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Craig A. Hansen, Esq. (SBN 209622)
Email: craig@hansenlawfirm.net
Philip E. Yeager, Esq. (SBN 265939)
Email: phil@hansenlawfirm.net
Jack J. Ferguson, Esq. (SBN 307888)
Email: jack@hansenlawfirm.net
HANSEN LAW FIRM, P.C.
75 E. Santa Clara Street, Suite 1150
San Jose, CA 95113
Telephone: (408) 715-7980
Facsimile: (408) 715-7001
Attorneys for Plaintiffs
Nancy Chapel, Individually, and Carrie Scovill as
Trustee for the George Van Sickle Exempt Family Trust
E-FILED
10/12/2022 1:59 PM
Clerk of Court
Superior Court of CA,
County of Santa Clara
22CV405477
Reviewed By: A. Tam
SUPERIOR COURT FOR THE STATE OF CALIFORNIA
FOR THE COUNTY OF SANTA CLARA
NANCY CHAPEL, an Individual; and CARRIE
SCOVILL, as Trustee for THE GEORGE VAN
SICKLE EXEMPT FAMILY TRUST on behalf
of themselves directly as individual
shareholders and derivatively on behalf of all
shareholders of Vanderson Construction, Inc.
Plaintiffs,
v.
JENAY A. HOFFMAN, Personal
Representative of the Estate of James C.
Hoffman and as Trustee of the James C. and
Jenay A. Hoffman Family Trust Dated January
9, 2017; and DOES 1-20, inclusive,
Defendants.
VANDERSON CONSTRUCTION, INC., a
California Corporation
Nominal Defendant
22CV405477
Case No.
COMPLAINT FOR:
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BREACH OF FIDUCIARY DUTY
(DERIVATIVE)
BREACH OF FIDUCIARY DUTY
(DIRECT)
CONVERSION
UNJUST ENRICHMENT
ACCOUNTING
DEMAND FOR JURY TRIAL
Plaintiffs Nancy Chapel individually, and Carrie Scovill, as Trustee for The George Van.
Sickle Exempt Family Trust, directly as shareholders of VCI, and derivatively on behalf of all
shareholders of VCI, allege as follows:
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SUMMARY OF THE ACTION
1. Decedent James C. Hoffman (“Hoffman”) was a co-founder of Vanderson
Construction, Inc. (“VCTI”) a nominally named defendant corporation in this action. From VCI’s
inception to his death in 2021, Hoffman was an officer and director of VCI. As an officer and
director of VCI, Hoffman owed fiduciary duties to VCI and to its shareholders.
2. From VCI’s inception until Hoffman’s death in 2021, Hoffman was also a 50%
shareholder of all outstanding VCI stock. As a majority and/or equal shareholder, Hoffman owed
fiduciary duties to the other VCI shareholders.
3. Hoffman breached his fiduciary duties by: (1) paying himself an unauthorized and
excessive salary from 2005-2019 totaling $688,000 ; (2) making unauthorized payments to his
children of $39,165; and (3) investing $150,000 without VCI’s Board’s knowledge or
authorization..
4. Because of Hoffman’s breaches of fiduciary duties as an officer and director of
VCI, VCI has been harmed and is entitled to recover all distributions, payments and salaries to
Hoffman and his children that were unequal and unauthorized.
5. Alternatively, as minority VCI shareholders who have been affected by Hoffman’s
breaches of fiduciary duties, Plaintiffs are entitled to recover pro rata shares of all distributions,
payments and salaries to Hoffman and his children that were unequal and unauthorized. They
also entitled to pro rata shares of the profit from the corporate opportunity that Hoffman seized
for himself at the expense of the minority shareholders.
6. VCI and Plaintiffs are also entitled to attorney’s fees, punitive damages, costs and
prejudgment interest stemming from Hoffman’s bad faith conduct and breaches of his fiduciary
duties as described in detail herein.
THE PARTIES
ve Plaintiff Nancy Chapel (“Chapel”) is a shareholder of VCI. She currently owns
1,737.38 shares of VCI stock. Chapel is also a director of VCI and has been since 2017.
8. Plaintiff Carrie Scovill (“Scovill” or “Trustee”) is the trustee for the George Van
Sickle Exempt Family Trust (“Van Sickle Trust”). The Van Sickle Trust holds 1,237.12 shares of
Complaint 2 CASE No.a a w
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VCI stock.
