Judge: Stephen I. Goorvitch, Case: 21STCV39580, Date: 2022-08-22 Tentative Ruling

Case Number: 21STCV39580    Hearing Date: August 22, 2022    Dept: 39

Elizabeth Harandi v. Farshad Harandi, et al.

Case No. 21STCV39580

Demurrer and Motion to Strike

Order to Show Cause

[TENTATIVE] ORDER

NOTICE

            The Court posts this tentative order on August 18, 2022, at 11:45 a.m., in advance of the hearing on Monday, August 22, 2022, at 9:00  a.m.  The Court provides notice that if Plaintiff’s counsel does not appear at the hearing, absent good cause, he shall waive the right to be heard and shall submit to entry of this tentative order without further hearing. 

INTRODUCTION   

Plaintiff Elizabeth Harandi (“Plaintiff”) filed this action against Farshad Harandi (“Defendant Harandi”), Rodeo Realty, Inc. (“Rodeo Realty”) and Malibu Escrow Company (“Malibu Escrow”) asserting causes of action for breach of fiduciary duty, negligence/gross negligence, fraud, intentional infliction of emotional distress, negligent supervision, and unjust enrichment.  Plaintiff asserts a separate cause of action for punitive damages.  Plaintiff dismissed Malibu Escrow, and Rodeo Realty demurs to the second amended complaint and moves to strike the prayer for punitive damages and related allegations.  The demurrer is sustained without leave to amend, and the Court takes the motion to strike off-calendar as moot. 

PLAINTIFF’S ALLEGATIONS

            Plaintiff and Defendant Harrandi dissolved their marriage.  (Second Amended Complaint, ¶ 7.)  The principal asset of the marriage was a piece of community property in Malibu, California.  (Id., ¶ 8.)  The family court ordered the property to be sold, and the orders “indicated that both parties would be listed as both sellers and brokers on said property that was to be listed for sale.”  (Id., ¶ 8 & Exh. A.)  Specifically, the family court’s order states that the “former family residence” is held in the name of Defendant Harandi, but “each claim an interest in the property . . . .”  (Id., Exh. A.)  The family court ordered that the property be sold, and that Plaintiff “shall be a co-listing agent.”  (Ibid.)  The family court ordered that the “listing agents’ combined commissions shall not exceed 2.5%, which means that each would receive 1.25% of the final sales price.  (Ibid.)    

            The property was listed with two listing agents, Defendant Harandi (who was an agent with Rodeo Realty) and Plaintiff (who is a realtor).  (Id., ¶ 10(a) & Exh. B.)  Then, the property was taken off-market and relisted.  (Id., ¶ 10(b).)  The new listing did not list Plaintiff as a listing agent.  (Id., Exh. C.)  The property sold, and Malibu Escrow was the escrow agent.  (Id., Exh. D.) 

However, the transaction was not completed.  (Id., Exh. F.)  On November 2, 2018, the buyer’s agent sent an email to Plaintiff and Defendant Harrandi stating:

Please find attached our cancellation of contract notice for 26060 Pacific Coast Hwy.  Having conducted an extensive and considerably costly due diligence process, our clients feel that the nature and configuration of the property they entered into escrow, is considerably different to what the property actually is.  The property was marketed as a triplex, without disclosure on your part of the known violations, but now known through our diligence process that the lower level is unpermitted.  The cost to convert to a single family residence is costly and hugely prohibitive, therefore making the purchase at $6,750,000 uneconomically viable.  Given the stupendous cost associated with this conversion, our clients feel that a more reasonable price they can offer is $6,000,000.

(Ibid.)  Defendant Harandi responded:

When we were in the middle of a hot summer market with many potential buyers I wanted to cancel but was assured everything is going through.  All contingencies have been removed. . . .  I have instructed escrow not to release any funds and will not be signing any cancellations [sic] paper.

(Ibid.)     

Defendant Harandi declared bankruptcy in 2019.  (Id., Exhs. G, J.)  Defendant Harandi sought to use Rodeo Realty to sell the property in bankruptcy.  (Id., Exh. G.)  The U.S. Trustee objected, arguing that Rodeo Realty is not disinterested and therefore cannot be employed under Title 11, United States Code, section 327.  (Ibid.)  The U.S. Bankruptcy Court ordered a different realtor: “Plaintiff is informed and believes that another agent sold the subject property in which the Plaintiff’s ownership right or co-broker’s right were [sic] not recognized, honored or compensated for.”  (Id., ¶ 12.)     

