Demurrers and Motion for Preliminary Injunctions (Judge Glenda Sanders)

As to all demurrers filed in the Devine and HCR matters the court notes:

A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint.??Lambert v. Carneghi?(2008) 158 Cal.App.4th 1120, 1126.? The challenge is limited to the ?four corners? of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code ?? 451 or 452.? The complaint is read as a whole: material facts properly pleaded are assumed true; contentions, deductions or conclusions of fact/law are not.??Blank v. Kirwan?(1985) 39 Cal.3d 311, 318.? In general, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim.? The degree of detail required depends on the extent to which the defendant in fairness needs such detail which can be conveniently provided by the plaintiff.? Less particularity is required when the defendant ought to have co-extensive or superior knowledge of the facts.? Leek v. Cooper?(2011) 194 Cal.App.4th 399, 413.? Not every fact which ultimately supports a cause of action needs to be pled, and trial courts are obligated to accept as true even the most improbable factual averments without regard to the pleader?s ability to actually prove those facts.??See C.A. v. William S. Hart Union High School Dist.?(2012) 53 Cal.4th 861, 872.

Further, ?If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer. [W]e are not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the?factual?allegations of the complaint are adequate to state a cause of action under any legal theory. The courts of this state have… long since departed from holding a plaintiff strictly to the `form of action’ he has pleaded and instead have adopted the more flexible approach of examining the facts alleged to determine if a demurrer should be sustained.”??Quelimane v. Stewart Title Guaranty Co.?(1998) 19 Cal.4th 26, 38.

1.DEFENDANT ALAN G RYE?S DEMURRER TO THE NINTH, THIRTEENTH, AND FOURTEENTH CAUSES OF ACTION IN PLAINTIFF?S FIRST AMENDED COMPLAINT

Alan G. Rye?s demurrers to the 9th, 13th and 14th causes of action are?overruled.

Reading the complaint as a whole, Plaintiff is not alleging that Rye is a debtor, transferor or transferee.? Rather, Plaintiff alleges that Rye was conspirator in the allegedly fraudulent conveyance.? Further, accepting the allegations are true (as the Court must do in ruling on a demurrer), Plaintiff sufficiently alleges an injury as a result of the transfer based on the assertion that the transfer was for less than the assets were worth and, through the sale of JB?s loans and the simultaneous transfer of the property, Forstar?s interests in the property and its right to receive a share of the proceeds were negatively impacted.

As for the statute of limitations issue, Plaintiff alleges that she could not have discovered the conspiracy to fraudulently transfer assets until March 2016.? This sufficiently alleges delayed discovery which is a question of fact and not appropriate for demurrer.??Fox,?35 Cal.4th at 808-809;?Snow v. A.H. Robins Co.?(1985) 165 Cal.App.3d 120, 128.? Moreover, the last alleged overt act of the alleged conspiracy did not occur until January 13, 2016?less than a year before the complaint was filed.

Rye demurs to the 13th and 14th causes of action on the ground that there is no underlying valid cause of action to support these desired remedies.? As stated above, the fraudulent conveyance claim is sufficiently pled and Plaintiff may pursue the remedies identified in the 13th and 14th causes of action.??

2.DEFENDANT?S ALFRED BALDWIIN, RANDALL BONE, BALDWIN & SONS, LLC, LAKEVIEW 1 LLC, LAKEVIEW 2, LLC, SUNRANCH CAPITAL PARTNERS, LLC SRC-PH INVESTMENTS, LLC OTAY PROJECTS LP, SOUTHWIND DEVELOPMENT, LLC, PORTOLA PROJECT, LLC, VILLAGE II OF OTAY HB SUB LLC, SIGNATURE SR V2 R20, LLC, CANTAMAR SR V2, R23, LLC DEMURRER TO FIRST AMENDED COMPLAINT

The demurrers of Defendants Alfred Baldwin; Randall Bone; Baldwin & Sons, LLC; Lakeview 1, LLC; Lakeview 2, LLC; Sunranch Capital Partners, LLC; SRC-PH Investments, LLC; Otay Project, LP; Southwind Development, LLC; Portola Project, LLC; Village II of Otay HB Sub, LLC; Signature SR V2 R20, LLC; and Cantamar SR V2 R23, LLC (collectively the ?Baldwin Defendants?) to the 1st-10th? and 13th to 14th causes of action are?overruled.?

The Baldwin Defendant?s Request for Judicial Notice is?granted.

