Judge: Douglas W. Stern, Case: 22STCV04880, Date: 2023-05-15 Tentative Ruling

Case Number: 22STCV04880    Hearing Date: May 15, 2023    Dept: 68

Yu Chen vs. Cong Ye, et al.; 22STCV04880

MOVING PARTY: Defendant JPMorgan Chase Bank, National Association

Demurrer to First Amended Complaint

It is generally a poor practice to not oppose a demurrer, particularly when a prior demurrer was sustained to a prior complaint in favor of the same party.  The Court desires to know the position of parties as it determines the proper course of action.  Plaintiff has not filed an opposition to this demurrer.

In simple, layman terms “What did Chase do wrong?”

The Court now answers that question in legal terms.

I. BACKGROUND

Plaintiff filed a complaint on February 8, 2022, alleging four causes of action for (1) Conversion, (2) Common Count; (3) Constructive Trust; and (4) Violation of Penal Code Section 496. Initially the only named defendant was Defendant Cong Ye.

Plaintiff alleged that in April and May 2021, upon leaving the United States Plaintiff put $105,000 in Defendant Ye’s bank account. Ye confirmed receipt of the funds, and agreed to hold the funds on Plaintiff’s behalf and to return the funds to Plaintiff promptly on Plaintiff’s request. Plaintiff asked for the funds on December 8, 2021, and on December 9, 2021.

“11. On or about December 9, 2021, Defendant YE confessed to Plaintiff that, without Plaintiff’s consent, approval or knowledge, YE had withdrawn the FUND and sent all the balance to one of his relatives.

12. On or about December 11, 2021, Defendant YE acknowledged that he had converted all the Fund he was holding on Plaintiff’s behalf and promised to Plaintiff that he would return the FUND to Plaintiff.”

Ye returned a portion of the funds, but has no returned $79,000 of the funds to Plaintiff.

On October 14, 2022, Plaintiff filed an amendment to the complaint, adding Defendant JPMorgan Chase in place of one of the Does. Plaintiff did not otherwise amend the complaint. There were no allegations in the Complaint that related to the role of Chase. The Court sustained Defendant Chase’s demurrer to this complaint on February 1, 2023, and noted it its written ruling:

“Although Plaintiff made no allegations that relate even indirectly to how defendant JP Morgan Chase is involved in the allegedly wrongful acts, Plaintiff chose to not amend to allege a factual basis for joining JP Morgan Chase in this action, but instead chose to stand on the allegations of the Complaint.”

Plaintiff filed the First Amended Complaint on February 21, 2023. Plaintiff added a cause of action for unjust enrichment to the complaint.

Defendant filed this Demurrer to the most recent version of the Complaint on March 27, 2023. No opposition has been filed as of May 11, 2023.

The material allegations of the First Amended Complaint did not cure the failure of Plaintiff to allege a basis for imposing liability on Defendant Chase.

“9. In April and May 2021, upon leaving the United States and at various times, Plaintiff deposited … the sum of USD 105,000 (“FUND”) to Defendant YE’s bank account. Plaintiff asked Defendant to temporarily hold the FUND on Plaintiff’s behalf and to promptly return all of the FUND to Plaintiff upon Plaintiff’s request. Defendant YE confirmed the receipt of the FUND, agreed to hold the FUND on Plaintiff’ behalf and to return all the FUND to Plaintiff promptly upon his request.

10. On or about December 8, 2021, Plaintiff asked Defendant YE to send all the FUND back to him…

11. On or about December 9, 2021, Defendant YE confessed to Plaintiff that, without Plaintiff’s consent, approval or knowledge, YE had withdrawn the FUND and sent all the balance to one of his relatives.

* * *

13. Upon Plaintiff’s repeated requests and demands, Defendant YE repaid Plaintiff the sum of USD 26,000 as of December 23, 2021. Plaintiff has not received any repayment of the balance of the FUND since then.