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.)  “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, 147 Cal.App.4th at p. 747.)  However, courts do not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

PROCEDURAL HISTORY

            Plaintiff filed the initial complaint on October 26, 2021, and then filed a first amended complaint on December 27, 2021.  Both Rodeo Realty and Malibu Escrow filed demurrers and motions to strike.  The Court issued a tentative order on March 29, 2022, in advance of the hearing.  The Court held a hearing on April 6, 2022, following which it sustained the demurrers with leave to amend.  Plaintiff filed a second amended complaint on May 27, 2022.  Rodeo Realty and Malibu Escrow filed demurrer and motions to strike.  However, Plaintiff filed a request for dismissal against Malibu Escrow on August 16, 2022. 

DISCUSSION

            A.        Jurisdictional Issues

            As an initial matter, this Court lacks jurisdiction over this dispute.  The gravamen of this lawsuit is that the family court ordered Plaintiff and Defendant Harandi to split a commission from acting as co-listing agents on the sale of the family home, and that did not occur.  The family court order at issue related to the sale of the family home, which was a marital asset, and the sale was part of the division of marital property.  (See Second Amended Complaint, Exh. A.)  Therefore, any violation of this order must be addressed in the family law case.  The family court has jurisdiction to characterize, value and divide community property, and no other department of the superior court may entertain proceedings or make any order affecting the family law court’s property division jurisdiction.  (Askew v. Askew (1994) 22 Cal.App.4th 942, 961.) 

            It matters not that Plaintiff characterizes this dispute as one over the listing agents’ commission.  “Almost all events in family law litigation can be reframed as civil law actions if a litigant wants to be creative with various causes of action.  It is therefore incumbent on courts to examine the substance of claims, not just their nominal headings.”  (Neal v. Superior Court (2001) 90 Cal.App.4th 22, 25.)  By ordering Plaintiff and Defendant Harandi to act as co-listing agent, the family court effectively ordered that additional money—the commission, which was 2.5% of the sales price—would be added to the marital estate instead of going to a third-party realtor.  The family court then ordered that this additional marital asset would be split equally between the couple.  In other words, the substance of the family court’s order concerns the division of marital assets, e.g., money from the sale of the family home.  Similarly, Plaintiff challenges Defendant Harandi’s decision to return the sellers’ earnest money deposit, arguing that she is entitled to half that amount.  Again, the earnest money deposit—which goes to the seller if the buyer cancels the transaction—is an asset of the martial estate.  Therefore, this lawsuit is about the disposition of martial property, which must be resolved by the family court.

            Finally, the remedy for the violation of this order would involve the division of marital property.  For example, the family law judge could have ordered that Plaintiff receive additional funds from the marital assets to compensate her for the lost commission and/or the lost earnest money.  Therefore, this Court has no jurisdiction to resolve this dispute.  Although Rodeo Realty is not a party to the family law case, this dispute truly lies between Plaintiff and Defendant Harandi, which places the issue in the jurisdiction of the family court.

            Plaintiff has known about this issue since late 2018.  Therefore, if she did not raise the issue with the family court when she had the opportunity to do so, the doctrine of laches precludes her from doing so now.   

B.        The First Transaction

            In the alternative, the second amended complaint does not state causes of action relating to the first (failed) transaction to sell the family home.  Plaintiff alleges that she was not listed as a co-listing agent on the first transaction, which was not completed.  Plaintiff appears to allege that Defendant Harandi should not have authorized the return of the buyers’ earnest money, and that she is entitled to half that deposit.

            Plaintiff’s claims for breach of fiduciary duty, negligence, and negligent supervision fail because neither Defendant Harandi nor his employer, Rodeo Realty, owed Plaintiff a duty under these circumstances.  There is no law holding that a co-listing agent owes a fiduciary duty to another co-listing agent.  Nor is there any fiduciary duty based upon the parties having a business relationship.  They do not.  The reason Plaintiff and Defendant Harandi served as co-listing agents was because the family court ordered it.  Plaintiff argues that Defendant Harandi owed her a duty because a relator owes a duty to the client.  Again, Plaintiff was not the client because she was not on title to the house.  (See Second Amended Complaint, Exh. A, ¶ I.a.)  This was a court-ordered sale, and the family court set the parameters of the parties’ relationship.  A fiduciary duty cannot be created based upon such an order.

