Judge: Martha K. Gooding, Case: 2022-01254610, Date: 2022-10-17 Tentative Ruling

1) Demurrer to Complaint

 

2) Motion to Strike Complaint

 

3) Case Management Conference

 

The Demurrer of Defendants Attac Group, Inc. and Dustin Barr (collectively, “Defendants”) is overruled in part and sustained in part.  The demurrer is OVERRULED as to the first, second, third, fourth, and seventh causes of action.  The demurrer is SUSTAINED with 15 days leave to amend as to the fifth and sixth causes of action. 

 

Defendants’ request for judicial notice is granted.

 

Defendants’ motion to strike punitive damages is moot in light of the Court’s order sustaining the demurrer to the fifth cause of action.

 

DEMURRER

 

A demurrer can be used only to challenge defects that appear within the “four corners” of the pleading – which includes the pleading, any exhibits attached, and matters of which the court is permitted to take judicial notice.  Blank v. Kirwan (1985) 39 Cal. 3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.  Limited to the “four corners” as such, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim.  Leek v. Cooper (2011) 194 Cal. App. 4th 399, 413.

 

On demurrer, a complaint must be liberally construed.  Code Civ. Proc. § 452; Stevens v. Superior Court (1999) 75 Cal. App. 4th 594, 601.  All material facts properly pleaded, and reasonable inferences, must be accepted as true.  Aubry v. Tri-City Hospital Dist. (1992) 2 Cal. 4th 962, 966-67.

 

A pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim.  The degree of detail required depends on the extent to which the defendant in fairness needs such detail which can be conveniently provided by the plaintiff.  Less particularity is required when the defendant ought to have co-extensive or superior knowledge of the facts.  Under normal circumstances, there is no need for specificity in pleading evidentiary facts.  However, bare conclusions of law are insufficient.  Code Civ. Proc. §§ 425.10(a), 459; Doe v. City of Los Angeles (2007) 42 Cal. 4th 531, 549-50; Zelig v. County of Los Angeles (2002) 27 Cal. 4th 1112, 1126; Doheny Park Terrace HOA v. Truck Ins. Exchange (2005) 132 Cal. App. 4th 1076, 1098-99; Berger v. California Insurance Guarantee Assn (2005) 128 Cal. App. 4th 989, 1006.

 

The well pled allegations that we accept as true necessarily include the contents of any exhibits attached to the complaint. Indeed, the contents of an incorporated document (in this case, the agreement) will take precedence over and supercede any inconsistent or contrary allegations set out in the pleading. In the case of such a conflict, we will look solely to the attached exhibit. (Holland v. Morse Diesel International Inc. (2001) 86 Cal.App.4th 1443, 1447, 104 Cal.Rptr.2d 239; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604–605, 176 Cal.Rptr. 824.)

Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1409.

 

          Uncertainty

 

A demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.  People v. Lim (1941) 18 Cal. 2d 872, 883.  “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”  Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 616.  Errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief.  Saunders v. Cariss (1990) 224 Cal. App. 3d 905, 908.  A party attacking a pleading on “uncertainty” grounds must specify how and why the pleading is uncertain, and where that uncertainty can be found in the challenged pleading.  Fenton v. Groveland Community Services Dept. (1982) 135 Cal.App.3d 797, 809 (disapproved on other grounds in Katzberg v. Regents of the University of California (2002) 29 Cal.4th 300). 

 

Further, uncertainty is a disfavored ground on a demurrer.  See, Rutter, Civil Procedure Before Trial, Section 7:85. A demurrer for uncertainty will only be sustained where the complaint is so poorly pled that a defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. See Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 616. 

 

            Alter Ego

 

Plaintiff alleges Defendant Barr is the alter ego of Defendant Attac.  [Complaint, ¶ 5.]

 

The doctrine of alter ego is one whereby one party to litigation is held liable for the wrongdoing of another, based upon the legal and equitable doctrine that the use of corporate or other business entities should not be allowed to be used to perpetrate injustice upon an injured party.

 

Typically, the doctrine is applied as to the acts of corporations, or LLCs to impose liability upon the individual beneficial owners. However, the alter ego doctrine has also been utilized in the setting of parent and subsidiary, and the like.

 

“The two basic requirements for the application of this doctrine are: (1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow. (Automotriz etc. De California v. Resnick, supra, 47 Cal.2d p. 796,; Stark v. Coker, supra, 20 Cal.2d p. 846,; Associated Vendors, Inc. v. Oakland Meat Co., 210 Cal.App.2d at 837.)  Both of these requirements must be found to exist before the corporate existence will be disregarded, the determination being primarily one for the trial court. (Associated Vendors, Inc. v. Oakland Meat Co., 210 Cal.App.2d at 837.”) 

