Judge Gregory Keosian, Case 22STCP02581 2023-03-01 Tentative Ruling

Defendants Larisa Sabadash and AFB Trading One, Inc.’s Demurrer and Motion to Strike Portions of the Complaint is SUSTAINED as to the second and third causes of action, with leave to amend, and the motion to strike is GRANTED with leave to amend.

A defendant may serve and file a motion to quash service of summons on the grounds of a lack of jurisdiction over him or her. (Code Civ. Proc., § 418.10 subd. (a)(1).) A plaintiff opposing a motion to quash service for lack of personal jurisdiction “has the initial burden to demonstrate facts establishing a basis for personal jurisdiction.” (HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1167.) If satisfied, the burden then shifts to defendant to show that exercise of jurisdiction would be unreasonable. (Id.)

Mere notice of litigation does not confer personal jurisdiction absent substantial compliance with the statutory requirements for service of summons. (MJS Enterprises, Inc. v. Superior Court (1984) 153 Cal.App.3d 555, 557.) While courts are not required to accept self-serving evidence — such as declarations that one was not served — submitted to support a motion to quash, facial defects of the proof of service will rebut its presumption of proper service. (American Exp. Centurion Bank, supra, 199 Cal.App.4th at p. 390.) The burden is on a plaintiff to prove facts showing that service was effective. (Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413.)

Defendant Alexander Sabadash (Alexander) moves to quash the service of summons made upon him on two grounds. First, he contends that the substitute service made upon co-defendant Larisa Sabadash (Larisa) at her Beverly Hills home was defective, as Alexander and Larisa are now legally separated, and Alexander has lived continuously in Russia, where he is imprisoned, since 2014. (Motion at pp. 2–3.) He accordingly argues that he must be served according to the Hague Convention as a foreign resident. (Motion at pp. 3–4.) Additionally, he argues that even if service were proper, this court lacks jurisdiction over him as he neither resides in California nor has purposefully availed himself of the benefits of the forum state. (Motion at pp. 4–8.)

Plaintiff in opposition contends that Alexander is a resident of California, as demonstrated by several court documents and declarations submitted by himself and Larisa in California courts, and that his imprisonment in Russia does not legally obviate his residence here. (Opposition at pp. 4–9.) Furthermore, Plaintiff contends that personal jurisdiction over Alexander personally is not necessary to register or enforce a judgment here, when any such enforcement would operate against Alexander’s California assets. (Opposition at pp. 9–11.) Plaintiff further argues that jurisdictional discovery would confirm that Alexander is a resident of California or an alter ego of such a resident. (Opposition at pp. 11–15.) Furthermore, Plaintiff argues that the court should authorize service upon Alexander’s attorney, as Russia has ceased cooperating with the requirements of the Hague Convention for allowing service through a designated central authority. (Opposition at pp. 4–7.)

A court may exercise jurisdiction on any basis not inconsistent with the Constitution of California or of the United States. (Code Civ. Proc., § 410.10.) The exercise of personal jurisdiction is constitutionally permissible only “if the defendant has sufficient ‘minimum contacts’ with the forum state so that the exercise of jurisdiction ‘does not offend “traditional notions of fair play and substantial justice.” [Citations.]’ ” (HealthMarkets, Inc. v. Superior Court (“HealthMarkets, Inc.”) (2009) 171 Cal.App.4th 1160, 1166 [citing International Shoe Co. v. Washington (1945) 326 U.S. 310, 316].) A defendant’s conduct with the forum state must be such that the defendant has “fair warning” that its activities might subject it to personal jurisdiction. (HealthMarkets, Inc., supra, 171 Cal.App.4th at p. 1166–1167; Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472.)

“Minimum contacts exist where the defendant's conduct in the forum state is such that he should reasonably anticipate being subject to suit there, and it is reasonable and fair to force him to do so. [Citations.] In contrast, contacts that are random, fortuitous, or attenuated do not rise to the minimum level, and general jurisdiction cannot be exercised under these circumstances.” (F. Hoffman-La Roche, Inc. v. Superior Court (“F. Hoffman-La Roche”) (2005) 130 Cal.App.4th 782, 795.)

A defendant that has substantial, continuous, and systematic contacts with the forum state is subject to general jurisdiction in the state, meaning jurisdiction on any cause of action. Absent such extensive contacts, a defendant may be subject to specific jurisdiction, meaning jurisdiction in an action arising out of or related to the defendant's contacts with the forum state. Specific jurisdiction depends on the quality and nature of the defendant's forum contacts in relation to the particular cause of action alleged.

