Judge Andrew E. Cooper, Case Number: 23CHCP00018, Date: 2024-01-23 Tentative Ruling

Counsel wishing to submit on a tentative ruling may inform the clerk or courtroom assisant in North Valley Department F51, 9425 Penfield Ave., Chatsworth, CA 91311, at (818) 407-2251. Please be aware that unless all parties submit, the matter will still be called for hearing and may be argued by any appearing/non-submitting parties. If the matter is submitted on the court's tentative ruling by all parties, counsel for moving party shall give notice of ruling. This may be done by incorporating verbatim the court's tentative ruling. The tentative ruling may be extracted verbatim by copying and specially pasting, as unformatted text, from the Los Angeles Superior Court’s website, http://www.lasuperiorcourt.org. All hearings on law and motion and other calendar matters are generally NOT transcribed by a court reporter unless one is provided by the party(ies).

MARCH 20, 2024

Los Angeles Superior Court Case # 23CHCP00018

MOVING PARTY: Defendants Albert Gonzalez, Jr.; and Albert Gonzalez, Sr. (collectively, “Defendants”)

1. Defendant Albert Gonzalez Sr. demurs to the second through fifth causes of action in Plaintiff’s complaint;

2. Defendant Albert Gonzalez Jr. demurs to the second and fifth causes of action in Plaintiff’s complaint; and

1. Defendant Albert Gonzalez Sr.’s demurrer is overruled as to Plaintiff’s fourth cause of action, and sustained with 30 days leave to amend as to Plaintiff’s second, third, and fifth causes of action;

The Court hereby imposes $150.00 in monetary sanctions against Defendants’ counsel for failing to reserve two separate hearing dates, failing to separately file Defendants’ motion to strike, and failing to properly bookmark declarations and exhibits.

This action involves a business dispute between the parties, in which Plaintiff alleges that he and defendant Albert Gonzalez, Jr. are members in nonmoving defendant ALALDA, LLC, with each member holding a 50% membership interest therein. (Compl. ¶¶ 1, 2.) Plaintiff alleges that despite their equal ownership in the company, “Defendant Albert Gonzalez, Jr. made and continues to make decisions on behalf of ALALDA, LLC, without input from remaining member Plaintiff, Daniel Torres. Defendant Albert Gonzalez, Jr. has failed to maintain adequate corporate records such as articles of incorporation complete with amendments; operating agreements and amendments; financial statements and books and records related to the internal affairs of the Company. Defendant Albert Gonzalez, Jr. has excluded Plaintiff Daniel Torres from the affairs of ALALDA, LLC, without the consent of Plaintiff as member and 50% owner.” (Id. at ¶ 21.) Plaintiff further alleges that “at all relevant times, Albert Gonzalez Sr. was not a member of ALALDA, LLC although upon Plaintiffs [sic] information and belief, Defendant Albert Gonzalez Sr. mistakenly believes he holds a 33.3% membership interest.” (Id. at ¶ 3.)

On 1/18/23, Plaintiff filed his complaint, alleging against Defendants the following causes of action: (1) Dissolution of Limited Liability Company; (2) Breach of Fiduciary Duty; (3) Accounting; (4) Declaratory Relief; and (5) Conversion.

On 5/19/23, Defendants each filed a demurrer with motion to strike against Plaintiff’s complaint, but reserved only one hearing for the two separate motions. On 1/9/24, Plaintiff filed his opposition to Defendant Albert Gonzalez, Jr.’s demurrer and motion to strike. On 1/12/23, Defendant Albert Gonzalez, Sr. filed a reply.

On 1/19/24, the Court continued the hearings on both demurrers and motions to strike to this date to afford the parties the opportunity to file their oppositions and replies thereto. However, no additional oppositions or replies have since been filed with the Court.

As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action” and is uncertain, meaning “ambiguous and unintelligible.” (Code Civ. Proc., § 430.10, subds. (e) and (f).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Before filing its demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)

Here, Defendants’ counsel declares that on 2/22/23, he sent Plaintiff’s counsel a letter in an attempt to resolve the issues raised in the instant demurrer and motion to strike. (Ex. A to Decl. of C. Scott Zeidman.) On 5/10/23, Plaintiff’s counsel responded, but the parties were unable to come to a resolution. (Zeidman Decl. at ¶ 3.) Accordingly, the Court finds that counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).

