Judge William A. Crowfoot, Case 22AHCV00668 2023-04-25 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00668, Date: 2023-04-25 Tentative Ruling

On September 8, 2022, plaintiff Café on Lemon, Inc. (“Plaintiff”) filed this action against Gina Fanara (“Fanara”), Kevin Tang (“Tang”), and Dilys Jones, as Trustee of the Louis C. Petrie Separate Property Trust (“LP Trust”) (erroneously sued as “Louis Petrie Separate Property Trust”) (collectively, “Defendants”). In its original complaint, Plaintiff asserted claims for: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) intentional interference with prospective economic relations, (4) negligent interference with prospective economic relations, (5) injunctive relief, and (6) declaratory relief.

On February 8, 2023, this Court sustained LP Trust’s demurrer as to Plaintiff’s second cause of action for breach of the covenant of good faith and fair dealing and overruled LP Trust’s demurrer to the remaining causes of action. The Court also sustained Tang’s demurrer in its entirety. Plaintiff was given 20 days to file an amended complaint.

On March 27, 2023, Plaintiff filed the operative First Amended Complaint asserting claims for: (1) breach of contract, (2) intentional interference with prospective economic relations, (3) negligent interference with prospective economic relations, (4) injunctive relief, and (5) declaratory relief. The First Cause of Action for Breach of Contract is asserted against LP Trust and Fanara, the Second and Third Causes of Action for Intentional and Negligent Interference with Prospective Economic Advantage are asserted against all Defendants, and the Fourth and Fifth Causes of Action for Injunctive and Declaratory Relief are asserted only against LP Trust.

On March 27, 2023, Tang filed a demurrer to the entire FAC, including the second and third causes of action, on the ground that all causes of action fail to state sufficient facts. Tang also filed a motion to strike Plaintiff’s punitive damage allegations.

On March 30, 2023, LP Trust filed a demurrer to the entire FAC on the grounds that it did not state sufficient facts and is uncertain. The Court notes that although LP Trust demurs to a cause of action for breach of implied covenant of good faith and fair dealing, this cause of action no longer exists.

On April 3, 2023, Fanara filed a demurrer to the FAC and a motion to strike. Fanara demurs to the First, Second, and Third causes of action on the grounds that they are uncertain and fail to state sufficient facts. Fanara moves to strike Plaintiff’s prayer for punitive damages and attorneys’ fees. Fanara’s demurrer and motion to strike was originally scheduled to be heard on May 10, 2023 but on April 5, 2023, Fanara received leave of court to reschedule the hearing for April 25, 2023. Therefore, all three defendants’ demurrers and motions will be heard on April 25, 2023.

On September 4, 2019, Plaintiff was assigned a lease agreement for the real property located at 120 E. Lemon Avenue, Unit B, Monrovia, California 91016 (the “Property”); Plaintiff assumed the lease agreement as a new tenant and paid a $500 transfer fee. (FAC, ¶¶ 3, 9.) The Property is owned by LP Trust. (FAC, ¶ 5.) Plaintiff opened a restaurant named Café on Lemon (also referred to as the “Restaurant”) on February 11, 2020. (FAC, ¶ 10.) On March 15, 2020, Café on Lemon had to close for four months due to COVID-19 restrictions. (FAC, ¶ 11.) After reopening in August 2020, the Restaurant’s business had dropped significantly and Plaintiff alleges that it has not been able to regain its patronage and sales. (Ibid.)

Plaintiff alleges that Fanara is a real estate agent who acted as a dual agent for both Plaintiff and LP Trust. (FAC, ¶ 6.) Tang is alleged to be a Senior Real Property Accountant with non-party APEX Properties, LLC (“APEX”), which was in the process of purchasing the Property. (FAC, ¶ 7.)

In early May of 2022, Plaintiff listed the Restaurant for sale and received an offer to purchase on May 17, 2022 by Arman Arakelyan (“Arakelyan”). (FAC, ¶ 13.) On June 1, 2022, Plaintiff was informed by LP Trust that the Property was being sold and asked to sign an estoppel certificate. (FAC, ¶ 12.) Plaintiff signed and returned the estoppel certificate. (Ibid.) On or about June 29, 2022, Plaintiff notified LP Trust that he intended to sell the Restaurant. (FAC, ¶ 14.) On August 1, 2022, Plaintiff requested a meeting with the Trust’s representative, Scott Holman (“Holman”). (FAC, ¶ 15.) On the same day, Holman, Fanara, and Tang allegedly emailed Plaintiff with a “low ball offer to purchase” through a letter of intent. (FAC, ¶ 16.) Plaintiff made a written demand to Defendants requesting a clear response either accepting or rejecting the proposed sale pursuant to Paragraph 36 of the lease agreement. (FAC, ¶ 17.) Plaintiff alleges that Defendant did not respond and on August 10, 2022, Arakelyan effectively cancelled the sale agreement with Plaintiff by cancelling escrow. (FAC, ¶¶ 18-19.)

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law. We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed. [Citation.]” (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed. (Code Civ. Proc., § 452.) A demurrer may be brought if insufficient facts are stated to support the cause of action asserted. (Code Civ. Proc., § 430.10, subd. (e).) A demurrer may also be brought if a pleading is uncertain; the term “uncertain” includes ambiguous and unintelligible. (Id., subd. (f).)

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, subd. (b)(1).) 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, subd. (a); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].) The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

LP Trust demurs to the First Cause of Action on the grounds that it is uncertain and fails to state facts sufficient to state a cause of action. Plaintiff alleges that LP Trust and Fanara failed to respond to Plaintiff as required by Paragraph 36, failed to provide any notice of acceptance or denial in writing, by unreasonably withholding its consent, by delaying any response, and by failing to cooperate and refusing to act in good faith. (FAC, ¶ 21.)

