CHEN v. TSE

LAW AND MOTION TENTATIVE RULINGS DATE: AUGUST 12, 2026 TIME: 8:30 A.M.

Defendants demur to the first cause of action for dissolution, the second cause of action for partition of real property, 1 the third cause of action for declaratory relief, and the fourth cause of action for accounting

II. LEGAL STANDARDS

“A demurrer tests the pleading alone, and not the evidence or the facts alleged.” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “For that reason, we ‘assume the truth of the complaint's properly pleaded or implied factual allegations.’ [Citation.] We also ‘consider judicially noticed matters.’ [Citation.] ‘In addition, we give the complaint a reasonable interpretation, and read it in context.’ [Citation.]” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 15 Cal.App.4th 1308, 1315.)

III. DISCUSSION

Plaintiffs object to the meet and confer declaration of Stephen Sherman filed in support of defendants’ demurrer, asserting it contains inadmissible evidence of efforts of the parties to compromise. These objections are overruled. A party is required to file a declaration concerning the parties’ meet and confer efforts before filing a demurrer. (Code of Civ. Proc. § 430.41(a).)

a. First cause of action – Judicial dissolution of LLC

Defendants assert this cause of action fails to state sufficient facts because the allegations do not fulfill the requirements of Corporations Code section 17707.03, subdivision (b).

In connection with this cause of action, the FAC alleges that those in control of the LLC, Tse and Fok, are guilty of or knowingly countenanced fraud, mismanagement, or abuse of authority; that plaintiffs have made demand for cooperation and distribution of profits and accounting but defendants have refused to do so, and continuing the LLC is no longer practicable. Plaintiffs seek a dissolution decree and the appointment of a receiver or liquidating trustee. (FAC at ¶¶ 27-31.)

Corporations Code section 17707.03 provides:

“(a) Pursuant to an action filed by any manager or by any member or members of a limited liability company, a court of competent jurisdiction may decree the dissolution of a limited liability company whenever any of the events specified in subdivision (b) occurs. (Emphasis added.)

1 Plaintiffs do not oppose the demurrer to the second cause of action for partition. So, the demurrer to this cause of action is sustained without leave to amend.

LAW AND MOTION TENTATIVE RULINGS DATE: AUGUST 12, 2026 TIME: 8:30 A.M.

(b)

(1) It is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.

(2) Dissolution is reasonably necessary for the protection of the rights or interests of the complaining members.

(3) The business of the limited liability company has been abandoned.

(4) The management of the limited liability company is deadlocked or subject to internal dissension.

(5) Those in control of the limited liability company have been guilty of, or have knowingly countenanced, persistent and pervasive fraud, mismanagement, or abuse of authority.”

Defendants argue the FAC fails to allege that continued operation of the LLC is no longer reasonably practicable and that there are no allegations concerning how the LLC was not acting in conformity with the operating agreement.

The demurrer to this cause of action is overruled. The applicable section of the Corporations Code permits any member or manager of an LLC to file for judicial dissolution whenever any of the 5 enumerated events are alleged to have occurred. The FAC alleges sufficient facts to support a cause of action under section 17707.03, subdivision (b)(5). Plaintiffs allege they are managing members and those in control [defendants] allegedly refinanced a loan from property owned by the LLC, without plaintiffs’ permission and for defendants’ enrichment. Plaintiffs maintain that Tse and Fok knowingly perpetrated fraud and mismanagement or abuse of their authority. (FAC at ¶¶ 22- 29.) Defendants argue the FAC fails to meet the heightened pleading standard for fraud, but the FAC does not allege a cause of action for fraud so the heightened pleading standard would not apply.

b. Third cause of action – Declaratory relief

Defendants assert this cause of action fails to state sufficient facts because plaintiffs do not cite or attach the LLC operating agreement or written instrument under which they seek their declaration of rights.

Code of Civil Procedure section 1060 provides that “[a]ny person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual

LAW AND MOTION TENTATIVE RULINGS DATE: AUGUST 12, 2026 TIME: 8:30 A.M.

controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”

Here, plaintiffs allege an actual controversy exists between the parties as to the rights, obligations, and ownership interests of the LLC and that they seek a judicial determination of each member’s rights and obligations. (FAC at ¶¶ 40-41.) The demurrer to this cause of action is overruled.

c. Fourth cause of action – Accounting

Defendants assert this cause of action is insufficiently pled because it does not cite to or attach the LLC operating agreement to establish the existence and scope of any right to accounting as a minority member of the LLC.

“A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant, such a fiduciary relationship, that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.) “An action for an accounting has two elements: (1) ‘that a relationship exists between the plaintiff and defendant that requires an accounting’ and (2) ‘that some balance is due the plaintiff that can only be ascertained by an accounting.’ [Citations.].” (Sass v. Cohen (2020) 10 Cal.5th 861, 869,)

In connection with this cause of action, plaintiffs demand an accounting as to all the expenses of the Hayward and Ben Lomond properties as well as an account for all expenses associated with the properties. (FAC at ¶¶ 45-46.) The Court agrees that this cause of action is insufficiently pled. Plaintiffs do not sufficiently allege a relationship between the parties that requires an accounting. The demurrer to this cause of action is sustained with leave to amend.

IV. CONCLUSION

The demurrer to the first and third causes of action are overruled. The demurrer to the second cause of action is sustained without leave to amend and the demurrer to the fourth cause of action is sustained with leave to amend. Plaintiffs shall file a second amended complaint within 30 days from this hearing date.