Judge Bruce G. Iwasaki

Department 58

Hearing Date: March 5, 2024

Case Name: Liu v. RPM Property Management, LLC

Case No.: 23STCV25116

Matter: Demurrer and Motion to Strike

Moving Party: Defendant RPM Property Management, LLC, Chen-Wei Liu, Yiuli Yeh, and Catherine Liu

Responding Party: Plaintiff Chi-Ping Liu

Tentative Ruling: The Demurrer to the Complaint is overruled as to the second, third, and fifth causes of action and sustained as to the fourth cause of action. The motion to strike is granted.

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 the second through fifth causes of action of the Complaint. Defendants also filed a motion to strike portions of the Complaint. Plaintiff filed an opposition to the demurrer and motion to strike. No timely reply was filed.

The demurrer is overruled in part and sustained in part. The motion to strike is granted.

Legal Standard for Demurrers

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.)

Second Cause of Action for Failure to Pay Distributions:

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

Corporations Code section 17704.04, subdivision (b), provides:

“A person has a right to a distribution before the dissolution and winding up of a limited liability company only if the limited liability company decides to make an interim distribution. Unless the articles of organization or written operating agreement provides otherwise, a person's dissociation does not entitle the person to a distribution, and, beginning on the date of dissociation, the dissociated person shall have only the right of a transferee of a transferable interest with respect to that person's interest in the limited liability company, and then only with respect to distributions, if any, to which a transferee is entitled under the operating agreement. If the dissociation is in violation of the operating agreement, the limited liability company shall have the right to offset any damages for the breach of the operating agreement from the amounts, if any, otherwise distributable to the dissociated person with respect to that person's interest in the limited liability company.” [Emphasis added]

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.

Third Cause of Action for Breach of Fiduciary Duty

The third cause of action alleges that Defendants’ failure to pay these distributions violated the fiduciary duties they owed to Plaintiff. (Compl., ¶¶ 16-17.)

“The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)

The demurrer argues – in a conclusory manner and without any legal analysis – that these allegations fail to state a claim.

In opposition, Plaintiff argues that she has alleged that Defendants Victor Liu, Yiuli Yeh, and Catherine Liu are managers of Defendant RPM and, thus, have a fiduciary relationship to Plaintiff. (Compl., ¶ 10.) However, instead of paying distributions from Defendant RPM, they operated Defendant RPM for their own use and benefit to the exclusion of Plaintiff, including excluding Plaintiff from receiving distributions. (Compl., ¶ 12.)

These allegations are sufficient to overcome the conclusory arguments made in the demurrer. The demurrer to the third cause of action is overruled.

Fourth Cause of Action for Conversion:

The fourth cause of action for conversion alleges that Defendants converted specific distributions amounts owed to Plaintiff. (Compl., ¶ 22.)

“Conversion is generally described as the wrongful exercise of dominion over the personal property of another. [Citation.] The basic elements of the tort are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Thus, to establish a viable cause of action for conversion, Plaintiffs must establish an actual interference with their ownership or right of possession of property. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 610.) To do that they must have “either ownership and the right of possession or actual possession [of the property] at the time of the alleged conversion thereof.” (General Motors Acceptance Corp. v. Dallas (1926) 198 Cal. 365, 370.) “ ‘To establish a conversion, plaintiff must establish an actual interference with his ownership or right of possession. . . . Where plaintiff neither has title to the property alleged to have been converted, nor possession thereof, he cannot maintain an action for conversion.’ ” (Moore v. Regents of the Univ. of Cal. (1990) 51 Cal.3d 120, 136.)

It is well-established that “a mere contractual right of payment, without more, will not suffice” to support a claim for conversion. (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.) Moreover, “[m]oney 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.” (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1042 [italics in original]; see also Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 235 [A “generalized claim for money [is] not actionable as conversion.”].)

Here, as argued in the demurrer, the Complaint fails to allege facts identifying a specific sum that was converted or that Plaintiff had a specific right to ownership or possession to a specific sum – as opposed to a general duty by RPM to issue a distribution.

The demurrer to this cause of action is sustained.

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 the use of the plaintiff.’ ”” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.)

The allegations in the Complaint alleging indebtedness resulting form the failure to pay the distributions from Defendant RPM are adequate to state a claim under this common count. (Id.; Hamberger-Polhemus Co. v. Hind, Rolph & Co. (1927) 81 Cal.App. 624, 625.)

The demurrer to this common count is 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 the breach of the fiduciary duty claim and the (now sustained) conversion claim. (Compl., ¶¶ 20, 24.)

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.)

The Complaint is devoid of any allegations showing that Defendants acted “willfully,” “maliciously,” or with “oppression, fraud, or malice.” Rather, Plaintiff relies solely on the allegations showing the existence of a tort claim for breach of fiduciary duty. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-895 [“Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or 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.’ [Citation]”].) Accordingly, the motion to strike is granted.

Conclusion

The demurrer is to the Complaint is overruled as to the second, third, and fifth causes of action, and is sustained as to the fourth cause of action. The motion to strike is granted. Plaintiff shall have leave to amend. The amended complaint shall be served and filed on or before April 5, 2024.