Judge Daniel M. Crowley, Case Number: 23STCV11294, Date: 2024-07-25 Tentative Ruling

Defendant California Department of Housing and Community Development’s unopposed demurrer to Plaintiffs Kiavand LLC’s and Shahrokh Zarrin’s 1st, 2nd, 3rd, and 4th causes of action in their first amended complaint is sustained with 20 days leave to amend. Defendant’s demurrer to Plaintiffs’ 2nd cause of action as it is alleged by Kiavand against Defendant is sustained without leave to amend.

Defendant California Department of Housing and Community Development’s motion to strike portions of Plaintiffs’ first amended complaint is denied as moot.

Defendant California Department of Housing and Community Development (“HCD”) (“Defendant”) demurs unopposed to the first amended complaint (“FAC”) of Plaintiffs Kiavand LLC (“Kiavand”) and Shahrokh Zarrin (“Zarrin”) (collectively, “Plaintiffs”) in its entirety, as well as the 1st, 2nd, 3rd, and 4th causes of action. (Notice of Demurrer, pgs. 1-3; C.C.P. §430.10.)

Defendant also moves unopposed to strike portions of Plaintiffs’ FAC. (Notice of MTS, pgs. 1-2; C.C.P. §436.)

Before filing a demurrer, the demurring party must meet and confer in person, by telephone, or by video conference with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer. (C.C.P. §430.41(a).)

The demurring party shall file and serve with the demurrer a declaration stating either of the following: (A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer. (B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith. (C.C.P. §430.41(a)(3).)

Defendant’s counsel declares that on May 10, 2024, he met and conferred with Plaintiffs’ counsel via teleconference to discuss the instant demurrer and motion to strike, and the parties were unable to reach a resolution to the issues raised. (Decl. of Cherensky ¶¶4-5.) Defendant’s counsel’s declaration is sufficient under C.C.P. §430.41(a). Therefore, the Court will consider Defendant’s demurrer.

Plaintiffs filed their initial Complaint against the State of California on May 18, 2023. Plaintiffs filed the operative FAC against HCD on November 21, 2023, alleging four causes of action: (1) accounting: failure to pay benefits under the CA COVID-19 Rent Relief; (2) intentional infliction of emotional distress; (3) abuse of process; and (4) violation of the 5th Amendment of the United States Constitution for taking.

Defendant filed the instant demurrer and accompanying motion to strike on May 20, 2024. As of the date of this hearing no opposition has been filed.

Plaintiffs allege Kiavand is the owner of property located at 1006 N. Edinburgh Avenue, West Hollywood, CA 90046 (“Property”). (FAC 1:29-2:1.) Plaintiffs allege Kiavand applied under the CA COVID-19 Rent Relief program for statutory benefits conferred on Kiavand under SB 115 (“Application”). (FAC 2:2-3.) Plaintiffs allege the Application was assigned Case ID 841905 and was filed March 15, 2022. (FAC 2:4-5.) Plaintiffs allege the demand for benefits in the Application was $57,500 allowed by statute for the period April 202 to March 2022. (FAC 2:6-7.) Plaintiffs allege that apparently benefits were conferred upon Kiavand under the statute and an entitlement to benefits was created for $57,500 (“Entitlement”). (FAC 2:8-9.)

Plaintiffs allege Kiavand has not received any of the benefits that were awarded and the entire Entitlement was not delivered by HCD to Kiavand’s detriment. (FAC 2:10-12.) Plaintiffs allege HCD has since egregiously, recklessly, and intentionally violated Kiavand’s rights despite its compliance with the statute and SB 115. (FAC 2:13-14.) Plaintiffs allege despite many calls to HCD, HCD has intentionally disregarded Kiavand’s rightful request to receive the Entitlement. (FAC 2:15-16.)

