Judge: Joel L. Lofton, Case: EC064009, Date: 2023-03-28 Tentative Ruling

Case Number: EC064009    Hearing Date: March 28, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:     March 28, 2023                                   TRIAL DATE: August 24, 2022

CASE:                         PASQUALE ZAZA v. PETER STOJANOV, as Administrator of the Estate of Maria Nagy; GABORATORY, INC.; AND DOES 1 THROUGH 10

CASE NO.:                 EC064009

MOTION TO SET ASIDE JUDGMENT

MOVING PARTY:               Defendant Peter Stojanov

RESPONDING PARTY:      Plaintiff Pasquale Zaza

SERVICE:                              Filed February 17, 2023

OPPOSITION:                       Filed February 27, 2023

REPLY:                                   Filed March 3, 2023

RELIEF REQUESTED

            Defendant moves to set aside judgment.

BACKGROUND

This case arises out of Plaintiff Pasquale Zaza’s (“Plaintiff”) claim that Maria Nagy (“Maria”), who is now deceased, had deprived him of profits relating to the sale of copyrighted jewelry by selling the products through a different company. Plaintiff filed the original complaint on August 24, 2015. Plaintiff filed this fourth amended complaint (“FAC”) on August 12, 2021, alleging four causes of action for (1) breach of contract, (2) fraud, (3) conversion, and (4) accounting.

TENTATIVE RULING

            Hearing for an Order to Show Cause regarding dismissal based on the issue of standing is set for 45 days from the date of this order. The hearing will be held on May 12, 2023. The parties are ordered to submit supplemental briefing consistent with the timing set forth in Code of Civil Procedure section 1005, subdivision (b).

LEGAL STANDARD

            “A judgment or decree, when based upon a decision by the court, or the special verdict of a jury, may, upon motion of the party aggrieved, be set aside and vacated by the same court, and another and different judgment entered, for either of the following causes, materially affecting the substantial rights of the party and entitling the party to a different judgment: [¶] 1. Incorrect or erroneous legal basis for the decision, not consistent with or not supported by the facts; and in such case when the judgment is set aside, the statement of decision shall be amended and corrected. [¶] 2. A judgment or decree not consistent with or not supported by the special verdict.” (Code Civ. Proc section 663.)

DISCUSSION

            Standing

            In support of his motion to set aside judgment, Defendant argues that Plaintiff’s claims are derivative in nature, and that therefore, Plaintiff lacks standing to bring this claim.

            “Standing is a threshold issue necessary to maintain a cause of action, and the burden to allege and establish standing lies with the plaintiff.” [Citation.] “Standing goes to the existence of a cause of action [citation], and the lack of standing may be raised at any time in the proceedings.” (Spotlight on Coastal Corruption v. Kinsey (2020) 57 Cal.App.5th 874, 882.) “Lack of standing may be raised at any time in the proceeding, including at trial or in an appeal.” (Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993, 1000.)

            Thus, Defendant is entitled to raise this issue of standing in his motion to set aside judgment. The primary issue then, is whether Plaintiff’s claim seeks recovery of an individual claim or a derivative claim on behalf of Gaboratory.

            “Shareholders may bring two types of actions, ‘a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder,’ or a ‘derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.’ ” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 311-12.)

“A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both.” (Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018, fn. 3.) “But where a cause of action seeks to recover for harms to the corporation, the shareholders have no direct cause of action ‘[b]ecause a corporation exists as a separate legal entity’ [citation] and ‘is the ultimate beneficiary of such a derivative suit’ ”. (Schrage v. Schrage (2021) 69 Cal.App.5th 126, 149.)

“ ‘[T]he action is derivative, i.e., in the corporate right, 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.’ ” (Jara v. Supreme Meats, Inc. (2004) 121 Cal.App.4th 1238, 1254.)

            “ ‘The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.’ ” [citations.]  For example, “ ‘[i]f the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action.’ ” (Schrage v. Schrage, supra, 69 Cal.App.5th at p. 150.) “If the injury is not incidental to an injury to the corporation, an individual cause of action exists.” (Ibid.)

            Here, Plaintiff’s claims are based on his status as a shareholder of Gaboratory. (FAC ¶ 16.) Plaintiff asserts that Maria Nagy had used another company to sell Gaboratory products. (Id. ¶ 22.) Further, Plaintiff’s claims rest on his allegations that he was deprived of his profit share as a shareholder in Gaboratory”. (Id. ¶ 38.) Plaintiff’s claims for injury are  directly related to harm suffered by Gaboratory’s whole body of stock when Maria Nagy sold Gaboratory products through a separate entity. Plaintiff’s claims are incidental to the injury to Gaboratory and are therefore derivative in nature. Plaintiff thus lacks standing to assert that the harm suffered constitute an individual claim.

            Order to Show Cause

            Hearing for an Order to Show Cause regarding dismissal based on the issue of standing is set for 45 days from the date of this order. The hearing will be held on May 12, 2023. The parties are ordered to submit supplemental briefing consistent with the timing set forth in Code of Civil Procedure section 1005, subdivision (b).

            The hearing for the motion for new trial is ordered continued to May 12, 2023, and will be heard concurrently with the Order to Show Cause.

CONCLUSION

            Hearing for an Order to Show Cause regarding dismissal based on the issue of standing will be held on May 12, 2023 at 8:30 a.m.. The parties are ordered to submit supplemental briefing consistent with the timing set forth in Code of Civil Procedure section 1005, subdivision (b).

            Moving Party to give notice.

Dated:   March 28, 2023                                 ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit.  Parties intending to appear are strongly encouraged to appear remotely.  alhdeptx@lacourt.org