The Baldwin Defendants argue that the first and second causes of action fail because Defendant James Baldwin cannot have breached fiduciary duty to Forstar because Baldwin and Forstar are one and the same and Plaintiff?s allegations of aiding and abetting are conclusory and without detail.? Application of the alter ego doctrine does not mean that there is only one entity for all purposes.? As the court explained in?Mesler v. Bragg Management Co.?(1985) 39 Cal.3d 290, 301:

The corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require. [?] . . . . It is not that a corporation will be held liable for the acts of another corporation because there is really only one corporation. Rather, it is that under certain circumstances a hole will be drilled in the wall of limited liability erected by the corporate form; for all purposes other than that for which the hole was drilled, the wall still stands.

The post-judgment determination that James Baldwin was Forstar?s alter ego did not dissolve Forstar nor did it merge Baldwin into Forstar, particularly as the conduct alleged in this complaint predated that determination.

With regard to the aiding and abetting, the First Amended Complaint makes specific allegations of wrongdoing as to each defendant sufficient for pleading purposes.??FAC, ?? 71-94.

The Baldwin Defendants argue that the 3rd, 4th, 5th, 7th and 9th causes of action fail because Forstar was not a creditor of Otay Project and, further, Otay Project is merely a member of a limited liability company that is a general partner of Otay Project, a limited partnership.

Under the allegations of the complaint, which must be presumed true for purposes of a demurrer, Forstar was a creditor of Otay Project based on its claims and subsequent judgment.? Further, Plaintiff alleges a unity of interest between Otay Project, Forstar, James Baldwin, Alfred Baldwin and other defendants and asserts that the defendants operated as a single enterprise.? The allegations are sufficient to survive demurrer.

The Baldwin Defendants argue that the 3rd and 9th causes of action fail because the property allegedly transferred was not an asset as it was encumbered by a lien.? Property is not an asset for purposes of ? 3439.04 only ?to the extent it is encumbered by a valid lien.?? Any unencumbered portion is an asset for fraudulent transfer purposes.?Filip v. Bucurenciu?(2005) 129 Cal.App.4th 825, 835.? Under the allegations of the complaint, the property had value beyond any lien.? Accordingly, the allegations are sufficient for pleading purposes.

The Baldwin Defendants argue that the 6th and 10th causes of action fails because Plaintiff does not adequately allege a fraudulent transfer.? Actual intent to fraudulently transfer assets must only be pled as to the initial transferor.? With regard to subsequent transferees, it is sufficient to allege that they did not take the property in good faith or for reasonably equivalent value.? Here, Plaintiff sufficiently alleges fraudulent intent as to the initial transferor as well as that the subsequent transferees did not take in good faith or for reasonably equivalent value.

The Baldwin Defendants argue that the 3rd, 4th, 5th, 6th and 9th causes of action are barred by the applicable statute of limitations.? A cause of action generally accrues when ?the cause of action is complete with all its elements.???Fox v. Ethicon Endo-Surgery, Inc.?(2005) 35 Cal.4th 797, 806.? However, “[a]n important exception to the general rule of accrual is the ?discovery rule,? which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.”??Fox, 35 Cal.4th at 807 (citation omitted).? Under the allegations of the complaint, Plaintiff could not have discovered the conspiracy to fraudulently transfer assets until March 2016.? This sufficiently alleges delayed discovery which is a question of fact and not appropriate for demurrer.??Fox,?35 Cal.4th at 808-809;?Snow v. A.H. Robins Co.?(1985) 165 Cal.App.3d 120, 128.? Moreover, the last alleged overt act of the alleged conspiracy did not occur until January 13, 2016?less than a year before the complaint was filed.?

The Baldwin Defendants argue that the 7th, 8th and 13th causes of action are fatally uncertain because there is inconsistency between the allegations of the complaint and the attached exhibits.? The complaint appears to include a number of typographical errors.? These errors do not, however, render the complaint fatally uncertain as to those causes of action.? These are the types of issues which can and should be worked out in discovery.??Khoury v. Maly?s of California, Inc. (1993) 14 Cal.App.4th 612, 616 (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.?);?Saunders v. Cariss?(1990) 224 Cal.App.3d 905, 908 (errors and confusion created by ?the inept pleader? are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief).

Finally, the Baldwin Defendants argue that the 13th and 14th causes of action fails because Plaintiff has not asserted any viable claims and is not entitled to a constructive trust or an accounting.? As stated above, the underlying claims are sufficiently pled and Plaintiff may pursue the remedies identified in the 13th and 14th causes of action.?

3.DEFENDANT?S RONALD THERRIEN, CATH LLC, KK3RM LLC, NOBLE COURT LP, RMJB INC DEMURRER TO FIRST AMENDED COMPLAINT?

