Judge: Lee W. Tsao, Case: 23NWCV00974, Date: 2023-10-19 Tentative Ruling

Case Number: 23NWCV00974    Hearing Date: October 19, 2023    Dept: C

CITY OF ARTESIA v. MAYA INN AND SUITES, INC.

CASE NO.:  23NWCV00974

HEARING:  10/19/23

#8

     I.        Defendants MAYA INN AND SUITES, INC. and VENKATESH RAO KOKA’s Demurrer to Plaintiff’s Complaint is OVERRULED.

    II.        Defendants MAYA INN AND SUITES, INC. and VENKATESH RAO KOKA’s Motion to Strike Portions of Plaintiff’s Complaint is DENIED.  

Opposing party to give notice.

Defendants operate a Motel 6 in the City of Artesia.  This is an action stemming from Defendants’ alleged failure to pay Transient Occupancy Taxes to the City of Artesia.  

Plaintiff’s Complaint asserts the following causes of action:

(1) Violation of Artesia Municipal Code §§ 3-5.301 – 3-5.314;

(2) Violation of CA Bus. & Prof. Code §17200 et seq.; and

(3) Conversion

Defendants generally demur to Plaintiff’s third cause of action for conversion.

Third Cause of Action – Conversion

Defendants argue that this cause of action is subject to demurrer because the failure to pay money cannot constitute conversion as a matter of law.

The elements of a cause of action for conversion are: (1) Plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “A cause of action for conversion of money can be stated only where a defendant interferes with the plaintiff’s possessory interest in a specific, identifiable sum, such as when a trustee or agent misappropriates the money entrusted to him.” (Kim v. Westmoor Partners, Inc. (2011) 201 Cal.App.4th 267, 284.) [U]nless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment,” money cannot be the subject of a cause of action for conversion. (McKell v. Wash. Mut., Inc. (2006) 142 Cal.App.4th 1457, 1491.)

Here the Complaint alleges a specific sum has been withheld by Defendants: “As of January 9, 2023, Defendants had assessed approximately $2,043,954.90 in TOTs for transient stays at the Property during the audit period but had only paid $362,697.00 of those TOT’s to the City.” (Complaint, ¶ 23.)  Under the Artesia Municipal Code, the taxes are collected by Defendants and held in trust for the City of Artesia. (Complaint, ¶ 37; AMC § 3-5.307.)  The Kim court noted the Plaintiff in that case “did not allege he entrusted funds to defendants for a specific purpose” and that case actually involved “a simple creditor-debtor relationship.” (Kim at 285.)  Here, Plaintiff alleges a possessory interest in a specific, identifiable sum entrusted to defendants for a specific purpose (i.e., remittance to the City of taxes paid to defendants by third-party hotel users).  It is undisputed that Defendants have only remitted a portion of this money.  Therefore, the court finds that the third cause of action is sufficiently plead. 

The demurrer is OVERULED.

Motion to Strike

Defendants move to strike all requests for restitution and disgorgement in the Complaint.

A motion to strike lies either when (1) there is “irrelevant, false or improper matter inserted in any pleading”; or (2) to strike any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (CCP §436.)

An order for restitution is one compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken—persons who had an ownership interest in the property. Disgorgement is a broader remedy. An order for disgorgement may compel a defendant to surrender all money obtained through an unfair business practice even though not all money is to be restored to the persons from whom it was obtained or those claiming under those persons. It has also been used to refer to surrender of all profits earned as a result of an unfair business practice regardless of whether those profits represent money taken directly from persons who were victims of the unfair practice. (see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144-1145.)

The Motion to Strike is DENIED.  As discussed above, Plaintiff alleges a possessory interest in a specific, identifiable sum entrusted to defendants for a specific purpose (i.e., remittance to the City of taxes paid to defendants by third-party hotel users).  The City has a vested interest in the money at issue.  (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4^th 1134 (restitution is not limited to the return of money or property that was once in Plaintiff’s possession; it is broad enough to allow recovery of money or property in which Plaintiff has a vested interest).  As such, Plaintiff’s request for restitution and disgorgement is proper.

Accordingly, the motion to strike is DENIED.