People of the State of California, et al. v. Dario L. Pini, et al.
Case No: 17CV00718
Hearing Date: Fri Mar 08, 2019 9:00

Nature of Proceedings: Demurrer

People of the State of California ex rel. Ariel Pierre Calonne etc. v. Dario L. Pini, et al. (Judge Sterne)

Case No. 17CV00718

Hearing Date: March 8, 2019

HEARING: Demurrer of Receiver to First Amended Cross-Complaint of Dario L. Pini

ATTORNEYS:

For Plaintiff People of the State of California etc.: Ariel Pierre Calonne, John Doimas, Office of the City Attorney, City of Santa Barbara; Matthew R. Silver, Daniel J. Pasek, Silver & Wright LLP

For Defendant, individually and as trustee, and Cross-Complainant Dario L. Pini and Defendants D.L.P. Properties, Nonnie Investments, LLC, 104 Las Aquajes, LLC, Alamar II, LLC, Alamar III, LLC: Paul R. Burns, Solange D. Sanhueza, Law Offices of Paul R. Burns, P.C.

For Receiver and Cross-Defendant William J. Hoffman, as Receiver and individually, and cross-defendants Trigild Management Services, Inc., Trigild Holdings, Inc., and Trigild Incorporated: Fernando Landa, Jamie Altman Buggy, CGS3 LLP

TENTATIVE RULING:

The general demurrer of cross-defendant William J. Hoffman, in his individual capacity, is sustained, with leave to amend, as to all causes of action, and the special demurrer for uncertainty of all cross-defendants in all capacities is sustained, with leave to amend, as to all causes of action. Cross-complainant Dario L. Pini shall file and serve his second amended cross-complaint on or before March 25, 2019.

Background:

(1) Procedural History

As explained below, the first amended cross-complaint (FACC) of defendant and cross-complainant Dario L. Pini arises out of the storage of moulding on property that is the subject of receivership.

On April 18, 2018, the court entered its Receivership Order 6 in this case relating to property located at 329 E. Carrillo Street in Santa Barbara (329 E. Carrillo or the Property). That order includes a finding by the court that the owner of record of 329 E. Carrillo is defendant Alamar III, LLC. (Receivership Order 6, filed Apr. 18, 2018, ¶ I(2).) The order appointed William J. Hoffman (Receiver) as receiver “to take possession of the property.” (Id., ¶ II(1).) The order additionally stated: “The receiver may employ Trigild as a management company and may pay reasonable amounts to Trigild as approved by the Court.” (Ibid.) Among other things, the order directed the Receiver to “take possession of and manage the Property.” (Id., ¶ II(6(a).) (Note: On the court’s own motion, the court takes judicial notice of Receivership Order 6. (Evid. Code, § 452, subd. (d)(1).))

On September 7, 2018, Pini filed a motion for leave to file a separate action against the Receiver for claims arising out of the storage of the moulding. The motion was opposed. On October 9, 2018, the court issued its order after hearing denying Pini’s motion. In denying the motion, the court noted that claims against the Receiver may be resolved in this action and that a separate action was not necessary for Pini to obtain whatever relief to which Pini may be entitled. (Order, filed Oct. 9, 2018, at p. 6.)

On October 11, 2018, Pini filed his original cross-complaint in this action against Receiver. (Note: The cross-complaint is so styled to reflect that Pini, as a party-defendant, raises a claim arising out of the subject matter of this action against the Receiver, a court-appointed receiver but not otherwise a party to this action. Although not a typical cross-complaint, the procedures for adjudication of a cross-complaint are reasonably well suited to resolution of Pini’s claims.) On November 5, 2018, Pini filed an amendment to the original cross-complaint identifying Trigild Management Services Incorporated as “Doe 1.”

On December 3, 2018, Receiver filed his demurrer to the original cross-complaint.

On December 31, 2018, Pini filed his FACC prior to the hearing on the demurrer to the original cross-complaint. The court ordered the hearing on the demurrer to the original cross-complaint off calendar as moot.

On January 29, 2019, Receiver filed this demurrer to the FACC.

On February 25, 2019, Pini filed his opposition to the demurrer.

On March 1, 2019, Receiver filed his reply to the opposition.

On March 4, 2019, Pini filed two documents, both styled as evidentiary objections and motion to strike portions of the Receiver’s reply, but each addressing different aspects of the reply. (The motions to strike are denied. The issues raised by those documents are variations of the issues raised by the main papers and are discussed in that context.)

The arguments of the parties are discussed below.

(2) Allegations of FACC

As alleged in the FACC: Pini is the owner of valuable Victorian-era crown moulding made from lathed red oak (the moulding). (FACC, ¶¶ 17, 21.) Beginning some time prior to Receiver’s appointment as receiver, the moulding was stored at 329 E. Carrillo. (FACC, ¶¶ 16, 21.)

