Judge Lynne M. Hobbs, Case Number: 21STCV33756, Date: 2024-07-02 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 21STCV33756, Date: 2024-07-02 Tentative Ruling

Case Number: 21STCV33756 Hearing Date: July 2, 2024 Dept: 61

SARKIS BALBUCHAKYAN vs SEDRAK GARBIYELYAN, et al.

TENTATIVE

Cross-Defendants Sarkis and Mariam Balbuchakyans’ Demurrer and Motion to Strike Portions of the First Amended Cross-Complaint is SUSTAINED with leave to amend as to the first, third, fourth, fifth, and sixth causes of action for breach of contract, conversion, fraud, unjust enrichment, and contribution and indemnity, and SUSTAINED with leave to amend as to the second cause of action for breach of fiduciary duty asserted by Yeranuhi Gabriyelyan. within 20 days of Notice of Ruling. The demurrer is otherwise OVERRULED as to the second cause of action for breach of fiduciary duty alleged by Sedrak Gabriyelyan, and as to the seventh and eighth causes of action for declaratory relief and accounting.

The motion to strike is GRANTED with leave to amend as to the allegations against Cross-Defendant Mariam Balbuchakyan and the claims asserted by Cross-Complainant Yeranuhi Gabrielyan, within 20 days of Notice of Ruling. The motion to strike is DENIED as to the prayer for punitive damages, declaratory relief, and equitable relief.

Moving Party to give notice.

DISCUSSION

I. DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) 39 Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“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. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Cross-Defendants Sarkis Balbuchakyan and Mariam Balbuchakyan (Cross-Defendants) demurrer to the First Amended Cross-Complaint (FAXC) of Cross-Complainants Sedrak Gabriyelyan and Yeranuhi Gabriyelyan (Cross-Complainants). Cross-Defendants argue that the FAXC’s first cause of action for breach of contract fails to specify whether the contract at issue was written, oral, or implied, fails to allege any consideration supporting the obligation at issue, and further runs afoul of the statute of frauds for contracts not capable of performance within one year.(Demurrer at pp. 3–5.) Cross-Defendants further argue that the breach of fiduciary duty claim fails to allege any fiduciary duty owed to Cross-Complainant Yeranuhi Gabriyelyan, who was not a partner of Cross-Defendants, and further fails to allege and wrongful conduct constituting a breach as to any Cross-Complainant. (Demurrer at pp. 5–6.) Cross-Defendants

levy similar arguments against the third cause of action for conversion of partnership assets, with the additional argument that Cross-Complainants have failed to allege the particular funds which Cross-Defendants are alleged to have converted. (Demurrer at pp. 6–8.) Cross-Defendants argue that the fourth cause of action for fraud does not specify who is alleging it, pleads no claim against Yeranuhi Gabriyelyan, and fails to allege facts supporting a fraudulent misrepresentation on the part of Cross-Defendants, or justifiable reliance by Cross-Complainants, with sufficient particularity. (Demurrer at pp. 9–13.) Cross-Defendants finally argue that the claim for unjust enrichment, contribution, declaratory relief, and accounting fail to allege sufficient facts. (Demurrer at pp. 13–15.)

Cross-Defendants are correct that the breach of contract claim does not allege the nature of the contract or consideration to support the contract’s existence. Failure to state whether a contract in a contract action is based on a written, oral, or implied agreement is grounds for demurrer under Code of Civil Procedure § 430.10, subd. (g). Additionally, “A contract requires consideration. Consideration consists of either a benefit to the promisor or a detriment to the promisee.” (San Luis Obispo Local Agency Formation Commission v. City of Pismo Beach (2021) 61 Cal.App.5th 595, 600.) Here, the FAXC alleges that the parties agreed that Balbuchakyan would manage the partnership business, without alleging the form of the agreement or consideration therefore. (FAXC ¶¶ 15, 29.)

Accordingly, the demurrer is SUSTAINED as to the first cause of action, with leave to amend.

Cross-Defendants are also correct that no breach of fiduciary duty claim is alleged by Cross-Complainant Yeranuhi Gabriyelyan, because there is no allegation that any Cross-Defendant owed her a fiduciary duty. One of the elements of a claim for breach of fiduciary duty is “the existence of a fiduciary relationship.” (O'Neal v. Stanislaus County Employees' Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.) While business partners owe each other fiduciary duties (See BT-I v. Equitable Life Assurance Society of the United States (1999) 75 Cal.App.4th 1406, 1410 [“Partnership is a fiduciary relationship, and partners are held to the standards and duties of a trustee in their dealings with each other.”]) no partnership relationship is alleged between Yeranuhi Gabriyelyan and any Cross-Defendant — only between Sedrak Gabriyelyan and Sarkis Balbuchakyan. (FAXC ¶¶ 36–37.) Accordingly, the demurrer is SUSTAINED as to the second cause of action alleged by Yeranuhi Gabriyelyan, with leave to amend.

