Judge: Mel Red Recana, Case: 23GDCV01509, Date: 2024-10-23 Tentative Ruling
Case Number: 23GDCV01509 Hearing Date: October 23, 2024 Dept: 45
Hearing date: October
23, 2024
Moving Party: Defendants
In Vein – 5 Degree, Hi Man Park, and Mi Jin Kim
Responding
Party: Plaintiff 1753 Hill LLC
(1) Defendants’ Demurrer to Plaintiff’s
Third Cause of Action in the First Amended Complaint
(2) Defendants’ Motion to Strike
Portion of Plaintiff’s First Amended Complaint
The Court
considered the moving papers, opposition, [and reply].
Defendants’
Demurrer is OVERRULED. The motion to strike is GRANTED WITH LEAVE TO AMEND.
Background
This
action arises from an agreement between Plaintiff 1753 Hill LLC (“Plaintiff”)
and Defendants In Vein – 5 Degree (“Vein”), Hi Man Park (“Mr. Park”), and Mi
Jin Kim aka Mimi Park (“Mrs. Park”; together with Mr. Park, “the Parks”) (collectively,
“Defendants”). Plaintiff alleges that he loaned Defendants $85,000 so
Defendants could satisfy a judgment entered against Defendants 2017; although
Defendants transmitted checks to Plaintiff to repay the loan, Defendants
stopped a payment on $83,000 in checks.
On
July 17, 2023, Plaintiff filed a Complaint against Defendants.
On
August 22, 2023, Defendants Demurred to Plaintiff’s Complaint, and concurrently
filed a Motion to Strike portions of the Complaint.
On
October 2, 2023, Plaintiff filed the operative First Amended Complaint (“FAC”)
that alleges causes of action against all Defendants for (1) breach of oral
contract, (2) money had and received, and (3) conversion.
On
December 14, 2023, Defendants filed the instant Demurrer to Plaintiff’s First
Amended Complaint. And on December 15, 2023, Defendants filed the instant
Motion to Strike portions of Plaintiff’s First Amended Complaint.
On
October 10, 2024, Plaintiff concurrently filed its Oppositions to both
Defendants’ Demurrer and Motion to Strike.
On
October __, 2024, Defendant filed its Reply.
Legal
Standard
Demurrer Standard
A demurrer can be used only to challenge
defects that appear on the face of the pleading under attack; or from matters
outside the pleading that are judicially noticeable. (Blank v. Kirwan
(1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered
(i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980)
110 Cal.App.3d 868, 881.)
A demurrer for sufficiency
tests whether the complaint states a cause of action. (Hahn v. Mirda
(2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts
read the allegations liberally and in context. (Taylor v. City of Los
Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216,
1228.) In a demurrer proceeding, the defects must be apparent on the face
of the pleading or via proper judicial notice. (Donabedian v. Mercury
Ins. Co. (2004) 116 Cal. App. 4th 968, 994.) “A demurrer tests the
pleadings alone and not the evidence or other extrinsic matters.
Therefore, it lies only where the defects appear on the face of the pleading or
are judicially noticed.” (SKF Farms v. Super. Ct. (1984) 153 Cal.
App. 3d 902, 905.) “The only issue involved in a demurrer hearing is
whether the complaint, as it stands, unconnected with extraneous matters,
states a cause of action.” (Hahn, supra, 147 Cal.App.4th at
747.)
Motion
to Strike Standard
Motions to
strike are used to reach defects or objections to pleadings that are not
challengeable by demurrer (i.e., words, phrases, prayer for damages,
etc.). (CCP §§ 435-437.) A party may file a motion to strike in
whole or in part within the time allowed to respond to a pleading, however, if
a party serves and files a motion to strike without demurring to the complaint,
the time to answer is extended. (CCP §§ 435(b)(1), 435(c).)
A motion to
strike lies only where the pleading has irrelevant, false, or improper matter,
or has not been drawn or filed in conformity with laws. (CCP §
436.) The grounds for moving to strike must appear on the face of the
pleadings or by way of judicial notice. (CCP § 437.)
In ruling on a
motion to strike, the allegations in the complaint are considered in context
and presumed to be true: “[J]udges read allegations of a pleading subject to a
motion to strike as a whole, all parts in their context, and assume their
truth.” (Clauson v. Sup.Ct. (Pedus Services, Inc. (1998) 67
Cal.App.4th 1253, 1255.)
Discussion
Plaintiff’s Third Cause of Action for Conversion
Pleads Sufficient Facts to Survive Demurrer
“Conversion
is the wrongful exercise of dominion over the property of another. The elements
of a conversion claim are: (1) the plaintiff’s ownership or right to possession
of the property; (2) the defendant’s conversion by a wrongful act or
disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225,
1240.) Further, under well-established California law, “[m]oney can be the
subject of an action for conversion if a specific sum capable of identification
is involved.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445,
452, citing Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599; Baxter v.
