Judge: Barbara M. Scheper, Case: 21STCV31784, Date: 2023-02-28 Tentative Ruling
Case Number: 21STCV31784 Hearing Date: February 28, 2023 Dept: 30
Dept. 30
Calendar No.
Park vs. Gi, et. al., Case No. 21STCV31784
Tentative Ruling re: Cross-defendant’s Demurrer to Second Amended
Cross-Complaint
Cross-Defendant
Jung Sam Park (Park) demurs to the Second Amended Cross-Complaint (SACC) of
1500 Plaza, LLC, Crocker & Towne Wholesale Mart, LLC, Daniel Soungman Gi,
DS Capital, LLC, and Natvan, Inc. (collectively, Cross-Complainants). The Court
overrules the demurrer as to the first cause of action and otherwise sustains
the demurrer.
In reviewing the legal sufficiency
of a complaint against a demurrer, a court will treat the demurrer as admitting
all material facts properly pleaded, but not contentions, deductions, or
conclusions of law. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co. v. Hartford Ins. Co.
(1984) 163 Cal.App.3d 1055, 1062.) It is well settled that a “demurrer lies
only for defects appearing on the face of the complaint[.]” (Stevens v. Superior Court (1999) 75
Cal.App.4th 594, 601.) “The rules by which the sufficiency of a complaint is
tested against a general demurrer are well settled. We not only treat the
demurrer as admitting all material facts properly pleaded, but also give the
complaint a reasonable interpretation, reading it as a whole and its parts in
their context.” (Guclimane Co. v. Stewart
Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes omitted).) For
purposes of ruling on a demurrer, the complaint must be construed liberally by
drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)
When ruling on a demurrer, the
Court may only consider the complaint’s allegations or matters which may be
judicially noticed. (Blank, supra, 39
Cal.3d at 318.) The Court may not consider any other extrinsic evidence or
judge the credibility of the allegations plead or the difficulty a plaintiff
may have in proving his allegations. (Ion
Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) A demurrer is
properly sustained only when the complaint, liberally construed, fails to state
facts sufficient to constitute any cause of action. (Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574, 578.)
Here, Cross-Defendants request the Court take notice of six
exhibits: (1) The trial brief filed by Crocker & Towne Wholesale Mart LLC
(C&T) in Crocker & Towne Wholesale Mart LLC v. Kim Whan Pak (21STCV16410);
(2) the Complaint filed by C&T in that action (21STCV16410); (3) the
Statement of Information filed by East Property LLC on February 9, 2018; (4)
the Statement of Information filed by C&T on May 11, 2018; (5) the
Statement of Information filed by 800GS LLC on July 16, 2019; and (6) the
Statement of Information filed by SS Landmark LLC on September 11, 2019.
(Sullivan Decl. ¶¶ 12-14, Exs. 4-9.)
Specifically,
Cross-Defendants request notice of statements in C&T’s trial brief and
complaint that Park’s alleged receipt of $50,000 from a C&T tenant took
place in August 2013. (Demurrer, p. 2; Sullivan Decl., Ex. 4, p. 4 [73].) The
request for judicial notice is improper to the extent that Cross-Defendants
seek to establish the date of the alleged misconduct: “[W]hile
courts are free to take judicial notice of the existence of each document in a court file, including the truth
of results reached, they may not take judicial
notice of the truth of hearsay statements
in decisions and court files.” (Lockley v.
Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.)
The SACC asserts ten
causes of action arising from Park’s alleged misconduct in connection with his
and Cross-Complaint Daniel Soungman Gi’s (Gi) shared investments into
commercial real estate. Gi is a commercial real estate developer, and Park is a
licensed commercial real estate broker employed by The Quantum Associates, Inc.
(Quantum). (SACC ¶¶ 14-15.) The two developed a
professional relationship beginning in 2010, where Park would solicit Gi to
invest into business ventures for the purchase and leasing of commercial
properties, and Park would be responsible for securing tenants and managing the
properties. (SACC ¶ 18.) On Park’s recommendation, Gi
also hired Park’s sister, Jungme Cohn, to maintain financial records and
prepare and file tax documents for the investment properties. (SACC ¶ 20.)
The claims in the SACC
arise from Park’s alleged misconduct in connection with three properties that
Park and Gi invested into together. The first investment that Park solicited Gi
for was for undeveloped property located at 920 Crocker Street, Los Angeles,
California, made through the entity DS Capital, LLC. (SACC ¶ 24.)
