Judge: Cynthia A Freeland, Case: 37-2023-00043136-CU-BC-NC, Date: 2024-02-27 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

DEPT.:

EVENT DATE:

EVENT TIME:

SOUTH BUILDING TENTATIVE RULINGS - February 08, 2024

02/09/2024  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

CASE NO.:

CASE CATEGORY:

EVENT TYPE:

CASE TITLE: CASE TYPE:

Civil - Unlimited  Breach of Contract/Warranty Demurrer / Motion to Strike 37-2023-00043136-CU-BC-NC MITRA K. ESENSTEN AS TRUSTEE OF THE KARUBIAN 2021 IRREVOCABLE TRUST VS. LEAVITT [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 10/27/2023

Defendants David Leavitt, Kaci Vanderhoek, Caroline Leavitt (collectively, the 'Individual Defendants'), and Baron & Baroness Jewels Inc. e/s/a Lux USA, Lux Estate Sales, and Lux USA Jewelry (collectively, the 'Entity Defendants' and, together with the Individual Defendants, 'Defendants')'s demurrer to Plaintiffs Mitra K. Esensten as Trustee of the Karubian 2021 Irrevocable Trust (the 'Trust'), Mitra K.

Esensten individually ('Mitra'), and Sydney J. Esensten ('Sydney' and, together with Mitra and the Trust, 'Plaintiffs')'s First Amended Complaint (the 'FAC') is overruled.

Before turning to the merits, the court notes that the demurrer must be overruled as to the Entity Defendants because they are not presently represented by counsel in this action. On December 12, 2023, the court granted Defendants' counsel request to be relieved as counsel. See ROA Nos. 49, 52.

The Order granting that motion granted the Entity Defendants 30 days from December 12, 2023, or until January 11, 2024, to obtain counsel. As of the date of this ruling, there is no indication that the Entity Defendants accomplished the foregoing. Consequently, the Entity Defendants are not permitted to pursue the pending demurrer. See CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal. App. 4th 1141, 1145 ('[U]nder long-standing common law rule of procedure, a corporation, unlike a natural person, cannot represent itself before courts of record in propria persona, nor can it represent itself through a corporate officer, director or other employee who is not an attorney. It must be represented by licensed counsel in proceedings before courts of record.').

A demurrer tests the legal sufficiency of a pleading. See McKell v. Washington Mutual, Inc. (2006) 142 Cal. App. 4th 1457, 1469. When reviewing a demurrer, the court 'give[s] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.' Blank v. Kirwan (1985) 39 Cal. 3d 311, 318. The court 'treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law.' Durell v. Sharp Healthcare (2010) 183 Cal. App. 4th 1350, 1358. The court's analysis is limited to the complaint, exhibits attached to the complaint and incorporated by reference, and matters properly subject to judicial notice. See Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal. App. 4th 659, 665; Thorburn v. Department of Corrections (1998) 66 Cal. App. 4th 1284, 1287-1288; Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.

The demurrer to the second cause of action for intentional infliction of emotional distress ('IIED') is overruled. The elements for IIED are: '(1) outrageous conduct by the defendant; (2) the defendant's intention of causing or reckless disregard of the probability of causing emotional distress; (3) the plaintiff's suffering severe or extreme emotional distress; and (4) actual and proximate causation of the emotional distress by the defendant's outrageous conduct.' Yau v. Santa Margarita Ford, Inc. (2014) 229 Calendar No.: Event ID:  TENTATIVE RULINGS

3044803 CASE NUMBER: CASE TITLE:  MITRA K. ESENSTEN AS TRUSTEE OF THE KARUBIAN 2021  37-2023-00043136-CU-BC-NC Cal. App. 4th 144, 160. 'Extreme and outrageous conduct is conduct that is 'so extreme as to exceed all bounds of that usually tolerated in a civilized community' and must be 'of a nature which is especially calculated to cause, and does cause, mental distress.'' Chang v. Lederman (2009) 172 Cal. App. 4th 67, 86-87 (quoting Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal. 4th 965, 1001; Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal. 3d 148, 155, fn. 7). 'Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him power to damage the plaintiff's interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress.' Smith v. BP Lubricants USA Inc. (2021) 64 Cal. App. 5th 138, 147. 'In order to avoid a demurrer, the plaintiff must allege with 'great[ ] specificity' the acts which he or she believes are so extreme as to exceed all bounds of that usually tolerated in a civilized society.' Vasquez v. Franklin Management Real Estate Fund, Inc. (2013) 222 Cal. App. 4th 819, 832 (quoting Schlauch v. Hartford Accident & Indemnity Co. (1983) 146 Cal. App. 3d 926, 936). 'Severe emotional distress means 'emotional distress of such substantial quality or enduring quality that no reasonable [person] in civilized society should be expected to endure it.'' Hughes v. Pair (2009) 46 Cal. 4th 1035, 1051 (quoting Potter, 6 Cal. 4th at 1004).

