Judge: Olivia Rosales, Case: 21NWCV00818, Date: 2022-09-08 Tentative Ruling
Case Number: 21NWCV00818 Hearing Date: September 8, 2022 Dept: C
CHARTWELL STAFFING
SERVICES, INC. v. TRIANGLE WAREHOUSE & LOGISTICS SERVICES, INC.
CASE NO.: 21NWCV00818
HEARING: 09/08/22
#4
TENTATIVE ORDER
I.
Defendants
JOHN EDWARD DEARING; THOMAS BRIAN DEARING; and MARTIN MANTILLA’s Demurrer to
Plaintiff’s Complaint is SUSTAINED with 30 days leave to amend.
II.
Defendants
JOHN EDWARD DEARING; THOMAS BRIAN DEARING; and MARTIN MANTILLA’s Motion to
Strike Portions of Plaintiff’s Complaint is MOOT.
Moving Party to give
notice.
This action was
filed by Plaintiff CHARTWELL STAFFING SERVICES, INC. (“Plaintiff”) on December
8, 2021. The relevant facts, as alleged, are as follows: “On information and
belief, defendants Special Dispatch of California, Inc… on the one hand… and
John Edward Dearing, Thomas Brian Dearing, and Martin Mantilla… (‘the
Shareholders’), on the other hand, while purporting to operate as a corporation
and its individual principals in fact operate as alter egos of one another….”
(Complaint ¶10.) “CSS and Special Dispatch entered into a written service
agreement dated July 27, 2015 (‘the Services Agreement’) …. (Complaint ¶11.)
“On information and belief, Triangle WLS and/or Special Dispatch ABC, acquired
the assets of Special Dispatch but gave inadequate consideration for those
assets, none of which were made available for meeting the claims of unsecured
creditors.” (Complaint ¶15.)
“If the acts of
Special Dispatch of California, Inc. are treated as that of the entity alone,
and not the acts of the Shareholders, an inequitable result will follow
including, but not limited to, Special Dispatch of California, Inc. avoiding
their liability to CSS through subterfuge. As a result, the ends of justice
require that Special Dispatch of California, Inc.’s obligations be recognized
as that of the Shareholders and vice versa. (Complaint ¶10.)
The Complaint
asserts the following causes of action: (1) Breach of Written Contract; (2)
Breach of Implied-in-Fact Contract; (3) Common Count; (4) Breach of Fiduciary
Duty; (5) Promissory Fraud; and (6) Theft Damages.
Defendants JOHN
EDWARD DEARING; THOMAS BRIAN DEARING; and MARTIN MANTILLA (collectively
“Individual Defendants”) generally and specially demur to each cause of action.
The Individual Defendants specifically argue that Plaintiff has not
sufficiently pled alter ego allegations to survive demurrer; and that
Alter Ego
Plaintiff alleges that the Individual Defendants are the
alter ego(s) of the entity defendant Special Dispatch of California, Inc. (See
Complaint ¶10.)
The Individual Defendants argue that the demurrer should be
sustained as to them because Plaintiff fails to allege sufficient facts to
support piercing the corporate veil.
Ordinarily, a corporation is regarded as a legal entity, separate and
distinct from its stockholders, officers and directors, with separate and
distinct liabilities and obligations. [Citations.]” (Sonora Diamond Corp. v.
Superior Court (2000) 83 Cal.App.4th 523, 538.) “In California, two
conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest
and ownership between the corporation and its equitable owner that the separate
personalities of the corporation and the shareholder do not in reality exist.
Second, there must be an inequitable result if the acts in question are treated
as those of the corporation alone.” (Id.) Among the factors to be considered in
applying the doctrine are commingling of funds and other assets of the two
entities, the holding out by one entity that it is liable for the debts of the
other, identical equitable ownership in the two entities, use of the same
offices and employees, and use of one as a mere shell or conduit for the
affairs of the other. (Id., at
538-539.) Other factors include
inadequate capitalization, disregard of corporate formalities, lack of
segregation of corporate records, and identical directors and officers. (Id., at 539.) No one characteristic governs. The courts must look at the totality of the
circumstances to determine whether the doctrine should be applied. Alter ego is an extreme remedy which is
sparingly used. (Id.)
