Judge Daniel M. Crowley, Case Number: 22STCV33091, Date: 2023-08-18 Tentative Ruling

Cross-Defendant No Soo Kim’s demurrer to Cross-Complainants Korea Gardens Restaurant, Inc.’s and Kenneth Kim’s first amended cross-complaint is overruled as to the 1st and 2nd causes of action.

Cross-Defendant No Soo Kim (“No Soo”) (“Cross-Defendant”) demurs to the 1st and 2nd causes of action in Cross-Complainants Korea Garden Restaurant, Inc.’s (“KGR”), and Kenneth Kim (“Kenneth”) (collectively, “Cross-Complainants”) first amended cross-complaint (“FAXC”). (Notice of Demurrer, pg. 2.)

Cross-Defendant’s 4/6/23 request for judicial notice of (1) portions of No Soo’s Requests for Admissions to Kenneth, Set Number One, served January 24, 2023, including Exhibit “1,” thereto (Exh. B); (2) portions of Kenneth’s Responses to Plaintiff’s Requests for Admissions, Set One, served April 10, 2023 (Exh. C); (3) portions of No Soo’s Requests for Admissions to KGR, Set Number One, served January 24, 2023, including Exhibit “1,” thereto (Exh. D); and (4) portions of KGR’s Responses to Plaintiff’s Requests for Admissions, Set One, served April 10, 2023 (Exh. E), is granted.

Before filing a demurrer, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer. (C.C.P. §430.41.)

Cross-Defendant’s counsel declares he attempted to meet and confer Cross-Complainants’ counsel on March 20, 2023, and sent a detailed email with respect to the issues on this demurrer. (Decl. of Lim ¶2, Exh. 1 at pgs. 4-6.) Cross-Defendant’s counsel declares he sent a follow-up email to Cross-Complainants’ counsel on April 11, 2023, about the necessity to meet and confer, and on April 14, 2023, he called Cross-Complainants’ counsel and sent an email. (Decl. of Lim ¶¶3-4.) Cross-Defendant’s counsel declares Cross-Complainants’ counsel, to date, has not met and conferred with respect to the demurrer. (Decl. of Lim ¶5.) Cross-Defendant has demonstrated sufficient efforts in good faith to attempt to resolve the issues on this demurrer out of court. (C.C.P. §§430.41(a)(3)(B).) Therefore, the Court will consider the instant demurrer.

Cross-Complainants filed the initial cross-complaint on February 6, 2023. Cross-Complainants filed the operative FAXC on March 9, 2023, against Cross-Defendant alleging two causes of action: (1) declaratory relief re real property; and (2) declaratory relief re existence of partnership. Cross-Complainants’ causes of action arise from KGR’s alleged entry into an agreement (“Agreement”) with non-party Yongsusan USA, Inc. (“Yongsusan”), on or about April 1, 1998, which was signed by Kenneth as KGR’s president and No Soo as Yongsusan’s then-president. (FAXC ¶9.) Cross-Complainants allege on or about September 19, 2005, KGR and Yongsusan agreed that No Soo would be substituted in place of Yongsusan, and this is the only amendment to the Agreement. (FAXC ¶12.)

Cross-Defendant filed the instant demurrer on April 26, 2023. Cross-Complainants filed a notice of errata re Exhibit A to the FAXC on August 4, 2023. Cross-Complainants filed their opposition on August 7, 2023. Cross-Defendant filed a reply on August 11, 2023.

Cross-Defendant demurs on the basis that Cross-Complainants’ 1st and 2nd causes of action fail to state facts sufficient to constitute causes of action against Cross-Defendant and are so uncertain they fail to constitute to properly pleaded causes of action because Cross-Complainants failed to attach the copy of the Agreement, indicated as “Exhibit A,” and incorporated by reference in the FAXC. (Demurrer, pg. 6.)

“[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 Insurance 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 Hospital District (1992) 2 Cal.4th 962, 967.)

It is essential, that a cause of action based upon a written contract allege the terms of the contract. (See Twaite v. Allstate Insurance Co. (1989) 216 Cal.App.3d 239, 252 [“it is absolutely essential to plead the terms of the contract either in haec verba or according to legal effect”]; Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 654.)

Cross-Complainants concede they failed to attach Exhibit A to their FAXC and filed a notice of errata attaching the Agreement. (Notice of Errata, Exh. A.) Cross-Defendant concedes the Notice of Errata renders their demurrer to the 1st cause of action moot.

Accordingly, Cross-Defendant’s demurrer to the 1st cause of action is overruled as moot.

Under the sham pleading doctrine, “[i]f a party files an amended complaint and attempts to avoid the defects of the original complaint by either omitting facts which made the previous complaint defective or by adding facts inconsistent with those of previous pleadings, the court may take judicial notice of prior pleadings and may disregard any inconsistent allegations.” (Colapinto v. County of Riverside (1991) 230 Cal.App.3d 147, 151.)

“The general rule . . . is that material factual allegations in a verified pleading that are omitted in a subsequent amended pleading without adequate explanation will be considered by the court in ruling on a demurrer to the later pleading.” (Shoemaker v. Myers (1990) 52 Cal.3d 1, 12-13.) Although Shoemaker dealt with a verified complaint, the principle has been held equally applicable to unverified complaints. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1109; Hearn Pacific Corp. v. Second Generation Roofing Inc. (2016) 247 Cal.App.4th 117, 131-132 n.7 [noting there may be an exception if unverified complaint has been superseded by an amended pleading].)

