This case was last updated from Los Angeles County Superior Courts on 09/10/2021 at 12:42:04 (UTC).

RACHEL HOWITT, ET AL. VS CATHY SCULLIN, ET AL.

Case Summary

On 05/23/2019 RACHEL HOWITT filed a Contract - Other Contract lawsuit against CATHY SCULLIN. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******8048

  • Filing Date:

    05/23/2019

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

 

Party Details

Plaintiffs

HOWITT TRUSTEE OF THE ZUGSMITH FAMILY TRUST

ZUGSMITH TRUSTEE OF THE ZUGSMITH FAMILY TRUST

ZUGSMITH MICHAEL

HOWITT RACHEL

Defendants

SCULLIN INDIVIDUALLY AND IN HER CAPACITY AS TRUSTEE OF THE SCULLIN REVOCABLE FAMILY TRUST ROBERT

SCULLIN INDIVIDUALLY AND IN HER CAPACITY AS TRUSTEE OF THE SCULLIN REVOCABLE FAMILY TRUST CATHY

VENTURA GAVIOTA LLC A CALIFORNIA LIMITED LIABILITY COMPANY

SCULLIN CATHY

ABIR COHEN TREYZON SALO LLP

SCULLIN ROBERT

VENTURA GAVIOTA LLC

Attorney/Law Firm Details

Plaintiff Attorneys

LINZER KENNETH

LARSON STEPHEN G.

Defendant Attorneys

SZKOPEK AGNES MONICA

SZKOPEK A. MONICA

 

Court Documents

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER RE STIPULATION TO CONTINUE TRIAL, FINAL STATUS CO...) OF 04/16/2021

4/16/2021: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER RE STIPULATION TO CONTINUE TRIAL, FINAL STATUS CO...) OF 04/16/2021

Substitution of Attorney

1/7/2021: Substitution of Attorney

Other - - OTHER - RULING RE: DEFENDANT'S DEMURRER TO THE SECOND AMENDED COMPLAINT

3/9/2020: Other - - OTHER - RULING RE: DEFENDANT'S DEMURRER TO THE SECOND AMENDED COMPLAINT

Request for Judicial Notice

11/27/2019: Request for Judicial Notice

Request for Judicial Notice

11/18/2019: Request for Judicial Notice

Declaration - DECLARATION OF A. MONICA SZKOPEK'S IN SUPPORT

11/18/2019: Declaration - DECLARATION OF A. MONICA SZKOPEK'S IN SUPPORT

Proof of Service (not Summons and Complaint)

11/18/2019: Proof of Service (not Summons and Complaint)

Summons - SUMMONS ON AMENDED COMPLAINT (1ST)

10/25/2019: Summons - SUMMONS ON AMENDED COMPLAINT (1ST)

Summons - SUMMONS ON COMPLAINT

10/1/2019: Summons - SUMMONS ON COMPLAINT

Declaration - DECLARATION IN SUPPORT OF MOTION TO STRIKE

7/10/2019: Declaration - DECLARATION IN SUPPORT OF MOTION TO STRIKE

Declaration - DECLARATION IN SUPPORT OF DEMURRER TO COMPLAINT

7/10/2019: Declaration - DECLARATION IN SUPPORT OF DEMURRER TO COMPLAINT

Demurrer - with Motion to Strike (CCP 430.10) - DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) TO COMPLAINT

7/10/2019: Demurrer - with Motion to Strike (CCP 430.10) - DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) TO COMPLAINT

Case Management Statement

7/31/2019: Case Management Statement

Notice and Acknowledgment of Receipt

6/24/2019: Notice and Acknowledgment of Receipt

Certificate of Mailing for - CERTIFICATE OF MAILING FOR MINUTE ORDER (COURT ORDER) OF 06/11/2019

6/11/2019: Certificate of Mailing for - CERTIFICATE OF MAILING FOR MINUTE ORDER (COURT ORDER) OF 06/11/2019

