Judge: Ralph C. Hofer, Case: 22GDCV00664, Date: 2022-12-09 Tentative Ruling
Case Number: 22GDCV00664 Hearing Date: December 9, 2022 Dept: D
TENTATIVE RULING
Calendar: 6
Date: 12/9/2022
Case
No: 22GDCV00664
Trial
Date: None Set
Case
Name: Tarakjian
v. Assali, et al.
DEMURRER
MOTION TO STRIKE
Moving Party:
Defendants George Assali and UASA,
LLC
Responding Party: Plaintiff
Rafi Tarakjian
RELIEF REQUESTED:
Sustain demurrer to first and fourth causes of
action of Complaint
Strike punitive damages, attorney’s fees
CAUSES OF ACTION: from
Complaint
1)
Breach of Contract
2)
Breach of Implied Covenant of Good Faith and Fair
Dealing
3)
Breach of Fiduciary Duty
4)
Fraud and Deceit
5)
Unjust Enrichment
6)
Negligent Misrepresentation
7)
Open Book
8)
Account Stated
9)
Quantum Meruit
SUMMARY OF FACTS:
Plaintiff
Raffi Tarakjian alleges that in 2016, plaintiff met defendant George Assali,
who represented to plaintiff that he was a licensed real estate agent, had been
doing property flips for over twenty years, had never lost money flipping
properties, and that defendant guaranteed that he would return a profit on
plaintiff’s investment. During several
meetings, the parties agreed that plaintiff would provide funding for property
from an auction and additional funding as needed to remodel the property after
its purchase, and that defendant would be responsible for managing the
remodeling of the purchased property. Once the remodeling was complete, the
property would be sold by defendant Assali acting as the selling agent, or
rented out, and plaintiff would receive the net profit from the sale of each
property. It was also agreed that
invoices for all expenses would be provided to plaintiff, and that plaintiff
could demand the return of his investment at any time.
Plaintiff
alleges that plaintiff formed and registered CARP Property, LLC to purchase
properties to be remodeled and sold.
After two successful property flips, defendant Assali insisted that CARP
Property, LLC no longer be used to purchase the investment properties, but that
all future transactions should go through defendant personally or through his
corporation, defendant UASA, LLC. Plaintiff agreed to this modification of the
terms of the original agreement.
The
complaint alleges that plaintiff transferred further funds to Assali to be used
to purchase two properties in Long Beach, and further funds were provided for
Long Beach flip for supplies and a porch add on, but Assali did not provide
plaintiff with any of the profits from the sale of the properties being
flipped, insisting that the profits be added to the original investment to have
more capital to purchase more properties, or higher valued properties. Sometime thereafter, defendant stopped
sharing details of the properties with plaintiff.
Plaintiff
alleges that in December of 2018, a property in Glendale was successfully
flipped, and that, upon information and belief, from 2018 to 2020, Assali
purchased multiple properties that were eventually sold for a profit. When
Assali’s communications with plaintiff became inconsistent and defendant stopped
involving plaintiff in the details of the properties being purchased and sold,
plaintiff requested that Assali repay plaintiff whatever plaintiff was
owed. After making three payments
through UASA, LLC to either CARP Property LLC or to plaintiff, Assali claimed
he was not able to return the remaining funds owed to plaintiff and that he
would return the money on the next property flips. Plaintiff alleges that plaintiff
has made multiple demands for Assali to return the amount owed to plaintiff,
but Assali has refused to return plaintiff’s money, and ignored plaintiff’s
demands.
ANALYSIS:
Demurrer
First Cause of Action—Breach of Contract
To plead a cause of action for
breach of contract, plaintiff must plead the following elements: Contract
formed, and terms alleged verbatim or according to legal effect; plaintiff’s
performance or excuse for nonperformance; defendant’s breach; and damage to
plaintiff. Walsh v. Standart
(1917) 174
Defendants Assali and UASA, LLC argue
that the first cause of action for breach of contract fails to allege whether
the contract is written, oral, or implied by conduct.
Defendants rely
on CCP § 430.10, which states, in pertinent part:
“The
party against whom a complaint…has been filed may object, by demurrer...to the
pleading on any one or more of the following grounds:
(g)
In an action founded upon a contract, it
cannot be ascertained from the pleading whether the contract is written, is
oral, or is implied by conduct.”
