Judge Daniel M. Crowley, Case 21SMCV00182 2023-04-27 Tentative Ruling

Judge: Daniel M. Crowley, Case: 21SMCV00182, Date: 2023-04-27 Tentative Ruling

Case Number: 21SMCV00182 Hearing Date: April 27, 2023 Dept: 207

Background

This action deals with a sale-leaseback agreement of a real property located at 25 Beverly Park Circle, Beverly Hills, California 90210. Defendant and Cross-Complainant 25 Beverly Park Circle PropCo, LLC (“PropCo”) has filed a First Amended Cross-Complaint (“FACC”) against Plaintiff Keyway Pride Limited, LLC (“Keyway”) and Kimora Lee Simmons (“Simmons” or, together with Keyway, “Cross-Defendants”). Cross-Defendants now bring this demurrer to PropCo’s causes of action for unlawful detainer, quiet title, breach of contract, unjust enrichment, equitable lien, ejectment, and money had and received, arguing each fails to state facts sufficient to constitute a cause of action against them under Code Civ. Proc. § 430.10(e). PropCo opposes the demurrer.

Legal Standard

When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.)

Analysis

1. Meet and Confer

The Court finds Cross-Defendants have complied with the meet and confer requirements set forth under Code Civ. Proc. § 430.41. (Boustani Decl. at ¶2.)

2. Unlawful Detainer

PropCo alleges Cross-Defendants occupied the property pursuant to a fixed term lease. PropCo’s unlawful detainer action is expressly brought under Code Civ. Proc. § 1161(1) for failure to vacate the property upon the expiration of the lease’s fixed term. (FACC at ¶38.) Cross-Defendants argue the FACC fails to attach the notices of termination of the lease pursuant to Code Civ. Proc. § 1166(d)(1). No notice of termination is required to bring an unlawful detainer claim under section 1161(1) as the tenancy in question has already been terminated by the expiration of the lease’s term. (C.C.P. § 1161(1); see also Ryland v. Appelbaum (1924) 70 Cal.App. 268, 270 [“It is well established that it is the duty of the tenant as soon as his tenancy expires by its own limitations, to surrender the possession of the premises and that no notice of termination is necessary, the lease itself terminating the tenancy; and if he continues in possession beyond that period without the permission of the landlord, he is guilty of unlawful detainer, and an action may be commenced against him at once”].) Nevertheless, the language in Code Civ. Proc. § 1166(d)(1) suggests that a notice of termination (while not required under Section 1161(1)) must be attached to the complaint. Thus, PropCo should amend its complaint to attach the notice in accordance with Section 1166(d)(1).

Cross-Defendants also argue the FACC does not adequately plead that the Tenant Protection Act of 2019 codified at Civil Code § 1946.2 applies to the property or that PropCo has complied with its terms. As PropCo points out, Cross-Defendants cite to no authority for the claim that such matter must be included in an unlawful detainer Complaint. Civil Code § 1946.2, by its express terms, does not apply to the expiration of a fixed term lease. Section 1946.2 provides that where a tenant has occupied a residential property for 12 months, “the owner of the residential real property shall not terminate the tenancy without just cause.” The FACC does not allege PropCo terminated the lease, rather it alleges the lease terminated on its own terms once the lease term expired. (See Civ. Code § 1933 [“The hiring of a thing terminates: 1. At the end of the term agreed upon…”].) Cross-Defendants have thus not established section 1946.2 applies to this action, much less that it imposes pleading requirements on a party asserting a claim for unlawful detainer.