Order to Show Cause Failure to File Proof of Service

5/30/2019: Order to Show Cause Failure to File Proof of Service

Notice of Case Management Conference

5/30/2019: Notice of Case Management Conference

Civil Case Cover Sheet

5/23/2019: Civil Case Cover Sheet

53 More Documents Available

 

Docket Entries

  • 07/05/2022
  • Hearing07/05/2022 at 09:30 AM in Department 78 at 111 North Hill Street, Los Angeles, CA 90012; Jury Trial

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  • 06/20/2022
  • Hearing06/20/2022 at 08:30 AM in Department 78 at 111 North Hill Street, Los Angeles, CA 90012; Final Status Conference

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  • 06/01/2021
  • Docketat 09:30 AM in Department 78; Jury Trial (with a 7 day time estimate) - Not Held - Continued - Stipulation

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  • 05/17/2021
  • Docketat 08:30 AM in Department 78; Final Status Conference - Not Held - Continued - Stipulation

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  • 04/16/2021
  • Docketat 2:31 PM in Department 78; Court Order

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  • 04/16/2021
  • DocketMinute Order ( (Court Order Re Stipulation to Continue Trial, Final Status Co...)); Filed by Clerk

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  • 04/16/2021
  • DocketCertificate of Mailing for ((Court Order Re Stipulation to Continue Trial, Final Status Co...) of 04/16/2021); Filed by Clerk

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  • 04/16/2021
  • DocketStipulation and Order (TO CONTINUE TRIAL, FINAL STATUS CONFERENCE, AND RELATED DATES;); Filed by Rachel Howitt (Plaintiff)

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  • 01/26/2021
  • Docketat 09:30 AM in Department 78; Jury Trial (with a 7 day time estimate) - Not Held - Continued - Stipulation

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  • 01/11/2021
  • Docketat 08:30 AM in Department 78; Final Status Conference - Not Held - Continued - Stipulation

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68 More Docket Entries
  • 06/11/2019
  • DocketCertificate of Mailing for (Minute Order (Court Order) of 06/11/2019); Filed by Clerk

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  • 06/11/2019
  • DocketMinute Order ((Court Order) of 06/11/2019); Filed by Clerk

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  • 06/03/2019
  • DocketNotice of Related Case; Filed by Rachel Howitt, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff); Michael Zugsmith, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff)

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  • 05/30/2019
  • DocketOrder to Show Cause Failure to File Proof of Service; Filed by Clerk

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  • 05/30/2019
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 05/28/2019
  • DocketSummons (on Complaint); Filed by Rachel Howitt, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff); Michael Zugsmith, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff)

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  • 05/23/2019
  • DocketCivil Case Cover Sheet; Filed by Rachel Howitt, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff); Michael Zugsmith, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff)

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  • 05/23/2019
  • DocketCivil Case Cover Sheet; Filed by Rachel Howitt, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff); Michael Zugsmith, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff)

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  • 05/23/2019
  • DocketComplaint; Filed by Rachel Howitt, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff); Michael Zugsmith, Trustee of the Zugsmith Family Trust, dated July 25, 1990 (Plaintiff)

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  • 05/23/2019
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

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Tentative Rulings

Case Number: 19STCV18048    Hearing Date: March 09, 2020    Dept: 78

Superior Court of California

County of Los Angeles

Department 78

rachel howitt, et al.;

Plaintiffs,

vs.

cathy scullin, et al.;

Defendants.

Case No.:

19STCV18048

Related Cases:

BC581496

BC645362

Hearing Date:

January 21, 2020

[TENTATIVE] RULING RE:

Defendants’ demurrer to the second AMENDED complaint

Defendants’ Demurrer to the Second Amended Complaint is OVERRULED.

Defendants’ Motion to Strike Portions of the Second Amended Complaint is DENIED.

