MOTION FOR SUMMARY JUDGMENT

Calendar: 1
Case No: EC055400
Date: 2/21/14

MP: Cross-Defendant, Jacob Tchamanian
RP: Cross-Complainant, John O’Brien

ALLEGATIONS IN FOURTH AMENDED CROSS-COMPLAINT:
The Cross-Complainant, John O’Brien, entered into an oral agreement with Jacob Tchamanian and Arthur Keshishyan under which they agreed to purchase 100% of the stock for JM Medical Supplies, Inc. under a payment plan. Jacob Tchamanian and Arthur Keshishyan agreed to act as general managers and conduct business operations during the purchase period. The Cross-Complainant suffered damages because the Cross-Defendants breached the agreement and engaged in fraudulent conduct.

CAUSES OF ACTION IN FOURTH AMENDED COMPLAINT:
1) Breach of Stock Purchase Agreement
2) Breach of Employment Agreement
3) Common Counts – Quantum Meruit
4) Fraud – Intentional Misrepresentation
5) Fraud – Intentional Misrepresentation

RELIEF REQUESTED:
Summary Judgment of Cross-Complaint

DISCUSSION:
Trial set for March 24, 2014.

This hearing concerns the motion for summary judgment filed by Cross-Defendant, Jacob Tchamanian, to the Fourth Amended Cross-Complaint. Under CCP section 437c, the Cross-Defendant has the burden of proof to offer evidence demonstrating that the Cross-Complainant cannot establish an essential element in each cause of action.

1. First Cause of Action for Breach of Contract
The Cross-Defendant argues that the Cross-Complainant cannot establish the element that there was a contract between the parties. The first cause of action claims that the Cross-Defendants breached an oral agreement to purchase the company, JM Medical Supplies.
A breach of contract cause of action must include the following elements:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

The Cross-Defendant relies upon evidence in his own declaration. In paragraphs 5 to 6, Jacob Tchamanian states that he was not interested in purchasing JM Medical Supplies from the Cross-Complainant and that he did not agree to purchase JM Medical Supplies. Mr. Tchamanian states in paragraph 4 that his son, Harout Tchamanian, entered into an agreement with the Cross-Complainant.
This evidence in the declaration of Jacob Tchamanian indicates that the Cross-Complainant cannot establish the first element. Under CCP section 437c, the Cross-Complainant has the burden of offering facts that demonstrate that there is a question of fact.
The Cross-Complainant readily meets this burden with the facts in his own declaration. John O’Brien states in paragraphs 7 and 8 that he entered into an agreement with Jacob Tchamanian and Arthur Keshishyan under which Jacob Tchamanian and Arthur Keshishyan agreed to purchase JM Medical Supplies for $320,000. These facts indicate that there is a question of fact whether a contract existed between Jacob Tchamanian and John O’Brien.

The Cross-Defendant then argues that the statute of frauds bars the claim because the contract was an agreement to answer for the debt of another. The Cross-Defendant relied upon Civil Code section 1624(a)(2), which states that a special promise to answer for the debt, default, or miscarriage of another, except in cases provided under Civil Code section 2794, is invalid unless it is in writing.
However, the Cross-Defendant failed to discuss the phrase “except in cases provided under Civil Code section 2794”. Section 2794 states that a promise to answer for the obligation of another, in any of the following cases, is deemed an original obligation of the promisor, and need not be in writing:

1) Where the promise is made by one who has received property of another upon an undertaking to apply it pursuant to such promise; or by one who has received a discharge from an obligation in whole or in part, in consideration of such promise;
2) Where the creditor parts with value, or enters into an obligation, in consideration of the obligation in respect to which the promise is made, in terms or under circumstances such as to render the party making the promise the principal debtor and the person in whose behalf it is made, his surety;
3) Where the promise, being for an antecedent obligation of another, is made upon the consideration that the party receiving it cancels the antecedent obligation, accepting the new promise as a substitute therefor; or upon the consideration that the party receiving it releases the property of another from a levy, or his person from imprisonment under an execution on a judgment obtained upon the antecedent obligation;
4) Where the promise is upon a consideration beneficial to the promisor, whether moving from either party to the antecedent obligation, or from another person;
5) Where a factor undertakes, for a commission, to sell merchandise and act as surety in connection with the sale;
6) Where the holder of an instrument for the payment of money, upon which a third person is or may become liable to him, transfers it in payment of a precedent debt of his own, or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument.

