Judge: Virginia Keeny, Case: 22STCV20793, Date: 2025-03-04 Tentative Ruling
Case Number: 22STCV20793 Hearing Date: March 4, 2025 Dept: 45
ARTUR SARGSYAN V. TT CLUB MUTUAL
INSURANCE LIMITED, ET AL.
DEMURRER TO SECOND AMENDED CROSS-COMPLAINT; MOTION TO
STRIKE
Date of Hearing: March 4, 2025 Trial Date: May 19, 2025
Department: 45 Case No.: 22STCV20793
Moving
Party: Plaintiff and
Cross-Defendant Artur Sargsyan dba Frontline Sports
Responding
Party: Defendant, Cross-Defendant,
and Cross-Complainant TT Club Mutual Insurance Limited
BACKGROUND
This is an insurance dispute. Plaintiff Artur Sargsyan dba
Frontline Sports (“Plaintiff” or “Sargsyan”) filed this action on June 24, 2022
against Defendants TT Club Mutual Insurance Limited (“TT Club”) and PAF
Insurance Services, LLC (“PAF”) for: (1) Breach of Contract; (2) Breach of the
Implied Covenant of Good Faith and Fair Dealing; (3) Reformation; (4)
Professional Negligence; (5) Negligent Misrepresentation; (6) Tort of Another;
and (7) Violation of Bus. & Prof. Code § 17200. Plaintiff is the owner and
operator of a sports memorabilia business in Sunland, California. (Compl., ¶
6.) The Complaint alleges that Defendant TT Club failed to fully indemnify
Plaintiff under the terms of their policy for losses suffered from sports
trading cards that were lost in shipment on July 9, 2020. (Compl. at ¶¶ 15-16,
24-27, 29-32.)
TT Club filed a Cross-Complaint on October 27, 2022 against
PAF, alleging causes of action for: (1) Violation of the Carmack Amendment; (2)
Equitable/Comparative/Implied Indemnity; (3) Contribution; and (4) Declaratory
Relief.
PAF filed a Cross-Complaint against TT Club on December 14,
2022, alleging the following causes of action: (1) Equitable Indemnity; (2)
Apportionment of Fault/Contribution; and (3) Declaratory Relief.
After being granted leave to file an amended
cross-complaint, TT Club filed a First-Amended Cross-Complaint against PAF,
Total Quality Logistics, and Luda Express Inc. on December 15, 2023, alleging
causes of action for: (1) Violation of the Carmack Amendment; (2)
Equitable/Comparative/Implied Indemnity; (3) Contribution; (4) Declaratory
Relief; (5) Fraud; and (6) Violation of Penal Code § 496.
On January 3, 2024, PAF filed a First-Amended
Cross-Complaint against TT Club and Luda Express, Inc. alleging causes of
action for: (1) Violation of the Carmack Amendment; (2) Equitable Indemnity;
(3) Apportionment/Contribution; and (4) Declaratory Relief.
On February 13, 2024, TT Club filed a Second Amended
Cross-Complaint against PAF, Total Quality Logistics, Luda Express, Inc. and
Plaintiff, which alleges the following causes of action: (1) Violation of the
Carmack Amendment; (2) Declaratory Relief; (3) Fraud; (4) Violation of Penal
Code § 496; and (5) Breach of Contract.
On March 14, 2024, the parties stipulated to allow TT Club
to file a Second Amended Cross-Complaint “in the form previously submitted to
the [C]ourt on February 12, 2024.” (03/14/24 Stipulation and Order at ¶ 6.) The
Court ordered TT Club to file its Second Amended Cross-Complaint on or before
April 5, 2024. (See 03/14/24 Order on Stipulation.)
On April 4, 2024, TT Club filed a Second Amended
Cross-Complaint against PAF, Total Quality Logistics, Luda Express, Inc. and
Plaintiff, which alleges the following causes of action: (1) Violation of the
Carmack Amendment; (2) Declaratory Relief; (3) Fraud; (4) Violation of Penal
Code § 496; and (5) Breach of Contract.
On June 7, 2024, Sargsyan filed a demurrer to the third and
fourth causes of action in the Second Amended Cross-Complaint filed by TT Club.
Also, on such date, Sargsyan filed a motion to strike portions of the Second
Amended Cross-Complaint filed by TT Club.
