Moving Parties: Defendants Gertrude Siegel and Gertrude Siegel Living Trust (“Siegel”); defendants Aida Rose LLC, VNR Holdings LLC, Gamer Vartanian, and Andre Navasargian (“Buyers”)

Resp. Party: Plaintiff Moses Cho (“plaintiff”)

Siegel’s demurrer to the first, second, third, sixth, seventh, eleventh, and twelfth causes of action is SUSTAINED. Siegel’s demurrer to the fourth and fifth causes of action is OVERRULED. Siegel’s demurrer to the eighth, ninth, and tenth causes of action is OVERRULED AS MOOT.

The Buyers’ demurrer is OVERRULED in its entirety.

Siegel’s motion to strike the requests for punitive damages in the fourth and fifth causes of action is DENIED. The remainder of Siegel’s motion to strike is MOOT.

The Buyers’ motion to strike is GRANTED in its entirety.

The Court declines to take judicial notice of the exhibits filed with the declaration of Ronald Kim in support of plaintiff’s opposition to the motion to expunge lis pendens. Though these documents are contained in the Court’s file in this action, the truth of the matters stated in the documents is not subject to judicial notice. (See Weil & Brown, Civ. Proc. Before Trial (The Rutter Group 2013) ¶ 7:15:10.)

The Court disregards the declaration of plaintiff Moses Cho filed with the oppositions. A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Plaintiff’s declaration constitutes extrinsic evidence and is inappropriate for the instant demurrers and motions to strike.

BACKGROUND:

Plaintiff commenced this action on 11/9/12, against defendants for: (1) specific performance; (2) breach of written contract; (3) breach of implied covenant of good faith and fair dealing; (4) declaratory relief; and (5) injunctive relief. Plaintiff filed a first amended complaint (“FAC”) on 6/6/13 alleging causes of action for: (1) specific performance; (2) breach of written contract; (3) breach of the covenant of good faith and fair dealing; (4) fraud; (5) negligent misrepresentation; (6) tortious interference with contract; (7) tortious interference with prospective economic advantage; (8) breach of fiduciary duty; (9) constructive fraud; (10) negligence; (11) declaratory relief; and (12) injunctive relief.

Plaintiff alleges that he entered into a lease for the subject premises in January 2006. (FAC ¶ 26.) The lease sets forth plaintiff’s right to purchase the property. (Id., ¶ 16.) Under the lease, plaintiff was given a right of first and second refusal. (Id., ¶¶ 27-28.) In June 2012 plaintiff communicated his written offer to purchase the property for $1,750,000.00. (Id., ¶ 31, Exh. B.) Defendant Siegel made a counter offer to sell the property for $2,450,000.00. (Id., ¶ 32, Exh. C.) Plaintiff responded with a further offer of $2,000,000.00. (Id., ¶ 33, Exh. D.)

A Notice of Sale dated August 9, 2012, purported to set forth a single combined offer of $4,000,000.00 to purchase the subject property and another property. (Id., ¶¶ 34-35.) Plaintiff alleges that the Notice of Sale violated the terms of the lease agreement. (Id., ¶ 36.) Plaintiff alleges Siegel improperly demanded that plaintiff expressly waive his rights to purchase by signing an “estoppel certificate,” which plaintiff refused to sign, resulting in Siegel serving a three-day notice to cure or quit. (Id., ¶¶ 38-39.) Siegel sold the property to the Buyers in December 2012. (Id., ¶ 50.)

On 12/28/12 plaintiff filed a notice of lis pendens regarding the property at 43 East Colorado Blvd., Pasadena, California.

On 5/22/13, the Court granted defendant Aida Rose’s motion to expunge lis pendens. The Court found that plaintiff failed to establish a probability of prevailing because he failed to show that his attempt to exercise his right of first refusal complied with the express terms of the lease agreement.

ANALYSIS:

DEMURRERS

Siegel demurs to the entire FAC and all twelve causes of action on the ground that the FAC fails to state sufficient facts to constitute a cause of action. The Buyers demur to the first, sixth, seventh, and eleventh causes of action on the ground that they fail to state sufficient facts to constitute a cause of action.

