Hakimpour v. Andraos Capital Management

Filed 6/25/07 Hakimpour v. Andraos Capital Management CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from a judgment of the Superior Court of Los Angeles County, Patricia L. Collins, Judge. Reversed with directions.

Richland & Associates, Felipa R. Richland and Erik Priedkalns for Cross-complainant and Appellant.

Seyfarth Shaw and Todd C. Hunt for Cross-defendant and Respondent.

____________________

INTRODUCTION

Farid Hakimpour appeals from a judgment of dismissal entered after the trial court sustained the demurrer of Andraos Capital Management, Inc. without leave to amend. We reverse with directions.

FACTUAL AND PROCEDURAL BACKGROUND

This action began as a complaint filed by Mehdi Hamedani (Hamedani) against appellant Farid Hakimpour (Hakimpour) for breach of contract. Hamedani alleged that he and Hakimpour executed a written agreement whereby Hamedani would give Hakimpour his half of the stock of Online Auto Repair, Inc. and give up his role in managing the business in exchange for Hakimpours payment of $25,000. Hamedani further alleged that he gave Hakimpour the stock and took himself off the corporations bank account, but Hakimpour failed to pay the $25,000.

Hakimpour filed a cross-complaint against Hamedani and Manijeh Rahsepar Mohammadi (Mohammadi), later amending the cross-complaint to add respondent Andraos Capital Management, Inc. (ACM) as a cross-defendant. Hakimpour alleged damages from fraud, unfair business practices, conversion and conspiracy and sought declaratory relief, rescission, an accounting and indemnification. Hamedanis demurrer was sustained without leave to amend as to the causes of action for declaratory relief and indemnification, and with leave to amend as to the remainder of the causes of action.

Hakimpour then filed a first amended cross-complaint against Hamedani, Mohammadi and ACM for fraud, rescission, unfair business practices, conversion, accounting and indemnification. Hamedani and ACM filed demurrers to the first amended cross-complaint. The trial court sustained the demurrers without leave to amend and dismissed the first amended cross-complaint.[1]

Hakimpour filed a notice of appeal from the judgment of dismissal and also a petition for writ of mandate with respect to the dismissal as to Hamedani. On November 16, 2006, we issued an opinion and order granting peremptory writ of mandate. (Hakimpour v. Superior Court (Nov. 16, 2006, B193270) [nonpub. opn.], Hakimpour I.)

In Hakimpour I, we set forth the pertinent factual allegations of the first amended cross-complaint as follows: 11. Cross-Complainant is informed, believes and thereon alleges, that on or after October 5, 2004 and continuing through September 8, 2005 and including at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation induced and coerced Cross-Complainant to borrow monies in excess of $100,000.00 for the purported interests of On Line Auto Repair, Inc.

12. Cross-Complainant is informed, believes and thereon alleges, that on or about July 6, 2004 and continuing through August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation used, borrowed, converted, and otherwise took said monies for personal gain and not for the purported interests of On Line Auto Repair, Inc.

13. Cross-Complainant is informed, believes and thereon alleges, that on or about August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation, and knowing said representations to be false, advised Cross-Complainant that the monies borrowed by Cross-Complainant in excess of $100,000.00, for the purported interests of On Line Auto Repair, Inc., were lost, gone, and/or otherwise nonrecoverable by Cross-Complainant.

14. Cross-Complainant is informed, believes and thereon alleges, that on or about August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation advised Cross-Complainant that the monies borrowed by Cross-Complainant in excess of $100,000.00, for the purported interests of On Line Auto Repair, Inc., were lost, gone, and/or otherwise nonrecoverable, thereby inducing and coercing Cross-Complainant to execute a document, which purported to dissolve shared interests in the corporation On Line Auto Repair, Inc., all to the detriment of Cross-Complainant and all to the benefit of Cross-Defendants and each of them.

15. Cross-Complainant is informed, believes and thereon alleges, that on or about August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation advised Cross-Complainant that the proposed dissolution was fair and equal to both parties, thereby inducing and coercing Cross-Complainant to execute a document, which purported to dissolve shared interests in the corporation On Line Auto Repair, Inc.[,] all to the detriment of Cross-Complainant and all to the benefit of Cross-Defendants and each of them.

16. Cross-Complainant is informed, believes and thereon alleges, that on or about August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, by means of fraud and material misrepresentation advised Cross-Complainant that the corporation On Line Auto Repair, Inc. had a fair market value of $50,000.00 and that Cross-Complainant had to pay Cross-Defendant HAMEDANI $25,000.00 in order to dissolve said corporation and that based on the assessed fair market value, the proposed dissolution was fair and equal to both parties, thereby inducing and coercing Cross-Complainant to execute a document which purported to fairly dissolve shared interests in the corporation On Line Auto Repair, Inc.[,] all to the detriment of Cross-Complainant and all to the benefit of Cross-Defendants and each of them.

