Judge Holly J. Fujie, Case Number: 23STCV25545, Date: 2024-05-07 Tentative Ruling

MOVING PARTY: Defendants First Quality Builds LLC (“FQB”), Farshid Seyed Hosseni (“Hosseni”), Elham Riahi Moghaddam (Moghaddam”), and Eli Tour LLC (“Eli”) (sometimes collectively, “Defendants”)

On October 19, 2023, Plaintiff Navid filed a Complaint against Defendants FQB; Hosseni[1]; Moghaddam; Eli; and DOES 1-50, inclusive for: (1) Breach of Contract; (2) Negligence; (3) Unfair Business Practices; (4) Trespass; (5) Intentional Misrepresentation; (6) Unjust Enrichment; (7) Conversion / Embezzlement; (8) Violation of Business & Professions Code Section 7031; (9) Violation of Penal Code Section 496; and (10) Fraudulent Transfer.

On March 21and March 22, 2024, Defendants filed the instant Demurrer and Motion to Strike (the “Motion”), respectively. On April 24, 2024, Plaintiff filed an opposition to the Demurrer and the Motion. No reply was filed.

The Court finds that the parties sufficiently engaged in the meet and confer process.

“The primary function of a pleading is to give the other party notice so that it may prepare its case [citation], and a defect in a pleading that otherwise properly notifies a party cannot be said to affect substantial rights.” (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)¿

“A¿demurrer¿tests the legal sufficiency of the factual allegations in a complaint.” (Ivanoff v. Bank of America, N.A.¿(2017) 9 Cal.App.5th 719, 725.) The Court looks to whether “the complaint alleges facts sufficient to state a cause of action or discloses a complete defense.” (Id.) The Court does not “read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the complaint ‘as a whole and its parts in their context.’ [Citation.]” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 804.) The Court “assume[s] the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken.” (Harris, supra, 56 Cal.4th p. 240.) “The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)¿¿¿

¿ A general demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted or under section 430.10, subdivision (a), where the court has no jurisdiction of the subject of the cause of action alleged in the pleading. All other grounds listed in Section 430.10, including uncertainty under subdivision (f), are special demurrers. Special demurrers are not allowed in limited jurisdiction courts. (Code Civ. Proc., § 92, subd. (c).)¿¿¿

¿ Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)¿¿

Defendants demur to Plaintiff’s entire Complaint on the following grounds: (1) it fails to state sufficient facts to constitute a cause of action against Defendants; (2) it is uncertain; and (3) no certificate was filed as required by Code of Civil Procedure section 411.35 pursuant to Code of Civil Procedure section 430.10, subdivision (h).

Defendants argue that the alleged contract entered into was between FQB and Plaintiff, so Defendants Moghaddam and Eli are not proper parties thereto. Furthermore, Defendants argue that despite naming Defendant Hosseni in the contract, on its face, the license number provided in the contract belongs to FQB and not to Defendant Hosseni as an individual. Thus, Defendants contend that Plaintiff lacks standing against them because he fails to allege facts related to any contract as to Defendants Moghaddam and Eli.

In opposition, Plaintiff argues he does have standing against Defendants Moghaddam and Eli under alter ego liability. Plaintiff further argues the Complaint does not allege that Defendants Moghaddam and Eli are parties to the contract at issue. (Compl. ¶ 11.) In fact, Plaintiff contends Defendants Moghaddam and Eli are named for a different reason in the Complaint.

Here, the Complaint alleges a contractual relationship between Plaintiff, Defendant Hosseni and Defendant FQB. (Compl. ¶ 16, Ex. B.) The Contract attached to the Complaint appears to name Defendant Hosseni as a party and includes his signature as the “contractor” alongside the signature of Plaintiff. (Id.) Furthermore, the Complaint alleges claims for trespass against Defendant Moghaddam and alter ego liability of Defendant Eli. (Compl. ¶¶ 11, 21, 43-44, Ex. E.)

Therefore, Plaintiff does have standing to bring this pending action against Defendants Moghaddam and Eli.

