Department 5 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107
CIVIL LAW & MOTION
Lauren Carl etc vs Louis Troiani etc
|Hearing Date:||Mon Jan 27, 2014 9:30|
Nature of Proceedings: Demurrer/Motion Strike Claims for Atty FeesCase: Lauren Carl v. Louis Troiani, et al., #1438716 Date: January 27, 2014 Matter: Demurrer and Motion to Strike Claim for Attorney Fees Tentative Ruling: The court sustains defendant Louis Troiani’s demurrer to plaintiff Lauren Carl’s complaint, without leave to amend. Because of the ruling on the demurrer, the motion to strike is moot. Discussion: Complaint: Plaintiff Lauren Carl, an individual and shareholder, and in the right of, and for the benefit of Studio Progetti, Inc. (“SPI”), alleges: Carl is the CFO and 50% shareholder of SPI. [Complaint ¶ 1] (SPI is also named as a nominal defendant.) Defendant Louis Troiani is the sole director, president, CEO, secretary and 50% shareholder of SPI. [¶ 3] In 1991, Carl and Troiani formed SPI as a partnership and incorporated it in August 1995. SPI is an architectural and design practice. Troiani is a licensed architect and project manager of design. Carl was an unlicensed architectural project manager and served as co-office manager. [¶ 6] Carl and Troiani are husband and wife, having been married on April 25, 1992. [¶ 10] Carl filed a petition for dissolution of marriage on October 9, 2012. [¶ 6] In 2008, Troiani began leading a secret life outside the marriage and began converting SPI monies to his own personal use. [¶ 12] Troiani deposited SPI checks and other payments intended for the benefit of SPI into a secret account or cashed checks and kept the money for himself. [¶ 13] Carl was led to believe that Troiani provided all SPI receivables to her for deposit into SPI’s business account. [¶ 15] Troiani created an additional secret business address, e-mail addresses and bank accounts for the purpose of concealing his activities. [¶ 17] Carl and Troiani also own “sweat equity” real estate investments earned by performing work through SPI at a discounted rate in exchange for investment interests. [¶ 18] Carl was led to believe by Troiani that he was providing her with all the dividend opportunities and income from sweat equity investments. [¶ 19] Troiani concealed and usurped for his own benefit dividend income from sweat equity investments. [¶ 20] Troiani concealed sweat equity investments in which Carl owned an interest and other business opportunities belonging to SPI. [¶ 21] Troiani secretly overcharged SPI for expenses neither incurred by nor for the benefit of SPI and converted those amounts to himself. [¶ 22] Troiani breached the fiduciary duty he owned to SPI and Carl as a co-shareholder. [¶ 23] Troiani also owned Carl a fiduciary duty as her spouse. Those claims are being litigated in a pending dissolution of marriage proceeding (Case No. 1413770). [¶ 24] Troiani intentionally, willfully and maliciously breached his fiduciary duties as president, co-shareholder and sole director. Therefore, Carl sues on behalf of herself and SPI. [¶ 25] Carl did not make a demand on Troiani prior to this suit since any effort would have been futile or is excused because Troiani committed the wrongdoing that is the subject of this complaint and there are no disinterested directors on whom to make the demand. [¶ 26] The causes of action in the complaint are 1) fraudulent concealment and deceit, 2) conversion, 3) intentional breach of fiduciary duty, 4) constructive fraud, 5) intentional misrepresentation, and 6) accounting. Demurrer: Defendant Troiani demurs to all six causes of action. Troiani argues: 1) The court lacks jurisdiction because the family law court has acquired jurisdiction to divide the community property and, pending the ultimate valuation and division, no other department of the superior court may issue orders that would adversely affect the family law court’s ability to exercise its reserved jurisdiction. 2) There is another action pending – the dissolution action – between the same parties on the same causes of action. On November 6, 2013, Carl filed a request for orders re: breach of fiduciary duties, attorney fees and costs in the dissolution action, stating factually identical claims. Carl has improperly split her causes of action into two proceedings. 3) Each cause of action is uncertain because there has not yet been a characterization, valuation and division of any of the property, including the personal services business. Motion to Strike: Troiani moves to strike allegations regarding and prayers for attorney fees as Carl has not and cannot identify a statutory basis for attorney fees or an agreement for fees. Opposition: Carl argues: The demurrer based on another action pending must be overruled because the actions seek different remedies and the civil action entitles plaintiff to remedies to which she is not entitled in the family law action. Family Code § 721 does not broaden a spouse’s duties and obligations to include those of officers and directors beyond providing access, information and an accounting. The parties do not stand in the same relation in the two cases. In the family law action, Carl is owed a fiduciary