Superior Court, State of California
|LINE # |CASE # |CASE TITLE |RULING |
|LINE 1 |19CV349824 |Gomez-Zepeda v. American Auto Works |After a careful review of the record, the Court APPROVES the final |
| | | |settlement and APPROVES plaintiff’s counsel’s application for fees |
| | | |and costs. Plaintiff’s counsel to submit proposed orders for the |
| | | |Court’s signature. |
|LINE 2 |19CV347991 |Jerkovich v. Azzarello |Early Mandatory Settlement Conference: The Court GRANTS the motion. |
| | | |The Court will confer with the parties as to when to set the MSC. |
|LINE 3 |19CV347991 |Jerkovich v. Azzarello |Motion for Protective Order re Interr.: The Court GRANTS the |
| | | |unopposed motion for protective order. The Court will not award |
| | | |sanctions, however, since the failure to oppose may be due to |
| | | |plaintiff’s counsel’s withdrawal from the case. |
|LINE 4 |19CV347991 |Jerkovich v. Azzarello |Motion to Quash/Modify Deposition Subpoena: The Court GRANTS the |
| | | |unopposed motion to quash the subpoena. The Court will not award |
| | | |sanctions, however, since the failure to oppose may be due to |
| | | |plaintiff’s counsel’s withdrawal from the case. |
|LINE 5 |19CV347991 |Jerkovich v. Azzarello |Summary Judgment: See tentative ruling. The Court will prepare the |
| | | |final order. |
|LINE 6 |19CV347991 |Jerkovich v. Azzarello |Motion for Protective Order re RFAs: The Court GRANTS the unopposed |
| | | |motion for protective order. The Court will not award sanctions, |
| | | |however, since the failure to oppose may be due to plaintiff’s |
| | | |counsel’s withdrawal from the case. |
|LINE 7 |19CV347991 |Jerkovich v. Azzarello |Owner Distributions: In the Court’s 9/15/20 order, the Court halted |
| | | |owner distributions, and asked the parties to file briefs by 1/7/21 |
| | | |concerning the issue. The Court has received no such briefs, so the |
| | | |Court will keep the status quo and not resume distributions. |
|LINE 8 |19CV348847 |Shyshka v. Saavedra |See tentative ruling. The Court will prepare the final order. |
|LINE 9 |19CV356338 |Wells Fargo Bank v. Su Nguyen |Good cause appearing, the Court GRANTS defendant’s motion to withdraw|
| | | |and will sign the previously-submitted order. |
|LINE 10 |2015-1-CV- 283549 |Kim v. Samsung SDS America |CONTINUED to 1/15/21 at 4 pm as a special-set hearing. |
|LINE 11 |2002-1-FL-108117 |In re Viera |The Court finds that petitioner has satisfied the factors required |
| | | |for sealing court records. (See Cal. R. Ct. 2.550(d).) The Court |
| | | |will sign the already-submitted order. |
|LINE 12 |19CV358545 |Mish & Mash v Fry’s |CONTINUED to 3/2/21 at 9 am so Mish & Mash can revive the LLC with |
| | | |the California Secretary of State. (The Court takes no position on |
| | | |what effect the revival will have on this motion or case.) |
|LINE 13 |16CV302601 |Castlepoint v. Cal-Coast Custom Drywall |See tentative ruling. The Court will issue the final order. (A |
| | | |draft order was inadvertently filed and served a few days ago—the |
| | | |Court withdraws that order.) |
|LINE 14 |20CV361306 |Edge Law Group v. Joseph |See tentative ruling. The Court will issue the final order. (A |
| | | |draft order was inadvertently filed and served a few days ago—the |
| | | |Court withdraws that order.) |
|LINE 15 |19CV347732 |Young v. Mitchell |Good cause appearing, the Court GRANTS defendant’s unopposed motion |
| | | |to compel responses to RFAs. The RFAs are deemed admitted. And |
| | | |because plaintiff has shown no substantial justification for failing |
| | | |to respond to these RFAs, the Court assesses reasonable monetary |
| | | |sanctions of $800, payable within 30 days to defendant c/o |
| | | |defendant’s counsel. |
|LINE 16 |19CV347732 |Young v. Mitchell |Good cause appearing, the Court GRANTS defendant’s unopposed motion |
| | | |to compel responses to form interrogatories. Plaintiff must provide |
| | | |verified, code-compliant responses without objections (except |
| | | |privilege) within 30 days of today (1/14/21). And because plaintiff |
| | | |has shown no substantial justification for failing to respond to |
| | | |these form interrogatories the Court assesses reasonable monetary |
| | | |sanctions of $800, payable within 30 days to defendant c/o |
| | | |defendant’s counsel. |
| | | | |
| | | |That means plaintiff must pay a total of $1600 in sanctions for the |
| | | |two motions together. |
|LINE 17 |2008-5-cv-002546 |National Credit Acceptance v. T. Obrien |CONTINUED to 1/28/21 at 9 am in Dept. 7. That is the date already |
| | | |set for the order to show cause hearing concerning sale of the |
| | | |judgment debtor’s dwelling. There is no need for anyone to show up |
| | | |on 1/14/21. |
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Case Name: Jerkovich v. Azzarello, et al.
Case No.: 19CV347991
Defendant/cross-complainant Donna Kinsella (“Kinsella”) moves for summary adjudication in her favor on claims asserted in the complaint (“Complaint”) filed by plaintiff/cross-defendant Patricia Jerkovich (“Jerkovich”).
I. Background
A. Factual
This action arises out of a dispute between the owners of commercial properties in San Jose. According to the allegations of the Complaint, Jerkovich’s father and defendant Ignatius Azzarello (“Azzarello”) purchased three commercial properties in San Jose as equal joint partners approximately 50 years ago. (Complaint, ¶ 2.) At that time, they also opened a joint business checking account. (Id.) Jerkovich’s father passed away in February 2013, leaving her as 50% owner of the property and joint business checking account. (Id.)
In early 2014, Jerkovich requested that Azzarello remove her father’s name from the joint checking account and replace it with her name; he refused. (Complaint, ¶ 3.) On July 25, 2014, Jerkovich and Azzarello signed a written management agreement for the purpose of determining the roles and responsibilities of each party in the management of the three properties. (Id., ¶ 4.) Azzarello was assigned to be the property manager[1] and was to receive $150 per month as compensation. (Id.) His duties included improving and repairing the properties as needed, handling the funds, oversight of tenants, maintenance, inspections and all other customary duties expected of a property manager. (Id.) Azzarello was to send monthly checks to Jerkovich for her 50% share of the income received from the rents. (Id.) Azzarello assigned his daughter Kinsella to be the office manager, and she was responsible for sending monthly checks to Jerkovich, as well as other administrative duties and assisting in the management of the properties with her father. (Id.)
The aforementioned agreement was made in lieu of placing Jerkovich’s name on the joint checking account, in order to appease Azzarello. (Complaint, ¶ 5.) In January 2018, without notifying Jerkovich, Azzarello changed the account information, listing himself as “sole proprietor” with Kinsella as an authorized signer. (Id.) Jerkovich and Azzarello continued their relationship pursuant to the agreement for nearly five years. (Id., ¶ 7.)
On March 2, 2018, the San Jose Police Department Vice Unit (“SJPD”) conducted an investigation into one of the Jerkovich/Azzarello properties, specifically one located at 1010 Park Avenue, relating to suspected facilitation of prostitution. (Complaint, ¶ 8.) SJPD sent a letter to Azzarello stating that they found such illegal activity occurring on the property and ordered him to take appropriate activity to ensure that it ended. (Id.) This involved removing the current tenants in violation and expending money for repairs to bring the building back up to code, during which time the property would not be rented and no income could be made. (Complaint, ¶ 8.) Jerkovich alleges that Azzarello is responsible for all of the foregoing costs and expenditures due to his failure to properly manage the property. (Id.)
Jerkovich did not receive any of the lost rental revenue owed to her during the time the building was uninhabitable, pursuant to the terms of her agreement with Azzarello. (Complaint, ¶ 9.) She also sustained damages that are owed to her by Azzarello as a result of accepting a bid, without her consent, to make repairs to bring the property back up to code. (Id.) Jerkovich alleges that Azzarello is not competent to remain as property manager and believes that Chestnut Industrial Property Management should be appointed to take his place. (Complaint, ¶ 10.)
B. Procedural
Based on the foregoing allegations, Jerkovich filed the Complaint[2] on October 15, 2018, asserting the following causes of action: (1) bailment; (2) concealment; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) unlawful and unfair business practices (Bus. & Prof. Code, § 17200 et seq.); (6) interference with prospective economic advantage; (7) negligence; (8) breach of fiduciary duty; (9) breach of duty of loyalty; (10) breach of covenant of good faith and fair dealing; (11) breach of contract; (12) partition of real property (Code Civ. Proc., § 872.210); (13) declaratory relief; and (14) injunctive relief. On February 18, 2020, Kinsella filed the instant motion for summary adjudication.[3] Jerkovich opposes the motion.
II. Kinsella’s Motion for Summary Adjudication
With the instant motion, Kinsella seeks summary adjudication in her favor and against Jerkovich on every claim asserted in the Complaint except for the twelfth cause of action for partition of real property.
A. Request for Judicial Notice
In support of her motion for summary adjudication, Kinsella requests that the Court take judicial notice of the operative Complaint in this action. As this is a court record, it is a proper subject of judicial notice pursuant to Evidence Code section 452, subdivision (d). Consequently, Kinsella’s request for judicial notice is GRANTED.
B. Legal Standard
“A defendant seeking summary judgment [or adjudication] must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72 [internal citations omitted].)
