Judge: Theresa M. Traber, Case: BC691484, Date: 2022-07-29 Tentative Ruling
Case Number: BC691484 Hearing Date: July 29, 2022 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: July 29, 2022 TRIAL DATE: NOT
SET
CASE: Dorothy Diller v. Barry Weiss, et al.
CASE NO.: BC691484 
(1)
DEMURRER
TO CROSS-COMPLAINT
(2)
MOTION
TO STRIKE CROSS-COMPLAINT
(3)
MOTION
TO QUASH SERVICE OF SUMMONS
MOVING PARTY: (1) (2) Cross-Defendant Arthur Diller; (3) Plaintiff
and Cross-Defendant Dorothy Diller, Cross-Defendant Arthur Diller, and
Specially-Appearing Cross-Defendant Brookshire Diller Family, LLC
RESPONDING PARTY(S): (1) (2) (3)
Defendants and Cross-Complainants Barry Weiss and Edmundo Rosenberg
CASE
HISTORY:
·
01/29/18: Complaint filed
·
05/19/18: First Amended Complaint filed
·
01/29/19: Second Amended Complaint filed.
·
07/30/21: Third Amended Complaint filed.
·
12/07/21: Cross Complaint filed by Edmundo
Rosenberg and Barry Weiss as to Dorothy Diller, Arthur Diller, and Brookshire
Diller Family, LLC
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
Plaintiff alleges that Defendants have breached the fiduciary duties owed
by partners to a partnership agreement.
Cross-Defendant Arthur Diller
demurs to the Cross-Complaint in its entirety and moves to strike portions of
the Cross-Complaint. Cross-Defendants Dorothy Diller, Arthur Diller, and
Specially-Appearing Cross-Defendant Brookshire Diller Family, LLC move to quash
service of the Cross-Complaint on Brookshire Diller Family, LLC through Arthur
Diller.
//
TENTATIVE RULING:
Cross-Defendant Arthur Diller’s
Demurrer to the Cross-Complaint is SUSTAINED with leave to amend.
Cross-Complainants shall have 30 days leave to amend the Cross-Complaint.
Cross-Defendant Arthur Diller’s
Motion to Strike portions of the Cross-Complaint is DENIED AS MOOT.
Cross-Defendant Brookshire Diller
Family, LLC’s Motion to Quash service of the Cross-Complaint is DENIED.
DISCUSSION:
Demurrer to Cross-Complaint
Cross-Defendant
Arthur Diller demurs to the Cross-Complaint in its entirety on the grounds that
it fails to state facts sufficient to constitute a cause of action and is
uncertain.
Legal Standard
A demurrer 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.) 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.” (SKF Farms v. Superior Court
(1984) 153 Cal.App.3d 902, 905.) “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 p. 747.) The
ultimate facts alleged in the complaint must be deemed true, as well as all
facts that may be implied or inferred from those expressly alleged. (Marshall
v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields
v. County of San Diego (1984) 155 Cal.App.3d 103, 133 [stating, “[o]n
demurrer, pleadings are read liberally and allegations contained therein are
assumed to be true”].) “This rule of liberal construction means that the
reviewing court draws inferences favorable to the plaintiff, not the
defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th
1228, 1238.)
Meet and Confer
Before filing a demurrer, the
demurring party shall meet and confer in person or by telephone with the party
who has filed the pleading subject to the demurrer and file a declaration
detailing their meet and confer efforts. (Code Civ. Proc., § 430.41(a).)
However, an insufficient meet and confer process is not grounds
to overrule or sustain a demurrer. (Code Civ. Proc., §
430.41(a)(4).)
The Declaration of Shelly D.
McMillan, counsel for Cross-Defendant, states that the parties met and
conferred regarding the demurrer and motion to strike on June 20, 2022.
(McMillan Decl. ¶ 2.) The Court therefore finds that Cross-Defendant has
satisfied the meet and confer requirements of section 430.41.
First Cause of Action: Breach of Partnership Agreement
Cross-Defendant
demurs to the first cause of action for breach of the partnership agreement on
the ground that it fails to state facts sufficient to constitute a cause of
action against Cross-Defendant.
To
establish a cause of action for breach of a partnership agreement, the
plaintiff must establish the existence of a contract. (Reichert v. General
Ins. Co. (1968) 68 Cal.2d 822, 830.)
