Judge: Michael Shultz, Case: 21CMCV00267, Date: 2022-09-08 Tentative Ruling
Case Number: 21CMCV00267 Hearing Date: September 8, 2022 Dept: A
21CMCV00267
GP Trading Partners, LLC v. Midas Express, Inc., et al.
[TENTATIVE] ORDER
I.
BACKGROUND
The Third Amended Complaint (“TAC”)
filed on August 12, 2022, alleges that Plaintiff purchased from non-parties,
Cast Group, LLC, and Paz Global Ventures (“Sellers”), a container full of A+
Nitrile Gloves on June 29, 2021, pursuant to a written agreement. The container
of gloves (“Container”) arrived in the port of Long Beach on June 21, 2021, and
was transported to a warehouse operated by Defendant, Midas Express, Inc.
(“Midas”).
The TAC alleges that on August 16,
2021, Plaintiff inquired about taking over the warehouse storage contract
between the Sellers and Midas, however, Midas required confirmation that
Plaintiff owned the Container before Midas could put Plaintiff on the warehouse
contract. Plaintiff confirmed its ownership of the gloves. On August 26, 2021,
Midas advised Plaintiff that it would no longer permit Plaintiff access to the
goods because the Sellers asserted ownership.
Midas subsequently permitted
Defendant, Exxtra Express, Inc. (“Exxtra”) to pick up the container to be
delivered to Exxtra’s warehouse, where the container is currently stored.
Plaintiff alleges claims for declaratory relief, preliminary injunction,
negligence, conversion, injunctive relief, and violation of Penal Code § 496
(receiving stolen property).
II.
ARGUMENTS
A.
Demurrer filed July 1, 2022
Defendant Midas demurs to the
sixth cause of action for violation of Penal Code § 496 as it fails to state a
cause of action and is precluded by the alleged facts as the court previously
determined when sustaining demurrer to the sixth cause of action with leave to
amend. The alleged facts fail to establish that Midas could have known that any
property in its possession was allegedly stolen. Plaintiff’s allegation that Sellers asserted
ownership of the container full of gloves precludes a finding that Midas knew
the container had been stolen. The TAC also makes clear that Midas never
received stolen property because it did not possess the container after any
alleged theft.
B.
Opposition filed August 25, 2022
Plaintiff argues that Penal Code
section 496 applies to theft-related tort claims like conversion. Plaintiff
made other changes to the pleading which establish a clear violation of the
statute. The Sellers’ representative confirmed to Midas that Plaintiff owned
the container and requested that Midas change the container’s ownership from
Sellers to Plaintiff. Midas did not change the storage contract. Instead, Midas
took steps to steal it. Plaintiff argues
that Midas decided to convert the goods, and then aided and abetted the theft
of the goods although Plaintiff confirmed its ownership of the goods. Penal
Code section 484 defines “theft” to include the fraudulent appropriation of
property by a person who has been entrusted with that property.
C.
Reply filed August 31, 2022
In sustaining demurrer, the court expressly
declined to consider Siry Inv., L.P. v. Farkhondehpour (2020) 13 Cal.5th
333. Siry did disapprove of one of the decisions cited by Defendant, but
it did not change the plain language of section 496. Siry still requires
that Plaintiff meet the strict requirements of 496. Plaintiff’s new allegations do not change the
alleged circumstances; at the time Defendant obtained the container, it was not
stolen property.
III.
LEGAL STANDARDS
A demurrer tests the
sufficiency of a complaint as a matter of law and raises only questions of law.
Schmidt v. Foundation Health (1995) 35
Cal.App.4th 1702, 1706. In testing the sufficiency of the complaint, the court
must assume the truth of (1) the properly pleaded factual allegations; (2)
facts that can be reasonably inferred from those expressly pleaded; and (3)
judicially noticed matters. Blank v. Kirwan (1985) 39 Cal.3d 311, 318.
The Court may not
consider contentions, deductions, or conclusions of fact or law. Moore v. Conliffe (1994) 7 Cal.4th 634, 638.
Because a demurrer tests the legal sufficiency of a complaint, the plaintiff
must show that the complaint alleges facts sufficient to establish every
element of each cause of action. Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43. Where the complaint fails to state facts
sufficient to constitute a cause of action, courts should sustain the demurrer.
Code Civ. Proc., § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.4th
1112, 1126.
Sufficient facts are
the essential facts of the case "with reasonable precision and with
particularity sufficiently specific to acquaint the defendant with the nature,
source, and extent of his cause of action.” Gressley v. Williams (1961) 193
Cal.App.2d 636, 643-644. Whether the Plaintiff will be able to prove the
pleaded facts is irrelevant. Stevens v. Superior Court (1986) 180 Cal.App.3d
605, 609–610.
