Case Name: Freidrik Ternian, et al. v. Ninos Ternian, et al.

Case No.: 18CV328105

Demurrer to Cross-Complaint

Factual and Procedural Background

Complaint

Plaintiffs Freidrik Ternian and Souzi Ternian, trustees of the Freidrik Ternian and Souzi Ternian Family Trust, dated February 17, 2011 (collectively, “Plaintiffs”), and defendants Ninos Ternian and Zhaklin Ternian, trustees of the Nino and Zhaklin Ternian Family Trust, dated September 28, 2015 (collectively, “Defendants”), took title to real property located at 1655 Little Orchard Street and 271 Barnard Avenue in San Jose (“Subject Property”) as joint tenants in 2005. (Complaint, ¶¶12 – 14.)

Plaintiffs request their interest in the Subject Property be separated from those of Defendants because the parties are engaged in litigation involving their corporation, Arseen Auto Body, Inc. (“Arseen”), which currently operates on the Subject Property.

On May 10, 2018, Plaintiffs filed a complaint against Defendants asserting causes of action for:

(1) Partition
(2) Waste
(3) Accounting
(4) Constructive Trust

Cross-Complaint

On August 10, 2018, Defendants filed an answer to Plaintiffs’ complaint. In addition, Ninos Ternian also filed a cross-complaint against Plaintiffs and Arseen. The cross-complaint alleges Ninos Ternian (“Ninos”) is the founder of Arseen, an auto body business, and has operated the business for about 29 years. (Cross-Complaint, ¶6.) Freidrik Ternian (“Freidrik”) is Ninos’s brother. (Cross-Complaint, ¶7.) Ninos gave Freidrik an interest in Arseen on the condition that Freidrik would help the business in areas in which Arseen was involved, including certain community and cultural contributions. (Id.) Ninos also made Plaintiffs a part of the purchase of the Subject Property on which Arseen operates. (Id.) Freidrik never contributed capital to fund Arseen or support Arseen’s business success. (Id.)

In December 2017, Freidrik withdrew from Arseen and abandoned his employment and duties with Arseen. (Cross-Complaint, ¶8.) Freidrik committed fraud, breached his fiduciary duty, and made unauthorized withdrawals from Arseen. (Id.) Freidrik has since taken actions at odds with his duties to Arseen as an ostensible director and shareholder including, without limitation, causing Arseen to suffer unnecessary cost and expense and attempting to infringe on its rights to the Subject Property. (Id.)

To ensure Arseen would have a base of operations for as long as Arseen operated, Ninos sources the opportunity to purchase the Subject Property for Arseen. (Cross-Complaint, ¶9.) Ninos made all the arrangements to make the purchase and had Plaintiffs and Defendants placed on title. (Id.) Ninos alleges that, at the time this was done, everyone understood and agreed the building was for Arseen. (Id.)

In connection with the Subject Property, Arseen has paid all the taxes, insurance, interest and principal payments. (Cross-Complaint, ¶10.) Neither plaintiff has contributed anything to the Subject Property. (Id.) Arseen has paid hundreds of thousands of dollars in improvements and fixtures to and within the Subject Property. (Id.)

The cross-complaint asserts a single cause of action for declaratory relief. Arseen contends it has an ownership, leasehold, license, or other right to the Subject Property that is irrevocable by the current title holders. (Cross-Complaint, ¶13.) Arseen disputes the Subject Property can be partitioned and sold; or if it is sold, that any sale is subject to Arseen’s rights and interests. (Cross-Complaint, ¶14.)

On October 15, 2018, Plaintiffs filed the motion now before the court, a demurrer to Ninos’s cross-complaint.

I. Plaintiffs’ demurrer to Ninos’s cross-complaint is SUSTAINED.

Plaintiffs raise several arguments in demurring to the cross-complaint but the one the court finds persuasive is Plaintiff’s contention that Ninos lacks standing to assert a claim for declaratory relief on behalf of Arseen.

“Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” (Code Civ. Proc., §367.) “The purpose of the real party in interest requirement is to assure that any judgment rendered will bar the owner of the claim sued upon against relitigating. It is to save a defendant, against whom a judgment may be obtained, against further harassment or vexation at the hands of some other claimant to the same demand.” (O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1094 (O’Flaherty).) Where the plaintiff lacks standing to sue, the complaint is subject to a general demurrer for failure to state facts sufficient to state a cause of action in this plaintiff. (Weil & Brown, CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2018) ¶7:60, p. 7(I)-35; see also Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1002.)

Ninos’s opposition even recognizes that Plaintiffs “did not name the reputed true owner of the property, Cross-Defendant Arseen. … By its cross-complaint, [Ninos] has named the reputed owner of the property, Arseen.” (Defendants’ Opposition to Demurrer, p. 2, lines 4 – 7.) However, Plaintiffs’ failure to name Arseen as a defendant in the complaint does not confer standing upon Ninos to assert a cross-complaint on Arseen’s behalf.

In a partition action, “The plaintiff shall join as defendants in the action all persons having or claiming interests of record or actually known to the plaintiff or reasonably apparent from an inspection of the property, in the estate as to which partition is sought.” (Code Civ. Proc., §872.510.) Here, however, Arseen apparently does not have any interest of record or any interest which was known to Plaintiffs and, consequently, Arseen was not named as a defendant in the underlying partition action. Plaintiffs’ complaint did not name all persons unknown pursuant to Code of Civil Procedure sections 872.520, subdivision (a), and 872.550.

Where a nonparty with an interest is not named, the proper procedure is intervention. “An intervention takes place when a nonparty, deemed an intervenor, becomes a party to an action or proceeding between other persons by doing any of the following: (1) Joining a plaintiff in claiming what is sought by the complaint[;] (2) Uniting with a defendant in resisting the claims of a plaintiff[;] (3) Demanding anything adverse to both a plaintiff and a defendant.” (Code Civ. Proc., §387, subd. (b).) “The court may, upon timely application, permit a nonparty to intervene in the action or proceeding if the person has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both.” (Code Civ. Proc., §387, subd. (d)(2).)

Alternatively, “The court shall upon its own motion or upon motion of any party make such orders for joinder of additional parties and for appointment of guardians ad litem pursuant to Sections 372, 373, and 373.5 as are necessary or proper.” (Code Civ. Proc., §872.520, subd. (c).) As a party to the partition action, Ninos could make a motion to join Arseen, but Ninos does not have standing to assert a cross-complaint on Arseen’s behalf.

Accordingly, Plaintiffs’ demurrer to cross-complainant Nino’s cross-complaint on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is SUSTAINED WITHOUT LEAVE TO AMEND.