Judge: Maurice A. Leiter, Case: 22STCV21305, Date: 2023-08-17 Tentative Ruling

Case Number: 22STCV21305    Hearing Date: August 24, 2023    Dept: 54

Hearing Date: August 24, 2023

Department 54, Judge Maurice A. Leiter

Demurrer to First Amended Complaint

Moving Party: Defendants Yeung Chin Li and Yeung’s Trading Corp.

Responding Party: None

T/R:     DEFENDANTS’ DEMURRER IS OVERRULED.

DEFENDANTS TO FILE AND SERVE AN ANSWER TO THE FIRST AMENDED COMPLAINT WITHIN 20 DAYS OF NOTICE OF RULING.

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 September 2, 2022, Plaintiff Pacific American Fish Co., Inc. filed the operative first amended complaint against Defendants Annie Tam, Yeung Chin Li, and Yeung’s Trading Corp., asserting causes of action for (1) conversion; (2) fraudulent misrepresentation; (3) fraud by concealment; (4) breach of fiduciary duty; (5) unjust enrichment; and (6) accounting.

Plaintiff, a seafood distributor and California resident, alleges that its former employee, Defendant Tam, and Defendants Yeung Chin Li and Yeung’s Trading Corp. fraudulently redirected to themselves shipments from Plaintiff’s warehouse in California intended for New York customers. Plaintiff also alleges Defendants fraudulently released products from cold storage to themselves.

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. Alter Ego

To invoke the alter ego doctrine, the plaintiff must plead unity of interest and ownership and that an inequity will result if the corporate entity is treated as the sole actor. (See Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) Factors to consider in applying the doctrine include the commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, inadequate capitalization, and disregard of corporate formalities. (Sonora Diamond Corp. v Superior Court (2000) 83 Cal.App.4th 523, 538-39.)

Defendants assert Plaintiff has failed to allege Yeung Chin Li is the alter ego of Yeung’s Trading Corp. In opposition, Plaintiff points out that the FAC does not seek to hold Yeung liable solely as the alter ego of Yeung’s Trading Corp. Plaintiff has pleaded facts showing specific acts by Yeung giving rise to liability against him personally; Defendants have not shown as a matter of law that there can be no personal liability here. The demurrer cannot be sustained on this basis.

B. Statute of Limitations

A demurrer lies where the dates alleged in the complaint show “clearly and affirmatively” that the action is barred by a statute of limitations.  It is not enough that the complaint shows that the action may be barred. (Geneva Towers Ltd. Partnership v. City of San Francisco (2003) 29 Cal.4th 769, 781.)  

Defendants argue that the FAC is barred by the statute of limitations because the alleged wrongdoing occurred in 2017 and 2018, more than five years before the complaint was filed. In opposition, Plaintiff asserts that the delayed discovery rule applies. Plaintiff alleges it did not discover the facts giving rise to liability until July 1, 2019, when Tam quit her job with Plaintiff and admitted to Plaintiff that she had taken money from Plaintiff. This is sufficient to allege delayed discovery.

C. 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.) 

Defendants assert the claim for conversion fails because Plaintiff has not alleged that Defendants intentionally converted Plaintiff’s property. Plaintiff does allege this.

The demurrer to the cause of action for conversion is OVERRULED.

D. Fraud

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.)

Defendant demurs to Plaintiff’s causes of action for misrepresentation and concealment on the ground that Plaintiff has failed to allege facts with the requisite specificity. The Court disagrees. Plaintiff alleges a complex scheme in which Defendants diverted Plaintiff’s products for their own profit. Plaintiff alleges Defendants did this intentionally and knowingly. This is sufficient to state causes of action for fraud.

The demurrer to the causes of action for fraud is OVERRULED.

E. Unjust Enrichment

Defendant demurs to the fifth cause of action on the ground that unjust enrichment is not a cause of action. While unjust enrichment is not a cause of action, courts have stated that unjust enrichment is synonymous with restitution, and allow recovery where the plaintiff asserts a proper basis for recovering restitution. (See Durrell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370; McBride v. Boughton (2004) 123 Cal.App.4th 379, 387-88.) Such bases include quasi-contract, fraud, duress, conversion, or similar conduct. (Durrell, supra, 183 Cal.App.4th at 1370; McBride, supra, 123 Cal.App.4th at 387-88.)

The demurrer to the cause of action for unjust enrichment is OVERRULED.

F. Accounting

“The right to an accounting can arise from the possession by the defendant of money or property which, because of the defendant’s relationship with the plaintiff, the defendant is obliged to surrender.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179-80.)

Plaintiff alleges Tam kept records of her transactions but failed to disclose them, and an accounting is necessary to determine damages. This is sufficient to state a claim for accounting.

The demurrer to the cause of action for accounting is OVERRULED.