[Tentative] Ruling
The Court SUSTAINS the demurrer of Sargsyan to the third
cause of action for fraud and fourth cause of action for violation of Pen. Code
§ 496 in the SAXC filed by TT Club with 20 days leave to amend.
The motion to strike is GRANTED with 20 days leave to amend.
LEGAL
STANDARD
A party
may demur to a cross-complaint on the grounds that it “does not state facts
sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd.
(e).) A demurrer tests whether the cross-complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th
740, 747.)
When
considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT
Mobile, Inc.
(2010) 185 Cal.App.4th 1068, 1078.) “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.)¿On demurrer, a court does “not accept contentions, deductions or
conclusions of fact or law.” (Simonyan v. Nationwide Insurance Company of America (2022) 78 Cal.App.5th
889, 895.)
Although
courts construe pleadings liberally, sufficient facts must be alleged to
support the allegations pled to survive a demurrer. (Rakestraw v. California
Physicians' Serv. (2000) 81 Cal.App.4th 39, 43.) Where a demurrer is
sustained, leave to amend must be allowed where there is a reasonable
possibility of successful amendment. (Goodman v. Kennedy (1976) 18
Cal.3d 335, 349.) The burden is on the party who filed the pleading subject to
demurrer to show the court that a pleading can be amended successfully. (Ibid.)
“Any
party, within the time allowed to respond to a pleading may serve and file a
notice of motion to strike the whole or any part thereof.” (Code Civ. Proc. §
435(b)(1).) A court may “[s]trike out any irrelevant, false, or improper matter
inserted in any pleading.” (Code Civ. Proc. § 436(a).) A court may “[s]trike
out 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.” (Code Civ. Proc. §
436(b).)
DEMURRER
Pertinent
Allegations of the Second Amended Cross-Complaint
The
Court finds it necessary to set forth the pertinent allegations of the Second
Amended Cross-Complaint (“SAXC”) filed by TT Club. The SAXC alleges the
following: by the SAXC, TT Club seeks to recover from Sargsyan the $500,000.00
in insurance proceeds it paid Sargsyan for the alleged loss of a shipment of
sports trading cards while the shipment was allegedly in transit by motor
vehicle from Nicholasville, KY to Sunland, CA, in July 2020. (SAXC, ¶ 1.) TT
Club paid Sargsyan $500,000.00 on or about January 27, 2022, based on a claim
for loss of the trading cards made by the TT Club by Sargsyan and his business
associate Elvis Toomas (“Toomas”). (SAXC, ¶ 2.) Sargsyan and Toomas alleged
that a shipment of sports trading cards insured under a policy of insurance
issued on behalf of the TT Club had disappeared sometime between July 9, 2020,
when the cards had allegedly been stowed in a trailer entrusted to Luda
Express, Inc. (“Luda”) in Kentucky for motor carriage to California, and July
14, 2020, when the trailer was delivered by Luda to Sargsyan in California
without the cargo. (SAXC, ¶ 2.) Luda asserts that the cards were never
delivered to it by Sargsyan, but Sargsyan contends that Luda removed the cards
after he entrusted them to Luda for transport to California. (SAXC, ¶ 2.)
In
October 2019, Sargsyan allegedly paid $10,000.00 in cash for and acquired a
cache of sports trading cards offered for bid on E-Bay, and the trading cards
were stored in a public storage unit in Nicholasville, KY. (SAXC, ¶ 13.) In
July 2020, Sargsyan engaged Total Quality Logistics (“TQL”) to arrange the
motor carriage of a portion of the trading cards from Kentucky to his facility
in Sunland, CA. (SAXC, ¶ 14.) TQL hired Luda to transport the cards to
California, and Luda assigned Jason Xu (“Xu”), a commercial truck driver, to
perform the actual transport of the cards to California. (SAXC, ¶ 14.)
PAF
Insurance Services, LLC (“PAF”) issued three separate certificates of marine
cargo insurance naming Sargsyan as the Assured based on an online application
made to PAF by Sargsyan on July 6, 2020. (SAXC, ¶ 15.) The certificates
identified the Policy number as PAF001. (SAXC, ¶ 15.) The certificates were
issued at the behest of PAF via the TT Club website and provided that the TT
Club would insure Cross-Complainant Insured’s loss or damage liability or
expense, subject to the full terms and conditions of the policy. (SAXC, ¶ 15.)
