Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-3_16-ap-03072/USCOURTS-canb-3_16-ap-03072-0/pdf.json

Parties Involved:
Andrea A. Wirum
Plaintiff
Nicholas Kraemer
Defendant
Barrett Raftery
Defendant
Doorman Property Management, Inc.
Defendant

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UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

In re: 

DOORMAN PROPERTY MAINTENANCE, 

 Debtor. 

ANDREA A. WIRUM, Trustee, 

 Plaintiff, 

v. 

NICHOLAS KRAEMER, BARRETT 

RAFTERY and DOORMAN PROPERTY 

MANAGEMENT, INC., 

 Defendants.

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Case No. 15-30912 DM 

Chapter 7 

Adv. Proc. No. 16-03072 

MEMORANDUM DECISION ON DEFENDANTS’ MOTION TO DISMISS AND 

TRUSTEE’S MOTION FOR PARTIAL SUMMARY JUDGMENT 

 On December 16, 2016, this court heard the motion of Doorman 

Property Management dba Doorman dba Doorman Property Maintenance 

(“Debtor”), Nicholas Kraemer, and Barrett Raftery (collectively, 

“Defendants”) to dismiss the adversary complaint filed against 

them by Andrea A. Wirum (“Trustee”), chapter 7 trustee for 

Debtor’s chapter 7 estate. It also heard the Trustee’s countermotion for partial summary judgment on her ninth, tenth and 

Signed and Filed: January 10, 2017

________________________________________

DENNIS MONTALI

U.S. Bankruptcy Judge

Entered on Docket 

January 10, 2017

EDWARD J. EMMONS, CLERK 

U.S. BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

Case: 16-03072 Doc# 40 Filed: 01/10/17 Entered: 01/10/17 08:33:39 Page 1 of 9
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eleventh claims for relief. For the reasons set forth below, the 

court is granting both motions in part and denying them in part. 

I. STANDARDS GOVERNING RULE 12(b) MOTIONS 

 Defendants seek dismissal of all but one claim against them 

pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12”), 

incorporated by Federal Rule of Bankruptcy Procedure 7012(b)) 

(“Bankruptcy Rule 7012”). “To survive a motion to dismiss, a 

complaint must contain sufficient factual matter, accepted as 

true, to ‘state a claim to relief that is plausible on its 

face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim 

has facial plausibility when the plaintiff pleads factual content 

that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. 

at 678. “[D]ismissal for failure to state a claim is proper only 

where there is no cognizable legal theory or an absence of 

sufficient facts alleged to support a cognizable legal theory.” 

Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 

1041 (9th Cir. 2010) (citation omitted). 

II. ANALYSIS OF SPECIFIC CAUSES OF ACTION 

 Trustee asserted eleven causes of action against Defendants, 

who moved for dismissal of all except the first (breach of 

fiduciary duty). Applying the foregoing standards governing Rule 

12(b)(6) motions, the court will address the second through 

eleventh causes of action in turn: 

A. Second Claim for Relief: Breach of Fiduciary Duty by 

Abuse of Process 

 Incorporating the allegations of the first claim for relief, 

Trustee asserted a separate claim for breach of fiduciary duty by 

Case: 16-03072 Doc# 40 Filed: 01/10/17 Entered: 01/10/17 08:33:39 Page 2 of 9
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abuse of process in her second claim. Defendants concede that 

the facts alleged (albeit disputed) in the first claim could give 

rise to a claim for breach of fiduciary duty, but seek dismissal 

of the second claim for “breach of fiduciary duty by abuse of 

control” as duplicative and unrecognized as a separate tort under 

California law. The court agrees. As noted in In re Zoran Corp. 

Derivative Litigation, 511 F.Supp.2d 986, 1019 (N.D. Cal. 2007), 

claims for abuse of control or gross mismanagement “are often 

considered a repackaging of claims for breach of fiduciary duties 

instead of being a separate tort.” Abuse of control may be an 

element of proof for a claim for breach of fiduciary duty, but 

does not give rise to an additional independent tort. The court 

will therefore dismiss the second claim for relief without leave 

to amend. 

B. Third Claim for Relief: Gross Negligence 

Defendants contend that California does not recognize a 

separate and distinct claim for gross negligence that is 

independent of any statutory basis, citing Eriksson v. Nunnink, 

191 Cal.App.4th 826, 856 n. 18 (2011) (“In reality, California 

does not recognize a distinct cause of action for ‘gross 

negligence’ independent of a statutory basis.”). In making this 

statement, the Nunnick court quoted and relied on the holding of 

Saenz v. Whitewater Voyages, Inc., 226 Cal.App.3d 758, 766 n. 