A demurrer may also be
sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s
factual allegations are so confusing, they do not sufficiently apprise a
defendant of the issues it is being asked to meet. Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2; Code Civ. Proc., § 430.10(f).
A pleading is required to assert general
allegations of ultimate fact. Evidentiary facts are not required. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 47; Lim v. The.TV Corp. Internat. (2002) 99 Cal.
App. 4th 684, 690. However, unlike federal courts, California state courts are
not a notice pleading jurisdiction, and notice alone is not a sufficient basis
for any pleading. California
is a fact pleading jurisdiction. Merely putting an opposing party on notice is
not sufficient. Bach v.
County of Butte
(1983) 147 Cal.App.3d 554, 561; see Diodes,
Inc. v. Franzen
(1968) 260 Cal.App.2d 244, 250.
Defendant
complied with the statutory requirement to meet and confer with Plaintiff prior
to filing the demurrer. Code Civ. Proc., § 430.41. The parties were not able
reach a resolution. Declaration of Dylan Burstein, ¶ 3.
IV.
DISCUSSION
On May 26, 2022, the Hon. Thomas
D. Long sustained demurrer to the 6th cause of action alleged in the
second amended complaint for violation of Penal Code § 496 (“Section 496”) with
leave to amend. Burstein Declaration, Ex. A. The court expressly declined to
consider Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333 because the opinion was not final at the time. Burstein
Declaration, Ex. A, page 4-5. The Supreme Court issued its opinion on Siry
on July 21, 2022.
The sixth cause of action alleges
that Plaintiff entrusted Midas with the container believing that Midas would
safeguard it. TAC ¶ 59. Plaintiff alleges that Midas decided to “fraudulently
convert” the container for its own purposes. TAC ¶ 59. Midas then concealed and withheld the stolen
container from Plaintiff to advance its own goals namely aiding and abetting
the Sellers in retaking possession of the container. TAC ¶ 60.
Section 496 states that
"every person who buys or receives 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 who conceals, sells, withholds, or
aids in concealing, selling, or withholding any property from the owner,
knowing the property to be so stolen or obtained, shall be punished by
imprisonment in a county jail for not more than one year.” Penal Code § 496. The court
previously determined that to support a claim under Section 496, Plaintiff must
allege a “clear violation of the statute” and establish that the property was
stolen or obtained in a manner constituting theft, that defendant knew the
property was so stolen or obtained, and defendant received or had possession of
the stolen property citing Lacagnina v. Comprehend Systems, Inc. (2018) 25 Cal.App.5th
955. Burstein Declaration, Ex. A, page 5.
Siry “fundamentally agreed” with the proposition that Section 496 is
unambiguous, namely “a plaintiff may recover treble damages and attorney’s fees
when property has been obtained in any manner constituting theft.” Siry
at 184. Siry is factually distinguishable because in that case, the
defendant received diverted partnerships belonging to plaintiff and satisfied
the element that it received or “obtained” the funds in a manner constituting
theft. Id. at 184.
Every person is guilty of “theft”
if such persons "feloniously steal, take, carry, lead, or drive away the
personal property of another, or who shall fraudulently appropriate property
which has been entrusted to him or her, or who shall knowingly and designedly,
by any false or fraudulent representation or pretense, defraud any other person
of money, labor or real or personal property. " Pen. Code, § 484. The
statute defines “theft” in the disjointive. Siry observed that “’embezzlement,’
which is defined as ‘the fraudulent appropriation of property by a person to
whom it is entrusted’ (§ 503), ‘is a recognized form of theft within the
meaning of section 496.’" Siry at 176, n. 11.
Defendant contends that because
the container did not have the character of stolen property at the time Midas
received it from Plaintiff, it cannot constitute theft. However, this does not
negate the definition of theft to include fraudulently appropriating property entrusted
to Midas.
The SAC alleges that title to the
container transferred to Plaintiff after Plaintiff accepted deliver at Midas’
warehouse. TAC ¶ 10. Plaintiff entrusted the container to Midas. Id.
Plaintiff alleges that Midas thereafter withheld the container from Plaintiff
and delivered access to third parties and permitted them to transport the
property to another location. TAC ¶ 21. Plaintiff has alleged facts that fall
within one of the definitions of “theft” under Section 484.
Based on the foregoing, demurrer
to the TAC is DENIED. Defendant shall file its answer within 10 days. Cal.
Rules of Court, rule 3.1320.