Department 58

Hearing Date: July 18, 2024

Case Name: Chi-Ping Liu aka Joyce Liu v. RPM Property Management, LLC, et al.

Case No.: 23STCV25116

Motion: Demurrer with Motion to Strike

Moving Parties: Defendants Rpm Property Management LLC, Victor Liu, Yiuli Leh, and Catherine Liu

Responding Party: Plaintiff Chi-Ping Liu aka Joyce Liu

Tentative Ruling: The demurrer is overruled. The motion to strike is denied.

This is an action over ownership distribution allegedly owed but not paid by Defendants RPM Property Management, LLC (RPM), Chen-Wei Liu, Yiuli Yeh, and Catherine Liu to Plaintiff Chi-Ping (Plaintiff). On October 13, 2023, Plaintiff filed this lawsuit alleging the causes of action for (1.) accounting, (2.) failure to pay distributions, (3.) breach of fiduciary duty, (4.) conversion, and (5.) money had and received.

On January 5, 2024, Defendants RPM Property Management, LLC, Chen-Wei Liu, Yiuli Yeh, and Catherine Liu (Defendants) demurred to its the second through fifth causes of action. Defendants also filed a motion to strike the punitive damages allegations in the Complaint. The Court overruled the demurrer as to the second, third, and fifth causes of action, but sustained the demurrer to the fourth cause of action. The Court also granted the motion to strike the punitive damages allegations. The Court granted leave to amend, ordering Plaintiff to serve and file the amended complaint on or before April 5, 2024.

On April 5, 2024, Plaintiff filed the operative First Amended Complaint (“FAC”), asserting the same causes of action in the original Complaint. The FAC also contains punitive damages allegations. On May 28, 2024, Plaintiff filed a request to dismiss the fourth cause of action for conversion without prejudice.

On June 4, 2024, Defendants filed their instant demurrer to the second cause of action for failure to pay distributions and fifth cause of action for money had and received. Defendants also filed a motion to strike the punitive damages allegations in the FAC.

On July 5, 2024, Plaintiff filed her oppositions to the demurrer and motion to strike.

No timely reply has been filed.

The demurrer is overruled. The motion to strike is denied.

Legal Standard for Demurrer

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law ….” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Meet and Confer

As an initial matter, the Court finds that Defendants have satisfied the meet and confer requirement for the demurrer and motion to strike. (Declaration of Kenneth I. Gross, filed on June 5, 2024, ¶¶ 3-4.)

Second Cause of Action for Failure to Pay Distributions:

The second cause of action alleges that Defendants failed to pay Plaintiff Liu distributions she owed as the owner of an interest in Defendant RPM. (FAC, ¶ 17.)

In its previous order, the Court found that the original Complaint had alleged facts sufficient to state a claim for failure to pay distributions and, therefore, overruled the Defendants’ demurrer to the second cause of action. (See Minute Order dated March 5, 2024, p. 2 [“Relying on Corporations Code section 17704.04, subdivision (b), Defendants argue that Plaintiff has not alleged that Defendant RPM had ‘decide[d] to make an interim distribution.’ ¶ In opposition, Plaintiff points to allegations that Defendant RPM is still in existence (Compl., ¶ 11) and RPM made a distribution to Defendant Victor Liu based on his ownership interest (Compl., ¶ 12 [‘Defendants VICTOR LIU, YIULI YEH, and CATHERINE LIU have made distributions to Defendant VICTOR LIU as the owner of an interest in Defendant RPM PROPERTY MANAGEMENT, LLC, but have failed to make any distributions to Plaintiff JOYCE LIU.’]). Thus, these allegations, liberally read, are sufficient to state a claim. ¶ The demurrer to the second cause of action is overruled”].)

Defendants now demur the second cause of action, arguing that the second cause of action fails to state facts sufficient to constitute a cause of action because Plaintiff did not bring that claim in the name of RPM (i.e., a derivative pleading). In addition, to the extent Plaintiff is bringing a direct action against the individual defendants, a derivative pleading is exclusive, and, therefore, Plaintiff’s failure to plead a derivative claim renders the FAC deficient.

