Case Number: KC069617 Hearing Date: March 06, 2018 Dept: O

Ferro v. Petrov, et al. (KC069617)

Defendants Petrov, Harrison, and JPM Industries’ DEMURRER TO COMPLAINT

Respondent: Plaintiff Ferro

Plaintiff Ferro’s MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION, SET ONE

Respondents: 1. Defendant Petrov

2. Defendant Harrison

3. Defendant JPM Industries

TENTATIVE RULING

Meet and Confer

Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. If an amended complaint, cross-complaint, or answer is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a demurrer to the amended pleading. (CCP 430.41(a).)

While Defendants failed to meet and confer “in person or by telephone,” and for almost 5 months Defendant’s counsel seems incapable of telephoning other counsel to discuss as required by code, because this demurrer has been pending since November 2017, this court will entertain the demurrer on the merits this one time, in the interest of judicial efficiency.

Merits

1st CAUSE OF ACTION:

BREACH OF CONTRACT:

The elements for a breach of contract cause of action are: (1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) resulting damages. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) In alleging a breach of contract cause of action, it is necessary to specify whether the contract is written, oral or implied by conduct. (CCP 430.10(g).) In order to plead a written contract (the first element listed above), a plaintiff must, in addition to alleging the making of the contract, do one of the following: (1) set forth the contract in haec verba; or (2) plead the contract’s legal effect by alleging the substance of its relevant terms. (4 Witkin, California Procedure 4th Edition, 479-481.) In order to plead an oral contract, a plaintiff must plead its legal effect, i.e., allege the substance of the contractual terms. (Id., at 483.)

The court finds the contract claim is adequately pled. The written contract is attached as Ex. 1 and titled, Stock Redemption Agreement. Par. 15 alleges that Defendant breached the agreement by failing to pay and failing to provide supporting documents and accounting to Plaintiff. Par. 13 alleges Plaintiff’s performance. Par. 16 alleges resulting damages.

Defendants demur on the ground that Plaintiff failed to mediate the action pursuant to Sec. 9.5. However, Plaintiff’s counsel attests that he made many efforts to mediate and resolve this matter prior to this action. (Frymer Decl., Par. 3.) While this allegation does not appear in the Complaint, the court finds the general allegation of Plaintiff’s performance at Par. 13 sufficiently covers Plaintiff’s mediation obligation at Sec. 9.5.

Demurrer is OVERRULED.

2nd – 9th CAUSE OF ACTION:

Defendants contend the claims are barred because it includes a waiver and full release of prior claims pursuant to CC 1542. However, because Defendants breached the settlement agreement, Plaintiff is entitled to assert all relevant claims, including both the contract claim, as well as the tort claims that formed the basis of the settlement agreement. Demurrer on the basis of CC 1542 is OVERRULED.

2nd CAUSE OF ACTION:

BREACH OF FIDUCIARY DUTY:

The elements are: 1) fiduciary duty; 2) breach of the duty; and 3) damage caused by the breach. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182; Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.)

Par. 18 alleges Defendants’ status as co-owners with express and implied obligations and fiduciary duty to act for the benefit of Plaintiff. Par. 21 alleges Defendants’ breach, and Par. 22 alleges resulting damages.

Demurrer is OVERRULED.

3rd CAUSE OF ACTION:

UNFAIR BUSINESS PRACTICES: B&P CODE 17200:

The Unfair Business Practices Act shall include “any unlawful, unfair or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Even a single incident – a one-time act that is unfair, unlawful or fraudulent – is sufficient to state a claim under 17200. (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 fn. 3.)

Par. 25 alleges that Defendants derived profits in an amount unknown at this time, and thus restitution of all such profits is claimed. The court finds the allegations are sufficient to state a claim for unfair business acts.

Demurrer is OVERRULED.

4th CAUSE OF ACTION:

CONVERSION:

The elements are: 1) Plaintiff’s ownership or right to possession of personal property; 2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and 3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Fischer v. Machado (1996) 50 Cal.App.4th 1069, 1072; Farmers Ins. Exchange v. Zerin (1997) 53 Cal. App. 4th 445, 451.)

Par. 28 alleges that Defendants took possession of properties and used them without the right to do so, and held themselves out as owning them. Par. 29 alleges that Defendants refused to restore the assets and/or account to or reimburse Plaintiff. Pars. 30-31 alleges resulting damages.

Further, a general demurrer does not lie to only part of a cause of action. If there are sufficient allegations to entitle plaintiff to relief, other allegations cannot be challenged by general demurrer. (Kong v. City of Hawaiian Gardens Redevelop. Agency (2003) 108 CA4th 1028, 1046.) So, although Plaintiff has alleged conversion of funds, the 4th cause of action also alleges conversion of “materials, supplies, confidential information, intellectual properties.”

Demurrer is OVERRULED.

5th CAUSE OF ACTION:

SUPPRESSION OF FACT:

The elements are: 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See CC 1709.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.)

