Judge: Joseph Lipner, Case: 22STCV33377, Date: 2023-09-19 Tentative Ruling

Case Number: 22STCV33377    Hearing Date: February 29, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendants D/AQ Corporation d/b/a DAUM Commercial Real Estate Services (“DAUM”), Carlos Castillo, and David Muir (“Defendants”) demur to the Second Amended Complaint (“SAC”) filed by Plaintiff Kylale, LLC (“Plaintiff”).

The Court OVERRULES Defendant’s demurrer.

Background

This action arises out of the dispute of a lease agreement (the “Lease”). Kylale, LLC (“Plaintiff”) is the owner of real property located at 3138 W. Pico Blvd., Los Angeles, CA 90019 (the “Property”). Plaintiff entered into a lease agreement on July 26, 2021 with lessee Follow the Leader Food Service, Inc. (“FTL”). Plaintiff alleges that DAUM served as the broker for Plaintiff and FTL, while Castillo and Muir served as dual real estate agents for both Plaintiff and FTL.

Plaintiff is an LLC whose sole member is Hasty Yadegaran. Yadegaran and her husband, Dr. Houman Baratian, interacted with Defendants to form the Lease. Yadegaran acted directly on behalf of Plaintiff. Although Yadegaran was the only person with actual authority to bind Plaintiff, Defendants primarily interacted with Baratian and Plaintiff’s property manager, who is identified as Yahooda.

Plaintiff alleges that pursuant to the terms of the Lease, Defendants were obligated to secure a guarantor from Kumi Kawamura, the Chief Financial Officer of FTL. However, when FTL breached the Lease agreement as lessee, it was discovered that no guarantor had ever been secured. Plaintiff alleges that this discovery only took place on June of 2022.

Plaintiff filed this action on October 12, 2022. The operative complaint is now the SAC, which alleges (1) negligence; (2) breach of fiduciary duty; (3) intentional misrepresentation; (4) concealment; and (5) negligent misrepresentation.

On September 19, 2023, the Court sustained a demurrer with leave to amend, finding that the Lease contained a one-year limitations period, but that Plaintiff may be able to amend the complaint to allege facts showing that the delayed discovery doctrine applies, extending the limitations period. The Court also requested argument in any subsequent demurrer on the issues of whether the limitations period applies to Plaintiff’s non-contract causes of action, and whether Defendants are entitled to rely on the contractual limitations period as third-party beneficiaries or otherwise.

Plaintiff filed the SAC on October 9, 2023.

Defendants demurred to the SAC on November 13, 2023. Plaintiff filed an opposition. Defendants filed an untimely reply brief on February 27, 2024, two court days before the scheduled hearing.

Request for Judicial Notice

The Court grants Defendant’s request for judicial notice.

Legal Standard

As a general matter, 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 pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) The court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Where a demurrer is sustained, 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 plaintiff to show the court that a pleading can be amended successfully. (Ibid.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Discussion

Contractual Limitations Period

“It is … well-established that parties to a contract may agree to a provision shortening the statute of limitations, qualified, however, by the requirement that the period fixed is not in itself unreasonable or is not so unreasonable as to show imposition or undue advantage.” (Wind Dancer Production Group v. Walt Disney Pictures (2017) 10 Cal.App.5th 56, 73 [citation and quotation marks omitted].)

Paragraph 25(b) of the Lease provides that “[t]he Parties agree that no lawsuit or other legal proceeding involving any breach of duty, error or omission relating to this Lease may be brought against Broker more than one year after the Start Date … provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.” (Complaint, Ex. B at p. 11, ¶ 25(b).) The start date of the Lease was August 1, 2021; therefore, if the one-year period applies, an action would have to have been filed by August 1, 2022. This action was not filed until October 12, 2022.

By its express terms, the contractual limitations period does not apply to gross negligence or willful misconduct. The contractual period therefore does not apply to plaintiff’s second, third, or fourth causes of action for breach of fiduciary duty, intentional misrepresentation, and concealment. The contractual limitations period does apply to Plaintiff’s causes of action for negligence and negligent misrepresentation, neither of which allege gross negligence.

Delayed Discovery

“[A] cause of action under the discovery rule accrues when the plaintiff discovers or should have discovered all facts essential to his cause of action; this has been interpreted under the discovery rule to be when plaintiff either (1) actually discovered his injury and its negligent cause or (2) could have discovered injury and cause through the exercise of reasonable diligence.” (Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, 1423 [internal citations and quotation marks omitted; cleaned up].)

In Wind Dancer Production Group v. Walt Disney Pictures, supra, 10 Cal.App.5th at p. 75-77, the appellate court found that the plaintiffs had validly waived their right to rely on the discovery rule to toll the statute of limitations against the defendant by contractually agreeing to a shortened limitations period with a specified date of accrual. (Ibid.) The court also expressly considered the respective bargaining positions of the parties, relying on the fact that the plaintiffs were well-known and successful producers in the entertainment industry and were represented by highly regarded attorneys, agents, and production companies. (Id. at p. 76.) “The producers [were] therefore more akin to [an] experienced commercial property owner … who was represented by legal counsel in negotiating a large-scale construction project, than the home buyers in Moreno who relied on the home inspector for specialized counsel and advice about their prospective purchase.” (Ibid.)

