Judge: Malcolm Mackey, Case: 22STCV32211, Date: 2023-07-24 Tentative Ruling
Case Number: 22STCV32211 Hearing Date: July 24, 2023 Dept: 55
HWY
LOGISTICS, INC. v. SAMUEL CHIH, 22STCV32211
Hearing Date: 7/24/23,
Dept. 55.
#6:
DEMURRER TO FIRST AMENDED COMPLAINT.
MOTION TO STRIKE PORTIONS OF PLAINTIFFS’ FIRST AMENDED
COMPLAINT.
Notice: Okay
Opposition
MP:
Defendants
RP:
Plaintiffs
Summary
On 10/3/22, plaintiffs filed a Complaint.
On 4/12/23, plaintiffs filed a First Amended
Complaint, alleging that Defendant SAMUEL CHIH, hired by Defendant HWY
LOGISTICS, INC., as a dispatcher, and later appointed CEO, stole both plaintiffs'
corporate assets and embezzled funds for personal use, and was fired on 9/13/22,
upon discovery.
The causes of action are:
1. BREACH OF CONTRACT;
2. FRAUD COUNT ONE;
3. VIOLATION OF
CALIFORNIA PENAL CODE § 484;
4. CONVERSION-COUNT ONE;
5. BREACH OF FIDUCIARY
DUTY;
6. CONSTRUCTIVE FRAUD;
7. EMBEZZLEMENT;
8. FRAUD-COUNT TWO;
9. CONVERSION-COUNT TWO;
10. FRAUD-COUNT THREE;
11. CONVERSION-COUNT
THREE;
12. FRAUD-COUNT FOUR;
13. FRAUD-COUNT FIVE;
14. NEGLIGENT PER SE;
15. CIVIL CONSPIRACY;
16. TRESPASS TO CHATTELS;
17. INJUNCTIVE RELIEF;
18. DECLARATORY RELIEF;
19. ACCOUNTING; AND
20. UNJUST ENRICHMENT.
MP
Positions
Moving parties request an order sustaining the
demurrer to the First Amended Complaint, and granting the motion to strike
alleged remedies, on grounds including the following:
·
After being granted an opportunity to
amend their complaint, Plaintiffs have failed to cure the vast majority of
defects in their original complaint.
·
Causes of Action Nos. 2, 6, 8, 10, 12 and
13 are five separate causes of action for fraud and one for constructive fraud.
As all six of these causes of action sound in fraud, they must be pled with
specificity. Plaintiffs have not alleged
how the alleged misrepresentations were made, when they were made, where they
were made, to whom the misrepresentations were made and by what means.
·
Plaintiffs’ Cause of Action 3 (Violation
of Penal Code § 484 – Theft by Trick) and Cause of Action 7 (Violation of Penal
Code § 503 – Embezzlement) are criminal charges, not civil claims.
·
As to plaintiffs’ Cause of Action No. 14
for negligence, negligence per se is not a cause of action. McKenna v. Bessley
(2021) 67 Cal.App.5th 552, 574.
Plaintiffs have not alleged negligence, but intentional misconduct based
on Penal Code sections for theft by trick and embezzlement, which are
intentional criminal acts.
·
“[C]onspiracy is not a cause of action,
but a legal doctrine that imposes liability on persons who, although not
actually committing a tort themselves, share with the immediate tortfeasors a
common plan or design in its preparation.” Applied Equip. Corp. v. Litton Saudi
Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.
Facts beyond conclusions are not alleged, and duty is not alleged as to
the spouse.
·
Plaintiffs’ Cause of Action No. 17 for
injunctive relief is not a legally recognized cause of action. “Injunctive
relief is a remedy, not a cause of action.” Guessous v. Chrome Hearts, LLC
(2009) 179 Cal.App.4th 1177, 1187. There
is nothing to enjoin after employer terminated.
·
“[I]njunctive and declaratory relief are
equitable remedies, not causes of action.” Faunce v. Cate (2013) 222
Cal.App.4th 166, 173. There is nothing
to declare beyond damages as adequate relief.
