Judge: Anne Richardson, Case: 20STCV45276, Date: 2023-09-01 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 20STCV45276    Hearing Date: January 26, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Pleadings

Plaintiff Alida L. Ross (Alida)—individually and derivatively on behalf of Defendant Spec Tool Company (Spec Tool)—sues Defendants Spec Tool, David B. Fink, individually and as Trustee of The Albert G. Fink, Jr. Revocable Living Trust of 2000 (David), Debra L. Gassman, as Trustee of The Gassman Living Trust, dated 6-7-91 (Debra), and Does 1-100 pursuant to a June 13, 2023 Third Amended Complaint (TAC).

The TAC alleges claims of (1) Involuntary Dissolution against Spec Tool and Does 1 through 100, (2) Declaratory Relief against Spec Tool, David, Debra, and Does 1 through 100, (3) Violation of Cal. Corp. Code Section 1600, et seq. against Spec Tool and Does 1 through 100, (4) Breach of Fiduciary Duty against David and Does 1 through 100, and (5) Civil Conspiracy against David and Does 1 through 100.

(The parties are referred to in this ruling by their first names for ease of reference given that many of the involved individuals have the same last name. No disrespect is intended.)

The claims arise from allegations that, among other things, Spec Tool—a family business initially owned by Albert G. Fink, Jr., deceased (Albert Jr.), and Alida’s parents—has been directed by Defendants to the financial detriment of Alida Ross, who has been frozen out of employment with or directorship over the corporation, and that Defendants have failed since 2005 to pay Alida any dividends owed to her based on her shareholder interest in Spec Tool—per the FAC, 31.02% according to Alida but 22.26% according to Spec Tool. The claims also arise from allegations that in 2003, Albert Jr. and David Fink (Albert Jr.’s son) conspired to obtain a controlling interest in Spec Tool by taking advantage of their positions in the company and the diminished mental state of Alida and Albert Jr.’s mother to acquire 1,412 shares in Spec Tool through payment of only $56,480—roughly $40 per share—where Spec Tool’s financial statements for 2003 reflected that the shares’ book value at the time was approximately $1,387 per share.

(All claims against Defendant Fink failed on demurrer on September 1, 2023. No leave to amend was granted.)

Motion Before the Court

On November 17, 2023, Debra filed a motion for judgment on the pleadings (MJOP) with respect to the TAC’s second cause of action for declaratory relief.

On December 7, 2023, the Court signed a stipulation by the parties to set a hearing date for Debra’s MJOP and set a hearing for January 26, 2024.

On January 12, 2024, Alida opposed the MJOP.

On January 19, 2023, Debra replied to the opposition.

Debra’s MJOP is now before the Court.

Request for Judicial Notice

Per Debra’s request, the Court takes judicial notice of various filings by the parties in this action: a notice of ruling filed September 6, 2023; a declaration filed by Alida on May 19, 2021; and a declaration filed by Defendant Fink on January 20, 2021. (MJOP, RJN, p. 2, Exs. 1-3, citing Evid. Code, § 452, subd. (d); Julian Volunteer Fire Co. Assn. v. Julian-Cuyamaca Fire Protection Dist. (2021) 62 Cal.App.5th 583, 600 [judicial notice may be taken as to existence of document and legal effects deriving therefrom]; Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 885 [Documents are only judicially noticeable to show their existence and what orders were made such that the truth of the facts and findings within the documents are not judicially noticeable]; Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 375 [hearing on demurrer may not be turned into contested evidentiary hearing through guise of having court take judicial notice of documents whose truthfulness or proper interpretation are disputable].)

Motion for Judgment on the Pleadings

Legal Standard

Either prior to trial or at the trial—and barring statutory provisions otherwise—the plaintiff or the Defendants may move for judgment on the pleadings where the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791 A motion for JOP is used to challenge a pleading in the same manner as a general demurrer—that is, the challenged pleading (1) establishes that the court does not have subject-matter jurisdiction or (2) does not allege facts sufficient to support a cause of action or defense. (Code Civ. Proc., § 438, subd. (c)(1); see Marzec v. Public Empls. Ret. Sys. (2015) 236 Cal.App.4th 889, 900; International Assn of Firefighters v. City of San Jose (2011) 195 Cal.App.4th 1179, 1196.)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) 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, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) However, this analysis “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