The second investment was for the purchase of a leasehold interest in 914 Birch
Street/1500 E. Olympic Blvd, made through the
entity 1500 Plaza. (SACC ¶ 35.) 1500 Plaza was jointly formed by
Park and Gi, who held respective interests of 25% and 75%. (SACC ¶
36.) The third investment was for commercial property located at 934 S. Los
Angeles, purchased in 2015 through Crocker & Towne Wholesale Mart, LLC
(C&T), an entity originally formed by Gi and his wife. (SACC ¶¶
40-41.) For each property, Park, through Quantum, was made responsible for
property management, securing tenants, and tenant interface on behalf of the
respective owner. (SACC ¶¶ 27, 37, 43.)
Cross-Complainants
allege that on September 28, 2022, they first learned that Park was engaged in
significant self-dealing with tenants of the properties. (SACC ¶ 49.)
Specifically, Park made an oral deal to provide a tenant of C&T multiple
rent-free months on its lease in exchange for the tenant directly paying Park
$50,000. (SACC ¶ 50.) Cross-Complainants learned of this incident when the
tenant complained to Quantum about the deal. (SACC ¶ 50.) This is the only
instance of Park’s self-dealing that is specifically described in the SACC.
Cross-Complainants also allege that Park
misrepresented to Gi that he could no longer afford to make capital
contributions to the property entities, while simultaneously forming his own solely
owned corporation, SPNP, Inc. (SPNP) to engage in competing commercial real
estate operations. (SACC ¶¶ 62-63.) Cross-Complainants first learned of SPNP’s
existence on July 25, 2022, and then learned of Park’s motive to compete in
commercial real estate through SPNP on September 20, 2022, when Park filed a
corporate Statement of Information indicating that SPNP’s purpose was
“commercial real estate operator.” (SACC ¶ 61.) Cross-Complainants allegedly had
no knowledge of Park’s misconduct prior to their discovery of his deal with the
C&T tenant and his formation of SPNP. (SACC ¶ 65.)
Statute of
Limitations
Park again demurs
to the first through fifth and seventh through ninth causes of action on the
basis that the claims are time-barred.
“Generally speaking, a cause of action
accrues at ‘the time when the cause of action is complete with all of its
elements.’ [Citation.] An important exception to the general rule of accrual is
the ‘discovery rule,’ which postpones accrual of a cause of action until the
plaintiff discovers, or has reason to discover, the cause of action.
[Citations.] A plaintiff has reason to discover a cause of action when he or
she ‘has reason at least to suspect a factual basis for its elements.’
[Citations.] Under the discovery rule, suspicion of one or more of the elements
of a cause of action, coupled with knowledge of any remaining elements, will generally
trigger the statute of limitations period.” (Fox v. Ethicon Endo–Surgery,
Inc. (2005) 35 Cal.4th 797, 806–807.)
In applying the
discovery rule, “[t]he limitations period begins once the plaintiff has notice
or information of circumstances to put a reasonable person on inquiry. [Citation.]
Subjective suspicion is not required. If a person becomes aware of facts which
would make a reasonably prudent person suspicious, he or she has a duty to
investigate further and is charged with knowledge of matters which would have
been revealed by such an investigation. [Citations.]” (Mangini v.
Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1150.)
“[T]o overcome an apparent limitations bar, the plaintiff claiming
delayed discovery of the facts constituting the cause of action has the burden
of setting forth pleaded facts to show ‘(1) the time and manner of discovery
and (2) the inability to have made earlier discovery despite reasonable
diligence. The burden is on the plaintiff to show diligence, and conclusory
allegations will not withstand demurrer.’ ” (Czajkowski v. Haskell & White, LLP (2012) 208 Cal.App.4th 166, 175.)
For the requirement that
a plaintiff show “inability to have made earlier discovery despite reasonable
diligence, “ ‘where a fiduciary relationship exists, facts which would
ordinarily require investigation may not excite suspicion.’ [Citation.] In
effect, the same degree of diligence is not required where a fiduciary
relationship exists between the parties at the time the alleged acts of
negligence occur. [Citations.] The plaintiff is only required to establish
facts sufficient to show that he made an actual discovery of hitherto unknown
information within two years before the filing of the action in order to
satisfy the duty of diligence and to thereby come within the limitations
period. [Citations.] However, plaintiff does have a duty to investigate even
where a fiduciary relationship exists when ‘he has notice of facts sufficient
to arouse the suspicions of a reasonable man.’ [Citations.]” (Electronic
Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d
834, 855.)
