Opinion
B294799 B295837
02-02-2023
DAVID KERMANI, Plaintiff and Appellant, v. MINDY TORRES et al., Defendants and Respondents.
Law Office of Patrick Thomas Santos and Patrick Thomas Santos for Plaintiff and Appellant. Hill, Farrer & Burrill, William W. Steckbauer and Sean A. Topp for Defendants and Respondents, Shoreham Capital, L.P., Sorben, LLC, Ruby Group, Inc., Somito Capital, LP and Beverly Hansen, LP.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC694971 William F. Fahey, Judge. Affirmed.
Law Office of Patrick Thomas Santos and Patrick Thomas Santos for Plaintiff and Appellant.
Hill, Farrer & Burrill, William W. Steckbauer and Sean A. Topp for Defendants and Respondents, Shoreham Capital, L.P., Sorben, LLC, Ruby Group, Inc., Somito Capital, LP and Beverly Hansen, LP.
COLLINS, ACTING P.J.
Appellant David Kermani filed a complaint against three individuals and six entities arising out of his lease of, and subsequent attempt to purchase an interest in, a commercial property. As relevant to this appeal, in his first cause of action for breach of contract against defendants Mindy Torres, Ralph Norman, and Benham Soroudi, appellant alleged that the defendants failed to secure an insurance policy naming appellant as an insured, as required under the property lease agreement. When the property incurred water and fire damage, appellant alleged that the defendants failed to submit the claims under the required insurance policy. Appellant's six other claims related to his unsuccessful attempt to purchase a partial interest in the property from Torres and Norman, and their purported conspiracy with Soroudi to sell the interest to another buyer. Appellant also generally alleged that the six entity defendants- respondents Shoreham Capital, L.P., Sorben, LLC, Ruby Group, Inc., Somito Capital, LP, and Beverly Hansen, LP (collectively, respondents), along with Sunset Cap, LLC-were liable as alter egos to Soroudi.
Torres, Soroudi, Sunset Cap, and respondents demurred to the complaint, which the court sustained in its entirety with leave to amend. Appellant filed a first amended complaint (FAC) alleging the same claims against the same defendants, who again demurred. The trial court sustained the demurrer to the FAC as to the first cause of action for breach of contract, finding that appellant failed to allege any breaches of the lease agreement as to any defendant, that Soroudi was not a party to the lease, and that appellant had failed to adequately allege alter ego as to Sunset Cap and respondents. The court also sustained the demurrer as to all other claims against respondents, and denied further leave to amend. On appeal, appellant challenges the dismissal of respondents, arguing that the trial court erred in finding that he failed to properly plead that respondents were liable under an alter ego theory and in denying leave to amend. He also appeals from the resulting award of attorney fees and costs to respondents. We find no error and affirm.
FACTUAL AND PROCEDURAL HISTORY
Appellant's first amended complaint-the pleading at issue here-alleged seven causes of action over 29 pages and involved nine defendants. However, in this appeal he challenges only the portion of the court's order sustaining the demurrer as to respondents, who were named as defendants in the fourth through seventh causes of action and included in the first cause of action on an alter ego theory. Moreover, as discussed further below, we agree with respondents that only the first cause of action remains at issue, as all other claims were settled. We therefore detail the factual background only as relevant to the issues within the scope of this appeal.
I. Appellant's Pleadings
A. Prior Lawsuit
Appellant, along with Elan Kermani, filed a complaint in July 2017 against defendants Mindy Torres and Charles Norman. The Kermanis alleged claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. The complaint arose out of the purported attempt by the Kermanis to buy a one-third interest held by Torres and Norman in a commercial real property. The Kermanis dismissed the action without prejudice in November 2017.
B. Complaint
Appellant filed a new complaint in February 2018 against Torres, individually and as trustee of the Posner B&M Family Trust (the Posner Trust), Norman, Soroudi, Sunset Cap, and respondents. The complaint involved the same property, and included allegations regarding appellant's attempt to purchase an ownership interest, but added claims related to appellant's tenure as a tenant there. Appellant's first cause of action for breach of contract alleged that Torres, Norman, and Soroudi breached the lease agreement by failing to obtain an insurance policy listing appellant as a named insured, and then by refusing to submit claims for fire and water damage under the policy. Appellant's second through seventh causes of action again alleged purported promises by Torres and Norman to sell their interest in the property to appellant, and further alleged that defendants engaged in a scheme to defraud appellant by pretending to proceed with the sale while actually selling the property interest to an entity controlled by Soroudi.
