Judge Holly J. Fujie, Case Number: 24STCV00051, Date: 2025-02-06 Tentative Ruling

MOVING PARTY: Defendants Medversant Technologies, L.L.C (“Medversant”) and Matthew Haddad (“Haddad”) (collectively “Defendants”)

On January 2, 2024, Plaintiff filed this action to recover outstanding legal fees from Defendants. The operative second amended complaint (“SAC”) alleges causes of action for: (1) breach of written contract; (2) book account; (3) account stated; (4) services rendered; and (5) quantum meruit.

On October 23, 2024, Defendants filed the instant demurrer (the “Demurrer”). On January 23, 2025, Plaintiff filed an opposition to the Demurrer (the “Opposition”). On January 30, 2025, Defendants filed a reply (the “Reply”).

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; Code of Civil Procedure (“CCP”) § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

To establish a cause of action for open book account, the following elements must be satisfied: (1) plaintiff and defendant had financial transactions, (2) plaintiff kept an account of the debits and credits involved in the transactions, (3) defendant owes plaintiff money on the account, and (4) the amount of money that the defendant owes the plaintiff.¿ (State Comp. Ins. Fund v. ReadyLink Healthcare, Inc. (2020) 50 Cal.App.5th 422, 449; CCP § 337a.)¿ A book account is “open” if a balance remains due on this account.¿ (Interstate Group Administrators, Inc. v. Cravens, Dargan & Co. (1985) 174 Cal.App.3d 700, 708.)¿A claim for open book account requires transactions arising “out of a contract or some fiduciary relation” with the defendant. (Professional Collection Consultants v. Lujan (2018) 23 Cal.App.5th 685, 690-691.)

Defendants demur to the second cause of action for book account on the ground that there is an express contract between the parties. (Demurrer, pp. 6:14-8:4.) The SAC alleges that Defendants became indebted to Plaintiff under a retainer agreement, with a remaining unpaid balance exceeding $400,000.000, and that despite demands, no payment has been made. (SAC ¶¶ 25-26) Defendants cite to Tsemetzin v. Coast Fed. Savings & Loan Ass’n (1997) 57 Cal.App.4th 1334 to support their argument. The Court does not find that this case supports Defendants’ argument. Tsemetzin supports the contention that monies which become due under an express contract cannot, in the absence of a contrary agreement between the parties, be treated as items under an open book account to allow the unpaid creditor to evade the statutory limitations period. (Tsemetzin, supra, 57 Cal.App.4th at p. 1343.)

Courts have held that a common count can be based upon an express contract. The elements of common count “apply whether they are based upon an express contract, a contract implied in fact, or a quasi-contract.” (4 Witkin, Cal. Proc. (5th ed. 2008), Pleading, § 554, p. 682; see also Kawasho Internal, U.S.A., Inc. v. LakewoodPipe Service, Inc. (1983) 152 Cal.App.3d 785, 793; Weitzenkorn v. Lesser (1953) 40 Cal 2d 778, 793; Philpot v. Superior Court (1934) 1 Cal.2d. 512, 518-523.) A common counts claim can be based upon performance by one party pursuant to a void contract or an express contract. (Utility Audit Co., Inc. v. City of Los Angeles (2003) 112 Cal.App.4th 950, 958; see Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1623.) Therefore, the Court does not find that Plaintiff’s cause of action is subject to demurrer on this ground. Thus, the Demurrer to the second cause of action is OVERRULED.

Defendants demur to all causes of action as to Haddad on the ground that the SAC fails to adequately allege alter ego liability. Defendants argue that Haddad is not a party to the retainer agreement and thus he cannot be held liable for any of Plaintiff’s claims absent a basis for alter ego liability.

“In California, two conditions must be met before the alter ego doctrine will be invoked.¿ First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist.¿ Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.”¿ (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App 4th 523, 538; Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300.)¿

Allegations have been held sufficient where the complaint alleged that the corporation was a mere shell and conduit for an individual defendant’s affairs; that the corporation was inadequately capitalized; that the corporation failed to abide by the formalities of corporate existence; that the individual used the corporation’s assets as her own; and that recognizing the separate existence of the corporation would promote injustice. (Rutherford Holdings, LLC v. Plaza Del Rey¿(2014) 223 Cal.App.4th 221, 235-236.)

The SAC alleges that Haddad is “a principal and/or owner, Chief Executive Officer, and/or sole managing member of Medversant,” that Haddad knew that Medversant did not have sufficient assets to pay its obligations, and that Haddad “used his control over Medversant to manipulate assets and liabilities for his own personal benefit by, among other things, using the legal fiction of separateness between Haddad and Medversant as a ruse to hide assets and liabilities.” (SAC ¶ 6) The SAC alleges that Medversant “was a mere shell and sham without capital, assets, stock or stockholders” which was “conceived, intended, and used by Haddad as a device to avoid individual liability and for the purpose of substituting a financially insolvent corporation in the place of Haddad.” (SAC ¶ 7) The SAC further alleges that “adherence to the fiction of a separate existence of Medversant as an entity distinct from Haddad” would “permit an abuse of the corporate privilege, sanction fraud, and promote an injustice in that Haddad has used the corporate form of Medversant to shield himself from personal liability in connection with the conduct used to secure the services of Plaintiff.” (SAC ¶ 9)

The allegations here are sufficient at the pleading stage. The SAC alleges that Haddad had singular control over Medversant, that Medversant was inadequately capitalized, that Medversant was a mere shell used to avoid personal liability and that recognizing the separate existence of Medversant would promote injustice. Plaintiff need only allege ultimate facts rather than evidentiary facts. (Rutherford, supra, 223 Cal.App.4th at p. 236.) As Rutherford also observed when affirming the trial court’s finding that the alter ego allegations were adequate, “less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff which certainly is the case here.” (Id. [internal quotes omitted].) Thus, the Demurrer to the first through fifth causes of action as to Haddad is OVERRULED.

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.

Hon. Holly J. Fujie

Judge of the Superior Court