Judge Bruce G. Iwasaki, Case Number: 24STCV32513, Date: 2025-04-17 Tentative Ruling

This is a collections case brought by a food products distributor seeking to recover on unpaid invoices. Plaintiff filed the operative Complaint against Defendants alleging causes of action for (1) breach of written contract; (2) open book account; and (3) account stated.

Defendants John Hatziris, Vasili Hatziris now demur to the Complaint. Defendants also move to strike portions of the Complaint. Plaintiff opposes the demurrer and the motion to strike.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) 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 applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Demurring Defendants demur to the first cause of action on the grounds that Plaintiff has failed to state a claim.

To state a cause of action for breach of contract, “a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant's breach and resulting damage. [Citation.]” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

Here, Exhibit A attached to the Complaint alleges that Plaintiff, a food distributor, is owed $211,942.56 from Defendant Malibu Fish Grill 4, Inc. and $146,782.40 from Malibu Fish Grill 3, Inc. based on unpaid invoices. (Compl., Ex. A [invoices].)

On demurrer, Defendants John Hatziris and Vasili Hatziris argue that notwithstanding these allegations, “Plaintiff has improperly sued not only the two entities who are the only parties to the invoices, but also a series of unrelated entities, including two individuals (John and Vasili Hatziris), and grouped them all together as “Defendants”.” (Dem., 3:14-16.) That is, the exhibit attached to the Complaint contradicts Plaintiff’s allegations that there existed a contract between Plaintiff and all the “Defendants” together. (Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1409 [“[T]the contents of an incorporated document (in this case, the agreement) will take precedence over and supercede any inconsistent or contrary allegations set out in the pleading. In the case of such a conflict, we will look solely to the attached exhibit.”].)

Defendants acknowledged the existence of alter ego allegations in the Complaint, but contend these allegations are insufficient as matter of law.

The Complaint contains a single paragraph alleging alter ego against Defendants John Hatziris and Vasili Hatziris. (Compl., ¶ 12). Plaintiff alleges that it is “informed and believes” that the “Malibu Fish Companies are shell entities that are dominated” by John Hatziris and Vasili Hatziris, and that “they have commingled funds and other assets.” (Compl., ¶ 12.) The Complaint also alleges that all the businesses share the exact same business address. (Compl., ¶¶ 4-9.) Further, John Hatziris is the Chief Executive Officer, Chief Financial Officer, and Secretary of all the Defendant entities, and Vasili Hatziris is the President of all the Defendant entities. (Compl., ¶¶ 10-11.)

“Ordinarily a corporation is considered a separate legal entity, distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. [Citation.] The same is true of a limited liability company (LLC) and its members and managers. [Citations.] [¶] That legal separation may be disregarded by the courts ‘when [a corporation or LLC] is used [by one or more individuals] to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose.’ ” (Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 220-221; see Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539.)

“Before the alter ego doctrine will be invoked in California, two conditions generally must be met. [¶] ‘First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.’ [Citation.] While courts have developed a list of factors that may be analyzed in making these determinations, ‘[t]here is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case.’ ” (Curci Investments, LLC v. Baldwin, supra, 14 Cal.App.5th at p. 221; see Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300; Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at p. 538.)

In general, the conditions in which a court may disregard the structure of a corporate entity and consider it the alter ego of a member “necessarily vary according to the circumstances in each case inasmuch as the [alter ego] doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.” (Zoran Corp. v. Chen (2010) 185 Cal. App. 4th 799, 811.)

Although some of these allegations are admittedly based on information and belief,[1] Plaintiff has alleged specific facts that support these beliefs. That is, the shared business addresses suggest a comingling of assets that supports a unity of interest, and the use of identical officers suggests there is a unity of ownership. These allegations are sufficient under the circumstances to support the alter ego theory -- at least at the pleading stage where the allegations are liberally construed.

Second Cause of Action for Open Book Account and Third Cause of Action for Account Stated:

“A common count is not a specific cause of action, however; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution under an assumpsit theory. When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394-395.)

On demurrer, Defendants argue the the second cause of action for open book account and third cause of action for account stated are both alternative theories under the same recovery tied to the first cause of action for breach of contract and are similarly subject to demurrer as they fail to state sufficient facts.

However, as the Court has overruled the demurrer to the breach of contract cause of action, the demurrer to these causes of action also fail.

The demurrer to Complaint is overruled. The motion to strike the alter ego allegations was brought as an alternative way to challenge the pleading “in the event the Court determines that the Demurrer constitutes as an improper attempt to demurrer to only part of a cause of action.” (Mot., 3:7-9.) Thus, the motion to strike is denied for the same reasons that the demurrer was overruled.

[1] The complaint ordinarily may allege ultimate rather than evidentiary facts, and it may allege “ ‘on information and belief any matters that are not within [the plaintiff's] personal knowledge if he has information leading him to believe that the allegations are true.’ ” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 [quoting Pridonoff v. Balokovich (1951) 36 Cal.2d 788].) But “a pleading made on information and belief is insufficient if it ‘merely assert[s] the facts so alleged without alleging such information that “lead[s] [the plaintiff] to believe that the allegations are true.” ’ ” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1158–1159 [quoting Doe v. City of Los Angeles, supra, 42 Cal.4th at p. 551, fn. 5].)

Judge Bruce G. Iwasaki

Department 58