Defendants are incorrect in arguing that “there cannot be maintained derivative and direct causes of action simultaneously.” (Demurrer, p. 7:16-17.)

“A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both.” (Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1019, fn. 3.) By way of background, “claims are derivative where the injury alleged is one inflicted on the corporate entity or on the ‘whole body of its stock,’” and personal if they “assert[] a right against the corporation which the shareholder possesses as an individual apart from the corporate entity ….” (Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222.)

In any event, as Plaintiff argues in her reply, Code of Civil Procedure section 430.41 (b) states that “[a] party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading has been sustained shall not demur to any portion of the amended complaint . . . on grounds that could have been raised by demurrer to the earlier version of the complaint ....”

Here, the grounds Defendants are bringing in their instant demurrer could have been raised in their first demurrer. Since Defendants failed to do so, it is improper for them to now demur on those grounds.

Accordingly, the demurrer to the second cause of action for failure to pay distributions is overruled.

Fifth Cause of Action for Money Had and Received

“A cause of action for money had and received is stated if it is alleged the defendant ‘is indebted to the plaintiff in a certain sum “for money had and received by the defendant for these of the plaintiff.”’ [Citation.]” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.)

The Court previously overruled the demurrer as to the fifth cause of action after finding that “[t]he allegations in the Complaint alleging indebtedness resulting from the failure to pay the distributions from Defendant RPM are adequate to state a claim under this common count.” (Minute Order dated March 5, 2024, p. 5, at the top of the page.)

Defendants now argue that in so ruling, “the Court recognize[d] that [the fifth cause of action] … is tied to the failure to pay distributions cause of action, which is based on the same facts, and is seeking the same relief. Therefore, should [the] underlying second cause of action be demurred to and sustained for failure to plead derivatively, then the fifth cause of action for money had and received should also be considered insufficiently pled absent further amendment to the second cause of action, and demurrer to [the] fifth cause of action should be sustained as well.” (Demurrer, p. 9:4-9.)

The Court, however, has overruled the demurrer to the second cause of action.

Accordingly, the demurrer to the fifth cause of action for money had and received is also overruled.

Legal Standard for Motions to Strike

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) 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.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subds. (b)(1)-(3).)

Discussion

Defendants move to strike the request for punitive damages from the Complaint.

With respect to the punitive damages request, Plaintiff relies on the allegations in her breach of the fiduciary duty claim and conversion claim. (FAC, ¶¶ 20, 24.)

However, on May 28, 2024, Plaintiff dismissed the conversion claim.

Therefore, the Court only needs to determine whether Plaintiff has alleged facts sufficient to support her punitive damages allegations in connection with her third cause of action for breach of fiduciary duty.

Punitive damages are recoverable where the defendant has been guilty of oppression, fraud, or malice, express or implied. (Civ. Code § 3294.) “Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation our outrage, such as spite or malice, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Specific intent to injure is not necessary for a showing of malice—it is sufficient that the defendant’s conduct was so “wanton or so reckless as to evince malice or conscious disregard of others’ rights.” (McConnell v. Quinn (1925) 71 Cal. App. 671, 682.)

A request for punitive damages that is not supported with specific allegations of oppression, fraud, or malice is subject to a motion to strike. Conclusory allegations that defendants acted “willfully,” “maliciously,” or with “oppression, fraud, or malice” are not, without more, sufficient to give rise to a claim for punitive damages, but such language is permissible where the complaint contains sufficient factual support for the conclusions. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.)

Here, the Court finds that the FAC has alleged facts sufficient to support a claim for punitive damages by alleging that Defendants breached their fiduciary duties (e.g., by stealing Plaintiff’s distributions) with the intent to harm Plaintiff and because of greed and animosity. (FAC, ¶ 20.)

Accordingly, the motion to strike is denied.

Conclusion

The demurrer is overruled. The motion to strike is denied.