Here, neither Yadegaran nor Baratian had any prior experience negotiating, procuring, drafting, or reviewing commercial real estate leases or personal guaranties. They had no legal experience and are not lawyers. Although they retained a property manager, Yahooda did not represent them in connection with the formation of the Lease. Plaintiff was not represented by counsel in the formation of the Lease, nor were Yadegaran or Baratian. Thus, Plaintiff’s only fiduciaries that it could rely on were the broker and real estate agents – Defendants. This case is therefore distinguishable from Wind Dancer, where the Plaintiffs were exceedingly well-represented by parties who were not defendants in the action.

There are further reasons not to ignore the delayed discovery doctrine in this matter. In Wind Dancer, although the court found that the plaintiffs had validly waived the discovery rule, it nevertheless denied summary judgment because it found that there was a triable issue of fact as to whether the doctrine of estoppel applied. (Wind Dancer, supra, 10 Cal.App.5th at p. 79.) “Under the doctrine of estoppel, a defendant may be equitably estopped from asserting a statutory or contractual limitations period as a defense if the defendant's act or omission caused the plaintiff to refrain from filing a timely suit and the plaintiff's reliance on the defendant's conduct was reasonable.” (Ibid [citation and quotation marks omitted; cleaned up].) The court found that the plaintiffs had presented evidence that the defendant engaged in conduct over the course of the parties’ relationship which caused the plaintiffs to refrain from raising their claim within the contractual limitations period, warranting a denial of summary judgment. (Id. at pp. 81-83.)

Here, Plaintiffs allege that Defendants repeatedly attempted to conceal their failure to obtain a personal guaranty. When Defendants initially provided Plaintiff with the Lease, they represented that it was completed, despite not having procured the personal guaranty, which was a part of the lease. When Plaintiff’s counsel contacted Defendants on June 3, 2022 seeking a copy of the personal guaranty, Defendants provided several documents but did not disclose that they had never obtained the personal guaranty. When Plaintiff’s counsel notified Defendants on June 6, 2022 to file a claim with their malpractice insurer, Defendants did not respond initially, requiring a follow-up on June 24, 2022 where Plaintiff’s counsel also suggested the possibility of pre-litigation mediation. On June 30, 2022, Defendants’ counsel requested additional information, which Plaintiff’s counsel provided on the same day. Defendants again did not respond. Plaintiff’s counsel followed up again on September 16, 2022, and again asked Defendants to contact them about the early mediation. Plaintiff filed suit on October 13, 2022.

Thus, not only were Plaintiffs not sophisticated parties and unrepresented for most of the course of these events, but Defendants also allegedly caused delays to Plaintiff’s counsel’s investigation and filing of this action. These facts are therefore not sufficiently analogous to Wind Dancer to support a finding that Plaintiff waived the delayed discovery doctrine.

Proceeding to the doctrine itself, Plaintiff may not have had inquiry notice until June 3, 2022. As discussed above, Yadegaran and Baratian are not sophisticated real-estate investors. They had no prior experience forming commercial real estate contracts. In fact, their only real estate contract experience prior to forming the Lease involved the acquisition of their home and their acquisition of a membership interest in another LLC. They were not represented by legal counsel in the transaction. Their only representation was by Defendants.

 Defendants argue that someone such as Yadegaran could not be a complete novice regarding commercial properties because she hired a property manager and purchased a property for $4,303,000.00. Not only is it improper to dispute facts on a demurrer, but these allegations are also plausible – a party who is inexperienced in real estate matters may still manage to purchase an expensive property by hiring a broker, as Yadegaan did here.

Thus, when Defendants represented to Yadegaran and Baratian that Defendants were providing them with the entire Lease, Yadegaran and Baratian were not in a position where a reasonable person of their skill and experience would be able to review the Lease and discern that a personal guaranty was missing, or that its absence would expose them to significant financial risk.

The first time that Plaintiff may have had notice that something was wrong was therefore on either June 3, 2022 or June 6, 2022, when Plaintiff’s counsel first obtained the documents that lacked the personal guaranty, and then contacted Defendants to notify them that Plaintiff would file a lawsuit. It is unnecessary to determine where, in this date range, the limitations periods began to run. The October 13, 2022 complaint was filed well within the period.

Thus, the Court cannot determine as a matter of law on demurrer that Plaintiff’s claims are barred by either the statute of limitations (for the non-negligence claims) or the contractual limitations period (for the negligence claims).

Disclosure Forms

Defendants argue that hazardous substance and cannabis disclosure forms which were signed as part of the Lease informed Plaintiff that Plaintiff should obtain legal representation in connection with the lease. Defendants also argue that those disclosure forms contained indemnification clauses shielding Defendants from liability associated with the preparation of those documents. While this is true, those disclosures were in connection with the cannabis and hazardous substance warning documents, and not the Lease as a whole.

The Court therefore overrules the demurrer.