April Ouellette v. BAM Ouellette Properties, LLC, et al.

30 Line 4 Case Name: April Ouellette v. BAM Ouellette Properties, LLC, et al.

Case No.: 22CV397444

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

Respondent Mitchell Ouellette (“Respondent”) under Code of Civil Procedure Sections 430.10(e) et seq., including Section 430.30, demurs to the Petition to Wind Up Affairs of Dissolved Limited Liability Company under Corporations Code Section 17707.04 (the “Petition”) and its only cause of action, the First Cause of Action for Decree Winding Up Affairs (Co rp. Code Sec. 17707.04) against all Respondents (the “First Cause of Action”) filed by Petitioner April Ouellette (“Petitioner”). Notice of Demurrer (the “Demurrer”) at 1:18-24.

The Demurrer came on for hearing on May 13, 2026, at 9:00 AM in Department 16. After reviewing all the papers and the record, and giving counsel for all parties the full and fair opportunity to be heard, the Court finds and rules as follows.

I. Factual Allegations of the Petition

As pleaded in the Petition, BAM Quellette Properties LLC (“BAM”) was formed on April 3, 2012, with its principal place of business at 7462 Redhill Way in Browns Valley, California. Since its formation its managing members were April Quellette (trea surer), Bruce Quellette, and Mitchell Quellette. BAM is the owner of a real property loca ted at 7451 Railroad Street in Gilroy, California. (Petition ¶¶ 1, 2, 4)

On February 14, 2025, Bruce Quellette resigned from BAM leaving Petitioner and Respondent as the only remaining members. BAM’s Limited Liability Company Agreement (“Operating Agreement”) provides that the Company shall be terminated if any member resigns. However, Respondent has refused to vote in favor of Petitioner handling the dissolution process and has refused to consent to the dissolution. (Petition ¶¶ 8, 9, 11).

As a result, Petitioner initiated this action on March 5, 2025, seeking a decree to Wind-Up Affairs of the Dissolved Limited Liability Company, pursuant to Corporation Code section 17707.04.

II. Legal Standard on Demurrer

“The party against whom complaint or cross-complaint has been filed may object, by demurrer or answer as provided in [Code of Civil Procedure] section 430.30, to the pleading on any one or more of the following grounds: . . . (e) The pleading does not state

31 sufficient facts to constitute cause of action, (f) The pleading is uncertain.” (C.C.P. § 430.10(e) & (f).)

A demurrer may be used by “[t]he party against whom complaint has been filed” to object to the legal sufficiency of the pleading as whole, or to any “cause of action” stated therein, on one or more of the grounds enumerated by statute. (C.C.P. §§ 430.10 & 430.50(a).)

“A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s abilit y to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 213-214.) In ruling on demurrers, courts may consider matters subject to judicial notice. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal. App. 4th 743, 751.) Evidentiary facts found in exhibits attached to complaint can be consi dered on demurrer. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.)

Under California law, even if a demurrer is sustained, leave to amend the complaint is routinely granted. California courts are quite liberal permitting amendment s, not only where a complaint is defective in form, but also where substantive defect s are app arent: “Liberality in permitting amendment is the rule, if fair opportunity to correct any defect has not been given.” Angie M. v. Superior Court (1995) 37 Cal. App. 4th 1217, 1227. In the case of an original complaint (like we have here), plaintiff need not even request leave to amend: “Unless the complaint shows on its face that it is incapable of amendment, denial of leave to amend constitutes an abuse of discretion, irrespective of whether leave to amend is requested or not.” McDonald v. Sup. Ct. (Flintkote Co.) (1986) 180 Cal. App. 3d 297, 303-304. And so where, like here, we have an original complaint where plaintiff has not yet had opportunity to amend the complaint in response to a demurrer, “leave to amend is liberally allowed as a matter of fairness, unless the complaint shows on its face that it is incapable of amendment.” City of Stockton v. Sup. Ct. (Civic Partners Stockton, LLC) (2007) 42 Cal. 4th 730, 747; see also Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action).

III. Judicial Notice

Respondent requests judicial notice of the following:

• EXHIBIT 1: The Petition to Wind Up Affairs of Dissolved Limited Liability Company Pursuant to Corporations Code Section 17707.04, and attachments thereto, Exhibits A, LIMITED LIABILITY COMPANY AGREEMENT OF BAM Ouellette Properties LLC A CALIFORNIA STATE LIMITED LIABILITY COMPANY, and Exhibit B, (letter), filed in this Superior Court of Santa Clara County on March 5, 2025 by Petitioner April Ouellette in Case No. 25CV460430, (the “Petition”).

