Case Number: GC049845 Hearing Date: May 02, 2014 Dept: B

ATTENTION: THE COURT WILL BE DARK ON MAY 2, 2014.

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Demurrer and Motion to Strike

This case arises from the Plaintiff’s claim that the Defendant, Pasadena Auto Dealer, Inc., breached an agreement by failing to repay a line of credit. Defendants, Mohammad Ebrahimi, and Nabila Ebrahimi, breached an agreement to guaranty the performance of Pasadena Auto Dealer, Inc.

Pasadena Auto Dealer, Mohammad Ebrahimi, and Nabila Ebrahimi then filed a Cross-Complaint against Nextgear Capital, Inc., Manheim Investments, Inc., and a number of individuals to claim that Daniel Star, Maria Yabut, Corey Pasek, Kevin Miller, James Johnson, Steve Akerboom, and Michael Markov defrauded them.

The Cross-Complaint alleges that the Cross-Complainants obtained a line of credit from the Cross-Defendants to finance the purchase of vehicles at auctions. The Cross-Complainants allege they suffered damages because the Cross-Defendants breached fiduciary duties, a duty of loyalty, and a contract by improperly charging fees and fraudulently adding vehicles into the dealer account. In addition, the Cross-Defendants engaged in fraud by stating that would perform their duties under the contract while concealing that they were wrongfully adding vehicles to the dealer account and improperly charging fees. The Cross-Defendants also converted vehicles to their own possession.

The Causes of Action in the Second Amended Cross Complaint are:
1) Breach of Fiduciary Duty (against DSC)
2) Breach of Loyalty (against DSC)
3) Breach of Contract (against DSC)
4) Breach of Implied Covenant of Good Faith and Fair Dealing (against DSC)
5) Fraud (against all Cross-Defendants)
6) Concealment (against all Cross-Defendants)
7) Conversion (against DSC and individual Cross-Defendants)
8) Unfair Competition (against DSC)
9) Negligent Interference with Prospective Economic Advantage (against DSC/Manheim)

This hearing concerns the demurrer and motion to strike of Cross-Defendant, Andrey Markov, directed at the Second Amended Cross-Complaint.

1. Demurrer

The failure to state sufficient facts to constitute a cause of action is a ground for a demurrer under CCP section 430.10(e). In order to determine whether there are grounds for the demurrer, the Court examines the allegations in order to determine whether they contain the essential facts necessary to plead a valid cause of action. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 38-39. The Court assumes the truth of all material facts properly pleaded and gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context. Id.

a. Fifth Cause of Action for Fraud

The Cross-Defendant, Andrey Markov, argues that the fraud claim does not plead the elements of misrepresentation, his knowledge of falsity, his intent to defraud, or the Cross-Complainants’ justifiable reliance on his misrepresentations. The Cross-Complainants’ cause of action for fraud must include 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.

Facts constituting each element of the torts of deceit must be alleged with particularity; the claim cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Since fraud must be pleaded with particularity, the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.

The fifth cause of action for fraud begins on page 20 at paragraph 91. The caption indicates that it is directed at all the Cross-Defendants. The Cross-Complainants allege in paragraph 95 that the Cross-Defendant, DSC, made representations that it would carry out the terms of the PAD agreement. There are no particular allegations that identify any representations made by the moving party, Andrey Markov. There are no allegations that identify how, when, where, to whom, or by what means Andrey Markov made any representations. This is insufficient.

Further, there are no allegations that Andrey Markov had knowledge that his representations were false, that he made any representations with an intent to defraud, or that the Cross-Complainants relied upon his representations. This is insufficient to plead the elements of a false representation, knowledge of falsity, intent to defraud, or justifiable reliance.

The allegations regarding Andrey Markov in the fifth cause of action state that he was a staff member who destroyed papers, carried out illegal activities, and altered invoices. However, there are no allegations that plead a cause of action for fraud against him, i.e., that he made a misrepresentation with the intent to defraud the Cross-Complainants.

The opposition papers include a few paragraphs regarding the demurrer in which the Cross-Complainants claim that they have pleaded sufficient facts in their causes of action and that the “current Cross-Complaint is especially clear”. The Cross-Complainants do not direct the Court to the paragraphs in which they pleaded the essential elements of their fraud cause of action against Andrey Markov. The Cross-Complainants do not explain their theory of fraud against Andrey Markov.

