Judge: Frank M. Tavelman, Case: 23BBCV02659, Date: 2024-06-21 Tentative Ruling
Case Number: 23BBCV02659 Hearing Date: June 21, 2024 Dept: A
LOS
ANGELES SUPERIOR COURT
NORTH
CENTRAL DISTRICT - BURBANK
DEPARTMENT
A
TENTATIVE
RULING
JUNE 21, 2024
DEMURRER
Los Angeles Superior Court
Case # 23BBCV02659
MP: Exceed Companies LLC & William
Mcgrayan (Defendants)
The Court
is not requesting oral argument on this matter. The Court is guided by
California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear
is requested. Unless the Court directs argument in the Tentative Ruling,
no argument is requested and any party seeking argument should notify all other
parties and the court by 4:00 p.m. on the court day before the hearing of the
party’s intention to appear and argue. The tentative ruling will become
the ruling of the court if no argument is received.
Notice
may be given either by email at BurDeptA@LACourt.org or by telephone at (818)
260-8412.
ALLEGATIONS:
Ameris Bank (Ameris) brings this
action against Canmar Promo Corp. (Canmar), Anahit Sahakyan (Sahakyan), Exceed
Companies LLC dba Exceed Capital Lending (Exceed), William Mcgrayan aka Vahe
Margaryan (Mcgrayan), and Mane Nersisyan (Nersisyan) (collectively Defendants).
Plaintiff alleges that Defendants worked together to create a number of “straw”
companies with the purpose of inducing Ameris to issue a Small Business
Administration Loan in the amount of $2,250,000. Ameris alleges it issued the loan to Canmar
based on the representations of these companies and that Canmar is actually a
defunct entity.
Ameris’ First Amended Complaint
(FAC) states five causes of action for (1) Breach of Contract, (2) Intentional
Fraud, (3) Negligent Misrepresentation, (4) Civil Conspiracy, and (5) Breach Of
Fiduciary Duty.
Exceed and Mcgrayan (hereinafter
Demurring Defendants) now demur to Ameris’ second, third, fourth, and fifth
causes of action. Ameris opposes the demurrer.
ANALYSIS:
I.
LEGAL
STANDARDS
Demurrer
The grounds for a demurrer must appear on the
face of the pleading or from judicially noticeable matters. (C.C.P. §
430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for
sufficiency tests whether the complaint states a cause of action. (Hahn v.
Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a
demurrer hearing is whether the complaint states a cause of action. (Id.)
A demurrer assumes the truth of all factual,
material allegations properly pled in the challenged pleading. (Blank v.
Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable,
the plaintiff’s allegations must be accepted as true for the purpose of ruling
on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981)
123 Cal. App. 3d 593, 604.) But this does not include contentions;
deductions; conclusions of fact or law alleged in the complaint; facts
impossible in law; or allegations contrary to facts of which a court may take
judicial notice. (Blank, supra, 39 Cal. 3d at 318.)
Pursuant to Code of Civil Procedure (“C.C.P.”)
§§ 430.10(e) and (f), the party against whom a complaint has been filed may
demur to the pleading on the grounds that the pleading does not state facts
sufficient to constitute a cause of action, or that the pleading is uncertain,
ambiguous and/or unintelligible. It is an abuse of discretion to sustain a
demurrer without leave to amend if there is a reasonable probability that the
defect can be cured by amendment. (Schifando v. City of Los Angeles
(2003) 31 Cal. 4th 1074, 1082.)
II.
MERITS
Meet and Confer
C.C.P. §§ 430.41(a) requires that the moving
party meet and confer with the party who filed the pleading that is subject to
the demurrer. Upon review the Court finds the meet and confer requirements were
met. (Tan Decl. ¶¶ 2(a).)
Second
COA – Intentional Fraud – Sustained with Leave to Amend
To
properly allege fraud against a corporation, the plaintiffs must plead the
names of the persons allegedly making the false representations, their
authority to speak, to whom they spoke, what they said or wrote, and when it
was said or written. (Tarmann v. State
Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)
Here,
Demurring Defendants argue the factual allegations supporting this cause of
action are pled without the requisite specificity. Demurring Defendants argue
that the FAC merely states the elements of fraud in a conclusory matter without
specific factual allegations stated as to the misrepresentations made.
A
review of the FAC reveals that Ameris alleges a large conspiracy involving Demurring
Defendants and several other parties. Ameris contends the majority of this
conspiracy was set into motion by Demurring Defendants and Nersisyan. Ameris alleges
that Mcgrayan and Nersisyan, on behalf of Exceed, created a number of “straw
companies” for the purpose of submitting loan applications on their behalf.
(Compl. ¶ 31.) Ameris alleges that Canmar is one such company.