Elan Kermani was not a named plaintiff in the new complaint and is not a party to this appeal.
All defendants except Norman demurred. On July 12, 2018, the court sustained the demurrers in their entirety and granted appellant 10 days leave to amend his complaint. As reflected in the notice of ruling filed by respondents, the court cautioned that appellant "shall have only one opportunity to amend the Complaint."
There was no court reporter present for the demurrer hearing. Appellant's counsel did not appear for the hearing. He had appeared prior to the case being called and informed the court clerk that he was unable to stay for the hearing due to an appearance in criminal court.
In addition, the court ordered appellant to include specific details in his first amended complaint. As relevant here, the court required appellant to: (1) include copies of the master lease, the purported assignment, the sublease, and the escrow agreement; (2) with respect to allegations relating to insurance, identify the insurance company, the insured, and the payor of premium insurance payments; and (3) amend the breach of insurance premium payments with "more specificity," noting that those allegations were "extremely vague and unclear."
C. FAC
Appellant filed his first amended complaint (FAC) on August 2, 2018 against the same nine defendants and alleging the same seven causes of action. Appellant alleged that at the time he became involved with the property in 2013, Shoreham held a one-third interest in the property, the Posner family and the Posner Trust held a one-third interest, and Norman and Torres each held a one-sixth interest. The Posner family deeded their interest to Norman in early 2017.
Appellant attached a copy of the operative commercial lease to the FAC. The lease was signed in 2001 between landlords Norman, as trustee of the Norman Trust, and Bernard Posner, individually and on behalf of the Posner Trust, and tenant Steve Edelson, as trustee of the Edelson Trust. The lease covered the entirety of the property from September 2001 to August 2016. The same parties signed an amendment in 2005, extending the lease term to August 2026. In 2013, appellant became a tenant at the property when he assumed the lease from Edelson. Under the assignment, Edelson assigned all his rights, title, and interest in the lease to appellant effective June 1, 2013. Thus, during the time of the incidents alleged in appellant's first cause of action for breach of contract (2013 to early 2017), the owners of the property were Shoreham, Posner and the Posner Trust, Norman, and Torres. During this same period, the landlords under the lease agreement were Norman, as trustee of the Norman Trust, Posner, and the Posner Trust.
Appellant attached copies of the 2005 amendment and 2013 assignment to the FAC.
As relevant here, paragraph 9(a) of the lease required the landlord to "keep in good condition and repair the foundations, exterior walls, and exterior roof of the Premises," with certain exceptions, including as provided in paragraph 12, covering damage or destruction to the premises. Paragraph 11(a) provided that the tenant "at its cost shall maintain during the term of this Lease on the Premises a policy or policies of standard fire and extended coverage insurance," to be "issued in the names of Landlord and Tenant." Paragraph 11(b) similarly required that the tenant "shall maintain" public liability and property damage insurance, naming the landlord and tenant as additional insureds. Further, upon the tenant's failure to procure such insurance, paragraph 11(b) stated that "the Landlord may, but shall not be required to, procure and maintain same at the expense of Tenant."
Appellant alleged that the property was damaged by fire in November 2015, but the "defendant owners" "never submitted the claim to insurance" and never repaired the fire damage or reimbursed appellant for losses incurred from the fire. Appellant alleged that he was forced to terminate a new sublease early because of defendants' failure to submit the fire damage claim to insurance. Appellant also alleged that the property suffered water damage in January 2017, including collapse of the roof, and that Torres refused to submit the claim to insurance, stating that "all repairs are tenants [sic] responsibility" under the lease.
In his first cause of action for breach of contract against Torres, Norman, and Soroudi, appellant identified "Breach of Contract No. (s) 1, 2, 3, and 4" and also listed "Breach of Contract - Counts I" through "IV." Counts "I and II" involved the 2015 fire and 2017 water damage to the property. Appellant alleged that the landlord was required under paragraph 9 of the lease to repair the roof, and therefore that defendants breached the contract by failing to submit the water loss damage claim to insurance.
As the trial court noted, appellant confusingly separated this single cause of action into four sub-claims, and referred to the sub-claims as both numbers and "counts."
Appellant also alleged that defendants' failure to submit the claim for fire damage to insurance constituted a breach of contract. In "Count III," appellant alleged that defendants breached the master lease by failing to ensure that his name appeared as an insured, as required under paragraph 11 of the lease.