32 • EXHIBIT 2: Copy of a Filed Endorsed Copy of State of California Office of the Secretary of State, Statement of Information Limited Liability Company File No: BA20240842668 filed in the official records of the State of California, Secretary of State on April 28, 202 4 (“Statement of Information”).

Evidence Code Section 452(d) permits judicial notice of the records in the pe nding action, or in any other action pending in the same court or any other court of record in the United States. The Court will take judicial notice of the existence of these documents, but not the truth of their content.

Furthermore, while the Court can judicially notice of the existence of documents on file with state agencies, the truth of the contents of materials prepared by private pa rties and merely on file with state agencies are not subject to judicial notice. (See, Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 607-608, citing Hughes v. Blue Cross of Northern California (1989) 215 Cal.App.3d 832, 856.)

Accordingly, Respondent’s request is GRANTED IN PART in that the Court takes Judicial Notice of the existence of both Exhibits 1 and 2 but not of the truth of their contents.

IV. Analysis of Demurrer

A. Appointment of a Referee Did Not Moot this Demurrer

Petitioner contends the Court’s Order of April 24, 2026, appointing a referee to wind up affairs of the Company renders Respondent’s demurrer and dissolution argument moot because the referee has already been appointed to help the Court resolve the part ies’ deadlock on wind-up decision. (Opposition 2:8-26). But as a matter of law and logic, that does not follow at all.

A demurrer tests whether the Petition states a legally sufficient basis for relief, analyzing defects apparent on the face of the pleading or judicially notice able matters. (Code. Civ. Proc. § 430.30; See also Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 213-214.) Therefore, demurrer is a question of law device aimed at testing the sufficiency of the pleading, here, the Petition.

By contrast, the authorities describing referees and references characterize them a s tools to assist the court with particular subject matters (e. g., accounting/long accounts) and require an order specifying the scope and reasons for the reference. (See, Code. Civ. Proc. § 639.) But nothing in the statutory text of Section 639 hints let alone resolves that a Petition sufficiently pleads a cause of action where a Referee is appoin ted in the interim. In other words, appointing a Referee does not extinguish pending pleading challenges.

Likewise, the Corporation Code provisions contemplate that, once a judicial dissolution action is filed, the case may proceed through additional steps, including a buyout election and a valuation process that can stay winding up/dissolution whi le value

33 is determined. (See, Corp. Code § 17707.03) The statute also expressly requires appointment of appraisers in the valuation context if the parties cannot agree. (Ibid.)

Therefore, this statutory framework and authorities indicate that the Court may issue interim procedural orders such as appointing a referee without having first reached the issue of whether the Petition was sufficiently pleaded to survive a Demu rrer. The mere fact of a referee appointment does not logically eliminate the demurrer’s function —which is to test the Petition’s legal sufficiency. So appointing a Referee did not resolv e the distinct issue of whether the Petition was well pleaded or not —the issue now before the Court in this Demurrer, which the Court will now decide.

B. As the Petition fails to plead facts to show an event of Dissolution—a required element under Section 17707.04— the Petition fails to plead facts sufficient to establish a Cause of Action under Section 17707.04.

Corporations Code Section 17707.04 relief is expressly conditioned on dissolution. The statute begins: “In the event of a dissolution of a limited liability company ...” and only then authorizes a court decree ordering winding up on petition if necessary to protect parties in interest. (Corp. Code § 17707.04). In other words, an event of dissolution is an essential element of a Section 17707.04 cause of action. Hence, it follows as a matt er of logic and law that if this Petition fails to plead facts to establish an event of dissol ution, the Petition fails to state a Section 17707.04 claim and thus the Demurrer must be sustained under Code of Civil Procedure Section 430.10(e).

Here, Petitioner attempts to plead dissolution by alleging (1) BAM’s Operating Agreement provides that the Company shall be terminated if any member resigns (Petition ¶ 8; Exhibit A), and (2) Bruce Quellette resigned from BAM on February 14, 2025, leaving Petitioner and Respondent as the only remaining members (Petition ¶ 9; Exhibit B)

But Respondent points out that the Petition is not viable because it fails to all ege sufficient facts showing Bruce Quellette’s resignation letter triggered an event of dissolution under section 9.2 of BAM’s Operating Agreement. More specifically, Respondent contends, the resignation letter was improperly sent to him only and to his address instead of the required Company’s place of business, which was listed as 2004 Oscar Court in Gilroy California in section 2.3 of the Operating Agreement. (Reply at 5:4- 26).

