Judge Upinder S. Kalra, Case 22STCV34721 2023-04-11 Tentative Ruling

CASE NAME: Sagi Jacob Cohen, et al. v. Better Escrow Services, a California Corporation, et al.

1. An order sustaining the demurrer as to the 1^st, 2^nd, 3^rd, 4^th, and 7^th causes of action.

2. An order striking various portions of the Complaint that request punitive damages.

1. Demurrer is SUSTAINED, with leave to amend, as to the 1^st, 2^nd, and 3^rd causes of action.

On October 31, 2022, Plaintiffs Sagi Jacob Cohen and Shlomit Cohen (“Plaintiffs”) filed a complaint against Defendants First Coast Home Improvement, LLC; First Coast Home Improvement, business entity of form unknown; Sparkling Stones, LLC; Mariam Kevliyan; Avetis Avetikian aka Avik Avetikian aka Avik Avetikyan; Narine Avetikyan; Michelle Maghalyan; California Quest Realty, aka Cal Quest Realty; Pacific Point SW, LLC; Pacific Point Realty Fund, LLC; and Better Escrow Services (“Defendants.”) The complaint alleges that Plaintiffs wanted to buy a house and used Defendants to facilitate the purchase. Plaintiffs signed a Residential Purchase Agreement and Joint Escrow Instructions for a house in Woodland Hills, California. Plaintiffs offer was allegedly accepted and was told by Defendant Avik to deliver a cashier’s check for $60,000 to Avik’s company, First Coast Home Improvement. However, Plaintiffs learned the house was sold and later Defendant Avik told Plaintiffs to wire $247,722.52 to Better Escrow Services. Plaintiffs discovered that the wired money was not used to buy the Woodland Hills house, but to purchase an unrelated property in Altadena. Defendant failed to repay the funds.

On December 29, 2022, Defendant Narine Avetikyan filed the current Demurrer with Motion to Strike. Plaintiffs’ Opposition to the Demurrer was filed on March 28, 2023. Defendant’s Reply was filed on April 4, 2023. No Opposition or Reply has been filed as to the Motion to Strike as of April 6, 2023.

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. 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. …. 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 147 Cal.App.4th at 747.)

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436(a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436(b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id. § 437.) “When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” (Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768.)

Prior to filing a demurrer, the demurring party is required to satisfy their meet and confer obligations pursuant to Code of Civ. Proc. §430.41, and demonstrate that they so satisfied their meet and confer obligation by submitting a declaration pursuant to Code of Civ. Proc. §430.41(a)(2) & (3). The Declaration of Ali R. Moghaddami indicates that the parties met and confer via email on December 16, 2022. While the Court finds this meet and confer somewhat lacking, Plaintiffs did not raise any issue with it. Therefore, the Corut finds that this meet and confer is satisfactory.

Defendant Narine Avetikyan demurs on the grounds that the 1^st, 2^nd, 3^rd, 4^th, and 7^th causes of action do not contain sufficient facts to constitute causes of action.[1]

Defendant argues that this cause of action fails because it does not provide any specific or identifiable amount of money that was allegedly converted by Defendant. The complaint states that the Avik Defendants converted the funds to purchase another house. Moreover, the complaint does not identify any “wrongdoing [Defendant Narine] has allegedly committed.” (Demurrer 6: 18-20.)

Plaintiffs argue that that the complaint sufficiently alleges that Defendant worked with her husband, Avik, knowingly participated in and benefitted from the fraud when she “swindled funds to buy a real property she now owns and controls through the LLC.” (Opp. 4: 6-9.) Additionally, Plaintiffs argue that under Haigler v. Donnelly (1941) 18 Cal. 2d 674, when an agent is given money and misapplies the funds, the agent is liable for conversion. Even still, Plaintiffs argue that the complaint alleges a specific amount of money that was “misappropriated and delivered to the wrong place to purchase real estate in defendants’ company name instead of in the name of Plaintiffs.” (Opp. 5: 15-16.)

The elements of conversion are (1) plaintiff’s ownership or right to possession of property; (2) the defendant’s conversion by a wrongful act or right to disposition of property rights; and (3) damages. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.)

“Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment….A “generalized claim for money [is] not actionable as conversion.” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.)

After a review of the complaint, the Court finds that Plaintiffs have failed to sufficiently allege a cause of action for conversion against Defendant Narine Avetikyan. The second element for a cause of action for conversion is that the “defendant’s conversion by a wrongful act.” Here, the complaint indicates that it was Defendant Avik, not Narine, who wrongfully converted the $60,000 in escrow deposit money on or about February 5, 2020 (Complaint ¶ 26) and the balance of the $247,722.52 in 2022. (Complaint ¶ 35.) As stated above, in PCO, Inc., money can be the subject of a conversion, such as when an agent “accepts a sum of money to be paid to another…” (PCO, Inc., supra, 150 Cal.App.4th at 395.) Here, the complaint alleges that Avik was the agent who accepted the money, not Narine. Thus, the complaint does not contain sufficient facts to allege that Defendant Narine was the one who wrongfully converted Plaintiffs’ money. The allegation that some time later on October 3, 2022, Narine filed an updated Statement of Information does not sufficiently provide the missing link.

As stated above, the cause of action for conversion was insufficiently pleaded. Here, the Court finds the same: Plaintiffs have failed to allege facts to constitute a cause of action for conversion.

As to the constructive trust aspect, the Court finds that this was insufficiently pleaded. “Imposition of “[a] constructive trust is an equitable remedy to compel the transfer of property by one who is not justly entitled to it to one who is. [Citation.]” (Citation omitted). It is not “a substantive claim for relief.” (American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1485, as modified (May 27, 2014)).