OF Decedent Hoffman was a co-founder of VCI and an officer and director of VCI
during his lifetime. Plaintiffs are informed and believe that from VCI’s inception until Hoffman’s
death in 2021, Hoffman was a 50% shareholder of all outstanding VCI stock.
10. Defendant Jenay A. Hoffman (“Jenay Hoffman’) is the personal representative of
the Estate of James C. Hoffman (“Hoffman Estate”) and Trustee of the James C. and Jenay A.
Hoffman Family Trust Dated January 9, 2017 (“Hoffman Trust”). On information and belief,
Hoffman’s shares of VCI stock and all other assets identified herein, including but not limited to,
monies in the form of unauthorized salary payments are part of the Hoffman Estate and/or the
Hoffman Trust.
11. | Nominal Defendant VCI is a closed California Corporation with its principal place
of business in San Jose, California.
12. Plaintiffs presently do not know the true names and capacities of the Defendants
sued herein as DOES 1-20, inclusive, and therefore sues those Defendants by such fictitious
names. Plaintiffs will amend this statement to allege such Defendants' true names and capacities
when they are ascertained. Plaintiffs are informed and believe, and based thereon allege, that
each of the fictitiously designated Defendants was acting as the agent, partner or joint venturer of
all other Defendants and is joint and severally responsible for the acts and omissions alleged
herein (collectively referred to herein as “Defendants”).
JURISDICTION AND VENUE
13. Venue is appropriate in this Court because VCI’s sole corporate asset is in Santa
Clara County.
14. This Court has jurisdiction over the claims in this lawsuit because VCI’s principal
place of business is in Santa Clara County and the Hoffman Estate is being administered in this
County. On November 9, 2021 Plaintiff Chapel filed a Notice if Petition to Administer Estate.
CLAIMS IN ESTATE PROCEEDING
15. | On November 8, 2021, Plaintiff Nancy Chapel petitioned to administer the Estate
of James C. Hoffman at Santa Clara Superior Court Case No. 21PR191389 (the “Estate Case”).
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16. On December 23, 2021, Plaintiffs filed respective creditor claims in the Estate
Case.
17. On April 12, 2022, Jenay A. Hoffman petitioned to administer Estate Case., and
that petition was granted.
18. On July 13, 2022, Jenay A. Hoffman was granted letters of administration to
administer James C. Hoffman’s Estate.
19. On July 25, 2022, Jenay A. Hoffman rejected the Plaintiffs’ creditor claims.
FACTUAL ALLEGATIONS
20. | VCI was founded in 1963 by James Hoffman and George Van Sickle.
21. Asan officer and director of VCI from 1963-2021, Hoffman owed fiduciary duties
to VCI and to its shareholders at all times alleged herein.
22. | Asa majority and/or equal shareholder of all outstanding shares of VCI stock from
1963-2021 Hoffman also owed fiduciary duties to the other VCI shareholders at all times alleged
herein.
23. Hoffman breached his fiduciary duties to VCI and to Plaintiffs in the following
manner:
Hoffman Pays Himself Unauthorized and Excessive Salaries
24. Plaintiffs are informed and believe, that from 2005 to 2019, Hoffman paid himself
$688,000 in purported salary from VCI funds. Hoffman’s payments were unauthorized,
excessive, inappropriate, and in violation of the California Corporations Code.
25. | VClis a holding company and does not transact in any active trade or business.
Instead, VCI merely receives distribution checks and in turn, makes corresponding distribution
checks to its shareholders. No salary should be paid to any officer or director, and thus no salary
was authorized to be paid to anyone, including Hoffman as an officer or director.
26. Plaintiffs are informed and believe that the payment and amount of any salary to
Hoffman was never presented to or authorized by the Board.
27. Hoffman’s salary was not approved in any minutes of the directors’ meeting.
28. A written consent should have been, but was not, signed by the VCI directors.
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29. Plaintiff Chapel would not have consented to Hoffman’s receipt of a salary had it
been presented to her as a director or as a shareholder of VCI.
30. Plaintiff Scovill would not have consented to Hoffman’s receipt of a salary had it
been presented to the Trust as a shareholder of VCI.
31. Plaintiffs are also informed and believe that two signatories were required on all
VCI checks and that Hoffman’s payroll checks to himself only contained his own signature.
