34-2018-00232371

James Barrett vs. Selnek-is Tem-al Corporation

Nature of Proceeding: Hearing on Demurrer (Alcoholic Beverage Control)

Filed By: Younger, Jaclyn V.

Defendant Alcoholic Beverage Control’s Demurrer to the Complaint is sustained without leave to amend for failure to state facts sufficient to constitute a cause of action.

Well-pleaded factual allegations must be taken as true for purposes of a demurrer. ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of a complaint, not the truth or the accuracy of its factual allegations or the plaintiff’s ability to prove those allegations. (Ball v. GTE Mobilnet of California (2000) 81 Cal.App.4th 529, 534-35.)

Defendant’s Request for Judicial Notice is unopposed and is granted. In the instant matter, Defendant requests judicial notice of briefs filed in former proceedings raising the same issues, as well as the decisions of the ABC, Court of Appeal, and Supreme Court denying plaintiff’s writs of mandate, as well as dismissal with prejudice of the same claims raised herein filed by plaintiff’s assignor in a prior action. It does bear noting that, in taking judicial notice of these documents, the Court accepts the fact of their existence, not necessarily the truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal.4th 543, 590 (e.g. judicial notice of findings of fact does not mean that those findings of fact are true); Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121.) “‘Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.'” (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.) A court may take judicial notice of something that cannot reasonably be controverted, even if it negates an express allegation of the pleading. (Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 468-469.) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States” may be noticed. (Ev.C. 452(c); see 2 C.E.B., Civ. Proc. During Trial 3d, §14.19.) The court must take judicial notice of the matters specified in Evidence Code section 451, which include: the constitutional, statutory, and decisional law of California and the United States (see City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., (1998) 68 Cal. App. 4th 445, 479, n.31.)

On June 18, 2018, the Court granted the motion to quash service of summons filed by Selnek-is Tem-al Corporation (“Selnek-is”), on the basis that the court lacked personal jurisdiction over the tribe due to its sovereign immunity.

Plaintiff and his predecessor in interest Salton Sea Venture Inc. operated a gas station, convenience store, and truck stop near where Selnek-is offered similar

services. Plaintiff, as did Salton Sea previously, claims that the state’s failure to collect taxes from Selnek-is, and ABC’s failure to suspend their liquor license for this failure, supports plaintiff’s causes of action. Plaintiff alleges an 8th cause of action for Failure to Perform Mandatory Duty, a 9th cause of action for Injury to Public Funds, and a 10th cause of action for Violation of Equal Protection.

ABC contends that plaintiff lacks standing to sue and that all of the claims are barred by res judicata.

Plaintiff alleges that “ABC Defendants have failed to make any attempts whatsoever to enforce the mandatory Cal. Bus. & Prof Code § 24205 automatic suspension against Selnek-is and TM Travel Center.” (Complaint ¶¶ 280, 298.) In addition, he asks “[f]or declaratory relief stating that the Cal. Bus. & Prof Code § 25619 duty of peace officers to inform against and diligently prosecute offenders of the ABC Act is a mandatory duty which is based on a reasonable person

objective standard.” (Id. at ¶¶ 289, 304.)

Plaintiff’s prior ABC administrative action

On June 30, 2014, Plaintiff filed a formal accusation with the ABC requesting that it suspend Selnek-is’ license to sell alcohol under Business and Professions Code section 24205 on the ground that Selnek-is was three-months delinquent in the payment of sales and use taxes owed to the State of California. Plaintiff claimed this put Selnek-is’ license under an automatic suspension. (Request for Judicial Notice (“RJN”) Exhibit 1.) ABC conducted a formal administrative hearing on October 28, 2014, where Plaintiff was given a full opportunity to present oral testimony and documentary evidence. Thereafter, the ABC dismissed Plaintiffs accusation on December 30, 2014. (RJN, Exhibit 1.) The Alcoholic Beverage Control Appeals Board (“Board”) affirmed the ABC’s decision not to suspend Selnek-is’ liquor license on December 7, 2015. (RJN, Exhibit 1.) Plaintiff filed a Petition for Reconsideration of the ABC’s decision. The Board denied the

petition. (RJN, Exhibit 1.) On January 6, 2016, Plaintiff filed a writ petition with the Court of Appeal for the Fourth Appellate District (Case No. D069538) seeking review of the Board’s decision. (RJN, Exhibit 2.) The Court of Appeal for the Fourth Appellate District denied this writ petition on January 13, 2016 and the Supreme Court (Case No. S231970) denied Plaintiffs petition for review on February 24, 2016. (RJN, Exhibits 3-4.)