The Complaint is devoid of any factual allegations to suggest
that the Individual Defendants are the alter ego(s) of the defendant
corporation. Only conclusions—not facts—are alleged indicating a unity of
interest between the corporate defendants and the Individual Defendants. (Leek
v. Cooper (2011) 194 Cal.App.4th 399, 415. [“To recover on an alter ego
theory, a plaintiff need not use the words, ‘alter ego,’ but must allege
sufficient facts to show a unity of interest and ownership, and an unjust
result if the corporation is treated is treated as the sole actor”].) The Court
needs sufficient facts, as opposed to bare legal conclusions which would allow
an inference that the Individual Defendants are the alter egos of the corporate
defendant. Moreover, there are insufficient facts alleged to support the
Individual Defendants’ liability as individuals, outside of their capacities as
shareholders of the corporate entities.
Therefore, the demurrer to the first, second, third, and fifth causes of
action is SUSTAINED with 30 days leave to amend.
Fourth Cause of
Action – Breach of Fiduciary Duty (Trust Fund Doctrine)
The elements of a cause of action for breach of fiduciary
duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty;
and (3) damages proximately caused by the breach. (Stanley v. Richmond
(1995) 35 Cal.App.4th 1070, 1086.) In California, corporate directors owe an
extra-contractual duty to insolvent corporation’s creditors consistent with the
“trust-fund doctrine.” (Berg & Berg Enterprises LLC v. Boyle (2009)
178 Cal.App.4th 1020, 1041.) This duty encompasses the "avoidance of
actions that divert, dissipate, or unduly risk corporate assets that might
otherwise be used to pay creditors claims.” (Id.) This would include
acts that involve self-dealing or the preferential treatment of creditors. (Id.)
Thus, in order to establish the “trust fund doctrine”, a plaintiff must plead
and prove a dissipation or diversion of corporate assets. Mere self-dealing is
not enough.
Plaintiff alleges the following: “Upon information and
belief, from at least April 2020, Special Dispatch was insolvent and the
officers, directors and members of Special Dispatch of California, including
[the Individual Defendants] failed to reasonably preserve the assets of Special
Dispatch to avoid liability to the creditors of Special Dispatch… by
authorizing and approving of the transfers of property and assets for the
personal use, to the use of their marital community, or otherwise for purposes
not authorized or intended to operate and maintain the value of Special
Dispatch….” (Complaint ¶38.)
Plaintiff
has not alleged sufficient factual allegations to maintain a claim for breach
of fiduciary duty under the trust fund doctrine. Although specificity is not
required, Plaintiff must allege facts—boilerplate recitations of law do not
suffice. The demurrer to the fourth cause of action is SUSTAINED with 30 days
leave to amend.
Sixth Cause of Action
– Theft Damages (Penal Code §496)
“Penal Code section
496, subdivision (a)… makes receiving or buying property that has been obtained
in any manner constituting theft a criminal offense punishable by imprisonment.
Section 496, subdivision (c)… provides that any person who has been injured by
a violation of [section 496(a)] … may bring an action for three times the
amount of actual damages, if any, sustained by the plaintiff, costs of suit,
and reasonable attorney’s fees. [Citation]” (Bell v. Feibush (2013) 212
Cal.App.4th 1041, 1043.)
Plaintiff does not
allege sufficient facts to maintain this claim. Plaintiff fails to allege that
the Individual Defendants received stolen property, or that a criminal theft
has occurred. The demurrer to the sixth cause of action is SUSTAINED with 30
days leave to amend.
The Motion to Strike
is rendered MOOT by the Court’s ruling on the Demurrer above.