As stated above, Defendants argue that the contract allegedly breached here is between a viable Washington Limited Liability Company, i.e., FQB, so the individual defendants, Hosseni and Moghaddam, and the corporation Eli Tour LLC are improper defendants and should be dismissed. Furthermore, Defendants contend it is clear the contract is between FQB and Plaintiff because the contract was not signed by an individual, i.e., Defendants Hosseni and Moghaddam. Defendants also contend there is no justification for an unjust enrichment cause of action based on obtaining a loan with no terms because Plaintiff accepted a check from Defendant FQB and attempted to cash it too early. Likewise, Defendants assert the allegations with respect to the eighth cause of action require certification with the Complaint. Similarly, Defendants assert that Plaintiff fails to mention any permit/licenses acquired by him as the homeowner to adhere to any existing laws with respect to the Califia Project. In addition, Defendants assert that it is clearly alleged in the Complaint that a “loan” was voluntarily given by Plaintiff to Defendant Hosseni, so it cannot constitute a violation of Penal Code section 496 or a claim for conversion.

In opposition, Plaintiff argues that the individual defendants are proper defendants even if Defendant FQB was a viable entity. Furthermore, Plaintiff contends the Complaint expressly states that Defendant FQB has been administratively dissolved in the State of Washington. Moreover, Plaintiff reiterates that Defendants provide no supporting legal authorities for any of its positions such as a claim that since a check provided by Defendant FQB was attached to the Complaint, that somehow provides immunity to the other defendants. Additionally, Plaintiff argues that no certification is needed per Code of Civil Procedure section 411.35 because this case involves an unlicensed general contractor. Last, Plaintiff argues that Defendants attempt to turn their Demurrer into an evidentiary hearing, which is improper.

“In every action, including a cross-complaint for damages or indemnity, arising out of the professional negligence of a person holding a valid architect’s certificate issued pursuant to Chapter 3 (commencing with Section 5500) of Division 3 of the Business and Professions Code, or of a person holding a valid registration as a professional engineer issued pursuant to Chapter 7 (commencing with Section 6700) of Division 3 of the Business and Professions Code, or a person holding a valid land surveyor’s license issued pursuant to Chapter 15 (commencing with Section 8700) of Division 3 of the Business and Professions Code on or before the date of service of the complaint or cross-complaint on any defendant or cross-defendant, the attorney for the plaintiff or cross-complainant shall file and serve the certificate specified by subdivision (b).” (Code Civ. Proc., § 411.35, subd. (a).)

Here, as discussed above, the contract attached to the Complaint identifies Defendant Hosseni as a signatory to the contract. Furthermore, the Complaint does not allege contractual claims against Defendants Moghaddam and Eli. Moreover, the Complaint arises out of a contractual relationship between Plaintiff and an unlicensed contractor, not an architect, professional engineer, or land surveyor as required for certification under Code of Civil Procedure section 411.35.

Therefore, the Complaint properly pleads allegations against the demurring Defendants.

Defendants contend FQB was a separate legal entity distinct from the individuals Defendants who created it and adequately capitalized. Moreover, Defendants contend piercing the corporate veil cannot be done in a verified complaint without evidence of (1) unity of interest and (2) alter ego liability. Last, Defendants assert there are at least 14 different factors that need to be considered before a plaintiff can pierce a corporate veil and it is improper to do so in the instant case.

In opposition, Plaintiff argues Defendants cannot introduce evidence as to Defendant FQB being a separate entity because it ignored the allegation in the Complaint that Defendant FQB is not licensed to do business in the State of California and has been administratively dissolved by the State of Washington. Plaintiff further contends that Defendants’ argument that 14 different factors need to be considered before he can pierce a corporate veil should be summarily rejected as it is not supported by any reasoning or authority. Finally, Plaintiff asserts California law allows for a plaintiff to include parties that are not the offending entity as the offending entity’s alter egos in a Complaint.

Here, Defendants provide no legal authority or factual reasoning to support their contention that 14 different factors must be considered before a plaintiff can pierce the corporate veil, thus this argument is unavailing. Also, the Complaint sufficiently alleges the alter ego liability of the Defendants. (Compl. ¶¶ 2-11.) Moreover, to the extent that Defendants attempt to contend that Defendant FQB is still a viable entity, the Complaint sufficiently alleges that Defendant FQB was dissolved and not licensed to do business in California in 2023, i.e., at the time it entered into the contract with Plaintiff. (Compl. ¶ 51.)

Therefore, the Complaint sufficiently pleads allegations giving rise to alter ego liability.