Factual Background

This is an action for breach of contract. The Second Amended Complaint (“SAC”) alleges as follows. Plaintiffs Rachel Howitt and Michael Zugsmith are Trustees of the Zugsmith Family Trust, Dated July 25, 1990 (the “Zugsmiths”). (SAC p. 1.) In 2001, the Zugsmiths and Defendants Cathy Scullin and Robert Scullin (the “Scullins”) acquired title to a commercial building in their respective revocable family trusts. (SAC ¶¶ 3-4, 9.) In 2005, title of the building transferred to Defendant Ventura Gaviota, LLC (“VG LLC”) and the two couples managed the building amicably for over a decade, each couple with 50% interest in VG, LLC. (SAC ¶¶ 9, 11.) The SAC alleges that the Scullins engaged in behavior including failure to lease vacant office space, favoring their own interests, failing to pay a management fee (SAC ¶¶ 31, 36, 39.) The SAC also alleges aiding and abetting breach of fiduciary duty against Defendant law firm Abir Cohen Treyzon Salo, LLC (“ACTS LLC”). (SAC ¶ 47.) In 2019, the Zugsmiths sold their VG LLC interest to the Scullins pursuant to a court order in the related cases. (SAC ¶ 15.)

procedural history

The Zugsmiths filed the Complaint on May 23, 2019. A FAC was filed on October 1, 2019, and a SAC was filed on October 25, 2019, alleging 6 causes of action:

  1. Breach of fiduciary duty

  2. Breach of written contract

  3. Breach of oral contract

  4. Aiding and abetting breach of fiduciary duty

  5. Breach of the implied covenant of good faith and fair dealing

  6. Intentional infliction of emotional distress

Defendants filed the present Demurrer on November 18, 2019.

Zugsmiths filed an Opposition on December 24, 2019.

Defendants filed a Reply on January 2, 2020.

On January 21, 2020, this case was stayed until January 31, 2020 due to stipulation for stay filed in the Related Case No. BC581496 (which is consolidated with Case No. BC645362, but not the instant case).

On February 3, 2020, in the Related Case No. BC581496, party NAI Capital, Inc. filed a Notice of Filing Petition for Relief Under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 101, et. seq., and Imposition of Automatic Stay.

Discussion

  1. OBJECTIONS

The Zugsmiths object to the Declaration of Monica Szkopek offered in support of the Scullin’s Demurrer. Objections Nos. 1, 2, 3 (as to the first sentence), 5, and 6 (except as to the first two sentences) are SUSTAINED. The remainder are overruled.

  1. JUDICIAL NOTICE

Where a motion is based on a matter of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code, the matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit. (California Code of Civil Procedure §438(d)). Any request for judicial notice must be made in a separate document listing the items for which notice is requested. (CRC 3.1113(l)). Judicial notice may be taken of “(a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state. (b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States. (c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States. (d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (e) Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (f) The law of an organization of nations and of foreign nations and public entities in foreign nations. (g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute. (h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452.)

The Scullins request judicial notice of: (1) the SAC; (2) the Operating Agreement of VG LLC; (3) Section 3.1A of the Operating Agreement; (4) Section 3.3A of the Operating Agreement; (5) Section 2.10 of the Operating Agreement; (6) Section 10.4 of the Operating Agreement; (7) Section 10.2 of the Operating Agreement; and (8) Complaint filed 5/23/19. Request Nos. 1 and 8 are GRANTED, Request No. 2 is GRANTED only as to the existence of the Operating Agreement. The remainder are DENIED. “[A] court ruling on a demurrer cannot decide a question that may depend on disputed facts by means of judicial notice. This rule applies not only with respect to the interpretation of a contract, but also with respect to its enforceability.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 115; see infra §3B.)

The Zugsmiths request judicial notice of: (1) 11/20/16 Declaration of C. Scullin filed in Support of Motion for Summary Adjudication in Case No. BC581496. This request is GRANTED.

  1. DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) A court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 (“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”))

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Here, the Defendants Demurrer to all six causes of action.

