Titlehere

Judge: Craig Griffin, Case: "Honarkar v. The Picerne Group, Inc.", Date: 2022-08-15 Tentative Ruling

A) Starboard Macarthur Square, LP, and Starboard California, Inc. Demurrer

Starboard Macarthur Square, LP, and Starboard California, Inc.’s (“Starboard” together) demurrer to The Picerne Group, Inc.’s (“TPG”) Second Amended Complaint (“SAC”) is OVERRULED in part and SUSTAINED in part.

A demurrer challenges the defects appearing on the face of the pleading or from other matters properly subject to judicial notice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The issue is the sufficiency of the pleading, not the truth of the facts alleged. Thus, no matter how unlikely or improbable, the allegations made must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corporation v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) Absent court orders or other items subject to judicial notice, or items attached as exhibits to the complaint, the court may not consider the contents of pleadings or other exhibits when ruling on a demurrer. (Day v. Sharp (1975) 50 Cal.3d 904, 914; Sosinsky v. Grant (1992) 6 Cal.App.4th 1746, 1749.)

“In our examination of the complaint we are guided by the well settled principles governing the testing of its sufficiency by demurrer: A demurrer admits all material and issuable facts properly pleaded. [Citations omitted.] However, it does not admit contentions, deductions or conclusions of fact or law alleged therein. [Citations omitted.]” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 666, 672.)

Under Section 430.10(e) the test is whether the complaint states any valid claim entitling plaintiff to relief, even if Plaintiff’s cause of action is improperly titled, or an improper remedy is stated. (Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 38.)

Finally, if a demurrer is sustained as to any cause of action or causes of action, it is an abuse of discretion to deny leave to amend if there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) But if a party cannot amend to state a valid cause of action, or the party opposing the demurrer cannot state how a valid cause of action can be pled, which the opposing party has the burden of proof on, then the demurrer should be sustained without leave to amend. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)

Starboard demurs to causes of action (“COA”) Nos. 5, 7, and 8 on the basis that they do not state sufficient facts to constitute COA against Starboard. (Civ. Proc. Code 430.10(e).)

1) COA No. 5 – Intentional Interference With Contract

“The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal. 4th 26, 55.)

TPG has alleged the Agreement to Enter Into Joint Venture (“Agreement”) between TPG and Honarkar and attached the Agreement to the Complaint. (SAC ¶¶ 1, 5, 72-73, 76, 166, Ex. A.)

TPG has alleged Starboard’s “actual and direct knowledge of TPG and Honarkar’s joint venture to acquire the Newport Crossings Property (“Property”),” in part through TPG, Starboard, and their respective attorneys’ communications during the underlying litigation with Starboard (“Litigation”) and its resolution. (SAC ¶¶ 13, 27, 86, 103, 115, 168, 172.) TPG also provided a copy of the Agreement to Starboard. (SAC ¶ 13, 168.) TPG has alleged Starboard’s knowledge of the contract. TPG has adequately pled sufficient facts as to these elements.

TPG alleged during the Litigation, which it had been involved in and working towards a successful resolution, Starboard stopped responding to TPG, and Honarkar and Starboard worked out a deal secretly without TPG that was in violation of the Agreement. (SAC ¶¶ 17-18, 27, 87, 90-91, 172.) TPG has alleged Starboard knew its participation in the “scheme” would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 174-175.) Starboard and Honarkar then entered into a secret settlement agreement without TPG’s knowledge or input, which ultimately led to Starboard transferring the Property to Aryabhata. (SAC ¶ 92-94, 96.) Although it is unclear if the acts alleged to have been taken by Starboard were actually designed to induce a breach or disruption of the Agreement, or if they were simply Starboard trying to end the Litigation but which resulted in the breach, TPG does not need to prove this element at this time. TPG has likely adequately pled sufficient facts as to this element.

TPG has alleged a breach of the Agreement between TPG and Honarkar when Honarkar found new capital and partners and subsequently “cut a deal” with Starboard and acquired the Property without TPG. (SAC ¶¶ 18-19, 27, 127.) TPG has adequately pled sufficient facts as to this element.

TPG has also alleged damages by way of moneys expended on the Litigation and the loss of the ability to purchase and develop the Property. (SAC ¶¶ 5, 11-12, 14-15, 25, 27-28, 30, 83-83, 126, 170.) TPG has adequately pled sufficient facts as to this element.

While it is unclear if TPG will ultimately be successful in this COA against Starboard as TPG stated the goal of the Agreement was for Starboard to sell the Property to Honarkar, which ultimately happened only without TPG (SAC ¶¶ 5-6.), that issue is not proper for a demurrer. The only issue is whether TPG has stated sufficient facts as to this COA, which TPG has.

The demurrer is OVERRULED as to this COA.

2) COA No. 7 – Aiding and Abetting Breach of Fiduciary Duty

“The elements of a claim for aiding and abetting a breach of fiduciary duty are: (1) a third party's breach of fiduciary duties owed to plaintiff; (2) defendant's actual knowledge of that breach of fiduciary duties; (3) substantial assistance or encouragement by defendant to the third party's breach; and (4) defendant's conduct was a substantial factor in causing harm to plaintiff. [Citations.] Some cases suggest a complaint must allege a fifth element--that the aider and abettor had the specific intent to facilitate the wrongful conduct.” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal. App. 4th 328, 343.)

“[E]xamples of relationships that impose a fiduciary obligation to act on behalf of and for the benefit of another are “a joint venture, a partnership, or an agency.” (Cleveland v. Johnson (2012) 209 Cal. App. 4th 1315, 1339.)

The same facts as alleged in COA No. 5 largely support this COA.

TPG has adequately pled a joint venture between TPG and Honarkar, which would create a fiduciary duty between the two. (SAC ¶¶ 1, 5-10, 12, 72-73, 76, 166, 181-182, 187, Ex. A.) TPG has alleged Starboard’s “actual and direct knowledge of TPG and Honarkar’s joint venture to acquire the Property,” in part through TPG, Starboard, and their respective attorneys’ communications during the Litigation and its resolution. (SAC ¶¶ 13, 27, 86, 103, 115, 168, 172, 189.) TPG also provided a copy of the Agreement to Starboard. (SAC ¶ 13, 168.) TPG has adequately pled sufficient facts as to these elements.

TPG alleged during the Litigation, which it had been involved in and working towards a successful resolution, Starboard stopped responding to TPG, and Honarkar and Starboard worked out a deal secretly without TPG that was in violation of the Agreement. (SAC ¶¶ 17-18, 27, 87, 90-91, 172.) TPG has alleged Starboard knew its participation in the “scheme” would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 174-175.) Starboard and Honarkar then entered into a secret settlement agreement without TPG’s knowledge or input, which ultimately led to Starboard transferring the Property to Aryabhata. (SAC ¶ 92-94, 96, 188, 190-191.) While TPG has not specifically alleged encouragement, it has alleged substantial assistance in the breach in that had the transfer of the Property from Starboard to Honarkar not occurred under the terms of the allegedly secret agreement, then Honarkar likely would not have been able to have breached the Agreement. (SAC ¶ 191.) Starboard’s transfer of the Property to Honarkar without TPG’s knowledge or input was a substantial factor in causing the harm to TPG. (Id.)

