Judge: Stephen P. Pfahler, Case: 22CHCV00748, Date: 2023-03-27 Tentative Ruling

Case Number: 22CHCV00748    Hearing Date: March 27, 2023    Dept: F49

Dept. F-49

Date: 3-27-23

Case #22CHCV00748

Trial Date: Not Set

 

DEMURRER

 

MOVING PARTY:                Defendant, Afshin Azizisefat, et al.

RESPONDING PARTY:       Plaintiff, Varuzh Azaryan

 

RELIEF REQUESTED

Demurrer to the Complaint

·         1st Cause of Action: Fraud and Intentional Deceit

·         2nd Cause of Action: Conspiracy to Defraud

·         3rd Cause of Action: Breach of Fiduciary Duty

·         4th Cause of Action: Constructive Fraud

·         5th Cause of Action: Breach of Contract

·         6th Cause of Action: Breach of Covenant of Good Faith and Fair Dealing

 

Motion to Strike

 

SUMMARY OF ACTION

Plaintiff Varuzh Azaryan alleges the formation of an agreement with defendant Afshin Azizisefat, whereby the parties would jointly acquire and remodel 12509 Pinney St., Pacoima with all proceeds split equally. Plaintiff alleges Afshin agreed to contribute a down payment and take title to the property, with Plaintiff undertaking remodeling operations.

 

It’s not clear whether the parties intended to resell or rent the premises. Plaintiff alleges a written agreement “itemizing their partnership and Plaintiff’s ownership interest” on May 7, 2022. On August 31, 2022, Plaintiff alleges Afshin Azizisefat (Afshin) listed the premises for sale without the agreement of Plaintiff, and denied the existence of any partnership agreement or equity interest in the property. Afshin identified defendant Neda Azizisefat (Neda) as the business partner and joint equity holder. Afshin also provided a “fraudulent and backdated” promissory note dated March 2022 as evidence of Defendants’ ownership interest.

 

On September 9, 2022, Plaintiff filed a complaint for Fraud and Intentional Deceit, Conspiracy to Defraud, Breach of Fiduciary Duty, Constructive Fraud, Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, Quiet Title, and Conversion. Neda is only named in the conspiracy cause of action; Afshin is named in all causes of action.

 

RULING

Demurrer: Overruled.

Defendants Afshin Azizisefat and Neda Azizisefat submit a demurrer to the first through sixth causes of action to the complaint on grounds of insufficient facts and failure to state a claim. Plaintiff in opposition maintains all causes of action are well pled. Defendants in reply reiterate the arguments in the demurrer.

 

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.]

 

1st Cause of Action: Fraud and Intentional Deceit

Afshin challenges the subject cause of action on grounds that the complaint lacks an alleged knowing false statement and basis of reasonable reliance. Plaintiff in opposition maintains the cause of action is properly pled.

 

“‘The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Ibid.) “‘Active concealment or suppression of facts by a nonfiduciary “is the equivalent of a false representation, i.e., actual fraud.” [Citation.] (Citation).)’ A fraud claim based upon the suppression or concealment of a material fact must involve a defendant who had a legal duty to disclose the fact. (Civ.Code, § 1710, subd. (3) [a deceit includes “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact”]; Citation.)” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186.)

 

Plaintiff apparently seeks to allege fraud based on Afshin falsely presenting an interest and intent to form a real estate investment partnership, when in fact Afshin intended to “steal the proceeds” of Plaintiff’s acumen and work on the project. [Comp., ¶¶ 12-14, 22, 26-27.] The court finds the allegations sufficient for purposes of withstanding the demurrer. The intent comes across in the context of the transaction, and the reliance is demonstrated in the conduct of Plaintiff acting upon the belief and assumption regarding the furtherance of the purported partnership agreement.

 

2nd Cause of Action: Conspiracy to Defraud

Defendants rely on the argued deficiencies in the first cause of action as a lack of foundation for the conspiracy claim. Plaintiff counters that the complaint both alleges fraud and conspiracy.

 

“Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510–511.) The conspiracy “must be activated by the commission of an actual tort.” (Id. at 511.)

 

“A party seeking to establish a civil conspiracy ‘must show that each member of the conspiracy acted in concert and came to a mutual understanding to accomplish a common and unlawful plan, and that one or more of them committed an overt act to further it. [Citation.] It is not enough that the [conspirators] knew of an intended wrongful act, they must agree—expressly or tacitly—to achieve it.’ (Citation omitted.) It must be recognized, however, that because of the very nature of a conspiracy, ‘its existence must often be inferentially and circumstantially derived from the character of the acts done, the relations of the parties and other facts and circumstances suggestive of concerted action.’ (Citation omitted.) While a complaint must contain more than a bare allegation the defendants conspired, a complaint is sufficient if it apprises the defendant of the ‘character and type of facts and circumstances upon which she was relying to establish the conspiracy.’ (Citations omitted.)” (Arei II Cases (2013) 216 Cal.App.4th 1004, 1022.)

 

A conspiracy claim requires three elements: “(1) the formation and operation of the conspiracy, (2) wrongful conduct in furtherance of the conspiracy, and (3) damages arising from the wrongful conduct.” (Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1581.) The operative complaint provides reference to the elements of a conspiracy. [Comp., ¶¶ 33-38.]

 

While the action of Neda lacks specifics, the previously found sufficient fraud claim combined with the conspiracy allegations renders the cause of action satisfactory for purposes of the demurrer.

 

3rd Cause of Action: Breach of Fiduciary Duty

Afshin 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.

 

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., ¶¶ 19-20, 41.] The court finds no dispute over the imposition of a fiduciary duty between partners, and therefore finds the allegations otherwise adequate.

 

4th Cause of Action: Constructive Fraud

Afshin refers back to the first and third causes of action in support of the lack of a constructive fraud cause of action. Plaintiff maintains constructive fraud is properly pled.

 

The elements of constructive fraud are: “(1) a fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive; and (4) reliance and resulting injury (causation).” (Stokes v. Henson (1990) 217 Cal.App.3d 187, 197.) The complaint alleges a fiduciary relationship and fraud. [Comp., ¶¶ 47-49.]

 

5th Cause of Action: Breach of Contract

Defendant contends the complaint lacks support for the formation of a contract and consideration. Defendant also challenges the lack of terms. Plaintiff maintains the contract is properly pled as stated in the purported written partnership agreement.

 

“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.)

 

The agreement is summarized as an itemized statement of partnership ownership interests. [Comp., ¶ 20.] The terms are sufficient. The court finds no legal or factual support for the arguments regarding lack of assent and consideration. The court declines to state the arguments for Defendant.

 

6th Cause of Action: Breach of Covenant of Good Faith and Fair Dealing

Afshin relies on the lack of a contract as the only basis for the demurrer to the instant cause of action. Plaintiff maintains a valid contract is stated. Given the valid contract, the court declines to find an invalid cause of action on this basis. (See Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)

 

The demurrer is overruled.

 

 

Motion to Strike: Denied.

Defendants move to strike all punitive damages claims. Plaintiff counters that the fraud claims support the punitive damages claims.

 

Plaintiff seeks punitive damages in the fraud and breach of fiduciary causes of action. Defendants lack any specific challenge beyond reliance on the fraud allegations. 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.

 

The fraud causes of action support punitive damages. The court finds the incorporated fraud claims in the breach of fiduciary duty claims also support punitive damages. The motion to strike is denied.

 

 

In summary, the demurrer is overruled, and the motion to strike is denied. Defendants are ordered to answer within 10 days of this order.

 

Defendants to give notice.