Judge: Michael Shultz, Case: TC028783, Date: 2023-01-13 Tentative Ruling
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Case Number: TC028783 Hearing Date: January 13, 2023 Dept: A
TC028783 German Munoz, et al. v. Truman Weatherly, et
al.
[TENTATIVE] ORDER
DENYING
I.
BACKGROUND
Plaintiffs filed this action on May
3, 2017. The operative Fourth Amended Complaint (4AC) filed on May 11, 2021,
alleges that Plaintiffs, German Munoz and Connie Lopez, owned Plaintiff Therapeutic
Health Collective (THC) (collectively, Plaintiffs) and had the right to possess
permits and licenses to operate a medical marijuana dispensary. Defendants
allegedly filed fraudulent and misleading corporate documents with the
California Secretary of State purporting to merge THC with Pacoima Recovery
Collective and took physical possession of Plaintiffs’ sellers’ permit.
Plaintiffs allege claims for conversion, fraud, unjust enrichment, intentional
interference with prospective economic advantage, declaratory relief,
preliminary injunction, and for unfair business practices under Business &
Professions Code, section 17200.
II.
ARGUMENTS
A.
Motion filed November 17, 2022
Plaintiffs request an order
enjoining Defendants from transferring, hiding, and/or concealing, in any way,
the corporation known as THC. Defendants undertook to divest Plaintiffs of
their interest in THC. Plaintiffs can show a strong likelihood of prevailing on
the merits of their claims for fraud and conversion. Defendant, Michael
Blazevich, filed a Certificate of Revivor fraudulently identifying himself as
CEO of THC and subsequently transferred the corporation to a third party, Ray
Christopher Chacon San Miguel, who has since been substituted into the
complaint for Doe 1. Money damages cannot provide adequate relief. Defendants
will not suffer any prejudice.
B.
Opposition filed December 15, 2022
Anna Blazevich, Ray Chacon San
Miguel, and David Welch (collectively Defendants) argue that the documents
submitted by Plaintiffs are public records that do not support the underlying
claim that Defendant Blazevich, who passed away on November 2, 2019, was not
the true owner of THC. Ms. Blazevich (his sister) was charged with settling
Defendant Blazevich’s affairs, including transferring the management and
control of THC to Defendant San Miguel.
The 4AC alleges that Plaintiffs were last involved with the
operation of THC in 2017 although Plaintiffs also allege they presently
maintain ownership of THC. Plaintiffs have not submitted any evidence to
support their burden of showing a likelihood of prevailing on the merits. Plaintiffs
have not demonstrated how they will be irreparably harmed without a preliminary
injunction. Defendants contend Defendant San Miguel has been operating the
business for nearly 10 years; that is the status quo that should be maintained.
Defendant Blazevich’s death resulted in the proper transfer of the corporation to
Defendant San Miguel.
C.
Reply filed December 21, 2022
Plaintiffs argue that the
opposition admits that Defendant Blazevich was appointed manager and CEO of THC
in 2013 by a vote of THC’s members. Plaintiff Munoz was the last listed
president of the corporation in 2010. The Secretary of State suspended THC on
September 3, 2013. Defendant Blazevich filed a certificate of revivor on
November 5, 2013, claiming to be the president which is false. During the
period of suspension, THC could not transact business including electing new officers
or amending the articles of incorporation.
III.
LEGAL STANDARDS
The purpose of a preliminary injunction is
to preserve the status quo pending a decision on the merits. MaJor
v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623. A
cause of action must exist before injunctive relief may be granted. Id. If
a complaint fails to state a cause of action, an order granting a preliminary
injunction must be reversed. Id. An injunction may be granted on numerous
grounds, including where it appears that some act would produce “great or
irreparable injury” to a party or when pecuniary compensation would not afford
adequate relief. Code
Civ. Proc., § 526 subd. (a) (2) and (4).