Again, some cases suggest specific intent is also an element. “[T]he word “intent” is not determinative. “California courts have long held that liability for aiding and abetting depends on proof the defendant had actual knowledge of the specific primary wrong the defendant substantially assisted. . . The court stated, ‘The words “aid and abet” as thus used have a well understood meaning, and may fairly be construed to imply an intentional participation with knowledge of the object to be attained.’ [Citations.] A defendant who acts with actual knowledge of the intentional wrong to be committed and provides substantial assistance to the primary wrongdoer is not an accidental participant in the enterprise.” [Emphasis added.] Upasani v. State Farm Gen. Ins. Co. (2014) 227 Cal. App. 4th 509, 519.)

As discussed, TPG has alleged Starboard was aware of the fiduciary relationship between TPG and Honarkar, Starboard worked with Honarkar in secret to settle the Litigation without TPG’s knowledge, and then transferred the Property to Honarkar in secret as well. TPG has adequately alleged actual knowledge of Honarkar’s wrongdoing and willingly participated in the actions.

The demurrer is OVERRULED as to this COA.

3) COA No. 8 – Violation of Business and Professions Code section 17200 et seq.)

“The California Unfair Competition Law [“UCL”] ([Bus. & Prof. Code] § 17200 et seq.) defines ‘“unfair competition” as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.”’” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 609.)

“In contrast to its limited remedies, the unfair competition law's scope is broad. The unfair competition law's scope is broad. Unlike the Unfair Practices Act, it does not proscribe specific practices. Rather, as relevant here, it defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice.” [Citation.] Its coverage is “sweeping, embracing ' ”anything that can properly be called a business practice and that at the same time is forbidden by law.“ ' ” [Citations.] It governs “anti-competitive business practices” as well as injuries to consumers, and has as a major purpose “the preservation of fair business competition.” [Citations.] By proscribing “any unlawful” business practice, “section 17200 'borrows' violations of other laws and treats them as unlawful practices” that the unfair competition law makes independently actionable. [Citations.] [¶] However, the law does more than just borrow. The statutory language referring to “any unlawful, unfair or fraudulent” practice (italics added) makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. “Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent. 'In other words, a practice is prohibited as ”unfair“ or ”deceptive“ even if not ” unlawful“ and vice versa.'” (Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal. 4th 163, 180.)

As discussed, supra, TPG has adequately pled sufficient facts to support COA Nos. 5 and 7. Intentional interference with contractual relations is an “unlawful” business act that would support a COA under the UCL. (CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1107 (9th Cir. 2007). Aiding and abetting a breach of fiduciary would likely fall under “unfair” prong of the UCL. “An unfair business practice occurs when the practice “ 'offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.'” (Podolsky v. First Healthcare Corp. (1996) 50 Cal. App. 4th 632, 647.) A COA under the UCL would generally be permissible based on the alleged actions of Starboard. However, damages under this COA against Starboard are not sufficiently pled.

““While the scope of conduct covered by the UCL is broad, its remedies are limited.” [Citation.] Injunctive relief is the primary form of relief available. [Citation.] In public enforcement actions, civil penalties also may be assessed. (See Bus. & Prof. Code, § 17206.) But in a private action, “[t]he only monetary remedy available ... is restitution.” ([Citation.]; see Bus. & Prof. Code, § 17203 [court may “make such orders and judgments ... as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition”].) Damages are not recoverable. [Citation.] In short, “under the UCL, ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’ ” [Citation.] ‘ ” (Lee v. Luxottica Retail N. Am., Inc. (2021) 65 Cal. App. 5th 793, 800.) “[F]ederal courts . . . have consistently held that compensation for lost business is not recoverable in an action against a business competitor under the UCL.” (Id., at 805.)

In the present matter, TPG has not alleged Starboard unfairly obtained any money from TPG that would support monetary restitution. As for injunctive relief, TPG has alleged Starboard is no longer in possession or control of the Property, thus it is TPG has not pled sufficient facts to support any relief TPG could receive from Starboard under this COA.

This COA is SUSTAINED with leave to amend.

B) Aryabhata Group LLC

1) Demurrer

Aryabhata Group LLC’s (“Aryabhata”) demurrer is OVERRULED.

Aryabhata demurs to the COA Nos. 5, 7, 8, and 10 of the SAC on the basis that they do not state sufficient facts to support these COA against Aryabhata. (Civ. Proc. Code § 430.10(e).)

a) COA No. 5 – Intentional Interference With Contract

TPG has alleged the Agreement between TPG and Honarkar and attached the Agreement to the Complaint. (SAC ¶¶ 1, 5, 72-73, 76, 166, Ex. A.) TPG has alleged Aryabhata, as part of the group identified as the “Co-conspirators,” was aware of TPG’s rights under the Agreement. (SAC ¶¶ 19, 27, 29, 104, 110, 169-170.) TPG also alleged Aryabhata is the alter ego of Honarkar, Makhijani and/or Shyam and was formed solely for the purpose of taking title of the Property. (SAC ¶¶ 35, 110.)

Aryabhata is correct that if TPG’s allegation that Aryabhata is an alter ego of Honarkar is true, then this COA is not proper as is can only be pled against a stranger to a contract, and Honarkar is not a stranger to the Agreement. (Applied Equip. Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal. 4th 503, 513-14; PM Grp., Inc. v. Stewart (2007) 154 Cal. App. 4th 55, 65.) However, TPG has also alleged Aryabhata may be an alter ego of Makhijani and/or Shyam. If Aryabhata is an alter ego of Makhijani and/or Shyam, but not Honarkar, then the COA would be viable as neither Makhijani and/or Shyam are alleged to be parties to the Agreement. The determination of this issue would be proper for a summary judgment motion, but not for a demurrer. At this point, it would be proper to let the COA proceed and parties to conduct discovery to either narrow the allegations and/or dismiss improper allegations at a later date.

TPG has pled sufficient facts as to the first two elements.

