Judge Michael P. Linfield, Case 21STCV10856 2022-08-17 Tentative Ruling

Judge: Michael P. Linfield, Case: 21STCV10856, Date: 2022-08-17 Tentative Ruling

Case Number: 21STCV10856 Hearing Date: August 17, 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