Section K of the Operating Agreement defines resignation as a decision to no longer continue upon written notice to the Company. (Petition, Exhibit A) The resignation letter attached to the petition is addressed to Mitch Ouellette at 3557 Jenkins Ave, San Jose, California, and does not on its face show it was sent to the Company at its address. (Petition, Exhibit B) Petitioner argues that notice to the Company can be inferred s ince the Company is essentially its member. (Opposition 4:9-14) The Court disagrees.

34 Under generally applicable rules of contract interpretation, a court tries “to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code § 1636.) If the contract language “is clear and explicit, and does not involve an absurdity,” the language governs the interpretation. (Civ. Code § 1638.) And, if possible, “[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writin g alone.” (Civ. Code § 1639.) When parties have provided by their agreement that notice shall be given in a particular way, as here, notice given in such manner is binding and sufficient. (Reserve Oil & Gas Co. v. Metzenbaum, (1948) 84 Cal. App. 2d 769, 776, internal citation omitted)

Hence, Bruce Quellette’s letter of resignation sent to Respondent’s address instead of the Company’s place of business was not effective under the Operating Agreement and did not trigger a dissolution event.

As the resignation letter was not a triggering event, the Petition fails to sufficiently plead that an event of dissolution occurred. Having failed to sufficiently plead facts to establish an event of dissolution, the Petition to state facts sufficient to constitut e a cause of action under Corporations Code Section 17707.04. 9 Accordingly, the Demurrer is SUSTAINED under Code of Civil Procedure Section 430.10(e).

C. Leave to Amend is Granted this one time.

Where the Court respectfully disagrees with Respondent is that in sustaining this Demurrer to this original Petition, the Court will GRANT Petitioner LEAVE TO AMEND the Petition within 30 days of today to try to cure the pleading deficiencies i dentified in this Order.

Petitioner does seek leave to amend Petition, arguing that she can allege additional facts to refute Respondent’s interpretation of the Operating Agreement regarding his authority to control the Company’s wind-up activities as the majority shareholder. (Opposition 5:2-27).

In opposing this request for leave to amend, Respondent does make strong arguments. Respondent points out that Petitioner does not explain how an amendment can transform the defective nature of Bruce Quellette’s notice of resignation. As put by Responden t, “[t]he alleged resignation has already occurred and cannot be retroactively rendered compliant with the Operating Agreement.” (Reply at 8:4-5). And as the defective resignation letter does not and cannot establish an event of dissolution, Respondent argues that amendment would be futile to cure this pleading deficie ncy. (Reply 8: 3-10).

9 As the Court finds and rules that the Petition fails to plead a cause of action und er Corporations Code Section 17707.04 because the Petition fails to plead facts to establish the required element of an event of dissolution, the Court need not and does not reach the parties’ additional arguments over business continuation and over whether judicial intervention is necessary.

35 While Respondent’s arguments are reasonable and well taken that amendment here may turn out to be futile, the Court cannot say at this point that the Petition on its face is “incapable” of amendment or that there is “no reasonable possibility” of amendment. City of Stockton, 42 Cal. 4th at 747; Goodman, 18 Cal. 3d at 349, supra. It is conceivable (or at least not beyond the bounds of conceivability) that Petitioner in a First Amended Petition might plead facts to address the pleading deficiencies identif ied above in this Order. So in the generous spirit of abundant liberality of California law to all litigants, the Court will give Petitioner 30 days from today to file a First Amended Petition to try to cure these pleading deficiencies. 10

V. Conclusion & Order

The Court SUSTAINS Respondent’s Demurrer to the Petition under Code of Civil Procedure Section 430.10(e), but GRANTS Petitioner LEAVE TO AMEND within 30 days from today if Petitioner wishes to do so.

SO ORDERED.

Date: May 13, 2026 Hon. Vincent I. Parrett Superior Court of the State of California, County of Santa Clara

10 So that all parties and the Referee Matthew Taylor, Esq., recently appointed by O rder of this Court on April 24, 2026, are not surprised, it is appropriate for the Court to share now that if Petitioner should fail to cure these pleading deficiencies through this fair opportunity to amend, the Court would not be inclined to grant leave to amend again if the First Amended Petition were to be successfully challenged by demurrer.