Case Number: BC719634 Hearing Date: January 07, 2019 Dept: 34

SUBJECT: Demurrer to First, Second, Fourth, Fifth and Sixth Causes of Action and Motion to Strike Portions of the Complaint

Moving Party: Defendants Parviz Yari, Parviz Acquisitions, LLC, and Landen, LLC

Resp. Party: Minot, LLC

Defendants’ demurrer to the first, second, fourth, fifth and sixth causes of action are OVERRULED.

Defendants’ motion to strike is DENIED.

PRELIMINARY COMMENTS:

This lawsuit involves an alleged debt of $55,022.00. The attorneys for both parties have probably collectively spent in excess of $20,000 litigating this case, including the motions, oppositions and replies to these two demurrers and motions to strike.

This Court would not be surprised if Defendants filed a Motion to Abate. In addition, both parties are requesting a five (5) day jury trial. The Court would suggest that counsel for both parties discuss with their clients if it would be in their best interest to try to resolve this case before the attorney’s fees exceed the amount in dispute.

BACKGROUND:

Plaintiff Minot, LLC, commenced this action on August 29, 2018, asserting causes of action for: (1) Breach of Contract; (2) Foreclosure of Mechanics’ Lien; (3) Recovery on Mechanics’ Bond Release Bond; (4) Open Book Account; (5) Account Stated; and (6) Quantum Meruit.

ANALYSIS:

Defendants Parviz Acquisitions, LLC, and Landen, LLC demur to the first, second, and fourth through sixth causes of action. Defendant Parviz Yari also demurred, separately, to the first, second, and fourth through sixth causes of action. (The third cause of action is asserted against Doe Defendants, only, and is not asserted against the moving Defendants Parviz Yari, Parviz Acquisitions, LLC, or Landen, LLC [hereinafter “Defendants”].) The demurrers are identical; therefore, the Court treats them the same. Defendants also move to strike portions of the complaint alleging that Plaintiff is entitled to attorney’s fees.

Legal Standard

“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 (Code Civ. Proc., §§ 430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905; see Ion Equip. Corp v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum of points and authorities].)

Discussion

  1. Foreign Corporation Qualification

Defendants argue that Plaintiff is an unqualified, foreign corporation lacking capacity to maintain this action because Plaintiff failed to register with the California Secretary of State. Plaintiff responds, in opposition, by arguing that this requirement does not apply to it because it does not engage in repeated and successive transactions of business in California.

Plaintiff is a foreign limited liability corporation. Pursuant to Corp. Code § 17708.07, “A foreign limited liability company transacting intrastate business in this state shall not maintain an action or proceeding in this state unless it has a certificate of registration to transact intrastate business in this state.” The defendant “bears the burden of proving . . . the action arises out of the transaction of intrastate business by a foreign corporation.” (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1740.)

There is no dispute that Plaintiff is not registered. Rather, the parties dispute whether Plaintiff has been transacting intrastate business, such that it is subject to this provision. The statute defines “transact[ing] intrastate business” as follows:

(a) A foreign limited liability company that enters into repeated and successive transactions of business in this state, other than in interstate or foreign commerce, is considered to be transacting intrastate business in this state within the meaning of this article.

(b) Without excluding other activities that may not be considered to be transacting intrastate business in this state within the meaning of this article, activities of a foreign limited liability company that do not constitute transacting intrastate business in this state include all of the following:

(9) Conducting an isolated transaction that is completed within 180 days and is not in the course of a number of repeated transactions of a like nature.

(Corp. Code § 17708.03(a)-(b).)

Here Plaintiff’s complaint states that it entered into an agreement to provide lumber “as ordered from time to time” by Defendants for a construction project in Los Angeles, California. (Minot Complaint, ¶ 10, p. 3; ¶ 19, p. 4.) Plaintiff further alleges it supplied lumber materials to Defendants from “July 1, 2017 through January 2018.” (Minot Compl., ¶ 21, p. 4.) Defendants contend that this constitutes a course of repeated and successive transactions, which extended beyond 180 days, and is therefore intrastate commerce. In its opposition, Plaintiff takes the position that the overall agreement to provide lumber as ordered constitutes “one transaction” and therefore Plaintiff is exempt from the requirement that it register with the California Secretary of State. (Minot Opp., p. 5, lines 10-13.)