To the extent that
Cross-Complainants’ claims are based on the incident of self-dealing involving
the C&T tenant, the Court finds the allegations in the SACC sufficient to
support application of the delayed discovery rule. (SACC ¶ 50.) However, Cross-Complainants
have not pled sufficient facts showing their delayed discovery of the remainder
of Park’s alleged misconduct.
For instance, the
SACC alleges that Park “knowingly and intentionally misrepresented his
intentions to Dan Gi for the purpose of inducing Dan Gi to invest with him in
the [three] real properties” (¶ 62); that Park “misrepresented to Dan Gi that
he could not make further contributions to the Disputed Entities for the
purpose of diverting his capital and business opportunities to his solely owned
corporation SPNP, Inc. for his own personal benefit” (¶ 68); and that Park “knowingly
and intentionally misrepresent[ed] his ability to make calls for capital
contribution to the Disputed Entities” while falsely promising to repay Gi for
Gi’s extra contributions (¶ 69). In support of Cross-Complainants’ delayed
discovery of this misconduct, the SACC alleges, “[i]t was not until
Cross-Defendants filed the Complaint in this action in August of 2021, that
Cross-Complainants had any reason to think Sam Park would not pay
Cross-Complainants back as promised. Then, upon the discovery of
Cross-Defendants’ competing company on September 20, 2022, and
Cross-Defendants’ theft from Cross-Complainants on September 28, 2022,
Cross-Complainants realized Cross-Defendants never intended to pay
Cross-Complainants back…” (SACC ¶ 73.)
Cross-Complainants
argue that their allegations are sufficient because Park’s status as a
fiduciary justifies a lesser degree of diligence in discovering the alleged
misconduct. However, the problem is not Cross-Complainants’ failure to plead
reasonable diligence; rather, it is that Cross-Complainants have not pled their
discovery of the facts constituting Park’s misconduct, save for the incident
involving the C&T tenant. But neither Cross-Complainants discovery of that
incident nor their alleged discovery of SPNP’s Statement of Information (SACC ¶
61) show how Cross-Complainants learned that Park misrepresented his intentions
regarding the investments or his inability to make contributions. Even where a
fiduciary duty exists, to show delayed discovery, a plaintiff must “establish facts sufficient to show that he made
an actual discovery of hitherto unknown information within two years before the
filing of the action in order to satisfy the duty of diligence and to thereby
come within the limitations period.” (Electronic Equipment Express, Inc.,
122 Cal.App.3d at 855.) Cross-Complainants have not pled their actual
discovery of the facts underlying much of the misconduct that they seek to
bring within the limitations period. Accordingly, the Court will consider the
remaining causes of action only with respect to Park’s alleged misconduct
involving the C&T tenant.
First Cause of Action for Breach of Fiduciary
Duty
“The elements of a cause
of action for breach of fiduciary duty are: (1) existence of a fiduciary duty;
(2) breach of the fiduciary duty; and (3) damage proximately caused by the
breach.” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) “[P]artners or joint venturers
have a fiduciary duty to act with the highest good faith towards each other
regarding affairs of the partnership or joint
venture. [Citation.] The essential element of a joint venture is an
undertaking by two or more persons to carry out a single business enterprise
jointly for profit.” (Pellegrini v. Weiss (2008) 165 Cal.App.4th
515, 524.)
The SACC alleges that Gi and his wife have been the only
members of C&T since its formation. (SACC ¶ 40.) However, Park and Gi
allegedly agreed to operate and sub-lease the property at 934 S. Los Angeles
through C&T, while sharing in profits and expenses based on their initial
investments of 25% and 75%. (SACC ¶ 43.) These facts are sufficient to plead
the existence of a fiduciary duty owed by Park to Gi as joint venturers. The
allegations that Park unilaterally secured direct payment from a tenant in
exchange for multiple months rent-free are sufficient to show breach of
fiduciary duty based on self-dealing. (See Bardis v. Oates (2004) 119
Cal.App.4th 1, 12 [“A partner has no right to deal with partnership property
other than for the sole benefit of the partnership”].) Accordingly, the
demurrer is overruled as to the first cause of action.
