Judge: Helen Zukin, Case: 21SMCV01474, Date: 2023-01-23 Tentative Ruling

Case Number: 21SMCV01474    Hearing Date: January 23, 2023    Dept: 207

Background

Plaintiff Lani Hay, individually and as Trustee of the LNMNH Revocable Trust (“Plaintiff”) brings this action against Defendants 1012 2nd Street Homeowners’ Association (the “HOA”), 1012 2nd Street, LLC, Soheil Mehrabanian (“Mehrabanian”), Saeed Babaeean (“Babaeean”), and others concerning a common interest development in which Plaintiff owns one of four units. Defendants Mehrabanian and Babaeean serve as board members for the HOA and are the owners of Defendant 1012 2nd Street, LLC, which itself owns two of the units in the development. Plaintiff’s operative Complaint, filed on September 3, 2021, alleges causes of action for breach of governing documents, breach of fiduciary duty, negligence, nuisance, violation of Open Meeting Act, and declaratory relief.

Defendants Mehrabanian, Babaeean, and 1012 2nd Street, LLC (collectively “Defendants”) have filed identical motions for judgment on the pleadings. Plaintiff filed and served a single opposition to the three motions, and Defendants filed a joint reply. As the motions are identical and raise the same arguments, the Court addresses each of those three motions together.

Request for Judicial Notice

Defendants request the Court take judicial notice of Plaintiff’s Complaint in this action. Plaintiff requests the Court take judicial notice of records from the Los Angeles County Recorder’s Office and the California Secretary of State. The parties’ requests are unopposed and are GRANTED.

Legal Standard

“A motion for judgment on the pleadings serves the function of a demurrer, challenging only defects on the face of the complaint… [¶] The grounds for a motion for judgment on the pleadings must appear on the face of the complaint or from a matter of which the court may take judicial notice.” (Richardson-Tunnell v. School Ins. Program for Employees (2007) 157 Cal.App.4th 1056, 1061.) In considering a motion for judgment on the pleadings, courts consider whether the factual allegations, assumed true, are sufficient to constitute a cause of action. (Fire Insurance Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452-453.)

Analysis

            1.         Meet and Confer Requirement

“Before filing a motion for judgment on the pleadings pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion for judgment on the pleadings for the purpose of determining if an agreement can be reached that resolves the claims to be raised in the motion for judgment on the pleadings.” (Code Civ. Proc. § 439(a).) Defendants have satisfied this meet and confer requirement. (Watson Decl. at ¶1.)

            2.         Corporations Code § 7710

Defendants argue Plaintiff’s action is in essence a derivative action brought in the name of the HOA and thus must satisfy the statutory requirements for bringing a derivative action under Corporations Code § 7710. Under section 7710(b), a plaintiff bringing a derivative action must plead: (1) plaintiff is a member; (2) plaintiff’s efforts to make the board take the requested actions, or a showing that a demand would have been futile; and (3) plaintiff provided the board written notice of the ultimate facts of the proposed causes of action or the proposed complaint. (Corp. Code § 7710(b).) Defendants argue Plaintiff has not satisfied these pleading requirements. Plaintiff concedes she did not satisfy the pleading requirements imposed by section 7710, but rather argues she is not obligated to comply with those requirements because her action is individual, not derivative in nature.

As Defendants point out, the question in determining whether an action is derivative or individual in nature depends on the gravamen of the claims presented. An action is derivative if “‘the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’” ( Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106 [citation omitted].) An individual cause of action exists only if damages to the shareholders were not incidental to damages to the corporation. (Id. at 107.)

The Court finds the gravamen of Plaintiff’s Complaint is not derivative injury to the HOA. Plaintiff seeks monetary damages for water damage to her personal unit in the development. Plaintiff alleges she was injured by Defendants’ refusal to obtain and turn over insurance proceeds owed to her to remediate the water damage to her unit. The Complaint also seeks declaratory relief to enforce the voting rights of members of the HOA and asserts the Defendants have acted in excess of their authority by failing to hold proper elections for seats on the HOA board. “Examples of direct shareholder actions include suits brought to … enjoin a threatened ultra vires act or enforce shareholder voting rights.” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 313.) The Complaint further seeks the imposition of monetary civil penalties against the HOA.

The only claims sought in the Complaint which are based on injury to the HOA are assertions that the HOA did not maintain common areas or properly abate nuisances. The Court finds these allegations, standing on their own, are insufficient to demonstrate that the gravamen of the Complaint is to redress injuries to the HOA. Accordingly, the Court finds Corporations Code § 7710 is inapplicable to Plaintiff’s Complaint and DENIES Defendants’ request for judgment on the pleadings as to Plaintiff’s entire Complaint on this basis.

            3.         Standing

Defendants argue Plaintiff has not alleged a sufficient basis for standing to assert claims against them. As to Defendant Mehrabanian and Defendant Babaeean, Defendants argue they do not own property in the development and thus cannot be sued in an individual capacity. As to Defendant 1012 2nd Street, LLC, Defendants allege Plaintiff has only asserted claims against it for actions taken by board members (namely Defendants Mehrabanian and Babaeean) and not by  Defendant 1012 2nd Street, LLC as an owner.

The Court disagrees with both arguments. As Plaintiff correctly points out, the California Supreme Court has recognized that individual board members of a homeowners association may be sued in an individual capacity where they personally participated in a wrongful action. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 503-506; see also Ritter & Ritter v. Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 120-121.) Plaintiff’s claims against Defendant 1012 2nd Street, LLC are based on allegations that it is the alter ego and/or agent of Defendants Mehrabanian and Babaeean and the HOA. In ruling on a motion for judgment on the pleadings, the Court must assume the truth of the factual allegations in the Complaint. Accordingly, Plaintiff has standing to assert claims against Defendant 1012 2nd Street, LLC based on the actions of Mehrabanian and Babaeean and the HOA. The Court thus denies Defendants’ motion for judgment on the pleadings based on Plaintiff’s asserted lack of standing.

            4.         Second, Fourth, Fifth, and Sixth Causes of Action

Defendants move for judgment on the pleadings on Plaintiff’s second cause of action for breach of fiduciary duty, fifth cause of action for violation of Open Meeting Act, and sixth cause of action for declaratory relief, arguing these causes of action are “not alleged against the moving defendants.” (Motion at 10.) The Court disagrees. Defendants, together with Defendant 1012 2^nd Street Homeowners’ Association, are collectively defined in Plaintiff’s Complaint as the “HOA Defendants.” (Complaint at 1.) The second, fifth, and sixth causes of action are expressly asserted against the “HOA Defendants” and thus are asserted against the moving Defendants. As to the fourth cause of action for nuisance, Defendants moving papers offer no argument on that cause of action in their moving papers and thus have failed to demonstrate they are entitled to judgment on this cause of action. This is a separate and independent basis which warrants the denial of Plaintiff’s motion for judgment on the pleadings as to Plaintiff’s second, fourth, fifth, and sixth causes of action.

Conclusion

The motions for judgment on the pleadings brought by Defendants Mehrabanian, Babaeean, and 1012 2nd Street, LLC are DENIED.