Judge: Elaine Lu, Case: 22STCV31391, Date: 2023-08-22 Tentative Ruling

Case Number: 22STCV31391    Hearing Date: August 22, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

            On September 26, 2022, Plaintiff Carolyn S. Kwak (“Plaintiff”) filed the instant fraud and breach of contract action against Defendant Young H. Kwak (“Defendant”).  On February 21, 2023, Plaintiff filed the operative First Amended Complaint (“FAC”) against Defendant.  The FAC asserts two causes of action for (1) Intentional Misrepresentation, and (2) Breach of Contract.

            On March 15, 2023, Defendant filed the instant demurrer and motion to strike portions of the FAC.  On August 9, 2023, Plaintiff filed an opposition to the demurrer.  On August 15, 2023, Defendant filed replies for the demurrer and motion to strike.

Allegations of the Operative Complaint

The FAC alleges that:

            In 2014, Plaintiff purchased 3316 S. Beverly Drive, Los Angeles, CA (“Property”) for $765,000.00 of which $400,000.00 of the downpayment was a gift from Defendant to Plaintiff.  (FAC ¶ 3.)  In September 2020, Plaintiff decided to sell the Property and listed the Property for sale for $1,295,000.00.  (FAC ¶ 4.) 

            “On October 1, 2020 Defendant asked Plaintiff to purchase PROPERTY via a private interfamily sale as a development property for a purchase price of $1,320,000.00. Defendant verbally offered and confirmed in writing that she would assume Plaintiff’s Mortgage Loan on PROPERTY, withhold the original $400,000.00 gift made in 2014 and deposit it into an escrow for the purchase of a new property, and pay the balance of the interfamily sale proceeds to Plaintiff.”  (FAC ¶ 5.)  Plaintiff agreed to the terms of the sale and removed the Property from the listing on October 1, 2020.  (FAC ¶ 6.)

            “Plaintiff then recorded a series of deeds on October 3, 2020 eventually transferring the PROPERTY into the name of the defendant on October 3, 2020.”  (FAC ¶ 7.) 

            “On October 7, 2020, Defendant stated the $400,000.00 original mortgage gift down payment deposited via Plaintiff’s trust bank account to purchase PROPERTY would subsequently be transferred into escrow when Plaintiff purchased a new home. Defendant provided a Preliminary Estimated Buyer Statement from Mission Escrow outlining the accounting of Defendant’s interfamily purchase for PROPERTY.”  (FAC ¶ 8.)

            “On October 13, 2020, Plaintiff met Defendant at PROPERTY. At that time, Defendant subsequently refused to assume the Mortgage Loan (leaving the Mortgage Loan liability in the amount of $586K in Plaintiff’s name) for the interfamily sale of PROPERTY.”  (FAC ¶ 9.)

            “Plaintiff objected to Defendant not assuming Mortgage Loan in Plaintiff’s name and requested Defendant to transfer the PROPERTY back in Plaintiff’s name to proceed with selling the PROPERTY. On October 13, 2020, Defendant stated that the original $400,000.00 mortgage down payment gift was actually an “interest-free loan”, and required a $400,000.00 note recorded on Property in order to transfer the property back into Plaintiff’s name. Plaintiff obliged with Defendant’s demands and recorded a $400,000.00 note on October 14, 2020.”  (FAC ¶ 10.)

Request for Judicial Notice

            In conjunction with the moving papers, Defendant requests that the Court take judicial notice of:

1.     Plaintiff Carolyn S. Kwak’s First Amended Complaint in this action filed on February 21, 2023

2.     Plaintiff Carolyn S. Kwak’s original Complaint in this action filed on September 26, 2022

3.     Plaintiff Carolyn Kwak’s Petition to Determine the Validity of Purported First Amendment to the Trust, etc. (“Trust Petition”), filed by Plaintiff on April 18, 2022 in this Court, In the Matter of the Jin Kwak and Young Kwak 2009 Revocable Trust, Los Angeles Superior Court Case No. 22STPB00377

4.     Plaintiff Carolyn Kwak’s First Supplement to Trust Petition, filed by Plaintiff on April 26, 2022 in this Court, In the Matter of the Jin Kwak and Young Kwak 2009 Revocable Trust, Los Angeles Superior Court Case No. 22STPB00377

            As the Court may take judicial notice of court records and actions of the State, (See Evid. Code, § 452(c)(d)), defendants’ unopposed requests for judicial notice are GRANTED as to the facts and documents cited above.  However, the Court does not take judicial notice of the truth of assertions within. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.)

