Judge: Kevin C. Brazile, Case: BC635325, Date: 2024-04-03 Tentative Ruling

Hearing Date: April 3, 2024

Case Name: Patel v. Kumar, et al.

Case No.: 23STCV16587 

Matter: Demurrers (2x); Motions to Strike (2x)

Moving Party: (1) Defendants Jayesh Kumar and Madhuben Kumar

(2) Defendants Govind Patel, Shyamal Patel, Taz Hospitality, LLC, and 

Hollywood Corner, Inc.

Responding Party: Plaintiff Mahendra Kumar Patel

Notice: OK

Ruling: The Demurrers are overruled.

The Motions to Strike are 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 July 14, 2023, Plaintiff Mahendra Kumar Patel filed the operative Complaint against Defendants Jayesh Kumar, Madhuben Kumar, Govind Patel, Shyamal Patel, Taz Hospitality, LLC, and Hollywood Corner, Inc. for (1) fraud, (2) conspiracy to defraud, (3) breach of fiduciary duty, and (4) conversion.  Plaintiff alleges that Defendants promised him 25% of the sale proceeds of a hotel owned by HUM Hospitality Group but that, after the sale, they never tendered any money to Plaintiff. 

1. Demurrer

Defendants Jayesh Kumar and Madhuben Kumar demur to the Complaint for lack of standing, failure to state sufficient facts, and uncertainty.  Defendants Govind Patel, Shyamal Patel, Taz Hospitality, LLC, and Hollywood Corner, Inc. separately demur on the same grounds.

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 Plaintiff lacks standing because he wasn’t a shareholder of HUM after his shares were taken as collateral on a separate agreement—the Membership Interest Purchase Agreement (“MIPA”), which relates to the purchase of another corporation.

This lacks merit because it relies on extrinsic evidence.  While the MIPA is referenced and attached to the Complaint, the “pledge and security agreement”—which is the basis for Defendants’ argument—is not mentioned in the Complaint.  Defendants seek for the Court to take judicial notice of this document, but there is no basis to take judicial notice of a private contract, particularly where, as here, the opposing party has objected.  The Demurrers mostly read as though they seek summary judgment.  (See infra.) 

Defendants next argue that there is no fraud pleaded to the extent that they did not need Plaintiff’s approval to sell the hotel and the claim lacks specificity. 

Defendants’ first argument, however, would ultimately require reference to HUM’s bylaws, which has not been pleaded in the Complaint and as to which judicial notice is, again, inappropriate.  

It is primarily pleaded that Defendants repeatedly promised that if Plaintiff approved the subject sale, then they would later provide him 25% of the proceeds.  This is to be regarded as true for the pleadings stage.

On the other hand, this fraud claim lacks specificity to the extent it is not clear when, where, or how the subject false promise was made.  While it is alleged that the promise was made repeatedly, some specificity as to at least one instance is required.  

Then again, the Complaint sufficiently pleads concealment of the fact that 50% of the hotel was transferred to Govind and that, had Plaintiff known this, he would not have provided his approval for the transaction, which ultimately lead to his loss of over $4 million.  Notably, the specificity requirements are somewhat relaxed for a concealment claim.  (See Alfaro v. Community Housing Imp. System & Planning Ass’n., Inc. (2009) 171 Cal.App.4th 1356, 1384.) 

The derivative conspiracy claim is also sufficient as a conspiracy is “easy to allege . . . .” (Choate v. County of Orange (2000) 86 Cal.App.4th 312, 333.)  Overt and independently tortious conduct in furtherance of the conspiracy need not be alleged (Ramey v. General Petroleum Corp. (1959) 173 Cal.App.2d 386, 403), and general allegations of agreement have been held sufficient (Bartley v. California Association of Realtors (1980) 115 Cal.App.3d 930, 934.)  As a note, liability with respect to Taz, and its member, Hollywood Corner, seems to come from the fact that Taz may have executed some iteration of the subject sales agreement.  That was probably a typo/error on the agreement, but the Court will accept the Complaint for the time-being.  

Next, Defendants’ arguments as to the breach of fiduciary duty claim fail to the extent based on the rejected (at this time) contention that Plaintiff did not have shares in HUM.

Defendants further argue that Plaintiff has no possessory or title interest in proceeds from the sale of the hotel so as to allege a conversion claim.  

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.) 

Distributions or the like can be the subject of a conversion claim (see, e.g., SP Inv. Fund I LLC v. Cattell (2017) 18 Cal.App.5th 898, 907), and it seems uncontested that the other shareholders in HUM obtained some of the sale proceeds individually. 

Defendants also argue that they never possessed Plaintiff’s 25% share of money.  However, they have failed to establish that they must possess the funds themselves to be liable.  For example, a misdelivery of funds can be actionable (Byer v. Canadian Bank of Com. (1937) 8 Cal.2d 297, 299), and, here, it might be said that the funds were misdirected to improper entities and/or individuals.  

In sum, the Demurrers are overruled.  The Requests for Judicial Notice are denied.  Answers are to be filed within 20 days.

2. Motions to Strike

Motions to strike are used to challenge defects in the pleadings not subject to demurrer.  Any party may move to strike the whole or any part of a pleading within the time allotted to respond to the pleading.  (Code Civ. Proc. § 435(b)(1).)  The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the Court is required to take judicial notice.  (Id. § 437(a).)  The Court may strike out any irrelevant, false, or improper matter inserted in any pleading, and strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.  (Id. § 436.)  An “irrelevant” matter includes any “demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint.”  (Id. § 431.10(b)(3), (c); see also Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1036-1042.)

Defendants’ Motions to Strike are denied because (1) they present arguments already rejected for their Demurrers (see supra), (2) fraud has been pleaded so as to support punitive damages, and (3) the Motions otherwise seek to improperly function as a line-item veto.  (See PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683.)

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.