“The ‘tried and true’ way for defendants to meet their burden of proof on summary judgment motions is to present affirmative evidence (declarations, etc.) negating, as a matter of law, an essential element of plaintiff’s claim.” (Weil & Brown, Cal. Prac. Guide; Civ. Proc. Before Trial (The Rutter Group 2014) ¶ 10:241, p. 10-104, citing Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) “The moving party’s declaration and evidence will be strictly construed in determining whether they negate (disprove) an essential element of plaintiff’s claim ‘in order to resolve any evidentiary doubts or ambiguities in plaintiff’s (opposing party’s) favor.’” (Id., ¶ 10:241.20, p. 10-105, citing Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64.)
“Another way for a defendant to obtain summary judgment is to ‘show’ that an essential element of plaintiff’s claim cannot be established. Defendant does so by presenting evidence that plaintiff ‘does not possess and cannot reasonably obtain, needed evidence’ (because plaintiff must be allowed a reasonable opportunity to oppose the motion).” (Id., ¶ 10:242, p. 10-105, citing Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854-855.) “Such evidence usually consists of admissions by plaintiff following extensive discovery to the effect that he or she has discovered nothing to support an essential element of the cause of action.” (Id.)
C. Analysis
The long and short of Jerkovich’s Complaint is that Azzarello and Kinsella knew, or should have known, about the prostitution activity and illegal modifications the tenant made to the 1010 Park Avenue space, and breached their duty to inspect the unit, discover the prostitution and tenant modifications, and report them to Jerkovich. Kinsella maintains that all of Jerkovich’s claims fail as a matter of law because she and her father did not have a duty to inspect 1010 Park Avenue while it was occupied, and they did not know that prostitution was taking place or that the tenant had made any improper modifications to the space.
1. Kinsella’s Undisputed Material Facts
In support of her motion for summary adjudication, Kinsella submits the following purportedly undisputed material facts: Azzarello and Henry Jerkovich purchased the three properties in 1969 in equal shares, and Jerkovich acquired her father’s 50% share in 2013 when he passed away. Azzarello transferred his 50% interest to the Azzarello Family Trust in 2010 after its formation, and was trustee until his death in January 2019. He managed the properties from 2013 until he passed away. (Kinsella’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Adjudication (“UMF”), No. 1.)
Kinsella moved in with her father in November 2013, living with him until his death, and assisted her father in managing the properties, taking an increasing role as time went on. (UMF No. 5.) Her duties including collecting rents, dealing with and addressing tenant issues as they arose, and paying property taxes, insurance, maintenance, repairs, and other expenses related to the properties’ operations. (UMF No. 4.)
Amy Nguyen (“Nguyen”) was operating a barber shop known as “The Happy Barber” on the first and second floor of 1010 Park Avenue in November 2013. (UMF Nos. 2, 3.) Nguyen vacated the second-floor space in July 2014. (UMF No. 5.) Subsequent to that, Kinsella inspected the vacated the space and did not observe anything that caused her concern about Nguyen’s use or occupancy of the space. (UMF No. 6.)
In early to mid-2014, the tenant at 1002 Park Avenue complained that customers of a nearby dance studio were parking their cars in spaces at 1010 Park Avenue after 6:00 p.m. In February 2014, Kinsella and Azzarello went to the property on multiple occasions to determine if anyone was making unauthorized use of the parking spaces. (UMF No. 7.) In each instance, they arrived at 6:00 p.m., parked across the street, and spent approximately 1-2 hours observing the front of 1002 and 1010 Park Avenue. (Id.) The Happy Barber was closed for business every time and they did not see anyone enter or exit the business while they were there. (Id.) Kinsella made the same observations when visiting the properties in July 2014. (Id.)
In July 15, 2014, Nguyen and Azzarello signed a month-to-month lease in which she agreed to pay rent in the amount of $2,200 per month to occupy the first-floor space at 1010 Park Avenue and continue to use the space as “The Happy Barber.” (UMF No. 8.) Nguyen occupied the first-floor continuously from July 2014 through March 30, 2018. (UMF No. 2.) During that time, Kinsella met with Nguyen on several occasions at 1010 Park Avenue and never heard or saw anything that caused her to suspect that prostitution was taking place at the property, or that Nguyen had made any illegal modifications to it. (UMF No. 9.)
On July 25, 2014, Azzarello and Jerkovich executed a written agreement (the “Agreement”) pursuant to which Azzarello agreed to manage the properties and receive $150 per month for doing so. (UMF No. 21.) The Agreement authorized Azzarello to maintain a business checking account for the properties in his name and to handle funds in the account. (UMF No. 22.) In addition, it was orally agreed that Azzarello would pay Jerkovich 50% of the properties’ net rental revenue after operating expenses each month, with funds set aside on a monthly basis and held in the business account to pay future expenses. (UMF No. 23.) Azzarello was entitled to the remaining 50%, plus his $150 management fee. (Id.)
In March 2018, Azzarello received a letter form the SJPD stating that on March 2, 2018, the SJPD Vice Unit conducted an investigation into online reviews being left for Happy Barber describing prostitution, and advising Azzarello to take appropriate action to ensure that illegal activity was not occurring. (UMF No. 24.) Kinsella forwarded the letter to Jerkovich on March 4, 2018. (UMF No. 25.) On March 5, 2018, Azzarello sent Nguyen a 30-day notice to vacate 1010 Park Avenue; she ultimately vacated the space at the end of the month. (UMF No. 26.) Azzarello and Kinsella had received no other complaints about the Happy Barber or Nguyen, and did not know about the prostitution prior to that time. (UMF Nos. 10, 11.)
Jerkovich was informed of the eviction and she inspected 1010 Park Avenue in early April 2018. Azzarello provided Jerkovich with an opportunity to select a licensed contractor to perform repairs and improvements to the space, but she failed to do so. On April 13, 2018, Azzarello and Kinsella received a proposal from Slater Construction to perform such work in the amount of $12,500. (UMF No. 27.) Kinsella received a proposal from a second contractor to do the work for $13,000. (Id.) Azzarello accepted the first proposal, with work beginning in mid-April and completing approximately 60 days later. (UMF Nos. 28, 29.)
Azzarello located a new tenant who took occupancy of the first-floor space at 1010 Park Avenue and began paying rent in September 2018. Jerkovich continued to receive owner disbursements of $2,100 per month or more while the space was vacant, and her owner distributions increased to $2,900 per month after the space was leased to the new tenant. (UMF Nos. 30, 31.) This action followed.
2. Negligence (7th Cause of Action)
The Court first addresses the seventh cause of action for negligence as the issue of duty is determinative on the substantive merits of many of Jerkovich’s remaining claims.
In the seventh cause of action, Jerkovich alleges that Azzarello and Kinsella negligently mismanaged the property and breached their duty to her by failing to properly inspect 1010 Park Avenue to uncover defects and make it safe for its intended purpose. (Complaint, ¶ 97.) Kinsella asserts that summary adjudication of this claim in her favor is warranted because she and her father owed Jerkovich no duty to inspect the property while Nguyen occupied it because they had no reason to do so, not having any awareness of the alleged prostitution taking place or that any illegal modifications to the space had been made.
“In order to establish liability on a negligence theory, a plaintiff must prove duty, breach, causation and damages.” (Ortega v. Kmart Corp. (2001) 26 Cal.4th 1200, 1205.) Whether a landlord owed a duty in a particular case and, if so, the extent of that duty, are questions of law to be decided by the court. (Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1213.) All landowners, including landlords, must use reasonable care to protect people who come onto their property. (Civ. Code, § 1714; CACI Nos. 1000, 1001, 1006.) “For landlords, reasonable care ordinarily involves making sure the property is safe at the beginning of the tenancy, and repairing any hazards the landlord learns about later.” (Stone v. Center Trust Retail Properties, Inc. (2008) 163 Cal.App.4th 608, 612.) As explained in Mata v. Mata (2003) 105 Cal.App.4th 1121, 1131-1132, “[b]ecause a landlord has relinquished possessory interest in the land, his or her duty of care to third parties is attenuated as compared with the tenant who enjoys possession and control. Thus, before liability must be thrust on a landlord for a third party’s injury due to a dangerous condition on the land, the plaintiff must show that the landlord had actual knowledge of the dangerous condition in question, plus the right and ability to cure the condition.”
It is a well-established principle that once a landlord has surrendered possession and control of the land to the tenant, he has no right to enter without permission. (Uccello v. Laudenslayer (1975) 44 Cal.App.3d 504, 511.) The obligation to inspect arises “only if [the landowner] had some reason to know there was a need for such action.” (Mora v. Baker Commodities (1989) 210 Cal.App.3d 771, 781.) Limiting a landlord’s obligations in this fashion release him from needing to engage in “potentially intrusive oversight of the property, thus permitting the tenant to enjoy its tenancy unmolested.” (Salinas v. Martin (2008) 166 Cal.App.4th 404, 412.)
A landlord’s duty to evict arises only where the landlord has notice that a tenant’s behavior makes criminal acts highly foreseeable. (See Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1219-1220 [explaining that “undertaking the eviction of a tenant cannot be considered a minimal burden. The expense of evicting a tenant is not necessarily trivial, and eviction typically results in the unit sitting vacant for some period”].)