Defendants Ronald Therrien; Cath, LLC; KK3RM, LLC; Noble Court, L.P., and RMJB, Inc.?s demurrers to the 1st, 2nd, 13th and 14th causes of action are?overruled.??

Defendants? Amended and Supplemental Requests for Judicial Notice are?granted.?

Plaintiff?s Request for Judicial Notice is?granted.?

Defendants? motion to strike is?denied.?

DEMURRER

Plaintiff alleges Therrien was involved in several fraudulent transfers of property.??See FAC, ???67, 71, 72, 73 (g)-(h), 75 (a)-(b), 89, 90, 102 and 107.? For pleading purposes, the allegations are sufficient to assert breach of fiduciary duty, conspiracy to breach fiduciary duty and aiding and abetting breach of fiduciary duty particularly as, according to the allegations of the complaint, Therrien would have equal or greater knowledge of the alleged fraud.

With regard to the 11th cause of action, Therrien argues that the property transfer which is the subject of that claim was the result of a trustee?s foreclosure sale and is entitled to a rebuttable presumption (conclusive as to Noble Court) that the sale was proper.? Both parties submit various deeds related to the property transfer raised by the 11th cause of action.? The deeds are not definitive as to either party?s position.? A demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable.?See Del E. Webb Corp. v. Structural Materials Co.?(1981) 123 Cal.App.3d 593, 605.

Therrien further argues that First American is in indispensable party which somehow supports the demurrer to the 11th cause of action.? Therrien did not, however, demur on the grounds of misjoinder of parties.? Further, ?the relationship of an absent person to the action, and the practical effects of an adjudication upon him and others, may not be sufficiently revealed at the pleading stage; in such a case it would be appropriate to defer decision until the action was further advanced. . . .???Countrywide Home Loans, Inc. v. Superior Court?(1999) 69 Cal.App.4th 785, 792-793.

Therrien argues that defendants Cath, LLC; KK3RM, LLC; and RMJB should be ?dismissed? from the action because they are not parties to the trustee?s sale but were involved in subsequent sale of the real estate.? Again, a demurrer tests the sufficiency of the pleadings and the pleading is sufficient.

Finally, Therrien argues that the 13th cause of action for a constructive trust fails because it seeks a remedy, rather than stating a cause of action and the 14th cause of action is improper based on Plaintiff?s allegations.? Because the underlying claims are sufficiently pled, Plaintiff may pursue the remedies identified in the 13th and 14th causes of action.??

4.DEFENDANT MOLLER INVESTMENT GROUP INC DEMURRER TO FIRST AMENDED COMPLAINT

Defendant Moller Investment Group, Inc.?s demurrer to the 6th cause of action is?sustained with leave to amend.? Plaintiff has 15 days in which to amend the 6th cause of action as against Moller.? Defendant?s demurrer to the 12th cause of action is?overruled.

Moller argues that the 6th cause of action is barred by the statute of limitations as the transfers were made more than four years before the complaint was filed and Plaintiff could reasonably have discovered the claims.? However, Plaintiff sufficiently alleges delayed discovery which is a question of fact and not appropriate for demurrer.??Fox,?35 Cal.4th at 808-809;?Snow v. A.H. Robins Co.?(1985) 165 Cal.App.3d 120, 128.? Moreover, the last alleged overt act of the alleged conspiracy did not occur until January 13, 2016?less than a year before the complaint was filed.? Accordingly, the demurrer is overruled on statute of limitations grounds.

Moller also argues, that the 6th cause of action fails because it is not pled with sufficient specificity.? Moller was not the original transferor so specificity was not required in the pleading.? However, the 6th cause of action, as currently pled, fails to state a claim against Moller because the allegations in the paragraphs identified by Plaintiff are against an entity named Moller Otay Lakes Investment, LLC (also referred to as ?Moller Otay?).? This name differs from Defendant?s (Moller Investment Group, Inc.) Thus, Plaintiff has not sufficiently pled any claim against Moller in connection with the sixth cause of action and the demurrer is sustained, with leave to amend on that ground.

Moller argues that the 12th cause of action also consists of general and conclusory allegations which are not enough to survive demurrer However, the allegations against Moller in the 12th cause are sufficient to withstand demurrer.

5.DEFENDANT OTAY VILLAGE (SAN DIEGO) ASLI V LLLP DEMURRER TO FIRST AMENDED COMPLAINT

Defendant Otay Village?s demurrers to the 2nd, 6th and 14th causes of action are?overruled.

