Judge: Gail Killefer, Case: 23STCV23872, Date: 2024-03-27 Tentative Ruling
Case Number: 23STCV23872 Hearing Date: April 9, 2024 Dept: 37
HEARING DATE: Tuesday, April 9, 2024
CASE NUMBER: 23STCV23872
CASE NAME: Kevin Kim v. Brue Haebong Lee, et al.
MOVING PARTY: Defendant Masters Realty &
Investment (a California Corporation)
OPPOSING PARTY: Plaintiff Kevin Kim
TRIAL DATE: Not Set
PROOF OF SERVICE: OK
PROCEEDING: Demurrer to Complaint
OPPOSITION: 11 March 2024
REPLY: 21
March 2024
TENTATIVE: Defendant Masters Realty & Investment’s demurrer
to the Complaint is sustained with 30 days leave to amend as to the first cause
of action for breach of contract, the second cause of action for fraud and the third
cause of action for negligent misrepresentation. The court sets an OSC Re:
Amended Complaint for May 10, 2024, at 8:30 a.m. Defendants to give notice.
Background
On October 10, 2023, Kevin Kim
(“Plaintiff”) filed a Complaint against Bruce Haebong Lee (“Lee”); Seven Seung
Woo Bae (“Bae”); Masters Realty Group, Inc. (“MRG”); Masters Realty &
Investment (“MRI”) (a corporation); Masters Realty & Investment (a
business); and Does 1 – 50.) The operative Complaint alleges three causes of
action: (1) Breach of Contract; (2) Fraud; and (3) Negligent Misrepresentation.
On March 28, 2024, the court
sustained Defendants Bae and Kim’s demurrer to Plaintiff’s Complaint with leave
to amend. Now Defendant Master Realty & Investment demurs to Plaintiff’s
Complaint. Plaintiff opposes the demurrer. The matter is now before the court.
I. Legal Standard
Where pleadings are defective, a
party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950)
36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the
grounds for a demurrer must appear on the face of the pleading or from
judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985)
39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the
complainant’s properly pled facts as true and ignores contentions, deductions,
and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695,
713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court
does not consider whether a plaintiff will be able to prove the allegations or
the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula
Hospital (1989) 214 Cal.App.3d 590, 604.)
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 complainant to
show the Court that a pleading can be amended successfully. (Ibid.)
II. Demurrer[1]
A. Summary
of Allegations in Complaint
The
Complaint alleges that Defendant Lee with the assistance of his son-in-law,
Defendant Bai operate a real estate brokerage under the names of Defendants
MRG, MRI, and Masters Realty & Investment. (Compl. ¶ 13.) Even though
Defendant MRG has been suspended with the California Secretary of State,
Defendants Lee and Bae have been using checks with the name of MRG, Defendant
Lee has reported to the Department of Real Estate that he is doing business as
“Masters Realty & Investment,” a corporation duly organized by Defendant
Bae, who is a shareholder, director, and officer of said corporation. (Compl. ¶
13.) The Complaint further alleges that Defendant Lee is the alter-ego of
Defendant MRG. (Compl. ¶¶ 14-16.) Defendants Lee and Bae are also alleged to be
the alter-ego of Defendant MRI. (Compl. ¶¶ 17-19.)
On
July 19, 2010, Kim and Defendant MRG entered into a written Independent
Contractor Agreement (the “Agreement”). (Compl. ¶ 20, Ex. A.) Plaintiff asserts
that under the Agreement, Defendant MRG would charge Plaintiff certain fees,
including $90.00 for the “Errors & Omissions Insurance” (hereinafter
“E&O Policy”) for each transaction in which Kim was involved. (Compl. ¶
21.)
Plaintiff
alleges that Defendant Lee made representations to Plaintiff that Defendant MRG
as the broker would obtain the E&O Policy for a fee of $90.00, later
increasing to $100.00, as charged in each of Plaintiff’s transactions. (Compl.
