Judge Lynette Gridiron Winston, Case Number: 23PSCV02476, Date: 2025-01-13 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 23PSCV02476, Date: 2025-01-13 Tentative Ruling

2. Defendant All Good Escrow, Inc.’s Motion to Strike Portions of Plaintiff’s Third Amended Complaint; and

3. Defendants Bolun Zhang and Taikoo Supply Chain Inc.’s Demurrer to Third Amended Complaint.

The Court SUSTAINS Defendant All Good Escrow, Inc.’s demurrer to the Eleventh Cause of Action in the Third Amended Complaint without leave to amend.

The Court DENIES Defendant All Good Escrow, Inc.’s motion to strike as moot with respect to the Eleventh Cause of Action to the Third Amended Complaint, but GRANTS the motion as to the prayer for relief on the Eleventh Cause of Action for Civil Theft pursuant to Penal Code § 496, subdivision (c), located at page 35, line 22 through page 36, line 1 of the Third Amended Complaint, but only as to Defendant All Good Escrow, Inc.

The Court directs Defendant All Good Escrow, Inc. to submit a proposed judgment of dismissal for the Court’s review and signature.

The Court GRANTS Defendants Bolun Zhang and Taikoo Supply Chain Inc.’s demurrer to the Third Cause of Action in the Third Amended Complaint without leave to amend. Defendants Bolun Zhang and Taikoo Supply Chain Inc. must provide an answer to all remaining causes of action in the Third Amended Complaint within 10 days of the Court’s order.

Defendants All Good Escrow, Inc., Bolun Zhang, and Taikoo Supply Chain Inc. are ordered to give notice of the Court’s ruling within five days of this order.

This is a real property dispute. On August 14, 2023, Plaintiff Weijun Zhang (Plaintiff) filed this action. Following multiple demurrers and motions to strike, Plaintiff filed the operative Third Amended Complaint (TAC) on October 17, 2024, against defendants Bolun Zhang (Bolun), Jinghan Zhang (Jinghan), All Good Escrow, Inc. (All Good), Taikoo Supply Chain, Inc. (Taikoo), Danny Hao (Hao) (collectively, Defendants), and Does 2 through 20, alleging causes of action for promissory fraud, breach of oral contract, 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 November 14, 2024, All Good demurred to the eleventh cause of action in the TAC. All Good’s demurrer is unopposed.

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 (Donabedian).) 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. at pp. 993-994.)

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 pleading, cause of action, or affirmative defense. (See Cal. Rules of Court, rule 3.1320, subd. (a); 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, 1046-1047.)

The Court GRANTS Defendant All Good’s requests for judicial notice as to Exhibits 2 through 4. (Evid. Code, § 452, subd. (d).) However, the Court takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.) The Court DENIES All Good’s requests for judicial notice as to Exhibits 5 through 7, as those documents are not court record copies. (See Evid. Code, § 452, subd. (d); Newcomb Decl., Exs. 5-7.)

Per Code of Civil Procedure section 430.41, subdivision (a), All Good was required to meet and confer in person, by telephone, or by video conference before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds All Good’s efforts to meet and confer sufficient. (Newcomb Decl., ¶¶ 2-3.)

Eleventh Cause of Action – Civil Theft under Penal Code § 496, subdivision (c)

“Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished…” (Penal Code, § 496, subd. (a).)

“Every swap meet vendor, as defined in Section 21661 of the Business and Professions Code, and every person whose principal business is dealing in, or collecting, merchandise or personal property, and every agent, employee, or representative of that person, who buys or receives any property of a value in excess of nine hundred fifty dollars ($950) that has been stolen or obtained in any manner constituting theft or extortion, under circumstances that should cause the person, agent, employee, or representative to make reasonable inquiry to ascertain that the person from whom the property was bought or received had the legal right to sell or deliver it, without making a reasonable inquiry, shall be punished…” (Penal Code, § 496, subd. (b).)

“Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees.” (Penal Code, § 496, subd. (c).)

All Good demurs to the Eleventh Cause of Action for civil theft under Penal Code section 496, subdivision (c), on the grounds that it fails to state facts sufficient to constitute a cause of action. All Good contends this cause of action fails because All Good is not a swap meet vendor per subdivision (b) of Penal Code section 496, and because the TAC fails to allege facts demonstrating that All Good bought or received, or assisted in buying or receiving, stolen property knowing that it had been stolen. All Good further argues that its duties as an escrow agent are limited to the escrow instructions, none of which have been attached to the TAC or the prior iterations of the complaint, and which are essential for finding liability against an escrow company.

The Court agrees with All Good. The TAC contains no allegations indicating that All Good knowingly bought or received, or assisted in buying or receiving, stolen property. (See TAC, ¶¶ 25-29, 133-137.) All Good also correctly notes that still no escrow instructions have been attached to the TAC, nor have their terms been alleged, despite the Court’s multiple rulings on prior demurrers indicating the general need for escrow instructions to determine liability against an escrow company like All Good. (See Order re Tentative Ruling (9/11/24); Order re Tentative Ruling (2/21/24); Alereza v. Chicago Title Co. (2016) 6 Cal.App.5th 551, 561.)

