Judge: Elaine Lu, Case: 22STCV36925, Date: 2023-09-11 Tentative Ruling

Case Number: 22STCV36925    Hearing Date: September 11, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background       

            On November 22, 2022, Plaintiff Ricardo Sanchez (“Ricardo”)[1] filed the instant breach of contract and quiet title action against Defendants Cain Sanchez Jr. (“Cain”), Dependable Pallet Logistic, Inc. (“DPL”), Yong Yu Sanchez (“Yong Yu”), and Yans Holding LLC (“Yans”) (collectively “Defendants”).  The complaint asserts eleven causes of action for (1) Breach of Contract, (2) Breach of Covenant of Good Faith and Fair Dealing, (3) Quiet Title, (4) Declaratory Relief, (5) TRO and Injunction, (6) Accounting, (7) Constructive Trust, (8) Breach of Contract, (9) Breach of Contract, (10) Failure to Pay Wages, and (11) Failure to Pay Overtime Wages.

            On February 7, 2023, Cross-Complaints David Sanchez, Cain, and Yans (collectively “Cross-Complainants”) filed a cross-complaint against Cross-Defendant Ricardo.  On February 22, 2023, Cross-Complainants filed the operative first amended cross-complaint (“FACC”) against Cross-Defendant Ricardo.  The FACC asserts seven causes of action for (1) Breach of Contract, (2) Breach of Contract, (3) Conversion, (4) Fraud, (5) Constructive Trust, (6) Breach of Fiduciary Duty, and (7) Accounting.

            On March 28, 2023, Cross-Defendant Ricardo filed the instant demurrer and motion to strike portions of the FACC.  On August 25, 2023, Cross-Complainants filed their oppositions.  On September 1, 2023, Ricardo filed his respective replies.

Allegations of the Operative Complaints

            The complaint alleges that:

            Ricardo owned 16119 Glenhope Drive, La Puente, California 91744-4119 (“Subject Property”) until 2016 when it was subject to a non-judicial foreclosure.  (Complaint ¶¶ 1, 12.)  On August 24, 2016, Ricardo re-acquired title for the Subject Property for $374,500.00.  (Id. ¶ 12.)  To fund the repurchase of the Subject Property, Ricardo borrowed $286,000.00 from his nephew, Cain.  (Id. ¶ 12.) 

            Ricardo entered into an oral agreement where Ricardo would repay Cain by refinancing the Subject Property.  (Id. ¶ 13.)  Ricardo was then informed that he would need to hold title of the Subject Property for at least six months before he could refinance.  (Id. ¶ 13.)  Ricardo offered to provide a deed of trust in favor of Cain to secure the loan, but Cain request and Ricardo agreed that Ricardo would transfer title of the Subject Property to Cain and Cain would refinance – taking the loaned amount of $286,000.00 – and then transfer title back to Ricardo with Ricardo paying monthly loan payments.  (Id. ¶ 13.)  Pursuant to this agreement, Ricardo transferred title of the Subject Property to Cain on September 2, 2016.  (Id. ¶ 13.)

            Thereafter, Cain breached the agreement by refinancing the Subject Property and taking $330,000 in cash instead of the loaned amount of $286,000.00.  (Id. ¶ 14.)  Cain further breached the agreement by refinancing the Subject Property – taking another $175,000.000 in cash – leaving liens in excess of $461,000.00 against the Subject Property.  (Id. ¶ 16.)  Cain then transferred title to the Subject Propertyto Defendant Yans.  (Id. ¶ 17.) 

            On August 1, 2022, Cain demanded that Ricardo obtain a loan to repurchase back the Subject Property which Ricardo attempted to do but was thwarted by Cain refusing to co-sign on the loan.  (Id. ¶ 18.)  During this time Plaintiff Ricardo was making monthly loan payments of $2,000.00 to Defendant Yong Yu.  (Id. ¶ 14.)

            Defendants Cain and Yong Yu hired Ricardo to work on properties that they own from 2016 through August 2018 but failed to pay Ricardo for the labor and material used.  (Id. ¶ 20.)  Defendant Cain through Defendant DPL hired Ricardo to perform construction repairs and maintence services from March 1, 2019 through November 17, 2022 but failed to pay Ricardo.  (Id. ¶¶ 20-21.) 

            The FACC alleges that:

            Cross-Complainants Cain and Yans rented the Subject Property to Ricardo for $2,000 per month.  (FACC ¶ 7.)  Ricardo failed to pay the rent for the Subject Property from September 2018 to February 2021 for a total sum of $60,000.  (FACC ¶ 9.)

