Judge: David Sotelo, Case: 22STCV05934, Date: 2022-10-27 Tentative Ruling
Case Number: 22STCV05934 Hearing Date: October 27, 2022 Dept: 40
MOVING PARTY: 1. Plaintiff Lesley F. Testan Defendants
(Unopposed Motion to Seal);
2. Testan Law,
Susan Novell, and
Patricia Beyer
(Demurrer).
Plaintiff Lesley F. Testan (“Lesley”)—(i) as Trustee of the S. and L. Testan Family Living Trust (“Testan Family Trust”), (ii) on behalf of Nominal Defendant Testan Corporate Center (“TCC”), and/or (iii) in a derivative capacity on behalf of TCC—sues Defendants Susan Novell, Patricia Beyer, Testan Law, and Does 1-50, as well as Nominal Defendants Jeffrey Adelson, Lilly Shiu, Kathleen L. Brundo, and TCC, pursuant to claims of (1) Breach of Fiduciary Duty, (2) Dissolution, (3) Appointment of Receiver, (4) Violations of Business and Professions Code, and (5) Declaratory Relief on the grounds that, inter alia, the Defendants have engaged in Breaches of Fiduciary Duty against Plaintiff Testan by, among other things, not allowing Plaintiff Lesley F. Testan, as 62% interest holder in TCC, to assist in the management of TCC or review TCC’s books, and by drafting fraudulent documents concerning TCC property.
Pre-Suit Allegations: Plaintiff Lesley F. Testan (respectfully: “Lesley”), in multiple capacities, sues Defendants Susan Novell, Patricia Beyer, Testan Law, and Does 1-50, as well as Nominal Defendants Jeffrey Adelson, Lilly Shiu, Kathleen L. Brundo, and Testan Corporate Center (“TCC”), based on the following allegations:
Testan Law (initially named Adelson, Testan, Brundo, Novell & Jimenez, a Professional Corporation), is a civil litigation law firm that primarily handles defense matters involving workers compensation, insurance, and general liability. Testan Law was founded in 1996 by former (now deceased) President, CEO, and Senior Managing Partner, Steven Testan.
In November 2013, with other attorneys and directors/officers of Testan Law, Steven Testan formed TCC for the purpose of acquiring, co-owning, and co-managing 31330 Oak Crest Drive, Westlake Village, California 91361 (the “TCC Building”). In December 2013, TCC purchased the TCC Building.
In January 2014, Testan Law began leasing approximately 60% of the TCC Building, conducting most of its business operations from there pursuant to a Written Lease (“Lease”) dated December 29, 2019. The remaining 40% of the TCC Building was occupied by three other tenants pursuant to leases now in the exclusive possession of the Defendants.
Also, in January 2014 (specifically on January 1, 2014), the original TCC Operating Agreement was amended (“the “First Amendment”), pursuant to which Steven Testan was entitled to a 62% majority interest in TCC. (Exhibit 1 to the Second Amended Complaint or “SAC.”)
On April 21, 2021, pursuant to a jointly executed written assignment (the “Assignment”), Steven Testan assigned his 62% membership interest in TCC to himself and Lesley, as Trustees of the S. and L. Testan Family Living Trust (the “Testan Family Trust” or simply “Trust”). (Exhibit C to the SAC.) The Assignment was made pursuant to Section 6.2(a) of the First Amendment to the TCC Operating Agreement.
Steven Testan then died on May 8, 2021. Upon his passing, Lesley became the sole Trustee of the Testan Family Trust, under which authority Plaintiff claims to hold a 62% membership interest in TCC.
Despite the Assignment from Steven Testan to his Family Trust, following the death of Steven, Defendants Susan Novell, Patricia Beyer, Testan Law (particularly Ms. Novell) refused to provide Plaintiff with documents/information concerning the TCC Building, or recognize Lesley Testan’s interest in TCC or position as the purported Manager of TCC (a position Steven Testan held in TCC until his death in May 2021).
Plaintiff also alleges that: Defendants have failed to timely make the mortgage payment for April 2022, resulting in a late fee of $1,346.11; even though the tax returns for
TCC were due in March 2022, Lesley—who holds a 62% interest in TCC, with the right to participate to protect her majority interest—was unable to complete the tax returns because Novell refuses to furnish the financial and related information concerning TCC and the Building; Novell is putting TCC at risk of default on its loan, at risk of lapse in insurance coverage, and at risk of tax issues with the Internal Revenue Service, the California Franchise Tax Board and/or other relevant taxing authorities; and, following Steven Testan’s death, Novell instructed Defendant Patricia Beyer to sign an undated and retroactive Addendum purporting to extend Testan Law’s Lease in the TCC Building through December 31, 2023, subject to a confidentiality provision holding that “Tenant acknowledges that the contents of this addendum and any related documents are confidential information” and that “Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant’s financial, legal and space planning consultants and any Proposed Transferee.”