Here, Kinsella submits evidence, in the form of her own declaration, stating that neither she nor her father were aware that prostitution was taking place at 1010 Park Avenue before March 2018, and that they did not know about the modifications Nguyen made to the space until after she vacated the unit. (See Declaration of Donna Kinsella in Support of Motion for Summary Adjudication (“Kinsella Decl.”), ¶¶ 5, 7-10, 15.) Based on these attestations, Kinsella and her father would have no duty to inspect 1010 Park Avenue because there was no reason for them to conduct such an inspection,
In her opposition, Jerkovich nevertheless insists that Kinsella and Azzarello did have a duty to inspect the subject property, and cites to various cases in which landlords have been held liable for harm suffered on their properties. These cases, however, are inapposite. Jerkovich first cites to Staats v. Vitner’s Golf Club, LLC (2018) 25 Cal.App.5th 826 in support of her contention that those who own property have a duty to maintain it in a reasonably safe condition and in order to comply with this duty, must inspect it to ascertain its condition. But that case did not involve a landlord’s duty to inspect after possession had been surrendered to a tenant.[4] As explained in Mata, supra, this distinction is critical because the landlord’s duty of care in such a situation is attenuated compared to one who enjoys possession and control of the land. (Mata, supra, 105 Cal.App.4th at 1131-1132.)
Jerkovich next cites to Mora v. Baker Commodities, supra, where an employee brought a personal injury action against the lessor of the premises where he was injured in which his employer operated a slaughterhouse and meat packing plant. She cites to this case as rejecting an argument she characterizes Kinsella as making, that once a property is leased to a commercial tenant, the lessor can no longer be held responsible for any injuries that occur thereon. However, that is not what Kinsella has argued here. Instead, she has correctly summarized the law articulated in Mora in stating that a landlord such as herself and her father has no duty to inspect a leased premises after possession has been surrendered to the tenant unless he has some reason to know there is a need for such an inspection. (Mora, supra, 210 Cal.App.3d at 781.) While Jerkovich is correct that at the time a lease is executed and upon its renewal the landlord has the right to reenter the property and conduct an inspection (see Uccello v. Laudenslayer (1975) 44 Cal.App.3d 504, 512-513), the authorities she cites do not mandate an inspection where the lease has merely been renewed. To wit, in Garcia v. Holt (2015) 242 Cal.App.4th 600, a plaintiff landscaper filed an action for premises liability against a property owner after he was injured by explosives brought onto the property by a tenant without the owner’s knowledge. The original lease was for a one-year term and then upon its conclusion, became a month-to-month tenancy. The plaintiff argued that when the lease became a month-to-month tenancy, it renewed each month and the landlord had a right to periodically enter the premises. He further asserted that with the right to enter, the landlord had a corresponding duty to make “reasonable periodic inspections” regardless of actual knowledge of a dangerous condition. (Garcia, 242 Cal.App.4th at 605.) The court rejected this argument, explaining that the plaintiff had “misconstrue[d] the law” and that the obligation to inspect arises “only if [the landowner] had some reason to know there was a need for such an action.” (Garcia, 242 Cal.App.4th at 605.) Here, Kinsella has submitted evidence which establishes that neither she nor her rather had such reason.
Finally, Jerkovich discusses People v. Pacific Landmark, LLC (2005) 129 Cal.App.4th 1203, where the State brought an action against the owner of a strip mall and the manager of the property for a preliminary injunction against their permitting prostitution on the property. This case is easily distinguishable from the case at bar because the owner in Pacific Landmark was advised repeatedly and continuously by law enforcement that illegal prostitution activity was taking place on the premises, yet nevertheless continued to allow such activity to continue. Such was the level of involvement by the manager of the property-owner LLC, in fact, that the court concluded he could be held personally liable for participating in tortious or criminal conduct while performing his duties as manager. Here, Jerkovich does not accuse Kinsella and Azzarello of participating in the illegal conduct that occurred at 1010 Park Avenue. Moreover, outside of insisting that Kinsella and Azzarello had a duty to inspect the property and would have discovered the illicit conduct and Nguyen’s modifications had they done so, Jerkovich offers no evidence which rebuts Kinsella’s declaration that neither she nor her father were aware prior to March 2018 that prostitution was taking place on the property or had any reason to suspect that it was.
In her own declaration, Jerkovich merely speculates that Kinsella was aware of such illicit activity because she “visited the property multiple times and spoke with the owner Amy Nguyen in person, and [she] fostered same by failing to conduct proper site inspections or questioning why the barber shop was only open from 6:00 p.m. to 1:00 a.m., which resulted in parking problems at the site.” (Declaration of Patricia Jerkovich in Support of Opposition to Motion for Summary Adjudication (“Jerkovich Decl.”), ¶ 18.) This is insufficient to raise a triable issue because a party opposing a motion for summary judgment/adjudication cannot controvert the moving party’s declarations by evidence “based on speculation, imagination, guess work, or mere possibilities.” (Doe v. Salesian Soc. (2008) 159 Cal.App.4th 474, 481.) Further, Kinsella explains in her declaration that she never observed the Happy Barber to be open after 6:00 p.m. and the parking problems were purportedly from a neighboring dance studio, not 1010 Park Avenue patrons. (Kinsella Decl., ¶¶ 7-10.) Jerkovich presents no actual evidence to the contrary.
In an effort to raise a triable issue, Jerkovich also submits the declaration of Phil Johnson, who is identified as a commercial leasing expert, and states that a reasonably prudent manager would have conducted thorough inspections and walk-throughs of the subject property at least annually and, in his opinion, had Kinsella and Azzarello conduct such walk-throughs, they would have discovered the modifications and prostitution at 1010 Park Avenue much earlier. But whether a duty to inspect exists in the first instance is a matter of law for the Court to decide, and is not determined based on the opinion of an expert witness. Had the Court concluded that such a duty existed, Mr. Johnson’s testimony may have been relevant to the nature of that duty and whether Kinsella and Azzarello breached it, but as discussed above, existing case law simply does not impart such an obligation given the facts of this case. Johnson opining that Kinsella and Azzarello had a duty to regularly inspect the property as a matter of course does not legally make it so.
In sum, Kinsella submits evidence which establishes that neither she nor her father had any reason to suspect that prostitution was taking place at 1010 Park Avenue or that illegal modifications had been made to the space by Nguyen. Consequently, there was no corresponding duty to inspect the property. Absent the necessary duty, Jerkovich cannot succeed on her negligence claim. Accordingly, Kinsella’s request for summary adjudication of this cause of action is GRANTED.
3. Bailment (1st Cause of Action)
In the first cause of action, Jerkovich alleges that, pursuant to the agreement entered into on July 25, 2014, Azzarello was the bailee of the property that is the subject of this action and breached his obligations in that role to Jerkovich, as bailor, by failing to routinely inspect the property for any defects, failing to make the property safe for its intended use (commercial purposes), and failing to adequately warn her of any known dangers. (Complaint, ¶¶ 24-25.) Had he conducted such an inspection, she alleges, Azzarello would have discovered that the changes made to the rented space (multiple rooms, etc.) were not compatible with the original intended use of the space or were done in violation of various commercial codes. (Id.) Jerkovich maintains that the defendants allowed a “madam” to operate a brothel at the property for years. (Id., ¶ 26.)
In her opposition, Jerkovich states that she does not dispute Kinsella’s request for summary adjudication of this cause of action. Accordingly, Kinsella’s request is GRANTED.
4. Fraud Claims (Concealment, Intentional Misrepresentation and Negligent Misrepresentation) (2nd, 3rd and 4th Causes of Action)
Jerkovich’s second, third and fourth causes of action are all various species of fraud. In the second cause of action for concealment, Jerkovich alleges that Azzarello and Kinsella knew or should have known that prostitution was taking place at the Happy Barber and had a duty to disclose such information to her, but failed to do so in order to continue collecting rent from their tenant. (Complaint, ¶¶ 34, 35, 39-42.) She further alleges that as a result of the concealment, she was damaged by the loss of rental revenue while the unit was vacant, repair costs, and diminution in the value of the property. (Id., ¶¶ 37, 42-46.)
In the third cause of action for intentional misrepresentation, Jerkovich alleges that on multiple occasions from 2013 through April 2018, Azzarello and Kinsella told her that “everything was fine” and “all was well” with the property, and they knew, or should have known that these representations were false because they either knew about the prostitution activities or they would have discovered them if they had performed routine inspections as was their obligation. (Complaint, ¶¶ 49-52.) She claims this resulted in the same damages as the second cause of action. (Id., ¶¶ 53-58.)
Finally, in the fourth cause of action for negligent misrepresentation, Jerkovich restates the allegations of the third cause of action but alleges that even if Azzarello and Kinsella honestly believed there was no prostitution taking place at 1010 Park Avenue, they had no reasonable basis to tell her that everything was going well because they had not inspected the space when they made that representations. (Complaint, ¶ 65.)
As a general matter, the elements of a cause of action for fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.” (Anderson v. Deloitte & Touche (1997) 56 Cal.App.4th 1468, 1474.) The elements of negligent misrepresentation are nearly identical, with only the second different, instead requiring the absence of reasonable grounds for believing the misrepresentation to be true. (Bock v. Hansen (2014) 225 Cal.App.4th 215, 231.)
The elements for a fraud claim predicated specifically on concealment are: (1) the defendant had a duty to disclose the concealed or suppressed fact to the plaintiff; (2) the defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; and (3) the plaintiff was damaged as a result. (Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198.) “A failure to disclose a fact can constitute actionable fraud or deceit in four circumstances: (1) when the defendant is the plaintiff's fiduciary; (2) when the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations that are misleading because some other material fact has not been disclosed.” (Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255.)
Kinsella argues that she is entitled to summary adjudication of these claims because neither she nor her father knew about the prostitution taking place at 1010 Park Avenue prior to March 2, 2018, and had no reason to suspect that such activity was occurring. (UMF Nos. 7, 10, 11.) Thus, she continues, they did not make false representations to Jerkovich when they told her that everything was fine with the properties because they believed that to be the case, and were not concealing anything.