Plaintiff filed yet another writ petition with the Imperial County Superior Court, which was transferred to Los Angeles County Superior Court. (RJN, Exhibit 5.) Pursuant to Civil Procedure section 396, the case was transferred to the Second

Appellate District on May 4, 2016 (Case No. B272115) and the parties were requested by the Court to submit additional briefing. (RJN, Exhibit 6-7.) On February 16, 2017, the Second Appellate District denied Plaintiffs writ petition. (RJN, Exhibit 8.)

Salton Sea Complaint

On February 18, 2016, Salton Sea Venture, Inc. filed an amended complaint in Imperial County Superior Court against Selnek-is, ABC, and other state defendants (Case No. ECU08956). (RJN, Exhibit 9.) In that complaint Salton Sea Venture, Inc. claimed that ABC had a duty and obligation to suspend Selnek-is’ alcoholic beverage control license under California Business and Professions Code section 24205

because Selnek-is was delinquent in its payment of use taxes, transaction taxes, and sales taxes. (Id. at ¶¶ 149,156.) On or about August 11, 2016, Salton Sea Venture, Inc. dismissed its complaint with prejudice. (RJN, Exhibit 10.) As noted, Plaintiff alleges he received an assignment of Salton Sea Venture, Inc.’s rights. Parenthetically, it is axiomatic that an “assignment merely transfers the interest of the assignor. The assignee ‘stands in the shoes’ of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of assignment.” (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 948, p. 844.)

ABC contends plaintiff lacks standing to sue because he has not alleged an injury in fact. A lack of standing to sue ‘is vulnerable to a general demurrer on

the ground that it fails to state a cause of action.'” (Brown v. Randall (2011) 198 Cal. App. 4th 1, 8.) Defendant contends that the claim based on the Business and Professions Code section 17204 fails because Plaintiff has not suffered an injury in fact. Plaintiff alleges he received an assignment of Salton Sea Venture, Inc.’s rights, and not that he was injured himself. (See Stern, Cal Practice Guide:

8 Business & Professions Code Section 17200 Practice (The Rutter Group 2018) t

7:3.2.) [“The requirement of Proposition 64 that the claimant must have suffered injury in fact means that an uninjured claimant cannot take an assignment of a UCL [Unfair Competition Law] claim from an injured assignor.”].) However, plaintiff also appears to be suing on his own behalf as well for injuries arising after he obtained an assignment of rights from Salton Sea. As it might be possible to amend this cause of action to allege an injury in fact, the demurrer to this cause of action would ordinarily be sustained with leave to amend. However, since the dispositive issue is res judicata, the court is not granting leave to amend to allege an injury in fact, as the court determines that the defect arising from the res judicata defense cannot be cured.

Res judicata/collateral estoppel

As the California Supreme Court has explained, “‘Res judicata’ describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Under the doctrine of res judicata, for example, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, fn. omitted.) Thus, “Claim preclusion ‘prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.’ [Citation.] Claim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. [Citations.] If claim preclusion is established, it operates to bar relitigation of the claim altogether.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824, italics omitted.) “Claim preclusion, the ‘primary aspect’ of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties.” (Ibid.) “The related concept of collateral estoppel will preclude relitigation of an issue of fact or law necessarily decided in a prior judgment in a subsequent suit involving a party to the first case.” (J.R. Norton Co. v. Agricultural Labor Relations Bd. (1987) 192 Cal. App. 3d 874, 884.) Res judicata and collateral estoppel apply to decisions by administrative agencies. (Ibid.)

To determine whether a claim is indeed precluded, California courts follow the primary right theory. (Mycogen Corp., supra, 28 Cal.4th at p. 904.) “ ‘The primary right theory .

