Judge: Gary I. Micon, Case: 23CHCP00019, Date: 2025-03-18 Tentative Ruling
Case Number: 23CHCP00019 Hearing Date: March 18, 2025 Dept: F43
Dept. F43
Date: 03-18-25
Case # 23CHCP00019, Torres v. Gonzalez,
Jr., et al.
Trial Date: 04-13-26
MOTION FOR SUMMARY
JUDGMENT
MOVING PARTY: Defendant Albert Gonzalez, Jr.
RESPONDING PARTY: Plaintiff Daniel Torres
RELIEF REQUESTED
Order granting defendant’s motion for summary
judgment or in the alternative summary adjudication of the second and third
causes of action.
RULING: Motion
for summary adjudication of the second and third causes of action is granted.
SUMMARY OF ACTION
This action arises from a business
relationship between plaintiff Daniel Torres (Plaintiff) and defendants Albert
Gonzalez, Jr., Evangelina Gonzalez, and Olivos Property Management, Inc. Alda Management is a close corporation and a
real estate management and leasing company in which two shareholders, Plaintiff
and defendant Albert Gonzalez, Jr., owned a 50% interest. Plaintiff serves as Alda Management’s Secretary
and Director, and defendant Albert Gonzalez, Jr., serves as Chief Executive
Officer, Chief Financial Officer, and Director.
Defendant Evangelina Gonzalez is an employee of Alda Management, Inc.
Plaintiff alleges that defendant Albert
Gonzalez, Jr. has breached his fiduciary duty to Plaintiff by managing Alda
Management’s day-to-day operations, hiring defendant Evangelina Gonzalez with
Plaintiff’s approval, excluding Plaintiff from accessing important information,
and refusing to disclose Alda Management’s books and records to Plaintiff. Additionally, defendant Evangelina Gonzalez
assisted defendant Albert Gonzalez, Jr., in breaching his fiduciary duty by
intentionally working as an employee for Alda Management without Plaintiff’s
authorization.
Plaintiff filed suit against all defendants
on January 18, 2023. Plaintiff’s Second
Amended Complaint (SAC) alleges causes of action (1) for dissolution of
corporation against Alda Management, (2) breach of fiduciary duty against
Albert Gonzalez, Jr., (3) accounting against Albert Gonzalez, Jr., and (4) aiding
and abetting against Evangelina Gonzalez and Olivos Management, Inc.
Defendant Albert Gonzelez, Jr. (Defendant) filed
a motion for summary judgment on December 19, 2024. Plaintiff filed an opposition on February 26,
2025. A reply was filed March 4, 2025.
Because Defendant’s motion only addresses the second and
third causes of action, the court does not address the first and fourth causes
of action.
SUMMARY OF ARGUMENTS
Defendant argues that the undisputed facts
show that Plaintiff’s evidence is outside the applicable statute of limitations
and that Plaintiff cannot show any harm as neither Plaintiff nor Alda
Management, Inc. had any rights to the funds allegedly misused. The checks Plaintiff uses to support his complaint
are dated within four (4) years of the filing of Plaintiff’s complaint, making
Plaintiff’s use of them barred by the statute of limitations. This is reflected in Plaintiff’s discovery
responses and the SAC. As for the
accounting claim, discovery of Alda Management’s banking records was not
delayed in this case because Plaintiff was a signer on Alda Management’s bank
account where the checks at issue were drawn since as early as 2012, and
Plaintiff received bank statements which included images of the checks. Plaintiff also cannot maintain a breach of a
fiduciary duty claim based on Lucio v. Alda Management, Inc., et al.
(case # BC674755) because that case was filed and responded to over four years
before Plaintiff filed this case, and any claim regarding that case is also
barred under the statute of limitations.
Further, neither Plaintiff nor Alda Management suffered damages as a
result of the Lucio lawsuit.
Plaintiff lacks standing to contest expenditures made by Alda Management
because Alda Management’s funds were owned by Albert Gonzalez and Irma Torres
and entities owned by Defendant and Torres, and the expenditures were approved
by an appropriate person: defendant Albert Gonzalez. Plaintiff cannot present evidence that Alda
Management’s corporate structure required Plaintiff consult, authorize, approve
or sign any check or approve the hiring of any employee. Additionally, Plaintiff does not show damages
caused by breach of a fiduciary duty. The
allegations underlying the accounting claim are the same claims underlying the
breach of fiduciary duty claim. Because
Plaintiff’s breach of fiduciary duty falls outside the statute of limitations, Plaintiff
cannot maintain an accounting claim.
