Judge: Malcolm Mackey, Case: 22STCV14800, Date: 2023-01-12 Tentative Ruling
Case Number: 22STCV14800 Hearing Date: January 12, 2023 Dept: 55
WEI
LI v. US XINLI, INC. 22STCV14800
Hearing Date: 1/12/23,
Dept. 55
#9: DEMURRER TO FIRST AMENDED COMPLAINT.
Notice: Okay
Opposition
MP:
Defendants
RP:
Plaintiff
Summary
On 5/4/22, Plaintiff WEI LI filed a Complaint.
On 7/13/22, Plaintiff filed a First Amended Complaint,
alleging: To help his son with college entry and attendance, Plaintiff signed a
Service Contract with Defendant Weng, who signed her name as the
“representative for New Force International Education, and Plaintiff paid a
total of $39,950.00. Defendant Weng
deliberately used different business entities in the Service Contract, and on
her business card, to confuse Plaintiff, and to create the false impression
that she was a successful businesswoman with great resources and capabilities.
The causes of action are:
1. INTENTIONAL
MISREPRESENTATION
2. NEGLIGENT
MISREPRESENTATION
3. RESCISSION OF CONTRACT
4. BREACH OF CONTRACT
5. CONVERSION
6. UNJUST ENRICHMENT
7. UNFAIR BUSINESS
PRACTICE
8. FALSE ADVERTISEMENT.
MP
Positions
Moving parties request an order sustaining the
demurrer to the First Amended Complaint, on grounds including the following:
·
The Complaint and First Amended Complaint
are inconsistent as to the contracting party.
In the complaint, Plaintiff alleged the contract was signed with US
XINLI INC and that US XINLI (Complaint, p.3, ¶13; Complaint, p.4, ¶21 ). Plaintiff amended to allege the signatory of
the contract “does not exist” (SAC, p.6, ¶26; SAC, p.7, ¶44), and
Plaintiff signed the contract with “New
Force1International Education.”
·
Plaintiffs only made a barebone allegation
that defendants failed to perform the contract with no substantive supporting
allegations.
·
Plaintiffs’ purported “discovery” of
misrepresentations is irreconcilable with the alleged representations, which
negates the existence of misrepresentation made by the defendants.
·
Plaintiffs could not show they could have
justifiably relied on defendants’ representation re: experience &
qualification, because the admission of Plaintiffs’ second payment made five
months after defendants provided tutoring service contradicts Plaintiffs’
allegation that they were allegedly defrauded.
·
There exists no cause of action for the
negligent misrepresentation of an intention to perform a promise. Tarmann v.
State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159.
·
Plaintiffs’ payment was made under a
contract with consent, which is an absolute defense to conversion claims. See
Klett v. Security Acceptance Co. (1952) 38 Cal.2d 770, 789; Virtanen v.
O'Connell (2006) 140 Cal.App.4th 688, 716-717; Farrington v. A. Teichert &
Son, Inc. (1943) 59 Cal.App.2d 468, 474.
·
The Tort Causes of Action are barred by
the economic loss rule.
·
“California does not recognize unjust
enrichment as a separate cause of action.” Castillo v. Toll Bros., Inc. (2011)
197 Cal.App.4th 1172, 1210.
·
As for Unfair Business Practices,
Plaintiffs could not satisfy the unlawful prong as they fails to identify what
statutory scheme was allegedly violated by which Movant Defendant, or what
fraud was likely to deceive the public.
Plaintiffs attempt to turn a contract breach claim into a tort.
RP
Positions
Opposing party advocates overruling, for reasons
including the following:
·
A reading of the Complaint and the First
Amended Complaint shows that there is no inconsistency. As shown in the Service
Agreement, attached to the First Amended Complaint, Defendant Liping Weng used
many names in the document. Her deposition shows that, while she signed the
Service Agreement as the “representative” of “New Force International
Education” or “Xinli International Education,” there was no such entity.