Honarkar sought new capital partners and partners to provide funding for the Property, including Aryabhata. (SAC ¶¶ 19, 170.) The Co-conspirators provided funds to enable Honarkar to refinance his debts and to transfer the Property from Starboard to Aryabhata. (SAC ¶ 102.) The Co-conspirators also allegedly assisted Honarkar in the foreclosure litigation with the goal of obtaining the Property. (SAC ¶¶ 108-111, 173.) TPG alleged Aryabhata was formed for the purpose of purchasing the Property without TPG’s knowledge and involvement and so the Co-conspirators could try to claim a bona fide third party acquisition of the Property. (SAC ¶¶ 27, 105, 108, 111, 170, 173.) TPG has alleged Aryabhata/Co-conspirators knew their participation in the scheme would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 174-175.) Honarkar was also alleged to have been in a joint venture with Co-conspirators to develop the Property, even though Honarkar did not yet own the Property. (SAC ¶ 110.) The actions induced Honarkar to breach the Agreement and/or prevented Honarkar from performing his obligations. (SAC ¶ 171, 175.) TPG has pled sufficient facts to support the third and fourth elements of this COA.

Aryabhata allegedly purchased the Property and continues to be the owner. (SAC ¶¶ 25, 28, 109-110.) Aryabhata was managed by the same manager of each of Honarkar’s entities. (Id.) TPG has adequately pled damages.

Aryabhata argues there was no valid contract between Honarkar and TPG for Aryabhata to interfere with. A determination of whether the contract was valid or not would require the court to make a determination of fact, which is permitted. All facts pleaded in the complaint are assumed to be true however improbable they may be. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal. 4th 962, 967.)

Aryabhata argues the claim for specific performance fails as a matter of law. “Specific performance of a contract may be decreed whenever: (1) its terms are sufficiently definite; (2) consideration is adequate; (3) there is substantial similarity of the requested performance to the contractual terms; (4) there is mutuality of remedies; and (5) plaintiff's legal remedy is inadequate. (Civ.Code, § 3390, subd. 5 [court may not specifically enforce “[a]n agreement, the terms of which are not sufficiently certain to make the precise act which is to be done clearly ascertainable”].” (Blackburn v. Charnley (2004) 117 Cal. App. 4th 758, 766.) Again, Aryabhata asks the court to analyze the Agreement and make a determination as to the validity of the Agreement and it terms. This is not proper for a demurrer. Further, “[a] demurrer is not the appropriate vehicle to challenge a portion of a cause of action demanding an improper remedy. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 [“a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy”]; PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 (PH II ) [“demurrer does not lie to a portion of a cause of action”]; Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163 [petitioners' punitive damage allegations not subject to real parties' demurrers]; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 7:42.1, p. 7–18 [“A general demurrer challenges only the sufficiency of the cause of action pleaded, and must be overruled if any valid cause of action is pleaded; a demand for improper relief does not vitiate an otherwise valid cause of action. [Citations.]”].).” (Caliber Bodyworks, Inc. v. Superior Ct. (2019) 134 Cal. App. 4th 365, 384–85, disapproved of on other grounds by ZB, N.A. v. Superior Ct. (2019) 8 Cal. 5th 175 (“Caliber”.)

TPG has pled sufficient facts to state this COA against Aryabhata. (Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal. 4th 26, 55). Even if specific performance is not proper relief, that would not support sustaining the demurrer as to this COA as enough facts have been pled. (Caliber, supra, 134 Cal. App. 4th at 384–85.)

The demurrer is OVERRULED as to this COA.

b) COA No. 7 – Aiding and Abetting Breach of Fiduciary Duty

The same facts as alleged in COA No. 5 largely support this COA.

TPG has adequately pled a joint venture between TPG and Honarkar, which would create a fiduciary duty between the two. (SAC ¶¶ 1, 5-10, 12, 72-73, 76, 166, 181-182, 187, Ex. A.) (Cleveland v. Johnson (2012) 209 Cal. App. 4th 1315, 1339.)

TPG has alleged Aryabhata, as part of the group identified as the “Co-conspirators,” was aware of TPG’s rights under the Agreement. (SAC ¶¶ 19, 27, 29, 104, 110, 169-170, 189.) TPG also alleged Aryabhata is the alter ego of Honarkar, Makhijani and/or Shyam and was formed solely for the purpose of taking title of the Property. (SAC ¶¶ 35, 110.) TPG has adequately pled sufficient facts as to these elements.

Honarkar sought new capital partners and partners to provide funding for the Property, including Aryabhata. (SAC ¶¶ 19, 170.) The Co-conspirators provided funds to enable Honarkar to refinance his debts and to transfer the Property from Starboard to Aryabhata. (SAC ¶ 102.) The Co-conspirators also allegedly assisted Honarkar in the foreclosure litigation with the goal of obtaining the Property. (SAC ¶¶ 108-111, 173.) TPG alleged Aryabhata was formed for the purpose of purchasing the Property without TPG’s knowledge and involvement and so the Co-conspirators could try to claim a bona fide third party acquisition of the Property. (SAC ¶¶ 27, 105, 108, 111, 170, 173.) TPG has alleged Aryabhata/Co-conspirators knew their participation in the scheme would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 174-175.) Honarkar was also alleged to have been in a joint venture with Co-conspirators to develop the Property, even though Honarkar did not yet own the Property. (SAC ¶ 110.) The actions induced Honarkar to breach the Agreement and/or prevented Honarkar from performing his obligations. (SAC ¶ 171, 175.) TPG has pled sufficient facts assistance and/or encouragement by Aryabhata towards Honarkar breaching the Agreement and that Aryabhata/Co-conspirator’s actions were a substantial factor in causing harm to TPG. (SAC ¶ 189.) The alleged actions also support Aryabhata/Co-conspirator’s intent to facilitate Honarkar’s breach of the Agreement. (Upasani v. State Farm Gen. Ins. Co. (2014) 227 Cal. App. 4th 509, 519.)

TPG has pled sufficient facts to state this COA against Aryabhata. (Nasrawi v. Buck Consultants LLC (2014) 231 Cal. App. 4th 328, 343.)

The demurrer is OVERRULED as to this COA.

c) COA No. 8 – Violation of Business and Professions Code section 17200 et seq.)

As discussed, supra, TPG has pled sufficient facts to support COA Nos. 5 and 7. Intentional interference with contractual relations is an “unlawful” business act that would support a COA under the UCL. (CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1107 (9th Cir. 2007). Aiding and abetting a breach of fiduciary would likely fall under “unfair” prong of the UCL. “An unfair business practice occurs when the practice “ 'offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.'” (Podolsky v. First Healthcare Corp. (1996) 50 Cal. App. 4th 632, 647.)

Aryabhata made no arguments as to this COA other than alleging COA Nos. 5 and 7 are not viable and therefore there is no basis for COA No. 8. As TPG has pled sufficient facts to support COA Nos. 5 and 7 against Aryabhata, TPG has pled a sufficient facts and basis for COA No. 8.

The demurrer is OVERRULED as to this COA.

d) COA No. 10 – Constructive Trust

“Three conditions must be shown to impose a constructive trust: (1) a specific, identifiable property interest, (2) the plaintiff's right to the property interest, and (3) the defendant's acquisition or detention of the property interest by some wrongful act.” (Higgins v. Higgins (2017) 11 Cal. App. 5th 648, 659.)