Legal Standard

Demurrer Standard 

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. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

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 “give the complaint a reasonable interpretation, and read it in context.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)  In a demurrer proceeding, 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 pleadings alone and not the evidence or other extrinsic matters.  Therefor’e, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “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.) 

Motion to Strike Standard

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer (i.e., words, phrases, prayer for damages, etc.).  (See CCP §§ 435-437.)  A party may file a motion to strike in whole or in part within the time allowed to respond to a pleading.  However, if a party serves and files a motion to strike without demurring to the complaint, the time to answer is extended.  (CCP §§ 435(b)(1), 435(c).)

A motion to strike lies only where the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws.  (CCP § 436.)  The grounds for moving to strike must appear on the face of the pleadings or by way of judicial notice.  (CCP § 437.)

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).)  There is a similar meet and confer requirement for motions to strike.  (CCP § 435.5.)

Here, Defendant has fulfilled the meet and confer requirements.  (Jenson Decl. ¶¶ 2-4, Exh. 1.)

Discussion – Demurrer

First Cause of Action – Intentional Misrepresentation

Defendant asserts that the first cause of action for Intentional Misrepresentation is not alleged with sufficient specificity.  The Court agrees.

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)  “Fraud allegations ‘involve a serious attack on character’ and therefore are pleaded with specificity.  [Citation.]  General and conclusory allegations are insufficient.  [Citation.]  The particularity requirement demands that a plaintiff plead facts which ‘‘‘show how, when, where, to whom, and by what means the representations were tendered.’’’  [Citation.]”  (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)  “[E]ach element must be pleaded with specificity.  [Citations.]”  (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166 disapproved of on other grounds by Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905.) 

The FAC alleges in relevant part that “[o]n October 1, 2020 [Defendant] represented to [Plaintiff] that she would assume Plaintiff’s Mortgage Loan, withhold the original $400,000.00 gift made in 2014 and deposit it into an escrow for the purchase of a new property, and pay the balance of the interfamily sale proceeds to Plaintiff.”  (FAC ¶ 12.)  However, there is no specificity as to how this misrepresentation was made, where this misrepresentation was made, or the context of the alleged misrepresentation.  It is equally unclear what was untruthful about any specific misrepresentation and what the actual truth was.

Moreover, it is unclear what the specific alleged harm is.  The FAC alleges that Plaintiff used a $400,000 gift from Defendant in 2014 to purchase the Property for $765,000 leaving approximately $365,000 owing for the purchase of the Property.  (FAC ¶ 3.)   In 2020, Plaintiff agreed to sell the Property to Defendant for $1,320,000, and Defendant allegedly offered to assume Plaintiff’s mortgage in exchange for withholding $400,000 from the sale to be deposited in escrow for Plaintiff to purchase a new property.  (FAC ¶ 5.)  Plaintiff transferred the Property to Defendant.  (FAC ¶ 7.)  Plaintiff then claims that Defendant breached the agreement on October 13, 2020 because Defendant failed to assume the mortgage on the property – which was somehow $586,000 at this point ($221,000 more than what was due and owing on the Property after purchase).  (FAC ¶ 9.)  Because the mortgage was still in Plaintiff’s name, Plaintiff requested the Property transferred back to Plaintiff which Defendant conditioned on a $400,000.00 interest free loan being recorded on the Property.  (FAC ¶ 10.)  In sum – as alleged – Defendant agreed to purchase the Property for $1,320,000 of which $400,000 was to be withheld in escrow for Plaintiff to purchase a new house.  Thus, Plaintiff presumably received the remaining $920,000.  Though Defendant refused to take on the mortgage, Defendant agreed to return the Property for an interest free loan of $400,000, which Plaintiff agreed to.  Plaintiff does not specify whether the property was returned but presuming as such, Plaintiff has made a net $520,000 based on this transaction, and Plaintiff has the house in Plaintiff’s name.  As alleged, Plaintiff is in a significantly better position than before the transaction.  Thus, as alleged, Plaintiff was not harmed but rather significantly benefited from the alleged “fraud”.

Accordingly, Defendant’s demurrer to the first cause of action is SUSTAINED.

Second Cause of Action – Breach of Contract

Defendant contends that the second cause of action is barred by the statute of frauds. 