Plaintiff’s second cause of action alleges against all Defendants a Breach of Fiduciary Duty. “The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)

Here, Plaintiff alleges that Defendant Albert Gonzalez, Jr. and “each of the fictitiously named defendants” owed a fiduciary duty to ALALDA, LLC “to exercise candor, good faith, loyalty and care in the management and administration of the business affairs” thereof. (Compl. ¶¶ 28–30.) “Among the breaches of Defendants’ fiduciary duties are corporate waste, the misappropriate of corporate opportunities for his own personal gain, and upon information and belief, self-dealing with other entities owned by Defendants without appropriate disclosures and not for arms-length value.” (Id. at ¶ 32.)

Defendants argue that “Plaintiff’s complaint fails to allege facts that there was any fiduciary duty between plaintiff and Albert Gonzalez [Sr.]. Indeed, in his verified complaint, plaintiff alleges that defendant Albert Gonzalez [Sr.] does not own any interest in ALALDA.” (Dem. re A.G. Sr., 4:22–24.) Defendants further assert that “while the complaint alleges a fiduciary duty between plaintiff and defendant Albert Gonzalez, Jr., the complaint completely fails to allege any essential facts to support a breach of such duty.” (Dem. re A.G. Jr., 5:6–8.)

Defendants further argue that “it is impossible, due to the vagueness and lack of factual specificity to determine” whether Defendant Albert Gonzalez, Jr.’s alleged conduct falls within the four-year statute of limitations for a Breach of Fiduciary Duty cause of action. (Id. at 6:13–14, citing Code Civ. Proc. § 343.) The Court notes that Plaintiff does not address this issue in his opposition. However, the Court also notes that Defendants appear to concede that “there appears to be sufficient, albeit not terribly specific, allegations made against Albert Gonzalez, Jr. for pleading a cause of action for Breach of Fiduciary Duty.” (Defs.’ Reply 3:19–20.)

Based on the foregoing, the Court agrees with Defendants that as to Defendant Albert Gonzalez, Sr., the complaint fails to allege a relationship giving rise to a fiduciary duty owed to Plaintiff, and any breach thereof. As to Defendant Albert Gonzalez, Jr., the Court is satisfied that Plaintiff has alleged (1) the existence of a fiduciary relationship between the parties; (2) Defendant Albert Gonzalez, Jr.’s breach of his fiduciary duties; and (3) resulting damages. (Compl. ¶¶ 28, 30, 32, 34.)

Accordingly, the Court sustains Defendant Albert Gonzalez, Sr.’s demurrer and overrules Defendant Albert Gonzalez, Jr.’s demurrers as to Plaintiff’s second cause of action.

Plaintiff’s third cause of action alleges an Accounting against all Defendants. “A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting. An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.)

Here, Plaintiff alleges that he is owed an accounting by Defendants because the parties “had financial transactions with each other and owed each other a fiduciary duty,” and “it is unknown to Plaintiff if Defendants have diverted money or if the value of assets has been misappropriated as Plaintiff cannot adequately ascertain without an accounting of the activities of ALALDA, LLC.” (Compl. ¶¶ 37–39.)

Defendant Albert Gonzalez, Sr. argues that Plaintiff has failed to allege a relationship between the two giving that would require an accounting. (Dem. re A.G. Sr., 5:16–17.) “Moreover, Plaintiff has not pled anywhere in his complaint that any balance is due the Plaintiff that can only be ascertained by an accounting.” (Defs.’ Reply 8:5–6.) The Court notes that Plaintiff does not address this cause of action in his opposition.

Upon review, the Court agrees with Defendant that Plaintiff has failed to allege that a balance is due to him, and alleges only that “it is unknown to Plaintiff if Defendants have diverted money or if the value of assets has been misappropriated.” (Compl. ¶ 39.) Based on the foregoing, the Court sustains Defendant Albert Gonzalez, Sr.’s demurrer as to Plaintiff’s third cause of action.

Plaintiff’s fourth cause of action against alleges Defendants Declaratory Relief. “To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.)

Here, Plaintiff alleges that “an actual controversy has arisen and now exists between Plaintiff and Defendant as to the operations of ALALDA, LLC,” and that “a judicial determination as to the ownership interest in ALALDA, LLC” is warranted. (Compl. ¶¶ 41, 43.)

Defendant Albert Gonzalez, Sr. argues that “as plaintiff alleges that Albert Gonzalez [Sr.] is not a member of ALALDA, LLC, there could be no controversy between plaintiff and defendant Albert Gonzalez [Sr.]. Absent such a controversy, plaintiff cannot sue Albert Gonzalez [Sr.] for Declaratory Relief.” (Dem. re A.G. Sr., 6:14–16.)

