Hearing DemurrerCal. Super. - 6th Dist.September 29, 2017SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER SanJose Nihonmachi LLC vs Miraido Corporation etal Hearing Start Time: 9:00AM 17CV316504 Hearing Type: Hearing: Demurrer Date of Hearing: 02/08/2018 Comments: Heard By: Stoelker, James L Location: Department 13 Courtroom Reporter: - No Record Transcribed Courtroom Clerk: Robert Gutierrez Court Interpreter: Court Investigator: Parties Present: Future Hearings: Exhibits: - No appearance. No one called to contest the Tentative Ruling. The tentative ruling is adopted. See below for ruling. Case Name: San Jose Nihonmachi, LLC v. Miraido Corporation, et al. Case No.: 17-CV-316504 I. Background This action arises from a dispute over a real estate development project and the settlement of a previous lawsuit amongst the parties. In 1991, nonparty San Jose Nihonmachi Corporation ( Nihonmachi Corporation) as the sole general partner of [nonparty] Nihonmachi Development Partners, LP. purchased 3.2 acres of land at the corner of Sixth Street and Jackson Street (the Property) in the Japantown neighborhood of San Jose, California. (First Amended Complaint ( FAC ), 9.) Defendant Yoshihiro Uchida, then a member ofthe board of directors of Nihonmachi Corporation, personally loaned $4.2 million to Nihonmachi Development Partners, LP. and negotiated the purchase ofthe Property on the partnership s behalf. (FAC, 9.) When Nihonmachi Development Partners, LP. could not repay the loan, it executed a deed in lieu of foreclosure and transferred the Property to defendant Miraido Corporation ( Miraido ), a business founded and controlled by Mr. Uchida. (FAC, 10.) In 1993, Nihonmachi Corporation and Miraido formed a limited partnership, nonparty Nihonmachi-Miraido Partners, L.P., for the purpose of developing the Property. (FAC, 9, 14.) When they formed the partnership, general partner Miraido contributed title to the Property and limited partner Nihonmachi Corporation Printed: 2/8/2018 02/08/2018 Hearing: Demurrer - I7CV316504 Page 1 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER contributed $900,000.00. (FAC, 11.) Several years later, nonparty San Jose Redevelopment Agency became interested in and ultimately purchased the Property for $3,000,000.00. (FAC, 13.) Miraido distributed $2,750,000.00 following the sale but did not make any distribution to Nihonmachi Corporation. (FAC, 13.) In 1996, Mr. Uchida tried to scare away his business partners by falsely telling them they would have to provide significant personal information and be subject to liability in their individual capacities if they participated in developing the Property through the San Jose Redevelopment Agency. (FAC, 14.) Around this time, Mr. Uchida also tried to dissolve Nihonmachi Corporation but shareholders intervened and prevented him from doing so. (FAC, 14-15.) In 1997, Miraido and Nihonmachi Corporation agreed, as partners of Nihonmachi-Miraido Partners, LP, to form a new partnership known asJapantown Development, L.P. (FAC, 16.) Unable to qualify for loans to develop the Property on its own, Japantown Development, L.P. subsequently gave 25% ofthe project to defendant A.F. Evans Company, Inc. (AFE Co. ), the predecessor in interest to defendant AFE Urban, Inc. ( AFE Urban), based on its creditworthiness. (FAC, 17.) AFE Co. was to take over responsibility for developing the Property. (FAC, 17.) Thus, development ofthe Property continued via Japantown Development, L.P. with AFE Co. serving as general partner and Nihonmachi-Miraido Partners, LP. serving as limited partner. (See FAC, Ex. B [Partnership Agreement].) Later that year, defendant Japantown Development, L.P. leased the Property from the San Jose Redevelopment Agency for 59 years and executed an accompanying Disposition and Development Agreement. (FAC, 18.) According to plaintiff San Jose Nihonmachi, LLC ( Plaintiff), the successor in interest to Nihonmachi Corporation, Miraido did not properly account for the finances ofJapantown Development, LP. and attempted to reduce its ownership interest in the partnership. (FAC, 18.) Thus, in 1998, Nihonmachi Corporation commenced the earlier lawsuit against project participants, particularly Miraido, Mr. Uchida, Japantown Development, LP, and AFE Co., as well as against Gloria Rose Ott. Nihonmachi Corporation asserted causes of action against the defendants for an accounting, declaratory relief, breach of contract, business interference, and breach of fiduciary duty for which it sought damages and permanent injunctive relief. In 2003, the parties settled their lawsuit. (FAC, 20.) As part of the settlement, they agreed the capital accounts of Miraido and Nihonmachi Corporation s partnership, Nihonmachi-Miraido Partners, LP, would be adjusted to 76.8 percent and 23.2 percent, respectively. (See FAC, Ex. C [Settlement Agreement].) Plaintiff alleges the agreed-upon adjustment of their respective capital accounts was based on misinformation provided by Mr. Uchida and Miraido. (FAC, 19-20.) Plaintiff also questions partnership transactions from 1998 to the present. (FAC, 22-26.) According to Plaintiff, in addition to irregular transactions, Miraido, as general partner of Nihonmachi-Miraido Partners, LP, has