Therefore, the Court sustains the demurrer to the fifth cause of action for fraud. This is the Cross-Complainants’ third attempt to plead their claims. California law imposes the burden on the Cross-Complainants to demonstrate the manner in which they can amend their pleadings to state their claims against Andrey Markov. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Cross-Complainants do not meet this burden because they do not offer any basis to find that they can correct the defect in the fifth cause of action by amendment.

Accordingly, the Court does not grant leave to amend.

b. Sixth Cause of Action for Concealment

The Cross-Defendant argues that this cause of action lacks sufficient facts to plead a concealment claim against him. The elements of a cause of action for fraudulent concealment are the following:

1) the defendant must have concealed or suppressed a material fact,
2) the defendant must have been under a duty to disclose the fact to the plaintiff,
3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and
5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.
Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th 151, 157-158.

Facts constituting each element of fraud must be alleged with particularity; the claim cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.

The sixth cause of action for concealment begins on page 24 of the pleadings with paragraph 109 and is directed at all the Cross-Defendants. A review of the cause of action reveals no particular allegations demonstrating that Andrey Markov concealed a material fact, had a duty to disclose facts to the Cross-Complainants, or acted with an intent to defraud.

Instead, the pleadings concern DSC and Manheim’s failure to disclose information regarding the PAD agreement. The allegations regarding Andrey Markov in the sixth cause of action state that he was a staff member who destroyed papers, carried out illegal activities, and altered invoices. However, there are no particular allegations that plead a cause of action for concealment against him, i.e., that he concealed material facts when he had a duty to disclose these facts to the Cross-Complainants. This is insufficient to plead the claim against Andrey Markov.

The opposition papers include a few paragraphs regarding the demurrer in which the Cross-Complainants claim that they have pleaded sufficient facts in their causes of action and that the “current Cross-Complaint is especially clear”. The Cross-Complainants do not direct the Court to the paragraphs in which they pleaded the essential elements of their concealment cause of action against Andrey Markov. The Cross-Complainants do not explain their theory of concealment against Andrey Markov.

Therefore, the Court sustains the demurrer to the sixth cause of action for concealment. This is the Cross-Complainants’ third attempt to plead their claims. California law imposes the burden on the Cross-Complainants to demonstrate the manner in which they can amend their pleadings to state their claims against Andrey Markov. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Cross-Complainants do not meet this burden because they do not offer any basis to find that they can correct the defect in the sixth cause of action by amendment.

Accordingly, the Court does not grant leave to amend.

c. Seventh Cause of Action for Conversion

The Cross-Defendant, Andrey Markov, argues that the cause of action does not plead that he took wrongful possession of any property. A claim for conversion must allege the following elements:

1) Plaintiff had the right of ownership and possession to the property converted;
2) Defendant unlawfully took the property, and
3) the value of the property converted.
Taylor v. S & M Lamp Co. (1961) 190 Cal. App. 2d 700, 705.

The seventh cause of action for conversion begins on page 26 of the pleadings with paragraph 119 and is directed at DSC and the individual Cross-Defendants. A review of the cause of action reveals no allegations regarding Andrey Markov, i.e., there are no allegations that he unlawfully took the Cross-Complainants’ property.

Instead, the Cross-Complainants allege in paragraphs 120 and 121 that DSC improperly converted eleven motor vehicles and improperly charged fees. This does not plead a claim for conversion against Andrey Markov.

The opposition papers include a few paragraphs regarding the demurrer in which the Cross-Complainants claim that they have pleaded sufficient facts in their causes of action and that the “current Cross-Complaint is especially clear”. The Cross-Complainants do not direct the Court to the paragraphs in which they pleaded the essential elements of their conversion cause of action against Andrey Markov. The Cross-Complainants do not explain their theory of conversion against Andrey Markov.

Therefore, the Court sustain the demurrer to the seventh cause of action for conversion. This is the Cross-Complainants’ third attempt to plead their claims. California law imposes the burden on the Cross-Complainants to demonstrate the manner in which they can amend their pleadings to state their claims against Andrey Markov. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Cross-Complainants do not meet this burden because they do not offer any basis to find that they can correct the defect in the seventh cause of action by amendment.

Accordingly, the Court does not grant leave to amend.

2. Motion to Strike

The Cross-Defendant requests that the Court strike portions of the pleadings that support the claim for punitive damages. In light of the tentative ruling to sustain the demurrers to the fifth, sixth, and seventh causes of action, there are no causes of action remaining in the Second Amended Cross-Complaint that are directed at Andrey Markov. Since there are no claims against Andrey Markov, his motion to strike is moot and is taken off calendar.