Judge: David B. Gelfound, Case: 21CHCV00760, Date: 2024-03-22 Tentative Ruling

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Case Number: 21CHCV00760    Hearing Date: March 22, 2024    Dept: F49

Dept. F49 

Date: 3/22/24

Case Name: Maya Shulman,

et al. v. Kapustin

Case # 21CHCV00760

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F49

DEMURRER AND MOTION TO STRIKE THE FIRST AMENDED CROSS-COMPLAINT

Motion filed: 10/18/23

MOVING PARTY: Plaintiff/Cross-Defendant Maya Shulman, a law corporation, and Cross-Defendant Maya Shulman DBA Shulman Family Law Group (collectively, the “demurring Parties” or “Cross-Defendants”) 

RESPONDING PARTY: Defendant/Cross-Complainant Olga Kapustin (“Defendant/Cross-Complainant” or “Kapustin”) 

NOTICE: ok

RELIEF REQUESTED: An order sustaining the Demurrer to Defendant/Cross-Complainant’s First Amended Cross-Complaint (“FACC”).

TENTATIVE RULING: The Demurrer is OVERRULED. The Motion to Strike is DENIED.

BACKGROUND

On September 30, 2021, Plaintiff/Cross-Defendant Maya Shulman, a law corporation, (“Plaintiff” or “Shulman”) filed its Complaint against Defendant/Cross-Complainant Olga Kapustin (“Defendant/Cross-Complainant” or “Kapustin”) and Does 1 to 10, alleging the following causes of action: (1) breach of Contract; and (2) common counts. Plaintiff claims to have incurred damages as Kapustin failed to make payments as required by the terms of the Fee Agreement. (Compl., ¶ “BC-2.”)

On January 14, 2022, in response to a demurrer filed by Kapustin on December 29, 2021, Plaintiff filed the operative, First Amended Complaint (“FAC”), rendering the demurrer moot. Subsequently, on June 6, 2022, Kapustin filed her Answer to the Complaint.

On the same day, June 6, 2022, Kapustin also filed her Cross-Complaint against the Plaintiff and Maya Shulman DBA Shulman Family Law Group (collectively, the “demurring Parties” or “Cross-Defendants”), and Does 1 to 5, alleging causes of action for (1) fraud; and (2) declaratory relief.

On September 19, 2022, Cross-Defendants filed a demurrer with motion to strike to the Cross-Complaint, which the Court sustained in its February 16, 2023, Minute Order. The Cross-Complaint was granted leave to amend.

On October 9, 2023, Kapustin served Cross-Defendants with the First Amended Cross-Complaint (“FACC”), which was subsequently filed with the Court on February 13, 2024.

On October 18, 2023, Plaintiff/Cross-Defendant Maya Shulman, a law corporation,

filed the instant Demurrer with Motion to Strike to the FACC (the “Demurrer”).  On the same day, Cross-Defendant Maya Shulman DBA Shulman Family Law Group served and filed a Notice of Joinder, joining and adopting the Demurrer and Motion to Strike FACC of Plaintiff/Cross-Defendant Maya Shulman, a law corporation.

On February 8, 2024, Kapustin filed her Opposition to the Demurrer with Motion to Strike. Subsequently, on February 14, 2024, Plaintiff/Cross-Defendant replied.

ANALYSIS

A.                Joinder to Demurrer

Cross Defendant Maya Shulman DBA Shulman Family Law Group filed and served a Notice of Joinder on October 18, 2023, joining and adopting Plaintiff/Cross-Defenant’s Demurer with Motion to Strike.

The Notice of Joinder was filed concurrently with the Demurrer; therefore, the Court considers its filing timely. Significantly, the Demurrer explicitly identifies both parties Maya Shulman DBA Shulman Family Law Group and Maya Shulman, a Law Corporation, are the “Moving Parties.” (Dem., at 1.)

Consequently, the Court regards Maya Shulman DBA Shulman Family Law Group as also being a moving party, seeking relief on her own behalf and will be bound by the Court’s ruling on the instant Demurrer. (See Barak v. The Quisenberry Law Firm (2006) 135 Cal.App.4th 654.)

