Case Number: BC640352 Hearing Date: December 19, 2019 Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES – CENTRAL DISTRICT

CHRISTOPHER MITCHELL, et al.,

Plaintiffs,

vs.

JEREMY DANIELS-STOCK, et al.

Defendants.

AND RELATED CONSOLIDATED CASE

CASE NO.: BC640352

[TENTATIVE] ORDER RE: DEMURRER TO COMPLAINT

Date: December 19, 2019

Time: 8:30 a.m.

Dept. 56

MOVING PARTIES: Defendants Jeremy Daniels-Stock (“Daniels-Stock”) and JDS Minions, Inc. (“JDS”)

RESPONDING PARTY: Plaintiff Koi Pond, Inc.

The Court has considered the moving, opposition, and reply papers.

BACKGROUND

Plaintiff filed a complaint in Koi Pond, Inc. v. Jeremy Daniels Stock et al., Los Angeles Superior Court case number 19STCP03959 (the “Consolidated Case”) on September 12, 2019 which arises from alleged wrongful actions in connection with investing in real estate ventures for profit. The Consolidated Case is related and consolidated with the lead case entitled Christopher Mitchell et al. v. Jeremy Daniels-Stock et al., Los Angeles Superior Court case number BC640352 (the “Lead Case”). The complaint in the Consolidated Case alleges causes of action for: (1) breach of fiduciary duties; and (2) quiet title.

Defendants filed a demurrer to the first and second causes of action with respect to the Consolidated Case. Defendants assert that Plaintiff’s complaint in the Consolidated Case is time barred on its face.

MEET AND CONFER

The meet and confer requirement has been met.

DEMURRER

“A demurrer tests the sufficiency of a complaint as a matter of law.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) “[T]he court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.” (Id.) “The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer “[t]he complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “On demurrer, all material facts properly pleaded and all reasonable inferences which can be drawn therefrom are deemed admitted.” (Bush v. California Conservation Corps (1982) 136 Cal.App.3d 194, 198.) A general demurer is allowed when the complaint on its face shows that an action is barred by the statute of limitations. (Saliter v. Pierce Brothers Mortuaries (1978) 81 Cal.App.3d 292, 300.) “It is established that a demurrer which merely states that the cause of action set forth in the complaint is on its face barred by the statute of limitations is sufficient to raise that defense.” (Williams v. International Longshoremen’s and Warehousemen’s Union, Local No. 10 (1959) 172 Cal.App.2d 84, 87.) “A plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict the facts pleaded in the original complaint or by suppressing facts which prove the pleaded facts false.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1491.)

Issue No. 1: First Cause of Action

“The statute of limitations for breach of fiduciary duty is three or four years, depending on whether the breach is fraudulent or nonfraudulent.” (American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1479.) In the context of a breach of fiduciary duty cause of action “where the gravamen of the claim is deceit” the statute of limitations is three years. (Fuller v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 963.) “The nature of the right sued on, not the form of action demanded, determines the applicability of the statute of limitations.” (Schneider v. Union Oil Co. (1970) 6 Cal.App.3d 987, 993.) “An 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 as reason to discover, the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) “A plaintiff has reason to discover a cause of action when he or she has reason to at least suspect a factual basis for its elements.” (Id.) “Under the discovery rule, suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period.” (Id.) “A cause of action under this discovery rule accrues when plaintiff either (1) actually discovered his injury and its negligent cause or (2) could have discovered injury and cause through the exercise of reasonable diligence.” (McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 108.) In order to invoke the benefit of the discovery rule a plaintiff must “specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.” (NBCUniversal Media, LLC v. Superior Court (2014) 225 Cal.App.4th 1222, 1232.) The statute of limitations for conversion is three years under California Code of Civil Procedure, Section 338(c)(1). The statue of limitations for breach of oral contract is two years under California Code of Civil Procedure, Section 339.

Plaintiff’s complaint alleges that: (1) Daniels-Stock represented he was getting all necessary permits and inspections when in actuality Daniels-Stock was using unlicensed contractors and was lying about permits which he never obtained (Complaint at ¶ 19); (2) over the last six months of 2014 and the beginning of 2015, Daniels-Stock drained the Koi Pond bank account and effectively stole the money from Koi Pond (Id.); (3) in January 2016, Daniels-Stock took the funds he had stolen from Koi Pond and used those funds to form JDS (Id. at ¶ 25); and (4) Daniels-Stock breached his fiduciary duty to Koi Pond by converting Koi Pond’s funds, hiring unlicensed individuals and failing to obtain permits, failing account for funds, failing to timely and accurately report on the status of the rehab of the two projects, and creating JDS to convert Koi Pond’s funds for his own personal benefit. (Id. at ¶ 43.) The complaint alleges two property rehab projects—the Dauphine and St.Philip projects—began in 2014 and 2015, respectively. The complaint alleges that: (1) Daniels-Stock drained the Koi Pond bank account with respect to the Dauphine project over the last six months of 2014 and the beginning of 2015 (Complaint at ¶ 19); (2) with respect to the St.Philip project, Daniels-Stock paid himself $32,000.00 from the Koi Pond bank account without producing receipts to validate that figure (Id. at ¶ 21); (3) in November 2015, Daniels-Stock took another $30,000.00 from the Koi Pond bank account (Id. at ¶ 22); and (4) by February 2016, it was obvious that Daniels-Stock was not doing his job with respect to the St. Philip project and that he was taking money out of the Koi Pond bank account for his own use rather than spending it on any remodeling of the St. Philip project. (Id. at ¶ 24.)

Initially, the Court finds that Plaintiff cannot invoke the discovery rule because the complaint does not plead the manner of discovery of the alleged wrongful actions at issue, and the complaint does not plead facts showing reasonable diligence on behalf of Plaintiff as required by NBCUniversal.

The Court finds that Plaintiff’s first cause of action is barred by the statute of limitations. The Court finds that the gravamen of the first cause of action is the deceit of Daniels-Stock based on the complaint’s allegations that Daniels-Stock made various representations that were contrary to the truth in order for him to convert Koi Pond’s funds. Even if the Court found that the gravamen of the first cause of action was conversion, the applicable statute of limitations would still be three years. The complaint indicates that: (1) with respect to the Dauphine project, Daniel-Stock’s wrongful actions concluded by the beginning of 2015 (Complaint at ¶ 19); (2) the discovery of Daniel-Stock’s wrongful actions in connection with the St.Philip project was revealed by February 2016 when Mitchell had to take over that project (Id. at ¶ 24); and (3) Daniels-Stock created JDS on or about January 21, 2016 and used funds he had stolen from the bank account of Koi Pond to start JDS. (Id. at ¶ 25.) The complaint in the Consolidated Case was filed on September 12, 2019. The complaint was filed more than three years after the last action took place that gives rise to the breach of fiduciary duty cause of action.

Therefore, the Court SUSTAINS the demurrer of Defendants to the first cause of action in the complaint with 20 days leave to amend.

Issue No.2: Second Cause of Action

A quiet title cause of action is insufficient where the complaint is not verified. (Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1866.)

Plaintiff’s opposition fails to even address Defendants’ argument that the quiet title cause of action is based on the faulty breach of fiduciary duty cause of action, and that the quiet title cause of action is insufficient because the complaint is unverified. The Court finds that Plaintiff’s failure to address these arguments indicates a concession to such arguments. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.)

Therefore, Defendants’ demurrer to the second cause of action in the complaint is SUSTAINED with 20 days leave to amend.

Moving parties are ordered to give notice of this ruling.