In opposition, Plaintiff asks the court to
grant a 120-day continuance because a forensic accountant in a separate case
involving Albert Gonzalez and Irama Torres (case # 22CHCV00729) is conducting
an investigation which will produce essential evidence that is necessary for
Plaintiff to support his causes of action and oppose the summary judgment
motion. Plaintiff seeks to learn what
funds went in and out of Alda Management.
Plaintiff contends that because the forensic accountant requested
documents related to Alda Management, Inc. from Plaintiff as part of his
forensic examination, the forensic accountant is looking into Alda Management,
Inc.’s financial profile in relation to the other entities and properties owned
by Albert Gonzalez and Irma Torres. Plaintiff
intends to file a motion for leave to file an amended complaint once the
investigation concludes. Plaintiff’s
opposition is limited to the continuance issue, and no opposition on the merits
or responsive undisputed material facts were filed.
Defendant replies arguing that Plaintiff’s
opposition does not include a separate statement or any material facts as to
why this motion should be denied. Plaintiff’s
request for a continuance does not set forth the legally required showing as to
the essential facts that Plaintiff expects to receive during the continuance
and the reasons for the need to continue the motion. Plaintiff’s assumptions regarding the outcome
of the forensic accountant’s investigation are misguided. The forensic accountant has explained that his
investigation and examination will not include an analysis Alda Management,
Inc.’s financial profile or whether Defendant breached his fiduciary duties. Plaintiff has access to Alda Management’s
bank records and has already deposed Alda Management’s C.P.A. Miguel Ramos
about Alda Management’s financials. There
is nothing further for Plaintiff to do and Plaintiff does not indicate that he
will do anything other than wait for the forensic report. The report will not fix the statute of
limitations issues, and a continuance will unnecessarily prolong this case.
The
Second Amended Complaint’s Allegations
The SAC alleges the following: Defendant Alda
Management, Inc. is close corporation and real estate management and leasing
company incorporated on April 26, 2012.
(SAC, ¶¶ 4, 13, 18.) Plaintiff
and Defendant are directors and shareholders of Alda Management, with each
owning a 50% interest in the corporation.
(SAC, ¶¶ 1-2.) On February 14, 2022,
defendant Evangelina Gonzalez filed a Statement of Information listing Defendant
as Alda Management’s Chief Executive Officer, Chief Financial Officer, and
Director, and Plaintiff as Secretary and Director. (SAC, ¶ 15.)
Defendant handles Alda Management, Inc.’s
day-to-day operations and excluded Plaintiff:
(1) Defendant blocked Plaintiff’s access to his assigned Alda Management
email address with no explanation; (2) Defendant excluded Plaintiff from Alda
Management’s affairs without Plaintiff’s consent; (3) Defendant failed to call
or convene any Board of Directors meetings; (4) Defendant hired defendant
Evangelina Gonzalez without Plaintiff’s authorization and allowed her to file
Statements of Information for Alda Management; (5) from February 2, 2016
through February 26, 2018, Defendant issued and executed thirteen checks
payable to cash from Alda Management’s checking account ending in 8400 without
Plaintiff’s consent; (6) between September 2021 and September 2022, Defendant
issued eighteen checks equaling $1,000.00 payable to defendant Evangelina
Gonzalez for “management”; and (7) Defendant refuses and continues to refuse to
allow Plaintiff to access Alda Management, Inc.’s books and records. (SAC, ¶¶ 22(a)-(d),
23, 25-27, 29-31.) Plaintiff alleges
that Defendant refuses to disclose Alda Management’s books because it would
reveal Defendant’s failure to maintain adequate corporate records such as
corporate bylaws, accounting books and records, minutes of proceedings of
shareholders and the board, annual reports, and financial statements. (SAC, ¶ 26.)
Defendant usurped corporate opportunities by
establishing a competing property management company without proper disclosures. (SAC, ¶¶ 54.)
On April 21, 2020, Defendant incorporated defendant Olivos Property
Management, Inc., a property management company in which he is the Chief
Executive Officer, Secretary and Director and defendant Evangelina Gonzalez is
the Chief Financial Officer and Director (SAC, ¶¶ 52-53.) Defendant authorized Olivos Property to provide
management services to Alda Management without notice or authorization from
Plaintiff. (SAC, ¶ 54.)
