Judge Bruce G. Iwasaki, Case Number: 23STCV21191, Date: 2024-07-12 Tentative Ruling

Responding Party: N/A - Unopposed

Tentative Ruling: Hanmi’s Demurrer to Cross-Complainants Cross-Complaint is sustained in its entirety. Cross-Complainants are granted 10 days leave to amend, with the First Amended Complaint to be filed by July 22, 2024.

On September 1, 2023, Hanmi Bank (Hanmi) filed a Complaint containing fifteen (15) causes of action against several defendants, including Mark D. Crabtree (Crabtree) and Anju Sharma aka Anju Crabtree (Sharma) in both their individual capacities, and their capacities as trustees. Then on February 2, 2024, Crabtree and Sharma (collectively, Cross-Complainants) filed a Cross-Complaint (XC) against Hanmi alleging two causes of action. The motion now before the Court is Hanmi’s Demurrer to Cross-Complainants Cross-Complaint. The demurrer is unopposed.

The case stems from allegations that the Cross-Complainants defaulted on a loan (Loan) from Hanmi for $1,900,000.00. (Complaint, ¶ 13.) The Loan was secured by a Deed of Trust encumbering real property located at 5121 E. State Highway 58, Boron CA 93516, where the Cross-Complainants owned and operated an ARCO gas station and convenience store (the Property). (Complaint, ¶ 18.) After defaulting on the loan, Hanmi alleges that Cross-Complainants sold the property with net proceeds amounting to $413,314.07. (Complaint, ¶ 21.) Hanmi alleges that no sale notice to creditors, including Hanmi was given, despite the fact that Hanmi held a first-priority security interest in the proceeds. (Complaint, ¶ 21-23.) Hanmi then filed suit alleging the following fifteen (15) causes of action:

In their Cross-Complaint, Cross-Complainants allege that in granting the Loan to Cross-Complainants, Hanmi made certain representations with regard to assisting Cross-Complainants with staying in compliance with Small Business Administration regulations. (XC, ¶ 9.) However, Cross-Complainants also allege that Hanmi negligently managed the loan and Cross-Complainants lost their Small Business Administration qualifications and suffered damages. (XC, ¶¶ 10-12.) Cross-Complainants filed suit alleging the following causes of action against Hanmi: (1) negligence and (2) intentional misrepresentation – fraud.

Concurrently filed with their demurrer, Hanmi files their Request for Judicial Notice (RJN) and requests that this Court judicially recognize the following:

The Court need not judicially notice the initial Complaint, as it is unnecessary for the Court to judicially notice filings in its own docket that it will inevitably refer to. The Court will also deny judicial notice as to Exhibit 2 because the documents attached do not correlate with the request, and Hanmi makes no formal request for the documents actually attached (the Commercial Security Agreement, the UCC Financing Statement, the Deed of Trust, the Grant Deed, and a Mayflower Escrow document) to be judicially noticed. Therefore, the RJN is denied.

“Before filing a demurrer…the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. §430.41(a).) Attached to the demurrer is the Declaration of J. Alexandra Rhim (Rhim Decl.) which states that the parties conferred over telephone on April 23, 2024, but the parties were unable to reach an agreement. Nonetheless, the requirements of Code Civ. Proc. §430.41(a) have been satisfied. Therefore, the Court turns its attention to the demurrer.

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Hanmi demurs on the grounds that both causes of action fail to state facts sufficient to support their respective causes of action. The Court agrees, sustains the demurrer, and grants Cross-Complainants ten days leave to amend, with the First Amended Complaint to be filed by July 22, 2024.

In order to state a claim for negligence, Plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.)

The Cross-Complaint is devoid of any facts demonstrating that Hanmi breached a legal duty. It is unclear what wrongdoing was committed by Hanmi. The Cross-Complaint only alleges that Hanmi provided a loan to Cross-Complainants and that – somehow – Hanmi’s negligence in managing the loan caused harm. With no detail as to Hami’s alleged misconduct, the first cause of action must fall to demurrer.

The elements of a cause of action for negligent misrepresentation include “[m]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiff must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

The same deficiency in the first cause of action persists in the second cause of action. Specifically in relation to Hanmi’s status as a corporation, Cross-Complainants are required to plead which representative of Hanmi articulated the false representation to Cross-Complainants and when it was said. However, those details are wholly absent.

With regard to Cross-Complainants’ negligence action, they are required to set forth essential facts with reasonable particularity sufficient to acquaint their defendant with the nature, source, and extent of the cause of action. (See Doe v. City of Los Angeles (2007) 42 Cal.4^th 531, 550.) With causes of action based in fraud, the pleading requirement is heightened. (See Furia v. Helm, (2003) 111 Cal.App.4^th 945, 956.) The Cross-Complaint here meets neither threshold, therefore, the demurrer to both causes of action is sustained.

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]. As there is reasonable possibility of successful amendment, the Court shall grant ten (10) days leave to amend, with the First Amended Complaint to be filed and served by July 22, 2024.

Accordingly, Hanmi’s Demurrer to Cross-Complainants Cross-Complaint is sustained in its entirety. Cross-Complainant is granted ten days leave to amend, with the First Amended Complaint to be filed by July 22, 2024.

Department 58