As with a demurrer, the grounds for a motion for judgment on the pleadings must appear on the face of the pleading or be based on facts capable of judicial notice. (Bufil v. Dollar Fin. Grp. (2008) 162 Cal.App.4th 1193, 1202, disapproved on other grounds in Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 985-986, fn. 15.) The only significant difference between the two motions is that a motion for judgment on the pleadings is brought after the time to file a general demurrer has expired. (Code Civ. Proc., § 438, subd. (f); Caldera Pharms. v. Regents of the Univ. of Cal. (2012) 205 Cal.App.4th 338, 350; International Assn of Firefighters v. City of San Jose, supra, at p. 1196.)

Order Granting Judgment on the Pleadings on TAC, Second Cause of Action, Declaratory Relief, as Stated Against Defendant Debra Gassman: GRANTED, without leave to amend.

I. Parties’ Arguments

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. (Code Civ. Proc., §1060.) The fundamental basis of declaratory relief is a present and actual controversy between the parties over a proper subject. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 80.)

The second cause of action seeks declaratory relief finding that “the purported 2003 acquisition of 1,412 shares of Spec Tool stock by David [Fink; Plaintiff’s nephew] and Albert Jr. [Fink, Plaintiff’s deceased brother and David’s father] was improperly made and therefore void or voidable.” (TAC, ¶¶ 4, 47.)

In her MJOP, Debra challenges the second cause of action on statute of limitations grounds, arguing that the discovery date of any injury to Alida must have occurred in 2005. Debra also challenges the second cause of action on the grounds that: “Here, Plaintiff’s long delay in pursuing this claim has significantly prejudiced [Spec Tool]. Plaintiff’s claims all relate to a 2003 transaction involving Albert Jr. But Albert Jr. is now deceased. Thus, the single most important witness to this action, Albert Jr., is unavailable as a result of Plaintiff’s delay. Even if he were not, the 15[-]year delay has resulted in important documents becoming lost or otherwise unavailable, and other witnesses’ memories are likely to have significantly faded. Thus, … Plaintiff’s … claims should be barred by the doctrine of laches.” Last, Debra argues that equitable estoppel is not applicable based on judicial admissions by Alida showing that Alida wrote letters to Albert Jr. that showed Alida was not intimidated by Albert Jr. as early as September 2005 or May 2006. (MJOP, pp. 5-9, citing MJOP, RJN, Exs. 2-3.)

In opposition, Alida argues that the pleading’s equitable estoppel allegations nullify any arguments based on statute of limitations or laches. Alida more specifically argues that the TAC sufficiently alleges equitable estoppel, and that equitable estoppel applies where victimization has occurred and can undercut the invocation of any statute of limitations or laches arguments. Alida also argues that Debra seeks to convert this into a contested evidentiary hearing by relying on evidence for which Debra requested judicial notice. Last, Alida argues that the continuing violations doctrine extends the accrual of the statute of limitations. (Opp’n, pp. 8-14.)

In reply, Debra reiterates the statute of limitations and laches positions and argues that the TAC fails to allege equitable estoppel against Debra specifically. Debra also argues that there is no “continuing violation” applicable to Debra and her husband Kevin Gassman. Last, Debra argues that “now that the Court has adjudicated Plaintiff’s claim for declaratory relief in favor of Spec Tool and David Fink, the Court lacks the jurisdiction to void the shares owned by David Fink, notwithstanding the fact that Plaintiff named Ms. Gassman as a nominal defendant on the cause of action for declaratory relief[;] [i]ndeed, Ms. Gassman does not have the ability or power to set aside the 2003 transaction.” (Reply, pp. 1-5.)

II. Statute of Limitations and Laches

Unless a complaint affirmatively discloses on its face that the statute of limitations has run, the general demurrer on these grounds must be overruled. (See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 881 [“It must appear clearly and affirmatively that, upon the face of the complaint, the right of action is necessarily barred”].) Instead, “[t]he proper remedy ‘is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment ….’ [Citation.]” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 325.) Generally, a “statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her” (the “discovery rule”). (Bernson v. Browning–Ferris Industries (1994) 7 Cal.4th 926, 932.) “[A] cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806-807.) “… ‘When an obligation or liability arises on recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period.’” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1198-1199.)

