed above
re: the demurrer, the alter ego allegations are sufficiently pled.
¿ ¶ 58 (12:1-3) that reads: “As a direct and proximate result of
the conversion of Plaintiff’s furnishings, Plaintiff has suffered anxiety, worry,
mental and emotional distress in a sum to be determined at time of trial.” GRANTED
with leave to amend. Although Plaintiff is not suing as an assignee of emotional
distress damages, Plaintiff has not alleged an emotional attachment to or reliance
upon the personal property:
Although we have not been able to locate any
California authority other than Schroeder which deals directly with a claim
for emotional distress growing out of the conversion of personal property, we note
the Restatement Second of Torts section 927, illustration m, page 542, states that
where property has been converted: "If the deprivation is the legal cause of
harm to the feelings, damages may be allowable for the harm, as when the defendant
intentionally deprives the plaintiff of essential household furniture, which humiliates
the plaintiff, a result that the defendant should have realized would follow."
(See also Fredeen v. Stride (1974) 269 Or. 369 [525 P.2d 166, 168] [veterinarian's
conversion of plaintiff's dog supports emotional distress damages].)
(Gonzales v. Pers.
Storage (1997) 56 Cal.App.4th 464, 476.)
¿ ¶ 59 (12:4-9) that reads:
Defendants converted Plaintiff’s property
with malice, oppression,
and fraud, and in conscious disregard for
the rights of Plaintiff. At all
relevant times, the acts of conversion were
made with the knowledge,
consent, acquiescence, and ratification
of Gozlan and Malka, officers
and managers of Defendants. Pursuant to California Civil Code §
3294, Plaintiff is entitled to recover from
Defendants exemplary and
punitive damages in an amount to be determined
at time of trial.
DENIED. There are sufficient facts
pled to justify an award of punitive damages for conversion, i.e., that Defendants
acted with malice, as that term is defined in Civil Code, § 3294(c) to mean: “conduct
which is intended by the defendant to cause injury to the plaintiff or despicable
conduct which is carried on by the defendant with a willful and conscious disregard
of the rights or safety of others.”
¿ Breach of Contract – Prayer No. 2 (14:26) that reads: “Return and
accounting for all personal property placed in the care of LTD.” GRANTED with
leave to amend. The demurrer to the breach of contract cause of action was sustained,
so that cause of action is not viable to support this prayer.
¿ Breach of Contract – Prayer No. 3 (15:1-2) that reads: “Statutory
damages up to
$600.00 for LTD’s continued malicious possession of the Property.”
GRANTED with leave to amend.
¿ Negligence – Prayer No. 3 (15:8) that reads: “For the recovery
of reasonable
attorneys’ fees under Tort of Another Doctrine. GRANTED without
leave to amend.
“[A]s a general rule, attorney fees
are not recoverable as costs unless they are authorized by statute or agreement.”
(People ex rel. Dept. of Corporations v. Speedee
Oil Change Systems, Inc. (2007) 147 Cal.App.4th 424, 429.)
It is settled that a person who is required through the tort of another
to act in protection of his interest by bringing or defending an action against
a third person is entitled to recover compensation for the reasonably necessary
attorney's fees incurred. (Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d
618, 620 [30 Cal.Rptr. 821, 381 P.2d 645]; Glass v. Gulf Oil Corp. (1970) 12 Cal.App.3d
412, 437-438 [96 Cal.Rptr. 902].)
(Moe v. Transamerica
Title Ins. Co. (1971) 21 Cal.App.3d 289, 303.)
Here, Plaintiff
does not allege that he was required to bring or defend an action against a third
party due to Defendant’s negligence.
¿ Conversion – Prayer No. 2 (15:17) that reads: “General damages,
including without limitation, for humiliation and anxiety.” GRANTED with leave
to amend as to humiliation and anxiety only. (See discussion above.)
¿ Conversion – Prayer No. 3 (15:18) that reads: “For exemplary and
punitive
damages.” DENIED. (See discussion above.)
Plaintiff is
given 30 days’ leave to amend where indicated.