Judge Lynne M. Hobbs, Case Number: 24STCV05914, Date: 2024-08-29 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 24STCV05914, Date: 2024-08-29 Tentative Ruling

Case Number: 24STCV05914 Hearing Date: August 29, 2024 Dept: 61

SHERI COHEN, et al. vs YUN RU, et al.

TENTATIVE

Defendants Mordechai Yosef Orian, Yun Ru, TCU Malibu and TCB Malibu Consulting, Inc.’s Demurrer is SUSTAINED with leave to amend as to the following claims:

· the second cause of action for conspiracy,

· the fifth and sixth causes of action for breach of contract and covenant of fair dealing alleged against Defendants Orian, TCB Malibu, and TCB Malibu Consulting, Inc.;

· the seventh cause of action for accounting;

· the eighth cause of action for constructive trust;

· the ninth cause of action for negligence;

· the fifteenth cause of action for declaratory relief

The demurrer is SUSTAINED as to the ninth cause of action for negligence, the thirteenth cause of action for negligent infliction of emotional distress, and the fourteenth cause of action for fraudulent conveyance without leave to amend. The demurrer is otherwise OVERRULED.

Plaintiffs to give notice.

DISCUSSION

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) 39 Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“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. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Defendants Mordechai Yosef Orian, Yun Ru, TCU Malibu and TCB Malibu Consulting (Defendants) demurrer to 14 of the 15 causes of action contained in Plaintiffs Sheri Cohen and Ofer Cohen (Plaintiffs), arguing that each of these claims is time-barred. (Demurrer at pp. 2–15.) Defendants offer other arguments as to the individual causes of action, which will be discussed in turn.

1. Statutes of Limitations

Claims for conversion, fraud, fraudulent conveyance, and breaches of fiduciary duty based on fraud have a three-year statute of limitations.(Code Civ. Proc. § 338; Macedo v. Bosio (2001) 86 Cal.App.4th 1044, 1052 fraudulent transfer claims]; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1479 [breach of fiduciary duty].) Claims for breach of contract, breach the covenant of fair dealing, and accounting have a four-year statute of limitations. (Code Civ. Proc. §§ 337, subd. (a) [contract and accounting].) And claims for negligence, professional negligence, and intentional infliction of emotional distress have a two-year statute of limitations. (Code Civ. Proc. § 335.1; Wassmann v. South Orange County Community College District (2018) 24 Cal.App.5th 825, 853 [IIED].)

Defendants’ arguments as to the statute of limitations is similar for each claim. They note that the first allegedly fraudulent loan agreement that is the subject of this action was executed on August 8, 2024. (FAC Exh. A.) They note that the agreement for the purchase of an interest in a Hawaiian coffee farm, allegedly induced by Defendants, was executed on October 11, 2018. (FAC Exh. B.) And Plaintiffs’ alleged payment of $45,000 is said to have taken place “[d]uring this same period.” (FAC ¶ 28.) Defendants argue that, given these, dates, Plaintiffs’ action, originally filed on March 8, 2024, is time-barred, as it was initiated more than four years after any wrongful act complained of in the FAC. (Demurrer at pp. 2–15.)

Defendants’ argument is unpersuasive for two reasons. First, Plaintiff’s claims accrue, not with the formation of the contracts, but with the breaches thereof, or of the underlying misconduct that forms the basis for Plaintiffs’ tort claims. “Traditionally, a claim accrues “ ‘ “when [it] is complete with all of its elements”–those elements being wrongdoing [or breach], harm, and causation.” (Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1341.) Moreover, Plaintiffs may benefit from the delayed discovery rule, which tolls accrual of a cause of action until the plaintiff discovers, or reasonably should have discovered, the cause of action. (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 193.) Whether a plaintiff could or should have discovered the cause of action is “generally a question of fact, properly decided as a matter of law only if the evidence . . . can support only one reasonable conclusion.” (Ibid.) A plaintiff’s “burden of discovery is reduced when he or she is in a fiduciary relationship.” (Id. at p. 181, fn. 13.)

