Judge Gail Killefer, Case Number: 23STCV11645, Date: 2024-04-23 Tentative Ruling

MOVING PARTY: Defendants Mega Wear, Inc. dba Meawear Corp (“Mega”); Jasmine Sportswear, Inc. (“Jasmine NY”); jasmine Sports Wear, Inc. (“Jasmine CA”); Albert Nigri (“Albert”); Nissim Nigri (“Nissim”); Jazmin Han aka Jasmine Han (“Jazmin”); Solly Nigri aka Salim Heri Nigri (“Solly”)

TENTATIVE: Defendants’ demurrer to the FAC is sustained with leave to amend. Plaintiff is granted 30 days leave to amend. The court sets the OSC RE: Amended Complaint for May 31, 2024, at 8:30 a.m. Defendants to give notice.

On May 23, 2023, Romex Textiles, Inc. (“Plaintiff”) filed a Complaint against Mega Wear, Inc. dba Meawear Corp (“Mega”); Jasmine Sportswear, Inc. (“Jasmine NY”); Jasmine Sports Wear, Inc. (“Jasmine CA”); Albert Nigri (“Albert”); Nissim Nigri (“Nissim”); Jazmin Han aka Jasmine Han (“Jazmin”); Solly Nigri aka Salim Heri Nigri (“Solly”) (collectively “Defendants”); and Does 1 to 50.)

The operative First Amended Complaint alleges four causes of action: (1) Breach of Written Contact; (2) Open Account: (3) Account Stated; and (4) Goods Sold and Delivered (Quantum Valebant).

Defendants now demurrer to all four cases of action alleged in the FAC. The Plaintiff opposed the demurrer. The matter is now before the court.

Discussion

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

The FAC alleges that Defendants Albert, Nissim, Jaszmin, and Solly control and are the alter egos of Defendants Mega, Jasmine NY, and Jasmine CA and hold positions of authority in the latter entities as officers, directors, managers, shareholders and/or owners. (FAC ¶¶ 12-13.)

Plaintiff alleges that through a series of written agreements, Plaintiff and Defendants acted as a joint venture wherein Defendants agreed to purchase fabric goods from Plaintiff. (FAC ¶ 15.) The terms of the agreement are set forth in written Invoice Numbers wherein Defendants agreed to pay certain sums for fabric goods between March 2021 and June 2022. (FAC ¶ 15.) The other material terms of the agreements are set out in Paragraph 15 of the FAC.

After delivering the goods and crediting Defendants’ account for payments made, the total owed to Plaintiff by Defendants was $31,743.95. (FAC ¶¶ 15, 16.) Defendants breach the agreements by failing to pay for the goods. (FAC ¶ 19.)

Between September 22 and November 22, Defendants also agreed to purchase fabrics from Encore Textiles, Inc. (“Encore”) that were memorialized in Encore’s invoices to Defendants. (FAC ¶ 20.) After all payments/credits were accounted for, Defendants owed Encore $6,276.77. (FAC ¶ 21.) The other material terms are laid out in Paragraph 20 of the FAC. In May 2023, Encore’s invoices and accounts were assigned for valuable consideration to Plaintiff and Plaintiff can enforce all rights in Encore’s invoices. (FAC ¶ 25.) In the aggregate Plaintiff is owed and had been damaged in the principal sum of $38,020.62. (FAC ¶ 26.)

Defendants initially argued that Plaintiff’s opposition should not be heard because Plaintiff’s opposition was due April 10, 2024, nine days before the April 23, 2024, hearing but Plaintiff did not file and serve the opposition until April 12, 2024. (CCP § 1005(b); CRC 3.1300(a).) The parties later stipulated to deem Plaintiff’s late filed opposition timely. The court approved the stipulation and will consider the Plaintiff’s opposition.

Alter ego doctrine permits, in appropriate circumstances, a court to “pierce the corporate veil” and impose individual liability on shareholders for the acts or obligations of a corporation. (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1513.)

