Judge: Donald F. Gaffney, Case: Li v. Luk, Date: 2023-07-26 Tentative Ruling
TENTATIVE RULING:
For the reasons set forth below, Defendants Wai Leung Luk and Liyun Zhong’s Demurrers are overruled, and their Motions to Strike are denied, both in their entirety.
A. Statement of Law - Demurrer
“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds: … (e) The pleading does not state facts sufficient to constitute a cause of action. (f) The pleading is uncertain. As used in this subdivision, ‘uncertain’ includes ambiguous and unintelligible.” (Code Civ. Proc., § 430.10, subds. (e) & (f)[1]; see § 430.50, subd. (a) [demurrer may be taken to whole pleading or to any of the causes of action stated therein].)
“A person against whom a complaint or cross-complaint has been filed may, within 30 days after service of the complaint or cross-complaint, demur to the complaint or cross-complaint.” (§ 430.40, subd. (a).) “A demurrer shall distinctly specify the grounds upon which any of the objections to the complaint, cross-complaint, or answer are taken. Unless it does so, it may be disregarded.” (§ 430.60.)
A demurrer challenges the sufficiency of a pleading by raising questions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 833.) As such, the only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (McKenney v. Purepac Pharmaceutical Co. (2008) 167 Cal.App.4th 72, 77.) If the complaint fails to state a cause of action, the court must grant the plaintiff leave to amend if there is a reasonable possibility the defect can be cured by amendment. (Blank, supra, 39 Cal.3d at p. 318.) On the other hand, “a trial court does not abuse its discretion by sustaining a general demurrer without leave to amend if it appears from the complaint that under the applicable substantive law there is no reasonable possibility that an amendment could cure the complaint’s defect.” (Heckendorn v. City of San Marino (1986) 42 Cal.3d 481, 486.)
In ruling on a demurrer, the trial court must accept as true all material facts properly pleaded in plaintiff’s petition, disregarding only conclusions of law and allegations contrary to judicially noticed facts. (Burt v. County of Orange (2004) 120 Cal.App.4th 273, 277.) All that is necessary as against a general demurrer is to plead facts entitling the plaintiff to some relief under any possible legal theory. (Woods v. Superior Court (1981) 28 Cal.3d 668, 673.) In evaluating the demurrer, the trial court gives the pleading a reasonable interpretation by reading it as a whole and all of its parts in their context. (Blank, supra, 39 Cal.3d at p. 318.) “‘A general demurrer admits the truth of all material factual allegations in the complaint [citation]; … the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.’ [Citations.]” (Concerned Citizens of Costa Mesa, Inc. v. 32nd Dist. Agricultural Assn. (1986) 42 Cal.3d 929, 936; see Knickerbocker v. City of Stockton (1988) 199 Cal.App.3d 235, 245 [proof of damages].)
B. Statement of Law – Motion to Strike
“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof….” (§ 435.) “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.” (§ 436.)
“The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (§ 437, subd. (a).)
C. Defendants Adequately Complied With The Meet and Confer Obligation Prior to Filing the Demurrer and Motion to Strike
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, to see whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (§ 430.41, subd. (a).) The demurring party is required to meet and confer with the opposing party at least five days before the date the responsive pleading is due. (§ 430.41, subd. (a)(2).) As part of the meet-and-confer process, the demurring party “shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies.” (§ 430.41, subd. (a)(2).)
“Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike.” (§ 435.5, subd. (a).) “As part of the meet and confer process, the moving party shall identify all of the specific allegations that it believes are subject to being stricken and identify with legal support the basis of the deficiencies. The party who filed the pleading shall provide legal support for its position that the pleading is legally sufficient, or, in the alternative, how the pleading could be amended to cure any legal insufficiency.” (§ 435.5, subd. (a)(1).)
The meet-and-confer declaration shall state “the means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer,” or “[t]hat the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (§ 430.41, subd. (a)(3).) However, “[a]ny determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer. (§ 430.41, subd. (a)(4); Dumas v. Los Angeles County Bd. of Supervisors (2020) 45 Cal.App.5th 348, 356; Olson v. Hornbrook Community Services Dist. (2019) 33 Cal.App.5th 502, 515.)
“The moving party shall file and serve with the motion to strike a declaration stating either of the following: (A) The means by which the moving party met and conferred with the party who filed the pleading subject to the motion to strike, and that the parties did not reach an agreement resolving the objections raised by the motion to strike. (B) That the party who filed the pleading subject to the motion to strike failed to respond to the meet and confer request of the moving party or otherwise failed to meet and confer in good faith.” (§ 435.5, subd. (a)(3).) However, “[a] determination by the court that the meet and confer process was insufficient is not grounds to grant or deny the motion to strike.” (§ 435.5, subd. (a)(4).)
