Judge: Michael P. Linfield, Case: 22STCV13776, Date: 2022-09-19 Tentative Ruling
Case Number: 22STCV13776 Hearing Date: September 19, 2022 Dept: 34
SUBJECT: Demurrer
Moving Party: Defendants LA Stainless Kings, Inc. and Szabolcs Apai
Resp. Party: Plaintiff Pasta Sisters Trucks LLC
The Court SUSTAINS in part and DENIES in part Defendants’ Demurrer. The Court sustains with leave to amend the Demurrer as to causes of action two (breach of fiduciary duty), three (rescission), four (violation of Vehicle Code § 11700) and five (violation of UCL). The Court sustains without leave to amend the Demurrer to the sixth cause of action (restitution). The Demurrer is OVERRULED as to the first cause of action for Breach of Contract and as to the alter ego allegations.
BACKGROUND:
On April 26, 2022, Plaintiff Pasta Sisters Trucks LLC filed its Complaint against Defendants LA Stainless Kings, Inc., Szabolcs Apai, and Does 1 through 20, inclusive, on causes of action regarding the sale of a food truck.
On July 14, 2022, Defendants LA Stainless Kings, Inc. and Szabolcs Apai filed their Demurrer as to all causes of action in the Complaint. Defendants concurrently filed their Request for Judicial Notice and Declaration of Gabor Szabo.
On September 6, 2022, Plaintiff filed its Opposition. Plaintiff concurrently filed its Objections to Defendant’s Request for Judicial Notice.
ANALYSIS:
I. Judicial Notice
Defendants request judicial notice of:
(1) Article of Incorporation of LA Stainless Kings, Inc., filed with the California Secretary of State;
(2) Most recent Statement of Information of LA Stainless Kings, Inc., filed with the California Secretary of State;
(3) First Statement of Information of LA Stainless Kings, Inc., filed with the California Secretary of State;
(4) Notice of Issuance of Shares of LA Stainless Kings, Inc., filed with the California Secretary of State;
(5) Plan Check Official Inspection Report for VIN xxxx85760, from County of Los Angeles Department of Public Health;
(6) Registration Card for VIN xxxx85760, from California Department of Motor Vehicles; and
(7) LA Stainless Kings, Inc.’s occupational license information and issued license, from California Department of Motor Vehicles.
Plaintiff objects to the Request. Plaintiff generally objects that these items do not fall into any of the categories accepted for the Court to take judicial notice. (Object., p. 2:1–4; Evid. Code, § 452.) Plaintiff also specifically objects to documents four through seven, arguing that the Court may not take notice of the truth of the matters asserted within, and particularly in the scope of a demurrer. (Object., p. 2:9–18 and 2:22–26.)
The Court does not agree with Plaintiff’s general objection. Each of the seven documents listed by Defendants does fall within categories from which the Court may take judicial notice. Thus, the Court takes judicial notice of all seven documents.
However, Plaintiff is correct in noting that “[w]hile courts take judicial notice of public records, they do not take notice of matters stated therein.” (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375 (citing Love v. Wolf (1964) 226 Cal.App.2d 378, 403.) “When judicial notice is taken of a document, however, the truthfulness and proper interpretations of the document are disputable.” (StorMedia Inc. Superior Court (1999) 20 Cal.4th 449, fn. 9 (citing Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374).)
II. Legal Standard for a Demurrer
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. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (Code Civ. Proc., §§ 422.10, 589.)
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.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure section 430.10 (grounds), section 430.30 (as to any matter on its face or from which judicial notice may be taken), and section 430.50(a) (can be taken to the entire complaint or any cause of action within).
A demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty (Code of Civil Procedure section 430.10, subdivision (f)), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Id.)
Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).
III. Discussion
A. Alter Ego of Defendants
1. Legal Standard
“The doctrine is applicable where some innocent party attacks the corporate form as an injury to that party's interests. The issue is not so much whether the corporate entity should be disregarded for all purposes or whether its very purpose was to defraud the innocent party, as it is whether in the particular case presented, justice and equity can best be accomplished and fraud and unfairness defeated by disregarding the distinct entity of the corporate form.” (Id.)