  1. BREACH OF FIDUCIARY DUTY – FIRST CAUSE OF ACTION; BREACH OF WRITTEN CONTRACT – SECOND CAUSE OF ACTION

The elements of a cause of action for breach of the duty of loyalty of persons employed in positions of trust, by analogy to a claim for breach of fiduciary duty, are (1) the existence of a relationship giving rise to a duty of loyalty, (2) one or more breaches of that duty, and (3) damage proximately caused by that breach. (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410.)

The elements of a cause of action for breach of contract are: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff. (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391.)

Defendants argue that the first and second cause of action fail as a matter of law because the SAC does not allege gross negligence, the Operating Agreement does not assign any specific duties, and that the Zugsmiths do not have standing because they are not longer members of VG LLC. (Motion at pp. 2-3.)

Here, both causes of action are premised on the allegation that Cathy Scullin was “grossly negligent in failing, and intentionally failed, to find a replacement tenant for the tenant she drove out of the Tenant Leased Space” and that this “was motivated by the Scullins’ and each of their own desire to cause the Zugsmiths’ injury by depriving them of the additional revenues a replacement tenant or tenants would have paid in rent for the vacant space, had the vacant space been rented.” (SAC ¶¶ 23, 28.) The SAC alleges that the Scullins’s breached their fiduciary duties by putting their own interests above the Zugsmiths. (SAC ¶ 28.) The SAC further alleges that the Scullins breached the VG LLC Operating Agreement, signed in 2001, by failing to fulfil their fiduciary duties which were provided by the agreement as “certain duties of good faith, loyalty and by reference to the applicable limited liability company statutory scheme in effect, to certain statutory duties as well.” (SAC ¶¶ 34, 36.)

  1. Gross Negligence

Regarding the gross negligence argument, the SAC expressly alleges that Cathy Scullin was grossly negligent in paragraph 23 and that the Scullins were collectively grossly negligent in paragraphs 26, 27, and 28. However, a complaint cannot simply allege a conclusion, rather, to support a theory of “ ‘[g]ross negligence,’ ” a plaintiff must allege facts showing “either a ‘ “ ‘want of even scant care’ ” ’ or ‘ “ ‘an extreme departure from the ordinary standard of conduct.’” (Anderson v. Fitness Internat., LLC (2016) 4 Cal.App.5th 867, 881 citing City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 754.)

Here, the SAC alleges that Cathy Scullin failed to lease a vacancy in the building shared with the Zugsmiths and that it was her responsibility to lease the vacancy, resulting in months of possible lease revenues. (SAC ¶¶ 22-23.) The SAC further alleges that Cathy was on notice that its largest tenant was not planning to renew its lease but the Scullins did not list the vacant space and failed to find a replacement tenant. (SAC ¶ 25.)

However, as a matter of law, the failure to perform a duty generally amounts to ordinance negligence, not gross negligence. (Anderson v. Fitness Internat., LLC, supra, 4 Cal.App.5th at 881.) Here, the SAC does not allege any further facts to rise the claims from ordinary negligence to gross negligence.

  1. Intentional Misconduct

In Reply, Defendants do not address the Zugsmiths’ argument that the breach was alternatively causes by intentional misconduct, rather than gross negligence. (Oppo. at p. 3.)

The Court agrees with the Zugsmiths that for purposes of demurrer the SAC sufficiently alleges that the Scullins breached their fiduciary duties to VG LLC through intentional conduct by intentionally failing to fill the vacancies in the building. (SAC ¶¶ 22-25.) Accordingly, the SAC successfully alleges both causes of action based on intentional misconduct. The Court further finds that the SAC sufficiently alleges the existence of a fiduciary duty by the Zugsmiths and the Scullins based on the “duties of loyalty and due care, including the obligation to act with the utmost good faith for the befit of the Zugsmiths and VG LLC.” (SAC ¶¶ 29, 34.) Defendants’ argument that the Operating Agreement did not assign any party specific responsibilities because the SAC alleges that leasing was Cathy Scullin’s responsibility , in the context of s demurrer does not alter that conclusion. (SAC ¶ 22.)