On May 2, 2018, the Receiver, through Nancy Daniels, an employee of cross-defendant Trigild Management Services, Incorporated (Trigild Management), sent an email which stated in part:

“We understand that Mr. Pini currently stores significant numbers of five gallon paint containers at East Carrillo. If he does not need access to any of them during the receiver period, they may remain in place. If he needs access, they must be relocated off-site, from any property under receiver’s control. It appears that Mr. Pini may have other items stored throughout the various properties. As with the paint, they may remain stored for the duration of the receivership, but may not be accessed. If Mr. Pini requires access to the paint or other stored items, he needs to provide a written request to move such items by May 7, 2018 and we will arrange a time for him to retrieve them. [¶] To be clear, no associates of Mr. Pini’s, including Mr. Pini himself may be on any of the properties, subject to the receivership order, without written permission from the receiver.” (FACC, ¶ 17 exhibit A.)

Pini characterizes this email as a written agreement to store his personal property throughout the duration of the receivership and to assume a duty of care for the safe and proper storage of the property. (FACC, ¶¶ 17, 27.)

On May 3, 2018, in a conference call, the Receiver and Daniels confirmed the agreement to permit Pini to store his personal property on the receivership properties and Pini agreed to allow the Receiver and Daniels to conduct their activities at the receivership properties without the immediate burden, logistics, and effort of having Pini remove the personal property. (FACC, ¶ 28.)

On July 24, 2018, without permission from or notice to Pini, the Receiver’s agents and employees, at the Receiver’s direction, removed Pini’s personal property from 329 E. Carrillo, including the moulding. (FACC, ¶ 22.)

After July 24, 2018, Pini made extensive efforts to remove his remaining personal property from the receivership properties. (FACC, ¶ 23.)

On August 21 and 22, 2018, although Daniels and the Receiver’s counsel agreed to access in writing, Pini’s employees arrived at the property for removal and lost one hour of their work time when they were not provided access. (FACC, ¶ 24.)

The FACC asserts three causes of action: (1) breach of written contract (two counts); (2) conversion; and (3) negligence. Cross-defendants are identified as Hoffman, in both his official capacity as receiver and individually, Trigild Management, Trigild Holdings, Incorporated (Trigild Holdings), and Trigild Incorporated (Trigild Inc.). (FACC, ¶¶ 3-5, 7, 8.) (Note: Trigild Management, Trigild Holdings, and Trigild Inc. are collectively referred to herein as the “Trigild entities.”) All causes of action are asserted against all cross-defendants.

Analysis:

“ ‘The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’ ” (Zhang v. Superior Court (2013) 57 Cal.4th 364, 370, internal quotation marks and citations omitted.)“Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.” (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482.)

“As against special demurrers, the facts must be alleged with sufficient clarity to inform defendants of the issues to be met.” (Dumm v. Pacific Valves (1956) 146 Cal.App.2d 792, 799.) A plaintiff or cross-complainant must “set forth in his complaint the essential facts of his case with reasonable precision and with particularity sufficiently specific to acquaint the defendant of the nature, source, and extent of his cause of action.” (Smith v. Kern County Land Co. (1958) 51 Cal.2d 205, 209, internal quotation marks and citation omitted.)

Much of the argument on demurrer relates to the claims as against Hoffman in his official capacity as receiver as compared with the claims as against Hoffman individually. In opposition and in response to the reply, Pini argues that Hoffman’s arguments should be ignored because Hoffman demurs only in his capacity as receiver and asserts that cross-defendants’ counsel represents Hoffman only in his official capacity. Counsel has clarified that they represent Hoffman in both capacities and the demurrer is brought by Hoffman in both capacities, as well as by each of the other cross-defendants. (Reply, p. 2.) In his papers, Pini has addressed the merits of all of the issues raised in demurrer. The court will address the merits of the demurrer.

(1) Breach of Contract

Pini’s first cause of action is for breach of contract. “A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

Pini alleges the contract to be the May 2 email, confirmed orally on May 3, to permit Pini to store his personal property on the receivership properties during the receivership. Cross-defendants argue that this contact is without consideration. The contract is alleged to be in writing. Consideration need not be pleaded for a written agreement. (Brooks v. Fidelity Savings & Loan Association (1938) 26 Cal.App.2d 114, 117-118.) Lack of consideration is not apparent on the face of the pleading and hence not subject to demurrer. Nevertheless, a form of consideration is alleged by Pini’s forbearance from removing the personal property, that is, the continued possession of the moulding by Receiver. (FACC, ¶ 28; see also City of Los Angeles v. Anchor Casualty Co. (1962) 204 Cal.App.2d 175, 181 [“A contract if is sufficient to support a contract if it is either beneficial to the promisor or detrimental to the promisee ….”].) The demurrer will not be sustained on this ground as to the first count of this cause of action; the same analysis applies with equal force to the second count of this cause of action.

