Judge: Randy Rhodes, Case: 22CHCV00493, Date: 2023-03-14 Tentative Ruling

Case Number: 22CHCV00493    Hearing Date: March 14, 2023    Dept: F51

Dept. F-51 

Date: 3/14/23

Case #22CHCV00493

DEMURRER

Demurrer Filed: 1/5/23

MOVING PARTY: Defendant Gary G. Topolewski, an individual (“Moving Defendant”)

RESPONDING PARTY: Plaintiff Bank of the West (“Plaintiff”)

NOTICE: OK

RELIEF REQUESTED: Moving Defendant demurs to Plaintiffs’ entire complaint.

TENTATIVE RULING: The demurrer is sustained as to Plaintiff’s first, second, third, fourth, fifth, sixth, seventh, ninth, and tenth causes of action, with 20 days leave to amend. The demurrer is overruled as to Plaintiff’s eighth cause of action. Plaintiff’s request for judicial notice is denied.

BACKGROUND

This action arises out of three business loans extended by Plaintiff to nonmoving defendant Topolewski America, Inc. (the “Company”). Plaintiff allegedly entered into three separate loan agreements with the Company on 7/26/19, 5/14/20, and 7/12/21, each secured by various pieces of the Company’s equipment as collateral. (Compl. ¶¶ 11–19.) 

Plaintiff alleges that the Company breached the loan and security agreements “by, among other things, failing and refusing to allow [Plaintiff] to inspect the Equipment Collateral.” (Id., ¶ 24.) Plaintiff also alleges that it has reason to believe the Company “never actually had ownership or possession of the Collateral and that [the Company] made continuing misrepresentations to [Plaintiff] concerning [the Company’s] alleged ownership and possession thereof.” (Ibid.) Plaintiff alleges that Moving Defendant and the Company (collectively, “Defendants”) “are the alter egos of one another, and each is fully responsible and liable for all obligations and debts.” (Compl. ¶ 7.)  

On 7/6/22, Plaintiff filed its complaint against Defendants, alleging causes of action for Breach of Contract and Breach of Security Agreement with respect to each of the three loans. Plaintiff’s complaint also pleads causes of action for (7) Recovery of Personal Property; (8)  Temporary Restraining Order/Preliminary Injunction; (9) Conversion; and (10) Fraud and Deceit.

On 1/5/23, Moving Defendant filed the instant demurrer. On 2/28/23, Plaintiff filed its opposition and request for judicial notice. On 3/6/23, Moving Defendant filed his reply.

ANALYSIS

Meet and Confer 

Before filing its demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)

Moving Defendant’s counsel declares that on 12/27/22, she telephoned Plaintiffs’ counsel to meet and confer regarding the issues raised in the instant demurrer and motion to strike, and the parties discussed telephonically on 12/29/22 without coming to a resolution. (Decl. of Sara Katz, ¶¶ 2–3.) Therefore, the Court finds that Moving Defendant’s counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a). 

Legal Standard 

As a general matter, a party may respond to a pleading against it by demurrer based on any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) 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 pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

Here, Moving Defendant demurs to Plaintiff’s entire complaint for failure to allege facts sufficient to support any of its causes of action. (Code Civ. Proc., § 430.10, subd. (e).)

Alter Ego

Moving Defendant demurs to the contract-based causes of action[1] in Plaintiff’s complaint on the basis that Moving Defendant is not a party to any of the subject agreements, and argues that Plaintiff’s alter ego allegations connecting Moving Defendant and the Company are conclusory. “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.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.)

Plaintiff alleges in its complaint that at all relevant times, Moving Defendant and the Company “completely dominated and controlled one another, such that they are all one and the same and do not conduct themselves as distinct legal entities. That control and dominance resulted in interdependence, overlap, and commonality between and amongst Mr. Topolewski and Borrower such that they were the alter ego of one another. For these reasons and others, adherence to the fiction of the separate existence of Mr. Topolewski and Borrower would sanction a fraud and promote injustice. Mr. Topolewski and Borrower are the alter egos of one another, and each is fully responsible and liable for all obligations and debts of Borrower, including the claims asserted herein by Plaintiff.” (Compl. ¶ 7.)

Plaintiff also alleges that “Defendants are, and at all times mentioned herein have been, the agents, principals, partners, co-conspirators and/or co-venturers of each other, that each such Defendant acted within the course, scope and authority of said relationship, and that, as a result, said Defendants are jointly and severally liable for the acts alleged herein.” (Id. at ¶ 6.)

Here, Moving Defendant argues that Plaintiff’s alter ego allegations are conclusory and not supported by requisite facts. Plaintiff argues in opposition that no heightened pleading standard is required to allege recovery under an alter ego theory, and that Plaintiff has sufficiently alleged that Moving Defendant and the Company are alter egos of one another. Plaintiff notes that the discovery process will be able to uncover additional facts thereto.