not followed accounting procedures set forth in the 2003 settlement agreement including the requirement that funds directed to the partnership be processed through the partnership and not directly deposited by Miraido in its own accounts. (FAC, 26.) In essence, Plaintiffclaims Miraido has mismanaged funds and engaged in self-dealing in violation oftheir partnership agreement and the 2003 settlement agreement. Plaintiff asserts causes ofaction against Miraido, Mr. Uchida, Japantown Development, L.P., AFE Urban, and AFE Co. for: (1) Accounting (against all defendants); (2) Breach of Fiduciary Duty/Constructive Fraud (against Miraido, Mr. Uchida, Japa ntown Development, LP, and AFE Urban); (3) Declaratory Relief/Rescission of 2003 Settlement Agreement due to Fraud (against Miraido, Uchida, Japantown Development LP, and AFE Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 2 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER Urban); and (4) Permanent Injunction (against Japantown Development, L.P, AFE Urban, and Miraido). (See FAC at pp. 17:1-2, 21:10-11, 22:21-22, 25:3-4.) Currently before the Court is a demurrer to and a motion to strike allegations in the FAC by defendants Miraido and Mr. Uchida (collectively, Miraido Defendants ) as well as a demurrer to and a motion to strike allegations in the FAC by defendants Japantown Development, LP. and AFE Urban (collectively, Urban Defendants). II. Miraido Defendants A. Demurrer Miraido Defendants demur to the third cause of action on the ground of uncertainty and to the first, second, third, and fourth causes of action on the ground of failure to state facts sufficient to constitute a cause of action. They filed a request forjudicial notice in support. 1. Request forJudicial Notice Miraido Defendants request judicial notice ofthe third amended complaint from the 1998 lawsuit and the partnership agreement, including amendments thereto, for Nihonmachi-Miraido Partners, LP. The pleading from the 1998 lawsuit is a proper subject ofjudicial notice because it is a court record. (See Evid. Code, 452, subd. (d).) When a court takesjudicial notice ofa pleading, the fact that a plaintiff made certain allegations in the pleading is established, but the Court does not accept the truth ofthose factual allegations. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564.) With respect to the partnership agreement, a court may take judicial notice of the existence of a contract if its existence is undisputed. (See Fremont Indemnity Co. v. Fremont General Corp. ( Fremont ) (2007) 148 Cal.App.4th 97, 113; Evid. Code, 452, subd. (h).) Butjudicial notice is limited to the existence ofthe agreement; the truth of statements contained in the document and its proper interpretation are not subject tojudicial notice ifthose matters are reasonably disputable. (Fremont, supra, 148 Cal.App.4th at p. 113.) Here, Plaintiff identifies the Nihonmachi-Miraido Partnership Agreement in the FAC and does not dispute its existence in its opposition. (See FAC, 12.) Accordingly, with the limitation above in mind, this partnership agreement is a proper subject ofjudicial notice. In conclusion, Miraido Defendants request forjudicial notice is GRANTED. In reaching this conclusion, the Court rejects the repeated assertion by Miraido Defendants that Plaintiff improperly failed to attach the Printed: 2/8/2018 02/08/2018 Hearing: Demurrer - 17CV316504 Page 3 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER partnership agreement to the FAC. A written contract may be pleaded either by its terms set out verbatim in the complaint or a copy ofthe contract attached to the complaint and incorporated therein by reference or by its legal effect. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489; see also Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 401-02.) Accordingly, no impropriety or failure can be attributed to Plaintiff simply because one ofthe agreements for the many nested entities involved in the real estate development project is not attached to the pleading. 2. Uncertainty The third cause of action is for Declaratory Relief/Rescission of 2003 Settlement Agreement due to Fraud. (See FAC at p. 22:21-22.) Miraido Defendants argue the third cause ofaction is uncertain because it improperly attempts to combine two causes ofaction into one[,] particularly a claim for declaratory relief and a claim for rescission ofthe 2003 Settlement Agreement. (Mem. of Pts. & Auth. at p. 12:10-11.) A party may demur on the ground of uncertainty to challenge a pleading as uncertain, ambiguous, or unintelligible. (Code Civ. Proc., 430.10, subd. (f).) [D]emurrers for uncertainty are disfavored and are granted only ifthe pleading is so incomprehensible that a defendant cannot reasonably respond. (Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135.) Significantly, Miraido Defendants do not cite any authority to support the conclusion a demurrer on the ground of uncertainty is sustainable for the reason they articulate. Additionally, Miraido Defendants do not otherwise explain, and it is not obvious to the Court, how the third cause of action is so incomprehensible they cannot reasonably respond. In conclusion, Miraido Defendants do not substantiate their demurrer to the third cause ofaction on the ground of uncertainty, which is therefore OVERRULED. 