Judge Edward B. Moreton, Jr, Case Number: 24SMCV02536, Date: 2025-05-15 Tentative Ruling

Judge: Edward B. Moreton, Jr, Case: 24SMCV02536, Date: 2025-05-15 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

LYNN KRESSEL,

Plaintiff,

M.G. INVESTMENT PROPERTIES, LLC, et al.,

Defendants.

Case No.: 24SMCV02536

Hearing Date: May 15, 2025

[TENTATIVE] order RE:

Defendant m.g. investment

properties, llc’s DEMURRER TO

PLAINTIFF’s first amended

COMPLAINT

This action arises from an alleged investment scam. In February 2020, Defendant M.G. Investment Properties LLC (“MGIP”) approached Plaintiff Lynn Kressel about an “investment opportunity” to develop and sell real property located at 23923 Malibu Road, Malibu, California 90265 (the “Property”). (First Amended Complaint (“FAC”) ¶7.) At the time, Plaintiff was 71 years old, without reliable income, and she was not a sophisticated party with experience in any investments. (Id. ¶9.) Yigal Hamias and Kate Harrison Hamias are the principals of Defendant.

Defendant solicited from Plaintiff an “investment” or “loan” of $1 million and represented the funds would be used for the specific purpose of developing the Property for sale. (Id. ¶8.) Once the property was sold, Plaintiff would be repaid the $1,000,000 principal amount in full plus a guaranteed additional amount of $440,000. (Id.) The parties entered into a contract entitled “Promissory Note and Debt Acknowledgement” (the “Agreement”), purporting to memorialize the parties’ “partnership to develop said land and sell for profit.” (Id. ¶10.) Plaintiff signed the Agreement and sent it back to Defendant via email. (Id. ¶11.)

Plaintiff then sent Defendant $1 million of her life savings. (Id.) After Plaintiff sent the monies, Defendant effectively ceased communications with Plaintiff. Defendant refused to provide any updates or substantive responses to Plaintiff’s numerous inquiries about the status of her investment until more than a year and half after she made her investment. (Id. ¶¶ 12, 15.)

In October 2021, Mr. Hamias reassured Plaintiff that her investment was safe, and that Defendant’s development and anticipated sale of the Property were still ongoing. (Id. ¶15.) At 70+ years old and retired, Plaintiff became concerned about the status of her investment and eager to recover her money. As such, Plaintiff offered to forego repayment of $1,440,000 for the lower amount of $1,150,000 if paid by December 31, 2021. (Id. ¶16.)

On November 18, 2021, Mr. Hamias texted Plaintiff and advised that he was in the process of obtaining a loan expected to close at the end of the month, such that Plaintiff could expect to be paid by December 4, 2021. (Id. ¶17.) On December 2, 2021, Mr. Hamias texted Plaintiff with another excuse that pushed payment to December 8, 2021. This date came and went with no payment. (Id. ¶18.)

While Defendant eventually returned Plaintiff’s principal amount of $1,000,000, Defendant failed to pay any additional amounts—and the additional guaranteed amount of $440,000 under the Agreement remains outstanding. (Id. ¶20.) On August 15, 2022, Mr. Hamias represented that he had people interested in buying the Property, and that Plaintiff would be paid the additional amount owed once the Property was sold. (Id. ¶21.)

Contrary to Mr. Hamias’s representations, the Property was never even listed for sale. Instead, in or around January 2024, Plaintiff learned that Mr. and Mrs. Hamias had moved into the Property and had been living there for some time. (Id. ¶22.) Plaintiff alleges she has been the victim of an “investment” scam, and Defendant had no intention of developing the Property for sale. (Id. ¶23.) Instead, Defendant treated Plaintiff’s $1 million investment as a two year interest-free loan for its principals’ own personal benefit. (Id. ¶23.)

The operative FAC alleges claims for (1) breach of the implied covenant of good faith and fair dealing, (2) breach of implied in fact contract, (3) breach of fiduciary duty, and (4) elder abuse.

This hearing is on Defendant’s demurrer. Defendant argues that (1) the claims for breach of implied covenant and breach of implied in fact contract fail because there is no binding contract as the contract attached to the complaint is unsigned, and to the extent Plaintiff is referring to another contract, it cannot be ascertained whether it is written, oral or implied; (2) the claim for breach of fiduciary duty fails because Plaintiff’s loan to Defendant does not create a fiduciary relationship; and (3) the claim for elder abuse fails because Plaintiff has not alleged that her personal property was taken for a wrongful use or with the intent to defraud or both.

