Judge: Michael P. Linfield, Case: 21STCV10856, Date: 2022-08-11 Tentative Ruling
Case Number: 21STCV10856 Hearing Date: August 11, 2022 Dept: 34
SUBJECT: Defendants’ Motion for Judgment
on the Pleadings
Moving
Party: Defendants Salvatore
Anthony DiMaria, ADD Enterprises Inc. d/b/a Anthony’s Meats, Manning’s Beef
LLC, Charlie DiMaria & Son, Inc., and Manning Land Co., LLC (herein
collectively “Defendants”)
Resp. Party: Plaintiff
Linkun Investments, Inc. (“Linkun”)
Defendants Salvatore Anthony
DiMaria, ADD Enterprises Inc. d/b/a Anthony’s Meats, Manning’s Beef LLC,
Charlie DiMaria & Son, Inc., and Manning Land Co., LLC’s Motion for
Judgment on the Pleadings as to the First, Second, Third, Fourth, Seventh,
Ninth, and Tenth Causes of Action in Plaintiff Linkun Investments, LLC’s
Complaint are all DENIED.
I.
BACKGROUND
On March 19, 2021, Plaintiff Linkun
Investment, Inc. filed a complaint against Defendants Salvatore Anthony
DiMaria, an individual; Shing “Jacky” Lo, an individual; Add Enterprises, Inc.
dba Anthony’s Meats, a Delaware Corporation; Manning’s Beef LLC, a California
limited liability corporation; Charlie DiMaria & Son Inc., a California
corporation; Manning Land Company, LLC, a California limited liability corporation,
and DOES 1- 50, inclusive, to allege the following causes of action:
1.
Fraud
and Concealment;
2.
Breach
of Fiduciary Duty;
3.
Conversion;
4.
Violation
of Penal Code § 496;
5.
Dissolution
of Joint Venture and Accounting;
6.
Breach of
Joint Venture Agreement;
7.
Breach
of Joint Venture Agreement;
8.
Breach
of Personal Guarantees;
9.
Breach
of Covenant of Good Faith and Fair Dealing; and
10.
Uniform
Voidable Conveyance Act.
On March 23, 2022, the Court
ordered the parties to attend an informal discovery conference prior to ruling
on Plaintiff Linkun Investment, Inc.’s discovery motions.
On July 1, 2022, Defendants
Salvatore Anthony DiMaria, ADD Enterprises Inc. d/b/a Anthony’s Meats,
Manning’s Beef LLC, Charlie DiMaria & Son, Inc., and Manning Land Co., LLC
moved the Court for an order granting Defendants’ Motion for Judgment on the
Pleadings as to the Complaint filed by Plaintiff Linkun Investment, Inc. (MJOP,
p. 2:7-9.)
On July 15, 2022, Plaintiff Linkun
Investment, Inc. opposed Defendants’ motion for judgment on the pleadings.
On July 21, 2022, Defendants
replied to Linkun’s opposition.
II.
ANALYSIS
A.
Requests
for Judicial Notice
Plaintiff Linkun Investments, Inc.
requests that the Court take judicial notice of the following documents,
pursuant to Evidence Code, §§ 452 and 453.
1.
McSen
Fund LLC Purchase Letter of Intent.
2.
JTX
Group, Inc. Term Sheet
3.
The
complaint filed in JTX Group, Inc. v. Global Meat Federation, Inc., et al.,
Case No. 19STCV43653 (Ca. Super. Ct.).
4.
Michael
Spindler’s Final Report dated December 21, 2021, which was adopted by the Court
and has the effect of a special verdict
5.
Linkun’s
Request For Admission, Set One
6.
DiMaria’s
Response To Request For Admission, Set One. (Request for Judicial Notice, p.
1:5-22.)
The Court GRANTS Linkun’s request
for judicial notice for Exhs. 1 and 2 (Evidence Code, § 452(h)) and GRANTS
Linkun’s request for judicial notice as to Exhs. 3 and 4 (Evidence Code, §
452(d)).
The Court DENIES Linkun’s request
for judicial notice as to Exhs. 5 and 6 as superfluous. Any party that wishes
to draw the Court’s attention to a matter filed in this action may simply cite
directly to the document by execution and filing date. (See Cal. Rules of
Court, rule 3.1110(d).)
B.
Legal
Standard
“A motion for judgment on the
pleadings performs the same function as a general demurrer, and hence attacks
only defects disclosed on the face of the pleadings or by matters that can be
judicially noticed.” (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th
1057, 1064.) “In deciding or reviewing a judgment on the pleadings, all
properly pleaded material facts are deemed to be true, as well as all facts
that may be implied or inferred from those expressly alleged.” (Fire Ins.
Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.) A motion for
judgment on the pleadings does not lie as to a portion of a cause of action. (Ibid.)
“In the case of either a demurrer or a motion for judgment on the pleadings,
leave to amend should be granted if there is any reasonable possibility that
the plaintiff can state a good cause of action.” (Gami v. Mullikin Medical
Ctr. (1993) 18 Cal.App.4th 870, 876.) A non-statutory motion for judgment
on the pleadings may be made any time before or during trial. (Stoops v.
Abbassi (2002) 100 Cal.App.4th 644, 650.)
Because a motion for judgment on
the pleadings performs the same function as a general demurrer, the procedures
in responding to demurrers similarly apply to motions for judgment on the
pleadings. (See e.g., Evinger v. Moran (1910) 14 Cal.App.328,
329.)
C.
Discussion
1.
Are
Defendants Manning’s Beef LLC, Charlie DiMaria & Son, Inc., and Manning
Land Company, LLC parties to the JV Agreement with Plaintiff Linkun
Investments, Inc.?
Defendants argue that Manning’s
Beef LLC, Charlie DiMaria & Son, Inc., and Manning Land Company, LLC are
not parties to the JV Agreement with Linkun because they did not sign the
Agreement. (MJOP, p. 5:27—6:5.) Linkun notes (1) that each of these Defendants
“were obligated to perform under the JVA”, (2) that Defendant DiMaria “solely
owned and operated each of the affiliated entity defendants (Complaint, ¶¶ 6,
77)” and had authority to bind them to the JV Agreement, and that (3) “the law
is clear that DiMaria’s tortious conduct is imputed to his solely owned entity
defendants” under Peregrine Funding, Inc. v. Sheppard Mullin Richter &
Hampton LLP (2005) 133 Cal.App.4th 658, 679. (Opposition, p. 9:18—10:2.)
The Court finds that under Peregrine,
alleged tortious acts attributed to Defendant DiMaria are properly imputed to
his various businesses, including Defendants Manning’s Beef LLC, Charlie
DiMaria & Son, Inc., and Manning Land Company, LLC on demurrer, given
allegations in the Complaint that DiMaria is the controlling shareholder of
multiple companies and the allegations that DiMaria shares an address with each
of the Defendants in question. (Complaint, ¶¶ 8, 11-13.)
2.
First
Cause of Action for Fraud and Concealment; Second Cause of Action for Breach of
Fiduciary Duty; Third Cause of Action for Conversion
a.
Elements
of Alleged Causes of Action
Civil Code section 1710, paragraph
(3) provides that deceit includes "the suppression of a fact, by one who
is bound to disclose it.” In general, to prove a fraud based on concealment, a
plaintiff must demonstrate: (1) the defendant ... concealed or suppressed a
material fact, (2) the defendant [had] a duty to disclose the fact to the
plaintiff, (3) the defendant ... intentionally concealed or suppressed the fact
with the intent to defraud the plaintiff, (4) the plaintiff was unaware of the
fact and would not have acted as he or she did if he or she had known of the
concealed or suppressed fact, and (5) as a result of the concealment or
suppression of the fact, the plaintiff sustained damage. (Prakashpalan v.
Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1129 (cleaned
up).)
"Technically, a fiduciary
relationship is a recognized legal relationship such as guardian and ward,
trustee and beneficiary, principal and agent, or attorney and client, whereas a
‘confidential relationship’ may be founded on a moral, social, domestic, or
merely personal relationship as well as on a legal relationship. The essence of
a fiduciary or confidential relationship is that the parties do not deal on
equal terms, because the person in whom trust and confidence is reposed and who
accepts that trust and confidence is in a superior position to exert unique
influence over the dependent party." (Richelle L. v. Roman Catholic
Archbishop (2003) 106 Cal.App.4th 257, 271 (cleaned up).) The elements of a
breach of fiduciary duty are as follows: "1) The vulnerability of one
party to the other which 2) results in the empowerment of the stronger party by
the weaker which 3) empowerment has been solicited or accepted by the stronger
party and 4) prevents the weaker party from effectively protecting
itself." (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th
1141, 1161 (cleaned up).)
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. (Hodges v. County of Placer (2019) 41 Cal.App.5th 537,
551.)
b.