17. Cross-Complainant is informed, believes and thereon alleges, that on or about August 6, 2005 and at all times relevant hereto, Cross-Defendants and each of them, knew or should have known that the fair market value of On Line Auto Repair, Inc. was not $50,000.00 and that in fact On Line Auto Repair, Inc. was in debt in an amount in excess of $250,000.00, including but not limited to loan and lease obligations that Cross-Defendant HAMEDANI was obligated to pay, and based thereon the represented fair market value by Cross-Defendants was made to induce and coerce Cross-Complainant to execute a document which purported to fairly dissolve shared interests in the corporation On Line Auto Repair, Inc.[,] all to the detriment of Cross-Complainant and all to the benefit of Cross-Defendants and each of them. (Hakimpour I, supra, at pp. 2-4.)

DISCUSSION

As we stated in Hakimpour I, supra, at page 5, [a] demurrer tests the legal sufficiency of the complaint. In reviewing an order sustaining a demurrer, we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and facts of which judicial notice can be taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.)

On appeal, we review the trial courts sustaining of a demurrer without leave to amend de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law and applying the abuse of discretion standard in reviewing the trial courts denial of leave to amend. (Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 718-719; Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790.) Plaintiff bears the burden of proving the trial court erred in sustaining the demurrer or abused its discretion in denying leave to amend. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459; Coutin v.Lucas (1990) 220 Cal.App.3d 1016, 1020.) To show abuse of discretion, plaintiff must show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co. (1997) 59 Cal.App.4th 6, 18.)

In Hakimpour I, supra, we first examined whether the first amended complaint stated a cause of action for fraud: The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage. [Citations.] (Lazarv. Superior Court (1996) 12 Cal.4th 631, 638.) In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] (Id. at p. 645.) Thus the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citation.] [] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered. [Citation.] (Ibid.)

The cross-complaint sets forth sufficient facts to withstand demurrer. The cross-complaint sets forth who (cross-defendants) made the misrepresentations to whom (Hakimpour); what those misrepresentations were (the sum of $100,000 that Hakimpour had borrowed on behalf of On Line Auto Repair, Inc., was lost, gone and/or otherwise unrecoverable, the corporation had a fair market value of $50,000, and payment to Hamedani of $25,000 would be a fair and equal way in which to dissolve the corporation); when the misrepresentations were made (August 6, 2005); and how the misrepresentations caused harm to Hakimpour (by inducing him to borrow the sum of $100,000, and inducing him to execute a document to dissolve the corporation). (Hakimpour I, supra, at pp. 5-6.)

After holding that Hakimpours first amended cross-complaint stated facts sufficient to constitute a cause of action for fraud, we concluded that those same facts were sufficient to state causes of action for rescission, unfair business practices, conversion and accounting. (Hakimpour I, supra, at pp. 6-7.) The question before us now is whether our conclusion should be any different as to ACM than it was as to Hamedani.

The main problem with making the determination as to whether Hakimpours first amended cross-complaint states a cause of action against ACM is a lack of specificity as to the various relationships among the parties and who did what. Hakimpour simply relies on the allegation that Cross-defendants and each of them, were the agents, employees, partners, joint venturers, associates, and/or affiliates of each other, and in acting and doing the things alleged herein, were acting within the course and scope of such agency, position and/or relationship with the permission, knowledge and consent of each other. Because ACM is a corporation, such a general allegation is insufficient. The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157; accord, Lazar v. Superior Court, supra, 12 Cal.4th at p. 645.)

As ACM points out, Hakimpour apparently [r]ecognizing the lack of required particularity in his [first amended cross-complaint] as to ACM, . . . attempts to resolve its deficiencies by misstating its allegations in his Opening Brief. That is, he identifies Mohammadi as a certified public account/financial advisor and agent of ACM, who was present at an August 6, 2005 meeting with Hakimpour and Hamedani and made certain representations to Hakimpour as to the fair market value of On Line Auto Repair, Inc. He claims to have relied on Mohammadis representations in entering into the contract with Hamedani, to his detriment.

As previously stated, to show abuse of discretion in denying leave to amend, plaintiff must show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (Goodman v. Kennedy, supra, 18 Cal.3d at p. 349; J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co., supra, 59 Cal.App.4th at p. 18.) This showing may be made either in the trial court or on appeal. (Careau & Co.v.Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386.) We deem Hakimpours misstatement of the allegations of his first amended cross-complaint to be his showing as to how the cross-complaint could be amended to state a cause of action. From these allegations, it appears that Hakimpour can amend the cross-complaint to provide the requisite specificity and state a cause of action for fraud. (Lazar v. Superior Court, supra, 12 Cal.4th at pp. 638, 645.) Hakimpour therefore has met his burden of showing that the trial court abused its discretion in denying him leave to amend his first amended cross-complaint as to ACM. (Goodman, supra, at p. 349; J.B. Aguerre, Inc., supra, at p. 18.) Inasmuch as the remainder of the causes of action are based upon the alleged fraud (Hakimpour I, supra, at pp. 6-7), Hakimpour must be given an opportunity to amend those as well.

The judgment of dismissal is reversed. The trial court is directed to vacate its order sustaining ACMs demurrer without leave to amend and to enter a new order granting Hakimpour leave to amend his first amended cross-complaint. Hakimpour is awarded costs on appeal.

NOT TO BE PUBLISHED

SPENCER, P. J.

We concur:

VOGEL, J.

JACKSON, J.*

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[1] The record is unclear as to the resolution of the action with respect to Mohammadi, but he is not a party to this appeal.

* Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.