Judge: Maurice A. Leiter, Case: 20STCV48450, Date: 2023-07-21 Tentative Ruling

Case Number: 20STCV48450    Hearing Date: January 19, 2024    Dept: 54

Hearing Date: January 19, 2024

Department 54, Judge Maurice Leiter

Demurrer to Second Amended Cross-Complaint and Motion to Strike

Moving Party: Cross-Defendants Haifeng Wu, Honchen Capital and Lucky International CBD Technology, Inc.

Responding Party: Cross-Complainants Angelina Leo, Steven Nia, and W1, Inc.

T/R:     CROSS-DEFENDANTS’ DEMURRER IS OVERRULED.

THE MOTION TO STRIKE IS DENIED.

CROSS-DEFENDANTS TO FILE AND SERVE ANSWERS TO THE SECOND

AMENDED CROSS COMPLAINT WITHIN 20 DAYS OF NOTICE OF RULING.

CROSS-DEFENDANTS TO NOTICE

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

 On December 18, 2020, Plaintiff Lucky International Technology, Inc. filed a Complaint alleging causes of action for (1) conversion, (2) trespass to chattels, (3) claim and delivery, and (4) injunctive relief against Defendants Angelina Leo, Steven Nia, and W1, Inc.  The action arises from a joint business venture to sell cannabis products. 

On November 27, 2023, Leo, Nia and W1 filed the operative second amended cross-complaint against Wu, Honchen and Lucky International CBD Technology Inc., asserting causes of action for breach of contract, breach of fiduciary duty, fraud, promissory estoppel, conversion, and declaratory relief. Cross-Complainants allege Cross-Defendants misrepresented various facts regarding the business and Cross-Complainants' access to CBD chemicals to induce Cross-Complainants into investing in the company.

REQUEST FOR JUDICIAL NOTICE

Cross-Defendants' request for judicial notice is DENIED.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. First Cause of Action for Breach of Contract

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Cross-Defendants demur to the first cause of action on the grounds that Cross-Complainants fail to allege the elements of breach of contract and the claim is barred by the subsequent Stock Purchase Agreement.

Cross-Complainants allege the parties entered into a Shareholder Agreement in which Cross-Defendants would provide hemp and CBD products for Cross-Complainants to sell. Cross-Complainants allege they performed their obligations under the contract, but Cross-Defendants failed to provide the hemp and CBD products. Cross-Complainants were damaged as a result. This is sufficient to state a cause of action for breach of contract.

Whether the Stock Purchase Agreement affects the Shareholder agreement is not suitable for determination on demurrer. The Court cannot consider extrinsic evidence not provided in the pleading or subject to judicial notice.

The demurrer to the first cause of action is OVERRULED.

B. Second Cause of Action for Breach of Fiduciary Duty

The elements for a breach of fiduciary duty cause of action are “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.)

Cross-Defendants demur to the second cause of action for breach of fiduciary duty on the ground that Cross-Defendants did not owe Cross-Complainants a fiduciary duty. Cross-Defendants assert that they and Cross-Complainants were not “joint venturers” as alleged in the cross-complaint, but rather Cross-Complainants were shareholders and officers. This is not grounds for demurrer. The Court must take the allegations of the cross-complaint as true. Cross-Complainants allege they were joint venturers. Joint venturers owe fiduciary duties to each other.

The demurrer to the second cause of action is OVERRULED.

C. Third Cause of Action for Unpaid Wages

Cross-Defendants assert the third cause of action fails because Cross-Complainants were not employees of Lucky. Cross-Complainants allege Cross-Defendants agreed to pay Cross-Complainants monthly wages but failed to do so. This is sufficient on demurrer to state a claim for unpaid wages.

The demurrer to the third cause of action is OVERRULED.

D. Fourth and Fifth Causes of Action for Fraud and Negligent Misrepresentation

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent misrepresentation, must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)

Cross-Defendants demur to the fourth and fifth causes of action on the ground that they are not pleaded with the requisite specificity. Cross-Complainants allege Cross-Defendant Wu misrepresented several specific material facts in 2020, including Cross-Defendants' access to the products they were contracted to provide. Cross-Complainants allege Cross-Defendants knew the representations were false and made them to induce Cross-Complainants to enter the joint venture. This is sufficient to allege causes of action for fraud.

The demurrer to the fourth and fifth causes of action is OVERRULED.

E. Sixth Cause of Action for Promissory Estoppel

“The elements of promissory estoppel are (1) a promise, (2) the promisor should reasonably expect the promise to induce action or forbearance on the part of the promisee or a third person, (3) the promise induces action or forbearance by the promisee or a third person (which we refer to as detrimental reliance), and (4) injustice can be avoided only by enforcement of the promise.”  (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 803, reh’g denied (Apr. 11, 2013), review denied (July 10, 2013).)

Cross-Defendants demur to the sixth cause of action on the ground that Cross-Complainants do not allege a clear promise to transfer title to the Jaguar vehicle. This is contrary to the pleading. The demurrer cannot be sustained on this basis.

The demurrer to the sixth cause of action is OVERRULED.

F. Seventh Cause of Action for Conversion

To plead a cause of action for conversion, one must allege (1) the plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Cross-Defendants assert Cross-Complainants fail to allege Cross-Defendants interfered with the ownership of the Jaguar vehicle. Cross-Complainants allege Cross-Defendants refused to transfer title of the vehicle despite Cross-Complainants’ right to it. This is sufficient to state a claim for conversion.

The demurrer to the seventh cause of action is OVERRULED.

G. Eighth Cause of Action for Declaratory Relief

Cross-Defendants assert Cross-Complainants fail to state a claim for declaratory relief but do not provide analysis supporting this assertion.

The demurrer to the eighth cause of action is OVERRULED.

H. Motion to Strike

Any party, within the time allowed to response to a pleading, may serve and file a notice of motion to strike the whole or any part" of that pleading. (CCP § 435(b)(1).) “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 asserted 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." (CCP § 436.)

Cross-Defendants move to strike the prayer for punitive damages on the ground that Cross-Complainants fail to allege malice, oppression, or fraud. As stated, Cross-Complainants have sufficiently alleged causes of action for fraud. This is sufficient to support a claim for punitive damages.

The motion to strike is DENIED.