Judge: Joseph Lipner, Case: 22STCV34243, Date: 2023-09-19 Tentative Ruling

Case Number: 22STCV34243    Hearing Date: December 19, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff and Cross-Defendant Michael Bragar (“Plaintiff”) demurs to the third, fourth, and fifth causes of action in the First Amended Cross-Complaint (“FACC”) filed by Cross-Complainants Christopher D. Mitchell and Westlake Capital Partners, Inc. (“Westlake”) (collectively, “Cross-Complainants”).

The Court SUSTAINS Plaintiff’s demurrer WITHOUT LEAVE TO AMEND.

Background

This case arises out of an investment that Plaintiff made into Defendant Westlake, his employer at the time. Westlake is a gold and silver investment dealer. Plaintiff worked for Westlake, dealing gold and silver. Plaintiff alleges that he was persuaded to purchase an interest in Westlake based on fraudulent misrepresentations about Westlake’s financial condition. After the purchase, Plaintiff alleges that he learned that Westlake’s financial condition was far worse than he had been told and that Defendants had committed a number of breaches of fiduciary duty against him.

On September 20, 2023, Plaintiff filed the First Amended Complaint (“FAC”), which is now the operative complaint, alleging (1) fraud, (2) fraudulent concealment; (3) negligent misrepresentation; (4) breach of contract and the implied covenant of good faith and fair dealing; (5) conversion in violation of Penal Code, section 496; (6) breach of fiduciary duty; (7) constructive termination in violation of public policy; and (7) rescission.

Conversely, Cross-Complainants allege that Plaintiff ceased dealing gold and silver for Westlake shortly after purchasing equity in the company. Cross-Complainants allege that Plaintiff had succumbed to “crypto-mania” and therefore regretted agreeing to deal in gold and silver instead of cryptocurrency. Cross-Complainants allege that Plaintiff, instead of selling gold and silver for Westlake, turned his attention to dealing cryptocurrencies for Mitchell’s other business, Defendant Bitcoin Advizers LLC (“BA”). Cross-Complainants allege that Plaintiff asked Mitchell to sell him an interest in BA, but Mitchell refused, causing Plaintiff to quit his job and initiate this action against Defendants in retaliation.

Cross-Complainants filed the Cross-Complaint on March 7, 2023 against Plaintiff and Larrin Marrisett (collectively, “Cross-Defendants”), alleging (1) breach of contract; (2) fraud; (3) apportionment of fault; (4) indemnification; and (5) declaratory relief. Plaintiff demurred to the Cross-Complaint on March 10, 2023. Cross-Complainants did not oppose the demurrer.

The Court sustained the demurrer as to the third, fourth, and fifth causes of action in the Cross-Complaint on September 19, 2023.  Due to a clerical error, the order sustaining the demurrer, which was properly reflected in the Court’s tentative ruling (Kholsa Decl. Ex. A), did not appear in the final minute order.  The Court expects to correct that September 19, 2023 minute order nunc pro tunc.

On October 9, 2023, Cross-Complainants filed the FACC, which is the operative Cross-Complaint, against Cross-Defendants, again alleging (1) breach of contract; (2) fraud; (3) apportionment of fault; (4) indemnification; and (5) declaratory relief.

Plaintiff filed this demurrer on October 31, 2023. Cross-Complainants have not opposed the demurrer.  Nor have Cross-Complainants provided any reason that amendment of the cross-complaint should be allowed.

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

Apportionment of Fault – Third Cause of Action

Here, Cross-Complainants allege that Plaintiff and Marrisett were in whole or in part responsible for any injuries suffered by Plaintiff. As such, Cross-Complainants allege that if they are found to be liable to Plaintiff, then Plaintiff and Marrisett should be required to pay a share of Plaintiff’s judgment apportioned to Plaintiff’s own fault.

In sustaining the demurrer to this cause of action in the original Cross-Complaint, the Court explained that the asserted allegations read more like an equitable indemnity cause of action than one for apportionment of fault. (Kohsla Decl. ¶ 3, Exh. A at p. 5.)

“To state a claim for equitable indemnity, a defendant must allege the same harm for which he may be held liable is properly attributable—at least in part—to the cross-defendant.” (Platt v. Coldwell Banker Residential Real Estate Services (1990) 217 Cal.App.3d 1439, 1445, fn.7.)

