Judge: Robert B. Broadbelt, Case: 21STCV33335, Date: 2023-03-28 Tentative Ruling

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Case Number: 21STCV33335    Hearing Date: March 28, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:             Plaintiffs Aaron G. Villa and Armando Navarro

RESPONDING PARTY:       n/a

Request for Court Judgment by Default

Plaintiffs Aaron G. Villa and Armando Navarro (“Plaintiffs”) filed this action on September 9, 2021, against defendants Stanley Huser and Extra Mile Staffing, alleging three causes of action for (1) conversion, (2) cancellation of instrument, and (3) declaratory relief.

Defendant Stanley Huser was dismissed with prejudice on February 23, 2022.

Default was entered against defendant Extra Mile Staffing, an unknown business entity (“Defendant”) on January 13, 2022.

Plaintiffs now request that the court enter judgment by default in the amount of $500,000.  Plaintiffs also request, in their Statement of the Case and the declaration of plaintiff Armando Navarro, that the court (1) cancel the Certificate of Dissolution as to Extra Mile Staffing, and (2) reinstate Extra Mile Staffing.

The court denies Plaintiffs’ request for court judgment by default.

“‘Substantively, “[t]he judgment by default is said to ‘confess’ the material facts alleged by the plaintiff, i.e., the defendant’s failure to answer has the same effect as an express admission of the matters well pleaded in the complaint.”’”  (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 281 [emphasis in original].)  However, “if the well-pleaded allegations of the complaint do not state any proper cause of action, the default judgment in the plaintiff’s favor cannot stand.”  (Id. at p. 282.)

First, the court finds that Plaintiffs have not alleged facts sufficient to state a cause of action for conversion because the Complaint does not allege facts establishing their standing to assert this cause of action. 

In connection with this cause of action, Plaintiffs allege that (1) Extra Mile Staffing (“Extra Mile”), for which they are both shareholders, generated goodwill and a good reputation over a three-year period; (2) Defendant sought “to capitalize on Extra Mile’s good will and convert that value for their own use and benefit[;]” (3) Plaintiffs did not allow Defendant to misappropriate Extra Mile’s goodwill and reputation; and (4) as a result of Defendant’s actions, Plaintiffs have been damaged.  (Compl., ¶¶ 1-2, 14-15, 17-18.)  

On the face of the Complaint, Plaintiffs have alleged a cause of action based on harm to Extra Mile, and not to Plaintiffs.  This is improper.  “California law does not give a party personal standing to assert rights or interests belonging solely to others.”  (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 936.)  Thus, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.”  (Code Civ. Proc., § 367.)  Here, Plaintiffs have not pleaded facts establishing that they have been personally damaged as a result of the acts of Defendant in (1) filing a Certificate of Dissolution as to Extra Mile, or (2) converting Extra Mile’s goodwill and reputation.

The court notes that, as shareholders, Plaintiffs may have the ability to bring a derivative lawsuit on behalf of Extra Mile.  “[A] derivative suit is one in which the shareholder seeks ‘redress of the wrong to the corporation.  [Citations.]’”  (Bader v. Anderson (2009) 179 Cal.App.4th 775, 793.)  Thus, “the cause of action in a shareholder derivative suit belongs to and remains with the corporation.  Such a lawsuit is derivative, i.e., brought in the ‘corporate right,’ to recompense the corporation for injuries done to it.”  (McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378, 382.) 

However, Plaintiffs have not alleged this action as a shareholder derivative suit and instead seek to recover damages on behalf of themselves for harm done to Extra Mile.  (Compl., ¶¶ 17-18 [“Plaintiff[s] ha[ve] been damaged in the sum of not less than $500,00” as a result of the misappropriation of Extra Mile’s goodwill and reputation].)  Plaintiffs are not entitled to such relief.  First, as set forth above, Plaintiffs are not the real parties in interest.  (Code Civ. Proc., § 387.)  Second, Plaintiffs have not filed this action as a shareholder derivative suit in order “to recompense [Extra Mile] for injuries done to it.”  (McDermott, Will & Emery, supra, 83 Cal.App.4th at p. 382.)  Thus, the court cannot enter court judgment by default on this cause of action because it is not a well-pleaded cause of action.  (Kim, supra, 201 Cal.App.4th at p. 282.) 

The court therefore denies Plaintiffs’ request for court judgment in the amount of $500,000 in damages on the first cause of action for conversion. 

Second, the court finds that Plaintiffs have not stated facts sufficient to constitute a proper cause of action as to the second and third causes of action because they have not established standing.  Plaintiffs’ second and third causes of action seek, respectively, (1) judicial declarations that (i) Plaintiffs are the sole owners of Extra Mile, (ii) Defendant has no interest in Extra Mile, (iii) Defendant illegally and fraudulently filed the March 4, 2021 Certificate of Dissolution, and (iv) the March 4, 2021 Certificate of Dissolution is void and unenforceable, and (2) cancellation of the March 4, 2021 Certificate of Dissolution.  (Compl., ¶¶ 20, 24; Compl., Prayer, p. 7:13-25.)

As to the requests for judicial declarations, the court finds that Plaintiffs have not pleaded facts or provided evidence establishing that they are entitled to that relief.  First, Extra Mile, as a corporation, does not have “owners.”  (Compl., ¶ 7 [alleging that Extra Mile was “incorporated”].)  Second, although Plaintiffs have alleged that they are shareholders of Extra Mile, they have not pleaded facts or provided evidence showing that they are the sole shareholders and would be entitled to a declaration that they are the sole shareholders of Extra Mile.

As to the requests that the court declare unenforceable and set aside the March 4, 2021 Certificate of Dissolution, the court finds that Plaintiffs have not provided authority for the court to issue that relief.  First, as set forth above, although Plaintiffs have pleaded that they are each a shareholder of Extra Mile, they have not alleged facts or provided evidence establishing that they are the only shareholders or that they are authorized to set aside the Certificate of Dissolution under law based on their status as shareholders.  Plaintiffs have not cited, in their Complaint or the documents filed in support of their request for judgment, any authority establishing that the court may grant this relief upon Plaintiffs’ request.  Second, although the court notes that there are statutes that permit reinstatement of a business entity in some circumstances, Plaintiffs have not pleaded any such statute in their Complaint.  For example, Government Code section 12261 provides that “[t]he Secretary of State shall reinstate to active status on its records, a business entity for which a court finds” that either (A) “[t]he factual representations by a shareholder, member, partner or other person that are contained in the termination document are materially false[,]” or (B) “[t]he submission of the termination document to the Secretary of State for filing is fraudulent.”  (Gov. Code, § 12261, subd. (a).)  However, Plaintiffs did not seek that relief or plead this statute as a basis for relief in their Complaint.  The court therefore may not enter judgment pursuant to this statute.  (Finney v. Gomez (2003) 111 Cal.App.4th 527, 550 [judgment is void if the trial court has entered a judgment for a type of relief not requested in the complaint].)

The court therefore denies plaintiffs Aaron G. Villa and Armando Navarro’s request for court judgment by default against defendant Extra Mile Staffing an unknown business entity.

IT IS SO ORDERED.

DATED:  March 28, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court