LP Trust’s demurrer to the FAC is substantively identical to its demurrer to the original Complaint. LP Trust once again argues that: (1) Plaintiff has not properly pleaded a claim for breach of contract because it is unclear to whom the alleged actions are attributed and there are no copies of any specific communications, (2) that there was no breach of contract under a plain reading of Paragraph 36 and that it had the right to impose conditions for its consent, and (3) Plaintiff fails to provide documentation of any written demand.

As it did previously, the Court rejects LP Trust’s arguments. As stated in its earlier order, the lease agreement is attached to the Complaint, LP Trust is the alleged Lessor, and Plaintiff appropriately alleges that LP Trust breached paragraph 36 of the lease agreement. Furthermore, the facts of the face of the pleading are at issue. Therefore, questions about evidence, such as specific communications or a written demand, are irrelevant at this time. (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315 [“A demurrer tests the pleading alone, and not on the evidence or facts alleged.”])

Fanara demurs to Plaintiff’s claim for breach of contract on the grounds that Plaintiff does not sufficiently allege that a contract existed between her and Plaintiff.

The Court agrees. The lease agreement attached to the FAC does not identify Fanara as a party. Furthermore, although Fanara is alleged to be a real estate agent of Plaintiff and LP Trust, Plaintiff does not allege that there is a separate contract between Fanara and Plaintiff that Fanara allegedly breached. The Court additionally notes that Plaintiff’s opposition brief to Fanara’s demurrer mistakenly refers to LP Trust throughout, not Fanara.

2. Second and Third Causes of Action: Intentional and Negligent Interference with Prospective Economic Advantage

The elements of a claim for interference with prospective economic advantage include “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional or negligent acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404, citations, brackets, and quotation marks omitted.) Further, “the alleged interference must have been wrongful by some measure beyond the fact of the interference itself. For an act to be sufficiently independently wrongful, it must be unlawful, that is, it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Ibid., citation, ellipsis, and quotation marks omitted.) However, the wrongful actions do not need to be directed towards the plaintiff. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1163.)

Plaintiff asserts that each of the Defendants conspired to interfere with his sale of the Restaurant to Arakelyan. (FAC, ¶ 27.) Plaintiff alleges that LP Trust tried to delay the sale of the Restaurant by unreasonably failing and refusing to give its consent for Arakelyan to take over the lease and by failing to respond to its request for assignment. (Ibid.) Plaintiff also alleges that Tang sent a letter of intent on August 1, 2022 (“LOI”) seeking to lease the Property “out from under Plaintiff” as a “straw man” tenant. (FAC, ¶¶ 27-28.) Plaintiff further alleges that Fanara was familiar with the plan and participated in the email and offer to lease contained in the LOI. (FAC, ¶ 27.)

LP Trust argues that Plaintiff fails to allege any wrongful interference. LP Trust adds that it did not intend to commit any wrongful act or negligent interference but simply conducted due diligence in order to maintain the viability of its property, maximize rental income, and minimize the possibility of future vacancies. The Court expressed in its minute order dated February 8, 2023 that “LP Trust’s argument is not based on the facts plead on the face of the complaint, but rather an interpretation of the lease agreement and whether LP Trust’s conditions of the assignment were ‘fair.’ This is an inappropriate argument at the demurrer stage.” Upon reviewing LP Trust’s demurrer to the FAC, however, the Court recognizes that Plaintiff’s third and fourth causes of action indeed are duplicative of its breach of contract claim; the wrongful conduct actually alleged is the mere failure to perform in accordance with the lease agreement. A breach of contract “cannot be transmuted into tort liability by claiming that the breach detrimentally affected the promisee’s business.” (Arntz Contracting Co. v. St. Paul Fire & Martine Ins. Co. (1996) 47 Cal.App.4th 464, 478-479.) Plaintiff does not allege that LP Trust violated a separate duty arising from tort, such as fraud or a breach of fiduciary duty. (Drink Tank Ventures LLC v. Real Soda in Real Bottles, Ltd. (2021) 71 Cal.App.5th 528, 539.) Therefore, without more, LP Trust is correct that the tort claim for interference with prospective economic advantage fails.

Similarly, Fanara and Tang each argue that Plaintiff fails to allege any independently wrongful act which would form the basis for a claim of intentional or negligent interference of prospective economic advantage. Plaintiff alleges that Fanara and Tang were involved with the LOI. However, as with LP Trust, there are no facts or explanation either in the FAC or Plaintiff’s opposition briefs to show how the LOI involves the violation of an independent duty arising from the principles of tort law, such as intentional or negligent misrepresentation or a breach of fiduciary duty.

Therefore, the LP Trust, Fanara and Tang demurrers to the Third and Fourth Causes of Action are SUSTAINED.

LP Trust states that it demurs to the Fourth and Fifth Causes of Action but offers no substantive argument in support of its demurrer. Therefore, the demurrer to the Fourth and Fifth Causes of Action is OVERRULED.

Because the Court sustains the Fanara and Tang demurrers in their entirety, their motions to strike are MOOT.

LP Trust’s demurrer is OVERRULED as to the First, Fourth, and Fifth Causes of Action and SUSTAINED as to the Second and Third Causes of Action.

Plaintiff has leave to amend the First, Second and Third Causes of Action within 20 days of the date of this hearing. If Plaintiff does not file an amended complaint within 20 days, Tang and Fanara are each ordered to file proposed judgments of dismissal.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.