Without an evidentiary record before it, however, the Court concludes it lacks sufficient information to determine whether this did or did not constitute intrastate commerce. In Detsch & Co. v. Calbar, Inc. (1964) 228 Cal.App.2d 556, the Court of Appeal held that

“[w]here . . . there is a solicitation within the State of California of orders for goods by a local distributor or agency acting on behalf of a foreign corporation, such orders being subject to acceptance or rejection by the foreign corporation in another state and where, upon approval of the orders, the goods purchased pursuant thereto are shipped directly from such other state to the purchasers in California, such sales and shipment constitute interstate commerce and the prior solicitation incidental thereto is a part of such interstate transaction and is not intrastate commerce.” (Id. at p. 567.)

Here, neither the complaint nor the demurrer nor the opposition contain any evidence of how the transactions between Plaintiff and Defendants were conducted and therefore the Court cannot determine whether they were interstate or intrastate in nature. Additionally, while it is true the alleged transaction extended beyond 180 days, the reference to 180 days in Corp. Code § 17708.03(b)(9) is not determinative. While the statute explicitly exempts certain transactions falling within 180 days, it also notes that these exceptions are not exhaustive. Thus, the fact that the transaction extended beyond 180 days does not, alone, support a finding of interstate conduct.

The demurrer on this ground is overruled. If Defendants believe that Plaintiff has no standing to pursue this litigation, they may bring a motion for abatement.

  1. Alter Ego Allegations

Defendants next demur on the ground Plaintiff has not sufficiently alleged an alter ego relationship.

In Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, the Court of Appeal held the following was sufficient to allege alter ego liability:

“Rutherford alleged that Caswell dominated and controlled PDR; that a unity of interest and ownership existed between Caswell and PDR; that PDR was a mere shell and conduit for Caswell’s affairs; that PDR was inadequately capitalized; that PDR failed to abide by the formalities of corporate existence; that Caswell used PDR assets as her own; and that recognizing the separate existence of PDR would promote injustice. These allegations mirror those held to pass muster in First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915–916, 73 Cal.Rptr. 657. As in First Western, “[a]ssuming these facts can be proved, [Caswell] … may be held liable … under the alter ego principle.” (Id. at p. 916, 73 Cal.Rptr. 657.)

“Defendants argue that Rutherford failed to allege specific facts to support an alter ego theory, but Rutherford was required to allege only “ultimate rather than evidentiary facts.” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550, 67 Cal.Rptr.3d 330, 169 P.3d 559.) Moreover, the “less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff,” which certainly is the case here. (Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474, 20 Cal.Rptr. 609, 370 P.2d 313.) Therefore, we affirm the trial court’s ruling that Rutherford sufficiently pled an alter ego theory of liability.” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-36.)

Here, Plaintiffs have made analogous allegations in its complaint:

“3. PLAINTIFF is informed and believes and based thereon alleges that if PAL is in fact a limited liability company, such company is in mere form only, has no existence separate and apart from defendant Landen, LLC and/or Parviz Yari and /or Defendant DOES 1 through 25, inclusive, and there exists and at all times mentioned herein, existed a unity of interest and ownership between defendants Landen, LLC and/or Parviz Yari and/or DOES 1 through 25, inclusive, and PAL such that any individuality and separateness between them has ceased, and PAL is the alter ego of defendants Landen, LLC and/or Parviz Yari and/or DOES 1 through 25, inclusive. PLAINTIFF is informed and believes and based thereon alleges that the assets and properties of PAL are commingled with the separate assets of defendants Landen, LLC and/or Parviz Yari and/or DOES 1 through 25, inclusive, inclusive, such that there is no distinction between individual and corporate assets.

“4. PLAINTIFF is informed and believes and based thereon alleges that adherence to the fiction of the separate existence of PAL as an entity distinct from defendants Landen, LLC and/or Parviz Yari and/or DOES 1 through 25, inclusive, would permit an abuse of the corporate privilege and would permit injustice in that they would succeed in avoiding legally incurred liabilities while maintaining the benefits of the corporate entity.