The Seigel and Buyers Defendants’ Demurrer to the First Cause of Action for Specific Performance

The Court rejects the Buyers’ argument that the first cause of action cannot be asserted against them because they were not parties to the lease. Specific performance may be obtained where a lease is sufficiently clear as to the rights of the lessee, the lessor and buyer were aware of the rights of the lessee, and where the lessor and buyer effect a sale and purchase of the property in a manner which destroys the lessee’s right to make an offer to purchase the property. (See Maron v. Howard (1968) 258 Cal.App.2d 473, 486-487.) The FAC alleges sufficient facts to establish that the Buyers are subject to specific performance because the Buyers conspired to disregard plaintiff’s rights to purchase the property. (See FAC ¶¶ 41-50.)

Siegel argues that the first cause of action fails because plaintiff has not exercised his rights of refusal in the properties. The lease agreement provides a right of first refusal to purchase the property located at 39 East Colorado Blvd, Pasadena, and a right of second refusal to purchase the property at 43 East Colorado Blvd, Pasadena. (See Compl., Exh. A, ¶¶ 52.1, 52.2.) Siegel argues that plaintiff fails to allege that he exercised this right as to the 39 East Colorado Blvd property and that he did not properly exercise the right as to the 43 East Colorado Blvd property.

Because the Court declines to take judicial notice of the items requested by Siegel, the argument as to the 43 East Colorado Blvd property is unsupported.

As for the failure to allege an exercise of the right of first refusal for the 39 East Colorado Blvd property, plaintiff argues that the right of first refusal was not extinguished because Siegel’s offer was made in bad faith. (See San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 317 [where the terms of an offer presented to a lessee differed from those in an offer to a prospective purchaser, the offer was in bad faith and the right was not extinguished]; Nelson v. Reisner (1958) 51 Cal.2d 161, 169 [where an offer was exorbitant, unreasonable, and not made in good faith, the right of first refusal was not waived].)

The terms of the lease include separate provisions for the right of first and second refusal for the properties. (See FAC Exh. A, ¶¶ 52.1, 52.2.) The notice of sale pertaining to the offer from the Buyers stated that both properties would be purchased together. (See id., Exh. H, ¶ 8.) Plaintiff argues that the insistence on purchasing both properties simultaneously was inconsistent with the lease terms, and thus was made in bad faith. (See id., ¶¶ 37, 47.) Moreover, plaintiff alleges facts which show that the offers were not in good faith because the Buyers’ offers were not valid at the time. (See id., Exh. H, ¶ 12 [the offer is deemed to have been withdrawn if not accepted by 11/16/12]; cover letter [offer conveyed to plaintiff on 11/20/12].) These facts are sufficient, at the pleadings stage, to suggest that plaintiff’s right of first refusal was not extinguished.

Siegel next argues that the first cause of action is moot because the properties have been sold and transferred and that Siegel is therefore “powerless” to transfer the properties to plaintiff. An obligation cannot be specifically enforced if the party has no power to lawfully performed when required to do so. (Civ. Code, § 3390.) “If the vendor has no title or interest in the land that he contracts to convey he will not be required specifically to perform. The decree would be of no avail for equity will not compel him to obtain title.” (Miller v. Dyer (1942) 20 Cal.2d 526, 528-529.) In the opposition, plaintiff fails to explain how it is possible for Siegel to specifically perform the terms of the lease where Siegel has sold the property to the Buyers. Therefore, Siegel’s argument against specific performance is well taken.

The court notes that Plaintiff appears to accept that the Siegel’s demurrer to the first cause of action should be sustained. (See Opposition, p. 2:17-18 [“In the proposed Second Amended Complaint, Plaintiff voluntarily withdraws the First Cause of Action for Specific Performance as to the Siegel Defendants.”])

Siegel’s demurrer to the first cause of action is SUSTAINED. The Buyers’ demurrer to the first cause of action is OVERRULED.

The Seigel Defendants’ Demurrer to the Second Cause of Action for Breach of Contract

Siegel argues that the second cause of action fails because plaintiff fails to allege a breach of the lease agreement. The FAC alleges that defendants breached the lease by, among other things, improperly demanding that plaintiff purchase both properties simultaneously. (See FAC ¶¶ 37, 45, 47, Exh. H.)

