Judge: Ashfaq G. Chowdhury, Case: 23GDCV02307, Date: 2024-02-16 Tentative Ruling
Case Number: 23GDCV02307 Hearing Date: April 11, 2024 Dept: E
Case No: 23GDCV02307
Hearing Date: 04/11/2024 – 8:30am
Trial Date: UNSET
Case Name: JOHN WOOD as
the assignee of the Estate of Donald R. Wood v. MARK G. MCNELIS; MARK G.
MCNELIS & ASSOCIATES, CPA’s, Inc., and DOES 1-20
[TENTATIVE RULING ON DEMURRER]
Moving Party: Defendants, Mark G. Mcnelis and Mark G. Mcnelis & Associates,
CPA’s, Inc.
Responding Party: Plaintiff, John Wood
Moving Papers: Notice/Demurrer
Opposition Papers: Opposition
Reply Papers: No Reply
as of 4/5/2024; Reply would have been due 4/4/2024
RELIEF
REQUESTED
Defendants demur to the Amended Complaint (AC) as follows:
1. The
First Cause of Action for Breach of Contract fails to state facts sufficient to
constitute a cause of action (CCP §430.10(e));
2. The
Second Cause of Action for Common Counts fails to state facts sufficient to
constitute a cause of action (CCP §430.10(e));
3. The
Third Cause of Action for Breach of Contract fails to state facts sufficient to
constitute a cause of action (CCP §430.10(e)).
BACKGROUND
Plaintiff’s initial
Complaint was filed on 10/30/2023.
An Amended
Complaint (AC) was filed on 2/5/2024. On 2/16/2024, Defendants’ demurrer to the
initial Complaint was denied as moot based on the filing of the Amended
Complaint.
Defendants
now demur to the AC.
PROCEDURAL
ANALYSIS
Proof of Service Timely Filed
(CRC Rule 3.1300):Ok
16/21 Court Days Lapsed (CCP 1005(b)): Ok
Proper Address (CCP §1013, §1013a, §1013b): Ok
Meet
and Confer
A party filing a
demurrer “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 parties
shall meet and confer at least five days before the date the responsive
pleading is due. If the parties are not able to meet and confer at least five
days prior to the date the responsive pleading is due, the demurring party
shall be granted an automatic 30-day extension of time within which to file a
responsive pleading, by filing and serving, on or before the date on which a
demurrer would be due, a declaration stating under penalty of perjury that a
good faith attempt to meet and confer was made and explaining the reasons why
the parties could not meet and confer.”
(Code Civ. Proc., §430.41, subd. (a)(2).)
Failure to
sufficiently meet and confer is not grounds to overrule or sustain a demurrer.
(Code Civ. Proc., §430.41(a)(4).)
Here, Defendants’
counsel alleges that a meet and confer occurred, but an agreement was not able
to be reached. (Bates Decl. ¶4-6.)
LEGAL
STANDARDS FOR DEMURRERS
Demurrer –
Sufficiency
A demurrer for
sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda, (2007) 147 Cal.App.4th
740, 747.) 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.) The court “treat[s]
the demurrer as admitting all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law ….” (Berkley v. Dowds (2007) 152
Cal.App.4th 518, 525.) 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 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. (Code Civ. Proc., §§ 430.30, 430.70.) 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
747.)
The
general rule is that the plaintiff need only allege ultimate facts, not
evidentiary facts. (Doe v. City of
Los Angeles (2007) 42 Cal.4th 531, 550.)
“All that is required of a plaintiff, as a matter of pleading … is that
his complaint set forth the essential facts of the case with reasonable
precision and with sufficient particularity to acquaint the defendant with the
nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp.
(1945) 26 Cal.2d 149, 156-157.)
On
demurrer, a trial court has an independent duty to “determine whether or not
the … complaint alleges facts sufficient to state a cause of action under any
legal theory.” (Das v. Bank of
America, N.A. (2010) 186 Cal.App.4th 727, 734.) Demurrers do not lie as to only parts of
causes of action, where some valid claim is alleged but “must dispose of an
entire cause of action to be sustained.”
(Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97,
119.) “Generally
it is an abuse of discretion to sustain a demurrer without leave to amend if
there is any reasonable possibility that the defect can be cured by
amendment.” (Goodman v. Kennedy
(1976) 18 Cal.3d 335, 349.)
TENTATIVE RULING
First
Cause of Action (Breach of Contract) and Second Cause of Action (Common Counts)
This action arises from
an alleged oral contract that was entered into between John Wood’s Assignor
(the Estate of Donald R. Wood “Wood Estate”) and Defendants on or about May 20,
2020. Plaintiff alleges that the Wood Estate would transfer client files held
by Donald R. Wood prior to his death on April 23, 2020 in exchange for
Defendants’ agreement to pay to the Wood Estate 25% of all fees, if any, earned
by Defendants over a period of four years following the transfer of the
aforementioned transferred clients and/or client files. (See AC Common
Allegations ¶13.)
Plaintiff
alleges that since neither Plaintiff nor Plaintiff’s assignor could guarantee
that any of the clients whose files were transferred to Defendants would agree
to utilize the services offered to them by Defendants within the following
year, it is possible that Defendants would owe nothing to Plaintiff’s assignor if
such clients failed or refused to conduct business with Defendants. (See AC Common
Allegations ¶13.)
Plaintiff
alleges upon information and belief that several of the aforementioned clients
whose files had been transferred to Defendants by the Wood Estate did in fact,
agree to utilize the services offered by Defendants. (See AC Common Allegations
¶13.)