32. Accordingly, Hoffman acted unilaterally in paying himself whatever he wanted
without (i) obtaining approval from the other directors or shareholders, (ii) making adequate
disclosures to the shareholders, and (iii) obtaining a second signer as required by VCI internal
controls.
33. California Corporations Code Section 307(b), provides, in relevant part, that an
interested director must disclose to the non-interested directors the action(s) to be approved. The
interested director’s vote is not counted as there is a conflict of interest. Hoffman was not only a
director but an officer who was paying himself. Therefore, Hoffman was mandated by law to seek
approval from the directors for his compensation as an officer. This never occurred.
34. In the time that Hoffman made illegal distributions to himself in the form of an
unauthorized and excessive $688,000 salary, the remaining shareholders of VCI received $30,000
of distributions in total. Accordingly, Hoffman received $658,000 more than the remaining
shareholders without authorization.
35. Collectively, all shareholders received $718,000 from 2005 to 2019. Because VCI
does not have an active trade or business and no salaries were authorized, the entire $718,000
should have been distributed pro rata equally to the shareholders.
Hoffman’s Unauthorized Payments to His Children
36. Plaintiffs are informed and believe that between 2017 and 2021 Hoffman made
unauthorized distributions to his children in the amount of $31,444. The payments to his children
were purportedly compensation for services. However, VCI is a holding company without any
active trade or business. Any purported “need” for services should have been presented to the
Board or shareholders for approval. They were not.
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37. Moreover, no paid services are or were required and none would have been
authorized by plaintiff Chapel as a shareholder or director or Scovill as a shareholder.
38. Accordingly, Hoffman’s $22,546 in payments to his son, Curtis Hoffman; (2)
$7,504 in payments to his son, William Hoffman; and (3) $1,394 in payments to his daughter,
Jeanette Fife, were unauthorized and excessive.
Using Corporate Funds to Make Investments Without VCI Board Approval
39. Plaintiffs are informed and believe that on January 27, 2017 Hoffman unilaterally
took $100,000 from VCI and invested the proceeds in a Heartland Dental Clinic in Huntsville,
Alabama (the “Heartland Property”) without obtaining approval from the VCI board of directors.
40. Plaintiffs are also informed and believe that Hoffman made a similar unauthorized
$50,000 deposit for an O’Reilly Auto Parts Store in Munford, TN (the “O’Reilly Property”) with
VCI funds without notifying or obtaining approval from VCI’s Board of Directors.
41. By failing to notify the VCI Board and shareholders of the investments and
obtaining requisite advance approval, Hoffman denied them of the opportunity to determine
whether the Heartland and O’Reilly investments were proper and appropriate for VCI.
DERIVATIVE AND DEMAND EXCUSED ALLEGATIONS
42. Plaintiffs are bringing this action, in part, as a derivative action on behalf of VCL,
to redress the wrongful conduct by Defendants alleged in this Complaint.
43. Plaintiffs are shareholders of, and continuously has been shareholders of, VCI at
all times alleged herein.
44. Plaintiffs will adequately and fairly represent the interests of VCI and its
shareholders in enforcing and prosecuting their rights.
45. Plaintiffs are excused from making a pre-suit demand on VCI’s Board of Directors
because any such demand would be futile.
46. | The most recent VCI corporate Statement of Information filed March 11, 2022
with the California Secretary of State lists 2 directors: Cutis Hoffman and plaintiff Chapel. Curtis
Hoffman is also listed as the CEO of VCI.
47. _ Plaintiffs are informed and believe that the composition of the VCI board remains
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as listed in the March 2022 Statement of Information.
48. Director Curtis Hoffman is incapable of independently and disinterestedly
considering a demand to commence and prosecute this action because he is the son of decedent
James Hoffman and is a direct beneficiary of the alleged wrongdoings as alleged in this
Complaint, including but not limited to, receiving unauthorized distributions.
49. Director Curtis Hoffman is also incapable of independently and disinterestedly
considering a demand to commence and prosecute this action because, on information and belief,
Curtis Hoffman is a direct beneficiary of the Hoffman Estate and the Hoffman Trust and any
monetary recovery against the Estate will lower its value.
CAUSES OF ACTION
First Cause of Action
(Breach of Fiduciary Duty)
(Against Jenay A. Hoffman, Personal Representative and Trustee)
(Derivatively on Behalf of VSI)
50. Plaintiffs hereby incorporate by reference the allegations of the preceding as set
forth in full herein.