Here, the Cross-Defendants agreed to purchase the stock of JM Medical Supplies by making a payment of $320,000 through a payment $120,000 to the Cross-Complainant and $200,000 to the creditors of JM Medical Supplies. The Cross-Defendants made the promise to pay the creditors upon a consideration beneficial to themselves, i.e., they agreed to pay the debts in return for a transfer of stock. This falls within exception (4) in section 2794 because it was a promise upon a consideration beneficial to the promisor.
Further, even if the Cross-Defendant’s argument were accurate, it would apply only to a portion of the agreement. As noted above, the agreement required a payment of $120,000 to the Cross-Complainant. There are no grounds to find that this portion had to be in writing.
Accordingly, the statute of frauds does not apply to the agreement and it is not a complete defense to the claim.

Finally, the Cross-Defendant argues that the contract was executed and that this supersedes all negotiations. Under Civil Code section 1625, the execution of a contract in writing, whether the law requires it to be written or not, supersedes all the negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.
This is the statutory enactment of the Parole Evidence Rule and is based on the legal principle that when the parties have embodied their agreement in an agreement in writing, the writing becomes the contract of the parties. Foxx v. Williams (1966) 244 Cal. App. 2d 223, 231-232. The legal principle is not an evidentiary rule of exclusion; instead, it is a substantive legal principle that the writing is the agreement. Id. Extrinsic evidence is excluded because it cannot serve to prove what the agreement was, this being determined as a matter of law to be the writing itself. Id. The rule applies when there is a single and final memorial of the understanding of the parties. Id. When that takes place, prior and contemporaneous negotiations, oral or written, are excluded; or, as it is sometimes said, the written memorial supersedes these prior or contemporaneous negotiations. Id.
The Cross-Defendant’s argument is defective because he did not sign the written agreement. Since he did not sign it, the written agreement is not the single and final memorial of the understanding of the parties, i.e., any alleged agreement between the Cross-Defendant and the Cross-Complainant. Further, the written agreement, the Asset Purchase Agreement, was signed only by the Cross-Complainant, John O’Brien. Since the written agreement was signed by only one party, there is a question of fact whether it is single and final memorial of any understanding between any parties.
Accordingly, this argument does not offer any basis for finding that the Cross-Complainant cannot establish the first cause of action.

Therefore, the Cross-Defendant has not established that the first cause of action lacks merit because there are questions of fact whether he entered into an agreement with the Cross-Complainant, because the agreement is not barred by the statute of frauds, and because the parole evidence rule does not apply.

2. Second Cause of Action for Breach of Contract
The Cross-Complainant alleges in the second cause of action that the Cross-Defendants breached an agreement to pay him for interim management services. A breach of contract cause of action must include the following elements:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

The Cross-Defendant relies upon evidence in his own declaration. In paragraph 8, Jacob Tchamanian states that he did not promise to pay a salary to the Cross-Complainant and that he did not agree to pay the Cross-Complainant to maintain his license status.
This evidence in the declaration of Jacob Tchamanian indicates that the Cross-Complainant cannot establish the first element. Under CCP section 437c, the Cross-Complainant has the burden of offering facts that demonstrate that there is a question of fact.
The Cross-Complainant readily meets this burden with the facts in his own declaration. John O’Brien states in paragraph 9 that he entered into an agreement with Jacob Tchamanian and Arthur Keshishyan under which Jacob Tchamanian and Arthur Keshishyan agreed to pay him to stay on at JM Medical Supplies because he was the license holder until they obtained their licenses to operate JM Medical Supplies. Mr. O’Brien states in paragraph 9 that he was to be paid $500 per week for his services as the license holder and as a consultant and advisor for JM Medical Supplies under the new ownership. These facts indicate that there is a question of fact whether a contract existed between Jacob Tchamanian and John O’Brien.

The Cross-Defendant then argues that the written “Asset Purchase Agreement” did not include any term regarding payments to John O’Brien. This argument is irrelevant because the Cross-Complainant does not claim that the failure to pay him was a breach of the Asset Purchase Agreement. Instead, John O’Brien claims that the failure to pay him was a breach of a separate employment agreement.
The Cross-Defendant then argues that the written Asset Purchase Agreement supersedes the claim of an oral employment agreement under Civil Code section 1625, i.e., the Parole Evidence Rule. As discussed above, the Cross-Defendant’s argument is defective because he did not sign the written agreement. Since he did not sign it, the written agreement is not the single and final memorial of the understanding of the parties, i.e., it is not a final memorial of his agreement with the Cross-Complainant. Accordingly, this argument does not offer any basis for finding that the Cross-Complainant cannot establish the first cause of action.

Therefore, the Cross-Defendant has not established that the second cause of action lacks merit because there are questions of fact whether he entered into an agreement with the Cross-Complainant and because the parole evidence rule does not apply.

