Judge Serena R. Murillo, Case Number: 23STCV01974, Date: 2023-08-07 Tentative Ruling

Judge: Serena R. Murillo, Case: 23STCV01974, Date: 2023-08-07 Tentative Ruling

Case Number: 23STCV01974 Hearing Date: October 16, 2023 Dept: 31

TENTATIVE

Defendant’s demurrer is OVERRULED.

Request for Judicial Notice

Defendants requests the Court to take judicial notice of the Request for Dismissal as to Defendant Daniel Sallus.

The request is GRANTED pursuant to Evidence Code section 452(d).

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law ….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525).) 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. (Code Civ. Proc., §§ 430.30, 430.70.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

Demurrers for uncertainty are disfavored, because discovery can be used for clarification, and apply only where defendants cannot reasonably determine what issues or claims are stated. (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822; Khoury v. Maly's of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.)

Meet and Confer

The demurrer and motion to strike are accompanied by the declaration of Daniel R. Sallus, which satisfies the meet and confer requirement. (Code Civ. Proc. § 430.41.)

Discussion

Defendant demurs to the sole cause of action for breach of contract, arguing it fails to state sufficient facts to constitute a cause of action and it is uncertain. Defendant argues that Plaintiff fails to allege sufficient facts for alter ego liability, and merely states conclusory allegations without factual support.

To invoke the alter ego doctrine, the plaintiff must plead unity of interest and ownership and that an inequity will result if the corporate entity is treated as the sole actor. (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) Factors to consider in applying the doctrine include the commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, inadequate capitalization, and disregard of corporate formalities. (Sonora Diamond Corp. v Superior Court (2000) 83 Cal.App.4th 523, 538-39.) “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.) Such facts include domination and control, a unity of interest and ownership, use of the corporate alter ego as “a mere shell and conduit,” inadequate capitalization, failure to “abide by the formalities of corporate existence,” use by the shareholder of the corporate assets as his or her own, and the recognition that the separate existence of the corporation would promote injustice. (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App. 4th 221, 235.)

The complaint alleges that Zumaworks was the Alter Ego LLC of individual Defendants and there existed and a unity of interest and ownership such that the individuality and separateness of has ceased. It also alleges that Zumaworks was organized by said Defendants as a device to avoid individual liability and for the purpose of substituting financially irresponsible limited liability companies in the place and stead of said individual Defendants and accordingly Zumaworks was formed with capitalization totally inadequate for the business in which said limited liability company was engaged. By virtue of the foregoing, adherence to the fiction of the separate legal existence of the Alter Ego LLC would, under the circumstances, sanction a fraud and promote injustice in that Plaintiff would be unable to realize upon any judgment in its favor. (Complaint, ¶ 8.) This is sufficient to survive a demurrer.

Defendant argues the allegations are insufficient because plaintiffs are simply alleging a commonality of ownership. However, unlike defendants’ citation to Leek, here, the allegations go beyond mere commonality of ownership. Plaintiff alleges that Zumaworks was formed by Defendant with capitalization totally inadequate for the business, and for the purpose of substituting financially irresponsible limited liability companies in the place of individual Defendants.

Next, Defendant argues that there are no claims of direct liability as to the first cause of action against Defendant since he is not a party to the contract and was not a guarantor. However, the allegations against Defendant arises from the existence of alter ego liability. Having already found the allegations of the alter ego liability sufficient, the court does not address this further.

Moreover, the complaint is not uncertain, and Defendant has not made a specific argument as to whether it is.

Conclusion

Accordingly, Defendant’s demurrer is OVERRRULED.

Moving party is ordered to give notice.