The Court explained in its order granting the previous demurrer that the Cross-Complainant did not allege sufficient facts showing that the harm Plaintiff sued over was in whole or part the fault of Plaintiff or Marrisett. (Kohsla Decl. ¶ 3, Exh. A at p. 5.) The Court explained that simply stating that Plaintiff or Marrisett were responsible for the injuries suffered was too uncertain and vague. (Kohsla Decl. ¶ 3, Exh. A at p. 5.)

The FACC contains similarly threadbare allegations, stating only that “[Marrisett] … was responsible for the injuries, if any, suffered by [Plaintiff]” and that “[Plaintiff] and/or agents of [Plaintiff] … were responsible for the injuries, if any, suffered by Michael.” (FACC at p. 13.) The FACC then goes on to state that each Cross-Defendant, as a result, must reimburse Cross-Complainants for any judgment for Plaintiff against Cross-Complainants. These allegations fail to cure the previously identified deficiencies. The Court therefore sustains the demurrer with respect to this cause of action.

Under these circumstances, it is appropriate to deny leave to amend. Even looking at other portions of the FACC, Cross-Complainants do not identify facts that would show that either of the Cross-Defendants were responsible for the alleged injuries to Plaintiff. It appears that Cross-Complainants not only failed to attempt to add any facts to cure the foregoing deficiencies, but failed to even oppose the demurrer, which requests dismissal without leave to amend, for the purposes of showing how leave to amend could salvage this cause of action. The Court therefore denies leave to amend.

Indemnification – Fourth Cause of Action

The fourth cause of action appears to be one for contractual indemnification, since it alleges that Cross-Defendants agreed in a writing to indemnify Cross-Complainants against any liabilities arising out of any act, conduct, or omission by Westlake or any of its agents, officers, or employees.

“An indemnitee seeking to recover on an agreement for indemnification must allege the parties’ contractual relationship, the indemnitee’s performance of that portion of the contract which gives rise to the indemnification claim, the facts showing a loss within the meaning of the parties’ indemnification agreement, and the amount of damages sustained.” (Four Star Electric, Inc. v. F & H Construction (1992) 7 Cal.App.4th 1375, 1380.)

In sustaining the demurrer to this cause of action in the original Cross-Complaint, the Court explained that Cross-Complainants had not alleged sufficient facts showing that Cross-Defendants are contractually responsible for any damages suffered by Plaintiff. Although the Court granted leave to amend there, it appears that Cross-Complainants have re-filed the cause of action with almost no change to the language or attempt to allege facts showing the existence of an indemnity contract. As stated above, Cross-Complainants have not even opposed the motion for the purposes of identifying how another opportunity to amend the Cross-Complaint would cure this deficiency. The Court therefore sustains the demurrer without leave to amend as to this cause of action.

Declaratory Relief – Fifth Cause of Action

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)

A cause of action for declaratory relief should not be used as a second cause of action for the determination of identical issues raised in another cause of action. (General of America Insurance Co. v. Lilly (1968) 258 Cal.App.2d 465, 470.) “The availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief” (California Insurance Guarantee Association v. Superior Court (1991) 231 Cal.App.3d 1617, 1624), and a duplicative cause of action is subject to demurrer (Palm Springs Villas II Homeowners Association, Inc. v. Parth (2016) 248 Cal.App.4th 268, 290). Further, “there is no basis for declaratory relief where only past wrongs are involved.” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366, quotation marks omitted.)

Here, Cross-Complainants seek declaratory relief stating that: “Marrisett … is responsible for the damages, if any, alleged in Plaintiff[’s] … Complaint against Cross-Complainants in this action” and that “[Plaintiff] is responsible for the damages, if any, alleged in Plaintiff[’s] … Complaint against Cross-Complainants in this action.”

The relief sought is identical to that sought in the causes of action for indemnification. Furthermore, this cause of action is completely devoid of facts which would show that either of the Cross-Defendants are responsible for any damages suffered by Plaintiff – under one of the indemnity theories or otherwise. Thus, it is appropriate to sustain the demurrer on both of these grounds.

Once again, Cross-Complainants appear to have wasted their opportunity for amendment by re-filing nearly identical allegations with no additional facts to cure the previously identified deficiencies. The Court therefore denies leave to amend.