“5. PLAINTIFF is informed and believes and based thereon alleges that at all material times mentioned herein, defendant LANDEN, LLC (“LANDEN”) is a California limited liability company doing business in the county of Los Angeles, State of California with its principal office located at 10850 Wilshire Blvd., Los Angeles, CA 90024. On further information and belief, defendant Parviz Yari is the sole managing member.

“6. PLAINTIFF is informed and believes and based thereon alleges that if Landen is in fact a limited liability company, such company is in mere form only, has no existence separate and apart from defendant PAL, PARVIZ and/or defendant DOES 26 through 50, inclusive, and there exists and at all times mentioned herein, existed a unity of interest and ownership between defendants LANDE, PAL, PARVIZ and/or defendant DOES 26 through 50 such that any individuality and separateness between them has ceased, and LANDEN is the alter ego of defendants PAL, PARVIZ and/or defendant DOES 26 through 50, inclusive. PLAINTIFF is informed and believed and based thereon alleges that the assets and properties of LANDEN are commingled with the separate assets of defendants PAL, PARVIZ and/or defendant DOES 26 through 50, such that there is no distinction between individual and corporate assets.

“7. PLAINTIFF is informed and believes and based thereon alleges that adherence to the fiction of the separate existence of LANDEN as an entity distinct from defendants PAL, PARVIZ and/or defendant DOES 26 through 50, inclusive, would permit an abuse of the corporate privilege and would permit injustice in that they would succeed in avoiding legally incurred liabilities while maintaining the benefits of the corporate entity.

8. On information and belief, defendant PARVIZ YARI is a resident of the County of Los Angeles, State of California. On further information and belief, PARVIZ is the sole managing member of PAL and LANDEN.” (Minot Compl. ¶¶ 3-8.)

Plaintiff’s allegations are exceedingly similar to the Rutherford Holdings allegations. The alter ego allegation has been sufficiently pled at this stage.

  1. First Cause of Action: Breach of Contract

“A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367.)

Defendants demur on the ground that Plaintiff has not sufficiently alleged the terms of the agreement between Plaintiffs and Defendants, because Plaintiff neither sets out its terms verbatim nor attaches the agreement.

This argument is baseless. “A plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199.) Therefore, “plaintiff’s failure to either to attach or to set out verbatim the terms of the contract [is] not fatal to his breach of contract cause of action.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402; see generally, 4 Witkin, Cal. Proc. (5th ed. 2008) Pleading, §§ 518, 519.) Here, Plaintiff alleges the parties “entered into an agreement,” evidenced by the allegation that Defendants “ordered and agreed to purchase from Plaintiff various lumber materials” for which there are “invoices in the amount of $55,022.00.” (Minot Compl., ¶¶ 19-20, 23.) This is clearly sufficient at this stage.

Defendants’ demurrer to the first cause of action is therefore OVERRULED.

  1. Second Cause of Action: Foreclosure of Mechanics’ Lien

“A person that provides work authorized for a work of improvement, including, but not limited to, the following persons, has a lien right under this chapter:

“(a) Direct contractor.

“(b) Subcontractor.

“(c) Material supplier.

“(d) Equipment lessor.

“(e) Laborer.

“(f) Design professional.” (Civ. Code § 8400.)

As with Plaintiff’s breach of contract cause of action, Defendants demur to the second cause of action on the ground that Plaintiff has not sufficiently alleged the terms of the agreement between Plaintiffs and Defendants.

As discussed above, Plaintiff has sufficiently pleaded the legal effect of the contract, and by corollary, that the work provided was authorized. Thus, Plaintiff has sufficiently alleged its lien right pursuant to Civil Code § 8400.

Defendants’ demurrer to the second of action is OVERRULED.

  1. Fourth Cause of Action: Open Book Account

“A book account is defined in Wright v. Loaiza, 177 Cal. 605, 606-607 [171 P. 311], as ‘a detailed statement, kept in a book, in the nature of debit and credit, arising out of contract or some fiduciary relation.‘ It is, of course, necessary for the book to show against whom the charges are made. (Block v. D. W. Nicholson Corp., 77 Cal.App.2d 739, 746 [176 P.2d 739].) It must also be made to appear in whose favor the charges run. This may be shown by the production of the book from the possession of the plaintiff and his identification of it as the book in which he kept the account between him and the debtor.” (Joslin v. Gertz (1957) 155 Cal.App.2d 62, 65-66.)