Siegel also argues that this cause of action fails because the lease provides that plaintiff has waived all monetary damages for any breach by the lessor of the subject provisions. (See FAC Exh. A, ¶¶ 52.1, 52.2.) Plaintiff argues that this provision should be disregarded as unconscionable because it would result in denying plaintiff any relief for the breach. “[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2004) 24 Cal.4th 83, 102.) Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power, while substantive unconscionability focuses on overly harsh and one-sided results. (Gentry v. Superior Court (2007) 42 Cal.4th 443, 468-469.) Procedural and substantive unconscionability need not be present to the same degree. “ ‘Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.’ [Citations.] In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz, 24 Cal.4th at p. 114.)

The FAC does not contain facts establishing that the waiver of damages provision is both procedurally and substantively unconscionable. Plaintiff provides a declaration with facts as to procedural unconscionability, but, as stated above, these extrinsic facts are inappropriate for a demurrer. The provision is not necessarily substantively unconscionable because, as discussed above, plaintiff may obtain relief in his specific performance action against the Buyers.

Siegel’s demurrer to the second cause of action is SUSTAINED.

The Seigel Defendants’ Demurrer to the Third Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing

Because the lease explicitly states that plaintiff may not seek monetary damages for any breach of the subject provisions, the third cause of action also fails. Moreover, the facts do not establish a special relationship which would support a request for tort damages for the breach. (See Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 314 [“The ‘general rule preclud [es] tort recovery for noninsurance contract breach, at least in the absence of violation of ‘an independent duty arising from principles of tort law.’”].)

Siegel’s demurrer to the third cause of action is SUSTAINED.

The Seigel Defendants’ Demurrer to the Fourth Cause of Action for Fraud and Fifth Cause of Action for Negligent Misrepresentation

Siegel argues that there was no fraud because the representations that defendants would honor the rights of refusal were not false because defendants complied with their obligations to plaintiff by giving him the notices of sale. Plaintiff alleges that the Siegel defendants engaged in conduct to deny and circumvent plaintiff’s rights of refusal. (See FAC ¶¶ 37-39, 42-45, 47, 49-50, 71, 78.) These allegations are sufficient to withstand a demurrer.

Siegel’s demurrer to the fourth and fifth causes of action is OVERRULED.

The Seigel and Buyers Defendants’ Demurrer Sixth Cause of Action for Tortious Interference with Contract

Siegel is correct that it cannot be held liable for tortious interference with the lease agreement because it was a party to that agreement. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514 [“the tort cause of action for interference with a contract does not lie against a party to the contract”]; FAC ¶ 18 [Siegel was a party to the lease agreement].)

The Buyers also demur to this cause of action on the ground that there are no facts as to intentional acts by the Buyers to interfere with the contract. “The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

Plaintiff alleges the existence of an agreement between him and Siegel. (See FAC ¶ 18.) Plaintiff alleges the Buyers had knowledge of this agreement. (Id., ¶ 86.) Plaintiff alleges that agreement was actually breached and plaintiff was damaged. (Id., ¶¶ 87-88.) Plaintiff alleges the Buyers conspired with Siegel to circumvent plaintiff’s contractual rights by making single, combined offer on both properties and by removing the due diligence period. (See id., ¶¶ 36, 42, 44.) These allegations are sufficient to support the sixth cause of action against the Buyers.

Siegel’s demurrer to the sixth cause of action is SUSTAINED. The Buyers’ demurrer to the sixth cause of action is OVERRULED.

The Seigel and Buyers Defendants’ Demurrer to the Seventh Cause of Action for Tortious Interference with Prospective Advantage

“The five elements for intentional interference with prospective economic advantage are: (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.” (Youst v. Longo (1987) 43 Cal.3d 64, 71, fn. 6.)

As with the sixth cause of action, Siegel cannot be liable for the seventh cause of action because they were parties to the subject economic relationship. (See Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 262; FAC ¶ 18.)

The Buyers argue that this cause of action fails for the same reason as the sixth cause of action; i.e., because the Buyers are not alleged to have engaged in intentional wrongful conduct. As discussed above, plaintiff alleges that the Buyers wrongfully conspired with Siegel to disrupt plaintiff’s contractual rights. (See FAC ¶¶ 36, 42, 44.)

Siegel’s demurrer to the seventh cause of action is SUSTAINED. The Buyers’ demurrer to the seventh cause of action is OVERRULED.

The Seigel Defendants’ Demurrer Eighth, Ninth, and Tenth Causes of Action

Though Siegel demurs to these causes of action, Siegel acknowledges that the causes of action are not alleged against them.