51. Asan officer and director of VCI, Hoffman owed fiduciary duties to VCI.
52. Hoffman breached his fiduciary duties to VCI by (1) paying himself an
unauthorized and excessive salary; (2) making unauthorized payments to his children; and (3)
using VCI funds for investments without the Board’s or shareholders’ knowledge or consent.
53. Asaresult of Hoffman’s breaches of his fiduciary duties VCI has been damaged in
an amount to be proven at trial.
54, Because Hoffman’s breaches of fiduciary duties were willful, malicious,
oppressive and made in bad faith, VCI is entitled to punitive damages.
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Second Cause of Action
(Breach of Fiduciary Duty)
(Against Jenay A. Hoffman, Personal Representative and Trustee)
(Directly on Behalf of Chapel and Scovill)
55. Plaintiffs hereby incorporate by reference the allegations of the preceding as set
forth in full herein.
56. Asan officer and director of VCI, Hoffman owed a duty to VCI’s shareholders.
57. As an equal/majority shareholder of VCI, Hoffman owed fiduciary duties to VCI’s
other shareholders.
58. As minority shareholders with 1,737.38 shares and 1,237.12 shares of VCI stock
respectively, Chapel and Scovill, Hoffman owed fiduciary duties to Plaintiffs directly.
59. Hoffman breached his fiduciary duties to Plaintiffs by paying himself an excessive
and unauthorized salary; paying unauthorized dividends to his family members; and using VCI’s
funds to make undisclosed and unauthorized investments.
60. As aresult of Hoffman’s breaches of fiduciary duties Plaintiffs have been deprived
of and are entitled to damages from the unauthorized use of VCI funds.
61. Because Hoffman’s breaches of fiduciary duties were willful, malicious,
oppressive and made in bad faith, Plaintiffs are entitled to punitive damages.
Third Cause of Action
(Conversion)
(Derivatively on Behalf of VSI)
62. Plaintiffs hereby incorporate by reference the allegations of the preceding as set
forth in full herein.
63. | VCIhas a right to possess its corporate assets.
64. Defendants intentionally and substantially interfered with VCI’s assets by
unlawfully distributing them to Hoffman and his family members.
65. Asa direct and proximate result of Defendants' conversion, VCI has been
damaged in that VCI has been deprived its assets and its right to distribute them.
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66. Defendants' actions as alleged herein were oppressive, fraudulent, and malicious.
As aresult, VCI is entitled to an award of punitive damages according to proof.
Fourth Cause of Action
(Unjust Enrichment)
(Derivatively on Behalf of VSI)
67. Plaintiffs hereby incorporate by reference the allegations of the preceding as set
forth in full herein.
68. Hoffman received a benefit in the form of unauthorized and excessive salaries
from VCI to the detriment of VCI and its shareholders.
69. Defendants retained these benefits causing them to become unjustly enriched.
70. As a result of Hoffman’s conduct, VCI is entitled to receive an award in the
amount to be proven that Defendants have been unjustly enriched.
Fifth Cause of Action
(Accounting)
(Derivatively on Behalf of VSD
71. Plaintiffs hereby incorporate by reference the allegations of the preceding as set
forth in full herein.
72. A relationship exists between the parties that requires an accounting.
73. Asan officer, director and majority shareholder of VCI, Hoffman must account to
VCI for the profits received from the excessive and unauthorized distributions.
PRAYER
Wherefore, Plaintiffs pray for judgment against Defendants as follows:
1. Damages in an amount according to proof;
2. Prejudgment interest at the statutory rate;
3. Restitution;
Punitive Damages;
An accounting;
Se
Attorney’s fees and costs;
Complaint 9 CASE No.oo
7. For all such other relief as the Court deems just and proper.
Dated: October 12, 2022 HANSEN LAW FIRM, P.C.
_
By:
Cfaig A. Harfsen
Philip E. Yeager
Jack J. Ferguson
Attorneys for Plaintiffs
Nancy Chapel, Individually, and Carrie
Scovill, as Trustee for the George Van
Sickle Exempt Family Trust
DEMAND AND FOR JURY TRIAL
Plaintiffs demand a trial by jury on all jury triable claims and issues in this action.
Dated: October 12, 2022 HANSEN LAW FIRM, P.C.