         

Auer v. Frank (1964) 227 Cal.App.2d 396, 408.

 

Here, as Defendants note, Plaintiffs have made essentially boilerplate allegations.  That the allegations are boilerplate is not necessarily fatal.  At the beginning of an action, and before discovery, the plaintiff cannot be expected to know the information to allege specific facts. 

 

“Courts have followed a liberal policy of applying the alter ego doctrine where the equities and justice of the situation appear to call for it rather than restricting it to the technical niceties depending upon pleading and procedure.”  Greenspan v. Ladt, LLC. (2010) 185 Cal. App. 4th 1413, 1445. See also First Western Bank and Trust Co. v. Bookasta (1968) 267 Cal. App. 2d 910, 915-16 (reversing order sustaining demurrer for purported failure to adequately allege alter ego).  See also First Western Bank and Trust Co. v. Bookasta (1968) 267 Cal. App. 2d 910, 915-16 (reversing order sustaining demurrer for purported failure to adequately allege alter ego).  But see Moore v. Regents of the University of California (1990) 51 Cal. 3d 120, 134 n. 12 (noting allegations to be egregious boilerplate and noting with apparent approval that trial court ultimately found them too conclusory); Leek v. Cooper (2011) 194 Cal. App. 4th 399, 413 (discussing conflicts in law on whether alter ego need be pleaded and finding, in the case before it, that it must); Las Palmas Assoc. v. Las Palmas Center Assoc. (1991) 235 Cal. App. 3d 1220, 1248-50 (finding alter ego shown when (1) there is such unity of interest and ownership that separate personalities no longer exist and (2) the acts are treated as those of corporation alone, inequity will result). 

The Court finds Plaintiff’s alter ego allegations are sufficient at the pleading stage.

 

          First Cause of Action for Breach of Written Contract (the “MOU”)

 

The elements of breach of contract are (1) existence of a contract, (2) plaintiff’s performance or excuse from non-performance, (3) breach by defendant, and (4) damages.  First Commercial Mortgage Co. v. Reece, 89 Cal. App. 4th 731, 745 (2001). 

 

A written contract may be pleaded either by its terms – by setting it out verbatim in the complaint or by attaching a copy of the contract attached to the complaint and incorporating it therein by reference – or by its legal effect.  Holcomb v. Wells Fargo Bank, NA (2007) 155 Cal. App. 4th 490, 501. 

 

Plaintiff has alleged the existence of the Memorandum of Understanding (the “MOU”) – entered into on or about July 30, 2019 – under which he would be compensated for bringing business deals to Attac.  Under the MOU, Plaintiff’s compensation was to be 50% of the profit from those deals, as well as 5% of Attac’s overall profit.  Plaintiff alleges breach of this agreement.

 

Nonetheless, Defendants argue that Plaintiff cannot state a cause of action for breach of the MOU because the parties’ Independent Contractor Agreement (“ICA”) – entered into on or about December 23, 2019 – superseded it.  For this argument, Defendants rely on the following provision in the ICA

 

All terms and conditions contained in any other writings previously executed by the parties regarding the matters contemplated herein shall be deemed to be merged herein and superceded hereby.

 

[Complaint, Ex. B at ¶ 13 (emphasis added).]

 

But the “matters contemplated” by the ICA are business management and operations management consulting services, and not procurement of business deals. [Complaint, ¶ 13 and Ex. B.]

 

Defendants argue the Court can interpret the contract as a matter of law, and they present an interpretation that arguably would result in the ICA, for practical purposes, superseding the MOU. But on demurrer, Plaintiff’s alleged interpretation – that the contracts cover two different matters – must be accepted.  Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.

 

The demurrer to the first cause of action is OVERRULED.

 

          Second Cause of Action for Breach of Written Contract (the “ICA”)

 

Defendants contend Plaintiff’s claim for breach of the written ICA contract is uncertain because of what they describe as contradictory damages allegations; they also argue it is barred by collateral estoppel based on the Labor Commission Order.  [RJN, Tab 1.]

 

But Defendants did not demur to the second cause of action for uncertainty.

 

For collateral estoppel, Defendants point to certain findings of fact in the Labor Commission Order and argue that the Labor Commission finding of an oral agreement establishes the new agreement modifying the ICA, thereby precluding Plaintiff’s claim for breach of the ICA.