The proof of service filed on July 29, 2022, states that Alexander was served by substitute service upon Larisa Sabadash at a Beverly Hills address on July 21, 2022. Alexander presents a declaration stating that he has lived and worked in Rusisia his entire life, and has never permanently lived in California. (Alexander Decl. ¶ 2.) He states he has not lived in California for eight years, and has been in a Russian prison since his arrest in 2014. (Alexander Decl. ¶ 2.) Alexander states that he does not own the property at the address at issue, and that his only California asset is shares of co-defendant AFB Trading One, Inc. (AFB). (Alexpander Decl. ¶ 7.) Larisa declares that she lives at the address in question, and that Alexander has been in the home since 2014, has not authorized her to accept service of process, and has been legally separated from her since she filed for divorce in May 2014. (Larisa Decl. ¶¶ 2–4.)

Plaintiff in opposition presents several court filings in other cases involving Larisa and Alexander, which he contends show Alexander’s residence in California prior to his arrest. One is a declaration submitted in support of a complaint for declaratory judgment of naturalization filed by Alexander in April 2008, in which he presented a declaration attesting to his residence at the service address. (Stolyar Decl. Exhs. 1, 2.) Another is a declaration signed by Alexander in August 2016, stating that his daughter lived with him and Larisa in Beverly Hills until May 2014. (Stolyar Decl. Exh. 4.) Another document is a stipulation to waive dismissal in Alexander and Larisa’s marital dissolution action signed by Alexander’s attorney in May 2022, in which it is stated that Alexander and Larisa have “made their home, and raised their family, in Los Angeles County since the early 1990’s.” (Stolyar Decl. Exh. 6.) Another declaration, submitted by Alexander in support of a motion for summary judgment in another action, states that his wife and children “have lived in the property” that was served “since I purchased it.” (Stolyar Decl. Exh. 8, ¶ 6.) Plaintiff also presents a declaration executed by Larisa attesting to similar facts. (Stolyar Decl. Exh. 3.)

Alexander in reply argues that the declaration supposedly contained with his naturalization complaint is not included among the documents available. (Supp. Zorkin Decl. ¶¶ 2–5.) Alexander further argues that the signature on that declaration does not match other instances of his signature. (Reply at pp. 2–3.) As to the other documents that Plaintiff presents, Alexander contends that while the court may take judicial notice of the existence of a document in a court record, it may not take judicial notice of any of the facts contained within them, meaning that any attestations to Beverly Hills residence contained within the papers is inadmissible hearsay. (Reply at pp. 3–4.)

Presuming that the declaration attributed to Alexander’s naturalization complaint is inauthentic, the court may still consider statements made by Alexander or by his attorney in prior court cases. The court may take judicial notice of the existence of the court documents presented by Plaintiff and of the existence of the statements that Plaintiff relies upon, although this does not go so far as to notice the truth of the matters stated therein, which are but hearsay. (See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [“[W]hile courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files.”].) However, the hearsay rule will not bar admission of the statements made by Alexander in these prior proceedings, because “[e]vidence of a statement is not made inadmissible by the hearsay rule when offered against the declarant in an action to which he is a party in either his individual or representative capacity, regardless of whether the statement was made in his individual or representative capacity.” (Evid. Code § 1220.)

Thus the court may consider the assertion contained in Alexander’s naturalization complaint (not the declaration) that he is a resident of the Southern District of California. (Supp. Zorkin Decl. Exh. 4, ¶ 8; see Cahill Bros., Inc. v. Clementina Co. (1962) 208 Cal.App.2d 367, 383 [“[A] pleading in a prior action or in others which are pending may be offered either as an evidentiary admission against the pleader in a subsequent proceeding or for the purpose of impeachment.”].) Also admissible is the statement in the 2022 stipulation, signed by Alexander’s attorney, that Alexander and Larisa made their home in Los Angeles County since the 1990s. (Stolyar Decl. Exh. 6.) The statements made in Alexander’s prior declarations — that he lived in Beverly Hills with his family until his arrest in 2014, and that he purchased the home in question — are also admissible, and Alexander’s objections to this evidence are OVERRULED.

