Case Name:   Hussein Kaoun, et al. v. Katayon Ghadirian, et al.

 

Case No.:       1-13-CV-249453

 

Demurrer by Plaintiffs/Cross-Defendants Hussein Kaoun and Ali Farzan

to Amended Cross-Complaint of Defendant/Cross-Complainant Katayon Ghadirian

 

The complaint of Plaintiffs Hussein Kaoun and Ali Farzan alleges that defendant Katayon Ghadirian fraudulently deceived plaintiffs into investing approximately $192,000 into a restaurant business. On July 12, 2013, Plaintiffs commenced this action against Ghadirian by filing a complaint which asserts causes of action for:

 

(1)            Fraud & Deceit

(2)            Breach of Contract

(3)            Negligent Misrepresentation

(4)            Violation of Business & Professions Code section 17200 et seq.

(5)            Constructive Fraud

(6)            Breach of Fiduciary Duty

(7)            Misappropriation

(8)            Breach of Implied Covenant of Good Faith and Fair Dealing

 

On September 9, 2013, Ghadirian filed a general denial and a cross-complaint against Kaoun and Farzan. Ghadirian’s cross-complaint asserted causes of action for:

 

(1)            Fraud & Deceit

(2)            Breach of Contract

(3)            Negligent Misrepresentation

(4)            Violation of Business & Professions Code section 17200 et seq.

(5)            Constructive Fraud

(6)            Breach of Fiduciary Duty

(7)            Breach of Implied Covenant of Good Faith and Fair Dealing

 

On October 9, 2013, Kaoun and Farzan filed a demurrer to Ghadirian’s cross-complaint. On November 27, 2013, the court (Hon. Kirwan) sustained the demurrer with leave to amend.

 

On March 5, 2014, Ghadirian retained an attorney and filed a substitution of counsel. On March 11, 2014, Kaoun and Farzan sought an ex parte order dismissing Ghadirian’s cross-complaint on the basis that Ghadirian did not file an amended pleading.  The court denied the request.  On April 7, 2014, Kaoun and Farzan filed (1) a motion for judgment on the pleadings to a portion of the cross-complaint; and (2) a motion to dismiss the cross-complaint.  On the same date, Ghadirian filed a motion for leave to amend the cross-complaint.  The court heard all three motions on April 29, 2014, and granted Ghadirian’s motion for leave to amend, rendering the other motions moot.

 

On May 23, 2014, Ghadirian filed her [first] amended cross-complaint (“FAXC”), which is the subject of this motion.  Ghadirian alleges that in or about February/ March 2010, Kaoun and Farzan verbally agreed with Ghadirian to become partners to develop and operate a restaurant.  (FAXC, ¶¶6 and 11.)  Pursuant to the agreement, Kaoun would purchase a 24% interest in the business for $96,000, and Farzan would purchase a 25% interest for $100,000. (FAXC, ¶¶6 and 11.)  The parties agreed to share profits and liabilities in accordance with their percentage of ownership and to contribute additional money as needed to the development and operation of the business.  (FAXC, ¶¶6 and 11.)  Kaoun and Farzan orally represented to Ghadirian that each was ready and able to invest more money into the business as needed. (FAXC, ¶¶16, 24, 33, and 40.)  Kaoun also represented to Ghadirian that he would apply for a work permit.  (FAXC, ¶26.)  Kaoun further agreed to provide operation management for the restaurant kitchen and chef services for the business.  (FAXC, ¶6.)  Farzan further agreed to provide engineering and construction related services toward the renovation of the restaurant and general operation management assistance.  (FAXC, ¶11.)