A similar issue and analysis exist with respect to cross-defendants’ argument that Pini has failed to allege performance. While performance is usually alleged in the statutorily accepted conclusory fashion of simply alleging the fact of performance (see Code Civ. Proc., § 457), performance by Pini is encompassed within the allegations of consideration and breach. With respect to the first count, performance is forbearance in maintaining possession of the moulding with the Receiver. With respect to the second count, performance is the detrimental reliance of sending workers. In both cases, the allegations, reasonably construed, sufficiently state the fact of performance. The demurrer will not be sustained on this ground.

Cross-defendants make two related arguments that form the principal basis for their demurrer. Cross-defendants argue that Pini has not alleged the existence of any contract with Hoffman in his individual capacity and Pini has not alleged the existence of any contract with any of the Trigild entities.

The basic principles involved here are: “Breach of contract cannot be made the basis of an action for damages against defendants who did not execute it and who did nothing to assume its obligations.” (Gold v. Gibbons (1960) 178 Cal.App.2d 517, 519.) “[A]n agent is not ordinarily liable on contracts he executes on behalf of a disclosed principal.” (Epic Communications, Inc. v. Richwave Technology, Inc. (2009) 179 Cal.App.4th 314, 329, italics omitted.) Thus, it is material to the cause of action to know the party or parties that Pini alleges as the contracting party.

In paragraph 27 of the FACC, Pini alleges: “On May 2nd, 2018 Cross-Defendants HOFFMAN, and TRIGILD MANAGEMENT SERVICES INCORPORATED, and Hoffman’s alter ego Trigild entities, by and through the ostensible and express agent and employee of Hoffman and TRIGILD MANAGEMENT SERVICES INCORPORATED, and NANCY DANIELS (‘Daniels’), agreed in writing via email at 7:00p.m. that Pini’s valuable personal property could ‘remain stored for the duration of the receivership’ at the 8 properties identified in ¶ 4 above. (See Exhibit ‘A’ hereto)”

Exhibit A is the email from Daniels, who lists her title as Director of Real Estate. The allegation is at best uncertain as to the identity of the contracting party. Complicating this issue somewhat, exhibit A as attached to the FACC is missing the image under Daniels’s name, so it is unclear whether the logo is intended to identify a specific entity. The FACC is ambiguous as to whether Pini alleges that Hoffman (in some capacity, as discussed below) is the principal and hence the contracting party, and Daniels and Trigild entities are agents of Hoffman, whether Trigild Management is the contracting party, and Daniels (and perhaps others) are agents, or whether there is some other combination of principal and agents. Particularly here, where capacity is a sticky point with the parties, it is necessary for Pini to allege the specific identity of the contracting party. If the contracting party is not a signatory to the agreement, then the basis by which the signatory binds the contracting party must also be pleaded to avoid uncertainty. The existing pleading does not do so and so the special demurrer for uncertainty will be sustained on this ground.

As to Hoffman, the uncertainty is even greater. As alleged in the FACC, Hoffman is a court-appointed Receiver as to 329 E. Carrillo. Receivership Order 6 empowered the Receiver to take possession and manage 329 E. Carrillo. Such order empowered and authorized the Receiver to take actions, such as the actions alleged to be the contract in the first cause of action, to manage personal property of third parties located on the Property and to determine the time, manner, and conditions of storage of or access to such personal property. (See Nulaid Farmers Association v. LaTorre (1967) 252 Cal.App.2d 788, 791 [“Where a receiver’s powers and duties are not directly prescribed by statute, they are dependent upon the court’s order of appointment.”].) The contract is, by its terms and its nature, a contract arising out of the powers and duties of the Receiver acting in his capacity as receiver. Such contractual obligations may be asserted only against the Receiver in his official capacity. (See Chiesur v. Superior Court (1946) 76 Cal.App.2d 198, 201 [“Actions against the receiver are in law actions against the receivership or the funds in the hands of the receiver, and his contracts … and liabilities are official, and not personal ….”].) “Where one sues or is sued in a representative capacity, it must be averred that it is as such representative and even a mere statement of the representative character, following the name of the party, will be treated as only descriptio personae. [Citations.] The point is important because a receiver is liable to persons not beneficially interested in his receivership, in his official capacity only.” (Sealite, Inc. v. Finster (1957) 149 Cal.App.2d 612, 618-619.) There are no facts alleged that Hoffman entered into the contract at issue in his individual capacity. Absent specific facts alleging circumstances by which the contract was made by Hoffman in an individual capacity, the cause of action may not be asserted against Hoffman in that capacity as a contracting party but only in his official capacity as Receiver.

The general demurrer is sustained as to Hoffman in his individual capacity and the special demurrer for uncertainty is sustained as to Hoffman in all capacities.