This Action: Based on these allegations, on February 16, 2022, Lesley sued Susan Novell, Patricia Beyer, and Testan Law, as well as Nominal Defendants Jeffrey Adelson, Lilly Shiu, Kathleen L. Brundo, and TCC. The operative Second Amended Complaint (“SAC”) alleges five causes of action:
(1) Breach of Fiduciary Duty, against (i) Defendants Testan Law and Susan Novell, on the grounds that these defendants owed a fiduciary duty to Plaintiff Lesley F. Testan pursuant to Testan Law’s and Novell’s actions as property managers of the TCC Building and that these defendants breached their duty by failing to provide Lesley Testan with the rent roll, leases, and other information and documents regarding the Building (and her 62% interest in TCC), failing to relinquish control and management to TCC, collecting rent belonging to TCC, denying Plaintiff’s right to access and control TCC’s bank accounts as the rightful signatory, and failing to timely pay vendors and insurance and (ii) against Defendants Susan Novell and Patricia Beyer on the grounds that these defendants entered into the invalid purported Addendum to Testan Law’s Lease at the TCC Building, without authority.
(2) Judicial Dissolution, Involuntary, of TCC, against Defendants and Nominal Defendants, pursuant to Corporation’s Code section 17707.03, subdivision (b), based on the impracticability of running TCC in conformity with its Operating Agreement, the need to protect the rights and interests of Lesley Testan, the deadlock in management of TCC, and Defendant Novell’s unilateral control of TCC, which has permitted fraud, mismanagement, abuse of authority, and unfairness toward Plaintiff Lesley Testan.
(3) Appointment of Receiver, against Defendants and Nominal Defendants, based on alleged facts supporting a finding that Defendants failed and neglected to carry on the business of TCC in a proper manner, necessitating the need for the appointment of a receiver to take possession of the TCC, its assets (including the Building), and wind down TCC’s dissolution;
(4) Violation of Business and Professions Code, against Testan Law, on the grounds that Testan Law, without a proper real estate broker or sales license from the California Department of Real Estate, has acted as property manager for the TCC building by managing projects, collecting rent, negotiating leases, and working with tenants, brokers, contractors, accountants, and insurance brokers, while giving or intending to give Testan Law reduced rent or other lease concessions.
(5) Declaratory Relief, against all Defendants, seeking to resolve Plaintiff Lesley Testan’s right to participate in the management of TCC, access information and documents, otherwise protect her 62% interest in TCC, and right to serve as Manager of TCC.
Motions Before the Court
On August 9, 2022, Defendants Testan Law, Susan Novell, and Patricia Beyer made an opposed Demurrer to Plaintiff Lesley Testan’s Second Amended Complaint on grounds of failure to sufficiently plead standing and substance to the SAC’s causes of action.
On October 5, 2022, Plaintiff Lesley Testan made an unopposed Motion to File Documents Under Seal related to Lesley’s Opposition to a Motion to Disqualify Lesley’s Counsel made by the Defendants and denied by this Court on August 31, 2022.
Per Plaintiff Lesley Testan’s request, the Court TAKES JUDICIAL Notice of the June 23, 2022 Decision on Application for Appointment of Receiver made by Department 85 at the Los Angeles Superior Court. (Evid. Code, § 452, subd. (b), 453.)
“The public has a First Amendment right of access to civil litigation documents filed in court and used at trial or submitted as a basis for adjudication.” (Savaglio v. Wal-Mart Stores, Inc. (2007) 149 Cal.App.4th 588, 596 [citing NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1208-1209, fn. 25].) Therefore, before a trial court orders a record sealed, it must hold a hearing and make express findings set forth in California Rules of Court, rule 2.550, subdivision (d), finding that (1) there exists an overriding interest that overcomes the right of public access to the record, (2) the overriding interest supports sealing the record, (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed, (4) the proposed sealing is narrowly tailored, and (5) no less restrictive means exist to achieve the overriding interest. A court’s order allowing documents to be filed under seal must contain express factual findings establishing these five factors. (Cal. Rules of Court, rule 2.550, subd. (d).)
