Judge: Kevin C. Brazile, Case: 22STCV07958, Date: 2022-11-07 Tentative Ruling

Hearing Date: November 7, 2022

Case Name: Adjamian v. Rosenthal, et al.

Case No.: 21STCV32408

Matter: Demurrer

Moving Party: Defendants Tamara Rosenthal, STJ, LP, and Magnifique Congregate 

Living Inc.

Responding Party: Plaintiff Boris Adjamian

Notice: OK

Ruling: The Demurrer of STJ and MC is sustained as to the first cause of 

action.  The Demurrer is otherwise overruled.  Leave to amend is 

denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On June 27, 2022, Plaintiff Boris Adjamian filed the operative First Amended Complaint (“FAC”) against Defendants Tamara Rosenthal, STJ, LP (“STJ”), and Magnifique Congregate Living Inc. (“MC”) for (1) breach of fiduciary duty, (2) breach of partnership agreement, (3) conversion, (4) fraud, (5) violation of Pen. Code § 496, and (6) intentional interference with contractual relations.  

The allegations of the FAC are as follows.  Plaintiff and his sister, Defendant Tamara Rosenthal, are 50-50 owners of Rose Desert Congregate Care, Inc. (“Rose”), a congregate living health facility (“CLHF”).  Plaintiff was to receive profits from his ownership interest in Rose, but instead agreed to Rosenthal’s representation that their profits be invested into new CLHFs in which Plaintiff and Rosenthal would have 50-50 interests, either through a partnership or indirectly through other entities.  Rosenthal invested Plaintiff’s money in new CLHFs, which came to be owned by STJ and MC, but later stated that Plaintiff had no interest in these entities.  

Defendants Rosenthal, STJ, and MC demur to first, third, fourth, and fifth causes of action for uncertainty and failure to state sufficient facts.  

When considering demurrers, courts read the allegations liberally and in context, and “treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.)  It is error “to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.”  (Aubry v. Tri-City Hospital Dist.¿(1992) 2 Cal.4th 962, 967.)

1. Conversion & Penal Code § 496

The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.  (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)  

Pen. Code § 496(c) allows for treble damages when there is a violation of subsection (a), which provides in relevant part, “Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.”

Previously, the Court overruled the Defendants’ demurrer to these claims, stating, “Defendants have failed to cite authority that dividends or profits cannot be the subject of a conversion claim or the like.  Ralston v. Bank of Cal. (1896) 112 Cal. 208, 215 explicitly states otherwise. Additionally, liberally construing the Complaint, it indicates that had profits not been invested in new facilities, they would have been distributed to Plaintiff. [¶] Further, Pen. Code § 496 might apply to stock/interest in STJ and MC or the profits that these entities generated and that were to be distributed to Plaintiff based on his investment, but which he did not obtain based on Rosenthal’s assertion that Plaintiff had no interest in the aforementioned entities.”

Defendants now argue that the Court should reconsider its ruling in light of Siry Inv., L.P. v. Farkhondehpour (2022) 13 Cal.5th 333.  Specifically, Defendants argue that, among other things, Plaintiff has not pled a criminal intent by Defendants to steal property in Plaintiff’s possession.  

“To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond ‘mere proof of nonperformance or actual falsity.’ (People v. Ashley (1954) 42 Cal.2d 246, 264, 267 P.2d 271.) This requirement prevents ‘ “[o]rdinary commercial defaults” ’ from being transformed into a theft. (Id., at p. 265, 267 P.2d 271.) If misrepresentations or unfulfilled promises ‘are made innocently or inadvertently, they can no more form the basis for a prosecution for obtaining property by false pretenses than can an innocent breach of contract.’ ”  (Siry Inv., L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361–62.)

“The unambiguous relevant language [of Code Civ. Proc. § 496] covers fraudulent diversion of partnership funds.”  (Id. at p. 361.)

Whether criminal intent exists is a factual question; the pleadings are sufficient.  The Demurrer is overruled.

2. Breach of Fiduciary Duty

Defendants STJ and MC argue that they have no fiduciary duties to Plaintiff.  

The Court previously ruled, “The Complaint seems to premise the fiduciary duties of STJ and MC on a partnership agreement between the parties.  However, the Complaint seems to allege that Plaintiff invested in STJ and MC, rather than STJ and MC being partners with Plaintiff in a venture.”  

The FAC fails to remedy this issue, only stating legal conclusions.  The Demurrer of STJ and MC to the first cause of action for breach of fiduciary duty is sustained, without leave to amend.  The Demurrer of Rosenthal was previously overruled.

3. Fraud

Defendants argue that Plaintiff’s fraud claim is not particularly pled and does not allege reliance and causation.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Lazar v. Superior Court (1996) 12 Cal. 4th 631, 638, internal quotation marks omitted.) 

“[F]raud must be pled specifically; general and conclusory allegations do not suffice. [Citations] Thus the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.  This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal quotation marks omitted.)  

Here, the fraud claim is essentially sufficient as it alleges that in early 2019, Rosenthal orally promised that if Plaintiff gave Rosenthal his distributions, Plaintiff would have a 50% interest in STJ.  This was false because Rosenthal later disclaimed any such interest, and concealed the truth when corporate records were requested.  Plaintiff alleges that he relied on Rosenthal’s representations by allowing Rosenthal to possess his distributions.  

The Demurrer is overruled.

4. Summary 

In sum, the Demurrer of STJ and MC is sustained as to the first cause of action.  The Demurrer is otherwise overruled.  Leave to amend is denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.