¶¶ 21, 22.) In October 2019, Plaintiff was a salesperson representing a buyer
named Daniel Moon (“Moon”) in connection with the purchase of a business
property (the “Montebello Transaction”). Upon the close of escrow of the
Montebello Transaction, on or about July 22, 2020, Plaintiff requested and
received a Commission Disbursement Request, reflecting that Defendants Lee and
MRG charged $100.00 for the E&O Policy for the Montebello Transaction.
(Compl. ¶ 25, Ex. 2.) On December 21, 2021, Moon filed a Complaint against the
sellers in connection with the Montebello Transaction and named Plaintiff as
one of the defendants. (Compl. ¶¶ 25, 27, Ex. 3, 5.)
On
January 3, 2023, Plaintiff received an email in response to a notice sent by
the Department of Real Estate stating that MRG license no. 01503134 expired on
June 30, 2021, telling Plaintiff the notice should be disregarded and that
Defendants were now using the license no. 01004371. (Compl. ¶ 26.) Due to the
Moon lawsuit, Plaintiff requested that Defendants submit the Moon Lawsuit to
the E&O Policy carrier to tender the defense on behalf, which Bae did, but
on April 17, 2023, Defendants received an email from the E&O Policy carrier
denying the request. (Compl. ¶¶ 28, 29, Ex. 6.) The final denial letter from
the E&O Policy carrier, dated June 5, 2023, states that the Policy is effective
on or after September 30, 2020, but because the Montebello Transaction opened
and closed in 2019 and Plaintiff allegedly made the final and full payment to
the sellers on April 17, 2024, the Montebello Transaction was not covered.
(Compl. ¶ 29, Ex. 6 at pp. 7-8.) Defendants did not have an E&O Policy
during the time the Montebello Transaction occurred despite Defendants charging
Plaintiff a $100.00 fee for the E&O Policy on July 22, 2020. (Compl. ¶ 29,
Ex. 2.)
Plaintiff demanded
that Defendants retain counsel to provide a defense to the Moon lawsuit, but
Plaintiff was forced to retain his own counsel and Defendants only paid
$5,000.00 of a $15,000.00 retain fee. (Compl. ¶¶ 30, 31, Ex. 7.) Plaintiff’s
counsel in the Moon lawsuit was able to obtain the Plaintiff’s dismissal but
the Plaintiff incurred $26,085.26 in legal fees. (Compl. ¶ 32, 33, Ex. 8.)
Plaintiff has now filed suit against Defendants relating to their
misrepresentation regarding the E&O Policy coverage alleged to be included
as part of the Agreement.
Defendant Masters
Realty & Investment now demurs to all causes of action
alleged in the Complaint.
B. First Cause of Action Breach of Contract
The elements of a
claim for breach of contract are: “(1) the existence of the contract, (2)
plaintiff’s performance or excuse for nonperformance, (3) defendant's breach,
and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal. 4th 811, 821.) In addition, the complaint must
demonstrate damages proximately caused by the breach. (St. Paul Ins. v.
American Dynasty (2002) 101 Cal.App.4th 1038, 1060.) Furthermore, “the
complaint must [also] indicate on its face whether the contract is written,
oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co.
(1985) 166 Cal.App.3d 452. at 458-59 citing CCP, § 430.10(g).) “If the action
is based on an alleged breach of a written contract, the terms must be set out
verbatim in the body of the complaint or a copy of the written instrument must
be attached and incorporated by reference.” (Id. at p. 459 [internal
citations omitted].)
Plaintiff asserts
that the Agreement, attached as Exhibit A, provides that Defendants as brokers
for Plaintiff would charge certain fees for providing the E&O Policy, but
Defendants failed to do so, causing Plaintiff to incur damages in excess of $26,085.25.
(Compl. ¶¶ 35-40.) Attachment A to the Agreement, as incorporated by reference,
in the Agreement itself, provides that a $90.00 fee will be charged per
transaction related to the Errors and Omission Insurance. (Compl. Ex. 1 at
Attachment A.)
