Here is the text of a tentative ruling by Alameda County Superior Court Judge Robert B. Freedman overruling the demurrer of Nelson Oliva and daughters Taylor Oliva, Gabrielle Oliva and Adrianna Oliva to the city of Hercules' First Amended Complaint.
11/15/12 TR -- Demurrer to the First Amended Complaint -- Overruled
This Tentative Ruling is issued by Judge Robert B. Freedman On the Demurrer of Defendants Nelson E. Oliva ("Nelson"), Taylor Oliva, Gabrielle Oliva, and Adriana Oliva (collectively "Daughters") to Plaintiffs' First Amended Complaint ("FAC"), filed on September 18, 2012, the court ORDERS as follows: (1) Nelson's demurrer to all causes of action on the ground of uncertainty and failure to state a cause of action (C.C.P. § 430.10(e) and (f)) is OVERRULED. Although Nelson is one of the demurring defendants, there are no arguments in the supporting memorandum addressed specifically to him. Instead, all of the arguments are to the effect that there are insufficient allegations as against Daughters. (See Memo. at pp. 7-10 [in discussing each cause of action, defendants request that the demurrer be sustained "as to Defendants Taylor, Gabrielle, or Adriana"].) Although the reply raises a new argument that the complaint is uncertain as to Nelson, including because it fails to specify whether the alleged agreements are written or oral (see Reply, pp. 6-7), this ground for the demurrer was not set forth in the moving papers and Nelson did
not give Plaintiffs an opportunity to respond to it. Accordingly, the court need not address it. In any case, demurrer for uncertainty "will be sustained only where the complaint is so bad that the defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her." (Weil & Brown et al., Cal. Prac. Guide: Civ. Proc. Before Trial [TRG 2011 rev.] § 7:85, citing Khoury v. Many's of Calif., Inc. (1993) 14 Cal. App. 4th 612, 616.) The court does not find the allegations as to Nelson so uncertain. (2) Daughters' demurrers to the First through Fifth Cause of Action on the ground of uncertainty and failure to state causes of action are OVERRULED. Daughters argue that each cause of action fails to specify that Daughters owed or breached a duty to Plaintiffs, including because there are no allegations that Daughters "made any representations of any kind to Plaintiffs" or were "officials or employees of Plaintiffs at any point in time" or owed fiduciary duties to Plaintiffs. (See Memo., p. 6, and pp. 7-10.) The FAC sufficiently apprises Daughters, however, that the causes of action against them are based on allegations that each Daughter was "an officer, employee, director and/or shareholder" of Defendant NEO Consulting, Inc. ("NEO"), that NEO was the "alter ego" of Nelson and Daughters, including because NEO was "inadequately capitalized" and was a "shell" which defendants used for their own personal use and benefit "as a device to obtain public contracts that otherwise were void on their face under California Government Code § 1090," and that Daughters "aided and abetted" Nelson in his violation of his alleged fiduciary duties to Plaintiffs. (See FAC, ¶¶ 5-8, 23-27, 31, 34, 39, 43-44, 48, 52-53.) Under California law, "[l]inability may ... be imposed on one who aids and abets the commission of an intentional tort if the person ... knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act...." (Casey v. U.S. Bank National Ass'n (2005) 127 Cal. App. 4th 1138, 1145.) Although Plaintiffs' allegations regarding Daughters' specific "aiding and abetting" conduct are not detailed, the court finds them sufficient to give notice at the pleading stage. Further, while Daughters are correct that there are no allegations that they are persons specified in Government Code § 1090 or that they themselves breach a duty under that statute (see Klistoff v. Superior Court (2007) 157 Cal. App. 4th 469, 479-480), this does not mean that Daughters cannot be included in causes of action seeking to void the contracts that allegedly violated that statute or to disgorge proceeds they allegedly obtained through Nelson's alleged violation of that statute. Government Code § 1092 provides that "[e]very contract made in violation of any of the provisions of Section 1090 may be avoided at the instance of any party except the officer interested therein," and upon proof of a violation thereof "the public entity involved is entitled to recover any compensation that it has paid under the contract without restoring any of the benefits it has received." (Klistoff v. Superior Court (2007) 157 Cal. App. 4th 469, 481-482; see also Carson Redevelopment Agency v. Padilla (2006) 140 Cal. App. 4th 1323, 1328-1329 [noting, but without specifically addressing them, that agency had included causes of action for imposition of a constructive trust, accounting, rescission and restitution along with a cause of action under Gov. Code §§ 1090 and 1092].) In light of the above, and the "alter ego" allegations in the FAC to the effect that Daughters used NEO as an undercapitalized "shell" and personally derived proceeds that Plaintiffs seek to disgorge, the court finds that there are sufficient allegations (for pleading purposes) of the basis for the claims against Daughters. In this regard, the court notes that the decision in Klistoff, supra, is distinguishable. (See Klistoff, supra, 157 Cal. App. 4th at pp. 481-482 ["The City has not alleged that K & S was Klistoff's alter ego and that the corporate identity of K & S should be disregarded" or that the City paid public funds to that entity or its principal.]) (3) Daughters' demurrer to the Sixth Cause of Action (declaratory relief -- setoff) is DROPPED by the court as moot in light of Plaintiffs' clarification that this cause of action is directed only against Nelson and not against Daughters. Daughters are correct that Plaintiffs did not in all instances comply with CRC 2.112(4) by specifying the parties to whom each cause of action is directed. Nevertheless, Plaintiffs have clarified that the First through Fifth Causes of Action are directed to all defendants and the Sixth Cause of Action is directed only to Nelson, so the FAC shall be so construed. (4) All defendants shall file and serve an answer to the FAC by December 3, 2012. PLEASE NOTE: The above tentative ruling will be issued as the court's order, and no hearing will be held, unless the contesting party contacts the opposing party or parties and the Clerk of Department 20 by 4 p.m. on the court day before the scheduled hearing to state an intent to appear at the hearing to contest the tentative ruling. The Clerk of Department 20 may be contacted by email to Dept.email@example.com