However, there is no basis to dismiss the claim alleged by Cross-Complainant Sedrak Gabriyelyan. Cross-Defendants argue that the alleged misconduct is not stated with sufficient specificity, and contains only conclusions. (Demurrer at p. 6.) Yet the FAXC alleges sufficient ultimate facts against Sedrak to constitute a breach of fiduciary duty: that he knowingly acted against his partner’s interest, and operated the business for his personal benefit, misappropriating assets and income for himself, failing to reasonably provide for the needs of the business’s clients, and failing to keep his partner apprised of the business’s activities and condition. (FAXC ¶¶ 36–37.) Cross-Defendants present no authority for the proposition that further factual detail must be alleged. The demurrer is therefore OVERRULED as to the second cause of action alleged against Sedrak Gabriyelyan.

Cross-Defendants’ argument as to the conversion claim is persuasive, however. An element of a conversion claim is “the plaintiff's ownership or right to possession of personal property” (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181), and here the only property allegedly converted belonged to the partnership, not to Cross-Complainant Yeranuhi Gabriyelyan. (FAXC ¶ 43.) She had no ownership interest in the property, and alleges no claim for conversion. Moreover, Cross-Complainants allege only the conversion of money, which cannot form the basis for a conversion claim “unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.” (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1042.) Cross-Complainants here allege no specific identifiable sum of money for the purpose of their conversion claim. Accordingly, the demurrer is SUSTAINED with leave to amend as to the third cause of action for conversion.

Cross-Defendants’ arguments on the fraud claim are also persuasive, as the facts are not pleaded with sufficient particularity. The elements of fraud are “(1) a representation, (2) that is false, (3) made with knowledge of its falsity, and (4) with an intent to deceive, coupled with (5) actual detrimental reliance and (6) resulting damage.” (Lim v. The.TV Corp. Internat. (2002) 99 Cal.App.4th 684, 694 [121 Cal.Rptr.2d 333, 339]Fraud causes of action must be pleaded with particularity, meaning that the plaintiff must allege “how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Here, the alleged representation was Sedrak Balbuchakyan’s representation “that he . . . could and would take over management of the partnership and would continue to operate same in a profitable manner.” (FAXC ¶¶ 15, 48.) But Cross-Complainants do not allege how, when, where, and by what means this representations was made. Indeed, it is not clear from the FAXC who is alleging the claim for fraud, and who is its target. The claim states it is being alleged against “both Cross-Defendants,” but alleges no conduct by Mariam Balbuchakyan, and vacillates between allegations made by “Cross-Claimants” and those made by “Cross-Claimant” in the singular. (FAXC ¶¶ 47–52.) Yet Cross-Complainants’ counsel has informally represented that no claim is being made by Yeranuhi Gabriyelyan, or against Mariam Balbuchakyan. (Demurrer at p. 8; Stepanyan Decl. Exh. A.) Because the fraud claim is not pleaded with particularity, the demurrer is therefore SUSTAINED as to the fourth cause of action with leave to amend.

The demurrer to the unjust enrichment claim is also well-taken, because “[u]njust enrichment is not a cause of action.” It is “just a restitution claim.” (De Havilland v. FX Networks, LLC (2018) 21 Cal.App.5th 845, 870.) The demurrer is therefore SUSTAINED as to the fifth cause of action with leave to amend.

Cross-Defendants’ demurrer to the contribution and indemnity claims is also persuasive. “The contribution statutes establish no right of contribution before judgment, but only a right of contribution among joint judgment debtors.” (River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986, 992.) Additionally, “indemnity refers to the obligation resting on one party to make good a loss or damage another party has incurred.” (Jocer Enterprises, Inc. v. Price (2010) 183 Cal.App.4th 559, 573.) There are no allegations to support the contention that Cross-Complainants or Cross-Defendants are liable to a third party. The demurrer is therefore SUSTAINED with leave to amend as to the sixth cause of action.

Cross-Defendants’ argue that the claim for declaratory relief fails because there is not written instrument alleged as stated in Code of Civil Procedure § 1060. (Demurrer at p. 14.) However, no written instrument is required for a claim of declaratory relief. “A disputed oral contract may properly be the subject of a declaratory judgment.” (Columbia Pictures Corp. v. De Toth (1945) 26 Cal.2d 753, 760.) Accordingly, the demurrer is OVERRULED as to the seventh cause of action for declaratory relief.

Cross-Defendants finally argue that the eighth cause of action for accounting fails because Cross-Complainants possess information as to the partnership’s accounts. (Demurrer at p. 15.) This argument, however, rests upon a direct repudiation of what the pleadings allege. The FAXC states that Cross-Defendants are “in control of the books and records of the partnership” (FAXC ¶ 16), and that they have refused Cross-Complainants “access to the books, records, and accounts of the partnership.” (FAXC ¶ 37d.) The demurrer is therefore OVERRULED as to the eighth cause of action.