Ameris
alleges that on March 9, 2023, Canmar executed and delivered to Ameris a Loan
Agreement relating to a loan to Canmar in the stated principal amount of
$2,250,000.00 (hereinafter Canmar Loan). Although it is not clearly stated, it
is apparent from the overall allegations that Ameris contends Exceed served as
the broker for the loan. For example, Ameris alleges that it communicated only
with Mcgrayan and Exceed during the loan approval process and were kept from ever
communicating with Canmar or its president Sahakyan. (FAC ¶ 37.) Plaintiff
further alleges that, during the time Exceed was brokering the loan, it was
doing so with a suspended license. Ameris alleges that Exceed’s finance
lender/broker license was revoked by the Department of Financial Protection and
Innovation of the State of California on December 27, 2022. (FAC ¶ 46,
Exh. I.)
Ameris further
alleges that “Nersisyan and Mcgrayan, in their individual capacity and
on behalf of Exceed Capital, were intimately involved in the process and
created/submitted documents to Ameris on behalf of Canmar.” (FAC ¶ 38.) Ameris
alleges that Demurring Defendants submitted documents under penalty of perjury
to demonstrate that Canmar was valued at a net worth of $900,000. (FAC ¶ 43).
However, Ameris does not attach these documents to the FAC, nor do they state
their specific nature. Ameris also alleges that Demurring Defendants submitted a fake Top 10 Customers List falsely
demonstrating that Canmar had performed over $1,537,000 in services. (FAC
¶¶ 43, 44, Exh. H.)
Ameris further asserts that Nersisyan,
in both an individual capacity and on behalf of Exceed Capital, procured a $1.8
million life insurance policy on behalf of Sahakyan that was utilized as
collateral for the Canmar Loan. (FAC. ¶ 38.) Ameris further alleges that Exceed
Capital selected this specific life insurance policy because it was not
dependent on age or a medical exam of the insured and thus Nersisyan did not
have to produce any individual for the medical examination. (FAC. ¶ 40.) Ameris
allege that this life insurance policy has now been cancelled due to
nonpayment. (FAC ¶ 41.)
Ameris
alleges that Canmar thereafter defaulted on the loan. (FAC ¶ 21.) On July
14, 2023, approximately three days after Ameris sent its first letter noticing
default, Ameris received a wire transfer from a third party, Dynamic
Delivery Install, Inc. (Dynamic). (FAC ¶ 26.) Ameris applied the payment
to the Canmar Loan as directed. (FAC ¶ 27.) The receipt of the wire
transfer prompted Ameris to send another letter to Canmar, requesting to know
who Dynamic was and why they were wiring money for the Canmar Loan. (FAC
¶ 28, Exh. G.) Ameris alleges this letter received no response. (FAC
¶ 30.) Ameris further alleges that Dynamic was another of the companies
submitted to Ameris by Exceed for a loan. (FAC ¶ 32.)
Ameris,
apparently concerned at this point, alleges that it conducted an investigation
of Canmar and the Canmar Loan. (FAC ¶ 30.) Ameris alleges that its
investigation revealed Canmar was never operating in the capacity that was
related to Ameris on the loan documents. (FAC ¶ 30.) Ameris also alleges
that Canmar was suspended by the California Secretary of State in 2017 and was
only revived in 2020 with the purpose of defrauding Ameris. (FAC
¶ 35.) Ameris alleges that Canmar’s
office space was merely a shell and abandoned shortly after the loan was
secured. (FAC ¶ 45.)
As an
initial matter, Demurring Defendants argue that these facts are not alleged
specifically because Ameris does not allege how the falsity of the loan
documents was discovered. Demurring Defendants cite to no authority stating
that a fraud cause of action must allege how a plaintiff determined the
representations made were false. The Court finds this argument unpersuasive.
The Court does not view the specificity requirements as necessitating Ameris
plead how it discovered the loan documents were fraudulent. Demurrers are meant
to test the sufficiency of pleadings, not the veracity of the allegations made.
How Ameris came to learn the documents were false is matter for discovery, not
demurrer. As it stands, Ameris’ allegation that it conducted an internal
investigation of the loan and determined the documents to be false is
sufficient. (See FAC ¶¶ 29, 30.)
Although
Ameris has alleged a variety of fraudulent behavior, the Court finds that the
current allegations are insufficiently detailed. Ameris’ allegation that Mcgrayan
presented false loan documents is not specific enough to establish what
misleading statements were made. The FAC is unclear as to whether the entirety
of these statements were false, certain values were forged, or some other
aspect of them was fraudulent. Ameris’ statement that Demurring Defendants
submitted documents under penalty of perjury to demonstrate that Canmar was
valued at a net worth of $900,000” is too vague for purposes of a fraud action.