“A cause of action for constructive trust is not based on the establishment of a trust, but consists of fraud, breach of fiduciary duty or other act which entitles the plaintiff to some relief. Relief, in a proper case, may be to make the defendant a constructive trustee with a duty to transfer to the plaintiff.” (Michaelian v. State Comp. Ins. Fund (1996) 50 Cal. App. 4th 1093, 1114; Ehret v. Ichioka (1967) 247 Cal. App. 2d 637, 642.) “Because a constructive trust is an equitable remedy to which a defrauded plaintiff might be entitled in an appropriate case [Citation], and because [plaintiff] has incorporated his fraud, conspiracy and RICO allegations into his eighth cause of action and merely requests a constructive trust remedy as an alternative to damages, the trial court should be allowed the opportunity to explore this remedy at trial.” (Douglas v. Superior Ct., 215 Cal. App. 3d 155, 160 (“Douglas”).)

TPG has pled a specific and identifiable interest and right in the Property by way of the Agreement. (SAC ¶¶ 1, 5, 19, 27, 29, 104, 72-73, 76, 110, 166, 169-170 Ex. A.) TPG has also alleged Aryabhata holds current title to the Property. (SAC ¶¶ 25, 28, 109-110.) TPG has pled the three conditions that would support the imposition of a constructive trust. TPG pled a fiduciary duty by way of a joint venture between TPG and Honarkar and pled sufficient facts to support COA Nos. 5 and 7, which would, if successful, entitle TPG to some relief. TPG has incorporated by reference the prior allegations and COA into COA No. 10. It also appears TPG is seeking the constructive trust as a remedy. TPG has met the requirements under Douglas, supra, to support this COA.

Aryabhata made no arguments other than constructive trust is a remedy and not a cause of action. However, as noted, the ruling in Douglas applies here.

The demurrer is OVERRULED as to this COA.

2) Motion to Strike

Aryabhata’s motion to strike is DENIED.

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. . .” (Civ. Proc. Code § 435(b)(1). “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Civ. Proc. Code § 436.)

Aryabhata requests the court strike language relating to claims for specific performance (SAC ¶¶ 31, 113-121, 128-130, 141-142, 152, 163, 178, 184, 199, Prayer ¶¶ 1 and 2) and punitive damages (SAC ¶¶ 179, 192, Prayer ¶ 8).

a) Specific Performance

“Specific performance of a contract may be decreed whenever: (1) its terms are sufficiently definite; (2) consideration is adequate; (3) there is substantial similarity of the requested performance to the contractual terms; (4) there is mutuality of remedies; and (5) plaintiff's legal remedy is inadequate.” (Blackburn v. Charnley (2004) 117 Cal. App. 4th 758, 766.) A court cannot enforce specific performance an agreement if the terms are not sufficiently certain to make the precise act which is to be done clearly ascertainable. (Civ. Code § 3390(e).)

Aryabhata argues neither the SAC nor TPG’s opposition identify a specific provision of the Agreement that is sufficiently definite to serve as the bases of specific performance. Aryabhata incorrectly argues that Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 127 (“Lewis”), requires a party to identify a clause in an agreement. There is nothing in Lewis indicating that requirement. Instead, the court in Lewis held the contract in question contained no provision supporting what the plaintiff requested. In the present matter, the Agreement states (among other things):

“Honarkar and TPG hereby agree to form the Company (as defined in Exhibit "A''- hereto and hereby incorporated herein) and execute the LLC Agreement (as defined in Exhibit “A”) in accordance with this Agreement for the purpose of acquiring the Property in whatever manner determined by TPG, but upon the terms and conditions herein stated. Honarkar hereby agrees to assign and convey to the Company all of Honarkar's right, title and interest as "Purchaser" in and to the PSA.” (SAC, Ex. A § 2.)

The “Property” is identified as the property for sale by Starboard in the PSA, which was supposed to be attached to the Agreement, but which was not included with the SAC. (SAC, Ex. A § A.)

Additionally, “Honarkar has received, all to the satisfaction of TPG, written consent and permission from "Selle under the PSA to assign the "Purchaser's" rights under the PSA to the Company so that the Company may purchase the Property for a purchase price of $40,000,000 (based on 350 "Entitled Units" procured pursuant to the "Entitlements Approval" and "Map Approval", as a11 such terms are defined in the PSA) with no additional costs whatsoever chargeable to the Company (as "Purchaser") directly or indirectly relating to procuring such "Entitled Units" or otherwise other than usual and customary escrow fees and expenses and the cost of obtaining an ALTA (American Land Title Association) owner's title insurance policy and the costs of any survey required as a condition of obtaining such an ALTA policy.” (SAC, Ex. A § 5.4.)

Further, “If the condition described in Section 5 .4 is not otherwise satisfied (but all other-conditions are satisfied or waived), the Company shall, notwithstanding any other provision herein to the contrary, be formed in accordance with Section 6 and purchase the Property directly from Honarkar, and in such event, Honarkar agrees to sell the Property to the Company concurrently with (but immediately following) Honarkar's purchase of the Property pursuant to the PSA ( e.g., a double escrow) for a purchase price of $40,000,000 (based on 350 "Entitled Units" procured pursuant to the "Entitlements Approval" and "Map Approval") with no additional costs whatsoever chargeable to the Company directly or indirectly relating to procuring such "Entitled Units" other than usual and customary escrow fees and expenses and the cost of obtaining an ALTA owner's title insurance policy and the costs of any survey required as a condition of obtaining such an AL TA policy.” (SAC, Ex. A § 5.4.1.) The joint venture terms were also identified. (SAC, Ex. A at Ex. “A”.)

TPG requests specific performance by way of the court ordering either defendants convey the Property to TPG in accordance with the Agreement (right to purchase the Property transferred to NewCo, or Property to be sold to TPG for $40 million), or to require defendants Honarkar to convey ownership of Aryabhata to TPG in accordance with the terms of the Agreement. (SAC ¶¶ 31, 117-118, 128-130.) TPG alleges other remedies at law are inadequate and cannot fully compensate TPG for defendants’ misconduct as the Property is unique and cannot be substituted with a different piece of land. (SAC ¶ 113.) The Agreement permits TPG to compel Honarkar to perform his obligations under the Agreement, which was to convey the Property to TPG. (SAC ¶ 114.) As Honarkar controls Aryabhata, which in turn owns the Property, TPG alleges Aryabhata is subject to the terms of the Agreement. (SAC ¶ 115.) TPG states it will honor the rights of all parties under the Agreement, including putting up money to purchase the Property and for Honarkar to retain significant rights under the Agreement. (SAC ¶ 116.)