Here, the Court DENIES, Without Prejudice, the Motion to Seal by Plaintiff Lesley Testan because the request is not at all narrowly tailored nor is the seal request the least restrictive means of achieving the protection of some confidential information within those documents. The Motion seeks to seal from the record the Opposition to Motion to Disqualify itself and four Declarations, which the public as a right to inspect, and which do not, in many instances, contain confidential information that merits the requested relief.
First Cause of Action, Breach of Fiduciary Duty: OVERRULED.
The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary duty, (2) breach, and (3) damages proximately caused by the breach. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) As to the first element, the basic fiduciary obligations are twofold: undivided loyalty and confidentiality. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1102, superseded by statute on different issue, as stated in Pavicich v. Santucci (2000) 85 Cal.App.4th 382, 396.) A fiduciary or confidential obligation or relationship can arise when confidence is reposed by persons in the integrity of others, and if the latter voluntarily accepts or assumes to accept the confidence, he or she may not act to take advantage of the other’s interest without that person’s knowledge or consent. (Oates v. Lincoln (2001) 93 Cal.App.4th 25, 35.) Because of the vagueness of the common law definition of the confidential relation that gives rise to a fiduciary duty, and the range of the relationships that can potentially be characterized as fiduciary, the “essential elements” have been distilled as follows: (1) the vulnerability of one party to the other which (2) results in the empowerment of the stronger party by the weaker which (3) empowerment has been solicited or accepted by the stronger party and (4) prevents the weaker party from effectively protecting itself. (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1161.) Vulnerability, in short, is the necessary predicate of a confidential relation, and the law treats it as essential. (Ibid.)
The SAC’s First cause of action for Breach of Fiduciary Duty is alleged: (1) against Defendants Testan Law and Susan Novell, on the grounds that these defendants owed a fiduciary duty to Plaintiff Lesley F. Testan pursuant to Testan Law’s and Novell’s actions as property managers of the TCC Building and that these defendants breached their duty by failing to provide Lesley Testan with the rent roll, leases, and other information and documents regarding the Building (and her 62% interest in TCC), failing to relinquish control and management to TCC, collecting rent belonging to TCC, denying Plaintiff’s right to access and control TCC’s bank accounts as the rightful signatory, and failing to timely pay vendors and insurance (including $80,000 incurred on insurance by Lesley Testan on behalf of TCC); and (ii) against Defendants Susan Novell and Patricia Beyer on the grounds that these defendants entered into the invalid purported Addendum to Testan Law’s Lease at the TCC Building, without authority. (SAC, ¶¶ 25-27.)
DISCUSSION AS TO Standing, Direct v. Derivation Action [including breach of duty]
The demurring Defendants—Susan Novell, Patricia Beyer, and Testan Law—first argue that Plaintiff Lesley Testan fails to properly plead standing to bring a Fiduciary Duty claim against them through a direct violation of the Plaintiff’s rights. (See Demurrer, 12:22-13:28.)
This argument is premised on the grounds that the Breach of Fiduciary Duty is a derivative claim because any mismanagement or improper conduct leading to any breach of fiduciary duty would necessarily flow from harm to TCC itself and not direct harm to Lesley Testan’s 62% interest in TCC by way of the Testan Family Trust, and that Lesley Testan is thus not the proper party in interest to bring a claim for direct harm based on the alleged conduct. (Demurrer, 12:23-13:9.)
On Opposition, Lesley Testan argues that she was directly harmed by the Defendants and has standing to, among other things, access TCC’s books and records pursuant to Corporations Code section 17704.10. (Opp’n, 2:24-3:6, 7:10-19.)
Subdivisions (b)(1) and (2) of Corporations Code section 17704.10 provide in relevant part that “[e]ach member, manager, and transferee has the right, upon reasonable request, for purposes reasonably related to the interest of that person as a member, manager, or transferee, to … (1) … inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13,” e.g., “(7) … books and records of the limited liability company as they relate to the internal affairs of the limited liability company for at least the current and past four fiscal years” (Corp. Code, § 17701.13, subd. (d)(7)), and “(2) obtain in writing from the limited liability company, promptly after becoming available, a copy of the limited liability company’s federal, state, and local income tax returns for each year.” Corporations Code section 17704.10, subdivision (i) provides that this request may be made by a transferee or his or her attorney. (See Opp’n, 7:16-19.)
Novell, Beyer, and Testan Law recognize that Lesley Testan as Trustee of the Testan Family Trust is “a non-member transferee.” (Demurrer, 11:14.)