Defendant demurs to the entire FAC on the basis Kiavand fails to establish that it is entitled to a benefit under the Emergency Assistance Rental Program (“ERAP”). (Demurrer, pgs. 9-10.) Defendant demurs to the 1st, 2nd, 3rd, and 4th on the basis the causes of action fail to state facts sufficient to constitute causes of action against it. (Demurrer, pgs. 10-14.)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

“To have a property interest in a benefit, a person clearly must have more than an abstract need or desire and more than a unilateral expectation of it.” (Hobbs v. City of Pacific Grove (2022) 85 Cal.App.5th 311, 320, as modified (Nov. 14, 2022), citations and quotations omitted.) Instead, the alleged benefit must “stem from an independent source such as state law.” (Id.)

ERAP, enacted in response to the COVID-19 pandemic, is based on certain provisions of the Federal Consolidated Appropriations Act, 2021 (“FCA”) and of the American Rescue Plan Act of 2021 (“ARP”). Both acts restrict the use of allocated funds, generally, to provide financial assistance and housing stability services to eligible households negatively affected by the pandemic, and define eligible households as tenant households. (See FCA (Pub.L. No. 116-260, Div. N, tit. V, subd. A, §50l(k)(3)(A) (Dec. 27, 2020) 134 Stat. 2077); ARP (Pub.L. No. 117-2, tit. III, subd. B, §3201(f)(2) (Mar. 11, 2021) 135 Stat. 58 [“The term ‘eligible household’ means a household of 1 or more individuals who are obligated to pay rent on a residential dwelling.”]; see also State Rental Assistance Program Guidelines (September 27, 2021) Department of Housing and Community Development (as of May 15, 2024), §8.1 [“Applications may be submitted by tenants and landlords, though program eligibility is based on the tenant household. Landlords who will be providing tenant information on behalf of the tenant shall provide evidence that they have the tenant’s authorization]; id. at §9.1 [“Under the Acts, the intended beneficiary of rent relief funds is the tenant(s) of an Eligible Household. Therefore, program eligibility is based on the applicant being or having been a renter of a residence for which rent is owed.”].)

HCD, or its agent, is authorized under law to implement ERAP. (See Health & Safety Code §50897.3(a)(1)(A).) That implementation includes developing “fraud protections and approval processes” to assess incoming applications. (See id. at §50897.3(a)(l)(D)(i).) “[R]ental assistance is awarded in rounds of funding based on eligibility.” (Id. at §50897.3 (a)(l)(D)(ii)(II).) HCD, or its agent, “shall provide notification to the landlord and tenant when either the landlord or the tenant submits a completed application for rental assistance [and again] once a final decision has been rendered.” (Health & Safety Code §§50897.1(r)(l)-50897.1(r)(2).)

Here, Plaintiffs fail to allege Kiavand is entitled to ERAP benefits by and through its tenant, and the respective tenant is not joined as a necessary party in this action. (See State Rental Assistance Program Guidelines (September 27, 2021) Department of Housing and Community Development (as of May 15, 2024), §§8.1, 9.1.) Further, Plaintiffs’ allegation that Kiavand’s Application created a $57,500 Entitlement is not supported by law based on the processes HCD must follow. (See Health & Safety Code §§50897.1(r)(l)-50897.1(r)(2).)

Accordingly, Defendant’s demurrer to the entire FAC is sustained with 20 days leave to amend.

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, internal citations omitted.) “An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Id., internal citations omitted.)

Plaintiffs’ FAC seeks to recover $57,500 pursuant to Kiavand’s Application and Entitlement. (FAC 2:6-9, 3:3.) However, a cause of action for an accounting is not available for recovery of this sum certain. (Teselle v. McLoughlin (2009) 173 Cal.App.4th at pg. 179.)

Accordingly, Defendant’s demurrer to Kiavand’s 1st cause of action is sustained with 20 days leave to amend.

“A cause of action for intentional infliction of emotional distress [“IIED”] exists when there is ‘(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.’ A defendant’s conduct is ‘outrageous’ when it is so ‘extreme as to exceed all bounds of that usually tolerated in a civilized community.’ And the defendant’s conduct must be ‘intended to inflict injury or engaged in with the realization that injury will result.’” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050-1051.)

A business entity cannot bring a claim for IIED. (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1260.)