Kinsella additionally asserts that Jerkovich’s claim fails because she cannot establish the element damages, explaining that Jerkovich has not alleged that she and her father concealed the prostitution activity in order to defraud her. Rather, she continues, Jerkovich alleges that they did so in order to continue collecting rent from the tenant (Complaint, ¶ 41), but Jerkovich herself benefitted from that decision. These assertions are well taken and sufficient for Kinsella to meet her initial burden on these claims because absent knowledge of the illicit activity at 1010 Park Avenue, none of the fraud claims against her can succeed.
In opposition, Jerkovich fails to raise a triable issue. As with the negligence cause of action, she fails to rebut Kinsella’s statements that neither she nor her father knew prior to March 2018 that prostitution was taking place at 1010 Park Avenue or had any reason to suspect such conduct was occurring. Instead, she relies on improper speculation. Further, for the reasons already explained, Kinsella and her father did not have a duty to inspect the property absent a reason to do so, which they did not have. Because Jerkovich has failed to raise a triable issue, Kinsella’s request for summary adjudication of the second, third and fourth causes of action is GRANTED.
5. Unfair Business Practices (5th Cause of Action)
In the fifth cause of action, Jerkovich alleges that Kinsella and Azzarello’s alleged acts and omissions constitute unlawful, unfair and/or fraudulent business practices under California’s Unfair Competition Law (“UCL”) (Bus. & Prof. Code, § 17200 et seq.), and seeks restitution of unlawfully withheld funds in the form of unpaid rental revenue and costs of repair. (Complaint, ¶¶ 74-76.)
“The UCL prohibits ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising,’ and any act prohibited by the false advertising law. (Bus. & Prof. Code, § 17200.) “Section 17200 ‘borrows’ violations from other laws by making them independently actionable as unfair competitive practices. In addition, under section 17200, a practice may be deemed unfair even if not specifically proscribed by some other law.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143, internal quotations and citations omitted.)
Kinsella maintains that summary adjudication of this claim is warranted because, per the evidence she has submitted in support of her motion, she and her father were not aware of the prostitution activity before March 2, 2018, and did not have a duty to inspect Nguyen’s space while she occupied it because they had no reason to. She explains that they did not perpetrate fraud on Jerkovich and she cannot establish that she was injured by anything that they did, as opposed to third parties such as Nguyen. Kinsella’s argument and evidence are sufficient to meet her initial burden on this cause of action.
As with the preceding causes of action, Jerkovich fails to rebut Kinsella’s showing by demonstrating the existence of a triable issue of material fact. Therefore, Kinsella’s request for summary adjudication of the fifth cause of action is GRANTED.
6. Interference with Prospective Economic Advantage (6th Cause of Action)
In the sixth cause of action, Jerkovich alleges that Kinsella interfered with her economic advantage in the form of rental revenue as a result of renting out the three properties by failing to perform their duties as property manager, specifically inspection of the premises. (Complaint, ¶¶ 83-86.) She further alleges that she has been damaged in that her prospective economic advantage obtained from a relationship with legitimate tenants has been harmed because there is now a negative connotation to the property due to the prostitution. (Id., ¶ 87.)
The elements of the tort of intentional interference with prospective economic advantage “are usually stated as follows: (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 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.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.) Critically, “a plaintiff seeking to recover from an alleged interference with prospective contractual or economic advantage must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff’s expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” (See also Reeves v. Hanlon, (2004) 33 Cal. 4th 1140, 1152.) “In this regard, an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Id., internal quotations omitted.)
Kinsella maintains that adjudication of this claim in her favor is warranted because Jerkovich does not allege any improper or wrongful act by her or her father that was designed to disrupt an economic relationship between Jerkovich and a tenant at the properties.
This assertion is well taken, as Jerkovich has not alleged any act by Kinsella or her father designed to interfere with Jerkovich’s expectancy that qualifies as independently wrongful, i.e., that is “proscribed by proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (See Reeves, supra, 33 Cal.4th at 1152.) This failure is a pleading deficiency. As a defendant’s motion for summary adjudication “necessarily includes a test of the sufficiency of the complaint,” where there is a deficiency in the subject pleading, the court may treat the motion as one for judgment on the pleadings. (See American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.) In her opposition, Jerkovich fails to persuasively rebut Kinsella’s argument, citing to inapplicable authorities that discuss the privilege of free competition, a defense to a claim for intentional interference with prospective economic advantage. But she fails to explain how she has fulfilled this pleading requirement or how she could do so if given an opportunity to amend. Therefore, the Court will treat Kinsella’s motion relative to the 6th cause of action as a motion for judgment on the pleadings and GRANT the motion WITHOUT LEAVE TO AMEND.
7. Breach of Fiduciary Duty (8th Cause of Action)
In her eighth cause of action, Jerkovich alleges that Kinsella and Azzarello breached their fiduciary duties to her by failing to inspect the property for defects and making it safe for its intended use, and failing to act as reasonably careful property managers because they allowed a “madam” to operate a brothel on the property for years. (Complaint, ¶¶ 107-112.)
Kinsella asserts that she is entitled to summary adjudication of this cause of action because, for the reasons articulated above with respect to Jerkovich’s claim for negligence, she and her father did not have a duty to inspect 1010 Park Avenue because they had no reason to believe that there was a reason to conduct such an inspection. The same analysis that warranted granting Kinsella’s request for summary adjudication of that claim in her favor warrants granting summary adjudication in her favor on the eighth cause of action. Thus, her request is GRANTED.
8. Breach of Duty of Loyalty (9th Cause of Action)
In the ninth cause of action, Jerkovich alleges that Kinsella and Azzarello breached their duty of loyalty because they knowingly acted against her interests in the properties by making multiple false representations over a number of months, and the prostitution issue could have been avoided or rectified earlier before damages had accrued if Jerkovich had been aware of it. (Complaint, ¶ 116.)
The elements of a claim for breach of a duty of loyalty are (1) the existence of a relationship giving rise to a duty of loyalty, (2) one or more breaches of that duty, and (3) damage proximately caused by that breach. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101.) There is no dispute that such a duty was owed here. But as set forth above, Kinsella submits evidence that she and her father did not knowingly make false representations concerning 1010 Park Avenue or fail to fulfill an obligation to inspect the property. Such evidence sufficiently negates the element of breach in this cause of action.
In her opposition, Jerkovich fails to submit admissible evidence which demonstrates the existence of a triable issue of material fact with respect to this element. Consequently, Kinsella’s request for summary adjudication of the ninth cause of action is GRANTED.
9. Breach of Contract (11th Cause of Action)
The tenth cause of action is predicated on allegations that Azzarello breached the Property Management Agreement (the “Agreement”) by failing to pay Jerkovich the rental revenue due from May to September 2018, i.e., when 1010 Park Avenue was vacant. (Complaint, ¶ 136.) Kinsella contends that she is entitled to summary adjudication of this cause of action because her father complied with all of his contractual obligations.
The essential elements of a breach of contract claim are: (1) the existence of a contract between the plaintiff and defendant; (2) plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff. (Oasis W. Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) It is undisputed by both parties that Jerkovich and Azzarello entered into the Agreement and that it was orally agreed that Azzarello would pay Jerkovich 50% of the properties’ net rental revenue after operating expenses each month, with funds set aside and held in the business checking account to pay future expenses. (Jerkovich’s Separate Statement of Undisputed Material Facts in Support of Opposition to Motion for Summary Adjudication (“PUMF”), Nos. 21, 23.) Kinsella submits evidence which demonstrates that while 1010 Park Avenue was vacant, Kinsella continued to receive 50% of the properties’ net revenue as promised. (UMF Nos. 23, 24, 26.) While the amount of net revenue decreased during this time given the vacancy of one of the three properties, Kinsella’s evidence establishes that Jerkovich received 50% of what rental revenue was received as agreed. Kinsella therefore meets her initial burden on this claim by establishing that her father did not breach the Agreement as alleged by Jerkovich
In her opposition, Jerkovich insists that summary adjudication of this claim should not be granted because the trier of fact could find that Azzarello “did not perform the duties that a property manager would, resulting in [her] damages ….” (Jerkovich Opp. at 19:18-19.) But she fails to rebut Kinsella’s showing that she received 50% of the net rental revenues for the properties between May 2018 and September 2018. In her opposing separate statement, she complains that the amounts she received during that time were significantly less than what she could have received had Kinsella and Azzarello acted as reasonably prudent property managers and discovered the illicit conduct much earlier. But Jerkovich’s breach of contract claim is not based on the allegations that she received one amount and was promised another specific amount. Rather, she alleges that Azzarello failed to pay her the rental revenue due to her- a specified percentage of the net revenue received for the properties. But Kinsella has established that Jerkovich was provided with half of the net amounts received during that time. As the pleadings limit the issues that must be addressed on summary judgment/adjudication, a moving defendant need only negate the plaintiff’s theories of liability as alleged therein. (See Hutton v. Fidelity Nat’l Title Co. (2013) 213 CalApp.4th 486, 493.) Kinsella has done so and Jerkovich fails to demonstrate to the contrary. Consequently, Kinsella’s request for summary adjudication of the eleventh cause of action is GRANTED.
10. Breach of Implied Covenant of Good Faith and Fair Dealing (10th Cause of Action)
In the tenth cause of action, Jerkovich alleges that Azzarello violated the implied covenant of good faith and fair dealing arising out of the Agreement by “taking actions calculated to prohibit and deprive [her] of the benefits for which she bargained for in entering” it and he refused to perform his obligations thereunder for the purpose of denying her rental revenue. (Complaint, ¶ 126.)