duty as a spouse. In the civil action, she sues as a 50% shareholder of SPI. Different causes of action and claims are raised in each lawsuit. Cases Troiani cites are not applicable. Family Code § 1100 remedies are not exclusive. The action cannot be abated in favor of the family law action as it will deprive Carl of her constitutional right to a jury trial. The complaint is certain. SPI is a jointly owned corporation and plaintiff is entitled to 50% dividends. As to the motion to strike, Carl agrees to strike the request for fees as to the fraudulent concealment and as set forth in the general prayer, except for the cause of action for constructive fraud which can include attorney fees. Reply: Troiani replies: Carl does not dispute that the factual allegations in the family law action and this civil action are identical. Carl concedes that, if the family law action goes to judgment, it will be res judicata as to the claim in the present suit. A requisite for the plea of another action pending is that the causes of action and issues in the two actions be substantially the same and the parties stand in the same relative position as plaintiff and defendant, not that they be named as plaintiff and defendant in both actions. The cause of action is based on the facts alleged in each complaint and the injury to plaintiff, not the particularly legal theory of defendant’s wrongful act. The violation of one primary right constitutes a cause of action, though it may entitle the injured party to many forms of relief. There is no denial of a right to a jury trial. When actions involve both equitable and legal issues, the court may decide the equitable issues first and its decision may result in factual findings that effectively dispose of the legal claims. As to attorney fees, Carl’s cited authority stands for the proposition that attorney fees may be recovered under the tort of another doctrine, which is not applicable here. Analysis: The court takes judicial notice of pleadings filed in the dissolution action. “Evidence Code sections 452 and 453 permit the trial court to ‘take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached – in the documents such as orders, statements of decision, and judgments – but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.’” People v. Woodell, 17 Cal.4th 448, 455 (1998). Troiani does not offer the allegations in the dissolution proceedings for the truth of the allegations but merely to show they are substantially the same allegations as Carl has made in this action. Since the allegations were not offered to prove their truth, they are not subject to the prohibition against hearsay. Magnolia Square Homeowners Ass'n v. Safeco Ins. Co., 221 Cal.App.3d 1049, 1057 (1990). 1. Jurisdiction and the Dissolution Action: Troiani demurs to the complaint because the court lacks jurisdiction. CCP § 430.10(a). He relies on a line of authority holding that courts lack jurisdiction to hear civil actions that adversely affect the division of property in marital dissolution actions. Troiani cites Neal v. Superior Court, 90 Cal.App.4th 22 (2001). In that case, pursuant to a dissolution decree, husband executed a $10,000 note to wife. Wife assigned the note to a collection agency. The parties reached a subsequent stipulation under which husband would get a loan to pay wife $11,500 as an accord and satisfaction. When he did not pay anything toward the new obligation, wife filed a motion to set aside the stipulation. Husband filed a civil complaint against wife and the collection agency, alleging that he had satisfied the indebtedness reflected in the note. He also alleged that wife had made misrepresentations that induced him to agree to the stipulation. The complaint listed causes of action for declaratory relief, fraud, breach of contract, imposition of a constructive trust, and abuse of process. Id. at 23-24. The court of appeal found that the trial court should have sustained wife’s demurrer to the civil complaint. “A recurrent theme in the family law opinions of this court is the disfavoring of civil actions which are really nothing more than reruns of a family law case.” Id. at 25. “[F] amily law cases should not be allowed to spill over into civil law, regardless of whether the family law matter may be characterized as an action for fraud …, malicious prosecution …, or securities law violation …. Almost all events in family law litigation can be reframed as civil law actions if a litigant wants to be creative with various causes of action. It is therefore incumbent on courts to examine the substance of claims, not just their nominal headings.” Id. In Askew v. Askew, 22 Cal.App.4th 942 (1994), with a dissolution action pending, husband filed a civil suit against wife alleging fraud in the inducement to marry and seeking imposition of a trust on wife’s share of certain property taken in joint tenancy. Id. at 946. After dispensing with much of the civil action on other grounds, the court of appeal held that the remainder of the action should be dismissed. “After a family law court acquires jurisdiction to divide community property in a dissolution action, no other department of a superior court