3. Failure to State Sufficient Facts Miraido Defendants demur to the first, second, third, and fourth causes of action on the ground of failure to state facts sufficient to constitute a cause of action. Although they present arguments with respect to each cause of action individually, they also argue, as a preliminary matter, that Plaintiff is bound by the 2003 settlement agreement, and thus, none of its causes ofaction can be based on events preceding the effective date ofthat agreement[,] citing the litigation privilege in support. (Mem. of Pts. & Auth. at p. 7:19-20.) The Court first addresses this argument before reaching the arguments advanced with respect to the individual causes of action. Although not clearly articulated by Miraido Defendants, it appears their position is that Plaintiff cannot maintain any cause ofaction because each is barred by the litigation privilege. The litigation privilege is codified in Civil Code section 47: [a] privileged publication or broadcast is one made. . . [i]n any. . .judicial proceeding. . . . (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057.) The privilege recognized in [Civil Code] section 47 derives from common law principles establishing a defense to the tort of defamation. (Ibid.) Now, the privilege provides immunity from all torts except for malicious prosecution; the privilege is no longerjust a defense to a defamation claim. (Ibid.) Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 4 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) Significantly, Miraido Defendants do not analyze these essential elements and the facts alleged in each cause of action as necessary to demonstrate the first, second, third, and fourth causes of action are based on privileged communications. Thus, Miraido Defendants do not demonstrate the litigation privilege bars each and every cause ofaction in the pleading. Accordingly, Miraido Defendants argument is not a basis for sustaining the demurrer to any cause of action. The Court next turns to the arguments presented with respect to each cause of action individually. i. First Cause of Action The first cause of action is for an accounting. Plaintiff alleges neither Miraido, as general partner of Nihonmachi-Miraido Partners, L.P., nor AFE Urban Co., as general partner ofJapantown Development, L.P., have provided it with an accounting despite acknowledgements by accountants for both partnerships that there are financial inaccuracies that require corrections of capital accounts. (FAC, 57-59.) Plaintiff alleges the Property (now developed) was recently sold thereby triggering dissolution of the Japa ntown Development, L.P., but that it cannot determine the amount of funds to be distributed to it from the sale and wind up of the business such that it needs an accounting. (FAC, 62-64.) Miraido Defendants argue Plaintiff fails to state a cause ofaction for an accounting because Plaintiff had a financial relationship with Nihonmachi-Miraido Partners, LP. but not with Miraido or Mr. Uchida in his individual capacity. Miraido Defendants are correct that, as a general matter, [a] cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiffthat can only be ascertained by an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) Nevertheless, Miraido Defendants do not substantiate their argument that the relationship between Plaintiff, Miraido, and Mr. Uchida is insufficient. It appears Miraido Defendants position is that a plaintiff may only assert a cause of action for an accounting against the partnership itself, but they do not cite any authority to support this position. In actuality, a party may assert a cause of action for an accounting against a partner, not just the partnership as an entity, as well as an individual in control of partnership assets. (lbid.) All that is required is that some relationship exists that requires an accounting. (lbid.) It need not be a fiduciary relationship. (lbid.) For example, a plaintiff may assert a cause of action for an accounting against an individual who took over the management of partnership business upon the death ofan individual partner. (Id. at p. 180.) The central issue is whether the defendant has possession or control over the assets to be accounted for. (Id. at pp. 179-80.) Here, Plaintiff alleges Miraido was the general partner of Nihonmachi-Miraido Partners, LP. and that Mr. Uchida was individually involved in the business of Miraido, as its founder and majority shareholder, as well as in the business of the partnership. This is sufficient for pleading purposes. Consequently, the demurrer to the first cause of action is OVERRULED. ii. Second Cause of Action Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 5 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER The second cause of action is for Breach of Fiduciary Duty/Constructive Fraud. (FAC at p. 21:10.) Plaintiff is a member of Nihonmachi-Miraido Partners, LP and alleges its partner Miraido as well as Miraido s President/CEO, Mr. Uchida, owed it a fiduciary duty. (FAC, 75-77.) Plaintiff alleges Miraido and Mr. Uchida breached the fiduciary duty they owed it as a