Judge: Mark H. Epstein, Case: 21SMCV01484, Date: 2023-02-10 Tentative Ruling

Case Number: 21SMCV01484    Hearing Date: February 10, 2023    Dept: R

The facts are these.  The landlord had a lease with a tenant, Corona Pathology.  Waheb is Corona’s CEO.  Corona defaulted on the lease.  Corona was sold to a third party without any disclosure of the unpaid rent.  That party sold Corona to Knecht, who (of course) also did not know of the unpaid rent.  The landlord settled with Knecht.  Knecht seems to have paid some of the money owed and assigned its claims against Waheb to the landlord, who is now suing to enforce that claim.  The sole cause of action is equitable indemnity.  The original breach of the lease was allegedly five years ago, and defendant claims that it is barred by the statute of limitations as well as on its merits.

Equitable indemnity is a legal theory that requires one tortfeasor or co-obligor to indemnify another.  It arises generally when both are jointly and severally liable to a plaintiff and the plaintiff collects as to one of them.  The party who paid the plaintiff can then seek equitable indemnity from the other on the theory that the other ought to bear a fair share of the burden.

There are problems with that doctrine here.  While Waheb may well have been Corona’s CEO, that does not make him liable for the breach of the lease.  Unless he was a personal guarantor or there is an alter ego relationship, an officer of an entity is not liable for the entity’s debts.

Further, plaintiff here alleges that Knecht also had a fraud claim against Waheb for failing to disclose the unpaid debt when Waheb sold Corona to Knecht.  If that is the case, then plaintiff would need to allege that Knecht assigned the fraud claim to plaintiff (who, as Corona’s landlord, does not seem to have had any claim of fraud against anyone).  In other words, this is not really equitable indemnity. 

If plaintiff wants to sue for equitable indemnity, it needs to plead the elements properly.  If plaintiff instead is suing for fraud, plaintiff will need to show that the fraud cause of action was assigned and then plead those elements properly.

The demurrer is SUSTAINED WITH LEAVE TO AMEND.  Plaintiff has 30 days.