ELIZABETH HARANDI VS FARSHAD HARANDI, ET AL.

Tentative Rulings

Case Number: *******9580 Hearing Date: April 6, 2022 Dept: 39

Elizabeth Harandi v. Farshad Harandi, et al.

Case No. *******9580

Demurrers and Motions to Strike

Order to Show Cause

The Court posts this tentative order on March 25, 2022, in advance of the hearing on April 6, 2022, at 9:00 a.m. The Court provides notice that any party not appearing at the hearing shall waive the right to be heard. The Court provides notice that if Plaintiff’s counsel does not appear at the hearing to articulate a successful basis to amend the complaint, the Court may change this tentative order to deny leave to amend, thereby dismissing this case with prejudice. The parties may appear remotely or in-person.

TENTATIVE ORDER

INTRODUCTION

Plaintiff Elizabeth Harandi (“Plaintiff”) filed this action against Farshad Harandi (“Defendant Harandi”), Rodeo Realty, Inc. (“Rodeo Realty”) and Malibu Escrow Company (“Malibu Escrow”) asserting causes of action for breach of fiduciary duty, negligence/gross negligence, fraud, and intentional infliction of emotional distress. Plaintiff asserts a separate cause of action for punitive damages. Now, Rodeo Realty and Malibu Escrow demur to the complaint and move to strike the prayer for punitive damages and related allegations. Plaintiff does not oppose the motions. The Court sustains the demurrers without leave to amend.

PLAINTIFF’S ALLEGATIONS

Plaintiff and Defendant Harrandi dissolved their marriage. (First Amended Complaint, 7.) The principal asset of the marriage was a piece of community property in Malibu, California. (Id., 8.) The family court ordered the property to be sold, and the orders “indicated that both parties would be listed as both sellers and brokers on said property . . . .” (Ibid.) The property originally was listed with two listing agents, Defendant Harandi (who was an agent with Rodeo Realty) and Plaintiff (who is a realtor). (Id., 10(a) & Exh. B.) Then, the property was taken off-market and relisted. (Id., 10(b).) The new listing did not list Plaintiff as a listing agent. (Id., Exh. C.) The property sold, and Malibu Escrow was the escrow agent. (Id., Exh. D.) However, the transaction was canceled by the buyer. (Id., Exh. F.)

Defendant Harandi declared bankruptcy in 2019. (Id., Exhs. G, J.) Defendant Harandi sought to use Rodeo Realty to sell the property in bankruptcy. (Id., Exh. N.) The U.S. Trustee objected, arguing that Rodeo Realty is not disinterested and therefore cannot be employed under Title 11, United States Code, section 327. (Id., Exh. G.) The U.S. Bankruptcy Court ordered a different realtor: “Plaintiff is informed and believes that another agent sold the subject property in which the Plaintiff’s ownership right or co-broker’s right were [sic] not recognized, honored or compensated for.” (Id., 12.)

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.) However, courts do not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

DISCUSSION

Plaintiff asserts causes of action for breach of fiduciary duty, negligence/gross negligence, fraud, and intentional infliction of emotional distress. However, Plaintiff’s factual allegations and legal theories are confusing and seemingly untenable as a matter of law.

A. The First Transaction

Plaintiff’s first amended complaint is unclear with respect to how Rodeo Realty, Malibu Escrow, and Defendant Harandi have any liability for the first transaction. Plaintiff concedes that the initial sale for which she was not listed as the broker was canceled, and the documents attached to her complaint make clear that the buyer canceled the transaction. Plaintiff does not allege that the brokers received a commission for this failed transaction and that she was entitled to half of this commission.

Although not alleged in the first amended complaint, Plaintiff suggests in her opposition that her theory of liability stems from the canceled transaction and return of the “earnest money.” In her opposition, Plaintiff states:

In or about November of 2018, the buyer cancelled the contract and Defendant Harandi, as an agent of Rodeo Realty unilaterally authorized the cancellation and release of deposit without authorization of Plaintiff. Malibu Escrow then returned the Initial deposit to the buyer, also without the written authorization of Plaintiff.