partner by wrongfully accepting and failing to account for $965,160.30, failing to disclose and properly obtain consents for partnership business, and failing to require a final accounting by Japantown Development, L.P. (FAC, 75-77.) Plaintiffalleges AFE Urban and Japantown Development, L.P. breached the fiduciary duty they owed it by failing to timely repair and disclose the need for repairs at the Property while subsequently attempting to pass on the increased cost of $1,400,000.00 resulting from their conduct and by failing to provide a final accounting as necessary to wind upthe business. (FAC, 78-79.) First, Miraido Defendants argue Plaintiff fails to state a claim for breach of fiduciary duty against Mr. Uchida because it does not adequately allege the existence of a fiduciary relationship. The existence of a fiduciary relationship is an essential element of a claim for breach of fiduciary duty. (Meisterv. Mensinger (2014) 230 Cal.App.4th 381, 395.) A fiduciary relationship is any relation existing between parties to a transaction wherein one ofthe parties is in duty bound to act with the utmost good faith for the benefit ofthe other party. (Wolfv. Super Ct. (2003) 107 Cal.App.4th 25, 29-30 [internal citations and quotations marks omitted].) Miraido Defendants argue that Mr. Uchida has no direct relationship with Plaintiff and his status as the founder, principal shareholder, and chairman of Miraido is insufficient to establish the existence of a fiduciary duty. (Mem. of Pts. & Auth. at p. 11:7-10.) Miraido Defendants are correct that a corporate officer owes a fiduciary duty to the corporation and that this duty does not extend to third parties transacting business with the corporation. (United States Liability Insurance Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 594-95.) Put differently, a corporate officer is not liable to a third person for a breach ofduty owing to the corporation alone; the act must also constitute a breach ofduty owed to the third person. (lbid.) Consequently, Mr. Uchida does not owe Plaintiff a fiduciary duty simply because it transacted business with Miraido and he owed Miraido a fiduciary duty as an officer. Plaintiff does not allege facts showing Mr. Uchida directly owed Plaintiff a fiduciary duty. Accordingly, Plaintiff does not allege the existence of a fiduciary relationship sufficient to state a claim for breach of fiduciary duty against Mr. Uchida. Second, Miraido Defendants argue Plaintiff does not state a claim against Miraido because its claim is time- barred. In general, a party may demur on the ground of failure to state facts sufficient to constitute a cause ofaction if the complaint shows on its face that the statute [of limitations] bars the action. [Citation.] (E- Fab., Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.) A court may only sustain a general demurrer on this basis if the challenged cause of action is clearly and affirmatively barred by the statute of limitations based on the allegations on the face of the pleading. (Id. at p. 1316.) In evaluating a demurrer on this basis, a court must determine (1) which statute of limitations applies and (2) when the claim accrued. (lbid.) In general, the statute of limitations for a breach of fiduciary duty claim is four years. (See, e.g., Thomson v. Canyon (2011) 198 Cal.App.4th 594, 607 [applying four-year statute of limitations to breach of fiduciary duty claim].) Nevertheless, Miraido Defendants do not demonstrate the second cause ofaction accrued more Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 6 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER than fouryears prior to the filing of the complaint in 2017. Miraido Defendants acknowledge the second cause of action is based on conduct occurring as recently as 2016 and 2017. Accordingly, it is not obvious, especially in the absence of any explanation from Miraido Defendants, that the second cause of action accrued more than fouryears prior to the filing of the complaint. Miraido Defendants thus do not substantiate their argument that the second cause of action, as asserted against Miraido, is time-barred. For the reasons set forth above, Mr. Uchida s demurrer to the second cause ofaction is SUSTAINED with 10 days leave to amend and Miraido s demurrer to the second cause ofaction is OVERRULED. iii. Third Cause of Action The third cause of action is for declaratory relief and is based on the allegation that Plaintiff s assent to the 2003 settlement agreement was procured through fraud, particularly misrepresentations about the finances of the entities involved in the development project. Miraido Defendants argue Plaintiff fails to state a claim for declaratory relief because it seeks to redress past wrongs. (Mem. of Pts. & Auth. at p. 13:2.) To state a claim for declaratory relief, a plaintiff must allege there is an actual controversy relating to the legal rights and duties of the respective parties, not an abstract or academic dispute. (Centex Homes v. St. Paul Fire and Marine Insurance Co. ( Centex) (2015) 237 Cal.App.4th 23, 29, quoting Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, 746-47.) But while Plaintiff does allege misconduct occurred in the past, it also alleges a