(See FAC ¶ 43.) Presumably this combination of any number of allegedly
fraudulent documents was done to simplify Ameris’ pleadings, but it has left
Demurring Defendants without notice of what these documents are.
Likewise,
the Court finds the allegations concerning Canmar’s status as a “shell company”
to be insufficiently detailed. While Ameris is not required to plead the
exacting details of their investigation, they must at the very least allege the
facts their investigation turned up. Canmar’s office space being empty, while
peculiar, is not sufficient on its own to support Ameris’ allegation that
Canmar was created for the sole purpose of defrauding them. The facts which cause Ameris to conclude
Canmar was a shell company should be set forth. One of the facts is the vacant property, but
that alone may not be sufficient. Did
Canmar have any assets? Did it have any
customers? Were there other factors that
can be asserted to support the conclusion that Canmar was a shell company set
up primarily for fraud?
The
specificity requirement means a plaintiff must allege facts showing how, when,
where, to whom, and by what means the representations were made. (Lazar
supra, 12 Cal.4th at 645.) Here, Ameris has alleged no facts concerning the
means by which the misrepresentations were made. Ameris alleges that Demurring
Defendants communicated exclusively with them during the loan process, but the
FAC contains no allegations as to the nature of this communication. Presumably
in this exclusive communication some statements regarding Canmar were made to
include Ameris’ reliance. Without factual allegations as to these statements,
Ameris’ FAC lacks for specificity.
The
above being said, the Court finds that these are defects which can likely be
cured upon amendment. Accordingly, the demurrer to this cause of action is
SUSTAINED with 30 days’ leave to amend.
Third
COA – Negligent Misrepresentation – Overruled
The
elements of a cause of action for negligent misrepresentation include
“[m]isrepresentation of a past or existing material fact, without reasonable
ground for believing it to be true, and with intent to induce another’s
reliance on the fact misrepresented; ignorance of the truth and justifiable
reliance on the misrepresentation by the party to whom it was directed; and
resulting damage.” (Hydro-Mill Co., Inc.
v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115
Cal.App.4th 1145, 1154 [quotation marks omitted].)
Demurring
Defendants argue that Ameris’ cause of action for Negligent Misrepresentation
also fails for lack of specificity. Demurring Defendants present no novel
arguments as to this cause of action, instead directing attention to the
arguments made regarding the cause of action for Intentional Fraud.
From
the Court’s review of the FAC it appears that Ameris has pled negligent
misrepresentation sufficiently. Specifically, Ameris alleges that Exceed’s
finance lender/broker license was revoked by the Department of Financial
Protection and Innovation of the State of California on December 27, 2022. (FAC
¶ 46, Exh. I.) As a result, Ameris alleges that Exceed was not permitted
to operate as a broker during the time of the loan transaction. (FAC
¶ 47.) Ameris alleges this revocation was never disclosed to Ameris
despite Exceed and Mcgrayan communicating exclusively on behalf of Canmar. (FAC
¶ 37.) The Court finds these allegations are sufficient to sustain Ameris’
cause of action for Negligence Misrepresentation.
Accordingly,
the demurrer to this cause of action is OVERRULED.
Fourth
COA – Civil Conspiracy - Overruled
“Civil conspiracy
is not an independent tort. Instead, it is a legal doctrine that imposes
liability on persons who, although not actually committing a tort themselves,
share with the immediate tortfeasors a common plan or design in its
perpetration.” (City of Industry v. City
of Fillmore (2011) 198 Cal.App.4th 191, 211-212 [quotation marks omitted].)
“The elements of a civil conspiracy are (1) the formation of a group of two or
more persons who agreed to a common plan or design to commit a tortious act;
(2) a wrongful act committed pursuant to the agreement; and (3) resulting
damages.” (Id. at p. 212.)
Demurring
Defendants demur to this cause of action arguing that Civil Conspiracy cannot
be a separate cause of action. Demurring Defendants further argue that this
cause of action is duplicative in that it adds no theory of liability not
already pled in the second cause of action for Intentional Fraud.
The
Court begins by addressing the argument that Civil Conspiracy cannot serve as a
cause of action. In Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994)
7 Cal.4th 503, the California Supreme Court addressed the validity of a cause
of action for Civil Conspiracy. The Applied court held:
A civil conspiracy, however atrocious, does
not per se give rise to a cause of action unless a civil wrong has been
committed resulting in damage. A bare agreement among two or more persons to
harm a third person cannot injure the latter unless and until acts are actually
performed pursuant to the agreement. Therefore, it is the acts done and not the
conspiracy to do them which should be regarded as the essence of the civil
action.
(Applied
supra, 7 Cal.4th at 511 [internal quotation marks and citations omitted].)