 

The Court finds Defendants’ argument unpersuasive.

 

[Collateral estoppel] applies “only if several threshold requirements are fulfilled. First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. [Citations.] The party asserting collateral estoppel bears the burden of establishing these requirements.” (Id. at p. 341, 272 Cal.Rptr. 767, 795 P.2d 1223.) “Even assuming all the threshold requirements are satisfied, however, our analysis is not at an end. We have repeatedly looked to the public policies underlying the doctrine before concluding that collateral estoppel should be applied in a particular setting.” (Id. at pp. 342–343, 272 Cal.Rptr. 767, 795 P.2d 1223.)

 

We have recognized that “[c]ollateral estoppel may be applied to decisions made by administrative agencies.” (People v. Sims (1982) 32 Cal.3d 468, 479, 186 Cal.Rptr. 77, 651 P.2d 321.) For an administrative decision to have collateral estoppel effect, it and its prior proceedings must possess a judicial character. (Ibid.) Indicia of proceedings undertaken in a judicial capacity include a hearing before an impartial decision maker; testimony given under oath or affirmation; a party's ability to subpoena, call, examine, and cross-examine witnesses, to introduce documentary evidence, and to make oral and written argument; the taking of a record of the proceeding; and a written statement of reasons for the decision. (Id. at p. 480, 186 Cal.Rptr. 77, 651 P.2d 321.)

 

Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 37 Cal.4th 921, 943–944 (emphasis added).

 

“ ‘[C]ollateral estoppel may be applied to decisions made by administrative agencies “[when] an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate....” ’ [Citations.]” (People v. Garcia, supra, 39 Cal.4th at p. 1076, 48 Cal.Rptr.3d 75, 141 P.3d 197.) Labor Commissioner hearings under section 96 meet this standard.

 

Res judicata and collateral estoppel additionally have specific application to Labor Commissioner decisions on wage claims under section 98, by virtue of section 98.2,6 which gives the administrative order the force of a final, binding judgment in the event (as was the case here) the losing party does not seek judicial review of the administrative order.

 

Noble v. Draper (2008) 160 Cal.App.4th 1, 11–12 (emphasis added).

 

The Court concludes that determining whether collateral estoppel applies will require a fuller factual record.  On the pleadings alone, the Court cannot definitively determine that collateral estoppel properly applies here and vitiates Plaintiff’s ICA claim.  The Labor Commissioner’s finding of an oral employment agreement is not inconsistent with Plaintiff’s allegations.  [See Complaint, ¶14.]  Nor do the findings, or any of the documents submitted from the Labor Commission proceedings, refer to the ICA.

 

The demurrer to this cause of action is OVERRULED.

 

          Third Cause of Action for Common Counts (services rendered)

 

To state common counts, a plaintiff needs to allege (1) indebtedness, (2) consideration (e.g., money had and received, work done, good sold), and (3) nonpayment.  Farmers Ins. Exch. v. Zerin (1997) 53 Cal. App. 4th 445, 460.

 

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.  Gleason v. Klamer (1980) 103 Cal. App. 3d 782, 786; Zinn v. Fred R. Bright Co. (1969) 271 Cal. App. 2d 597, 600. 

 

To be an account stated, “it must appear that at the time of the statement an indebtedness from one party to the other existed, that a balance was then struck and agreed to be the correct sum owing from the debtor to the creditor, and that the debtor expressly or impliedly promised to pay to the creditor the amount thus determined to be owing.”  H. Russell Taylor's Fire Prevention Service, Inc. v. Coca Cola Bottling Corp. (1979) 99 Cal. App. 3d 711, 726.  When a statement is rendered to a debtor and no reply is made in a reasonable time, the law implies an agreement that the account is correct as rendered.  California B.G. Assn. v. Williams (1927) 82 Cal. App. 434, 442.

 

“As Witkin states in his text, a common count is proper whenever the plaintiff claims a sum of money due, either as an indebtedness in a sum certain, or for the reasonable value of services, goods, etc. furnished.  It makes no difference in such a case that the proof shows the original transaction to be an express contract, a contract implied in fact, or a quasi-contract.  A claim for money had and received can be based upon money paid by mistake, money paid pursuant to a void contract, or a performance by one party of an express contract.”  Utility Audit Co., Inc. v. City of Los Angeles (2003) 112 Cal. App. 4th 950, 958 (citation and internal quote marks omitted). B. Witkin, Cal. Proc. (5th ed. 2013) Pleading, § 554.