3. Third Cause of Action for Quantum Meruit
The Cross-Complainant claims that he is entitled to damages because the Cross-Defendants did not pay for the benefit he conferred upon them. The Cross-Defendant argues that this claim cannot be established because there was a written agreement between the parties that embraced the subject matter.
As noted above, there was no written agreement between the Cross-Defendant and the Cross-Complainant. The Cross-Defendant did not sign the written agreement. Since the Cross-Defendant does not offer any evidence of a written agreement between himself and the Cross-Complainant, he has not met his burden of proof.

Therefore, the Cross-Defendant has not established that the third cause of action lacks merit because he has not met his burden of proof.

4. Fifth Cause of Action for Fraud
The Cross-Complainant alleges that he suffered damages as a result of the fraudulent representations of the Cross-Defendant that induced him into the agreements. The Cross-Complainant alleges in paragraphs 51 and 52 that in the month of August 2009 at 12300 Alondra Blvd., Suite 301, Jacob Tchamanian made false, oral representations to the Cross-Complainant that he had great wealth, that he could afford to buy JM Medical Supplies for cash, and that he owned Ambumed Inc., Maximed, MedServ, and interests in Maxi-Care and Gold Medical Group worth several hundred thousand dollars.
The Cross-Complainant’s fourth cause of action for fraud includes the following elements:

1) a representation, usually of fact, which is false;
2) knowledge of its falsity;
3) intent to defraud;
4) justifiable reliance upon the misrepresentation; and
5) damage resulting from that justifiable reliance
Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.

The Cross-Defendant does not identify an essential element that cannot be established. Instead, he makes arguments that do not meet his burden of proof.

First, the Cross-Defendant argues that he did not purchase JM Medical Supplies from John O’Brien and that Civil Code section 1625, the Parole Evidence Rule, bars the Cross-Complainant from enforcing any oral agreement. As discussed above, it is a question of fact whether the Cross-Defendant entered into an agreement to purchase JM Medical Supplies and Civil Code section 1625 does not apply because the Cross-Defendant did not enter into a written agreement with the Cross-Complainant that memorializes the agreements between the parties.
Further, the Cross-Defendant does not demonstrate that this argument meets his burden of proof, i.e., that an essential element of the fraud claim cannot be established. Accordingly, it does not meet the Cross-Defendant’s burden of proof.

Second, the Cross-Defendant argues that he is not liable for the false representations made by Arthur Keshishyan. This argument does not meet the Cross-Defendant’s burden of proof because, as noted above, the Cross-Complainant alleges in paragraphs 51 and 52 that the Cross-Defendant, Jacob Tchamanian made false representations to the Cross-Complainant. The Cross-Complainant is seeking damages on the theory that the Cross-Defendant’s false representations were intended to induce him into the agreement and that this resulted in damages to him.
Further, the Cross-Defendant does not demonstrate that this argument meets his burden of proof, i.e., that an essential element of the fraud claim cannot be established. Accordingly, it does not meet the Cross-Defendant’s burden of proof.

Third, the Cross-Defendant argues that the false representations were not made by or did not concern himself. However, a review of his declaration reveals no statement that he did not made the representations identified in the Cross-Complainant, e.g., that he had great wealth, that he could afford to buy JM Medical Supplies for cash, and that he owned Ambumed Inc., Maximed, MedServ, and interests in Maxi-Care and Gold Medical Group. Further, these alleged representations concern Jacob Tchamanian because they are representations regarding his ability to pay for the business and representations indicating that he had familiarity with the business.
Further, the Cross-Defendant does not demonstrate that this argument meets his burden of proof, i.e., that an essential element of the fraud claim cannot be established. Accordingly, it does not meet the Cross-Defendant’s burden of proof.

Therefore, the Cross-Defendant has not established that the fourth cause of action lacks merit because he has not met his burden of proof.

5. Summary Adjudication
In the alternative, the Cross-Defendant sought summary adjudication. His notice of motion is defective because he did not comply with the requirement in CRC rule 3.1350(b) by specifying the causes of action for which he sought summary adjudication in the notice of motion. Further, as discussed above, the Cross-Defendant has not demonstrated that the Cross-Complainant cannot establish an essential element in any of the causes of action.
Accordingly, the Cross-Defendant is not entitled to summary adjudication of any cause of action.

THEREFORE, the Court will deny the Cross-Defendant’s motion for summary judgment and motion for summary adjudication because there are questions of fact in the first and second causes of action whether the Cross-Defendant entered into an agreement to purchase JM Medical Supplies and whether the Cross-Defendant entered into an agreement to pay the Cross-Complainant for his license and for consulting services. Further, the Cross-Defendant did not meet his burden of proof with regards to the third and fourth causes of action.

RULING:
DENY motion for summary judgment.
DENY motion for summary adjudication.