Judge: Wesley L. Hsu, Case: 21PSCV00841, Date: 2023-03-22 Tentative Ruling

Case Number: 21PSCV00841    Hearing Date: March 22, 2023    Dept: L

1. Defendant George Larrazolo’s Demurrer to Plaintiff’s Third Amended Complaint is OVERRULED.

2. Defendant George Larrazolo’s Motion to Strike Portions of Plaintiff’s Third Amended Complaint is GRANTED in part (i.e., as to Paragraphs 79 and 81) and DENIED in part (i.e., as to Paragraphs 94 and 106).

Background    

Plaintiff Lisa Larrazolo Bohn (“Lisa”) alleges as follows: Irene Larrazolo (“Irene”) and George Larrazolo (“George”) are Lisa’s parents. Lisa works as Project and Operations Manager for the family business, American Riggers Inc. (“ARI”), which is an industrial moving company providing hauling, rigging, equipment relocation, assembly and installation of heavy equipment and machinery for businesses. Lisa and her husband transformed ARI into a million-dollar corporation, loaned ARI over six figures to pay bills and cover payroll over the years and withheld many of their own payroll checks to ensure employees could be paid. On October 29, 1986, George and Irene created the Larrazolo Trust. On October 17, 2019, George and Irene executed an “Amendment to the Fourth Amendment and Complete Restatement of the Larrazolo Trust Under Declaration of Trust Dated October 29, 1986, as Restated April 7, 2016” (“Fifth Amendment”), which provided that Irene’s 51% share in ARI was to be immediately distributed to Lisa outright and free of Trust upon Irene’s death. Also, on or about February 15, 2020, George, Irene and Lisa entered into a Business Operating Agreement (“Agreement”), which provided, in pertinent part, that George would continue to operate ARI during the lifetime of Irene and George or until Lisa obtained a property to which ARI could be relocated at which time Lisa would then take over all of ARI’s operations and be 100% owner. The Agreement provided that Lisa would receive 49% of ARI as a gift from the Trust upon Irene’s death. The Agreement also provided that ARI would pay for 100% relocation of the business onto a new property, that George would pay off a $230,000.00 loan to Adobe Oil, that any future loans or debt were to be approved by Lisa and that George would receive up to $1,200/week for up to 2 years after the transfer. Irene died on February 19, 2020. George breached the Agreement by failing and refusing (1) to transfer 100% ownership and operation of ARI to Lisa upon her obtaining a property to which ARI could be relocated, (2) to transfer 49% of ARI stock to Lisa as a gift from the Trust upon Irene’s death, (3) to have ARI to pay for 100% for the relocation of the ARI to a new property, (4) to pay off the Adobe Oil loan, (5) to have any future loans or debt to be approved by Lisa and by failing and refusing (6) to limit payment to himself to $1,200 per week and instead receiving payments in significantly greater amounts. In June 2021, Lisa signed the lease agreement for the new ARI property; however, George refused to have funds released for paying said lease. George has also withdrawn $100,000.00 from ARI’s bank account and refuses to return $10,000.00 of these monies.

On November 16, 2022, the court sustained George’s demurrer to the second and seventh causes of action in Plaintiff’s Second Amended Complaint without leave to amend.

On December 15, 2022, Plaintiff filed a Third Amended Complaint (“TAC”), asserting causes of action against George, ARI and Does 1-50 for:

1.     Breach of Written Contract

2.     Intentional Misrepresentation

3.     Breach of Fiduciary Duties

4.     Conversion

5.     Unfair Business Practices (Bus. & Prof. Code § 17200)

6.     Declaratory Relief

On January 17, 2023, Plaintiff dismissed ARI, without prejudice.

A Case Management Conference is set for May 11, 2023.

1. Demurrer to TAC

Legal Standard

A demurrer may be made on grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action and/or is uncertain. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

When considering demurrers, courts read the allegations liberally and in context. 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 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

George demurs, per Code of Civil Procedure § 430.10, subdivisions (e) and (f), to the sixth cause of action in Plaintiff’s TAC, on the basis that it fails to state facts sufficient to constitute a cause of action and is uncertain.

“Any person interested . . . under a contract, . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights. . ., including a determination of any question of construction or validity arising under the instrument or contract. . .” (Code Civ. Proc., § 1060.)

“Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied.” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4^th 357, 366.)

Here, Plaintiff adequately alleges a controversy as to the rights and duties of the parties pursuant to the contract. (TAC, ¶¶ 102 and 103).

George’s demurrer to the sixth cause of action is overruled.

2. Motion to Strike Portions of TAC

Legal Standard

Pursuant to Code of Civil Procedure section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437.)

Discussion

George moves the court for an order striking out the following portions of Plaintiff’s TAC:

1.     Paragraph 79 (i.e., “[i]mproper derivative allegations”);

2.     Paragraph 81 (i.e., “[i]mproper derivative allegations”);

3.     Paragraph 94 (i.e., “[i]mproper conduct not constituting ‘unfair business practices’ or

‘unfair competition’”); and

4.     Paragraph 106 (i.e., “[i]mproper request for monetary/economic damages as part of cause

of action for declaratory relief”).

Derivative Allegations (i.e., Paragraphs 79 and 81)

George asserts that Paragraphs 79 (i.e., “American Riggers, and Lisa as a shareholder, were in possession of cash, stock, bank accounts, and other financial instruments containing various personal property, intended for the benefit of the Business, and thus Lisa, as a shareholder, to which she was entitled to immediate possession” [emphasis added]) and 81 (i.e., “Lisa is informed and believes that George has fraudulently converted cash, bank accounts, real property and other financial instruments for his own personal benefit and against the interests of the Business and Lisa, as shareholder. On September 21, 2021, George withdrew $100,000.00 from the American Riggers bank account, leaving the Business in dire financial condition and unable to operate adequately. Although he subsequently returned $90,000.00 of the funds, he has failed and refused to return the remaining $ 10,000.00” [emphasis added]) should be stricken, on the basis that Plaintiff lacks standing to bring derivative claims.

An “action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance of distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106 [quotation marks and citations omitted].) The court agrees that these allegations are irrelevant and improper in the TAC, which is not a shareholder’s derivative action.

The motion, then, is granted in this regard.

Unfair Business Practices (i.e., Paragraphs 94)

The court previously overruled George’s demurrer to the Unfair Business Practices cause of action in Plaintiffs’ SAC. George now seeks to strike out portions of the Unfair Business Practices cause of action on the same grounds. A demurrer on grounds previously overruled is improper because the court is “foreclosed from rendering a new determination on the viability of those claims” absent a timely motion for reconsideration under Code of Civil Procedure § 1008. (Bennett v. Suncloud (1997) 56 Cal.App.4^th 91, 96-97.) George has failed to provide the court with any authority which would enable him to file a motion to strike out the only substantive paragraph in this cause of action after his demurrer was previously overruled on the same ground.

The motion is denied in this regard.

Declaratory Relief and Economic Damages (i.e., Paragraph 106)

Paragraph 106 of Plaintiff’s TAC does not reference “past and future” economic damages. The motion is denied in this regard.