Judge: Stephen I. Goorvitch, Case: 24STCP03184, Date: 2025-05-23 Tentative Ruling
Case Number: 24STCP03184 Hearing Date: May 23, 2025 Dept: 82
Madera Group Investments, LLC Case No. 24STCP03184
v.
Hearing:
May 23, 2025
Location:
Stanley Mosk Courthouse
Department:
82
Casa Madera Weho, LLC Judge:
Stephen I. Goorvitch
[Tentative] Order Overruling Demurrer
[Tentative] Order Denying Motion to Stay
Action
INTRODUCTION
Petitioner Madera
Group Investments, LLC (“Petitioner” or “MGI”) filed this petition to enforce
its statutory right pursuant to Corporations Code section 17704.10, as a member
of a limited liability company, to inspect the books and records of Respondent
Casa Madera Weho, LLC (“Respondent” or “CMWH”).
Respondent now demurs to the first amended petition for writ of mandate
(“FAP”) on the grounds that Petitioner has an adequate remedy in a different
legal action; Petitioner has engaged in “improper claim splitting;” and
Petitioner seeks to inspect the Respondent’s records for an improper
purpose. In
the alternative, Respondent moves to stay this action pending resolution
of Casa Madera Weho, LLC v. Madera Group Investments, LLC, et al., Case
Number 24STCV20213, filed in Los Angeles Superior Court (the “CMWH Action”). The demurrer is overruled and the
motion to stay is denied.
LEGAL STANDARD
A demurrer tests the sufficiency of a pleading, and the
grounds for a demurrer must appear on the face of the pleading or from
judicially noticeable matters. (Code Civil Proc. § 430.30, subd. (a); Blank v.
Kirwan (1985) 39 Cal.3d 311, 318.) “We assume the truth of the allegations in
the complaint, but do not assume the truth of contentions, deductions, or
conclusions of law.” (California Logistics, Inc. v. State (2008) 161
Cal.App.4th 242, 247.) The allegations in the petition must be
liberally construed in favor of Petitioner on demurrer. (See Mobil Oil Corp. v Exxon Corp.
(1986) 177 Cal.App.3d 942, 947.) “A demurrer
must dispose of an entire cause of action to be sustained.” (Poizner
v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “A demurrer tests the pleadings alone and not
the evidence or other extrinsic matters.”
(Hahn v. Mirda (2007) 147
Cal.App.4th 740, 747.)
EVIDENTIARY ISSUES
Respondent seeks judicial notice of various pleadings. Petitioner does not object. The court grants the request pursuant to
Evidence Code section 452(c).
DISCUSSION
A. Petitioner Does Not Have
a Plain, Speedy, and Adequate Remedy
Code of Civil Procedure section 1086 provides: “The writ must be issued
in all cases where there is not a plain, speedy, and adequate remedy, in the
ordinary course of law.” “It is a
general rule that the extraordinary remedy of mandate is not available when
other remedies at law are adequate.” (Agosto
v. Board of Trustees of Grossmont-Cuyamaca Community College Dist. (2010)
189 Cal.App.4th 330, 336.)
The burden, of course,
is on the petitioner to show that he did not have such a remedy…. The question
whether there is a ‘plain, speedy and adequate remedy in the ordinary course of
law,’ within the meaning of the statute, is one of fact, depending upon the
circumstances of each particular case, and the determination of it is a
matter largely within the sound discretion of the court.
(Flores v. Department of Corrections & Rehabilitation (2014)
224 Cal.App.4th 199, 206.)
Here, Petitioner filed
this petition to enforce its statutory right pursuant to Corporations Code
section 17704.10 to inspect Respondent’s books and records. It is well established that mandate is the
appropriate remedy to enforce a statutory right of inspection. (See Johnson v. Langdon (1902) 135
Cal. 624, 626 [“The remedy
by mandamus is the appropriate remedy of the
stockholder in case of a refusal of the statutory right.”]; see also City of
King City v. Community Bank of Central California (2005) 131 Cal.App.4th 913,
927 [mandate “is available to force the disclosure of records or the
performance of similar duties owed to shareholders or other principals by a
corporate officer or similar functionary”].)
In the demurrer, Respondent argues that Petitioner has an
adequate remedy in a cause of action for breach of contract that
Petitioner filed in a cross-complaint in a different action filed by Respondent
(“the CMWH Action”). Specifically, Petitioner
alleges that Respondent breached section 8.1 of its operating agreement by
failing to produce to Petitioner the records identified in Petitioner’s first,
second, and third document requests.
