Judge Holly J. Fujie, Case 22STCV09350 2023-02-23 Tentative Ruling

MOVING PARTY: Defendants Danny M. Elia (“Elia”), Walter Tharp (“Tharp”), Capital Financial Advisors, Inc. (“CFA”), and El Conector LLC (“ECL”) (collectively, “Moving Defendants”)

RESPONDING PARTY: Plaintiffs Willow Creek Homes, LLC (“Willow Creek”) and Todd C. Nolette (“Nolette”) (collectively, “Plaintiffs”)

This action arises out of a dispute over a loan connected to real property (the “Property”). The currently operative first amended complaint (the “FAC”) alleges: (1) common count – money had and received; (2) common count – goods and services rendered; (3) reasonable value of work, labor and services; (4) breach of written contract; (5) intentional misrepresentation; (6) false promise; (7) suppression of fact; (8) interference with economic relations; (9) unjust enrichment; and (10) unlawful business practices.

In relevant part, the FAC alleges: Defendants Alex A. Khadavi (“Khadavi”) and Palazzo de Vista, LLC (“Palazzo”) owned and were working on a development project on real property (the “Property”) they owned. (See FAC ¶¶ 5-8, 19.) In or about November 2019, several creditors sought to foreclose on the Property. (See FAC ¶ 19.) Khadavi and Palazzo partnered with Elia to help avoid foreclosure. (Id.) Khadavi, Palazzo and Elia thereafter retained Plaintiff to procure a bridge loan in the amount of $30,000,000 in order to prevent foreclosure.[1] (FAC ¶ 20.) Plaintiff possessed a valid real estate license and mortgage originator endorsement. (FAC ¶ 4.) During negotiations, Khadavi and Elia made assurances that Plaintiff would be compensated for its efforts to secure a loan. (FAC ¶ 21.) The retainer agreement, which included the terms of Plaintiff’s compensation, was memorialized in a written contract signed by Khadavi on December 4, 2019 (the “Agreement”). (See FAC ¶ 22, Exhibit A.) The Agreement, which is addressed to and signed by Khadavi, states, in relevant part:

You agree to pay through the close of escrow 2.5% of the loan amount the final loan amount as set by my lender.” (See id.)

Plaintiff procured three potential loans. (FAC ¶ 24.) Khadavi ultimately accepted a loan proposed by Axos Bank (“Axos”) (the “Axos Loan”). (Id.) Due to Plaintiff’s relationship with its Senior Vice President, Darin Judis (“Judis”), Axos offered terms that were acceptable to Khadavi. (Id.)

Judis thereafter introduced Plaintiff to Tharp and CFA to process the placement of the Axos Loan. (FAC ¶ 25.) After an escrow account was opened for the placement of the AXOS Loan, Plaintiff continued to provide services and provided all the work, labor, and services that Tharp and CFA requested with regard to processing it. (See FAC ¶ 25, 28.)

Both before and during escrow, Tharp and CFA knew of the existence and terms of the Agreement and falsely represented to Plaintiff that they would process the Loan through escrow in order to properly indicate the fee provided for in the Agreement. (See FAC ¶ 26.) Tharp told Plaintiff that it would be paid pursuant to the terms of the Agreement. (Id.)

Defendants led Plaintiff to believe that the closing of escrow was delayed, which Plaintiffs learned to be false through an independent investigation in or around November 2021. (FAC ¶ 29.) At this time, Plaintiff learned that it had not been compensated as provided in the Agreement. (See id.)

Moving Defendants filed a demurrer (the “Demurrer”) to the FAC on the grounds that Plaintiffs filed to state sufficient facts to constitute a claim with respect to each cause of action and the pleading is uncertain.[2]

A demurrer tests the sufficiency of a complaint as a matter of law. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts. (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Demurrers for uncertainty are disfavored. (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822.) 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. (Id.)

Moving Defendants argue that the FAC’s failure to distinguish between Willow Creek and Nolette renders the FAC uncertain. The Court agrees. Absent language that individuates them, the FAC is unclear as to which Plaintiff Moving Defendants interacted with and in what capacity. While the FAC alleges that Nolette is the manager and sole member of Willow Creek, the FAC does not allege that they comprise a single entity. Nor does the FAC allege facts to suggest that Willow Creek and Nolette suffered separate harms as a result of Moving Defendants’ alleged wrongdoing. The failure to distinguish Willow Creek and Nolette is particularly confusing because Nolette does not appear to be a party to the Agreement and it is unclear which Plaintiff held a real estate license, which are relevant to the sufficiency of several causes of action, and in light of the heightened pleading standard for fraud claims.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative. If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person. The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date. This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

[1] The FAC names Nolette as a Plaintiff. Nolette was not a party to this action when the original complaint (the “Complaint”) was filed. The FAC alleges that Nolette is the sole manager and member of Willow Creek. (FAC ¶ 2.) The FAC specifies that Willow Creek and Nolette would collectively be referred to as “Willow Plaintiffs” in the pleading. (FAC ¶ 3.) The substantive allegations of the FAC, however, make reference to a singular Plaintiff.

[2] Moving Defendants filed a demurrer to Willow Creek’s original complaint (the “Complaint”) that challenged the sufficiency of the allegations of each cause of action at issue in the present Demurrer with the exception of the breach of contract claim. On October 24, 2022, the Court overruled Elia’s and ECL’s demurrer to the Complaint’s first through third causes of action and sustained the remainder of the demurrer.