Judge: Lynette Gridiron Winston, Case: 23PSCV03574, Date: 2024-04-18 Tentative Ruling

Case Number: 23PSCV03574    Hearing Date: April 18, 2024    Dept: 6

CASE NAME:  Jesse Hirezi, et al. v. Hannah Bishara Hirezi, et al. 

Defendants’ Demurrer to Verified Complaint 

TENTATIVE RULING 

The Court SUSTAINS the demurrer to Fourth and Ninth Causes of Action with leave to amend. The Court OVERRULES the demurrer to all other causes of action. Plaintiffs must file and serve the amended complaint within 20 days of the Court’s order. 

The Court DENIES the motion to strike in its entirety. 

             Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order. 

BACKGROUND 

This is a family business dispute. On November 15, 2023, plaintiffs Jesse Hirezi (Jesse), an individual and as Trustee of the J & R Hirezi Family Trust of April 20, 2015, Randa Hirezi (Randa), an individual and as Trustee of the J & R Hirezi Family Trust of April 20, 2015 (collectively, Plaintiffs) filed this action against defendants Hanna Bishara Hirezi a/k/a Hanna Hirezi a/k/ John Hirezi (John), Mona Qumsieh Hirezi a/k/a Mona Hirezi a/k/a Mona J. Herzi, Bethlehem Star, Inc. (Bethlehem), Golden Springs, LLC, Arrow Beverage, Inc. (collectively, Defendants), and Does 1 through 20, alleging causes of action for breach of partnership agreement, breach of fiduciary duty, dissolution of partnership/corporation, conversion, accounting, quasi contract and constructive trust, money had and received, declaratory relief, and partition. 

On March 11, 2024, Defendants demurred to and moved to strike portions of the complaint. On April 5, 2024, Plaintiffs opposed the demurrer and motion to strike. On April 10, 2024, Defendants replied to the opposition to the demurrer. Defendants did not reply to the opposition to the motion to strike. 

LEGAL STANDARD – Demurrer 

            A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.) 

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862, disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 [error to consider contents of release not part of court record].) 

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”]) 

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.) 

DISCUSSION – Demurrer 

Meet and Confer 

Per Code of Civil Procedure section 430.41, subdivision (a), Defendants were required to meet and confer with Plaintiffs telephonically or in person before filing the demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds Defendants’ meet-and-confer efforts sufficient. (Rossi Decl., ¶ 2.) 

First Cause of Action – Breach of Partnership Agreement 

“A cause of action for breach of contract requires pleading of a contract, plaintiff's performance or excuse for failure to perform, defendant's breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) 

Defendants demur to the First Cause of Action for breach of partnership agreement on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants contend this cause of action fails because the contract attached to the complaint is not supported by consideration or signed by the parties. Defendants also contend it is barred by the statute of limitations, fails to satisfy the statute of frauds, and by Corporation Code section 800 regarding derivative actions. 

In opposition, Plaintiffs contend the complaint alleges sufficient facts regarding consideration for their breach of contract claim. They reference paragraph 11 of the complaint, which alleges Jesse and John each receiving a 50% share in Bethlehem from their mother, and that the terms of the contract attached to the complaint confirm a prior oral agreement between them regarding their respective shares in Bethlehem. Plaintiffs further argue that this cause of action is not barred by the statute of limitations or statute of frauds. They also argue that this is a direct action, not a derivative action, and that even if it was a derivative action, the complaint alleges facts to satisfy those requirements. 

The Court agrees with Plaintiffs. For purposes of the demurrer, the allegations of the complaint are taken as true. The complaint alleges that in or about 2015, Jesse and John entered into an oral partnership agreement and that the terms are as set forth in the shareholders agreement attached as Exhibit 1 thereto. (Compl., ¶ 14, Ex. 1.) Thus, Plaintiffs allege the existence of an oral agreement. The fact that the Shareholder Agreement is not signed or does not state the consideration is immaterial because the breach of contract claim is not based on the Shareholder Agreement, but rather the oral partnership agreement. 

As for the other grounds for demurrer, the Court finds them unavailing. The complaint does not allege sufficient facts on its face for the Court to determine whether the statute of limitations bars this cause of action. (Union Carbide Corp. v. Sup.Ct. (Villmar Dental Labs, Inc.) (1984) 36 Cal.3d 15, 25.) The complaint alleges breaches of the partnership agreement in May 2022 and within the last year. (Compl., ¶¶ 18-20.) There are also no allegations that indicate this contract comes within the statute of frauds. (See Civ. Code, § 1624.) Nowhere in the complaint are there any allegations that indicate the alleged agreement had to take over one year to perform. (See Id., § 1624, subd. (1).) The Court also finds that Plaintiffs’ allegations are rooted in a direct action, as the alleged injury is Plaintiffs’ deprivation of Bethlehem’s profits, not to the corporation itself. (See Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 107.) 