Code Civ. Proc. § 430.41 requires that before the filing of a demurrer the moving party “shall meet and confer in person or by telephone” with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (Code Civ. Proc. § 430.41(a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc. § 430.41(a)(2).) Thereafter, the moving party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. § 430.41(a)(3).) Defendant submits the Declaration of Yossi Noudel, which fails to show the parties met and conferred by telephone or in person. Rather, defense counsel called and left a voicemail, purportedly detailing the defects in the FAC. There is no indication counsel invited Plaintiff’s counsel to call back or proposed dates and times when the parties could meet and confer. However, while this fails to satisfy the meet and confer requirements of § 430.41, the Court cannot overrule a demurrer based on an insufficient meet and confer.

A demurrer can be used only to challenge defects that appear within the “four corners” of the pleading - which includes the pleading, any exhibits attached, and matters of which the court is permitted to take judicial notice. (Blank v. Kirwan¿(1985) 39 Cal. 3d 311, 318;¿Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.) As limited to the “four corners”, a pleading is adequate if it contains a reasonably precise¿statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim.¿ (Leek v. Cooper¿(2011) 194 Cal. App. 4th 399, 413.)

On demurrer, a complaint must be liberally construed.¿ (Code Civ. Proc., § 452;¿Stevens v. Superior Court¿(1999) 75 Cal. App. 4th 594 601.) All material facts properly pleaded, and reasonable inferences, must be accepted as true. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal. 4th 962, 966-67.)

A pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim. The degree of detail required depends on the extent to which the defendant in fairness needs such detail which can be conveniently provided by the plaintiff. Less particularity is required when the defendant ought to have co-extensive or superior knowledge of the facts. Under normal circumstances, there is no need for specificity in pleading evidentiary facts. However, bare conclusions of law are insufficient.¿ (Code Civ. Proc., §§ 425.10(a),¿459; Zelig v. County of Los Angeles¿(2002) 27 Cal. 4th 1112, 1126;¿Doheny Park Terrace HO A v. Truck Ins.) Exchange¿(2005) 132 Cal. App. 4th 1076, 1098-99;¿Berger v. California Insurance Guarantee Assn¿(2005) 128 Cal. App. 4th 989, 1006.)

A demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.¿ (People v. Lim¿(1941) 18 Cal. 2d 872, 883.) “A demurrer for uncertainty¿is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”¿ (Khoury v. Maly's of California, Inc. (1993) 14 Cal. App. 4th 612, 616.) Errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief.¿ (Saunders v. Cariss¿(1990) 224 Cal. App. 3d 905, 908.) A party attacking a pleading on “uncertainty” grounds must specify how and why the pleading is uncertain, and where that uncertainty can be found in the challenged pleading.¿ (Fenton v. Groveland Community Services Dept. (1982) 135 Cal.App.3d 797, 809¿(disapproved on other grounds in¿Katzberg v. Regents of the University of California¿(2002) 29 Cal.4th 300).)

Further, uncertainty is a disfavored ground on a demurrer.¿(See, Rutter,¿Civil Procedure Before Trial, Section 7:85.) A demurrer for uncertainty will only be sustained where the complaint is so poorly pled that a defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her.¿ (Khoury, 14 Cal. App. 4th at 616.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Defendant argues that the contract claims fail under the statute of fraud because the agreement Plaintiff attaches to the FAC is unsigned by Defendant. The Court disagrees.

Defendant does not specify which of the contracts covered by the statute of frauds (Cal. Civ. Code §1624(a)) is at issue here. Defendant could have repaid the loan within one year so §1624(a)(1) does not apply. This is not an agreement to purchase real property so §1624(a)(6) does not apply. This is not a loan made “by a person engaged in the business of lending or arranging for the lending of money or extending credit” so §1624(a)(7) does not apply.

In any event, even if the statute of frauds applies, the alleged contract bears Defendant’s letterhead (Ex. A to FAC), and courts have found this satisfies the signature requirement. (See e.g.,¿West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 798¿(“the April 5, 2010 letter bears the Chase Bank letterhead, which suffices as a signature.");¿Donovan, 26 Cal.4th at 277¿(noting a letterhead may be a sufficient to satisfy statute of frauds).)

