Judge Deirdre Hill, Case 20TRCV00832 2022-10-25 Tentative Ruling

ALERT

Due to Coronavirus, please consider appearing by phone for Department M cases.

Department M strongly encourages the use of LA CourtConnect* for ALL hearings, without need for prior approval, unless live testimony by a witness is required.

The contact information for LA CourtConnect* is:

https://lacourt.portalscloud.com/VCourt/

*Parties with a fee waiver on file may be eligible to appear at no/reduced cost

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the 3^rd cause of action for intentional misrepresentation and 4^th cause of action for negligent misrepresentation. The demurrer is OVERRULED as to the 5^th cause of action for promissory estoppel. Cross-defendants are ordered to file an answer within ten days.

On November 12, 2020, plaintiff Probelle Enterprises, Inc. filed a complaint against defendant Faranak M. Kamnei dba Angelus Medical & Optical for (1) breach of agreement, (2) breach of implied covenant of good faith and fair dealing, (3) tortious interference with prospective advantage, (4) conversion, (5) claim and delivery, (6) unfair competition – B&P §17200, (7) breach of fiduciary duty, (8) accounting, (9) unjust enrichment, and (10) common count – money had and received.

On May 12, 2021, the court overruled defendant’s demurrer as to the 1^st, 4^th, 5^th, 7^th, 8^th, 9^th, and 10^th causes of action and sustained it with leave to amend as to the 2^nd, 3^rd, and 6^th causes of action. The motion to strike was denied as to each cause of action, the allegations as to defendant, and the prayer for costs and granted with leave to amend as to punitive damages and attorney’s fees.

On June 2, 2021, plaintiff filed a FAC against Faranak M. Kamnei an ind dba Angelus Medical & Optical and FMK, Inc. for (1) breach of agreement, (2) tortious interference with prospective advantage, (3) conversion, (4) claim and delivery, (5) breach of fiduciary duty, (6) accounting, (7) unjust enrichment, and (8) common count-money had.

On June 23, 2021, defendants filed a cross-complaint against Probelle and Michael Levy for (1) breach of contract, (2) breach of fiduciary duty, (3) money had and received, (4) accounting, (5) lost profits, (6) negligent interference with prospective economic relations, (7) intentional interference with prospective economic relations, (8) negligence, (8) intentional misrepresentation, (10) negligent misrepresentation, (11) unjust enrichment, and (12) promissory estoppel.

On September 10, 2021, the court granted cross-defendants Probelle Enterprises and Michael Levy’s special motion to strike under CCP §415.16 as to the 6^th and 7^th causes of action in the cross-complaint.

On February 25, 2022, Faranak M. Kamnei dba Angelus Medical & Optical, Inc filed a FACC for (1) breach of contract, (2) breach of fiduciary duty, (3) money had and received, (4) accounting, (5) lost profits, (6) negligence, (7) intentional misrepresentation, (8) negligent misrepresentation, (9) unjust enrichment, and (10) promissory estoppel.

On June 3, 2022, the court overruled cross-defendants Probelle Enterprises and Michael Levy’s demurrer to the FACC as to the 1^st and 4^th causes of action. The court sustained the demurrer with leave to amend the demurrer as to the 7^th, 8^th, 9^th, and 10^th causes of action. The demurrer was sustained without leave to amend as to the 2^nd, 3^rd, 5^th, and 6^th causes of action.

On June 22, 2022, cross-complainants filed a SACC for (1) breach of contract, (2) accounting, (3) intentional misrepresentation, (4) negligent misrepresentation, and (5) promissory estoppel.

When considering demurrers, courts read the allegations liberally and in context. Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228. “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905. “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.

Cross-defendants Probelle Enterprises, Inc and Michael Levy demur to the 3^rd, 4^th, and 5^th causes of action in the SACC on the grounds that they fail to state sufficient facts to constitute a cause of action and are uncertain.

The SACC alleges that in the summer of 2016, Levy approached Faranak with a business offer, in order to provide a complete solution to each other’s customers, while he was in the middle of setting up a showroom in Beverly Hills. SACC, ¶12. Levy requested to join Faranak’s business, Angelus Medical. Id., ¶13. On January 29, 2020, Levy and Faranak entered into another verbal agreement to procure and sell masks after Levy indicated that there were masks available through his uncle’s company. Id., ¶14. Based on the agreement, the parties agreed to offer each other’s products and services to their customers in an exchange for 10% overall commission. Id., ¶15. Angelus Medical was responsible for delivering medical equipment to any customers that were brought in by Probelle, which would allow a 10% commission to Probelle. Id., ¶16. Probelle was responsible for delivering remodeling services to customers brought in by Angelus Medical, which would create a 10% commission to Angelus Medical. Id., ¶17. Angelus Medical was responsible for paying for the products, providing storage for the products, marketing the products, and paying for staff to sell the products. Id., ¶18.