Second Cause of Action for Conversion; Third
Cause of Action for Violation of Penal Code § 496
To
plead a cause of action for conversion, one must allege (1) the plaintiff’s
ownership or right to possession of personal property; (2) defendant’s
disposition of the property inconsistent with plaintiff’s rights; and (3)
resulting damages. (Fremont Indemnity Co. v. Fremont General Corp.
(2007) 148 Cal.App.4th 97, 119.) “To mandate a conversion action ‘it is not essential that plaintiff shall be
the absolute owner of the property converted but she must show that she was entitled
to immediate possession at the time of conversion.’
” (Hartford Financial Corp. v. Burns (1979) 96 Cal.App.3d 591, 598.)
Penal Code § 496, subd. (a), makes
it a criminal offense to conceal or withhold any property from the owner,
knowing the property to be stolen or obtained in any manner constituting theft
or extortion. Under Penal Code § 496, subd. (c), “[a]ny person who has been
injured by a violation of subdivision (a) or (b) may bring an action for three
times the amount of actual damages, if any, sustained by the plaintiff, costs
of suit, and reasonable attorney's fees.” (Pen. Code, § 496.) “[A] criminal
conviction under section 496(a) is not a prerequisite to recovery of treble
damages under section 496(c).” (Bell v. Feibush (2013) 212 Cal.App.4th
1041, 1043.)
Cross-Complainants
claims for conversion and civil theft both fail because the allegations do not
show that they possessed or had a right to possess the $50,000 allegedly paid
to Park from the C&T tenant. The demurrer is therefore sustained as to the
second and third causes of action.
Fourth Cause of Action for Fraud in the
Inducement; Fifth Cause of Action for Misrepresentation
The elements of fraud are: (1)
misrepresentation (false representation, concealment, or nondisclosure); (2)
knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4)
justifiable reliance; and (5) damages. (See Civil Code §1709.) Fraud actions
are subject to strict requirements of particularity in pleading. (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216.)
The
liberal construction of pleadings does not apply to a fraud claim. Instead, a
fraud claim must be pled with specificity. (Tenet Healthsystem Desert, Inc.
v. Blue Cross of California¿(2016) 245 Cal.App.4th 821, 837.) “The
particularity requirement demands that a plaintiff plead facts which show how,
when, where, to whom, and by what means the representations were tendered.” (Cansino
v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)
As discussed above, Cross-Complainants’ claims are
time-barred to the extent that they are based on Park’s alleged misrepresentations
to Gi regarding Park’s intentions in investing and his ability to make
contributions. (SACC ¶¶ 62, 68-69.) The SACC does not plead any
misrepresentations made by Park in connection with the $50,000 payment from the
C&T tenant. Accordingly, the demurrer is sustained as to the fourth and
fifth causes of action.
Sixth Cause of
Action for Conspiracy
The
sixth cause of action for conspiracy, asserted against Park and SPNP, alleges
that Park and SPNP “conspired to deprive Cross-Complainants of income and
business opportunities arising from the Investment Properties and other
commercial real estate, properties held by Cross-Complainants by diverting the
same away from Cross-Complainants to Cross-Defendants.” (SACC ¶ 114.) “A conspiracy cannot be alleged as a tort
separate from the underlying wrong it is organized to achieve.” (Stansfield
v. Starkey (1990) 220 Cal.App.3d 59, 76.) Because the underlying conduct is
time-barred, the demurrer is sustained as to this cause of action.
Seventh Cause of Action
for Intentional Interference with Contract
The
elements of a cause of action for intentional interference with contractual
relations are “(1) a valid contract between plaintiff and a third party; (2) defendant’s
knowledge of this contract; (3) defendant’s intentional acts designed to induce
a breach or disruption of the contractual relationship; (4) actual breach or
disruption of the contractual relationship; and (5) resulting damage.” (Pacific
Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118,
1126.)
Cross-Complainants’
claim for intentional interference with contract is premised on Park’s alleged
interference with the lease contracts between C&T and its tenants. However,
“the representative of a contracting party may not be
held liable for the tort of interfering with its principal's contract.” (Mintz
v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1607.) The SACC
alleges that Park was responsible for managing C&T’s property and securing
commercial tenants. (SACC ¶ 43.) Cross-Complainants cannot base their claim for
intentional interference with contract on Park’s conduct in his role as
C&T’s agent. Accordingly, the demurrer is sustained as to the seventh cause
of action.