Philip E. Yeager
Jack J. Ferguson
Attorneys for Plaintiffs
Nancy Chapel, Individually, and Carrie
Scovill, as Trustee for the George Van
Sickle Exempt Family Trust
Complaint 10 CASE No,
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oo ow Craig A. Hansen, Esq. (SBN 209622) Email: craig@hansenlawfirm.net Philip E. Yeager, Esq. (SBN 265939) Email: phil@hansenlawfirm.net Jack J. Ferguson, Esq. (SBN 307888) Email: jack@hansenlawfirm.net HANSEN LAW FIRM, P.C. 75 E. Santa Clara Street, Suite 1150 San Jose, CA 95113 Telephone: (408) 715-7980 Facsimile: (408) 715-7001 Attorneys for Plaintiffs Nancy Chapel, Individually, and Carrie Scovill as Trustee for the George Van Sickle Exempt Family Trust E-FILED 10/12/2022 1:59 PM Clerk of Court Superior Court of CA, County of Santa Clara 22CV405477 Reviewed By: A. Tam SUPERIOR COURT FOR THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA NANCY CHAPEL, an Individual; and CARRIE SCOVILL, as Trustee for THE GEORGE VAN SICKLE EXEMPT FAMILY TRUST on behalf of themselves directly as individual shareholders and derivatively on behalf of all shareholders of Vanderson Construction, Inc. Plaintiffs, v. JENAY A. HOFFMAN, Personal Representative of the Estate of James C. Hoffman and as Trustee of the James C. and Jenay A. Hoffman Family Trust Dated January 9, 2017; and DOES 1-20, inclusive, Defendants. VANDERSON CONSTRUCTION, INC., a California Corporation Nominal Defendant 22CV405477 Case No. COMPLAINT FOR: qa) @) 3) (4) 6) BREACH OF FIDUCIARY DUTY (DERIVATIVE) BREACH OF FIDUCIARY DUTY (DIRECT) CONVERSION UNJUST ENRICHMENT ACCOUNTING DEMAND FOR JURY TRIAL Plaintiffs Nancy Chapel individually, and Carrie Scovill, as Trustee for The George Van. Sickle Exempt Family Trust, directly as shareholders of VCI, and derivatively on behalf of all shareholders of VCI, allege as follows: Ml Complaint CAsE No.a a w co SUMMARY OF THE ACTION 1. Decedent James C. Hoffman (“Hoffman”) was a co-founder of Vanderson Construction, Inc. (“VCTI”) a nominally named defendant corporation in this action. From VCI’s inception to his death in 2021, Hoffman was an officer and director of VCI. As an officer and director of VCI, Hoffman owed fiduciary duties to VCI and to its shareholders. 2. From VCI’s inception until Hoffman’s death in 2021, Hoffman was also a 50% shareholder of all outstanding VCI stock. As a majority and/or equal shareholder, Hoffman owed fiduciary duties to the other VCI shareholders. 3. Hoffman breached his fiduciary duties by: (1) paying himself an unauthorized and excessive salary from 2005-2019 totaling $688,000 ; (2) making unauthorized payments to his children of $39,165; and (3) investing $150,000 without VCI’s Board’s knowledge or authorization.. 4. Because of Hoffman’s breaches of fiduciary duties as an officer and director of VCI, VCI has been harmed and is entitled to recover all distributions, payments and salaries to Hoffman and his children that were unequal and unauthorized. 5. Alternatively, as minority VCI shareholders who have been affected by Hoffman’s breaches of fiduciary duties, Plaintiffs are entitled to recover pro rata shares of all distributions, payments and salaries to Hoffman and his children that were unequal and unauthorized. They also entitled to pro rata shares of the profit from the corporate opportunity that Hoffman seized for himself at the expense of the minority shareholders. 6. VCI and Plaintiffs are also entitled to attorney’s fees, punitive damages, costs and prejudgment interest stemming from Hoffman’s bad faith conduct and breaches of his fiduciary duties as described in detail herein. THE PARTIES ve Plaintiff Nancy Chapel (“Chapel”) is a shareholder of VCI. She currently owns 1,737.38 shares of VCI stock. Chapel is also a director of VCI and has been since 2017. 8. Plaintiff Carrie Scovill (“Scovill” or “Trustee”) is the trustee for the George Van Sickle Exempt Family Trust (“Van Sickle Trust”). The Van Sickle Trust holds 1,237.12 shares of Complaint 2 CASE No.a a w co VCI stock. OF Decedent Hoffman was a co-founder of VCI and an officer and director of VCI during his lifetime. Plaintiffs are informed and believe that from VCI’s inception until Hoffman’s death in 2021, Hoffman was a 50% shareholder of all outstanding VCI stock. 