Defendants’ counsel represents he “met and conferred with counsel in writing on numerous occasions and stated all specific allegations, causes of action that Defendant believes are subject to demurrer and motion to strike and identified the legal basis for the deficiencies. Plaintiff respon[d]e[d] and disagreed with defendant’s points and authorities.” (Declaration of William L. Niu, ¶ 2.) According to attorney Niu, “the parties have not reach[ed] an agreement resolving the objections raised in the demurrer and motion to strike.” (Niu Declaration, ¶ 3.)
While Defendants did not meet and confer with Plaintiff “in person or by telephone,” the Demurrers, Motions to Strike, and the respective Oppositions, make clear Plaintiff does not agree with Defendants’ position as to the adequacy of the First Amended Complaint’s allegations.
Therefore, the Court finds Defendants adequately complied with sections 430.41 and 435.5’s meet-and-confer requirements prior to their filing of the Demurrer and Motion to Strike.
D. The Court Overrules the Demurrer
a. 1st-3rd Causes of Action
Zhong demurs to the first cause of action for Breach of Oral Contract, the second cause of action for Breach of Implied Contract, and the third cause of action for Negligence, arguing she was not a party to the contract between Plaintiff and Luk.
However, Zhong’s Demurrer asks the Court to ignore the allegations of the First Amended Complaint, wherein Plaintiff alleges Zhong “was present, personally met with the Plaintiff together with Luk and participated in the negotiations of the Contract.” (First Amended Complaint, ¶¶ 19, 60; see also ¶ 13 [Luk requested the $80,000 payment for Phase One of the contract be transferred to Zhong’s bank account, as “money from the Project all went to his wife”].)
It is further alleged “[e]ach defendant, whether actually or fictitiously named herein, as the principal, agent (actual or ostensible), coconspirator, or employee of each other Defendant and in acting as such principal or within the course and scope of such employment, agency, or conspiracy, took some part in the acts and omissions hereinafter set forth and by such reason, and each Defendant was acting as an agent for each other; each Defendant is liable to the Plaintiff.” (First Amended Complaint, ¶ 5.)
While the allegations of the First Amended Complaint focus primarily on whether Luk abided by the parties’ oral contract for the remodel of Plaintiff’s residence, there are sufficient allegations Zhong was a party to the contract, such that Luk’s alleged breaches, as well as his negligence, are imputed to Zhong.
Thus, he Court overrules Zhong’s Demurrer to the first through third causes of action.
b. 4th-6th Causes of Action
Luk and Zhong contend the fourth cause of action for Promissory Fraud, the fifth cause of action for Intentional Misrepresentation, and the sixth cause of action for Negligent Misrepresentation, have not been pled with sufficient specificity.
As a preliminary matter, Zhong is not a defendant to the fifth or sixth causes of action. Thus, Zhong’s demurrer to these causes of action is overruled.
“The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages. [Citation.] The elements of negligent misrepresentation are the same except for the second element, which for negligent misrepresentation is the defendant made the representation without reasonable ground for believing it to be true. [Citations.]” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.)
“ ‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. [Citations.]” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract. [Citations.]” (Ibid.)
“‘In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] “Thus ‘“the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ [Citation.] This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’”’ [Citation.]” (Small v. Fritz Companies Inc. (2003) 30 Cal.4th 167, 184; Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166-1167, disapproved, on other grounds, as discussed in Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 948, fn. 12 [lenders do not have duty to exercise due care in processing, reviewing and responding to loan modification applications].) The purpose of the requirement that fraud be pled specifically is to “provide[] enough information for respondents to know what purported falsehoods they must defend against. [Citation.]” (Murphy v. BDO Seidman, LLP (2003) 113 Cal.App.4th 687, 693.)
Defendants contend the First Amended Complaint is silent as to what promises and/or representations were made, if any, prior to Plaintiff paying Defendants on three separate occasions.
This is belied by a cursory review of the First Amended Complaint. Reading the First Amended Complaint as a whole, and all its parts in context, it is clear Plaintiff’s allegation against Defendants is that they misrepresented their ability to perform the remodeling project of Plaintiff’s residence. This includes the misrepresentation that they had obtained the necessary permits and approvals, as well as Luk’s representations that he would complete the project. (First Amended Complaint, ¶¶ 11-12, 15-18, 20-21, 26-28, 30, 32-38.) Instead, the reality was that Luk was an unlicensed contractor, he did not obtain the necessary permits and approvals, and he only completed approximately 10% of the project, which needed to be redone by new contractors due to the defective nature of Luk’s work. (First Amended Complaint, ¶¶ 26, 28, 33, 36-37, 41-43.)
