Siddiqui v. Molayem

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RUBY SIDDIQUI, Plaintiff and Appellant, v. GEORGE MOLAYEM et al., Defendants and Appellants.

B317507, B319705

California Court of Appeals, Second District, First Division

August 28, 2024

NOT TO BE PUBLISHED

APPEALS from a judgment and postjudgment order of the Superior Court of Los Angeles County, No. SC127504 Mark A Young, Judge. Affirmed in part, reversed in part, and remanded with directions.

Law Offices of Stanley H. Kimmel and Stanley H. Kimmel for Defendants and Appellants.

Child & Marton and Bradford T. Child for Plaintiff and Appellant.

KELLEY, J. ^[*]

Defendants Hill Street Jewelers USA, Inc. (Hill Street) and George Molayem (collectively, defendants) committed fraud against plaintiff Ruby Siddiqui when they induced her to pay $171,663.15 for jewelry she successfully bid on through their online jewelry auctions, by misrepresenting that the auctions were affiliated with the United States government and misrepresenting the sources, quality, and workmanship of the 63 items of jewelry she purchased. Defendants do not challenge the trial court's determination, made after a court trial, that Siddiqui had been defrauded, but they do challenge the amount of restitution damages and prejudgment interest awarded, as well as the award of punitive damages.

After the bench trial, the trial court awarded Siddiqui $171,663.15 as restitution for rescission of the auction contracts based on fraud; prejudgment interest on that amount at an annual rate of 10 percent from the date Siddiqui paid defendants for the jewelry; and $343,326.30 in punitive damages (two times the restitution amount). We affirm the trial court's award of restitution and punitive damages. However, we agree with defendants that the court erred in awarding prejudgment interest at the 10 percent rate applicable to breach of contract claims. We reverse that portion of the judgment and remand the matter for recalculation of prejudgment interest.

Siddiqui appeals from the trial court's postjudgment order denying her motion for attorney fees under Civil Code^[1]section 1717 based on an attorney fees provision in the auction contracts. The trial court concluded Siddiqui is not entitled to attorney fees because (1) the contractual fee provision states that it applies only to collection actions and (2) this action is not "on a contract" within the meaning of section 1717. We disagree with these legal conclusions. Under section 1717 the attorney fees provision must be applied to all claims on the auction contracts in order to effectuate the complete mutuality of remedy intended by the legislature. This action for rescission of the auction contracts based on fraud is "on a contract," in that an interpretation of the terms and conditions of the contracts was integral to the trial court's resolution of Siddiqui's claims and defendants' defenses thereto. We reverse the order denying Siddiqui's motion for attorney fees and remand the matter for a determination of the amount of attorney fees to award her.

FACTUAL AND PROCEDURAL BACKGROUND^[2]

A. Siddiqui Decides to Use Her Disability Insurance Payment to Start a Jewelry Business

In 2012, Siddiqui became disabled from her profession as a medical doctor. In 2015, she received a lump sum payment from her disability insurance. She had previously learned to make jewelry during an earlier illness and she decided to start a business with the funds from her disability insurance. She devised a plan to purchase some pieces of jewelry from federal government auctions, refurbish them, and sell them for a higher price. She trusted government auctions more than other auction houses because she did not believe she "would get cheated" there.

B. Siddiqui Finds "Federal Government Auction" and "U.S. Jewelry Liquidation," and She Purchases 63 Pieces of Jewelry Through Them for $171,663.15

Siddiqui searched online for auction houses. She discovered a website called Invaluable that connected her with many different sellers. Through Invaluable, she found "Federal Government Auction" and "U.S. Jewelry Liquidation." Based on their marketing, she believed these auction sites were affiliated with the United States government. Federal Government Auction represented on its website that its luxury inventory came from tax delinquency cases, and it listed a case number in connection with each piece of jewelry. Siddiqui did not see anything on the websites indicating Federal Government Auction and U.S. Jewelry Liquidation were not affiliated with the United States government.

