TENTATIVE RULING

Plaintiffs/Cross-Defendants Mike Khattab and Nagwa Khattab’s Demurrer to First Amended Cross-Complaint is SUSTAINED without leave to amend as to the first and second causes of action.

Plaintiff/Cross-Defendant Mike Khattab shall file and serve an answer to Defendants/Cross-Complainants Ahmedshah Patail and Shams Virjee’s First Amended Cross-Complaint within ten (10) days of entry of this order. (Cal. Rules of Court, rule 3.1320(j).)

Plaintiffs/Cross-Defendants Mike Khattab and Nagwa Khattab to give notice. 

REASONING

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967), but the Court does not “assume the truth of contentions, deductions, or conclusions of fact or law” (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125).

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“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.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

First Cause of Action: Cancellation of Instrument

Civil Code section 3412 provides that “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” “To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position.” (U.S. Bank National Association v. Naifeh (2016) 1 Cal.App.5th 767, 778.)

In the first cause of action, Defendants/Cross-Complainants Ahmedshah Patail and Shams Virjee (“Defendants”) seek cancellation of their withdrawals from Midvale LLC and Tabor LLC because the withdrawals are void due to not receiving consideration for the withdrawals. (First Am. Cross-Compl. (“FACC”) ¶¶ 12, 13, 17, 24.) As with the prior pleading, Defendants have alleged only that the withdrawals are void due to lack of consideration and that Plaintiffs/Cross-Defendants Mike Khattab and Nagwa Khattab (“Plaintiffs”) had no intention of making a good faith offer to Defendants, but it remains unclear that consideration was required for the withdrawals to be effective. (See Corp. Code, § 17706.02.) The nature of Defendants’ apprehension of injury is also not sufficiently stated, as Defendants provide only a conclusory statement in this regard. (FACC ¶ 26.) The Court lacks a basis to conclude that further amendment will cure these deficiencies. Accordingly, Plaintiffs’ demurrer to the first cause of action is SUSTAINED without leave to amend. 

Second Cause of Action: Accounting

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting. An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, citations and paragraph break omitted.)

In the second cause of action, Defendants again allege that Plaintiffs prevented them from equal management of Tabor LLC and Midvale LLC, they failed to provide accurate statements of accounts and failed to accurately allocate profits to Defendants, and Plaintiffs have refused to render an accounting. (FACC ¶¶ 28-20.) It is not clear that an accounting is proper here because Defendants’ claim for breach of fiduciary duty implies that Defendants’ harm can be made certain by calculation. Defendants have not amended this claim in any meaningful way, such that the Court cannot conclude that granting leave to amend will yield a cognizable claim. Thus, Plaintiffs’ demurrer to the second cause of action is SUSTAINED without leave to amend.