Judge: Robert B. Broadbelt, Case: 23STCV13211, Date: 2025-02-28 Tentative Ruling

Case Number: 23STCV13211    Hearing Date: February 28, 2025    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:              Defendants FMB Development, LLC, 1242 Sunset Plaza LLC, 1013 Genesee LLC, 1408 North Poinsettia LLC, 1866 Heather Way, LLC, and Ilan Kenig

RESPONDING PARTY:       Plaintiff Shabi Cohen

(1)   Demurrer to First Amended Complaint

MOVING PARTY:                 Defendant Moises Gilinski    

RESPONDING PARTY:       Plaintiff Shabi Cohen

(1)   Demurrer to First Amended Complaint

(2)   Motion to Strike Punitive Damages

The court considered the unredacted moving, opposition, and reply papers filed in connection with each demurrer and motion to strike.[1]

BACKGROUND

Plaintiff Shabi Cohen (“Plaintiff”) filed the operative First Amended Complaint in this action on March 14, 2024, alleging three causes of action for (1) breach of written contract,      (2) breach of verbal contract, and (3) fraud.

Now pending before the court are two sets of responsive pleadings directed to the First Amended Complaint. 

First, defendants FMB Development, LLC (“FMB”), 1242 Sunset Plaza LLC (“Sunset LLC”), 1013 Genesee LLC (“Genesee LLC”), 1408 North Poinsettia LLC (“Poinsettia LLC”), 1866 Heather Way, LLC (“Heather LLC”), and Ilan Kenig (“Kenig”) (collectively, “FMB Defendants”) move the court for an order sustaining their demurrer to Plaintiff’s second and third causes of action.  

Second, defendant Moises Gilinski (“Gilinski”) moves the court for an order (1) sustaining his demurrer to the third cause of action for fraud, and (2) striking from Plaintiff’s First Amended Complaint the prayer and request for punitive damages in connection with the third cause of action.

FMB DEFENDANTS’ DEMURRER

            The court sustains defendant FMB’s demurrer to the second cause of action for breach of verbal contract because Plaintiff has stated that he “has agreed to dismiss” that cause of action against it, without prejudice.  (Opp., n. 2 and pp. 5:7-10.)  However, Plaintiff has not filed a Request for Dismissal of that cause of action.  Thus, the court will sustain FMB’s demurrer to the second cause of action without leave to amend.

            The court sustains defendants Sunset LLC, Genesee LLC, Poinsettia LLC, and Heather LLC’s demurrer to the second cause of action for breach of verbal contract because it does not state facts sufficient to constitute a cause of action since the moving defendants have shown that it is barred by the statute of frauds.  (Code Civ. Proc., § 430.10, subd. (e).)

“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: [¶¶]  A special promise to answer for the debt, default, or miscarriage of another, except in the cases provided for in Section 2794.”[2]  (Civ. Code, § 1624, subd. (a)(2).)  The writing requirement of the statute of frauds “serves only to prevent the contract from being unenforceable; the statute of frauds merely serve[s] an evidentiary purpose.”  (Reeder v. Specialized Loan Servicing LLC (2020) 52 Cal.App.5th 795, 801 [internal quotation marks and citation omitted].)

Plaintiff has alleged that defendants Sunset LLC, Genesee LLC, Poinsettia LLC, and Heather LLC (the “LLC Defendants”) gave various verbal assurances to Plaintiff as additional consideration for Plaintiff to enter into the settlement agreement that is the subject of this action.  (FAC ¶ 35.)  Specifically, Plaintiff alleges that he relied upon the verbal assurances of LLC Defendants “as part of the consideration for agreeing to the Settlement Agreement, the terms of which would provide the Plaintiff the security for repayment of the Purchase Loans.”  (Ibid.)  The verbal assurances include LLC Defendants’ promise to guarantee Gilinski’s obligations to pay the subject purchase loans and to grant security interests in the subject properties.  (FAC ¶ 16.)  The LLC Defendants allegedly breached the parties’ oral agreement (1) “by failing to pay the deposits toward the Purchase Price in a timely manner and in the amounts required by the terms after the Settlement Agreement after [Gilinski] failed to do so[,]” and (2) “by failing to execute and deliver the deeds of trust securing [Gilinski’s] performance of the Purchase Loans to the Plaintiff.”  (FAC ¶ 37.)  Thus, Plaintiff has alleged that LLC Defendants have orally promised to answer for defendant Gilinski’s debt, and therefore the second cause of action, which is based on a breach of that agreement, is made unenforceable by the statute of frauds.  (Civ. Code, § 1624, subd. (a)(2).)  