Cross-Defendant
contends that Cross-Complainants do not allege the substance of any partnership
agreement involving him. In addition, Cross-Defendant argues he is not liable
for the acts alleged which are purportedly a breach of that partnership
agreement because they were taken on behalf of Dorothy Diller, the principal
for whom he was an agent. A known agent acting for a disclosed principal is not
personally liable for transactions consummated on behalf of the principal. (Janken
v. Hughes (1996) 46 Cal.App.4th 55, 79.) Furthermore, when an agent signs
an agreement acting under the power of attorney of another, and not in their
personal capacity, the agent is not bound by the agreement. (See Monschke v.
Timber Ridge Assisted Living, LLC (2016) 244 Cal.App.4th 583, 587.)
Cross-Complainants
cite Civil Code section 2343(3), which states that one who assumes to act as an
agent for another is liable to a third party as if he were a principal “when
his acts are wrongful in their nature.” Cross-Complainants misconstrue the
meaning of this provision. Civil Code section 2343(3) stands for the
oft-repeated tenet that “an agent is liable for his own torts.” (See, e.g, Bock
v. Hansen (2014) 225 Cal.App.4th 215.) However, the first cause of action
is not a claim in tort, but in contract.
Here, the
Cross-Complaint alleges that Dorothy Diller appointed Arthur Diller as her
attorney in fact on July 27, 1998. (Cross-Complaint ¶ 16.) Nowhere in the
Cross-Complaint is it alleged that Cross-Defendant ever entered into the
partnership agreement or was ever involved in it except through holding Dorothy
Diller’s power of attorney. Each of the alleged breaches in the Cross-Complaint
refers to Dorothy Diller and Cross-Defendant “as her attorney in fact through a
Durable Power of Attorney.” (Cross-Complaint ¶¶ 59-62.) As pled, these
allegations are not sufficient to sustain a cause of action for breach of
partnership agreement against Cross-Defendant.
//
Second Cause of Action: Declaratory Judgment
Cross-Defendant
demurs to the second cause of action for declaratory judgment on the ground
that it fails to state facts sufficient to constitute a cause of action against
Cross-Defendant.
The second
cause of action seeks a judicial determination of how Dorothy Diller’s
partnership interest is held and the rights and obligations based on that
interest. Since, as stated above in connection with the first cause of action,
the Cross-Complaint does not allege facts that would show that Cross-Defendant
entered into the partnership agreement, the allegations cannot sustain a cause
of action for declaratory judgment against Cross-Defendant.
Third Cause of Action: Breach of the Implied Covenant of
Good Faith and Fair Dealing
Cross-Defendant
demurs to the third cause of action for breach of the implied covenant of good
faith and fair dealing on the ground that it fails to state facts sufficient to
constitute a cause of action against Cross-Defendant.
“There is an implied covenant of
good faith and fair dealing in every contract that neither party will do
anything which will injure the right of the other to receive the benefits of
the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50
Cal.2d 654, 658.) However, there must be an enforceable contract for the
implied covenant to exist. (Peterson Development Co. v. Torrey Pines Bank
(1991) 233 Cal.App.3d 103, 116 [“An underlying contract is required” to state a
cause of action for breach of the covenant of good faith and fair dealing]; Jones
v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1722 [“While
an action for breach of the covenant of good faith and fair dealing sounds in
tort, the duty of good faith and fair dealing arises from and exists solely
because of the contractual relationship between the parties”].)
As the Cross-Complaint fails to properly allege the
existence of a contract to which Cross-Defendant was a party, as stated above
in connection with the first cause of action, the Cross-Complaint also fails to
state facts sufficient to constitute a cause of action for breach of the
implied covenant of good faith and fair dealing as to Cross-Defendant.
Fourth Cause of Action: Unfair Competition
Cross-Defendant demurs to the fourth
cause of action for unfair competition on the grounds that the Cross-Complaint
fails to state facts sufficient to constitute a cause of action.
The Business and Professions Code
prohibits “unfair competition,” defined as any “unlawful, unfair, or fraudulent
business act or practice.” (Bus. & Prof. Code § 17200.) To bring a claim
under this law, a person must have “suffered injury in fact and [have] lost
money or property as a result of unfair competition.” (Bus. & Prof. Code §
17204.)
“The test of whether a business practice is unfair
‘involves an examination of [that practice’s] impact on its alleged victim,
balanced against the reasons, justifications, and motives of the alleged wrong
doer. In brief, the court must weigh the utility of the defendant’s conduct
against the gravity of harm to the alleged victim.’” (Smith v. State Farm
Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718 [internal
citations omitted].)
