Judge: Mark A. Young, Case: 20SMCV01632, Date: 2023-01-18 Tentative Ruling

Case Number: 20SMCV01632    Hearing Date: January 18, 2023    Dept: M

CASE NAME:           Farrell, et al., v. Darshad, et al.

CASE NO.:                20SMCV01632

MOTION:                  Demurrer to the First Amended Cross-Complaint

HEARING DATE:   1/17/2023

BACKGROUND

On October 30, 2020, Plaintiffs Michelle Farrell, Yury Fedotov, Matthew Schreiber, Michael Ravizza filed a complaint alleging causes of action for: (1) Specific Performance; (2) Fraud and Deceit; (3) Promise Made Without Intention to Perform; (4) Civil Battery; (5) Assault; (6) Trespass/ Wrongful Eviction; (7) Intentional Infliction of Emotional Distress; (8) Violation if Unruh Civil Rights Act; (9) Violation of the Ralph’s Civil Right Act; (10) Violation of the Unfair Competition Law; (11) Violation of California Constitution, Article I, Section 1; (12) Violation of Civil Code § 789.3(b); (13) Breach of Quiet Enjoyment; (14) Breach of Implied Covenant of Good Faith and Fair Dealing; (15) Abuse of Process; and (16) Violation of Civil Code § 1954.

This action arises from a lease agreement between Plaintiffs and Darshad with an option to purchase real property commonly known as 8620-8624 Holloway Drive, West Hollywood, California 90069 (the “Holloway Drive Property”). Plaintiffs assert that prior to the lease, the property was uninhabitable and that they only took the lease to improve the property. After accepting payments, Darshad denied that the rent was paid and denied that he signed the lease agreements. Darshad hired counsel, Anderson, who filed “Forcible Entry/Forcible Detainer” complaints claiming that there was no written lease agreement between the parties, and that Farrell and her family broke into Plaintiffs’ property without Plaintiff’s permission. In this suit, the Estate of Darshad asserts that these leases were entered into through undue influence.

Darshad passed away on January 11, 2021. Defendant Goldie Marshall was appointed as Decedent’s estate’s Personal Representative on June 23, 2021, and Letters Testamentary issued on June 28, 2021, Marshall stipulated to her addition as a Defendant.  The Estate filed a cross-complaint against Michelle Farrell, Yury Fedotov, Matthew Schreiber and all “Persons Unknown, Claiming Any Legal or Equitable Right, Title, Estate, Lien or Interest” in the Property. Cross-complaint alleges eleven causes of action for: (1) Financial Elder Abuse (Welf. & Inst. Code §§ 15600, Et Seq.); (2) Undue Influence (Welf. & Inst. Code §§ 15610.70, Et Seq.); (3) Fraud; (4) Conspiracy to Commit Undue Influence, Financial Elder Abuse, & Fraud; (5) Cancellation of Lease; (6) Breach of Contract; (7) Breach of the Covenant of Good Faith and Fair Dealing; (8) Quiet Title; (9) Waste; (10) Ejectment; and (11) Declaratory Relief.

On June 10, 2022, Plaintiff/Cross-Defendants Farrell and Schreiber filed the instant demurrer and motion to strike against the CC. Fedotov joins. Cross-Complainants oppose.

Legal Standard

            A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) 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. (CCP §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations omitted.)

            A special demurrer for uncertainty is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

            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. (CCP § 435(b)(1); Cal. Rules of Court, Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

            “Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to show in what manner plaintiff can amend the complaint, and how that amendment will change the legal effect of the pleading. (Id.)

MEET AND CONFER

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (CCP §§ 430.41, 435.5.) Counsel met and conferred as required.

Analysis

Request for Judicial Notice

Cross-Defendants’ request for judicial notice is GRANTED. (Evid. Code §§ 452(c), (d).)

Cross-Complainants’ request is also GRANTED.

Extrinsic Evidence

The Court notes that Cross-Defendants premise their demurrer, in part, on extrinsic evidence. Cross-Defendants present the Farrell Declaration to establish evidentiary facts that contest the pleadings. (See ¶¶3-23.) This is patently improper on demurrer. The Court will not consider this evidence at the pleading stage, or any arguments relying on such evidence.

Collateral Estoppel/Res Judicata

Cross-Defendants argue that the issue preclusion effect of res judicata bars the Estate from raising the current claims because it had the opportunity to present those theories in certain underlying unlawful detainer (UD) actions.