 

In their Reply, Defendants appear to argue that a demurrer for uncertainty lies because Plaintiff’s Complaint does not make clear when the amounts allegedly owing became due – and thus does not make clear when the statute of limitations runs.  [See discussion below.]  But the absence of alleged dates in a complaint is not a basis for demurrer for uncertainty.

 

Defendants also object that Plaintiff is seeking damages beyond the two-year statute of limitation applicable to common counts.  Code Civ. Proc. § 339.  But the complaint expressly alleges the debt sued on was incurred in the last two years.  [Complaint, ¶ 28.]  Defendant points to allegations that the MOU was first breached more than two years earlier, so such damages would not be recoverable.  This does not mean, however, that damages incurred later are not recoverable.  In short, although the two-year statute of limitations may limit the damages recoverable by Plaintiff, it does not bar his entire action – given the allegation that damages were incurred within two years – so it is not a basis to dispose of the action by demurrer.

 

The demurrer to this cause of action is OVERRULED.

 

          Fourth Cause of Action for Restitution

 

Restitution is not a cause of action; it is a remedy. Munoz v. MacMillan (2011) 195 Cal.App.4th 648, 661.

 

But Plaintiff has pleaded breach of contract and services rendered, which could give rise to a restitution remedy. The Court finds there is little utility to requiring Plaintiff to amend simply to fold his restitution allegations into different causes of action. 

 

The demurrer to this cause of action is OVERRULED.

 

          Fifth Cause of Action for Breach of Fiduciary Duty

 

The elements of breach of fiduciary duty are (1) existence of a fiduciary duty, (2) breach of that duty, and (3) damages.  Twomey v. Mitchum, Jones & Templeton Inc. (1968) 262 Cal. App. 2d 690. 

 

An employment relationship is not generally a fiduciary relationship.  O'Byrne v. Santa Monica-UCLA Medical Center (2001) 94 Cal.App.4th 797, 811. “Under prevailing judicial opinion no presumption of a confidential relationship arises from the bare fact that parties to a contract are employer and employee; rather, additional ties must be brought out in order to create the presumption of a confidential relationship between the two.” Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 129.

 

Besides them both being disabled veterans, Plaintiff points to his and Barr’s standing as shareholders, officers, and directors of Attac to allege the existence of a fiduciary duty. [Complaint, ¶ 39.]

 

Although an officer owes fiduciary duties to the corporation and shareholder, the corporation does not have a fiduciary duty to the officer.  Nor do officers and directors have fiduciary duties to each other.  A majority shareholder may have a fiduciary duty to a minority shareholder, but that is limited to situations where the majority shareholder uses his majority status to obtain a bigger benefit for himself as majority shareholder than is provided to minority shareholders.  Singhania v. Uttarwar (2006) 136 Cal.App.4th 416, 426.

 

Here, the actions and transactions alleged by Plaintiff are not based on his status as a shareholder; the MOU, ICA, and services provided were more in the nature of employment relationships.  Nor does Plaintiff allege facts otherwise showing a confidential relationship.

 

A fiduciary or confidential relationship can arise when confidence is reposed by persons in the integrity of others, and if the latter voluntarily accepts or assumes to accept the confidence, he or she may not act so as to take advantage of the other's interest without that person's knowledge or consent.  Slovensky v. Friedman (2006) 142 Cal. App. 4th 1518, 1534; Pierce v. Lyman (1991) 1 Cal. App. 4th 1093, 1101–02.  A fiduciary relationship is a relationship existing between parties to a transaction wherein one party is duty bound to act with the utmost good faith for the benefit of the other. 

 

“Before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.”  City of Hope Nat. Medical Center v. Genentech, Inc. (2008) 43 Cal. 4th 375, 386.  Significantly, “the essence of a fiduciary or confidential relationship is that the parties do not deal on equal terms because the person in whom trust and confidence is reposed and who accepts that trust and confidence is in a superior position to exert unique influence over the dependent party.”  Brown v. Wells Fargo Bank, NA (2008) 168 Cal. App. 4th 938, 960.

 

Plaintiff has not alleged a fiduciary relationship in connection with the transactions alleged.  The demurer to this cause of action is SUSTAINED.