Cross-Complainants cite no precedent showing that the
alleged actions of Cross-Defendant, in refusing to confirm Dorothy Diller’s 12%
ownership to the Partnership, its banking institution, or the Department of
Social Services is unfair as a matter of law. Further, Cross-Complainants
allege no facts showing how they have been damaged by the Cross-Defendants’
refusal to confirm the nature of the partnership. Cross-Complainants state in
their opposition that the Partnership operated a retirement home which needed
the financing and licensing, the procurement of which Cross-Defendant, by not
participating, refused to facilitate. However, those allegations are not
included in the Cross-Complaint. Nor are there any other allegations that would
permit the court to assess the gravity of harm. These allegations, without
more, are not sufficient to support a cause of action for unfair competition.
Fifth Cause of Action: Breach of Fiduciary Duty
Cross-Defendant
demurs to the fifth cause of action for breach of fiduciary duty on the ground
that it fails to state facts sufficient to constitute a cause of action.
To state a
claim for breach of fiduciary duty, a plaintiff must allege the existence of a
fiduciary relationship, its breach, and damage proximately caused by that
breach. (Knox v. Dean (2012) 205 Cal.App.4th 417, 432-33.)
Cross-Defendant
contends that the fifth cause of action fails to state facts sufficient to
constitute a cause of action against him because the Cross-Complaint does not
allege any facts that would support a contention that a fiduciary duty was owed
by him to Cross-Complainants. In opposition, Cross-Complainants contend that
the Cross-Complaint alleges that Cross-Defendant is an alleged co-conspirator,
joint tortfeasor, and alter ego of BDF-LLC. (Cross-Complaint ¶ 7.)
In reply, Cross-Defendant contends
that, although the Cross-Complaint alleges that Dorothy Diller and
Cross-Defendant purportedly transferred her 12% ownership in the partnership to
BDF-LLC, the Cross-Complaint does not allege that the rest of the
partnership consented to the agreement. Although judicial notice of the
operative Third Amended Complaint, which contains the partnership agreement,
was not requested, the Court will take judicial notice of its own records
pursuant to Evidence Code section 452(d). Section 7 of the partnership
agreement requires unanimous written consent of the partners before
transferring ownership of any interest, with some exceptions, among which is
that the Dillers could transfer their interest to a general or limited
partnership or corporation in which they or one of their original members or
partners own and maintain a controlling interest. (TAC Exh. A.)
Here, the Cross-Complaint alleges
that the ownership interest was purportedly transferred to BDF-LLC
(Cross-Complaint ¶ 16.) However, the Cross-Complaint also alleges that, in
Dorothy Dillers’ March 11, 2019 deposition, she testified that her 12% interest
was held individually. (Cross-Complaint ¶ 32.) These allegations appear
contradictory to the subsequent allegation that the ownership interest actually
was transferred to BDF-LLC, such that BDF-LLC became a partner and thereby assumed
a fiduciary duty to the partnership that could be imputed to Cross-Defendant. (Cross-Complaint
¶ 65.) As pled, these apparently inconsistent allegations preclude
establishment of a fiduciary duty owed by Cross-Defendant. The Cross-Complaint
has therefore failed to state facts sufficient to constitute a cause of action
against Cross-Defendant for breach of fiduciary duty.
Sixth Cause of Action: Dissociation of Partnership
Interest
Cross-Defendant demurs to the sixth
cause of action for dissociation of partnership interest on the ground that it
fails to state facts sufficient to constitute a cause of action.
Cross-Defendant
contends that the Cross-Complaint fails to state sufficient facts to support
this cause of action because it has failed to offer allegations showing a
partnership agreement between Cross-Defendant and the Cross-Complainants. For
the foregoing reasons in connection with the first and fifth causes of action,
the Court finds that the Cross-Complaint has failed to allege fact sufficient
to support a cause of action for dissociation of partnership interest against
Cross-Defendant.
Uncertainty
Cross-Defendant also demurs to the
Cross-Complaint in its entirety on the ground that it is uncertain.