Assessment
of Plaintiff’s Pleading
Linkun’s First Cause of Action
alleges fact suppression (Complaint, ¶¶ 48, 49, 50), Defendants’ duty to
disclose (Complaint, ¶¶ 48, 49), concealment with intent to defraud Linkun
(Complaint, ¶¶ 48, 51), Linkun’s lack of knowledge of facts Defendant concealed
(Complaint, ¶¶ 48, 52, 53), and damages (Complaint, ¶¶ 48, 54, 55). The Court
finds that Linkun’s Complaint sufficiently pleads Fraud and Concealment.
Linkun’s Second Cause of Action
alleges (1) Linkun’s vulnerability to Defendants that required duties of
candor, good faith, fidelity, and loyalty from Defendants (Complaint, ¶¶ 56,
57, 58), Defendants empowerment through breach (Complaint, ¶¶ 56, 59, 60),
Defendants’ acceptance of their role as the stronger party of opportunities to
take actions against Linkun (Complaint, ¶¶ 56, 61), and Defendants’ conduct
that prevented Linkun from self-protection and damage (Complaint, ¶¶ 56, 62,
63.) The Court finds that Linkun’s Complaint sufficiently pleads Breach of
Fiduciary Duty.
Linkun’s Third Cause of Action
pleads (1) Linkun’s right to exclusively use its $3,412,849.18 investment
solely for benefit of the joint venture (Complaint, ¶¶ 64, 65), Defendants’
wrongful control over Linkun’s investment (Complaint, ¶¶ 64, 66), and (3)
damages (Complaint, ¶¶ 64, 67, 68). The Court finds that Linkun’s Complaint
sufficiently pleads Conversion.
c.
The
Economic Loss Rule
"We begin with a brief
background on the economic loss rule. Economic loss consists of damages for
inadequate value, costs of repair and replacement of the defective product or
consequent loss of profits—without any claim of personal injury or damages to
other property.... Simply stated, the economic loss rule provides: Where a
purchaser's expectations in a sale are frustrated because the product he bought
is not working properly, his remedy is said to be in contract alone, for he has
suffered only ‘economic’ losses. This doctrine hinges on a distinction drawn
between transactions involving the sale of goods for commercial purposes where
economic expectations are protected by commercial and contract law, and those
involving the sale of defective products to individual consumers who are
injured in a manner which has traditionally been remedied by resort to the law
of torts. The economic loss rule requires a purchaser to recover in contract
for purely economic loss due to disappointed expectations unless he can
demonstrate harm above and beyond a broken contractual promise. Quite simply,
the economic loss rule prevents the law of contract and the law of tort from
dissolving one into the other.
In Jimenez v. Superior Court
(2002), 29 Cal.4th 473, we set forth the rationale for the economic loss rule:
The distinction that the law has drawn
between tort recovery for physical injuries and warranty recovery for
economic loss is not arbitrary and does not rest on the luck of one plaintiff
in having an accident causing physical injury. The distinction rests, rather,
on an understanding of the nature of the responsibility a manufacturer must
undertake in distributing his products. We concluded that the nature of this
responsibility meant that a manufacturer could appropriately be held liable for
physical injuries (including both personal injury and damage to property other
than the product itself), regardless of the terms of any warranty. But the
manufacturer could not be held liable for the level of performance of his
products in the consumer's business unless he agrees that the product was
designed to meet the consumer's demands.
In Jimenez, we applied the economic
loss rule in the strict liability context. We explained the principles
surrounding the economic loss rule in that context: Recovery under the doctrine
of strict liability is limited solely to physical harm to person or property.
Damages available under strict products liability do not include economic loss,
which includes damages for inadequate value, costs of repair and replacement of
the defective product or consequent loss of profits—without any claim of
personal injury or damages to other property.... In summary, the economic loss
rule allows a plaintiff to recover in strict products liability in tort when a
product defect causes damage to ‘other property,’ that is, property other than
the product itself. The law of contractual warranty governs damage to the
product itself. We have also applied the economic loss rule to negligence
actions." (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th
979, 988–989 (cleaned up).)
Tort damages have been permitted in
contract cases where a breach of duty directly causes physical injury; for
breach of the covenant of good faith and fair dealing in insurance contracts;
for wrongful discharge in violation of fundamental public policy; or where the
contract was fraudulently induced. In each of these cases, the duty that gives
rise to tort liability is either completely independent of the contract or
arises from conduct which is both intentional and intended to harm. (Erlich
v. Menezes (1999) 21 Cal.4th 543, 551–552.)
