Judge: Michael Shultz, Case: 22CMCV00749, Date: 2023-02-17 Tentative Ruling
INSTRUCTIONS: If the parties wish to submit on the tentative ruling and avoid a court appearance on the matter, the moving party must:
1. Contact the opposing party and all other parties who have appeared in the action and confirm that each will submit on the tentative ruling.
2. No later than 4:00 p.m. on the court day before the hearing, call the Courtroom (310-761-4302) advising that all parties will submit on the tentative ruling and waive hearing; and
3. Serve notice of the Court's ruling on all parties entitled to receive service.
If this procedure is followed, when the case is called the Court will enter its ruling on the motion in accordance with its tentative ruling. If any party declines to submit on the tentative ruling, then no telephone call is necessary, and all parties should appear at the hearing. If there is neither a telephone call nor an appearance, then the matter may either be taken off calendar or ruled on.
TENTATIVE RULINGS -- http://www.lacourt.org/tentativeRulingNet/u
Case Number: 22CMCV00749 Hearing Date: February 17, 2023 Dept: A
22CMCV00749 Hadi Farid etc. v. Aquasea,
Inc., et al.
[TENTATIVE] ORDER
I.
BACKGROUND
The
complaint for unlawful detainer alleges that Defendant, Aquasea, Inc. (Tenant),
leased commercial real property from Plaintiff, Aqua Investments Group, LLC
(AIG), pursuant to a written lease agreement. Defendant, Mehrdad Kharrazi
(Kharrazi), owns Aquasea and is a personal guarantor of the lease. Plaintiff,
Hadi Farid, and Defendant Kharrazi are owners and managing members of AIG. The Term of the Lease was for thirty-six (36)
months commencing February 1, 2019, through February 1, 2022. A true and
correct copy of the executed Lease is attached hereto as Exhibit A and incorporated
herein by reference. The lease expired
by its own terms on February 1, 2022, and has not been legally extended or
renewed. Defendants allegedly failed to vacate the premises.
II.
ARGUMENTS
Defendants
contend that Plaintiffs three-day notice to terminate the tenancy does not comply
with the requirements of statute. Defendants
are not hold-over tenants since the lease term was changed to month-to-month,
and therefore, a three-day notice to pay rent or quit notice is required. Defendants also contend that Plaintiff, as a
shareholder of AIG, must allege that he presented this litigation to the AIG
Board prior to filing suit.
Plaintiffs
respond that the complaint adequately states a cause of action for unlawful
detainer against Defendants. Plaintiff Hadid alleged sufficient facts to
support his standing to sue on behalf of AIG and a three-day notice to pay rent
or quit is not required where the lease expired by its terms.
III.
LEGAL STANDARDS
The bases for demurrer
are limited by statute and may be sustained in pertinent part where the
plaintiff does not have the legal capacity to sue or for a failure to state
facts sufficient to state a cause of action. (Code Civ. Proc., § 430.10). A demurrer “tests the
sufficiency of a complaint as a matter of law and raises only questions of
law.” (Schmidt v. Foundation Health
(1995) 35 Cal.App.4th 1702, 1706). In testing the sufficiency of the complaint,
the court must assume the truth of (1) the properly pleaded factual
allegations; (2) facts that can be reasonably inferred from those expressly
pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39
Cal.3d 311, 318). The court may not consider contentions, deductions, or
conclusions of fact or law. (Moore v. Conliffe (1994) 7
Cal.4th 634, 638). Because a demurrer tests the legal sufficiency of a
pleading, the plaintiff must show that the pleading alleges facts sufficient to
establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43). The court accepts “as true both
facts alleged in the text of the complaint and facts appearing in exhibits
attached to it. If the facts appearing in the attached exhibit contradict those
expressly pleaded, those in the exhibit are given precedence.” (Mead v. Sanwa Bank California (1998) 61 Cal. App. 4th 561,
567-568).
IV.
DISCUSSION
A.