The doctrine of res judicata generally precludes parties, or their privies, from relitigating a cause of action or issue determined with finality in a prior proceeding. (Smith v. ExxonMobil Oil Corp. (2007) 153 Cal.App.4th 1407, 1413-14; Wright v. Ripley (1998) 65 Cal.App.4th 1189, 1193.) The doctrine has two distinct aspects: a) claim preclusion, which precludes the litigation of previously litigated cause of action, and b) issue preclusion, which precludes the litigation of an issue necessarily decided in a prior action. (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 828.) “[R]es judicata does not merely bar relitigation of identical claims or causes of action. Instead, in its collateral estoppel aspect, the doctrine may also preclude a party to prior litigation from redisputing issues therein decided against him, even when those issues bear on different claims raised in a later case. Moreover, because the estoppel need not be mutual, it is not necessary that the earlier and later proceedings involve the identical parties or their privies. Only the party against whom the doctrine is invoked must be bound by the prior proceeding. [Citations.]” (Ibid.)   

The nature of unlawful detainer actions prevents a blanket application of normal issue preclusion rules. Issue preclusion will apply if the party to be bound agreed expressly or impliedly to submit an issue to prior adjudication and had a full and fair opportunity to litigate under circumstances affording due process protections. (Ayala v. Dawson¿(2017) 13 Cal.App.5th 1319, 1327.) An unlawful detainer action is a summary proceeding ordinarily limited to resolution of the question of possession. (Malkoskie v. Option One Mortg. Corp. (2010) 188 Cal.App.4th 968, 973 [discussing a stipulated judgment whereby plaintiff stipulated to specific factual contentions embraced by the underlying complaint, which precluded later claims that contradicted such facts.].) Any judgment arising from an unlawful detainer action generally is given limited res judicata effect. (Ibid.) However, litigation of an affirmative defense, if raised without objection and with a fair opportunity to litigate, will result in a judgment conclusive upon issues material to that defense even on a defense not ordinarily cognizable in unlawful detainer. (Vella v. Hudgins (1977) 20 Cal.3d 251, 257.) 

Two cases illustrate whether an issue was “fully and fairly litigated” in an underlying unlawful detainer action: Wood v. Herson (1974) 39 Cal.App.3d 737 and Vella v. Hudgins (1977) 20 Cal.3d 251.)  In Wood, defendant Herson arranged to obtain a mortgage loan and purchase property allegedly on behalf of plaintiffs Woods, who could not qualify for the mortgage. (Wood, supra, 39 Cal.App.3d at 740–742.) A dispute arose over whether Herson held title and was the true property owner, or that he had no right to possession since only held title in trust for the Woods. (Ibid.) Herson brought an unlawful detainer action. (Ibid.) The Woods defended against the UD action by arguing fraud and claiming that Herson had agreed orally to purchase the property on their behalf and then transfer title to them. (Ibid.) They presented this theory through an affirmative defense of fraud. (Ibid.) Herson prevailed. (Ibid.) In a subsequent suit by the Woods for specific performance predicated on the same theory, the trial court granted summary judgment against them, applying the doctrine of collateral estoppel. (Id. at 739.)  

The Wood court affirmed, reasoning that the Woods’ affirmative defense of fraud in the unlawful detainer action was virtually identical to the fraud allegations upon which their suit for specific performance was based, the court concluded that even though title ‘normally is not a permissible issue in an unlawful detainer action,’ the essential issues had been fully and fairly disposed of in the earlier proceeding. (Wood, supra, 39 Cal.App.3d at 740.) The Vella court noted that Woods considered a variety of factors to determine that the fraud issue was fully litigated.  

“The [Woods] court cited in support of its ruling such varied factors as the length of the ‘summary’ unlawful detainer hearing (seven days), the scope of discovery by the parties (‘extensive’ and ‘complete’), the quality of the evidence (‘detailed’), and the general character of the action (‘[clearly] ... not the customary unlawful detainer proceeding’). A lengthy and comprehensive superior court record replete with precise findings of fact persuaded the Woods court that application of collateral estoppel to curtail further litigation would involve ‘no miscarriage of justice—(the) Woods have had their day in court....’ ”  

(Vella, supra, 20 Cal.3d at 256 [citations omitted]; cf. Woods, supra, 740-745.) 
 