The terms and conditions contained a per conveyance limit of $500,000.00 and
the certificates identified the “Assured” as “Arthur Sargsyan/Frontline Sports”
and the TT Club client as “PAF Insurance Services LLC.” (SAXC, ¶ 15.)
One
of the three separate certificates of marine cargo insurance was issued on July
8, 2020, and the other two certificates were issued on July 9, 2020. (SAXC, ¶
16.) Each of the certificates were in respect to the carriage of “500 boxes
card packed in monster boxes” from Nicholasville, KY to Sunland, CA on a
“Vessel/Conveyance” operated by Luda, “Sailing on/or about July 9, 2020.”
(SAXC, ¶ 16.) Each interest was described as “Full Trailer Load, Shipper Load and
Count Sealed at Origin Consisting of (500 Boxes Cards Packed in Monster
Boxes).” (SAXC, ¶ 16.) Each certificate identified “Marks or Numbers”
respectively as 14697632-1, 14697632-2, and 14697632-3. (SAXC, ¶ 16.) The sum
insured under each of the certificates was stated to be $500,000.00. (SAXC, ¶
16.) The certificates of insurance were issued to Sargsyan under contractual
authority granted to PAF by TT Club in an open marine cargo policy naming PAF
as the assured at all times subject to the terms and conditions of policy No.
PAF001. (SAXC, ¶ 17.)
As
part of the process for obtaining the insurance from PAF, Sargsyan completed an
online form that provided the necessary details of the shipment to be insured,
including the particulars of the insured shipments. (SAXC, ¶ 18.) The PAF
online website through which the application was submitted included a link to
the TT Club policy terms. (SAXC, ¶ 18.) Those terms and conditions included a
limit of liability of $500,000.00 “per conveyance. (SAXC, ¶ 18.) Upon
information and belief, a specific recitation of the “Valuation” terms of the
policy was also provided by PAF in the online application form that stated the
insured value of the goods had a “limit of liability for any one
shipment/conveyance” of $500,000.00. (SAXC, ¶ 18.) Upon information and belief,
prior to the alleged shipment of the cards, PAF reiterated to Sargsyan via
email that the alleged $1,500,000.00 value of the cards was to be split equally
between three separate shipments. (SAXC, ¶ 19.) Sargsyan was given instructions
to forward the bills of lading for each shipment after loading, which he did
not do until after the trailer arrived in California and the trailer had been
opened and discovered to be empty. (SAXC, ¶ 19.) Sargsyan represented that he
would send pictures at loading, which also was not done until after the empty
trailer arrived in California. (SAXC, ¶ 19.)
TT
Club alleges that, on July 9, 2020, Xu, a commercial truck driver assigned by
Luda to pick up and transport the shipment of trading cards, arrived at the
storage facility in Nicholasville, KY, between 2:00 p.m. and 3:00 p.m. Eastern
Daylight Time (EDT) and dropped off the trailer to be used to transport the
trading cards. (SAXC, ¶ 20.) After Xu departed from the storage facility and
drove to a nearby Walmart parking lot, Sargsyan, Toomas, and day laborers which
were hired, loaded boxes allegedly containing the trading cards into the
trailer and took photos and videos of the boxes as they were allegedly loaded.
(SAXC, ¶ 20.) The loading of the boxes into the container was completed no
later than 6:41 p.m. EDT on July 9, in Nicholasville. (SAXC, ¶ 20.) Sargsyan or
Toomas did not notify Maxwell Wu (“Wu”) (Luda’s General Manager and dispatcher
in California), or the Luda driver Xu that the loading was completed until
approximately 9:21 p.m. that night, after which Wu dispatched the Luda driver
Xu to return to the Nicholasville storage facility to pick up the cargo. (SAXC,
¶ 20.)
Xu
arrived at the storage facility at approximately 10:00 p.m. EDT on July 9 to
pick up the trailer and, upon his arrival, he found the trailer doors closed.