Eighth Cause of
Action for Open Book Account
“In
the common law action of general assumpsit, it is customary to plead an
indebtedness using ‘common counts.’ In California, it has long been settled the
allegation of claims using common counts is good against special or general
demurrers. The only essential allegations of a common count are ‘(1) the
statement of indebtedness in a certain sum, (2) the consideration, i.e., goods
sold, work done, etc., and (3) nonpayment.’” (Farmers Ins. Exchange v.
Zerin (1997) 53 Cal.App.4th 445, 460 [internal citations omitted].)
“A common count is not a speci¿c cause of action, . . .
rather, it is a simpli¿ed form of pleading normally used to aver the existence
of various forms of monetary indebtedness, including that arising from an
alleged duty to make restitution under an assumpsit theory. When a common count
is used as an alternative way of seeking the same recovery demanded in a
speci¿c cause of action, and is based on the same facts, the common count is
demurrable if the cause of action is demurrable.” (McBride v. Boughton
(2004) 123 Cal.App.4th 379, 394 [internal citations omitted].)
Cross-Complainants’ claim for Open Book Account alleges that
Park owes Gi $1,498,409 based on Gi’s contributions to DS Capital on Park’s
behalf and Park’s 50% membership interest in DS Capital. (SACC ¶¶ 126-131.) As
discussed above, the SACC has not pled sufficient facts showing delayed
discovery of this part of Park’s alleged misconduct, and so this cause of
action also fails as time barred.
Ninth Cause of
Action for Accounting
A cause of action for an accounting requires a showing that
a relationship exists between the plaintiff and defendant that requires an
accounting and that some balance is due to the plaintiff that can only be
ascertained by an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th
156, 179.)
“Equitable
principles govern, and the plaintiff must show the legal remedy is
inadequate.... Generally, an underlying fiduciary relationship, such as a
partnership, will support an accounting, but the action does not lie merely
because the books and records are complex. Some underlying misconduct on the
part of the defendant must be shown to invoke the right to this equitable
remedy.” (Green Valley Landowners Assn. v. City of Vallejo (2015) 241
Cal.App.4th 425, 442.)
Cross-Complainants’ ninth cause of
action seeks an accounting of funds that Park or SPNP received “from any tenant
of Cross-Complainants, in relation to any commission earned on any lease
obtained on behalf of Cross-Complainants, any commission earned in relation to
any financing for those properties, and any commission earned in relation to
Cross-Defendants’ and/or Cross-Complainants’ purchase of the Investment
Properties, and other commercial real estate properties in which
Cross-Defendants acted as broker for Cross-Complainants, including an
accounting of all cash payments made to, from, or on behalf of Cross-Defendants.”
(SACC ¶ 148.) Cross-Complainants have failed to allege underlying misconduct by
Park justifying the requested accounting; the one instance of self-dealing alleged
does not show that an accounting is necessary as to all commissions earned by Park, in connection with any lease
obtained on behalf of Cross-Complainants. Accordingly, the demurrer is sustained as to this cause of action.
Tenth Cause of
Action for Constructive Trust
A constructive trust is an involuntary equitable trust
created by operation of law as a remedy to compel the transfer of property from
the person wrongfully holding it to the rightful owner.” (Communist Party v.
522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990.) “A constructive trust is not a true trust but an equitable
remedy available to a plaintiff seeking the recovery of specific property in a
number of widely differing situations. The cause of action is not based on the
establishment of a trust, but consists of the fraud, breach of fiduciary duty,
or other act that entitles the plaintiff to some relief.” (5 Witkin, Cal. Proc.
(6th ed. 2022) Pleading, § 836.)
Similar to the ninth cause of action, Cross-Complainants’
tenth cause of action for Constructive Trust seeks to impose a constructive
trust “over the funds that Cross-Defendants received from any tenant of
Cross-Complainants, in relation to any commission earned on any lease obtained
on behalf of Cross-Complainants…” (SACC ¶ 148.)
As the Court previously stated, a constructive trust is an
equitable remedy, not a cause of action. Furthermore, the SACC has not pled
facts justifying the relief requested. As with the claim for accounting, the
one instance of self-dealing alleged does not justify imposition of a
constructive trust over all commissions earned by Park in connection with any
lease obtained on behalf of Cross-Complainants.