Pars. 33 alleges that Defendants made representations that all information and records would be shared with Plaintiff. Pars. 34-35 allege scienter and intent to defraud. Pars. 36-37 allege reliance, and Pars. 38-39 allege resulting damages. The court finds the allegations are sufficiently specific, and any uncertainty over the specific dates and times may be resolved through discovery.

Demurrer is OVERRULED.

6th CAUSE OF ACTION:

INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE:

To prevail on a cause of action for intentional interference with prospective economic advantage in California, a plaintiff must plead and prove (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant’s acts. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152 n. 6. See also Smith v. Pust (1993) 19 Cal. App. 4th 263, 274 – the act must have been intentionally directed at the plaintiff or done in the plaintiff’s presence.)

Par. 41 alleges economic relationships with customers and vendors. Pars. 42-45 alleged Defendants’ knowledge of these relationships, acts disrupting the relationships, and resulting damage.

Demurrer is OVERRULED.

7th CAUSE OF ACTION:

ACCOUNTING:

The elements are: 1) existence of a relationship requiring accounting, such as fiduciary; and 2) an unliquidated and unascertained balance is owed. (St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352, 359; Raymond v. Independent Growers, Inc. (1955) 133 Cal.App.2d 154, 160.)

The complaint alleges a fiduciary relationship between Plaintiff and Defendants and a request for accounting.

Demurrer is OVERRULED.

8th CAUSE OF ACTION:

CONSPIRACY:

Defendants contend that the allegations in support of conspiracy rely on the commission of the previously defectively pled torts. However, because the court finds the claims are adequately pled, demurrer on this ground is OVERRULED.

9th CAUSE OF ACTION:

DECLARATORY RELIEF:

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, 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 and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought. (CCP 1060.)

Pars. 57-60 seek a declaration of the parties’ rights or duties with respect to one another. The court finds the complaint alleges an actual controversy. Demurrer is OVERRULED.

2. Defendant’s Motions to Compel Further Discovery Responses

NOTE: Fees due:

The Court Reservation System (“CRS”) receipt attached to the motions indicates that it was reserved for hearing as one motion to compel further discovery responses. Plaintiff filed one motion under the reservation number 171212273549, but the motion addresses three separate discovery requests for John Petrov, Stephanie Harrison, and JPM Industries, Inc. (Motion, 1:24-26.)

Because the responses are identical, the court understands Plaintiff’s reasoning in filing one motion to achieve efficiency. However, the CRS guidelines require separate filing fees for each discovery vehicle at issue. Plaintiff’s counsel is ordered to pay additional filing fees for two motions prior to hearing.

On the merits:

Plaintiff Ferro’s motion to compel further responses to requests for production, set one is GRANTED. Defendants are ordered to serve additional responses within 10 days. Sanctions are imposed against Defendants and counsel, jointly and severally, in the sum of $3,810.00, payable within 30 days.

Plaintiff Ferro moves to compel further responses to request for production of documents per CCP 2031.310.

CCP 2031.310 allows a party to file a motion compelling further answers to document requests if it finds that the response is inadequate, incomplete, or evasive, or an objection in the response is without merit or too general. The motion shall be accompanied with a meet and confer declaration. (CCP 2031.310(b).)

Defendants contend that the documents are irrelevant and burdensome because “this is a dispute over the last payment on the Playa Pacific Project.” (Opposition, 5:2-3.)

However, Plaintiff’s claims incorporate both the contract action, as well as tort and accounting claims against Petrov and the company. The complaint alleges that Plaintiff and Defendant Petrov were co-owners and shareholders in Defendant LP Industries. In 2015, it is alleged Plaintiff discovered numerous accounting discrepancies – Petrov, with the aid of Defendants Harrison and Michelle, was burying personal expenses and costs using LP assets and funds. Thereafter, the parties entered into negotiations for Plaintiff’s departure, without Plaintiff having any liability to the company or any responsibility for its affairs or Petrov’s misdeeds.

Now, because Defendants are alleged to have breached the settlement agreements, Plaintiff is entitled to assert all relevant claims, including both the contract claims, as well as the tort claims that the contract was centered around. Therefore, the discovery requests are not overbroad or irrelevant.

Individual Defendants Harrison and Petrov also contend that they are not obligated to respond because they were sued in their individual capacities, and do not have to produce documents that belong to the corporation. However, Defendants cite nonbinding, out of court authorities in Kentucky and Kansas, based on the Federal Rules of Civil Procedure. No such authority exists in California. If documents are in the individual Defendants’ possession they must be produced.

The motion is GRANTED. Defendants are ordered to serve additional responses within 10 days.

Sanctions: CCP 2031.310(d) authorizes the court to impose a sanction against any party/attorney who unsuccessfully makes or opposes a motion to compel further responses, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.

Here, sanctions are appropriate because Defendants, without substantial justification, failed to produce any documents to the discovery requests. The court finds Plaintiff’s total request of $3,810.00 (for all 3 discovery requests) is reasonable. Accordingly, sanctions are imposed against Defendants and counsel, jointly and severally, in the sum of $3,810.00, payable within 30 days.