Judge: Robert B. Broadbelt, Case: 21STCV06598, Date: 2023-10-18 Tentative Ruling

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Case Number: 21STCV06598    Hearing Date: April 15, 2024    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Plaintiff Jesika Yeroomian, individually, as trustee of the Yeroomian Living Trust dated December 18, 2018, and as trustee derivatively on behalf of Ocean Front Urgent Care P.C.

RESPONDING PARTY:       Defendant Dr. Mostafa Rahimi

Motion for Order Appointing Neutral to Conduct Dissolution

The court considered the moving, opposition, and reply papers filed in connection with this motion.

EVIDENTIARY OBJECTIONS

The court rules on the evidentiary objections and request to strike portions of the declaration of Jesika Yeroomian, filed by defendant Dr. Mostafa Rahimi on April 2, 2024, as follows:

Objection No. 6 is sustained.

Objections Nos. 1-5 and 7 are overruled.

The court denies defendant Dr. Mostafa Rahimi’s request to strike pages 3:7-6:6 and 4:9-4:12 of the memorandum of points and authorities filed in support of the pending motion.

DISCUSSION

Plaintiff Jesika Yeroomian, individually, as trustee of the Yeroomian Living Trust dated December 18, 2018, and as trustee derivatively on behalf of Ocean Front Urgent Care P.C. (“Plaintiff”) moves the court for an order appointing a neutral to conduct the winding up of Ocean Front Urgent Care P.C. (“Ocean Front”).  Plaintiff contends that the appointment of a neutral is necessary because she has alleged that defendant Dr. Mostafa Rahimi (“Defendant”) has engaged in wrongdoing regarding Ocean Front, such that it would be inappropriate to permit Defendant to wind up Ocean Front on his own.

“If a corporation is in the process of voluntary winding up, the superior court of the proper county, upon the petition of (a) the corporation, or (b) a shareholder or shareholders who hold shares representing 5 percent or more of the total number of any class of outstanding shares, or (c) any shareholder or shareholders of a close corporation, or (d) three or more creditors, and upon such notice to the corporation and to other persons interested in the corporation as shareholders and creditors as the court may order, may take jurisdiction over such voluntary winding up proceeding if that appears necessary for the protection of any parties in interest.  The court, if it assumes jurisdiction, may make such orders as to any and all matters concerning the winding up of the affairs of the corporation and for the protection of its shareholders and creditors as justice and equity may require.”  (Corp. Code, § 1904.)  The statutory provisions regarding involuntary dissolution (with the exception of Corporations Code sections 1800 and 1801) also apply to such court proceedings.  (Ibid.)  Pursuant to Corporations Code section 1805, “the board shall conduct the winding up of the affairs of the corporation, subject to the supervision of the court, unless other persons are appointed by the court, on good cause shown, to conduct the winding up.”  (Corp. Code, § 1805, subd. (b).)

First, the court finds that Ocean Front is in the process of voluntarily winding up.  (Corp. Code, § 1904.)  The parties do not dispute that (1) on September 21, 2023, the California Department of Justice, on behalf of the Medical Board of California, sent a letter to Defendant  (i) outlining “two immediate areas of concern for the Board concerning the corporate structure and current ownership of Ocean Front[,]” including (A) Ocean Front’s failure to comply with a legal requirement during corporate formation, and (B) the transfer of ownership to Plaintiff, since she, as an individual, as well as the Yeroomian Living Trust “are not qualified to be a shareholder and/or owner of a professional corporation because neither are licensed physicians[,]” and (ii) requesting voluntary compliance from Defendant to dissolve the corporate entity Ocean Front, and (2) on January 4, 2024, the court entered an order on the parties’ stipulation that Defendant may file a “Certificate of Election to Wind U[p] and Dissolve Ocean [F]ront Urgent Care, P.C.” with the California Secretary of State.  (Lachant Decl., Ex. A; Def. Decl., Ex. 1, pp. 2, 3; Jan. 4, 2024 Order, ¶ 2.)  Defendant has submitted evidence showing that he has since signed an intent to dissolve Ocean Front.  (Def. Decl., ¶¶ 5, 7; Def. Decl., Ex. 2 [Certificate of Election to Wind Up and Dissolve for Ocean Front signed by Defendant on December 13, 2023].)

Second, the court notes that Defendant has requested, in his operative First Amended Cross-Complaint, that the court take jurisdiction over the winding up of Ocean Front.  (Def. FACC, p. 11:1-5 [requesting the court “take jurisdiction as necessary of the winding up of affairs of” Ocean Front]; Mot., p. 7:8-9.)  However, that is not the petition requesting relief pursuant to Corporations Code section 1904 that is pending before the court.  Thus, the court evaluates the request made in Plaintiff’s motion independent from this allegation in the First Amended Cross-Complaint.

Third, the court finds that Plaintiff has not shown that she has standing to request this relief under Corporations Code section 1904.

