Judge Lynne M. Hobbs, Case Number: 23STCV28887, Date: 2024-07-18 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV28887, Date: 2024-07-18 Tentative Ruling

Case Number: 23STCV28887 Hearing Date: July 18, 2024 Dept: 61

ARTUR ELIZAROV, et al. vs 1250 NORTH FAIRFFAX AVENUE, LLC, et al.

TENTATIVE

Defendants 1250 North Fairfax Avenue, LLC and Sares Regis Management Company, LP’s Demurrer to the Complaint is OVERRULED.

Plaintiff to give notice.

DISCUSSION

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.)

Defendants 1250 North Fairfax Avenue, LLC and Sares Regis Management Company, LP (Defendants) offer two arguments as to the claims asserted in Plaintiffs Artur Elizarov and Ilya Alekseyeff’s (Plaintiffs) Complaint. First, they argue that the claims are barred by the doctrine of res judicata and the release signed by Plaintiffs in the underlying landlord-tenant litigation on which Plaintiffs’ claims are based. (Demurrer at pp. 7–10.) Second, Defendants argue that the first cause of action for fraud is not pleaded with adequate specificity. (Demurrer at pp. 10–14.)

The tenets of res judicata prescribe the preclusive effect of a prior final judgment on the merits. The doctrine has two distinct aspects: claim preclusion and issue preclusion. Claim preclusion, often referred to as res judicata, provides that a valid, final judgment on the merits precludes parties or their privies from relitigating the same cause of action’ in a subsequent suit. Issue preclusion, or collateral estoppel, precludes re-litigation of issues argued and decided in prior proceedings. Application of the doctrine of res judicata is intended to preserve the integrity of the judicial system, promote judicial economy, and protect litigants from harassment by vexatious litigation. It rests upon the sound policy of limiting litigation by preventing a party who has had one fair adversary hearing on an issue from again drawing it into controversy and subjecting the other party to further expense in its reexamination. Whether the doctrine of res judicata applies in a particular case is a question of law which we review de novo. (City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 227–228, internal quotation marks and citations omitted.)

Claim preclusion has three elements: “First, the second lawsuit must involve the same cause of action’ as the first lawsuit. Second, there must have been a final judgment on the merits in the prior litigation. Third, the parties in the second lawsuit must be the same (or in privity with) the parties to the first lawsuit.” (Id. at p. 228., internal quotation marks and citations omitted.)

Defendants have shown the existence of a final judgment on the merits — a dismissal with prejudice entered by Plaintiffs in a prior action against Defendants on April 19, 2023, LASC Case No. 22STCV12808 — and the identity of parties between that first action and the present. (RJN Exh. 3.)

However, Defendants have not shown that the present action concerns the same cause of action as the first. For res judicata purposes, “[t]he cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced.” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798.) In the prior action, Plaintiffs’ claims were based on certain wrongs: the alleged misrepresentations made by Defendants regarding the condition of leased premises prior to renting it, and claims for nuisance conditions on the premises in breach of the lease agreement. (RJN Exh. 1.) The claims here, however, do not rest upon any promise contained in the lease, or any duty related to the condition of the property rented. The present claims arise from Defendants’ covenants contained in the settlement agreement and its alleged breach thereof. (Complaint ¶¶ 9–18.) The prior litigation did not arise out of the settlement agreement that ended the prior litigation.

Defendants note that the settlement agreement contains a release of known and unknown claims then existing between the parties. (Demurrer at pp. 9–10.) But a claim for fraud in the inducement of a contract does not exist before the contract is signed: “Undeniably, fraudulent inducement occurs before a contract is signed. But the reliance is not a past event; the reliance is the signing of the contract and the changing of legal positions, which is concurrent with the exemption clauses. Moreover, the damages are either concurrent or prospective. (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 152–153.) By the same token, Defendants cannot claim that the release in the settlement agreement absolves them of liability for the subsequent breach of that settlement agreement, as is alleged here. (Complaint ¶¶ 36–41.)

Defendants’ argument as to the lack of specificity in the fraud claim fares little better. “[F]raud must be pled specifically; general and conclusory allegations do not suffice.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993.) The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Here, the alleged fraud is the misrepresentation contained in the settlement agreement, signed by Defendants, that Defendants agreed to waive and discharge any debts owed by Plaintiffs, when in fact Defendants had reported that such debts were unpaid and written-off. (Complaint ¶¶ 31–35.) Plaintiffs allege harm in their surrender of rights under the settlement, and in the denial of subsequent rental applications based on Defendant’s report. (Complaint ¶¶ 17–18.) This suffices to allege a claim of fraud.

The demurrer is therefore OVERRULED.