Plaintiff has asserted, and the court agrees, that parties may be estopped from relying on the statute of frauds.[3]  (Reeder, supra, 52 Cal.App.5th at p. 802, n. 1; Tukes v. Richard (2022) 81 Cal.App.5th 1, 25 [“‘[t]he doctrine of estoppel to plead the statute of frauds may be applied where necessary to prevent either unconscionable injury or unjust enrichment’”].)  “Such fraud [warranting the application of the doctrine of estoppel] may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract[] [citations], or in the unjust enrichment that would result if a party who has received the benefits of the other’s performance were allowed to rely upon the statute.”  (Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624 [internal citations omitted].)  However, Plaintiff has not alleged facts establishing that (1) he was induced by LLC Defendants to seriously change his position in reliance on their verbal promises, or (2) LLC Defendants have received the benefits of Plaintiff’s performance, thereby resulting in unjust enrichment.  (Monarco, supra, 35 Cal.2d at pp. 623-624.)   For example, while Plaintiff has alleged that LLC Defendants made the subject verbal promises “[a]s additional consideration” for the subject agreement, Plaintiff did not allege that he was induced to seriously change his position in reliance on those assurances in support of the second cause of action.  (FAC ¶¶ 16, 35.)  Further, while Plaintiff has alleged that LLC Defendants benefited from the agreement since it allowed Gilinski to enter the projects and fund construction on the subject properties, Plaintiff does not appear to allege that unjust enrichment has resulted from such benefit.  (FAC ¶ 35.)

The court further finds that Plaintiff has not, in the alternative, alleged facts sufficient to constitute a cause of action for promissory estoppel against LLC Defendants because Plaintiff has not alleged (1) that LLC Defendants “should reasonably [have] expect[ed] the promise to induce action or forbearance on the part of” Plaintiff, and (2) that “injustice can be avoided only by enforcement of the promise.”  (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2016) 6 Cal.App.5th 1207, 1225; New Livable California v. Association of Bay Area Governments (2020) 59 Cal.App.5th 709, 714-715 [demurrer tests whether complaint states a cause of action under any legal theory].)

The court therefore sustains LLC Defendants’ demurrer to the second cause of action.  However, the court will grant Plaintiff leave to amend this cause of action to allege the doctrine of estoppel or promissory estoppel, if appropriate.[4]

The court sustains defendant Kenig’s demurrer to the third cause of action for fraud because it does not state facts sufficient to constitute a cause of action since (1) Kenig has shown, on the face of the First Amended Complaint and exhibits attached thereto, that it is barred by the affirmative defense of release, and (2) Plaintiff did not allege all of the subject misrepresentations with particularity as required.  (Code Civ. Proc., § 430.10, subd. (e).)

First, the court finds that defendant Kenig has shown that Plaintiff released this claim against him.

The subject Settlement Agreement, which is attached to the First Amended Complaint, states that Plaintiff, on behalf of himself and other parties not relevant here (e.g., his spouses, heirs, etc.), “release[d] and forever discharge[d] Developer, Management Company [defined to include LLC Defendants], the New Investor and any of the principals or owners, individually and collectively, as well as each of their respective . . . agents . . . [and] managers” from any “unknown cause of action, claim, right to any lien, or demand for damages, costs, or contribution, whether uncertain or speculative, which [Plaintiff] may have at any time prior hereto or which may be brought in the future in connection with any acts or omissions which have arisen at any time prior to the date of this [Settlement] Agreement . . . .”  (FAC Ex. A, Settlement Agreement, p. 4, ¶ 3.)  Plaintiff further waived the protection of Civil Code section 1542, which states that a general release does not extend to claims the releasing party does not know or suspect to exist at the time of executing the release and that, if known, would have materially affected his settlement with the released party.  (Id., ¶ 4; Civ. Code, § 1542.)

Plaintiff has alleged that defendant Kenig “was the duly appointed member for each of the Subject LLCs,” i.e., LLC Defendants.  (FAC ¶¶ 16, 34, 6 [defining “Subject LLCs” to be the LLC Defendants].)  The alleged fraudulent statements were made by Kenig “[d]uring the negotiations of the Settlement Agreement,” such that the acts had “arisen at any time prior to the date of” the parties’ Settlement Agreement.  (FAC ¶ 40; FAC Ex. A, Settlement Agreement, p. 4, ¶ 3.)  As set forth above, the release (1) applies to managers of LLC Defendants, i.e., including Kenig, and (2) applies to claims, known or unknown, arose before the date of the Settlement Agreement, which includes this cause of action for fraud since it necessarily must have arisen before the date of the Settlement Agreement.  Thus, the court finds, on the face of the First Amended Complaint and exhibits attached thereto, that Plaintiff released his claim against Kenig for fraud.   