(Plaintiff’s Opposition, p. 2:14-17.) Plaintiff argues that the initial deposit was in the amount of $202,500, and suggests that she is entitled to half that amount as damages. (Id., p. 2:10-12.)

Based upon the foregoing, the Court presumes that Plaintiff’s theory is that Defendants breached fiduciary duties, were negligent, defrauded her, and intentionally caused her emotional distress by returning the earnest money to the prospective purchaser without her authority. However, Plaintiff’s allegations are insufficient because she does not allege that Defendants had any choice but to return the earnest money under the contract. Even if so, that would not support claims for intentional tort, viz., fraud and intentional infliction of emotional distress. Plaintiff does not allege facts demonstrating that Defendants knowingly and intentionally returned the earnest money in order to defraud Plaintiff and cause her emotional distress. At heart, Plaintiff’s theory is flawed because by returning the earnest money, Rodeo Realty and Defendant Harandi also lost their half of the money, too.

Similarly, Plaintiff seems to allege that Rodeo Realty and Defendant Harandi authorized the cancelation of the transaction with the buyer, as a result of which “Plaintiff did not realize the expected selling commission.” (Plaintiff’s Opposition, p. 5:3.) Again, Plaintiff’s factual allegations and legal theories are nonsensical. Plaintiff does not allege that Rodeo Realty and Defendant Harandi had any basis to refuse to cancel the transaction and, if so, did so with the intention of defrauding Plaintiff and causing her emotional distress. To the contrary, the contract attached to the first amended complaint suggests that the buyer could cancel the transaction, and the issue is whether the buyer was entitled to a refund of the earnest money.

In the alternative, the Court finds that the allegations against Malibu Escrow are insufficient. Plaintiff alleges only that Malibu Escrow acted as the escrow agent. “An escrow holder has no general duty to police the affairs of its depositors, however. An escrow holder’s agency is limited to faithful compliance with instructions.” (Claussen v. First American Title Guaranty Co. (1986) 186 Cal.App.3d 429, 435–436.) Plaintiff identifies nothing in the escrow contract requiring that both brokers—Defendant Harandi and Plaintiff—approve escrow instructions. In the absence of a clear prohibition against Malibu Escrow following the instructions of one broker on the transaction, there is no basis to assert claims against it.

B. The Second Transaction

It is unclear how any defendant has liability for the ultimate sale of the property. Plaintiff concedes that Rodeo Realty was not the broker for the second transaction. Plaintiff does not allege that Malibu Escrow was the escrow agent for the second transaction. Even if so, Malibu Escrow has no liability for following the instructions of the realtor on that transaction. (Ibid.)

Finally, Plaintiff does not appear to have a viable claim against Defendant Harandi for the second transaction. The first amended complaint appears to predicate this action on Defendant Harandi selling the property without listing her as the co-listing agent, thereby depriving her of her commission, in violation of the family court’s order. However, the ultimate sale of the property was supervised by the U.S. Bankruptcy Court for the Central District of California, which approved the realtor for this transaction. As the U.S. Trustee noted in his objection, Title 11, United States Code, section 327, authorizes the trustee, with the approval of the U.S. Bankruptcy Court, to retain professionals “that are disinterested persons.” Plaintiff admits that she has an interest in the property, and the record makes clear that the U.S. Bankruptcy Court—not Defendant Harandi—selected the realtor for the transaction.