In light of this evidence, Alexander is a resident of California, for that is where is he lived with his family for many years up to his arrest in 2014. Alexander’s declaration states that he did not live permanently in California prior to his arrest, but this statement is conclusory and unconvincing in light of his numerous prior statements to the contrary.

Nor does Alexander’s present imprisonment in Russia obviate his domicile in California. “General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are substantial, continuous, and systematic.” (F. Hoffman-La Roche, Ltd. v. Superior Court (2005) 130 Cal.App.4th 782, 796.) Since one obtains domicile in a given jurisdiction by virtue of actual presence and intention to remain (See In re Marriage of Thornton (1982) 135 Cal.App.3d 500), compulsory relocation to another place — such as by imprisonment — generally does not change one’s domicile, since the relocation is not achieved by a voluntary act. (See Jones v. Hadison (8^th Cir. 1977) 562 F.2d 249, 250–251 [“With respect to the domicile of prisoners, the traditional rule is that a prisoner does not acquire a new domicile when he is incarcerated in a different state; instead, he retains the domicile he had prior to his incarceration. . . . This rule was based on the notion, borrowed from conflicts of law, that a change of domicile requires a voluntary act and that the domicile of a person cannot be changed by virtue of the legal and physical compulsion of imprisonment.”].)

This court therefore possesses general jurisdiction over Alexander, and substitute service upon his wife at their Beverly Hills residence was permissible under Code of Civil Procedure § 415.20. The motion to quash is DENIED.

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Defendants Larisa Sabadash and AFB Trading One, Inc. (Defendants) demurrer to the second and third causes of action for fraudulent transfer on the grounds that Plaintiff Alexpander Invanovich Gavva (Plaintiff) lacks standing to assert claims under the Uniform Voidable Transactions Act (UVTA) and is not a creditor under the same. (Demurrer at pp. 6–8.) Defendants further argue that the debtor in question — codefendant Alexander Sabadash — is not a resident of California and thus is not subject to California’s UVTA. (Demurrer at pp. 8–9.) Defendants finally argue that the fraudulent transfer claims are not pleaded with the requisite particularity. (Demurrer at pp. 9–11.)

The arguments related to Defendant Alexander’s residency are addressed in this court’s resolution of the concurrently filed motion to quash, and further by the allegation in the Complaint that Defendant Alexander possesses a residence in California. (Complaint ¶¶ 5–6.)

The UVTA renders “transfer[s] made or obligation[s] incurred by a debtor . . . voidable as to a creditor” if the debtor made the transfer without equivalent consideration and with the intent to avoid payment on the debt. (Civ. Code § 3439.04, subd. (a)(1), (2).) A “creditor” under the UVTA is “a person that has a claim.” (Civ. Code § 3439.01, subd. (c).) And a “claim” is defined as “a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” (Civ. Code § 3439.01, subd. (b).) Defendants argue that the claims alleged in the Complaint belong to Tavrichesky Bank Joint-Stock Company and IFC Capital, not Plaintiff himself. (Complaint ¶¶ 15–17.)

Plaintiff, however, articulates a basis for standing. The Complaint alleges that he was appointed a “Financial Manager,” empowered by court order to collect the judgment debts from Defendant Alexander. (Complaint ¶¶ 16, 19–20.) The Complaint alleges that the role of a “financial manager” under Russian law is analogous to that of a receiver under California law. (Complaint ¶ 2.) Plaintiff in opposition to the present demurrer notes that bankruptcy trustees and receivers may stand in the shoes of creditors and prosecute UVTA claims. (Opposition at pp. 3–4, citing In re Slatkin (9th Cir. 2007) 222 Fed.Appx. 545, 546–547 [“The Trustee was standing in the shoes of a creditor and California's Uniform Fraudulent Transfer Act permits present and future creditors to challenge a fraudulent transfer.”].) Plaintiff further notes that in other cases involving “foreign representatives” under U.S. bankruptcy law attempting to prosecute fraudulent transfer actions, the determination as to whether the representative had the authority to prosecute claims on behalf of the creditors depended on whether the representative possessed the authority under the law where they were appointed. (See In re Hellas Telecommunications (Luxembourg) II SCA (S.D.N.Y. 2015) 524 B.R. 488, 523 [standing to assert state-law fraudulent transfer claim “requires an examination of Plaintiff’s authority as liquidators under U.K. law”].) Plaintiff further presents the declaration of Olga Snitserova, a Moscow attorney, who testifies that among the powers and duties of a financial manager is “the right to initiate and defend legal actions on behalf of the debtor’s estate, including claims for the recovery and collection of the debtor’s property and debts, both inside and outside of the Russian Federation.” (Snitserova Decl. ¶ 12.)[1] Thus Plaintiff possesses standing to bring the present action.