Based on the foregoing, the Court OVERRULES the demurrer to the First Cause of Action. 

Second Cause of Action – Breach of Fiduciary Duty 

To state a cause of action for breach of fiduciary duty, the plaintiff must allege facts demonstrating the existence of a fiduciary relationship, the breach of that duty, and damages. (O’Neal v. Stanislaus County Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.) 

Defendants demur to the Second Cause of Action for breach of fiduciary duty on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. More specifically, Defendants contend the absence of the alleged contract as discussed above undermines the existence of a fiduciary duty. Defendants also contend this cause of action is premature because partners cannot sue each other before dissolution of the partnership. 

In opposition, Plaintiffs contend Defendants cite no legal authorities for their argument that the absence of a contract negates the existence of a fiduciary duty, and that such allegations involve questions of fact not appropriate for demurrer. Plaintiffs contend again that this claim is not derivative. Plaintiffs also contend the arguments that this claim is premature is contradicted by the law which specifically permits partners to maintain actions against other partners. 

The Court finds the complaint sufficiently alleges the oral partnership agreement and therefore a fiduciary duty exists between the partners. (See Corp. Code, § 16404.) As for the premature claim argument, the Court agrees with Plaintiffs that it is unpersuasive. The law specifically provides for partners to make direct claims against each other without an accounting to enforce their rights. (Corp. Code, § 15910.01.) Plaintiffs also correctly note that the case Defendants cited in their moving papers for this argument, Malott v. Seymour (1950) 101 Cal.App.2d 245, expressly acknowledges that the rule limiting claims between partners is subject to statute. (Id., at p. 246.) 

Based on the foregoing, the Court OVERRULES the demurrer to the Second Cause of Action. 

Third Cause of Action – Dissolution of Partnership/Corporation 

Under Corporations Code section 16801, a partner may dissolve a partnership under certain circumstances, such as death of a partner, the express will of the partners, the expiration of the term or completion of the undertaking. (Corp. Code, § 16801.) 

Defendants demur to the Third Cause of Action for dissolution of the corporation/partnership on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants’ arguments here are the same as set forth above under the Second Cause of Action, as are Plaintiffs’ opposing arguments. 

For the same reasons set forth above, the Court finds this cause of action sufficiently states a claim for dissolution of partnership. 

Based on the foregoing, the Court OVERRULES the demurrer to the Third Cause of Action. 

Fourth Cause of Action – Conversion 

To state a cause of action for conversion, the plaintiff must allege facts demonstrating the plaintiff’s ownership or right to possession of personal property, the defendant acted inconsistent with that right, and damages. (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181.) Money may not be the subject of a conversion claim unless a specific identifiable sum is involved. (Haigler v. Donnelly (1941) 18 Cal.2d 674, 681.) Moreover, “a mere contractual right of payment, without more, will not suffice” to support a claim for conversion. (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.) 

Defendants demur to the Fourth Cause of Action for conversion on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants contend it fails in part for the reasons set forth above with respect to the absence of a contract, and on the basis that the complaint does not allege a specific identifiable sum. In opposition, Plaintiffs contend the specific pleading requirement is relaxed when the Defendant possesses full information concerning the matter. 

The Court agrees with Defendants. The complaint does not allege a specific identifiable sum. (Compl., ¶ 48.) Even with an incorporation by reference, the complaint still only alleges a general ballpark sum of $700,000. (Compl., ¶¶ 25, 44.) Plaintiffs’ arguments regarding relaxed pleading standards is inapplicable here. The case Plaintiffs cited for this argument, Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157-158, addresses the heightened pleading requirements for a fraud claim, not a conversion claim. As for the other issues regarding the lack of a contract and a premature claim between partners, the Court finds those arguments unavailing for the same reasons set forth above. 

Based on the foregoing, the Court SUSTAINS the demurrer to the Fourth Cause of Action with leave to amend. 

Fifth Cause of Action – Accounting 

To state a cause of action for an accounting, the plaintiff must allege facts demonstrating that a relationship exists between the plaintiff and the defendant that requires an accounting, and that some balance is due that can only be ascertained by an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) 

Defendants demur to the Fifth Cause of Action for accounting on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants make the same arguments as set forth above with respect to the Second Cause of Action. Defendants also contend this cause of action is derivative of the breach of contract claim. 

In opposition, Plaintiffs contend the complaint alleges facts demonstrating a partnership relationship and that they agreed to distribute the profits according to their respective shares. 