Under these circumstances, it is clear that, (1) based on allegations that Lesley Testan is acting, at the very least, as Trustee of the Testan Family Trust, and (2) based on allegations that the Trust holds a 62% interest in TCC, (3) Lesley Testan may herself make a proper request for the inspection of TCC’s books during business hours, and thus has standing to bring claims directly (not derivatively) against some or all of these Defendants for failure to comply with Corporations Code section 17704.10, subdivision (b).
On Reply, Novell, Beyer, and Testan Law argue that Section 17704.10 is limited by Corporations Code section 17705.04, which only permits use of Section 17704.10 for “purposes of settling the estate” of a deceased member. (Reply, 3:7-24.)
However, this position is misleading. It is correct that Section 17705.04 provides that “[i]f a member dies, the deceased member’s personal representative or other legal representative may exercise the rights of a transferee provided in subdivision (c) of Section 17705.02 and, for the purposes of settling the estate, the rights of a current member under Section 17704.10.” (Corp. Code, § 17705.04.)
However, the SAC’s caption and fifth paragraph make clear that Lesley Testan sues in part based on her Trusteeship of the Testan Family Trust, which holds a 62% transferee interest in TCC (SAC, i:14-17, 2:13-18), while the Breach of Fiduciary Duty claim makes clear that Lesley Testan brings that cause of action “in each of her multiple alternate capacities alleged” [punctuation edited] (see SAC, 6:25). Therefore, even though the Testan Family Trust may contain in it a portion of the Estate of Steven Testan—which is not entirely clear to the Court per the parties’ briefing and evidence—the SAC and its first cause of action are being brought by the Trustee of the Testan Family Trust, which is, per an April 21, 2021 transaction, the alleged direct transferee of Steven Testan’s 62% interest in TCC. (See SAC, ¶ 20.)
Thus, Plaintiff Lesley Testan not only pleads standing to directly pursue claims related to the books and records of TCC in conformity with Section 17704.10, but has also, through the same allegations, alleged a basis for breach of fiduciary duty (duty itself discussed infra).
Further, to the extent that the other pleaded grounds for Breach of Fiduciary Duty are deficient, the Court notes that “[a] demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047) and that a Motion to Strike would therefore have been the proper procedural tool for challenging the remaining deficient portions of the SAC, if any, that allege actual breach in the Breach of Fiduciary Duty claim.
Last, to the extent that the Demurrer relies on theories of derivative actions and futility demands (Demurrer, 15:8-17:15), these arguments are irrelevant to a production demand pursuant to Corporations Code section 17704.10 and thus need not be further addressed as to this claim.
DISCUSSION AS TO Failure to Plead Existence of a Fiduciary Duty
The next and last relevant argument on Demurrer against the Breach of Fiduciary Duty claim is that the SAC fails to plead a fiduciary duty to Lesley Testan for a variety of reasons, all centered on the failure to plead a request by Plaintiff and undertaking by Defendants to act in favor of Plaintiff Lesley Testan. (Demurrer, 17:18-18:19; see also Reply 7:10-8:3.)
On Opposition, Lesley Testan argues that the Defendants do owe her a fiduciary duty based on “Defendants Novell and Testan Law voluntarily undert[aking] to manage the [TCC] Building for the benefit of Plaintiff, as the holder of Steven’s estate’s 62% interest in TCC” and on “Plaintiff … depend[ing] upon Defendants for visibility into the affairs of TCC and to account for TCC property and records.” (Opp’n, 10:22-26.)
On Reply, the Defendants call this argument “flims[y]” because it is based on the claim that Testan Law “‘voluntarily undertook to manage the Building’ in exchange for compensation in the form of reduced rent and other lease concession.” (Reply, 7:20-22.)
The Court agrees with Lesley Testan, if not exactly on her stated grounds.
Again, a fiduciary relationship lies where there exists (1) the vulnerability of one party to the other which (2) results in the empowerment of the stronger party by the weaker which (3) empowerment has been solicited or accepted by the stronger party and (4) prevents the weaker party from effectively protecting itself. (Persson v. Smart Inventions, Inc., supra, 125 Cal.App.4th at p. 1161.)
The Court is satisfied that the SAC pleads Lesley Testan’s vulnerability, as Trustee of the Testan Family Trust, in owning a 62% interest in TCC, where the Defendants have taken over management of TCC and stonewalled Lesley Testan’s ability to, for example, access books and records for TCC, resulting in empowerment of the Defendants over Lesley Testan as Trustee, power imbalance which has been accepted by the Defendants through their actions in continuing to manage TCC’s affairs to the exclusion of Lesley Testan (even if rightfully excluded from management), thus preventing Lesley Testan from protecting her Trust’s 62% interest in Testan Law herself. (See SAC, ¶¶ 25-26.)