"A demurrer for uncertainty is
strictly construed, even where a complaint is in some respects uncertain,
because ambiguities can be clarified under modern discovery
procedures." (Khoury v. Maly's of California, Inc. (1993)
14 Cal.App.4th 612, 616.) "A demurrer for uncertainty will be
sustained only where the complaint is so bad that defendant cannot
reasonably respond--i.e., he or she cannot reasonable determine what issues
must be admitted or denied, or what counts or claims are directed against him
or her." (Weil & Brown, Civil Procedure Before Trial (The Rutter
Group) § 7:85 (emphasis in original).) "The objection of uncertainty does
not go to the failure to allege sufficient facts." (Brea v.
McGlashan (1934) 3 Cal.App.2d 454, 459.)
Even a generous reading of
Cross-Defendant’s moving papers does not show that the complaint is so
defective as to prevent him from reasonably responding. Indeed, that Cross-Defendant
has been able to identify the contentions raised against him and dispute
whether those contentions entitle Cross-Complainants to relief appears to
defeat this line of argument. The Court therefore finds that the
Cross-Complaint is not uncertain.
Leave to Amend
When a
demurrer is sustained, the Court determines whether there is a reasonable
possibility that the defect can be cured by amendment. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318). When a plaintiff “has pleaded the
general set of facts upon which his cause of action is based,” the court should
give the plaintiff an opportunity to amend his complaint, since plaintiff
should not “be deprived of his right to maintain his action on the ground that
his pleadings were defective for lack of particulars.” (Reed v. Norman
(1957) 152 Cal.App.2d 892, 900.) Accordingly, California law imposes the
burden on the plaintiffs to demonstrate the manner in which they can amend
their pleadings to state their claims against a defendant. (Goodman
v. Kennedy (1976) 18 Cal.3d 335, 349.) “Denial of leave to amend
constitutes an abuse of discretion unless the complaint shows on its face it is
incapable of amendment. [Citation.] Liberality in permitting
amendment is the rule, if a fair opportunity to correct any defect has not been
given." (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217,
1227.)
Cross-Complainants
have not shown the manner in which they could amend the pleadings to state
their claims against Cross-Defendant. However, the Court is nevertheless
inclined to grant leave to amend in light of the liberal standard for amendment
of pleadings and the nature of the defects in the Cross-Complaint. The Court
will therefore exercise its discretion to grant leave to amend.
Conclusion
Accordingly,
Cross-Defendant Arthur Diller’s Demurrer to the Cross-Complaint is SUSTAINED in
its entirety with leave to amend.
Motion to Strike
Cross-Defendant
Arthur Diller moves to strike allegations of punitive damages as to the third
and fifth causes of action.
As
Cross-Defendant’s demurrer has been sustained as to the Cross-Complaint in its
entirety, Cross-Defendant’s Motion to Strike is DENIED AS MOOT.
Motion to Quash Service of Summons
Special Appearance
No motion under Code of Civil Procedure 418.10 “shall be
deemed a general appearance by the defendant.” (Code Civ. Proc. § 418.10(d).)
Here, Specially Appearing Defendant (“Defendant”) brought this motion under
section 418.10. Thus, filing this motion does not constitute a general
appearance.
Motion to Quash
Cross-Defendants
Dorothy Diller, Arthur Diller, and specially appearing Cross-Defendant
Brookshire Diller Family, LLC move to quash service of the Cross-Complaint on
Arthur Diller on behalf of BDF, LLC.
Timeliness
A motion to quash must be made as Defendant’s initial
appearance in the action, on or before the last day to plead “or within any
further time that the court may for good cause allow.” (Code Civ. Proc. § 418.10(a).) Filing the motion also extends
the time within Defendant may answer or demur. (Code Civ. Proc. § 418.10(b).)
Here, Cross-Complainants filed a proof of service on July 15,
2022, stating that personal service was effected on Specially Appearing
Cross-Defendant through Cross-Defendant Arthur Diller on May 30, 2022.
(Opposition Exh. D.) However, at the time this motion was filed, the earliest
proof of service on file for Specially Appearing Cross-Defendant was dated June
10, 2022, in Los Angeles. (Opposition Exh. A.) When a defendant moves to quash
service of the summons and complaint, the plaintiff has “the burden of proving
the facts that did give the court jurisdiction, that is the facts requisite to
an effective service.” (Coulston v. Cooper (1966) 245 Cal.App.2d 866,
868.)
Cross-Complainants contend that this motion is not timely
because the last date to quash service on May 30, 2022 was June 29, 2022.
Specially-Appearing Cross-Defendant contests the validity of the May 30, 2022 proof
of service.
