Judge: Salvatore Sirna, Case: 23PSCV00561, Date: 2024-12-05 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: December 5, 2024 Dept: G
Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s
Demurrer to Second Amended Cross-Complaint of Humble Retailers, Inc.
Respondent: Cross-Complainant Humble Retailers, Inc.
Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s
Demurrer to Second Amended Cross-Complaint of Satish Mahajan
Respondent: NO OPPOSITION
TENTATIVE
RULING
Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s
Demurrer to Second Amended Cross-Complaint of Humble Retailers, Inc. is SUSTAINED
with twenty (20) days leave to amend.
Cross-Defendants Rajesh Thakkar and Nidhi Mittal’s
Demurrer to Second Amended Cross-Complaint of Satish Mahajan is
SUSTAINED with twenty (20) days leave to amend.
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, 2023, 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, 2023, 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 March 21, 2024, the court sustained a demurrer to the
Cross-Complaint by Thakkar and Mittal with leave to amend.
On April 11, 2024, Humble Retailers and Satish Mahajan
filed a First Amended Cross-Complaint (FACC) against the same cross-defendants
alleging the same causes of action. On July 17, 2024,
the court sustained demurrers to the FACC by Thakkar and Mittal with leave to
amend.
On
August 6, 2024, Humble Retailers and Satish
Mahajan filed a Second Amended Cross-Complaint (SACC) against the same
cross-defendants alleging the same causes of action.
On October 2, 2024, Thakkar and Mittal filed the present
demurrers. Prior to filing on September 5, 2024, Thakkar and Mittal’s counsel
telephonically met and conferred with Humble Retailers and Satish Mahajan’s
counsel. (Feazell Decl., ¶ 6.) On November 5, 2024, the court continued the
hearing on the present demurrers in order for parties to provide further
briefing.
A hearing on the present demurrers is set for December 5,
2024, along with a case management conference and OSC Re: Failure to File Proof
of Service.
ANALYSIS
Thakkar and Mittal demur to Satish Mahajan’s
second cause of action for conversion and the entire SACC as to Humble
Retailers. For the following reasons, the court SUSTAINS their demurrers in
their entirety with leave to amend.
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’ first
cause of action for breach of contract fails to plead sufficient facts to state
a claim. The court agrees.
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
When the court sustained Thakkar and Mittal’s
demurrer to this cause of action in the initial Cross-Complaint, the court
found it failed to allege any facts establishing Humble Retailers was a party
to the purchase agreement at issue. (3/21/2024 Ruling, p. 2-3.) The FACC
attempted to cure this defect by adding Humble Retailers’ name to the list of
sellers alleged in the FACC. (FACC, ¶ 7.) But in ruling on Thakkar and Mittal’s
demurrer to the FACC, the court found these allegations insufficient as they
contradicted the purchase agreement which only listed Satish Mahajan and Gosain
as sellers. (7/17/2024 Ruling, p. 3.)
The SACC now alleges Humble Retailers “is
definitely a party to the transaction” because it was the owner of the liquor
license that Thakkar and Mittal purchased. (SACC, ¶ 7.) At the hearing and in
supplemental briefing, Thakkar and Mittal argue this allegation contradicts the
terms of the purchase agreement. (Suppl. Brief, p. 4:7-22.) Specifically, they
point to the fact that the liquor license was not specifically mentioned in the
purchase agreement. (SACC, Ex. 1.) They also point out the fact that the purchase
agreement requires all payments to go to Satish Mahajan, not Humble Retailers.
(SACC, Ex. 1.)
“If the allegations in the complaint conflict
with the exhibits, we rely on and accept as true the contents of the exhibits.
However, in doing so, if the exhibits are ambiguous and can be construed in the
manner suggested by plaintiff, then we must accept the construction offered by
plaintiff.” (SC Manufactured Homes, Inc. v. Liebert (2008) 162
Cal.App.4th 68, 83.) Here, while Thakkar and Mittal are correct in arguing the
purchase agreement fails to explicitly list Humble Retailers as a party or
include the liquor license as one of the assets, they fail to appreciate the
ambiguity of this agreement. Notably, while they focus on the fact that the
purchase agreement requires payments to be made to Satish Mahajan, Thakkar and
Mittal seemingly ignore the fact that the purchase agreement does not list
Satish Mahajan as the sole seller. Instead, the agreement lists both Satish
Mahajan and Gosain as sellers. Furthermore, the purchase agreement does not
list the specific assets that are being sold and instead references the sale of
the “market,” an ambiguous term that could reasonably include the market’s
liquor licenses as alleged the SACC. (SACC, Ex. 1.)