  1. Standing/Legal Capacity & Statute of Frauds

Defendants argue that Cathy’s obligation is barred by the statute of frauds, but do not provide further argument or legal support for this contention and this argument is unavailing. Defendants further argue that the Zugsmiths lack standing because they are no longer members of VG LLC. (Motion at p. 3.) Defendants cite to a Civil Procedure section for lack of legal capacity to sue, rather than legal standing. (Motion at p. 3; CCP 430.10(b).)

“There is a difference between the Capacity to sue, which is the right to come into court, and the Standing to use, which is the right to relief in court.” (Friendly Village Community Assn., Inc. v. Silva & Hill Constr. Co. (1973) 31 Cal.App.3d 220, 224.)

Here, the Zugsmiths are alleging damages based on breach of contract and breach of fiduciary duty which occurred during the time that the Zugsmiths were members of ZG LLC. There is no evidence that they do not have the legal capacity to sue as the Zugsmiths have not brought this action on behalf of ZG LLC. (See generally, Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604.) Plaintiffs have not brought this action as a derivative suit to enforce the rights of a corporation, but rather to enforce their individual rights to recover for injury done to them. (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1114.) The gravamen of the injuries alleged in these causes of action is injury to the Zugsmiths, not to ZG LLC. (See, Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, 1254.)

  1. Breach of Fiduciary Duty Damages

Defendants argue that the breach of fiduciary duty claim fails because “the damages sought are wholly speculative and thus not recoverable.” (Motion at p. 5.) Defendants cite to a single case to support this argument, Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696. In Atkins, the “governing law” section provides that a damage award must not be “speculative, remote, imaginary, contingent, or merely possible” (Id. at p. 738 citing In re Estate of Kampen (2011) 201 Cal.App.4th 971, 991–992.) However, Atkins’ discussion addresses a a jury verdict for future economic damages which necessarily involved any analysis of the facts that had been presented. It provides no support for Defendants’ demurer.

  1. Collateral Estoppel

Defendants argue that the Zugsmiths are collaterally estopped from raising the issue of unleased space in the building because this issue was necessarily litigated and resolved in trial of the related cases. BC581496/BC645362. (Motion at p.

The issue in the November 2018 trial the fair market value of the building by jointly owned by the Zugsmiths and the Scullins for purposes of setting a buy-out price in the partition action. The issue here it quite different because what the Zugsmiths are claiming is that the Scullins actions while the building was jointly owned damaged them, both by depriving them of revenue while the building was jointly owner and depressed the value of the building. Only the value of the building, not the cause of any decrease in value, was at issue in the partition action.

Accordingly, the Demurer to the First and Second Causes of Action is OVERRULED.

  1. BREACH OF ORAL CONTRACT – THIRD CAUSE OF ACTION

The Scullins argue that the SAC is a sham pleading because it removes an admission from the original Complaint, and the Operating Agreement bars the Zugsmiths from asserting there was an oral modification. (Motion at pp. 8-9.)

With regards to the first point, the Court finds that the SAC has not deviated from the allegations in the original complaint. The original complaint alleged: “In or around 2001, the Zugsmiths and the Scullins entered into an oral agreement (the “Oral Agreement”), pursuant to which each of the Managers would receive a management fee for the activities they each engaged in, in connection with VG LLC. (Comp. ¶ 37.) The SAC currently alleges: “ In or around 2001, and notwithstanding anything contained in the VG LLC Operating Agreement to the contrary, the Zugsmiths and the Scullins entered into an oral agreement (the “Oral Agreement”), pursuant to which each of the Managers would receive an annual payment in recognition of certain activities they each engaged in, in connection with the ownership and operation of VG LLC, which for ease of reference, was colloquially referred to as a “management fee.” (SAC ¶ 39.) Further, the section to which the Scullins specifically refer to, ¶ 22, continues to maintain that C. Scullin did not receive a commission. (SAC ¶ 24.) The Scullins’ “sham pleading” argument is misdirected and incorrect as the two complaints are pleading fundamentally the same facts.