King (1927) 81 Cal.App. 192, 194 (“It is true that sometimes money can be
treated as specific property, and where identified can form the basis of an
action for conversion”).)
Here,
Plaintiff has pled sufficient facts to state a valid cause of action for
conversion against Defendants. First, the properly pled allegations of
Plaintiff’s FAC demonstrate that Plaintiff had a right to possession of the
$83,000 represented by Defendant’s post-dated checks. After Plaintiff agreed to
loan Defendants $85,000 to satisfy a Judgment, Defendants “agreed to repay the
loan on a monthly installment basis in the amount of $2,000 beginning in May
2023.” (FAC, ¶ 14.) Further, in May 2023, Defendants, through their affiliate
company “transmitted 27 postdated checks in the amount of $2,000 each,
representing the monthly loan repayment to [Plaintiffs] through August 10,
2025. Each of the checks contain a note stating ‘pay off debt.’” (Id., ¶
15.) These allegations, construed as true, demonstrate Plaintiff’s right to
possession of this $83,000, specifically identified with reference to the
checks delivered by Defendants’ affiliate company.
Further,
Plaintiff has properly pled that Defendants converted Plaintiff’s right to the
$83,000. Defendants contend that a mere breach of an executory contract, or
failure to pay a debt, does not constitute a conversion. (See Baxter, supra,
81 Cal.App. 192, 194 (“[W]here the money or fund is not identified as a
specific thing the action is to be considered as one upon contract or for debt
and not for conversion. [Citations.]”) (internal citations omitted).)
However,
Plaintiff properly respond that a conversion claim may apply to the taking of
intangible property rights, including money, when the intangible property is
represented by physical documents such as checks. (Ibid (“It is true
that sometimes money can be treated as specific property, and where identified
can form the basis of an action for conversion”); see Cal. U. Com. Code,
§§ 3104 (defining negotiable instruments to include checks), 3420 (“The law
applicable to conversion of personal property applies to instruments”); Welco
Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 212 (“[T]here can be
a conversion of intangible rights represented by special instruments such as a
bank checkbook”).) Here, Defendants dispossessed or converted Plaintiff’s right
to the $83,000 by stopping payment on the checks. (FAC, ¶¶ 15-16; see Department
of Industrial Relations v. UI Video Stores, Inc. (Blockbuster) (1997) 55
Cal.App.4th 1084, 1095-96 (holding that employer unlawfully converted checks,
reimbursing employees for uniform costs as provided in settlement agreement
with DLSE, when it stopped checks to employees that were not located).)
Finally,
Plaintiff has also properly pled damages by referencing the amount of money it
was owed by Defendants’ stopped checks. As stated previously, money can be the
subject of a conversion action when a specific sum capable of identification is
involved. (Farmers Ins. Exchange, supra, 53 Cal.App.4th at p. 452; Baxter,
supra, 81 Cal.App. at p. 194.) At the pleading stage, a plaintiff can
satisfy the damages element “by alleging, in effect, an amount of cash ‘capable
of identification.’” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 397, quoting Haigler
v. Donelly (1941) 18 Cal.2d 674, 681.) Here, Plaintiff has properly pled
that it was damaged when Defendants improperly withheld a specified amount of
money, $83,000, with an identifiable source, the bank account on the checks.
(FAC ¶¶ 14-16.)
Defendants’
arguments to the contrary either misconstrue the First Amended Complaint or are
unmeritorious. First, as previously established, Plaintiff’s cause of action
for conversion is based on the allegation that Defendants wrongfully withheld
repayment of the $83,000 by providing Plaintiff with “27 postdated checks in
the amount of $2,000 each, representing the monthly loan repayment to
[Plaintiff] through August 10, 2025” and then issuing a stop payment on all
such checks. (FAC, ¶¶ 15-16.) However, Defendants state that they “had no
chance to perform any act to exercise dominion or repudiation of Plaintiff’s
ownership” because Plaintiff “voluntarily surrendered possession of its funds
to the third party creditor by direct payment.” (Demurrer, p. 3:23-25.)
Defendants seem to argue that they could not have converted the $85,000
provided to satisfy the Judgment, but this is irrelevant to the claim Plaintiff
actually alleges and misrepresents Plaintiff’s legal claim.