Cross-Defendants also argue the FACC has not been properly verified pursuant to Code Civ. Proc. § 446 because it was verified by Roger Stone and the verification does not specify that he is a manager or member of PropCo. This is not a proper ground for demurrer. (See Lapique v. Kelley (1927) 82 Cal.App. 586, 592 [“Appellant next contends that the court erred in overruling plaintiff’s demurrer to the cross-complaint and answer. The only point argued is that the pleading was not verified as required by law. This objection could apply only to the answer. Such an objection cannot be raised by demurrer”].) Further, Cross-Defendants’ argument appears to be based on language in section 446(a) stating “When a corporation is a party, the verification may be made by any officer thereof.” The use of “may” in this context is permissive and does not require service by an officer or prohibit any other person from verifying the pleading. (H. G. Bittleston Law & Collection Agency v. Howard (1916) 172 Cal. 357, 362 [“But the clause in section 446 providing for verification of a pleading by an officer when the corporation is a party is not exclusive. It is permissive only, and does not exclude an attorney or other person from making the verification in a proper case”].)

Cross-Defendants’ demurrer to PropCo’s cause of action for unlawful detainer is SUSTAINED with leave to amend to attach the termination notice.

3. Quiet Title

Cross-Defendants argue PropCo’s cause of action for quiet title is duplicative of Keyway’s own cause of action for quiet title and should be dismissed. However, as PropCo points out, Keyway seeks only to quiet title against PropCo whereas PropCo seeks to quiet title as to any and all adverse interests. The caselaw cited by Cross-Defendants shows there may be circumstances where it would be unnecessary or duplicative for a party to assert a cause of action for quiet title by way of cross-complaint rather than by simply answering a plaintiff’s own such cause of action, but those authorities do not hold it is per se improper for parties to assert separate claims for quiet title in the same litigation. The Court OVERRULES Cross-Defendants’ demurrer to this cause of action.

4. Breach of Contract and Ejectment

Cross-Defendants argue PropCo’s cause of action for breach of contract has been released pursuant to section 10.1.5 of the purchase and sale agreement (“PSA”) entered into between Keyway and PropCo. (Ex. A to FACC.) Cross-Defendants rely on language from section 10.1.5 stating “As of the Close of Escrow, Buyer and the Buyer Parties hereby fully and irrevocably release Seller and the Seller Group from any and all claims that the Buyer and/or Buyer Parties may have or thereafter acquire against Seller and/or the Seller Group for any cost, loss, liability, damage, expense, demand, action or cause of action (“Claims”) arising from or related to any matter of any nature relating to, the Property….” (Id. at §10.1.5.) Cross-Defendants argue PropCo thus released all claims for breach of the parties’ lease agreement.

However, section 10.1.5 contains a carve out with expressly states the release does not extend to “any other breach by Seller of an express obligation of Seller under this Agreement which by its terms survives the Close of Escrow.” (Id.) As PropCo points out, the lease between PropCo and Keyway was attached to the PSA as Exhibit D-1, and was required to be signed and delivered under section 5.1.3 of the PSA. (Ibid.) The lease survived the close of escrow under the PSA as it governed the parties’ landlord-tenant relationship after closing. (Ex. C to FACC.) Simmons, in turn, signed the sublease, agreeing to be bound by the terms of the master Lease. (Ex. D to FACC.) Accordingly, it is not apparent from the FACC and its attachments that PropCo’s cause of action for breach of the lease agreement was released by section 10.1.5 of the PSA, and Cross-Defendant’s demurrer to this cause of action is thus OVERRULED.

Cross-Defendants raise a similar argument with respect to PropCo’s cause of action for ejectment, arguing it is also barred by section 10.1.5. PropCo’s claim for ejectment is based on Cross-Defendants’ continued occupancy of the property after the expiration of the lease term, an event which did not occur until well after the execution of the PSA. (FACC at ¶¶68-71.) “The rule for releases is that absent special vitiating circumstances, a general release bars claims based upon events occurring prior to the date of the release.” (Villacres v. ABM Industries, Inc. (2010) 189 Cal. App. 4th, 562, 588-89.) In other words, the release in section 10.1.5 did not bar PropCo from asserting claims against Cross-Defendants in perpetuity simply because they relate in some way to the subject property, rather it applied only to those claims, known and unknown, which existed at the time the PSA was executed by the parties. It thus does not bar PropCo from asserting a claim for ejectment based on actions taken by Cross-Defendants subsequent to the execution of the release. Cross-Defendants’ demurrer to the ejectment claim is OVERRULED.

