Judge: Walter P. Schwarm, Case: 30-2018-00999118, Date: 2022-08-09 Tentative Ruling
Motion No. 1:
Defendants’ (Martin H. Kay, M.D. and Rachel Bak, M.D.) Demurrer to Plaintiff Jennifer Armstrong, M.D.’s Third Amended Complaint (Demurrer), filed on 3-24-22 under ROA No. 463, is SUSTAINED. The Notice to the Demurrer (Notice) was filed on 3-24-22 under ROA No. 476.
The court GRANTS Defendants’ Request for Judicial Notice (RJN), filed on 3-24-22 under ROA No. 465, as to Exhibits 4, 5, and 6 pursuant to Evidence Code section 452, subdivision (d). The court DENIES the RJN as to Exhibit 1, 2, and 3 as immaterial to the court’s decision set forth below. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)
“A demurrer tests the pleading alone, and not the evidence or the facts alleged. . . . To the extent there are factual issues in dispute, however, this court must assume the truth not only of all facts properly pled, but also of those facts that may be implied or inferred from those expressly alleged in the complaint.[Citations.]” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) Code of Civil Procedure section 452, states, “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” Perez v. Golden Empire Transportation Transit District (2012) 209 Cal.App.4th 1228, 1238, provides, “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant. [Citations.]” C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872 (C.A.), provides, “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged. [Citation.]”
The Demurrer each of the causes of action in Plaintiff’s (Jennifer Armstrong, M.D.) Third Amended Complaint (TAC), filed on 2-22-22 under ROA No. 461, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f). (Notice.)
First, the Demurrer contends Plaintiff has violated the sham pleading rule “. . . by deleting from the TAC the exhibits attached in the SAC, namely the Agreement, which was attached and incorporated into the SAC. (Demurrer; 6:3-5.) On 7-26-22 under ROA No. 482, Plaintiff filed a “Notice of Errata to Plaintiff Jennifer Armstrong, M.D.’s Third Amended Complaint as to Inadvertently Omitted Exhibits ‘A’ through ‘F’ (NOE).” Therefore, the court OVERRULES Defendants’ Objection to Plaintiff Jennifer Armstrong, M.D.’s Notice of Errata to Plaintiff’s Third Amended Complaint, filed on 8-1-22 under ROA No. 494. The TAC expressly referred to Exhibits A through F in the TAC. (TAC, ¶¶ 7, 8, 9, 11, and 12.) As a result, the court OVERRULES the Demurrer to the extent it relies on the sham pleading rule.
Second, Defendants state, “As discussed above, an action must be prosecuted in the name of the real party in interest. Here, Plaintiff has failed to state allegations sufficient to provide her with standing to bring any of the TAC’s causes of action.” (7; 2-4.) Plaintiff’s Opposition to Defendants Martin Kay, M.D. and Rachel Bak, M.D. Demurrer to Plaintiff’s Third Amended Complaint (Opposition), filed on 7-27-22 under ROA No. 484, responds, “More importantly, however, the Amendment to the Purchase Agreement specifically designates Plaintiff as the Purchaser.” (Opposition; 13:1-3 (Emphasis in Opposition.).)
Code of Civil Procedure section 367 provides, “Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” Desaigoudar v. Meyercord (2003) 108 Cal.App.4th 173, 183, states, “Because a corporation is a legal entity separate from its shareholders, when a corporation has suffered an injury to its property the corporation is the party that possesses the right to sue for redress.”
