Judge: Thomas Falls, Case: KC070029, Date: 2022-11-02 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, attorneys are advised to check this website to determine if any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Dept. R at 909-802-1117 before 8:30 the morning of the hearing.

Case Number: KC070029    Hearing Date: November 2, 2022    Dept: R

Virginia Asset Partners, LLC v. USM Investments, Inc., et al. (KC070029)

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VIRGINIA ASSET PARTNERS, LLC’s MOTION FOR JUDGMENT ON THE PLEADINGS AGAINST DEFENDANT USM INVESTMENTS, INC.

 

            Responding Party: Unopposed as Monday, 10/24 (due 9 court days before the hearing)

 

Tentative Ruling

 

VIRGINIA ASSET PARTNERS, LLC’s MOTION FOR JUDGMENT ON THE PLEADINGS AGAINST DEFENDANT USM INVESTMENTS, INC. is GRANTED. USM’s Answer and Cross-Complaint are stricken.

 

Background

 

This lawsuit involves a dispute over the sale of the real property located at 20560 E. Holt Avenue in Covina (“subject property”). Plaintiff Virginia Asset Partners, LLC (“Plaintiff”) alleges that Defendants Linda Young and Sergio Ulloa misrepresented the subject property’s acreage. Specifically, two days after entering into the Sale Contract with Plaintiff, Defendant Sergio Ulloa purported to convey on behalf of Defendant USM a portion of the Subject Property to the Carillos, thus rendering the lot size as 1.7 acres rather than the represented 3.6 acres.

 

On February 8, 2018, Plaintiff filed the instant action.

 

On May 3, 2018, USM Investments, Inc. (“USM”) filed a cross-complaint, asserting causes of action against Plaintiff Virginia Asset Partners, LLC dba Virginia Assets LLC (“Plaintiff”), Cross-Defendant Jade Escrow, Inc. (“Jade”) and Roes 1-20 for:

 

1.      Breach of Contract

2.      Fraud

3.      Breach of the Covenant of Good Faith and Fair Dealing

4.      Rescission

5.      Breach of Fiduciary Duty

6.      Breach of Contract

7.      Professional Negligence

 

On October 10, 2019, Plaintiff filed two “Amendment[s] to Complaint,” wherein Herman Carrillo was named in lieu of Doe 1 and Rosemary Carrillo was named in lieu of Doe 2 (collectively, “the Carrillos”).

 

On July 13, 2021, Plaintiff filed a Third Amended Complaint (“TAC”), asserting causes of action against USM, Sergio M. Ulloa, individually and as President of USM Investments, Inc. (“Ulloa”), the Carrillos, Linda Young (“Young”), SHM Quantum Leap, Inc. dba Keller Williams Signature Realty (“Keller Williams”) and Does 3-20 for:

 

1.      Specific Performance

2.      Declaratory Relief

3.      Breach of Contract

4.      Fraud

5.      Aiding and Abetting

6.      Constructive Trust

7.      Cancellation of Instruments

8.      Preliminary and Permanent Injunction

9.      Breach of Fiduciary Duties

10.  Breach of Contract

11.  Tort of Another

12.  Negligent Misrepresentation

13.  Intentional Misrepresentation

 

On August 20, 2021, Plaintiff dismissed the Carrillos without prejudice.

 

On October 18, 2021, a “Stipulation and Order Dismissing Causes of Action from the Third Amended Complaint” was filed, wherein Plaintiff dismissed the second and sixth-eighth causes of action as against Young and Keller Williams only with prejudice.

 

On November 22, 2021, the court adopted its Tentative Ruling with the following modification:

The Demurrer - with Motion to Strike (CCP 430.10) filed by SHM Quantum Leap, Inc. on 10/08/2021 is Sustained with Leave to Amend. Demurrer to Complaint of Plaintiff Virginia Asset Partners, LLC is OVERRULED in part (i.e., as to the tenth cause of action) and SUSTAINED in part (i.e., as to the fourth and eleventh through thirteenth causes of action). Defendant SHM Quantum Leap, Inc. dba Keller Williams’ demurrer is SUSTAINED as to the fifth cause of action. Petitioner is granted 30 days leave to amend. Defendant's Motion to Strike Portions of Plaintiff’s Third Amended Complaint is DENIED as MOOT.

 

On December 21, 2021, Plaintiff filed a Fourth Amended Complaint against Defendants USM Investments, Inc; Sergio Ulloa; Herman Carrillo; Rose Marie Carrillo; Linda Young; SHM Quantum Leap, Inc. Dba Keller Williams Signature Realty for:

 

1. Specific Performance;

2. Declaratory Relief;

3. Breach Of Contract;

4. Fraud;

5. Aiding And Abetting;

6. Constructive Trust;

7. Cancellation Of Instruments;

8. Preliminary And Permanent Injunction;

9. Breach Of Fiduciary Duties;

10. Breach Of Contract;

11. Negligent Misrepresentation; And

12. Intentional Misrepresentation

 

On April 4, 2022, Defendants filed a Motion to Set Aside/Vacate Default (“Motion”), which the court granted.

 

On August 6, 2022, the court heard oral argument on three summary judgment motions and one motion to continue trial, and the court denied all four motions.