(Emphasis added).
In this case, the pleading does not
specify, either in the cause of action itself, or in the incorporated general
allegations, whether the contract alleged is written, oral, or implied by
conduct, or some specific combination of these forms.
Plaintiff indicates in the
opposition that it can be inferred from plaintiff’s complaint as a whole that
the alleged agreement is oral, partially written, and implied by conduct. Plaintiff then also seems to argue that since
plaintiff does not include a written contract or claim that there was a written
agreement, it can be inferred that there was no written agreement. This position does not clarify the matter;
was the agreement “partially written,” or was there no written agreement? It is
not clear from the complaint as a whole what the nature of the agreement is,
and it is not clear why, if plaintiff knows the nature of the particular
aspects of the agreement relied upon, plaintiff did not simply amend the
pleading to more clearly allege the nature of the contract to comply with CCP
section 430.10 (g). The demurrer is
sustained on this ground.
Defendants then argue that the
cause of action is barred by the statute of frauds.
Defendants rely on Civil Code
section 1624 (a)(3), which provides:
(a) The following contracts are
invalid, unless they, or some note or memorandum thereof, are in writing and
subscribed by the party to be charged or by the party’s agent:...
(3) An agreement... for the sale of real property, or of an interest
therein...”
As an initial matter, the demurrer
as stated in the notice filed with the court does not demur to this cause of
action on this ground. The demurrer
states:
“1. The first cause of action for
“Breach of Contract” is improper as in an action founded upon a contract, it
cannot be ascertained from the pleading whether the contract is written, is
oral, or is implied by conduct under Code of Civil Procedure 430.10,
subdivision (g).”
There is no mention of any other
ground on which demurrer is brought to the first cause of action.
In addition, since it cannot be
ascertained whether the contract was oral, written, or implied by conduct, this
argument, which depends on the contract being an oral contract, appears
premature.
Finally, and more importantly, from
the allegations of the complaint it does not appear that the alleged agreement
was for the sale of real property, or of an interest therein, but for the
parties to work together to purchase, remodel and resell real property. There is no claim made in the pleading that
there was an oral agreement that plaintiff would obtain title to or an interest
in any real property. As argued in the
opposition, the agreement was not for the sale of any specific real property or
an interest in such, but an investment agreement.
The alleged agreement between the
parties to operate an investment enterprise is in the nature of a partnership
agreement, and it has long been held that the statute of frauds does not apply
to a partnership which acquires real property for partnership uses, or which
has as its object to deal in real property.
See Bates v. Babcock (1892) 95 Cal.479, 486-488; Koyer v. Willmon (1907) 150 Cal. 785,
787 (“It is settled by the decisions in this state that a partnership for the
purposes of buying, holding, and selling lands may be formed by an agreement
resting in parol only, and that such parol agreement is valid”); Simpson v. Winkelman (1964, 2nd
Dist.) 225 Cal.App.2d 746, 751.
The demurrer on this ground is overruled.
Defendants then argue that cause of
action is subject to the statute of limitations for a breach of contract claim.
Again, as set forth above, the only
ground specified in the notice of motion for demurrer to this cause of action
was CCP section 430.10(g).
In addition, the argument assumes
that the applicable statute of limitations would be the two-year statute
applicable to oral contracts, when it is not yet clearly alleged the nature of
the contract.
More importantly, to sustain a
demurrer based on a statute of limitations defense, the running of the statute
must appear “clearly and affirmatively” from the face of the complaint; it is
not enough that the complaint may be time-barred. Committee for Green Foothills v. Santa
Clara County Board of Supervisors (2010) 48 Cal.4ths 32, 42, citing and
quoting Geneva Towers Ltd. Partnership v. City of San Francisco (2003)
29 Cal.4th 769, 781:
“We conclude the demurrer in the present case should have been
overruled. “A demurrer based on a statute of limitations will not lie where the
action may be, but is not necessarily, barred. [Citation.] In order for the bar
of the statute of limitations to be raised by demurrer, the defect must clearly
and affirmatively appear on the face of the complaint; it is not enough that
the complaint shows that the action may be barred. [Citation.]” (Marshall v. Gibson, Dunn & Crutcher
(1995) 37 Cal.App.4th 1397, 1403, 44 Cal.Rptr.2d 339.).
