Judge Lynette Gridiron Winston, Case Number: 23PSCV02476, Date: 2023-11-08 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 23PSCV02476, Date: 2023-11-08 Tentative Ruling

Case Number: 23PSCV02476 Hearing Date: February 21, 2024 Dept: 6

CASE NAME: Weijun Zhang v. Bolun Zhang, et al.

Defendant All Good Escrow, Inc.’s Demurrer to Plaintiff’s Verified First Amended Complaint

TENTATIVE RULING

The Court SUSTAINS Defendant All Good Escrow, Inc.’s demurrer to the entire First Amended Complaint with leave to amend. Plaintiff must file and serve the Second Amended Complaint within 30 days of the Court’s order.

The Court also DENIES Plaintiff’s request, in the opposition, for leave to add new causes of action. Plaintiff must file a motion or obtain the stipulation of Defendant All Good.

Defendant All Good Escrow, Inc. is ordered to give notice of the Court’s ruling within five calendar days of this order.

BACKGROUND

This is a real property dispute. On August 14, 2023, Plaintiff Weijun Zhang (Plaintiff) filed this action against Defendants Bolun Zhang (Bolun), Jinghan Zhang (Jinghan), All Good Escrow, Inc. (All Good), Taikoo Supply Chain, Inc. (Taikoo) (collectively, Defendants), and Does 1 through 20. On October 25, 2023, Plaintiff filed the operative First Amended Complaint (FAC) against the same Defendants, alleging causes of action for promissory fraud, breach of oral contract, rescission of contract pursuant to Civil Code § 1689(b), breach of covenant of good faith and fair dealing, conversion, actual fraudulent conveyance, constructive fraudulent conveyance, quiet title, common count: money had and received, breach of fiduciary duty, imposition of constructive trust, and civil theft under Penal Code section 496(c).

On January 11, 2024, All Good filed a demurrer to the First Amended Complaint. On February 2, 2024, Plaintiff filed an opposition. On February 9, 2024, All Good filed a reply.

LEGAL STANDARD

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.)

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; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862, disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 [error to consider contents of release not part of court record].)

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”])

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

PRELIMINARY ISSUES

The Court notes that All Good’s demurrer does not comply with the requirements of Rule 3.1320, subdivision (a) of the California Rules of Court, which provides that, “[e]ach ground of demurrer must be in a separate paragraph and must state whether it applies to the entire complaint, cross-complaint, or answer, or to specified causes of action or defenses.” (Cal. Rules of Court, rule 3.1320, subd. (a).) The Court will still consider All Good’s demurrer, but admonishes All Good to comply with the requirements of the California Rules of Court going forward.

The Court also notes that Plaintiff’s opposition fails to comply with Rule 3.1113, subdivision (f) of the California Rules of Court, which provides that opposition memorandums over 10 pages must contain a table of contents and table of authorities. (Cal. Rules of Court, rule 3.1113, subd. (f).) The Court further notes that Plaintiff’s opposition contains an introduction section that is approximately four pages long, arguing much of what is set forth in the opposition memorandum. The Court finds this to be improper, as it appears to be an attempt to evade the 15-page limit set forth in Rule 3.1113, subdivision (d) of the California Rules of Court. (Id., rule 3.1113, subd. (d).) The Court will still consider Plaintiff’s opposition, but admonishes Plaintiff to comply with the requirements of the California Rules of Court going forward.

DISCUSSION

Meet and Confer

Per Code of Civil Procedure section 430.41, subdivision (a), All Good was required to meet and confer with Plaintiff in person or telephonically before bringing their demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds All Good’s meet-and-confer efforts sufficient. (Kinney Decl., ¶ 4.)

Entire Complaint

All Good demurs to the entirety of the FAC on the grounds that it fails to state a cause of action and is uncertain. More specifically, All Good contends that none of the causes of action in the FAC identify All Good as a defendant to whom those causes of action are directed per Rule 2.112 of the California Rules of Court. All Good further contends the extent of the allegations of the FAC are that All Good is an escrow company that was involved in the underlying real property transaction, and that such allegations do not constitute the elements of a cause of action.

In opposition, Plaintiff contends the FAC adequately alleges facts for the tenth cause of action for breach of fiduciary duties. Plaintiff contends that All Good was a fiduciary of Plaintiff as an escrow company receiving funds on behalf of a client like Plaintiff. Plaintiff also contends that All Good owed Plaintiff a duty to disclose all facts regarding Plaintiff’s funds and ensuring Plaintiff understood the effects of the transaction. Plaintiff further contends that All Good negligently misused Plaintiff’s funds without Plaintiff’s informed consent. Plaintiff also seeks leave to amend to add causes of action for negligent concealment and misrepresentation, deceit by suppression of material facts, negligence, money had and received, and constructive fraud against All Good.

The Court agrees with All Good that none of the causes of action in the FAC are directed towards All Good. “Each separately stated cause of action, count, or defense must specifically state:… (4) The party or parties to whom it is directed (e.g., ‘against defendant Smith’).” (Cal. Rules of Court, rule 2.112, subd. (4).) Nowhere in the FAC do any of the causes of action in the FAC identify All Good as a party against whom they are directed per Rule 2.112, subdivision (4) of the California Rules of Court. The extent of the allegations in the FAC against All Good are only that All Good was the escrow company involved in the underlying transaction. (FAC, ¶¶ 4, 9, 23-24, 33.) There are no allegations anywhere in the FAC demonstrating that All Good engaged in any sort of wrongful conduct.

Moreover, although not specifically mentioned in the parties’ respective briefs, the Court notes that the FAC does not attach a copy of the alleged escrow instructions at issue or allege the terms of those instructions, which is essential for finding liability against an escrow company. “[E]scrow companies have obligations limited to carrying out escrow instructions [citation]…” (Alereza v. Chicago Title Co. (2016) 6 Cal.App.5th 551, 561; see Id. [“Escrow companies already owe a fiduciary duty to parties to an escrow to properly carry out all escrow instructions. [Citation.] Failure of an escrow company to perform gives parties to the escrow a cause of action for breach of contract for any proximately caused damages. [Citation.]”]; see also Id. at p. 554 [“We conclude [defendant escrow company] did not owe a duty of care to [plaintiff] because he was not a party to the escrow, not mentioned in the escrow instructions as a third party beneficiary, and did not sustain his losses as a direct result of the escrow company's negligence.”]) Without those terms, the FAC fails to allege sufficient facts to impose liability against All Good.

The Court further finds Plaintiff’s arguments in the opposition to be unavailing and comprised largely of conclusory arguments. Plaintiff’s opposition also largely fails to respond to the issues raised in All Good’s demurrer, such as the failure to direct any of the causes of action in the FAC against All Good per Rule 2.112 of the California Rules of Court. The Court construes Plaintiff’s failure to respond to this issue to be a tacit admission that All Good’s arguments here are meritorious. (Holden v. City of San Diego (2019) 43 Cal.App.5th 404, 418; C. Opposing the Motion—and Rebutting the Opposition, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 9(I)-C, ¶ 9:105.10.)

Based on the foregoing, the Court SUSTAINS Defendant All Good Escrow, Inc.’s demurrer to the First Amended Complaint with leave to amend.

CONCLUSION

The Court also DENIES Plaintiff’s request in the opposition for leave to add new causes of action. Plaintiff must file a motion or obtain the stipulation of Defendant All Good.

Defendant All Good Escrow, Inc. is ordered to give notice of the Court’s ruling within five calendar days of this order.