As a general matter, “[t]he covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made The covenant thus cannot be endowed with an existence independent of its contractual underpinnings. It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350, internal citation and quotations omitted.) To prevail on such a claim, the plaintiff must show that the defendant’s conduct “demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)
Here, Kinsella submits evidence which demonstrates that her father performed his obligations under the parties’ Agreement by paying Jerkovich her share of net revenue collected from the properties’ tenants each month. (UMF. No. 31.) She has also demonstrated that she and her father did not have a duty to inspect 1010 Park Avenue because they had no reason to do so, and therefore to the extent that this cause of action is predicated on any failure to conduct such inspections, Kinsella has met her initial burden to demonstrate that Jerkovich cannot establish all of the elements of her claim.
In her opposition, as with the breach of contract claim, Jerkovich fails to rebut Kinsella’s showing and demonstrate that a triable issue of material fact exists with respect to this cause of action. Accordingly, Kinsella’s request for summary adjudication of the tenth cause of action for breach of the implied covenant is GRANTED.
11. Declaratory and Injunctive Relief (13th and 14th Causes of Action)
In the thirteenth cause of action, Jerkovich requests that the Court order the Agreement null and void based on Kinsella and her father allegedly fraudulently inducing her to believe that everything with the properties was running smoothly. (Complaint, ¶¶ 154-155.) She further requests that she be allowed to nominate a new property manager. (Id, ¶ 155.) In the fourteenth cause of action, Jerkovich requests that the Court order the following: the appointment of an interim manager to take over management of the property; and an accounting from Kinsella of all funds deposited and withdrawn from the joint business account for the last five years, as well as all expenditures made to bring 1010 Park Avenue back up to code. (Complaint, ¶¶ 161-163.)
In her opposition, Jerkovich states that she does not dispute Kinsella’s request for summary adjudication of these claims. Therefore, Kinsella’s request is GRANTED.
D. Conclusion
In accordance with the foregoing analysis, Kinsella’s motion for summary adjudication is GRANTED as to all but the sixth cause of action. As to this claim, the motion is treated as one for judgment on the pleadings and is GRANTED WITHOUT LEAVE TO AMEND.
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19CV348847
Shyshka v. Saavedra
Plaintiff/cross-complainant Trevar Shyshka (“Shyshka”) demurs to the First Amended Cross-Complaint (“FACC”) filed by defendant/cross-complainant Carlos Saavedra (“Saavedra”).
I. Background
C. Factual
1. Complaint
This is an action for breach of contract and specific performance arising out of a dispute concerning the purchase of real property. According to the allegations of the complaint (“Complaint”), on September 28, 2015, Shyshka entered into a contract with Saavedra to lease real property located in San Jose (the “Property”). (Complaint, ¶ 6.) The lease had a retroactive start date of August 1, 2015, and contained an option to purchase the Property. (Id., ¶¶ 6-7.) Pursuant to the terms of the option, Shyshka could purchase the property, if he chose to exercise the option, for $600,000. (Id.) In order to effectively exercise his option, Shyshka was required to deliver a written unconditional notice of exercise to Saavedra, and was additionally required to pay $4,500 as consideration. (Id.)
On September 29, 2015, Shyshka timely and properly exercised his option to purchase the Property by delivering unconditional notice of his intent, paying $4,500 as consideration, and executing a Lease Option Agreement and Addendum. (Complaint, ¶ 8.) Pursuant the terms of the agreement, the term of the lease option was from September 29 2015 until the balloon payment was made on or before March 24, 2024. (Id.) One this payment was made, the property would be transferred by grant deed to Shyshka by Saavedra. (Id.) Shyshka was permitted to close escrow at any time. (Id., ¶ 9.)
On October 1, 2015, Shyshka executed a Residential Income Property Purchase Agreement and Joint Escrow Instructions. (Complaint, ¶ 10.) Pursuant to the terms of the foregoing and accompanying Seller Financing Addendum and Disclosure, Saavedra extended $600,000 in credit to Shyshka at an interest of 6% per annum. (Id., ¶ 10.) Payments were to be $3,500 per month for the first 18 months, and would then increase to $3,900. (Id.) The monthly payments were to be applied to the down payment, and a final balloon payment of $468,906 was due on March 24, 2024, although it was understood that Shyshka could purchase the Property prior to that date. (Id.)
In mid-April 2019, Shyshka advised Saavedra that he intended to complete the purchase earlier than anticipated and would obtain financing to do so, to which Saavedra agreed. (Complaint, ¶ 12.) In reliance on Saavedra’s acknowledgment of his right to do so, Shyshka obtained a loan for $582,500 on May 7, 2019 and, based on representations made by the title company, informed Saavedra that escrow was anticipated to close on or about May 14, 2019, though it was not a firm closure date. (Id., ¶ 13.) On May 20, 2019, Saavedra contacted Shyshka to inquire as to whether escrow had closed. (Id., ¶ 14.) Shyshka contacted the title company and was advised that escrow would close by the end of the day. (Id.) However, despite the foregoing representation by the title company, escrow did not close on May 20, through no fault of Shyshka. (Id., ¶ 15.)
On May 22, 2019, Saavedra sent a letter to the title company stating that he was cancelling the purchase and sale transaction because of the failure to deposit funds in his account on May 14, 2019 as agreed upon. (Complaint, ¶ 16.) This action followed.
2. FACC
Saavedra owned and operated The Willow Home at the Property from 1974 through 2015, a sober living environment and rehabilitation program for individuals with substance abuse issues. (FACC, ¶ 8.) Intending to close The Willow Home program, on September 29, 2015, Saavedra, who was then 74 years old, and Shyshka entered into an agreement to lease the Property, as well as Lease Option Agreement and Addendum which provided Shyshka with the option of purchasing the Property. (Id, ¶ 9.) The parties did not contemplate, negotiate, or discuss prepayment of the loan or the purchase of the Property prior to March 24, 2024, and Saavedra was to occupy the Property until that time. (Id., ¶¶ 11-12.) Saavedra required the assistance of his daughter and property manager during the foregoing events because as a native Spanish speaker, he required the translation and explanation of English legal terms and contract provisions. (FACC, ¶ 13.)
Shyshka subsequently took over The Willow Home program, renaming it the Genesis Project, and began residing at the Property. (FACC, ¶ 14.) Saavedra gradually became apprehensive of his safety while living at the Property, noting that he was not receiving mail there and that the address number was removed from the mailbox. (Id., ¶ 15.) Shyshka also asked Saavedra if he would need to continue to make payments under the Lease Option Agreement if the latter was hit by a bus and killed. (Id.) Shyshka also repeatedly disregarded the terms of the parties’ agreements when he made repairs and upgrades at the Property without Saavedra’s approval.
On April 15, 2019, Saavedra underwent should surgery and later returned to the Property to recover. (FACC, ¶ 17.) As a result of the surgery and the medication he was taking, Saavedra did not feel well and had issues with his memory. (Id.) On May 3, 2019, Shyshka approached Saavedra and asked him to accompany him to the title company to execute documents relating to the early purchase of the Property, explaining that he would provide a payment on the Property. (Id., ¶ 18.) He did not indicate that he intended to complete the purchase of the Property. (Id.) Once there, Saavedra was alone with Shyshka, who did not provide him with an opportunity to consult with independent counsel or his family regarding execution of the documents, nor explain that the premature sale of the Property would result in him losing ownership prior to March 24, 2014, as well as the corresponding interest and rental payments he was entitled to under the Lease Option Agreement. (Id., ¶ 19.) After leaving the office, Shyshka explained that he could rent the back room to Saavedra but preferred he move out immediately so that it could be rented to another person. (Id., ¶ 20.)
After discussing the foregoing events with his family, Saavedra requested the title company not proceed with the premature sale. (FACC, ¶ 21.) Shyshka became frustrated, yelling at Saavedra that he would obtain ownership of the Property one way or another. (Id., ¶ 22.) As a result of Shyshka’s behavior, Saavedra left the Property and is fearful of returning. (Id.) In December 2019, Shyshka entered Saavedra’s private room without authorization and with a key, despite not being provided with one by Saavedra. (Id., ¶ 24.)
D. Procedural
Shyshka filed the Complaint on June 11, 2019. On August 20, 2020, Saavedra filed the FACC asserting claims for (1) financial elder abuse and (2) intentional infliction of emotional distress. On October 8, 2020, Shyshka filed the instant demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) Saavedra opposes the motion and requests the imposition of sanctions against opposing counsel pursuant to Code of Civil Procedure section 128.5 in the amount of $3,000.
II. Shyshka’s Demurrer
A. Substantive Merits
With the instant motion, Shyshka maintains that Saavedra has failed to state a claim for financial elder abuse because he has not pleaded all of the necessary elements.
Welfare and Institutions Code section 15657, et seq., more commonly known as the “Elder Abuse and Dependent Adult Civil Protection Act” or simply, the “Elder Abuse Act” (the “Act”), governs the damages, fees, and costs recoverable in actions involving the abuse of elderly or dependent adults. This includes financial abuse, which is defined under the Act as occurring when a person or entity “takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult, or assists in so doing, for wrongful use or with intent to defraud, or both, or when the taking, secreting, appropriating, obtaining, or retaining is accomplished by undue influence.” (Wel. & Inst. Code, § 15610.30, subd. (a).) A person or entity “takes, secretes, obtains, or retains real … property when an elder … is deprived of any property right, including by means of an agreement ….: (Welf. & Inst. Code, § 15610.30, subd. (c).) As Shyshka explains, property rights are characterized as a “complex bundle of rights,” which includes the “rights to possess the property, to use the property, to exclude others from the property, and to dispose of the property by sale or by gift.” (Bounds v. Superior Court (2014) 229 CalApp.4th 468, 479.)