Cross-Complainants offer no evidence other than the proof
of service itself in support of their contention that the proof of service is
valid. “[C]ompliance with the statutory procedures for service of process is
essential to establish personal jurisdiction. [Citation.]” (Dill v. Berquist
Construction Co. (1994) 24 Cal.App.4th 1426, 1444.) “[T]he filing of a
proof of service creates a rebuttable presumption that the service was proper”
but only if it “complies with the statutory requirements regarding such
proofs.” (Id. at 1441-1442.)
Article 6 of the Hague Service Convention, to which Israel
is a signatory, defines the form of the certificate of service for
international service, and states that the certificate must be “in the form of
the model annexed.” (Hague Convention Art. 6; Table of signatories available at
https://www.hcch.net/en/instruments/specialised-sections/service [last viewed July 27, 2022].) California courts may not
exercise jurisdiction in violation of an international treaty. (Floveyor
Int’l, Ltd. v. Superior Court (1997) 59 Cal.App.4th 789, 795; Kott v.
Superior Court (1996) 45 Cal.App.4th 1126, 1136.) The proof of service contains all of the
elements of the model form, but is not made on the form itself. Furthermore,
the proof of service states that the documents were directed to “Brookshire
Diller Family LLCArthur Diller,” and that they were delivered to “The Addressee
himself.”
In response, Cross-Defendants present the declaration of
Arthur Diller, made under penalty of perjury. A verified declaration, like the
Diller Declaration, is competent evidence when considering whether an
individual has been properly served because the verified declaration is made
under penalty of perjury. (See Buchanan v. Soto (2015) 241 Cal.App.4th
1353, 1362; Elkman v National States Ins. Co. (2009) 173 Cal.App.4th
1305, 1313.) In the declaration, Arthur Diller
concedes that he was in Israel on May 30, 2022, but that he was not served with
any documents nor did he receive any documents from Cross-Complainants while he
was in Israel, and states that he left Israel on May 31, 2022. (Diller Decl. ¶
3.) Arthur Diller concedes, however, that he was personally served on June 10,
2022 in Los Angeles. (Id. ¶ 4.)
The Court is persuaded that the May 30, 2022 proof of service is
invalid. Cross-Complainants have offered no evidence other than the proof of
service itself to show that service was effective on May 30, 2022. There is no
declaration from the process server, nor any other supporting evidence that the
certificate of service is valid. Furthermore, the errors on the certificate of
service and the failure to use the model form call into question the veracity
of the form. Even if the Court construes the certificate as compliant with the
Hague Service Convention, Specially-Appearing Cross-Defendant has produced
evidence rebutting the presumption that the certificate is valid.
The Court therefore finds that service was effective on June 10,
2022, in Los Angeles, California. The motion was filed and served on July 8,
2022. Therefore, the motion is timely.
Analysis
Specially Appearing Cross-Defendant argues that the service
of the summons and complaint should be quashed because the Court does not have
personal jurisdiction over Specially Appearing Cross-Defendant.
“When a motion to quash is properly brought, the burden of
proof is placed upon the plaintiff to establish the facts of jurisdiction by a
preponderance of the evidence.” (Aquila,
Inc. v. Sup. Ct. (2007) 148 Cal.App.4th 556, 568; see also Elkman v.
National States Ins. Co. (2009) 173 Cal.App.4th 1305, 1312-13 [“Where a
nonresident defendant challenges jurisdiction by way of a motion to quash, the
plaintiff bears the burden of establishing by a preponderance of the evidence
that minimum contacts exist between the defendant and the forum state to
justify imposition of personal jurisdiction.”].) Evidence of the facts giving
rise to personal jurisdiction or their absence may be in the form of
declarations. (Arensen v. Raymond Lee Organization, Inc. (1973) 31
Cal.App.3d 991, 995.) The Court should exclude evidence that would be
inadmissible at trial. (See, e.g., Judd v. Superior Court (1976) 60
Cal.App.3d 38, 43-44 [Court of Appeal excluded inadmissible hearsay evidence
offered in support of affirmation of trial court’s denial of motion to quash,
and subsequently reversed the trial court’s denial].)
Specially Appearing Cross-Defendant contends that the Court
lacks personal jurisdiction because, under Delaware law, BDF, LLC no longer
exists.