As a director, Defendant has breached his
fiduciary duty to shareholder Plaintiff and Alda Management by failing to
exercise candor, good faith, loyalty and care in the management and
administration of Alda Management’s business affairs. (SAC, ¶¶ 47, 49.) These breaches include corporate waste,
misappropriating corporate opportunities for his own personal gain, and
self-dealing with other entities owned by defendants without appropriate
disclosures. (SAC, ¶ 51.) Defendant paid for unnecessary valet
services; misappropriated corporate opportunities by hiring his sister
defendant Evangelina Gonzalez without Plaintiff’s consent; and engaged in self-dealing
where Defendant received more company distribution payments, up to $1,000 more
a month, than Plaintiff, at the expense and detriment of Plaintiff and his
position as 50% shareholder. (SAC, ¶ 55.)
As a result, Plaintiff suffered damages including receiving less company
distribution payments than Defendant.
(SAC, ¶¶ 55, 57.)
Plaintiff alleges the following causes of
action: (1) Dissolution of Corporation; (2) Breach of Fiduciary Duty; (3)
Accounting; and (4) Aiding and Abetting.
ANALYSIS
Motion
for Continuance
“If it appears from the affidavits submitted
in opposition to a motion for summary judgment or summary adjudication, or
both, that facts essential to justify opposition may exist but cannot, for
reasons stated, be presented, the court shall deny the motion, order a
continuance to permit affidavits to be obtained or discovery to be had, or make
any other order as may be just.” (Code
Civ. Proc., § 437c, subd. (h).) “If,
after granting a continuance to allow specified additional discovery, the court
determines that the party seeking summary judgment has unreasonably failed to
allow the discovery to be conducted, the court shall grant a continuance to
permit the discovery to go forward or deny the motion for summary judgment or
summary adjudication.” (Code Civ. Proc.,
§ 437c, subd. (i).)
“To demonstrate good faith, the party seeking
a continuance must submit an affidavit or declaration showing that ‘(1) the
facts to be obtained are essential to opposing the motion; (2) there is reason
to believe such facts may exist; and (3) the reasons why additional time is
needed to obtain these facts.’” (Jade Fashion & Co., Inc. v.
Harkham Indus., Inc. (2014) 229 Cal.App.4th 635, 656 [quoting Cooksey v.
Alexakis (2004) 123 Cal.App.4th 246, 254].) The affidavit must also state “the specific
steps or procedures the opposing party intends to utilize to obtain such
evidence.” (Johnson v. Alameda County
Medical Center (2012) 205 Cal.App.4th 521, 531-33.)
“But when a party submits an affidavit
demonstrating that facts essential to justify opposition may exist but have not
been presented to the court because the party has not been diligent in
searching for the facts through discovery, the court’s discretion to deny a
continuance is strictly limited.” (Insalaco
v. Hope Lutheran Church of West Contra Costa County (2020) 49 Cal.App.5th
506, 519.)
Plaintiff presents his attorney’s declaration,
a joint stipulation and order appointing a forensic accountant in case
22CHCV00729, a deposition transcript for Alda Management’s C.P.A. Miguel Ramos,
and a copy of Alda Management’s 2021 tax return. (Declaration of Leah S. Schoen, Exhs. A-F.)
Essential
facts and reason to believe they exist
“The affidavit or declaration in support of
the continuance request must detail the specific facts that would show the
existence of controverting evidence.” (Lerma v. County of Orange (2004)
120 Cal.App.4th 709, 715.)
Plaintiff seeks essential facts regarding
what funds went in and out of Alda Management.
(Schoen Dec., ¶ 18.) Plaintiff
believes that Defendant has made conflicting statements regarding Alda
Management’s corporate structure as a pass-through entity even though Alda
Management’s 2021 Tax Return reflects that Alda Management has its own income,
expenses, and pays income taxes.
Plaintiff contends that pass-through entities do not pay federal income
taxes. If the funds in Alda Management’s
bank accounts are owned by Albert Gonzalez, Irma Torres, and entities and
properties Alda Management manages, Alda Management should not have any income
on its tax returns.
