Judge: Michael Shultz, Case: 24STCV01680, Date: 2025-01-16 Tentative Ruling
Case Number: 24STCV01680 Hearing Date: January 16, 2025 Dept: 40
24STCV01680 Sanfi Properties, LLC et al. v. Jebarah Investments
[TENTATIVE] ORDER DEMURRER SUSTAINING DEMURRER AND GRANTING THE MOTION TO STRIKE (IN PART) BY DEFENDANTS
I. BACKGROUND
The second amended complaint (“SAC”) filed on September 16, 2024, arises from the parties’ dispute over their individual interests with respect to the purchase of various parcels of real property. Plaintiffs contend that Defendants have exercised dominion and control over the real property by fraud. Plaintiffs allege claims for fraudulent concealment, slander of title, conversion, violation of Penal Code section 496, cancellation of instruments, and declaratory relief.
II. ARGUMENTS
All five Defendants demurrer to the entire pleading for failure to state a cause of action and particularly to the two claims for fraudulent concealment (second and third causes of action) and declaratory relief (eighth cause of action.) Defendants separately move to strike the alter ego allegations, the claim for punitive damages, and the prayer for attorney’s fees.
Plaintiffs oppose both the demurrer and motion to strike on grounds the alter ego allegations are sufficiently alleged to support liability against the named Defendants, the claims for fraudulent concealment meet heightened pleading requirements, and the claim for declaratory relief is proper. Plaintiffs argue the allegations at issue should not be stricken. Alternatively, Plaintiffs ask for leave to amend.
III. LEGAL STANDARDS
The bases for demurrer are limited by statute and may be sustained for reasons including failure to state facts to state a cause of action and uncertainty. (Code Civ. Proc., § 430.10.) A demurrer “tests the sufficiency of a complaint as a matter of law and raises only questions of law.” (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.) The court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638.)
A motion to strike is limited to matters that appear on the face of the pleading or on any matter of which the court can take judicial notice. (Code Civ. Proc., § 437.) The court may strike out any irrelevant, false, or improper matter inserted in any pleading; or strike all or any part of the pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. §436 subd. (a)-(b).)
IV. DISCUSSION
A. Demurrer to the second cause of action for fraudulent concealment is SUSTAINED.
Sanfi v. Eyad, Mujahed, and Jebarah
Plaintiff Khaled Fathi Shalabi (“Khaled”) alleges he is the sole owner of Plaintiff, Sanfi Properties, LLC (“Sanfi). Sanfi alleges it is the sole owner of the San Fernando real property. This claim alleges that Defendant, Eyad Jebarah (“Eyad”) in his personal capacity as an officer of Jebarah Investments, instructed Plaintiff Khaled to sign a deed in lieu of foreclosure on the San Fernando Property that transferred ownership of that property from Sanfi to Jebarah, alleged to be the alter ego of both Eyad and Mujahed. (SAC ¶ 86.) Eyad allegedly misrepresented what the documents were and concealed the true nature of the documents. (SAC ¶¶ 86-88). Khaled could not read or understand English, which Eyad knew. (SAC ¶ 89.) This resulted in Khaled’s loss of the San Fernando real property. (SAC ¶ 91.)
The elements of a fraud claim based on concealment are: “(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310–311.)
There are “four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” (Id. at 311). If a fiduciary relationship does not exist, but the latter three circumstances are present, plaintiff must still show “the existence of some other relationship between the plaintiff and defendant from which a duty to disclose can arise.” (Id. at 311.)
Citing Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 292, Plaintiffs contend that even where there is no duty to disclose, “where a person does speak, he must speak the whole truth to the end that he does not conceal any facts which materially qualify those stated.” ( SAC ¶ 88.)
To elaborate, Vega stated that “[i]n some but not all circumstances, an independent duty to disclose is required; active concealment may exist where a party ‘[w]hile under no duty to speak, nevertheless does so, but does not speak honestly or makes misleading statements or suppresses facts which materially qualify those stated.’”(Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 294; Cicone v. URS Corp.,(1986) 183 Cal.App.3d 194, 201; [o]ne who is asked for or volunteers information must be truthful, and the telling of a half-truth calculated to deceive is fraud.”].)
This claim is uncertain because Plaintiffs are alleging an affirmative misrepresentation, not a half truth or a truthful statement made in a misleading manner. (SAC ¶ 86 [Eyad went to Khaled’s office and “instructed Khaled to sign a series of documents and fraudulently misrepresented what the documents were.”].) Plaintiffs do not allege what Eyad actually said that made the representation false, only that the documents were, in fact, a transfer of ownership. (SAC ¶ 87.) Plaintiffs attempt to cast the claim as one for concealment, when based on the clear allegations of the complaint, Eyad allegedly made an affirmative misrepresentations about the documents. (Id.)
Intentional misrepresentations of fact must be alleged with specificity. The claim must be supported by facts supporting the following elements: (1) a misrepresentation, (2) made with knowledge of its falsity, (3) Defendant intended to defraud Plaintiff, i.e., induce Plaintiff’s reliance, (4) and Plaintiff justifiably relied on the misrepresentation, (5) causing damage. (Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.)
Fraud claims are subject to strict requirements of particularity in pleading. (Id.) The particularity requirements necessitate pleading facts showing “how, when, where, to whom, and by what means the representations were tendered." (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) The requirement “applies not only to the alleged misrepresentation, but also to the elements of causation and damage." (Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 776.) The allegations do not meet this standard.
