Judge: Peter A. Hernandez, Case: 22PSCV00734, Date: 2023-05-26 Tentative Ruling

Case Number: 22PSCV00734    Hearing Date: May 26, 2023    Dept: K

Defendant Brian A. Schott’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

Background   

Plaintiff Jose De Jesus Delgado Perez (“Plaintiff”) alleges as follows:

On May 8, 2020, Brian A. Schott (“Schott”), on behalf of Jerma Holdings, Inc. (“JHI”), and Plaintiff signed a “Contract for the Purchase and Sale of a Business” (“Contract”), wherein Plaintiff agreed to purchase from JHI a business named Sunshine Laundry (“Subject Business”) in exchange for $60,000.00. A condition of the Contract was that a new lease had to be negotiated with the owners of the property where the Subject Business was located. Plaintiff took possession of the Subject Business two months after signing the Contract and paid rent to Schott, who then paid management. The lease remains in Schott’s name. On December 14, 2021, an incident occurred at the premises due to a leaking HVAC which caused electrical wires to become wet and ignite. Property management has advised Plaintiff that Schott is responsible for replacement of the rooftop mechanical and venting systems pursuant to a May 23, 2013 “Remodel & Operational Requirements Addendum” (“Addendum”). The Addendum was not disclosed to Plaintiff and the repairs/replacement work was not done. Plaintiff has been unable to operate the Subject Business since the incident occurred but has continued to pay rent. Property management and insurance have refused to cover the loss, as has Schott. New management has recently taken over, has refused to allow Plaintiff to assume the lease, and has now deemed the property abandoned.

On March 7, 2023, Plaintiff filed a First Amended Complaint (“FAC”), asserting causes of action against JHI, Schott and Does 1-10 for:

1.                  Breach of Contract

2.                  Fraud

3.                  Negligent Misrepresentation

A Case Management Conference is set for May 26, 2023.

Legal Standard

A demurrer may be made on grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

Schott demurs to the second and third causes of action in Plaintiff’s FAC, on the basis that they both fail to state facts sufficient to constitute causes of action.

Schott contends that it remains under clear what theory of liability Plaintiff is seeking to enforce against him. Plaintiff confirms in his opposition that he seeks to hold Schott personally liable on an alter ego theory. (Opp., 4:12-13 and 5:19-20). “Under the alter ego doctrine,. . . when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) “The essence of the alter ego doctrine is not that the individual shareholder becomes the corporation, but that the individual shareholder is liable for the actions of the corporation.” (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 as the sole actor.” (Id. [emphasis added].)

Plaintiff asserts that, while he has not utilized the words “alter ego” in his FAC, he has nevertheless alleged facts showing a unity of interest and ownership between Schott and JHI. The court disagrees. Plaintiff has only alleged that Schott entered into the written contract on behalf of JHI (FAC, ¶ 7), that Schott suggested that Joel Lopez Mercado be added as a buyer to assist in qualifying to assume the lease (Id., ¶ 12), that Schott eventually inquired with management about Plaintiff taking over the lease, “but the lease remains in his name” (Id.), that Plaintiff gave the rent to Schott “who then paid management (Id., ¶ 13), that Schott is identified on the May 23, 2013 Remodel & Operational Requirements Addendum, paragraph B as responsible for the replacement of the rooftop mechanical and venting systems (Id., ¶ 14), that Schott is believed to have known about the leaking roof and malfunctioning HVAC unit (Id., ¶ 15), and that an individual named “John” told Plaintiff that Schott knew about the issues with the premises but ignored them and never fixed anything (Id., ¶ 16).

Further, Plaintiff has not alleged the element of inequitable result.

Schott’s demurrer to the second and third causes of action is sustained.