present dispute about the settlement agreement and adjustments to capital accounts made pursuant thereto and states it desires a declaration as to the validity of the 2003 Settlement Agreement so it may ascertain its rights and duties. . .. (FAC, 89.) Significantly, Miraido Defendants do not provide any explanation or authority to support their position. Thus, there is no basis for concluding the third cause of action impermissibly seeks redress for past wrongs. Miraido Defendants otherwise argue that ifthe third cause ofaction is really a claim for rescission, then it still fails to state a valid cause of action because Plaintiff does not allege the essential elements of a fraud claim. (Mem. of Pts. & Auth. at p. 13:11-16.) But the third cause ofaction is for declaratory relief regardless ofthe fact that Plaintiff included the word rescission in the label on the cause ofaction. (See Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 [the label on a cause of action is not controlling].) Additionally, contrary to what Miraido Defendants appear to believe, rescission is a remedy, not a cause of action. (See Akin v. Certain Underwriters at Lloyd s London (2006) 140 Cal.App.4th 291, 298-99.) Finally, Miraido Defendants do not cite and the Court is otherwise unaware of any authority to support the proposition that a plaintiff must allege the essential elements of a tort claim, specifically fraud, in order to seek rescission of a contract. Miraido Defendants therefore do not substantiate their argument. In conclusion, the demurrer to the third cause of action is OVERRULED. iv. Fourth Cause of Action The fourth cause ofaction is for Permanent Injunction. (FAC at p. 25:3.) Miraido Defendants argue the Court should sustain the demurrer to the fourth cause ofaction because injunction is a remedy and is not a Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 7 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER cause of action. It is true that a permanent injunction is a remedy and is not a recognized cause of action. (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 65.) While a party may obtain an injunction if he or she is otherwise entitled to such relief, a court may sustain a demurrer to a cause of action for injunction because it is not actually a cause ofaction. (lbid.) The fourth cause ofaction is in fact pleaded as a cause of action for permanent injunction ; Plaintiff has not simply mislabeled some other recognized cause of action. The demurrer to the fourth cause of action is therefore sustainable. Because injunction is not a recognized cause of action, there is no reasonable possibility plaintiff can cure this defect by amending the pleading. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Accordingly, the demurrer to the fourth cause ofaction is SUSTAINED WITHOUT LEAVE TO AMEND. B. Motion to Strike Miraido Defendants move to strike as irrelevant various factual allegations in the pleading. (See Not. of Mot. at pp. 2:3-3:1.) The allegations do not fall into any one category or concern any one subject. For example, Miraido Defendants move to strike the allegation that the deed in lieu of foreclosure for the Property is attached as Exhibit A to the FAC. (See FAC, 10.) A court may [s]trike out any irrelevant. . . matter inserted in any pleading. (Code Civ. Proc., 436, subd. (a).) An irrelevant matter is defined as an immaterial allegation that is not essential to the statement ofa claim or that is neither pertinent to nor supported by an otherwise sufficient claim. (Code Civ. Proc., 431.10, subds. (b), (C)-) Although Miraido Defendants identify this legal standard in their memorandum of points and authorities, they do not clearly explain how the allegations they seek to strike are irrelevant. The only argument advanced by Miraido Defendants is that the allegations they seek to strike are contradicted by the 2003 settlement agreement. It is entirely unclear how they reach the conclusion that the allegations are irrelevant from the factual premise that the allegations are contradicted by the settlement agreement. Furthermore, they do not substantiate their assertion that the allegations they seek to strike are in fact contradicted by the settlement agreement. In conclusion, Miraido Defendants do not demonstrate the allegations may be stricken as irrelevant. Miraido Defendants motion to strike is therefore DENIED. |||. Urban Defendants A. Demurrer Urban Defendants demur to the second and third causes of action on the grounds of uncertainty, lack of legal capacity, and failure to state facts sufficient to constitute a cause of action. The Court notes Urban Defendants appear to be raising an additional ground for demurrer in a footnote in their memorandum of points and authorities. Urban Defendants state [t]he FAC is demurrable on the ground of misjoinder ofthese two causes ofaction. (Mem. of Pts. & Auth. at p. 4, fn. 11.) This assertion is improper because the grounds for demurrer must be separately stated in the demurrer, not buried in a footnote in the memorandum of points and authorities. (See Cal. Rules of Court, rule 3.1320(a) [Each ground of demurrer must be in a separate paragraph and must state whether it applies to the entire complaint. . . or Printed: 2/8/2018 02/08/2018 Hearing: Demurrer - 17CV316504 Page 8 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER specified causes ofaction. . . . ].) Furthermore, while misjoinder of parties is a ground for demurrer, improperjoinder of causes ofaction is no longer a ground for demurrer. (Code Civ. Proc., 430.10, subd. (d); Legis. Com. com., West s Ann. Code Civ. Proc., 430.10.) Accordingly, the FAC is not demurrable on this additional ground. Having resolved these preliminary procedural issues, the Court next turns to the merits of the demurrer. 