Judge: Stephen P. Pfahler, Case: 22CHCP00338, Date: 2023-04-17 Tentative Ruling

Case Number: 22CHCP00338    Hearing Date: April 17, 2023    Dept: F49

DEMURRER TO THE COMPLAINT

MOVING PARTY: Defendant, Armen Vardanyan

RESPONDING PARTY: Plaintiff, Ararat Yousefi

RELIEF REQUESTED:

Demurrer to the Complaint

·         1^st Cause of Action: Breach of Contract

·         2^nd Cause of Action: Breach of Fiduciary Duty

·         3^rd Cause of Action: Dissolution of Partnership

·         4^th Cause of Action: Quiet Title

·         5^th Cause of Action: Declaratory Relief

Motion to Strike

SUMMARY OF ACTION

Plaintiff Ararat Yousefi alleges the formation of a partnership with defendant Armen Vardanyan and a subsequent oral agreement for the purpose acquiring, renovating and reselling 10330 Eton Ave., Chatsworth. The agreement required the property purchased in the name of Defendant, with the later addition of Plaintiff to title upon the completion of renovations. Plaintiff further represents agreement to a one-half interest in the property at all relevant times.

The property was apparently acquired with funds provided by Plaintiff. Notwithstanding the agreement, Plaintiff alleges Defendant used some or all of said funds for purposes not related to the acquisition and/or renovations, plus allegedly committed “waste” at other properties owned by the parties

On September 28, 2022, plaintiff filed a complaint for Breach of Contract, Breach of Fiduciary Duty, Dissolution of Partnership, Quiet Title, and Declaratory Relief. On October 3, 2022, Plaintiff filed a notice of pending action.

RULING

Demurrer: Overruled in Part/Sustained with Leave to Amend in Part.

Request for Judicial Notice: Granted.

Defendant Armen Vardanyan brings a demurrer to the entire complaint for Breach of Contract, Breach of Fiduciary Duty, Dissolution of Partnership, Quiet Title, and Declaratory Relief on grounds of failure to state valid claims.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616; Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 [“[U]nder our liberal pleading rules, where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend.]

1^st Cause of Action, Breach of Contract: Overruled.

Defendant challenges the lack of terms regarding the partnership agreement and basis of the agreement itself. Defendant also maintains any such contract agreement based on an oral agreement is barred by the two year statute of limitations. Plaintiff maintains the contract is properly pled, and cites to the definition of a partnership as a basis of the claim. Defendant in reply challenges the lack of specific opposition challenging the type of partnership.

“To state a cause of action for breach of contract, [a plaintiff] must plead the contract, his performance of the contract or excuse for nonperformance, [defendant’s] breach and the resulting damage. (Citation.) Further, the complaint must indicate on its face whether the contract is written, oral, or implied by conduct. (Citation.)” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458–59; Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) In examining a breach of contract claim, the court is required to examine the terms, or at least the legal effect of the contract. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318 [“we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context”]; Otworth v. Southern Pac. Transportation Co., supra, 166 Cal.App.3d at p. 459 [“If the action is based on an 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 instrument must be attached and incorporated by reference”]; Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199 [“In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language”].) Formation of a contract requires four elements: The parties capable of contracting, the parties consent, the contract is for a lawful object, and sufficient consideration is given. (Civ. Code, § 1550.) Consent of the parties must be free, mutual and communicated by each to the other. (Civ. Code, § 1565.)

Plaintiff alleges both the formation of a partnership agreement, and a later formation of the oral contract for the purchase of the property at a price of $1.025 million, renovation and sale of the property. Property would be held equally, but “not necessarily by a recorded document,” though Plaintiff would be added onto title at a late date. All proceeds would be shared upon the deduction of costs. [Comp., ¶ 6.] The actual breach of contract cause of action alleges additional claims including improper use of funds and refusal to account for expenses.

The agreement is summarized as an itemized statement of partnership ownership interests. [Comp., ¶ 20.] The terms are sufficient. The court declines to consider the conflated argument regarding the oral partnership agreement, as the later oral contract is in fact alleged. The court also declines to consider the statute of limitations. The argument lacks any specific dates, and the court declines to infer any dates extrinsic to the operative pleading. The demurrer is overruled.

2^nd Cause of Action, Breach of Fiduciary Duty: Overruled.

Defendant challenges the subject cause of action on grounds of the lack of a validly pled fiduciary duty, due to an insufficiently pled partnership agreement foundation. Plaintiff cites to the complaint in support of the existence of the partnership agreement and therefore a fiduciary duty. Defendant in reply challenges the lack of address to the type of fiduciary duty argument.

A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150.) “A fiduciary or confidential relationship can arise when confidence is reposed by persons in the integrity of others, and if the latter voluntarily accepts or assumes to accept the confidence, he or she may not act so as to take advantage of the other's interest without that person's knowledge or consent.” (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101–02.) “The elements of a cause of action for breach of a duty of loyalty, by analogy to a claim for breach of fiduciary duty, are as follows: (1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach. (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410.)

The operative complaint alleges the existence of the parties’ partnership agreement. [Comp., ¶ 6.] The court finds no dispute over the imposition of a fiduciary duty between partners, and therefore finds the allegations otherwise adequate. Arguments regarding corporate officers and punitive damages are both extrinsic to the demurrer and/or not pertinent to the determination of a validly pled cause of action. The demurrer is overruled.

