Judge: Kevin C. Brazile, Case: 23STCV01694, Date: 2024-03-06 Tentative Ruling

Hearing Date: March 6, 2024

Case Name: Zarabian v. Willwerth, et al.

Case No.: 20STCV29052

Matter: Demurrer

Moving Party: Defendant Adelanto Warehousing, LLC

Responding Party: Plaintiff Babak Zarabian 

Notice: OK

Ruling: The Demurrer is overruled as to the eighth cause of action, but is 

otherwise sustained.  Twenty days leave to amend is granted as to the 

first, second, third, and sixth causes of action.  Leave to amend is denied as to the fourth, fifth, seventh, and ninth causes of action.

Moving party 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. 

This is an action in which Plaintiff Babak Zarabian alleges that the Defendants cut him out of a partnership deal relating to the “Zanna” family of corporate entities.  On December 28, 2023, Plaintiff filed the Fourth Amended Complaint (“4AC”) for (1) breach of contract, (2) breach of fiduciary duty, (3) accounting, (4) money had and received, (5) negligence, (6) intentional misrepresentation, (7) negligent misrepresentation, (8) unjust enrichment, and (9) promissory estoppel.

Defendant Adelanto Warehousing, LLC now demurs to the entirety of the 4AC for 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. Breach of Contract

The essential elements of a breach of contract cause of action are: (1) a contract between the parties; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff from the breach.  (Wall Street Network, Ltd. v. New York Times Co.¿(2008) 164 Cal.App.4th 1171, 1178.)¿ 

Defendant argues the breach of contract claim fails because there are no facts pleaded specifically as to Adelanto.  

While basic facts have been pleaded, the material terms of the contract have not been sufficiently indicated.  What was the ownership stake that Plaintiff was supposedly entitled to or how was it supposed to be calculated?  How did the parties share profits and losses?  What were Defendants’ obligations?  Nothing is clear other than that Plaintiff invested money and got nothing in return.  

Defendant also argues that the statute of limitations applies under “C.C.P. § 339 since the original Complaint was filed on July 31, 2020, more than two (2) years from the alleged oral partnership agreement, i.e., April 16, 2018.”

This, however, fails to take into account that the statute of limitations accrues upon breach, which has not been analyzed.

The Demurrer is sustained as to the first cause of action, with twenty days leave to amend.  

2. Breach of Fiduciary Duty

“The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach. [Citation.]” (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1044.)

Defendant argues that “Plaintiff fails to state specific and sufficient facts to prove that there was a fiduciary duty between Plaintiff and Adelanto, and whether Adelanto breached its fiduciary duties. Plaintiff’s FAC fails to identify a legally recognized fiduciary relationship between Plaintiff and Adelanto.”

The 4AC indicates that there was a “fiduciary relationship arising from their joint participation in the business enterprise named ‘Zanna.’ ”  But, the source of the duty is still not clear.  Is Plaintiff alleging a joint venture?  If so, it does not seem that Plaintiff specifically pleaded that there was a “(1) joint interest in a common business; (2) with an understanding to share profits and losses; and (3) a right to joint control.”  (Jacobs v. Locatelli (2017) 8 Cal.App.5th 317, 328 n.10.)  Again, the allegations are anything but clear.  

3. Accounting

“An account stated is an agreement, based on prior transactions between the parties, that the items of an account are true and that the balance struck is due and owing. [Citation.] To be an account stated, ‘it must appear that at the time of the statement an indebtedness from one party to the other existed, that a balance was then struck and agreed to be the correct sum owing from the debtor to the creditor, and that the debtor expressly or impliedly promised to pay to the creditor the amount thus determined to be owing.’ [Citation.]”  (Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 752.)

“The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due. [Citations.]”  (Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600.)

Here, the derivative accounting claim fails given that the relationship amongst the parties is unclear.  The Demurrer is sustained, with twenty days leave to amend.