The SACC also alleges that a few weeks later, Levy requested to have additional furniture stored in Angelus Medical’s warehouse while the Beverly Hills facility was being remodeled. Id., ¶19. Levy never built the showroom that was anticipated to build in Beverly Hills and continued to use Angelus Medical’s warehouse without paying any rent, despite many requests made by Faranak for rent payments. Id., ¶20. Since 2016 to the present, Levy has been using Angelus Medical’s facility, staff, and customers. Id., ¶21. In 2020, Levy stopped making any payments despite Faranak’s multiple requests to pay or remove all furniture and materials from Angelus Medical warehouse. Id., ¶22.

The SACC further alleges that in 2020, Faranak discovered that Levy had closed several contracts directly through Angelus Medical’s customers, which did not pay the agreed upon 10% commission to Angelus Medical. Id., ¶23. As Probelle’s merchandise was still stored in Angeles Optical, Levy had also failed to pay for invoices. Id., ¶24. Up to this date, there are 22 open (non-paid) invoices for a total of $153,708.15. All of these invoices have been issued to cross-defendants for the furniture that they have been storing at Angelus Medical’s warehouse. Id., ¶25.

The SACC also alleges that Levy has approached at least two of Faranak’s business associates, whom he has asked to misrepresent the facts of this civil case. Id., ¶26. One of Faranak’s business associates who has been approached by Levy is Mojan Karimi. Mojan Karimi has been currently working as a consultant and sales representative for Angelus Medical. Id., ¶27. Another of Faranak’s business associate who has been approached by Levy is Moe Taghavi. Moe Taghavi is a representative for Angelus Medical from Henry Schein, Inc. Id., ¶28. Due to the extensive network of Ms. Karimi, she had scheduled several introductory meetings with the decision makers at several hospitals. The first meeting was scheduled for the second week in June with the VP of purchasing at Providence Mission Hills/Holy Cross hospital. Levy had approached Ms. Karimi and Mr. Taghavi during the first week in June requesting them to sign documents that would be presented in the court against Faranak. Both business associates refused to do so. Id., ¶29. Due to Levy’s conduct, Karimi no longer feels comfortable to proceed with the scheduled meetings and business opportunities while this civil case is active. Id., ¶30. Despite Levy’s actions, Faranak has never discussed any details of this case with any of their business colleagues. Id., ¶31. Levy never built the show room that was supposed to be built, but Levy kept extending Probelle’s stay for long period of times without paying any rent. Id., ¶32.

The elements of a fraud claim are (1) misrepresentation; (2) knowledge of falsity; (3) intent to deceive; and (4) reliance and resulting damage. Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal. App. 4th 282, 290. “To withstand demurrer, the facts constituting every element of fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings.” Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal. App. 4th 772, 782. The particularity requirement necessitates pleadings facts that “show how, when, where, to whom, and by what means the representations were tendered.” Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.

“’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.’ (Citation omitted). The elements of promissory fraud (i.e., of fraud or deceit based on a promise made without any intention of performing it) are (1) a promise made regarding material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promise to enter into a transaction; (4) reasonable reliance by the promise; (5) nonperformance by the party making the promise; and (6) resulting damage.” Behnke v. State Farm General Ins. Co. (2011) 196 Cal. App. 4th 1443, 1453. Mere failure to perform is not sufficient to establish promissory fraud. Tenzer v. Superscope (1985) 39 Cal. 3d 18, 30-31 (“’something more than nonperformance is required to prove the defendant’s intent not to perform his promise. . . . [I]f plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury”) (citation omitted).