Defendant argues that the cause of action for fraud does not contain sufficient facts to constitute a cause of action. Specifically, the Complaint does not contain the required specificity for a fraud cause of action. There are no facts alleged that Defendant Narine made any representations, the date of any alleged misrepresentations, any allegations that Defendant attempted to induce Plaintiffs to rely on these alleged statements, or that Plaintiff acted to their detriment on any statements made by Defendant Narine.

Plaintiffs argue that complaint sufficiently alleges that Defendant Narine is liable based on her participation in the conspiracy. Further, Plaintiffs argue that the complaint alleges specific conduct, such as when the Defendant established and operated West Coast Home Improvements, LLC, with her husband in order to defraud individuals including plaintiffs, that she accept the benefit of funds she knew were obtained using the company to perpetrate fraud, that she took her husband’s name off the company the day after her purportedly passed away, and more.” (Opp. 5: 25 – 6: 2.) Moreover, Plaintiffs argue that paragraphs 20 through 39 provide the facts of the misrepresentations made by Avik “as part of the conspiracy.” (Opp. 6: 12-14.)

“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.)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice…this particularity requirements necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tenders.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)“[W]hen averments of fraud are made, the circumstances constituting the alleged fraud must be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” (Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003) (internal quotations and citations omitted).

After a review of the complaint, the Court finds that Plaintiffs have failed to allege facts that constitute fraud. As stated above, fraud requires specificity, the “who, what, where, when” of the alleged statements. Nowhere in the complaint does it state that Defendant Narine made any misrepresentations, when or where these alleged misrepresentations took place, and in what manner. As to Plaintiffs claim of conspiracy, the Court finds this argument fails. “There is no separate tort of civil conspiracy and no action for conspiracy to commit a tort unless the underlying tort is committed and damage results therefrom. The significance of a conspiracy theory of liability is that each member may be held jointly liable as a tortfeasor, even though he or she may not have participated directly in the underlying tort. [Citation omitted.] “The elements of an action for civil conspiracy are (1) formation and operation of the conspiracy and (2) damage resulting to plaintiff (3) from a wrongful act done in furtherance of the common design.” [Citation omitted.] Where fraud is alleged to be the object of the conspiracy, the claim must be pleaded with particularity.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1136.) Even under Plaintiffs’ argument concerning conspiracy, when fraud is alleged, the claim must be pleaded with particularity. Here, there are insufficient facts to indicate that Defendant Narine had knowledge of the fraudulent intent of Defendant Avik Avetikyan at the time he engaged in the conduct or that Narine took part in a conspiracy to defraud.

Defendant argues that the Complaint fails to allege facts about what property Defendant has allegedly stolen, that Defendant knowingly received the funds, a demand by Plaintiffs to return the funds, and an “active concealment of the funds by Defendant Narine.” (Demurrer 9: 18-22.) The only indication that Defendant Narine was involved is Narine “removing Defendant Avik from Defendant First Coast Home Improvement, Inc.’s Statement of Information upon his death and her alleged benefit by association due to Defendant Avik’s purported actions.” (Id. at 22-25.)

Plaintiffs argue that the complaint is sufficient because as Criminal Code § 484 indicates, theft includes property that is “fraudulently appropriated.” Thus, because the complaint states that Plaintiffs’ property, the $400,000, was fraudulently appropriate by defendants. The complaint alleges that Defendant Narine received the stolen property and knowingly operated the companies to perpetuate the fraudulent theft. (Opp. 7: 3-8.)

Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.

The Court finds that the Complaint does not sufficiently allege a violation of Penal Code § 496. The complaint indicates that Defendant Narine accepted funds stolen from Plaintiffs. Plaintiffs allege that Defendant Avik stole the funds and then Defendants First Coast Home Improvement, LLC and Narine Avetikyan accepted those funds. California Penal Code § 484(a) states: “Every person who shall feloniously steal… or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property,…is guilty of theft.” Here, while the complaint sufficiently alleges that Avik applied the funds from Plaintiff to a different transaction and failed to repay the funds, (Complaint ¶¶ 35, 37, 39,) the complaint does not sufficiently allege that when Defendant Narine accepted those fund, she had knowledge of their stolen nature. (Complaint ¶ 77.) Therefore, the complaint sufficiently alleges violation of California Penal Code § 496.

Defendant moves to strike various portions of the Complaint which request punitive and exemplary damages. The portions include paragraphs 52, 57, 65, and Prayer for Reliefs ¶ 3, 6, and 8.

As these portions are contained within the causes of action that the Court has sustained, the Motion to Strike is MOOT.

Leave to amend should be liberally granted if there is a reasonable possibility an amendment could cure the defect. (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.) The Plaintiff has the burden of demonstrating that leave to amend should be granted, and that the defects can be cured by amendment. (“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.” Goodman v. Kennedy (1976) 18 Cal.3d 335, 349). While Plaintiffs did not demonstrate that leave to amend would be possible, the Court finds that, in light of the view that leave to amend is to be liberally granted, the three causes of action may be amended to allege sufficient and specific factual allegations to constitute causes of action.

Demurrer is SUSTAINED, with 20 days leave to amend, as to the 1^st, 2^nd, 3^rd ^,and 7^th causes of action.

[1] As to the 4^th Cause of Action for Negligent Misrepresentation, Plaintiffs indicate that this cause of action will be dismissed without prejudice prior to the hearing.