Judge Christian R. Gullon, Case Number: 23PSCV03467, Date: 2023-12-14 Tentative Ruling

Judge: Christian R. Gullon, Case: 23PSCV03467, Date: 2023-12-14 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, attorneys are advised to check this website to determine if any changes or updates have been made to the tentative ruling.

Counsel may submit on the tentative rulings by calling the clerk in Dept. O at 909-802-1126 before 8:30 the morning of the hearing. Submission on the tentative does not bind the court to adopt the tentative ruling at the hearing should the opposing party appear and convince the court of further modification during oral argument.

The Tentative Ruling is not an invitation, nor an opportunity, to file any further documents relative to the hearing in question. No such filing will be considered by the Court in the absence of permission first obtained following ex-parte application therefore.

Plaintiffs’ OBJECTION AND MOTION FOR REDUCTION OF AMOUNT OF BOND is GRANTED; bond is reduced to $15,000.00. In the alternative, as there is no opposition, the court may impose no bond due to the corporation’s lack of assets or money.

This case pertains to business organizations case. Plaintiff HERITAGE GENERAL CONTRACTING, INC. (“Heritage”); LARRY HARDEN, JR. (“Harden”); and ROLANCE JACK MEHSERDJIAN (“MEHSERDJIAN”) (collectively, “Plaintiffs”) allege the following against Defendant SIMON DAVID MCPHERSON (“MCPHERSON” or “Defendant”): On October 28, 2019, Heritage was formed with McPherson as the President, Mehserdjian as the Chief Financial Officer, and Harden as the Secretary. (Complaint ¶¶8, 11.) Each share an equal, one-third ownership share, comprising of 33.3% each. (¶12.) Around May 2023, McPherson allegedly started scheming to form a partnership using Heritage’s license. (¶¶20, 21.) Certain acts included taking certain monies, property, and assets.

On November 7, 2023, Plaintiffs filed suit asserting the following causes of action (COAs):

2. Preliminary Injunction/Unfair Business Practices (Bus. & Prof. C. § 17200, Et Seq.)

On November 22, 2023, the court issues the following minute order regarding ‘Plaintiff's Ex-Parte Application And Application For A Temporary Restraining Order And Order To Show Cause Re: Preliminary Injunction’:

As to Plaintiff's Category (1) Request: Preserve all documents, devices, electronic data files in Defendant's possession and/or copied and information relating to Heritage, including communications between Defendant and Heritage's customers, clients, vendors, contractors, and potential clients relating to Heritage, Defendant's employment with Heritage, and Heritage's CSLB license No. 1061808, IS GRANTED.[1] As to Plaintiff's Categories (2) thru (13), they are DENIED WITHOUT PREJUDICE. Plaintiff's Counsel is ordered to file a Supplemental Brief on or before 12/01/2023, by close of business day at 4:30 p.m. with email service to Defendant's Counsel and/or SIMON MCPHERSON. Defendant's Counsel and/or SIMON MCPHERSON are to file an Opposition on or before 12/08/2023, by close of business day at 4:30 p.m. with email service to Plaintiff's Counsel. Thereafter, Plaintiff's Counsel is to file a Reply on or before 12/12/2023, by close of business day at 4:30 p.m. with email service to Defendant's Counsel and/or SIMON MCPHERSON.

On December 11, 2023, Defendant filed a cross-complaint (“CC”) against Defendants Heritage, Rolhard Inc., Harden, MEHSERDJIAN, and Amy KANESHIRO asserting the following COAs:[2]

(12) Falsification and/or Destruction of Corporate Records (Corps. Code § 1507)

On December 19, 2023, the court issued its final ruling: “Plaintiffs’ Request for OSC Re: Preliminary Injunction is GRANTED in part (categories 1, 3 (modified, only phone records after August 2023), 7 (return of the phone), 9 (return of the laptop) and DENIED in part (2 (Defendant keeps his phone number), 4, 5 (denied because without the propriety information, Defendant cannot enter into contracts), 6, 8, 10, 11, 12 (denied because no evidence that Defendant has a thumb drive), 13 [13 is denied without prejudice should transfer of license to another RMO be unsuccessful].) Bond: Bond to be posted by Plaintiffs in the amount of $313,194.73 [calculated based upon the allegation of unlawful transfers individual plaintiffs made from the corporate account].”

On January 5, 2024, Plaintiffs filed the instant motion to reduce amount of bond.

On February 7, 2024, the parties filed a ‘Joint Stipulation And Order To Continue Hearing Dates And Deadlines,’ as the parties are engaged in settlement discussions.

Plaintiffs bring forth the motion pursuant to California Code of Civil Procedure (“CCP”) § 996.030. (Motion p. 4.) In turn, the statutes provides that a principal can move to reduce a bond on a motion or declaration and a hearing can be held in the same manner as a motion and hearing to determine whether a bond is insufficient. (See Code of Civ. Pro. §§ 996.010, 529(a).) The Court or officer is authorized to “determine that the amount of the bond is excessive and order the amount reduced to an amount that in the discretion of the court or officer appears proper under the circumstances.” (Code of Civ. Proc., § 996.030(b).) The Court may also waive a provision for bond and make any such appropriate orders where it determines that the principal is unable to give the bond or is indigent. (CCP § 995.240.)