The
above demonstrates that while Civil Conspiracy cannot be an “independent” cause
of action, it can be a “separate” cause of action. This is because a cause of
action for Civil Conspiracy requires the commission of an independent tort,
rather than the formation of a conspiracy alone. This is in contrast to a
criminal cause of action for conspiracy, which contains no requirement that the
purpose of the conspiracy is actually effectuated. (See Cal. Penal Code §
182(b).)
Here,
the Court finds Ameris has pled all of the elements of Civil Conspiracy. Ameris
alleges the Demurring Defendants, “…were aware of, cooperated and worked
together to defraud the Bank into issuing a loan to Canmar,” and “…agreed with
the plan for Canmar to submit fraudulent documents to the Bank and
Defendants…to induce the Bank into making the Loan to Canmar.” (FAC
¶¶ 83-85.) Further, Ameris alleges that the mechanisms of this conspiracy,
the false loan documents, were actually submitted in fulfillment of the
conspiracy. (FAC ¶ 84.) The Court finds these allegations are sufficient
to sustain Ameris’ cause of action for Civil Conspiracy.
Accordingly,
the demurrer to this cause of action is OVERRULED.
Fifth
COA - Breach of Fiduciary Duty – Sustained with Leave to Amend
“The
elements of a cause of action for breach of fiduciary duty are the existence of
a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011)
51 Cal.4th 811, 820.)
Demurring
Defendants demur to this cause of action on grounds that (1) it pleads
insufficient facts as to the existence of a fiduciary duty and (2) it is
uncertain because of conflicting allegations in the FAC.
It is
well-settled that a fiduciary duty under common law may arise “when one person
enters into a confidential relationship with another.” (Hasso v. Hapke
(2014) 227 CA4th 107, 140.) Hence, a fiduciary relationship is ordinarily
synonymous with a confidential relationship, founded on the confidence and
trust placed by one person in the integrity and expertise of another. (Cleveland
v. Johnson (2012) 209 CA4th 1315, 1338.) “Before a person can be charged
with a fiduciary obligation, he must either knowingly undertake to act on
behalf and for the benefit of another, or must enter into a relationship which
imposes that undertaking as a matter of law.” (Comm. on Children's
Television Inc. v. Gen. Foods Corp., 35 Cal. 3d 197, 221 (1983), superseded
on other by statute on other grounds as stated in Branick v. Downey Sav. and
Loan Ass'n, 39 Cal. 4th 235 (2006)
Here,
it is alleged that Exceed owed a fiduciary duty to Ameris by virtue of
soliciting the loan to Canmar. The Court does not find the allegations that
Exceed solicited the loan sufficiently alleges the existence of a fiduciary
duty. The Court does not find mere solicitation equates to the creation of a
confidential relationship whereby Exceed knowingly undertook to act on behalf
or for the benefit of Ameris. While it could be said that the FAC properly
alleges a fiduciary duty, that duty would be owed to Canmar and not Ameris.
Further,
Ameris’ argument that California law establishes the fiduciary duties of
brokers is unpersuasive. The case to which Ameris cites, Easton v. Strassburger
(1984) 152 Cal.App.3d 90, concerns brokerage which is factually distinguishable
from this case. Easton concerned a real estate broker and not a general
loan broker. This is important because the basis for fiduciary duty of a real
estate broker in California is derived from statute, specifically Cal. Civ.
Code § 2079.2. (See also Field v.
Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, 25.) While the
role of a loan broker and a real estate broker can be similar, the Court is
aware of no statutory authority establishing fiduciary duty for the latter to
lenders.
Accordingly,
the demurrer to this cause of action for failure to allege sufficient facts is
SUSTAINED with 30 days’ leave to amend. As the Court sustains the demurrer on
these grounds, the demurrer on the grounds of uncertainty is MOOT.
---
RULING:
In the event the parties submit on this
tentative ruling, or a party requests a signed order or the Court in its
discretion elects to sign a formal order, the following form will be either
electronically signed or signed in hard copy and entered into the Court’s
records.
ORDER
Exceed Companies LLC & William Mcgrayan’s Demurrer came on regularly for hearing on June 21,
2024, with appearances/submissions as noted in the minute order for said
hearing, and the Court, being fully advised in the premises, did then and there
rule as follows:
THE DEMURRER TO THE THIRD, AND FOURTH CAUSES OF
ACTION IS OVERRULED.
THE DEMURRER TO THE SECOND AND FIFTH CAUSE OF
ACTION IS SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.
UNLESS ALL PARTIES WAIVE NOTICE, DEFENDANT
EXCEED TO GIVE NOTICE.
IT IS SO ORDERED.
DATE: June
21, 2024 _______________________________
F.M. Tavelman, Judge
Superior
Court of California
County of Los Angeles