As set forth above, the court may, “upon the petition of” certain parties, take jurisdiction over the voluntary winding up of a corporation and make any orders as to all matters concerning the winding up of the corporation as justice and equity may require.  (Corp. Code, § 1904.)  Plaintiff contends that she has standing to bring this motion (1) because she has a 50 percent interest in Ocean Front, and (2) as a creditor.  (Mot., pp. 7:25-10:26.)

Plaintiff has presented evidence showing that her husband, Dr. Valod Yeroomian-Massihi (“Dr. Massihi”) transferred 50 percent of his interest in the issued and outstanding shares of stock in Ocean Front to the Yeroomian Living Trust (the “Trust”).  (Pl. Decl., ¶ 10; Pl. Decl., Ex. I [Stock Assignments].)  Plaintiff succeeded Dr. Massihi as trustee of the Trust following his death.  (Pl. Decl., ¶ 9.)  Plaintiff contends that this transfer was not contrary to law because the Trust document did not give voting powers to Plaintiff or the Trust.  

Pursuant to Corporations Code section 13406, “shares of capital stock in a professional corporation may be issued only to a licensed person or to a person who is licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices, and any shares issued in violation of this restriction shall be void.”  (Corp. Code, § 13406, subd. (a).)  Here, Plaintiff has not (1) set forth authority establishing that the “transfer” of stock should be distinguished from the “issuance” of stock, or (2) presented evidence that she or the Trust are “licensed to render the same professional services in the jurisdiction” in which Dr. Massihi practiced, and therefore has not shown that the shares transferred to the Trust are valid.  (Ibid.)

The court acknowledges that (1) section 13406 also states that “[a] shareholder of a professional corporation . . . qualified to render professional services in this state shall not enter into a voting trust, proxy, or other arrangement vesting another person (other than another person who is a shareholder of the same corporation) with the authority to exercise the voting power of any or all of the shareholder’s shares, and any purported voting trust, proxy, or other arrangement, shall be void[,]” and (2) the document entitled “Yeroomian Living Trust” provided that any non-licensed co-trustee shall not have the power to vote such professional shares.  (Corp. Code, § 13406, subd. (a); Pl. Decl., Ex. E, § 12.31.)  However, the statutory restriction on the execution of arrangements vesting others with voting powers appears to be separate from the restriction on the issuance of stock to unlicensed persons.  Specifically, it appears that section 13406 restricts both (1) the issuance of stock of a professional corporation to an unlicensed person, and (2) the execution of arrangements vesting another person with the authority to exercise the voting power of a shareholder’s shares.  (Corp. Code, § 13406, subd. (a).)  Thus, even if the Trust document did not violate the second restriction set forth therein, the transfer of stocks to the Trust violated the first restriction barring the transfer of stocks of a professional corporation (here, Ocean Front) to an unlicensed person (here, the Trust and Plaintiff as its trustee).  (Ibid.)

Plaintiff further asserts that she has standing to request this relief as a creditor of Ocean Front.  However, section 1904 specifies that the court may take jurisdiction over the winding up proceedings of a corporation “upon the petition of . . . (d) three or more creditors . . ..”  (Corp. Code, § 1904 [emphasis added].)  Plaintiff did not bring this motion on behalf of three or more creditors and therefore does not have standing under this provision of section 1904.

Fourth, even if the court had found that Plaintiff had met her burden to show that she has standing to request this relief, the court finds that Plaintiff has not shown that justice, equity, or good cause warrant the appointment of a neutral.  (Corp. Code, §§ 1904, 1805, subd. (b).)  The court finds that Plaintiff has not submitted (1) admissible evidence establishing that Defendant engaged in financial fraud against Dr. Massihi, or (2) competent evidence establishing that Defendant is improperly taking Ocean Front’s assets.  For example, although Plaintiff has submitted evidence showing that Defendant has issued new 1099s, Plaintiff has not produced evidence showing that this is evidence that Defendant has breached any fiduciary duties, and Defendant has explained that those forms were issued following discussions with his accountant to report income that was not reported earlier.  (Lachant Decl., Ex. D; Def. Decl., ¶ 20.)  Similarly, Plaintiff has not submitted competent evidence establishing that Defendant has transferred Ocean Front assets to himself; instead, Plaintiff relies on the declaration of her counsel, who states only that Defendant intends to transfer his medical practice “to a new business, where he will be continuing to treat his patients.”  (Lachant Decl., ¶ 4.)

            For the reasons set forth above, the court finds that Plaintiff has not met her burden (1) to show that she has standing to request the appointment of a neutral to conduct the dissolution of Ocean Front pursuant to Corporations Code sections 1904 and 1805, and (2) to show, even if she had standing to request this relief, that there is good cause, or that justice or equity require, the appointment of a neutral to conduct the dissolution of Ocean Front.  The court therefore denies Plaintiff’s motion.

ORDER

            The court denies plaintiff Jesika Yeroomian, individually, as trustee of the Yeroomian Living Trust dated December 18, 2018, and as trustee derivatively on behalf of Ocean Front Urgent Care P.C.’s motion for order appointing neutral to conduct dissolution.

            The court orders defendant Dr. Mostafa Rahimi to give notice of this ruling.

IT IS SO ORDERED.

DATED:  April 15, 2024

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court