The Court finds the complaint alleges sufficient facts to state a cause of action for an accounting. The complaint alleges a partnership relationship between John and Jesse. (Compl., ¶¶ 11-12, 14, Ex. 1.) It also alleges that Plaintiffs are owed some money as a result of that relationship. (Id., ¶ 25.) The Court finds Defendants’ repeated arguments regarding the absence of a contract and premature claims against partners unavailing for the same reasons set forth above. 

Based on the foregoing, the Court OVERRULES the demurrer to the Fifth Cause of Action. 

Sixth Cause of Action – Quasi-Contract/Constructive Trust 

“A cause of action for quasi-contract invokes consideration of equitable principles, rather than of contract. … [It] is an obligation … created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to [its] former position by return of the thing or its equivalent in money. [Citations.] (Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 639 [198 Cal. Rptr. 3d 211]; see 1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 1050, p. 1097; Rest.2d Contracts, § 4, com. b, p. 56.) The doctrine focuses on equitable principles; its key phrase is ‘unjust enrichment,’ which is used to identify the transfer of money or other valuable assets to an individual or a company that is not entitled to them. (Rest.3d Restitution and Unjust Enrichment, Foreword, vol. 1, p. XIII.)” (Welborne v. Ryman-Carroll Foundation (2018) 22 Cal.App.5th 719, 725 [internal quotations omitted].) Constructive trust is an equitable remedy that compels someone wrongfully holding property to hand it over to the rightful owner. (Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 920.) 

Defendants demur to the Sixth Cause of Action for quasi-contract/constructive trust on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants’ arguments here are the same as those set forth above under the Second Cause of Action. Plaintiffs’ arguments are the same. 

For the same reasons set forth above, the Court finds these arguments unpersuasive. The Court further finds that the complaint sufficiently alleges that Defendants transferred money or property that does not belong to them. (Compl., ¶¶ 54-56.) 

Based on the foregoing, the Court OVERRULES the demurrer to the Sixth Cause of Action. 

            Seventh Cause of Action – Money Had and Received 

            To plead a cause of action for money had and received, the plaintiff must allege facts demonstrating the defendant received money intended for the benefit of the plaintiff, that money was not used for the benefit of the plaintiff, and the defendant has not given money to the plaintiff. (CACI 370; see Philpott v. Superior Court in and for Los Angeles County (1934) 1 Cal.2d 512, 521-523.) 

Defendants demur to the Seventh Cause of Action for money had and received on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants’ arguments here are the same as those set forth above under the Second Cause of Action. Defendants also argue that it is subject to demurrer because it is based on the same facts as Plaintiffs’ First Cause of Action for breach of contract. In opposition, Plaintiffs contend they can plead in the alternative. 

The Court agrees with Plaintiffs. Where, as here, Plaintiffs allege defendants concealed and misappropriated monies they agreed to be used for the benefit of Plaintiffs, Plaintiffs may maintain a cause of action for money had and received. (See Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 937.) Furthermore, a common count for money had and received, may be alleged in the alternative to a breach of contract cause of action “When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.” McBride v. Boughton (2004) 123 Cal.App.4th 379, 394; see also Zumbrun v. Univ. of S. Cal. (1972) 25 Cal.App.3d 1,14. Plaintiffs common counts claim is based on the same underlying facts as the breach of contract cause of action, which the Court has found sufficient to withstand demurrer. 

Accordingly, the Court OVERRULES the demurrer to the Seventh Cause of Action. 

Eighth Cause of Action – Declaratory Relief 

To state a cause of action for declaratory relief, the plaintiff must allege facts demonstrating a proper subject of declaratory relief and an actual controversy concerning justiciable rights between the parties. (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546.) A general demurrer “is usually not an appropriate method for testing the merits of a declaratory relief action, because the plaintiff is entitled to a declaration of rights even if it is adverse to the plaintiff's interest. [Citation.]” (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 751.) But, a general demurrer may be appropriate where it is clear from the face of the complaint that the plaintiff seeks a declaration of rights to which he or she is not legally entitled. (Nede Mgmt. Inc. v. Aspen Am. Ins. Co. (2021) 68 Cal.App.5th 1121, 1130-1131.) 

Defendants demur to the Eighth Cause of Action for declaratory relief on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants’ arguments here are the same as those set forth above with respect to the Second Cause of Action. Defendants also argue that the Eighth Cause of Action is derivative of the First Cause of Action for breach of contract. In opposition, Plaintiffs contend the complaint alleges facts demonstrating an actual controversy as to the Plaintiffs’ rights regarding the partnership, and profits and income. 