Alda’s 2021 Tax Return lists gross receipts
in the amount of $295,001.00 and deductions in the amount of $286,474. (Schoen
Dec., ¶ 9, Exh. E.). Alda lists
deductions for “management” in the amount of $60,000.00 and “royalties” in the
amount of $225,000.00. A pass-through
entity does not generate any income so it makes no sense that Alda’s Tax Return
would reflect $60,000.00 received in management fees or $225,000.00 in royalties. (Schoen Decl. ¶9, Exh. E.) Alda pays an “accounting” expense of
$1,100.00 despite Defendant’s claim that Alda is a “pass-through company” with
no funds of its own because all funds received are owned by LLCs and Albert
Gonzalez and Irma Torres, and neither Alda nor Plaintiff had any ownership
interest in the funds deposited. (SS Fact #6).”
Further, contradicting Defendant’s claim is the fact that Alda’s 2021
tax return lists $66,574.00 in “cash assets” despite generating no income and
having no funds of its own. (Schoen
Dec., ¶ 9, Exh. E.)
Pursuant to a joint stipulation and court
order executed on October 10, 2024 in the case Albert Gonzalez v. Irma
Torres (22CHCV00729), Forensic Accountant David B. Connelly will
conduct a forensic investigation of properties held by Extra Hubbard, LLC,
Super Mission, LLC, and IA Manor, LLC, and other properties held by Albert
Gonzalez and Irma Torres. (Schoen Dec.,
¶¶ 5-6, Exh. C.) Plaintiff only became
aware of the existence of the appointment of a forensic accountant at the end
of January 2025 when Mr. Connelly requested documents from Plaintiff regarding
discovery Alda Management produced in this case. (Schoen Decl. ¶¶ 3-6, Exhs.
A-D.) Plaintiff asserts that the
forensic investigation will give Plaintiff access to financial information
including Alda Management’s financial profile in relation to the LLCs and
properties it manages. Specifically, the
“results of the forensic accounting are necessary to understand what funds are
coming in and going out of Alda Management.”
(Schoen Dec., ¶ 18.)
Defendant opposes contending that Plaintiff
fails to identify specific facts to be obtained. Plaintiff’s claim that general claim that
information about “what funds are coming in and going out of Alda Management”
fails to detail the essential facts that may exist and the specific reasons
they cannot be presented at this point in time.
Defendant’s motion identifies allegations in the SAC and in Plaintiff’s
discovery responses where Plaintiff identifies checks and a lawsuit (Lucia
v. ALDA) which resulted in damages to Plaintiff or Alda Management. Connelly’s forensic report will not produce
evidence or facts showing that checks cut more than four years ago are not
precluded by the statute of limitations or that Alda Management and Plaintiff
suffered damages from the Lucia lawsuit.
Defendant also presents Connelly’s declaration to support his contention
that Connelly does not remember offering to provide Plaintiff’s counsel with a
copy of the findings of his forensic examination report. (Declaration of David B. Connelly, ¶ 4.)
Additionally, Forensic Accountant David B.
Connelly declares that he was retained by Irma Torres and Albert Gonzalez, Sr.,
to perform a Forensic Accounting of properties and entities including: Extra
Hubbard, LLC, IA Manor, LLC, All real property held by Albert Gonzalez, Sr. and
Irma Torres as tenants in common, and real property owned by Extra Hubbard,
LLC, IA Manor, LLC, and Super Mission.
(Declaration of David B. Connelly, ¶ 2.)
The examination is limited to financial transactions regarding these
real properties. (Connelly Dec., ¶
5.) There is absolutely no mention of
Alda Management.
The court agrees that the examination is
limited in scope and will not fix any issues related to statute of limitations
issues.
Plaintiff’s declaration does not specifically
state the essential facts he seeks about determining the funds going in and out
of Alda Management. Plaintiff does note
some discrepancies between Defendant’s claims in his summary judgment motion
and Alda Management’s 2021 Tax Return, but Plaintiff does not state what
specific information he seeks and whether he will be able to get a copy of the
forensic examination report to support his opposition to the summary judgment
motion. It also appears that Plaintiff
may have misrepresented his interactions with Mr. Connelly as Mr. Connelly
states that Plaintiff’s counsel did not hire him to do an investigation, Mr.
Connelly’s investigation will not involve Alda Management’s financial profile,
and Mr. Connelly does not recall offering his final report to Plaintiff’s
counsel. Although Plaintiff’s discussion
about the 2021 Tax Return suggests there are discrepancies in Defendant’s
evidence, the procedure for bringing these discrepancies to light is in
opposing the substantive claims in Defendant’s summary judgment motion.