1. Uncertainty Urban Defendants demur to the second and third causes of action on the ground of uncertainty. Urban Defendants do not actually argue, and it is not otherwise obvious to the Court, the pleading is so incomprehensible they cannot reasonably respond. (See Lickiss, supra, 208 Cal.App.4th at p. 1135.) Consequently, Urban Defendants do not substantiate their demurrer to the second and third causes of action on the ground of uncertainty, which is therefore OVERRULED. 2. Lack of Legal Capacity A party may demur on the ground the plaintiff lacks the legal capacity to sue pursuant to Code of Civil Procedure section 430.10, subdivision (b). Legal capacity to sue means the right to come into court as distinct from the concept of standing, which is a party s right to relief. (See Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604.) Standing goes to the existence of a cause of action, and thus the proper ground for a demurrer on that basis is failure to state sufficient facts, not lack of legal capacity. (Ta rr v. Merco Constr. Engineers, Inc. (1978) 84 Cal.App.3d 707, 713.) For example, a defendant may demur on the ground the plaintiff lacks legal capacity to sue when an individual plaintiff is a minor, is deceased, or has been adjudicated incompetent or insane. (See Color-Vue, Inc., supra, 44 Cal.App.4th at p. 1604.) Another example ofa plaintiffthat lacks legal capacity to sue is a corporation that has been suspended for failure to pay its franchise taxes. (V & P Trading Co. v. United Charter, LLC (2012) 212 Cal.App.4th 126, 133-35.) Here, Urban Defendants cite Code of Civil Procedure section 430.10, subdivision (b) in their statement of grounds for demurring to both the second and third causes ofaction. In their memorandum of points and authorities, however, they only argue Plaintiff lacks the legal capacity to sue [them] on the second cause of action. (Mem. of Pts. & Auth. at p. 7:78) With respect to the second cause ofaction, Urban Defendants do not thereafter provide any explanation or legal authority to support the conclusion that Plaintiff lacks legal capacity to sue. Instead, Urban Defendants recount some of the allegations in the FAC and make a series of disjointed assertions about the concepts of demand futility and the business judgment rule. Consequently, Urban Defendants do not demonstrate Plaintiff lacks legal capacity to sue. The demurrer to the second and third causes of action therefore is not sustainable on that ground. To the extent Urban Defendants actually intended to raise some other pleading defect, their position is entirely unclear. For example, while defendants sometimes confuse the concepts of legal capacity and standing, it is not obvious Urban Defendants intended to make a standing argument. In conclusion, the demurrer to the second and third causes of action on the ground of lack of legal capacity is Printed: 2/8/2018 02/08/2018 Hearing: Demuner - ]7CV316504 Page 9 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER OVERRULED. 3. Failure to State Sufficient Facts i. Second Cause of Action Urban Defendants demur to the second cause of action on the ground of failure to state facts sufficient to constitute a cause of action. Yet, Urban Defendants do not clearly advance any arguments to support the conclusion that no cause ofaction has been stated. Other than the argument about legal capacity, addressed above, the only other statement Urban Defendants make about the second cause of action is as follows: The Second Cause of Action is even less informative. In pleading that punitive damages are appropriate, [Plaintiff] merely says that the defendants acted with fraud. (Mem. of Pts. & Auth. at p. 5:4-5.) The significance of this assertion is entirely unclear, particularly because it is made in the memorandum of points and authorities in support of Urban Defendants demurrer and their motion to strike is not actually directed to punitive damages allegations. Urban Defendants do not address the essential elements of any particular cause of action, such as breach of fiduciary duty, in order to demonstrate the factual allegations in the second cause of action are insufficient. Consequently, the demurrer to the second cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED. ii. Third Cause of Action With respect to the third cause of action for Declaratory Relief/Rescission of 2003 Settlement Agreement due to Fraud, Urban Defendants argue the demurrer is sustainable because Plaintiff does not plead the essential elements ofa fraud claim with particularity. (See FAC at p. 22:21-22.) Urban Defendants argument is problematic because they do not explain or cite authority