. . 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. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. [Citation.] . . . ‘As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. [Citation.] It must therefore be distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for

relief.” [Citation.] The primary right must also be distinguished from the remedy sought: “The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.” [Citation.] ‘The primary right theory . . . is invoked . . . when a plaintiff attempts to divide a primary right and enforce it

in two suits. 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 [citations]; 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.’ ” (Mycogen Corp., at p. 904, quoting Crowley v. Katleman (1994) 8 Cal.4th 666, 681-682.) In determining the primary right, “the significant factor is the harm suffered.” (Agarwal v. Johnson (1979) 25 Cal.3d 932, 954.)

In the instant Complaint, Plaintiff alleges that “ABC Defendants have failed to make any attempts whatsoever to enforce the mandatory Cal. Bus. & Prof Code § 24205 automatic suspension against Selnek-is and TM Travel Center.” (Complaint, ¶¶ 280, 298.) In addition, he asks “[f]or declaratory relief stating that the Cal. Bus. & Prof Code

§ 25619 duty of peace officers to inform against and diligently prosecute offenders of the ABC Act is a mandatory duty which is based on a reasonable person objective standard.” (Complaint, ¶¶ 289, 304.) In Plaintiff’s writ petitions to the Court of Appeal for the Fourth Appellate District and

Second Appellate District, Plaintiff similarly argued that the ABC had a mandatory duty to ensure that section 24205 was followed and to ensure that the Director followed section 25619. The Salton Sea Venture Inc. case similarly argued that ABC had a mandatory duty under section 24205. The primary right Plaintiff seeks to vindicate in this case is the same as in the prior writ petitions and the Salton Sea Venture case.

The second element, relitigation against the same party, has also been met because Plaintiff has filed three cases as set forth in the procedural history.

In his writ petitions to the Fourth Appellate District and Second Appellate District, Plaintiff argued that the ABC had a mandatory duty under section 24205 and the director had a mandatory duty under section 25619. The instant Complaint also names both Defendants. In addition, as noted above, because Plaintiff is in privity with Salton Sea Venture, Inc. as its assignee, the Court must consider Salton Sea Venture Inc.’s amended complaint, which named ABC as one of the defendants, to apply to assignee Barrett. Finally, the third element, final judgment on the merits, has also been met. “The final judgment rule is in effect as a result of the Supreme Court’s denial of the petition.” (J.R. Norton Co., supra, 192 Cal. App. 3d at p. 884.) In addition, “a dismissal with prejudice is the equivalent of a final judgment on the merits, barring the entire cause of action.” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 793;Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 820 [dismissal with

prejudice is the modern name for a common law retraxit; dismissal with prejudice under section 581 has the same effect as a common law retraxit and bars any future action on the same subject matter])

In opposition, plaintiff admits he has “stepped into the shoes” of Salton Sea Venture, Inc., who assigned plaintiff its rights and he admits that the issues and the parties in the prior actions are the same. Plaintiff contends, however, that it is inappropriate to address the res judicata defense on a demurrer. However, the Court has properly taken judicial notice of the issues previously determined as well as the judgments in the underlying cases, which are not subject to dispute and are the proper subject of judicial notice. Evidence Code section 452(d). Thus, the Court may properly reach a decision on this issue on a demurrer. The fact that plaintiff did not allege the existence of the prior litigation in his Complaint is not dispositive, nor is the fact that this case is brought by James Barrett, the assignee of Salton Sea Venture, rather than James Barrett the individual. Because Salton Sea has previously brought suit against the same defendants asserting almost identical claims, and voluntarily dismissed those claims with prejudice. Salton Sea would be barred from relitigating these issues, as well as any assignee of Salton Sea, including Barrett.