Here, Plaintiffs allege Kiavand is a California limited liability company. (FAC 1:28.) Therefore, Kiavand cannot, as a matter of law, assert a cause of action for IIED. (Huntingdon Life Sciences, Inc., 129 Cal.App.4th at pg. 1260.) Further, Plaintiffs fail to allege facts supporting a cause of action by Zarrin against Defendant; the FAC does not state any facts related to Zarrin. (See FAC.)

Accordingly, Defendant’s demurrer to Plaintiffs’ 2nd cause of action is sustained without leave to amend as to any claim by Kiavand against Defendant and sustained with 20 days leave to amend as to any claim by Zarrin against Defendant.

“The tort of abuse of process arises when one uses the court’s process for a purpose other than that for which the process was designed . . .. To succeed in an action for abuse of process, a litigant must establish two elements: that the defendant (1) contemplated an ulterior motive in using the process; and (2) committed a willful act in the use of the process not proper in the regular conduct of the proceedings.” (Braim v. Kennard (2001) 94 Cal.App.4th 40, 44.)

Plaintiffs fail to allege any facts stating that Defendant used the judicial process against Kiavand. (See FAC.) Plaintiffs solely allege Kiavand submitted the Application to HCD and had an Entitlement. None of these allegations relate to the use of the judicial process.

Accordingly, Defendant’s demurrer to the 3rd cause of action is sustained with 20 days leave to amend.

Violation of the 5th Amendment of the United States Constitution for Taking (4th COA)

The state and federal Constitutions guarantee real property owners “just compensation” when their land is “taken . . . for public use . . ..” (Cal. Const., art. I, §19; U.S. Const. amend. V; Lingle v. Chevron U.S.A. Inc. (2005) 544 U.S. 528, 537; Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 12-13.)

The Fifth Amendment’s Takings Clause, made applicable to the states through the Fourteenth Amendment, does not prohibit the taking of private property, but instead places a condition on the exercise of that power. (Lingle, 544 U.S. at pgs. 536-537.) “In other words, it ‘is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.’” (Id.)

Regulatory takings challenges are governed by the standards set forth in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104. The Penn Central acknowledged that it had hitherto been “unable to develop any ‘set formula’” for evaluating regulatory takings claims, but identified “several factors that have particular significance.” (Penn Central Transp. Co., 438 U.S. at pg. 124.) Primary among those factors are “[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations.” (Id.) In addition, the “character of the governmental action”—for instance whether it amounts to a physical invasion or instead merely affects property interests through “some public program adjusting the benefits and burdens of economic life to promote the common good”—may be relevant in discerning whether a taking has occurred. (Id.) “The Penn Central factors—though each has given rise to vexing subsidiary questions—have served as the principal guidelines for resolving regulatory takings claims that do not fall within the physical takings or Lucas rules.” (Lingle, 544 U.S. at pg. 539.)

Here, Plaintiffs fail to allege the character of the governmental action—whether the alleged taking amounts to a physical invasion or merely affects property interests. (Penn Central Transp. Co., 438 U.S. at pg. 124.) Further, Plaintiffs fail to allege the extent to which the alleged regulation at issue interfered with distinct investment-backed expectations. (Id.) Finally, and most importantly, as stated earlier, Plaintiffs fail to allege a property interest in the ERAP benefits that is recognized by law. (See State Rental Assistance Program Guidelines (September 27, 2021) Department of Housing and Community Development (as of May 15, 2024), §§8.1, 9.1.)

Accordingly, Defendant’s demurrer to Plaintiffs’ 4th cause of action is sustained with 20 days leave to amend.

Defendant’s unopposed demurrer to Plaintiffs’ entire FAC is sustained with 20 days leave to amend.

Defendant’s unopposed demurrer to Plaintiffs’ 1st, 2nd, 3rd, and 4th causes of action is sustained with leave to amend. Defendant’s demurrer to Plaintiffs’ 2nd cause of action as it is alleged by Kiavand against Defendant is sustained without leave to amend.

In light of the Court’s ruling on Defendant’s demurrer, Defendant’s motion to strike is denied as moot.

Hon. Daniel M. Crowley

Judge of the Superior Court