Defendants assert the complaint fails to state any cause of action because the allegations of the identities of the contracting parties are inconsistent with the attached exhibits to the Complaint. Specifically, Defendants assert Plaintiff alleged that he is a party to the contract but review of the written contract, which is attached, shows that Plaintiff is not the contracting party with Defendants. Furthermore, Defendants contend assuming a contract between Plaintiff and FQB was entered into for the purpose of building a Gazebo/BBQ area based on the allegations, then Plaintiff’s trespass claim fails because Plaintiff’s allegations state he contracted with FQB to construct, therefore consented and allowed access to his property. Defendants also argue Plaintiff fails to state a cause of action for fraudulent transfer or intentional misrepresentation because they must be pled with specificity. In fact, Defendants contend because the alleged contract attached to the Complaint is not between Plaintiff and the individual defendants, these claims fail as the named defendants are improper parties to the action.

In opposition, Plaintiff argues Defendants fail to provide any authorities for their argument other than some general authorities that do not support their argument. Furthermore, Plaintiff reiterates he never took the position that all of the defendants are parties to the contract, only that Defendants FQB and Hosseni are parties because the contract expressly lists them both as parties in the introductory paragraph. Lastly, Plaintiff argues he pled the fifth and tenth causes of action with specificity.

Here, Defendants appear to take the position that all of the causes of action asserted against them in Plaintiff’s Complaint fail because the identities of the contracting parties are inconsistent with the attached exhibits. As discussed above, the Complaint properly identifies Defendants FQB and Hosseni are parties to the contract for building the Gazebo/BBQ area. The Complaint also sufficiently alleges Plaintiff fully performed under the contract; Defendants FQB and Hosseni breached the contract; and Defendants FQB and Hosseni’s breach were the direct and proximate cause of damages suffered by Plaintiff. (D’Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800 [breach of contract elements].) Furthermore, the Complaint sufficiently alleges that Defendants FQB and Hosseni owed Plaintiff a duty of care in completing the project, breached that duty by among other things failing to supervise workers, and Defendants FQB and Hosseni breach were the direct and proximate cause of damages suffered by Plaintiff. (Lueras c. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62 [negligence elements].)

Moreover, the Complaint sufficiently alleges Defendants deceptively led Plaintiff to believe they were licensed in the State of California, received payment for the project from Plaintiff, and abandoned the project they were contracted to complete for Plaintiff. (Adhav v. Midway Rent A Car, Inc. (2019) 37 Cal.App.5th 954, 970 [unfair business practices elements].) Additionally, the Complaint sufficiently alleges Plaintiff owns the subject property; Defendants intentionally entered the property under false pretenses, which would negate Plaintiff’s purported consent; the property was damages; and Defendants conduct were a substantial factor in causing damage to the property. (Ralphs Grocery Co. v. Victory Consultants, Inc. (2017) 17 Cal.App.5th 245, 262 [trespass elements].) Likewise, the Complaint sufficiently alleges Defendants FQB and Hosseni misrepresented to Plaintiff that they were licensed to do business in California, knew their representations were false, intended Plaintiff to rely on those misrepresentations, Plaintiff did rely on those misrepresentations and hired them for the project, and suffered damages as a result of their conduct. (Aton Center, Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214, 1245 [intentional misrepresentation elements].) Similarly, the Complaint sufficiently alleges Defendants transferred property to Defendant Eli Tour LLC with the intent to hinder or delay their creditors such Plaintiff from recovering on his claim against them. (Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th 33, 39 [fraudulent transfer elements].)

Further, the Complaint sufficiently alleges Defendants received $18,400.00 from Plaintiff and did not complete the project they were contracted to do, received this money under false pretenses, and used those funds for their own personal use. (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769 [unjust enrichment elements]; Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181 [conversion elements]; People v. Selivanov (2016) 5 Cal.App.5th 726, 764 [embezzlement elements]; Pen. Code, § 496, subd. (a).) Finally, as explained earlier, the Complaint sufficiently alleges Defendants engaged in the business of a contractor in the State of California without being duly licensed to do so. (Bus. & Prof. Code, §§ 7031, subds. (a)-(b).)

