Judge: Virginia Keeny, Case: 22VECV01418, Date: 2023-03-06 Tentative Ruling
Case Number: 22VECV01418 Hearing Date: March 6, 2023 Dept: W
ENCINO
GARDENS, et al. v. SASHA ALEXANDER, et al.
Defendants sasha alexander and
zhana borum’s demurrer to the complaint
Date of Hearing: March
6, 2023 Trial
Date: None
set.
Department: W Case No.: 22VECV01418
Moving Party: Defendants Sasha Alexander and Zhana Borum
Responding Party: Plaintiffs Encino Gardens and Alex Arutunyan
BACKGROUND
This is a
breach of contract action. Plaintiffs allege on February 14, 2018, Plaintiff
Arutunyan purchased from the Defendants the rights, titles and interests to
operate a residential care facility for total consideration of $100,000.00, conditioned
to a thirteen (13) year lease. The parties concurrently executed a contract to
Lease the premises known as 4930 Noeline Ave. Encino, California 91436
(“Subject Property”) from Zhana Broum and Sasha Alexander for $4,850.00 per
month (“Lease”), placing a $10,000.00 down payment. Plaintiffs allege the lease
included an option for extension, which would allow for the lease to expire
2031. Plaintiffs further allege on March 27, 2022, Defendant Alexander
expressed his unilateral repudiation and unwillingness to perform on the
Plaintiffs exclusive options to extend the lease until March 14, 2031, thereby
depriving the Plaintiffs the benefit of contract. Plaintiffs further allege Defendants
fabricated allegations of wrongdoing and reported to DPSS.
On September
26, 2022, Plaintiffs filed a complaint against Defendants asserting causes of
action for (1) Breach of Contract; (2) Breach of Good Faith and Fair Dealing;
(3) Specific Performance; (4) Specific Performance; (5) Declaratory Relief; and
(6) Intentional Interference with Contract.
[Tentative] Ruling
Defendants Sasha Alexander and Zhana Borum’s Demurrer is SUSTAINED WITH
LEAVE TO AMEND.
ANALYSIS
Defendants Sasha Alexander and Zhana
Borum demur to the complaint on the grounds that none of causes of action state
facts sufficient to constitute a cause of action against Defendants.
Timeliness and Meet and Confer Efforts
Plaintiffs, in opposition, argue the
demurrer must be overruled as being untimely. “A person against whom a complaint
or cross-complaint has been filed may, within 30 days after service of the
complaint or cross-complaint, demur to the complaint or cross-complaint.” (CCP
§ 430.40.) Section 430.41(a)(2) states that the
parties must meet and confer in person at least five days before filing any
demurrer and if the parties fail to meet and confer, the demurring party is
granted an automatic 30-day extension within which to file a responsive
pleading.
Defendants filed an automatic 30-day
extension of time on December 5, 2022 and December 16, 2022. Plaintiffs claim,
however, Plaintiffs’ counsel and Defense counsel met and conferred on November
21 and 22 during which Plaintiffs’
counsel proposed a two-week extension only and Defense counsel sought to
circumvent Defendants’ obligations by filing the declarations to improperly
extend the responsive pleadings deadline. Plaintiffs also argue Defense
counsel failed to meet and confer and attach a declaration to that effect.
Whether or not the parties properly met
and conferred or Defense counsel properly filed a declaration in support of an
automatic extension, pursuant to Code of Civil Procedure section 473(a)(1), the
court may still consider a demurrer that is not timely. (Jackson v. Doe (2011) 192 Cal.App.4th
742, 749.) Notably, (1) Plaintiff failed
to obtain a default judgment against Defendants and (2) the court finds that
Plaintiff is not substantially prejudiced by the late demurrer. Moreover, the
failure to meet and confer is not grounds to sustain or overrule a
demurrer. (CCP §430.41(a)(4).) However, the court admonishes Defense counsel
for their failure to attach a meet and confer declaration as required by Code
of Civil Procedure section 430.41(a)(2).
Standing
Defendants demur to the complaint on
the grounds Plaintiff Encino Gardens, Inc. does not have standing to pursue its
claims because it fails to state facts sufficient to allege any causes of
action based on contract.
