Judge Salvatore Sirna, Case Number: 23PSCV00561, Date: 2023-11-02 Tentative Ruling

Judge: Salvatore Sirna, Case: 23PSCV00561, Date: 2023-11-02 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 23PSCV00561 Hearing Date: March 21, 2024 Dept: G

Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s Demurrer to Cross-Complaint

Respondent: Cross-Complainants Humble Retailers, Inc. and Satish Mahajan

TENTATIVE RULING

Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s Demurrer to Cross-Complaint is SUSTAINED IN PART with ten (10) days’ leave given to amend as to Cross-Complainant Humble Retailers, Inc.’s causes of action and Cross-Complainant Satish Mahajan’s Second Cause of Action.

Furthermore, Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s Demurrer is OVERRULED IN PART as to Cross-Complainant Satish Mahajan’s First, Third, and Fourth Causes of Action.

BACKGROUND

This is a contractual fraud action. In early 2022, Defendants Humble Retailers, Inc. (Humble Retailers), Satish Mahajan, Deepak Gosain, Narayan Singh, Mennu Mahajan, and Nikki Sachdeva sought to sell their liquor store in Azusa to Plaintiffs Rajesh Thakkar and Nidhi Mittal. After Defendants allegedly promised Thakkar and Mittal a turnkey business and failed to disclose the material risks, Thakkar and Mittal signed a business purchase contract on August 30, 2022, and agreed to purchase the liquor store for $375,000. They then made a $55,000 down payment prior to the opening of escrow.

Subsequently, when Thakkar and Mittal inspected the liquor store, they found twenty-two different issues that they communicated to Defendants including a defective walk-in cooler, a defective air conditioning system, defective exhaust and ventilation systems, an inadequate electrical load, fire safety violations, food safety violations, dilapidated building conditions, obscured security cameras, and pest infestations. Thakkar and Mittal allege Defendants also failed to transfer the liquor store’s ABC license, commercial lease, or business title. While Thakkar and Mittal did not take possession of the business, Defendants allegedly refused to return their down payments.

On February 27, 2023, Thakkar and Mittal filed a complaint against Defendants and Does 1-20, alleging the following causes of action: (1) fraud in the inducement, (2) conversion, (3) intentional misrepresentation, (4) negligent misrepresentation, and (5) breach of contract. On July 19, the court sustained a demurrer to the Complaint by Humble Retailers with leave to amend. The court also struck a demurrer by Mennu Mahajan and overruled a demurrer by Satish Mahajan.

On August 8, 2023, Thakkar and Mittal filed a First Amended Complaint (FAC) against the same defendants alleging the same causes of action. On November 28, the court overruled demurrers by Mennu Mahajan, Satish Mahajan, and Humble Retailers.

On December 18, 2023, Humble Retailers and Satish Mahajan filed a cross-complaint against Thakkar, Mittal, and Roes 1-25, alleging (1) breach of contract, (2) conversion, (3) specific performance, and (4) declaratory relief.

On February 16, 2024, Thakkar and Mittal filed the present demurrer. Prior to filing on February 9, Thakkar and Mittal’s counsel attempted to meet and confer telephonically with Humble Retailers and Satish Mahajan’s counsel but was unsuccessful. (Feazell Decl., ¶ 8.)

A hearing on the demurrer is set for March 21, 2024, along with a case management conference.

ANALYSIS

Thakkar and Mittal demur to Humble Retailers and Satish Mahajan’s entire Cross-Complaint. For the following reasons, the court SUSTAINS Thakkar and Mittal’s demurrer to Humble Retailers’s causes of action and Satish Mahajan’s second cause of action with leave to amend, and further OVERRULES their demurrer as to Satish Mahajan’s first, third, and fourth causes of action.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)

Breach of Contract (First Cause of Action)

Thakkar and Mittal argue Humble Retailers and Satish Mahajan’s first cause of action for breach of contract fails to plead sufficient facts to state a claim. The court agrees as to Humble Retailers and disagrees as to Satish Mahajan.

Legal Standard

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.) “[T]he vital elements of a cause of action based on contract are mutual assent (usually accomplished through the medium of an offer and acceptance) and consideration.” (Division of Labor Law Enforcement v. Transpacific Transportation Co. (1977) 69 Cal.App.3d 268, 275.)

Discussion

In this case, Thakkar and Mittal argue there are no facts establishing each of the elements of a breach of contract claim. The Cross-Complaint alleges Satish Mahajan and Gosain entered into a written purchase agreement with Thakkar and Mittal on September 1, 2022, in which Thakkar and Mittal agreed to purchase a market in Azusa from Mahajan and Gosain. (Cross-Complaint, ¶ 7.) The Cross-Complaint also provided an attached copy of the purchase agreement as Exhibit 1. While the Cross-Complaint alleges Satish Mahajan was a party to the contract, there are no facts establishing Humble Retailers was also a party to the contract. Thus, Humble Retailers does not state a cause of action for breach of contract against Thakkar and Mittal.