The only basis for liability against Mubahed and Jebarrah for Eyad’s alleged misrepresentation is the conclusory allegation that Jebarah is the alter ego of Eyad and Mujahed. (SAC ¶ 89.) To allege liability based on an alter ego theory, Plaintiffs must allege sufficient facts to show “a unity of interest and ownership [between an individual and a corporation], and an unjust result if the corporation is treated as the sole actor. (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) An allegation that a person owns all of the corporate stock and makes all of the management decisions is insufficient to cause the court to disregard the corporate entity.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.)
Plaintiffs allege that Jebarah is the alter ego of Eyad and Mujahed because the individuals are the sole owners of Jebarah, that Jebarah is merely a holding company, and that a unity of interest exists between Jebarah and Eyad and Mujahed because the individuals treat the properties as their own personal property and fail to abide by corporate formalities. (SAC ¶¶ 17-18.). As in Leek, these conclusory allegations are insufficient.
B. Demurrer to the third cause of action for fraudulent concealment is SUSTAINED.
Osamah and Sanfi v. Eyad, Mujahed, and Jebarah
Plaintiffs Sanfi and Osamah Fathi Kaled (“Osamah”) allege that Eyad, in his personal capacity as an officer of Jebarah, visited Osamah at the Downey Property, which Osamah allegedly owned, and instructed Osamah to sign a series of documents, misrepresenting what the documents actually were. (SAC ¶ 94.) The Downey deed in lieu of foreclosure and a promissory note that Osamah signed transferred ownership from Osamah to Jebarah. (SAC ¶ 95.) Eyad knew that Osamah could not read or understand English. (Id.)
This claim is uncertain for the same reason that the second cause of action is uncertain. Plaintiffs are alleging an affirmative misrepresentation of what the documents were, when the true fact was that the documents transferred ownership. (SAC 94.) This claim must also be alleged with specificity as there is no allegation of the misrepresentation.
The basis for liability against Mujahed and Jebarah is that Jebarah is the alter ego of Eyad and Mujahed. (SAC ¶ 95.) This conclusory allegation is not supported by any facts.
C. Demurrer to the eighth cause of action for declaratory relief is SUSTAINED.
Khaled v. All Defendants
This claim asserts that an actual controversy exists between Khaled and all Defendants concerning ownership of the “Jebarah Properties”, in particular, at the time of the sales of the Inglewood Property and Long Beach Blvd. Property, and the transfers of the Loma Vista Property, 50th Street Property and Bangle Rd. Property.” (SAC ¶ 126.) The “Jebarah Properties” are particularly described as the Loma Vista Property, the Vernon Property, the Bangle Road property in Downey, and the Lynwood Property. (SAC ¶ 36.)
Plaintiff Khaled alleges he purchased these investment properties for the benefit of his uncle, Mustafa Jebarah (“Mustafa”), who has since died. (SAC ¶ 21-23.) Mustafa is the father of Eyad and Mujahed. SAC ¶ 23.) Mustafa asked Khaled to serve as constructive trustee and agent of Mustafa’s estate, to hold title to and acquire properties on behalf of Mustafa’s estate for the benefit of Mustafa and his sons, and in the event of Mustafa’s passing, to transfer the properties and business to Mustafa’s sons (Eyad and Mujahed.) (SAC ¶ 23.)
A complaint for declaratory relief must demonstrate: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party with respect to property (among other things). (Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410; Code Civ. Proc., § 1060.)
This claim is uncertain to the extent that Plaintiffs allege that Eyad and Mujahed and “their alter ego entities Jenin Furnishing, Jenin Fashion and Jebarah” were and have always been equitable owners with equitable title over the Jebarah properties “and thus are responsible for all liability related to those properties,” a contention that Defendants allegedly deny. The allegations are insufficient with respect to the claim that Eyad and Mujahed are alter egos of entities of Jenin Furnishing, Jenin Fashion, and Jebarah. (SAC ¶ 126.) The allegations are conclusory as Plaintiffs allege Eyad and Mujahed are sole owners and “dominate the affairs of the corporation” which are conclusory allegations. (SAC ¶ 16.)
D. Motion to Strike is GRANTED as to the prayer for punitive damages.
Exemplary damages may be recovered if a plaintiff establishes “by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code, § 3294 subd. (a).) The predicate acts to support a claim for punitive damages must be intended to cause injury or must constitute fraud, or “malicious” or “oppressive” conduct as defined by statute. (Civ. Code, § 3294 subd. (c)(1); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.) The “fraudulent concealment” claims do not survive demurrer. The remaining damage claims are based on the alleged fraudulent conduct. (SAC ¶¶ 103, 112, 117).
Plaintiffs pray for attorney’s fees on all causes of action. There is no requirement that Plaintiffs pray for recovery for attorney’s fees in the first instance. It is not an abuse of discretion to refuse to strike a claim for attorney fees where plaintiff has not had a full opportunity to determine the basis for such fees. (Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1699. Yassin v. Solis (2010) 184 Cal.App.4th 524, 533;["There is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings."].)
CONCLUSION
Leave to amend is proper where a plaintiff has not had a fair opportunity to amend, and the defect is capable of being cured. (Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d 56, 69–70 [noting the “well-established rule that, even where the defect is one of substance, a demurrer should not be sustained without leave to amend if there is a possibility that subsequent amendments will supply omitted allegations, and the plaintiff has not had a fair opportunity to so amend."].)
Based on the foregoing, demurrer to the second and third causes of action are SUSTAINED with 30 days leave to amend.
The motion to strike is GRANTED with 30 days leave to amend as to the punitive damage claim. All other bases for striking the pleading are DENIED.