In summary, the demurrer is SUSTAINED with leave to amend as to the first, third, fourth, fifth, and sixth causes of action for breach of contract, conversion, fraud, unjust enrichment, and contribution and indemnity, and SUSTAINED with leave to amend as to the second cause of action for breach of fiduciary duty asserted by Yeranuhi Gabriyelyan. The demurrer is otherwise OVERRULED as to the second cause of action for breach of fiduciary duty alleged by Sedrak Gabriyelyan, and as to the seventh and eighth causes of action for declaratory relief and accounting.

II. 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. (Code Civ. Proc., § 435(b)(1)). The notice of motion to strike a portion of a pleading shall quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count or defense. (California Rules of Court Rule 3.1322.)

The grounds for a motion to strike shall appear on the face of the challenged pleading or form any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437(a)). The court then 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. (Code Civ. Proc., § 436.) When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend. (Perlman v. Municipal Court (1979) 99 Cal.App.3d 568, 575.)

Cross-Defendants move to strike all allegations asserting liability against Mariam Balbuchakyan, on the grounds that no factual allegations are alleged against her. (Motion at pp. 2–3.) Cross-Defendants also move to strike allegations alleged on behalf of Yeranuhi Gabriyelyan, on the grounds that no injury is alleged against her, as opposed to the partnership. (Motion at pp. 3–5.) Cross-Defendants finally move to strike the prayer for punitive damages, declaratory judgment, and equitable relief. (Motion at pp. 5–6.)

The allegations against Mariam Balbuchakyan are properly stricken. There are no allegations of any misconduct against this Cross-Defendant, save a boilerplate and conclusory allegation of conspiracy and mutual agency. (FAXC ¶ 7.) Cross-Complainants allege no facts to support the existence of a civil conspiracy (Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1581 [outlining conspiracy elements]), and even if such allegations were supported, the conspiracy claim would not support liability on the one remaining tort claim for breach of fiduciary duty. (See Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1104 [“If the nonfiduciary is neither an employee nor agent of the fiduciary, it is not liable to the plaintiff on a conspiracy theory because a nonfiduciary is legally incapable of committing the tort underlying the claim of conspiracy (breach of fiduciary duty).”].) Accordingly, the motion to strike is GRANTED with leave to amend for allegations against Mariam Balbuchakyan.

The motion is also properly granted for the claims alleged by Yeranuhi Gabriyelyan, because there are no allegations that she suffered any damages as distinct from the damages to the partnership, of which she was not a member. (FAXC ¶¶ 16–26.) The motion is therefore GRANTED with leave to amend as to the allegations asserted by Yeranuhi Gabrielyan.

Punitive damages are allowed in non-contract cases when a defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code § 3294, subd. (a).) The terms are defined as:

1. “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

2. “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

3. “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

(Civ. Code § 3294, subd. (c).)

Something more than the mere commission of a tort is always required for punitive damages. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Proof of negligence, gross negligence, or recklessness is insufficient to warrant an award of punitive damages. (Dawes v. Sup.Ct. (Mardian) (1980) 111 Cal.App.3d 82, 88–89.) Punitive damages may be recovered in an action for negligence or other nonintentional torts if the plaintiff pleads and proves that the defendant acted with the state of mind described as “conscious disregard” of the potential dangers to others. (Pfeifer v. John Crane, Inc. (2013) 220 Cal.App.4th 1270, 1299.) When malice is based on a defendant’s conscious disregard of Plaintiff’s rights, the conduct must be both despicable and willful. (College Hospital v. Superior Court (1994) 8 Cal.4th 794, 713 (“College Hospital”).)

Here, sufficient allegations are set forth to state a claim for punitive damages. Specifically, it is alleged that Cross-Defendant Sarkis Balbuchakyan assumed control of the partnership business when his partner’s eyesight deteriorated, on the representation that he would run the business faithfully and profitably. (FAXC ¶¶ 12–16.) Despite these representations, Sarkis has used the partnership for his own personal gain, concealing its condition from Cross-Complainants, and accumulating debts against the partnership. (FAXC ¶¶ 16–26.) The FAXC therefore alleges facts which, if believed, could establish despicable conduct carried on with a conscious disregard of Cross-Complainants’ rights.

Cross-Defendants’ arguments on the remaining claims for equitable and declaratory relief are unsupported. As noted in relation to Cross-Defendants’ demurrer, declaratory relief may be had on an oral contract. (See Columbia Pictures Corp., supra, 26 Cal.2d at p. 760.) And Cross-Defendants’ argument as to the prayer for equitable relief is advanced without citation to authority or factual elaboration. (Motion at p. 6.)

The motion is therefore GRANTED with leave to amend as to the allegations against Cross-Defendant Mariam Balbuchakyan, and the claims asserted by Cross-Complainant Yeranuhi Gabrielyan. The motion to strike is DENIED as to the prayer for punitive damages, declaratory relief, and equitable relief.