The Court finds Plaintiffs have alleged sufficient facts to state a cause of action for declaratory relief. The complaint alleges facts demonstrating a dispute regarding the disposition of certain proceeds arising out of Bethlehem’s business operations, of which John and Jesse are allegedly 50% owners. (Compl., ¶¶ 11-12, 14, Ex. 1.) These allegations are sufficient to demonstrate a controversy that concerns justiciable rights between the parties. (See Lee, supra, 6 Cal.App.5th at p. 546.) The Court finds Defendants’ other arguments regarding premature claims and lack of a contract to be unavailing for the same reasons set forth above. 

Based on the foregoing, the Court OVERRULES the demurrer to the Eighth Cause of Action. 

Ninth Cause of Action – Partition 

To plead a cause of action for partition, the plaintiff must allege facts demonstrating, “(a) A description of the property that is the subject of the action… In the case of real property, the description shall include both its legal description and its street address or common designation, if any. (b) All interests the plaintiff has or claims in the property. (c) All interests of record or actually known to the plaintiff that persons other than the plaintiff have or claim in the property and that the plaintiff reasonably believes will be materially affected by the action, whether the names of such persons are known or unknown to the plaintiff. (d) The estate as to which partition is sought and a prayer for partition of the interests therein. (e) Where the plaintiff seeks sale of the property, an allegation of the facts justifying such relief in ordinary and concise language.” (Code Civ. Proc., § 872.230.) 

Defendants demur to the Ninth Cause of Action for partition on the grounds that the complaint fails to allege facts sufficient to constitute a cause of action and on grounds of uncertainty. Defendants restate here their arguments from the Second Cause of Action set forth above. Defendants otherwise contend the complaint fails to allege the legal description of the property at issue. Plaintiffs do not dispute this in their opposition, and seek leave to amend to correct it. 

The Court agrees with Defendants. The complaint does not allege the legal description for the subject property for the partition claim. (See generally Compl.) Plaintiffs also concede this point. 

Based on the foregoing, the Court SUSTAINS the demurrer to the Ninth Cause of Action with leave to amend. 

Entire Complaint 

Defendants also contend in their memorandum of points and authorities that the entire complaint is subject to demurrer because it alleges no facts. (Memorandum of Points and Authorities, 12:9-20.) The Court disagrees, as evidenced by the Court overruling the demurrer to most of the causes of action alleged in the complaint. Additionally, Defendants’ demurrer does not indicate that it demurs to the entire complaint. (See Demurrer, pp. 2-3.) All grounds for demurrer must be set forth in the demurrer and must be directed either to a cause of action or the entire complaint. (Cal. Rules of Court, rule 3.1320, subd. (a); Code Civ. Proc., § 430.50, subd. (a).) 

Accordingly, the Court OVERRULES the demurrer to the entire complaint. 

LEGAL STANDARD – Motion to Strike 

            “Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” (Code Civ. Proc., § 435, subd. (b)(2).) “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) 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.) 

DISCUSSION – Motion to Strike 

Meet and Confer 

Per Code of Civil Procedure section 430.41, subdivision (a), Defendants were required to meet and confer with Plaintiffs telephonically or in person before filing the demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds Defendants’ meet-and-confer efforts sufficient. (Rossi Decl., ¶ 2.) 

            Analysis 

            Defendants seek to strike the punitive damage allegations sought with respect to Plaintiffs’ Second Cause of Action for Breach of Fiduciary Duty (Compl., ¶ 38) and the respective prayer for relief (at Prayer, ¶ 5), as well as the prayer for punitive damages on the Fourth Cause of Action (at Prayer, ¶ 3.). The complaint alleges that Defendants made false representations, misappropriated profits, and made fraudulent transfers. (Compl. ¶ 29.) These allegations are sufficient to support punitive damages. Thus, the Court denies the motion to strike paragraph 38 and page 14, line 18 of the prayer for relief.

Further, punitive damages may be recovered in an action for conversion. (Krusi v. Bear, Stearns & Co. (1983) 144 Cal.App.3d 664, 678.) However, since the Court sustained the demurrer to the Fourth Cause of Action for Conversion with leave to amend, the motion to strike page 15, line 3 of the prayer for relief is denied as moot.

            Accordingly, the Court DENIES the motion to strike in its entirety. 

CONCLUSION 

The Court SUSTAINS the demurrer to Fourth and Ninth Causes of Action with leave to amend. The Court OVERRULES the demurrer to all other causes of action. Plaintiffs must file and serve the amended complaint within 20 days of the Court’s order.

The Court DENIES the motion to strike in its entirety. 

             Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.