·
Plaintiff alleges in detail the specific
misrepresentations made by Defendant Weng in her individual capacity and on
behalf of her corporation. [see First Amended Complaint, paragraphs 13, 14, 15,
16, 17, 18, 19, and 20]. There is no
requirement for the plaintiff to “explain” in the complaint why the alleged
representations are false. Defendants’ argument about the justifiable reliance
is beyond the scope of the demurrer, which only tests the legal sufficiency of
the pleading.
·
The contracting party is not uncertain.
Defendant Weng is the one who could not identify which entity is the
contractual party in the written contract. [see Exhibit A attached to
Declaration of Helen Wong – Deposition of Liping Weng, page 83, line 11-25;
page 84, line 1-17; page 97, line 7-25; page 98, line 1-10]
·
Regarding conversion, Plaintiff alleges
that he paid the money to Defendants not knowing the material
misrepresentations, and demanded a refund.
·
The economic loss rule is inapposite. Punitive damages are available for torts even
though the tort incidentally involves contract breach. Defendants drafted the written contract with
fake and non-existent entity and signed the written contract on behalf of a
non-existent entity.
·
California courts recognize unjust
enrichment as a separate cause of action.
·
Regarding Unfair Business Practices,
Plaintiff alleges in detail the false representations made by Defendant Weng in
her individual capacity and on behalf of her corporation.
Tentative
Ruling
The demurrer is overruled.
Twenty days to answer.
Procedure
Generally, the instant demurrer omits some applicable
law and allegations.
“In considering a demurrer, the court is not required
to ignore controlling law merely because the plaintiff does not rely on
it.” Dey v. Continental Central
Credit (2008) 170 Cal. App. 4th 721, 730.
When considering demurrers, courts read the
allegations liberally, reasonably and in context. MKB Management, Inc. v. Melikian
(2010) 184 Cal.App.4th 796, 802; McKenney
v. Purepac Pharmaceutical Co. (2008)
167 Cal.App.4th 72, 77; Taylor v.
City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th
1216, 1228, disapproved of on other grounds by Jones v. Lodge at Torrey Pines
Partnership (2008) 42 Cal.4th 1158, 1173.
In ruling upon demurrers, courts treat as being true “not only the
complaint's material factual allegations, but also facts that may be implied or
inferred from those expressly alleged.” Poseidon
Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th
1106, 1111-12. Accord Schauer v.
Mandarin Gems of Cal., Inc. (2005) 125 Cal. App. 4th 949, 953.
Contracting
Party
Generally, a contract issue regarding uncertainty is
not properly decided via the demurrer procedure. Performance Plastering v. Richmond
American Homes of Cal., Inc. (2007) 153 Cal. App. 4th 659, 671.
The pleading properly alleges a nondisclosed
contracting party. An undisclosed
contracting principle or and agent potentially can be liable on such contracts.
"Where a contract is made by an agent acting on
behalf of an undisclosed principal, a third party, upon discovering the facts
of the agency, may sue the undisclosed principal." Del E. Webb Corp. v. Structural Materials
Co. (1981) 123 Cal. App. 3d 593, 606.
“ ‘[A] disclosed principal may be held liable on a contract made solely
in the name of the agent.' " Sunset Milling & Grain Co. v. Anderson
(1952) 39 Cal. 2d 773, 778. "An
instrument within the scope of his authority by which an agent intends to bind
his principal, does bind him if such intent is plainly inferable from the
instrument itself." Civ. C. §2337. See also Fundin v. Chicago Pneumatic
Tool Co. (1984) 152 Cal. App. 3d 951, 957;
Leonard v. Gallagher (1965) 235 Cal. App. 2d 362, 371. “‘A director, officer or other agent, signing
a corporate contract containing a promise in the proper form for an individual,
is not relieved from personal liability by the addition to his name of terms
such as 'director,' 'president' or the like. These terms are regarded merely as
descriptio personae, that is, a term descriptive of the person rather than the
relationship in which he signs the agreement….’" Sebastian Int'l v. Peck (1987) 195
Cal. App. 3d 803, 808.