Cross-Complainants allege No Soo failed to contribute capital to the partnership as required by the Agreement. (FAXC ¶23.) Cross-Complainants allege KGR also failed to contribute capital to the partnership as required by the Agreement. (FAXC ¶24.) Cross-Complainants allege that based on the parties’ mutual failure to contribute capital to the partnership as required by the Agreement, the Agreement fails based on mutual failure of consideration by all parties, and no partnership exists. (FAXC ¶25.)

Cross-Complainants allege they seek a declaration of non-existence of a partnership created by the Agreement in the first instance. (FAXC ¶26.) Cross-Complainants allege a controversy exists between Cross-Complainant and Cross-Defendant with regard to the existence of a partnership pursuant to the Agreement. (FAXC ¶27.) Cross-Complainants allege that the No Soo and KGR both failed to contribute capital to the partnership as required by the Agreement such that the failure of consideration renders the Agreement unperformed at its inception, and no partnership exists. (FAXC ¶27.) Cross-Complainants allege Cross-Defendant contends that the Agreement is valid and enforceable in that it created a partnership which Cross-Defendants now seeks to dissolve. (FAXC ¶27.)

Cross-Complainants allege they request a judicial declaration as follows: (A) No Soo did not contribute capital as required by the Agreement; (B) KGR did not contribute capital as required by the Agreement; and (C) based on the parties’ mutual failure of consideration, the Agreement fails, and no partnership was created as a result of the Agreement. (FAXC ¶28.)

Cross-Defendant argues the Notice of Errata attaching Exhibit A to the FAXC confirms that the pleading fails to sufficiently allege a failure of consideration, and the initial cross-complaint refutes this allegation by admitting the partnership restaurant business has operated for over twenty-four years. (CC ¶17.)

Cross-Complainants’ amendments in its FAXC do not invoke the sham pleading doctrine. First, the Court may only consider “factual allegations” of earlier pleadings and will not assume the truth of contentions, deductions, or conclusions of law. (Levi v. O’Connell (2006) 144 Cal.App.4th 700, 705.) Here, Cross-Complainants’ omission of the allegation that “the agreement constitutes a lawful, valid and binding contract” is immaterial because the allegation is not a fact admission but a legal conclusion. (See Cal.Jur.3d Pleading §36 [“general allegations are mere conclusions of law as to contract validity, legality, fairness, meaning or construction, or the intention of the parties thereto[.]”]; see also Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1314 [“Although on demurrer a reviewing court ordinarily assumes as true the facts alleged in the complaint, a pleader’s legal characterization of a contract is not controlling[.]”.])

Second, omissions from an earlier pleading are not grounds for challenge when the amended pleadings assert different claims or defenses to which the omitted allegations are immaterial. (See Amarel v. Connell (1988) 202 Cal.App.3d 137, 145.) In this case, Cross-Complainants’ original cross-complaint contained three causes of action, breach of contract, breach of fiduciary duty, and declaratory relief. In connection with the breach of contract claim, Cross-Complainant also alleged that “KGR has substantially performed under the terms of the agreement by, among other things, providing the Restaurant the use of all licenses and permits issued to KGR for the operation of the restaurant[.]” (See CC ¶17.) That cause of action was omitted in the FAXC, making the related allegation that “KGR has substantially performed” immaterial.

Third, the “sham pleading rule should not be applied in a case . . . where the [cross-complainant] seeks to change his legal theory of recovery and the legal conclusions he seeks to draw from underlying factual events, and also seeks to omit factual allegations that are irrelevant and immaterial to the new legal theories asserted.” (Berman v. Bromberg (1997) 56 Cal.App.4th 936, 949.) “It is irrelevant that new legal theories are introduced as long as the proposed amendments ‘relate to the same general set of facts.’” (Id. at pg. 945.) “In the absence of inconsistent factual allegations, any inconsistenc[ies] between [cross-complainants] legal theories [are] immaterial.’” (Id.; see also Lim v. The.TV Corp. International (2002) 99 Cal.App.4th 684, 690 [holding that there is no bar to alternative or inconsistent pleading of the legal effect of facts].) As such, Cross-Complainants’ FAXC is not a sham pleading.

Cross-Defendant’s argument that even if he did not contribute the $500,000, as required by the Agreement, it does not constitute failure of consideration because the Agreement does not set forth a payment deadline is also unavailing. “If no time is specified for the performance of an act required to be performed, a reasonable time is allowed. If the act is in its nature capable of being done instantly – as, for example, if it consists in the payment of money only – it must be performed immediately upon the thing to be done being exactly ascertained.” (Civ. Code §1657.) Nevertheless, extended delay in performance of a contract may also constitute failure to of consideration. (See National Pacific Oil Co. v. Watson (1920) 184 Cal. 216, 223 [three-year nine-month delay is material]; Barandun v. Barandun Mining & Milling Co. (1916) 172 Cal. 250, 253 [six-month delay in performance is material]; Rector v. Lewis (1916) 172 Cal. 1, 4 [two-month delay in performance is material].) Here, Cross-Complainants allege that the Agreement was entered into on or about April 1, 1998, and that “to date” No Soo has only contributed approximately $170,000 of the $500,000 required under the Agreement. (FAXC ¶¶9, 13.)

Finally, Cross-Defendant’s arguments pertaining to pleading recission and waiver are defenses to contract formation that are not required elements of a cause of action on a cross-complaint.

Accordingly, Cross-Defendant’s demurrer to Cross-Complainants’ 2nd cause of action is overruled.

Cross-Defendant’s demurrer to Cross-Complainants’ 1st and 2nd causes of action are overruled.

Hon. Daniel M. Crowley

Judge of the Superior Court