Demurrer to First Amended Complaint (Judge John J. Kralik)

Case Number: 19BBCV00749    Hearing Date: July 10, 2020    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

 

LEON ADJODHA,

Plaintiff,

v.

 

ROBERT WRIGHT, et al.,

Defendants.

  

Case No.: 19BBCV00749

 

Hearing Date:  July 10, 2020

 

[TENTATIVE] ORDER RE:

DEMURRER

 

BACKGROUND

  1. Allegations

Plaintiff Leon Adjodha alleges that he entered into an oral partnership agreement with Defendants Robert Wright and Christopher Larocca, whereby each partner would own a 1/3 interest in the real property located at 5614 Cahuenga Boulevard in North Hollywood.  Larocca’s interest in the premises was held through his corporation, Defendant Pelican Coast Capital LLC (“Pelican”).  The partners purchased the premises on December 4, 2015.  Each partner agreed to contribute either money, services, and/or expertise to the partnership.  Plaintiff alleges that most of the money used to purchase or operate the premises came from a separate partnership between Wright and Plaintiff.  Plaintiff alleges that on October 3, 2018, Larocca sold to Wright what they both purported to be Larocca’s 50% interest in the premises, when Larocca only had a 1/3 interest.  Plaintiff alleges that Wright refused to pay Plaintiff his share of the partnership’s profits obtained through the sale of the premises, such that he has been damaged in the approximate amount of $240,000.00.

The first amended complaint (“FAC”), filed January 14, 2020, alleges the following causes of action: (1) breach of partnership agreement against all Defendants; (2) breach of fiduciary duty against all Defendants; (3) Bane Act violations against Wright; (4) declaratory relief against all Defendants; and (5) violation of Penal Code §496 against all Defendants.

  1. Demurrer

On February 25, 2020, Larocca and Pelican filed a demurrer to the 1st, 2nd, 4th, and 5th causes of action alleged in the FAC.

On April 9, 2020, Plaintiff filed an opposition to the demurrer.

On April 17, 2020, Defendants filed a reply brief.

REQUEST FOR JUDICIAL NOTICE

            Defendants Larocca and Pelican (hereinafter, “Defendants”) request judicial notice of the grant deed, document no. 20151525196, dated November 25, 2015, for the subject premises.  The grant deed indicates that on November 25, 2015, Pelican and Wright each had an undivided 50% interest in the premises as tenants in common.  The request for judicial notice is granted.

DISCUSSION

  1. Breach of Contract (1st cause of action)

The essential elements of a cause of action for breach of contract are: “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.”  (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)  “An oral contract may be pleaded generally as to its effect, because it is rarely possible to allege the exact words.”  (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Defendants argue that the oral partnership agreement is not alleged with specificity as to it material terms, such as what contributions of money, services, or expertise to the partnership was provided by the partners.  (See FAC, ¶5.)

In opposition, Plaintiff relies on Kaljian v. Menezes (1995) 36 Cal.App.4th 573.  Generally, agreements among partners or joint venturers regarding real property are not within the statute of frauds.  (Id. at 583.)  Where a partnership agreement does not contemplate the transfer of title from one party to another for consideration, the statute of frauds is not violated.  (Id. at 584, 587.)  “A partnership interest does not entitle a partner to any particular portion of the business assets, but merely gives the partner a right to an accounting.”  (Id. at 584.)  While a transfer of interest in real property must be in writing, an agreement to share profits from a transaction involving real estate is not required to be in writing.  (Id. at 585.)  The existence or nonexistence of a joint venture is a factual question.  (Id. at 586.)

At the demurrer stage, the Court takes the allegations of Plaintiff’s FAC as true.  Plaintiff alleges both that the partners through their partnership would own a 1/3 interest in the property, and also alleges that the partners agreed their contributions would be fairly valued at 1/3 of the partnership.  (FAC, ¶¶1, 5.)  However, as currently alleged, the FAC’s facts fail to indicate whether the partnership was formed for the purpose of transferring or affecting title in the property, or whether the subject matter of the oral partnership agreement was for the equal share of profits from resale of the property.  (See e.g., Coward v. Clanton (1889) 79 Cal. 23, 24; Bates v. Babock (1892) 95 Cal. 479, 486.) As such, Plaintiff should allege further facts regarding the purposes terms of operation of the partnership.

Next, Defendants argue that Plaintiff has not attached copies of the deed of the premises to show who owns the property (whether it’s the individuals or the “partnership”), or the separate partnership agreement between Plaintiff and Wright.  (FAC, ¶5.)  Defendants argue that Exhibit 1 to the request for judicial notice includes the November 25, 2015 grant deed that shows that Pelican and Wright are the owners of the premises.  However, this grant deed is from before the sale of the property on December 4, 2015.  (FAC, ¶2.)  In addition, as stated above, the Court takes the allegations of the complaint as true in ruling on a demurrer, and Plaintiff has sufficiently alleged that he is a 1/3 owner in the property.  Whether this is in fact true will be determined beyond the pleading stage.