·
Plaintiffs’ Cause of Action No. 19 for
accounting should be dismissed as Plaintiffs have alleged they already know the
amount that was allegedly converted.
·
The fact that Defendants Chih and Li are
married is no legal basis for suing her.
Marriage does not constitute a factual or legal basis for suing someone.
“[H]ere both spouses are named in litigation, and where one spouse is included
solely in the capacity as a community representative, that spouse has no
personal liability, that spouse's separate property cannot be reached for the
type of debt alleged, and such spouse does not desire to participate in the
litigation, there appears to be no legitimate advantage to plaintiff in forcing
the unwilling spouse to participate in the litigation.” 11601
Wilshire Assocs. v. Grebow (1998) 64 Cal.App.4th 453, 457.
·
Punitive damages fail to be based upon
specifically pled fraud.
·
There is no alleged basis for remedies of “equitable
relief” and a “judicial injunction,” after Defendant has been fired.
·
Constructive trust is unavailable since
plaintiffs are seeking the recovery of fungible money, not any specific
traceable funds. Optional Cap, Inc. v.
DAS Corp. (2014) 222 Cal.App.4th 1388, 1402.
·
“An action for accounting is not available
where the plaintiff alleges the right to recover a sum certain or a sum that
can be made certain by calculation.” Sass v. Cohen (2020) 10 Cal.5th 861, 863.
·
Plaintiffs have failed to allege a
statutory or contractual basis for the recovery of attorney fees.“
RP Positions
Opposing parties advocate overruling and denying, or
allowing leave to amend specifically proposed allegations, for reasons
including the following:
·
Fraud is sufficiently alleged, such as
that defendants stole Plaintiffs' corporate assets and embezzled funds, and
plaintiffs would like leave to amend additional fraud aspects.
·
The Penal Code sections provide for civil
remedies, and plaintiffs would like leave to amend and allege more.
·
Defendants violated Penal Code sections
484 and 503, and the violations raise a presumption that the violator was
negligent.
·
Regarding conspiracy, and aiding and
abetting, plaintiffs seek leave to allege factual participation of the spouse.
·
Plaintiffs will amend to allege facts
regarding Trespass to Chattel and Injunctive Relief. Upon employment termination, Defendant Chih
did not convey all corporate assets in his possession to Plaintiffs. After
filing the complaint, Plaintiffs acquired some documents from Defendants’
counsel that documents generated from Plaintiffs’ corporate computer. Even
after September 13, 2022, Defendant Chih still has access to Plaintiffs’
computer system including internal computer electronic data of Plaintiffs.
·
Plaintiffs are entitled to receive an accurate
accounting from Defendant after inaccurate ones were provided, such that
plaintiffs do not know the amounts.
·
Punitive damages are well support by
fraud-related allegations.
·
Attorney fees are associated with no pleading
requirements.
·
Plaintiffs discovered the additional facts
in support of the causes of action and would like to seek leave from the court
to amend. The newly acquired facts show that, during the period of April, 2022
through present time, Defendant CHIH not only committed ultra vies acts but
also committed other fraudulent and criminal acts while he was employed by
Plaintiff HWY.
Tentative
Ruling
The demurrer is sustained, and the motion is granted,
with 30 days’ leave to amend.
Most defense arguments are not well-taken (as
addressed below), but plaintiffs have proposed extensive amendments that may
efficiently render moot some of the persuasive arguments.
Fraud
Plaintiffs need not allege the elements of active
deceit where the claim includes concealment or acts with regard to
contracting. See, e.g., Alfaro v. Community Housing Improvement System &
Planning Assn., Inc.
(2009) 171 Cal. App. 4th 1356, 1384
(rule of specifically pleading
how, when, where, to whom, and by what means, misrepresentations were
communicated, is intended to apply to affirmative misrepresentations, and not
to concealment); CC §1572(5); Vogelsang
v. Wolpert (1964) 227 Cal. App. 2d 102, 109; Masters v. San Bernardino County Employees
Retirement Assn. (1995)32 Cal.App.4th 30, 41; Brady v. Carman (1960)
179 Cal.App.2d 63, 67 (“Fraud is any act
fitted to deceive.”).