However, the Court observes that Plaintiff has alleged that “Defendant Albert Gonzalez Sr. mistakenly believes he holds a 33.3% membership interest” in ALALDA, LLC, and it is therefore proper for Plaintiff to seek a judicial determination of the ownership interest in the company. (Compl. ¶ 3.) Based on the foregoing, the Court finds that Plaintiff has alleged facts sufficient to constitute a cause of action for Declaratory Relief. Accordingly, the Court overrules Defendant Albert Gonzalez, Sr.’s demurrer to Plaintiff’s fourth cause of action.

Plaintiff’s fifth cause of action alleges against Defendants Conversion. “Conversion is generally described as the wrongful exercise of dominion over the personal property of another.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his or her own use. (Oakdale Village Group v. Fong (1996) 43 Cal. App. 4th 539, 544.)

Here, Plaintiff alleges that he “owns/possesses/has a right to possess a 50% ownership interest in ALALDA LLC,” and that “Defendants substantially interfered and continues to interfere with Plaintiff Daniel Torres’ property by knowingly or intentionally depriving him of his full ownership rights in ALALDA LLC” without his consent. (Compl. ¶¶ 46–48.) “Plaintiff Daniel Torres was harmed and continues to be harmed by Defendants [sic] actions. … Defendants’ conduct was and is a substantial factor in causing Plaintiff Daniel Torres’ harm.” (Id. at ¶¶ 49–50.)

Defendants each contend that “nowhere in the complaint does plaintiff plead that defendant … did anything to that plaintiff’s alleged ownership interest.” (Dem. re A.G. Sr., 7:2–3; Dem. re A.G. Jr., 7:25–26.) The Court agrees with Defendants only where Defendants’ argument applies to Defendant Albert Gonzalez, Sr. However, the Court observes that Plaintiff has alleged that “Defendant Albert Gonzalez, Jr. handles the day-to-day operations of ALALDA, LLC to the exclusion of Plaintiff” and that “Defendant Albert Gonzalez, Jr. operates ALALDA, LLC. as if he was the only member” by excluding Plaintiff from business affairs. (Compl. ¶¶ 20–21.)

Based on the foregoing, the Court finds that Plaintiff has alleged facts sufficient to constitute a cause of action for Conversion against Defendant Albert Gonzalez, Jr. Accordingly, the Court sustains Defendant Albert Gonzalez, Sr.’s demurrer and overrules Defendant Albert Gonzalez, Jr.’s demurrer as to Plaintiff’s fifth cause of action.

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression by clear and convincing evidence. (Civ. Code § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Id. at subd. (c); Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.)

Punitive damages must be supported by factual allegations. Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042; Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643.)

Here, Plaintiff seeks to recover punitive damages in connection with Defendant Albert Gonzalez, Jr.’s conduct[1] in breaching his fiduciary duties to Plaintiff. (Compl. ¶ 35.) Defendants argue that Plaintiff’s factual allegations are not pled with the requisite particularity and “do not constitute a claim for punitive damages.” (MTS 6:20–21.)

In opposition, Plaintiff argues that less particularity is required when, as here, a defendant possesses equal knowledge of the relevant facts. (MTS Opp. 5:14–27, citing Semole v. Sansoucie (1972) 28 Cal.App.3d 714, 719.) However, as Defendants note in reply, the Semole Court’s finding that “less particularity is required where the defendant may be assumed to have knowledge of the facts equal to that possessed by the plaintiff” was applied to a demurrer proceeding, whereas here, Plaintiff misapplies the finding to a motion to strike a claim for punitive damages. (MTS Reply 4:18–20, citing 28 Cal.App.3d at 719.) The Court agrees.

Based on the foregoing, and upon review of Plaintiff’s factual allegations, the Court finds that Plaintiff has failed to allege facts to support a finding that either Defendant acted with the requisite malice, fraud, or oppression sufficient to warrant the recovery of punitive damages. Accordingly, the Court grants Defendants’ motion to strike.

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Here, the Court notes that this is the first demurrer brought against Plaintiff’s original complaint, and that Plaintiff has requested leave to amend. (Pl.’s Opp. 8:11–13.) Therefore, under the Court’s liberal policy of granting leave to amend, Plaintiff is granted 30 days leave to amend the complaint to cure the defects set forth above. Plaintiff is cautioned that “following an order sustaining a demurrer … with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order. … The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” (Zakk v. Diesel (2019) 33 Cal.App.5th 431, 456.)

[1] “In an abundance of caution, Albert Gonzalez [Sr.], who cannot be certain that a claim for punitive damages isn’t pled against him, [also] moves to strike any claims of punitive damages against him.” (MTS 7:24–26.)