Moreover, to the extent that Plaintiff argues that his waiver of the protection of Civil Code section 1542 can be avoided on the ground that the Settlement Agreement was procured by fraud (such that Plaintiff may be able to prosecute this action for fraud against him), the court notes that (1) Plaintiff did not allege that he was seeking to rescind that provision (or entirety) of the Settlement Agreement, and (2) a party must generally seek rescission under a contract if he alleges that he has been fraudulently induced to enter into a contract.  (Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 921 [“If a party believes it has been fraudulently induced to enter into a contract, [i]n order to escape from its obligations the aggrieved party must rescind” [internal quotation marks and citation omitted]; Ibid. [In the “usual case of fraud, where the promisor knows what he is signing but his consent is induced by fraud,” “the party seeking to void the contract must rescind under our statutory and common law rules.  Rescission requires that the aggrieved party provide the other party to the agreement with prompt notice and an offer to restore the consideration received, if any”] [internal quotation marks and citation omitted].)  

Second, the court finds that Plaintiff has not alleged, with the requisite particularity, the subject representations that are the basis of this cause of action against defendant Kenig because Plaintiff (1) has alleged (along with other specified representations) that Defendant “also made the Verbal Assurances, at the time and manner described herein above[,]” but (2) did not define “Verbal Assurances,” such that it is unclear the content of those representations, and how, when, where, to whom and by what means, the other representations on which this cause of action is based.  (Lauckhart v. El Macero Homeowners Assn. (2023) 92 Cal.App.5th 889, 903 [“Fraud must be pleaded with particularity”].)

The court therefore sustains defendant Kenig’s demurrer to this cause of action.  The court will grant Plaintiff leave to amend to address these issues.

DEFENDANT GILINSKI’S DEMURRER

The court sustains defendant Gilinski’s demurrer to the third cause of action for fraud because it does not state facts sufficient to constitute a cause of action since (1) Gilinski has shown, on the face of the First Amended Complaint and exhibits attached thereto, that it is barred by the affirmative defense of release and waiver pursuant to the Settlement Agreement, in which Plaintiff agreed to release all known and unknown claims against Gilinski, and (2) although Plaintiff argues that the waiver of the protections of Civil Code section 1542 is void, Plaintiff did not allege such a fact or theory in the First Amended Complaint.  (Code Civ. Proc., § 430.10, subd. (e); FAC ¶ 40 [alleging misrepresentations made “[d]uring the negotiations of the Settlement Agreement”]; FAC Ex. A, Settlement Agreement, p. 4, ¶¶ 3 [the parties agreed that Plaintiff would release Gilinski (identified as “New Investor” in the first paragraph of the Settlement Agreement) from any “known or unknown cause of action, claim, right to any lien, or demand for damages, costs, or contribution, whether certain or speculative, which [Plaintiff] may have at any time prior hereto or which may be brought in the future in connection with any acts or omission which have arisen at any time prior to the date of this Agreement”], 4 [waiving protection of section 1542]; Opp. to Gilinski Dem., p. 10:1-4.)

DEFENDANT GILINSKI’S MOTION TO STRIKE

The court denies as moot defendant Gilinski’s motion to strike Plaintiff’s (1) request for punitive damages, set forth in paragraph 44, because that request is alleged in support of the third cause of action, to which the court has sustained Gilinski’s demurrer, and (2) prayer for punitive damages, set forth in paragraph 7, because that prayer is requested “On the Third Cause of Action” and the court has sustained Gilinski’s demurrer to that cause of action.

ORDER

            The court sustains defendant FMB Development, LLC’s demurrer to plaintiff Shabi Cohen’s second cause of action for breach of verbal contract without leave to amend.

The court sustains defendants 1242 Sunset Plaza LLC, 1013 Genesee LLC, 1408 North Poinsettia LLC, and 1866 Heather Way, LLC’s demurrer to plaintiff Shabi Cohen’s second cause of action for breach of verbal contract with leave to amend.

The court sustains defendant Ilan Kenig’s demurrer to plaintiff Shabi Cohen’s third cause of action for fraud with leave to amend.

            The court sustains defendant Moises Gilinski’s demurrer to plaintiff Shabi Cohen’s third cause of action for fraud with leave to amend.

            The court denies as moot defendant Moises Gilinski’s motion to strike punitive damages.

            The court grants plaintiff Shabi Cohen 20 days leave to file a Second Amended Complaint that (1) cures the defects in the second cause of action for breach of verbal contract, as alleged against defendants 1242 Sunset Plaza LLC, 1013 Genesee LLC, 1408 North Poinsettia LLC, and 1866 Heather Way, LLC, set forth in this ruling, and (2) cures the defects in the third cause of action for fraud as alleged against defendants Ilan Kenig and Moises Gilinski set forth in this ruling.

            The court orders defendant FMB Development, LLC to give notice of this ruling.

IT IS SO ORDERED.

DATED:  February 28, 2025

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court