Judge: Curtis A. Kin, Case: 21STCV40893, Date: 2022-08-18 Tentative Ruling

Case Number: 21STCV40893    Hearing Date: August 18, 2022    Dept: 72

DEMURRER

Date:      8/18/22 (9:30 AM)                 

Case:     Javid Somekh et al. v. South Gate Tweedy, LLC et al. (21STCV40893)

TENTATIVE RULING:

Defendants South Gate Tweedy, LLC and Mehdi Bolour’s Demurrer to Verified Fourth Amended Complaint is SUSTAINED IN PART.

As a preliminary matter, the most recent pleading is mislabeled as the Verified Third Amended Complaint (“TAC”). Accordingly, the following discussion refers to the operative pleading as the Verified Fourth Amended Complaint (“4AC”).

A.    FIRST CAUSE OF ACTION: DISSOLUTION OF PARTNERSHIP

Defendants contend that plaintiffs fail to allege the formation of a partnership, a prerequisite to the first cause of action for dissolution to partnership. A partnership requires “a sharing of profits as well as losses” and a “right to joint management and control of the business.” (Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1297, quoting People v. Park (1978) 87 Cal.App.3d 550, 564; see also Holtz v. United Plumbing & Heating Co. (1957) 49 Cal.2d 501, 506–07 [“[I]n order to create a joint venture there must be an agreement between the parties under which they have a community of interest, that is, a joint interest, in a common business undertaking, an understanding as to the sharing of profits and losses, and a right of joint control”].)

Plaintiffs allege that they agreed with defendant Medhi Bolour to enter into an oral partnership agreement. (4AC ¶ 12.) Plaintiffs also allege the terms of the oral agreement were memorialized in a formal written, partnership agreement. (4AC ¶ 16.) Bolour refused to sign the written agreement but purportedly orally agreed to comply with the terms of the unsigned written agreement. (4AC ¶ 18.)

The 4AC states that the written agreement which allegedly memorialized the terms of the oral partnership agreement is attached as Exhibit B. (4AC ¶ 16.) However, there were no exhibits attached to the 4AC. However, the written agreement was referenced in the prior Third Amended Complaint and attached therein as Exhibit B. (TAC ¶ 18.) “[A] plaintiff is bound by an allegation in an earlier version of the complaint even though the allegation is omitted from later versions . . . .” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 375.) Moreover, “Facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.” (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627, citing Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.)

Because plaintiffs continue to allege that the written agreement contains the terms of the oral partnership agreement (TAC ¶¶ 16, 18), the Court refers to Exhibit B of the TAC in determining whether plaintiffs allege the formation of a partnership with defendants. 

The 4AC contains no allegation that there was a sharing of losses in the purported partnership. Plaintiffs only allege that the partners were to share equally in rental income and proceeds of sale of the project. (4AC ¶ 12.) Moreover, the terms of the written partnership agreement discuss the sharing of profits, not losses. (TAC ¶ 18 & Ex. B at ¶ 7.) Because the written agreement does not provide for the sharing of losses, plaintiffs fail to allege the existence of a partnership that can be dissolved. While plaintiffs allege that they lost their $4 million investment (TAC ¶¶ 19, 33, 38, 44), this is a loss incurred by plaintiffs. Because no partnership was ever formed, the loss cannot be incurred by any partnership which would then be shared with the partners. 

Defendants also argue that plaintiffs fail to allege a right to joint management and control of the business. Plaintiffs allege that they and defendant Bolour would “share decision-making authority.” (4AC ¶ 16.) Plaintiffs also allege they had “exclusive control” and “autonomy” in “obtaining the approvals and entitlements.” (4AC ¶ 15.) However, plaintiffs allege that Bolour had 51% of the vote, and plaintiffs Javid Somekh and Hezi Kashanian had 49% of the vote. (4AC ¶ 16.) Moreover, the written agreement provides that defendant South Gate Tweedy, LLC has 51% of the vote and plaintiffs Somekh and Kashanian have 49% of the vote. (TAC Ex. B at ¶ 4.) Defendant Bolour is the managing member of South Gate Tweedy, LLC. (4AC ¶ 16.) Because Bolour, by way of South Gate Tweedy, LLC has majority control over the project, as the purported partnership is structured, plaintiffs fail to allege that they had any ability to manage or control the project.

