Judge: Elaine Lu, Case: 22STCV37873, Date: 2023-08-17 Tentative Ruling

Case Number: 22STCV37873    Hearing Date: August 17, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

            On December 5, 2022, Plaintiff Karen Garush Berkibekyan (“Plaintiff”) filed the instant action against Defendants Narek Eric Kazarian (“Kazarian”) and Spectrum Lending, LLC (“Spectrum”) (jointly “Defendants”).  The complaint asserts six causes of action for (1) Breach of Contract, (2) Fraud and Deceit – Intentional Misrepresentation, (3) Fraud and Deceit – Negligent Misrepresentation, (4) Fraud and Deceit – Promise Made Without Intention to Perform, (5) Cancellation of Instrument, and (6) Declaratory Relief.

            On March 22, 2023, Defendants filed the instant demurrer and motion to strike.  On June 23, 2023, Plaintiff filed her respective oppositions.  On June 29, 2023, Defendants filed their respective replies.  On June 30, 2023, Plaintiff filed a notice of related cases, which the Court denied on July 5, 2023.  (Minute Order 7/19/23.)

Allegations of the Operative Complaint

The complaint alleges that:

In October 2020, Defendant Kazarian arranged a loan between Defendant Spectrum as the lender and Plaintiff as the borrower.  (Complaint ¶ 7.)  On October 23, 2020, at 1915 W. Glenoaks Boulevard, Suite 101, Glendale, Los Angeles County, California, 91201, [Plaintiff] and Defendant SPECTRUM entered into an agreement, wherein SPECTRUM would lend [Plaintiff] $500,000.00 secured by a Deed of Trust (‘AGREEMENT’) against [Plaintiff’s] real property located at 12662 Meadowlark Avenue, Granada Hills, CA 91344 (‘PROPERTY’). Plaintiff signed the Deed of Trust (‘DOT’) on October 23, 2020, and Defendants caused it to be recorded with the Los Angeles County Recorders Office as instrument number 2020-1436000. (Id. ¶ 7, Exh. 1.)  However, Defendant Spectrum breached the Agreement by failing to tender the $500,000.00 loan proceeds to Plaintiff.  (Id. ¶ 10.)   

Legal Standard

Demurrer Standard 

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. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts “give the complaint a reasonable interpretation, and read it in context.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefor’e, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (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, supra, 147 Cal.App.4th at 747.) 

Motion to Strike Standard

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer (i.e., words, phrases, prayer for damages, etc.).  (See CCP §§ 435-437.)  A party may file a motion to strike in whole or in part within the time allowed to respond to a pleading.  However, if a party serves and files a motion to strike without demurring to the complaint, the time to answer is extended.  (CCP §§ 435(b)(1), 435(c).)

A motion to strike lies only where the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws.  (CCP § 436.)  The grounds for moving to strike must appear on the face of the pleadings or by way of judicial notice.  (CCP § 437.)

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring 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.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).)  There is a similar meet and confer requirement for motions to strike.  (CCP § 435.5.)

Here, Defendants have fulfilled the meet and confer requirements.  (Matevosyan Decl. ¶ 3.)[1]

Discussion – Demurrer

Entire Complaint

             Defendants contend that the entire complaint fails because the attached exhibit concedes that Plaintiff received the $500,000.00, contrary to the allegations in the complaint.  Defendants further contend that the entire complaint is uncertain.  The Court disagrees.

            “While the ‘allegations [of a complaint] must be accepted as true for purposes of demurrer,’ the ‘facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.’ ”  (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1145–1146; Alphonzo E. Bell Corp. v. Bell etc. Synd. (1941) 46 Cal.App.2d 684, 691, 116 P.2d 786 [“conclusions of the pleader ... contrary to the express terms of [an] instrument ... made a part of the complaint” are treated “as surplusage”].)