The terms of the Agreement are sufficient definite, consideration ($40 million for the Property; monetary assistance for the Litigation) is adequate, TPG has requested to be able to purchase the Property under the terms of the Agreement (or to pay the amount that the Property was purchased for), there is a mutuality of remedies in that TPG would pay for the Property and Honarkar would become either a partner in NewCo or would receive the price he paid to purchase the Property, and a legal remedy would be inadequate as real property is unique.

TPG has properly pled specific performance.

The motion to strike is DENIED as to this issue.

ii) Punitive Damages

Punitive damages are permitted under Civ. Code § 3294:

“(a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

. . .

(1) “Malice” means 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.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. . .” (Civ. Code § 3294.)

It is not sufficient to allege merely that a defendant “acted with oppression, fraud or malice.” A plaintiff must allege specific facts showing that defendant’s conduct was oppressive. (Smith v. Sup.Ct. (Bucher) (1992) 10 Cal.App.4th 1033, 1041-1042; Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643.) “Despicable conduct” is conduct that is so “vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (Scott v. Phoenix Schools, Inc. (2009) 175 Cal.App.4th 702, 715.)

Fraud, “must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made [citations].” (Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157 [“Tarmann”].) Fraud must be pled with particularity. (Comm. on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Particularity requires facts that, “show how, when, where, to whom, and by what means the representations were tendered.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993.) “[S]pecificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann, supra, 2 Cal.App.4th at 157-58.)

“Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim.” (Grieves v. Superior Court, 157 Cal. App. 3d 159, 166 (Ct. App. 1984).)

“(b) An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” [Emphasis added.] (Civ. Code § 3294(b).)

“[A] corporate entity cannot commit willful and malicious conduct; instead, “the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” Id. § 3294(b); [Citation.] Therefore, Plaintiffs must plead that an officer, director, or managing agent of Defendants committed an act of oppression, fraud, or malice.” (In re Yahoo! Inc. Customer Data Sec. Breach Litig., 313 F. Supp. 3d 1113, 1147–48 (N.D. Cal. 2018).)

TPG alleged Co-conspirators (including Aryabhata) were aware of TPG rights under the Agreement including to acquire the Property yet in violation of those right intentionally conspired to deprive TPG of the Property. (SAC ¶¶ 19, 27, 29, 104, 110, 169-170, 189) These Co-conspirators are alleged to have created and enacted a scheme to deprive TPG of the Property and the right under the Agreement, including encouraging and assisting Honarkar to secretly settle with Starboard, assist in finding funding, and then sell/transfer the Property to Aryabhata in order to claim the Property had been sold to a bona fide third party. (SAC ¶¶ 19, 27-29, 102, 105, 108-111, 170-171, 173-175, 179, 189.) TPG alleged Aryabhata is an alter ego and/or owned and controlled by Honarkar. (SAC ¶¶ 35, 46, 97.) TPG has also alleged the manager of all of Honarkar’s entities was also the manager of Aryabhata. (SAC ¶ 25.) If either of those allegations is true, then the acts of Honarkar that support punitive damages claims may be imputed onto Aryabhata.

Though Aryabhata argues Honarkar is not an officer, director, or managing agent of Aryabhata, that is not something the court can determine at this time. TPG has alleged sufficient facts to suggest Honarkar committed fraudulent acts and that Honarkar owns or controls Aryabhata, which might support punitive damage claims against Aryabhata. As a result of the acts of the Co-conspirators, TPG was harmed by both continuing to pay the Litigation costs and by Honarkar selling the Property sold to someone else despite the Agreement.

The acts of the Co-conspirators can be construed as conduct intending to cause injury to TPG with a willful and conscious disregard of the rights of TPG under the Agreement. (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal. App. 4th 1004, 1055. [“To establish conscious disregard, the plaintiff must show ‘that the defendant was aware of the probable dangerous consequences of his conduct, and that he wilfully and deliberately failed to avoid those consequences.’ ”].) Further, TPG has alleged fact showing Co-conspirators aided Honarkar in the acts that support the fraud COA, which would support the fraud prong of punitive damages.

TPG has pled sufficient facts to allow defendants to understand fully the nature of the charge made, including Aryabhata. (Tarmann, supra, 2 Cal.App.4th at 157) support punitive damages Aryabhata.

The motion to strike is DENIED on this issue.

C) Coastline Loans, LLC

1) Demurrer

Coastline Loans, LLC’s (“Coastline”) Demurrer to the SAC is OVERRULED.

Coastline demurs to COA Nos. 5 and 7 on the basis that they do not state sufficient facts to constitute COA against Coastline. (Civ. Proc. Code 430.10(e).)

a) COA No. 5 – Intentional Interference With Contract

There are few facts specific as to Coastline other than it lent Honarkar money to pay off debts and purchase the Property. Generally, most of the allegations against Coastline come as part of allegedly being one of the collective defendants identified as the “Co-conspirators.” (SAC ¶ 19.) Throughout the SAC, TPG alleges multiple acts as to the “Co-conspirators” that support this COA. While it is unclear if TPG will actually be able to prove any specific actions by Coastline outside of the loan, a demurrer requires the court assume all allegations of the SAC are true, including that Coastline was part of the conspiracy.

TPG has alleged the Agreement between TPG and Honarkar and attached the Agreement to the Complaint. (SAC ¶¶ 1, 5, 72-73, 76, 166, Ex. A.) TPG has alleged Coastline, as part of the group identified as the “Co-conspirators,” was aware of TPG’s rights under the Agreement. (SAC ¶¶ 19, 27, 29, 104, 110, 169-170.) TPG has pled sufficient facts to support the first two elements.

Honarkar sought new capital partners and partners to provide funding for the Property, including Coastline. (SAC ¶¶ 19, 25, 37, 170.) The Co-conspirators provided funds to enable Honarkar to refinance his debts and to transfer the Property from Starboard to Aryabhata. (SAC ¶ 102.) The Co-conspirators also allegedly assisted Honarkar in the foreclosure litigation with the goal of obtaining the Property. (SAC ¶¶ 108-111, 173.) Coastline also alleged to have given Honarkar a $175 million loan secured by real property, an placed a secured second deed of trust on the Property. (SAC ¶¶ 25, 37.) Coastline is also alleged to be owned by Stupin, who was and/or is a joint manager with Continuum’s President Shyam on multiple other ventures. (SAC ¶¶ 37-39, 59, 99.) TPG alleges Coastline, in addition to other Co-conspirators caused Honarkar to breach the Agreement despite knowledge of the Agreement to the Co-conspirators could benefit from the Property to the detriment of TPG. (SAC ¶ 99.) TPG has alleged Coastline/Co-conspirators knew their participation in the scheme would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 174-175, 189-190.) Honarkar was also alleged to have been in a joint venture with Co-conspirators to develop the Property, even though Honarkar did not yet own the Property. (SAC ¶ 110.) The actions induced Honarkar to breach the Agreement and/or prevented Honarkar from performing his obligations. (SAC ¶ 171, 175.) TPG has pled sufficient facts to support the third and fourth elements of this COA.