California Corporations Code section 17708.01 provides that
the law of the state or other jurisdiction under which a foreign limited
liability is formed governs the organization of the LLC, its internal affairs,
the authority of its members and managers, and the liability of a member as
member and manager as manager for the debts, obligations, or other liabilities
of the LLC. (Cal. Corp. Code § 17708.01(a).) Specially-Appearing
Cross-Defendant contends, and Cross-Complainants do not dispute that the
formation and existence of BDF, LLC is governed by law in Delaware, the state
in which it was formed. (See Motion Exh. A.)
Specially-Appearing Cross-Defendant contends that BDF, LLC
was cancelled by operation of Delaware law for failure to pay taxes. Under
Delaware law, failure to pay taxes for a period of three years results in
cancellation of the certificate of formation by operation of law. (6 Del. Code
§18-1108 (a).) Specially-Appearing Cross-Defendant contends that, when a
Delaware LLC is cancelled, it ceases to exist. (See 6 Del. Code § 18-201(b).)
Specially-Appearing Cross-Defendant contends that a nonexistent LLC cannot be
served or named in a complaint, citing numerous Delaware statutes limiting the legal
capacity of a cancelled LLC to act.
In opposition, Cross-Complainants contend that
Specially-Appearing Cross-Defendant misconstrues Delaware law.
Cross-Complainants argue that the statues and cases cited by
Specially-Appearing Cross-Defendant concern voluntary dissolution and
cancellation by a corporation, as each contains a reference to the filing of a
certificate of cancellation, rather than involuntary cancellation due to a
sustained failure to pay taxes. (See, e.g., Metro Commc’n Corp. BVI v.
Advanced Mobilecomm Techs. Inc. (2004) 854 A.2d 121, 138 [stating that suit
may only be brought against an LLC that is dissolving itself only until the
certificate of cancellation is filed].) In reply, Specially-Appearing
Cross-Defendant stands on its argument. In so doing, Specially-Appearing
Cross-Defendant appears to conflate the ability of a corporation to appear
and defend itself in a lawsuit with its ability to be served and named
in a complaint, which are not identical scenarios.
In the
Court’s view, the provisions of the Delaware Code governing involuntary
cancellation of a corporation for failure to pay taxes is analogous to the
corresponding provisions in the Revenue and Taxation Code. (See Rev. & Tax.
Code § 23301.) In Delaware, as in California, a corporation that fails to pay
taxes loses its legal rights. (6 Del. Code § 18-1108; Cal. Rev & Tax. Code
§ 23301.) Critically, both states provide for a mechanism of revival by filing
the appropriate paperwork with the Secretary of State and paying off the
outstanding tax obligations. (6 Del. Code § 18-1110; Cal. Rev. & Tax. Code
§ 23305.) It appears to the Court that, as with our equivalent provisions, this
portion of the Delaware Code is intended to penalize corporations that are
delinquent on their tax obligations and encourage them to pay their taxes on
time and in full. (See Timberline, Inc. v. Jaisinghani (1997) 54
Cal.App.4th 1361, 1366.) It would make little sense for a corporation to be
shielded from even being named in a complaint where the cancellation of its
certificate of formation is meant to be a punishment for failure to pay taxes
for three years. Such a proposition would create a perverse incentive for an
already delinquent corporation: simply stop paying taxes, or continue not to
pay taxes, and be shielded from all civil liability indefinitely. The Court
declines to adopt a reading of Delaware law that would permit that scenario.
Conclusion
Accordingly,
the Motion to Quash Service of the Cross-Complaint is DENIED.
CONCLUSION:
Accordingly, Cross-Defendant Arthur Diller’s
Demurrer to the Cross-Complaint is SUSTAINED with leave to amend.
Cross-Complainants shall have 30 days leave to amend the Cross-Complaint.
Cross-Defendant Arthur Diller’s
Motion to Strike portions of the Cross-Complaint is DENIED AS MOOT.
Cross-Defendant Brookshire Diller
Family, LLC’s Motion to Quash service of the Cross-Complaint is DENIED.
Moving Party to give notice as to the Demurrer and Motion to
Strike. Court to give notice as to the Motion to Quash.
IT IS SO ORDERED.
Dated: July 29, 2022 ___________________________________
Theresa
M. Traber
Judge
of the Superior Court
Any party may submit on the
tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day
before the hearing. All interested parties must be copied on the email. It
should be noted that if you submit on a tentative ruling the court will still
conduct a hearing if any party appears. By submitting on the tentative you
have, in essence, waived your right to be present at the hearing, and you
should be aware that the court may not adopt the tentative, and may issue an
order which modifies the tentative ruling in whole or in part.