may make an order adversely affecting that division.” Id. at 961. “Pending the ultimate valuation and division, no other department of the superior court may issue orders that would adversely affect the family law court's ability to exercise its reserved jurisdiction.” Id. at 962 (internal quotations and citation omitted).b The family law court has jurisdiction to divide the community property and “‘at the request of either party,’ to divide the separate property interests of the parties held in joint tenancy.” Id. Not all husband-wife disputes must be resolved in family court. For example, spouses may bring tort and contract actions against each other because interspousal immunity no longer exists. “However, the principle has no application when a dissolution proceeding is pending, and it certainly has no application when a spouse is attempting to enforce an interim order in a pending dissolution proceeding.” Burkle v. Burkle, 144 Cal.App.4th 387, 395 (2006). Carl claims that she sues in a different capacity in this case – as a shareholder. But she does not suggest that the shares are not community property. Even if they are, the court can divide separate property interests in the dissolution action. If Troiani has taken value from the corporation that belonged to the community or that belonged to Carl based on separate property shares, the court can adjust the division of property accordingly in the dissolution action. Moreover, Carl does not suggest her interest in “sweat equity” real estate investments arise out of her status as a shareholder in SPI. The identification and division of these interests are matters squarely before the court in the dissolution action. Carl claims that by sustaining the demurrer to the civil action, the resolution of the issues in the family law action will be res judicata as to her claims in the civil action, thereby denying her a right to a jury trial. But equitable actions often resolve legal claims without a jury. “[T] he fact that the trial of the equitable issues first resulted in factual findings that implicated the legal claims does not mean that [plaintiff] was improperly denied the right to a jury trial.” Nwosu v. Uba, 122 Cal.App.4th 1229, 1244 (2004). “[T]he better practice is for the trial court [to] determine the equitable issues before submitting the legal ones to the jury.” Hoopes v. Dolan, 168 Cal.App.4th 146, 157 (2008) [internal quotations and citation omitted]. “[T]he practical reason for this procedure is that the trial of the equitable issues may dispense with the legal issues and end the case.” Id. [internal quotations and citation omitted]. For the foregoing reasons, the court holds that it lacks jurisdiction to hear this civil action in light of the pending dissolution of marriage action. 2. Abatement: Alternatively, the court sustains the demurrer and abates this action pending resolution of the dissolution action. CCP § 430.10(c). “In order to sustain the plea of another action pending it is essential that it shall appear: (1) That both suits are predicated upon the same cause of action; (2) that both suits are pending in the same jurisdiction; and (3) that both suits are contested by the same parties.” Colvig v. RKO Gen., 232 Cal.App.2d 56, 70 (1965). “The identity of two causes of action is determined by a comparison of the facts alleged which show the nature of the invasion of plaintiff's primary right.” Bush v. Superior Court, 10 Cal.App.4th 1374, 1384 (1992). Troiani invokes the rule against splitting a cause of action. “The primary right theory is a theory of code pleading that has long been followed in California. It provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. [Citation.] A pleading that states the violation of one primary right in two causes of action contravenes the rule against ‘splitting’ a cause of action.” [Citation] Hamilton v. Asbestos Corp., 22 Cal.4th 1127, 1145 (2000). “The rule against splitting a cause of action … is in part a rule of abatement and in part a rule of res judicata.” Id. at 1146. “[I]t must also appear that [the pending action] is between the same parties as the later action and that these parties stand in the same relative position as plaintiff and defendant.” National Auto. Ins. Co. v. Winter, 58 Cal.App.2d 11, 16 (1943). The rule is that the parties “‘stand in the same relative position as plaintiff and defendant’ -- not that they be named as plaintiff and defendant in both actions.” Western Pipe & Steel Co. v. Tuolumne Gold Dredging Corp., 63 Cal.App.2d 21, 29 (1944). Here Carl has alleged the same facts in her request for orders in the dissolution action as she has alleged in the complaint in this case. She seeks determinations of her rights as an owner of SPI and various investments. She has brought each action as “plaintiff.” She concedes that a determination in the family law action would be res judicata as to her claims in this action. [Opposition 12:16-17] The demurrer based on another action pending is well taken. For the foregoing reasons, the court sustains the demurrer to the complaint in this case without leave to amend. Because of the ruling on the demurrer, the motion to strike is moot.