In order to establish laches, the party must show: “(1) delay in asserting a right or a claim; (2) the delay was not reasonable or excusable; and (3) prejudice to the party against whom laches is asserted. [Citations.]” (Magic Kitchen LLC v. Good Things Internat., Ltd. (2007) 153 Cal.App.4th 1144, 1157 (Magic Kitchen).)

Here, the complained-of transaction occurred in 2003. (TAC, ¶¶ 22-33(e), 45, 47.) The discovery date has previously been determined to be in or around April 20-28, 2005. (9/1/23 Minutes, p. 6.) By that time, Alida was on sufficient notice that some kind of transaction had occurred that gave David and Albert Jr. a majority 55.48% interest in Spec Tool, an interest that Alida alleges to have challenged in an estate meeting with her brother. (TAC, ¶ 50(c) [“‘How did that happen? Where did you find 20% of the stock?’”].) These allegations imply that, as of late April 2005, Alida knew or should have known that David and Albert Jr. had acquired a 20% interest in Spec Tool beyond what they should have received following the death of Alida and Albert Jr.’s mother. (See TAC, ¶¶ 50(b)-(d).) These allegations also amount to circumstances where Alida “should [have] suspect[ed] that [David and Albert Jr.] … [had] done something wrong to her” interest in Spec Tool, thus triggering the statute of limitations. (Bernson v. Browning–Ferris Industries (1994) 7 Cal.4th 926, 932.)

However, the lawsuit was not brought until November 25, 2020, more than 15 years after the reasonable discovery date in the face of the pleadings (in or around April 20-28, 2005). Such delay in filing this suit amounts to a delay in asserting a right by Alida Ross, where the delay was not excusable given the long-time knowledge of the injuries—equitable estoppel arguments aside, to be discussed below.

Moreover, based on the above discovery date, which is clear from the face of the TAC, any statute of limitations would have run by May 1, 2009—equitable estoppel arguments aside, to be discussed below. (Maguire v. Hiberia Savings & Loan Soc. (1944) 23 Cal.2d 719, 734 [“[I]f declaratory relief is sought with reference to an obligation [that] has been breached and the right to commence an action for … relief upon the cause of action arising therefrom is barred by the statute [of limitations], the right to declaratory relief is likewise barred”; “[o]n the other hand, if declaratory relief is sought ‘before there has been any breach of the obligation in respect to which said declaration is sought,’ or within the statutory period after the breach, the right to such relief is not barred by lapse of time”]; Code Civ. Proc., § 343 [four-year statute of limitations for all causes of action for which Code does not provide a specific time frame]; cf. Stalberg v. Western Title Ins. Co. (1991) 230 Cal.App.3d 1223, 1230 [“The statute of limitations for breach of fiduciary duty is four years[] (§ 343[])”].)

III. Equitable Estoppel

Our Supreme Court noted that “estoppel may certainly be invoked when there are acts of violence or intimidation that are intended to prevent the filing of a claim.” (John R. v. Oakland Unified School Dist. (1989) 48 Cal.3d 438, 445, italics in original (John R.).) 

After review, the Court finds that equitable estoppel does not save the pleadings from the statute of limitations or laches arguments.

While the Court accepts Alida’s argument that abuse victims are often cowed or traumatized by their abusers, the Court finds that Alida’s allegations in her TAC that she did not file this lawsuit until 2020 based on Albert Jr. allegedly threatening her and her husband’s safety are contradicted by other records in this case.

The Court has taken judicial notice of affidavit admissions by Alida that admit threatening Albert Jr. with criminal complaints over IRS filings, and another letter written by Alida also shows that Alida threatened to file a civil lawsuit against Albert Jr. in May 2006 if Albert Jr. sold their deceased mother’s house. (See MJOP, RJN, Ex. 2, ¶ 50 [Alida Ross declaration made in this lawsuit admitting to writing a September 29, 2005 letter directed at Albert Jr.] & Ex. 3, Sub-Exs. H [copy of September 29, 2005 letter by Alida Ross to Albert Jr. stating that Albert Jr. should not be mistaken as to Alida Ross’s willingness to file criminal complaints against Albert Jr. related to alleged misrepresentations made by Albert Jr. to the IRS and impacting Alida Ross’s own tax liability]; see also MJOP, RJN, Ex. 3, Sub-Ex. K [May 6, 2006 letter from Alida Ross to Albert Jr. threatening to file civil lawsuit against Albert Jr. if Albert Jr. put up a house that belonged to their deceased mother up for sale].)