While it is true Plaintiff did not specify what representations were made, if any, prior to each of Plaintiff’s three payments, it is clear from the allegations of the First Amended Complaint that these were payments Plaintiff made for the project. It is disingenuous for Defendants to feign ignorance when their own Demurrers acknowledge the payments were progress payments. (See Luk Demurrer, 7:26-8:11 [setting forth that the first two payments, totaling $120,000, were made after Defendants had completed no more than 10% of the project, and acknowledging the final $65,000 payment was made the month Defendants ceased work on the project].)
The Court overrules the Demurrers to the fourth through sixth causes of action.
c. 7th Cause of Action
“ ‘The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by [that party’s] reliance.” ’ [Citation.] ‘To be enforceable, a promise need only be “ ‘definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.’ ” [Citation.] It is only where “ ‘a supposed “contract” does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.’ ” ’ [Citation.]” (Broome v. Regents of University of California (2022) 80 Cal.App.5th 375, 389.)
Defendants demur to the seventh cause of action for Promissory Estoppel, arguing, as with the fourth through sixth causes of action, the First Amended Complaint is silent on what promises or representations were made before each of Plaintiff’s three payments to Defendants.
As previously discussed, reading the First Amended Complaint as a whole, and all its parts in context, it is clear Plaintiff’s allegation against Defendants is that they misrepresented their ability to timely, and competently, perform the remodeling project of Plaintiff’s residence. Plaintiff’s reliance was reasonable because she had engaged Luk in the past, and Luk had completed the work satisfactorily. (First Amended Complaint, ¶ 9.) However, Defendants failed to perform the work competently, as they failed to obtain the necessary permits and approvals. They also failed to perform the work timely, as they only completed 10% of the work before abandoning the project. As a result, Plaintiff had to hire new contractors to correct and complete the work, and Plaintiff incurred in excess of $514,150 for these new contractors.
The Court overrules the Demurrer to the seventh cause of action.
d. 8th Cause of Action
“ ‘A cause of action is stated for money had and received if 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.” ’ ” (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 937; accord, Avidor v. Sutter’s Place, Inc. (2013) 212 Cal.App.4th 1439, 1454.) “This common count is available in a great variety of situations [citation] and ‘lies wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.’ [Citation.]” (Gutierrez, supra, 194 Cal.App.4th at p. 937; accord, Avidor, supra, 212 Cal.App.4th at p. 1454.)
In her Demurrer, Zhong argues she did not receive any money directly from Plaintiff, as the $31,000 she received was from a third-party, not from Plaintiff.
This is not a good faith argument, as Plaintiff alleged Luk requested that the $31,000 payment for Phase One of the project be sent to Zhong’s bank account. (First Amended Complaint, ¶¶ 13, 14.) It is further alleged Plaintiff complied with this request by depositing this amount in Zhong’s bank account. (First Amended Complaint, ¶ 15.)
While a third party made the deposit into Zhong’s account on Plaintiff’s behalf, paragraph 15 of the First Amended Complaint makes clear this deposit was made at Plaintiff’s direction, and it was specifically for “Lin Li’s remodeling payment.”
The Court overrules the Demurrer to the eighth cause of action.
e. 9th Cause of Action
“Generally, one who is unjustly enriched at the expense of another is required to make restitution. [Citations.] The elements of a cause of action for unjust enrichment are simply stated as ‘receipt of a benefit and unjust retention of the benefit at the expense of another.’ [Citations.]” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.) “ ‘ ‘The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” [Citation.]’ [Citation.]” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769.)
While one court recently held “[t]here is no cause of action in California labeled ‘unjust enrichment,’” it clarified that “ ‘[c]ommon law principles of restitution require a party to return a benefit when the retention of such benefit would unjustly enrich the recipient….’ [Citations.]” (City of Oakland v. Oakland Raiders (2022) 83 Cal.App.5th 458, 477.) It further acknowledged the elements of such a claim “ ‘ “are simply stated as “receipt of a benefit and unjust retention of the benefit at the expense of another.” ’ ” (Ibid.)
“ ‘[A]n action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter.’ [Citation.] However, ‘restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.’ [Citation.] Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by ‘alleg[ing] in that cause of action] that the express contract is void or was rescinded.’ [Citation.] A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement. [Citation.]” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.)
Defendants argue an unjust enrichment cause of action does not lie where the parties have an enforceable express contract. However, the unjust enrichment cause of action makes allegations wholly separate from the breach of contract causes of action. Specifically, Plaintiff alleges Luk was an unlicensed contractor, such that Defendants are required to disgorge any financial benefits that were unjustly conferred on them. (See Bus. & Prof. Code, § 7031, subd. (b) [“Except as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract”].)