14. At all times relevant, Defendants knew that they were not entitled to any portion of the FUND, which belonged solely to Plaintiff.

15. Plaintiff has demanded that Defendants immediately return to Plaintiff the FUND. Defendant YE has acknowledged that the FUND is not his and that he must return same. But Defendants have failed to do so and to date have only returned to Plaintiff the sum of USD 26,000 of such FUND with USD 79,000 of the FUND still remaining due. Plaintiff is informed and believes, and thereon alleges that Defendants have used portion of or all of the aforementioned USD 79,000 unreturned balance to pay off the debts Defendant YE owed to Defendant Chase and some other co-Defendants of this case.”  (Bold added.)

Chase is named as a Defendant only in the Second Cause of action for Money Had and Received, Third Cause of Action for Constructive Trust, and Fifth Cause of Action for Unjust Enrichment.

II. ANALYSIS

A. The Demurrer

As a general matter, in a demurrer, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Leave to amend is liberally granted when there is a possibility that the Plaintiff can amend and state a valid claim. The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

1. Second Cause of Action for Common Count

Defendant demurs to the Second Cause of Action for Common Count of Money Had and Received on the basis that Plaintiff has failed to plead facts sufficient to maintain a cause of action against Defendant.

“The only essential allegations of a common count are ‘(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.’” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460, internal citations omitted.)

Plaintiff has not pled how Defendant Chase would be indebted to Plaintiff or what the sum would be. Plaintiff alleges that Plaintiff gave the funds to Defendant Ye.  It was Ye that was to hold the funds and return them on Plaintiff’s request. Chase is not alleged to have had any obligations to Plaintiff. The account stood in the name of Defendant Ye. It was Defendant Ye who withdrew the funds, and Plaintiff has not pled how Chase is indebted to Plaintiff.

Accordingly, Defendant’s demurrer as to Plaintiff’s Second Cause of Action is sustained without leave to amend.

                        2. Third Cause of Action for Constructive Trust

A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner. The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing. (Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990; Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 920.)

To allege a constructive trust, a plaintiff must plead: 1) a wrongful act (underlying claim incorporated into the cause of action); 2) specific, identifiable property or property interest, or excuse for inability to describe it; 3) plaintiff’s right to the property; and defendant has title thereto. (Communist Party, supra, 35 Cal.App.4th at 990.)

Once again, Plaintiff has failed to plead any wrongdoing on the part of Defendant Chase, or that Defendant Chase currently has title to the property that Plaintiff is alleging was wrongfully taken. As such, Plaintiff may not maintain a cause of action for constructive trust against Defendant Chase.

Accordingly, Defendant’s Demurrer as to Plaintiff’s Third Cause of Action is sustained without leave to amend.

            3. Fifth Cause of Action for Unjust Enrichment

Defendant demurs to the Fifth Cause of Action for Unjust Enrichment on the basis that Plaintiff has failed to state facts sufficient to constitute a cause of action against Defendant.

The First Amended Complaint pleads no facts that might impose liability on Chase for unjust enrichment. Plaintiff’s allegations against Chase appear in paragraph 15 of the First Amended Complaint.

“Plaintiff is informed and believes, and thereon alleges that Defendants have used portion of or all of the aforementioned USD 79,000 unreturned balance to pay off the debts Defendant YE owed to Defendant Chase and some other co-Defendants of this case.” (Bold added.)

Chase is no unjustly enriched when Ye used funds in his Chase account to pay his debts to Chase. Chase is entitled to accept payments to it of valid obligations owed it by its customers.  The fact that Ye may have misappropriated funds entrusted to him does not convert the payment by Ye of his debt to Chae into an “unjust enrichment” by Chase.  There is nothing unjust in allowing Chase to be paid what it is owed.

Defendant’s Demurrer as to Plaintiff’s Fifth Cause of Action is sustained without leave to amend.

III. ORDER

1.    Defendant’s Demurrer as to Plaintiff’s Second, Third, and Fifth Causes of Action is sustained without leave to amend.