Geneva Towers, at 781.
CCP section 339 sub. 1 provides a
two-year statute for liability not founded on an instrument in writing:
“Within two years: 1. An
action upon a contract, obligation or liability not founded upon an instrument
of writing…”
CCP section 337(a) provides a
four-year statute for liability founded upon an instrument in writing:
“Within four years: (a) An action upon any contract, obligation or liability founded
upon an instrument in writing…”
As the Second District has
recognized, “A cause of action for breach of contract accrues at the time of
breach, which then starts the limitations period running.” Cochran v.
Cochran (1997) 56 Cal.App.4th 1115, 1120, citing Whorton v.
Dillingham (1988) 202 Cal.App.3d 447, 456.
As
recognized in the moving papers, and again emphasized in the opposition, the
complaint alleges that in 2020, and into a time which would have fallen within even
a two-year statute of limitations, defendants made payments to plaintiff and plaintiff’s
limited liability company, so were continuing to perform, and “thereafter” indicated
the remaining funds would be returned.
[Complaint, paras. 35-38]. It is
accordingly not clear from the face of the complaint, or the specific
allegations therein, that the cause of action would be clearly and
affirmatively barred by any particular statute of limitations.
The demurrer on this ground
accordingly is overruled.
Fourth Cause of Action—Fraud and Deceit
To state a cause of action for
fraud, plaintiff must plead the following elements: A false representation,
actual or implied, or concealment of a matter of fact material to the
transaction which defendant had a duty to disclose, or defendant’s
promise made without intention to perform; defendant’s knowledge of the
falsity; defendant’s intent to deceive; plaintiff’s justifiable reliance
thereon; and resulting damage to plaintiff.
Pearson v. Norton (1964) 230 Cal.App.2d 1.
Defendants argue that the fraud
claim lacks specificity.
Generally, in a fraud cause of
action, a plaintiff must allege specifically how, what, where, to whom and by
what means a defendant made a misrepresentation. Stansfield v. Starkey (1990, 2nd
Dist.) 220 Cal.App.3d 59, 73, citation omitted.
When such a claim is made against a corporation, the level of
specificity required is even higher.
Under Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, in
fraud complaints against a corporation, a plaintiff must allege all of the
following:
-the names of the persons who made
the misrepresentation;
-their authority to speak for the
corporation;
-to whom they spoke;
-what they said or wrote; and
-when it was said
or written.
The cause of action alleges in very
broad terms that defendant Assali, individually and as the principal of
defendant UASA, LLC, represented to plaintiff that the real estate deals he was
involved in were legitimate and would quickly return profits on plaintiff’s
investment, and promised that the net profits would amount to 20% interest per
annum. [Complaint, para. 59]. It is not alleged by what means these
representations were made-- orally, or in writing-- or when or where they were
made. It is also not clearly alleged
the authority of defendant Assali to speak for defendant UASA, LLC at the time
the representations were made.
Plaintiff in opposition relies on
the general allegations of the pleading, which are incorporated by reference,
but which appear to greatly expand the theories of fraud on this plaintiff is
evidently relying. None of those general
allegations appear to include the missing details of when, where, and by what
means each representation was made.
[Complaint, paras. 17, 18, 20-41].
The demurrer is sustained with
leave to amend to permit plaintiff an opportunity to allege the fraud cause of
action, and each act of fraud or false promise relied upon, in the cause of action
itself with the requisite specificity.
The
Supreme Court in Erlich noted that several breaches of duty independent
of the contract have been recognized:
“Tort
damages have been permitted in contract cases where a breach of duty directly
causes physical injury (Fuentes v. Perez (1977) 66
Erlich, at
551-552 (emphasis added).
The
pleading here, alleging fraudulent misconduct, is not barred by the economic
loss rule, and the demurrer on this ground is overruled.
Motion to Strike
Procedural
Plaintiff
in the opposition argues that the motion to strike was not served or filed on
sufficient notice.
Under
CCP §436, the court may “upon motion made pursuant to Section 435, or at any
time in its discretion” strike out “all or any part of any pleading not drawn
or filed in conformity with the laws of this state, a court rule or an order of
the court.”
