Case Number: TC029184 Hearing Date: June 18, 2019 Dept: A

# 6. David Azizi v. Behnam Rafalian, et al.

Case No.: TC029184

Matter on calendar for: demurrer to first amended cross-complaint

Tentative ruling:

I. Background

Plaintiff David Azizi, as an independent trustee for the Shamsam Irrevocable Trust, brought this action against defendants Behnam Rafalian, Carson Town Center L.P. (“Carson LP”), 500 Carson Town Center LLC (“Carson LLC”), and Western Alliance Bank for violations of Rafalian’s duties as a constructive trustee.

On April 29, 2005, Rafalian and Ray Haeim commenced a civil suit (SC085372) against Shahram Elyaszadeh (“Ely”). The suit concerned the property at 500 Carson Town Center, Carson, California 90745-1446. Ely filed a cross-complaint in the action. On November 6, 2006, judgment was entered in favor of Ely and a constructive trust was imposed on Rafalian to safeguard Ely’s 50% ownership in the property (“Carson Judgment”). The judgment was affirmed on appeal.

On February 29, 2012, Ely assigned his interest to Azizi, as trustee. On November 30, 2017, Rafalian conveyed the property to Carson LP without Azizi’s knowledge. Rafalian is a partner in Carson LP and owns a 79.20% interest. The general partner in Carson LP is Carson LLC. Rafalian has an 80% membership interest in Carson LLC. Rafalian then granted a Deed of Trust to Western in the amount of $21,575,000.

Rafalian filed a cross-complaint on October 26, 2018 alleging fraudulent conveyance and transfer of property, to which Azizi demurred. On February 22, 2019, the Court sustained Rafalian’s demurrer with leave to amend.

On November 25, 2009, judgment was entered in the case of Ron Goldman, et al v. Shahram Elyaszadeh, et al., LASC BC411539 (“Goldman Judgment”), against Ely. On February 25, 2019, after the demurrer to the cross-complaint in the current action was sustained, the Goldman Judgment was assigned to Rafalian. Rafalian then filed a new suit on February 27, 2019 in Department 39 for fraud, titled Behnam Rafalian v. Shahram Elyaszadeh, 19STCV06801. On March 14, 2019, Rafalian filed his First Amended Cross-Complaint (“FACC”) in this case, which incorporates the Complaint (19STCV06801) in his February 27, 2019 suit.

Azizi now demurs to the FACC. Rafalian filed an opposition, to which Azizi replied.

II. Standard

A demurrer tests the sufficiency of a complaint as a matter of law and raises only questions of law. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.) In testing the sufficiency of the complaint, the court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.App.3d 311, 318.) The Court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.App.4th 634, 638.) Because a demurrer tests the legal sufficiency of a complaint, the plaintiff must show that the complaint alleges facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. (C.C.P. § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.App.4th 1112, 1126.)

Sufficient facts are the essential facts of the case “with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.) “Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer.” (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)

Under Code Civil Procedure § 430.10(f), a demurrer may also be sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s factual allegations are so confusing they do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)

III. Analysis

The Court grants the parties’ requests for judicial notice which include a recorded deed, various documents filed in the courts of this state, and the unpublished appellate ruling in the underlying case of Ray Haeim, et al. v. Sean Ely, et al. (June 10, 2008, B196355) 2008 WL 2346099.

a. Statute of limitations for fraudulent transfers

Two different statutes of limitations may apply to fraudulent transfers, depending on the type of suit advanced. The Uniform Fraudulent Transfer Act (“UFTA”) requires an action be brought within four years of the transfer or within one year after the transfer could have reasonably been discovered. (Civ. Code, § 3439.09(a).) The statute of limitations for a common law fraudulent transfer claim is three years and accrues with discovery of the transfer. (C.C.P., § 338(d).) For both types of claims, there is a seven-year statute of repose. (Civ. Code, § 3439.09(c).) Any action to set aside a fraudulent transfer must be filed within seven years of the transfer, regardless of any delayed discovery. (PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 185.)

b. Statute of limitations and the Goldman assignment

Rafalian acquired the Goldman Judgment on February 25, 2019. He argues the statute of limitations under either the common law or UFTA began to run on this date. This is incorrect. “ ‘ “[T]he assignee ‘stands in the shoes’ of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.” ’ [Citation.]” (Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304, 310–311 (emphasis in original).) Azizi’s statute of limitations defense to the Goldman Judgment depends on whether the previous holders of the judgment knew or should have known of the 2012 assignment. If an action is time-barred, it cannot be revitalized through assignment.