Thus, in order to state a claim for financial elder abuse, a plaintiff must allege that: (1) the victim was an “elder” at the relevant time; (2) the defendant took, secreted, appropriated or retained, or assisted another in taking, secreting, appropriating or retaining, real or personal property of the elder; and (3) wrongful use of the property or intent to defraud the elder. (Welf. & Inst. Code, § 15610.30.) Such a claim, as is the case with all statutory causes of action, must be pleaded with particularity. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.)
Here, Saavedra alleges in the FACC that Skyshka’s attempt to purchase the Property prior to March 2024 in accordance with the terms of the parties’ agreement constitutes financial elder abuse. (FACC, ¶¶ 25-29.) He does not assert that the underlying agreement to sell the Property is itself unlawful, but rather Shyshka’s exercise of the purchase option prior to March 2024, which he maintains was premature. (Id., ¶ 27.) The foregoing allegations are problematic as they relate to stating a claim for financial elder abuse because there is no allegation that Shyshka actually “t[ook], secrete[d], appropriate[d], obtain[ed], or retain[ed] real or personal property” belonging to Saavedra within the meaning of the Elder Abuse Act. As Shyshka maintains in his supporting memorandum, per the allegations of the FACC, Saavedra still owns the Property, and he cancelled the sale. (Id., ¶ 7.) Thus, Saavedra has not pleaded facts establishing that he has been deprived of a property right by Shyshka’s conduct.
In his opposition, Saavedra counters that the parties had agreed that the back room of the Property would remain owner-occupied by him until the purchase was completed in March 2024 and that in proceeding with the premature purchase of the Property prior to March 2024, Shyshka would obtain ownership prior to that point in time, thereby prohibiting Saavedra from his right to possess that room and collect rent from Shyshka. Relying on Bounds v. Superior Court (2014) 229 Cal.App.4th 468, 472, Saavedra maintains that an agreement need not be consummated to constitute a “taking.” The Court does not find these arguments persuasive.
As Shyshka maintains in his supporting and reply papers, Bounds is factually distinguishable from the case at bar. In that action, the cross-complainant/petitioner, who was elderly, executed a letter of intent to sell her real property and industrial equipment to a corporate purchaser for a specified price that was substantially under market value. (Bounds, 229 Cal.App.4th at 474.) Thereafter, the cross-complainant/petitioner executed two sets of escrow instructions despite not having signed a purchase contract; the purchase price for the real property reflected in the escrow instructions was even lower that it was in the letter of intent. (Id.) The cross-complainant/petitioner, through counsel, subsequently terminated the escrow, and the purchasers filed suit seeking specific performance of the sales agreements. (Id.)
The petitioner filed a cross-complaint for financial elder abuse alleging that in any sales or loan transaction concerning the property, she would be required to disclose the corporate purchaser’s claim that it had a legally enforceable right to acquire the property, which impacted her ability to sell it. (Bounds, 229 Cal.App.4th at 475-476.) The court concluded that, for the purposes of withstanding a demurrer, the foregoing allegations were sufficient to allege a “taking” under the financial elder abuse statute regardless of the fact that the sale had ultimately been cancelled. (Id. at 472.)
The significant distinction between the instant action and Bounds is that in the latter the petitioner’s position was that the transaction- as a whole- was improper and the result of financial elder abuse. Here, in contrast, Saavedra does not challenge the parties’ underlying 2015 agreement to sell the Property, which remains in force as neither side asserts any claim to cancel it. Consequently, any of Saavedra’s property rights that have allegedly been impacted were already limited by virtue of the 2015 agreement (i.e., Saavedra’s right to sell the Property) and assertions that Saavedra’s right to possess the back room and to collect rent from Shyshka were affected lack merit because the sale was never actually completed. In other words, Saavedra’s financial elder abuse claim is predicated on a transaction that ultimately did not occur. At all relevant times, Saavedra retained ownership of the Property, subject to the terms of the parties’ agreement, and still does today. Thus, Saavedra has not pleaded facts establishing a “taking” by Shyshka within the meaning of the Elder Abuse Act, and Bounds does not support Saavedra’s position. Absent any deprivation of property rights, Saavedra has not stated a claim for financial elder abuse and therefore Shyshka’s demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.
B. Saavedra’s Request for Sanctions
In his opposition, Saavedra requests that the Court sanction Shyshka pursuant to Code of Civil Procedure section 128.5 (“Section 128.5”), arguing that he and his counsel engaged in bad faith conduct in the meet and confer process and with the filing of this demurrer that was intended to cause unnecessary delay. Under this code section, a judge may order a party or counsel, or both, “to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.” (Code Civ. Proc., § 128.5, subd. (a).) “[A]ctions or tactics” is defined to include “the making or opposing or motions or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading.” (Code Civ. Proc., § 128.5, subd. (b)(1).) “Frivolous” means “totally and completely without merit or for the sole purpose of harassing an opposing party.” (Code Civ. Proc., § 128.5, subd. (b)(2).) However, the Court need not even reach the substantive merits of this request, as it is clear that it suffers from a fatal procedurally deficiency, namely, Saavedra’s failure to comply with the so-called “safe-harbor” provision of Section 128.5. This provision provides that:
If the alleged action or tactic is the making or opposing of a written motion or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading that can be withdrawn or appropriately corrected, a notice of motion shall be served as provided in [Code of Civil Procedure] Section 1010, but shall not be filed with or presented to the court, unless 21 days after service of the motion or any other period as the court may prescribe, the challenged action or tactic is not withdrawn or appropriately corrected.
(Code Civ. Proc., § 128.5, subd. (f)(1)(B) [emphasis added].)
Here, Saavedra’s request for 128.5 sanctions in based on the filing of the demurrer, a responsive pleading. Consequently, any request by Saavedra must comply with the foregoing procedure in order for it to be considered by the Court. There is no indication that he did so. Therefore, his request for sanctions is DENIED.
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16CV302601
Castlepoint v. Cal-Coast Custom Drywall
Defendant Cal-Coast Custom Drywall Construction, Inc. (“Cal-Coast”) demurs to the Third Amended Complaint (“TAC”) filed by plaintiff Castlepoint National Insurance Company (“Castlepoint”). As explained below, the Court SUSTAINS the demurrer with 20 days’ leave to amend. The Court notes that if Castlepoint files a fourth amended complaint, that complaint likely will be Castlepoint’s last chance to state viable claims.
I. BACKGROUND
A. Factual
According to the allegations of the TAC, Cal-Coast purchased a workers compensation and employers liability insurance policy (the “Policy”) from a predecessor to Castlepoint, Tower Select Insurance Company (“Tower”), in October 2012. (TAC, ¶ 10, Exhibit A.) A later audit performed by Tower revealed that the premium basis estimate provided by Cal-Coast was inaccurate, and that the actual audited total premium and fees for that period was an additional $78,157. (Id., ¶ 11, Exhibit B.) Cal-Coast, however, refused to make any further payments on the Policy premium, thereby allegedly breaching the agreement between the parties.
B. Procedural
In November 2016, Tower filed this lawsuit against Cal-Coast for breach of contract. In November 2016, Amtrust North America, Inc. (“Amtrust”) became the new plaintiff and filed a first amended complaint (“FAC”) asserting the same claim for breach of contract, alleging that it was the administrator for Castlepoint. Cal-Coast demurred to the FAC arguing, among other things, that Amtrust failed to plead sufficient facts showing that it had standing to bring the lawsuit. In January 2020, the Court sustained the demurrer with leave to amend on that basis.
In February 2020, Amtrust filed a second amended complaint (“SAC”), alleging that it was acting by assignment from the Conservation and Liquidation Office on behalf of the Insurance Commissioner of the State of California, as conservator for Castlepoint. Cal-Coast again demurred, arguing that Amtrust still had not pleaded sufficient facts to establish its standing to file suit. The Court agreed, sustaining the demurrer with leave to amend in June 2020.
In August 2020, Castlepoint, now as plaintiff, filed the TAC asserting a single claim for breach of contract. Cal-Coast responded by filing this demurrer on the grounds that the party who filed the pleading does not have the legal capacity to sue, the pleading fails to state facts sufficient to constitute a cause of action, the pleading is uncertain, and it cannot be ascertained from the pleading whether the contract sued upon is written, oral, or implied by conduct. (Code Civ. Proc., § 430.10, subds. (b), (e), (f) and (g).) Castlepoint opposes the motion.
The Court provided a tentative ruling on January 6, 2021, and no party contested the tentative ruling or appeared at the January 7 hearing. The Court now issues its final order.
II. STANDING
As it has done in previous demurrers, Cal-Coast argues that the named plaintiff (now Castlepoint) lacks standing to pursue the subject claim for breach of contract. [5]
Standing is the threshold element required to state a cause of action and, thus, lack of standing may be raised by demurrer. To have standing to sue, a person, or those whom he properly represents, must “have a real interest in the ultimate adjudication because [he] has [either] suffered [or] is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented. Code of Civil Procedure section 367 establishes the rule that “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” A real party in interest is one who has “an actual and substantial interest in the subject matter of the action and who would be benefited or injured by the judgment in the action.
(Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031-1032, internal citations and quotations omitted.)