Coastline makes the same lack of valid contract argument that Aryabhata, which also fails as a demurrer is not the proper place for the court to make determination of fact.

The demurrer is OVERRULED as to this COA.

b) COA No. 7 – Aiding and Abetting Breach of Fiduciary Duty

Again, most of the facts alleged against Coastline in this COA are as Coastline being one of the “Co-conspirators.” (SAC ¶¶ 19, 27, 29, 104, 110, 169-170, 189.)

TPG alleged Coastline, as part of the group identified as the “Co-conspirators,” was aware of TPG’s rights under the Agreement. (SAC ¶¶ 19, 27, 29, 104, 110, 169-170, 189.) Honarkar sought new capital partners and partners to provide funding for the Property, including Aryabhata. (SAC ¶¶ 19, 170.) The Co-conspirators provided funds to enable Honarkar to refinance his debts and to transfer the Property from Starboard to Aryabhata. (SAC ¶¶ 102, 189.) The Co-conspirators also allegedly assisted Honarkar in the foreclosure litigation with the goal of obtaining the Property. (SAC ¶¶ 108-111, 189-190.) TPG has alleged Aryabhata/Co-conspirators knew their participation in the scheme would destroy TPG’s rights under the Agreement. (SAC ¶ 29, 189-191.) Honarkar was also alleged to have been in a joint venture with Co-conspirators to develop the Property, even though Honarkar did not yet own the Property. (SAC ¶ 110.) The actions induced Honarkar to breach the Agreement and/or prevented Honarkar from performing his obligations. (SAC ¶ 171, 175.) TPG has pled sufficient facts assistance and/or encouragement by Coastline towards Honarkar breaching the Agreement and that Coastline /Co-conspirator’s actions were a substantial factor in causing harm to TPG. (SAC ¶ 189-190.) The alleged actions also support Coastline /Co-conspirator’s intent to facilitate Honarkar’s breach of the Agreement. (Upasani v. State Farm Gen. Ins. Co. (2014) 227 Cal. App. 4th 509, 519.)

TPG has pled sufficient facts to state this COA against Coastline. (Nasrawi v. Buck Consultants LLC (2014) 231 Cal. App. 4th 328, 343.)

The demurrer is OVERRULED as to this COA.

2) Motion to Strike

Coastline’s Motion to Strike is GRANTED in part and DENIED in part.

Coastline requests the following be struck from the SAC:

1. The reference to "Coastline" on page 50, paragraph 179, as it relates to punitive damages;

2. The reference to "Coastline" on page 54, paragraph 192, as it relates to punitive damages;

3. The reference to "Coastline" in the prayer for relief on page 61, paragraph 8, as it relates to punitive damages; and,

4. Request for attorney fees in reference to "Coastline" in the prayer for relief on page 61, paragraph 9, as it relates to punitive damages.

Regarding the attorney fees request, there is no specific reference to Coastline in that Prayer. The Agreement does permit recovery of attorney, so the Prayer is proper as potential relief against at least Honarkar, even if it may not pertain to Coastline. (SAC, Ex. A § 11.8.)

The motion is DENIED as to the attorney fees.

As to the punitive damages claims, the base allegations against Coastline are that it and its owner lent money to Honarkar for the purpose of purchasing the Property. TPG alleged Coastline, through its owner Stupin, lent money to Honarkar to purchase the Property and pay off the loans from Loancore, which had a 100 percent guarantee from Stupin. (SAC ¶¶ 21, 59.) Coastline, formed by Stupin, was the bank that provided a loan secured by various properties including the Property. (SAC ¶¶ 23, 25, 37.) TPG alleged, on information and belief, Coastline knowingly aided in the taking of title of the Property contrary to rights of TPG for the purpose of causing damage TPG. (SAC ¶ 37.) Stupin is alleged to have participated in the refinancing of Honarkar’s massive debt and assisted Honarkar in the Litigation and acquiring the Property in the name of Aryabhata. (SAC ¶ 62.) Coastline is also alleged to be one of the Co-Conspirators that were aware of the Agreement and assisted Honarkar in breaching the Agreement.

While the loaned money ultimately assisted Honarkar in paying off debts and purchasing acquiring the Property (or assigning the Property to Aryabhata), merely lending money without any additional specific allegations of fraud, malice, or oppression, would not support punitive damages. At this time, TPG has not pled sufficient allegations to support punitive damages against Coastline.

The motion is GRANTED as to the punitive damages items.

D) Continuum Analytics, Inc

1) Demurrer

Continuum Analytics, Inc.’s (“Continuum”) Demurrer to the SAC is OVERRULED.

Continuum also demurs to COA Nos. 5 and 7 on the basis that they do not state sufficient facts to constitute COA against Coastline. (Civ. Proc. Code 430.10(e).)

a) COA No. 5 – Intentional Interference With Contract

As with Aryabhata and Coastline, Continuum is alleged to be one of the “Co-conspirators” that TPG has attributed general actions to. (SAC ¶ 19.) TPG has also alleged that Coastline and Continuum have common agents and/or managers (Kluchin). (SAC ¶¶ 24, 37, 49-51.) Kluchin, who is also alleged to be an employee (Chief Operating Officer) of Continuum (SAC ¶¶ 24, 52), states that he and a group of private real estate investors worked with Honarkar to stave off Honarkar’s financial ruin and to form Aryabhata, which the Property would become part of. (SAC ¶¶ 98, 108-111) Further, Continuum is alleged to have changed ownership of all of Honarkar’s entities to MOM . (SAC ¶ 24.) Aryabhata’s listed managers/members are MOM, which shares the address of where all of Honarkar’s entities were transferred to. (SAC ¶¶ 37, 39, 45-46.) TPG alleges Continuum aided to Co-conspirators in taking title of the Property in derogation of TPG’s rights. (SAC ¶¶ 36, 192.) Continuum is alleged to have known of the Agreement and caused Honarkar to breach the Agreement and/or prevented Honarkar from performing his obligations. (SAC ¶¶ 99, 171.)

TPG has pled sufficient facts to support this COA.

The demurrer is OVERRULED as to this COA.

b) COA No. 7 – Aiding and Abetting Breach of Fiduciary Duty

As with COA No. 5, TPG has pled sufficient facts to support this COA.

The demurrer is OVERRULED as to this COA.

2) Motion to Strike

Continuum’s motion to strike is DENIED.

Continuum requests the following be struck from the SAC:

1. Claim for punitive damages related to Fifth Cause of Action (for Intentional Interference with Contract) located at paragraph 179;

2. Claim for punitive damages related to the Seventh Cause of Action (for Aiding and Abetting Breach of Fiduciary Duty) located at paragraph 192;

3. Prayer for “punitive damages” in paragraph 8 of the Prayer for Relief.

As an initial note, TPG has already plead sufficient facts to support punitive damages claims against at least Aryabhata and Honarkar (supra). Continuum does not seek to strike only its name from the punitive damages claims as did Coastline, but rather seeks to strike the entire claim of punitive damages. This would not be permissible as again, there are valid punitive damage claims.