Defendants contend Encino Gardens, Inc.
is not a party to the Lease or any other agreement attached thereto. Generally,
a person who is not a party to a contract has no standing to enforce the
contract or to recover damages for wrongful withholding of benefits to the
contracting party. (See, e.g., Republic Indemnity Co. v. Schofield (1996)
47 Cal.App.4th 220, 227; Gantman v. United pacific Insurance Co. (1991)
232 Cal.App.3d 1560, 1566.) Defendants note Plaintiffs allege “Mr.
Arutunyan …executed a contract to Lease” and “Defendants and Mr. Arutunyan executed
a Bill of Sale”. (Complaint ¶¶ 27, 12.) The documents attached to the complaint
further support Defendants’ argument Encino Gardens is not a party to the lease
or the bill of sale.
In opposition, Plaintiffs argue Encino
Gardens has standing as an intended beneficiary. In order for a plaintiff to
allege breach of contract as a third party beneficiary, the plaintiff must
plead a contract that was made expressly for his benefit. (See Martin v.
Bridgeport Community Association, Inc. (2009) 173 Cal.App.4th 1024, 1034.)
“‘The test in deciding whether a contract inures to the benefit of a third
person is whether an intent to so benefit the third person appears from the
terms of the agreement . . . .’” (Id. (quoting Schonfeld v. City of
Vellejo (1975) 50 Cal.App.3d 401, 420.) “The fact that a third party is
incidentally named in the contract, or that the contract, if carried out
according to its terms, would inure to his benefit, is not sufficient to
entitle him to enforce it.” (Id.) “Reading the agreement as a whole in
light of the circumstances under which it was made, the terms of the agreement
must clearly manifest an intent to make the obligation inure to the benefit of
the third party.” (Id.)
Upon review of the contract, the
contract provides that “Tenant wishes to lease the premises for the purpose of operating
a state licensed residential facility.” (Compl., Lease Exhibit.) Plaintiff
contends because a licensed RCFE must satisfy a complex set of rules and
regulations issued and enforced by the California Department of Social Serves,
the lease agreement was obviously not only for Defendant Arutyunyan as an
individual but for Encino Gardens as an applicant must submit to the
department: tax, insurance, background,
policies and procedures, and other documents before a survey and license is
provided. Plaintiff, however, does not allege this in their complaint nor do
they seek judicial notice of the requirements in obtaining an RCFE license. As
a result, Plaintiff has not established Encino Gardens is a third-party
beneficiary of the contract.
The court sustains Defendants’ demurrer
on this basis but with leave to amend.
Multiple Entities
Defendants next demur to the complaint
on the grounds the complaint improperly lumps three separate entities together
as one and asserts no factual allegations to support claims on behalf of each
separate entity. The court finds the complaint is not so uncertain that the
demurring defendant cannot reasonably respond thereto (See e.g., Khoury v.
Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)
Plaintiff alleges Encino Gardens is “a
six-bed residential care facility for the elderly.” (Compl. ¶9.) The complaint
does not define Encino Gardens to include Encino Garden, LLC and Encino Gardens
Retirement Homes, LLC. Plaintiff alleges that the facility itself used to
operate under Encino Garden, LLC and Encino Gardens Retirement Homes, LLC.
First Cause of Action
Defendants demur to the first cause of
action for breach of contract on the grounds Plaintiffs have failed to allege
facts supporting a claim for breach.
“It is well settled that when the
provisions of an option contract prescribe the particular manner in which the
option is to be exercised, they must be strictly followed. (Flickinger v.
Heck (1921), 187 Cal. 111, 114, 200 P. 1045; Callisch v. Farnham (1948),
83 Cal.App.2d 427, 430, 188 P.2d 775; see generally 1 Witkin, Summary of Cal.
Law (8th ed. 1973) p. 127.) However, when the option contract merely suggests,
but does not positively require, a particular manner of communicating the
exercise of the option, another means of communication is not precluded. (Estate
of Crossman (1964), 231 Cal.App.2d 370, 372, 41 Cal.Rptr. 800.)” (Palo
Alto Town & Country Village, Inc. v. BBTC Company (1974) 11 Cal.3d 494,
498.)