Here, Plaintiff alleges that the loan — the first transaction with Defendants — was to be repaid in full in two years, i.e. by August 2020. (FAC Exh. A.) The four-year statute contract limitations period has accordingly not yet run as to this contract claim. Additionally, Plaintiffs allege that when Defendants stopped payment, they were met with “many excuses,” but that Defendants “did not refuse to pay them.” (FAC ¶ 29.) Defendants argue that another allegation stating that Defendants offered “many additional promises” to Plaintiffs” starting in September 2022 until January of 2024,” means that Plaintiffs were only prevented from discovering the facts of their own claims, by their own account, when those claims were already time-barred before September of 2022. (See e.g., Demurrer at pp. 2–3, 5.) However, the FAC is not reasonably read to either limit the scope of Defendants’ alleged excuse-making to this particular period, nor to read any of the claims objected to as being time-barred prior to that time. This conclusion is further bolstered by the pleaded existence of a fiduciary duty owed to Plaintiffs:

“Where a fiduciary obligation is present, the courts have recognized a postponement of the accrual of the cause of action until the beneficiary has

knowledge or notice of the act constituting a breach of fidelity. [Citations.] The existence of a trust relationship limits the duty of inquiry. ‘Thus, when a potential plaintiff is in a fiduciary relationship with another individual, that plaintiff's burden of discovery is reduced and he is entitled to rely on the statements and advice provided by the fiduciary.’ ”

(WA Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th 148, 157.)

Thus Defendants’ argument from the statute of limitations furnishes no basis to sustain the demurrer as to any claim.

1. Conversion

Defendants argue that the failure to repay an amount owed sounds in contract, rather than conversion. (Demurrer at p. 3.) Defendant neglects, however, that the FAC alleges not merely a failure to repay on a loan agreement, but also the entrusting of money to Defendants for the purchase of a business, which they took for their own use. (FAC ¶¶ 27, 30.) This is thus not a mere claim for breach of contract, but an allegation that Defendants have “have misappropriated, commingled, or misapplied specific funds held for the benefit of others.” (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 216.) The demurrer is therefore OVERRULED as to the conversion claim.

However, Defendants’ argument as to the second cause of action for conspiracy to commit conversion is persuasive, as civil conspiracy is not an independent cause of action. (Civil conspiracy is not an independent cause of action. (See Navarrete v. Meyer (2015) 237 Cal.App.4th 1276, 1291.)

The demurrer is therefore SUSTAINED as to the second cause of action, without leave to amend.

2. Fraud

“The necessary elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.” (Belasco v. Wells (2015) 234 Cal.App.4th 409, 424.) Fraud claims must be pleaded with particularity, and require “pleading facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)

Defendants argue that Plaintiff’s alleged claims of fraud are ambiguous and vague, or else sound in contract rather than fraud. (Demurrer at pp. 6–7.) This argument fails, as the alleged misrepresentations are concrete contractual terms, which may form a basis for a fraud claim under settled California law. This claim is known as “promissory fraud, which is “a promise of future performance with no present intent to actually perform.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 403.) Although Defendants argue for the application of the economic loss rule, which states that parties to a contract are limited to contract damages, the very authority that Defendants cite states that this doctrine does not apply “where the contract was fraudulently induced.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 990.) This is what Plaintiffs allege here.

The demurrer is therefore OVERRULED as to the claims for fraud and concealment.

3. Breach of Contract

Defendants argue that the contracts at issue in this claim — the loan agreement and the agreement to buy a coffee farm — were by their terms executed only by Defendant Yun Ru, and that the other defendants are nonsignatories and not liable under the contracts. (Demurrer at p. 8.) This argument is persuasive, as an essential element of a breach of contract claim is “the existence of the contract.” (D'Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800.) Plaintiffs in opposition refer only to their boilerplate allegation that all defendants are the agents of each other. (Opposition at p. 7; FAC ¶ 20.) But where ins attached contracts disclose that only one defendant was the party, such an allegation is insufficient to salvage the claim. “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Accordingly, the demurrer to the fifth and sixth causes of action for breach of contract and breach of the covenant of fair dealing is SUSTAINED with leave to amend as to Defendants Mordechai Yusef Orian, TCU Malibu and TCU Malibu Consulting, Inc.

Defendants additionally argue that the claim for breach of implied covenant fails because it alleges no conduct beyond breach of contractual terms. (Demurrer at p. 9.) “[C]ourts should limit tort recovery in contract breach situations to the insurance area, at least in the absence of violation of an independent duty arising from principles of tort law other than denial of the existence of, or liability under, the breached contract.” (Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 95.) Here, however, Plaintiffs allege more than mere breaches of contract, but their fraudulent inducement and the conversion of funds entrusted to Defendants for a particular purpose. Thus there is no basis to sustain the demurrer to the breach of covenant claim, as to signatory defendants.