Based upon the foregoing, the case against Defendant Harandi is untenable as a matter of law. In terms of the pleadings, Plaintiff cannot allege that Defendant Harandi omitted her as a co-listing agent on the ultimate sale of the property because the U.S. Bankruptcy Judge—not Defendant Harandi—was the one who selected the realtor. Plaintiff does not allege any damages stemming from the prior, failed sale at which Rodeo Realty and Defendant Harandi were the realtors. More important, the case cannot proceed against Defendant Harandi pursuant to the Supremacy Clause of the U.S. Constitution. Section 327 of the U.S. Bankruptcy Code would preclude Plaintiff from acting as a co-realtor for this transaction because, like Defendant Harandi, she had an interest in the property. To the extent there is a conflict between the U.S. Bankruptcy Code and the California Family Code, federal law takes precedence. Similarly, the U.S. Bankruptcy Court assumed jurisdiction over the sale of the property, creating a conflict between the orders from the U.S. Bankruptcy Court and the California Superior Court over who would act as the realtor. The federal court’s orders take precedence over the state court’s orders. For these reasons, this action against Defendant Harandi is barred as a matter of law, to the extent it is predicated on the second transaction. Rather, Plaintiff’s remedy is to seek an equitable remedy from the family court given that its order was “overruled” by the U.S. Bankruptcy Court.

CONCLUSION AND ORDER

Based upon the foregoing, the Court orders as follows:

1. The Court sustains the demurrers by Rodeo Realty and Malibu Escrow. The Court also dismisses Defendant Harandi without prejudice pursuant to its Order to Show Cause, issued in writing on March 11, 2022. The Court denies the motions to strike as moot.

2. The Court shall afford Plaintiff leave to amend to resolve the issues raised in the demurrers and Order to Show Cause. Plaintiff’s counsel shall file an amended complaint on or before April 29, 2022.

3. The Court continues the case management conference to June 10, 2022, at 8:30 a.m. Defendants may notice any demurrer and/or motion to strike for hearing on that date/time.

4. The Court stays discovery in this matter until the pleadings are resolved. The Court sets an Order to Show Cause why the stay of discovery should not be lifted for June 10, 2022, at 8:30 a.m.

5. Counsel for Rodeo Realty shall provide notice and file proof of such with the Court.

Case Number: *******9580 Hearing Date: March 11, 2022 Dept: 39

Elizabeth Harandi v. Farshad Harandi, et al.

Case No. *******9580

Demurrers and Motions to Strike

INTRODUCTION

Plaintiff Elizabeth Harandi (“Plaintiff”) filed this action against Farshad Harandi (“Defendant Harandi”), Rodeo Realty, Inc. (“Rodeo Realty”) and Malibu Escrow Company (“Malibu Escrow”) asserting causes of action for breach of fiduciary duty, negligence/gross negligence, fraud, and intentional infliction of emotional distress. Plaintiff asserts a separate cause of action for punitive damages. Now, Rodeo Realty and Malibu Escrow demur to the complaint and move to strike the prayer for punitive damages and related allegations. Plaintiff does not oppose the motions. The Court sustains the demurrers without leave to amend.

PLAINTIFF’S ALLEGATIONS

Plaintiff and Defendant Harrandi dissolved their marriage. (First Amended Complaint, 7.) The principal asset of the marriage was a piece of community property in Malibu, California. (Id., 8.) The family court ordered the property to be sold, and the orders “indicated that both parties would be listed as both sellers and brokers on said property . . . .” (Ibid.) The property originally was listed with two listing agents, Defendant Harandi (who was an agent with Rodeo Realty) and Plaintiff (who is a realtor). (Id., 10(a) & Exh. B.) Then, the property was taken off-market and relisted. (Id., 10(b).) The new listing did not list Plaintiff as a listing agent. (Id., Exh. C.) The property sold, and Malibu Escrow was the escrow agent. (Id., Exh. D.) However, the transaction was canceled by the buyer. (Id., Exh. F.) Then, Defendant Harandi declared bankruptcy in 2019. (Id., Exhs. G, J.) Defendant Harandi sought to use Rodeo Realty to sell the property in bankruptcy. (Id., Exh. N.) The U.S. Trustee objected, arguing that Rodeo Realty is not disinterested and therefore cannot be employed under Title 11, United States Code, section 327. (Id., Exh. G.) The U.S. Bankruptcy Court ordered a different realtor: “Plaintiff is informed and believes that another agent sold the subject property in which the Plaintiff’s ownership right or co-broker’s right were [sic] not recognized, honored or compensated for.” (Id., 12.)