            “The elements of a cause of action for breach of contract are: ‘(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.’”  (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 [internal citations omitted].) 

            Statute of Frauds

            “A general demurrer may be interposed when the complaint shows on its face that the agreement sued on is within the statute of frauds and does not comply with its requirements.”  (Parker v. Solomon (1959) 171 Cal.App.2d 125, 136.) “The statute of frauds declares several types of agreements ‘invalid’ unless ‘they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent.’ (§ 1624, subd. (a).)”  (Westside Estate Agency, Inc. v. Randall (2016) 6 Cal.App.5th 317, 323.)  “A court applying the statute of frauds is accordingly presented with two questions: (1) does the statute apply to the contract at issue?; and if so, (2) are the statute's requirements of a properly subscribed writing met?” (Ibid.) 

            The FAC alleges in relevant part that “Plaintiff and defendant entered into contract for the sale of the PROPERTY on October 1, 2020. The parties agreed that Defendant purchase the PROPERTY for $1,320,000.00, Defendant would assume Plaintiff’s Mortgage Loan on PROPERTY, withhold the original $400,000.00 gift made in 2014 and deposit it into an escrow for the purchase of a new property, and pay the balance of the interfamily sale proceeds to Plaintiff.”  (FAC ¶ 20.)  Pursuant to Civil Code section 1624(a)(3), to be valid “[a]n agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged.”  (Id., [italics added].)  Thus, the contract at issue was for the sale of the Property and therefore required to be in writing and signed by Defendant.  The FAC fails to allege as such.  The only allegation made is that Defendant made the offer verbally and confirmed an unspecified portion writing.  (FAC ¶ 5.)

Further, the original complaint alleges that the parties entered into an oral agreement for the sale of the property.  (RJN Exh. 2 at ¶ 20.)  Under the sham pleading doctrine, “[a] plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict facts pleaded in the original complaint, or by suppressing facts which prove the pleaded facts false.” (Cantu v. Resolution Trust Corporation (1992) 4 Cal.App.4th 857, 877-878.)  Where an amended complaint omits harmful allegations without explanation, the Court may take judicial notice of the prior pleadings and disregard any inconsistent allegations in the amended pleading.  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.)  The sham pleading doctrine is not intended to prevent honest complainants from correcting erroneous allegations or to prevent correction of ambiguous facts.  (Ibid.)  Instead, it is intended to enable courts “‘to prevent an abuse of process.’” (Amid v. Hawthorne Community Medical Group, Inc. (1989) 212 Cal.App.3d 1383, 1390–1391.)  Here, however, Plaintiff has failed to provide any explanation for the change in allegation from an oral contract to a verbal contract confirmed in writing.

Accordingly, Defendant’s demurrer to the second cause of action is SUSTAINED.

Discussion – Motion to Strike

            Defendants seek to strike the prayer for attorney’s fees from the FAC. 

Attorney’s Fees

            Attorney’s fees shall only be recoverable as provided for by statute, contract or other law. (CCP §§1021, 1033.5(a)(10)). 

            Here, the FAC fails to allege any basis to support the prayer for attorneys’ fees.  Moreover, Plaintiff failed to file an opposition to the motion to strike and explain the basis for the prayer for attorneys’ fees.

            Accordingly, Defendant’s motion to strike the prayer for attorney’s fees is GRANTED.

Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Goodman v. Kennedy, supra, 18 Cal.3d at p.348; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) 

            Here, it is unclear whether Plaintiff can successfully amend the complaint, especially given that there not only does not appear to be any damages but a significant benefit to Plaintiff. However, as this is the first time that the court has sustained a demurrer to these causes of action on these grounds and the claims are not necessarily barred, the Court finds it is proper to allow Plaintiff an opportunity to cure the defects discussed in this order.  (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037.) 

CONCLUSION AND ORDER

Based on the foregoing, Defendant Young H. Kwak’s demurrer to the first amended complaint is SUSTAINED WITH LEAVE TO AMEND.

Defendants’ motion to strike the prayer for attorneys’ fees is GRANTED WITH LEAVE TO AMEND.

Plaintiff is to file an amended complaint within thirty (30) days of notice of this order.

The case management conference is continued to November 1, 2023 at 8:30 am.

Moving Parties are to give notice and file proof of service of such.

DATED: August ___, 2023                                                    ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court