10. Defendant Jenay A. Hoffman (“Jenay Hoffman’) is the personal representative of the Estate of James C. Hoffman (“Hoffman Estate”) and Trustee of the James C. and Jenay A. Hoffman Family Trust Dated January 9, 2017 (“Hoffman Trust”). On information and belief, Hoffman’s shares of VCI stock and all other assets identified herein, including but not limited to, monies in the form of unauthorized salary payments are part of the Hoffman Estate and/or the Hoffman Trust. 11. | Nominal Defendant VCI is a closed California Corporation with its principal place of business in San Jose, California. 12. Plaintiffs presently do not know the true names and capacities of the Defendants sued herein as DOES 1-20, inclusive, and therefore sues those Defendants by such fictitious names. Plaintiffs will amend this statement to allege such Defendants' true names and capacities when they are ascertained. Plaintiffs are informed and believe, and based thereon allege, that each of the fictitiously designated Defendants was acting as the agent, partner or joint venturer of all other Defendants and is joint and severally responsible for the acts and omissions alleged herein (collectively referred to herein as “Defendants”). JURISDICTION AND VENUE 13. Venue is appropriate in this Court because VCI’s sole corporate asset is in Santa Clara County. 14. This Court has jurisdiction over the claims in this lawsuit because VCI’s principal place of business is in Santa Clara County and the Hoffman Estate is being administered in this County. On November 9, 2021 Plaintiff Chapel filed a Notice if Petition to Administer Estate. CLAIMS IN ESTATE PROCEEDING 15. | On November 8, 2021, Plaintiff Nancy Chapel petitioned to administer the Estate of James C. Hoffman at Santa Clara Superior Court Case No. 21PR191389 (the “Estate Case”). Complaint 3 CASE No.a a w co 16. On December 23, 2021, Plaintiffs filed respective creditor claims in the Estate Case. 17. On April 12, 2022, Jenay A. Hoffman petitioned to administer Estate Case., and that petition was granted. 18. On July 13, 2022, Jenay A. Hoffman was granted letters of administration to administer James C. Hoffman’s Estate. 19. On July 25, 2022, Jenay A. Hoffman rejected the Plaintiffs’ creditor claims. FACTUAL ALLEGATIONS 20. | VCI was founded in 1963 by James Hoffman and George Van Sickle. 21. Asan officer and director of VCI from 1963-2021, Hoffman owed fiduciary duties to VCI and to its shareholders at all times alleged herein. 22. | Asa majority and/or equal shareholder of all outstanding shares of VCI stock from 1963-2021 Hoffman also owed fiduciary duties to the other VCI shareholders at all times alleged herein. 23. Hoffman breached his fiduciary duties to VCI and to Plaintiffs in the following manner: Hoffman Pays Himself Unauthorized and Excessive Salaries 24. Plaintiffs are informed and believe, that from 2005 to 2019, Hoffman paid himself $688,000 in purported salary from VCI funds. Hoffman’s payments were unauthorized, excessive, inappropriate, and in violation of the California Corporations Code. 25. | VClis a holding company and does not transact in any active trade or business. Instead, VCI merely receives distribution checks and in turn, makes corresponding distribution checks to its shareholders. No salary should be paid to any officer or director, and thus no salary was authorized to be paid to anyone, including Hoffman as an officer or director. 26. Plaintiffs are informed and believe that the payment and amount of any salary to Hoffman was never presented to or authorized by the Board. 27. Hoffman’s salary was not approved in any minutes of the directors’ meeting. 28. A written consent should have been, but was not, signed by the VCI directors. Complaint 4 CASE No.a a w co 29. Plaintiff Chapel would not have consented to Hoffman’s receipt of a salary had it been presented to her as a director or as a shareholder of VCI. 30. Plaintiff Scovill would not have consented to Hoffman’s receipt of a salary had it been presented to the Trust as a shareholder of VCI. 31. Plaintiffs are also informed and believe that two signatories were required on all VCI checks and that Hoffman’s payroll checks to himself only contained his own signature. 32. Accordingly, Hoffman acted unilaterally in paying himself whatever he wanted without (i) obtaining approval from the other directors or shareholders, (ii) making adequate disclosures to the shareholders, and (iii) obtaining a second signer as required by VCI internal controls. 