(RJN Exh. E.) Although the FAP
and cross-complaint apparently concern the same document requests, the FAP
seeks to enforce a statutory right to inspection while the cross-complaint
seeks to enforce a contractual right to inspection. Corporations Code section 17704.10 creates
a specific, direct right to access business records. Respondent has not cited any published
appellate decision holding that a cause of action for breach of contract is an
adequate remedy to enforce a statutory right to inspection. Moreover, petitions for writs of mandate are
resolved more expeditiously than common law claims that may require discovery
and a trial on the merits. Thus, it does
not appear from the face of the petition or judicially noticed record that
Petitioner has a plain, speedy, and adequate remedy in its
cross-complaint in the CMWH Action.
In that respect, Respondent raises a fact question that cannot be
decided on demurrer.
In reply, Respondent clarifies that
“the issue is not whether the breach of contract claim in MGI’s Cross-Complaint
provides an adequate remedy for its statutory right, but whether MGI could have
– and should have – pled a claim in its Cross-Complaint to also enforce its
statutory right.” (Reply 3:14-16.) Petitioner may file a separate case for writ
of mandate because petitions for writs of mandate are handled in a separate
court. Petitions for writs of mandate
are handled in the Writs & Receivers Department while complaints asserting
non-writs causes of action are handled in an independent calendar court. (See Los Angeles County Superior Court Local
Rules 2.8 & 2.9.) Regardless, whether
Petitioner could have pleaded its statutory claim in the CMWH Action does not demonstrate that it
has a plain, speedy, and adequate remedy in the
ordinary course of law. (See Corp.
Code § 17704.10(f).) As discussed,
Respondent does not demonstrate that the related case necessarily would have
provided such a remedy. Therefore, the
demurrer is overruled on this basis.
B. No Grounds for Dismissal
Based on Claims Splitting
Respondent contends that the petition should be “dismissed” because “MGI’s Writ
Petition seeks the same relief sought in its Cross-Complaint filed in the CMWH
Action, albeit on different legal grounds” and Petitioner has impermissibly
“split” its cause of action. (Dem.
17-18.) As discussed, Petitioner may
file a separate case for writ of mandate because those cases are handled in a
separate court. (See Local Rules 2.8
& 2.9.) More important, neither case
has a resulted in a final judgment on
the merits. (See RJN Exhs.
A-I.) Thus, in contrast to the cases
cited by Respondent, there is no basis for dismissal based on res judicata. (See Mycogen Corp. v. Monsanto Co.
(2002) 28 Cal.4th 888, 897 [second action related to a license agreement barred
by res judicata from final judgment in first action for declaratory
relief and specific performance]; Ford Motor Co. v. Superior Ct. (1973)
35 Cal.App.3d 676, 679-680 [final judgment in earlier federal action was res
judicata and barred later state court action].) Respondent has not cited any authority
holding that dismissal is required, prior to a final judgment, simply
because two actions involve similar or related claims (or even the same claims). Therefore, the demurrer is overruled on this
basis.
C. Petitioner States a Cause
of Action to Enforce its Statutory Inspection Rights
Respondent argues
that the Petitioner’s demands for documents were for an improper purpose and
exceed the scope of Corporations Code sections 17704.10(b)(1) and
17701.13(d). Section 17704.10 provides
in relevant part:
(a) Upon the request of a member or transferee,
for purposes reasonably related to the interest of that person as a member or
a transferee, a manager or, if the limited liability company is
member-managed, a member in possession of the requested information, shall
promptly deliver, in writing, to the member or transferee, at the expense
of the limited liability company, a copy of the information required to be
maintained by paragraphs (1), (2), and (4) of subdivision (d) of Section
17701.13,
and any written operating agreement of the limited liability company.
(b) Each member, manager, and transferee has
the right, upon reasonable request, for purposes reasonably related to the
interest of that person as a member, manager, or transferee, to each of
the following:
(1) To inspect and copy during normal business hours
any of the records required to be maintained pursuant to Section 17701.13.
(2) To obtain in writing from the limited liability
company, promptly after becoming available, a copy of the limited liability
company's federal, state, and local income tax returns for each year….[¶¶]
Section 17701.13
provides in relevant part:
(d) Each limited liability company shall maintain in
writing or in any other form capable of being converted into clearly legible
tangible form at the office referred to in subdivision (a) all of the
following:
(1) A current list of the full name and last known
business or residence address of each member and of each transferee set
forth in alphabetical order, together with the contribution and the share in
profits and losses of each member and transferee.
(2) If the limited liability company is a
manager-managed limited liability company, a current list of the full name and
business or residence address of each manager.
(3) A copy of the articles of organization and all
amendments thereto, together with any powers of attorney pursuant to which the
articles of organization or any amendments thereto were executed.
(4) Copies of the limited liability company's federal,
state, and local income tax or information returns and reports, if any, for the
six most recent fiscal years.
