Judge: Martha K. Gooding, Case: 21-01198292, Date: 2023-08-28 Tentative Ruling
Demurrer to Amended Cross-Complaint – SUSTAINED IN PART and OVERRULED IN PART
Before the Court is the Demurrer by Cross-Defendants New Sun International, LLC (“New Sun”) and Xiaowei Hong (“Hong”) (collectively, “Cross-Defendants”) to the First Amended Cross-Complaint (“FACC”) filed by Cross-Complainants Jie Li and K&B Investment Fund (“K&B”) (collectively, “Cross-Complainants”).
Cross-Defendants generally and specially demur to Cross-Complainants’ claims for conversion, fraud, money had and received, unfair business practices, and declaratory relief.
For the reasons set forth below the Demurrer is SUSTAINED IN PART and OVERRULED IN PART. To the extent the Demurrer is sustained, it is sustained with 15 days leave to amend.
2nd Cause of Action for Conversion
The elements of a tort claim for conversion are: “(1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages.” (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181.)
Cross-Defendants contend the conversion claim fails to the extent it is brought by Jie Li, because Jie Li was not a party to the Share Purchase Agreement; only K&B and Wenqi are alleged to be parties. Accordingly, Jie Li has failed to plead a right to possession of the $190,000 that allegedly was converted. (Dem. at 8.) This argument has merit.
In the FACC, Cross-Complainants allege that “Cross-Complainant K&B entered into a Share Purchase Agreement ( the ‘Agreement’) with Wenqi,” that “[u]nder the terms of the Agreement, Wenqi was required to pay $240,000 to K&B,” and that as a result of the alleged agreement with Hong, “whereby Hong and Wenqi diverted the funds due and owing to K&B under the terms of the Agreement, “K&B was deprived of the $190,000.” (FACC ¶¶ 15, 22 [emphases added].) There are no allegations that Jie Li has ownership of – or right to possession of – the $190,000.
Accordingly, the demurrer to the conversion claim brought by Jie Li is sustained with leave to amend.
The result is different however, with respect to the Demurrer to the conversion claim brought by K&B. The Demurrer to K&B’s conversion claim is overruled.
Cross-Defendants contend K&B’s conversion claim fails because “there are still absolutely no facts pled that New Sun or Hong were a party to the Contract . . . nor are there sufficient facts pled that New Sun or Hong acted intentionally to dispose of Cross-Complainant K&B’s property.” (Demurrer at 9.) But Cross-Defendants could wrongfully interfere with K&B’s right to possession of the $190,000 even if they were not parties to the Share Purchase Agreement. Further, it would be premature to find that Cross-Defendants did not “act intentionally,” where the FACC alleges that there was an agreement between Hong and Wenqi to divert the funds. A demurrer “admit[s] all the properly pleaded material facts” and “even the most improbable alleged facts” are accepted as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)
Thus, the Demurrer is sustained with leave to amend as to the claim for conversion by Jie Li, but overruled as to the conversion claim by K&B.
3rd Cause of Action for Fraud – Intentional Misrepresentation
A fraud claim must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. (Croeni v. Goldstein (1994) 21 Cal.App.4th 754, 758.)
“Fraud must be pleaded with specificity rather than with ‘general and conclusory’ allegations.” (Ragland v. U.S. Bank Nat’l Ass’n (2012) 209 Cal. App. 4th 182, 196, citing Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 [“This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered].)
“An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) The action is one of deceit, which requires proof the defendant made a misrepresentation of fact or a promise without any intention to perform it. (Civ.Code, § 1710.)
Cross-Defendants contend the fraud claim is not pled with particularity. (Demurrer at 9.) The Court agrees. The FACC does not specify “how, when, where, to whom, and by what means” Cross-Defendants made any representation that they would pay $240,000 to Cross-Complainants for an interest in K&B.
The Demurrer to the fraud claim is sustained with leave to amend.
4th Cause of Action for Money Had and Received
The “essential allegations” of a common count for money had and received are “(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.)
“A cause of action for money had and received is stated if it is alleged the defendant ‘is indebted to the plaintiff in a certain sum ‘for money had and received by the defendant for the use of the plaintiff.’” (Id.; see also CACI no. 370.)
The Court agrees Jie Li has not adequately alleged she had a right to “receive” the $190,000, as explained above in connection with the conversion claim. Accordingly, the Demurrer is sustained with leave to amend as to Jie Li’s common count for money had and received.
As to this common count by K&B, the Court finds K&B has sufficiently alleged the basic elements—that Cross-Defendants received $190,000 that was intended for K&B.
The Demurrer to this cause of action is overruled as to K&B.
5th Cause of Action for Unfair Practices (B&P Code § 17200)
Business & Professions Code section 17200 – California’s Unfair Competition Law (“UCL”) – defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with § 17500) of Part 3 of Division 7 of the Business and Professions Code.”
Cross-Defendants contend this cause of action is subject to demurrer because the UCL provides for restitution, but does not provide for damages, attorneys’ fees, or punitive damages. However, Cross-Defendants concede that restitution refers to “the return of money taken from the plaintiff as a result of the unlawful conduct,” which is the relief sought by the FACC.
To the extent Cross-Defendants “object” to the claims for punitive damages or attorneys’ fees, that is not an objection that can be raised by demurrer. (Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, 1562 [“a demurrer tests the sufficiency of the factual allegations of the complaint rather than the relief suggested in the prayer of the complaint”]; Cal. Prac. Guide Civ. Pro. Before Trial at ¶ 7:42.1 [“A motion to strike, not a general demurrer, is the procedure to attack an improper claim for punitive damages or other remedy demanded in the complaint”].)
Additionally, the basis of the claim can be any unlawful or unfair act; it is not limited to proving fraud. Accordingly, the Demurrer to this cause of action is overruled.
8th Cause of Action for Declaratory Relief
Cross-Complainants seek a judicial determination of the respective rights and duties of Cross-Complainants and Cross-Defendants with respect to the interest, if any, of Plaintiff/Cross-Defendant Wenqi in K&B. In particular, Cross-Complainants seek a declaration of “the comparative ownership of Cross-Complainants and Cross-Defendants, and each of them, in K&B, and . . . an order establishing responsibility for comparative indemnity and/or contribution in favor of Cross-Complainants for any sums that Cross-Complainants may be compelled to pay and for which Cross-Defendants are determined responsible, entirely or in part.” Cross-Complaint ¶ 62.
New Sun and Hong contend this claim is subject to demurrer because “there is no controversy that requires declaratory relief by this Court before it as to New Sun or Hong, who were not parties to the Contract and are not claiming an interest in K&B,” and that there “is no other controversy identified which is sufficiently pled for a declaratory relief against New Sun or Hong.” (Demurer at 13.)
Although the FACC does seek a judicial determination as to the ownership rights, if any, of Wenqi in K&B, it also makes clear that Cross-Complainants are seeking a declaration regarding Cross-Defendants’ indemnity and contribution obligations, if any, to Cross-Complainants.
The Demurrer to this cause of action is overruled.
Cross-Complainants shall file and serve their amended pleading within 15 days.
Cross-Defendants are ordered to give notice.