In the SAC, Amtrust alleged the following facts in order to establish its standing: (1) Tower issued the subject insurance policy to Cal-Coast; (2) Castlepoint was the “surviving corporation from a merger of all former affiliated insurance companies, including Tower …”; and (3) Amtrust “is now, at all relevant hereto was, … acting by assignment from the Conservation and Liquidation Office on behalf of the Insurance Commissioner of the State of California, as conservator for Castlepoint National Insurance Company.” The Court concluded that the foregoing did not establish standing because, at most, Amtrust alleged that it had been granted some of type of right by virtue of an assignment that it received from the Insurance Commissioner of California as conservator for Castlepoint, but had not pleaded any facts about the nature of that right. As the Court explained, the “burden of proving an assignment falls upon the party asserting rights thereunder,” and an assignment agreement “must describe the subject matter of the assignment with sufficient particularity to identify the rights assigned.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 988.) Amtrust did not allege that the conservator assigned it claims that Castlepoint had arising out of the Policy, or that the conservator assigned it the right to prosecute actions on behalf of Castlepoint.
Moreover, the Insurance Commissioner’s status of conservator was terminated on April 1, 2017, and there were no facts pleaded by Amtrust demonstrating that the conservator had the authority to assign the unspecified right to Amtrust at the time the assignment was made, or that if it had been assigned the right to sue Cal-Coast, it still retained that right. Because Amtrust’s counsel indicated that the company might be able to remedy the aforementioned deficiencies, the demurrer was sustained with leave to amend.
Now in the TAC, Amtrust has now been replaced by Castlepoint as plaintiff. Castlepoint now alleges that the instant action is being prosecuted under the liquidation order entered on March 30, 2017 in the civil action entitled Dave Jones, Insurance Commissioner of the State of California v. Castlepoint Insurance Company in San Francisco Superior Court (the “Liquidation Order”). (TAC, ¶ 1.) But the Liquidation Order expressly gives all rights and title to all of the assets of the estate of Castlepoint, including the right to pursue legal action, to the California Insurance Commissioner in its role as the “Liquidator” (the “Liquidator”). For instance:
3. The Commissioner’s status as Conservator of Castlepoint is terminated. The Insurance Commissioner is appointed Liquidator of Castlepoint as set forth in Insurance Code section 1016 …;
5. Title to all of the assets of Castlepoint, wherever situated and including any and all assets held in the names of any company that is a predecessor by merger with Castlepoint,[6] shall be and hereby are vested in the Liquidator, in his official capacity as such, including without limitation real and personal property, deposits, certificates of deposit, bank accounts, mutual funds, securities, contracts, rights of actions, books, records and other assets of any and every type and nature, wherever situated, presently in Castlepoint’s possession and/or those which may be discovered hereafter;
7. The Liquidator is authorized to collect all moneys due to Castlepoint, and to do such other acts as are necessary or expedient to collect, protect and liquidate Castlepoint’s assets, property and business;
12. The Liquidator is authorized, for the purpose of executing and performing any of the powers and authority conferred upon the Liquidator under Insurance Code sections 1010 et seq., in the name of Castlepoint or in the Liquidator’s own name, to initiate, prosecute and/or defend any and all suits and other legal proceedings, legal or equitable, and to execute, acknowledge and deliver any and all deeds, assignments, releases and other instruments necessary and proper to effectuate any sale of any real and personal property or other transaction in connection with the administration, liquidation or other disposition of the asserts of Castlepoint, in this or other states as may appear to him necessary to carry out his functions as Liquidator;
16. The Liquidator is authorized to appoint, employ and compensate under his hand and official seal, legal counsel, as his agents, and to employ special deputies, clerks and/or assistants, and to give each of them those powers that the Liquidator deems necessary;
29. The Court hereby stays any and all provisions of any agreement entered into by and between any third party and Castlepoint, that provide, in any manner, that selection, appointment or retention of a conservator, receiver or trustee, or entry of an order such as hereby made, shall be deemed to be, or otherwise operate as, a breach, violation, event of default, termination, event of dissolution, event of acceleration, insolvency, bankruptcy, or liquidation. The assertion of any and all rights and remedies relating thereto are also stayed and barred, except as otherwise ordered by this Court. This Court shall have and retain exclusive jurisdiction over any cause of action that has arisen or may otherwise arise under any such provision …
(See Liquidation Order, ¶¶ 3, 5, 7, 12, 16 and 29 [emphasis added].)
The Liquidation Order plainly grants to the state Insurance Commissioner in its role as the “Liquidator” of Castlepoint’s estate all of the assets of the company, including the sole right to pursue any legal action. Thus, only the Liquidator, and not the newly named plaintiff or its counsel, has the authority to pursue legal action for breach of contract and to collect all past, present, and future outstanding money and debts due to Castlepoint. (See Liquidation Order, supra.) Castlepoint is not the Liquidator, and there are no allegations in the TAC that it or its present counsel has been granted authority from the Liquidator or the California Supreme Court to file the present action. The Liquidator retains the authority to appoint others to carry out its obligations or address its interests as set forth in the Liquidation Order (see paragraph 16), but there is nothing in the TAC or in anything else that is properly before the Court establishing that the Liquidator has so appointed Castlepoint or any other party.
Castlepoint has submitted the declaration of its counsel. This declaration attaches several exhibits that purportedly demonstrate Castlepoint’s standing. But as the Court explained in its order on Cal-Coast’s demurrer to the SAC, it cannot consider extrinsic evidence in ruling on a demurrer. (See Hilltop Properties, Inc. v. State (1965) 233 Cal.App.2d 349, 353 [“[a] demurrer only reaches to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice”]; Code Civ. Proc., § 430.30, subd. (a).) Consequently, the Court has not considered the contents of the declaration, or any of the attached exhibits. Consequently, the TAC as currently pled fails to establish that Castlepoint has standing to pursue the claim asserted therein and thus Castlepoint has failed to state facts sufficient to constitute a cause of action.
III. TIMELINESS
The applicable limitations period for Castlepoint’s breach of contract claim is four years. (Code Civ. Proc., § 337.) According to the TAC, Castlepoint’s breach of contact claim accrued in January 2014, when it allegedly refused to make any further payments toward the policy premium due for the Policy, thereby breaching its terms. (TAC, ¶ 13.) The current plaintiff (Castlepoint) filed suit against Cal-Coast in July 2020, well after four years after the purported breach of the Policy’s terms. But the original complaint, filed by Tower, was filed in November 2016, which was within the four-year limitations period.
So does the change of plaintiff matter for timeliness purposes? Cal-Coast says yes, and thus the TAC is untimely. Castlepoint says no. The Court agrees with Castlepoint, based on Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235 (Branick). In Branick, the California Supreme Court rejected the defendant’s assertion that the original plaintiff who subsequently lost standing should not be permitted to substitute in a new plaintiff, explaining that “courts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true real parties in interest.” (Branick, supra, 39 Cal.4th at p. 243.) As for whether the amendment substituting in a new plaintiff relates back to the filing of the original complaint, the Court explained that in order for the relation-back doctrine to apply, the amended complaint asserted by the new plaintiff must (1) rest on the same general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the original one. (Id. at p. 244.)
Here, the substance of the TAC is identical to the original complaint filed in November 2016. Therefore, the requirements of the relation-back doctrine under Branick are met, which means that the TAC relates back to the filing of the original complaint. That means the TAC is timely.
Cal-Coast disputes that the TAC relates back, explaining that such a conclusion would make sense if Tower, the original plaintiff, was the one who filed it, but it does not because there is a new plaintiff. Cal-Coast continues that the Liquidator became executor of Castlepoint’s estate on March 30, 2017, at which point it still had time to file its own action or join the instant one but chose not to do so. Cal-Coast insists that these facts “make it clear” that the Liquidator and Castlepoint are now time-barred from bringing a claim for breach of contract. These arguments, however, are directly contradicted by Branick, which Cal-Coast notably does not address, and therefore the Court does not find them persuasive.
IV. CONCLUSION
For the foregoing reasons, Cal-Coast’s demurrer to the TAC on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND. All other grounds are OVERRULED.
The Court has given Tower/Amtrust/Castlepoint several chances to get its complaint right. This likely will be Castlepoint’s last chance to do so.
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20CV361306
Edge Law Group v. Joseph
Cross-defendant Allen Baden moves to strike portions of the cross-complaint (“Cross-Complaint”) filed by defendants/cross-complainants Peak Health Center (“Peak Health”), Bomi Joseph, Daniela Barahona, and Bomi, LLC (“Bomi”) (collectively, “Cross-Complainants”). As explained below, the Courts GRANTS IN PART the motion.
I. BACKGROUND
A. Factual
1. Complaint
According to the allegations of the Complaint, Bomi, Peak Health, and Joseph retained Plaintiff Edge Law Group as its counsel in June 2018, as did defendant The Phyto Foundation (“Foundation”). (Complaint, ¶¶ 23, 24, 26, 28 and Exhibits A, B, D and F.) Barahona executed the agreement for legal services with Plaintiff on behalf of the Foundation. (Id., ¶ 28.) Peak Health retained Plaintiff to pursue claims alleging trademark infringement, unfair competition, and unfair trade practices against Jared Berry and Carlsbad Naturals, LLC dba CBD Naturals in federal court (the “Berry Action”). (Id., ¶ 32.) Plaintiff provided the agreed-upon legal services to Defendants, who failed to pay all invoices due for such services. (Complaint, ¶¶ 36, 39, 40, 42, 43, 47, 49.)