Further, a contracting party is not required for rescission. Star Pacific Investments, Inc. v. Oro
Hills Ranch, Inc. (1981) 121 Cal. App. 3d 447, 457 (“[I]n order to obtain
rescission of an agreement, including rescission on the basis of inducement
into the agreement by the defendant's fraudulent misrepresentation, a plaintiff must generally restore to the
defendant everything of value which the plaintiff has received from defendant
under the agreement.”).
Contract
Breach
The pleading alleges facts in support of contract
breach, such as failure to provide services up to the level of connections,
great resources and capabilities, as Defendant represented orally and in
writing.
Pleaders must state facts showing a breach. Levy v. State Farm Mutual Automobile Ins.
Co. (2007) 150 Cal. App. 4th 1, 5-6.
“On a demurrer, the court must consider the
sufficiency of the allegations, including any parol evidence allegations, to
determine whether the contract is reasonably susceptible to the plaintiff's
alleged interpretation.” George v.
Automobile Club of So. Cal. (2011) 201 Cal.App.4th 1112, 1128.
"A contract may be partly oral and partly
written." Griffith v. Bucknam
(1947) 81 Cal. App. 2d 454, 458. “A
so-called partly written and partly oral contract is in legal effect a
contract, the terms of which may be proven by both written and oral
evidence.” Lande v. Southern Cal.
Freight Lines (1948) 85 Cal.App.2d 416, 421. “A claim of a consistent collateral oral agreement” in connection with a partially
integrated, written agreement presents “a question of
interpretation of the agreement.” FPI
Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 396.
Contradictory
Exhibits
The pleading and amended pleading are not
contradictory, in light of explanations that the written contracting party was
discovered to be a nonexistent entity, there was an undisclosed contracting
party and misrepresentations had been made to fraudulently induce the contract.
Where a pleading contradicts, or omits facts pled in,
prior complaints, judges have discretion to take judicial notice of the
earlier allegations and disregard inconsistent ones, absent the pleader’s
satisfactory explanation. State of Cal. ex rel. Metz v. CCC Information
Services, Inc. (2007) 149 Cal. App. 4th 402, 412; Holland v. Morse Diesel Internat.
(2001) 86 Cal. App. 4th 1443, 1447; Berman
v. Bromberg (1997) 56 Cal.App.4th
936, 946 (perceiving no inconsistency or sham pleading). The rule that pleaders cannot without
explanation omit allegations, “does not mean that every word dropped in a
pleading becomes a binding admission by which the pleader is forever bound.” Schmidlin v. City of Palo Alto (2007)
157 Cal. App. 4th 728, 755.
A demurrer lies if a complaint contains allegations of
fact that are inconsistent with documents attached to the pleading. Del E. Webb Corp. v. Structural Materials
Co. (1981) 123 Cal. App. 3d 593, 604, 606 (“We can find nothing in this
evidence which constitutes admissions so inconsistent with facts alleged … that
would render the complaint demurrable.”).
Intentional
Misrepresentation
The pleading alleges multiple bases inferring
Defendant’s knowledge of falsity, including nonexistent entities, and a lack of
experience, connections and resources.
Distinguishably, supportive facts were absent in other
cases. “The allegation of the parties' intent is a conclusion of fact, which
need not be accepted for purposes of demurrer.”
Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007)
152 Cal. App. 4th 1106, 1115. Accord
Cansino v. Bank of Amer. (2014) 224 Cal. App. 4th 1462, 1472 (“Nor
is the knowledge element of fraud satisfied by the complaint's conclusory
statement that defendants ‘knew that the … [r]epresentation[] [was] either
false or at least highly speculative’ because the allegation does not identify
how defendants knew that the 2005 appraisal misrepresented the market value of
the property at the time the property was appraised.”); Wilhelm v. Pray (1986) 186 Cal. App.