“A claim based upon an alter ego theory is not itself a claim for substantive relief.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 418.)
“The alter ego test encompasses a host of facts: [14 factors listed.] This long list of factors is not exhaustive.” (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 249–250.) “The basic rule stated by our Supreme Court as a guide in the application of this doctrine is as follows: The two requirements 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.” (Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 837.)
"It therefore appears that the court 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." (First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915 (emphasis omitted).)
“[W]hile it is the better practice to allege the facts upon which a plaintiff seeks to hold a defendant on the alter ego theory, still it is the law of California that that issue may be raised by a simple allegation that the defendant sought to be charged had made the contract involved.” (Los Angeles Cemetery Assoc. v. Superior Court of Los Angeles County (1968) 268 Cal.App.2d 492, 494 (emphasis omitted).)
2. Discussion
For the purposes of the Demurrer, Plaintiff meets the standard for the alter ego theory. Plaintiff alleges multiple facts supporting its claim of alter ego, including commingling of assets, unity of ownership interest, and management of the company to avoid liability. (See Complaint, ¶ 5.) Plaintiff also alleges that “great injustice will result” if Defendants are not treated as alter egos. (Id.) This is sufficient to withstand Defendants’ Demurrer.
B. Breach of Contract
1. Legal Standard
If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.)
2. Discussion
For the purposes of the Demurrer, Plaintiff meets the standard for breach of contract. First, Plaintiff has established that there was a written contract between the parties. (Compl., ¶¶ 16–22, 25.) Second, Plaintiff has established that it performed under the contract. (Id. at ¶ 22.) Third, Plaintiff has established that Defendant breached the contract. (Id. at ¶ 23, 27–28.) Finally, Plaintiff has established the resulting damages to Plaintiff. (Id. at ¶ 32.)
The demurrer to the first cause of action for Breach of Contract is overruled.
C. Breach of Fiduciary Duty
1. Legal Standard
“There are two kinds of fiduciary duties – those imposed by law and those undertaken by agreement.” (Gab Bus. Servs. v. Lindsey & Newsom Claim Servs. (2000) 83 Cal.App.4th 409, 416.)
“Fiduciary duties are imposed by law in certain technical, legal relationships such as those between partners or joint venturers, husbands and wives, guardians and wards, trustees and beneficiaries, principals and agents, and attorneys and clients.” (Id. [citations omitted].)
“A fiduciary duty is undertaken by agreement when one person enters into a confidential relationship with another.” (Id. at 417.) “Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he [or she] voluntarily accepts or assumes to accept the confidence, can take no advantage from his [or her] acts relating to the interest of the other party without the latter's knowledge or consent. . . .” (Barbara A. v. John G. (1983) 145 Cal.App.3d 369, 382 (quoting Herbert v. Lankershim (1937) 9 Cal.2d 409, 483) (internal quotation marks omitted).) “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.” (Id. at 383.)
“Every contract requires one party to repose an element of trust and confidence in the other to perform.” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 31.) “The mere fact that in the course of their business relationships the parties reposed trust and confidence in each other does not impose any corresponding fiduciary duty in the absence of an act creating or establishing a fiduciary relationship known to law.” (Worldvision Enters. v. ABC (1983) 142 Cal.App.3d 589, 595.)
2. Discussion
Plaintiff does not allege facts that meet the standard for breach of fiduciary duty. There are no allegations in the Complaint from which for the Court could find that that there is a fiduciary relationship, in law or in agreement, between the parties. Plaintiff does not cite to a fiduciary relationship in law, and there is no evidence from the contract language cited that would indicate a fiduciary relationship has been undertaken by agreement. (Compl., ¶ 20.) Plaintiff’s allegations about what was listed on Defendant LA Stainless Kings, Inc’s website also do not meet the standard for the creation of a fiduciary agreement. (Id. at ¶¶ 10–15.)
The demurrer to the second cause of action for breach of fiduciary duty is sustained with leave to amend.
D. Rescission
1. Legal Standard
“A contract is extinguished by its rescission.” (Civ. Code, § 1688.)