Defendant Masters
Realty & Investment asserts that there is no breach of
contract because nowhere in the Agreement or Exhibit A does it provide that the
purpose of the E&O policy was to cover and protect Plaintiff. More
importantly, while the Complaint alleges that Defendant Bae organized the
entity known as Masters Realty & Investment and is a corporate
officer of said entity, the Complaint fails to allege what connection Masters
Realty & Investment had with the Agreement, let alone how Masters Realty
& Investment breached the Agreement. (Compl. ¶ 13.)
Accordingly, without
some specificity as to Defendant Masters Realty & Investment’s role
in the alleged breach of contract, the demurrer to the first cause of action is
sustained with leave to amend.
C. Second and Third Causes of Action for
Fraud and Negligent Misrepresentation
“The elements of
fraud, which give rise to the tort action for deceit, are (a) misrepresentation
(false representation, concealment, or nondisclosure); (b) knowledge of falsity
(or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d)
justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996)
12 Cal.4th 631, 638.) “In California, fraud must be pled specifically; general
and conclusory allegations do not suffice.” (Id. at p. 645.) Specificity
“necessitates pleading facts which show how, when, where, to whom, and by what
means the representations were tendered.” (Id. at p. 631.)
“The elements of negligent
misrepresentation, a form of deceit, are misrepresentation of a past or
existing material fact, without reasonable ground for believing it to be true,
and with intent to induce another's reliance on the fact misrepresented; ignorance
of the truth and justifiable reliance on the misrepresentation by the party to
whom it was directed; and resulting damage.” (Home Budget Loans, Inc. v.
Jacoby & Meyers Law Offices (1989) 207 Cal.App.3d 1277, 1285.)
For the fraud action,
the Complaint alleges that (a) in entering into the Agreement, Defendants
through Defendant Lee made the representation that in paying $90.00 per
transaction, later increased to $100.00, E&O Insurance would be provided;
(b) Defendant MRG was an active corporation under the laws of the state of
California; (c) MRG had a valid license; (d) Defendants obtained E&O policy
for the Montebello Transaction; (e) Plaintiff would have the E&O Policy for
the Montebello Transaction; and (f) Plaintiff would be covered under the
E&O Policy in the Moon lawsuit. (Compl. ¶ 42.) The Complaint asserts that
the representations were false, Defendants knew they were false when the
representations were made, and the representations were made with the intent to
induce Plaintiff to enter into the Agreement and work as a salesperson for
Defendant and to continue charging fees. (Compl. ¶¶ 43, 45.)
For the negligent
misrepresentation cause of action, the Complaint asserts that the Defendants
“acted negligently in making the aforementioned false and fraudulent
representations in that they made them without any reasonable ground for
believing them to be true.” (Compl. ¶ 50.) “Moreover, Defendants did not have
any information which warranted such representations.” (Compl. ¶ 51.)
The court agrees that
the fraud causes of action against Defendant Masters Realty & Investment
are not pled with the requisite specificity. First,
Plaintiff alleges he entered into the Agreement with Defendant MRG for which
Defendant Lee is an alter ego, not Defendant Masters Realty & Investment.
(Compl. ¶¶ 14-16, 21.) Second, Plaintiff
fails to state what misrepresentations Masters
Realty & Investment made to Plaintiff via an agent or how
any such representations were ratified by a managing member of Masters Realty
& Investment.
Based on the above,
the demurrer to the second and third causes of action are sustained with leave
to amend.
Conclusion
Defendant Masters Realty & Investment’s
demurrer to the Complaint is sustained with leave to amend as to the first
cause of action for breach of contract, the second cause of action for fraud
and the third cause of action for negligent misrepresentation. Plaintiff is
given 30 days leave to amend. The court
sets an OSC Re: Amended Complaint for May 10, 2024, at 8:30 a.m. Defendants to
give notice.