 

          Sixth Cause of Action for Declaratory Relief

 

The essential elements of a declaratory-relief cause of action are (i) an actual controversy between the parties regarding contractual or property rights (ii) involving continuing acts/omissions or future consequences, (iii) which has sufficiently ripened to permit judicial intervention and resolution, but (iv) which has not yet blossomed into an actual cause of action.  See Osseous Technologies of America, Inc. v. Discoveryortho Partners LLC (2010) 191 Cal. App. 4th 357, 366-69. 

 

          Declaratory Relief on a Contract

 

“Any person interested under a written instrument . . . or under a contract, who desires a declaration of his or her rights or duties with respect to another . . . may ask for a declaration of rights and duties . . . .”  Code Civ. Proc. § 1060 (emphasis added).

 

The general purposes of declaratory relief inform the interpretation of sections 1060 and 1061. “ ‘ “The purpose of a declaratory judgment is to ‘serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.’ ” [Citation.] “Another purpose is to liquidate doubts with respect to uncertainties or controversies which might otherwise result in subsequent litigation [citation].” [Citation.]' [Citation.] ‘ “One test of the right to institute proceedings for declaratory judgment is the necessity of present  adjudication as a guide for plaintiff's future conduct in order to preserve his legal rights.” ’ ” (Meyer, supra, 45 Cal.4th at p. 647, 88 Cal.Rptr.3d 859, 200 P.3d 295.) “[S]ection 1060 does not require a breach of contract in order to obtain declaratory relief, only an ‘actual controversy.’ Declaratory relief pursuant to this section has frequently been used as a means of settling controversies between parties to a contract regarding the nature of their contractual rights and obligations.” (Ibid.)

Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal. App. 4th 357, 364–65 (emphasis added).

 

          Court’s Discretion

 

Code of Civil Procedure section 1061 provides: “The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” 

 

Declaratory relief is properly refused with respect to issues that can and are likely to be determined in the main/underlying action.  See, e.g., General of America Ins. Co. v. Lilly (1968) 258 Cal. App. 2d 465, 470–71; California Ins. Guarantee Assn. v. Superior Court (1991) 231 Cal. App. 3d 1617, 1623–24.  “Generally, an action in declaratory relief will not lie to determine an issue which can be determined in the underlying tort action . . . [t]he declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action; [rather] [t]he object of the statute is to afford a new form of relief where needed and not to furnish a litigant with a second cause of action for the determination of identical issues.”). 

 

Here, Plaintiff’s claims regarding payments under the MOU and ICA will be determined in his first and second causes of action.  His claim for payment for his shares is not properly the subject of a declaratory relief action as there is no written agreement alleged regarding the return of the shares.

 

The demurrer to this cause of action is SUSTAINED.

 

          Seventh Cause of Action for Accounting

 

Finally, the Court turns to the cause of action for an accounting.

 

An action for an accounting has two elements: (1) “that a relationship exists between the plaintiff and defendant that requires an accounting” and (2) “that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle, supra, 173 Cal.App.4th at p. 179, 92 Cal.Rptr.3d 696; see also 5 Witkin, Cal. Procedure, supra, Pleading, § 820.) The action carries with it an inherent limitation; an accounting action “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, at p. 179, 92 Cal.Rptr.3d 696; see also St. James Church of Christ Holiness v. Superior Court of Los Angeles County (1955) 135 Cal.App.2d 352, 359, 287 P.2d 387.)

 

An action for an accounting has been characterized as “a means of discovery.” (Teselle, supra, 173 Cal.App.4th at p. 180, 92 Cal.Rptr.3d 696 [“the purpose of the accounting is, in part, to discover what, if any, sums are owed to the plaintiff, and an accounting may be used as a discovery device”].)

 

Sass v. Cohen (2020) 10 Cal.5th 861, 272 Cal.Rptr.3d 836, 842, (emphasis added).

 

Plaintiff has alleged sufficient facts for an accounting cause of action.  The demurrer to this cause of action is OVERRULED.

 

MOTION TO STRIKE

 

Plaintiff’s claim for punitive damages is premised on his breach of fiduciary duty claim, in which he alleges that the other actions alleged in the Complaint (the alleged breaches of contract) were taken by Defendants in violation of their fiduciary duty to Plaintiff.

 

Based on the Court’s ruling, above, sustaining the demurrer to the fifth cause of action for breach of fiduciary duty, the Motion to Strike the punitive damages claim is MOOT.

 

In any event, the Court notes that Plaintiff’s Complaint does not allege facts supporting circumstances of oppression, fraud, or malice.  See Civil Code § 3294; American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017, 1051. 

 

Plaintiff is ordered to give notice, unless all parties waive notice at the hearing.