B.                 Demurrer

Cross-Defendants Maya Shulman DBA Shulman Family Law and Maya Shulman, a Law Corporation submit the instant Demurrer to the Fraud Cause of Action in the FACC, on the grounds of insufficient facts to constitute a cause of action, citing Code of Civil Procedure section 430.10 subdivision (e).

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law[.]” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

In California, fraud must be pleaded specifically; general and conclusory allegations do not suffice. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74.) “[T]he 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.’” (Stansfield, supra, at p. 73, italics in original.)

The Court addressed only the operative document - the FACC of Kapustin. The FACC alleges causes of action for (1) Fraud, and (2) Declaratory Relief. Within the Fraud cause of action, the Complaint asserts liability under the theories of both Misrepresentation and Concealment. (FACC, at 3.)

1)      Elements of Concealment

In the instant Demurrer, the Cross-Defendants contend that the FACC fails to state facts sufficient to support three of the elements under the Concealment theory: (1) that Cross-Defendants have a duty to disclose the fact, (2) that Cross-Defendants intended that Kapustin rely on the false statement, and (3) that Kapustin would have acted differently if she had known of the fact. (Dem. at 4-6.)

“[T]he elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)

The Court finds the arguments presented by the demurring Parties to be without merit for the following reasons.

First, a duty to disclose a material fact arises where there exists a confidential relationship between the parties, or other special circumstances require disclosure. (See Shafer v. Berger, et al. (2003) 107 Cal.App.4th 54, 71; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336 (LiMandri).) Here, a duty to disclose arises from both an attorney-client relationship as established by the Fee Agreement, as well as the presence of special circumstances pertinent to parties entering into a contractual agreement. (LiMandri, supra, at 337.)

 The demurring Parties do not contest the existence of the attorney-client relationship based on the Fee Agreement. On the contrary, Plaintiff/Cross-Defendant seeks to enforce the Fee Agreement. Despite this, the demurring Parties contend that they do not have a duty to disclose by specially addressing that the “DBA” belonged to the corporation instead of the individual, maintaining that the corporation holds proper licenses and registrations. (Dem., at 4.) This argument, however, misses the point.

On examination of the FACC, it does not claim Cross-Defendants’ failure to disclose the ownership of the “DBA”; rather, it alleges that Cross-Defendants failed to disclose the non-existence of Shulman Family Law Group as a law firm (FACC, ¶ 3a.), which is in contradiction to the representations made in the Fee Agreement about its staffing. The Fee Agreement purportedly claimed the staff consisted of three attorneys and two legal assistants. (FACC, ¶¶ FR-2a, 2b.) The demurring Parties neither address whether their staffing constitutes a material fact that is subject to disclosure, nor do they challenge that the sufficiency of the representations as constituting misrepresentation, leading the Court to conclude that the demurring Parties have not effectively contested the alleged duty to disclose, as outlined in the FACC.

Second, the demurring Parties argue that the intent element required for a concealment claim necessitates demonstrating more than merely knowing the statement is false or recklessly disregarding its truth. Specifically, it must also show the party accused of fraud intended for the plaintiff to rely on the false statement., citing Engalla v. Permanent Med. Grp., Inc., (1997) 15 Cal.4th 951, 976.)

Contrary to the demurring Parties’ contention that “KAPUSTIN fails to even allege the mental state of the Moving Parties” (Dem., at 5), the Court observes that the FACC explicitly alleges that “Defendant concealed or suppressed these facts with the intent to defraud and induce plaintiff to act as described in item FR-5[.]” (FACC, ¶ FR-3c.) Furthermore, the paragraph FR-5 details that “Ms. Kapustin signed the December 17, 2018 Fee Agreement and paid money to Defendants” (FACC, ¶ FR-5), illustrating the alleged reliance. Consequently, the Court finds the demurring Parties’ argument on this point to be unconvincing.

Third, for a concealment claim to be viable, the Cross-Complainant must allege that, had she known of the concealed fact, she would have acted differently.

Here, the FACC specifically states, “Had Ms. Kapustin known that Shulman Family Law Group does not exist, she would not have signed the Free Agreement to allow it to represent her and would have retained a real law firm[.]” (FACC, ¶ FR-5.)