Nonetheless, the court finds the SACC remains
insufficiently pled and uncertain. In Thakkar and Mittal’s FAC, they allege
Satish Mahajan and Gosain own and control Humble Retailers, an entity which
operates the market/liquor store at issue. (FAC, ¶ 22-23.) They also allege
Satish Mahajan and Gosain signed the purchase agreement on Humble Retailers’
behalf. (FAC, ¶ 83.) While such allegations could have established Humble
Retailers’ standing for this cause of action, the SACC does not reference or
incorporate these allegations. (Berg v. Investors Real Estate Loan Co. (1962)
207 Cal.App.2d 808, 806 [“[A] cross-complaint must itself be sufficient and
cannot be cured by the pleadings in the original action, that is, the complaint
and answer, apart from permissible incorporation by reference.”].)
In fact, the court finds the SACC is
completely devoid of any allegations describing Satish Mahajan’s relationship
with or to Humble Retailers. It is also unclear on what standing Satish Mahajan
and Humble Retailers are relying to enforce the purchase agreement. Specifically,
it is unclear whether the SACC claims Satish Mahajan and Gosain signed the
purchase agreement in their individual capacities with Humble Retailers serving
as a third-party beneficiary of the sale, or whether Satish Mahajan and Gosain
signed the purchase agreement as agents of Humble Retailers as suggested by Thakkar
and Mittal’s pleading. Regardless, the
court finds the SACC does not make this clear and instead vaguely alleges they
were all “sellers.” (SACC, ¶ 7.) Finally, to the extent the SACC alleges the
liquor license was part of the sale, the SACC fails to allege specific facts that
support this interpretation of the purchase agreement.
Accordingly, the court SUSTAINS Thakkar and Mittal’s demurrer to this cause of action with leave to
amend.
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
When the court sustained Thakkar and Mittal’s
demurrer to this cause of action in the initial Cross-Complaint, the court
found Humble Retailers and Satish Mahajan failed to allege how they had a
property interest in the Azusa market’s profits while Thakkar and Mittal were
in possession of the market. (3/21/2024 Ruling, p. 3.) The FACC attempted to
cure this defect by adding the allegation that Thakkar and Mittal assumed
control of the market before the close of escrow for ten days and were not the
rightful owners because escrow had not closed. (FACC, ¶ 20.) But in ruling on
Thakkar and Mittal’s demurrer to the FACC, the court found these allegations
insufficient because they failed to demonstrate how Humble Retailers and Satish
Mahajan were entitled to the profits of the market. (7/17/2024 Ruling, p. 3.)
Specifically, the FACC did not allege Thakkar and Mittal operated the Azusa
market without Humble Retailers and Satish Mahajan’s permission. (7/17/2024
Ruling, p. 3.) Nor did it allege facts establishing how Humble Retailers and
Satish Mahajan were legally entitled to the profits of the Azusa market before
the closing of escrow. (7/17/2024 Ruling, p. 3.) Instead, the purchase
agreement established Satish Mahajan was entitled to the costs of inventory at
the time of closing and not the additional profits from the sale of such
inventory. (FACC, ¶ 8, Ex. 1.)
The court finds the SACC does little to cure
these deficiencies. It alleges that while Humble Retailers and Satish Mahajan
allowed Thakkar and Mittal to assume control of the business prior to the close
of escrow so they could familiarize themselves with the business, they were not
entitled to any of the profits nor were they obligated for any the business’s
expenses. (SACC, ¶ 20.) The SACC fails, however, to allege from where such a
prohibition came and whether it was memorialized in an oral or written
agreement. And, as noted above, the purchase agreement only entitled Satish
Mahajan to the costs of inventory and was silent as to who was entitled to the
profits of the market if possession was prematurely surrendered to Thakkar and
Mittal.
Accordingly, the court SUSTAINS Thakkar and Mittal’s demurrer to this cause of action with leave to
amend.
Specific Performance (Third Cause of Action)
Thakkar and Mittal maintain Humble Retailers’ third cause
of action for specific performance fails to plead sufficient facts to state a
claim because the SACC 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, the court SUSTAINS Thakkar and Mittal’s demurrer to
this cause of action with leave to amend.
Declaratory Relief (Fourth Cause of Action)
Thakkar and Mittal argue Humble Retailers’ fourth cause of
action for declaratory relief fails to plead sufficient facts to state a claim
because the SACC fails to establish the existence of an actual controversy. The
court agrees.
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 SACC alleges there is an actual
controversy arising between Satish Mahajan, Humble Retailers, Thakkar, and
Mittal regarding their obligations pursuant to the purchase agreement for the
Azusa market. (SACC, ¶ 28-29.) Because the SACC fails to adequately allege a
cause of action for breach of contract and specific performance as noted above,
this cause of action also fails.
Accordingly, the court SUSTAINS Thakkar and Mittal’s demurrer to this cause of action with leave to amend.
CONCLUSION
Based on the
foregoing, Thakkar and Mittal’s demurrers to the SACC are SUSTAINED with
twenty (20) days leave to amend.