Defendants argue that “the facts
alleged in the first, second, and third causes of action (Fraud and
Concealment, Breach of Fiduciary Duty, and Conversion) are identical to the
terms of the JV Agreement entered between Plaintiff and ADD.” (MJOP, MPA, p.
4:26-28.) Defendants note further that these causes of action are not easily
classifiable by Erlich, even though Linkun alleged Fraud and
Concealment, because Defendants consider this claim “duplicative, a dress-up
cause of action that simply mirrors the breach of contract action for which
there is no separate tort damage other than the economic loss Plaintiff
allegedly suffered.” (MJOP, MPA, p. 5:20-22.)
Linkun notes that its Fraud and
Concealment claim is an independent tort based on traditional common law fraud
that does not invoke the economic loss doctrine. (Opposition, p. 8:12-25; Robinson,
34 Cal.4th at 984.) Linkun argues that its Breach of Fiduciary Duty claim “is
premised on the independent tort duty imposed on all Joint Venturers by
operation of law.” (Opposition, p. 10:13-14; Enea v. Superior Court
(2005) 132 Cal.App.4th 1559, 1564.) Linkun argues that its Conversion cause of
action survives because “a tortious breach of contract . . . may be found when (1) the breach is
accompanied by a traditional common law tort, such as fraud or conversion; (2)
the means used to breach the contract are tortious, involving deceit or undue
coercion or; (3) one party intentionally breaches the contract intending or
knowing that such a breach will cause severe, unmitigable harm in the form of
mental anguish, personal hardship, or substantial consequential damages.” (Erlich, 21 Cal.4th at pp. 553–554.)
Notwithstanding the economic loss
doctrine, the Court finds that Linkun’s pleadings for the First, Second, and
Third Causes of Action are sufficient to constitute causes of action.
3.
Fourth
Cause of Action for Violation of Penal Code § 496
Under Penal Code § 496, it is a
crime to buy or receive any property “that has been stolen or that has been
obtained in any manner constituting theft or extortion, knowing the property to
be so stolen or obtained,” or to conceal, sell, withhold, or aid in concealing,
selling, or withholding any property from its owner, knowing the property to be
so stolen or obtained. (Penal Code, § 496(a).) “Any person who has been injured
by a violation of subdivision (a) or (b) may bring an action for three times
the amount of actual damages, if any, sustained by the plaintiff, costs of
suit, and reasonable attorney's fees.” (Penal Code, § 496(c).)
Linkun alleges that one or more
Defendants diverted all or part of Linkun’s $3,412,849.18 investment in the
joint venture “to third parties in a manner constituting theft or
embezzlement.” (Complaint, ¶¶ 69, 70.) Linkun alleges “that one or more
Defendants received all or part of Linkun’s investment and/or the profits and
dividends that Linkun should have received therefrom, knowing the money
belonged to Linkun and was stolen or embezzled.” (Complaint, ¶¶ 69, 71.) The
Court finds that Linkun’s Complaint sufficiently pleads Violation of Penal Code
§ 496.)
Defendants argue that Siry Investment,
L.P. v. Farkhondehpour (2020) 45 Cal.App.5th 1098, 1134 precludes recovery
on this cause of action under facts that establish only that “the plaintiff
merely alleges and proves conduct involving fraud, misrepresentation,
conversion, or some other type of theft that does not involve “stolen”
property.” Linkun notes that this case is “unpublished” and lacks binding
effect, and that published authority holds that any theft type may allow for
treble damages under Penal Code § 496. (Opposition, p. 14:15-19; Switzer v.
Wood (2019) 35 Cal.App.5th 116, 120.) Linkun is not quite correct that the case is
unpublished; rather review has been granted by the California Supreme Court;
the case can therefore only be cited for its persuasive value, not for
precedential value. (California Rules of
Court, Rule 8.1115(e)(1).)
Nonetheless, the Court agrees with
Linkun.
The Court finds that the Fourth
Cause of Action for Violation of Penal Code § 496 alleges sufficient facts to
constitute a cause of action under CCP § 430.10(e).
4.
Seventh
Cause of Action for Breach of Joint Venture Agreement
The three elements to show the
existence of a joint venture, similar to a general partnership are: “(1) joint
interest in a common business; (2) with an understanding to share profits and
losses; and (3) a right to joint control.” (Jacobs v. Locatelli (2017) 8
Cal.App.5th 317, 328.) “Ordinarily, a joint venture is created by contract or
agreement between the parties, but there need not be any formal written
agreement between the parties defining their respective rights and duties. Such
a venture may be formed by parol agreement. Such a joint venture may be assumed
as a reasonable deduction from the acts and declarations of the parties.” (Rickless
v. Temple (1970) 4 Cal.App.3d 869, 893 (cleaned up).)