In response to Plaintiff’s arguments
regarding the 2021 Tax Return, Defendant also presents the Declaration of Alda
Management’s certified public accountant, Miguel Ramos. (Declaration of Miguel Ramos.) Mr. Ramos has been Alda Management’s accountant
since 2012. Mr. Ramos states that Alda
Management is a 1120 California corporation that receives funds from Albert
Gonzalez, Irma Torres, and their LLCs and that the income listed on the tax
return are funds received from Albert Gonzalez, Irma Torres, and their LLC
entities. (Ramos Dec., pp. 1:11-12, 16-17.)
An S-corporation uses the 1120 tax form to file
federal taxes, which Alda Management did here.
(Schoen Dec., Exh. E, at p. 20.)
An S-corp is a corporation that is taxed as pass-through entity with
income, losses, deductions, and credits flowing through the shareholders,
partners, or members who then report these items on their own personal tax
returns. (26 U.S.C. §§ 1361(a),
1366.) However, s-corps are responsible
for tax on certain built-in gains and passive income at the entity level. (Ibid.)
Alda Management’s fiscal year ends March 31st,
and the calendar year ends December 31 which results in Alda Management having
funds in its account by the end of the year even though those funds belong to
Albert Gonzalez, Irma Torres, and their LLCs.
(Ramos Dec., pp. 1:13-15; see also 26 U.S.C. § 1378(a), (b).)
The “income” on the tax return is funds
received by Albert Gonzalez, Irma Torres, and their LLCs. (Ramos Dec., pp. 1:16-17.) The “expenses” are expenses incurred by
Albert Gonzalez, Irma Torres, and their LLC entities. (Ramos Dec., pp. 1:18-19.) The “cash assets” are cash assets that
originated from Albert Gonzalez, Irma Torres, and their LLC entities. (Ramos Dec., pp. 1:20-21.) The “royalty payments” are checks written to
the two owners (shareholders) Albert Gonzalez & Irma Torres, made payable
to Albert Gonzalez and to Irma Torres.
(Ramos Dec., pp. 1:22-23.) The
“management fees” are fees paid to individuals who performed work for Albert
Gonzalez, Irma Torres, and the LLCs.
(Ramos Dec., pp. 1:24-25.) Mr.
Ramos explains that management fees were approximately $2,000.00/month and that
those fees were paid with Alda Management funds (whose origins are from Albert
Gonzalez, Irma Torres, and/or their respective entities). (Ramos Dec., pp. 1:25-27.)
Plaintiff declaration does not provide an
explanation or argument to oppose Mr. Ramos’s declaration regarding the items
on the 2021 Tax Return. The court also
notes that Plaintiff first deposed Mr. Ramos in March 2023. (Schoen Dec., Exh. F.) Finally, Plaintiff’s counsel does not state
that she conducted discovery into any of Defendant’s other entities or that she
was somehow prevented from doing so.
Therefore, Plaintiff fails to state the
specific essential facts he seeks or the reason why essential facts exist.
Accordingly, Plaintiff’s request for a
continuance is denied.
Motion
for Summary Judgment
The purpose of a motion for summary judgment or summary
adjudication “is to provide courts with a mechanism to cut through the parties’
pleadings in order to determine whether, despite their allegations, trial is in
fact necessary to resolve their dispute.” (Aguilar
v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 843.) “Code of Civil Procedure section 437c,
subdivision (c), requires the trial judge to grant summary judgment if all the
evidence submitted, and ‘all inferences reasonably deducible from the evidence’
and uncontradicted by other inferences or evidence, show that there is no
triable issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7
Cal.App.4th 1110, 1119.)
The pleadings frame the issues
for motions “since it is those allegations to which the motion
must respond. (Citation.)” (Scolinos v. Kolts (1995) 37 Cal. App.
4th 635, 640-641; FPI Development, Inc.
v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD. v. Cineplex Odeon Corp. (1994) 29
Cal.App.4th 1459, 1472.) “On a motion
for summary judgment, the initial burden is always on the moving party to make
a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128
Cal.App.4th 1510, 1519.) A defendant moving for summary judgment “has met his
or her burden of showing that a cause of action has no merit if the party has
shown that one or more elements of the cause of action . . . cannot be
established.” (Code Civ. Proc., § 437c,
subd. (p)(2).) “Once the defendant . . . has met that burden, the burden shifts
to the plaintiff . . . to show that a triable issue of one or more material
facts exists as to the cause of action or a defense thereto.” (Ibid.)
