Judge: Maurice A. Leiter, Case: 22STCV36742, Date: 2023-04-14 Tentative Ruling

Case Number: 22STCV36742    Hearing Date: April 14, 2023    Dept: 54

Hearing Date: April 14, 2023

Department 54, Judge Maurice A. Leiter

Demurrer to First Amended Complaint and Motion to Strike

Moving Party: Defendants Kee Whan Ha, Hannam Chain U.S.A., Inc., Jung Wan Koo, 1000 South Vermont, LLC and Newkoa, LLC

Responding Party: Plaintiffs A-Ju Realty, Inc. and Yun Sam Chung

T/R:     DEFENDANTS’ DEMURRER IS OVERRULED.

DEFENDANTS’ MOTION TO STRIKE IS DENIED.

DEFENDANTS TO FILE AND SERVE ANSWERS TO THE FIRST AMENDED COMPLAINT WITHIN 30 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 February 7, 2023, Plaintiffs A-Ju Realty, Inc. and Yun Sam Chung filed the operative first amended complaint against Defendants Kee Whan Ha, Hannam Chain U.S.A., Inc., Jung Wan Koo, 1000 South Vermont, LLC and Newkoa, LLC, asserting 12 causes of action for breach of fiduciary duty, fraud, conversion, accounting, and intentional infliction of emotional distress.

            Plaintiff A-Ju Realty, Inc. was a 22.5% member of Defendant 1000 South Vermont, LLC, which owned real property in Koreatown, Los Angeles. Plaintiffs allege Defendant Ha, the manager of Vermont, represented that Vermont was going to develop the property and would require significant capital investment from Plaintiffs. Plaintiffs were not able to provide additional capital and instead agreed to a buyout of A-Ju’s 22.5% interest in Vermont for $3,000,000.00. Plaintiffs allege Defendants did not actually intend to develop the property, but rather intended to sell the property to a developer, which it later did for $40,000,000.00. Plaintiffs allege Defendants made these misrepresentations to induce Plaintiffs to sell the membership interest in Vermont and keep the profits of the sale for 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. 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.)

Defendants assert that Plaintiffs’ causes of action for fraud fail because they are based on non-actionable statements of future events and are not pleaded with the requisite specificity. Plaintiff alleges Defendant misrepresented their intentions and the circumstances surrounding whether to develop or sell the property. These are actionable misrepresentations. Plaintiff has alleged these misrepresentations with specificity. Plaintiffs provide the dates and content of the misrepresentations and cite emails to support their allegations.

The demurrer to the fraud causes of action is OVERRULED.

B. 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 causes of action for conversion fail because Plaintiffs voluntarily sold their interest in the company. Plaintiffs have sufficiently alleged they sold their interest based on Defendants’ misrepresentations. These allegations amount to conversion.

            The demurrer to the conversion causes of action is OVERRULED.

C. Intentional and Negligent Infliction of Emotional Distress

The elements of an intentional infliction of emotional distress cause of action are: (1) extreme and outrageous conduct by the defendant; (2) intention to cause or reckless disregard of the probability of causing emotional distress; (3) severe emotional suffering; and (4) actual and proximate causation of the emotional distress. (See Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 780; Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1009.) To satisfy the element of extreme and outrageous conduct, defendant’s conduct “‘must be so extreme as to exceed all bounds of that usually tolerated in a civilized society.’” (Moncada, supra, 221 Cal.App.4th at 780 (quoting Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883).)  

Defendants demur to the causes of action for IIED and NIED on the ground that Plaintiffs have failed to allege extreme and outrageous behavior. As discussed, Plaintiffs have alleged fraud. These allegations also support causes of action for IIED and NIED.

The demurrer to the causes of action for IIED and NIED is OVERRULED.

D. 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.)  

Plaintiffs allege Defendant Hannam, as a manager of Vermont, owed Plaintiff A-Ju fiduciary duties as a member of the entity. Plaintiffs allege Hannam breached these duties by making misrepresentations and engaging in self-dealing. This is sufficient to state causes of action for breach of fiduciary duty.

The demurrer to the causes of action for breach of fiduciary duty is OVERRULED.

E. Accounting and Declaratory Relief

Defendants argue that Plaintiffs are not entitled to an accounting because their underlying claims fail, and that Plaintiffs are not entitled to declaratory relief because they seek redress for past wrongs. Plaintiffs have sufficiently alleged their underlying claims and seek to have their membership interest reinstated. Plaintiffs have alleged entitlement to accounting and declaratory relief.

The demurrer to the causes of action for accounting and declaratory relief is OVERRULED.

F. 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.)

Defendants move to strike Plaintiffs’ claim for punitive damages. As Plaintiffs have alleged fraud, Plaintiffs have sufficiently alleged entitlement to punitive damages.

Defendants’ motion to strike is DENIED.