Judge Christian R. Gullon, Case Number: 22PSCV01630, Date: 2024-12-16 Tentative Ruling

Judge: Christian R. Gullon, Case: 22PSCV01630, Date: 2024-12-16 Tentative Ruling

Plaintiff’s Application for Entry of Default Judgment is DENIED without prejudice for insufficient evidence as to the $200,000 payment made to Defendants.

This case arises from a partnership dispute. Plaintiff DONGYI (USA) TRADING GROUP, INC. alleges the following against Defendant SUNSHINE EDUCATION ACADEMY (corporation) (“Sunshine”) and Wenying Sun (“Sun”) (collectively, “Defendants”): Plaintiff was established in 2017 and it later determined to invest an education business in Southern California. In November 2018, Plaintiff and Defendant Sunshine entered into an Investment Agreement whereby Plaintiff agreed to invest $200,000 in Defendant Sunshine for 51% its shares; Sun (CEO and General Manager of Sunshine) is a 49% shareholder of Sunshine. In 2022, Plaintiff requested Defendants to provide certain financial documents of Sunshine because Plaintiff was preparing a non-immigration petition for its owner to enter the United States. However, Defendant Sun had refused to produce them.

2. Shareholder’s Derivative Action for Damages Due to Breach of Fiduciary Duty

2. Shareholder’s Derivative Action For Damages Due To Breach Of Fiduciary Duty

On August 16, 2023, Plaintiff filed amendments to the complaint/fictitious/incorrect name naming the following defendants: US Sunshine International Group, a California corporation, Sunshine Medias, Inc., a California corporation (Defendant), Sunshine Boarding School, a California corporation), World Celebrity Club, a California corporation, and World Federation Of Youth Literary Art, a California nonprofit corporation.

On November 30, 2023, the court discharged the Order to Show Cause Re: Plaintiffs Failure to Appear on October 4, 2023, and the Order to Show Cause Re: Why the Court Should not Dismiss this Case in its Entirety for Lack of Prosecution.

On January 31, 2024, the court conducted its IDC; there was no appearance by Defendants.[1]

On April 16, 2024, the court heard the Motion to Compel Defendant Sunshine Education Academy’s Form Interrogatories Set No. One And Request For Monetary Sanctions (Set By The Court) And Motion To Compel Defendants Wenying Sun And Sunshine Education Academy’s Request For Production Of Documents Set No. One And Request For Monetary Sanctions. The granted the motions and ordered that “Documents and complete responses to interrogatories are to be produced within 60 days of this order.” (April 16, 2024 Minute Order, emphasis added.)[2]

On July 16, 2024, the court held an IDC Re: Deposition; MSC; and CMC. The minute order provides, in relevant part, the following: “The Court and Counsel confer re: discovery sought by Plaintiff's Counsel, specifically with regard to the Court Order made on April 16, 2024. The Court states it has read and considered the minute order dated April 16, 2024, documents and complete responses to interrogatories are to be produced within 60 days of this order. After conducting the Informal Discovery Conference (IDC), the issues remain unresolved. Plaintiff is now permitted to file formal discovery motions and is to contact court staff for scheduling/reservation dates. Defense Counsel [Andion] represents to the Court that he intends to file a motion to be relieved as counsel.” (Minute Order, emphasis added.)

On July 26, 2024, Plaintiff filed a instant motion for terminating sanctions and default judgment.

On August 12, 2024, Counsel Andion filed a motion to be relieved as counsel as to Sunshine and Sun.

On September 17, 2024, the court held its hearing regarding the foregoing motions. The court granted Counsel Andion’s motion to be relieved as counsel. The Motion for Terminating Sanction of Default Judgment was granted “but the amount of judgment is to be determined pending Plaintiff's Application for Default Judgment.” (See 9/17/24 Minute Order.)

On October 9, 2024, the court issued a Nunc Pro Tunc Order stating in relevant part the following: “The Answer of SUNSHINE EDUCATION ACADEMY, a California corporation, Defendant on the Amended Complaint (1st) filed by DONGYI (USA) TRADING GROUP, INC.., a California corporation on 11/09/2022, filed herein on 05/01/2023 is ordered stricken and the default is entered this date. The Answer of WENYING SUN, Defendant on the Amended Complaint (1st) filed by DONGYI (USA) TRADING GROUP, INC.., a California corporation on 11/09/2022, filed herein on 05/01/2023 is ordered stricken and the default is entered this date.”

On October 10, 2024, Plaintiff filed the instant application for entry of default judgment.

Plaintiff seeks default judgment in the total amount of $239,994.23 against both defendants ($200,000 in damages, $37,534.23 in interest, $2,400 in attorney fees, and $60 in filing fee).[3]

At the outset, the court notes that Plaintiff’s request for entry default judgment against the individual defendant based upon her role as the sole owner of the corporation is proper. While directors or officers do not incur personal liability for corporate torts merely because of their official position, they may be liable should they participate in the wrong or authorize or direct that it be done. (United States Liab. Ins. Co. v. Haidinger-Hayes (1970) 1 Cal.3d 586, 595; see also Wyatt v. Union Mortg. Co. (1979) 24 Cal.3d 773, 785.)

Here, Plaintiff states that “[f]rom the limited amount of information obtained, it became clear that the $200,000 investment into Sunshine Education Academy was transferred within one month by Defendant Wenying Sun to herself and other third parties without justification.” (Gao Decl., p. 3.) Thus, based off the financial records produced during discovery, Plaintiff has provided sufficient evidence that the individual defendant directed the harm.

That said, the application is denied for the lack of sufficient evidence as to the $200,000 investment. It is up to plaintiff to “prove up” the right to relief, by introducing sufficient evidence to support his or her claim. Without such evidence, the court may refuse to grant a default judgment for any amount, notwithstanding defendant's default. (Taliaferro v. Hoogs (1963) 219 Cal.App.2d 559, 560; Holloway v. Quetel (2015) 242 Cal.App.4th 1425, 1434-1435.)

Here, however, no deposit of sorts has been submitted to substantiate that Plaintiff did indeed make a $200,000 payment to Defendant. And according to the complaint, Plaintiff’s owner lives in China such that it is presumed any money was electronically transferred for there to be a paper trail/record to submit as evidence. Thus, the application for default judgment is denied for that reason.

Based on the foregoing, the default judgment application is denied without prejudice for insufficient evidence.

[1] According to counsel’s declaration filed on 2/20/24, he did not attend the 1/31/24 hearing because he “was under the impression” that should Plaintiff depose Sun, which Defendants agreed to, supplemental discovery responses would be unnecessary such that the IDC would be taken off calendar. According to Plaintiff’s Counsel’s declaration filed on 4/9/24, the agreement was contingent upon Defendants taking Plaintiff’s settlement offer, which they refused. In fact, after the conversation, Plaintiff’s Counsel filed the IDC brief with the court and served it upon Counsel Andion.

[2] The court’s tentative was to give 30 days for responses, but instead gave 60 days.

[3] The JUD-100 form does not provide a total amount.