“When deciding whether to grant summary judgment, the
court must consider all of the evidence set forth in the papers (except
evidence to which the court has sustained an objection), as well as all
reasonable inference that may be drawn form that evidence, in the light most
favorable to the party opposing summary judgment.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159
Cal.App.4th 463, 467; see also Code Civ. Proc., § 437c, subd. (c).) “An issue
of fact can only be created by a conflict in the evidence. It is not created by speculation, conjecture,
imagination or guesswork.” (Lyons v.
Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1041 (citation
omitted).)
Only the second and third causes of action are at issue.
1. Second
Cause of Action for Breach of Fiduciary Duty fails as a matter of law because Plaintiff’s
discovery responses establish that the cause of action is barred by the statute
of limitations.
Defendant moves for summary judgment on the second cause
of action because the evidence shows that the funds Defendant spent were not
funds owned by Alda Management and all evidence supporting this claim falls
outside the statute of limitations barring the claim entirely.
Issue
#1: The funds Defendant spent were not owned by Alda Management.
Defendant asserts that the undisputed facts show that funds
Defendant spent were not owned by Alda Management.
Alda Management is a “pass-through” management company
set up specifically and only to assist in the management of properties and
assets owned jointly by Albert Gonzalez and Irma Torres. (UMF No. 3, Declaration of Albert Gonzalez,
Jr., ¶ 3.) Plaintiff and Defendant set
up Alda Management’s operating method so that all monies that Alda Management
collected for rent and any other sources managed by Alda Management were
deposited into Alda Management’s bank account but were not owned by Alda Management. (UMF No. 24.)
Albert Gonzalez and Irma Torres own several properties
and LLCs including Extra Hubbard, LLC, Super Mission, LLC, IA Manor, LLC and
the now defunct GoTo Restaurant, LLC and AR, LLC. (UMF Nos. 2, 7; Declaration of Albert
Gonzalez, ¶ 4.) Plaintiff has no
ownership interest in these entities and properties. (UMF No. 2.)
Alda Management paid all operating expenses for Albert
Gonzalez, Irma Torres, and these entities. (UMF Nos. 7, 8, 9, 10, 11, 14, 15, 16, 17, 18,
19, 20, 21; Gonzalez Dec., ¶ 9(E)(3).)
Albert Gonzalez authorized all payments.
(UMF No. 7-11, 14-22.)
Alda Management’s structure was set up so that either
shareholder could write checks and conduct Alda Management business and did not
require both shareholders to approve issuance of checks, check writing,
expenditures, or employment decisions.
(UMF No. 4, Gonzalez Dec., ¶ 4.)
Alda Management also has no bylaws or documentation requiring both
shareholders to approve such decisions.
(UMF No. 5, Gonzalez, Jr. Dec., ¶ 5.)
Plaintiff does not dispute any of these facts.
Accordingly, the funds used by Alda Management were not
owned by Alda Management.
Issue #2: The evidence of checks and alleged formation
of Olivos Management fall outside the applicable statute of limitations because
Plaintiff should have discovered the activity at issue at least four years
before filing this case.
Defendant asserts that the undisputed facts show that
Plaintiff’s claims regarding several checks payable to case are barred by the
statute of limitations because the checks were all written over four years
before Plaintiff filed his complaint and Plaintiff had access to all accounting
information.
The statute of limitations for breach of fiduciary duty is three years if
based on fraudulent conduct and four years if based on nonfraudulent conduct. (American Master Lease, LLC v. Idanta
Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1479.) “Breach of fiduciary duty claims, which
include breach of loyalty and aiding and abetting breach of fiduciary duty
claims, have at most a four-year statute of limitations.” (Al-Ahmed v. Twitter, Inc. (N.D. Cal.
2023) 648 F.Supp.3d 1140, 1157 [citing
Code Civ. Proc., § 343].) “The discovery
rule applies to this standard, so that the four-year period ‘begins to run when
plaintiffs discovered, or in the exercise of reasonable diligence could have
discovered, that facts had been concealed.’”
(In re Brocade Communications, Sys., Inc. Derivative Litigation (N.D. Cal. 2009) 615 F.Supp.2d 1018, 1036
[citation omitted].)
The SAC identifies several checks Defendant executed on
Alda Management’s account: at least thirteen (13) checks payable to “cash” from
February 2, 2016 through February 26, 2018 (SAC, ¶ 23) and eighteen (18) checks
payable to defendant Evangelina Gonzalez between September 2021 and September
2022 (SAC, ¶ 25). (UMF Nos. 28-29.)