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.) However, courts do not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

DISCUSSION

A. Failure to File an Opposition

Plaintiff filed no oppositions to these motions. Pursuant to California Rules of Court, rule 8.54(c), “[a] failure to oppose a motion may be deemed a consent to the granting of the motion. Therefore, the Court sustains the demurrers and grants the motions to strike.

B. Malibu Escrow

Plaintiff cannot pursue claims against Malibu Escrow under these circumstances. Plaintiff alleges only that Malibu Escrow acted as the escrow agent. “An escrow holder has no general duty to police the affairs of its depositors, however. An escrow holder’s agency is limited to faithful compliance with instructions.” (Claussen v. First American Title Guaranty Co. (1986) 186 Cal.App.3d 429, 435–436.) Therefore, the Court sustains the demurrer and grants the motion to strike. The Court does not afford leave to amend as no amendment would be successful under these circumstances.

C. Rodeo Realty

Plaintiff cannot pursue claims against Rodeo Realty under these circumstances. Plaintiff concedes that the initial sale for which she was not listed as the broker was canceled, and the documents attached to her complaint make clear that the buyer canceled the transaction. Plaintiff does not allege that the brokers received a commission for this failed transaction and that she was entitled to half of this commission. Plaintiff admits that when the property was sold, Rodeo Realty was not the broker. Therefore, the Court sustains Rodeo Realty’s demurrer and grants the motion to strike. The Court does not afford leave to amend, as the Court does not believe Plaintiff can allege that the buyer paid a commission on the failed transaction.

D. Defendant Harandi

There are potential problems with the case against Defendant Harandi. As an initial matter, Plaintiff has not served Defendant Harandi. California Rules of Court, rule 3.110, requires a plaintiff to serve the summons and complaint within sixty (60) days, and the complaint was filed 136 days ago. More important, this action may not be tenable as a matter of law. Plaintiff predicates this action on Defendant Harandi selling the property without listing her as the co-listing agent, thereby depriving her of her commission, in violation of the family court’s order. However, the ultimate sale of the property was supervised by the U.S. Bankruptcy Court for the Central District of California, which approved the realtor for this transaction. As the U.S. Trustee noted in his objection, Title 11, United States Code, section 327, authorizes the trustee, with the approval of the U.S. Bankruptcy Court, to retain professionals “that are disinterested persons.” Plaintiff admits that she has an interest in the property. Therefore, as a matter of law, Plaintiff was prohibited from acting as a co-realtor on this transaction, and the U.S. Bankruptcy Court’s order concerning the sale would invalidate the family court’s order. In other words, Plaintiff does not allege that Defendant Harandi—as opposed to the U.S. Bankruptcy Court—selected the listing agent in this case. This problem appears to be fatal to her case.

CONCLUSION AND ORDER

Based upon the foregoing, the Court orders as follows:

1. The Court sustains the demurrer and grants the motion to strike by Malibu Escrow. The Court does not afford leave to amend, so Malibu Escrow is dismissed with prejudice.

2. The Court sustains the demurer and grants the motion to strike by Rodeo Realty. The Court does not afford leave to amend, so Malibu Escrow is dismissed with prejudice.

3. The Court sets an Order to Show Cause why the case against Defendant Harandi should not be dismissed with prejudice, as Plaintiff seeks to enforce an order that was rendered unenforceable by the U.S. Bankruptcy Court’s application of Title 11, United States Code, section 327. The hearing on the Order to Show Cause shall be held on April 11, 2022, at the following location:

Stanley Mosk Courthouse

111 North Hill Street

Department #39 (Goorvitch, J.)

Los Angeles, California 90012

Plaintiff’s counsel may appear remotely or in-person. Plaintiff may file a response on or before April 1, 2022. The Court provides notice that unless Plaintiff articulates a legal basis to proceed with this case and appears at the hearing, absent good cause, the Court intends to dismiss the case against Defendant Harandi with prejudice.

4. The Court’s clerk shall provide notice.