People of the State of California, et al. v. Dario L. Pini, et al.
Case No: 17CV00718
Hearing Date: Fri May 31, 2019 9:00

Nature of Proceedings: Demurrer and Motion to Strike

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: May 31, 2019

HEARING:

(1) Motion of Trigild Management Services to Strike the Second Amended Cross-Complaint of Dario L. Pini and for Award of Sanctions

(2) Demurrer of Trigild Management Services to Second Amended Cross-Complaint of Dario L. Pini and for Award of Sanctions

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 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:

(1) The motion of Trigild Management Services, Inc., to strike the second amended cross-complaint of Dario L. Pini is denied. Trigild’s request for sanctions is denied.

(2) The demurrer of Trigild Management Services, Inc., to the second amended cross-complaint of Dario L. Pini is overruled in its entirety.

(3) Cross-defendant Trigild Management Services, Inc., shall file and serve its answer to the second amended cross-complaint on or before June 17, 2019.

Background:

(1) Procedural History

As explained below, the second amended cross-complaint (SACC) of defendant and cross-complainant Dario L. Pini arises out of actions by cross-defendant Trigild Management Services, Incorporated (Trigild) regarding 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. 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 as “Doe 1.”

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

On December 31, 2018, Pini filed his first amended cross-complaint (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 a demurrer to the FACC.

On March 8, 2019, the court sustained Receiver’s demurrer to the FACC with leave to amend. In so ruling, the court determined that the FACC did not allege facts sufficient to state a cause of action against the Receiver in his individual capacity and that the FACC was uncertain as to the claims asserted against other cross-defendants.

On March 19, 2019, Pini filed a motion to clarify the court’s receivership orders with respect to properties located at 626-630 West Cota Street and 318-320 West Valerio Street. In that motion, Pini sought clarification as to whether filing an action against Trigild arising out of Pini’s claim that Trigild’s negligence caused damage to these properties violated the receivership orders prohibiting interference with the Receiver.

On March 27, 2019, Pini filed his SACC.

On March 29, 2019, Pini filed a request for dismissal, which was entered by the court, dismissing Hoffman from the SACC in both his individual capacity and his capacity as Receiver.

On April 12, 2019, the court clarified its receivership order as follows: “Litigation by the owner of the underlying property against a court-authorized property manager acting on behalf of the receiver for the benefit the receivership estate interferes with duties of the receiver to effect the purposes of the receivership. As a result, such litigation without first obtaining leave of court is improper interference with the receiver under the terms of the injunction.” (Order, filed April 12, 2019, attachment, p. 4.)

Trigild now demurs to the SACC and moves to strike the SACC on the grounds that the cross-complaint violates the receivership order as discussed in the court’s ruling of April 12. Trigild also seeks sanctions for violation of the court’s orders. The demurrer and motion to strike are opposed by Pini. The arguments of the parties are discussed below.

(2) Allegations of SACC

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

On May 2, 2018, Trigild, through Nancy Daniels, an employee of Trigild, 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.” (SACC, ¶ 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. (SACC, ¶¶ 17, 27.)

On May 3, 2018, in a conference call, the Receiver and Daniels confirmed Trigild’s 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. (SACC, ¶ 28.)

On July 24, 2018, without permission from or notice to Pini, at the Receiver’s and Daniels’s direction, Trigild’s agents or employees removed Pini’s personal property from 329 E. Carrillo, including the moulding. (SACC, ¶ 29.)

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

The SACC asserts three causes of action against Trigild: (1) breach of written contract; (2) conversion; and (3) negligence. In the FACC, cross-defendants were identified as Hoffman, in both his official capacity as receiver and individually, Trigild, Trigild Holdings, Incorporated, and Trigild Incorporated. (FACC, ¶¶ 3-5, 7, 8.) In the SACC, the only remaining cross-defendant is Trigild.

Analysis:

(1) Motion to Strike

Trigild moves to strike the SACC as filed in violation of the receivership orders as clarified in the court’s order of April 12, 2019.

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: [¶] … [¶] (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436, subd. (b).) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).)