            Here, the attached exhibit, which the complaint alleges is the DOT (Complaint ¶ 7) – does not concede that Defendants actually disbursed $500,000 to Plaintiff.  The portion cited by Defendants at page 5 of the purported DOT – entitled “Request for Full Reconveyance” – provides in full that:

The undersigned is the legal owner and holder of all indebtedness secured by the within Deed of Trust. All sums secured by said Deed of Trust have been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel all evidences of indebtedness, secured by said Deed of Trust, delivered to you herewith together with said Deed of Trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, the estate now held by you under the same.

(Complaint, Exh. 1 at p.5.)

            Plaintiff signed this purported reconveyance, which is dated October 25, 2020.  (Complaint, Exh. 1 at p.5.)  The cited portion of the document is not a deed of trust.  Nor does it concede or purport to reflect that the amount secured by the DOT has been paid to Plaintiff.  Instead – inexplicably – the Request for Reconveyance states that Plaintiff is the owner of the loan secured by the DOT and that all sums secured by the DOT have been repaid.  This is not a concession that any amount of funds were disbursed to Plaintiff.  Nor is this contrary to the allegation in the complaint that Defendant Spectrum failed to provide the loan amount of $500,000.00. 

The Court also rejects Defendants’ alternative argument that the complaint is uncertain.  A special demurrer for uncertainty, Code of Civil Procedure section 430.10(f), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her.  (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)  Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.) 

            Here, there is some uncertainty as to exhibit 1 of the complaint.  As noted above, the complaint claims that exhibit 1 is the DOT.  (Complaint ¶ 7.)  The DOT clearly designates Spectrum as the Trustee and Beneficiary and Plaintiff as the Trustor.  (Complaint Exh. 1 at p.1.)  The DOT is signed by Plaintiff as the Trustor with a document date of October 23, 2020, but the notarization indicates that the DOT was actually signed on October 25, 2020 – two days later.  (Complaint Exh. 1 at p.2.)  Page 5 of the DOT is a Request for Full Reconveyance, which Plaintiff signed purportedly as the Beneficiary of the DOT.  The Request for Full Reconveyance on page 5 is also dated October 25, 2020 and is separately notarized.  (Complaint Exh. 1 at p.5.)

The Notice of Full Reconveyance is plainly legally deficient.  As a matter of law, a reconveyance of a deed of trust must be signed by the Beneficiary or assignee of the Beneficiary.  (Civ. Code, § 2941(b)(1).)  Here, Plaintiff is clearly not the Beneficiary of the DOT.  Though this inconsistency should be clarified, this inconsistency alone does not make the Complaint uncertain.  The complaint is clear and explicit as to the basis for Plaintiff’s claims:  Defendant Spectrum agreed to loan $500,000 to Plaintiff and failed to do so, (Complaint ¶¶ 6-11), and Defendant Kazarian defrauded Plaintiff. (Complaint ¶ 12-34).  Defendants can reasonably ascertain the claims directed against them, determine what issues must be admitted or denied, and respond. 

Accordingly, Defendants’ demurrer to the entirety of the complaint for being contrary to the attached exhibit and for uncertainty is OVERRULED.

Second, Third, and Fourth Causes of Action: Fraud and Deceit

            Defendants contend that the complaint fails to allege the fraud claims with sufficient specificity.  The Court disagrees.

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)  

            “The elements of negligent misrepresentation are similar to intentional fraud except for the requirement of scienter; in a claim for negligent misrepresentation, the plaintiff need not allege that the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true.” (Bains v. Moores (2009) 172 Cal.App.4th 445, 454 [internal citations omitted].)  “Under California law, negligent misrepresentation is a species of actual fraud and a form of deceit.”  (Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1388.)  Both a claim for intentional misrepresentation and a claim for negligent misrepresentation must be pleaded with specificity rather than with general and conclusory allegations.  (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) 

“The elements of promissory fraud . . . are: (1) a promise made regarding a 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 promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.”  (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)  Promissory fraud must also be alleged with specificity. (Id.) 