Vella used the same framework as Woods but came to the opposite conclusion. In Vella, a property owner in an eviction action tried to block subsequent litigation against him by an evicted tenant based on the unlawful detainer judgment he previously obtained. (Vella, supra, 20 Cal.3d at 253.) The plaintiff, Vela, alleged she had a long-term intimate relationship with the property owner, Hudgins. (Ibid.) When Vella had trouble keeping up payments on the note, Hudgins purchased the note to protect her from default, and assured her she need not worry about making payments. (Id. at 254.) A dispute arose and Hudgins directed the deed of trust trustee to give notice of default. (Ibid.) In an ensuing unlawful detainer proceeding by Hudgins against Vella, Vella pleaded fraud as an affirmative defense, but ultimately lost and was evicted. (Ibid.) In a subsequent action, Vella brought a fraud claim against Hudgins, and she prevailed. (Ibid.)  

On appeal against Vella’s action, the Supreme Court rejected Hudgins’s contention that Vella’s separate fraud action was barred by issue preclusion. Vella described the Woods decision as an “uncommon” situation where the parties to an unlawful detainer action had fully and extensively litigated issues beyond simple possession. (Vella, supra, 20 Cal.3d at 257.) The Vella court explained that the facts presented in Vella were more typical of a summary unlawful detainer proceeding than the situation presented in Wood: 

The record offered in support of the plea of res judicata is virtually barren. Evidently the unlawful detainer proceedings were unrecorded or untranscribed, for no transcript of the municipal court hearing exists, and no findings of fact or conclusions of law were made, other than a notation in the trial judge’s minute order to the effect that Vella had not proved her affirmative defenses of ‘waiver and [equitable] estoppel and tender.’ The sparse record presented to us fails to show either the precise nature of the factual issues litigated, or the depth of the court’s inquiry. We decline to assume, given the summary character of this type of action, that the mere pleading of a defense without objection by the adverse party necessarily demonstrates adequate opportunity to litigate the defense. The fact that in the unlawful detainer action both parties submitted trial-length estimates of two hours, whereas trial of the second action consumed four days, while not controlling, does create a strong inference that the former proceeding was a conventional unlawful detainer action, unlike the elaborate and highly atypical proceeding considered in Wood. 

(Id. at 258.)  

Cross-Defendants emphasize that in the former proceedings, the Court found a valid lease, signed by Henry Darhad, and were granted right to possession. Cross-Defendants also call the proceedings “Forcible Entry/Forcible Detainer” suits. The two complaints attached only state a claim for unlawful detainer (though the allegations assert that the defendants broke into the property). (See Farrell Decl., Exs. A.) The UD ruling did explain the issues decided. The UD Court defined and decided the issue as follows: “whether the defendants are squatters on the property or whether they have a right to occupy the property pursuant to a Lease with Option to Purchase… [¶¶] Darshad did not prove the Lease with Option to Purchase dated April 15 was forged and finds, by preponderance of the evidence, that the April 15, 2020 Lease with Option to Purchase was signed by Darshad and is valid.” (See Farrell Decl., Ex. F, emphasis added.) This was consistent with the pled theory on the complaints. Thus, at a minimum, that issue was necessarily decided.

This Court must consider the limited nature of unlawful detainers and its limited preclusive effect. Even the UD Court recognized the strengths/weaknesses of the evidence presented. The UD Court commented on the fact that Darshad was unable to testify at the UD trial. The terms of the ruling are couched in the sole issue of UD: the right to possession. There, the Estate sought to establish the Lease as invalid and as a forgery. The UD Court held that the lease was valid. Here, the gravamen of the cross-complaint is for undue influence, not forgery. Thus, it is not clear from the record that the Estate was afforded a full and fair opportunity to litigate the factual theories presented here. Accordingly, this ruling would not preclude this proceeding from litigating issues relating to undue influence.

Cross-Defendants reason that these claims should have been raised in the former proceedings. Cross-Defendants point to the elder abuse, fraud, undue influence, conspiracy, cancellation of lease, and ejectment claims. However, the authorities on res judicata and merger rules examine non-UD cases and do not consider the limited effect of the previous litigation. Indeed, the cited authorities hold that “claims based on the same nucleus of facts may still be subject to a res judicata finding if the claims could have been brought in the earlier action.” (Tahoe Sierra Preservation Council, Inc. v. Tahoe Reg. Planning Agency, (9th. Cir. 2003) 322 F.3d 1064, 1078, emphasis added.) Cross-Defendants’ argument conflates issue preclusion with claim preclusion. Even if the two cases are within the same nucleus of facts, the Estate could not have brought any of these claims with the UD actions. Again, the only claim presented was for possession on the factual theory that the tenants were squatters. The affirmative claims here were not explored, nor could they be. Thus, the Court cannot conclude that this case is on the “same cause of action” as the UD actions.