However, Plaintiff has not alleged any transfers have occurred within the meaning of the UVTA. To allege claims under the UVTA, “The complaint should allege the status of the plaintiff as a creditor, and the facts of a transfer within the prohibitions of the Uniform Voidable Transactions Act; e.g., a conveyance with actual intent to defraud, or a transfer by an insolvent without reasonably equivalent value.” (8 Witkin Cal. Procedure (6^th ed. 2022), Pleading, § 880.) Here, Plaintiff has not alleged the facts of any transfer falling within the UVTA, save a broad invocation of “money and/or property.” (Complaint ¶ 37.)

Accordingly, the demurrer is SUSTAINED with leave to amend as to the second and third causes of action.

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part thereof. (Code Civ. Proc., § 435(b)(1)). The notice of motion to strike a portion of a pleading shall quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count or defense. (California Rules of Court Rule 3.1322.)

The grounds for a motion to strike shall appear on the face of the challenged pleading or form any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437(a)). The court then may strike out any irrelevant, false, or improper matter inserted in any pleading and strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.) When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend. (Perlman v. Municipal Court (1979) 99 Cal.App.3d 568, 575.)

Defendants move to strike allegations that they are the alter egos of Defendant Alexander, reasoning that Plaintiff cannot reverse-veil-pierce a corporation to prosecute a judgment against a shareholder, and further reasoning that the alter-ego doctrine does not permit a natural person to be found the alter ego of another. (Motion at pp. 1–3.)

Defendants are correct on both counts. The alter ego doctrine is a theory that allows plaintiffs to reach the assets of owners to satisfy the obligations of corporate defendants where there exists such a unity of interest and risk of unjust results that respecting the corporate form would be inequitable. (See Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.) As Larisa Sabadash is a natural person, she is not an alter ego of Alexander Sabadash, another natural person. Nor may Defendant AFB Trading One, Inc.’s AFB) corporate veil be pierced to satisfy the obligations of Alexander Sabadash, its shareholder: the court in Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1524, expressly rejected the doctrine of reverse veil-piercing. Although Plaintiff in opposition cites the case Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5^th 214, but this case specifically held that reverse veil piercing was available against the assets of an LLC, expressly distinguishing the Postal decision on the grounds that fewer grounds of relief were available to enforce debts against LLC members than there were against shareholders in corporations. (Curci, supa, 14 Cal.App.5^th at pp. 222–223.)

Defendants also demurrer to the prayer for punitive damages, on the grounds that no facts are pleaded to support allegations of malice, oppression, or fraud. (Motion at p. 3.)

Punitive damages are allowed in non-contract cases when a defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code § 3294.) The terms are defined as:

1. “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

2. “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

3. “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

Something more than the mere commission of a tort is always required for punitive damages. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Proof of negligence, gross negligence, or recklessness is insufficient to warrant an award of punitive damages. (Dawes v. Sup.Ct. (Mardian) (1980) 111 Cal.App.3d 82, 88–89.) Punitive damages may be recovered in an action for negligence or other nonintentional torts if the plaintiff pleads and proves that the defendant acted with the state of mind described as “conscious disregard” of the potential dangers to others. (Pfeifer v. John Crane, Inc. (2013) 220 Cal.App.4th 1270, 1299.) When malice is based on a defendant’s conscious disregard of Plaintiff’s rights, the conduct must be both despicable and willful. (College Hospital v. Superior Court (1994) 8 Cal.4th 794, 713 (“College Hospital”).)

The Complaint contains no facts to support allegations of oppression, malice, or fraud, and pleads only that Defendants have made unspecified transfers of “money and/or property.” (Complaint ¶ 37.) Although Plaintiff argues that punitive damages are available for fraudulent transfer claims, the mere fact that such damages may be alleged does not mean that Plaintiff has alleged them here.

[1] Foreign law is subject to judicial notice under Evidence Code § 452, subd. (f), and in considering whether to take judicial notice, a court may consider “[a]ny source of pertinent information, including the advice of persons learned in the subject matter, may be consulted or used, whether or not furnished by a party.” (Evid. Code § 454, subd. (a)(1).)