Case Number: EC061241 Hearing Date: May 16, 2014 Dept: B

25. EC061241
1028 LAKE LTD, et al v. GREG I. ANDERSON, et al
Demurrer
Case Management Conference
OSC for failure to file Proof of Service

The Plaintiffs allege that they entered into a partnership agreement with the Defendant, Greg Anderson, to improve commercial real property at 1028 N. Lake Ave., Pasadena. In addition, the parties entered into an agreement regarding the management of property.

After the Plaintiffs demanded that management of the property be returned and that the property be sold, the Defendant breached the agreement by refusing to hand over management. Further, the Defendant breached the agreement by compensating himself in excess of the agreed amount, by making repairs costing over $400,000 without approval, and by failing to provide quarterly accountings. The Plaintiffs seek to dissolve the partnership and to wind up its affairs.

In addition, the Plaintiffs allege that the Defendants became indebted to the Plaintiffs for structural engineering work and remodeling services he provided for the property.
Plaintiffs allege the following causes of action:
1) Breach of Contract
2) Breach of Contract
3) Breach of Fiduciary Duty
4) Dissolution of Partnership
5) Common Counts

This hearing concerns the demurrer of Defendant, Greg Anderson, individually, and the demurrer of Defendants, CGA Holdings, LP, and Greg Anderson and Carol Anderson as co-trustees of the CAA Separate Property Trust.

1. Defendant, Greg Anderson
a. Demurrer Based on Another Action Pending and Res Judicata

The Defendant argues that there is another action pending between the parties and that the doctrine of res judicata bars this Complaint. CCP section 430.10(c) authorizes a demurrer when there is another action pending between the same parties on the same causes of action. Further, the principle of res judicata may be raised by demurrer where the facts which give rise to it appear in the complaint or in facts of which the Court may take judicial notice.

The analysis of issues in actions is done through the primary right theory, which is a theory of code pleading that has long been followed in California. Crowley v. Katleman (1994) 8 Cal. 4th 666, 681-682. It provides that a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. Id. A primary right is indivisible: the violation of a single primary right gives rise to but a single cause of action. Id.

The primary right is simply the plaintiff’s right to be free from the particular injury suffered. Id. This must be distinguished from the legal theory on which liability for that injury is premised. Id. Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. Id.

The primary right theory is invoked most often when a plaintiff attempts to divide a primary right and enforce it in two suits. Id. The theory prevents this result by either of two means:

1) if the first suit is still pending when the second is filed, the defendant in the second suit may plead that fact in abatement under CCP section 430.10(c); or
2) if the first suit has terminated in a judgment on the merits adverse to the plaintiff, the defendant in the second suit may set up that judgment as a bar under the principles of res judicata.

Under the latter circumstance, an adverse judgment in the first suit is a bar even though the second suit is based on a different theory or seeks a different remedy. Id.

First, there is no other action pending between the parties on the Plaintiffs’ causes of action. The Plaintiffs filed a complaint in BC440897 (see Defendants’ request for judicial notice, exhibit 1). However, the Plaintiffs dismissed the Complaint without prejudice on September 11, 2013 (see request for judicial notice, exhibit 9). Since the Plaintiffs dismissed the complaint, the prior suit is not pending and there is not ground for a demurrer.

Further, the Plaintiffs dismissed the prior action without prejudice. The doctrine of res judicata applies when the following is shown:

1) the issue decided in the prior adjudication is identical with the one presented in the action in question;
2) there a final judgment on the merits; and
3) the party against whom the plea is asserted is a party or in privity with a party to the prior adjudication.
Columbus Line, Inc. v. Gray Line Sight-Seeing Companies Associated, Inc. (1981) 120 Cal. App. 3d 622, 628.

Here, there was no final judgment on the merits of the Plaintiffs’ complaint in BC440897 because the Plaintiffs dismissed the complaint without prejudice. Since there was final judgment on the merits, the doctrine of res judicata does not bar the pending case.

Therefore, there are no grounds for a demurrer to the Complaint based on another action pending or on res judicata.

The Defendants argue that the Plaintiffs are forum shopping because the prior action was assigned to Department 51 and the Plaintiffs dismissed the action after the judge issued an order that the parties must submit their claims to binding arbitration. This is a case management issue and, if the cases are related, the Defendants should file a notice of related cases and seek the proper relief. However, this is not grounds for a demurrer.

The Court notes that , CRC rule 3.300 defines “related case” to include pending civil cases related to civil cases that were dismissed with or without prejudice. Also, Local Rule 3.3(d) states that when a case is dismissed and a new action is later filed containing the same or essentially the same claims, the new action will be assigned to the same judge. Local Rule 3.3(e) imposes a duty on counsel to report that a new action should be assigned to the same judge in a notice of related cases.

b. Demurrer based on Failure to State Sufficient Facts

The Defendant then argues that each cause of action in the Complaint fails to state sufficient facts because the Plaintiffs’ claims were already decided in an arbitration between the parties. The Defendant is referring to the arbitration of his Cross-Complaint against the Plaintiffs. The Defendant makes no effort to support his demurrer by proceeding through each of the five causes of action, analyzing the pleadings, and demonstrating that they are based on the same issues that were decided in the arbitration of the Defendant’s Cross-Complaint.

For example, the pending Complaint includes a request for the dissolution of the partnership. The Defendant did not support his demurrer by directing the Court to any final adjudication that dissolved the partnership.
Accordingly, the Court overrules the demurrer to the Complaint based on the failure to state sufficient facts.

c. Demurrer to Fifth Cause of Action for Common Counts

The Defendant argues that there is no evidence to support the Plaintiff’s claim that his damages are $1,360,000. However, this is not the proper basis for a demurrer. Instead, the Plaintiff’s allegations are assumed true and the Plaintiff’s ability to prove the allegations is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.