 

In September 2010, Ghadirian asked Kaoun and Farzan to each contribute $12,000 toward the operation of the restaurant, but they refused.  (FAXC, ¶¶7 and 12.)  In May 2011, Ghadirian requested Kaoun and Farzan contribute additional funds to pay business expenses and rent, but they refused.  (FAXC, ¶¶7 and 12.)  Kaoun and Farzan’s refusal to contribute additional funds toward the operation of the business is a breach of the oral partnership agreement.  (FAXC, ¶¶7, 8, 12 and 13.)  As a result, Ghadirian’s interest in the business lost value and Ghadirian lost future profits she would have made from the operation of the business, in a sum of $500,000. (FAXC, ¶¶9, 14, 21, 30, 38, and 45.)

 

Ghadirian’s FAXC now asserts causes of action for:

 

(1)            Breach of Contract [versus Kaoun]

(2)            Breach of Contract [versus Farzan]

(3)            Deceit [versus Farzan]

(4)            Deceit [versus Kaoun]

(5)            Negligent Misrepresentation [versus Farzan]

(6)            Negligent Misrepresentation [versus Kaoun]

 

On June 23, 2014, Kaoun and Farzan filed this demurrer to the FAXC.  On July 9, 2014, Ghadirian filed her opposition to the demurrer.

 

I.  Timeliness of Reply Brief

 

Kaoun and Farzan’s reply brief, filed July 17, 2014, is untimely. Code of Civil Procedure section 1005, subdivision (b) states, in relevant part, “All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days, and all reply papers at least five court days before the hearing.” (Emphasis added.)  Based on the hearing date of July 22, 2014, cross-defendants should have filed their reply brief by July 15, 2014.

 

Kaoun and Farzan contend Code of Civil Procedure section 1010.6 grants them an additional two court days to file a reply, apparently based on the following language: “Electronic service of a document is complete at the time of the electronic transmission of the document or at the time that the electronic notification of service of the document is sent. However, any period of notice, or any right or duty to do any act or make any response within any period or on a date certain after the service of the document, which time period or date is prescribed by statute or rule of court, shall be extended after service by electronic means by two court days…” (Code Civ. Proc., §1010.6, subd. (a)(4).)

 

California Rules of Court, rule 2.251, subdivision (h)(2) states, “If a document is served electronically, any period of notice, or any right or duty to act or respond within a specified period or on a date certain after service of the document, is extended by two court days, unless otherwise provided by a statute or a rule.”

 

Neither of these provisions extends the time within which a reply brief must be filed. Both provisions grant a two court-day extension if the time to act or respond is triggered by service. The time to file a reply brief with the court is not triggered by service of the opposition. The time to file a reply brief is fixed based on the date of hearing and, therefore, not affected by either Code of Civil Procedure section 1010.6, subdivision (a)(4) or California Rules of Court, rule 2.251, subdivision (h)(2).

 

California Rules of Court, rule 3.1300, subdivision (d) states, “No paper may be rejected for filing on the ground that it was untimely submitted for filing.  If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.”  The court will consider the reply, but  Kaoun and Farzan are hereby placed on notice that any future failure to comply with the Code of Civil Procedure and/or the California Rules of Court may result in the court’s refusal to consider their papers.

 

 

II.  Request for Judicial Notice

 

In the “Declaration of Ramin Kermani-Nejad in Support Thereof,” Kaoun and Farzan ask the court to take judicial notice of “the Cross-Complaint” which is claimed to be attached as an exhibit but was not.  The request is defective in at least two respects.  California Rules of Court, rule 3.1306, subdivision (c) states, “A party requesting judicial notice of material under Evidence Code section 452 or 453 must provide the court and each party with a copy of the material.”  Plaintiff also fails to comply with California Rules of Court, rule 3.1112, subdivision (l) which states, “Any request for judicial notice must be made in a separate document listing the specific items for which notice is requested and must comply with rule 3.1306(c).”  The request is denied.

