Judge: Daniel S. Murphy, Case: 23STCV09309, Date: 2023-10-18 Tentative Ruling

Case Number: 23STCV09309    Hearing Date: March 15, 2024    Dept: 32

BACKGROUND

            On April 26, 2023, Plaintiff American Builders & Contractors Supply Co., Inc. filed this action against Defendants Energy Roofing, Inc., Nadav Marciano, and Arturo Suarez. The complaint asserts causes of action for (1) breach of contract, (2) open book account, and (3) account stated. The action arises from Defendants’ alleged failure to pay for construction materials provided by Plaintiff.

            On January 19, 2024, Defendant Marciano filed the instant demurrer to the complaint. Plaintiff filed its opposition on March 4, 2024. Defendant filed his reply on March 11, 2024.

LEGAL STANDARD

A demurrer for sufficiency tests whether a pleading states a cause of action or defense. (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. (Code Civ. Proc., § 430.30, subd. (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. (Ibid.) The only issue involved in a demurrer hearing is whether the pleading, as it stands, unconnected with extraneous matters, states a cause of action or defense. (Hahn, supra, 147 Cal.App.4th at 747.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendant has complied with the meet and confer requirement. (See Chemerinski Decl.)

DISCUSSION

“The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff's interests . . . In certain circumstances the court will disregard the corporate entity and will hold the individual shareholders liable for the actions of the corporation.” (Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 510.) Establishing alter ego “generally requires the proponent to demonstrate two elements: (1) a unity of interest and ownership such that the separate personalities of the corporation and the individual do not exist; and (2) an inequitable result if the corporate identity is not disregarded.” (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th 172, 189.)

In Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-36, the court of appeal held that the following alter ego allegations were sufficient to survive a demurrer: that the individual defendant dominated and controlled the entity defendant; that a unity of interest and ownership existed between the individual defendant and entity defendant; that the entity defendant was a mere shell and conduit for the individual defendant’s affairs; that the entity defendant was inadequately capitalized; that the entity defendant failed to abide by corporate formalities; that the individual defendant used the entity defendant’s assets as her own; and that recognizing the separate existence of the entity defendant would promote injustice.

Defendant Marciano argues that the complaint fails to state any cause of action against him because Plaintiff contracted with Defendant Energy Roofing, and there are no facts establishing that Marciano is the alter ego of Energy Roofing. Marciano is the principal of Energy Roofing. Plaintiff alleges that Marciano is the alter ego of Energy Roofing for the following reasons: unity of interest; commingling assets; inadequate capitalization; sole control; lack of formalities; and formed for a fraudulent purpose. (Compl. ¶ 7.) These allegations parallel the ones found sufficient in Rutherford Holdings, and they go beyond the bare allegations found insufficient in Leek v. Cooper (2011) 194 Cal.App.4th 399. They are ultimate facts that place Defendant on sufficient notice of the claims against him for pleading purposes. The specific evidentiary facts proving alter ego should be left for discovery.

Defendant also argues that Plaintiff fails to plead the second element of alter ego, that injustice would result from treating the entity as separate. However, the complaint alleges that “adherence to the fiction of the separate existence of MARCIANO and ENERGY ROOFING would, under the circumstances alleged, sanction a fraud or promote injustice.” (Compl. ¶ 7(g).) This is also an allegation of ultimate fact sufficient for pleading purposes, as acknowledged in Rutherford Holdings, supra, 223 Cal.App.4th at p. 235. Additionally, when the complaint is read as a whole and interpreted liberally, it may be reasonably inferred that treating Marciano and Energy Roofing separately would result in injustice. Therefore, the complaint satisfies both elements of alter ego.  

Lastly, Defendant Marciano argues that the complaint is uncertain because Plaintiff alleges that both Marciano and Suarez are alter egos of Energy Roofing. (See Compl. ¶¶ 7, 9.) Defendant provides no legal authority suggesting that identifying multiple alter egos is improper or renders a complaint uncertain. (See Gherman v. Colburn (1977) 72 Cal.App.3d 544, 565 [“A plaintiff may plead cumulative or inconsistent causes of action”].) Defendant Marciano is on sufficient notice of the alter ego allegations against him even if Plaintiff alleges that Suarez is also an alter ego of Energy Roofing.  

In sum, the complaint alleges sufficient ultimate facts demonstrating that Defendant Marciano is the alter ego of Defendant Energy Roofing. Therefore, the complaint adequately pleads claims against Defendant Marciano to survive demurrer.

CONCLUSION

            Defendant Nadav Marciano’s demurrer is OVERRULED.