Defendants
demur on the basis of the statute of frauds by citing to Civil Code § 1624(a)(1),
which states as follows: “The following contracts are invalid, unless they, or
some note or memorandum thereof, are in writing and subscribed by the party to
be charged or by the party’s agent: (1) An agreement that by its terms is
not to be performed within a year from the making thereof.” (Civil Code § 1624(a)(1).)
Defendants
point to the allegations in the AC as to the first cause of action for breach-of-contract
allegations which allege that the agreement pertained to fees earned over a
period of four years following the transfer of client files. (See AC Common
Allegations ¶13.)
Defendants
also point the Court to the allegations in the second cause of action for
common counts that bases the action on Defendants being indebted to Plaintiff
within the last two years. (See p. 5 AC.)
Presumably,
Defendants are arguing that because the statute of frauds invalidates a contract
“that by its terms is not to be performed within a year from the making
thereof,” then this contract is invalid because it covered a period of four
years.
In
Opposition, Plaintiff argues that it was possible that the contract could have
been performed within one year. Plaintiff argues:
One such possibility exists if each of those clients whose files
were transferred to Defendants demanded the return of their files. Another such
possibility exists if each of those clients simply refused to engage Defendants
as their tax accountant. The allegations in Paragraph 13 (pg. 3) which are
incorporated into each cause of action clearly state that it was possible that
the contract could be completed within one year if the “clients failed or
refused to conduct business with Defendants.” Since the contract had the
possibility of being performed within ]one] year, the defense of the statute of
frauds does not apply.
In addition to the foregoing, Defendants partially performed the
agreement. A contract that might otherwise be subject to the statute of frauds
may by entire or partial performance, support the contract. See, Fisher v.
Parsons (1963) 213 Cal. App. 2d 829, 836. Plaintiff has alleged partial
performance, and Defendants reaffirmed the existence of the contract and the
obligation to pay the Wood Estate as recently as September 30, 2023 when Mark
G. McNelis told Plaintiff that no more accountings would be provided, or
payments made. See, FAC at ¶ BC-3.
(Oppo. p. 4-5.)
The Court does
not fully understand this argument.
However, based
on the Court’s own reading and understanding of the AC, the Court tends to
agree that it is possible that the contract could have been performed within
one year.
Therefore,
to the extent that the Defendants are arguing that the breach-of-contract cause
of action (referring to four years) and the common counts cause of action (referring
to two years) being grounds to sustain the demurrer based on the statute of
frauds, that argument seems unavailing because the contract could be
performed within a year. “The fact that it is not probable or likely to be
performed within a year from the date it is made does not make it invalid if by
its terms it is possible that the contract may be performed within a year after
it is made.” (Fisher v. Parsons (1963) 213 Cal.App.2d 829, 837.)
Demurrers do not lie as to only parts of causes of action, where some valid
claim is alleged but “must dispose of an entire cause of action to be
sustained.” (Poizner v. Fremont
General Corp. (2007) 148 Cal.App.4th 97, 119.)
Tentative
Ruling First COA (Breach of Contract) Second Cause of Action (Common Counts)
The
Court’s tentative is to OVERRULE the Demurrer as to the Second Cause of Action.
Third
Cause of Action – Accounting
Defendants cite to Union
Bank v. Superior Court (1995) 31 Cal.App.4th 573, 593 and state that to
plead a cause of action for an accounting, a party must plead a breach of
fiduciary duty, fraud, or that the accounts are complicated and there is a
dispute as to whether the money is owed.
Defendants
then argue that because neither fraud nor complicated accounts are pled, Plaintiffs
had to allege a fiduciary relationship existed.
Defendants
then cite Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 30-31 and
argue that as a matter of law Plaintiff did not allege a fiduciary
relationship.
Further,
Defendants argue that it is insufficient for Plaintiff to allege a fiduciary
relationship based on the allegations of “did repose trust and confidence in
Defendants to fully(sic) and accurately account for the fees earned by
Defendants from former clients of Donald R. Wood.”
The Court
does not find Defendants’ argument availing to the extent that Plaintiff had
to allege a fiduciary relationship. “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.” (Teselle v.
McLoughlin (2009) 173 Cal.App.4th 156, 179.) Teselle does not
explicitly state that the relationship must be a fiduciary relationship.
Further, Defendants
failed to cite the portion of Wolf that seems to state that Plaintiff
does not necessarily have to allege a fiduciary relationship for an accounting
action.
As stated
in Wolf:
The duty to provide an accounting of profits under the
profit-sharing agreement in Waverly is appropriately premised
on the principle, also expressed in Nelson, that a party to a
profit-sharing agreement may have a right to an accounting, even absent a
fiduciary relationship, when such a right is inherent in the nature of the
contract itself. As the Court in Nelson observed, the right to
obtain equitable relief in the form of an accounting is not confined to
partnerships but can exist in contractual relationships requiring payment by
one party to another of profits received. That right can be derived not from a
fiduciary duty, but simply from the implied covenant of good faith and fair
dealing inherent in every contract, because without an accounting, there may be
no way “ ‘by which such [a] party [entitled to a share in profits] could
determine whether there were any profits…’”
(Wolf v. Superior Court (2003) 107
Cal.App.4th 25, 34.)
“A cause of action for accounting requires a showing of a
relationship between the plaintiff and the defendant, such as a fiduciary
relationship, that requires an accounting or a showing that the accounts are so
complicated they cannot be determined through an ordinary action at law.” (Fleet
v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.) “‘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.’” (Id.
(quoting Teselle v. McLoughlin (2009) 173 Cal.App.4th 156,
179).)
However, it does appear that Plaintiff would have to allege that the
accounts are so complicated they cannot be determined through an ordinary
action at law. Plaintiff did not allege that element.
Tentative Ruling Third Cause of Action
Defendants’ demurrer to the third cause of action is SUSTAINED
with leave to amend GRANTED.