The allegations asserted in this action arise exclusively from conduct related to the terms of the Agreement. Similar to Plaintiff’s Second Amended Complaint (SAC), filed on 6-29-21 under ROA No. 365, the TAC alleges, “Plaintiff Armstrong acquired 100% of the stock of Advanced Skincare MedCenter, Inc. . . . in or about June 2015 through a Purchase and Sale Agreement (‘Agreement’) . . . with Defendants Kay and Bak.” (TAC, ¶ 7 and NOE Exhibit A.) According to the Agreement, however, the Agreement was entered into by and between Advanced Medical Centers, Inc. (AMC) and Defendants Martin H. Kay, M.D. and Rachel Bak, M.D. (TAC, ¶ 7 and NOE Exhibit A.) The Agreement designates the “Purchaser” as “Advanced Medical Centers, Inc.” (TAC, ¶ 7 and NOE Exhibit A.) Plaintiff, in her individual capacity, is not a party to the Agreement. The SAC also attached an “Amendment to the PURCHASE AGREEMENT between Advanced Skincare Medical Centers, INC and Advanced Medical Centers, INC.” (SAC, ¶ 7 and NOE Exhibit A (Uppercase in Exhibit A.).) This Amendment states, “The purchase agreement is amended as follows: The PURCHASER will be considered Jennifer Armstrong, M.D.” (TAC, ¶ 7 and NOE Exhibit A (Uppercase in Exhibit A.).) This Amendment is not between parties to the Agreement. Rather, it is between “Advanced Skincare Medical Centers, INC and Advanced Medical Centers, INC.” The parties to the Agreement, however, are Advanced Medical Centers, Inc. and Defendants Martin H. Kay, M.D. and Rachel Bak, M.D. Advanced Skincare Medical Centers, Inc. was not a party to the Agreement. Second, the Amendment is only signed by Defendant—Martin Kay, in his individual capacity, and Plaintiff, in her individual capacity. It lacks the signature of Rachel Bak and any signature by an authorized person on behalf of Advanced Medical Centers, Inc. The Agreement contains an “Assignment” clause which states, “This Agreement and the rights and obligations hereunder shall not be assignable or transferable by Purchaser or Sellers . . . without the prior written consent of the other parties hereto.” (TAC, ¶ 7 and NOE Exhibit A (Section 9.1 of the Agreement.).) Accordingly, Plaintiff has not sufficiently alleged that the Agreement was amended such that Plaintiff, in Plaintiff’s individual capacity, became the purchaser. As alleged, Plaintiff is not a real party in interest with respect to the claims asserted in the TAC because the claims belong to Advance Medical Centers, Inc. as the party to the Agreement. Thus, the court finds that the Amendment does not support Plaintiff’s contention that the Amendment conferred standing upon Plaintiff.
Second, Plaintiff appears to contend that an oral agreement modified the Agreement was modified by an oral agreement. (Opposition 12:17-21.) Specifically, Plaintiff states, “A written contract can be ‘modified by executed oral agreements. And, an agreement to modify a written contract will he implied if the conduct of the parties is inconsistent with the written contract so as to warrant the conclusion that the parties intended to modify it.’ Daugherty Co. v. Kimberly-Clark Corp., 14 Cal.App.3d 151, 158 (1971).” (Opposition; 12:17-21.)
Civil Code section 1698 applies to the modification of a contract. Civil Code section 1698 states, “The modification of a written contract is governed by Civil Code Section 1698 which provides: “(a) A contract in writing may be modified by a contract in writing. [¶] (b) A contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties. [¶] (c) Unless the contract otherwise expressly provides, a contract in writing may be modified by an oral agreement supported by new consideration. The statute of frauds (Section 1624) is required to be satisfied if the contract as modified is within its provisions. [¶] (d) Nothing in this section precludes in an appropriate case the application of rules of law concerning estoppel, oral novation and substitution of a new agreement, rescission of a written contract by an oral agreement, waiver of a provision of a written contract, or oral independent collateral contracts.”
In support of modification by an oral agreement, the TAC alleges, “. . . Plaintiff has legal standing to bring this action as the purchaser of Advanced Skincare MedCenter, Inc. (“Advanced”). The parties mutually agreed that Plaintiff would substitute by amendment in place of Advanced Medical Centers, Inc. in the purchase agreement to become the purchaser of Advanced. Plaintiff advised Defendants that the substitution was required by the bank offering the purchase loan to Plaintiff to purchase Advanced. Defendants Kay and Bak expressly agreed to the Amendment; expressly agreed that Plaintiff would be the ‘purchaser’; and fully consummated the purchase transaction on this basis. Defendants fully accepted all benefits of the purchase transaction including the purchase price consideration; Defendants purported to convey 100% of the stock to Plaintiff at closing as ‘purchaser.’ ” (TAC, ¶ 1; Italics in TAC.)
Plaintiff’s contention that the oral agreement modified the Agreement does not consider the “Assignment” clause in the Agreement which precludes oral agreements. (TAC, ¶ 7 and NOE Exhibit A (Section 9.1 of the Agreement.).) Since the Agreement expressly precludes an oral agreement, Plaintiff has still not sufficiently alleged that she has standing.
Based on the above, the court SUSTAINS Defendants’ (Martin H. Kay, M.D. and Rachel Bak, M.D.) Demurrer to Plaintiff Jennifer Armstrong, M.D.’s Third Amended Complaint, filed on 3-24-22 under ROA No. 463, with 14-days leave to amend from the date of service of the notice of the court’s decision. (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747.)
Defendants are to give notice.
Motion No. 2:
Defendants’ (Martin H. Kay, M.D. and Rachel Bak, M.D.) Motion to Strike Portions of Plaintiff Jennifer Armstrong, M.D.’s Third Amended Complaint, filed on 3-24-22 under ROA No. 471, is DENIED as MOOT based on the court’s ruling as to Motion No. 1.
Defendants are to give notice.