The court finds that the FAC states facts sufficient to constitute a cause of action for IIED. The FAC alleges that Cyrus and Houri Karubian are Mitra's and Sydney's parents and grandparents, respectively.

See FAC, ¶ 2. Mr. and Mrs. Karubian purchased and acquired certain rare antiques over a more than 50-year period, including paintings, bronzes, glassware, porcelain, crystal, furniture, silverware, and designer clothing (collectively, the 'Inheritances') which were located at the Karubians' residence, 1405 Park Way, Beverly Hills, CA (the 'Property'). Ibid., ¶¶ 1-2. On March 8, 2022, Mrs. Karubian died. She was predeceased by Mr. Karubian. Ibid., ¶ 15. After Mrs. Karubian's passing, Plaintiffs agreed that they would market and sell some of the Inheritances that their family did not intend to keep. Ibid. To do so, Plaintiffs turned to the Individual Defendants who had held themselves out as honest, knowledgeable, and experienced individuals to handle the sale in an honest, respectable, and professional manner. Ibid.

On July 30, 2022, the Trust (through Mitra) and Antique and Estate Jewelry Ltd. dba Lux USA (through Ms. Venderhoek) entered into an Estate Sale Agreement (the 'Agreement') under which Defendants agreed to sell the Inheritances that had not previously been excluded by Plaintiffs as the excluded items either: (1) were of sentimental, unique, and special value, or (2) owned by Mitra and Sydney. Ibid., ¶ 16, Ex. B. Mitra and Sydney worked with Ms. Vanderhoek, Mr. Leavitt, and Defendants' staff to organize and prepare the designated Inheritances for sale, which sale was scheduled for August 25-27, 2022. Ibid., ¶ 20. Pursuant to ¶ 7 of the Agreement, Plaintiffs were encouraged not to be present for the sale given that it is a sensitive time for family members and their presence often makes potential customers uncomfortable. Ibid., ¶ 21.

The Individual Defendants were granted full access to the Property for purposes of conducting the sale.

Ibid., ¶ 22. Sometime before the first day of the sale (August 25, 2022), the Individual Defendants, without Plaintiffs' prior notice or consent, removed certain Inheritances from the Property to be sold to 'special clients' who could not attend the sale. This allegedly was in breach of the Agreement, which provided at ¶ 10 that Defendants needed to obtain authorization to remove the Inheritances from the Property before the scheduled sale. Ibid., ¶ 25. This has prevented Plaintiffs from obtaining the designated Inheritances that were to be excluded from the sale, which has emotionally impacted Mitra and Sydney in the wake of Mrs. Karubian's death. Ibid., ¶ 26.

The sale went forward as scheduled on August 25, 2022. The Individual Defendants represented to Mitra and Sydney that the sales were slower and that the prices received were much lower than anticipated. Ibid., ¶ 24. The Individual Defendants have refused to account for the sales proceeds or identify either: (1) the items that were sold at the sale, or (2) the items that were sold to special clients outside of the sale. Ibid., ¶¶ 24-25. Nor have Defendants deposited into the Trust 18% of the sales proceeds as required under the Agreement. Ibid., ¶¶ 27-28. Plaintiffs have since discovered that the Individual Defendants have been conducting business under multiple names and fraudulent entities that have been dissolved, suspended, and/or were not authorized to conduct business in California. Ibid., ¶ 31, Ex. A.

Calendar No.: Event ID:  TENTATIVE RULINGS

3044803 CASE NUMBER: CASE TITLE:  MITRA K. ESENSTEN AS TRUSTEE OF THE KARUBIAN 2021  37-2023-00043136-CU-BC-NC The foregoing is sufficient to survive the pleading stage. First, the court respectfully must disagree with Defendants that the FAC fails to sufficiently allege that Defendants engaged in extreme and outrageous conduct. As set forth above, outrageous conduct may be established by demonstrating that a defendant: (1) abuses a relation or position which gives him or her power to damage the plaintiff's interest; (2) knows that the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress.