Finally, Defendants argue that the 1st cause of action fails to state sufficient facts to allege Larocca’s personal liability.  In the FAC, Plaintiff alleges that he entered into the partnership agreement with Wright and Larocca but that Larocca’s interest in the premises was held through his corporation Pelican.  (FAC, ¶1.)   However, the allegations fail to show that Larocca personally had any interest in the premises, as he is distinct from his corporate entity Pelican.  Thus, Plaintiff has not sufficiently alleged a breach of contract claim against Larocca personally, or a sufficient basis to disregard the corporate structure.

The demurrer to the 1st cause of action is sustained with 20 days leave to amend.

  1. Breach of fiduciary duty (2nd cause of action)

To state a cause of action for breach of fiduciary duty, Plaintiff must allege: (1) the existence of a fiduciary relationship; (2) its breach; and (3) damage proximately caused by that breach.  (Roberts v. Lomanto (2003) 112 Cal. App. 4th 1553, 1562.)  A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.  (Wolf v. Superior Court (2003) 106 Cal.App.4th 625, 629.)  Examples of fiduciary relationship in the commercial context include trustee/beneficiary, directors and majority shareholders of a corporation, business partners, joint adventurers, and agent/principal. (Id.)

In the 2nd cause of action, Plaintiff incorporates paragraphs 1-10, and alleges that all Defendants were fiduciaries of Plaintiff and therefore owed him duties of loyalty and accounting for any money or assets received or held, to act in good faith and fair dealing, and to not knowingly falsely deny Plaintiff’s right as a partner.  (FAC, ¶¶11-12.)

Defendants demur to this cause of action, arguing that the partnership agreement is inadequately pled.  Plaintiff argues that Defendants’ reasoning fails for the same reasons as above.

As discussed above, the allegations of the partnership agreement are lacking.  However, the Court will allow amendment of the FAC so that Plaintiff may adequately allege the terms of the agreement and thereby the basis for the fiduciary relationship between the parties.

The demurrer to the 2nd cause of action is sustained with 20 days leave to amend.

  1. Declaratory Relief (4th cause of action)

A cause of action for declaratory relief is a remedy created by CCP §1060 and it is pleaded if it: (1) sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties and (2) requests that the rights and duties be adjudged.  (City of Tiburon v. Northwestern Pac. R.R. Co. (1970) 4 Cal.App.3d 160, 170; see CCP §1060 [identifying the remedy of declaratory relief].)  If these requirements are met, the Court must declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to a favorable declaration.  (Id.)  Declaratory relief is a broad remedy, and the rule that a complaint is to be liberally construed is particularly applicable to one for declaratory relief.  (Id.)

In the 4th cause of action, Plaintiff incorporates paragraphs 1-10 and alleges that an actual controversy has developed between the parties wherein Plaintiff contends he has a 1/3 interest in the partnership that purchased the premises and Defendants deny Plaintiff has such an interest.  (FAC, ¶18.)

As discussed above, the allegations regarding the partnership agreement should be amended to include more facts.

Also, Defendants argue that this cause of action fails against them because Plaintiff has alleged that Larocca and Pelican no longer have an interest in the property after they sold their interest to Wright.  (FAC, ¶6.)  Plaintiff does not address this argument in the opposition brief.  As currently worded, the declaratory relief cause of action appears to be improperly directed at Defendants who Plaintiff alleges no longer have an interest in the premises and partnership.

The demurrer to the 4th cause of action is sustained with 20 days leave to amend.

  1. Violation of Penal Code, §496 (5th cause of action)

In the 5th cause of action, Plaintiff incorporates paragraphs 1-10 and alleges by transferring an interest the premises without regard to Plaintiff’s partnership ownership interest and accepting money and consideration due to Plaintiff, all Defendants have embezzled Plaintiff’s interest in violation of Penal Code, §496.  (FAC, ¶21.)  As a result, Plaintiff seeks three times the damages. (Id., ¶22.)

Defendants demur to this cause of action, arguing that Plaintiff has not sufficiently alleged a partnership agreement between the parties or his ownership interest in the property such that they cannot be liable for taking Plaintiff’s property.  For the same reasons discussed above, the Court sustains the demurrer to the 5th cause of action with 20 days leave to amend so that Plaintiff may amend the allegations regarding the oral partnership agreement.

CONCLUSION AND ORDER 

Defendants Larocca and Pelican’s demurrer to the FAC is sustained as to the 1st, 2nd, 4th, and 5th causes of action with 20 days leave to amend.

Defendants shall provide notice of this order.