Judge: Mark H. Epstein, Case: 22SMCV00820, Date: 2023-04-18 Tentative Ruling

Case Number: 22SMCV00820    Hearing Date: April 18, 2023    Dept: R

The demurrers are SUSTAINED WITH LEAVE TO AMEND.

Plaintiff sues for breach of contract.  Plaintiff asserts that on 3/1/28, it entered into a lease for certain premises.  The lease provided for different rental amounts for different parts of the premises.  Plaintiff claims to have tendered at least $207,500 to defendant Kamran as a security deposit and believes that one or more of the defendants hold that deposit.

According to plaintiff, the lease provides that the landlord is entitled to recapture certain CAM (or common area maintenance) charges.  However, plaintiff further alleges that these CAM charges must truly relate to common areas and must be reasonable and actually incurred.  Plaintiff maintains that in fact the defendants acted in concert to falsify the charges and expenses incurred.  When plaintiff asked for backup and reconciliation, the defendants purportedly falsified the information.  The purpose was allegedly to inflate the CAM charges and therefore inflate, fraudulently, the rent received.  Plaintiff asserts that it felt it was forced to vacate the premises on June 17, 2022.  Defendants allegedly have refused wrongfully to acknowledge the termination of the lease and have not returned the security deposit.  Plaintiff also claims that defendants later re-leased the premises but left signage up that would mislead the public into believing that plaintiff was still there.  Defendants Kape, Kamran, and Goldman (three individuals who held positions with the entities) demur.  Plaintiff opposes.

The demurring defendants demur to the first, fourth, and sixth causes of action, arguing that they are not liable under the agent immunity rule.  That rule provides that, generally speaking, an agent is not liable for the principal’s torts nor can the agent be held to have conspired with the principal to commit those torts “where they act in their official capacities on behalf of the corporation and not as individuals for their individual advantage.”  (Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50.)  The same logic would apply to an allegation of aiding and abetting.  The actual landlord here was a non-human entity; the demurring defendants all held positions with the entity.  It is beyond question that the rule remains good law in California and will bar extending liability under a conspiracy or aiding and abetting theory generally.  That said, the rule does not protect an agent from her or his own intentional torts.  In other words, an entity’s employee cannot knowingly fraudulently falsify a document and then claim immunity under the agent’s rule.  

Turning to the specific causes of action, the demurrer is SUSTAINED WITH LEAVE TO AMEND as to the first cause of action.  Accounting is something owed by the contracting entity to plaintiff if it is owed at all.  The individual defendants have no independent accounting obligation. 

The same is true of the fourth cause of action, which is for a breach of the “implied duty to perform with reasonable care.”  The duty to perform a contract (not surprisingly) sounds in contract, not tort, and therefore would be a duty that the contracting party owes, not any individual employed by the contracting party.  The court simply does not see how the individuals could be liable for this cause of action.  (And one cannot conspire to breach a contract or aid and abet the breach of a contract.)  The demurrer is therefore SUSTAINED WITH LEAVE TO AMEND.

Finally, the sixth cause of action is for declaratory relief.  The problem is that it would seem that all of the declarations look backwards, not forwards, and (again) go more to contractual duties than torts.  That means that resolution of the other causes of action will, of necessity, result in resolving this one as well.  Accordingly, the demurrer is SUSTAINED WITH LEAVE TO AMEND.

The leave to amend is primarily given because it is unclear if plaintiff is really arguing an alter ego theory, which could make the individuals (or some of them) liable.  But more will need to be alleged to pierce the corporate veil, even at the pleading stage.  This doctrine goes to make an entity’s owners liable for the entity’s torts or breaches of contract.  Plaintiff will need to plead who owns the entity and why alter ego is appropriate or explain why they ought not be forced to so allege.  At the pleading stage, great detail is not required, but more is required than is pled here.

Plaintiff has 30 days’ leave to amend.