Because the evidence shows Plaintiff became a signer on
Alda Management’s accounts beginning November 8, 2016 (UMF No. 46; Exh. O, at
pp. 3-4), Plaintiff would have discovered the alleged check-writing through
review of bank statements and older bank records beginning November 2016. Therefore, the statute of limitations began
to run on November 8, 2016 and expired on November 9, 2020. Plaintiff’s discovery responses show that
Plaintiff was aware or should have known about the checks as early as the bank
statement issued after each check was written.
(UMF Nos. 40-43.)
Next, Defendant asserts that Plaintiff had access to Alda
Management’s banking records as early as November 2016 because Plaintiff was a
signer on Alda Management’s bank accounts and the bank statements that
pre-dated November 2016 were mailed to an address Plaintiff oversaw. (UMF Nos. 45-46, 49.) The bank statements included images of each
check that was issued from the account including the checks identified in the
SAC. (UMF Nos. 56-61, 63-69.)
Because the undisputed evidence shows that the “cash”
checks were issued more than four years before Plaintiff filed this case on January
18, 2023, and Plaintiff should have known about these checks as early as
November 2016, Plaintiff’s use of these checks to support his claims are barred
by the statute of limitations.
Defendant also asserts that the undisputed facts show
that Plaintiff knew or should have known about the checks written to Evangelina
Gonzalez as early as April 2021 because they appeared in the bank records which
Plaintiff had access to as early as November 2016. In May of 2021, Defendant stopped doing
duties for Alda Management and stopped receiving payment from Alda
Management. (UMF No. 12.) Defendant then authorized defendant Evangelina
Gonzalez and Olivos Property Management to handle Alda Management’s day-to-day
operations, and to receive the $1,000.00 monthly payment that would have gone
to Defendant. (UMF No. 12.) These payments were made from funds owned by
the LLCs and properties owned by Albert Gonzalez and Irma Torres. (UMF No. 12.)
The first check was issued on April 19, 2021. (Exh. Q, p. 12.)
Plaintiff was aware of defendant Evangelina Gonzalez’s
role and authority as early as February 2022 because on February 24, 2022,
Plaintiff and Defendant executed a Master Account Agreement which authorized
Evangelina as an authorized signer on Alda Management’s bank account. (UMF No. 13, Exh. R, p. 2.)
Plaintiff does not oppose this.
Next, Defendant asserts that the undisputed facts show
that Lucio v. Alda Management case (BC674755) on which Plaintiff bases
his claims is barred by the statute of limitations and that Plaintiff fails to
show that either he or Alda Management suffered damages from this case. The case was filed on September 1, 2017 and was
dismissed on January 26, 2022. (UMF Nos.
72, 75.) Plaintiff was served as a
defendant in that case on November 27, 2017.
(UMF No. 74.) Therefore,
Plaintiff had notice of the lawsuit on November 27, 2017, over five years
before filing this case. No judgment was
entered against Alda Management or Plaintiff, and neither Alda Management nor
Plaintiff incurred attorneys’ fees or costs in defending the Lucio
Lawsuit, contributed to the settlement, or incurred any out-of-pocket expenses
as a result of the lawsuit. (UMF Nos.
79, 80-82.) Throughout its existence, Alda
Management served one set of clients, never solicited new clients before,
during, or after the Lucio lawsuit, and did not suffer a loss of income due
to the Lucio lawsuit. (UMF No. 83.)
Plaintiff does not oppose. Therefore, Plaintiff fails to prove damages,
and the Lucio lawsuit is barred by the statute of limitations.
However, the undisputed evidence shows that the checks
payable to “Evangelina Gonzalez” were issued between April 2021 and September
2021, less than two years before Plaintiff filed this case on January 18, 2023,
these checks are not barred by the statute of limitations.
Issue
#3: Defendant did not breach his fiduciary duty to Plaintiff or Alda Management
To establish a cause of action for breach of a fiduciary
duty, the evidence must prove that (1) a fiduciary relationship exists, (2) a
breach of the relationship occurred, and (3) damage was proximately caused by
the breach. (O’Neal v. Stanslaus
County Employees’ Retriment Ass’n (2017) 8 Cal.App. 1184, 1215.) “[T]he determination whether a breach of
fiduciary duty occurs under a particular set of facts is ‘mainly for the trier
of facts.’” (Ibid.)
Corporate directors owe a fiduciary duty to the
corporation and its shareholders to act with honesty, loyalty, and “in good
faith, in a manner such director believes to be in the best interests of the
corporation and its shareholders.”
