Case Number: SC116038    Hearing Date: July 30, 2014    Dept: P

TENTATIVE RULING

JULY 30, 2014 CALENDAR No: 2

SC116038 — REALTY WORLD v. 13340 MDR, LLC, et al.

DEFENDANT PREFERRED BANK’S DEMURRER TO MDR PARTIES’ FIRST AMENDED CROSS-COMPLAINT

Defendant/cross-defendant Preferred Bank and cross-defendant Nixon- Washington LLC demur to an amended cross-complaint filed against them. The Court will sustain the demurrers with leave to amend.

Plaintiff Realty World Beach Cities (“Plaintiff”), which is no longer a party to this action, initiated this action. In its (now-dismissed) TAC, Plaintiff alleged as follows: Plaintiff entered into a Listing Agreement with defendant 13340 MDR, LLC (“MDR”) for sale of an unfinished condominium development located in Culver City. MDR was in financial distress at the time and owed defendant Preferred Bank approximately $18 million secured by a promissory note and deed of trust. Anastasi Development Company, LLC contacted Plaintiff regarding the property and was directed by Plaintiff to Defendant MDR’s principal, Defendant Areg Baghdassarians and Preferred. MDR, in a non-traditional transaction orchestrated by Preferred Bank (which had a joint venture agreement with Baghdassarians and MDR for the development of and profit sharing from the sale of the property) to disguise the sale, transferred the property to Anastasi Development Company, LLC. Preferred, MDR and Baghdassarians refused to pay the commission, asserting that the property was not actually “sold.”

In their first amended cross-complaint, MDR, Baghdassarians, and a new party to the action, developer Angeleno Builders, LLC (collectively, the “MDR Parties”), have alleged that Preferred failed to continue funding a construction loan pursuant to a joint venture agreement with the MDR Parties for the development of, and profit sharing from, the sale of the property, and that Preferred forced the MDR parties to transfer the property to Anastasi Development Company, LLC via a materially inaccurate “Deed in Lieu of Foreclosure.” The FACC alleges twelve causes of action for, inter alia, breach of written contract, restitution, rescission (of the “Deed in Lieu of Foreclosure”), fraud, breach of fiduciary duty, and related claims against Preferred Bank and its alleged alter ego, Nixon-Washington, LLC.

The manner in which the FACC is plead makes a determination of the demurrers impracticable. The complaint does not contain a concise statement of the facts. See CCP 425.10. Indeed, the FACC spans 75-pages and 584-paragraphs. Further, it employs the disfavored shotgun (or ‘chain letter’) style of pleading, wherein each claim for relief incorporates by reference all preceding paragraphs, which often masks the true causes of action.” International Billing Services, Inc. v. Emigh (2000) 84 Cal.App.4th 1175, 1179. See, as matters of example only, FACC, para. 471 (incorporating allegations of negligent misrepresentation into claim for intentionalmisrepresentation), FACC, paras. 572-584 (incorporating all prior allegations of the FACC and failing to identify with specificity exactly which claims are the subject of the MDR Parties’ request for punitive damages).

The Court notes that notwithstanding the length of the FACC, on its face it lacks numerous allegations pertinent to the claims sounding in fraud. See, e.g., Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157 (“[t]he requirement of specificity in a fraud action against a corporation requires the plaintiff to 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.”

Demurrers to all causes of action are sustained with leave to amend. SACC is to be served and filed on or before August 25, 2014.

In drafting the SACC, counsel for the MDR Parties may wish to bear in mind that the maxim “less is more” is often true and that presenting innumerable allegations of little materiality does not compensate for the lack of the pleading of facts which are essential to the proper pleading of a claim.

DEFENDANT PREFERRED BANK’S MOTION TO STRIKE RE MDR PARTIES’ FIRST AMENDED CROSS-COMPLAINT

Off-calendar as moot based on the ruling requiring the filing of a SACC.

CASE MANAGEMENT CONFERENCE

Re-set to October 20, 2014 at 8:30 a.m.

OTHER MATTERS

Preferred’s counsel utilized footnotes presented in a type size violative of CRC 2.104. This Department has approximately 500 active cases and is presented with thousands of pages each week; the Rule of Court on font size takes on added significance in this context.

Considering the apparent “gist” of the FACC, the Court questions why the brief in support of the demurrers contains no citation to, let alone discussion of, Riverisland Cold Storage, Inc. v. Fresno–Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1183.

Until recently, the parol evidence rule precluded fraud claims “premised on prior or contemporaneous statements at variance with the terms of a written integrated agreement.” Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 346, citing Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258. But in Riverisland, the California Supreme Court overruled Pendergrass and its progeny, concluding that the limitation on the fraud exception to the parol evidence rule was “plainly out of step with established California law” (Riverisland at 1181) and also “inconsistent with the terms of” section 1856 of the Code of Civil Procedure (Riverisland at 1182). In overruling Pendergrass, the court “reaffirm[ed] the venerable maxim [that] ‘[i]t was never intended that the parol evidence rule be used as a shield to prevent the proof of fraud.'” Riverisland, at 1182.

In other words, in Riverisland, the California Supreme Court reaffirmed the statutory exception to the parole evidence rule that allows a party to present extrinsic evidence to show that a written agreement was procured by fraud, even if the alleged misrepresentations were inconsistent with the subsequent language contained in the written agreement – and thus a merger or integration clause can no longer serve as a shield from fraud-in-the inducement or promissory fraud claims.

Preferred needs to keep Riverisland in mind in determining whether to demur to and/or the scope of any demurrer to the SACC.

While the Court does not believe that counsel for Preferred sought to mislead the Court, counsel on both sides are reminded of their duties under CCP 128.7 and their duty to cite to adverse authority under Cal. Rules of Professional Conduct, Rule 5- 200.

NOTICE

______ shall give notice of today’s rulings and timely file proof of service thereof, pursuant to CCP 1019.5 and CRC 3.1312