3d 1324, 1331 (“the complaint fails to plead with specificity a factual basis
for how Cohen ‘knew’ the representations she communicated to Goodman on behalf
of Leedy were false.”).
Further, the First Amended Complaint well alleges
various misrepresentations inducing contracting. See, e.g., Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-95 (fraudulent inducement occurs where a
promisor consents to a known contract, but
it was induced by fraud); Jones
v. Grieve (1911) 15 Cal. App. 561, 567
(“ ‘Actual fraud is committed when one, with intent to induce another to
enter into a contract, makes a positive assertion, in a manner not warranted by
the information of such person, of that which is not true, even though he
believes it to be true.’ ”).
“‘[T]he courts should not ... seek to absolve the
defendant from liability on highly technical requirements of form in pleading.
Pleading facts in ordinary and concise language is as permissible in fraud
cases as in any others, and liberal construction of the pleading is as much a
duty of the court in these as in other cases.’”
Appollo Capital Fund, LLC v. Roth Capital Partners, LLC
(2007) 158 Cal.App.4th 226, 242.
As to the degree of particularity required to allege fraud, “
‘considerations of practicality enter in.’ ”
Miles v. Deutsche Bank Nat’l Trust Co. (2015) 236 Cal. App. 4th
394, 403. To allege fraud, complainants
need not plead specific information that should be within the knowledge of
defendants. West v. JPMorgan Chase
Bank, N.A. (2013) 214 Cal.App.4th 780, 793.
Additionally, the First Amended Complaint sufficiently
alleges facts supporting the conclusion of reasonable reliance, including
recent arrival from China, and the individual defendants’ misleading representations. Plaintiff’s alleged knowledge of defendants’
tutoring services does not negate allegations of reliance on representations of
experience and qualifications, as tutoring could be done with poor experience
and qualifications.
Whether reliance upon a misrepresentation was
reasonable under the circumstances is not properly resolved via demurrer,
except in the rare case of undisputed facts precluding a reasonable difference
of opinion. Charnay v. Cobert
(2006) 145 Cal.App.4th 170, 186 (sufficient to allege that the complainant,
“relied on that representation in continuing with the litigation rather than
making any efforts to resolve it.”)). A
complainant’s conclusory assertion of reliance on misrepresentations is
insufficient to satisfy the requirement of specific pleading of fraud, and
instead facts must be alleged that would indicate actual reliance on the
misrepresentations. Small v. Fritz
Companies, Inc. (2003) 30 Cal. 4th 167, 184. “‘[W]hether reliance was reasonable is a
question of fact for the jury, and may be decided as a matter of law only if
the facts permit reasonable minds to come to just one conclusion.’” Grisham v. Philip Morris U.S.A., Inc.
(2007) 40 Cal. 4th 623, 637. “Reliance
exists when the misrepresentation or nondisclosure was an immediate cause of
the plaintiff's conduct which altered his or her legal relations, and when
without such misrepresentation or nondisclosure he or she would not, in all
reasonable probability, have entered into the contract or other transaction.” Alliance Mortgage Co. v. Rothwell
(1995) 10 Cal.4th 1226, 1239. “‘[A]
plaintiff will be denied recovery only if his conduct is manifestly
unreasonable in the light of his own intelligence or information. It must
appear that he put faith in representations that were ‘preposterous’ or ‘shown
by facts within his observation to be so patently and obviously false that he
must have closed his eyes to avoid discovery of the truth.’ Even in case of a
mere negligent misrepresentation, a plaintiff is not barred unless his conduct,
in the light of his own information and intelligence, is preposterous and
irrational.’”. OCM Principal
Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal. App.