(Corp. Code, § 309, subd. (a); see also Berge & Berg Enterprises,
LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1037.)
The evidence shows that Defendant and Plaintiff were both
shareholders, who each owned 50% of Alda Management. Both served as the sole directors of Alda
Management, with authority to write checks and conduct business, and approval
was not required for issuing checks, expenditures, or employment decisions. (UMF No. 4.)
Thus, Defendant owed a fiduciary duty to Plaintiff and Alda Management.
Plaintiff alleges that Defendant breached his fiduciary
duty when (1) he incorporated Olivos Property Management, Inc., a competing
property management company on April 21, 2020 without disclosing the
information to the Alda Board of Directors; (2) he engaged in corporate waste
through unnecessary expenses; (3) he hired his sister defendant Evangelina
Gonzalez instead of other qualified individuals without Plaintiff’s consent;
and (3) he engaged in self-dealing with the entities owned by “Defendants”
without proper disclosures and received more company distribution payments up to
$1,000.00 more a month an Plaintiff even though both were 50% shareholders.
Defendant’s evidence establishes that Defendant
authorized Evangelina Gonzalez to do management work for Alda Management
beginning in May 2021, although she was first paid in April 2021, and that
Plaintiff authorized Evangelina as a signer on Alda Management’s bank accounts
in February 2022. Plaintiff does not
present evidence establishing that Evangelina is Defendant’s sister. Although Defendant admits that he authorized
Olivos Property to perform work for Alda Management, Plaintiff does not present
evidence to establish that Defendant incorporated Olivos Property or that
Defendant has any ownership interest in Olivos Property. Additionally, Defendant’s evidence contradicts
Plaintiff’s allegations that Defendant received more distributions than
Plaintiff each month. Defendant’s check
images show that Plaintiff received a total of $49,000.00 in distributions, and
Defendant received a total of $48,000.00 in distributions. (Gonzalez, Jr. Dec., ¶ 7(E)(3), Exh. Q, pp.
1-11, 16-25.)
Plaintiff also fails to present evidence, not
based on the Lucio case or the “cash” checks, that Alda Management
suffered cognizable damages of any kind.
Therefore, Plaintiff’s breach of fiduciary duty cause of action fails as
a matter of law.
Accordingly, the court grants Defendant
summary adjudication on the second cause of action.
2. Third
Cause of Action for Accounting fails as a matter of law because the claim is
based on evidence barred by the statute of limitations
Defendant argues that Plaintiff’s accounting cause of
action fails as a matter of law because Plaintiff bases the claim on checks
dated between 2016 and 2018 which are barred by the statute of limitations.
Plaintiff alleges that his accounting cause of action is
based on Defendant’s mismanagement of Alda Management including inadequate
corporate books, inadequate recordkeeping, and failure to provide accounting to
Plaintiff as a 50% shareholder.
“An action for
an accounting has two elements: (1)
‘that a relationship exists between the plaintiff and defendant that requires an accounting’
and (2)
‘that some balance is due the plaintiff that can only be ascertained by
an accounting.’” (Sass v. Cohen
(2020) 10 Cal.5th 861, 869.)
As an initial matter, Plaintiff’s allegations based on
the checks issued between February 2016 and February 2018 are barred by the
statute of limitations.
The undisputed facts show that a fiduciary relationship
existed between Defendant and Plaintiff as directors of Alda Management. All funds received for the entities and
properties Alda Management managed were deposited into a business bank account
opened in July 2012. (UMF Nos. 6,
45.) The evidence shows that Plaintiff
did not gain full access to this account as a signer, and three subsequently
opened accounts, until November 2016. As
signers on the account, both Plaintiff and Defendant had access to the bank
account’s records going as far back to the account’s opening. Plaintiff does not present evidence to oppose
this or to show that Defendant owed him an accounting based on any other
accounts. Additionally, Plaintiff alleges
that Defendant may have diverted money from the bank account or misappropriated
the value of Alda Management’s assets (SAC, ¶ 62). However, Plaintiff presents no evidence that
shows some balance is due to him.
Therefore, Plaintiff’s accounting cause of action fails as a matter of
law.
Accordingly, the court grants Defendant
summary adjudication on the third cause of action.
CONCLUSION
Defendant’s motion for summary adjudication on the second
and third causes of action is granted.
Defendant Albert Gonzalez, Jr. to give notice.