The Court notes it does not consider these letters for the truth of the matters asserted, but rather for the fact that Alida admits to making the statements in the September 2005 letter (constituting a judicial admission), and the fact that they were made within months of the alleged June 3, 2005 threat that underlies the equitable estoppel argument by Alida, the legal effect of which is to undercut an equitable estoppel defense by Alida on the ground that Alida has admitted to writing a letter(s) showing she was not intimidated by Albert Jr. (Mark Tanner Constr., Inc. v. HUB Int’l Ins. Servs. (2014) 224 Cal.App.4th 574, 586 [statements in an opponent’s pleadings are treated as judicial admissions].)

The TAC’s allegations that Alida did not file this lawsuit until after Albert Jr. died based on mortal fear of Albert Jr. are meritless when juxtaposed against Alida’s letters, which threatened to make a criminal complaint against Albert Jr. in September 2005 based on IRS tax filings and threatened to initiate a civil lawsuit against Albert Jr. in May 2006 if Albert Jr. sold their deceased mother’s house. (MJOP, RJN, Ex. 2, ¶ 50 & Ex. 3, Sub-Ex. H.) California courts have held that the statute of limitations begins to run when the coercive effect of any relevant threats has ceased. (V.C. v. Los Angeles Unified School Dist. (2006) 139 Cal.App.4th 499, 517, citing John R., supra, 48 Cal.3d at p. 446.) “If there is still ample time to institute the action within the statutory period after the circumstances inducing delay have ceased to operate, the plaintiff who failed to do so cannot claim an estoppel.” (Lobrovich v. Georgison (1956) 144 Cal.App.2d 567, 573-574.)

Here, a comparison of the TAC’s allegations and, at the very least, the September 2005 letter Alida Ross admitted to writing shows that there was ample time to file this action between September 2005 and the applicable 2009 limitations period.

The Court also notes that the continuing violations doctrine does not appear applicable for two reasons. (See Opp’n, pp. 13-14.) First, the TAC does not allege continuing intimidation of Alida past the June 3, 2005 threat by Albert Jr. The opposition argues that continuing intimidation is shown by allegations of (1) denied requests for employment with Spec Tool, (2) denied requests for board membership in Spec Tool, (3) unpaid shareholder distributions, and (4) denied requests to ascertain the value of Spec Tool. (Opp’n, p. 14, citing TAC, ¶ 38.) That conduct differs from the June 3, 2005 threat, which Alida took to imply great bodily harm, not the mere freezing out of Alida from Spec Tool. (TAC, ¶ 50(h).) Second, the TAC does not allege any intimidation by Debra.

Defendant Debra Gassman’s MJOP is thus GRANTED.

IV. Leave to Amend

“To demonstrate an abuse of discretion [meriting the reversal of an order denying leave to amend], the burden is on the plaintiff to show there is a reasonable possibility that the proposed amendment will cure the defect … by showing in what manner the amendment to the complaint can be amended and how that amendment will change the legal effect of the pleadings.” (Brenner v. City of El Cajon (2003) 113 Cal.App.4th 434, 444.)

In her MJOP, Debra argues that no leave to amend should be granted as to the second cause of action as stated against Debra because Plaintiff has been unable to state a viable claim despite several opportunities to do so. (MJOP, p. 9.)

The opposition and reply do not make any specific arguments in favor or against leave to amend other than conclusions for or against that relief.

The Court finds that leave to amend is not warranted. It is not clear to the Court how the defects in pleading relating to laches and statute of limitations will be cured where the equitable estoppel defense has failed and various amendments to the pleadings have taken place. 

Conclusion

Defendant Debra Gassman’s Motion for Judgment on the Pleadings is GRANTED, without leave to amend.

The Court notes that only two claims remain operative in this action: the Involuntary Dissolution and Violation of Cal. Corp. Code Section 1600, et seq. claims against Spec Tool and Does 1 through 100.