            In August 2018, Ricardo “as arrested in Morris Township, Pennsylvania with ‘bulk’ heroin and cash.”  (FACC ¶ 8.)  Cross-Complainant Cain loaned a total of $58,350 to Ricardo for bail, legal fees, and other expenses related to the arrest.  (FACC ¶ 8.)

            In March 2017, Ricardo and Cain entered into a venture to build a vacation home in Nayarit, Mexico (“Mexico Property”).  (FACC ¶ 10.)  Cain paid $43,000 for the Mexico Property but as Ricardo had time to travel and supervise the project the Mexico Property was put into his name.  (FACC ¶ 10.)  In May 2017, to fund the venture, Cross-Complainant David – Cross-Defendant Ricardo’s brother – agreed to share the cost of building and furnishing the Mexico Property spending a total sum of $260,000.  (FACC ¶ 11.)  Ricardo was offered to invest as well but refused and left the Mexico Property project turning over management to Ricardo’s brother Jesus Sanchez who lives near the Mexico Property.  (FACC ¶ 11.)

            “The Mexico Property has been utilized as an Airbnb. On or about November 2022, Cross-Defendant [Ricardo] maliciously and fraudulently took over control of the Mexico Property refusing to allow Cross-Complainants access to the Airbnb account, which is under [Ricardo]’s name, and he has not allowed access to the Mexico Property. Cross-Complainants were forced to pay approximately $6,000 for a new vacation property for renters that were not able to use the Mexico Property for their vacation and had to cancel other reservations in a sum according to proof.”  (FACC ¶ 12.)

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 read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.)  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.  Therefore, 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.)

Cross-Defendant Ricardo has satisfied the meet and confer requirement.  (Ford Decl. ¶¶ 4-5.)

Discussion - Demurrer

First and Second Causes of Action

            Cross-Defendant Ricardo contends that the first and second causes of action for breach of contract fail because Cross-Complainants (1) failed to attach the contracts or plead them verbatim, and (2) failed to allege whether the contracts are written, oral, or implied.

“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].)  “A contract is an agreement to do or not to do a certain thing.”  (Civ. Code, § 1549.)  The essential elements of a contract are parties capable of contracting; their consent; a lawful object; and a sufficient cause or consideration.  (Civ. Code, § 1550.) “To state a cause of action for breach of contract, it is absolutely essential to plead the terms of the contract either in haec verba or according to legal effect.” (Progressive West Ins. Co. v. Yolo County Superior Court (2005) 135 Cal.App.4th 263, 270, Fn. 1.)

Further, a demurrer lies if “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.”  (CCP § 430.10(g).) 

Here, the first cause of action is for the failure to repay the loans to Cain relating to Ricardo’s arrest.  (FACC ¶ 14.)  The FACC does not attach any agreement nor specify whether the agreement was written, oral, or implied by conduct.  Further, while some terms are clear such as the amount loaned, not all of the essential terms have been alleged such as when Cain was to repay Cain by.

The second cause of action is for the alleged failure to pay rent for the Subject Property from September 2018 to February 2021.  (FACC ¶ 20.)  The essential terms have not been alleged.  “A lease must include a definite description of the property leased and an agreement for rental to be paid at particular times during a specified term.”  (Beckett v. City of Paris Dry Goods Co. (1939) 14 Cal.2d 633, 637.)  While a description of the property leased and the monthly amount has been alleged, the FACC fails to describe the terms of the lease such as when the lease began.  Further, the FACC fails to allege whether the lease was written, oral, or implied by conduct as required.

Accordingly, Cross-Defendant’s demurrer to the first and second causes of action is SUSTAINED.

Third Cause of Action: Conversion

Cross-Defendant Ricardo asserts that the third cause of action fails because real property cannot be subject to a conversion claim.  The Court agrees.

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.”  (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240, [internal citations omitted].)  “[I]t is generally acknowledged that conversion is a tort that may be committed only with relation to personal property and not real property.”  (Munger v. Moore (1970) 11 Cal.App.3d 1, 7; accord Salma v. Capon (2008) 161 Cal.App.4th 1275, 1295 [“The tort of conversion applies to personal property, not real property.”].)

Here, the third cause of action alleges that Ricardo converted the Mexico Property.  (FACC ¶¶ 26-27.)  As real property, the Mexico Property cannot be subject to a claim of conversion as a conversion claim only lies to personal property.  Accordingly, Ricardo’s demurrer to the third cause of action is SUSTAINED.

Fourth Cause of Action: Fraud

Cross-Defendant Ricardo asserts that the fourth cause of action is not alleged with sufficient specificity.

“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.) 