With regards to the second point, the Court may not take judicial notice of the Operating Agreement, as requested by the Scullins. “[A] court ruling on a demurrer cannot decide a question that may depend on disputed facts by means of judicial notice. This rule applies not only with respect to the interpretation of a contract, but also with respect to its enforceability.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 115.)

The Demurrer to the Third Cause of Action is OVERRULED.

  1. FOURTH CAUSE OF ACTION – AIDING AND ABETTING BREACH OF FIDUCIARY DUTY

The SAC alleges that ACTS LLC, and several of the firm’s attorneys, knew of the fiduciary duty owned by the Scullins to the Zugsmiths, as Members and Managers of VG LLC. (SAC ¶¶ 47, 49.) Further, the SAC alleges that ACTS LLC “made a conscious decision to assist and/or encourage the Scullins in breaching their fiduciary duties owed to the Zugsmiths by entering into the lease with VG LLC, and in fact did substantially assist and/or encourage the Scullins in breaching their fiduciary duties owed to the Zugsmiths by entering into the lease with VG LLC.” (SAC ¶ 49.)

In the instant Motion, the Scullins argue that the SAC does not allege an independent tort because ACTS LLC, on the face of the SAC, does not owe a fiduciary duty to the Zugsmiths. (Motion at p. 9.) The Scullins contend that the SAC “did not adequate allege that ACTS “knowingly” participated in any wrongful act, nor did they allege that any wrongful act had been committed by any Defendant.” (Motion at p. 10.)

The Court disagrees with the Scullins’ interpretation of the SAC.

First, a defendant is liable for aiding and abetting another in the commission of an intentional tort, including a breach of fiduciary duty, if the defendant knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act. (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.) The elements of a claim for aiding and abetting a breach of fiduciary duty are: (1) a third party's breach of fiduciary duties owed to plaintiff; (2) defendant’s actual knowledge of that breach of fiduciary duties; (3) substantial assistance or encouragement by defendant to the third party's breach; and (4) defendant’s conduct was a substantial factor in causing harm to plaintiff. (Id.)

Here, the SAC alleges that the Scullins breached their fiduciary duties to the Zugsmiths (See supra §IIIA), ACT LLC knew that Scullins owed such fiduciary duty (SAC ¶¶ 47-49), and the ACT LLC encouraged the Scullins to breach this duty and substantially assisted them “by tortiously entering into a lease for the former NAI Leased Space, rather than have the Scullins obtain a replacement tenant for the NAI Leased Space.” (SAC ¶ 49.)

The Scullins do not provide legal citations to support their allegations that ACTS LLC must commit an independent tort. (Motion at p. 9 .) The demurrer’s reliance on a single quotation from American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1477 is improper. In fact, American Master Lease uses the same standard stated above and expressly holds that a defendant can be liable for aiding and abetting breach of fiduciary duty without owing the plaintiff a fiduciary duty. (Id. at 1474-1476.) The well-settled law for aiding and abetting breach of fiduciary duty does not require a duty from ACTS LLC to the Zugsmiths, but merely knowledge of the Scullins’ breach. The SACs’ allegations are properly pleaded for purposes of demurrer.

Further, the Scullins’ argument that ACT LLC’s was actually advising the Scullins to breach the Operating Agreement (rather than their fiduciary duties), which is protected legal advice, is unpersuasive. The case cited by the Scullins is for inducing breach of contract, not aiding and abetting breach of fiduciary duty claims. This cause of action in the SAC has been pleaded as an aiding and abetting breach of fiduciary duty claim and will be addressed as such: Defendants may not redefine the cause of action to suit their argument.

Counsel should be aware, however, that the Court is acutely aware of the principle stated in Schick v. Lerner (1987) 193 Cal. App. 3rd 134 and its importance in avoiding tactical abuses aimed not at legitimate prosecution our defense of an action but instead making it more difficult for the opposing party to prosecute or defend their case. The only reason the Court is ruling as it is on the demurrer is that Howitt has alleged that the attorneys damaged plaintiff by entered into a lease while knowing that this act by Scullin breach her fiduciary duty. The Court has serious doubts as to whether this claim will survive when all the facts are before the Court but for the present the Court must rule on this issue in the context of the demurrer which admits the truth of the facts alleged in the complaint.