4. Accounting & Constructive Trust

Defendants argue that the accounting claim fails because Plaintiffs allege a specific sum of money owed to them, rather than indeterminate sums that require an accounting, and further that constructive trust is not an independent cause of action, but a remedy. (Demurrer at pp. 9–10.) Plaintiffs in opposition agree and withdraw these claims, seeking only leave to amend seek them as remedies. (Opposition at p. 10.)

The demurrer to the seventh and eighth causes of action for accounting and constructive trust is therefore SUSTAINED, with leave to amend.

5. Negligence & Professional Negligence

Defendants argue that no claim for negligence is pleaded because the ninth cause of action so framed merely attempts to restate the failure to perform contractual obligations as a tort in negligence. (Demurrer at pp. 9–10.) In this, they are correct. The negligence claim in the FAC is directed to Defendants’ failure to repay the loan and follow through on their coffee farm agreement, i.e. In their capacity as “lender/debtor and as joint venturers.” (FAC ¶ 101.)

Plaintiffs in opposition argue that “[t]here is no liability in tort for economic loss caused by **633 negligence in the performance or negotiation of a contract between the parties.” (Sheen v.

Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 923.) But they attempt to mischaracterize their ninth cause of action for negligence as sounding only in Defendant Orian’s professional malpractice in holding himself out as an immigration attorney. (Opposition at p. 11.) This is not what the negligence claim alleges.

Plaintiffs do allege another claim on this point, however: the tenth cause of action for professional negligence. Based expressly on Defendant Orian’s acts as their immigration attorney. (FAC ¶ 106.) Although Defendants argue that this claim is infirm because Orian was never licensed as an attorney. (Demurrer at p. 12.) But Defendants advances no argument or authority for the proposition that one who falsely holds himself out as professional should not be held to “the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise.” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137.)

The demurrer is therefore SUSTAINED without leave to amend as to the ninth cause of action for negligence, and OVERRULED as to the tenth cause of action for professional negligence.

6. Emotional Distress

“The elements of a prima facie case for the tort of intentional infliction of emotional distress are: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct.” (Miller v. Fortune Commercial Corporation (2017) 15 Cal.App.5th 214, 228–29.) Outrageous conduct “must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.” (Cochran v. Cochran (1998) 65 Cal.App.4th 488, 494.)

Defendants argue that Plaintiffs have not alleged outrageous conduct, except for a failure to repay on a contract. (Demurrer at pp. 13–14.) This is not an accurate characterization of the complaint, which alleges that Defendants false advertised professional qualifications as an immigration attorney to prey upon people of a shared cultural and religious background in order to extract money from them in the guise of what the victims believed to be a fiduciary relationship. Whether a defendant’s conduct can reasonably be found to be outrageous is a question of law that must initially be determined by the court; if reasonable persons may differ, it is for the jury to determine whether the conduct was, in fact, outrageous.” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 534.) The outrageousness of Defendants’ conduct alleged here cannot here be determined against Plaintiffs as a matter of law.

However, Defendants’ argument as to the thirteenth claim for negligent infliction of emotional distress is persuasive. “Negligent infliction **111 of emotional distress is not an independent tort; the tort is negligence.” (Behr v. Redmond (2011) 193 Cal.App.4th 517, 532.) Plaintiff’s claim for negligent infliction of emotional distress here is thus either duplicative of the defective claim for negligent performance of contracts, or duplicative of the claim for professional negligence, and thus subject to demurrer as extraneous.

The demurrer is therefore OVERRULED as to the twelfth cause of action for intentional infliction of emotional distress, and SUSTAINED without leave to amend as to the thirteenth cause of action for negligent infliction of emotional distress.

7. Declaratory Relief

Defendants argue that Plaintiffs fail to state a claim for declaratory relief, because that claim is a mere recitation of their claim for breach of contract. (Demurrer at p. 15.) A demurrer may be sustained to a declaratory relief claim when the controversy it seeks to resolve is “merely the controversy as to whether the plaintiff has a cause of action.” (Tokar v. Redman (1956) 138 Cal.App.2d 350, 353.) Plaintiffs’ claim here is even less than this, as they seek merely to establish “that Plaintiffs have wired $555,000 to Defendants.” (FAC ¶ 138.) These facts are necessarily established in Plaintiffs’ other causes of action, and no judicial declaration is necessary on this point.

Thus the demurrer is SUSTAINED with leave to amend as to the fifteenth cause of action for declaratory relief. Plaintiff has also withdrawn the fourteenth cause of action for fraudulent conveyance, in the face of Defendants’ challenge.