A statute of limitations defense cannot usually be determined on demurrer: “Generally, statute of limitations issues raise question of fact that must be tried . . . . [Citation.]” (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1374.) However, more than four years have passed since the transfer occurred, facially barring this action unless the discovery rule is properly pled. Rafalian “ ‘must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence’ [Citation.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) A review of the FACC and its incorporated Complaint (19STCV06801) do not reveal these allegations.

c. Second cause of action for declaratory relief: 2012 Assignment

Pleading declaratory relief requires: (1) a person interested under a written instrument or a contract, or (2) a declaration of his or her rights or duties with respect to another or in respect to property, and (3) an actual controversy. (C.C.P., § 1060; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 605–606.) The FACC’s second cause of action alleges that a controversy exists as to the 2012 assignment. This claim is derivative of the fraudulent transfer cause of action.

d. Leave to amend and relation back

Whether leave to amend is appropriate for the first and second causes of action depends on another issue, not adequately addressed by either side. “An amended complaint is considered a new action for purposes of the statute of limitations only if the claims do not ‘relate back’ to an earlier, timely-filed complaint. Under the relation-back doctrine, an amendment relates back to the original complaint if the amendment: (1) rests on the same general set of facts; (2) involves the same injury; and (3) refers to the same instrumentality. [Citations.]” (Pointe San Diego Residential Community, L.P. v. Procopio, Cory, Hargreaves & Savitch, L.L.P. (2011) 195 Cal.App.4th 265, 276.)

The question here is whether the FACC, based on Rafalian acquiring the Goldman Judgment on February 25, 2019 relates to the original cross-complaint. If it does not, it is barred by the seven-year statute of repose, and cannot be cured by amendment. Although the exact date of the 2012 assignment is not clear, notice of the assignment was filed on March 6, 2012. The statute of repose expired, at the latest, on March 6, 2019. The FACC was filed on March 14, 2019.

The Court requires supplemental briefs from the parties to address the relation back doctrine and its applicability to the circumstances of this case.

e. Third cause of action for declaratory relief: Carson Judgment

Rafalian’s third cause of action is also for declaratory relief. It pertains to the underlying 2006 Carson Judgment. Rafalian attacks this judgment by arguing he did not own the property at the time of that action; instead the property was in the name of CRICKM Trust. (FACC ¶ 11–14; Opp. at 12.) Azizi argues ownership and title was necessarily litigated in the underlying action. This raises an issue of collateral estoppel, or issue preclusion.

Issue preclusion “ ‘prohibits the relitigation of issues argued and decided in a previous case, even if the second suit raises different causes of action. [Citation.] Under issue preclusion, the prior judgment conclusively resolves an issue actually litigated and determined in the first action.’ [Citations.]” (Samara v. Matar (2017) 8 Cal.App.5th 796, 804.) “The doctrine applies ‘(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit, or one in privity with that party.’ [Citation.]” (Ibid.)

The issue of the property being located within the CRICKM Trust was necessarily litigated in the trial court, as evidenced by the appellate decision. The Court of Appeal found that the location of the various properties, in various limited liability companies and other entities, was immaterial because Rafalian and Ely purchased those properties as part of a joint venture. The court stated:

“[t]he manner of holding title (in their own names or in the names of various entities set up for the purpose of holding the properties) is not relevant because no transfers of title occurred between the joint venturers—although the fact that the property was held in the names of various trusts and limited liability companies is evidence supporting the existence of the joint venture agreement.” (Ray Haeim, et al. v. Sean Ely, et al. (June 10, 2008, B196355) 2008 WL 2346099, at *6.)

Rafalian also argued that the trial court could not impose a constructive trust on his interest in the properties. This was rejected; the court found the imposition of the trust to be proper. (Ray Haeim, supra, 2008 WL 2346099, at *7.) Accordingly, Rafalian has previously litigated the matter, a final adjudication was reached, and it was necessarily decided in the courts’ determination to impose a constructive trust.

The demurrer to the third cause of action for declaratory relief is sustained without leave to amend.

IV. Ruling

The care remains on calendar for oral argument on June 18, 2019. The Court requires simultaneous supplemental briefs from the parties to address the applicability of the relation back doctrine to the first and second causes of action. The briefs are limited to 5 pages and are due on July 9, 2019. The Court will take the matter under submission as of that date.