Plaintiff Farid has adequately alleged
standing to sue on behalf of AIG, the lessor.
Where
mismanagement of corporate officers causes damage to the corporation, it is the
entity that must bring suit, the individual shareholder cannot bring a direct
action for damages. (Schrage v. Schrage (2021) 69
Cal. App. 5th 126, 153). The
shareholder or member bringing the derivative lawsuit is the plaintiff in name
only because the lawsuit seeks redress for injury the company suffered, and any
recovery belongs to the company. (Heshejin
v. Rostami (2020) 54 Cal. App. 5th 984, 995). Additionally, the principles
governing derivative actions in the context of corporations apply to limited
liability companies and limited partnerships. (Schrage at 150). Therefore, Plaintiff Farid brings this derivative action on
behalf of the lessor AIG.
In
this context, the complaint must allege that Plaintiff Farid made a presuit
demand to the entity. The complaint must allege “with particularity plaintiff's
efforts to secure from the board such action as plaintiff desires, or the
reasons for not making such effort, and alleges further that plaintiff has
either informed the corporation or the board in writing of the ultimate facts
of each cause of action against each defendant or delivered to the corporation
or the board a true copy of the complaint which plaintiff proposes to
file." (Cal. Corp. Code § 800 subd. (b)(2)).
Plaintiffs
allege that presuit demand to AIG, in which Kharrazi is also a manager, would
be futile. (Complaint, ¶ 12). Kharrazi
also owns the tenant (Aquasea), which presents a conflict of interest. (Id.) To allege demand futility,
Plaintiffs must allege with particularity facts sufficient to “create a
reasonable doubt that, as of the time the complaint is filed, the board of
directors could have properly exercised its independent and disinterested
business judgment in responding to a demand “and the challenged transaction was
otherwise the product of a valid exercise of business judgment.” (Bader v. Anderson (2009) 179
Cal. App. 4th 775, 797).
Plaintiffs
have adequately alleged demand futility. AIG’s operating agreement designates
Plaintiff Farid and Defendant Kharrazi as managers and requires them to act
together with neither having authority to act alone on AIG’s behalf. (Complaint, ¶ 11). All
management decisions shall be made by the vote of a majority; since there are
only two managers, both must agree on all decisions. Id. However,
Kharazzi is also an owner of the tenant Aquasea; his interest in the lease
conflicts with his interest in AIG. Therefore,
Kharazzi is not “disinterested.”
The
alleged facts support a reasonable doubt that the challenged transaction was
otherwise the product of a valid exercise of business judgment. The court
considers both “the (substantive due care (substance of the transaction) and
the procedural due care (an informed decision) used by the directors." (Bader at 798). Here, the alleged facts, which the court accepts as true, contends
that the tenancy terminated by its terms, has not been renewed, and Kharrazi
unilaterally purported to extend the lease as a manager of AIG (the lessor) but
without notice to or agreement by Mr. Farid. (Complaint ¶ 13). These
allegations raise a reasonable doubt that Kharazzi’s conduct was a valid
exercise of business judgment as it was unilateral and contrary to the terms of
AIG’s Operating Agreement. (Complaint, ¶ 11).
B.
The complaint adequately states a
claim for unlawful detainer.
An
unlawful detainer case may be initiated without first serving a notice to quit
where the action is based on the expiration of a fixed-term tenancy. (Code Civ. Proc., § 1161, subd. 1).
The complaint alleges that the lease expired by its terms on February 1, 2022.
(Complaint, ¶ 13). Defendants assert facts outside the pleading to challenge
the allegations by claiming that Plaintiff continued to accept rent after lease
termination, based on the Declaration of Kharrazi, and therefore, the lease is
at will. (Demurrer, 4:24-27). The Court
does not consider these extrinsic facts for purposes of the demurrer.
V.
CONCLUSION
Accordingly,
demurrer to the complaint is OVERRULED. Defendants are ordered to answer within
five calendar days. (Cal. Rules of Court, rule 3.1320).