Consequently, to the extent Defendants urge the court to sustain the demurrer on the grounds that 'intentionality' is not alleged, the court declines to do so as that is not the only manner in which outrageous conduct can sufficiently be pled. Toward that end, the FAC sufficiently alleges that Defendants abused a relation or position of power over Mitra and Sydney and otherwise knew that Mitra and Sydney were susceptible to emotional distress. More specifically, the FAC alleges that before and at the time of the Agreement's execution, the Individual Defendants knew that: (1) Mitra and Sydney were grieving Mrs. Karubian's recent passing; (2) the Inheritances were of special and unique value; and (3) Mitra and Sydney had an emotional attachment to the Inheritances. Ibid., ¶ 40. Indeed, ¶ 7 of the Agreement plainly indicates that this was a sensitive time for Mitra and Sydney. Mitra and Sydney also made this clear to the Individual Defendants. Ibid., ¶ 41.

Moreover, the Individual Defendants knew that if they did not conduct the sale in a professional and honest manner and/or steal, if they failed to account for the sale proceeds, or removed from the Property the designated Inheritances that were not to be sold without Mitra's and Sydney's consent, severe emotional distress would result. Ibid., ¶ 42. For pleading purposes, the foregoing is sufficient to allege facts that could be found to constitute outrageous conduct, namely selling one's sentimental inherited property without accounting for the proceeds and/or selling one's sentimental inherited property that the individual specifically designated not be sold. Whether such conduct ultimately is determined to be extreme and outrageous is a factual issue that cannot be resolved on demurrer. See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97, 113-114 ('A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.').

Second, the court respectfully must disagree with Defendants that the FAC fails to sufficiently allege severe emotional distress. At the pleading stage, Plaintiffs need only allege emotional distress that is of such substantial or enduring quality that no reasonable individual in a civilized society should be expected to endure it. Severe emotional distress does not require a resulting physical injury – indeed, it 'may consist of any highly unpleasant mental reaction such as fright, grief, shame, humiliation, embarrassment, anger, chagrin, disappointment, or worry.' See Hailey v. California Physicians' Service (2007) 158 Cal. App. 4th 452, 476 (quoting Fletcher v. Western National Life Ins. Co. (1970) 10 Cal. App. 3d 376, 397). In this case, Defendants' characterization of the FAC's allegation of Mitra's and Sydney's severe emotional distress as 'conclusory' ignores that well-stated principle that the court, in ruling on a demurrer, must analyze the operative pleading by reading the document as a whole with its parts in their proper contexts. In this instance, the FAC alleges, in essence, that Mitra and Sydney were already suffering from emotional distress as a result of Mrs. Karubian's death, which emotional distress was amplified through Defendants' unauthorized sale of items carrying significant sentimental value. The exact nature of Mitra's and Sydney's emotional distress damages is an issue for the trier of fact.

Finally, Defendants' contention that the FAC constitutes a 'sham pleading' is unavailing. 'Under the sham pleading doctrine, admissions in a complaint that 'has been superseded by an amended pleading remain within the court's cognizance and the alteration of such statements by amendment designed to conceal fundamental vulnerabilities in a plaintiff's case will not be accepted.'' Nguyen v. Western Digital Corp. (2014) 229 Cal. App. 4th 1522, 1536 (quoting Lockton v. O'Rourke (2010) 184 Cal. App. 4th 1051, 1061). Initially, the court notes that, in ruling on the pending demurrer, the court's analysis is limited to the four corners of the FAC as well as matters properly subject to judicial notice. That being said, Defendants have not asked that the court take judicial notice of the original Complaint in this matter.

Nevertheless, it appears, based on the arguments asserted by Defendants, that the allegations set forth in the FAC merely clarify the allegedly wrongful conduct on Defendants' part. More importantly, the court finds that the sham pleading doctrine does not apply because, as Defendants concede, the Los Angeles County Superior Court never ruled on the demurrer to the original Complaint. The court instead granted Calendar No.: Event ID:  TENTATIVE RULINGS

3044803 CASE NUMBER: CASE TITLE:  MITRA K. ESENSTEN AS TRUSTEE OF THE KARUBIAN 2021  37-2023-00043136-CU-BC-NC Plaintiffs an opportunity to amend their pleading to allege facts sufficient for venue to remain in Los Angeles County. The allegations set forth in the FAC as to the second cause of action cannot be an attempt to plead around an adverse ruling because no such adverse ruling ever was issued in that regard.

Accordingly, the court overrules the demurrer to the second cause of action.

In light of the foregoing, the court overrules the demurrer. Defendants shall file and serve an answer or otherwise plead to the FAC within ten (10) days of this hearing. See Cal. R. Ct. 3.1320(j). As set forth above, the Entity Defendants only may submit a responsive pleading through counsel. If the Entity Defendants are unable to obtain counsel, then Plaintiff will be able to pursue entry of default in the normal course.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, February 9, 2024. If no party appears at the hearing, this tentative ruling will become the order of the court as of February 9, 2024. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

Calendar No.: Event ID:  TENTATIVE RULINGS

3044803