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” (Code Civ. Proc., § 435, subd. (b)(1).) “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., § 436, subd. (a).)¿

Defendants move to strike paragraphs 27, 33, 39, 48, 58, 64, 72, 78, 86 (attorney’s fees allegations) and paragraphs 38, 47, 57, 63, 67, 71, 77, and 93 (punitive damages allegations) form the Complaint. Defendants argue Plaintiff’s lack authority for his request for attorney’s fees because the Complaint contains conclusory allegations in regard to Code of Civil Procedure section 1029.8 and whether or not Defendants held a license does not provide authorization for attorney’s fees. Defendants further contend Plaintiff’s lack of privity based on the face of the Complaint shows that Defendants Hosseni, Moghaddam, and Eli Tour LLC were not part of the contract. Last, Defendants assert there no specific facts pled to show that Defendants engaged in malicious, oppressive, or fraudulent conduct directed at Plaintiff to support punitive damages.

In opposition, Plaintiff argues he is entitled to attorney’s fees under Code of Civil Procedure section 1029.8, subdivision (a), which provides in relevant part: “Any unlicensed person who causes injury or damage to another person as a result of providing goods or performing services for which a license is required under Division 2 (commencing with Section 500) or any initiative act referred to therein, Division 3 (commencing with Section 5000), or Chapter 2 (commencing with Section 18600) or Chapter 3 (commencing with Section 19000) of Division 8, of the Business and Professions Code, or Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Part 3 of Division 1 of Title 4 of the Corporations Code, shall be liable to the injured person for treble the amount of damages assessed in a civil action in any court having proper jurisdiction. The court may, in its discretion, award all costs and attorney’s fees to the injured person if that person prevails in the action.” As such, Plaintiff contends the Complaint expressly alleges Defendants were required to be licensed and were not in fact licensed, resulting in damages to Plaintiff. Moreover, Plaintiff asserts that the Complaint contains allegations against Defendants Moghaddam and Eli Tour LLC for liability not based on a contractual relationship as discussed in the opposition to the demurrer. Finally, Plaintiff argues the Complaint properly alleged fraud to support an award of punitive damages.

To state a claim for punitive damages under Civil Code section 3294, a plaintiff must allege specific facts showing that the¿defendant has been guilty of malice, oppression or fraud. (Smith v. Superior Court (1992) 10 Cal. App. 4th 1033, 1042.) The basis for punitive damages must be pled with specificity; conclusory allegations devoid of any factual assertions are insufficient. Id. A motion to strike may lie where the facts alleged, if proven, would not support a finding that the defendant acted with malice, fraud or oppression. (Turman v. Turning Point of Central California (2010) 191 Cal. App. 4th 53, 63.)¿¿

“Malice” is defined in section 3294(c)(1) as “conduct which is intended by the defendant to cause injury” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” “Oppression” is defined in section 3294(c)(2) as “despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights.” The term “despicable” has been defined in the case law as actions that are “base,” “vile,” or “contemptible.” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal. App. 4th 847, 891.)¿¿“Fraud” is defined in section 3294(c)(3) as “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.”¿¿

¿ To prove that a defendant acted with “willful and conscious disregard of the rights or safety of others,” it is not enough to prove negligence, gross negligence or even recklessness. (Dawes v. Superior Court (1980) 111 Cal. App. 3d 82, 87.) Rather, a plaintiff must allege facts demonstrating that “the defendant acted in such an outrageous and reprehensible manner that the jury could infer that he [or she] knowingly disregarded the substantial certainty of injury to others.” (Id. at 90). Further, the allegations must be sufficient for a reasonable jury to conclude that Defendant’s conduct was “despicable” defined as “base, vile or contemptible.” (College Hospital Inc. v. Superior Court (1994) 8 Cal. 4th 704, 725.)¿

The Court finds that the Complaint sufficiently pleads facts to support an award of attorney’s fees and punitive damages. The Complaint alleges Defendants were required to have contractor’s licenses to do business in California. The Complaint further alleges Defendants were not licensed contractors and/or otherwise permitted to do business in California. The Complaint also alleges Defendants misrepresented their licensure status to Plaintiff, knowing they did not have a license, with the intent to induce Plaintiff’s reliance on these misrepresentations, Plaintiff relied on these misrepresentations, and Plaintiff suffered damages in the amount of at least $18,400.00. Thus, the face of the Complaint shows authorization for attorney’s fees under Code of Civil Procedure section 1029.8, subdivision (a) and states sufficient facts with specificity as to fraud to support an award of punitive damages.

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.

Hon. Holly J. Fujie

Judge of the Superior Court

[1] This case is the subject of an automatic stay as to Defendant Hosseini as of April 2, 2024.