The 2nd and 6th causes of action are not time-barred.? Statutes of limitations arguments are not appropriate on demurrer unless ?it clearly and affirmatively appears on the face of the complaint that the cause of action is barred.???Pleasant v. Samuels?(1896) 114 Cal. 34, 38;?E-Fab, Inc. v. Accountants, Inc. Servs.?(2007) 153 Cal.App.4th 1308, 1315-1316. Here, the complaint (which is accepted as true for purposes of a demurrer) pleads belated discovery, including allegations of reasonable diligence.? Those allegations are sufficient, particularly given the complexity of the alleged scheme and the lack of any indication of fraud or other wrongdoing on the grant deeds.

Further, the 2nd and 6th causes of action state sufficient facts and are not fatally uncertain.? A ?plaintiff is required only to set forth the essential facts of his case with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action? and does not need to allege evidentiary facts.??Alch v. Superior Court(2004) 122 Cal.App.4th 339, 382.??C.A. v. William S. Hart Union H.S. Dist.?(2012) 53 Cal.4th 861, 872;?Centex Homes v. Superior Court?(2013) 214 Cal.App.4th 1090, 1102.? Any confusion created by the allegations can be addressed through discovery.??Doheny Park Terrace Homeowners Ass?n, Inc. v. Truck Ins. Exchange?(2005) 132 Cal.App.4th 1076, 1098-1099.

The allegations are the First Amended Complaint are sufficient to state the 2nd and 6th cause of action against Otay Village.??See?FAC, ?? 67, 71-94 and 151-157.

Because the demurrers to the 2nd and 6th causes of action are overruled, the demurrer to the 14th cause of action (which is based on the theory that the 2nd and 6th causes of action are defective) is also overruled.?

6.PLAINTIFF FAITH A DEVINE IN HER CAPACITY AS SUCCESSOR RECEIVER FOR FORSTAR LLC AND JB FINCO LLC MOTION FOR ISSUANCE OF PRELIMINARY INJUNCTION

In determining whether to grant injunctive relief, the Court must consider: (i) the likelihood the plaintiff will prevail on the merits; and (ii) the interim harm that plaintiff is likely to sustain if the injunction is denied compared to the harm the defendants are likely to suffer injunction is granted.?White v. Davis?(2003) 30 Cal.4th 528, 554.? An injunction is not available unless there is a showing of the likelihood of irreparable harm.??Intel Corp. v. Hamidi?(2003) 30 cal.4th 1342, 1352 (“`the extraordinary remedy of injunction’ cannot be invoked without showing the likelihood of irreparable harm.”).? ?In general, if the plaintiff may be fully compensated by the payment of damages in the event he prevails, then preliminary injunctive relief should be denied.”??Tahoe Keys Property Owners? Assn. v. State Water Resources Control Bd.?(1994) 23 Cal.App.4th 1459, 1471-1472 & fn. 9 [no showing of irreparable harm where fees could be refunded if the challengers prevailed].? See also?White, 30 Cal.4th at 554-555 [monetary harm is insufficient to justify the issuance of a preliminary injunction].

Here, Plaintiff has not made a showing of irreparable harm because payment of damages is an adequate remedy.? The motion for preliminary injunction is, therefore,?denied.? The denial is, however, without prejudice to a future motion or motions should Plaintiff learn that any of the properties involved in this action have been further impacted in any way she believes harmful to recovery of the judgment in the underlying action.

7.PLAINTIFF FAITH A DEVINE IN HER CAPACITY AS SUCCESSOR RECEIVER FOR FORSTAR LLC AND JB FINCO LLC MOTION FOR ORDER DETERMINING THAT THE APRIL 1, 2007 AND APRIL 20, 2007 ERNST & YOUNG LLP TAX OPINION LETTERS ARE NOT CONFIDENTIAL NEED NOT BE FILED UNDER SEAL

Plaintiff’s Motion for Order Determining that the April 1, 2007 and April 20, 2007 Ernst & Young LLP Tax Opinion Letters Are Not Confidential, Need Not Be Filed Under Seal and May Be Used for Any Purpose by the Receiver, or in the alternative, Determining that the April 1, 2007 and April 20, 2007 Ernst & Young LLP Tax Opinion Letters May be Filed Under Seal, to the Extent the Court Finds that the April 1, 2007 and April 20, 2007 Ernst & Young LLP Tax Opinions Letters are Confidential is?granted in part.?

With regard to the Tax Letters, the Court finds that

an overriding interest exists that overcomes the right of public access to the record;
the overriding interest supports sealing the records;
a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
the proposed sealing is narrowly tailored; and
no less restrictive means exist to achieve the overriding interest.

CRC 2.550(d);?McGuan v. Endovascular Technologies, Inc. (2010) 182 Cal.App.4th 974, 988.? Based on these findings, the Court orders that the Tax Letters be filed under seal in connection with Plaintiff?s Motion for Preliminary Injunction.