Accordingly, Siegel’s demurrer to the eighth, ninth, and tenth causes of action is OVERRULED as MOOT.

The Seigel and Buyers Defendants’ Demurrer Eleventh Cause of Action for Declaratory Relief

There are two essential elements for declaratory relief: “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [plaintiff’s] rights or obligations.” (Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) Declaratory relief is not an independent cause of action, but a form of equitable relief. (See Batt v. City and County of San Francisco (2007) 155 Cal.App.4th 65, 82.) “Injunctive relief is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted.” (Shell Oil Co. v. Richter (1942) 52 Cal.App.2d 164, 168.) Therefore, plaintiff must allege an actual dispute in order to obtain declaratory or injunctive relief.

“ ‘Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy which calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied. [Citations omitted.]’ [Citation.]” (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407.)

Siegel is correct that the eleventh cause of action fail as against them because the FAC acknowledges that only past wrongs are alleged. Plaintiff alleges that Siegel has already breached the agreement and sold the properties. (See FAC ¶¶ 37-47, 50, 113, 118.) Because plaintiff has alleged that the breach of contract has accrued, the declaratory relief action may be denied. Because Siegel has already sold the properties, an injunction against the sale, conveyance, or transfer of the property would be moot as against Siegel.

The Buyers demur to the eleventh cause of action on the ground that there is no dispute between the parties because the Buyers were not parties to the agreement. In the eleventh cause of action, plaintiff seeks a declaration that the Siegel defendants failed to comply with their contractual obligations. As stated above, plaintiff has sufficiently alleged a controversy against the Buyers in the first cause of action. A declaration as to whether the parties complied with the lease agreement in selling the properties is relevant to the dispute over whether specific performance is necessary.

Siegel’s demurrer to the eleventh cause of action is SUSTAINED. The Buyers’ demurrer to the eleventh cause of action is OVERRULED.

The Seigel Defendants’ Demurrer Twelfth Cause of Action for Injunction

For the reasons as discussed above concerning the eleventh cause of action for declaratory relief, Siegel’s demurrer to the twelfth cause of action for injunctive relief is SUSTAINED.

THE SEIGEL AND BUYERS DEFENDANTS’ MOTIONS TO STRIKE

The moving parties move to strike plaintiff’s claims for and references to punitive damages. Because the Court sustains most of Siegel’s demurrer, Siegel’s motion is moot to the extent that it seeks to strike portions of any causes of action other than the fourth and fifth causes of action.

The standard of proof for recovery of punitive damages is “clear and convincing” evidence of malice, fraud, or oppression. (Civil Code § 3294(a).) Under Civil Code 3294(c),

[¶] (1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. [¶] (2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. [¶] (3) ‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

“In determining whether a complaint states facts sufficient to sustain punitive damages, the challenged allegations must be read in context with the other facts alleged in the complaint. Further, even though certain language pleads ultimate facts or conclusions of law, such language when read in context with the facts alleged as to defendants’ conduct may adequately plead the evil motive requisite to recovery of punitive damages.” (Monge v. Superior Court (1986) 176 Cal.App.3d 503, 510.) The inquiry is generally fact specific to the nature of the claim raised and the context in which the damages are sought, but “the critical element is an ‘evil motive’ of the defendant.” (Ibid.) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.'” (American Airlines v. Sheppard (2002) 96 Cal.App.4th 1017, 1051.)

As stated above, plaintiff has alleged that Siegel engaged in fraudulent conduct. This is sufficient to support the claims for punitive damages against Siegel in the fourth and fifth causes of action. Accordingly, Siegel’s request to strike plaintiff’s claims for punitive damages in the fourth and fifth causes of action is DENIED.

Plaintiff seeks punitive damages against the Buyers in the sixth and seventh causes of action. Plaintiff alleges that the Buyers conspired with Siegel to disrupt plaintiff’s rights under the lease agreement. (See FAC ¶¶ 36, 42, 44.) Though these ultimate facts are sufficient to support these causes of action, there are no facts which suggest that the Buyers acted with malice, oppression, or fraud. The Buyer’s conduct of interfering with the rights under the lease is not sufficient, by itself, to support a request for punitive damages. Accordingly, the Buyers’ request to strike plaintiff’s claims for punitive damages against them is GRANTED.