3^rd Cause of Action, Dissolution of Partnership: Overruled.

Defendant challenges the dissolution of partnership claim on ground that the complaint fails to identify the type of partnership, thereby precluding any claim all together. Plaintiff counters that the complaint sufficiently alleges the existence of a partnership and the arguments are otherwise extrinsic. Defendant in reply reiterates the lack of the type of partnership as the basis for the lack of an underlying basis for dissolution.

The court finds the complaint sufficiently articulates the formation of the partnership agreement. The right to pled a dissolution of the agreement exists regardless of the underlying basis of the agreement. The arguments beyond the right to seek a dissolution are beyond the scope of the demurrer. The demurrer is overruled.

4^th Cause of Action: Quiet Title: Sustained with Leave to Amend.

Defendant challenges the quiet title claim on grounds of lack of a verified complaint, and failure to state facts supporting a claim based on the request for judicial notice showing title only in the name of Defendant. Plaintiff concedes to the lack of verification, but offers proof of verification. Plaintiff alleges the complaint states a claim for quiet title based on equitable interests. Defendant reply reiterates the lack of verification, and failure to respond to the statute of frauds argument.

The complaint is not verified, and the court declines to consider the notice of errata submitted as part of the opposition to the demurrer. (Code Civ. Proc., § 761.020.) The demurrer is therefore sustained on this basis for purposes of allowing Plaintiff to file the verification with the amended pleading. The court declines to consider the equity arguments given the lack of a valid, verified underlying cause of action.

5^th Cause of Action, Declaratory Relief: Overruled.

Defendant challenges the declaratory relief claim on the lack of an actual ongoing controversy. Plaintiff alleges the complaint alleges an ongoing controversy based on the exclusion from ongoing business operations arising from the partnership agreement. Defendant in reply reiterates the prospective emphasis of declaratory relief, and contends the subject action is strictly seeking to remedy past wrongs.

Declaratory relief arises under Code of Civil Procedure section 1060, which states in part:

“Any person interested under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”

“‘[S]ection 1060 does not require a breach of contract in order to obtain declaratory relief, only an ‘actual controversy.’ Declaratory relief pursuant to this section has frequently been used as a means of settling controversies between parties to a contract regarding the nature of their contractual rights and obligations.’” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 365.) Declaratory relief operates prospectively. (Id. at p. 366.)

“[U]nder California rules, an actual controversy that is currently active is required for such relief to be issued, and both standing and ripeness are appropriate criteria in that determination. (Citation.) One cannot analyze requested declaratory relief without evaluating the nature of the rights and duties that plaintiff is asserting, which must follow some recognized or cognizable legal theories, that are related to subjects and requests for relief that are properly before the court.”

(Otay Land Co.v. Royal Indemn. Co. (2008) 169 Cal.App.4th 556, 563.)

To the extent the operative complaint relies on the ongoing partnership dispute, the court finds the complaint sufficiently alleges declaratory relief. The demurrer is overruled.

Motion to Strike: Moot/Denied in Part/Granted in Part

Defendant moves to strike the entire complaint as well as (alternatively striking) the claims for punitive damages in the second cause of action.

To the extent the motion to strike constitutes a challenge to the adequacy of the pled causes of action, the court declines to turn the subject motion into the functional equivalent of a demurrer. (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683 [While a demurrer is not the exclusive means to challenge a cause of action, a motion to strike generally applies to parts of a cause of action, claim for damages, or where the cause of action or primary right is barred as a matter of law.]; Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281 [“Where a whole cause of action is the proper subject of a pleading challenge, the court should sustain a demurrer to the cause of action rather than grant a motion to strike”].) The court already considered the merits of the claims in the demurrer. The motion is moot as to quiet title, and denied as to the entirety of the remaining causes of action.

Civil Code Section 3294, subdivision (c) authorizes punitive damages upon a showing of malice, oppression, or fraud, which are defined as follows:

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

Punitive damages require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pled in support of punitive damages. (Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-392.) “The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. [Citation.] Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim. [Citation.]” (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166, fn. Omitted [emphasis added].)

The complaint lacks specific facts in support of punitive damages beyond the breach of fiduciary claim itself. The motion to strike is granted without prejudice as to the punitive damages claim.

In summary, the demurrer is sustained with 30 days leave to amend as to the quiet title cause of action, and overruled as to the remainder. The motion to strike is moot as to the quiet title cause of action, denied as to the challenges to the entire operative complaint, and granted as to the claims for punitive damages in the second cause of action.

Plaintiffs may not add any new or different causes of action, and may only add facts within the scope of the quiet title claim only, including verification. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) Any new causes of action added without leave from court are subject to a motion to strike. If Plaintiff declines to file an amended pleading, Defendant is ordered to answer the remaining cause of action within 10 days of the lapse of the amendment deadline. Assuming no alterations of the overruled causes of action, any subsequent challenges to any other causes of action other than the quiet title cause will be barred under the successive demurrer rule. (Code Civ. Proc., § 430.41, subd. (b).)

Defendant to give notice.