In support of this motion, Trigild attaches a copy of the court’s order of April 12, 2019, to the declaration of counsel. The court takes judicial notice of this order.

Pini opposes the motion to strike arguing that the filing of the SACC was expressly authorized by the court and that the April 12 ruling involved a different claim.

As the court has repeatedly emphasized, each of the receiverships are separate receiverships that are being managed together by the court because of their overlapping factual and legal issues. The presence of third party creditors with differing security interests in particular receivership properties make separating interests, claims, and liabilities of the properties and receiverships especially important.

It is important to remember that when Pini first raised the claim that is asserted in the SACC, Pini did so by motion for leave to file a separate action. The court denied that motion, observing that the preferred practice “is to hear and determine all rights of action and demands against a receiver by petition in the cause in which he was appointed.” (Ostrowski v. Miller (1964) 226 Cal.App.2d 79, 84, citation omitted.) In response, Pini filed his claim asserted the SACC in this action. The court deemed the claim a cross-complaint to provide a procedural structure to resolve that claim. The court expressly granted leave to amend following the Receiver’s demurrer to the FACC. The court clarified in its April 12 ruling that Pini’s filing of a cross-complaint, against the Receiver or against Trigild acting on behalf of the Receiver, without first obtaining leave of court would constitute improper interference with the Receiver under the terms of the injunction. The granting of leave to amend is permission of the court to file the SACC notwithstanding the receivership order as clarified in the April 12 ruling.

The claims at issue in Pini’s motion to clarify are different from the claims asserted in the SACC. In Pini’s motion to clarify, Pini sought to assert his own claim against a party acting on behalf of the Receiver for damage occurring to the receivership estate. In the SACC, Pini asserts a claim as the owner of personal property stored on receivership property, where the receivership property is owned by a legal entity different from Pini himself. Due process requires that Pini have a legally sufficient procedure to assert his claim for damage to his personal property. Pini does not have a legally sufficient procedure to surcharge the Receiver as to this property because the moulding is alleged to have been located and damaged on receivership property in which Pini, individually, does not have an interest. Pini is entitled to a procedure by which he has standing to assert this claim; it is questionable as to whether Pini has standing to seek a surcharge as to the receivership involved in the disposition of the moulding where the owner of the receivership property is an entity legally separate from Pini. (See Jun v. Myers (2001) 88 Cal.App.4th 117, 125.)

Accordingly, Trigild’s motion to strike the SACC as filed in violation of court orders will be denied. Trigild’s request for an award of sanctions will also be denied. This specific litigation is not in violation of the receivership orders because the court has granted leave to file the SACC. The court notes that litigation activity involving the SACC may nonetheless actually interfere with the present operation of the receiverships; the court will address the scope of litigation activity to be permitted in the present in the context of case management.

(2) Demurrer

“ ‘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.)

In the demurrer to the FACC, the court addressed issues with particular attention to the allegation of claims against Hoffman in his individual capacity. The only remaining claims asserted in the SACC are claims against Trigild. As discussed above, Pini brings this cross-complaint to assert a claim for damage to his own personal property that was stored on receivership real property not owned by Pini personally. This claim is analytically different from the claim at issue in the court’s April 12 order in which Pini was himself the owner of the real property underlying the specific receivership and the claim arose out of the receivership’s management of that same real property. The court’s April 12 order identified that, in that case, Pini had an adequate remedy to seek a surcharge against the Receiver for claims of negligent management of the receivership estate. Here, the claims asserted in the SACC are analytically in the nature of third-party claims for damages. The property at issue—the moulding—is alleged not to be part of the receivership estate for 329 E. Carrillo and is not owned by Alamar III, LLC. As noted above, it is questionable whether Pini, as the alleged owner of the moulding, has standing to seek a surcharge against the Receiver for damage to the moulding. This is the narrow basis upon which the court permitted the cross-complaint to be asserted in the first place. (See Vitug v. Griffin (1989) 214 Cal.App.3d 488, 493.) For the same reason discussed above in the context of the motion to strike, the SACC is not precluded by the court’s prior orders. The court will therefore address the issue of whether the SACC states any or all of the causes of action asserted therein. The court need not, and does not, here address whether any potential judgment on these claims would or would not be paid out of the applicable receivership estate. (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 ….”].)