With respect to motions, under CCP section
1005(b):
“Unless
otherwise ordered or specifically provided by law, all moving and supporting
papers shall be served and filed at least 16 court days before the hearing.”
CCP section 1010.6 (a)(4)(B) provides
that if the notice is served by electronic means, the period of notice before
the hearing shall be extended by two court days.
Here, the filings are a bit
confusing, as there is a listing of a motion to strike being filed on November
10, 2022, along with the filing of the demurrer. The document itself, however, is a Notice of
Demurrer. The same date a Declaration of
Thomas F. Gallagher in Support of Defendants Demurrer and Motion to Strike was
filed. It appears that the demurrer
papers, including the notice, memorandum of points and authorities, proposed
order, and proof of service, were filed twice, without moving papers filed that
date for the motion to strike, other than the declaration.
On November 22, 2022, the notice of
motion to strike, and supporting memorandum, proposed order, another
declaration, and proof of service were filed, noticing a December 9, 2022
hearing date. The proof of service shows
that those documents were served by e-mail or electronic transmission on the
same date.
This was only 11 court days before
the hearing date, so seven court days short of the required notice period.
Plaintiff has filed an untimely
opposition to the motion, filed November 29, 2022, only eight court days prior
to the hearing, rather than the nine court days required under CCP §1005(b) (“All
papers opposing a motion…shall be filed with the court and a copy served on
each party at least nine court days… before the hearing.”). No proof of service of the opposition has
been filed. Under the circumstances, the
court will consider the late filed opposition to the defectively noticed motion
to strike.
The
opposition addresses the merits of the motion to strike. It is
held that insufficient or defective notice may be waived if opposing counsel
argues the merits of the motion. Alliance
Bank v. Murray (1984, 2nd Dist) 161 Cal.App.3d 1, 7; Carlton v. Quint
(2000, 2nd Dist.) 77 Cal.App.4th 690, 697. The court reluctantly deems the
notice irregularity waived and considers the motion on its merits.
Punitive Damages
Defendants
seek to strike the prayer for punitive damages on the ground the pleading fails
to sufficiently allege malice, oppression or fraud.
Civil Code § 3294 authorizes
recovery of punitive damages on the basis of findings that “the defendant has
been guilty of oppression, fraud or malice.”
Here, punitive damages are sought in connection with the fourth
cause of action for fraud and deceit, and in the general prayer. [Complaint, para. 64, Prayer, para. 3]. Since the demurrer to the fourth cause of
action for fraud and deceit will be sustained with leave to amend, the motion
to strike is deemed moot. As pointed out
in the opposition, a properly alleged fraud claim will itself support recovery of punitive
damages; no allegations of malice or intent to injure are required. Stevens v. Superior Court (1986, 2nd
Dist.) 180 Cal.App.3d 605, 610-611.
Defendants
also seek to strike the prayers for attorney’s fees.
With
respect to the claims for attorneys’ fees, CCP section 1021 provides in
pertinent part:
“Except
as attorney’s fees are specifically provided for by statute, the measure and
mode of compensation of attorneys and counselors at law is left to the
agreement, express or implied, of the parties...”
Defendants
argue that there is no statutory or contractual basis for an award of fees in
this case.
The complaint seeks attorney’s fees
and costs, in connection with the seventh cause of action for open book
account, and eighth cause of action for account stated, “pursuant to Civil Code
section 1717.5.” [Complaint, paras. 80,
84]. The prayer also seeks “reasonable
attorneys fees.” [Prayer, para. 4].
The complaint accordingly states a
statutory basis for an award of fees.
Civil Code section 1717.5 provides, in pertinent part:
“(a) Except as
otherwise provided by law or where waived by the parties to an agreement, in any
action on a contract based on a book account, as defined in Section 337a of the
Code of Civil Procedure, entered into on or after January 1, 1987, which does
not provide for attorney's fees and costs, as provided in Section 1717, the
party who is determined to be the party prevailing on the contract shall be
entitled to reasonable attorney's fees, as provided below, in addition to other
costs. The prevailing party on the contract shall be the party who recovered a
greater relief in the action on the contract. The court may determine that
there is no party prevailing on the contract for purposes of this section.”