However, as Moving Defendant notes, Plaintiff “may not have to allege ‘every possible fact,’ but Plaintiff has not alleged even one fact. Plaintiff only alleges conclusions.” (Def.’s Reply, 2:11–12.) Here, Plaintiff has cited to paragraphs 6 and 7 of the complaint as sufficient to invoke the alter ego theory. However, these provisions do not include any factual allegations to support recovery under an alter ego theory.

Accordingly, the Court finds that Plaintiff has not alleged facts sufficient to support recovery under an alter ego theory, and therefore sustains Moving Defendant’s demurrer as to Plaintiff’s first, second, third, fourth, fifth, sixth, seventh and ninth causes of action.

Irreparable Harm

Plaintiff’s eighth cause of action seeks a temporary restraining order and preliminary injunction against Defendants “from taking further action to interfere with Lender’s rights to the Equipment Collateral.” (Compl. ¶ 98.) “The elements of a cause of action for injunctive relief are (1) a tort or other wrongful act constituting a cause of action; and (2) irreparable injury, i.e., a factual showing that the wrongful act constitutes an actual or threatened injury to property or personal rights which cannot be compensated by an ordinary damage award.” (Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.)

Moving Defendant demurs to this cause of action on the basis that Plaintiff has not pled irreparable harm “or any kind of harm that monetary damages would not fully compensate. The amount claimed owed is certain, i.e., the amount of the loans.” (Dem. 8:10–11.) Moving Defendant further asserts that the instant action is based on Defendants’ alleged outstanding obligations under the subject loan agreements, and therefore “when an identifiable sum of money would be adequate damages, injunctive relief is inappropriate.” (Def.’s Reply, 2:16–17.)

In opposition, Plaintiff notes that it has specifically alleged in its complaint “that, ‘if the Equipment Collateral is continuing to be used, the Equipment Collateral may be damaged, transferred, concealed, or disposed of, and therefore, such factors may render it impossible for [Plaintiff] to recover the value thereof.’” (Pl.’s Opp. 8:7–10, quoting Compl. ¶ 95.)

Based on the foregoing, the Court finds that Plaintiff has sufficiently pled irreparable harm as to the potential damage to the Equipment Collateral that could not be remedied by monetary damages. Accordingly, the demurrer is overruled as to Plaintiff’s eighth cause of action.

Fraud

Plaintiff’s tenth cause of action alleges Fraud and Deceit against Moving Defendant. The elements that must be pleaded in a cause of action for fraud are: (1) a misrepresentation (false representation, concealment or nondisclosure); (2) knowledge of its falsity (or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.)

Fairness requires that allegations of fraud be pled “with particularity” so that the court can weed out non-meritorious actions before a defendant is required to answer. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Moving Defendant argues that this cause of action has not been pled with the requisite degree of particularity. Specifically, “there is not a single representation made by Mr. Topolewski alleged in the Complaint, much less what the representation was, when it was made, how it was made.” (Dem. 11:5–6.)

In opposition, Plaintiff cites to paragraphs 35 through 44 of the complaint, which detail Plaintiff’s investigation efforts, and allegations that Defendants manufactured false documents and made misrepresentations to Plaintiff “concerning the Equipment Collateral, insurance certificates, and the business of the Borrower, in order to misappropriate proceeds from the Loans for their own personal gain.” (Compl. ¶ 44.) Moreover, “the Complaint alleges that Mr. Topolewski made specific misrepresentations to Plaintiff with full knowledge that each was false, with the intent to defraud Plaintiff and to induce reliance by Plaintiff, and which Plaintiff justifiably relied upon.” (Pl.’s Opp., 10:6 – 8, citing Compl. ¶¶ 110–112.)

The Court finds that Plaintiff’s allegations fall short of pleading a fraud cause of action against Moving Defendant with the requisite degree of particularity. Plaintiff is required to plead facts showing “how, when, where, to whom, and by what means the representations were tendered.” (Lazar, 12 Cal.4th at 645.) Here, the complaint does not contain these specific allegations.

Accordingly, the demurrer is sustained as to Plaintiff’s tenth cause of action.

LEAVE TO AMEND

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. (Ibid.; 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).¿

Here, the Court notes that this demurrer is to the original complaint, and Plaintiff has specifically requested leave to amend the complaint if the Court finds merit in any of Moving Defendant’s arguments. (Pl.’s Opp. 10:15–17.) Accordingly, under the Court’s liberal policy of granting leave to amend, the Court grants Plaintiff 20 days leave to amend the complaint to cure the defects set forth above.

“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” (Harris v. Wachovia Mortgage, FSB¿(2010) 185 Cal.App.4th 1018, 1023.)

CONCLUSION

The demurrer is sustained as to Plaintiff’s first, second, third, fourth, fifth, sixth, seventh, ninth, and tenth causes of action, with 20 days leave to amend. The demurrer is overruled as to Plaintiff’s eighth cause of action. Plaintiff’s request for judicial notice is denied.