Judge: Michael Shultz, Case: TC028783, Date: 2023-02-16 Tentative Ruling
Case Number: TC028783 Hearing Date: February 16, 2023 Dept: A
[TENTATIVE] ORDER
I.
BACKGROUND
The operative Fourth Amended Complaint (4AC) alleges that Plaintiffs,
German Munoz and Connie Lopez, owned Therapeutic Health Collective (THC)
(collectively, Plaintiffs) and had the right to possess permits and licenses to
operate a medical marijuana dispensary. Defendants allegedly filed fraudulent
and misleading corporate documents with the California Secretary of State purporting
to merge THC with Pacoima Recovery Collective and took physical possession of
Plaintiffs’ sellers’ permit. Plaintiffs substituted Defendant, Ray
Christopher Chacon San Miguel (Chacon), for Doe 1. (Am.
to 4AC, filed 6/10/22). Plaintiffs allege claims for conversion, fraud,
unjust enrichment, intentional interference with prospective economic
advantage, declaratory relief, preliminary injunction, and for unfair business
practices under Business & Professions Code, section 17200.
II.
ARGUMENTS
The Court has considered the motion,
opposition, and reply brief. Defendants, Anna Blazevich, David Welch, and Chacon,
(Defendants) move for judgment on the pleading as to all causes of action on
grounds Plaintiffs have not alleged sufficient facts to support each claim
alleged. Plaintiffs did not allege any acts of misconduct by Chacon. The fraud
claim is not alleged with specificity.
Plaintiffs argue that the fraud
claims are sufficiently alleged against all Defendants, including Chacon, and the
remaining claims are supported by the alleged facts. Alternatively, Plaintiffs
ask for leave to amend.
III.
LEGAL STANDARDS
The
two statutory grounds for a defendant’s motion for judgment on the pleadings is
either that the court does not have jurisdiction of the subject of the cause of
action, or the complaint does not state facts sufficient to constitute a cause
of action against that defendant. (Code Civ. Proc., § 438. subd. (c)(B)). A motion for judgment on the
pleadings performs the same function as a general demurrer and attacks only
defects disclosed on the face of the pleadings or by matters subject to
judicial notice. (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057,
1064). Therefore, Defendants’ contention in reply
that Plaintiffs must provide evidence of conversion is without merit. 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).
For
purposes of this motion, all properly alleged material facts are deemed 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).
IV. DISCUSSION
A. First
cause of action for conversion against Chacon.
This action arises from the alleged
conversion by Defendants of Plaintiffs’ permits and licenses to operate THC. (4AC,
¶ 18). To prevail on a claim for conversion, Plaintiffs must establish
their ownership interest at the time of the conversion and Defendants’ wrongful
act or dispossession of Plaintiffs’ property rights. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 136).
Chacon
was substituted in for a Doe defendant after the 4AC was filed. The specific
acts alleged against the Defendants include filing misleading corporate documents,
taking physical possession of Plaintiffs’ seller’s permit, and misappropriating
THC’s business identity, which Plaintiffs claim to own. (4AC,
¶ 19). Plaintiffs do not allege facts showing Chacon’s misconduct with
respect to Plaintiffs’ rights in THC.
B. Second
cause of action for false promise against Welch and for fraud against Chacon.
A claim for promissory fraud (or false
promise) must allege “(1) the defendant made a representation of intent to
perform some future action, i.e., the defendant made a promise, and (2) the
defendant did not have that intent at the time that the promise was made, i.e.,
the promise was false." (Beckwith
v. Dahl (2012) 205 Cal.App.4th 1039, 1060).
Plaintiffs allege that Welch represented
the Blazevich defendants in the aforementioned criminal proceeding and other
matters involving the filing of corporate documents on behalf of Pacoima and
THC. (4AC,
¶ 24). Welch allegedly represented to Plaintiff Munoz that he would
represent Munoz’s interest at that proceeding. (4AC,
¶ 48.). Plaintiff contends that the statement was made with intent to
obtain personal information from Plaintiff to assist in the Blasevichs’
attempts to control THC. (4AC,
¶ 49). Plaintiff alleges he was induced to provide documents and information
to his detriment. (4AC,
¶¶ 51-53). Welch used the information to divest Plaintiffs of their rightful
ownership in THC and instead transferred corporate title to the Blazevichs. (4AC,
¶ 16).
Defendants contend in their reply that
Welch could not have used information obtained from Plaintiff Munoz in 2014 to
facilitate a plan of merger completed on November 13, 2013. However, the 4AC
alleges that Welch used the information to put Defendants’ names on the
Statements of Information subsequently filed on behalf of THC in in September
2015 and February 5-6, 2018, without the knowledge or consent of Plaintiffs. (4AC,
¶ 16, 33-35).
Defendants contend that Plaintiffs did
not particularize the contents of the documents purportedly given to Welch
which makes it impossible for this Court to assess how the harm was caused.
Demurrer, 15:13-18. However, the 4AC repeatedly alleges that Welch used the
information obtained to divest Plaintiffs of their business interests in THC
and instead transferred corporate title to the Blazevichs. (4AC,
5:24-6:7).
