Judge: Lynette Gridiron Winston, Case: 21PSCV00428, Date: 2023-09-26 Tentative Ruling

Case Number: 21PSCV00428    Hearing Date: February 27, 2024    Dept: 6

CASE NAME:  Maria Angela Rodriguez v. Mercado Latino, Inc., et al. 

Defendants Mercado Latino, Inc., Grosac, Inc., Richard Rodriguez, and Roberto Rodriguez’s Demurrer to the First Amended Complaint 

TENTATIVE RULING           

The Court SUSTAINS the demurrer to the Fourth Cause of Action with leave to amend. Plaintiff must file the Second Amended Complaint within 20 days of the Court’s order. 

Defendants are ordered to give notice of this ruling and file proof of service of same within five calendar days. 

BACKGROUND 

This is an involuntary dissolution action. On May 21, 2021, Plaintiff Maria Angela Rodriguez (Plaintiff) filed this action against Defendants Mercado Latino, Inc. (Mercado Latino), Grosac, Inc. (Grosac), Richard Yarruths Rodriguez (Richard), Roberto Rodriguez (Roberto), Jorge Rodriguez (Jorge) (collectively, Defendants), and Does 1 through 50. On December 11, 2023, Plaintiff filed the operative First Amended Complaint (FAC), alleging causes of action for involuntary dissolution of Mercado Latino and Grosac, breach of fiduciary duty, financial elder abuse, and accounting. 

On January 19, 2024, Defendants Mercado Latino, Grosac, Richard, and Roberto (collectively, Moving Parties) filed a demurrer to the Fourth Cause of Action in the FAC. On February 13, 2024, Plaintiff filed an opposition. On February 20, 2024, Moving Parties filed a reply. 

LEGAL STANDARD 

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.) 

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. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862, disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 [error to consider contents of release not part of court record].) 

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”]) 

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)            

DISCUSSION           

            Meet and Confer 

            Per Code of Civil Procedure section 430.41, subdivision (a), Moving Parties were required to meet and confer telephonically or in person before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds Moving Parties’ meet-and-confer efforts to be insufficient, as the declaration of Michelle Leight failed to indicate whether the parties met and conferred telephonically or in person. (Leight Decl., ¶ 2, subd. (a).) Nevertheless, the Court may not overrule a demurrer for failure to adequately meet and confer. (Code Civ. Proc., § 430.41, subd. (a)(4).) 

Although not mentioned in Plaintiff’s opposition, the Court also notes that the notice of demurrer is not signed by counsel for Moving Parties. (See Notice, 2:5-10.) This fails to satisfy the signature requirement of Code of Civil Procedure section 128.7, subdivision (a). (Code Civ. Proc., § 128.7, subd. (a) [“Every pleading, petition, written notice of motion, or other similar paper shall be signed by at least one attorney of record in the attorney's individual name…”]) The Court will still consider the demurrer, but admonishes the Moving Parties to comply with the requirements of the Code of Civil Procedure going forward. 

Financial Elder Abuse – Failing to Plead Sufficient Facts with Particularity 

“Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following: 

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. 

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. 

(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70. 

(Welf. & Inst. Code § 15610.30, subd. (a).) 

            Elder abuse claims are statutory causes of action and therefore must be pleaded with particularity. (See Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790, citing Lopez v. Southern Cal. Rapid Trans. Dist. (1985) 40 Cal.3d 780, 795). 

            Moving Parties demur to the Fourth Cause of Action in the FAC on the grounds that it fails to state a cause of action for financial elder abuse. More specifically, they contend the FAC fails to allege facts with the requisite particularity, that the alleged misconduct does not constitute taking the real or personal property of an elder, and that no facts are alleged that constitute fraud. They further contend that the allegations of Defendants siphoning off earnings of the corporate Defendants do not constitute taking Plaintiff’s personal property because Plaintiff does not own those earnings. 

            In opposition, Plaintiff contends the FAC adequately alleges facts to support a cause of action for financial elder abuse, pointing to allegations that Defendants Richard, Roberto, and Jorge siphoned off dividends, profits, and distributions which belonged to Plaintiff as her personal property. Plaintiff further contends she does not need to satisfy the elements of a fraud claim because there is no fraud claim at issue in the FAC. 

The Court agrees with Moving Parties. First, Plaintiff effectively admits in her opposition that the FAC is defective as to this cause of action, as evidenced by Plaintiff indicating that she intended to amend and thereby obviate the need for this demurrer. (Opp., p. 3:9-13; Bickel Decl., ¶¶ 3-7, Exs. A, B.) 

Second, the FAC lacks the specificity required for a financial elder abuse claim. (See Covenant Care, Inc., supra, 32 Cal.4th at p. 790.) The allegations of the FAC for this cause of action are conclusory and made without reference to any specific facts. (See FAC, ¶¶ 47-57; Serrano v. Priest (1971) 5 Cal.3d 584, 591 [a demurrer admits the truth of properly pleaded factual allegations, not conclusions of law].) The FAC fails to allege any specific facts regarding how, when and what specific property Richard, Roberto, or Jorge took, appropriated or retained that belonged to Plaintiff. 

Third, Plaintiff does not necessarily have a personal property right in the profits, dividends, and distributions of the corporate Defendants here. “Shareholders do not own and have no right to receive corporate profits, except in limited circumstances: ‘It is fundamental, of course, that the corporation has a personality distinct from that of its shareholders, and that the latter neither own the corporate property nor the corporate earnings.’ [Citation.] Shareholders own stock in the corporation, from which they derive income only upon liquidation of the corporation or the declaration of a dividend by the corporate directors. [Citation.]” (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 229.) The FAC does not allege any specific distributions or dividends having been made or declared. (See FAC, ¶¶ 23, 36, 44, 50.) Additionally, while the Court agrees with Plaintiff’s contentions regarding Moving Parties’ fraud arguments, that is ultimately unavailing to Plaintiff given the issues identified above. 