(2) Conversion and Negligence

Pini’s second and third causes of action are torts asserted against all of the cross-defendants. Cross-defendants argue that these tort claims do not state claims against Hoffman in his individual capacity or against the Trigild entities. Cross-defendants also argue that the claims are uncertain.

In order to address these arguments, it is first necessary to understand the legal framework that exists under the facts alleged with respect to possession of the moulding. Prior to Receivership Order 6, the moulding was located at 329 E. Carrillo. (FACC, ¶ 21.) The owner of 329 E. Carrillo is defendant Alamar III, LLC (Owner). (Receivership Order 6, filed Apr. 18, 2018, ¶ I(2); FACC, ¶ 15.) The moulding is owned by Pini and not by Owner. (See FACC, ¶ 21.) At this point, the legal relationship of a bailment (or deposit) existed between Pini and Owner with respect to the moulding. (Note: “In our Civil Code, bailments are referred to as deposits [citation], but the case law still often employs the common law term, bailment, as well as bailor and bailee.” (Gebert v. Yank (1985) 172 Cal.App.3d 544, 551.)) “A voluntary deposit is made by one giving to another, with his consent, the possession of personal property to keep for the benefit of the former, or of a third party. The person giving is called the depositor, and the person receiving the depositary.” (Civ. Code, § 1814.) By Receivership Order 6, the court placed 329 E. Carrillo in receivership and ordered possession and management of 329 E. Carrillo transferred to the Receiver. The Receiver thus stepped into the shoes of Owner and occupied the same position as to Pini vis-à-vis the moulding as did Owner. (See California National Bank of Sacramento v. El Dorado Lime & Minerals Co. (1931) 213 Cal. 494, 496 [“A receiver takes control of property subject to all existing interests.”].) Significantly, because the moulding was left on the Property and Receiver was charged with management of the Property, even though the moulding itself was not part of the receivership estate, management of the moulding became part of the Receiver’s official duties. As argued by Pini in connection with the contract cause of action, the consideration for the deposit was the continued possession of the moulding by Receiver. Consequently, the legal status alleged as between Pini and Receiver was a gratuitous bailment (deposit). (See Civ. Code, § 1844.)

“ ‘A receiver is not liable in his individual capacity as a tort-feasor for any act within the scope of his duties as receiver and done under an express order of court which is not in excess of jurisdiction, the liability incurred being chargeable upon the property.’ ” (Chiesur v. Superior Court, supra, 76 Cal.App.2d at p. 202.) In order for a receiver to be liable in his individual capacity in tort, the acts of the receiver must be beyond the scope of his duties as receiver. (See Tapscott v. Lyon (1894) 103 Cal. 297, 305-306.) As alleged in the FACC and explained above, storage and management of the moulding was within the scope of the Receiver’s duties under Receivership Order 6. Because the second and third causes of action purport to assert these claims against the Receiver in his individual capacity, the general demurrer will be sustained as to the Receiver in his individual capacity. (See Sealite, Inc. v. Finster, supra, 149 Cal.App.2d at pp. 618-619.)

In opposition, Pini also argues that Hoffman provides no authority that a receiver can use a property owner’s own assets to defend claims by the owner against the receiver. (Opposition, pp. 12-13.) This argument goes beyond the pleading issues presented in this demurrer in two important respects. First, Pini does not bring this cross-complaint as the owner of property subject to the receivership, but as the owner of the personal property located on the real Property where the Receiver occupies the legal position formerly held by Owner. Pini is not the Owner; Alamar III, LLC, is the Owner. (See Corp. Code, § 17701.04, subd. (a) [“A limited liability company is an entity distinct from its members.”].) If Pini and Alamar III, LLC, were deemed to be the same person, then there would be no basis for this claim as a cross-complaint as distinct from the owner’s general right to seek to surcharge a receiver. (See Shannon v. Superior Court (1990) 217 Cal.App.3d 986, 998.) Second, claims based on whether the receivership estate is finally chargeable for expenses is a matter for the receivership final accounting. Pini’s argument does point out, however, that the claims raised in the cross-complaint appear inextricably intertwined with final accounting issues. The court will address this case management issue when the pleadings of the cross-complaint are finally resolved and expresses no opinion on the case management issues relative to the cross-complaint at this time.

As to the remaining cross-defendants, the FACC is uncertain as to the nature of the liability that is asserted against them. In particular, it is unclear whether the liability is asserted as direct liability as a tortfeasor or as vicarious liability based upon the relationship of a particular cross-defendant to the tortfeasor. Until the specific nature of the liability is clarified, the pleadings are uncertain and the court cannot determine the extent, if any, the FACC states a cause of action against any particular cross-defendant under the theory of liability as asserted. The special demurrer for uncertainty will be sustained as to all parties.

This is the first demurrer to cross-complaint claims upon which the court has ruled. The court will grant leave to amend.