In determining whether to grant a
preliminary injunction, the court considers two factors: “(1) the likelihood
that the plaintiff will prevail on the merits, and (2) the relative balance of
harms that is likely to result from the granting or denial of interim
injunctive relief.” White
v. Davis (2003) 30 Cal.4th 528, 554. The factors are
interrelated; “the greater the … showing on one, the less must be shown on the
other to support an injunction.” Dodge,
Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th
1414, 1420. As the moving party, Plaintiff must demonstrate at
least a reasonable probability of success on the merits. IT
Corp. v. County of Imperial (1983) 35 Cal.3d 63, 73.
IV. DISCUSSION
Plaintiffs
have not established a reasonable probability of prevailing on the merits of
the claims for conversion fraud. A claim for conversion requires Plaintiffs to establish
their ownership interest at the time of the alleged conversion and Defendants’
wrongful act or dispossession of Plaintiffs’ property rights. Moore
v. Regents of University of California (1990) 51 Cal.3d 120, 136.
Plaintiffs’ evidence consists of an
application for a certificate of revivor of THC signed by Defendant Blazevich
on November 4, 2013 and received by the Franchise Tax Board. Declaration of
Petrohilos, Ex. A. The records of the Secretary of State reflect that a
Statement of Information was filed on June 27, 2022, by Defendant San Miguel as
Chief Executive Officer, Secretary, and Chief Financial officer of THC. Id.,
Ex. B. These documents do not establish Plaintiffs’ right of ownership or
possession of the corporate entity or of its permits as alleged in the
complaint. Nor do these documents demonstrate that Defendants’ acts in filing
these public documents were “wrongful.” Moore
at 136.
A claim for fraud requires facts to
support the following elements: (1) a misrepresentation, (2) made with
knowledge of its falsity, (3) Defendant intended to defraud Plaintiff, i.e.,
induce Plaintiff’s reliance, (4) and Plaintiff justifiably relied on the
misrepresentation, (5) causing damage. Nagy
v. Nagy (1989) 210 Cal.App.3d 1262, 1268.
Plaintiffs allege that Anna and Michael
Blazevich submitted a Statement of Information purporting to be officers of
Pacoima Recovery Collective. (4AC, ¶ 25). Plaintiffs allege that Defendants filed
numerous Statements of Information on behalf of THC on May 1, 2014, September
18, 2015 and on February 5, 2018, and February 6, 2018. (4AC, ¶¶ 32-35). Plaintiffs
allege these filings were false and intentionally misleading. (4AC ¶ 39).
The only public filings submitted by
Plaintiffs are the Certificate of Revivor filed by Defendant Blazevich and the
Statement of Information filed by Defendant San Miguel referenced previously.
These documents do not establish that Defendants filed these documents with knowledge
of their falsity or Defendants’ intent to induce Plaintiffs’ justifiable
reliance causing damage to Plaintiffs. Moreover, the alleged misrepresentations
(filings) were presented to the Secretary of State, not Plaintiffs in order to
induce their reliance. (4AC, ¶¶ 36-39).
Plaintiffs have not established that the
balance of interim harm to Plaintiffs versus the Defendants warrant granting an
injunction. Plaintiffs allege that the April 11, 2017, Statement of Information
filed by Plaintiffs accurately reflects Plaintiff Lopez as an officer of THC. Plaintiffs
allege they did not become aware of Defendants’ fraudulent filings until the
latter part of 2016 (4AC ¶ 16). These allegations reasonably infer that Defendants
purportedly assumed ownership and operation of THC six years ago. By this motion, Plaintiffs attempt to change the
status quo to preclude Defendants from continued operation of THC by enjoining
Defendants from further transferring the company or its assets.
Plaintiffs have not established irreparable
harm if “further transfers … take place in an attempt to hide assets.” Petrohilos declaration. ¶ 15.
Plaintiffs have not shown any evidence of their right to ownership or
possession of any assets in the first instance. On balance, Defendants stand to
suffer greater harm if the injunction should issue, and Defendants are
restrained from their continued operation of THC including any decision to
transfer the corporation or its assets.
V. CONCLUSION
As Plaintiffs have not met their burden showing
a reasonable probability of prevailing on the merits or great or irreparable
harm, Plaintiffs’ motion is DENIED.