DISCUSSION AS TO Remaining Elements
Though not discussed by the parties, the Court is further satisfied that paragraph 27 of the SAC pleads causation leading to damages.
Second Cause of Action, Judicial Dissolution: SUSTAINED, With Leave.
The SAC’s Second cause of action seeks Involuntary Judicial Dissolution of TCC as against Defendants and Nominal Defendants pursuant to Corporation’s Code section 17707.03, subdivision (b) based on the impracticability of running TCC in conformity with its Operating Agreement, the need to protect the rights and interests of Lesley Testan, the deadlock in management of TCC, and Defendant Novell’s unilateral control of TCC, which has permitted fraud, mismanagement, abuse of authority, and unfairness toward Plaintiff Lesley Testan. (SAC, ¶¶ 28-30.)
On Demurrer and Reply, the Defendants briefly argue that “[a] claim for dissolution of a limited liability company, under Corporations Code section 17707.03 must be ‘filed by any manager or by any member or members of a limited liability company…” and that Lesley is neither a Manager nor a Member of TCC,” thus “lack[ing] standing and … [conferring on her] no right to sue for TCC’s dissolution.” (Demurrer, 19:14-18; Reply, 10:17-22.)
On Opposition, Lesley Testan makes the argument that “since Steven had the right as a member to seek judicial dissolution under the Operating Agreement, Plaintiff has standing to seek judicial dissolution to settle and administer Steven’s estate,” seemingly evoking Corporations Code section 17705.04. (Opp’n, 13:1-6.)
The Court agrees with Defendants Novell, Beyer, and Testan Law and adopts Department 85’s June 23, 2022 reasoning in holding that Lesley Testan is not, as pleaded in the FAC and supported by evidence, in any capacity, a member or manager of TCC, for which reason this cause of action is not sufficiently stated. (See Opp’n, RJN, Ex. 1, Tentative decision on application for appointment of receiver: granted, pp. 7-8.)
Third Cause of Action, Appointment of Receiver: SUSTAINED, Without Leave.
The Third cause of action seeks Appointment of Receiver against Defendants and Nominal Defendants based on the alleged facts supporting a finding that Defendants failed and neglected to conduct the business of TCC in a proper manner, necessitating the need for the appointment of a receiver to take possession of the TCC, its assets (including the TCC Building), and wind down TCC’s dissolution. (SAC, ¶¶ 31-33.)
On Demurrer and Reply, the Defendants argue, in part, that “[a]ppointment of a receiver is not a cause of action, but an equitable remedy” and for this proposition, cite to In re Stein (1936) 14 Cal.App.2d 303, 305, which explains in relevant part that “[t]he appointment of a receiver is an equitable remedy … [such that] there is no such thing as an action brought for the mere appointment of a receiver.” (Demurrer, 19:19-24; Reply, 4:11-13.)
On Opposition, Plaintiff Lesley Testan makes the unhelpful argument that “[w]hile Defendants claim that Plaintiff cannot seek appointment of a receiver, Department 85 has already appointed a receiver, in recognition of the very rights that Defendants claim Plaintiff does not have.” (Opp’n, 13:7-10.)
The Court agrees with Defendants Novell, Beyer, and Testan Law. There is no such thing as a cause of action of appointment of a receiver. (In re Stein, supra, 14 Cal.App.2d at p. 305.) The Court therefore need not further address Department 85’s June 23, 2022 discussion of the receiver appointment in this action, which was accomplished by way of motion, not a cause of action in a pleading.
Fourth Cause of Action, Violation of Business and Professions Code §§ 17200, et seq.: SUSTAINED, With Leave.
An individual has standing to maintain a section 17200 claim if he or she “has suffered injury in fact and has lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, § 17204.) “[A] party who has lost money or property generally has suffered injury in fact. Consequently, the plain language of these clauses suggests a simple test … a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.)
The Fourth cause of action alleges Violation of Business and Professions Code against Testan Law on the grounds that Testan Law, without a proper real estate broker or sales license from the California Department of Real Estate, has acted as property manager for the TCC building by managing projects, collecting rent, negotiating leases, and working with tenants, brokers, contractors, accountants, and insurance brokers, while giving or intending to give Testan Law reduced rent or other lease concessions. (SAC, ¶¶ 34-40.)