Penal Code Sections 484 and 503
It is
possible for some Penal Code sections to support private rights of action, but
no governing California law exists on point as to Sections 484 and 503. "A
legal proposition asserted without apposite authority necessarily
fails." People v. Taylor
(2004) 119 Cal.App.4th 628, 643. Arguably, Sections 484 and 496 are read
together, in support of a private right of civil action. “Penal Code section 484, subdivision (a)
describes the acts constituting theft to include theft by false pretense, which
is the consensual but fraudulent acquisition of property from its owner.” Bell v. Feibush (2013) 212
Cal.App.4th 1041, 1049 (also upholding
civil liability under Penal Code Section 496).
Negligence Per Se
Negligence Per Se is a cause of
action under some case law E.g., Capolungo v. Bondi (1986) 179
Cal.App.3d 346, 349 (“In order for a claim of negligence per se to succeed, all
four elements must be met.”). Where
there is a 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.
Whether the cited sections can
support negligence per se, depends on legislative intent, and not just that
intentional conduct was addressed. See Bradshaw v. City of Los Angeles (1990) 221
Cal. App. 3d 908, 918 (disallowing application of Penal Code section because
Legislature did not intend for the particular provisions to be the basis of a
claim of negligence per se), disapproved
on other grounds by Copley Press,
Inc. v. Sup. Ct. (2006) 39 Cal.4th 1272, 1284.
Conspiracy
Conspiracy is a cognizable cause of
action according to some opinions.
E.g., Douglas v. Sup. Ct. (1989)
215 Cal. App. 3d 155,159 ("second cause of action for conspiracy to
defraud incorporates the allegations of the first cause of action, the demurrer
to that cause of action should also have been overruled."); Berg & Berg Ent., LLC v. Sherwood
Partners, Inc. (2005) 131 Cal. App. 4th 802, 823; State of Cal. ex rel. Metz v. CCC
Information Services, Inc. (2007) 149 Cal. App. 4th 402, 419.
Conspiracy allegations need not be
more detailed. Quelimane
Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 47
(general allegations are permitted as to the pleading of conspiracy).
The Co-plaintiff is alleged to have
had some cognizable duties, such as a duty not to commit torts. “[T]he general rule is that ‘all persons have
a duty to use ordinary care to prevent others from being injured as the result
of their conduct.’” Conte v. Wyeth, Inc.
(2008) 168 Cal.App.4th 89, 103. "Courts
frequently have held that statutory requirements can establish both duty and
the applicable standard of care." Yarick v. PacifiCare of Cal.
(2009) 179 Cal. App. 4th 1158, 1166.
See also generally
Klistoff v. Sup. Ct. (2007) 157 Cal.App.4th 469, 479
(“The existence of a civil conspiracy makes each participant in the wrongful
act responsible as a joint tortfeasor for all damages resulting from the wrong,
whether or not a participant was a direct actor and regardless of the degree of
his activity” and a coconspirator cannot be liable unless he or she owes a duty
to the plaintiff as recognized by law);
Ferris v. Gatke Corp. (2003) 107 Cal. App. 4th 1211, 1225 (each
individual must owe a legal duty to plaintiff).
Injunction
Injunction is a cognizable cause of
action under some authorities.
E.g., Brownfield v. Daniel
Freeman Marina Hosp. (2d Dist. 1989) 208 Cal. App. 3d 405, 410; Intel
Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1352. But see
Marlin v. Aimco Venezia, LLC (2d Dist. 2007) 154 Cal.App.4th 154, 162 ("An injunction is a remedy, not a cause
of action.”); Shamsian v. Atlantic
Richfield Co. (2d Dist. 2003)
107 Cal. App. 4th 967, 984-85 (“Correctly, the respondents state that a request
for injunctive relief is not a cause of action…. Therefore, we cannot let this
‘cause of action’ stand. However, … on remand the trial court shall permit the
appellants to amend their … cause of action to include their request for
injunctive relief.”); City of S.