 

On September 6, 2022, Defendants SHM Quantum Leap, Inc. Dba Keller Williams Signature Realty And Linda Young's (“Moving Defendants”) filed a Motion To Bifurcate Equitable Issues At Trial, which the court granted.

 

On September 27, 2022, Plaintiff filed the instant MOTION FOR JUDGMENT ON THE PLEADINGS AGAINST DEFENDANT USM INVESTMENTS, INC. (“Motion”).

 

Legal Standard

 

It is well-established in California that either prior to trial or at the trial the plaintiff or the defendant may move for judgment on the pleadings and that the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense.  (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791; see also Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586 [The non-statutory motion for judgment on the pleadings can be made at any time, even during trial, since the grounds for a general demurrer are never waived.]; Code Civ. Proc. § 438.) 

 

A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed. (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198.)  Presentation of extrinsic evidence is therefore not proper on a motion for judgment on the pleadings. (Id.; Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.)  Both a demurrer and a motion for judgment on the pleadings accept as true all material factual allegations of the challenged pleading, unless contrary to law or to facts of which a court may take judicial notice.  (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677; Edwards v. Centex Real Estate Corp, (1997) 53 Cal.App.4th 15, 27.)  On a motion for judgment on the pleadings a court may take judicial notice of something that cannot reasonably be controverted, even if it negates an express allegation of the pleading.  (See Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 468-469; Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549) (emphasis added).

 

“Matters which are subject to mandatory judicial notice may be treated as part of the complaint and may be considered without notice to the parties.¿¿[Citation.]¿¿Matters which are subject to permissive judicial notice must be specified in the notice of motion, the supporting points and authorities, or as the court otherwise permits.”¿ (Schabarum¿v. California Legislature¿(1998)¿60 Cal.App.4th¿1205, 1216, fn. 5.)¿¿“Judgment on the pleadings does¿not depend upon a resolution of questions of witness credibility or¿evidentiary conflicts.¿¿In fact, judgment on the pleadings must be denied where there are material factual issues that require evidentiary resolution.”¿¿(Id.¿at¿1216.)¿ In ruling on a [motion for a judgment on the pleadings], the court must “liberally construe[]” the allegations of the complaint. ¿(Code Civ. Proc., § 452.)  “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.) 

 

Leave to amend should be granted if there is any reasonable possibility that the plaintiff can state a good cause of action.  (Virginia G. v. ABC Unified School Dist. (1993) 15 Cal.App.4th 1848, 1852.) 

 

Request for Judicial Notice (“RJN”)

 

Plaintiff asks the court to take judicial notice of the certificate of status for USM Investments, Inc., certificate # 047740327, on file with the California Secretary of State, filed December 1, 2016.

 

Evidence Code, §451 provides that the Court shall take judicial notice of “[a]ny matter made a subject of judicial notice by Section 11343.6, 11344.6, or 18576 of the Government Code or by Section 1507 of Title 44 of the United States Code.” This in turn includes rules, regulations, orders adopted by California state agencies and filed with the Secretary of State or printed in the California administrative code; executive orders, presidential proclamations, etc.  

 

Therefore, as the certificate of status has been issued by a California state agency (Secretary of State), the court GRANTS judicial notice of Exhibit 1.

 

Discussion

 

Plaintiff brings forth the motion on the grounds that USM is a suspended corporation.

 

The law regarding the corporate powers, rights and privileges of a suspended corporation are well-established and clear. “Revenue and Taxation Code section 23301 provides that ‘the corporate powers, rights and privileges of a domestic taxpayer may be suspended’ if it fails to pay ‘any tax, penalty, or interest . . . that is due and payable’ to the Franchise Tax Board.”  (Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304, 310.) “Except for filing an application for tax-exempt status or amending the articles of incorporation to establish a new corporate name, ‘a suspended corporation is disqualified from exercising any right, power or privilege.’”  (Id. (quoting Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1365).) During the period of suspension, the corporation may not prosecute or defend an action, seek a writ of mandate, appeal from an adverse judgment, or renew a judgment obtained before suspension. (Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306.)

 

Here, USM’s “powers, rights and privileges” were suspended by the California Franchise Tax Board pursuant to the provisions of the California Revenue and Taxation Code as of December 1, 2016. (See Lauber Decl., Ex. 2.)

 

Accordingly, USM lacks capacity to defend or sue in this matter.

 

The court’s only qualm with the motion is that USM has been a named Defendant since the commencement of the action in 2018. Plaintiff’s Counsel explains that “[o]n September 26, 2022 [he] went to the California Secretary of State website to review the corporate status and organizational documents of USM.” (Lauber Decl., 2.) But the court cannot help but comment on the suspect timing of the search as Plaintiff waited four years to do so, four years which may not only have precluded many of the filings before the court but may have saved Defendant and its Counsel days, hours, months, and years of work.


In any event, as Defendant USM is a suspended corporation—which is a matter that “cannot reasonably be controverted”—Defendant lacks the capacity to defend itself.

 

Conclusion

 

Based on the foregoing, the court grants the motion. Consequently, the court strikes USM's Answer and Cross-Complaint because they were not filed in conformity with the laws of this state (i.e., by a corporation in good standing).