showing, as a preliminary matter, the pleading standard for fraud applies here. It appears Urban Defendants perhaps treated this cause of action as being for the tort of fraud because the word fraud appears in the label on the cause ofaction, but that approach is misguided for two reasons. First, it fails to account for the remainder of the label, which reflects the cause of action is for declaratory relief. Second, when evaluating the legal sufficiency of a pleading, a court is not bound by the label on a cause of action. (See Quelimane Co., supra, 19 Cal.4th at p. 38.) If the complaint states a cause ofaction under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer. (lbid.) Looking beyond the label, the allegations in the third cause ofaction reflect it is for declaratory relief. Plaintiff disputes the validity of the 2003 settlement agreement on the basis Miraido Defendants and Urban Defendants provided it with inaccurate financial information in the course of procuring its assent to the agreement. (FAC, 86.) On this basis, Plaintiff seeks a declaration as to the validity ofthe 2003 settlement agreement. . . so [it] may ascertain its rights and duties under the [agreement]. (FAC, 89.) To state a claim for declaratory relief, a plaintiff must allege there is an actual controversy relating to the legal rights and duties of the respective parties, not an abstract or academic dispute. (Centex, supra, 237 Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 10 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER Cal.App.4th at p. 29 [internal quotation marks and citation omitted].) The pleader need not establish [he or she] is also entitled to a favorablejudgment. (lbid.) Consequently, when evaluating a demurrer to a claim for declaratory relief, a court simply considers whether the factual allegations of the complaint [] reveal that an actual controversy exists between the parties. (lbid.) Because a plaintiff is entitled to a declaration of his or her rights even ifthe declaration is ultimately adverse to his or her interests, a demurrer is generally not the appropriate weapon with which to attack the merits ofa claim for declaratory relief. (Siciliano v. Fireman s Fund Insurance Co. (1976) 62 Cal.App.3d 745, 755.) Urban Defendants do not address this pleading standard. They subsequently and inexplicably state they are not demurring to [Plaintiff s] declaratory reliefclaim and are instead demurring to a charge of fraud that fails to specify a number ofthe elements of fraud. (Mem. of Pts. & Auth. at p. 4:11-12.) In other words, Urban Defendants apparently do recognize the third cause of action is for declaratory relief but simply decided to address an entirely different cause of action than that which Plaintiffasserts. To be sure, Urban Defendants do not argue a declaratory relief claim involving fraud must be pleaded with specificity. Rather, they simply discuss fraud without any explanation or citation to legal authority demonstrating their argument supports the demurrer to the third cause of action for declaratory relief. Thus, Urban Defendants do not substantiate their argument. For the reasons set forth above, Urban Defendants do not demonstrate Plaintiff fails to state a cause of action. Accordingly, the demurrer to the third cause ofaction is OVERRULED. B. Motion to Strike First, Urban Defendants move to strike paragraphs 20, 22-30, 32-33, 59, 75, and Exhibit D to the FAC on the basis that [Plaintiff s] claims with respect to Miraido s accounting for costs are barred by the Statute of Limitations. (Not. of Mot. at p. 1:24-26.) Second, Urban Defendants move to strike the prayer for damages on the First Cause ofAction because Plaintiff may not recover damages based on a cause of action for an accounting. (Not. of Mot. at p. 1:27-28; see also FAC at p. 27:14.) The Court considers each part of their motion in turn. 1. Factual Allegations The first problem with Urban Defendants motion to strike portions ofthe pleading based on the statute of limitations is that they do not identify any statutory ground for their motion. (See Cal. Rules of Court, rule 3.1113(b) [A memorandum of points and authorities must contain. . . a concise statement of law. . . and a discussion of the statutes. . . cited. . . . ].) There are two statutory grounds for a motion to strike. Code of Civil Procedure section 436 authorizes a court to strike out irrelevant, false, or improper matter inserted in any pleading and all or any part ofany pleading not drawn or filed in conformity with the laws ofthis state, a court rule, or an order of the court. Urban Defendants do not cite any authority to demonstrate their statute of limitations argument supports striking allegations as improper. Additionally, while the second ground quoted above might be broadly construed to reach any deficiency in a pleading, including substantive ones, that is not its purpose or effect. (Ferraro v. Ca ma rlinghi (2008) 161 Cal.App.4th 509, 528, original italics.) Rather it authorizes the striking ofa pleading due to improprieties in its form or in the procedures pursuant to which it was filed. (lbid., original italics.) In sum, Urban Defendants do not demonstrate the allegations may be stricken as an initial