(SAXC, ¶ 21.) Xu did not observe the contents of the trailer or the number of
the seal on the trailer doors. (SAXC, ¶ 21.) A bill of lading no. 14697632 was
prepared by or on behalf of Plaintiff Frontline Sports to cover the motor
carriage of the trading cards from Nicholasville, KY to Sunland, CA. (SAXC, ¶
22.) When he picked up the trailer on the night of July 9, Xu signed the bill
of lading on behalf of Luda but did not observe the contents of the trailer or
the number of the security seal on the trailer doors. (SAXC, ¶ 22.)
TT
Club alleges that, upon the arrival of Luda’s driver at Sargsyan’s Sunland, CA
premises on July 14, 2020 with the trailer, it was discovered that none of the
trading cards were in the trailer. (SAXC, ¶ 25.)
As
to Sargsyan, the SAXC alleges that a general notice of claim was signed by
Sargsyan on July 24, 2020, and was sent to PAF and TT Club. (SAXC, ¶ 27.) A
formal written notice of claim was sent by Sargsyan to TQL and Luda on March
24, 2021, in accordance with the requirements of the Carmack Amendment. (SAXC,
¶ 27.) By these notices, Sargsyan represented that the cargo of trading cards,
valued in excess of $1,500,000.00, had been lost during transit from Kentucky
to California. (SAXC, ¶ 27.) In reliance on Sargsyan’s representations
regarding the loss of the cargo, on January 27, 2022, TT Club made a payment to
Sargsyan in the policy limit amount of $500,000.00, provisionally and with
respect to the marine cargo insurance claim under policy no. PAF001 for an
alleged shipment of 480 Boxes of Sports Memorabilia/Cards from Nicholasville,
KY to Sunland, CA under bill of lading no. 14697632. (SAXC, ¶ 28.) The payment
was made under an express reservation of rights to recover same in the event of
discovery of evidence of Sargsyan’s complicity in the Insured Cargo’s alleged
disappearance. (SAXC, ¶ 28.)
The
Third Cause of Action for Fraud
Initially,
the Court rejects the argument of Sargsyan that the economic loss rule bars the
third cause of action. (Reply at pp. 5-6.) Such argument was not raised in the
moving papers. Irrespective of such fact, the economic loss rule does not bar
the fraud cause of action because the economic loss rule “does not apply to
limit recovery for intentional tort claims like fraud.” (Rattagan v.
Uber Technologies, Inc. (2024) 17 Cal.5th 1, 38.)¿¿
“The elements of fraud are (a) a misrepresentation (false
representation, concealment, or nondisclosure); (b) scienter or knowledge of
its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e)
resulting damage.” (Hinesley v. Oakshade
Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the
alleged fraud must be alleged factually and specifically as to every element of
fraud, as the policy of “liberal construction” of the pleadings will not
ordinarily be invoked. (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 645.) To meet the specificity requirement, a cross-complainant must
allege “how, when, where, to whom, and by what means the representations were
tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462,
1469.)
The
Court finds that the third cause of action for fraud is insufficiently alleged.
(SAXC, ¶¶ 42-46.) TT Club alleges that Sargsyan knowingly made
misrepresentations and submitted a false claim (SAXC, ¶¶ 43(a)-(c)); however,
TT Club has not specified how such misrepresentations were tendered and has not
specified how the purported false claim was tendered to TT Club (SAXC, ¶¶
42-46). Moreover, TT Club has generally pled reliance but has not specifically
pled that such reliance was justifiable. (SAXC, ¶ 44.)
The
demurrer to the third cause of action in the SAXC is therefore SUSTAINED with
leave to amend. The Court does not find that there exists no reasonable
possibility of successful amendment as to the fraud cause of action.
The
Fourth Cause of Action for Violation of Penal Code § 496
“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.” (Pen. Code § 496(a).) “The elements of receiving stolen
property under section 496(a) are (1) stolen property; (2) knowledge that the
property was stolen; and (3) possession of the stolen property.” (People v.
Coca (2023) 96 Cal.App.5th 451, 459.)
The
Court finds that the fourth cause of action is insufficiently alleged. (SAXC,
¶¶ 47-55.) Here, TT Club has not alleged that Sargsyan knowingly submitted a
false insurance claim or obtained insurance proceeds based on a false insurance
claim. The Court also finds that the fourth cause of action is much too
conclusory even though it is a statutory cause of action. (See Soliz v.