4th 835, 864. “In evaluating the
reasonableness of a plaintiff's reliance on alleged misrepresentations, the
courts will consider what is apparent from the pleadings about the plaintiff's
knowledge and experience” and generally plaintiffs will be denied recovery only
if their conduct is manifestly unreasonable in the light of their intelligence
or information. Czajkowski v.
Haskell & White, LLP (2012) 208
Cal.App.4th 166, 175.
Negligent
Misrepresentation
The First Amended Complaint alleges misrepresentations
beyond just the intent to perform a contract, such as factual descriptions of
connections, experience and resources. See Hydro-Mill Co., Inc. v. Hayward, Tilton
& Rolapp Ins. Assocs., Inc. (2004) 115 Cal. App. 4th 1145, 1154 (“
‘courts have recognized a cause of action for negligent misrepresentation,
i.e., a duty to communicate accurate information, in two circumstances…. The
second situation arises where information is conveyed in a commercial setting
for a business purpose.’ ”); OCM
Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 854 (generally, a claim for negligent
misrepresentation requires a positive assertion, not an implied representation,
but , “when the defendant purports to convey the ‘whole truth’ about a subject,
“ ‘ “misleading half-truths” ' ” about the subject may constitute positive
assertions for the purpose of negligent misrepresentation.”); Magpali
v. Farmers Group (1996) 48
Cal. App. 4th 471, 481 (“A promise of future conduct is actionable as fraud
only if made without a present intent to perform.”).
Conversion
The defense of consent is not revealed as to
conversion, since the pleading alleges that contract payments were made due to
fraudulent inducement and Plaintiff’s lack of knowledge of the true facts. Consent means that the person affected has knowledge
of rights without any unlawful inducement.
Klett v. Sec. Acceptance Co. (1952) 38 Cal. 2d 770, 790 n. 12.
Additionally, the First Amended Complaint sufficiently
alleges a demand for return of the contract payments. See
Franklin v. Muni. Ct. (1972) 26 Cal. App. 3d 884, 902 (“An
allegation that the plaintiff demanded return of the property and that the
defendant refused to return said property has been deemed sufficient….”).
Defendants are required to address both bases of the
claim. Demurrers do not lie as to only parts
of causes of action, where some valid claim is alleged. Poizner v. Fremont General Corp.
(2007) 148 Cal.App.4th 97, 119 (“A demurrer must dispose of an
entire cause of action to be sustained.”);
Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108
Cal.App.4th 1028, 1046; Caliber
Bodyworks, Inc. v. Sup. Ct. (2005) 134 Cal.App.4th 365, 384-85, disapproved on other grounds by ZB, N.A. v. Sup.Ct. (2019) 8 Cal. 5th
175, 196 n. 8.
Economic
Loss Rule
The economic loss rule is inapposite to alleged
fraudulent inducement. See, e.g., County of Santa Clara v. Atlantic
Richfield Co. (2006) 137 Cal. App. 4th 292, 328 (economic loss rule is inapplicable to fraud actions); Dhital v. Nissan North America, Inc.
(2022) 84 Cal.App.5th 828, 840
(“concealment-based claims for fraudulent inducement are not barred by
the economic loss rule.”); Sheen v.
Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 929 (in some contexts, tort actions are
authorized, even though they arise from contracts, despite the economic loss
rule.).
Unjust
Enrichment
A cognizable cause of action for unjust enrichment
contains the elements:
Peterson v. Cellco Partnership
(2008) 164 Cal.App.4th 1583, 1593; Lectrodryer
v. SeoulBank (2000) 77 Cal. App. 4th 723, 726; Marina Tenants Assn. v. Deauville Marina
Development Co. (1986) 181 Cal. App. 3d 122, 134; Hirsch v. Bank of Amer. (2003) 107
Cal.App.4th 708, 716, 722. See also
Ghirardo v. Antonioli (1996) 14 Cal. 4th 39, 51 (receipt of a
benefit includes being saved from an expense or loss); Federal Deposit Ins. Corp. v. Dintino (2008)
167 Cal.App.4th 333, 346 (“a cause of action for unjust enrichment is not based
on … a written contract.”); Cal. Medical Ass'n v. Aetna U. S.