“Fraud allegations ‘involve a serious attack on character’ and therefore are pleaded with specificity.  [Citation.]  General and conclusory allegations are insufficient.  [Citation.]  The particularity requirement demands that a plaintiff plead facts which ‘‘‘show how, when, where, to whom, and by what means the representations were tendered.’’’  [Citation.]”  (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)  “[E]ach element must be pleaded with specificity.  [Citations.]”  (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166 disapproved of on other grounds by Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905.) 

            Here, the Complaint meets the stringent standards of pleading fraud with particularity.  The Complaint alleges in relevant part that “[o]n or about October 23, 2020, at 1915 W. Glenoaks Boulevard, Suite 101, Glendale, Los Angeles County, California, 91201 Defendant KAZARIAN made the following oral representations to [Plaintiff] on behalf of Defendant SPECTRUM: Defendant SPECTRUM would lend [Plaintiff] $500,000.00 secured by a Deed of Trust against [Plaintiff’s] PROPERTY.”  (Complaint ¶¶ 13, 20, 28.)  However, this statement was untrue in that Defendant Spectrum did not lend Plaintiff any sum and never had the intention to do so.  Defendant made the misrepresentation with the intent to induce Plaintiff into signing the DOT without any intention to lend the $500,000 to Plaintiff.  (Id. ¶¶ 14-15, 21-23, 29-30.)

            The Complaint alleges with sufficient specificity when the alleged misrepresentation was made (October 23, 2020), where the misrepresentation was made (at 1915 W. Glenoaks Boulevard, Suite 101, Glendale, Los Angeles County, California, 91201), how and by whom the misrepresentation was made (by Defendant Kazarian on behalf of Defendant Spectrum orally), and to whom the misrepresentation was made (Plaintiff).  Plaintiff has sufficiently alleged the content and context of the misrepresentation, stating all the elements of fraud.

            Accordingly, Defendants’ demurrer to the second, third, and fourth causes for fraud for lack of specificity is OVERRULED.

Discussion – Motion to Strike

            Defendants seek to strike the prayer for punitive damages and prayer for attorney’s fees from the Complaint. 

Attorney’s Fees

            Attorney’s fees shall only be recoverable as provided for by statute, contract or other law. (CCP §§1021, 1033.5(a)(10)). 

            Here, the attached DOT explicitly provides for attorneys’ fees for Spectrum “ (3) [t]o appear in and defend any action or proceeding purporting to affect the security hereof or affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed.”  (Complaint, Exh. 1 at p.3, [italics added].)  Pursuant to Civil Code section 1717, “[i]n any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs.”  (Civ. Code, § 1717(a).)  Thus, by law, any contractual provision for attorneys’ fees to any party is automatically bilateral.  Therefore, there is a proper basis for Plaintiff’s prayer for attorneys’ fees in the instant action

            Defendants’ motion to strike the prayer for attorney’s fees is DENIED.

           
Punitive Damages

            California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code, § 3294(a).) “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Id. at (c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id. at (c)(2).) “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id. at (c)(3).) Punitive damages thus require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-895.)

            Moreover, a demand for punitive damages for the commission of any tort requires more than the mere conclusory allegations of “oppression, fraud, and malice.”  (Civ. Code § 3294; see Perkins v. Superior Court (1981) 117 Cal. App.3d 1, 6-7.) 

            Here, the Court has overruled the demurrer the fraud claims, which are an adequate basis for punitive damages.  Accordingly, Defendants’ motion to strike the prayer for punitive damages is OVERRULED.

CONCLUSION AND ORDER

Based on the foregoing, Defendants Narek Eric Kazarian and Spectrum Lending, LLC’S demurrer to the complaint is OVERRULED.

Defendants’ motion to strike the prayer punitive damages is DENIED.

Defendants are to file an answer within thirty (30) days.

The case management conference is continued to September 26, 2023 at 8:30 am.

Moving Parties are to give notice and file proof of service of such.

DATED: August ___, 2023                                                    ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court