Moreover, as noted in Joslin, “An open book account may consist of a single entry reflecting the establishment of an account between the parties [citation] and may contain charges alone if there are no credits to enter.” (Id. at 66.)

As with Plaintiff’s breach of contract cause of action, Defendants again demur on the ground that Plaintiff has not sufficiently alleged the terms of the agreement between Plaintiffs and Defendants.

As discussed above, Plaintiff has sufficiently pleaded the legal effect of the contract and therefore the existence of an open book account. Here, Plaintiff has alleged that it provided Defendants with materials, equipment, and labor for which there are “invoices in the amount of $55,022.00,” which remain unpaid. (Minot Compl., ¶¶ 36-38.)

Defendants’ demurrer to the fourth cause of action is OVERRULED.

  1. Fifth Cause of Action: Account Stated

“The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due.” (Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600.) “[A]n ‘action upon an account stated is not upon the original dealings and transactions of the parties,’ rather it is ‘upon the new contract by and under which the parties have adjusted their differences and reached an agreement.’” (Martini E Ricci Iamino S.P.A.—Consortile Societa Agricola v. Trinity Fruit Sales Co., Inc. (E.D. Cal. 2014) 30 F.Supp.3d 954, 976.)

Defendants demur again on the ground that Plaintiff has not sufficiently alleged the terms of the agreement between Plaintiffs and Defendants.

For the reasons discussed above, Defendants’ demurrer to the fifth cause of action is OVERRULED.

  1. Sixth Cause of Action: Quantum Meruit

“To recover on a claim for the reasonable value of services under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794.)

Defendants demur to the sixth cause of action on the ground that a quantum meruit or quasi-contractual theory of recovery conflicts with Plaintiff’s allegation of an express contract.

Pleading in the alternative is permitted. When a pleader is in doubt about what actually occurred or what can be established by the evidence, he or she may plead in the alternative and make inconsistent factual allegations. (Mendoza v. Rast Produce Co., Inc. (2006) 140 Cal.App.4th 1395, 1402; Adams v. Paul (1995) 11 C4th 583, 593.) Thus, even if Plaintiff ultimately cannot obtain double recovery on both the breach of contract and quantum meruit claims, it is nevertheless appropriate to plead both at this stage.

Defendants’ demurrer to the sixth cause of action is OVERRULED.

  1. Motion to Strike

Defendants move to strike portions of paragraphs 25, 39, 43, and 47 and Prayer for Relief No. 2 in its entirety.

Code of Civil Procedure § 436 allows the Court to strike any “irrelevant, false, or improper matter inserted in any pleading” and “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.”

Paragraphs 25, 39, 43, and 47 allege entitlement to attorney’s fees pursuant to the alleged agreement between Plaintiff and Defendants. (Minot Compl., ¶¶ 25, 39, 43, 47.) Prayer for Relief No. 2 seeks attorney’s fees. Generally, a party is not entitled to attorney’s fees unless there is an express statutory or contractual provision allowing them. (See Code Civ. Proc. §§ 1032(a)(4) & (b), 1033.5(a)(10); Cal. Civ. Code § 1717(a).)

Defendants contend that this information should be stricken because “there is no pleading of any statute” or “any specific contractual provision” entitling Plaintiff to an award of attorney’s fees. (See Defendants’ Mot. To Strike, p. 7, lines 6-12.)

As previously discussed, at this stage Plaintiff is not required to set out the contractual terms verbatim, but merely to plead the legal effect of the contract. A court should not to strike a prayer for relief for attorney’s fees until the plaintiff “has had a full opportunity to determine, through discovery, whether a basis for recovery exists.” (Camenisch v. Superior Court (Burns) (1996) 44 Cal.App.4th 1689, 1699.) Here, Plaintiff has alleged the existence of an agreement which entitles it to attorney’s fees. (See Minot Compl., ¶¶ 19-20, 23, 25, 39, 43, 47.)

This is sufficient at this stage.

The motion to strike is DENIED.