Further, the sixth through eleventh causes of action are based on conduct which occurred following the UD ruling. Thus, those claims do not belong to the same nucleus of facts.

Therefore, the demurrer on these grounds is OVERRULED.

Specificity

Cross-Defendants argue that the claims for elder abuse, fraud, undue influence, conspiracy and all claims “grounded in fraud” are not pled with specificity.  Claims sounding in fraud must be pled with particularity. (See Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262 [“in California, every element of a cause of action for fraud must be alleged both factually and specifically, and the policy of liberal construction of pleadings will not be invoked to sustain a defective complaint”].) “The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.) 

Cross-Defendants cite no authority that allegations of fraud cannot be made on information and belief. (Moore v. Kayport Package Exp., Inc. (9th Cir. 1989) 885 F.2d 531, 540 [allegations of fraud based on information and belief usually do not satisfy the particularity requirements under rule 9(b)].)  

The cross-complaint, however, does not plead fraud to the heightened pleading standard required under California law.  It alleges that Cross-Defendants used Decedent’s susceptibility to undue influence to “misrepresent” that they were Decedent’s friends, only wanted what was best for Decedent, and that they sought to relieve Decedent of the burdens of taking care of the Holloway Property. (CC ¶¶ 58-59.)  The cross-complaint further alleges that the Lessees misrepresented to Decedent that a purchase price of $1,050,000.00 was fair and reasonable for the Holloway Property, that $6,500.00 per month was a fair rental value, that it was common that a tenant’s costs to repair and remodel a rental property be subtracted from monthly rental payments, and that it was appropriate that Decedent be prohibited from accessing the Holloway Property unless Lessees agreed to grant access. (Id.) Lessees made these misrepresentations to induce Decedent in leasing them the Holloway Property with an option to purchase upon the unconscionable terms and conditions represented. (¶¶ 60-61.)  The CC generally provides that this occurred in April 2020. Otherwise, there are no specific allegations as to the misrepresentations themselves, how/by what means those misrepresentations were made, where those misrepresentations were made, who specifically made such misrepresentations. The heightened pleading standard would also require a more precise date to be pled. 

Typically, the lack of specificity would be fatal to the cross-complaint.  Here, however, the posture of this case suggests that the facts may be more in the knowledge of Cross-Defendants, such that the specificity rule should be relaxed. (See Comm. On Childven's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 217; see also Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825 [less specificity “where it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy”].) Notably, Cross-Complainant is the Estate of the Decedent. Decedent would be the only other witness aside from Cross-Defendants themselves to the misrepresentations. Therefore, the current pleading passes muster under this relaxed standard.

Accordingly, Cross-Defendants’ demurrer is OVERRULED on this basis.

Statute of Limitations

Cross-Defendants argue that the claims are barred by the statute of limitations. The parties leased the Subject Property on April 11, 2020.  The Cross-Complaint was not filed until April 15, 2022.

Cross-Defendants contend that the limitations period is two years. However, the cited statute would not apply to the financial abuse, undue influence, breach of contract, or fraud claims asserted here. (See CCP § 335.1 [“Within two years: An action for assault, battery, or injury to, or for the death of, an individual caused by the wrongful act or neglect of another.”].)

The statute of limitations for fraud-based claims is three years. (CCP § 338(d).) Welf. & Inst. Code section 15657.7 provides that “An action for damages pursuant to Sections 15657.5 and 15657.6 for financial abuse of an elder or dependent adult, as defined in Section 15610.30, shall be commenced within four years after the plaintiff discovers or, through the exercise of reasonable diligence, should have discovered, the facts constituting the financial abuse.” As noted above, this action was filed within three years of April 11, 2020. Thus, the statute of limitations arguments fail. Accordingly, the demurrer on this basis is OVERRULED.

MTS – Information and Belief Allegations

Cross-Defendants argue that this Court should strike the allegations made on information and belief. Cross-Defendants do not explain why the Court should strike such allegations simply because they were alleged on information and belief.

Cross-Defendants argue that certain allegations are superfluous or abusive. The Court is not currently inclined to strike the cited language, as the language is not unduly abusive or irrelevant. While the language used may be more colorful, the cited allegations are not irrelevant to this undue influence action.

Punitive Damages

For the same reasons discussed as the fraud-based causes of action, the pleading does not meet the heightened pleading standard for punitive damages. “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(c)(3).)  Here, there are no specific allegations regarding Cross-Defendants’ attempts to deprive Decedent via misrepresentation.

Accordingly, Cross-Defendants’ motion to strike punitive damages is GRANTED with 10 days leave to amend.