            Nor is there sufficient evidence of fraud or intentional infliction of emotional distress.  Plaintiff does not allege facts demonstrating that Defendants knowingly and intentionally returned the earnest money in order to defraud Plaintiff and cause her emotional distress.  At heart, Plaintiff’s theory is flawed because by returning the earnest money, Defendant Harandi also lost his half of the money, too.  Unjust enrichment is not a separate cause of action or even an independent remedy.  (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387; see also Jorgani v. Superior Court (2008) 165 Cal.App.4th 901, 911-91.)  Therefore, the first transaction cannot form the basis of Plaintiff’s causes of action.      

            B.        The Second Transaction

            Plaintiff also appears to predicate this action on the second transaction through which the family house was ultimately sold.  However, it is unclear how Rodeo Realty has liability for the ultimate sale of the property because it was not the broker.  Nor is there any basis to find liability against Rodeo Realty in its capacity as Defendant Harandi’s alleged employer, because there is no viable claim against Defendant Harandi. 

The second amended complaint appears to predicate this action on Defendant Harandi selling the property without listing Plaintiff as the co-listing agent, thereby depriving her of her commission, in violation of the family court’s order.  However, the ultimate sale of the property was supervised by the U.S. Bankruptcy Court for the Central District of California, which approved the realtor for this transaction.  As the U.S. Trustee noted in his objection, Title 11, United States Code, section 327, authorizes the trustee, with the approval of the U.S. Bankruptcy Court, to retain professionals “that are disinterested persons.”   

Based upon the foregoing, the case against Defendant Harandi and Rodeo Realty is untenable as a matter of law with respect to the second transaction.  Plaintiff cannot allege that Defendant Harandi and Rodeo Realty omitted her as a co-listing agent on the ultimate sale of the property because the U.S. Trustee—not Defendant Harandi—selected the realtor, and the realtor was approved by the U.S. Bankruptcy Judge.  In other words, Defendant Harandi had no authority over that transaction and was not the one who “dropped” Plaintiff as a co-listing agent. 

More important, this case cannot proceed against Defendant Harandi or Rodeo Realty based upon the second transaction pursuant to the Supremacy Clause of the U.S. Constitution.  Section 327 of the U.S. Bankruptcy Code precluded Plaintiff from acting as a co-realtor for this transaction because she was not a disinterested party.  Once the U.S. Bankruptcy Court assumed jurisdiction over the sale of the property, the state court lost jurisdiction to issue or enforce any orders relating to that sale.  Similarly, there is no jurisdiction in the state court to assert claims based on any alleged misconduct relating to that transaction.  For these reasons, this action against Defendant Harandi, and any claims against Rodeo Realty based upon his conduct, are barred as a matter of law, to the extent they are predicated on the second transaction.  Plaintiff’s remedy is to raise the issues before the U.S. Bankruptcy Court or to seek an equitable remedy from the family court given that its order was “overruled” by the U.S. Bankruptcy Court. 

CONCLUSION AND ORDER

            Based upon the foregoing, the Court orders as follows:

            1.         The Court takes the case management conference off-calendar. 

            2.         The Court sustains the demurrer by Rodeo Realty.  The Court takes the motion to strike off-calendar as moot. 

            3.         The Court denies leave to amend.  The Court previously granted leave to amend, to no avail, and it does not appear that any amendment would resolve the deficiencies in the second amended complaint.

            4.         The Court issues an Order to Show Cause why the Court should not dismiss the case against Defendant Harandi with prejudice for the same reasons stated in this order.  The OSC hearing shall be held on September 21, 2022, at 8:30 a.m.  Plaintiff’s counsel may file a response nine court days in advance of the hearing. 

            5.         The Court lifts the stay of discovery and discharges the Order to Show Cause why the stay of discovery should not be lifted.   

            6.         The Court’s clerk shall provide notice.