Here, the fourth cause of action for fraud alleges that Ricardo owed Cross-Complainants a fiduciary duty and despite this duty Ricardo “abused the trust and confidence of Cross-Complainants by wrongfully and fraudulently retaining the Mexico Property and its rents.”  (FACC ¶¶ 32-33.)  Despite the use of the word “fraudulently”, Cross-Complainants have not alleged any fraud.  Cross-Complainants fail to allege any misrepresentation by Ricardo. Similarly, as no misrepresentation is alleged no specifics regarding said misrepresentations such as how, when, where, to whom, and by what means the representations were tendered.  The fact that Ricardo may have been a fiduciary and took over the Mexico Property is not fraud.  Absent a misrepresentation, Cross-Complainants have not alleged fraud.

Accordingly, Cross-Defendant Ricardo’s demurrer to the fourth cause of action for fraud is SUSTAINED.

Sixth Cause of Action: Breach of Fiduciary Duty

            Ricardo contends that the sixth cause of action fails because the FACC fails to allege a fiduciary relationship.

            “‘The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach.’”  (IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 646, [internal citation omitted].)  A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; see CACI 4100, et seq.)

            “‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which

imposes that undertaking as a matter of law.’” (City of Hope Nat'l Med. Ctr. v. Genentech (2008) 43 Cal.4th 375, 386.)  Facts giving rise to a confidential, fiduciary or trustee relationship must be pled, and a “bare allegation that defendants assumed a fiduciary relationship” is a conclusion. (Zumbrun v. Univ. of So. Cal. (1972) 25 Cal.App.3d 1, 13.)

            Here, the FACC alleges in relevant part that Ricardo was Cain and David’s close family member “[a]s a result, Cross-Defendant [Ricardo] owed and owes a fiduciary duty to act in the highest good faith towards Cross-Complainants.”  (FACC ¶ 48.)  The fact that the parties are close family members is insufficient.  (Zumbrun v. University of Southern California (1972) 25 Cal.App.3d 1, 13, [“The mere placing of a trust in another person does not create a fiduciary relationship.”].)  Rather, “[t]he key factor in the existence of a fiduciary relationship lies in control by a person over the property of another.”  (Vai v. Bank of America National Trust & Savings Ass'n (1961) 56 Cal.2d 329, 338.)  Here, no such facts have been clearly alleged.

            Accordingly, Cross-Defendant Ricardo’s demurrer to the sixth cause of action is SUSTAINED.

Fifth and Seventh Causes of Action: Constructive Trust and Accounting

            Cross-Defendant Ricardo contends that fifth and seventh causes of action fail as derivative claims.

            “[A] cause of action for accounting need only state facts showing the existence of the relationship which requires an accounting and the statement that some balance is due the plaintiff.”  (Brea v. McGlashan (1934) 3 Cal.App.2d 454, 460.)  “ ‘Equitable principles govern [accounting actions], and the plaintiff must show the legal remedy is inadequate.’”  (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 442.)

            A constructive trust “is not an independent cause of action but merely a type of remedy for some categories of underlying wrong.”  (Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023, Fn. 3.)  Both a claim for constructive trust and for accounting are “equitable forms of remedies are dependent upon a substantive basis for liability[.]”  (Ibid.) 
            Here, as the FACC has been sustained as to all of the substantive claims, the claims for equitable relief do not have a basis.  Accordingly, Cross-Defendant Ricardo’s demurrer to the fifth and seventh causes of action is SUSTAINED.

Discussion -Motion to Strike

            Cross-Defendant Ricardo seeks to strike the prayer for punitive damages and the allegation regarding Ricardo’s arrest “with ‘bulk’ heroin and cash”.  (FACC ¶ 8.)  As the Court has sustained Cross-Defendant Ricardo’s demurrer to the entire FACC, the motion to strike is MOOT.

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.) 

This is the first time that a complaint has been sustained against Cross-Complainants’ cross-complaint.  Accordingly, the court finds it is proper to allow Cross-Complainants 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.)   As to the third cause of action, leave to amend is granted to change the claim to a viable claim based on the same facts.

CONCLUSIONS AND ORDER

Based on the foregoing, Cross-Defendant Ricardo Sanchez’s demurrer to the First Amended Cross-Complaint is SUSTAINED WITH LEAVE TO AMEND.

Cross-Defendant Ricardo Sanchez’s motion to strike is MOOT.

Cross-Complainants are to file and serve an amended cross-complaint within thirty (30) days of notice of this order.

The Case Management Conference is continued to November 28, 2023 at 8:30 am.

Moving Party is to give notice and file proof of service of such.

DATED: September ___, 2023                                              ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court