(A) 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.)

Trigild argues that the first cause of action fails to state a cause of action against it because, to the extent a valid contract was formed, only the Receiver was a party to the contract and not Trigild. “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.)

In ruling on the demurrer to the FACC, the court sustained the Receiver’s special demurrer for uncertainty on the ground that the FACC was 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 is the contracting party (and Daniels is the agent of Trigild), or whether there is some other combination of principal and agents.

In paragraph 27 of the SACC, Pini alleges: “On May 2nd, 2018 Cross-Defendant TRIGILD MANAGEMENT SERVICES INCORPORATED, by and through the ostensible and express agent and DIRECTOR OF TRIGILD MANAGEMENT SERVICES, INCORPORATED, 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 quoted in part above.

“ ‘Where a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.’ [Citation.] ‘ “[W]here an ambiguous contract is the basis of an action, it is proper, if not essential, for a plaintiff to allege its own construction of the agreement. So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff’s allegations as to the meaning of the agreement.” ’ [Citation.]” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229.)

Pini pleads his construction of the contract as a contract between Trigild and Pini, entered into on behalf of Trigild by its agent Daniels. This is sufficient to allege a contract with Trigild. The court’s April 12 ruling does not imply that Trigild cannot enter into contracts by virtue of being the property manager of the Receiver. Again, the court does not address on demurrer the extent to which Trigild would ultimately bear a judgment in favor of Pini. (Cf. Sunset-Sternau Food Co. v. Bonzi (1964) 60 Cal.2d 834, 837 [indemnity between principal and agent].) The demurrer to the first cause of action will be overruled.

(B) Tort Claims

Pini’s second cause of action is for conversion; Pini’s third cause of action is for negligence. As to both causes of action, Trigild argues that Pini cannot assert a tort claim based upon the April 12 order. “A receiver is not immune from responsibility for his or her acts. A receiver cannot be held liable as a tortfeasor for an act done within the scope of the powers granted by the order of the court. [Citation.] Nevertheless, a receiver, as any fiduciary, may be surcharged and his or her surety held liable for a failure to properly carry out the duties imposed by the order of appointment.” (Shannon v. Superior Court (1990) 217 Cal.App.3d 986, 993.)

“The rule requiring court permission to sue a receiver stems from Code of Civil Procedure section 568. That section empowers a receiver to bring and defend actions as a receiver, but only ‘under the control of the court.’” (Vitug v. Griffin, supra, 214 Cal.App.3d at pp. 492-493.) “The rule that claimants must apply to the court before suing a receiver is founded upon notions of judicial economy. In most cases a claimant can obtain appropriate relief in the receivership action; therefore an independent action will not be necessary. [Citation.] By refusing permission to sue, the appointing court can require a claimant to intervene in the receivership proceedings to assert his claim, thus protecting the receiver from a proliferation of lawsuits. [Citation.] But the court may not refuse permission where the effect would be to cut off plaintiff’s rights.” (Id. at p. 493.)

The court’s April 12 ruling precluded Pini from filing an action against Trigild, as the court-appointed property manager for the Receiver, because the claim under consideration for the April 12 ruling was by the underlying owner of the property for negligence in the management of the receivership estate. This claim, whether asserted against the Receiver or against Trigild, is precisely the type of claim for which surcharge is an adequate and appropriate remedy. The claim asserted in the SACC is different—and surcharge is not an adequate remedy—because it is asserted by someone other than the owner of the receivership property for damage to property not part of the receivership estate.

As quoted above, Pini is entitled to a forum to seek remedies for his claims. The claim asserted in the SACC is a special case for which a separate claim proceeding within this action (here, a cross-complaint) is appropriate in the absence of an adequate remedy by surcharge. The court prescribes the procedures for addressing this particular claim by using the cross-complaint mechanism. Pini’s tort claims may be resolved through this mechanism (again, subject to the court’s management of the litigation of such claims). The court does not resolve or preclude resolution of the merits of the disputed claims on demurrer. Accordingly, the demurrer will be overruled as to the tort claims as well.