Defendant argues Plaintiffs have not
alleged that they exercised the option pursuant to the terms of the Lease. Specifically,
the Section XV of the Lease requires that tenant notice the landlord in writing
and either personally serve or send via pre-paid, first-class mail to the
parties at the address provided. However, in both their pleadings and in the
course of their dealings with Defendants, Plaintiff Arutunyan has failed to provide
proper notice of their election to pursue the five-year option term. As a
result, Plaintiff Arutunyan’s failure to perform pursuant to the lease
agreement is a prerequisite to support a claim for breach of contract.
The court must accept the facts alleged
in the pleadings as true. (Nguyen v. Western Digital Corporation (2014)
229 Cal.App.4th 1522, 1537 (quoting Del E. Webb Corp. v. Structural
Materials Co. (1981) 123 Cal.App.3d 593, 604).) Here, Plaintiffs
allege they expressed their desire to exercise their exclusive option to extend
the contract to the Defendants and (Compl. ¶32.) However, on March 27, 2022,
Defendant Alexander “clearly and positively expressed the Defendants unilateral
and unjustifiable repudiation and unwillingness to perform the essential terms of
the Lease by accepting Plaintiffs exclusive options to extend the Lease.”
(Compl. ¶33.) This is sufficient to support a claim for breach of contract. Specific
fact pleading is only required for fraud claims.
Accordingly, Defendants’ demurrer to
the first cause of action is OVERRULED.
Second Cause of Action
Defendants demur to the second cause of
action for breach of good faith and fair dealing on the grounds Plaintiffs’
merely restate a breach of contract claim and provide no additional facts to
support an allegation for breach of covenant.
The elements for breach of the implied
covenant of good faith and fair dealing are: (1) existence of a contract
between plaintiff and defendant; (2) plaintiff performed his contractual
obligations or was excused from performing them; (3) the conditions requiring
defendant’s performance had occurred; (4) the defendant unfairly interfered
with the plaintiff’s right to receive the benefits of the contract; and (5) the
plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist. V.
County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 (discussing
California law).) If a plaintiff's allegations of breach of the covenant of
good faith do not go beyond the statement of a mere contract breach and,
relying on the same alleged acts, simply seek the same damages or other relief
already claimed in a companion contract cause of action, they may be
disregarded as superfluous as no additional claim is actually stated. (Bionghi
v. Metropolitan Water District (1999) 70 Cal.App.4th 1358, 1370.)
Defendants contend the acts relied upon
in seeking damages for breach of the covenant are the same as those supporting
Plaintiffs’ breach of contract claim—namely alleged future nonperformance by
Defendants of the underlying lease agreement and option term. The court
disagrees. Plaintiffs’ breach of contract claim alleges breached the contract
by refusing to accept Plaintiffs’ option to extend the lease and by reporting
fabricated allegations to DPSS. In Plaintiffs’ second cause of action, Plaintiffs
allege Defendants unfairly interfered with Plaintiff’s right to receive the
benefits of the contract by fabricating wrongdoing by Plaintiffs to DPSS.
The court notes Defendants argument
Plaintiffs attempt to allege entitlement to tort recovery but fail to
demonstrate Plaintiffs have sought a tort remedy.
Accordingly, Defendants’ demurrer to
the second cause of action is OVERRULED.
Third Cause of Action[1]
Defendants demur to the third cause of
action for specific performance on the grounds specific performance cannot be
enforced in favor of a party who has not fully and fairly performed all the
conditions precedent on his part to the obligation of the other party and
because Plaintiff Arutunyan has failed to exercise the option in compliance
with the terms of the Lease, Plaintiffs cannot state a cause of action for
specific performance.
The court finds Plaintiff has
sufficiently alleged breach of contract including Plaintiffs’ condition
precedent by exercising the option under the terms required by the lease
agreement. Accordingly, Defendants’ demurrer to the third cause of action is
OVERRULED.
Fourth Cause of Action
Defendants demur to the fourth cause of
action on the grounds Plaintiffs do not allege that Defendants engaged in any
illegal or unfair business practices.