matter because they do not identify any statutory ground for their motion. Printed: 2/8/2018 02/08/2018 Hearing: Demuner - ]7CV316504 Page 11 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER Next, Urban Defendants do not substantiate the statute of limitations argument advanced in support. Although it is clear Urban Defendants are raising the statute of limitations, their argument is incredibly difficult to follow; there is no clear or logical flow to their argument. Urban Defendants recount various allegations in the pleading in a disjointed manner without first taking a position as to what the statute of limitations is for the claims at issue. Furthermore, Urban Defendants do not thereafter analyze when the claims accrued as necessary to demonstrate they seek to strike allegations of conduct occurring outside the limitations period. Accordingly, Urban Defendants do not substantiate their statute of limitations argument. For these reasons, Urban Defendants do not demonstrate portions ofthe FAC may be stricken out based on the statute of limitations. 2. Claim for Damages Urban Defendants also move to strike the prayer for damages on the First Cause of Action on the sole basis Plaintiff may not recover damages in connection with a cause of action for an accounting. (Not. of Mot. at p. 1:27-28; see FAC at p. 27:14.) Urban Defendants argument in support ofthe second part oftheir motion is similarly difficult to follow. Urban Defendants assert the accounting remedy is dependent upon the validity of some other cause of action showing damages. . .. (Mem. of Pts. & Auth. at p. 5:10-12.) But this assertion is not actually supported by the case Urban Defendants cite, Union Bank v. Superior Court (1995) 31 Cal.App.4th 573. The court in Union Bank did not hold an accounting was a remedy dependent on some other cause of action; rather, it concluded the plaintiff had not demonstrated she was entitled to an accounting because she could not prove fraud, breach of a fiduciary duty, or that the defendant owed her some unquantifiable sum of money sufficient to demonstrate an accounting was actually necessary. (Id. at pp. 593-94.) Furthermore, it is unclear how the rule Urban Defendants espouse supports their argument that Plaintiff cannot recover damages in connection with the first cause of action for an accounting. Urban Defendants do not offer any other support for their argument. Consequently, Urban Defendants do not substantiate their argument that the claim for damages should be stricken because they are not recoverable. 3. Conclusion Urban Defendants do not substantiate any of the arguments advanced in support of their motion to strike. Accordingly, the motion to strike portions ofthe FAC is DENIED. San Jose Nihonmachi Corporation is the predecessor in interest to plaintiff San Jose Nihonmachi, LLC. Although Plaintiff included cover pages for each exhibit to the FAC, they are blank and do not actually identify the letter marker for each exhibit. Thus, the Court refers to each exhibit according to its denomination in the body ofthe pleading. Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 12 of 13 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER Incidentally, Miraido Defendants do not seek to strike allegations as false. They clearly, unequivocally, and repeatedly state they seek to strike allegations on the ground they are irrelevant. Urban Defendants do not identify lack of legal capacity as a statutory ground by name. Nevertheless, in identifying the statutory ground of failure to state facts sufficient to constitute a cause of action in their demurrer, they cite both subdivisions (b) and (e) of section 430.10 of the Code of Civil Procedure. Code of Civil Procedure section 430.10, subdivision (b) authorizes a demurrer on the ground [t]he person who filed the pleading does not have the legal capacity to sue, which is an entirely separate and distinct ground from failure to state sufficient facts, the ground set forth in subdivision (e). Because Urban Defendants ultimately argue Plaintiff lacks legal capacity, the Court treats the demurrer to the second and third causes ofaction as being made on this additional ground. Urban Defendants argument is also difficult to read as they have used different font sizes, irregular margins, and appear to have bolded words at random. The Court notes a party moving to strike a portion ofthe pleading must quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause ofaction, count, or defense. (Cal. Rules of Court, rule 3.1322(a).) The moving party must quote the matter to be stricken in the notice of motion. (lbid.) Urban Defendants state they seek to strike a particular portion ofthe prayer for relief, but they do not identify this portion by quotation or paragraph number. On the last page oftheir memorandum of points and authorities, Urban Defendants identify the portion of the FAC to be stricken as page 27, line 14. Thus, although their notice of motion does not comply with the California Rules of Court, the Court can discern, with adequate specificity, the portion of the pleading they seek to strike as necessary to evaluate their motion. Printed: 2/8/2018 02/08/2018 Hearing: Demuner - 17CV316504 Page 13 of 13
