Judge: Daniel M. Crowley, Case: 21STCV40121, Date: 2023-02-28 Tentative Ruling

Case Number: 21STCV40121    Hearing Date: February 28, 2023    Dept: 28

Defendants 1330 AD LLC and James Murdoch’s Demurrer

Having considered the moving papers, the Court rules as follows. 

BACKGROUND

On November 1, 2021, Plaintiffs Alejandro Gascon Perez (“Perez”) and Nolberta Vasquez (“Vasquez”) filed this action against Defendants 1330 AD LLC (“1330”), Peter McCoy Construction Inc. (“PMC”) and James Murdoch (“Murdoch”) for negligence, premises liability and product liability.

On January 27, 2023, Murdoch and 1330 (“Moving Defendants”) filed a Demurrer to be heard February 28, 2023.

Trial is currently scheduled for August 29, 2022.

PARTY’S REQUESTS

Moving Defendants request the Court sustain Defendants’ demurrer on the basis that Plaintiffs’ allegations of alter ego liability fail to state facts sufficient to constitute a cause of action against Murdoch. Moving Defendants also request the Court sustain Defendants’ demurrer as to Vasquez’s loss of consortium allegations due to failure to state facts sufficient to constitute a cause of action.

LEGAL STANDARD

CCP § 430.10 states: “The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have the legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain. As used in this subdivision, “uncertain” includes ambiguous and unintelligible; and (g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.”

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.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (CCP § 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.  (Id.)  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, 147 Cal.App.4th at 747.)

Whatever may be the rule in other jurisdictions, the rule is well settled in this state that the mere fact one or two individuals or corporations own all of the stock of another corporation is not of itself sufficient to cause the courts to disregard the corporate entity of the last corporation and to treat it as the alter ego of the individual or corporation that owns its stock. In addition, it must be shown that there is such a unity of interest and ownership that the individuality of such corporation and the owner or owners of its stock has ceased; and it must further appear that the observance of the fiction of separate existence would, under the circumstances, sanction a fraud or promote injustice. Bad faith in one form or another must be shown before the court may disregard the fiction of separate corporate existence. (Cleaning P. Co. v. Hollywood L. Service (1932) 217 Cal. 124.)

DISCUSSION

Judicial Notice

The Court takes judicial notice of the requested documents pursuant to Evidence Code § 452(d) and (h).

Demurrer

Plaintiff’s complaint alleges that Perez was injured while trimming trees on 1330’s property. Plaintiff’s complaint alleges that Murdoch is the managing shareholder, director and officers of 1330, and was effectively an alter ego of 1330. Plaintiff further alleges that Murdoch uses 1330’s assets for his personal use and that 1330 is inadequately capitalized, having no capital, assets, stocks or stockholders.

There is no current cause of action for loss of consortium that would provide a basis for Vasquez’s claims. The Court sustains the demurrer as to Vasquez’s portion of the complaint.                 In order for a Plaintiff to bring a cause of action against a party based on the alter-ego theory, a Plaintiff must allege that is 1) a unity of interest and ownership that the individuality of the owner and the corporation has ceased and 2) that observance of the fictional entities would promote injustice.

In reviewing the wording of the complaint, the Court finds Plaintiffs’ allegations to meet the pleading standard in California. Plaintiffs clearly allege that Murdoch freely takes from 1330 without adequate consideration for his personal use, and that 1330 has no independent capital, assets or stockholders. Plaintiffs need not plead that 1330 does not observe any corporate formalities, like Defendants argue—they merely must provide adequate factual allegations that would show a unity of interests and that observance of fictional entities would promote injustice. Given that Plaintiff has alleged that 1330 has no independent capital, assets or shareholders, limiting Plaintiffs’ to recovering only from an alleged shell corporation would promote injustice. Moving Defendants’ documents showing that 1330 is an approved California LLC does not definitively show there is no potential issue of alter-ego. The Court overrules the demurrer as to this issue.

CONCLUSION

Defendants 1330 AD LLC and James Murdoch’s Demurrer, in PART, with 30 days leave to amend. The demurrer is sustained ONLY to Vasquez’s causes of action.

            Moving party is ordered to give notice of this ruling.

Moving Party is ordered to file the proof of service of this ruling with the Court within five days.

The parties are directed to the header of this tentative ruling for further instructions.