 

III.  Demurrer

 

A.        First and Second Causes of Action for Breach of Contract

 

1.         Damages

 

Kaoun and Farzan argue first that Ghadirian has not adequately alleged the element of damages in her first and second causes of action for breach of contract.  “The statement of a cause of action for breach of contract requires a pleading of (a) the contract; (b) plaintiff’s performance or excuse for nonperformance; (c) defendant’s breach; and (d) damage to plaintiff.” (4 Witkin, California Procedure (4th ed. 1997) Pleading, §482, p. 574; Roth v. Malson (1998) 67 Cal.App.4th 552, 557.)  “No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin.” (Civ. Code, §3301.)  Kaoun and Farzan contend the damages alleged by Ghadirian lack any factual explanation, are unfounded, and are too uncertain.

 

“It is true that damages that are remote and speculative and not in contemplation of the parties are not recoverable. However, it has been held, in contract cases, that whether or not a particular kind of damage is within the reasonable contemplation of the parties is not a question which ordinarily can be resolved on demurrer.” (Thomas v. Olin Mathieson Chemical Corp. (1967) 255 Cal.App.2d 806, 811.)

 

2.         Judicial Estoppel

 

“Judicial estoppel, sometimes referred to as the doctrine of preclusion of inconsistent position, prevents a party from “asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding.  The doctrine serves a clear purpose: to protect the integrity of the judicial process.” (13 Witkin, Summary of California Law (10th ed. 2005) Equity, §193, p. 532 citing Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181 (Jackson).)  “The doctrine [of judicial estoppel] applies when: (1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.”  (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 422 citing Jackson, supra, 60 Cal.App.4th at p. 183.)

 

Here, Kaoun and Farzan argue judicial estoppel should apply to bar Ghadirian from now asserting damages of $500,000 when she previously alleged in her original cross-complaint damages of only $200,000. Judicial estoppel does not apply to this situation. Notably, the third element identified above is not present, i.e., the court has not adopted Ghadirian’s first position as true.

 

3.         Uncertainty

 

Finally, Kaoun and Farzan demur to the breach of contract causes of action by arguing that their alleged obligation(s) under the agreement are vague. They argue that their alleged agreement to “contribute additional moneys to the development and operation of the business as needed” is too vague to withstand a demurrer.

 

This argument is not well taken.  “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616 (Khoury).)  A “demurrer for uncertainty will be sustained only where the complaint is so bad that the defendant cannot reasonably respond; i.e. he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him.”  (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2014) ¶7:85, p. 7(I)-39 citing Khoury, supra, 14 Cal.App.4th at p. 616.)  The allegation is not so uncertain that Kaoun and Farzan cannot understand the allegation or cannot admit or deny said allegation.

 

Accordingly, the demurrer to the first and second causes of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] and on the ground that the pleading is uncertain [Code Civ. Proc., §430.10, subd. (f)] is OVERRULED.

 

B.        Third through Sixth Causes of Action for Fraud/ Negligent Misrepresentation

 

1.         Uncertainty/ Specificity

 

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar); see also CACI, No. 1900.)  “Negligent misrepresentation is a form of deceit, the elements of which consist of (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages.”  (Fox v. Pollack (1986) 181 Cal.App.3d 954, 962; internal citation omitted; see also CACI, No. 1903.)

 

“Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.”  (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)  “The pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.”  (Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 518.)  The Lazar court did not comment on how these particular allegations met the requirement of pleading with specificity in a fraud action, but the court did say that “this particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’  A plaintiff’s burden in asserting a claim against a corporate employer is even greater.  In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.”  (Lazar, supra, 12 Cal.4th at p. 645.)

 

Kaoun and Farzan argue that the third through sixth causes of action are deficient because they allege “an indefinite timeframe and a vague promise.”  Ghadirian alleges Farzan represented he “was ready and able to invest more money into the business as needed, up to a pro rata share of $30,000 monthly business expenses, that he was financially strong and could make additional investments into the business as needed.”  (FAXC, ¶¶16 and 33.)  Ghadirian alleges Kaoun represented he “was ready and able to invest more money into the business as needed, that he had $240,000 to invest in the business, that he was financially strong and could make additional investments into the business as needed, [and] that he was a chef.” (FAXC, ¶¶16 and 33.)

