Case Number: KC064411    Hearing Date: April 24, 2014    Dept: J

Re: Ariosto Valerio v. Aubrey Valerio (KC064411)

DEMURRER TO CROSS-COMPLAINT (X2)

Moving Parties: Cross-Defendants Ariosto Valerio and V. Tropical Bakeshop I, Inc.

Respondent: No timely opposition filed

POS: Moving OK

The Complaint herein, filed 8/03/12, asserts causes of action for:

1. Trade Name Infringement
2. Trade Secret Misappropriation
3. Intentional Interference with Prospective Business Advantage
4. Negligent Interference with Prospective Business Advantage
5. Unfair Competition under B&P 17200
6. Injunctive Relief

The Cross-Complaint was filed on 1/06/14 by Aubrey Valerio, setting forth claims for:

1. Corporate Dissolution
2. Accounting
3. Fraud
4. Civil RICO
5. Breach of Fiduciary Duty

The Case Management Conference is for 4/24/14.

(1) DEMURRER OF V. TROPICAL BAKESHOP I, INC.:

Cross-Defendant V. Tropical Bakeshop I, Inc. demurs to the First and Second Causes of Action of the Cross-Complaint, as follows:

FIRST CAUSE OF ACTION FOR CORPORATE DISSOLUTION:

California Corporations Code section § 1800(a) states in relevant part, “[a] verified complaint for involuntary dissolution of a
corporation on any one or more of the grounds specified in subdivision (b) may be filed in the superior court of the proper county…”

Paragraph (b) states: “The grounds for involuntary dissolution are that:

(1) The corporation has abandoned its business for more than one year.
(2) The corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so
that there is danger that its property and business will be impaired or lost, and the holders of the voting shares of the corporation are so divided into factions that they cannot elect a board consisting of
an uneven number.
(3) There is internal dissension and two or more factions of shareholders in the corporation are so deadlocked that its business can no longer be conducted with advantage to its shareholders or the
shareholders have failed at two consecutive annual meetings at which all voting power was exercised, to elect successors to directors whose terms have expired or would have expired upon election of their
successors.
(4) Those in control of the corporation have been guilty of or have knowingly countenanced persistent and pervasive fraud, mismanagement or abuse of authority or persistent unfairness toward any shareholders or its property is being misapplied or wasted by its directors or officers.
(5) In the case of any corporation with 35 or fewer shareholders (determined as provided in Section 605), liquidation is reasonably necessary for the protection of the rights or interests of the
complaining shareholder or shareholders.”

In this case, the Cross-Complaint contains no allegations related to “V. Tropical Bakeshop I, Inc.” Instead, the only allegations are to a wholly separate entity “Valerio’s Tropical Bakeshop I, Inc.” an entity that has not been named in the action. Even if the proper entity were named, there are no facts pled in the Cross-Complaint to support a claim of involuntary corporate dissolution. First, Ariosto Valerio owns 55% of the shares of the Carson Store and can make the decisions for the business. Second, Cross-Complainant was terminated from employment in the Carson Store, which is an insufficient basis to maintain a cause of action for corporate dissolution. Thus, the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR ACCOUNTING:

To state a cause of action for accounting, the plaintiff must allege : (1) the existence of a relationship requiring accounting, such as fiduciary; and (2) some unliquidated and unascertained balance is owed. (St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352, 359.) Here, there is no showing in the Cross-Complaint as to any relationship among the parties that requires an accounting, when it was due, what the format was to be, or what is to be determined.

Thus, the demurrer to the second cause of action is sustained.

(2) DEMURRER OF ARIOSTO VALERIO:

FIRST CAUSE OF ACTION FOR CORPORATE DISSOLUTION:

Ariosto Valerio (“Ariosto”) asserts the same grounds as set forth above regarding V. Tropical Bakeshop I, Inc., i.e., that the pleading contains no allegations related to “V Tropical Bakeshop I, Inc.” In addition, Ariosto notes that even if there were such an entity mentioned, there are no facts alleged in the Cross-Complaint to support dissolution. Thus, the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR ACCOUNTING:

This claim fails for the same reasons asserted above, i.e., there is no showing in the Cross-Complaint of any relationship that requires an accounting, when it was due, what the format was to be, or what is to be determined. Thus, the demurrer to the second cause of action is sustained.

THIRD CAUSE OF ACTION FOR FRAUD:

The elements of fraud are: a representation, usually of fact, which is false; knowledge of its falsity; intent to defraud; justifiable reliance upon the misrepresentation; and damages resulting from that justifiable reliance. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 72-73.) Fraud must be pled with specificity; general and conclusory allegations do not suffice. Thus, the policy of liberal construction of the pleadings will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which show how, when where, to whom, and by what means the representations were tendered.” (See Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184). These requirements serve as “a device to separate meritorious and non-meritorious cases” before trial. (Id.)

Here, the fraud claim is not supported by facts pled with particularity. It alleges that Michael Brown and Ariosto Valerio convinced Cross-Complainant Aubrey Valerio to enter into an agreement to transfer his shares in four Valerio stores in exchange for shares in Chula Vista and payment of dividends and distributions without the intent to perform them. There are no allegations as to when or how the alleged “convincing” was made, where, or how the representations were tendered. Further, there are no facts to support the allegations of embezzlement or cash skimming. Moreover, there are no facts identifying the persons who made the alleged transfers, their ability to do so, or when they did so. There are no facts alleged regarding the authority of the person to speak for the corporation, what they said, or when they said it.

The demurrer to the third cause of action is sustained.

FOURTH CAUSE OF ACTION FOR CIVIL RICO:

The elements of a RICO claim are: (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity, (5) affecting interstate commerce, and (6) injury caused to plaintiff’s business or property. (McMartin v. Children’s Institute International (1989) 212 Cal. App. 3d 1393, 1406; People v. Highland Fed. Sav. & Loan (1993)14 Cal. App. 4th 1692, 1713; Gervase v. Sup. Ct. (1995) 31 Cal. App. 4th 1218, 1230-1232.)

Here, the RICO claim is not supported by the requisite facts to support the elements. Cross-Complainant alleges that Cross-Defendants have engaged in monetary transactions in property derived from specific unlawful activity and transportation of stolen property, without identifying what that specific unlawful activity is or what was stolen. Moreover, Cross-Complainant has not alleged any facts demonstrating an enterprise between the two Cross-Defendants, or any facts constituting a pattern, or affecting interstate commerce.

The demurrer to the fourth cause of action is sustained.

FIFTH CAUSE OF ACTION FOR BREACH OF FIDCUCIARY DUTY:

The elements of the claim are: (1) a fiduciary duty; (2) breach of the duty; and (3) damage caused by the breach. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.) The mere fact that the parties had trust and confidence in each other does not impose a corresponding fiduciary duty in the absence of an act creating a fiduciary relationship known to law. (World Vision Enterprises, Inc. v. ABC (1983) 142 Cal.App.3d 589, 595.) Here, allegations that Cross-Complainant was terminated from employment, did not receive dividends and/or distributions or accountings, and entered into an agreement to transfer his shares of interest do not support the claim. Further, the allegations that Cross-Defendants embezzled funds and engaged in some unknown racketeering conduct lack factual support in the allegations.

The demurrer to the fifth cause of action is sustained.

The court will hear from counsel for Cross-Complainant as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.