33. California Corporations Code Section 307(b), provides, in relevant part, that an interested director must disclose to the non-interested directors the action(s) to be approved. The interested director’s vote is not counted as there is a conflict of interest. Hoffman was not only a director but an officer who was paying himself. Therefore, Hoffman was mandated by law to seek approval from the directors for his compensation as an officer. This never occurred. 34. In the time that Hoffman made illegal distributions to himself in the form of an unauthorized and excessive $688,000 salary, the remaining shareholders of VCI received $30,000 of distributions in total. Accordingly, Hoffman received $658,000 more than the remaining shareholders without authorization. 35. Collectively, all shareholders received $718,000 from 2005 to 2019. Because VCI does not have an active trade or business and no salaries were authorized, the entire $718,000 should have been distributed pro rata equally to the shareholders. Hoffman’s Unauthorized Payments to His Children 36. Plaintiffs are informed and believe that between 2017 and 2021 Hoffman made unauthorized distributions to his children in the amount of $31,444. The payments to his children were purportedly compensation for services. However, VCI is a holding company without any active trade or business. Any purported “need” for services should have been presented to the Board or shareholders for approval. They were not. Complaint 5 CASE No.a a w co 37. Moreover, no paid services are or were required and none would have been authorized by plaintiff Chapel as a shareholder or director or Scovill as a shareholder. 38. Accordingly, Hoffman’s $22,546 in payments to his son, Curtis Hoffman; (2) $7,504 in payments to his son, William Hoffman; and (3) $1,394 in payments to his daughter, Jeanette Fife, were unauthorized and excessive. Using Corporate Funds to Make Investments Without VCI Board Approval 39. Plaintiffs are informed and believe that on January 27, 2017 Hoffman unilaterally took $100,000 from VCI and invested the proceeds in a Heartland Dental Clinic in Huntsville, Alabama (the “Heartland Property”) without obtaining approval from the VCI board of directors. 40. Plaintiffs are also informed and believe that Hoffman made a similar unauthorized $50,000 deposit for an O’Reilly Auto Parts Store in Munford, TN (the “O’Reilly Property”) with VCI funds without notifying or obtaining approval from VCI’s Board of Directors. 41. By failing to notify the VCI Board and shareholders of the investments and obtaining requisite advance approval, Hoffman denied them of the opportunity to determine whether the Heartland and O’Reilly investments were proper and appropriate for VCI. DERIVATIVE AND DEMAND EXCUSED ALLEGATIONS 42. Plaintiffs are bringing this action, in part, as a derivative action on behalf of VCL, to redress the wrongful conduct by Defendants alleged in this Complaint. 43. Plaintiffs are shareholders of, and continuously has been shareholders of, VCI at all times alleged herein. 44. Plaintiffs will adequately and fairly represent the interests of VCI and its shareholders in enforcing and prosecuting their rights. 45. Plaintiffs are excused from making a pre-suit demand on VCI’s Board of Directors because any such demand would be futile. 46. | The most recent VCI corporate Statement of Information filed March 11, 2022 with the California Secretary of State lists 2 directors: Cutis Hoffman and plaintiff Chapel. Curtis Hoffman is also listed as the CEO of VCI. 47. _ Plaintiffs are informed and believe that the composition of the VCI board remains Complaint 6 CASE No.a a w co as listed in the March 2022 Statement of Information. 48. Director Curtis Hoffman is incapable of independently and disinterestedly considering a demand to commence and prosecute this action because he is the son of decedent James Hoffman and is a direct beneficiary of the alleged wrongdoings as alleged in this Complaint, including but not limited to, receiving unauthorized distributions. 49. Director Curtis Hoffman is also incapable of independently and disinterestedly considering a demand to commence and prosecute this action because, on information and belief, Curtis Hoffman is a direct beneficiary of the Hoffman Estate and the Hoffman Trust and any monetary recovery against the Estate will lower its value. CAUSES OF ACTION First Cause of Action (Breach of Fiduciary Duty) (Against Jenay A. Hoffman, Personal Representative and Trustee) (Derivatively on Behalf of VSI) 50. Plaintiffs hereby incorporate by reference the allegations of the preceding as set forth in full herein. 