Case Number: TC028667 Hearing Date: June 28, 2018 Dept: A

# 8. Raymond Urias v. Cindy Broussard, et al

Case No.: TC028667

Matter on calendar for: hearing on demurrer

Tentative ruling:

I. Background

This dispute arises from a shareholder dispute in a small, closely-held business. Plaintiff Raymond Urias is a nurse practitioner who was hired by defendant Professional Bariatric Centers, Inc. (“PBC”). Defendant Cindy Broussard was an owner of PBC at the beginning of the underlying events.

Urias alleges in the operative Third Amended Complaint (“TAC”):

· Urias started working for PBC in June 2015 (TAC ¶ 14.)

· July 2015, Broussard began discussing with Urias the possibility of his taking a 25% interest in PBC. (Id. at ¶ 15.)

· July 23, 2015, Broussard and Urias entered into an agreement under which Broussard allegedly transferred a 25% interest in PBC to Urias. (Id. at ¶ 16; Exh. 1.)

· It was at all times Urias’ understanding that he received 25% ownership in PBC. (TAC at ¶ 17.)

· March 2016, Urias was named an officer/secretary and a director of PBC. Urias and Broussard were the only directors in 2016. (Id. at ¶ 20; Exh. 2.)

· June 2016, Urias submitted his initial request to see the PBC corporate records. Broussard has yet to present the corporate records. (TAC ¶ 22.)

· August 30, 2016, Urias arrived at PBC to find the locks had been changed and PBC closed. He was not able to reach Broussard. (Id. at ¶ 23.)

· September 1, 2016, Broussard advised Urias not to come in that week or the next. (Id. at ¶ 24.)

· September 8, 2016, Urias went to PBC to inquire why the locks were changed and why he was being advised to not work his shifts. Upon arriving at PBC, Urias discovered that Broussard and/or defendant Regina Butler were using Urias’ prescription supplies without his knowledge or consent. (Id. at ¶ 25.)

· Urias did not receive any notice of any shareholders’ meeting or board of directors’ meeting when it was determined to remove Urias as an Officer and Director of PBC. (Id. at ¶ 27.)

Urias’ TAC brings causes of actions for the following:

(1) Violation of corporation code § 1601;

(2) Declaratory relief;

(3) Breach of contract;

(4) Breach of fiduciary duty;

(5) Conversion;

(6) Dissolution;

(7) Preliminary injunction;

Defendants demur to the entire TAC. Urias opposes. Defendants move to strike references to 25% ownership from the complaint. Urias opposes.

II. Standard

A. Demurrer

Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. (C.C.P. § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal. App. 4th 1112, 1126.) In ruling on a demurrer, the Court shall accept all material allegations in the Complaint as true. (Blank v. Kirwan (1985) 39 Cal. App. 3d 311, 318.) The Court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal. App. 4th 634, 638.) Because a demurrer tests the legal sufficiency of a complaint, the plaintiff must show that the complaint alleges facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal. App. 4th 39, 43.)

A plaintiff must allege the “essential facts… with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.” (Gressley v. Williams (1961) 193 Cal. App. 2d 636, 643-644.)

Under C.C.P. § 430.10(f), a demurrer may also be sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s factual allegations are confusing and do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal. App. 3d 135, 139, fn. 2.)

When written instruments are the foundation of the causes of action and attached to the complaint as exhibits, they may be examined by the Court. (SCEcorp v. Superior Court (1992) 3 Cal. App. 4th 673, 677.)

B. Motion to strike

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (C.C.P. § 436(a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (C.C.P. §436(b).) The grounds for a motion to strike are that the pleading has irrelevant, false or improper matter, or has not been drawn or filed in conformity with laws. (C.C.P. § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (C.C.P. § 437.)

III. Analysis

The court accepts defendants’ request for judicial notice of its ruling on August 8, 2017 sustaining the demurrer to the First Amended Complaint. The Court accepts Urias’ request for judicial notice of its tentative of the same order.

A. Demurrer as to the entire complaint for uncertainty.

Exhibit 1 is a handwritten transfer of shares from Broussard to Urias. It reads:

“I Cindy Broussard give Raymond Urias 25% of my 50% shares of PBC as of 7/23/15. PBC inc. has no debt or had no lawsuits as of this above mentioned date.”