In the court’s final ruling, the court noted that “[n]either party adequately addressed the bond issue.” (See 12/19/23 Final Ruling.) With little guidance from the parties as to what amount would provide a guarantee Defendant against any damages may sustain should the court dismiss Plaintiffs’ lawsuit, the court reasoned the following:

Here, in determining Defendant’s harm (aside from incurring attorney fees with its defense), Defendant’s cross complaint and declaration focus on the allegation that two of the plaintiff shareholders have made improper/fraudulent transfers. (See Defendant’s Decl., p. 4:6-22.) Adding those amounts, it amounts to about 1 million dollars, which is where Defendant presumably calculated its proposed bond amount. The exact amount is $949,044.64. However, assuming that the corporation is dissolved, then Defendant would be entitled to only 1/3 of that amount (as each owns 33.33% of the corporation). One-third of the amount is $313,194.731.

In its motion, Plaintiffs argue that the fraud allegations are not based on any credible evidence and that Defendant’s potential damages caused by the injunction would at most be $15,000.[3]

First, as to alleged fraudulent activity, the allegations that were the basis for the bond amount calculation has been and are refuted with opposing declarations. (Motion p. 6.) See, for example, the following:

“I am aware that Harden, Rolhard, and Mehserdjian advanced funds to cover Heritage's business expenses. This include expenses made on their personal credit cards. I am aware that credit card payments, transfers, and checks to Harden, Rolhard, and Mehserdjian were made in repayment of loans and advanced funds. I am also aware and believe any other charges or "unexplained" expenses from 2020-2023 can be easily linked and tracked to a legitimate Heritage expense.” (Kaneshiro Decl., ¶6, emphasis added.)[4]

“The credit card payments, transfers, and checks to Harden, Rolhard, and I were made in repayment of loans and advanced funds. Any other charge or “unexplained” expense from 2020-2023 can be easily link and tracked to a legitimate Heritage expense or expenses that McPherson incurred.” (Request for Judicial Notice (RJN), Ex. 3 [Mehserdjian Decl., ¶10, emphasis added.)

“All expense charges, credit card payments, or transfers from Heritage to [Plaintiffs] were repayments of the loans and funds made to cover Heritage’s expenses. For example, in 2022, Rolhard footed the bill for the expenses incurred from a large project. As Heritage would get paid from this project, Heritage would then repay Rolhard. Heritage also cut checks to Rolhard for items such as rent and utilities.” (Harden Decl., ¶8, emphasis added.)

In sum, most of the checks were signed by Defendant (Kaneshiro Decl., ¶6) and as for the remainder, they were used for lawful transfers to repay the individual Plaintiffs for their loans to the company.

To the extent that certain checks were improper, Defendant has not identified any specific checks either in previous filings or filed an opposition to state otherwise.

Having resolved the issue that there is insufficient evidence of fraud, the court now must determine a new bond amount.

The purpose for the bond is to cover any damages to the defendant that would be caused by the issuance of the injunction if it is finally determined that the plaintiff was not entitled to the injunction.

Here, the injunction pertains to, inter alia, Defendant preserving evidence, returning Heritage’s phone, and returning Heritage’s laptop. As noted by Plaintiffs, any alleged harm does not amount to $313,194.73. If anything, the damages would be zero because Defendant is not working with Heritage such that he has no need for the phone, laptop, contacts, etc. Furthermore, in favor of reducing the bond, Heritage explains that the bond is unreasonable and excessive in light of the corporation’s inability to conduct business. (See Kaneshiro Decl., ¶4 [“I am aware the company is out of money and has not been able to conduct business.”].)

Based on the foregoing, as Defendant’s potential damages are minimal, the court reduces the bond amount to $15,000.00. In the alternative, as there is no opposition, the court may impose no bond due to the corporation’s lack of assets or money. (CCP § 995.240 [The Court may also waive a provision for bond and make any such appropriate orders where it determines that the principal is unable to give the bond or is indigent.].)

[1] Category 1 sought that Defendant “Preserve all documents, devices, electronic data files in Defendant’s possession and/or copied and information relating to Heritage, including communications between Defendant and Heritage’s customers, clients, vendors, contractors, and potential clients relating to Heritage, Defendant’s employment with Heritage, and Heritage’s CSLB license No. 1061808.” (Ex Parte Application p. 2.)

[2] Of pertinence to the instant motion, Defendant/Cross-Defendant alleges that Plaintiffs spent and took large amounts of money from Heritage and misrepresented those transactions as something else in the company books and records and took and used company funds and resources for their personal benefit or other purpose not benefiting the company. (CC ¶83.)

[3] Though Defendant’s cross-complaint is verified as to the purported fraud allegations, it does not contain sufficient evidentiary facts (i.e., pointing to specific checks on specific dates in specific amounts that show individual Plaintiffs improperly withdraw amounts from the corporate account). (See CCP section 527(a); Bank of America Nat’l Trust & Sav. Ass’n v. Williams (1948) 89 Cal.App.2d 21, 29.)

[4] Former controller and current consultant of Heritage.