51. Asan officer and director of VCI, Hoffman owed fiduciary duties to VCI. 52. Hoffman breached his fiduciary duties to VCI by (1) paying himself an unauthorized and excessive salary; (2) making unauthorized payments to his children; and (3) using VCI funds for investments without the Board’s or shareholders’ knowledge or consent. 53. Asaresult of Hoffman’s breaches of his fiduciary duties VCI has been damaged in an amount to be proven at trial. 54, Because Hoffman’s breaches of fiduciary duties were willful, malicious, oppressive and made in bad faith, VCI is entitled to punitive damages. Mf M/ Mf Mf Complaint a CASE No.a a w co Second Cause of Action (Breach of Fiduciary Duty) (Against Jenay A. Hoffman, Personal Representative and Trustee) (Directly on Behalf of Chapel and Scovill) 55. Plaintiffs hereby incorporate by reference the allegations of the preceding as set forth in full herein. 56. Asan officer and director of VCI, Hoffman owed a duty to VCI’s shareholders. 57. As an equal/majority shareholder of VCI, Hoffman owed fiduciary duties to VCI’s other shareholders. 58. As minority shareholders with 1,737.38 shares and 1,237.12 shares of VCI stock respectively, Chapel and Scovill, Hoffman owed fiduciary duties to Plaintiffs directly. 59. Hoffman breached his fiduciary duties to Plaintiffs by paying himself an excessive and unauthorized salary; paying unauthorized dividends to his family members; and using VCI’s funds to make undisclosed and unauthorized investments. 60. As aresult of Hoffman’s breaches of fiduciary duties Plaintiffs have been deprived of and are entitled to damages from the unauthorized use of VCI funds. 61. Because Hoffman’s breaches of fiduciary duties were willful, malicious, oppressive and made in bad faith, Plaintiffs are entitled to punitive damages. Third Cause of Action (Conversion) (Derivatively on Behalf of VSI) 62. Plaintiffs hereby incorporate by reference the allegations of the preceding as set forth in full herein. 63. | VCIhas a right to possess its corporate assets. 64. Defendants intentionally and substantially interfered with VCI’s assets by unlawfully distributing them to Hoffman and his family members. 65. Asa direct and proximate result of Defendants' conversion, VCI has been damaged in that VCI has been deprived its assets and its right to distribute them. Complaint 8 CASE No.a a w co 66. Defendants' actions as alleged herein were oppressive, fraudulent, and malicious. As aresult, VCI is entitled to an award of punitive damages according to proof. Fourth Cause of Action (Unjust Enrichment) (Derivatively on Behalf of VSI) 67. Plaintiffs hereby incorporate by reference the allegations of the preceding as set forth in full herein. 68. Hoffman received a benefit in the form of unauthorized and excessive salaries from VCI to the detriment of VCI and its shareholders. 69. Defendants retained these benefits causing them to become unjustly enriched. 70. As a result of Hoffman’s conduct, VCI is entitled to receive an award in the amount to be proven that Defendants have been unjustly enriched. Fifth Cause of Action (Accounting) (Derivatively on Behalf of VSD 71. Plaintiffs hereby incorporate by reference the allegations of the preceding as set forth in full herein. 72. A relationship exists between the parties that requires an accounting. 73. Asan officer, director and majority shareholder of VCI, Hoffman must account to VCI for the profits received from the excessive and unauthorized distributions. PRAYER Wherefore, Plaintiffs pray for judgment against Defendants as follows: 1. Damages in an amount according to proof; 2. Prejudgment interest at the statutory rate; 3. Restitution; Punitive Damages; An accounting; Se Attorney’s fees and costs; Complaint 9 CASE No.oo 7. For all such other relief as the Court deems just and proper. Dated: October 12, 2022 HANSEN LAW FIRM, P.C. _ By: Cfaig A. Harfsen Philip E. Yeager Jack J. Ferguson Attorneys for Plaintiffs Nancy Chapel, Individually, and Carrie Scovill, as Trustee for the George Van Sickle Exempt Family Trust DEMAND AND FOR JURY TRIAL Plaintiffs demand a trial by jury on all jury triable claims and issues in this action. Dated: October 12, 2022 HANSEN LAW FIRM, P.C. Philip E. Yeager Jack J. Ferguson Attorneys for Plaintiffs Nancy Chapel, Individually, and Carrie Scovill, as Trustee for the George Van Sickle Exempt Family Trust Complaint 10 CASE No,