Judge Deirdre Hill, Case 22TRCV00748 2023-02-09 Tentative Ruling

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The demurrer is OVERRULED as to the 1^st and 2^nd causes of action in the cross-complaint. Cross-complainant is ordered to file an answer within ten days.

On August 25, 2022, plaintiff 1008 The Strand LLC filed a complaint against Steel Partners, Ltd by Warren Lichtenstein for (1) breach of contract and (2) common count – open book.

On October 21, 2022, Steel Partners, Ltd. filed a cross-complaint against 1008 The Strand LLC for (1) conversion and (2) unjust enrichment.

On January 6, 2023, plaintiff filed an amendment designating Warren Lichtenstein as Doe 1.

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-defendant 1008 The Strand LLC demurs to the 1^st and 2^nd causes of action in the cross-complaint on the grounds that they fail to state sufficient facts to constitute a cause of action and are uncertain.

As context, the complaint alleges that plaintiff is the owner of residential real property located at 1008 The Strand, Manhattan Beach. Complaint, ¶7. On May 6, 2019, plaintiff entered into a written residential lease or month-to-month rental agreement with defendant to rent the property for a term of one year, ending on June 30, 2020, and then month-to-month thereafter, at the rate of $48,000 per month. The lease calls for $1,000 late fee for each month that the rent is late. Id., ¶8. On July 1, 2019, defendant took possession of the premises. Id., ¶9. On March 2, 2020, a lease amendment was entered to renew the lease terms for July 1, 2020 and ending June 30, 2021 at a monthly rate of $50,000. Id., ¶10. Plaintiff performed all conditions, covenants, and promises required to be performed in accordance with the terms and conditions of the lease. Id., ¶11. On April 1, 2021, defendant breached the terms of the lease and amendment by failing to pay the full amount of rent due April 1, 2021 and continued to fail to pay the full amount of rent due for each month thereafter until they vacated the property on July 5, 2021. Id., ¶12. Defendant made a partial payment of $8,064.50 on March 28, 2021 and a partial payment of $4,000 on June 28, 2021. No payments have been made since last payment. Id., ¶14. At the time they vacated the property they owed $99,269 in rent and late fees. Id., ¶15. After defendant vacated, repairs needed to be made to restore the property to rentable condition. Plaintiff paid $35,008 to complete the repairs. Id., ¶16.

The cross-complaint alleges that beginning on July 1, 2017 and continuing through early July 2021, Steel Partners, Ltd. (“SPL”) leased from 1008 LLC certain real property and improvements located at 1008 The Strand, Manhattan Beach. Cross-complaint, ¶4. During its tenancy, SPL purchased for use at the property certain high-end security equipment (including cameras and the device used to manage them), stereo equipment, and furniture. Id., ¶5. In the months leading up to SPL vacating the property in July 2021, the parties discussed 1008 LLC keeping the equipment and furniture in exchange for payment and/or an offset against any necessary repair costs. An agreement was never reached. 1008 LLC chose instead to simply keep SPL’s property and pay it nothing. Id., ¶6. To date, 1008 LLC has failed to return the equipment or furniture belonging to SPL and has failed to compensate SPL for its fair market value, despite SPL’s demand. Id., ¶7.

A cause of action for conversion requires the following elements: (1) plaintiff's ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97, 119. “Notably absent from this formula is any element of wrongful intent or motive; in California, conversion is a ‘strict liability tort.’” Voris v. Lampert (2019) 7 Cal. 5^th 1141, 1150. “It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” Spates v. Dameron Hospital Association (2003) 114 Cal. App. 4th 208, 221. “’Any act of dominion wrongfully exerted over the personal property of another inconsistent with the owner’s rights thereto constitutes conversion.’” Plummer v. Day/Eisenberg, LLP (2010) 184 Cal. App. 4^th 38, 50 (citation omitted).

The cross-complaint alleges that SPL owned certain high-end security equipment (including cameras and the device used to manage them), stereo equipment, and furniture. Cross-complaint, ¶9. 1008 LLC substantially interfered with SPL’s property by knowingly and intentionally taking possession of the property, preventing SPL from having access to the property, and refusing to return the property or compensate SPL for its fair market value, despite SPL’s demand. Id., ¶10. SPL did not consent to 1008 LLC’s interference with its property. Id., ¶11.

Cross-defendant argues that the allegations are insufficient because cross-complainant “must specify which equipment for Cross-Defendant to decipher who personal property belongs to” and “how can Cross-Complainant now plead conversion” when it alleges that it was the intent for cross-complainant to give the property in exchange for rent “thus taking away any malice behavior.”

The court finds that the allegations are sufficient as they meet the elements. Cross-complainant alleges ownership of the personal property identified as high-end security equipment, stereo equipment, and furniture; cross-defendant retained possession of the property; and cross-complainant was damaged. Malice is not an element. As to cross-defendant’s argument as to punitive damages in the reply, cross-defendant did not file a motion to strike.

Unjust enrichment is a cognizable cause of action in California under certain circumstances, especially when there is no enforceable express contract between the parties. See Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370. “The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” Lyles v. Sangadeo-Patel (2014) 225 Cal. App. 4th 759, 769 (citations omitted.)

The cross-complaint alleges that SPL conferred a benefit on 1008 LLC by furnishing the property with certain high end security equipment, stereo equipment, and furniture. Cross-complaint, ¶15. 1008 LLC appreciated the benefit and accepted and retained the equipment and furniture. Id., ¶16. Under the circumstances, it would be inequitable for 1008 LLC to retain the benefit without paying for the value of the benefit. Id., ¶17.

The court finds that the allegations are sufficient to meet the elements. Cross-complainant alleges that cross-defendants retained the personal property and benefitted from doing so.