Judge: Holly J. Fujie, Case: 22STCV10702, Date: 2023-04-17 Tentative Ruling

Case Number: 22STCV10702    Hearing Date: April 17, 2023    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY: Defendants Royal Holdings Technologies Corporation (“Royal”), Gerard Cappello (“Cappello”), Charles Bloomquist (“Bloomquist”), and Todd Dunphy (“Dunphy”) (collectively, “Moving Defendants”)

RESPONDING PARTY: Plaintiff

The Court has considered the moving, opposition and reply papers.

BACKGROUND

            Plaintiff’s complaint (the “Complaint”) alleges: (1) breach of contract; (2) fraud; (3) violation of the Uniform Fraudulent Conveyance Act (“UFCA”); (4) open book account; (5) account stated; and (6) quantum meruit.

In relevant part, the Complaint alleges: In early 2020, Plaintiff and Royal entered into a contract (the “Agreement”) for Plaintiff to develop software programs.  (Complaint ¶ 14.)  Plaintiff expended labor and costs to develop the  technology, which Royal failed to pay when Plaintiff submitted an invoice at the end of 2020.  (Complaint ¶ 15.)  In early 2022, Capello, Bloomquist, and Dunphy began using a different business entity to market the technology Plaintiff developed for Royalty pursuant to the Agreement.  (See Complaint ¶ 17.)  Moving Defendants transferred Royal’s technologies to this separate corporate entity in order to avoid repaying Royal’s creditors, including Plaintiff.  (See Complaint ¶¶ 17-18.) 

Moving Defendants filed a motion for judgment on the pleadings (the “Motion”) on the ground that the Complaint fails to state sufficient facts to constitute a cause of action.

DISCUSSION

Meet and Confer

            The meet and confer requirement has been met.

Legal Standard

            Under California Code of Civil Procedure (“CCP”) section 438, subdivision (c)(1)(B), a defendant may move for judgment on the pleadings if the complaint does not state facts sufficient to constitute a cause of action against that defendant.  (CCP § 438, subd. (c)(1)(B).)  The standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer.  (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1064.)  The court must assume the truth of all factual allegations in the complaint, along with matters subject to judicial notice.  (Wise v. Pacific Gas & Electric Co. (2005) 132 Cal.App.4th. 725, 738.)  The court must view the allegations in the light most favorable to the plaintiff.  (Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 28.)  A pleading which on its face is barred by the statute of limitations does not state a viable cause of action and is subject to judgment on the pleadings.  (Hunt v. County of Shasta (1990) 225 Cal.App.3d 432, 440.)

            As a preliminary matter, it appears that Royal is a suspended corporation that is therefore not empowered to defend itself in this litigation.  (See Palm Valley Homeowners Ass’n, Inc. v. Design MTC (2000) 85 Cal.App.4th 533, 560-61.)  The Complaint does, however, sufficiently state sufficient facts to allege that the individual Moving Defendants were Royal’s alter-egos.  (See Complaint ¶¶ 8-13; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-36.) 

First Cause of Action: Breach of Contract

The elements of a breach of contract claim are: (1) the contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) damage to plaintiff therefrom.  (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)  A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect.  (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)  In order to plead a contract by its legal effect, plaintiff must allege the substance of its relevant terms.  (Id.) 

            The Complaint does not set forth sufficient allegations of the Agreement’s legal effect to state a claim for breach of contract.  The Complaint alleges that the Agreement provided that Plaintiff would develop software technology, but does not allege Moving Defendants’ reciprocating obligations.  The Court therefore GRANTS the Motion to the first cause of action with 20 days leave to amend.

Second Cause of Action: Fraud

The elements of intentional misrepresentation are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.  (Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 428.)  Each element must be alleged with particularity.  (Id.)  The facts required to be pled are facts that show how, when, where, to whom, and by what means the representations were tendered.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

            The Complaint does not include specific allegations of any particular misrepresentations made by any particular individuals and therefore does not sufficiently allege fraud.  The Court therefore GRANTS the Motion to the second cause of action with 20 days leave to amend.

Third Cause of Action: Fraudulent Transfer

A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor, (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor either: (2) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debt were unreasonably small in relation to the business or transaction, (2B) intended to incur, or believed or reasonably should have believed that the debt would incur, debts beyond the debtor’s ability to pay as they became due.  (Civ. Code § 3439.04, subd. (a).)

            The Complaint does not allege that Royal’s assets were transferred without receiving reasonably equivalent value.  The Court therefore GRANTS the Motion to the third cause of action with 20 days leave to amend.

Fourth Cause of Action: Open Book Account

The elements of an open book account cause of action are: (1) the plaintiff and defendant had financial transactions; (2) the plaintiff kept an account of the debits and credits involved in the transactions; (3) the defendant owes the plaintiff money on the account; and (4) the amount of money that the defendant owes the plaintiff.  (State Compensation Insurance Fund v. ReadyLink Healthcare, Inc. (2020) 50 Cal.App.5th 422, 449.)

The Complaint does not allege that Plaintiff kept an account of the debits and credits involved in its dealings with Moving Defendants.  The Court therefore GRANTS the Motion to the fourth cause of action with 20 days leave to amend. 

Fifth Cause of Action: Account Stated

The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due.  (Leighton v. Forster (2017) 8 Cal.App.5th 467, 491.)

            The Complaint does not allege that Moving Defendants agreed on the amount that was owed to Plaintiff.  The Court therefore GRANTS the Motion with 20 days leave to amend. 

Sixth Cause of Action: Quantum Meruit

The requisite elements of quantum meruit are: (1) the plaintiff acted pursuant to “an explicit or implicit request for services” by the defendant; and (2) the services conferred a benefit on the defendant.  (MKB Management, Inc. v. Melikian (2010) 184 Cal.App.4th 796, 805.)

The Complaint sufficiently alleges that Plaintiff provided a service that benefitted Moving Defendants.  The Court therefore DENIES the Motion to the sixth cause of action. 

Moving party is ordered to give notice of this ruling.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative. If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person. The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date. This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

             Dated this 17th day of April 2023