Judge Kerry Bensinger, Case Number: 23STCV22282, Date: 2024-02-27 Tentative Ruling

This is a breach of contract and interference action concerning the purchase of a liquor store business. There are three parties. Plaintiff, Hayk Grigoryan, was the prospective buyer of the business. JK Liquor was the seller of the business. The Sima Bigelson 2000 Revocable Trust (the “Trust”) was the owner of real property where the business was located. In March of 2023, Plaintiff agreed to purchase the business from JK Liquor and deposited around $190,000 into escrow. The Trust was not a party to the purchase sale agreement. A lease agreement for the property existed between the Trust and JK Liquor. As part of the purchase sale agreement, JK Liquor assigned the lease to Plaintiff which required approval from the Trust. The Trust ultimately rejected the lease assignment. Four or five months passed before the Trust communicated its decision. In that time, the Trust proposed increases to the rent by 142% and the security deposit by 857%, requested 3 guarantors (whereas it required of JK Liquor only 1 guarantor to sign the lease), and requested payment of property tax on the whole building rather than the space for the liquor store business. Plaintiff agreed to all the foregoing conditions and also spent $6,500 to improve the liquor store in anticipation of the purchase being approved. Following the cancellation of escrow, JK Liquor and the Trust refused to refund the money spent to improve the business. Plaintiff alleges the Trust unlawfully interfered with Plaintiff’s contractual relations with JK Liquor by unreasonably rejecting the lease assignment and by causing JK Liquor to fail to perform the purchase sale agreement. Plaintiff further alleges that the Trust’s actions were illegal and unlawful and unreasonable because the Trust breached sections 12.1(f) and 12.2(e) of the lease agreement with JK Liquor by failing to cooperate and provide assignment of lease in a timely manner.

On September 15, 2023, Plaintiff filed a Complaint in pro per against Defendants, JK Liquor and the Trust for (1) Intentional Interference with Contractual Relations, (2) Tortious Interference with Economic Relations, and (3) Breach of Contract. The First and Second Causes of Action are asserted causes of action against the Trust only. The Third Cause of Action is asserted against JK Liquor only.

On December 28, 2023, the Trust filed a demurrer to the First and Second Causes of Action, and concurrently filed and motion to strike portions of the Complaint.

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law. We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed. [Citation.]” (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed. (Code Civ. Proc., § 452.) In construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations. (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3rd 764, 769.)

A demurrer may be brought if insufficient facts are stated to support the cause of action asserted. (Code Civ. Proc., § 430.10, subd. (e).) “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.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Where the complaint contains substantial factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty will be overruled or plaintiff will be given leave to amend. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) 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. (Ibid.)

Defense counsel has complied with the meet and confer requirement. (See Declaration of Steven A. Simons In Support of Inability to Conduct Meet-and Confer.)

As a threshold matter, the court finds the complaint is defective because a trust has no capacity to sue or be sued, or to defend an action. (Stoltenberg v. Newman (2009) 179 Cal.App.4th 287, 293 [“Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee ... ‘A trust ... is simply a collection of assets and liabilities. As such, it has no capacity to sue or be sued, or to defend an action].) Here, Plaintiff named the Trust as a defendant. On this basis, the Complaint is subject to demurrer. Notwithstanding this defect, the court addresses the substance of the Trust’s arguments to each cause of action.

1. First Cause of Action for Intentional Interference with Contractual Relations

“It has long been held that a stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract. The elements which a plaintiff must plead to

state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) Interference or disruption of the contract includes conduct that “prevented performance or made performance more expensive or difficult.” (See CACI No. 2201; see also Pacific Gas & Electric Co., supra, 50 Cal.3d at p. 1129.)

The Trust identifies three ways in which the First Cause of Action is purportedly uncertain. All three fail. First, the Trust argues the Complaint is devoid of factual allegations showing the Trust acted with the intent necessary to induce a breach or disruption of the purported contractual relations. However, the California Supreme Court recognizes that specific intent is not a required element of the tort of intentional interference with contract. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1154, 1157 (Korea Supply).) Further, “a plaintiff may alternatively plead that the defendant knew that the interference was certain or substantially certain to occur as a result of its action.” (Id. at p. 1154.)

Here, Plaintiff alleges, “It is a fact that Defendant TRUST (Landlord) intended to disrupt the performance of the subject contract or at least knew that disruption of performance was certain or substantially certain to occur, because without a new lease the lender would not approve the loan and State of California would not transfer ABC license to the new buyer.” (Complaint, ¶ 56.) Although not artfully pled, this allegation is sufficient to survive demurrer.

Second, the Trust argues there is no allegation of a valid contract. The court disagrees. Plaintiff alleges there was a valid, enforceable contract between Plaintiff and JK Liquor for the purchase of the liquor store and the Trust knew of the subject contract. (Complaint, ¶¶ 3, 14, 53, 54.) The Complaint is not vulnerable on this ground.

Last, the Trust argues the allegations do not show the Trust’s interfering conduct was wrongful by some legal measure other than the fact of the interference. In support of this proposition, the Trust cites Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376. Della Penna does not help the Trust’s cause. Della Penna dealt with a cause of action for intentional interference with prospective economic advantage. As the California Supreme Court warned in Korea Supply, supra, “although we find the intent requirement to be the same for the torts of intentional interference with contract and intentional interference with prospective economic advantage, these torts remain distinct.” (Korea Supply, 29 Cal.4th at p. 1157, emphasis added; see also CACI No. 2202.) The First Cause of Action is sufficiently pled.

“Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512; CACI No. 2202.)

The Trust also attacks the Second Cause of Action for lack of certainty because there is no allegation showing conduct which was wrongful by some legal measure other than the fact of the interference. Specifically, the Trust contends the allegation that the Trust interfered by “unreasonably rejecting the lease assignment” is conclusory and unsupported by facts. The Trust’s challenge fails. “[W]here a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has commercially reasonable objection to the assignee or the proposed use.” (Kendall v. Ernest Pestana, Inc. (1985) 40 Cal. 3d 488, 507 (Kendall).)

Here, Plaintiff alleges the Trust proposed substantial increases to the rent, deposit, and the number of guarantors, and required payment of property tax on the entire property (as opposed to the liquor store space itself) as conditions to approve the lease assignment. (Complaint, ¶¶ 15-18.) Plaintiff agreed to the conditions, yet the Trust rejected the assignment without providing a reasonable explanation. Under Kendall, Plaintiff states a claim for tortious interference with economic relations. This cause of action is sufficiently pled.

For the reasons stated herein, the demurrer to the First and Second Causes of Action is SUSTAINED because the Trust is not a legal entity. Leave to amend is GRANTED.

Plaintiff is ordered to file and serve his First Amended Complaint within 30 days of this order.

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¿ Kerry Bensinger¿¿

¿ Judge of the Superior Court¿