Defendants argue that Plaintiff’s alter-ego allegations are insufficient to impose contractual liability on individual Defendants. “Under California law, only a signatory to a contract may be liable for any breach.” (Clemens v. American Warranty Corp. (1987) 193 Cal.App.3d 444, 452.) “Breach of contract cannot be made the basis of an action for damages against defendants who did not execute it and who did nothing to assume its obligations.” (Gold v. Gibbons (1960) 178 Cal.App.2d 517, 519.) The FAC does not allege that entity Defendants entered into a contract with Plaintiff but rather that each Defendant agreed to purchase fabric goods from Plaintiff. (FAC ¶ 15.) Accordingly, the purported agreements are between Plaintiff and each Defendant, such that each Defendant is liable for the unpaid invoices.

The elements of a claim for breach of contract are: “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal. 4th 811, 821.) In addition, the complaint must demonstrate damages proximately caused by the breach. (St. Paul Ins. v. American Dynasty (2002) 101 Cal.App.4th 1038, 1060.) Furthermore, “the complaint must [also] indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458-59 citing CCP, § 430.10(g).)

“If the action is based on alleged breach of written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 308.) Alternatively, “a plaintiff may plead the legal effect of the contract rather than its precise language.”¿ (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)¿¿“[A]ll essential elements of a breach of contract cause of action [] must be pleaded with specificity.”¿(Levy v. State Farm Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 5.)

Defendants argue that Plaintiff’s breach of contract claim fails because there is no evidence of a written contract. “The prevailing rule is that an invoice, standing alone, is not a contract, [citations]; and a buyer is ordinarily not bound by statements thereon which are not a part of the original agreement.” (India Paint & Lacquer Co. v. United Steel Products Corp. (1954) 123 Cal.App.2d 597, 607.) “An invoice is a mere detailed statement of the nature, quantity and the cost or price of the things invoiced” and “the retention of the goods by the buyer did not of itself operate as an assent to the conditions on the invoice.” (Id. at p. 608citing Tanenbaum Textile Co. v. Schlanger, 287 N.Y. 400, 40 N.E.2d 225, 226.)

The court agrees that Plaintiff’s invoices are insufficient to show that a written contract existed between the parties, however, the invoices may be used as evidence of an oral contract or an implied contract between the parties for goods sold and delivered. (See Kocher v. Cartman Tire Exchange (1930) 108 Cal.App. 619, 620 [“Such orders were not contracts; they were but a portion of the evidence of the actual contracts”].) Therefore, to show the existence of a contract that is oral or implied, Plaintiff must plead facts to show how each Defendant agreed to the contract, including the terms in the invoice, and facts that show what capacity each Individual Defendant had with the Corporate Defendants, sufficient to bind each Defendant to the terms of the contract.

Plaintiff’s opposition alleges that the FAC never stated that the Invoices were the exclusive documentation of the existence of a contract. (Opposition at p. 7:21-22.) However, if there is other evidence of a written contract between the parties that lays out the essential terms of the contract, copies must be included in the pleading or set out verbatim in the complaint. (Harris, supra, 74 Cal.App.4th at p. 308.) The FAC fails to allege additional facts that would support the allegation that a written contract exists between Plaintiff and all Defendants that was memorized in another writing that is different from the invoices. Facts not alleged in the FAC are presumed not to exist. (Schick v. Lerner (1987) 193 Cal.App.3d 1321, 132.)

D. Second, Third, and Fourth Causes of Action – Common Counts: Open Account, Account Stated, Goods Sold and Delivered

Defendants demurrer to the common count causes of action on the basis that because the breach of contract claim fails, so do the common count causes of action. “When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394.) Here, the common count causes of action rely on the same operative fact as the breach of contract claim in that each Defendant became indebted to Plaintiff in the sum of $38,020.62. Accordingly, the “common count must stand or fall with his first cause of action[.]” (Id. at p. 395.)

The demurrer to the second, third, and fourth causes of action is sustained with leave to amend.

Defendants’ demurrer to the FAC is sustained with leave to amend. Plaintiff is granted 30 days leave to amend. The court sets the OSC RE: Amended Complaint for May 31, 2024, at 8:30 a.m. Defendants to give notice.

[1] Pursuant to CCP § 430.41, the meet and confer requirement has been met. (Tatone Decl. ¶ 6, Ex. 1.)