The Cross-Complaint also alleges Thakkar and Mittal were to pay a non-refundable $25,000 deposit at the opening of escrow and pay the remainder of the purchase price at the close of escrow. (Cross-Complaint, ¶ 9.) If either party backed out of the deal, the purchase agreement provided for $25,000 in liquidated damages. (Cross-Complaint, ¶ 10.) The Cross-Complaint alleges Thakkar and Mittal then rescinded the purchase agreement ten days after assuming possession of the Azusa market on September 3, 2022. (Cross-Complaint, ¶ 13.) Because the Cross-Complaint alleges Satish Mahajan’s performance (tendering possession of the Azusa market to Thakkar and Mittal), Thakkar and Mittal’s breach (rescinding the purchase agreement after ten days), and liquidated damages of $25,000, Satish Mahajan has adequately stated a cause of action for breach of contract.

Accordingly, Thakkar and Mittal’s demurrer to this cause of action is SUSTAINED with leave to amend as to Humble Retailers and OVERRULED as to Satish Mahajan.

Conversion (Second Cause of Action)

Thakkar and Mittal contend Humble Retailers and Satish Mahajan’s second cause of action for conversion fails to plead sufficient facts to state a claim. The court agrees.

Legal Standard

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.) “Conversion is an intentional tort.” (Multani v. Knight (2018) 23 Cal.App.5th 837, 853.) “Because the act [of conversion] must be knowingly done, ‘neither negligence, active or passive, nor a breach of contract, even though it result in injury to, or loss of, specific property, constitutes a conversion.’” (Taylor v. Forte Hotels International (1991) 235 Cal.App.3d 1119, 1124.) “[C]ases recognizing claims for the conversion of money ‘typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others.’” (Voris v. Lampert (2019) 7 Cal.5th 1141, 1152, quoting PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 396.)

Discussion

In this case, Thakkar and Mittal contend there are no facts establishing each of the elements of a conversion claim. Because Thakkar and Mittal rescinded the purchase agreement, the Cross-Complaint alleges Humble Retailers and Satish Mahajan are entitled to all sums paid by customers who visited the Azusa market during the time Thakkar and Mittal were in possession. (Cross-Complaint, ¶ 20.) But it is unclear how Humble Retailers and Satish Mahajan have a property interest in the Azusa market’s profits during the time in which Thakkar and Mittal were lawfully in possession. Nor does their opposition provide a single statute or case that provides any legal support for this claim.

Accordingly, because the Cross-Complaint failed to allege how Humble Retailers and Satish Mahajan had a property interest in the Azusa market’s profits after possession was surrendered, Thakkar and Mittal’s demurrer to this cause of action is SUSTAINED with leave to amend.

Specific Performance (Third Cause of Action)

Thakkar and Mittal maintain Humble Retailers and Satish Mahajan’s third cause of action for specific performance fails to plead sufficient facts to state a claim because the Cross-Complaint fails to adequately allege a cause of action for breach of contract. Thus, for the same reasons noted above with regards to the first cause of action, Thakkar and Mittal’s demurrer to this cause of action is SUSTAINED with leave to amend as to Humble Retailers and OVERRULED as to Satish Mahajan.

Declaratory Relief (Fourth Cause of Action)

Thakkar and Mittal argue Humble Retailers and Satish Mahajan’s fourth cause of action for declaratory relief fails to plead sufficient facts to state a claim because the Cross-Complaint fails to establish the existence of an actual controversy. The court agrees as to Humble Retailers and disagrees as to Satish Mahajan.

Legal Standard

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

Discussion

In this case, the Cross-Complaint alleges there is an actual controversy arising between Satish Mahajan, Thakkar, and Mittal regarding their obligations pursuant to the purchase agreement for the Azusa market. (Cross-Complaint, ¶ 28-29.) But there does not appear to an actual controversy with regards to Humble Retailers as they have failed to state a cause of action for breach of contract or conversion.

Accordingly, Thakkar and Mittal’s demurrer to this cause of action is SUSTAINED with leave to amend as to Humble Retailers and OVERRULED as to Satish Mahajan.

CONCLUSION

Based on the foregoing, Thakkar and Mittal’s demurrer to Humble Retailers and Satish Mahajan’s Cross-Complaint is SUSTAINED with ten (10) days’ leave given to amend in its entirety as to Humble Retailers and as to Satish Mahajan’s second cause of action. Furthermore, the demurrer is OVERRULED as to Satish Mahajan’s first, third, and fourth causes of action.