As noted, the function of a demurrer is to test the sufficiency of the pleading it challenges by raising questions of law. (Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219; Nordlinger v. Lynch (1990) 225 Cal.App.3d 1259, 1271.) Res judicata prevents re-litigation of an entire claim due to a prior judgment against a party seeking to re-litigate the claim. (Murray v. Alaska Airlines, Inc. (2010) 50 Cal.4th 860, 866-67.)The doctrine prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. A legal question is presented, properly addressed on demurrer under the facts presented. Indeed, “[t]he court may sustain a demurrer on claim preclusion grounds “[i]f all of the facts necessary to show that the action is barred are within the complaint or subject to judicial notice … .” ( Carroll v. Puritan Leasing Co. (1978) 77 Cal.App.3d 481, 485; Thompson v. Ioane, (2017) 11 Cal. App. 5th 1180, 1191; Planning & Conservation League v. Castaic Lake Water Agency, (2009) 180 Cal. App. 4th 210; Lazzarone v. Bank of Am., (1986) 181 Cal. App. 3d 581, 590 [” [a] complaint may be read as if it included matters judicially noticed. ( Code Civ. Proc., § 430.30, subd. (a); see 5 Witkin, Cal. Procedure, supra, § 896, p. 337.) Such matters may show the complaint fails to state a cause of action though its bare allegations do not disclose the defect. (See Weiner v. Mitchell, Silberberg & Knupp (1980) 114 Cal.App.3d 39, 47.) In this case Bank requested the trial court to take judicial notice of all orders, pleadings, and other matters on file in the matter of the estate of Carlo Lazzarone. The trial court was required to judicially notice those matters upon Bank’s request ( Evid. Code, §§ 452, subd. (d), 453) and we must do likewise on appeal (Evid. Code, § 459, subd. (a)(1)). Since the res judicata bar appears on the face of the documents judicially noticed, the defense is appropriately considered in reviewing the demurrer. (Code Civ. Proc., § 430.30, subd. (a); Flores v. Arroyo (1961) 56 Cal.2d 492, 496-497; Miller v. R.K.A. Management Corp. (1979) 99 Cal.App.3d 460, 465, 467-468].)

The Court also rejects plaintiff’s argument that the prior [litigated] decisions bar only religation of the issues with respect to the ABC’s failure to suspend Selnek-is’ alcohol license) during the time periods alleged in the earlier cases. Plaintiff contends that he was assigned the future rights concerning all subsequent failures to pay taxes and consequent failures by ABC to suspend Selnek-is’ alcohol license. He contends those claims are now ripe and he can now allege a failure to comply with the mandatory duty

to suspend the alcohol license upon nonpayment of taxes. However, even if a new wrong is alleged, the claims are still barred by collateral estoppel, which is “one aspect of the res judicata doctrine. (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341, fn.3.) “Collateral estoppel, or issue preclusion, precludes relitigation of issues argued and decided in prior proceedings.” (Id. at p. 341.) Res judicata and collateral estoppel require three common elements: “‘(1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.’” (People v. Barragan (2004) 32 Cal.4th 236, 253.) Collateral estoppel also requires the additional elements that the issue to be precluded was actually litigated and necessarily decided. (Lucido v. Superior Court (1990) 51 Cal.3d 335; Taylor v. Hawkinson (1957) 47 Cal.2d 893, 895-896.) The “‘necessarily decided’” requirement generally means only that the resolution of the issue was not “‘entirely unnecessary’ to the judgment in the initial proceeding.” (Lucido, supra, at p. 342.) Barrett admits that the issues in this suit and the prior cases are the same. The same defendants asserting nearly identical issues received a final adjudication on the merits. Barrett cites no authority for the proposition that he qualifies as a new party simply because he now claims to have received the interest of a third party.

Finally, plaintiff is incorrect in contending that the dismissal with prejudice by Salton Sea of the prior case is not “on the merits.” A dismissal with prejudice constitutes a final judgment for res judicata purposes. (Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 820 [dismissal with prejudice is the modern name for a common law retraxit; dismissal with prejudice under section 581 has the same effect as a common law retraxit and bars any future action on the same subject matter.]; Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 793.)

A court may sustain a demurrer with or without leave to amend. CCP 472a(c). Leave to amend a defective complaint should be denied where no liability exists under substantive law. Rotolo v San Jose Sports & Entertainment, LLC (2007) 151 Cal.App.4th 307, 321.

A demurrer must be sustained without leave to amend absent a showing by plaintiff that a reasonable possibility exists that the defect can be cured by amendment. Blank v Kirwan (1985) 39 Cal.3d 311, 318. The burden of proving such reasonable possibility rests squarely on the plaintiff. Torres v City of Yorba Linda (1993) 13 Cal.App.4th 1035, 1041. Plaintiff has not met that burden.

The demurrer is sustained without leave to amend.

The prevailing party shall prepare a formal order of dismissal for the Court’s signature pursuant to C.R.C. 3.1312.