(1990). The California Supreme Court, however, described this 

language as “offhand dicta” in City of Santa Barbara v. Superior 

Court, 41 Cal.4th 747, 780 (2007). It observed that a 

distinction between gross negligence and ordinary negligence is 

generally unnecessary but that such a distinction is appropriate 

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if gross negligence is “the only negligence-based theory open to 

plaintiffs and real parties in interest.” Therefore, in cases 

involving anticipatory releases and exculpation clauses that 

release liability except in cases of gross negligence or willful 

misconduct, the law continues to recognize gross negligence as a 

theory of recovery. Id. at 781. 

Trustee argues that her third claim is necessary, as gross 

negligence provides an exception to the business judgment 

defense. “A hallmark of the business judgment rule is that a 

court will not substitute its judgment for that of [a 

corporation’s directors] if the latter's decision can be 

“attributed to any rational business purpose.” Katz v. Chevron 

Corp., 22 Cal.App.4th 1352, 1366 (1994). Instead “[u]nder the 

business judgment rule[,] director liability is predicated upon 

concepts of gross negligence.” Id. 

The court acknowledges that gross negligence precludes the 

successful assertion of the business judgment defense to 

Trustee’s breach of fiduciary duty cause of action. When and if 

Defendants assert that defense, Trustee can argue that they 

cannot prevail as their actions were willful or grossly 

negligent. A separate cause of action for gross negligence is 

not necessary. That said, Trustee is entitled to take discovery 

in anticipation of the assertion of the business judgment defense 

by Defendants. The motion to dismiss the third claim for relief 

is granted with leave to amend. 

 C. Fourth Claim for Relief: Conversion 

 Trustee alleges in her fourth claim for relief that 

Defendants wrongfully exercised dominion over and converted for 

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their own benefit money and property of the Debtor. In their 

motion to dismiss, Defendants contend that they had a possessory 

interest in the money and thus there can be no conversion. The 

Trustee disputes the legitimacy of this possessory interest, thus 

giving rise to factual issues that preclude dismissal as a matter 

of law. 

 Trustee has sufficiently pled a claim for conversion of 

money, identifying in para 11(f) and (g) specific sums 

purportedly intercepted and retained by the defendants. As noted 

by one California appellate courts: 

A cause of action for conversion requires allegations of 

plaintiff's ownership or right to possession of property; 

defendant's wrongful act toward or disposition of the 

property, interfering with plaintiff's possession; and 

damage to plaintiff. Money cannot be the subject of a 

cause of action for conversion unless there is a specific, 

identifiable sum involved, such as where an agent accepts a 

sum of money to be paid to another and fails to make the 

payment. 

McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1491 

(2006); see also Fischer v. Machado, 50 Cal.App.4th 1069, 1072–

1074 (1996) (sales agent liable for conversion of proceeds from 

consignment sale of farm products); Software Design & 

Application, Ltd. v. Hoefer & Arnett, Inc., 49 Cal.App.4th 472, 

485 (1996) (“money cannot be the subject of a conversion action 

unless a specific sum capable of identification is involved”). 

 As Trustee has identified the specific funds purportedly 

converted by Defendants, the court will deny the motion to 

dismiss the fourth claim for relief. 

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 D. Fifth Claim for Relief: Unjust Enrichment 

 Trustee’s claim for unjust enrichment involves the same 

identified monies as those alleged in support of the conversion 

claim: the receipt of $26,000 in rent payments due to Debtor and 

the receipt of a $306,000 real estate commission to which Debtor 

was entitled. (See paras. 45 & 46 of the Complaint). As noted 

by Judge Whyte in the Apple/AT&T litigation, unjust enrichment 

claims that simply duplicate other statutory or tort claims are 

not cognizable: 

[C]ourts have repeatedly held that “there is no cause of 

action in California for unjust enrichment.” Melchior v. 

New Line Prods., Inc., 106 Cal.App.4th 779, 794, 131 

Cal.Rptr.2d 347 (2003). Moreover, plaintiffs cannot assert 

unjust enrichment claims that are merely duplicative of 

statutory or tort claims. See, e.g., Rosal v. First Federal 

Bank of Cal., 671 F.Supp.2d 1111, 1133 (N.D. Cal. 2009). 

In re Apple & AT&T iPad Unlimited Data Plan Litig., 802 F.Supp.2d 

1070, 1077 (N.D. Cal. 2011). The court will therefore dismiss 

the fifth claim for relief without leave to amend. 

E. Sixth and Seventh Claims for Relief: Fraudulent 

 Transfers 

Defendants request that the court dismiss the sixth and 

seventh claims for recovery of fraudulent transfers, contending 

that Trustee has failed to state a state a claim with the 

particularity required by Iqbal. The court disagrees. 