The Defendant argues that the arbitrator made findings that the Plaintiff cannot establish that the Defendants are indebted for $1,360,000. This argument is unpersuasive because the Defendant does not demonstrate that the arbitrator made findings on a common count claim similar to the one pleaded in the pending Complaint. Further, this is another attempt to argue that the Court should use the doctrine of res judicata to find that the cause of action is barred. The Defendant did not offer any analysis to establish that each of the three prongs needed to establish res judicata applies, i.e., identical issue in prior adjudication, final adjudication, and the parties are the same.
Therefore, the Court overrules the demurrer to the fifth cause of action.

2. Motion of Defendants, CGA Holdings, LP, and Greg Anderson and Carol Anderson as
co-trustees of the CAA Separate Property Trust

a. Demurrer Based on Another Action Pending
b.
The Defendants argue that there is another action pending between the parties. CCP section 430.10(c) authorizes a demurrer when there is another action pending between the same parties on the same causes of action. This argument is a repeat of the argument in the demurrer by Greg Anderson, individually.

As discussed above, there are no grounds for a demurrer based on another action pending between the parties because the Plaintiffs dismissed their Complaint in BC440897 on September 11, 2013 (see dismissal in Defendants’ request for judicial notice, exhibit 9).

Therefore, the Court overrules the demurrer based on another action pending.

b. Demurrer to First Cause of Action based on Lack of Sufficient Facts

The Defendants argue that the first cause of action for breach of contract cannot be pleaded by 1028 Lake, Ltd. because it was not a party to the partnership agreement. However, a review of the first cause of action reveals that it alleges in paragraph 8 that the Defendants breached provisions in the Property Management Agreement and an agreement regarding the compensation for his services as a property manager.

A copy of the Property Management Agreement is attached as untabbed exhibit 2. A review of the agreement reveals that it is between 1028 Lake, Ltd. and Greg Anderson. Since 1028 Lake, Ltd. is a party to the Property Management Agreement, it is the real party in interest with standing to seek relief for the breach of the agreement.

Further, the Defendants argue that the alleged contract lacks sufficient definite terms. This argument is unpersuasive because, as noted above, a copy of the Property Management Agreement is attached to the pleadings.

Therefore, the Court overrules the demurrer to the first cause of action.

c. Demurrer to Fourth Cause of Action for Dissolution of Partnership

The Defendants argue that 1028 Lake, Ltd., has no standing to seek its own dissolution. Under Corporations Code section 15908.02, a partner may apply for the dissolution of a limited partnership.

A copy of the partnership agreement is attached as untabbed exhibit 1 to the Complaint. A review of the partnership agreement reveals that the partners are Mike Seif and Greg Anderson. Since 1028 Lake, Ltd., is not a partner, it cannot apply for dissolution of the limited partnership.

Therefore, the Court sustains the demurrer to the fourth cause of action with regards to the claim by 1028 Lake, Ltd. without leave to amend. It is not possible to correct the identified defect because 1028 Lake, Ltd. is not a partner with authority to bring an action to dissolve the limited partnership.

d. Demurrer Based on Issues that “Should” have been Determined

The Defendants make the unpersuasive argument that there are grounds for a demurrer because the Plaintiffs dismissed their prior action when they “should” have determined them in the prior action. This appears to be an attempt to argue that res judicata applies to claims when, even though there was no final adjudication in the prior action, there should have been a final adjudication.

As noted above, the doctrine of res judicata applies only when there has been a final adjudication on the merits of the claims in the prior case. Columbus Line, Inc. v. Gray Line Sight-Seeing Companies Associated, Inc. (1981) 120 Cal. App. 3d 622, 628. Since there was no a final adjudication on the merits of the Plaintiffs’ claims, the doctrine of res judicata does not bar the Plaintiffs from bringing the claims in the pending action.

Further, the Plaintiffs have the right to dismiss their actions under CCP section 581. There is no requirement that the Defendants consent to the Plaintiffs’ act of dismissing the Plaintiffs’ complaint. Under CCP section 581(c), a plaintiff may dismiss his or her complaint, or any cause of action asserted in it, in its entirety, or as to any defendant or defendants, with or without prejudice prior to the actual commencement of trial. The purpose behind the right of a plaintiff to voluntarily dismiss a case under CCP section 581 is to allow a plaintiff a certain amount of freedom of action within the limits prescribed by the code. Zapanta v. Universal Care, Inc. (2003) 107 Cal. App. 4th 1167, 1172.
Accordingly, there are no grounds for a demurrer based on the Plaintiffs’ dismissal of their prior Complaint and the demurrer is overruled.

d. Demurrer to Fifth Cause of Action for Common Count

The Defendants argue that there is no evidence to support the Plaintiff’s claim that his damages are $1,360,000. However, this is not the proper basis for a demurrer. Instead, the Plaintiff’s allegations are assumed true and the Plaintiff’s ability to prove the allegations is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.

The Defendant argues that the arbitrator made findings that the Plaintiff cannot establish that the Defendants are indebted for $1,360,000. This argument is unpersuasive because the Defendant does not demonstrate that the arbitrator made findings on a common count claim similar to the one pleaded in the pending Complaint. Further, this is another attempt to argue that the Court should use the doctrine of res judicata to find that the cause of action is barred. The Defendant did not offer any analysis to establish that each of the three prongs needed to establish res judicata applies, i.e., there were identical issue in a prior adjudication, there was a final adjudication of the issues on the merits, and the parties are the same.

Therefore, the Court overrules the demurrer to the fifth cause of action.