These allegations (para. 80, 84) sufficiently
allege that attorney’s fees are specifically provided for by statute. Because the allegations of the complaint must
be taken as true, and defendants have not challenged by demurrer the
sufficiency of the seventh or eighth causes of action. The motion is denied.
The
opposition argues that attorney’s fees are available in connection with an
unfair competition claim, but cites legal authority under which it is held that
such fees are not generally available under Business &
Professions Code section 17200 et seq. Walker v. Countrywide Home Loans
(2002) 98 Cal.Ap.4th 1158. The court of
appeal in Walker did recognize that such fees may be available under CCP
section 1021.5, as a private attorney general.
Walker, at 1179. This
statute is not referenced in the complaint, but there is legal authority under
which it has been held error to strike from a pleading a request for attorneys’
fees under CCP § 1021.5, precisely because no prayer is required for this
theory to be relied upon. See Snatchko
v. Westfield, LLC (2010) 187 Cal.App.4th 469, 497.
The motion
to strike accordingly is denied.
Plaintiff
indicates in the opposition that plaintiff will seek leave to amend the
complaint and add an unfair business competition cause of action to support a
claim for attorney’s fees. Such an
additional cause of action may be alleged only if the court grants a duly
noticed motion for leave to amend, which the court would likely be required to grant
at this stage in the proceedings, or the parties stipulate that such a new
additional cause of action may be alleged in any amended pleading.
RULING:
Defendant George
Assali and UASA, LLC’s Demurrer to Complaint of Rafi Tarakjian:
Demurrer to the
first cause of action for breach of contract is SUSTAINED WITH LEAVE TO AMEND
on the ground it cannot be ascertained from the pleading whether the alleged contract
is written, is oral, or is implied by conduct, which is ground for demurrer
under CCP § 430.10 (g).
Demurrer to the
first cause of action on all other grounds is OVERRULED.
Demurrer to the
fourth cause of action for fraud and deceit is SUSTAINED WITH LEAVE TO AMEND on
the ground the cause of action is not alleged with sufficient specificity. See
Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 (plaintiff must
allege specifically how, what, where, to whom and by what means a defendant
made a misrepresentation). See also Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645 (in fraud complaints against a
corporation, a plaintiff must allege all of the following: the names of the
persons who made the misrepresentation; their authority to speak for the
corporation; to whom they spoke; what they said or wrote; and when it was said
or written). The cause of action
fails to allege when, where, and by what means any misrepresentations or false
promises were made. To the extent
plaintiff in the opposition relies on the general allegations, these do not
cure the deficiency, and the amended pleading must allege each alleged act of
fraud in the cause of action itself, with all elements alleged and with the
requisite level of specificity.
Demurrer to the fourth cause of action on all other grounds
is OVERRULED.
Ten days leave to amend the first and fourth causes of
action only.
Defendant George Assali and UASA, LLC’s Motion to Strike
Complaint of Plaintiff Rafi Tarakjian:
Both parties are cautioned that in the
future, the Court may refuse to consider pleadings which do not comply with
statutory notice requirements, filing deadlines, or other applicable statutes,
rules and procedures.
Motion to strike punitive damages is MOOT in light of the
sustaining of the demurrer to the fourth cause of action for fraud and deceit
with leave to amend.
Motion to strike prayer for attorney’s fees is DENIED.
The parties are ordered to meet and confer in full
compliance with CCP §§ 430.41 and 435.5 before any further demurrer or motion
to strike may be filed.
GIVEN THE CORONAVIRUS
CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT
D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES
Please make arrangement in advance if you wish to appear via
LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance. Please note that
LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel
and parties (including self-represented litigants) are encouraged not to
personally appear. With respect to the wearing of face masks, Department
D recognizes that currently, the Los Angeles Department of Public Health
strongly recommends masks indoors, especially when interacting with individuals
whose vaccination status is unknown; for individuals who have a health condition
that puts them at higher risk for severe illness; individuals who live with
someone who is at higher risk; and for individuals who are around children who
are not yet eligible for vaccines. In
accordance with this guidance, it is strongly recommended that anyone
personally appearing in Department D wear a face mask. The Department D Judge and court staff will
continue to wear face masks. If
no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise,
then the Court will assume the parties are submitting on the tentative.