For the foregoing reasons, plaintiffs fail to allege the formation of a valid partnership that could form the basis of the first cause of action.

The demurrer to the first cause of action is SUSTAINED.

B.     SECOND CAUSE OF ACTION: FRAUD IN THE INDUCEMENT

Defendants demur to the fraudulent inducement cause of action on the ground that plaintiffs’ allegations contradict the allegation that Bolour never intended to perform on these promises. (4AC ¶ 29; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481 [“‘“[S]omething more than nonperformance is required to prove the defendant's intent not to perform his promise.” [Citations]’”].) 

However, plaintiffs allege that Bolour “never intended to fund the development, and he never intended to share in the income from the development and the proceeds of any sale of the Project . . . .” (4AC ¶ 29; see also 4AC ¶ 20 [“However, with Defendant Bolour’s outburst, Plaintiff Somekh realized for the first time that Bolour had concealed his true intentions and never intended to live up to the parties’ oral Contract”].) This is an ultimate fact that the Court treats as true at the pleading stage. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 [“[T]he complaint ordinarily is sufficient if it alleges ultimate rather than evidentiary facts”].)

Defendants contend that plaintiffs’ allegation of ill intent is belied by their purported delay in obtaining the approvals and entitlements and delivering the Environmental Report to Bolour. (4AC ¶¶ 15, 20.) According to defendants, based on these delays, Bolour was justified in any non-performance. Defendants also note that plaintiffs omitted allegations of the $3.5 million bank loan that Bolour took over. (TAC ¶¶ 11, 12.) However, when a fraud cause of action is based on the intention not to perform, “the essence of the fraud is the existence of an intent at the time of the promise not to perform it, and such intent is always a question of fact.” (Kejr v. Construction Engineers (1954) 128 Cal.App.2d 396, 400.)

Accordingly, plaintiffs sufficiently allege Bolour’s fraudulent intent in inducing plaintiffs to enter into the oral partnership agreement. (TAC ¶¶ 29, 30.)

The demurrer to the second cause of action is OVERRULED.

C.    THIRD CAUSE OF ACTION: BREACH OF FIDUCIARY DUTY

“The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)

Defendants contend that because plaintiffs fail to state the existence of an enforceable partnership, plaintiffs fail to allege a fiduciary relationship upon which the third cause of action can be maintained. (4AC ¶ 35 [“Defendant Bolour, as Plaintiff Somekh and Kashanian’s partner, owed Plaintiffs a duty of fairness, loyalty, honesty, and good faith”].)

For the reasons discussed with respect to the first cause of action, plaintiffs fail to allege the existence of an enforceable partnership. As a result, plaintiffs fail to allege the breach of any fiduciary duty.

The demurrer to the third cause of action is SUSTAINED.

D.    FOURTH CAUSE OF ACTION: CONVERSION

Defendants demur to this cause of action on the ground that defendants’ ownership of the real property is not wrongful. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240 [conversion is the “wrongful exercise of dominion over the property of another”].) While defendants refer to the unsigned written partnership agreement and a Grant Deed as purported evidence that plaintiffs’ transferring of the real property was consensual, plaintiffs sufficiently allege they entered into business with defendants and ceded control over development of the project based on Bolour’s false promises to build the project. (4AC ¶¶ 29, 40.)

Defendants also demur to this cause of action on the ground that a conversion claim can be maintained only as to personal property, not real property. “[I]t is generally acknowledged that conversion is a tort that may be committed only with relation to personal property and not real property.” (Munger v. Moore (1970) 11 Cal.App.3d 1, 7.) Plaintiffs base the conversion cause of action on Bolour’s conveyance of the Atlantic Park Plaza commercial development project to South Park Tweedy, LLC. (4AC ¶¶ 10, 42, 43.) However, the project still cannot serve as a basis for the conversion cause of action because it is still with relation to real property, i.e., the real property located at 9923 Atlantic Avenue in South Gate, as the project is for commercial development at the property. Plaintiff does not explain how a commercial development can be considered personal property.  

The demurrer to the fourth cause of action is SUSTAINED.

Because plaintiffs had the opportunity to amend the dissolution of partnership, breach of fiduciary duty, and conversion causes of action and still cannot state these causes of action, leave to amend is DENIED.

The Court declines to impose sanctions under CCP § 128.7.