Though not raised by the parties directly on point, the Court is hard pressed to find or interpret the damages alleged in the fourth cause of action (see SAC, ¶ 40), for which reason this cause of action fails on sufficiency of pleading grounds.
Fifth Cause of Action, Declaratory Relief: OVERRULED.
The fundamental basis of declaratory relief is a present and actual controversy between the parties over a proper subject. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 80.)
The Fifth cause of action seeks Declaratory Relief against all Defendants to resolve Plaintiff Lesley Testan’s right to participate in the management of TCC, access information and documents, otherwise protect her 62% interest in TCC, and serve as Manager of TCC, in the same manner allowed to other TCC members. (SAC, ¶¶ 41-43.)
On Demurrer, the Defendants briefly argue that “Plaintiff seeks declaratory relief concerning her supposed ‘rights’ as a TCC ‘member’ as ‘in the same manner as any other member of TCC’” and that “under the TCC Operating Agreement and relevant law, Lesley is not a TCC member and she is excluded from the right to access information and participate in TCC management,” for which reason, “the declaratory relief claim is legally invalid in its entirety.” (Demurrer, 19:8-13; see also Reply, 10:2-15 [making same arguments re: membership in TCC in addition to other arguments not raised in the first instance on Demurrer as to this cause of action and therefore not considered on in this discussion].)
On Opposition, Plaintiff Lesley Testan argues that “Plaintiff has the rights under Section 6.9 of the Operating Agreement to take any action that Steven could take as a member for purposes of settling or administering his estate,” again invoking Corporations Code section 17705.04. (Opp’n, 12:21-27.)
The Court finds, based on its discussion of Lesley Testan’s rights to inspect TCC books and records pursuant to Corporations Code 17704.10, subdivision (b) and her Trusteeship of the Testan Family Trust, i.e., the April 21, 2021 transferee of the Steven Testan’s 62% interest in TCC (see First Cause of Action, Breach of Fiduciary Duty discussion supra), that at the very least, there is an actual controversy as to Lesley Testan’s rights to inspect TCC books and records, a component of the controversies alleged in the SAC at paragraphs 42(a)-(b), saving this cause of action on demurrer.
Because this portion of the claim stands, a demurrer based on the defectiveness of the remainder of the pleadings in this cause of action would be improper, instead necessitating a motion to strike not before the Court. (Kong v. City of Hawaiian Gardens Redevelopment Agency, supra, 108 Cal.App.4th at p. 1047 [“A demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy”].) Further, the Court need not discuss Lesley Testan’s standing to pursue derivative claims related to the Declaratory Relief claim. (See Demurrer, 14:26-15:7.)
Prayer Damages and Relief, Constructive Trust and Restitution: DEMURRER NOT PROPER.
On Demurrer, the Defendants challenge the Constructive Trust and Restitution requests for relief made by Plaintiff Lesley Testan. (Demurrer, 19:25-20:13, 20:14-21:9.)
However, the Court again notes that “[a] demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.” (Kong v. City of Hawaiian Gardens Redevelopment Agency, supra, 108 Cal.App.4th at p. 1047.) Rather, the proper procedural vehicle for such a challenge would have been a Motion to Strike, which was not made by Defendants Novell, Beyer, and Testan Law.
Plaintiff Lesley F. Testan Motion to File Documents Under Seal is DENIED, Without Prejudice, as not narrowly tailored.
Defendants Testan Law, Susan Novell, and Patricia Beyer’s Demurrer to the Second Amended Complaint is OVERRULED in Part and SUSTAINED in Part as follows:
OVERRULED as to the SAC’s first and fifth causes of action for Breach of Fiduciary Duty and Declaratory Relief because parts of these claims are sufficiently stated to survive demurrer;
SUSTAINED, Without Leave to Amend, as to the SAC’s third cause of action for Appointment of Receiver because such a ‘claim’ pursues equitable relief that does not state a viable cause of action upon which relief can be granted.
SUSTAINED, With Leave to Amend, as to the SAC’s second and fourth cause of action because Plaintiff Lesley Testan does not adequately plead or show standing to pursue Judicial Dissolution against Nominal Defendant TCC, nor does she plead sufficient damages for Violation of the Business and Professions Code section 17200, et seq.
Separately, the Demurrer to the SAC’s prayer for Constructive Trust and Restitution are NOT PROPER ON DEMURRER and should have been attacked by way of a Motion to Strike, which was not filed by the Defendants.
Plaintiff is given 20 CALENDAR DAYS to amend her operative pleading.