The auction catalogs Siddiqui reviewed before she placed her bids, included photos and descriptions of each item of jewelry. She relied on these photos and descriptions in deciding to bid on certain items. Some of the pieces also had gemological reports associated with them that were purportedly signed by a graduate gemologist. She took note of these reports before she made her bids, believing they looked official. She explained, "It was very important to [her] that there was an actual gemological laboratory that had looked at the jewels and certified them."

The auction catalogs for Federal Government Auction included terms and conditions, which Siddiqui skimmed before she placed her bids. She understood that all sales were final, and she knew she would owe a buyer's premium of 19 percent as well as a restocking fee of 25 percent if she canceled her purchase. She did not see a term indicating Federal Government Auction was not affiliated with any federal government agency.

On April 15, 2016, Siddiqui successfully bid on 55 items of jewelry from Federal Government Auction. The following day, she was the high bidder on six items from U.S. Jewelry Liquidation. On April 17, 2016, she successfully bid on an additional item from Federal Government Auction and another from U.S. Jewelry Liquidation. She received invoices for her purchases totaling $171,663.15. The invoices included black-and-white photos of the jewelry she purchased and descriptions of the jewelry.

On April 18, 2016, Siddiqui received a text message and an email from defendant Molayem, who indicated he worked for a company called "Multi Auction Services," an entity that serviced Federal Government Auction and U.S. Jewelry Liquidation. Molayem requested that she wire a total of $171,663.15, in two separate wire transfers, to a bank account in his name. The same day, Siddiqui went to her bank and made the transfers as instructed.

C. Siddiqui Discovers Federal Government Auction and U.S. Jewelry Liquidation Are Not Affiliated With the United States Government, and She Attempts to Cancel Her Purchases

Within 30 minutes after she made the wire transfers, Siddiqui called Molayem to let him know her bank had sent them. She asked him why the wires were going to a personal account instead of a federal government account. She inquired about his connection with the federal government. He indicated he had none, explaining," 'It's just marketing.' "

Siddiqui conducted online research regarding Molayem and discovered his affiliation with defendant Hill Street. She learned that Hill Street conducted business under many different names. After subsequent telephone conversations and text messages with Molayem, she believed "this was a really clever scam," and she did not want to be a part of it. She attempted to cancel the wire transfers, but the bank told her it was too late.

During their telephone calls, Siddiqui told Molayem she wanted to cancel her auction purchases and asked him not to send the jewelry. Molayem said there would be a "restocking fee" and other charges totaling around $70,000, even though she had not received any of the jewelry yet.

On April 25, 2016, Siddiqui sent an email to Molayem, attempting to cancel her purchases and get a full refund of the money she paid. She was unsuccessful. On April 27, 2016, Molayem advised Siddiqui that her request to cancel the transactions was denied and represented that most of the auction lots were under inspection getting ready to ship.

On May 2, 2016, Siddiqui sent Molayem another email to the same effect as her previous email. By this point she had received invoices for her purchases from Invaluable, which included color photos of the items she purchased (instead of the black-and-white photos she received in the invoices from defendants), and she realized the photos of the items and the descriptions of the items in the invoices did not match (e.g., color of the stones).

After defendants refused her requests to cancel the purchases, Siddiqui demanded they ship the jewelry to her immediately. She made the demand because she suspected defendants did not yet have the jewelry in their possession, and she wanted to confirm her suspicion. On May 18, 2016, Siddiqui refused to accept a delivery that came from defendants' address. At some point, thereafter, Siddiqui told Molayem she would forfeit the $70,000 in fees and charges if defendants would refund the rest of her money. They declined to refund any of her money.

D. Siddiqui Files This Action and Shortly Thereafter Defendants Send Her Some of the Auction Items Under the Guise of Amazon Shipments

In May 2017, more than a year after Siddiqui made her purchases from defendants, she filed this action seeking return of her money and other damages. Around a month later, in June 2017 Siddiqui received two packages in Amazon boxes, that she believed were products she had purchased from Amazon. She opened the boxes and found little baggies inside containing jewelry. She had not asked defendants to send her the jewelry at that time. She noticed that the jewelry she received did not match the photos and descriptions of the items on which she bid during the auctions. Moreover, the boxes contained...