[sic](Exh. 1.) At the bottom of the page appear the names of two doctors who each have a 25% ownership in PBC. (Exh. 1.) Defendants urge the view that the contract is unambiguous in that Urias is entitled to 25% of Broussard’s 50% of PBC’s shares, or 12.5%. Urias contends the contract shows Broussard’s intention to give half of her ownership in PBC to Urias, resulting in both having a 25% ownership in PBC. Regardless of whether the amount is 12.5% or 25%, the TAC sufficiently apprises Defendants of the issues they are being asked to address. (Williams, supra, (1986) 185 Cal. App. 3d at 139, fn. 2.)

As for the operation of the business, Civ.C. § 1856 allows the terms to be supplemented by evidence of consistent additional terms unless the writing is intended to be a complete and exclusive statement of the terms of the agreement. The writing does not state it is the exclusive statement of the terms of the agreement, therefore, extrinsic evidence may be supplied. There is at least ambiguity in Exhibit 1 as to Urias’ subsequent operations role.

The general demurrer as to uncertainty is overruled.

B. Violation of Corp.C. § 1601

Corp.C. § 1601 allows shareholders, the board, and committees of the board to view the accounting books and records of the corporation upon written demand. Urias argues that he made the written demand by way of his counsel when he supplied a draft copy of his complaint to defendants on December 8, 2016. (TAC ¶ 34.) Defendants argue a complaint is a pleading and “pleadings are allegations, not evidence, and do not suffice to satisfy a party’s evidentiary burden.” (Soderstedt v. CBIZ Southern California, LLC (2011) 197 Cal. App. 4th 133, 154–155.) In Soderstedt the plaintiff sought to prove there were 147 class members based on his allegations alone. (Ibid.) Here, plaintiff seeks to prove he requested an accounting in writing by sending a draft of his complaint. In this context, it is sufficient to survive a demurrer.

C. Declaratory Relief

Defendants argue that Butler is not a proper defendant and that there is no justiciable controversy. (Mtn. pg. 5:17.) Declaratory relief requires there be “actual controversy relating to the legal rights and duties of the respective parties.” (Ludgate Ins. Co. v. Lockheed Martin Group (2000) 82 Ca. App. 4th 592, 606.) Urias asks for declaratory relief as to his ownership interest in PBC. This is clearly at issue and does not turn on whether the percent owned is 12.5 or 25, although that will be decided. Butler is an owner of PBC and therefore her rights and duties will be determined as well. It is unclear that a decision rendered in Butler’s absence will be adequate. (Tracy Press, Inc. v. Superior Court (2008) 164 Ca. App. 4th 1290, 1298.) Her inclusion as a defendant is proper and the demurrer is overruled.

D. Breach of contract and breach of fiduciary duty and preliminary injunction

Defendants demur to these causes of action based on the 25%/12.5% dispute. These claims are not rendered uncertain by the amount of the shares Urias allegedly possesses. The demurrer as to causes of action 3, 4, and 7 is overruled.

E. Conversion

Urias’ conversion claim seeks alleged disbursements of his shares. (TAC ¶¶ 55–60.) Defendants argue conversion requires a specific sum to be identified. (Mtn. pg. 7:17–19.) “Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved . . . .” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glasner, Weil & Shapiro, LLP (2007) 150 Cal. App. 4th 384, 395.) Here, the specific sum is capable of being identified. PCO, Inc., suggests that this is enough to survive a demurrer but insufficient for a dispositive motion should Urias subsequently fail to identify a sum after discovery. (Ibid.)

F. Dissolution

Corp.C. § 1800(a)(1) allows an action of involuntary dissolution of a corporation to be brought by certain persons, including one-half or more of the directors in office or any shareholder that represents 33.3 percent of the outstanding shares. Defendants argue that Urias does not meet any of the qualifying definitions. Urias points out that at the time the Complaint was filed, he was one of only two directors. (Exh. 2.) Therefore, his action for dissolution should stand. For purposes of counting shares under Corp.C. § 1800(a)(2), the shares of those who have personally participated in any of the transactions enumerated by subdivision (b) paragraph (4) are excluded. (Corp.C. § 1800(a)(2).) Urias sufficiently alleges defendants violated (b)(4) in his TAC and thus, excluding their shares, Urias would have sufficient shares to qualify for a dissolution cause of action. The demurrer to the 6th cause of action is overruled.

As discussed above, Butler is properly included in this action as a defendant.

G. Motion to strike

The 25% ownership interest is not improperly pleaded. (C.C.P. § 436(a).) The motion to strike is denied.

IV. Ruling

The Court overrules the demurrer.

Next dates: PMSC 9/20/18; FSC 10/29/18; JT 11/5/18