Case Number: BC538401    Hearing Date: October 06, 2014    Dept: 46

Case Number: BC538401
MALIBU BEACH RECOVERY CENTER LLC VS TANYA ZEROUNIAN ESQ ET A
Filing Date: 03/07/2014
Case Type: Fraud (no contract) (General Jurisdiction)

10/06/2014 Conference-Case Management

TENTATIVE RULING: Demurrer is sustained pursuant to CCP §430.10(e) & (f). Plaintiff may have 20 days leave to amend. Motion to Strike is off calendar as moot. Case Management conference is continued to permit another round of demurrers, to 01/9/2015 at 8:30 a.m., or to the date of the next demurrer to the First Amended Complaint, whichever is later because it appears highly doubtful that Plaintiff can amend the complaint. Leave to amend is permitted only because this is the first demurrer.

Cause of Action for Intentional Interference with Contact – Plaintiff has failed to state a cause of action for Intentional Interference with Contract as Exhibit A to the Complaint contradicts the claim.

One who, without a privilege to do so, induces or otherwise purposely causes a third person not to perform a contract with another or not to enter into or continue a business relationship with another is liable to the other for the harm caused thereby. The interest protected in these torts is the interest in reasonable expectations of economic advantage. The types of “expectancies” are limited to two basic situations: (1) where the tortfeasor induces or otherwise purposely causes a third party not to enter into a business relation or contract with the plaintiff; or (2) where the plaintiff and a third party are already in a business relationship and the tortfeasor induces or otherwise purposely causes the third party to terminate the relationship or breach the contract. Worldwide Commerce, Inc. v. Fruehauf Corp. (1978) 84 Cal.App.3d 803, 808.

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 v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126. California recognizes a cause of action against noncontracting parties who interfere with the performance of a contract. “It has long been held that a stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract.” Id.

When a written instrument is attached to a pleading as an exhibit, “the court may, upon demurrer, examine the exhibit and treat the pleader’s allegations of its legal effect as surplusage.” Weitzenkorn v. Lesser (1953) 40 Cal.2d 778, 785-786. The allegations accepted as true for purposes of demurrer necessarily include the contents of any exhibits attached to the complaint. Indeed, the contents of an incorporated document (in this case, the lease agreement) will take precedence over and supersede any inconsistent or contrary allegations set out in the pleading. In the case of such conflict, the court we will look solely to the attached exhibit. Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1409.
Here, Plaintiff’s claim is based on their allegation that Defendants failed to honor the assignment of benefits by sending the checks to Zerounian rather than directly to Plaintiff or by at least naming Plaintiff on the checks. Specifically, “Defendants Blue Cross intentionally ignored the provisions of the assignment…and sent the money due to [Plaintiff] directly to [Zerounian], thus preventing [Plaintiff] from being paid for the services provided to Ms. Zerounian.” Complaint ¶ 28.

Plaintiff’s agreement with Zerounian, however, does not state that Defendants were to send payment directly to Plaintiff. Plaintiff attached a copy of the agreement at issue as Exhibit A to its complaint, which shows the agreement contains the following provision:

As the primary member on the Blue Cross/Blue Shield (“BC/BS”) account [#] I understand and acknowledge that it is the policy of my BC/BS insurance to pay benefits directly to the primary member rather than directly to the health care provider in the case of out of network mental health providers such as [Plaintiff]. As a condition of my admission to treatment at [Plaintiff], I agree to endorse, or cause to be endorsed, and promptly turn over to Plaintiff any and all checks received by me [from BC/BS as payment for treatment]. Complaint, Ex. A.

Here, the contents of the exhibit take precedence over Plaintiff’s allegations that Defendants were required to send payment directly to them. The agreement clearly shows that Defendants were under no such obligation. Thus, Plaintiff cannot show Defendants’ intentional acts to breach the underlying contract, and, based on this agreement will not be able to amend to make such allegations.

Although the court finds it unlikely that the Complaint can be amended in light of the attachment, Exhibit A, the court will allow one opportunity to Plaintiff to plead around what appears to be a fatal flaw in this cause of action.

Cause of Action for Conversion

Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are: (1) the plaintiff’s ownership or right to possession of the property at the time of the conversion; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.¿ Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452.

In Farmers, insured individuals were injured in a car accident and Farmers paid them medical benefits. Id. at 450. The insurance policies contained provision which required the insured individuals to reimburse Farmers for any benefits paid in the event of third party recovery. Id. The insured individuals hired an attorney to help them pursue a claim against the third party responsible for their injuries. Id. However, when the attorney received payments from the third party on behalf of the insured, he failed to pay any portion to Farmers and instead disbursed the funds to himself and others. Id. Farmers brought an action for, inter alia, conversion and intentional interference with contract against the attorney. Id. at 450-451.

The Court of Appeal affirmed the trial court’s ruling sustaining the demurrers on the grounds that Farmers’ allegations failed to show ownership or right to possession of any portion of the funds the attorney received from the third party on behalf of the insured individuals. Farmers argued it had a property interest in the recoveries obtained from the third party by virtue of the insurance policy language, which it claimed created an equitable lien on the funds. Id. at 452. However, the Court of Appeal noted that Farmers was attempting to enforce an equitable lien against the attorney who had no contract with Farmers and had promised Farmers nothing. Id. at 454. The Court found that Farmers had not detrimentally relied upon a promise of reimbursement in performing its contractual obligations under the insurance policies and had not foregone pursuing its rights against insured individuals based upon express or implied promises of payment from third parties. Id. at 456.

Here, Defendants argue that the instant case is analogous to Farmers, in that principals of unjust enrichment and equity do not compel the conclusion that Plaintiff had an equitable lien, and therefore a property right, in any of the monies at issue. Although Zerounian may have promised she would protect Plaintiff’s interests by paying for treatment rendered, Defendants never made any similar promise to protect Plaintiff’s interests. Plaintiff is attempting to enforce and equitable lien against Defendants, not Zerounian, who had no contract with Plaintiff and never promised to pay Plaintiff anything. Similarly, this matter does not involve considerations of detrimental reliance as Plaintiff has not alleged it provided treatment to Zerounian based solely on the promise of reimbursement from insurance benefits. Rather, Plaintiff alleged Zerounian “agreed to pay for [her] treatment at [Plaintiff] by assigning [her] insurance benefits, including but not limited to benefits due from Blue Cross Defendants.” Complaint ¶ 12.

Based on the foregoing, Plaintiff has failed to show ownership or possessory interests in the monies held by Defendants.

Although it appears that Plaintiff will not be able to amend its complaint to establish this cause of action as a matter of law, the court will grant Plaintiff one opportunity to attempt to plead around this apparently fatal flaw in the cause of action.

Motion to Strike

Defendants move to strike two paragraphs of the complaint encompassed by the demurrers as well as prayers for punitive damages. The demurrer was sustained as to both causes of action, thus analysis of whether those paragraphs should be stricken is moot.