Linkun alleges joint interest in a
common business with Defendants (Complaint, ¶¶ 80, 81), with an understanding
to share profits and losses (Complaint, ¶¶ 30, (a-o), 80), and a right to joint
control. (Complaint, ¶¶ 30(a-o), 80.) Linkun alleges that Defendants breached
the JV Agreement, causing damages. (Complaint, ¶¶ 80, 84, 85.) Linkun alleges
that the joint enterprise in question defined rights and duties for all
involved entities. (Complaint, ¶¶ 30, (a-o), 80-83.)
Though Defendants argue that they
did not sign the JV Agreement, Linkun notes parol evidence to suggest
otherwise. (MJOP, MPA, p. 7:17—8:13; Opposition, p. 11:18—13:13.) The Court may
not evaluate evidence on demurrer or a motion for judgment on the pleadings.
The Court finds that the Seventh
Cause of Action for Breach of a Joint Venture Agreement alleges sufficient
facts to constitute a cause of action under CCP § 430.10(e).
5.
Ninth
Cause of Action for Breach of Covenant of Good Faith and Fair Dealing
“The elements of a breach of the
implied covenant of good faith and fair dealing claim include the existence of
a contractual relationship between the parties, an implied duty, breach, and
causation of damages. The covenant of good faith and fair dealing, implied by
law in every contract, exists merely to prevent one contracting party from
unfairly frustrating the other party's right to receive the benefits of the
agreement actually made. The covenant thus cannot be endowed with an existence
independent of its contractual underpinnings. It cannot impose substantive
duties or limits on the contracting parties beyond those incorporated in the
specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24
Cal.4th 317, 349–350 [cleaned up].)
Linkun alleges the existence of a
contractual relationship between all parties (Complaint, ¶¶ 93-95), an implied
duty (Complaint, ¶¶ 93, 96), breach (Complaint, ¶¶ 93, 96), and causation of
damages (Complaint, ¶¶ 93, 97.)
The Court finds that, as stated
above (See §II(C)(1)), that Linkun’s Complaint alleges sufficient facts to
constitute a cause of action for Breach of the Implied Covenant of Good Faith
and Fair Dealing.
6.
Tenth
Cause of Action for Uniform Voidable Conveyance Act
Under the Fraudulent Transfer Act
(Civil Code, §§ 3439–3439.12), a transfer of assets made by a debtor is
fraudulent as to a creditor, whether the creditor's claim arose before or after
the transfer, if the debtor made the transfer (1) with an actual intent to
hinder, delay or defraud any creditor, or (2) without receiving reasonably
equivalent value in return, and either (a) was engaged in or about to engage in
a business or transaction for which the debtor's assets were unreasonably
small, or (b) intended to, or reasonably believed, or reasonably should have
believed, that he or she would incur debts beyond his or her ability to pay as
they became due. (Monastra v. Konica Business Machines, U.S.A., Inc. (1996)
43 Cal.App.4th 1628, 1635; Civil Code § 3439.04.)
Linkun alleges that Defendants
transferred Linkun’s investment and share of the joint venture profits to
Defendants (Complaint, ¶¶ 98-100.), with intent to hinder, delay, and/or
defraud (Complaint, ¶¶ 98-101), without equivalent return (Complaint, ¶¶ 98-103.).
Defendant notes that no additional
facts support Linkun’s contentions on reasonably equivalent return value and
Defendants’ intent, rendering Linkun’s pleadings mere conclusion. (MPA, p.
10:16-28.) However, there is no particularity requirement attached to claims
made under the Uniform Voidable Transfers Act that would be relevant on this motion
for judgment on the pleadings.
The Court finds that Linkun
successfully pled facts sufficient to constitute a cause of action under the
Uniform Voidable Conveyance Act.
III.
CONCLUSION
Defendants Salvatore Anthony
DiMaria, ADD Enterprises Inc. d/b/a Anthony’s Meats, Manning’s Beef LLC,
Charlie DiMaria & Son, Inc., and Manning Land Co., LLC’s Motion for
Judgment on the Pleadings as to the First, Second, Third, Fourth, Seventh,
Ninth, and Tenth Causes of Action in Plaintiff Linkun Investments, LLC’s
Complaint are all DENIED.