            Based on the foregoing, the Court SUSTAINS the demurrer to the Fourth Cause of Action with leave to amend. 

            Financial Elder Abuse – Lack of Standing 

“[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 or property without any severance or distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets. [Citation].” (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1016, internal quotation marks omitted.) “[A]n individual cause of action exists only if the damages were not incidental to an injury to the corporation. [Citation]. The cause of action is individual, not derivative, only where it appears that the injury resulted from the violation of some special duty owed the stockholder by the wrongdoer and having its origin in circumstances independent of the plaintiff's status as a shareholder. [Citation].” (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124, italics in original.) 

Moving Parties also demur to the Fourth Cause of Action in the FAC on the grounds that it fails to allege facts showing that Plaintiff has standing to bring this cause of action. In particular, they contend that the FAC’s alleged injuries are based on the individual Defendants’ purported misfeasance in managing the corporate Defendants, and that the FAC does not allege facts demonstrating that Defendants owed Plaintiff a special duty independent of her status as a shareholder. They further contend the gravamen of Plaintiff’s alleged injuries are to Mercado Latino and Grosac, not Plaintiff individually. 

            In opposition, Plaintiff contends the FAC alleges sufficient facts demonstrating that she has standing because it alleges the Defendants owed her a fiduciary duty as officers and directors of the corporate Defendants, and that they breached that duty when they siphoned off Plaintiff’s personal property to themselves.

The Court disagrees with Moving Parties, as the Court does not find that the gravamen of the allegations for the Fourth Cause of Action to be injuries to the corporate Defendants, i.e., derivative. (See Sole Energy Co., supra, 128 Cal.App.4th at p. 228.) Plaintiff does allege that the Defendants siphoned off money from corporate dividends and distributions meant for her. (FAC, ¶ 23, subd. (l); Id., ¶ 50.) While the Court finds these allegations to be problematic due to their lack of specificity, (see Covenant Care, Inc., supra, 32 Cal.4th at p. 790), they could form the basis of an individual claim for Plaintiff if she is able to allege a specific distribution or dividend which she was entitled to receive but which was wrongfully diverted, (see Sole Energy Co., supra, 128 Cal.App.4th at p. 229). Additionally, although not raised in the parties’ respective briefs, a corporation generally benefits from a derivative suit and may not challenge the merits of a cause of action by a general demurrer. (Patrick, supra, 167 Cal.App.4th at p. 1008.) Further the individual director defendants lack “any right to use the corporation … to impose on the corporation the burden of fighting their battle.” (Id.) The Corporate Defendants are nominal defendants in this case and there are no factual allegations against the Corporate Defendants as to any act of elder abuse. Thus, they should not be named as defendants in such cause of action. Plaintiff needs to clarify the specific defendants she is naming in this cause of action in any amended complaint. 

The Court also finds Plaintiff’s arguments regarding standing unavailing. Plaintiff already alleged the Third Cause of Action for breach of fiduciary duty, and to accept Plaintiff’s arguments here would essentially permit Plaintiff to plead a duplicate cause of action for breach of fiduciary duty that would be subject to demurrer. (See Palm Springs Villas II Homeowners Association, Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.) 

            However, given Moving Parties’ unavailing arguments, the Court OVERRULES the demurrer as to the Fourth Cause of Action on the lack of standing ground. 

            Financial Elder Abuse – Statute of Limitations 

            For the Court to sustain a demurrer on the basis of statute of limitations, the defects must be apparent from the face of the complaint. (Williams v. International Longshoremen's & Warehousemen's Union (1959) 172 Cal.App.2d 84, 87.) “An action for damages pursuant to Sections 15657.5 and 15657.6 for financial abuse of an elder or dependent adult, as defined in Section 15610.30, shall be commenced within four years after the plaintiff discovers or, through the exercise of reasonable diligence, should have discovered, the facts constituting the financial abuse.” (Welf. & Inst. Code § 15657.7.) 

            Moving Parties also demur to the Fourth Cause of Action on the grounds that it is barred by the statute of limitations. Moving Parties contend the FAC indicates on its face that Defendants purportedly engaged in misconduct since 2015. In opposition, Plaintiff contends nothing in the FAC indicates Plaintiff knew she had a cause of action for financial elder abuse against Defendants in 2015. 

            The Court agrees with Plaintiff. The only time the year 2015 is mentioned in the FAC is in paragraph 11, which mentions when Plaintiff and the individual Defendants’ father died. (FAC, ¶ 11.) Nothing else in the FAC alleges any facts regarding when the underlying misconduct purportedly occurred or clearly indicates when Plaintiff was purportedly aware of such wrongdoing. (See Welf. & Inst. Code § 15657.7.) 

            The Court further notes that Moving Parties’ reply papers raise arguments not contained in the demurrer, such as the relation-back doctrine. (Reply, 5:5-17.) Points raised for the first time in a reply brief are generally not considered. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1538.) Therefore, the Court declines to consider any such arguments raised for the first time in Moving Parties’ reply papers. 

            Based on the foregoing, the Court OVERRULES the demurrer to the Fourth Cause of Action on the statute of limitations ground. 

CONCLUSION           

For the reasons set forth above, the Court SUSTAINS the demurrer to the Fourth Cause of Action with leave to amend. Plaintiff must file the Second Amended Complaint within 20 days of the Court’s order. 

Defendants are ordered to give notice of this ruling and file proof of service of same within five calendar days.