Further, even if the statute of frauds applies, this case presents an exception to the rule. The purpose of the statute of frauds is to prevent fraud and perjury with respect to certain agreements by requiring, for enforcement, the more reliable evidence of a writing signed by the party to be charged. (Riley v. Bear Creek Planning Committee¿(1976) 17 Cal.3d 500, 509;¿Kohn v. Jaymar-Ruby, Inc. (1994) 23¿Cal.App.4th 1530, 1534.) The objective of the statute of frauds is to prevent fraud, and it cannot be invoked to perpetuate fraud. Thus, it is often said that the¿statute of frauds¿“is a shield and not a sword.” (1 Miller & Starr, Cal. Real Estate (3d. ed. 2000) § 1:72, p. 210.) There are numerous¿exceptions¿to the¿statute of frauds, one of which is applicable to the facts of this case.

“The doctrine of estoppel to assert the statute of frauds has been consistently applied by the courts of this state to prevent fraud that would result from refusal to enforce oral contracts in¿certain circumstances. Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his [or her] position in reliance on the contract [citations], or in the unjust enrichment that would result if a party who has received the benefits of the other’s performance were allowed to rely upon the statute.” (Monarco v. Lo Greco¿(1950) 35 Cal.2d 621, 623-624.)

Here, Plaintiff fully performed her part of the contract, by giving Defendant $1 million of her life savings with the expectation that she would not only get her money back but receive a return of $440,000. To apply the statute of frauds in these circumstances would result in an unjust enrichment to Defendant, whose principals would have purportedly received an interest free loan for two years, to purchase their personal home.

Defendant separately argues that the contract claims fail because it cannot be ascertained from the pleading, whether the contract is written, oral or implied by conduct. The Court agrees.

At the outset, the Court notes that it is entirely proper for a party to¿plead¿its claims in the¿alternative, such that it is not improper to allege that a¿written¿contract¿existed, but, if a fact-finder determines otherwise, then, in the¿alternative, an¿oral¿contract¿existed, and so on. As such, the fact that a¿pleading¿alleges multiple different types of contracts (written, oral, or¿implied) is not what makes it subject to demurrer under¿Code Civ. Proc., § 430.10(g). What makes a claim subject to demurrer under¿Code Civ. Proc., § 430.10(g)¿is a mish-mash allegation wherein the contract at issue is alleged as partially¿written¿and partially¿oral, or partially¿oral¿and partially¿implied-by-conduct, without any indication what terms were written, oral or implied. Confusion and commingling runs afoul of¿Code Civ. Proc., § 430.10(g). Clear¿pleading¿in the¿alternative¿does not.

Here, the FAC alleges the “[t]he Parties entered into an agreement that was both oral and written as reflected in a document that was titled ‘Promissory Note and Debt Acknowledgement.’ This oral/written agreement constituted an enforceable implied in fact contract and was supported by legal consideration.” (FAC ¶ 31.) It is unclear from these allegations (1) what terms of the agreement were in writing, (2) what portion of the agreement was oral, and (3) whether any terms were implied by conduct.

For this reason, the Court sustains the demurrer to Plaintiff’s contract claims with 20 days’ leave to amend.

Breach of Fiduciary Duty

Defendant argues that Plaintiff’s breach of fiduciary duty claim fails because the loan did not create a fiduciary relationship between the parties. The Court disagrees.

The parties’ alleged contract states that Plaintiff invested $1 million and by virtue of this investment “Lynn and M.G. have entered a partnership to develop said land and sell for profit.” (Ex. A to FAC.) The alleged contract, therefore, created a partnership, and under California law, partners owe each other a fiduciary duty. (Corp. Code §16404(a); Galardi v. State Bar (1987) 43 Cal.3d 683, 693.)

Defendant argues that the transaction between the parties was merely a loan. But this is contrary to the language of the alleged contract which not only characterizes the parties’ relationship as a partnership, but also characterizes the payments to Plaintiff as a division of “profits” rather than as “interest payments.”

It is true that Plaintiff does not allege she had any control or management of the partnership. However, nothing in the law requires that an individual partner exercise some particular degree of participation in the¿management¿and¿control¿of a business in order for the business to constitute a¿partnership. To the contrary, the applicable statutory provision requires¿only¿that “each partner [have]¿equal¿rights¿in the¿management¿and conduct of the partnership business.” (Corp. Code, § 16401, subd. (f), italics added.)