The Court?denies?the remainder of the relief requested by Plaintiff as it improperly seeks an advisory opinion as to whether these documents may be filed under seal in other proceedings not yet before the court.?

8.DEFENDANT OTAY VILLAGE (SAN DIEGO) ASLI V LLP MOTION TO SET ASIDE JUDGMENT?

Otay Village, LP?s motion to set aside the judgment is?denied.

Otay Village seeks to set aside the partial judgment on equitable grounds and pursuant to CCP ? 437(d).? CCP ? 473(d) reads, in its entirety:? ?The court may, upon motion of the injured party, or its own motion, correct clerical mistakes in its judgment or orders as entered, so as to conform to the judgment or order directed, and may, on motion of either party after notice to the other party, set aside any void judgment or order.?

Otay Village is not a party to the judgment and the judgment does not award damages nor any other relief as against Otay Village.? Otay Village, nevertheless, claims harm from the judgment, alleging that it:? (1) negatively impacts Otay Village?s reputation; (2) may drive off investors; (3) adversely affects Otay Village?s ability to defend itself on the merits because of the factual finding that Avalanche and Raindrop did not receive ?reasonably equivalent value? for the property; and (4) creates a risk that subsequent titleholders will seek indemnification or damages from Otay Village re: whether Otay Village was a?bona fide?purchaser.

Otay Village is a stranger to the judgment and must be an ?aggrieved? party in order to attack the judgment.? “One is considered aggrieved whose rights or interests are injuriously affected by the judgment. Appellant’s interest must be immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment.???Hassell v. Bird?(2016) 247 Cal.App.4th 1336, 1348 (internal citations and quotation marks omitted).? The harms identified by Otay Village do not include any immediate, pecuniary and substantial interest impacted by the judgment.

The Court acknowledges, however, that the judgment references Otay Village and Plaintiff or some other party could argue, at some point, that the factual findings of the stipulated judgment apply to Otay and/or foreclose Otay from presenting evidence regarding the amount paid for the property.? In order to address those concerns, the Court orders that the stipulated judgment has no legal effect as against Otay Village and does not foreclose Otay Village from presenting evidence in this action.

Otay Village?s request?that the Court take judicial notice of an objection filed in a separate action by Ronald Therrien (a defendant in this action) is denied.? The objection attached to Otay Village?s request references documents which allegedly establish that HCR was cancelled before it obtained the judgment confirming the arbitration award.? However, the referenced documents are neither attached to the request nor otherwise submitted by Otay Village in connection with the request or this motion.? Accordingly, the request is denied as irrelevant to the Court?s determination of this motion.??Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison?(1998) 18 Cal.4th 739, 748, fn. 6 (declining to take judicial notice of materials not ?necessary, helpful, or relevant?).

9.DEFENDANT RONALD THERRIEN, CATH LLC, KK3RM LLC, NOBLE COURT LP RMJB INC. MOTION TO STRIKE PORTIONS OF FIRST AMENDED COMPLAINT

MOTION TO STRIKE

In order to survive a motion to strike punitive damages, a plaintiff must plead ultimate facts to show entitlement to such relief.??Grieves v. Superior Court?(1984) 157 Cal.App.3d 159, 166.? It is not proper to strike a prayer for punitive damages simply because the allegations are mostly conclusory.??Perkins v, Superior Court?(1981) 117 Cal. App, 3d 1, 6.? Here, Plaintiff?s fraudulent conveyance causes of action, alone, are sufficient to support the prayer for punitive damages.

Therrien does not cite any authority to support his request that the prayer for joint and several liability be stricken.? Read in context with the entire complaint, the prayer is neither improper nor irrelevant.?

10.CROSS-DEFENDANT HCR MOORPARK INVESTORS LLC DEMURRER TO CROSS-COMPLAINT

HCR?s demurer to the cross-complaint is?overruled.

?If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer. [W]e are not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the?factualallegations of the complaint are adequate to state a cause of action under any legal theory. The courts of this state have… long since departed from holding a plaintiff strictly to the `form of action’ he has pleaded and instead have adopted the more flexible approach of examining the facts alleged to determine if a demurrer should be sustained.”??Quelimane Co., Inc. v. Stewart Title Guar. Co.?(1998) 19 Cal.4^th?26, 38-39.

Here, Cross-Complainants move to set aside the judgment on two separate grounds, including the assertion that the judgment is void because HCR was not qualified to do business in California when it obtained the judgment.? That issue of whether HCR was engaged in intrastate business in California without being certified involves questions of fact which cannot be determined on demurrer.