In this case, while Plaintiff may not recover both contract damages and restitution, she is entitled to plead an alternative theory of recovery.
The Court overrules the Demurrer to the ninth cause of action.
E. The Court Denies the Motion to Strike
a. Ninth Cause of Action
Defendants move to strike the ninth cause of action, arguing Plaintiff cannot assert such a cause of action because she has already alleged the existence of an enforceable express contract. However, as discussed, and pursuant to the authority of Rutherford and section 7031, subdivision (b) of the Business and Professions Code, Plaintiff was permitted to assert an unjust enrichment cause of action as an alternative to her contract-based causes of action.
As noted, Plaintiff has alleged Luk was not a licensed contractor, such that any contract between Plaintiff and Defendants is unenforceable due to Defendants’ status as unlicensed contractors. Due to the lack of licensure, Plaintiff was permitted to bring an action to seek restitution of all amounts paid to Defendants.
b. Punitive Damages
Defendants move to strike paragraphs 91 and 103, as well as Prayer no. 4. However, paragraphs 91 and 103 are alleged in Plaintiff’s causes of action for Promissory Fraud and Intentional Misrepresentation.
A properly pleaded fraud cause of action will support a claim for punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610 [“A fraud cause seeking punitive damages need not include an allegation that the fraud was motivated by the malicious desire to inflict injury upon the victim. The pleading of fraud is sufficient”].) see Miller v. National American Life Ins. Co. (1976) 54 Cal.App.3d 331, 336 [“proof of the cause of action for fraud is itself an adequate basis for awarding punitive damages”]; see Louisiana Pacific Corp. v. Money Market 1 Institutional Inv. Dealer (N.D. Cal., Mar. 28, 2011, No. C 09-03529 JSW) 2011 WL 1152568, at *11, fn. 8 [since trial court denied a motion to dismiss the plaintiff’s claim for common law fraud, the defendant’s motion to strike plaintiff’s prayer for punitive damages was denied]; see Dorsett v. Sandoz, Inc. (C.D. Cal., Dec. 23, 2010, No. CV067821AHMAJWX) 2010 WL 11509321, at *5 [since plaintiff stated a claim for fraudulent concealment, plaintiff was entitled to seek punitive damages].)
The Court denies the Motion to Strike punitive damages.
c. Attorneys’ Fees
Defendants move to strike prayer no. 6. The Court denies the Motion to Strike.
“Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.” (§ 1021.) “[G]enerally speaking, attorneys’ fees are not recoverable as costs unless expressly allowed by statute or by virtue of a contract. [Citations.]” (City of Industry v. Gordon (1972) 29 Cal.App.3d 90, 93; see §§ 1021, 1032 [recoverable costs]; see Covenant Mutual Ins. Co. v. Young (1986) 179 Cal.App.3d 318, 321 [under the “American rule,” both parties bear their own legal fees, unless attorneys’ fees are provided for under contract or statute].)
“Attorney fees incurred by a plaintiff in bringing a fraud action are not recoverable. [Citations.]” (Bezaire v. Fidelity & Deposit Co. (1970) 12 Cal.App.3d 888, 892; see Pederson v. Kennedy (1982) 128 Cal.App.3d 976, 978-979 [fraud not basis for attorney’s fees]; see Farmer v. Moser (In re Moser) (Bankr.N.D.Cal. July 9, 2011, Nos. 09-11945, 09-1126) 2011 Bankr. LEXIS 2667, at *8-9 [tort action for fraud arising out of a contract is not an action on a contract, such that plaintiff may not recover attorney fees based on any agreement to allow for attorneys’ fees for tort actions under section 1021].)
However, “Any unlicensed person who causes injury or damage to another person as a result of providing goods or performing services for which a license is required under … Division 3 (commencing with Section 5000)[2] … of the Business and Professions Code …, shall be liable to the injured person for treble the amount of damages assessed in a civil action in any court having proper jurisdiction. The court may, in its discretion, award all costs and attorney’s fees to the injured person if that person prevails in the action.” (§ 1029.8, subd. (a); see Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, 739-740 and In re Aleksanyan (Bankr. C.D. Cal., Aug. 19, 2022, No. 1:19-BK-11692-MT) 2022 WL 3580208, at *8 [acknowledging section 1029.8 provides for attorney fees where the contractor was unlicensed].)
While Plaintiff’s Opposition does not address Defendants’ motion to strike attorneys’ fees, section 1029.8 of the Code of Civil Procedure and section 7031, subdivision (b) of the Business and Professions Code provide the statutory basis for Plaintiff’s prayer for attorneys’ fees.
The Court denies the Motion to Strike.
Plaintiff to give notice.