Judge Thomas D. Long, Case Number: 20STCV31115, Date: 2024-08-22 Tentative Ruling

On November 29, 2021, Paula Green filed a third amended complaint (“TAC”) against Douglas Emmett Management LLC and Barrington Plaza LLC.

On March 26, 2024, Douglas Emmett Management LLC, Barrington Plaza LLC, and ESIS (collectively, “Cross-Complainants”) filed a first amended cross-complaint (“FACC”) against Paula Green and Larry Caldwell (collectively, “Cross-Defendants”).

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)

A person who desires a declaration of his or her rights or duties with respect to another may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an action for a declaration of rights or duties, either alone or with other relief. (Code Civ. Proc., § 1060.)

Cross-Complainants allege that Green, Douglas Emmett, and Barrington Plaza entered into a tentative settlement agreement pursuant to which ESIS (a third-party administrator of Douglas Emmett’s and Barrington Plaza’s insurer) delivered a check for $275,000 to Caldwell (Green’s attorney). (FACC ¶¶ 5, 12-13.) ESIS delivered the payment for the benefit of Douglas Emmett and Barrington Plaza, subject to the Court’s approval of the settlement funds under Code of Civil Procedure section 708.440, due to judgment creditors filing Notices of Judgment Liens as to Green. (FACC ¶¶ 11, 14, 21.) No application under section 708.440 has been filed. (See FACC ¶ 15.) Caldwell cashed the check and refuses to return the payment, despite there being no legal basis to retain it. (FACC ¶¶ 18-23.) Cross-Complainants allege that there is an actual controversy about the return of the funds because there was no Court approval under section 780.440, and they seek a judicial determination “that Cross-Defendants must return the Settlement Payment . . . [and] “that Plaintiff may not proceed to trial on her Third Amended Complaint unless and until Cross-Defendants return the Settlement Payment.” (FACC ¶¶ 26-28.) This sufficiently alleges the existence of an actual controversy for a judicial determination.

Cross-Defendants argue that “there is no settlement agreement, and no one is trying to enforce it. Seeking rescission of a non-existent agreement no one is trying to enforce would be seeking a legal nullity.” (Demurrer at p. 4.) They contend that, “as a matter of law, there is no legally enforceable settlement agreement between Paula Green and Defendants,” and “[n]either Paula Green nor Defendants contend that there is a binding settlement agreement, and neither of them are seeking enforce the settlement agreement.” (Id. at p. 5.) If that is true, then there would not be a basis for Cross-Defendants to retain the funds—which is a subject of Cross-Complainants’ requested judicial determination.

Cross-Defendants also argue that Douglas Emmett and Barrington Plaza have no standing because the funds were owned by ESIS, and they have no property interest. (Demurrer at p. 5.) This ignores the other determination sought by Cross-Complainants: “a judicial determination that Plaintiff may not proceed to trial on her Third Amended Complaint unless and until Cross-Defendants return the Settlement Payment” that was paid on their behalf to settle the TAC. (FACC ¶ 28; see FACC ¶¶ 12-14, 21.)

Cross-Defendants argue that ESIS lacks statutory authorization to bring the FACC because they were previously a non-party. (See generally Demurrer.)

A party against whom a cause of action has been asserted in a complaint may file a cross-complaint bringing any cause of action they have against the parties who filed the initial complaint or against any non-party if the cross-complaint’s claims arise out of the same transaction or assert an interest in the same property. (Code Civ. Proc., § 428.10.) When a party files a cross-complaint, “he may join any person as a cross-complainant or cross-defendant, whether or not such person is already a party to the action, if, had the cross-complaint been filed as an independent action, the joinder of that party would have been permitted by the statutes governing joinder of parties.” (Code Civ. Proc., § 428.20.)

That is what properly occurred here. Douglas Emmett and Barrington Plaza (the original Defendants) filed the FACC against Green (the original Plaintiff) and Caldwell (previously a non-party), which arises from the same controversy. (See Code Civ. Proc., §§ 379, 428.10.) They joined ESIS as a Cross-Complainant under Code of Civil Procedure section 428.20 because joinder is permitted under section 378. (See Opposition at pp. 4-7.)

Cross-Defendants argue that Douglas Emmett and Barrington Plaza made a judicial admission that ESIS owned the $275,000, so they cannot amend the remaining causes of action to assert a property interest in it. (See generally Demurrer.)

All Cross-Defendants allege all causes of action against both Cross-Defendants. However, Douglas Emmett’s and Barrington Plaza’s property interests and ability to assert these claims are unclear.

The second cause of action alleges conversion. Conversion requires (1) plaintiff’s ownership or right to possession of personal property, (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119) The FACC alleges that the funds were drawn from ESIS’s bank account, and “Cross-Defendants have substantially interfered with ESIS’s property.” (FACC ¶¶ 30-31.) There are no allegations about any ownership by Douglas Emmett and Barrington Plaza.

The third cause of action alleges unjust enrichment. “The elements of an unjust enrichment claim are the ‘receipt of a benefit and [the] unjust retention of the benefit at the expense of another.’ [Citation.]” (Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593.) Unjust enrichment is not a cause of action, but a court may construe a cause of action for unjust enrichment as a cause of action for quasi-contract seeking restitution. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.) “[T]he quasi-contract, or contract ‘implied in law,’ is an obligation created by the law without regard to the intention of the parties and designed to restore the aggrieved party to his former position by the return of the thing delivered or the money expended.” (Masonite Corp. v. Pacific Gas & Electric Co. (1976) 65 Cal.App.3d 1, 10-11.) The FACC alleges that “would be unjust and inequitable if Cross-Defendants were permitted to retain the benefit of the Settlement Payment when the Court has not approved a settlement or dismissal of Plaintiff’s Third Amended Complaint,” and Cross-Defendants will be unjustly enriched “if they are permitted to continue prosecuting Plaintiff’s Third Amended Complaint despite retaining the Settlement Payment without any legal basis for doing so.” (FACC ¶¶ 39-40.) However, there are no allegations about Cross-Defendants’ retention of Douglas Emmett’s and Barrington Plaza’s property.

The fourth cause of action alleges fraudulent transfer, and the fifth cause of action alleges constructive fraudulent transfer under the Uniform Voidable Transactions Act. The FACC alleges that Caldwell fraudulently transferred the funds, which are alleged to be ESIS’s property. (See FACC ¶¶ 23, 49-50, 58.) There are no allegations about the transfer of Douglas Emmett’s and Barrington Plaza’s property.

The sixth cause of action alleges breach of fiduciary duty. The FACC alleges that Caldwell owed a fiduciary duty to ESIS, but there is no allegation of a fiduciary duty owed to Douglas Emmett and Barrington Plaza. (See FACC ¶¶ 66-70.)

The seventh cause of action alleges money had and received. “A cause of action for money had and received is stated if it is alleged the defendant ‘is indebted to the plaintiff in a certain sum “for money had and received by the defendant for the use of the plaintiff.”’ [Citation.]” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.) The FACC alleges that Caldwell received the funds for the benefit of Douglas Emmett and Barrington Plaza, but they have not received the intended benefit. (FACC ¶¶ 72-74.) However, there are no allegations that Cross-Defendants are indebted to Douglas Emmett and Barrington Plaza; the FACC alleges that the funds belonged to ESIS.

The demurrer to the second through seventh causes of action is sustained as to Douglas Emmett’s and Barrington Plaza’s claims.

The demurrer to the second, third, fourth, fifth, sixth, and seventh causes of action (as to Douglas Emmett and Barrington Plaza) is SUSTAINED with 30 days’ leave to amend.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court