Moreover, Defendants’ attempt to
characterize Welch’s alleged false promise as “advising Munoz of his rights,” raises
a factual dispute and depends on facts outside of the pleading, which the Court
does not consider. (Motion, 15:19-21). Reliance on other evidence
purporting to conflict with the allegations is improper since a demurrer tests
the legal sufficiency of the allegations. It does not test their truth, the
Plaintiffs’ ability to prove them, or the possible difficulty in making such
proof. (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 840). The claim is adequately
alleged against Welch.
As Plaintiffs substituted Defendant Chacon
for Doe 1 after the 4AC was filed, there are no detailed allegations of fraudulent
misconduct by Chacon. The fraud claims are specifically based on filings with
the Secretary of State by Defendants, Linden, Cortez, and the Blazevichs. (4AC
¶ 25, 32-35). The fraud claim is defective as alleged against Chacon.
C. Intentional
interference with prospective economic relations against Chacon.
Plaintiffs allege that all Defendants,
collectively, engaged in acts to disrupt the Plaintiffs’ economic relationship
with the members of THC by misrepresenting themselves to the collective and the
Secretary of State as officers of THC (4AC
¶ 55).
To prevail on a claim for intentional
interference with prospective economic relations, plaintiff must prove
"(1) the existence, between the plaintiff and some third party, of an
economic relationship that contains the probability of future economic benefit
to the plaintiff; (2) the defendant's knowledge of the relationship; (3)
intentionally wrongful acts designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) economic harm proximately caused by the
defendant's action.” (Roy
Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th
505, 512).
Plaintiffs allege that they have an economic
relationship with the “marijuana collective” to whom Plaintiffs provide services
in exchange for reasonable monetary compensation. (4AC,
¶ 55). Plaintiffs allege the wrongful conduct against all Defendants consists
of misrepresenting themselves as officers of the corporation. However, the
preceding allegations identified the Blazevich Defendants and Linden as
officers of the corporation. Plaintiffs do not allege any actionable conduct
constituting interference by Chacon specifically. (4AC
¶¶ 32-35). Plaintiffs “must plead and prove as part of its case-in-chief
that the defendant not only knowingly interfered with the plaintiff's
expectancy but engaged in conduct that was wrongful by some legal measure other
than the fact of interference itself.” Della
Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.
D. Claims
for unjust enrichment, declaratory relief, and unfair competition against
Chacon.
Unjust enrichment is not a cause of
action but is an equitable principle that underlies “various legal doctrines
and remedies.” (County
of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533, 542). It
involves receipt of a benefit and unjust retention of the benefit at the
expense of another. (Lectrodryer
v. Seoulbank (2000) 77 Cal.App.4th 723, 726). Since the 4AC does
not allege any underlying wrongful conduct perpetrated by Chacon, this claim is
defective.
The statute governing claims for
declaratory relief permits an original action and authorizes such a claim to be
filed “alone.” (Ball
v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800); (Code
Civ. Proc., § 1060). Plaintiffs can pursue a claim for declaratory relief
in the absence of another cause of action or other requested relief. (Id.).
Plaintiffs need only allege that they are interested persons under a written
instrument and seek a declaration of their rights and duties under that instrument.
(Id.).
Therefore, although the underlying tort claims against Chacon are not well
stated, the declaratory relief claim is not defective standing alone.
As defined by statute, “unfair competition”
includes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof.
Code, § 17200). Its purpose is to protect both consumers and competitors by
promoting fair competition in commercial markets for goods and services.” (Gutierrez v.
Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1265). A plaintiff
alleging unfair business practices under the UCL must state with “reasonable
particularity” the facts supporting the statutory elements of the violation. (Khoury v. Maly's
of California, Inc. (1993) 14 Cal.App.4th 612, 619).
Here, Plaintiffs have not sufficiently
alleged underlying predicate acts constituting an unlawful, unfair, or
fraudulent practice perpetrated by Chacon. Accordingly, this cause of action is
not well plead.
E. Preliminary
Injunction against all Defendants.
The purpose of a preliminary injunction
is to preserve the status quo pending a decision on the merits. (Major v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623). A cause
of action must exist before injunctive relief may be granted. (Id.). If
a complaint fails to state a cause of action, an order granting a preliminary
injunction must be reversed. Id. Because underlying claims against Defendant
Chacon are inadequately alleged, this claim is equally defective.
As to the remaining Defendants, Plaintiffs
are not required at this stage to “establish” a probability of prevailing on
the merits or their right to ownership of the corporate entity with evidence. (Motion,
20:19-21).
V.
CONCLUSION
Accordingly, the motion is GRANTED in
part as to the claims for (1) conversion, (2) fraud, (3) intentional
interference with prospective economic relations, (4) unjust enrichment, (6)
preliminary injunction, and (7) unfair competition all as alleged against Defendant
Chacon. The motion is DENIED as to the claim for (5) declaratory relief as alleged
against Chacon.
The motion is DENIED as to the claims for
(2) fraud and (7) unfair competition against Welch. The motion is DENIED as to
the claim for (6) preliminary injunction as alleged against the remaining
Defendants.
Leave to amend is proper where plaintiff has
not had a fair opportunity to amend, and the defect is capable of being cured. (Colvig v. RKO General,
Inc. (1965) 232 Cal.App.2d 56, 69–70).
Since Plaintiffs have not had an opportunity to amend the claims with respect
to Defendant Chacon, the Court grants 10 days leave to amend. (Cal. Rules of Court, rule 3.1320).