The demurring Parties counter by arguing that “No reasonable person would have cared if the contracting law firm was an individual or a corporation. As such, as there can be no question that the capacity of the contracting law firm would not have changed OLGA KAPUSTIN’s decision to retain the MOVING PARTIES.” (Dem., at 5.)

However, when reviewing a Demurrer, the Court’s examination must be confined to the allegations presented in the complaint itself or to matters which the Court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) Here, the demurring Parties’ argument is made on their own evidence external to the FACC and not from any matter that the Court may take judicial notice. Consequently, this line of reasoning is not considered by the Court.

Similarly, the Court dismisses the demurring Parties’ contention that “even if OLGA KAPUSTIN retained the services of a different law firm, the costs and fees incurred were reasonable and would have been the same, thus no damage was suffered by OLGA KAPUSTIN.” (Dem., at 5.) This argument is based on the conclusion of facts as to the reasonableness of the costs and fees, not drawn from the FACC’s allegations or subject to judicial notice. Conversely, the FACC alleges specific damages amounting to $100,000. (FACC, ¶ FR-6.)

Consequently, the Court concludes that the demurring Parties have not convincingly argued against the particularity required for FACC’s allegations of fraudulent concealment, failing to undermine the claim’s established elements.

2)      Elements of 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.” “‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).)

Next, the instant Demurrer neglects to address the sufficiency of the FACC’s allegations under another legal theory of fraud – namely, Intentional or Negligence Misrepresentation. (FACC, at 3.) Although this theory shares the elements of elements with the concealment theory, it requires the false representation to be stated with particularity, knowledge of falsity, and justifiable reliance.

Here, the FACC delineates the alleged misrepresentation clearly: “That Shulman Family Law Group, identified as ‘Attorney’ in the December 17, 2018 Fee Agreement comprised of attorneys Maya Shulman, Geroge Seide, and Jordana Walsh and legal assistants Deanna Hayenga and Mary Dolan would represent Ms. Kapustin in Kapustin Dissolution.” (FACC, ¶ FR-2.) Moreover, the FACC alleges that “When defendant made the representation, defendant knew they were false.” (FACC, ¶ FR.-3.) Based on these assertions, the Court finds that the allegations sufficiently detail “how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield, supra, 220 Cal.App.3d at p. 73.)

At this stage of the proceeding, “A judge must overrule a demurrer if the allegations of the complaint adequately state a cause of action under any legal theory.” (Cellular Plus, Inc. v Superior Court (1993) 14 CA4th 1224, 1231.)

Accordingly, the Court concludes that the Demurrer fails to contest the sufficiency of the pleadings in the First Amended Cross-Complaint. Therefore, the Court OVERRULES the Demurrer.

C.                Motion to Strike

“A notice of motion to strike a portion of a pleading must quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count, or defense. Specifications in a notice must be numbered consecutively.” (Cal. Rules of Court, rule 3.1322(a).)

Given the instant Demurrer with Motion to Strike does not specify in the notice the specific portions it aims to strike, the Court interprets it as targeting all causes of action, in pursuant to California Rules of Court rule 3.1322(a). With the Court having already overruled the Demurring concerning the first cause of action, the Court now turns to consider the Motion to Strike as it pertains to the second cause of action – declaratory relief.

The remedy of declaratory relief is “cumulative, and shall not be construed as restricting any remedies.”  (See Code Civ. Proc., § 1062.) “The mere fact that another remedy is available will not suffice as sufficient grounds for a court to decline a declaration, because declaratory relief is not intended to be exclusive or extraordinary.”  (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 59.) 

The moving Parties’ main contention is that the second cause of action for declaratory relief functions as an affirmative defense rather than a stand-alone action. (Dem., at 3.) However, they fail to substantiate this claim or explain why declaratory relief is not an appropriate remedy for resolving disputes over the validity of a contract.

Therefore, the Court DENIES the Motion to Strike, finding no compelling rationale to exclude declaratory relief as a viable remedy for the disputes at hand.

CONCLUSION

Cross-Defendants’ Demurrer to the First Amended Cross-Complaint is OVERRULED.

The Motion to Strike is DENIED.

Moving parties are ordered to provide notice of this order.