California’s Unfair Competition Law
prohibits unlawful, unfair or fraudulent business acts or practices. (Bus. & Prof. Code, § 17200.) A defendant
violates the fraudulent business acts or practices prong by engaging in conduct
by which “members of the public are likely to be deceived.” (Comm. On
Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal. 3d 197,
211.) An ‘unfair’ business practice occurs “when that practice ‘offends an
established public policy or when the practice is immoral, unethical,
oppressive, unscrupulous or substantially injurious to consumers.’” (Davis
v. Ford Motor Credit Co. LLC (2009) 179 Cal. App. 4th 581, 595 (citations
omitted).) “An unlawful business practice or act is an act or practice,
committed pursuant to business activity, that is at the same time forbidden by
law.” (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969.)
Defendants argue the complaint fails to
satisfy the standard above by omitting allegations of any particular business practice
or practices that Defendants engaged in that were forbidden by law; any alleged
harm to Encino Gardens outweighing any benefit to Defendants; and any actions
taken by Defendants that were likely to deceive the public.
The court disagrees. The complaint does
specify a basis for a UCL claim and specifies with supporting factual
allegations the claim is based on an unlawful and unfair business practices.
Plaintiffs allege “Defendants campaign of systematic misrepresentation and
fabricated allegation of wrongdoing reported to DPSS is an unfair scheme and
practice designed to deceive the public and interfere with operations at Encino
Gardens, constituting unlawful and unfair business practices within the meaning
of the California Business and Professions Code section 17200 et seq.” (Compl.
¶50.) These allegations are sufficient for unfair business practices under the
UCL. (See Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th
1401, 1408 holding “[w]hether a practice is unfair is a ‘determination ... of
fact which requires a review of the evidence from both parties. [Citation.] It
thus cannot usually be made on demurrer.’”) Similarly, Plaintiff sufficiently alleges
Defendants unlawfully entered the premises in violation of Civil Code section
1954 as well as violated HIPPA by accessing the elderly patients’ personal,
financial, and medical records. (Compl. ¶¶51-52.)
Accordingly, Defendants’ demurrer to
the fourth cause of action is OVERRULED.
Fifth Cause of Action
Defendants demur to the fifth cause of
action for declaratory relief on the grounds have failed to allege any present
controversy between Plaintiffs and Defendants.
Code of Civil Procedure section 1060
provides that a person may bring an action for declaratory relief if he or she
“desires a declaration of his or her rights or duties with respect to another,
or in respect to, in, over or upon property . . . .” (CCP §1060.) A request for
declaratory relief may be brought alone or with other relief. (See id.)
Defendants argue none of the issues
Plaintiffs allege are appropriate for declaratory relief. Plaintiffs allege an
actual controversy exists concerning their respective rights and duties in
Leasing the Subject Property. (Compl. ¶56.) The court agrees with Defendants. Defendants’
alleged actions that have constituted the breach of contract have already
occurred and Plaintiffs have not alleged any uncertainty to resolve.
Accordingly, Defendants’ demurrer to
the fifth cause of action is SUSTAINED WITH LEAVE TO AMEND.
Sixth Cause of Action
Defendants demur to the sixth cause of
action for intentional interference with contract on the grounds Plaintiff does
not allege a contract between itself and a third party.
The elements for the tort of
intentional interference with the performance of a contract are: “(1) a valid
contract between plaintiff and another party; (2) defendant’s knowledge of the
contract; (3) defendant’s intentional acts designed to induce a breach or
disruption of the contractual relationship; (4) actual breach or disruption of
the contractual relationship; and (5) resulting damage.” (Asahi Kasei Pharma
Corporation v. Actelion Ltd. (2013) 222 Cal.App.4th 945, 958.)
Defendants contend the complaint fails
to allege the existence of an enforceable contract with a third party and fails
to allege Defendants knowledge or interference with said contract. The court
agrees. Plaintiffs have not alleged who the third party with which Plaintiff
had a valid contract with and how Defendants’ intentional acts disrupted that
contractual relationship.
Accordingly, Defendants’ demurrer to
the sixth cause of action is SUSTAINED WITH LEAVE TO AMEND.