The Demurrer to the Fourth Cause of Action is OVERRULED.

  1. FIFTH CAUSE OF ACTION – BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

The Scullins argue that the Fifth Cause of Action fails for the same reason as the breach of contract claim. (Motion at pp. 11-12.)

As the Court has found the Breach of Contract claim to be sufficient for demurrer (See supra, §IIIA), the Court accordingly this Fifth Cause of Action to be sufficient for demurer, as well.

The Demurrer to the Fifth Cause of Action is OVERRULED.

  1. ALLEGATIONS AS TO BOB SCULLIN AND VENTURA GAVIOTA, LLC

The Scullins allege that Causes of Action 1-3 and 5 fail to allege sufficient facts as to C. Scullin’s husband, R. Scullin, and Ventura Gaviota, LLC (“VG LLC”). (Motion at pp. 12-13.)

In Opposition, the Zugsmith’s argue that R. Scullin is included in nearly every factual allegation because R. Scullin and C. Scullin are referred to collectively in the SAC. (Oppo. at p. 13.)

The Court agrees. The SAC alleges that “As C. Scullin’s husband, R. Scullin was intimately involved and consulted with C. Scullin, such that there was no separateness of actions taken by C. Scullin, which were encouraged, furthered, adopted and ratified, as well as concurred with, by R. Scullin.” (SAC ¶ 14.) This is more than a “cause of action for being someone’s husband” as argued by the Scullins.

Further, the SAC alleges that all of the Scullin Parties (C. Scullin, R. Scullin, and VG LLC) and ACTS LLC “were acting as the agents, partners, representatives,

confederates, joint venturers and/or employees of each of the remaining defendants, and each other, and acting within the course and scope of said agency, partnership, representative status, confederacy, joint venture and/or employment[.]” (SAC ¶ 8.) The Courts finds these allegations are sufficient for demurrer.

The Demurrer is OVERRULED as to this argument.

  1. SIXTH CAUSE OF ACTION – INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

The Scullins argue that the communications alleged to have caused the emotional distress was related to litigation and thus protected by the California Constitution. (Motion at p. 13.) The Scullins also argue that the SAC removed an admission from the original complaint that Howitt suffered “debilitating physical pain due to injuries sustained at the Building” and removed the amount requested for mental treatment. (Motion at p. 14.)

These arguments are all without merit.

The SAC alleges that “For the past several years continuing at all times thereafter, C. Scullin and R. Scullin have engaged in a pattern of persistent harassment, belittling communications via email and many third persons, and verbal communications and interactions intended to create emotional distress, upset, anxiety, and worry in each of the Zugsmiths. The verbal harassment carried out by the Scullin Parties, and each of them, was not directly related to any pending litigation with the Zugsmiths.” (SAC ¶ 61.) This is sufficient for demurrer. These allegations, further, do not limit the alleged conduct causing the emotional distress to litigation-related emails.

The removal of the quoted line above, as well as the damages amount, do not fundamentally alter the allegations and do not make the SAC a “sham pleading.” “Under the sham pleading doctrine, allegations in an original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.) Here, as in Hahn, there is not indication that the omissions were made in bad faith or to abuse the process. The line about debilitating pain is erroneous and does not affect the ability of the SAC to withstand demurer. Further, the Scullins’ argument based on the fact no medical bills have been produced in discovery is both inappropriate on demurrer, and irrelevant on demurrer. The sham pleading doctrine is not applicable, here.

The Demurrer to the Sixth Cause of Action is OVERRULED.

  1. MOTION TO STRIKE

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part thereof. (Code Civ. Proc., § 435(b)(1)). The notice of motion to strike a portion of a pleading shall quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count or defense. (California Rules of Court Rule 3.1322.)