“A party to a contract may rescind the contract in the following cases:
(1) “If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.
(2) “If the consideration for the obligation of the rescinding party fails, in whole or in part, through the fault of the party as to whom he rescinds.
(3) “If the consideration for the obligation of the rescinding party becomes entirely void from any cause.
(4) “If the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.
(5) “If the contract is unlawful for causes which do not appear in its terms or conditions, and the parties are not equally at fault.
(6) “If the public interest will be prejudiced by permitting the contract to stand.
(7) “Under the circumstances provided for in Sections 39, 1533, 1566, 1785, 1789, 1930 and 2314 of this code, Section 2470 of the Corporations Code, Sections 331, 338, 359, 447, 1904 and 2030 of the Insurance Code or any other statute providing for rescission.”
(Civ. Code, § 1689, subd. (b)(1–7).)
2. Discussion
Plaintiff does not allege facts sufficient to sustain its cause of action for rescission. The allegations in the Complaint do not provide a basis for the Court to find that there has been a rescission of the agreement, either bilaterally or unilaterally.
The demurer to the third cause of action for recission is sustained with leave to amend.
E. Violation of Vehicle Code Section 11700
1. Legal Standard
“No person shall act as a dealer, remanufacturer, manufacturer, or transporter, or as a manufacturer branch, remanufacturer branch, distributor, or distributor branch, without having first been issued a license as required in Section 11701 or temporary permit issued by the department, except that, when the license or temporary permit has been canceled, suspended, or revoked or has expired, any vehicle in the dealer’s inventory and owned by the dealer when the dealer ceased to be licensed may be sold at wholesale to a licensed dealer. The former licensee shall give the purchasing dealer a statement of facts stating that the seller is not a licensed dealer. Any vehicle on consignment with the dealer when the dealer ceased to be licensed shall be returned to the consignor. Any vehicle in the dealer’s possession, but not owned by the dealer and not on consignment when the dealer ceased to be licensed, shall be returned to the owner of the vehicle.” (Veh. Code, § 11700.)
2. Discussion
The Court has taken judicial notice of Defendant’s occupational license from the Department of Motor Vehicles. (Req., Ex. 7.) Plaintiff does not allege facts to show a violation of Vehicle Code § 11700.
The demurrer to the fourth cause of action for violation of VC §11700 is sustained with leave to amend.
F. Unfair Competition Law
1. Legal Standard
2. Discussion
Plaintiff does not meet the standard for violation of UCL. Plaintiff repeatedly discusses the “unlawful,” “unfair,” and “fraudulent” conduct of Defendant, but Plaintiff never states what exactly the conduct was, much less how it was unlawful, unfair, and/or fraudulent. (Compl., ¶¶ 59, 62–67, and 69.) Moreover, as discussed above, there is no evidence of a fiduciary duty, and thus there are no grounds here for violation of UCL based upon violation of a fiduciary duty. In effect, we have only a complaint for Breach of Contract; a violation of the UCL cannot be based solely on a Breach of Contract.
The demurrer to the fifth cause of action for violation of the UCL is sustained with leave to amend.
G. Restitution
1. Legal Standard
“The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 460.) “The phrase ‘Unjust Enrichment’ does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.
“In addition, as [trial courts have] observed, there is no cause of action in California for unjust enrichment.” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.)
2. Discussion
Plaintiff pleads a cause of action that does not exist in California. As stated above, Plaintiff has basically filed a complaint for Breach of Contract. Damages for Breach of Contract would be a sufficient remedy for this cause of action.
The demurrer to the sixth cause of action for restitution is sustained without leave to amend.
IV. Conclusion
The Court SUSTAINS in part and DENIES in part Defendants’ Demurrer. The Court sustains with leave to amend the Demurrer as to causes of action two (breach of fiduciary duty), three (rescission), four (violation of Vehicle Code § 11700) and five (violation of UCL). The Court sustains without leave to amend the Demurrer to the sixth cause of action (restitution). The Demurrer is OVERRULED as to the first cause of action for Breach of Contract and as to the alter ego allegations.