5. Unjust Enrichment and Equitable Lien

The right to restitution or quasi-contractual recovery is based upon “unjust enrichment,” i.e., where a person obtains a benefit that the person may not justly retain, the person is unjustly enriched. (Prakashpalan v. Engstrom, Lipscomb and Lack (2014) 223 Cal.App.4th 1105, 1132, as modified on denial of reh’g (Feb. 27, 2014) [quoting Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 460]; see also Civ. Code, §§ 2223-2224.)

Cross-Defendants contend unjust enrichment is not a cause of action under California law. There is a split in California authority on this question. (Compare Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 [“There is no cause of action in California for unjust enrichment. Unjust enrichment is synonymous with restitution”] with Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593 [recognizing a cause of action for unjust enrichment under California law].) As there is authority recognizing a cause of action for unjust enrichment, the Court declines to dismiss PropCo’s cause of action for unjust enrichment at the pleading stage and for this reason OVERRULES Cross-Defendants’ demurrer to this cause of action.

Cross-Defendants raise the same argument about PropCo’s cause of action for equitable lien, citing authority which has characterized equitable liens as a form of relief rather than a cause of action. However, as with the unjust enrichment claim, at least one Court has acknowledged claims for equitable liens as stand-alone causes of action. (Sperber v. Robinson (1994) 26 Cal.App.4th 736, 742 [“only the fourth cause of action of the complaint alleged a lien and that cause of action was to declare an equitable lien in appellant's favor”].) Cross-Defendants themselves acknowledge PropCo may state a cause of action for equitable lien: “Until and unless Propco alleges a valid cause of action supporting an equitable lien (which has yet to occur), this purported cause of action fails.” (Demurrer at 10.) As set forth above, the Court has overruled Cross-Defendants’ demurrer to each of the above actions. Cross-Defendants offer no authority showing the above causes of action cannot support a claim for an equitable lien.

For these reasons, the Court OVERRULES Cross-Defendants’ demurrer to the sixth cause of action for equitable lien.

6. Money Had and Received

Cross-Defendants argue PropCo has not sufficiently alleged a common count cause of action for money had and received because the FACC does not claim that Keyway received $15,703,415.21 from PropCo and instead merely alleges Keyway “received the benefits” of the $15 million at PropCo’s expense. (See, e.g., FACC at ¶62.) Generally, “A cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Farmers Insurance Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460 [citation and quotation marks omitted].) However, this does not mean that a defendant must physically receive the money in question, rather it is enough that the money be expended by the plaintiff for the benefit of the defendant. (See, e.g., Deicher v. Corkery, 205 Cal. App. 2d 654, 661 (1962) [“[W]here one person pays out money for the benefit of another, at the latter’s request, a common count for money paid, laid out and expended will lie”]; see also Halperin v. Raville, 176 Cal. App. 3d 765, 772 (1986) [“showing that a person had use and benefit of money raises the obligation to pay for the value received”].) PropCo’s allegations that Keyway received the benefit of the $15 million at PropCo’s expense is thus sufficient to state a cause of action for money had and received. Cross-Defendants’ demurrer to this cause of action is thus OVERRULED.

Conclusion

Cross-Defendants’ demurrer to the First Amended Cross-Complaint is SUSTAINED with leave to amend as to the unlawful detainer cause of action. PropCo has 5 days to amend the complaint to attach the termination notice pursuant to Code Civ. Proc. § 1166(d)(2). Cross-Defendants’ demurrer to the causes of action for quiet title, breach of contract, ejectment, unjust enrichment, equitable lien, and money had and received is OVERRULED.