Second,
Defendants contend that Plaintiff has failed to indicate a specific sum capable
of identification because “no facts indicate that these particular dollars
[$83,000] were ever set aside nor segregated in any identifiable place for
Plaintiff’s possession.” (Demurrer at p. 4:12-14.) Further, Defendants contend
that “the very notion that the checks were post-dated provides indication that
funds to clear such checks never actually made deposit in any account at the
time of their issuance[.]” (Id., at p. 4:18-19.) However, this claim is
unmeritorious because Defendants offer no legal support for this argument. As
established above, Plaintiff’s only burden at the pleading stage is to
demonstrate a sum is capable of identification; a plaintiff need not prove
whether specific funds were set aside in fact. (Welco Electronics, Inc.,
supra, 223 Cal.App.4th at p. 209 (“[I]t is not necessary that each coin or
bill be earmarked”).)
Accordingly,
Plaintiff has properly pled sufficient facts to state a cause of action for
conversion based on Defendants’ wrongful withholding of $83,000 in checks owed
to Plaintiff. (See Bazzanella v. Bell (1970) 10 Cal.App.3d 560
(affirming the trial court’s ruling that defendant was liable for conversion of
checks totaling $12,694.72, which had been assigned to plaintiff).)
Based on the
foregoing, Defendants’ Demurrer to Plaintiff’s FAC is OVERRULED.
Motion
to Strike
Defendants’ Motion to Strike argues that that Plaintiff’s alter ego
allegations in the FAC, as well as Prayer for Relief relating to “attorneys’
fees” should be stricken pursuant to Code of Civil Procedure § 436 on the basis
that all such allegations are “irrelevant, false, and improper matter” and “not
drawn in conformity with California law.” (Mot. at 8:25-9:4.)
Code of Civil Procedure § 436(a)
authorizes the Court, upon proper motion made pursuant to § 435, to
“[s]trikeout any irrelevant, false, or improper matter inserted in any
pleading.” The purpose of Code of Civil Procedure § 436(a) “is to authorize he
excision of superfluous or abusive allegations.” (Ferrao v. Camarlinghi (2008) 161 Cal.App.4th 509, 528.) “[M]atter that is
essential to a cause of action should not be struck and it is error to do so.”
Further, Code of Civil Procedure §
436(b) authorizes a Court to “[s]trike out all or any part of any pleading not
drawn or file in conformity with the laws of tis state, a court rule, or an
order of the court.” This provision
authorizes the Court to strike a pleading due to improprieties in its form or
in the procedures pursuant to which it was filed and is commonly invoked to
challenge pleadings filed in violation of a deadline, court order, or
requirement of prior leave of court. (See e.g., Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 613 (“[P]laintiffs’
failure to file an amended complaint within the time allowed by the court
subjected any subsequently filed pleading to a motion to strike, either by
defendant’s or on the court’s own motion”).)
Motion
to Strike the Phrase “Alter Egos” from the FAC
Here, Defendants have not adequately proved
that Plaintiff’s alter ego allegations should be stricken from the FAC. “In
California, two conditions must be met before the alter ego doctrine will be
invoked. First, there must be such a unity of interest and ownership between
the corporation and its equitable owner that the separate personalities of the
corporation and the shareholder do not in reality exist. Second, there must be
an inequitable result if the acts in question are treated as those of the
corporation alone.” (Sonora
Diamond Corp. v. Super. Ct. (2000)
83 Cal.App.4th 523, 538.)
As an initial matter, Defendants
assert that Plaintiff must plead the applicability of the alter ego doctrine
with specificity. (Mot., p. 4:23-24.) However, Defendants cites no legal
authority to support this proposition. Further, Plaintiffs point out that
California appellate courts are split as to whether a Plaintiff even needs to
expressly plead the alter ego doctrine in the complaint. (Auer v. Frank (1964) 227 Cal.App.2d 396, 403 (noting a split of
authority whether the alter ego doctrine must be pleaded in the complaint and
siding with those cases holding that the alter ego theory need not be pleaded
in the complaint).) Further, even if courts require a plaintiff to plead the
alter ego doctrine, “it is the law of California that the [alter ego] issue may
be raised by a simple allegation that the defendant sought to be charged had
made the contract involved.” (Los
Angeles Cemetery Assn. v. Super. Ct. of Los Angeles Cnty. (1968) 268 Cal.App.2d 492, 494.)
Here, Plaintiff’s properly pled
allegations of fact in the FAC are sufficient to state the applicability of the
alter ego theory against the Parks. First, Plaintiffs allege sufficient facts
to show a unity of interest between the Parks and Vein. The FAC states that [a]
unity of interests in ownership and other interests” existed where “the parks
treated [Vein] and Knitopia as their ‘alter ego,’ rather than as separate
entities.” (FAC, ¶ 18.) Further, “the Parks used [Vein] and Knitopia as mere
shells, instrumentalities, and/or conduits from which they carried on their
various businesses” and “the activities of [Vein] and Knitopia were carried out
without the required holding of directors’ or shareholders’ meetings, and no
records or minutes of any corporate proceedings were maintained.” (Id., ¶ 19.)