Pasadena v. Department of Transp. (1994) 29 Cal. App. 4th 1280, 1293
(“Injunctive relief is a remedy, not a cause of action.”); Shell Oil Co. v. Richter (1942) 52
Cal. App. 2d 164, 168 (“Injunctive relief is a remedy and not, in itself, a
cause of action, and a cause of action must exist before injunctive relief may
be granted.”).
Also, the pleading does not allege that all conduct
complained of had ceased at the time of employment termination, and the
oppositions offer to amend to allege later-occurring facts.
Constructive Trust
The pleading alleges various types of property, and
does not admit that only money is involved, such that some cause of action is
alleged sufficiently.
The claim elements are:
Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 76; Dabney v. Philleo (1951) 38 Cal.2d 60,
68; Michaelian v. State Comp. Ins.
Fund (1996) 50 Cal. App. 4th 1093, 1114.
Additionally, the pleading need not
allege just seeking funds traceable to defendants, but may also allege other
traceable values. See Heckmann v. Ahmanson (1985) 168 Cal.
App. 3d 119, 135 (“under a constructive
trust upon money, the plaintiff is entitled to trace the fund to its ultimate
product or profit.”).
Declaratory Relief
Declaratory relief is a cognizable cause of action
under some authorities. See, e.g., Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal. App. 4th 592,
605-06; Bennett v. Hibernia Bank
(1956) 47 Cal. 2d 540, 549. But see
Batt v. City and County of San Francisco (2007) 155 Cal. App.
4th 65, 82 (declaratory relief is an equitable remedy, not an independent cause
of action), disapproved on other grounds
by McWilliams v. City Of Long
Beach (2013) 56 Cal.4th 613, 626.
Further, the
pleading does not allege there were only past wrongs and damages. See generally Gafcon, Inc. v. Ponsor & Assocs.
(2002) 98 Cal. App. 4th 1388, 1404 (“declaratory relief operates prospectively
only, rather than to redress past wrongs….”).
Accounting
The pleading does not allege that all amounts are known and nothing
requires an accounting, and the oppositions offer to allege a lack of such
knowledge. See generally Teselle v. McLoughlin (2009) 173
Cal.App.4th 156, 179 (“A cause of action for an accounting requires a showing
that a relationship exists between the plaintiff and defendant that requires an
accounting, and that some balance is due the plaintiff that can only be
ascertained by an accounting…. An action for accounting is not available where
the plaintiff alleges the right to recover a sum certain or a sum that can be
made certain by calculation.”).
Community Property
The pleading does not allege liability solely based
upon community property law, but instead alleges both plaintiffs’ violations
and conspiracy. The procedure to enforce
a judgment against the spouse, not possibly liable under any cause of action,
is post-judgment recovery of the debt, based upon community property law, and
not a lawsuit naming both spouses purely on a community-property theory. See, e.g., 4 Cal. Real Est. § 11:62
(4th ed.) (citing 11601 Wilshire
Assocs. v. Grebow (1998) 64 Cal.App.4th 453, 457).
Punitive Damages
Alleged fraud and concealment support punitive
damages, and no more specificity is required.
“In order to survive a motion to strike an allegation of punitive
damages, the ultimate facts showing an entitlement to such relief must be pled
by a plaintiff.” Clauson v. Sup. Ct.
(1998) 67 Cal. App. 4th 1253, 1255. Accord Spinks v. Equity Residential
Briarwood Apartments (2009) 171 Cal. App. 4th 1004, 1055; Blegen v. Sup. Ct. (1981) 125
Cal.App.3d 959, 962. “In order to state
a prima facie claim for punitive damages, a complaint must set forth the
elements as stated in the general punitive damage statute, Civil Code section
3294….. These statutory elements include
allegations that the defendant has been guilty of oppression, fraud or
malice.” Turman v. Turning Point Of
Central Cal., Inc. (2010) 191 Cal.App.4th 53, 63.
Attorneys Fees