Judge: Daniel S. Murphy, Case: 20STCV41059, Date: 2023-02-17 Tentative Ruling

Case Number: 20STCV41059    Hearing Date: February 17, 2023    Dept: 32

BACKGROUND

            On October 26, 2020, Plaintiff Angela Hsu initiated this action against various Defendants for (1) quiet title, (2) cancellation of instruments, and (3) usury. Plaintiff alleges that she and her husband (Decedent) were joint tenants of real property located in Oceanside, California as of September 1977 (the Property). In May 2015 and October 2017, unbeknownst to Plaintiff, Decedent borrowed $100,000 and $50,000 from Defendants, secured by the Property. Decedent passed away in August 2020, and Plaintiff alleges that as a result, she wholly owns the Property without encumbrance. Defendants have refused to remove the subject liens from the Property, prompting this lawsuit.

            On March 4, 2021, Defendants Tsasu LLC and Hestter Investment, LLC (collectively, the creditors) filed a cross-complaint against Plaintiff for breach of contract and declaratory relief, alleging that Plaintiff is responsible for the loans made to Decedent.

            On August 1, 2022, Plaintiff filed the operative First Amended Complaint, which adds causes of action for unjust enrichment and equitable indemnification against Pichi Lin (Lin). Plaintiff alleges that Decedent and Lin made the loans together without Plaintiff’s knowledge and that Lin benefitted from the money. Plaintiff alleges that if she is held liable to the creditors, then in fairness Lin should be liable to her, since Lin was the true beneficiary of the loans.  

            On December 22, 2022, Lin filed the instant demurrer to the FAC.  

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Ibid.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.) A complaint will survive demurrer if it sufficiently apprises the defendant of the issues, and specificity is not required where discovery will clarify the ambiguities. (See Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.) All reasonable inferences are drawn in favor of the complaint. (Kruss v. Booth (2010) 185 Cal.App.4th 699, 713.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendant has complied with the meet and confer requirement. (Parker Decl. ¶¶ 2-3.)

DISCUSSION

Unjust enrichment is a theory of restitution that involves: (1) receipt of a benefit; and (2) unjust retention of the benefit at the expense of another. (Elder v. Pacific Bell Telephone Co. (2012) 205 Cal.App.4th 841, 857.) Courts have construed unjust enrichment claims as quasi-contract claims seeking restitution. (Rutherford Holdings LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.) “Equitable indemnity, which requires no contractual relationship, is premised on a joint legal obligation to another for damages; it is subject to allocation of fault principles and comparative equitable apportionment of loss.” (C.W. Howe Partners Inc. v. Mooradian (2019) 43 Cal.App.5th 688, 700, internal citations omitted.) “The elements of a cause of action for equitable indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is equitably responsible.” (Ibid.)

            Plaintiff’s claims against Lin are premised on the theory that Decedent and Lin used the $150,000 of loans to fund their personal lifestyle, and therefore Lin has unjustly retained a benefit to the extent that Plaintiff bears the burden of repaying those loans. (FAC ¶ 39.) According to Plaintiff, Lin should fairly be responsible for the damages if Plaintiff is held liable to the creditors. (Id., ¶¶ 43-44.) However, it is undisputed that Decedent alone made the loans, secured by deeds of trust on the Property. (Id., ¶¶ 13-14, Ex. A, B.) These facts do not give rise to a claim for unjust enrichment based on any benefit that Plaintiff provided to Lin which should be returned, nor do they establish any fault by Lin for purposes of equitable indemnity. Plaintiff does not cite any authority affirming such causes of action based on an analogous fact pattern.

            Nevertheless, the standard on demurrer is whether “the plaintiff has stated a cause of action under any possible legal theory.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) Leave to amend is warranted if “in all probability plaintiff will eventually correct the defect.” (Bounds v. Superior Court (2014) 229 Cal.App.4th 468, 484.)

Here, it is possible for Plaintiff to assert a claim based on community property principles. The Family Code provides that “[a] spouse may not make a gift of community personal property, or dispose of community personal property for less than fair and reasonable value, without the written consent of the other spouse.” (Fam. Code, § 1100(b).) “[A] gift made in violation of section [1100] is, as against the donee, voidable by the wife in its entirety during the husband's lifetime . . . and to the extent of one-half after his death.” (Fields v. Michael (1949) 91 Cal.App.2d 443, 448.) A nonconsenting spouse is entitled to invalidate the other spouse’s transfer of community property. (Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 47.) Though labeled as unjust enrichment and equitable indemnity, Plaintiff’s claims sound in Section 1100(b) by alleging that Lin improperly received $150,000 or a portion thereof, which could potentially be classified as community property depending on the facts. (See, e.g., Knego v. Grover (1962) 208 Cal.App.2d 134, 148; In re Marriage of Bonvino (2015) 241 Cal.App.4th 1411, 1423.)

Plaintiff also claims that Lin has been improperly collecting rent on the Property even though Lin does not own the Property, and forged Decedent’s signature to accomplish this. These facts may also give rise to possible causes of action.

Because it is possible for Plaintiff to assert valid causes of action, leave to amend is warranted.

CONCLUSION

            Defendant Pichi Lin’s demurrer is SUSTAINED with leave to amend to assert causes of action based on invalid transfer of community property, improper collection of rent, and forgery.