Healthcare of Cal. (2001) 94 Cal. App. 4th 151, 172 (“unjust enrichment
does not lie where … express binding agreements exist and define the parties'
rights.”); McBride v. Boughton
(2004) 123 Cal. App. 4th 379, 388 (“restitution may be awarded in lieu of
breach of contract damages when the parties had an express contract, but it …
is unenforceable or ineffective for some reason” and may be available based
upon torts); Nibbi Bros. v. Home
Fed. Sav. & Loan Ass'n (1988) 205 Cal. App. 3d 1415, 1422 (for
enrichment to be unjust, a benefit ordinarily must have been conferred by
mistake, fraud, coercion or request, and not officiously); Jones v. Wells Fargo Bank (2003) 112
Cal. App. 4th 1527, 1541
("Defendants will not be unjustly enriched by receiving contingent
interest to which they are legally entitled."); Rutherford
Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231
(courts have construed pled unjust enrichment as being actually a cause
of action for quasi-contract seeking
restitution. ); City of Oakland v.
Oakland Raiders (2022) 83 Cal.App.5th 458, 477 (a claim based on unjust enrichment may also
be called “quasi-contract” or “quantum meruit”). But
see Jogani v. Sup. Ct. (2008)
165 Cal.App.4th 901, 911 (“[U]njust enrichment is not a cause of
action.”); Melchior v. New Line
Prods., Inc. (2003) 106 Cal.App.4th 779, 794 (defining it as a
remedy); McBride v. Boughton
(2004) 123 Cal.App.4th 379, 387 (“Unjust enrichment is not a cause of action …
or even a remedy….” ).
As to the split of authority, trial courts have
discretion to choose between the decisions.
Auto Equity Sales, Inc.
v. Sup. Ct. (1962) 57 Cal.2d 450, 456. Where there is a split of authority, “[a]s a
practical matter, a superior court ordinarily will follow an appellate opinion
emanating from its own district even though it is not bound to do so.” McCallum v. McCallum (1987) 190 Cal.App.3d 308, 316 n.4.
Unfair
Business Practices
The elements of a claim for unfair business practices
are easily alleged, even based on contract breach, as follows:
Bus. & Prof. Code § 17200; Paulus v. Bob Lynch Ford, Inc. (2006)
139 Cal.App.4th 659, 676. See also
Puentes v. Wells Fargo
Home Mortg., Inc. (2008)
160 Cal.App.4th 638, 645 (“‘[A] breach
of contract may ... form the predicate for Section 17200 claims,
provided it also constitutes conduct that is ‘unlawful, or unfair, or
fraudulent.” ’ ”); Quelimane Co. v.
Stewart Title Guar. Co. (1998) 19 Cal. 4th 26, 46 (holding claims for
unfair business practices need not be pled
specifically, and impliedly disapproving Khoury v. Maly's of Cal. (1993)
14 Cal. App. 4th 612, 619 ("A plaintiff alleging unfair business practices
under these statutes must state with reasonable particularity the facts
supporting the statutory elements of the violation.")); Gregory v. Albertson's, Inc. (2002)
104 Cal. App. 4th 845, 857 (“the demurrer was properly sustained because the
complaint ‘identifies no particular section of the statutory scheme [of
antitrust laws] which was violated and fails to describe with any reasonable
particularity the facts supporting violation.’ "); Linear Technology Corp. v. Applied
Materials, Inc. (2007) 152 Cal.App.4th 115, 134-35 (“Whether a practice is
deceptive, fraudulent, or unfair is generally a question of fact which requires
‘consideration and weighing of evidence from both sides’ and which usually
cannot be made on demurrer.”); ibid. at 133 (“to state a claim under the [UCL] one need
not plead and prove the elements of a tort” or of fraud).