"Count IV" involved a purported breach of a "written promise" made by Torres, and is not relevant here.
The remaining causes of action involved the attempted property interest purchase, specifically alleging breach of contract against Torres and Norman; breach of the implied covenant of good faith and fair dealing against Torres and Norman; fraudulent concealment against all defendants; fraudulent misrepresentation against all defendants; conspiracy to commit fraud against all defendants; and inducing breach of contract against Soroudi, Sunset Cap, and respondents.
Regarding the property purchase, appellant alleged that he orally agreed to purchase the two-thirds interest in the property owned by Torres and Norman in March 2016. After he secured a loan for the purchase, Torres "had a change of heart" and she and Norman sold their interest to Sunset Cap in May 2017, while continuing to misrepresent to appellant that the sale to him was pending. Appellant discovered the sale to Sunset Cap in July 2017; the same month, he received an email from Soroudi informing him that Soroudi was now "in control of 100% of ownership" of the property. Appellant alleged that Sunset Cap (who owned a two-thirds interest) and Shoreham (who owned a one-third interest) were alter ego entities of Soroudi; thus, Soroudi was "the de facto owner of 100% interest in the Property as of July 2017."
Appellant generally alleged that Sunset Cap and respondents were alter egos of Soroudi. He alleged that Soroudi was the sole managing member of Sorben; Sorben was the sole general partner of Shoreham, Somito, and Beverly; and Soroudi was the sole director and officer of Ruby Group. Appellant further alleged the following in support of his alter ego claim: the "use of all named entities as a mere shell, instrumentality or conduit for a single venture and/or the business of Defendant SOROUDI and/or another entity"; the commingling of funds and other assets; the treatment by Soroudi "of the assets of the entities as his own"; the "sole ownership of all of the stock and equity in all named entities," except for Sunset Cap and Beverly; the "manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another"; the "failure to maintain minutes or adequate corporate and/or company records"; the use of the named entities "as a shield against personal liability"; and the "formation and use of the entities to transfer to it [sic] the existing liability of the other named entities." He further alleged that "anytime a reference is made to 'SOROUDI' in this pleading, it is meant to include all of his Alter Ego Entities."
II. Demurrer to the FAC
The defendants demurred to the FAC. Defendants argued that appellant had not alleged that Soroudi was a party to the lease, thus he could not be liable for any breach of contract, nor could any entities under an alter ego theory. They further noted that they had made this same argument in the prior demurrer, and that appellant had failed to cure the deficiency in the FAC. Additionally, defendants argued that the FAC failed to state a cause of action because the lease agreement did not contain any obligations for the landlord to obtain insurance, so there could be no breach.
The court dismissed Norman without prejudice in August 2018 for appellant's failure to file proof of service of the FAC. He was not involved in the demurrer proceedings and is not a party to this appeal.
Appellant opposed the demurrer, arguing with respect to the first cause of action that Soroudi was "alleged to the be alter ego of all named entities," and that those entities "are the owners of the property. As such, Benham Soroudi is a party to the Master Lease." As for the insurance claims, appellant argued that he satisfied his obligations under the lease by paying the insurance premiums, and that the "landlord/owner" was obligated to submit the fire and water claims for insurance coverage.
The court heard argument on the demurrer on September 25, 2018 and then took the matter under submission. In its ruling issued September 28, 2018, the court noted that during the hearing it had "advised plaintiff's counsel of the continued problems with the FAC, including vague and conclusory allegations against several of the defendants," but plaintiff's counsel "insisted that the FAC was proper."
The court sustained the demurrer to the first cause of action, finding that the "exhibits attached to the FAC control over the vague and general allegations that there was a breach of paragraph 11 of the lease." The court further found that the "plain language of par. 11(b) shows that there is no obligation by the landlord to obtain liability insurance (i.e., the landlord 'may' procure such insurance). Nor is there any requirement in that paragraph for the landlord to have submitted claims to a carrier even if they decided to obtain insurance." Alternatively, the court found that "neither Soroudi nor Torres individually is a party to the lease and accordingly cannot be found liable for any breach thereof. The Court has considered, and rejects, plaintiff's alter ego argument."