Williams (1999) 74 Cal.App.4th 577, 585 [explaining that generally
“statutory causes of action must be pleaded with particularity”].)
The
Court finds that there does not exist no reasonable possibility of successful
amendment. TT Club may allege facts which, if proven, would state a cause of
action for violation of Penal Code § 496. The Court therefore SUSTAINS the
demurrer to the fourth cause of action in the SAXC with leave to amend.
MOTION TO STRIKE
Sargsyan
moves to strike TT Club’s punitive damages claims, treble damages claim, and
request for attorney’s fees from the SAXC. Sargsyan contends that because the
third and fourth causes of action fail—and such causes of action support the
demands for punitive damages, treble damages, and reimbursement for attorney’s
fees—such demands should be stricken from the SAXC. (Motion to Strike at p. 4:8-12.)
TT
Club’s Request for Attorney’s Fees
“California
follows what is commonly referred to as the American rule, which provides that
each party to a lawsuit must ordinarily pay his own attorney fees.” (Trope
v. Katz (1995) 11 Cal.4th 274, 278.) “[E]xcept as attorney’s fees are
specifically provided for by statute, the measure and mode of compensation of
attorneys and counsels at law is left to the agreement, express or implied, of
the parties . . . .” (Id. at p. 278-279.)
Here,
TT Club seeks attorney’s fees pursuant to the fourth cause of action in the
SAXC. (SAXC, ¶ 55.) Such cause of action has been deemed deficient pursuant to
the Court’s discussion above. Given that such cause of action is deficient, it
follows that it cannot support a request for attorney’s fees.
Thus,
the Court GRANTS the request to strike the prayer for attorney’s fees from the
SAXC.
TT
Club’s Punitive Damages Allegations are Insufficient
In
order to state a prima facie claim for punitive damages, a complaint must set
forth the elements as stated in the general punitive damage statute, Civil Code
section 3294. (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th
704, 721.) These statutory elements include allegations that the defendant has
been guilty of oppression, fraud or malice.¿(Civ. Code, § 3294, subd. (a).)¿¿¿
“In
order to survive a motion to strike an allegation of punitive damages, the
ultimate facts showing an entitlement to such relief must be pled by a
plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253,
1255.) California Civil Code, Section 3294 authorizes punitive damages
upon a showing of malice, fraud, or oppression. Malice is defined as either
“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.” (Civ. Code, § 3294,
subd. (c)(1).) “Despicable conduct is conduct which is so vile, base,
contemptible, miserable, wretched or loathsome that it would be looked down
upon and despised by ordinary decent people.” (Mock v. Michigan Millers
Mutual Ins. Co. (1992) 4 Cal. App. 4th 306, 331.) California Civil Code,
Section 3294(c)(2) defines oppression as “despicable conduct that subjects a
person to cruel and unjust hardship in conscious disregard of that person’s
rights.” Fraud under California Civil Code, Section 3294(c)(3) “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.”
Specific facts must be pled in support of punitive damages. (Hillard v. A.H.
Robins Co. (1983) 148 Cal.App.3d 374, 391-392.)
TT Club has failed to allege sufficient facts showing
malice, fraud, or oppression by Sargsyan. The allegations in support of
punitive damages are insufficient and are much too conclusory.
The Court therefore GRANTS Sargsyan’s request to strike
punitive damages from the SAXC.
The Request for Treble Damages is Insufficient
“Any person who has been injured by a violation of
subdivision (a) or (b) may bring an action for three times the amount of actual
damages, if any, sustained by the plaintiff, costs of suit, and reasonable
attorney’s fees.” (Pen. Code, § 496, subd. (c).)
Here, TT Club seeks treble damages pursuant to the fourth
cause of action. (SAXC, ¶ 54.) As stated above, such cause of action is
insufficiently alleged. It follows that such cause of action as pleaded cannot
support a claim for treble damages.
The Court therefore GRANTS Sargsyan’s request to strike
references to treble damages from the SAXC.
CONCLUSION
Based on the foregoing, the Court SUSTAINS the demurrer of
Sargsyan to the third cause of action for fraud and fourth cause of action for
violation of Pen. Code § 496 in the SAXC filed by TT Club with 20 days leave to
amend.
The motion to strike is GRANTED with 20 days leave to amend.
Moving party is ordered to give notice.