(5) A copy of the limited liability company's
operating agreement, if in writing, and any amendments thereto, together with
any powers of attorney pursuant to which any written operating agreement or any
amendments thereto were executed.
(6) Copies of the financial statement of the limited
liability company, if any, for the six most recent fiscal years.
(7) The books and records of the limited liability
company as they relate to the internal affairs of the limited liability company
for at least the current and past four fiscal years.
“A member’s right
of inspection is limited to purposes reasonably related to the member’s
interests as a member. This limitation is always subject to judicial
review to determine whether a lawful purpose exists. A corporation has the burden of proving that
the member will allow use of the information for purposes unrelated to the
person’s interest as a member.” (Parker
v. Tract No. 7260 Assn., Inc. (2017) 10 Cal.App.5th 24, 31-32, internal
citations and quotation marks omitted.)
Here, the FAP
alleges that Petitioner made requests for inspection of records on May 14,
2024, June 7, 2024, and July 3, 2024, that fall within the scope of
Corporations Code sections 17704.10 and 17701.13. (FAP ¶¶ 14-26, Exh. A-C.) Although Respondent “produced . . . various
business records in response . . . , limited to tax returns, tax extension
forms, various quarterly financial summaries, and organizational documents,” Respondent
“fail[ed] to produce to MGI the entirety of records identified in the First,
Second, and Third MGI Document Requests.”
(Id. ¶¶ 24, 25, 27, 30.) These
allegations are sufficient.
Respondent
contends that the purposes asserted in the document requests are “pretextual”
and “[t]he timeline of events strongly suggests an improper purpose for the
inspection demands.” (Dem. 19-21; see
RJN Exh. A, C, E, H, I [litigation timeline].) Respondent raises an issue of fact that
cannot be resolved on demurrer. The FAP
sufficiently alleges that Petitioner requested inspection of records for the
proper purposes “of assessing the value of its membership interest and the
risks associated with its investment.”
(FAP Exh. A.) “Mere speculation
that the member will use the information for an improper purpose is not
sufficient to nullify inspection rights; any suspicion must be based on
adequate facts in order to justify denial of inspection.” (Parker, supra, 10 Cal.App.5th at
31-32.)
Respondent
contends that Petitioner’s inspection requests seek information the exceeds the
scope of the “internal affairs” of the limited liability company and does not
fall within the scope of section 17701.13(d)(7). (Dem. 20-21.)
This argument, likewise, raises a question of fact that cannot be
resolved on demurrer. The FAP
sufficiently alleges that Petitioner requested inspection of records that fall
within the scope of the statutes. (FAP
¶¶ 14-26, Exh. A-C.) As examples,
Petitioner seeks inspection of general ledgers, financial reports, and the
LLC’s QuickBooks backup file. (Id. Exh.
A.) The court cannot find, before
reviewing all the parties’ evidence, that Respondent produced all such records
or that these records exceed the scope of the “internal affairs” of the limited
liability company. Moreover, even if parts
of the inspection requests exceed the scope of Corporations Code sections
17704.10 and 17701.13, that would not justify sustaining the demurrer. “A demurrer must
dispose of an entire cause of action to be sustained.” (Poizner
v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) The court must resolve these issues at the
hearing on the petition for writ of mandate.
Therefore, the demurrer is overruled on this basis.
D. Motion to Stay
In the alternative, Respondent moves to stay this action pending resolution
of the CMWH Action. (Dem. 2, 9, 18,
22.) However, in the moving papers and
reply, Respondent fails to provide any analysis of the legal
grounds for a stay. (See Nelson v.
Avondale HOA (2009) 172 Cal.App.4th 857, 862-863 [“When an appellant fails
to raise a point, or asserts it but fails to support it with reasoned argument
and citations to authority, we treat the point as waived.”].) Regardless, there is no basis for a stay of
this action because the two actions may proceed simultaneously without conflict. This is especially true, since there will be
no discovery and a quick hearing date in the instant case, perhaps even before
a case management conference in the other case.
CONCLUSION AND ORDER
Based
upon the foregoing, the court orders as follows:
1. The petition for writ of mandate is
denied.
2. The motion to stay is denied.
3. The court sets trial on the petition
for writ of mandate for July 18, 2025, at 9:30 a.m.
4. The opening brief shall be filed and
served on or before June 9, 2025. The
opposition brief shall be filed and served on or before June 26, 2025. The reply brief shall be filed and served on
or before July 7, 2025.
5. The court’s clerk shall provide
notice.
IT IS SO ORDERED
Dated: May 23,
2025 ______________________
Stephen
I. Goorvitch
Superior
Court Judge