Several months later, Berry and CDB Naturals filed counterclaims in the Berry Action alleging, among other things, that Joseph was a convicted felon guilty of committing embezzlement, forgery and preparing false evidence. (Complaint, ¶ 33.) Based upon these counterclaims, Plaintiff confronted Joseph about the veracity of the allegations, which he denied as being true, claiming they involved another individual and not him. (Id., ¶ 34.) The Berry Action ultimately settled, and Joseph’s criminal history did not resurface until the end of the parties’ relationship in September 2019, when Plaintiff learned that Joseph was sentenced to serve time in prison and was due to report to begin his sentence in the coming weeks. (Id., ¶ 35.) 2. Cross-Complaint
According to the allegations of the Cross-Complaint, in February 2018, Peak Health moved its business operations to a commercial building in Los Gatos where Baden maintained his legal practice. (Cross-Complaint, ¶¶ 8-9.) Baden would often come into Peak Health’s office suite uninvited, asking about the status of its legal representation. (Id., ¶ 10.) Baden also began to involve himself in a lawsuit that Cross-Complainants had filed, despite having yet to be retained as counsel. (Id., ¶¶ 12-13.) Eventually, Cross-Complainants, excluding Barahona, agreed to retain Edge Law Group (“Edge”) and Baden (collectively, “Cross-Defendants”) as their counsel. (Id., ¶¶ 14, 16.) Before the engagement, Baden made various promises to Cross-Complainants regarding billing practices and pre-approval for legal work to be performed by him and Edge. (Id., ¶ 15.)
Also before engagement, Baden falsely advised Cross-Complainants that he was a financially successfully attorney, when in actuality he was facing five tax liens totaling $581,349. (Cross-Complaint, ¶¶ 15A.) Cross-Complainants allege that had they been aware of the foregoing, they would not have retained the Cross-Defendants. (Id.)
Baden began to perform work for which no approval had been given and billed Cross-Complainants for such unauthorized work. (Cross-Complaint, ¶¶ 17-21.) Baden also improperly used Bomi’s asserts and information without authorization in order to register himself as a Nevada Registered Agent for the company. (Id, ¶ 24.) Such conduct amounted to the unauthorized practice of law in Nevada. (Id.) Baden also created various entities without authorization and utilized Cross-Complainants’ information to do so, which could have created numerous conflicts of interest or at least the appearance of some. (Id, ¶¶ 25-27.) Further, Baden utilized funds held in trust for Cross-Complainants to pay for expenses unrelated to them, in violation of his professional obligations. (Cross-Complaint, ¶¶ 29-32.)
In November 2018, Cross-Complainants received 22 invoices for legal work purportedly performed by Cross-Defendants totaling over $90,000. (Cross-Complainants, ¶ 34.) The invoices contained numerous hours for performing unauthorized and unnecessary work. (Id., ¶¶ 35-36.) Cross-Complainants disputed the invoices, and Baden offered to credit them $10,000 as a result of any miscommunication or mistakes. (Id., ¶ 37.) This offer was rejected by Cross-Complainants, who paid only for authorized work. (Id., ¶ 38.) Ultimately, given the confusion between the parties over billing amounts, in May 2019, Cross-Complainants offered to settle all outstanding past due invoices for a total amount of $20,000. (Id., ¶ 39.) Baden verbally agreed to such a settlement and cashed the two $10,000 checks provided which indicated they were for the “final-past due” invoice amounts. (Id., ¶ 40.) Cross-Complainants than advised Cross-Defendants that they wanted to limit their representation to a single litigation action and requested that they transfer all corporate work to another firm. (Id., ¶¶ 41-42.) In September 2019, Cross-Complainants terminated Baden’s representation in the aforementioned case. (Id.)
Despite the foregoing, Cross-Complainants subsequently received 22 invoices from Cross-Defendants for work purportedly performed, which was mostly duplicative of work already paid for or for unauthorized work. (Id., ¶ 45.) Cross-Complainants also allege that after his termination, Baden harassed them. (Cross-Complaint, ¶¶ 47-48.)
B. Procedural
Plaintiff Edge filed the Complaint in January 2020, asserting 21 separate claims for breach of contract, quantum meruit, and fraud against each of the defendants. Cross-Complainants filed the Cross-Complaint in August 2020, asserting the following causes of action: (1) breach of fiduciary duty of care and loyalty; (2) fraud and fraudulent inducement; (3) constructive fraud; (4) breach of contract; (5) unlawful, unfair and fraudulent business practices; (6) negligence per se; (7) Cal. Rules of Professional Conduct, Rule 1.7 Conflict of Interest; (8) Cal. Rules of Professional Conduct, Rule 1.5 Trust Account Mismanagement; and (9) Cal. Rules of Professional Conduct, Rule 1.5 Improper Collection of Fees.
In September 2020, Baden filed this motion to strike portions of the Cross-Complaint. Cross-Complainants oppose the motion.[7] The Court provided a tentative ruling on January 4, 2021, and no party contested the ruling or appeared at the January 5 hearing. The Court now issues its final order.
II. LEGAL STANDARD
Under Code of Civil Procedure section 436, a court may strike out any irrelevant, false, or improper matter inserted into any pleading or strike out all or 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. The grounds for a motion to strike must appear on the face of the challenged pleading or from any matter of which the court may take judicial notice. (See Code Civ. Proc., § 437, subd. (a).)
III. DISCUSSION
Baden moves to strike the allegations contained in paragraph 15A of the Cross-Complaint:
Prior to his engagement Cross-Defendant Baden informed Cross-Complainants that he was a financially successful attorney. Cross-Complainants are now aware that such a statement was false. The truth is that Cross-defendant did not disclose to Cross-Complainants that at the time of engagement, Cross-Defendant had five tax liens, from three different agencies, Federal Government of the USA, State of New York and State of California, for a sum total of $581,349. If Cross-Complainants were aware of this fact they would never have signed the agreements that Cross-Defendants had presented.
This paragraph is followed by a table listing the specific lien amounts placed by each agency. Baden seeks to have this table stricken as well, arguing that these allegations are irrelevant and improper and bear no relation to the claims asserted in the Cross-Complaint.
Baden maintains that allegations pertaining to tax liens have no relationship to the claims asserted by Cross-Complainants that he and Edge breached the agreement for legal services and fiduciary duties owed to them, insisting that they are frivolous and have been included in the Cross-Complaint solely for the purpose of “smearing” his character. Details concerning his financial history, he continues, do not advance any of the causes of action pleaded in the Cross-Complaint. Further, he explains, Cross-Complainants’ allegation that they would not have entered into agreements with Edge and Baden for legal representation if they had been aware of the tax liens “defies belief and reason.”
In their opposition, Cross-Complainants counter that the allegations that Baden seeks to have stricken are relevant because he represented to them he was a financially successful attorney when, given the amount of tax liens pending against him, that representation was clearly not accurate. Cross-Complainants continue that they have alleged that they relied on this representation to their detriment, i.e., they would not have retained Baden and Edge had they been aware of his financial issues.
There is some merit on both sides. On the one hand, allegations pertaining to the alleged falsity of Baden’s representation that he was financially successful are relevant, in the Court’s view, to Cross-Complainants’ claim for fraudulent inducement. On the other hand, the overall amount of the tax liens and the specific amounts of each tax lien are not especially relevant to that claim. If Cross-Complainants had alleged that Baden made specific misrepresentations to them regarding the liens and their amounts, the Court would likely have a different position, but no such allegations have been made.
Therefore, the Court will strike the total amount of tax liens set forth in paragraph 15A and will strike the chart following that paragraph, but will not strike other portions of the paragraph. In accordance with the foregoing, the motion to strike is GRANTED IN PART.
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[1] Azzarello resides in close proximity to the subject properties, while Jerkovich resides in San Diego County; this was the basis of the parties’ agreement that Azzarello would manage them. (Complaint, ¶ 6.)
[2] The Complaint was initially filed in San Diego County Superior Court. Kinsella filed a motion to transfer the action to this Court, which was granted on March 25, 2019.
[3] Azzarello passed away in January 2019.
[4] In Staats, a golfer brought an action against a golf course operator after she was stung by a swarm of wasps while taking lessons on the course. The operator was in control of the property at all times and the court held that its duty to keep its premises in a reasonably safe condition included protecting its patrons from wasp attacks. The court explained that in order to comply with the foregoing duty, the person who controls the property is obligated to inspect the property or take other means to ascertain its condition, and if a dangerous condition exists or would have been discovered by the exercise of reasonable care, give adequate warning of or remedy it. (Staats, 25 Cal.App.5th at 833.)
[5] Cal-Coast once again demurs on the ground that Castlepoint lacks the legal capacity to sue. (See Code Civ. Proc., § 430.10, subd. (b).) The Court explained in a previous demurrer order that lack of capacity usually refers to the party being a minor, deceased, or having been adjudicated incompetent or insane (see Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604), and not that party lacking standing to sue. The latter defect makes a complaint subject to a general demurrer for failure to state a cause of action. (See Tarr v. Merco Constr. Engineers, Inc. (1978) 84 Cal.App.3d 707, 713.) Thus, there is no basis to sustain the demurrer on the ground that Castlepoint lacks legal capacity to sue. The Court also finds that there is no basis to sustain the demurrer based on uncertainty because the allegations of the TAC cannot be characterized as so unintelligible that Cal-Coast cannot reasonably respond to them. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) In fact, they are quite the opposite of that, with the nature of Castlepoint’s claim abundantly clear.
[6] The other insurers that previously merged with and into Castlepoint or are otherwise predecessor to Castlepoint are: Tower Insurance Company of New York, Tower National Insurance Company, Hermitage Insurance Company, Castlepoint Florida Insurance Company, North East Insurance Company, Massachusetts Homeland Insurance Company, Preserver Insurance Company, York Insurance Company of Maine, Castlepoint Insurance Company and Kodiak Insurance Company.
[7] The Court notes that Baden failed to include a declaration with his motion establishing his compliance with meet and confer obligations as required by Code of Civil Procedure section 435.5, subd. (a)(3). While the failure to meet this obligation is not a ground for denial of the motion (see Code Civ. Proc., § 435.5, subd. (a)(4)), Baden is admonished to comply with all applicable procedural requirements prior to filing any future motions.
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