The Court further construes Plaintiff’s lack of opposition to All Good’s demurrer as a tacit admission that All Good’s arguments are meritorious. (D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 728, fn. 4 [where nonmoving party fails to oppose a ground for a motion, "it is assumed that [nonmoving party] concedes" that ground].) Concordantly, this is the fourth iteration of the complaint following multiple demurrers, and Plaintiff did not make an offer of proof as to how the aforementioned pleading defects can be corrected.

Based on the foregoing, the Court SUSTAINS Defendant All Good’s demurrer to the Eleventh Cause of Action without leave to amend.

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” (Code Civ. Proc., § 435, subd. (b)(2).) “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Id., § 436.)

Per Code of Civil Procedure section 435.5, subdivision (a), All Good was required to meet and confer in person, by telephone, or by video conference before bringing this motion to strike. (Code Civ. Proc., § 435.5, subd. (a).) The Court finds All Good’s efforts to meet and confer sufficient. (Newcomb Decl., ¶¶ 2-3.)

All Good seeks to strike the Eleventh Cause of Action on the grounds that it violates the Court’s prior orders. Given the Court sustained All Good’s demurrer, the Court DENIES the motion to strike as moot with respect to this cause of action.[1]

All Good seeks to strike the portion of the prayer for relief for the Eleventh Cause of Action for civil theft under Penal Code section 496, subdivision (c), page 35, line 22 through page 36, line 1 of the TAC, on the grounds that it violates the Court’s prior orders. Given the Court sustained Defendant All Good’s demurrer without leave to amend, the Court GRANTS All Good’s motion to strike this portion of the TAC without leave to amend, but only as to Defendant All Good.[2]

Defendants Bolun Zhang and Taikoo Supply Chain Inc.’s Demurrer to Third Amended Complaint

On November 25, 2024, Bolun and Taikoo demurred to the third cause of action of the TAC. Their demurrer is unopposed.

Per Code of Civil Procedure section 430.41, subdivision (a), Bolun and Taikoo were required to meet and confer in person, by telephone, or by video conference before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds Bolun and Taikoo’s efforts to meet and confer sufficient. (Tanji Decl., ¶¶ 3-4.)

To allege a breach of the implied covenant of good faith and fair dealing, the plaintiff must allege, “something beyond breach of the contractual duty itself and it has been held that [b]ad faith implies unfair dealing rather than mistaken judgment .... [Citations.]” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394 (Careau).) Duplicative causes of action are subject to demurrer. (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.)

Bolun and Taikoo demur to the Third Cause of Action for breach of covenant of good faith and fair dealing on the grounds that it fails to state a cause of action. They contend that this cause of action is duplicative of the Second Cause of Action for breach of oral contract, as it relies on the same allegations and seeks the same damages. Bolun and Taikoo also contend that the Court previously sustained their demurrer to this cause of action for the same reasons.

The Court agrees with Bolun and Taikoo. “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau, supra, 222 Cal.App.3d at p. 1395.) The TAC alleges largely the same facts and damage claims for both the Second Cause of Action for breach of oral contract claim and the Third Cause of Action for breach of the covenant of good faith and fair dealing cause of action. (TAC, ¶¶ 61-74.) Thus, the Third Cause of Action is duplicative of the Second Cause of Action and adds nothing new beyond the breach of the contractual duty itself.

The Court further construes Plaintiff’s lack of opposition from Plaintiff as a tacit admission that Bolun and Taikoo’s arguments are meritorious. (D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 728, fn. 4 [where nonmoving party fails to oppose a ground for a motion, "it is assumed that [nonmoving party] concedes" that ground].) Additionally, this is the fourth iteration of the complaint following multiple demurrers, and Plaintiff did not make an offer of proof as to how the aforementioned pleading defects can be corrected.

Based on the foregoing, the court SUSTAINS Bolun and Taikoo’s demurrer to the Third Cause of Action without leave to amend.

The Court SUSTAINS Defendant All Good Escrow, Inc.’s demurrer to the Eleventh Cause of Action in the Third Amended Complaint without leave to amend.

The Court directs Defendant All Good Escrow, Inc. to submit a proposed judgment of dismissal for the Court’s review and signature.

Defendants All Good Escrow, Inc., Bolun Zhang, and Taikoo Supply Chain Inc. are ordered to give notice of the Court’s ruling within five days of this order.

[1] The Court does agree, however, that the Eleventh Cause of Action would be subject to a motion to strike as to Defendant All Good for exceeding the scope of amendment permitted in the Court’s September 11, 2024 and September 26, 2024 orders, neither of which permitted Plaintiff to add Defendant All Good to the Eleventh Cause of Action for civil theft under Penal Code section 496, subdivision (c). (Order re Tentative Ruling (9/11/24); Order re Tentative Ruling (9/26/24); Code Civ. Proc., § 436, subd. (b).)

[2] The prayer for relief for the Eleventh Cause of Action would also be subject to a motion to strike as to Defendant All Good for exceeding the scope of amendment permitted in the Court’s September 11, 2024 and September 26, 2024 orders. (Order re Tentative Ruling (9/11/24); Order re Tentative Ruling (9/26/24); Code Civ. Proc., § 436, subd. (b).)