The SACC alleges that in 2020, Levy made verbal representations to cross-complainants: (1) Levy was in the middle of setting up a showroom in Beverly Hills to display medical products/furniture. SACC, ¶63. If cross-complainants had been informed that Levy was not building a showroom in Beverly Hills, cross-complainants would not have allowed Probelle to display its products in Angelus Medical showroom and use Angelus Medical warehouse to store furniture. Id., ¶64. In 2020, Probelle made verbal representations to cross-complainants (1) it needed space to temporarily display products while cross-defendants’ showroom was being set up; (2) Probelle would pay storage fees for having its furniture stored at Angelus Medical; (3) Probelle would give a 10% commission to Angelus Medical for services provided to any customer brought in by Angelus Medical. Id., ¶65. If cross-complainants had been informed that Probelle would not pay any storage fees and would not give 10% commission to Angelus Medical for remodeling services provided to any customer brought in by Angelus. Id., ¶66. Cross-defendants’ representations were false. Id., ¶67. Levy knew that the representations were false when they made them since the Beverly Hills facility was never built or remodeled. Id., ¶68. Probelle knew that the representations were false when they made them since Probelle never paid storage fees, nor did they pay the 10% commission to cross-defendants as per the agreement. Id., ¶69. Cross-defendants intended that cross-complainants rely on their representations and grant access to Angelus Medical’s showroom and its customers. Id., ¶70. Cross-complainants reasonably relied on cross-defendants’ representations when they believed cross-defendants’ representations and entered into the agreement in 2020. Id., ¶71. Cross-complainants were harmed. Id., ¶72.

Cross-defendants argue that the SACC is a “sham pleading” because it “has been scrubbed of any reference to the year 2016 altogether” “without any explanation whatsoever” and that cross-complainants are attempting to plead around the statute of limitations. Cross-defendants also argue that cross-complainants fail to plead with particularity.

In opposition, cross-complainants point out that they allege that the original agreement was made in 2016 but that in 2020, they entered into “another verbal agreement.” SACC, ¶14.

The allegations are insufficient to meet the elements as cross-complainants have not alleged more than non-performance. The allegations also do not show fraudulent intent. The court notes that both the FACC and the SACC alleged that the representations were made in 2020. The court had previously determined that the face of the cross-complaint does not show that any of the claims are barred by the statute of limitations.

The elements of negligent misrepresentation are: (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages. Where the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief, he may be liable for negligent misrepresentation, a form of deceit. B.L.M. v. Sabo & Deitsch (1997) 55 Cal. App. 4th 823, 834.

Cross-defendants argue the same as under the 3^rd cause of action that the SACC is a sham pleading because the SACC changes the date from 2016 to 2020.

The allegations are insufficient to meet the elements. None of the purported representations were of a “past or existing material fact.” The allegations also are conclusory that cross-defendants had no reasonable ground for such beliefs.

The elements of a promissory estoppel claim are (1) a clear promise, (2) reliance, (3) substantial detriment and (4) damages measured by the extent of the obligation assumed and not

performed. Toscano v. Greene Music (2004) 124 Cal. App. 4th 685, 692. Although equitable in nature, promissory estoppel is akin to a cause of action based on contract except that the consideration needed to form an enforceable contract is provided by detrimental reliance. Id. at 692-693. Under California law, “[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” Kajima/Ray Wilson v. Los Angeles Cnty. Metro. Transp. Auth. (2000) 23 Cal. 4th 305, 310.

Under this cause of action, the SACC alleges that Levy made a promise to cross-complainants that Levy would deliver remodeling services to customers brought in by Angelus Medical and give Angelus Medical a 10% commission from the services provided to those customers. SACC, ¶95. Cross-defendants did not intend to perform their promises when they made them. Id., ¶96. Cross-defendants intended that cross-complainants rely on their promises. Cross-complainants reasonably relied on cross-defendants’ promises when they entered into the agreement in 2020. Id., ¶98. Levy did not perform the promised acts since the Beverly Hills facility was never being built or remodeled. Id., ¶99. Probelle did not perform the promised acts since Probelle never paid storage fees, nor did they pay the 10% commission to cross-defendants as per the agreement. Id., ¶100. Cross-complainants were harmed. Id., ¶101. Due to cross-complainants’ detrimental reliance on cross-defendants’ promises, cross-complainants incurred financial expenses. Cross-complainants were responsible for paying for the products, storing of the products, marketing of the products, and paid for the staff to sell the products. Angelus Medical’s warehouse and showroom were being used by cross-defendants for an extended period without rent payments. Id., ¶102.

Cross-defendants argue that the SACC does not allege “un-bargained-for” reliance.

The court finds that the allegations are sufficient to meet the elements for promissory estoppel. The SACC adds additional allegations to support detrimental reliance.