4. Money Had & Received

The elements of a cause of action on a common count for money had and received are: “1. That [name of defendant] received money that was intended to be used for the benefit of [name of plaintiff]; [¶] 2. That the money was not used for the benefit of [name of plaintiff]; and [¶] 3. That [name of defendant] has not given the money to [name of plaintiff].” (CACI No. 370, italics added.) “ ‘A cause of action is stated for money had and received if the defendant is indebted to the plaintiff in a certain sum “for money had and received by the defendant for the use of the plaintiff.” ’ [¶] This common count is available in a great variety of situations [citations] and ‘lies wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.’ ”  (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 937.)

This claim is deficient because the only certain sum described is Plaintiff’s $13,000 investment, which was meant for Zanna’s benefit.  Plaintiff is really claiming a loss of profits or return on his investment, but no certain sum is described in this regard.  The Demurrer is, thus, sustained as to the fourth cause of action, without leave to amend.

5. Negligence 

Negligence requires duty, breach of duty, proximate causation, and damages.  (N.N.V. v. American Assn. of Blood Banks (1999) 75 Cal.App.4th 1358, 1402.) 

The negligence claim relates to the allegations that Adelanto agreed to manage finances but did an inadequate job by misappropriating funds.  

This claim inappropriately recasts Plaintiff’s contract claim as a tort claim and is, therefore, subject to the economic loss rule.  (See, e.g., Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal. 4th 979, 989-90.)

Thus, the Demurrer is sustained as to the negligence claim, without leave to amend.

6. Intentional/Negligent Misrepresentation

“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.)  

Negligent misrepresentation requires “misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.”   (Goonewardene v. ADP, LLC (2016) 5 Cal.App.5th 154, 175.)

A negligent misrepresentation claim should also be pleaded with specificity.  (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 185, fn. 14.) 

These claims lack specificity because there is no indication as to where or how the subject representations were made.  

Further, the negligent misrepresentation claim relates to a negligent false promise, which is not an actionable form of deceit.  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159.)

The Demurrer is sustained as to the subject claims.  Leave to amend is only granted as to the intentional misrepresentation claim.

7. Unjust Enrichment 

“Unjust enrichment is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies .... [Citation.] It is synonymous with restitution. [Citation.] (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793, 131 Cal.Rptr.2d 347.) Unjust enrichment has also been characterized as describing the result of a failure to make restitution.... (Dunkin, supra, 82 Cal.App.4th at p. 198, fn. 15, 98 Cal.Rptr.2d 44, quoting Lauriedale Associates, Ltd. v. Wilson (1992) 7 Cal.App.4th 1439, 1448, 9 Cal.Rptr.2d 774 (Lauriedale ).)  [¶] There are several potential bases for a cause of action seeking restitution. For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. (See generally 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, §§ 148–150, pp. 218–220; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, §§ 112, 118, pp. 137–138, 142–144.) Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory (an election referred to at common law as waiving the tort and suing in assumpsit).”  (McBride v. Boughton  (2004) 123 Cal.App.4th 379, 387–89 (internal quotes omitted).)

There may be a basis to allow unjust enrichment to the extent the parties’ alleged contract is ineffective and Plaintiff tendered $13,000 but received nothing in return.  The Demurrer is overruled as to the eighth cause of action.

8. Promissory Estoppel

The Demurrer is sustained without leave to amend as to the promissory estoppel claim because Plaintiff pleads consideration in the form of having tendered $13,000.  Indeed, a promissory estoppel claim is “aimed solely at allowing recovery in equity where a contractual claim fails for lack of consideration . . . .”  (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 904.)  

9. Summary

In sum, the Demurrer is overruled as to the eighth cause of action, but is otherwise sustained.  Twenty days leave to amend is granted as to the first, second, third, and sixth causes of action.  Leave to amend is denied as to the fourth, fifth, seventh, and ninth causes of action.

Moving party 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.