While each partner must have a¿right¿to participate in the management, conduct and control of the partnership, it is equally well established that partners may apportion their duties with respect to the management and control of the partnership in such a way that one or more partners may be given a greater share in the management than others. Thus, the fact that one partner may be given a greater day-to-day role in the management and control of a business than another partner has does not defeat the existence of the partnership itself. (Moulin v. Der Zakarian¿(1961) 191 Cal. App. 2d 184, 190¿(“when persons jointly associated agree that management of the enterprise be entrusted to one of the group, there may nevertheless by a community of interest in view of the fact that the making of the agreement to relinquish control is itself an exercise of the requisite¿right to control'”);¿Singleton v. Fuller, supra,¿118 Cal. App. 2d at 741¿(“the fact that no complete control of any part of a partnership venture is vested in each partner does not negative the existence of a partnership since, by agreement, one partner may be given the duty of management of the enterprise or any part thereof”).) Here, the evidence shows that the parties had an express partnership agreement pursuant to which Plaintiff provided the capital for the purpose of developing and selling property, and Defendant provided the on-site services necessary for the actual acquisition, development and sale of that Property.

Defendant next argues that Plaintiff has not sufficiently alleged Defendant breached a fiduciary duty. The Court disagrees.

It is undisputed that a partner owes a duty not to use partnership property for purposes unrelated to the partnership. (Prince¿v.¿Harting¿(1960) 177 Cal. App. 2d 720, 727.) Furthermore, “every partner is bound to act in the highest good faith to his copartner and may not obtain any advantage over him in the partnership affairs by the slightest misrepresentation [or] concealment . . . .” (Id., quoting¿Llewelyn¿v.¿Levi¿(1909) 157 Cal. 31, 37.) Here, Plaintiff alleges Defendant used the partnership property to provide an interest free loan to Defendant’s principals, rather than developing and selling the Property. This is sufficient to allege a breach of Defendant’s fiduciary duties.

Accordingly, the Court overrules the demurrer to Plaintiff’s breach of fiduciary duty claim.

Defendant argues that Plaintiff has not stated a claim for financial elder abuse because Plaintiff has failed to identify what personal or real property is alleged to have been taken from Plaintiff. The Court disagrees.

“The purpose of the [Elder Abuse Act (Welf. & Inst. Code, § 15600 et seq.)] is essentially to protect a particularly vulnerable portion of the population from gross mistreatment in the form of abuse and custodial neglect.” (Delaney v. Baker¿(1999) 20 Cal.4th 23, 33; Estate of Lowrie¿(2004) 118 Cal.App.4th 220, 226¿(Estate of Lowrie).)¿ As originally enacted, the Elder Abuse Act was designed to encourage the reporting of abuse of elders and dependent adults, but the Legislature modified the statutory scheme to “provide incentives for private, civil enforcement through lawsuits against elder abuse and neglect.” (Estate of Lowrie,¿ 118 Cal.App.4th at 226.) “Subject to statutory criteria and limitations, the statutory scheme now permits heightened remedies.¿These include pain and suffering damages even after the abused elder dies, punitive damages, and attorney fee awards." (Id. at 226-227.)

The elements of a cause of action for financial elder abuse are set out in¿section 15610.30, subdivision (a). Financial elder abuse includes, among other things, taking or retaining real or personal property of an elder to a wrongful use. (Welf. & Institutions Code § 15610.30, subd. (a)(1).) A person is deemed to have taken or retained property “to a wrongful use” if, among other things, the person takes or retains possession of property in “bad faith.” (Id. § 15610.30, subd. (b).) A person is deemed to have acted in “bad faith” if the person “knew or should have known” that the elder had a right to have the property transferred or made readily available to the elder or his representative. (Id. § 15610.30, subd. (b)(1).) And a person should have known of such a right if, “on the basis of the information received by the person . . . it is obvious to a reasonable person that the elder . . . has a right specified in paragraph (1).” (Id. § 15610.30, subd. (b)(2).)

Here, the Complaint sufficiently alleges Defendant took Plaintiff’s property ($1 million) in bad faith, by claiming the monies would be used to develop and sell the Property, when in fact Defendant allegedly used the investment for a two-year interest free loan for Defendant’s principals. That Defendant eventually returned the $1 million is of no moment. Defendant cites no case that the return of property taken and used for two years precludes a claim for financial elder abuse. Moreover, Defendant promised to return not only the original investment, but a $440,000 profit, which Plaintiff alleges was a fraudulent representation, which further supports that Defendant acted in bad faith.