As to Continuum specifically, TPG alleged Continuum was one of the Co-conspirators. As part of that, Continuum, through its COO Kluchin, worked with a group of private real estate investors and Honarkar to stave off Honarkar’s financial ruin and to create Aryabhata for the sole purpose of acquiring/developing the Property. All of Honarkar’s business entities/properties, including the Property, were then transferred by Continuum over to an entity (MOM) that shares the same business address as Continuum.

TPG has alleged Kluchin, who is a corporate officer of Continuum, was involved in the formation of Aryabhata and the transfer of the Property to Aryabhata. This would show authorization or ratification and permit punitive damages against Continuum. (Civ. Code § 3294(b); (In re Yahoo! Inc. Customer Data Sec. Breach Litig., 313 F. Supp. 3d 1113, 1147–48 (N.D. Cal. 2018.) TPG’s allegations also support the malice and fraud prongs of Civ. Code § 3294 in that Continuum’s actions were in willful and conscious disregard for TPG’s rights under the Agreement, which Continuum was allegedly aware of. Further, as a Co-conspirator, Continuum concealed that it was working with Honarkar to obtain the Property with the intent of depriving TPG of its rights under the Agreement to obtain the Property.

TPG has pled sufficient facts to support punitive damages.

The motion is DENIED.

E) Mohammad Honarkar

1) Demurrer

Mohammad Honarkar’s (“Honarkar”) Demurrer is OVERRULED.

Honarkar demurs to COA Nos. 3, 4, and 9 on the bases that they are uncertain and fail to state sufficient facts to support COA against Honarkar. (Civ. Proc. Code § 430.10(e) and (f).) Honarkar additionally demurs to the claim of specific performance and to the entire action generally as Honarkar claims there is another action pending. (Civ. Proc. Code § 430.10(a) and (c).)

a) Pending Action

Honarkar contends there is another pending action between these parties in the matter of Honarkar v. The Picerne Group, Inc., OCSC Case No.: 30-2021-01208258. That matter was previously consolidated with the present matter by this court on 10/25/21. (ROA #110.) It is unclear from Honarkar’s arguments why TPG would be precluded from filing what is now essentially a cross-complaint to Honarkar’s complaint for declaratory relief. Honarkar conceded that point in his pleading agreeing the two cases should be consolidated. (ROA #52 at 2:8-10 [“The consolidation is simple: the Second Action gets consolidated into the Lead Action under Rules of Court Rule 3.350(b), and the Second Action is deemed a cross-complaint under the law.”].)

Even if a determination on Honarkar’s complaint were to also resolve some (or all) of TPG’s COA, Honarkar’s complaint has not been determined on the merits as of yet and TPG should not be precluded from putting forth its own claims for relief.

The demurrer is OVERRULED as to this argument.

b) Specific Performance

“A demurrer is not the appropriate vehicle to challenge a portion of a cause of action demanding an improper remedy. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 [“a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy”]; PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 (PH II ) [“demurrer does not lie to a portion of a cause of action”]; Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163 [petitioners' punitive damage allegations not subject to real parties' demurrers]; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 7:42.1, p. 7–18 [“A general demurrer challenges only the sufficiency of the cause of action pleaded, and must be overruled if any valid cause of action is pleaded; a demand for improper relief does not vitiate an otherwise valid cause of action. [Citations.]”].).” (Caliber Bodyworks, Inc. v. Superior Ct. (2019) 134 Cal. App. 4th 365, 384–85, disapproved of on other grounds by ZB, N.A. v. Superior Ct. (2019) 8 Cal. 5th 175 (“Caliber”.)

Honarkar’s attack of the requested relief for specific performance is not proper for demurrer. An attack on a remedy should be brought instead in a motion to strike. None of the cases cited by Honarkar in support of his arguments involve demurrers.

The demurrer is OVERRULED as to this argument.

c) COA No. 3 – Fraudulent Misrepresentation

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal. 4th 631, 638.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] “Thus ' ”the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.“ ' [Citation.] [¶] This particularity requirement necessitates pleading facts which 'show how, when, where, to whom, and by what means the representations were tendered.' ”’” (Id., at 645.)

TPG has alleged specific statements and representations made by Honarkar to TPG. (SAC ¶¶ 15, 82-83, 90, 145.) TPG has alleged each of the statements were false and that Honarkar knew each was false or recklessly and without regard for the truth. (SAC ¶¶ 146-147.) TPG alleged Honarkar intended TPG to rely on the misrepresentations so TPG would continue paying the Litigation expenses and managing the Litigation, as well as paying Honarkar’s expenses, which TPG was not obligated to pay under the Agreement. (SAC ¶¶ 149, 152.) TPG has alleged it was harmed by Honarkar not complying with the terms of the Agreement and purchasing the Property for the benefit of the joint venture with TPG and Honarkar. (SAC ¶ 152.) TPG, under the belief it had an Agreement with Honarkar, justifiably relied on statements made by Honarkar. (Id.)

TPG has pled sufficient facts and this cause of action is not uncertain as to Honarkar.

Honarkar argues TPG’s fraud claims against Honarkar were from his actions or statements derived from the Litigation and thus are expressly precluded under litigation privilege of Civ. Code § 47. That code section does not appear applicable as the statements and concealment were not made before the court, made in furtherance of progressing the Litigation, or as part of the Litigation. Instead, as alleged, the statements were either made either to induce TPG to pay/continue paying for the Litigation and/or to prohibit TPG from obtaining the benefits of the Agreement. Extrinsic fraud it not covered by Civ. Code § 47. (Kimes v. Stone, 84 F.3d 1121, 1127, fn. 3 (9th Cir. 1996).)

Honarkar’s reply brief puts forth a new argument that there are no independent torts that would serve as the basis for fraud claims. However, “when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort.” [Emphasis added.] (Harris v. Atl. Richfield Co. (1993) 14 Cal. App. 4th 70, 78.) In Erlich v. Menezes (1999) 21 Cal. 4th 543, the court held, “the same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts.” (Id., at 551.) “ ‘ “A contractual obligation may create a legal duty and the breach of that duty may support an action in tort.” This is true; however, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. [Citation.] “ ' ”An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.“ ' ” (Id.) Here, had Honarkar simply not paid his portion of the Litigation fees, had not participated in the Litigation, or had simply not sold the Property to TPG, then the matter might only be a breach of contract. However, the Agreement is alleged to have created a fiduciary duty (or legal duty) between Honarkar and TPG, which Honarkar then breached by his allegedly fraudulent acts. Honarkar’s acts of not acting in the best interest of the alleged joint venture between he and TPG would support the fraud claims.