The grounds for a motion to strike shall appear on the face of the challenged pleading or form any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437(a)). The court then may strike out any irrelevant, false, or improper matter inserted in any pleading and strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.) When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend. (Perlman v. Municipal Court (1979) 99 Cal.App.3d 568, 575.)

The Scullins seek to strike: all references to claims for attorneys’ fees (SAC ¶¶ 30, 57, Prayer for Relief (d); sections that they allege contradict the Operating Agreement (SAC ¶¶ 13, 15, 19, 18, 22, 23, 24, 25, 26, 27, 28, 29, 31, 34, 35, 36, 39, 47, 49); language that they allege to include “unfounded inflammatory language,” including references to gross negligence, recklessness, and intentionality (Portions of SAC ¶¶ 20, 22, 23, 56, 61, 62); the claims for punitive damages (SAC ¶¶ 23, 32, 51, 59, 62, 64, Prayer for Relief (c)); and the SAC other claims for damages on the grounds of being “speculative” (SAC ¶¶ 37, 49, 50, 63.)

First, as stated above, the grounds for a motion to strike shall appear on the face of the challenged pleading or form any matter of which the court is required to take judicial notice, extrinsic evidence is improper. (Code Civ. Proc., § 437(a)). The Court has denied the Scullins’ request for judicial as to the substance of the Operating Agreement, and therefore the Court is unable to rule on whether the allegations are false or contradictory with respect to the Operating Agreement. If the Scullins seek to litigate the merits of the case and to introduce extrinsic evidence to show the falsity of a pleading, the proper procedure a Motion for Summary Judgment, not the instant Motion to Strike. (Code Civ. Proc., § 437(c)).

Accordingly, the sections relating to attorneys’ fees and the sections alleged to contradict the Operating Agreement will not be stricken.

Further, the Scullins have not provided sufficient authority to support striking the allegedly “inflammatory” language. Language alleging negligent, reckless, or intentional conduct is not “irrelevant and improper” because the a Defendant does not agree with the description. While the Court may strike inflammatory language, the complaint does not allege any language rising to the level of “inflammatory.” (Franklin Mint Co. v. Manatt, Phelps & Phillips, LLP (2010) 184 Cal.App.4th 313, 326.) Accordingly, the Court will not strike the requested sections.

With respect to the punitive damages sections, punitive damages are allowed in non-contract cases when a defendant is guilty of “oppression, fraud, or malice . . . ” (Civ. Code § 3294.) The terms are defined as:

  1. “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

  2. “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

  3. “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

Something more than the mere commission of a tort is always required for punitive damages. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Proof of negligence, gross negligence, or recklessness is insufficient to warrant an award of punitive damages. (Dawes v. Sup.Ct. (Mardian) (1980) 111 Cal.App.3d 82, 88–89.) Punitive damages may be recovered in an action for negligence or other nonintentional torts if the plaintiff pleads and proves that the defendant acted with the state of mind described as “conscious disregard” of the potential dangers to others. (Pfeifer v. John Crane, Inc. (2013) 220 Cal.App.4th 1270, 1299.) When malice is based on a defendant’s conscious disregard of Plaintiff’s rights, the conduct must be both despicable and willful. (College Hospital v. Superior Court (1994) 8 Cal.4th 794, 713 (“College Hospital”).)

Because all of the Zugsmith’s claims survive demurrer, they provide a basis for seeking punitive damages. (See Civ. Code § 3294, subd. (c)(3).

Lastly, with regards the argument against the other compensatory damages, the Court disagrees that the alleged damages are “purely speculative, fanciful and imaginary,” particularly on a Demurrer/Motion to Strike, where the Court accepts allegations as true. This is not a proper motion for addressing excluding speculative damages and evidence to avoid jury confusion and prejudice. (William Dal Porto & Sons, Inc. v. Agricultural Labor Relations Bd. (1987) 191 Cal.App.3d 1195, 1211.)

Accordingly, the Motion to Strike is DENIED in its entirety.

Defendants to provide notice.

DATED: March 9, 2020

________________________________

Hon. Robert S. Draper

Judge of the Superior Court

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