Judge: Kevin C. Brazile, Case: 23STCV27715, Date: 2024-02-14 Tentative Ruling

Hearing Date: February 14, 2024

Case Name: Dechter v. Massman, et al.

Case No.: 23STCV11406 

Matter: Demurrer; Motion to Strike

Moving Party: Defendants Ronald Massman and DHX–Dependable Hawaiian Express, 

Inc. 

Responding Party: Plaintiff Bradley J. Dechter

Notice: OK

Ruling: The Demurrer is overruled.

The Motion to Strike is denied.

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. 

On May 19, 2023, Plaintiff Bradley J. Dechter filed a Complaint.  On October 9, 2023, Plaintiff filed the operative First Amended Complaint (“FAC”) against Defendants Ronald Massman and DHX–Dependable Hawaiian Express, Inc. (“DHX”) for (1) breach of oral contract, (2) breach of oral contract, (3) fraud, and (4) unjust enrichment.  Plaintiff alleges that he is entitled to an interest in DHX due to his contributions, but that his ownership interest has been refused.  

1. Demurrer

Defendants Massman and DHX demur to the second through fourth causes of action 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.)

Defendants first argue that the second cause of action for breach of a 1991 oral contract is barred by a two-year statute of limitations as such claim accrued in December 2020 when the Hawaiian Island Business acquisition closed.  

The FAC alleges two alternative oral agreements that could apply: (a) a 2020 oral agreement to receive 20% in DHX and (b) a 1991 oral agreement to receive 35% on new ventures, which could also include DHX.  

The FAC sufficiently alleges delayed discovery as it is stated that the parties were still negotiating a long-form agreement in May 2021 for Plaintiff’s ownership stake in DHX.  Plaintiff alleges that “in the months following the closing, Massman and his agents continued to reaffirm the terms of the 2020 Oral Agreement. . . . In spite of the impasse regarding the long-form agreement, the terms of the 2020 Oral Agreement remained the same and were affirmed repeatedly by Massman. For example, on or around May 7, 2021, Massman and Dechter met to discuss the best way to effectuate the transfer of the DHX Ownership Interest. On May 20, 2021, Massman once again affirmed the terms of the 2020 Oral Agreement. . . . Massman failed to grant Dechter his 20% equity interest in DHX. Massman also did not provide Dechter with a 35% interest in the Hawaiian Island Business pursuant to the 1991 Oral Agreement. To date, Dechter has not received anything in exchange for identifying and closing the Hawaiian Island Business Acquisition. Massman ignored both agreements.”  While it is alleged that Defendants specifically reaffirmed the terms of the 2020 agreement—an not the 1991 agreement—to the extent the 1991 and 2020 agreements are alleged in the alternative, it might be said that Plaintiff could not realize he would not receive anything on the 1991 agreement until the parties’ negotiations came to a final conclusion.  Also, to the extent the agreements are alternatives, it would make little sense for Plaintiff to first file a claim for breach of the 1991 agreement while still negotiating under the 2020 agreement.  Ultimately, the statute of limitations seems to be a factual issue in this case.  

Defendants next argue that the third cause of action for fraud is barred by the economic loss rule.  This lacks merit because Plaintiff alleges a separate duty arising from tort to the extent false promise is alleged.  (See Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 990.)

Defendants also argue that the unjust enrichment claim fails because (1) “Dechter may not plead an allegedly enforceable contract, as he does in his First and Second Causes of Action, and then allege an unjust enrichment/restitution cause of action in his Fourth Cause of Action”; (2) “Dechter alleges that he has fully performed under the alleged 1991 and 2020 Oral Agreements, but he has not been paid what he is owed. The remedy of restitution is not available in such circumstances”; (3) “Dechter’s Fourth Cause of Action is not seeking restitution because it is not asking that DHX and Massman pay back to Dechter monies that they should not have received from Dechter”; and (4) “the Fourth Cause of Action does not allege that Massman received any of the alleged profits or benefits. Instead, it only alleges that DHX received those profits and benefits. As such, it fails to state a cause of action against Massman . . . .”

“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).)

At the very least, Plaintiff is permitted to plead unjust enrichment as an alternative to the breach of contract claims to the extent it is not clear what the evidence will ultimately substantiate.  (See, e.g., Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2018) 6 Cal.App.5th 1207, 1222.)

Further, Plaintiff has pleaded an entitlement to disgorgement, particularly as fraud has also been pleaded.  (Am. Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1482 [“[m]any instances of liability based on unjust enrichment ... do not involve the restoration of anything the claimant previously possessed ... includ[ing] cases involving the disgorgement of profits ... wrongfully obtained.... [Citation.] [T]he public policy of this state does not permit one to take advantage of his own wrong regardless of whether the other party suffers actual damage. [Citation.] Where a benefit has been received by the defendant but the plaintiff has not suffered a corresponding loss or, in some cases, any loss, but nevertheless the enrichment of the defendant would be unjust ... the defendant may be under a duty to give to the plaintiff the amount by which [the defendant] has been enriched.” (internal quotes omitted)].)  

Finally, the ultimate facts of alter ego liability have been sufficiently pleaded.  (Rutherford Holding, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236.)  

In sum, the Demurrer is overruled.  The Request for Judicial Notice is granted.  An answer is to be filed within twenty days.

2. Motion to Strike

Defendants also seek to strike the FAC’s alter ego allegations, but this has already been rejected.  The Motion to Strike is denied.

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.