The court overruled the demurrer to the second cause of action against Torres. The court sustained the demurrer as to the third cause of action. As for the fraud claims (the fourth, fifth, and sixth causes of action) the court overruled the demurrers as to Soroudi, Sunset Cap, and Torres for the alleged breach of the escrow agreement, but sustained the demurrer as to respondents, "without prejudice to the filing of a motion for leave to amend if plaintiff through discovery is able to develop evidence which shows that the remaining entities were involved in the alleged breach of the escrow agreement." The court overruled the demurrer to the seventh cause of action as to Soroudi and Sunset Cap, but sustained it as to respondents, again without prejudice. The court denied appellant's request "for yet another opportunity to amend," noting that "[b]etween the two cases, plaintiff has already had three opportunities to plead his claims. Further, neither plaintiff's opposition briefs nor plaintiff's counsel at the hearing proffered any additional facts which would warrant the filing of a fourth complaint."
On October 15, 2018, the court dismissed respondents from the complaint without prejudice.
III. Motion for Attorney Fees
On October 31, 2018, respondents filed a motion for attorney fees and costs pursuant to Code of Civil Procedure section 1717. They argued that they were entitled to fees based on a provision of the master lease awarding reasonable attorney fees and costs to the prevailing party in the litigation.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
On December 11, 2018, the court granted the motion, awarding respondents $39,913 in fees and $2,415 costs, for a total of $42,328.
IV. Appeals and Settlement
Appellant timely appealed from the order of dismissal of respondents and subsequently filed a separate appeal from the order granting attorney fees and costs. We consolidated the appeals for the purposes of briefing, argument, and decision.
Appellant elected to proceed by settled statement reflecting the demurrer hearings and other unreported trial court proceedings. Appellant submitted a proposed settled statement, to which respondents submitted proposed modifications. After appellant failed to comply with the court's order to submit a revised settled statement incorporating respondents' corrections and modifications, the court certified the modified settled statement submitted by respondents.
On April 10, 2019, after this appeal was filed but before briefing commenced, the parties filed a stipulation regarding settlement in the trial court. Pursuant to the stipulation, appellant agreed to dismiss Soroudi and Sunset Cap with prejudice from all causes of action, and to dismiss respondents with prejudice from the fourth through seventh causes of action. The stipulation further provided that the only remaining cause of action against respondents was the first cause of action for breach of contract, and that appellant intended to continue to pursue his appeal as to that cause of action. The stipulation also stated that the settlement could be enforced by the court pursuant to section 664.6. Appellant subsequently dismissed Torres, individually and as trustee, with prejudice from the complaint in November 2019.
DISCUSSION
Appellant contends he adequately alleged alter ego liability against respondents and therefore that the trial court erred in sustaining the demurrer and dismissing those entities. He further argues that even if any claim was deficient, the trial court erred in denying him leave to amend to cure those deficiencies. Based on those purported errors, he also seeks reversal of the attorney fees and costs awarded to respondents as prevailing parties. We conclude that these claims lack merit.
I. Demurrer A. Legal Standards
A demurrer tests the legal sufficiency of factual allegations in a complaint. (Title Ins. Co. v. Comerica Bank-California (1994) 27 Cal.App.4th 800, 807.) We review de novo the dismissal of a civil action after a demurrer is sustained without leave to amend. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879 (Cantu).) In doing so, "we determine whether the complaint states facts sufficient to constitute a cause of action." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) "'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.'" (Ibid.) "Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context." (Ibid.)
On appeal, a plaintiff bears the burden of demonstrating that the trial court erroneously sustained the demurrer as a matter of law. (Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 43.) To establish that a cause of action has been adequately pled, a plaintiff must demonstrate he or she has alleged "facts sufficient to establish every element of that cause of action. [Citation.]" (Cantu, supra, 4 Cal.App.4th at pp. 879-880.) If the complaint fails to plead any essential element of a particular cause of action, this court should affirm the sustaining of a demurrer. (Ibid.)
We review an order denying leave to amend for an abuse of discretion. Generally, it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.... However, the burden is on the plaintiff to demonstrate that the trial court abused its discretion. Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.'" (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; see also, e.g., Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227 [liberality in permitting a party to amend a pleading is the rule if a fair opportunity to correct the defect has not already been given and the pleading's deficiency can be easily corrected.])
B. Scope of Appeal
In his opening brief, appellant argued that he sufficiently pled alter ego claims against respondents in the first and fourth through seventh causes of action. Respondents countered that the only remaining claim at issue is the first cause of action for breach of contract against them, as that claim was specifically preserved under the parties' stipulated settlement agreement.
Appellant did not address the settlement agreement in his opening brief and did not file a reply on appeal.