 

The specificity required of pleading fraud requires Ghadirian to allege what Kaoun and Farzan said. Here, the FAXC adequately alleges what representations were made.  The representations are neither indefinite nor vague.  Ghadirian alleges, in part, that Kaoun and Farzan each represented he had the then present ability to contribute toward necessary business expenses.  Whether they had the ability to do so at the time the representations were made or at any time into the future is not a question for the court to decide on demurrer.

 

Moreover, the allegations of fraud/negligent misrepresentation encompass more than just the alleged future ability to pay business expenses.  The FAXC alleges that Kaoun and Farzan misrepresented their financial condition, an existing material fact.  With regard to Kaoun, the FAXC alleges he misrepresented his status as a chef, an existing material fact.  These representations are neither indefinite nor vague.  Kaoun and Farzan cannot demur to a portion of a cause of action.  (See Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778—“[A] defendant cannot demur generally to part of a cause of action;” see also PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682—“A demurrer does not lie to a portion of a cause of action.”)

 

Kaoun and Farzan argue, additionally, that the third through sixth causes of action fail because they do not involve misrepresentations of fact, but rather opinion.  “An essential element of a cause of action for negligent misrepresentation is that the defendant must have made a misrepresentation as to a past or existing material fact.  [Citation.]  The law is quite clear that expressions of opinion are not generally treated as representations of fact, and thus are not grounds for a misrepresentation cause of action. [Citation.]”  (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 835; punctuation omitted; see also Cohen v. S&S Construction Co. (1983) 151 Cal.App.3d 941, 946.)

 

Kaoun and Farzan contend the alleged representation of their ability to pay future business expenses is non-actionable opinion. What they fail to recognize is that: “Whether a statement is nonactionable opinion or actionable misrepresentation of fact is a question of fact for the jury.”  (Furla v. Jon Douglas Co. (1998) 65 Cal.App.4th 1069, 1081; see also CACI, No. 1904.)   “Where there is a reasonable doubt as to whether a particular statement is an expression of opinion or the affirmation of a fact, the determination rests with the trier of the facts.” (Pacesetter Homes, Inc. v. Brodkin (1970) 5 Cal.App.3d 206, 212 citing Willson v. Municipal Bond Co. (1936) 7 Cal.2d 144, 151.)

 

2.         Damages Revisited

 

Kaoun and Farzan also demur to the third through sixth causes of action, arguing that Ghadirian has not adequately alleged damages. They rely on Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268 – 1269, where the court wrote: “Fraudulent representations which work no damage cannot give rise to an action at law. [Citation.] An allegation of a definite amount of damage is essential to stating a cause of action. [Citation.]”  Kaoun and Farzan also raise the following legal principle regarding causation: “In order to recover for fraud … the plaintiff must plead and prove the ‘detriment proximately caused’ by the defendant’s tortious conduct.  Deception without resulting loss is not actionable fraud.  Whatever form it takes, the injury or damage must not only be distinctly alleged but its causal connection with the reliance on the representations must be shown.”  (Service By Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1818; internal quotations and citations omitted.)

 

Kaoun and Farzan contend Ghadirian does not adequately allege damage and that the court can only infer damages from a reading of the FAXC.  This it not accurate.  Ghadirian has expressly alleged a loss in the business value and a loss of future profits.  Kaoun and Farzan argue further that such damages are “unfounded.”  However, they overlook a key principle: “A demurrer tests only the legal sufficiency of the pleading.  It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.”  (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213 – 214.)

 

3.         Judicial Estoppel Revisited

 

To the extent Kaoun and Farzan assert the doctrine of judicial estoppel to the third through sixth causes of action, the result is the same as set forth above.

 

Accordingly, the demurrer of Kaoun and Farzan to the third through sixth causes of action in Ghadirian’s FAXC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] and on the ground that the pleading is uncertain [Code Civ. Proc., §430.10, subd. (f)] is OVERRULED.