Paragraphs 10 and 11 of the complaint describe Debtor’s property 

and business opportunities purportedly usurped by Defendants for 

their own benefit. In the Sixth Claim, Trustee alleges that the 

Defendants usurped or received the property rights described in 

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paragraphs 10 and 11 for less than reasonably equivalent value 

when Debtor was insolvent or on the brink of insolvency, and that 

the transfers were made with actual intent to hinder, delay or 

defraud any entity to which Debtor was or would become indebted. 

Because these allegations sufficiently set forth a claim for 

relief, the court is denying the motion to dismiss the sixth and 

seventh claims. 

 F. Eighth Claim for Relief: Preferential Transfers 

 According to paragraph 25 in Trustee’s first claim for 

relief (breach of fiduciary duty), Defendants diverted for their 

own personal use a $306,250 real estate commission belonging to 

Debtor and had Debtor pay rent on their personal premises. 

Contending that these funds had been wrongfully usurped, Trustee 

has asserted alternate theories for recovery of the sums: breach 

of fiduciary duty, conversion, unjust enrichment and fraudulent 

transfers. These transfers are also the basis of Trustee’s 

eighth claim for relief to recover preferential transfers. 

Bankruptcy Code section 547(b)(2) sets forth the second 

element for recovery of a preferential transfer: the transfer 

must be for or on account of an antecedent debt owed by a debtor 

before the transfer was made. Trustee’s complaint, however, does 

not sufficiently allege the existence of an antecedent debt. If 

such an antecedent debt exists, Trustee may amend the complaint 

to describe it. Otherwise, Trustee has not set forth a 

preference claim upon which relief can be granted. If in the 

course of discovery or litigation, Defendants assert the 

existence of such an antecedent debt (to demonstrate that they 

received property for value), Trustee may amend her complaint. 

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The court will therefore grant the motion to dismiss the eighth 

claim for relief with leave to amend. 

G. Ninth Claim for Relief: Determination of Liability Under 

Section 723 

When the petition commencing the underlying bankruptcy case 

was filed, Debtor was identified as “Doorman Property Management 

DBA Doorman Property Maintenance.” While Doorman Property 

Maintenance is a corporation, Doorman Property Management is a 

partnership. The petition and schedules, signed by Defendant 

Barrett Rafferty as CFO, repeatedly refer to Doorman Property 

Management without reference to Doorman Property Maintenance 

(see, e.g., the Declaration of Mr. Rafferty at page 32 of Docket 

No. 1 in Case No. 15-30912; on Schedule E, (id. at page 12). 

Following the initial section 341 meeting of creditors on August 

25, 2015, Defendants attempted to amend their petition to replace 

“Doorman Property Management” with “Doorman Property Maintenance, 

a CA SCorp, formerly known as Doorman Property Management, a CA 

SCorp [sic].” See Amended Voluntary Petition filed on October 9, 

2015 (Docket No. 13 in Case No. 15-30912). The Trustee 

thereafter filed a motion for substantive consolidation, which 

this court granted on April 12, 2016, specifying that the assets 

and liabilities of the partnership are and were part of the 

bankruptcy case retroactive to the petition date of July 16, 

2015. 

In light of this substantive consolidation, and in light of 

its reasons set forth on the record at the hearing on December 

16, 2016, the court will deny Debtor’s motion to dismiss the 

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ninth claim for relief and will grant Trustee’s motion for 

partial summary judgment in her favor on that claim. 

H. Tenth and Eleventh Claims for Relief: Turnover and 

Injunctive Relief 

In the tenth and eleventh claims for relief, Trustee 

requests that this court enjoin Defendants’ use or retention of 

certain intellectual property assets and to compel the turnover 

of such assets. These are not independent claims; the Trustee 

will need to demonstrate her entitlement to turnover and 

injunctive relief by prevailing on her other substantive claims. 

The court will therefore deny both the Defendants’ motion to 

dismiss and the Trustee’s motion for summary judgment as to these 

claims. 

III. CONCLUSION 

 Counsel for the Trustee should upload an order granting 

relief consistent with this Memorandum Decision. The order 

should not contain separate findings or conclusions, but should 

simply incorporate the reasoning of this Memorandum Decision. 

The court shall hold a further status conference in this 

adversary proceeding on February 24, 2017, at 1:30 p.m. 

**END OF MEMORANDUM DECISION**

Case: 16-03072 Doc# 40 Filed: 01/10/17 Entered: 01/10/17 08:33:39 Page 9 of 9