Judge: Elaine W. Mandel, Case: 20SMC00909, Date: 2023-10-26 Tentative Ruling

Case Number: 20SMC00909    Hearing Date: October 26, 2023    Dept: P

Tentative Ruling

Nohaile et. al. v. HLI Holdings, LLC et al., Case No. 20SMC00909

Hearing Date October 26, 2023

Defendant Itzhaki’s Demurrer to Second Amended Complaint

Plaintiffs sued defendants Titan Contracting Services, which built plaintiffs’ home, and its CEO/President Itzhaki, alleging defects and failure to conform to construction plans. Defendant Itzhaki demurs and moves to strike portions of the second amended complaint (SAC).  

Demurrer

Itzhaki argues the SAC does not allege specific conduct by Itzhaki that could give rise to liability and fails to allege sufficient facts to establish his alter ego status.

Alter ego liability applies when there is “such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) if the acts are treated as those of the corporation alone, an inequitable result will follow.” Las Palmas Assoc. v. Las Palmas Center Assoc. (1992) 235 Cal.App.3d 1220, 1249.

As to the first prong, plaintiffs allege “comingling of funds, lack of adequate capitalization, failure to maintain proper books and records[.]” SAC ¶8. These allegations of ultimate fact are sufficient at the pleading stage to show a unity of interest and ownership and fulfill the first prong.

As to the second prong, plaintiffs allege “adherence to the fiction of a separate existence between Titan, Itzhaki, and Does 1 through 20 would under the circumstances of this case, promote and constitute an injustice of sanction fraud [SIC].” Id. Plaintiffs do not identify any injustice that would result if alter ego liability is not applied, nor allege how failing to pierce the corporate veil would sanction fraud.

Plaintiffs argue Itzhaki can be held personally liable because the SAC alleges he “personally participated in and directed the construction work on plaintiffs’ new single-family residence[.]” SAC ¶6. Merely participating in or directing construction work does not give rise to liability; plaintiffs must allege specific tortious conduct, which the SAC does not. SUSTAINED.

Motion to Strike

Itzhaki’s motion to strike is duplicative of the demurrer. Given the demurrer ruling, the motion to strike is MOOT.