Under the stipulated settlement agreement filed with the court, appellant agreed to dismiss with prejudice respondents from the fourth through seventh causes of action, preserving only his pending appeal as to the first cause of action. "Generally, courts decide only 'actual controversies' which will result in a judgment that offers relief to the parties. [Citations.] Thus, appellate courts as a rule will not render opinions on moot questions.... The policy behind this rule is that courts decide justiciable controversies and will normally not render advisory opinions. [Citations.] [¶] One such event occurring for which a reviewing court will dismiss an appeal is when the underlying claim is settled or compromised." (Ebensteiner Co., Inc. v. Chadmar Group (2006) 143 Cal.App.4th 1174, 1178-1179; see also Muccianti v. Willow Creek Care Center (2003) 108 Cal.App.4th 13, 24 [finding appeal moot where parties entered into settlement agreement after filing of notice of appeal].) Here, appellant has dismissed with prejudice his claims against respondents other than those related to the first cause of action. We therefore conclude that those claims are moot and we need not reach them. Appellant has made no showing to the contrary, nor has he challenged the validity of the settlement agreement.
C. Breach of Contract Claim
Appellant contends that respondents are liable for the alleged breaches of the master lease as alter egos of Soroudi; the bulk of his opening brief is devoted to arguing that he adequately alleged facts to support alter ego liability. But he ignores the fact, as the trial court found, that Soroudi is not a party to the lease. The lease, which appellant attached to his FAC, includes as parties only Norman and Posner as landlords and Edelson as the tenant. Edelson then assigned his rights as tenant to appellant. But although appellant has claimed that Soroudi and Shoreham were his landlords, the plain language of the lease establishes otherwise.
Appellant cannot establish that Soroudi breached the lease when Soroudi was not a party to the contract. Indeed, appellant did not appeal the court's dismissal of Soroudi from the first cause of action and does not now contend that Soroudi was a party to the lease.
Appellant cannot allege a breach of contract claim against respondents as alter egos of Soroudi for the same reason. He has failed to allege that respondents were alter egos of any contracting party and therefore has established no basis for their liability for breach of contract. (See, e.g., Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1287 [nonsignatories to contract sued for breach as alter ego of signatory defendant].)
We therefore need not reach appellant's arguments regarding whether he properly pled alter ago liability for respondents and whether the trial court engaged in "civil litigation in reverse" by dismissing those entities without prejudice to a future motion for leave to amend should appellant develop further evidence during discovery.
Additionally, we reject appellant's argument that he properly pled a breach of the lease agreement based on the landlord's failure to add him as a named insured to the property's insurance policy and/or to submit certain claims under that policy. We agree with the trial court's finding that the lease contained no requirement for the landlord to perform these duties; instead, appellant as the tenant was obligated to procure the policy and to ensure that he and the landlord were named as insureds. Thus, we find no error in the court's order sustaining the demurrer as to appellant's first cause of action for breach of contract.
D. Leave to Amend
Appellant cursorily contends that the trial court erred in denying leave to amend, arguing the court improperly prejudged his FAC when sustaining the first demurrer by ordering that appellant would have only one opportunity to amend his complaint. He also takes issue with the court's statement that his FAC was effectively his third chance to plead his claims, arguing that his first lawsuit was not "even remotely similar" to the instant matter, and contends that he "completely complied" with all of the court's requirements for the FAC.
However, these arguments simply repeat appellant's contention that his FAC was legally sufficient. We have found that it was not, and appellant fails to identify any facts he would allege to cure the deficiencies in his breach of contract claim against respondents. Nor does he point to anywhere in the record where he made such a showing before the trial court. We therefore conclude that appellant has not met his burden to show that the trial court abused its discretion in denying leave to amend the complaint, as he has failed to demonstrate a reasonable possibility that he could cure the deficiencies in his breach of contract claim by amendment. (See Blank v. Kirwan, supra, 39 Cal.3d at p. 318.)
II. Order Granting Attorney Fees and Costs
Appellant also seeks reversal of the order granting attorney fees and costs to respondents as prevailing parties. His sole basis for this argument is the contention that the trial court erred in sustaining the demurrer. Because we have found otherwise, and appellant does not raise any other grounds for challenging the fee award, we affirm that order as well.
DISPOSITION
The judgment is affirmed. Respondents are entitled to their costs on appeal.
We concur: CURREY, J. SCADUTO, J. [*]
[*] Judge of the Los Angeles County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.