Benchmark Express Inc vs. Di Overnite Investments, LLC

Court (1974) 10 Cal.3d 616, 637.) The Court notes that Defendant’s argument that “Plaintiff has failed to include specific dates when notices of such violations were given to a governmental agency” is of no consequence because such information is not an element to the cause of action for breach of implied warranty of habitability. The Complaint states facts sufficient to constitute a cause of action for breach of implied warranty of habitability based on the water leakage issues and presence of toxic mold.

The Demurrer is SUSTAINED WITH LEAVE TO AMEND as to the fifth cause of action for fraud/concealment, sixth cause of action for negligent misrepresentation, and seventh cause of action for intentional infliction of emotional distress. Plaintiff sufficiently states these causes of action except that Plaintiff fails to plead who fraudulent concealed and negligently misrepresented the habitability of the apartment and when such statements or concealments were made with the requisite specificity to state such claims against the corporate Defendant. The intent element of these causes of action lacks the requisite specificity based on Defendant’s status as a corporation.

For the same reason, the Motion to Strike is GRANTED WITH LEAVE TO AMEND.

Defendant to give notice.

102 Benchmark Demurrer to First Amended Complaint Express Inc vs. Di Overnite Investments, LLC Defendants Seacoast Capital Managers of California and Seacoast Capital Partners IV L.P. (the “Seacoast 25-01458646 Parties”) demur to the First Amended Complaint (FAC) of plaintiffs Benchmark Express Inc.; Jonathan Garcia d/b/a Prove-It Industries; Ace Express It LLC; and Love Inc. (“Plaintiffs”).

The Seacoast Parties contend that Plaintiffs’ causes of action all fail against them because the alter ego allegations remain inadequate. They contend that Plaintiffs rely on conclusory allegations to plead alter ego liability but have not alleged the required unity of interest and ownership or that adherence to the separateness of the entities would sanction a fraud or promote injustice.

“ ‘The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff’s interests. [Citation.] In certain circumstances the court will disregard the corporate entity and will hold the individual shareholders liable for the actions of the corporation: “As the separate personality of the corporation is a statutory privilege, it must be used for legitimate business purposes and must not be perverted. When it is abused it will be disregarded and the corporation looked at as a collection or association of individuals, so that . . . the [individuals will be] liable for acts done in the name of the corporation.” [Citation.]’ ” (Ming-Hsiang Kao v. Holiday (2020) 58 Cal.App.5th 199, 205.)

“The first requirement for disregarding the corporate entity under the alter ego doctrine—whether there is sufficient unity of interest and ownership that the separate personalities of the individual and the corporation no longer exist—encompasses a series of factors. Among the many factors to be considered in applying the doctrine are one individual’s ownership of all stock in a corporation; use of the same office or business location; commingling of funds and other assets of the individual and the corporation; an individual holding out that he is personally liable for debts of the corporation; identical directors and officers; failure to maintain minutes or adequate corporate records; disregard of corporate formalities; absence of corporate assets and inadequate capitalization; and the use of a corporation as a mere

shell, instrumentality or conduit for the business of an individual. [Citation.] This list of factors is not exhaustive, and these enumerated factors may be considered with others under the particular circumstances of each case.” (Misik v. D’Arco (2011) 197 Cal.App.4th 1065, 1073.)

“ ‘The conditions under which the corporate entity may be disregarded, or the corporation be regarded as the alter ego of the stockholders, necessarily vary according to the circumstances in each case inasmuch as the doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.’ ” (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811.)

In addition to the prior allegations in support of alter ego liability, Plaintiffs allege in the FAC that the Seacoast Parties controlled the flow of funds used to pay contractors and Deliver-It lacked independent discretion to release payment without such approval. (FAC ¶ 10.) After the Seacoast Parties became involved in Deliver-It’s management and financing, Plaintiffs experienced a material change in payment practices, including chronic delays, missed payments, and shifting explanations tied to Board approval and invest review. (FAC ¶ 11.) Further, Love, Inc., through its principal Juan Quiros, was informed by Deliver-It’s head of accounting that the Seacoast Parties controlled the funds used to pay contractors and that Deliver-It could not release payment without approval. (FAC ¶ 79.)

These additional facts support the inference that the Seacoast Parties dominated and controlled Deliver-It as the chief investment companies of Deliver-It. This control over the day-to-day activity of Deliver-It could support a finding of alter ego liability. (See Zoran, 185 Cal.App.4th at pp. 812-813; see also Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236.) Thus, the Court finds that

Plaintiffs have adequately alleged a unity of interest at the pleading stage.

The Seacoast Parties argue that Plaintiffs have failed to allege that an inequitable result will follow if the corporate separateness is respected because Plaintiffs’ allegations that the Seacoast Parties had knowledge of the alleged fraudulent practices are conclusory and unsupported.

As discussed above, the FAC alleges that the Seacoast Parties controlled Deliver-It’s funds used to pay contractors such that Deliver-It could not make contractor payments without their approval. A reasonable inference from the allegations is that the Seacoast Parties were the ones who directed Deliver-It not to pay Plaintiffs for the work they performed pursuant to their subcontracts. If the allegations are proven, allowing the Seacoast Parties to avoid liability as separate entities from Deliver-It would satisfy the unjust result element. (JPV I L.P. v.

Koetting (2023) 88 Cal.App.5th 172, 200 [“inability to collect, when combined with [] other factors indicating inequitable uses of the corporate form, may satisfy the unjust result element for alter ego liability.”].) Thus, the Court also finds that Plaintiffs have adequately alleged an unjust result would follow if alter ego liability is not imposed.

Because the Court finds that the FAC adequately alleges alter ego liability at the pleading stage, and alter ego liability could support the causes of action asserted against the Seacoast Parties, the Court need not address the alternative arguments raised against the individual causes of action.

In light of all the above, the Demurrer is OVERRULED in its entirety.

Moving party to give notice.