As support for these contentions,
Plaintiffs allege that “the checks provided to [Plaintiff] for the purpose of
paying off the debt of [Vein] and Mr. Park were written by Mrs. Park not on
behalf of the judgment debtors ([Vein] and Mr. Park), but on behalf of
Knitopia, a different company that the Parks owned.” (FAC, ¶ 19.) “In other
words, the Parks had one of their companies (Knitopia) paid [sic] the debt of
another of their company [sic] ([Vein]).” (Ibid.) Additionally, the FAC alleges that “Mrs. Park was the one who issued
the stop payment notice for the checks suggesting that she both controls
Knitopia and [Vein], and acting on behalf of both of the entities for the
purpose of avoiding the debt obligation.” (Ibid.)
Second, Plaintiffs allege sufficient
facts to show that inequity would result by adhering to the fiction of the
separate corporate existence. The Plaintiff’s FAC alleges that such a
separation would “sanction a fraud and promote injustice in that [Plaintiff]
would be unable to realize any judgment in its favor.” (FAC, ¶ 20; see Las Palmas Associates v. Las Palmas
Center Associates (1991)
235 Cal.App.3d 1220, 1249 (“[I]t would be unjust to permit those who control
companies to treat them as a single or unitary enterprise and then assert their
corporate separateness in order to commit frauds and other misdeeds with
impunity”).)
Defendants’ contrary assertions,
that Plaintiff’s FAC does not plead sufficient factual matter to establish
applicability of the alter ego theory, is not based on sound legal assertions. Defendant
asserts that Plaintiff’s assertions as to both prongs are not specifically
pled, and do not provide enough certainty for the Court “to determine if there
are any indicia of reliability.” (Mot. 6:5-13.) However, as stated above, a
plaintiff need not necessarily even allege the alter ego theory in its
pleadings. Further, where alter ego is pled in the complaint, the general fact
pleading rules are applicable. (See Code Civ. Proc. § 425.10(a)(1); C.A. Williams S. hart Union High
School Dist. (2012) 53
Cal.4th 861, 872.)
Moreover, Defendants’ claims that
Plaintiff’s factual allegations the FAC, ¶¶ 18-20 are conclusory allegations
that need not be taken as true are unmeritorious. Plaintiff’s allegations
cannot be viewed as vague or conclusory because they put Defendant on notice of
the specific factual matter Plaintiff intends to prove at trial. (Youngman v.
Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245 (a plaintiff “is required …
to set forth the essential facts of his case with reasonable precision and with
particularity sufficient to acquaint a defendant with the nature, source and
extent of his cause of action”); Berstein v. Piller (1950) 98 Cal.2d 441,
443-44 (mere “recitals” or legal conclusions that leave the material facts to
“surmise” are insufficient and subject to demurrer).) Here, Plaintiff’s factual
assertions leave nothing to “surmise,” rather they set for the precise conduct
Defendants allegedly committed that constituted a unity of interest between the
Parks and Vein, and specifically address the inequity that would result if a
separation of entities was permitted.
Accordingly, Defendants’ Motion to
Strike references to the alter ego doctrine in the FAC is DENIED.
Motion
to Strike Language from Paragraph 3 of the Prayer for Relief of the FAC
Defendants
also seeks to strike the language of the Plaintiff’s third Prayer for Relief
that requests “[f]or … attorneys’ fees if and as available by law.” (FAC,
“Prayer for Relief,” ¶ 3.) Defendants contend that such language must be
stricken from Plaintiff’s prayer for relief because Plaintiff has not shown
that attorneys’ fees available on the basis of any cause of action alleged, and
because Plaintiff failed to show entitlement to attorneys’ fees under any
applicable statutory authority.
Finding
no argument to the contrary, the Court agrees that Plaintiff has not shown any
apparent basis for its entitlement to attorney fees under the causes of action
asserted, nor any applicable statutory authority.
However,
where a defect raised by a motion to strike is reasonably capable of cure,
courts generally abuse their discretion if they “deny leave to amend, because
the drastic step of denial of the opportunity to correct the curable defect
effectively terminates the pleader’s action.” (CLD Constr., Inc. v. City of
San Ramon (2004) 120 Cal.App.4th 1141, 1146-47.)
Accordingly,
Defendants’ Motion to Strike the language of Plaintiff’s third Prayer for
Relief that requests “[f]or … attorneys’ fees if and as available by law” is
GRANTED with leave to amend.
Conclusion
In
all, Defendants’ Demurrer to Plaintiff’s Third Cause of Action is OVERRULED.
And Defendants’ Motion to Strike is DENIED in part and GRANTED in part, with
leave to amend.
It
is so ordered.
Dated:
_______________________
MEL RED RECANA
Judge of the
Superior Court