As TPG has alleged a legal duty that would support the separate fraud claims, they should be permitted to proceed.

The demurrer is OVERRULED as to this COA.

d) COA No. 4 – Fraudulent Concealment

Concealment is, “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact” (Civ. Code § 1710(3).) “To state a claim for fraudulent concealment under California law, a plaintiff must allege: “ ‘(1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.’ ”” (In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prod. Lab. Litig., 754 F. Supp. 2d 1145, 1189 (C.D. Cal. 2010) [Toyota].( “A plaintiff may demonstrate a duty to disclose in four circumstances: “(1) when the defendant is [] in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact.”” (Id.)

TPG alleges Honarkar failed to disclose, among other things, 1) Honarkar was negotiating with Starboard to settle the Litigation; 2) had agreed with the Co-conspirators to acquire the Property for their own benefit to the exclusion of TPG; 3) intended and did form Aryabhata to take title of the Property from starboard; and 4) did not intend to convey the Property to NewCo as required in the Agreement. (SAC ¶¶ 18-19, 27, 29, 92, 94, 102, 155.) TPG alleges these facts were concealed by Honarkar and the Co-conspirators. (SAC ¶ 156.) Honarkar is alleged to have a fiduciary obligation and duty to TPG under the Agreement, and agreed to work jointly to secure a favorable outcome to the Litigation to enable the Property to be transferred to NewCo. (SAC ¶¶ 8, 10, 157.) TPG has alleged it did not know the concealed facts and that Honarkar intended to deceive TPG by concealing those facts. (SAC ¶¶ 96, 105-106, 158-159.) Finally, had TPG known the facts, it would have behaved differently and immediately ceased paying for the Litigation. (SAC ¶¶ 11, 15, 80-83, 160.) TPG has also alleged damages by way of money/assets expended on the Litigation (in excess of $200,000) and by loss of the opportunity to purchase the Property.

TPG has pled sufficient and certain facts to support this COA against Honarkar.

The demurrer is OVERRULED as to this COA.

e) COA No. 9 – Fraudulent Transfer—Civil Code section 3439 et seq.

Honarkar begins with the argument that TPG is not a proper “creditor” and that Honarkar is not a proper “debtor.” This is incorrect. “ ‘ “Certainly, for purposes of the Uniform Fraudulent Conveyance Act, a tort claimant before judgment is rendered is a ‘creditor’ within the meaning of Civil Code section 3439.01.” [Citation.] “It is well settled in this state that the relationship of debtor and creditor arises in tort cases the moment the cause of action accrues.” [Citation.] “ ‘[O]ne having a claim for a tort is a creditor before the commencement of an action thereon, as well as after, and as such creditor, is, upon recovering judgment, entitled to avoid a fraudulent transfer antedating the commencement of his action.’ ” ‘ “ (Oiye v. Fox (2012) 211 Cal. App. 4th 1036, 1057–58.) As TPG has alleged multiple COA against Honarkar that have accrued, Honarkar and TPG are properly considered “debtor” and “creditor” under the Uniform Voidable Transfer Act (“UVTA”). TPG has also alleged debts incurred by Honarkar in favor of TPG by way of the Litigation expenses that TPG expended on behalf of Honarkar.

Honarkar next argues with the title to the Property being in Aryabhata’s name, that it is not within the property of Honarkar. This is the exact reason for the UVTA, which is to permit a creditor to recover assets that have improperly been transferred away from the possession of the debtor into the possession of a third party. TPG has sufficiently pled not only the Property has been improperly transferred from Honarkar to Aryabhata, but also that Honarkar is an alter ego and/or in control of Aryabhata. (SAC ¶¶ 35, 46.) If the Honarkar is an alter ego and/or in charge of Aryabhata, that would support a “fraudulent transfer” designed to keep the Property out of TPG’s possession.

TPG did allege that Preferred did loan Aryabhata $30 million secured by a deed of trust on the Property. (SAC ¶ 61.) TPG further alleged the Property is securing Coastline’s $175 million loan. (SAC ¶ 37.) TPG also alleged statements made by Kulchin that Aryabhata acquired the Property for the purchase price of $45 million. (SAC ¶¶ 92, 108.) The allegations suggest there is one or more liens on the Property, but it is unclear at this time if those liens are valid liens. Further, if the purchase price were $45 million, but the only lien on the Property was from the $30 million loan by Preferred, then at the time of transfer there may have been unencumbered equity in the Property at the time of transfer that would permit it to be considered an “asset” under the UVTA. (In re Tootian, 634 B.R. 361, 369 (Bankr. C.D. Cal. 2021).) However, those issues are not proper for the court to determine on demurrer. The only issue is the sufficiency and certainty of the pleading. TPG has properly alleged this COA.

The demurrer is OVERRULED as to this COA.

2) Motion to Strike

Honarkar’s Motion to Strike is DENIED.

Honarkar requests to court strike the following claims:

- Claims for specific performance (SAC ¶¶ 31, 113-121, 128-130, 141-142, 151-153, 162-164, 184-185, 199-200.);

- Specific performance and/or mandatory injunction (SAC Prayer ¶¶ 1 and 2.);

- Claims for punitive damages (SAC ¶¶ 153, 164, 183, Prayer ¶ 8.) ;

- Order rescinding or voiding Honarkar’s assignment of his rights under the Amended PSA (SAC Prayer ¶ 4.);

- Prayer for “temporary restraining order, preliminary injunction and/or permanent injunction” (SAC Prayer ¶ 6.)

a) Specific Performance

As discussed in the analysis for the Aryabhata motion to strike, the claims for specific performance are proper. TPG has alleged that Honarkar is an owner and/or manager of Aryabhata and to that extent, specific performance may be obtained from Honarkar. Ownership/management of Aryabhata will presumably be parsed out during discovery, but for purposes of a motion to strike, TPG’s allegations are sufficient to overcome the motion.

The motion is DENIED as to this request.

b) Punitive Damages

As also noted in the Aryabhata motion to strike, punitive damages are available in this action. As also discussed in Honarkar’s demurrer, TPG has pled sufficient facts to support the fraud COA against Honarkar. These allegations are sufficient to meet the fraud and malice prongs of Civ. Code § 3294. This includes punitive damages being available as this is not merely a breach of contract action, but also a breach of legal duty action (as joint venturers), which would support recovery under tort theory. (Erlich v. Menezes (1999) 21 Cal. 4th 543, 551.)

The motion is DENIED as to this request.

c) Order rescinding/voiding assignment

Honarkar’s motion contained no arguments regarding the rescinding/voiding assignment.

The motion is DENIED as to this request.

d) TRO and/or injunctions

Honarkar’s motion contained no arguments regarding the TRO or injunctions.

The motion is DENIED as to this request.

An amended pleading is due in 15-days.

TPG to give notice.