Judge: Michael Shultz, Case: TC028783, Date: 2023-05-23 Tentative Ruling
Case Number: TC028783 Hearing Date: May 23, 2023 Dept: A
[TENTATIVE] ORDER OVERRULING
[TENTATIVE] ORDER DENYING MOTION TO STRIKE BY DEFENDANT, DAVID
WELCH
[TENTATIVE] ORDER GRANTING MOTION TO CONTINUE TRIAL BY CHRISTOPHER
CHACON SAN MIGUEL AND ANNA BLAZEVICH
I.
BACKGROUND
The operative Fifth Amended Complaint (5AC) alleges that Plaintiffs,
German Munoz, and Connie Lopez, owned Therapeutic Health Collective (THC)
(collectively, Plaintiffs) and possessed 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
allege seven causes of action for various torts, equitable remedies, statutory
violations, and for declaratory relief.
II.
DEMURRER
A.
Arguments
Defendant, Christopher
Chacon San Miguel (“Chacon”), demurs to the fourth cause of action for unjust
enrichment/imposition of constructive trust. This remedy is not predicated on a
tort claim. Standing alone, it is not a basis for relief.
Plaintiffs argue that the only
claims against Chacon are for unjust enrichment and declaratory relief, both of
which are adequately alleged. Chacon
wrongfully acquired THC through the fraudulent acts of Anna and Michael
Blazevich (collectively, “Blazevichs”).
In reply, Chacon argues that a
constructive trust is imposed to prevent a party from taking advantage of his
own wrongdoing. Plaintiffs do not allege that Chacon engaged in any wrongdoing.
B.
LEGAL STANDARDS
The bases
for demurrer are limited by statute and may be sustained for reasons including
failure to state facts sufficient to state a cause of action and uncertainty. (Code Civ.
Proc., § 430.10.) 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.) 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.)
C. Discussion
Plaintiffs allege that the Blazevichs usurped
Plaintiff’s ownership interest in THC and wrongfully transferred title to
themselves. Plaintiffs allege that on April 1, 2021, Anna Blazevich fraudulently
conveyed her interest to Chacon, although Chacon did not pay fair market value
for that interest and allowed Chacon to control the operation of THC. (5AC, ¶
17, 19-21.) Plaintiffs allege that
Chacon knew or should have known that Anna Blazevich did not have authority to
transfer her interest to Chacon. (Id.)
Unjust enrichment is not a cause of action or a remedy,
but is “a general principle, underlying various legal doctrines and remedies” and
is synonymous with restitution. (McBride
v. Boughton (2004) 123 Cal.App.4th 379, 387.) It is characterized as
the result of a failure to make restitution. (Id.) None of the cases cited by Chacon require that
a predicate tortious act by the Defendant is required. Rather, "[t]he
person receiving the benefit is required to make restitution only if the
circumstances are such that, as between the two individuals, it is unjust for
the person to retain it.” (Meister
v. Mensinger (2014) 230 Cal.App.4th 381, 398.) The purpose of
restitution is to “eliminate profit of the conscious wrongdoer, or ...
defaulting fiduciary without regard to notice or fault … .” (Id.)
Plaintiffs have adequately alleged Chacon’s conscious
wrongdoing in that he accepted Anna Blazevich’s transfer of her of interest in
THC, with actual or constructive knowledge that she had no authority to do so.
(5AC, ¶ 19.) Chacon contends that Plaintiff must show mistake, fraud, or
coercion citing Dinosaur
Development, Inc. v. White, 216 Cal. App. 3d 1310. That case is
factually distinguishable; there the Plaintiff sought approval from a local
community development department (“Department”) to build a subdivision. (Id. at 1313.) The
Department granted the Defendants’ (neighboring parties’) request that approval
be conditioned on ensured access from the neighbors’ property to a public road (Id.) at 1314. The Court
determined that the plaintiff was not entitled to restitution from the
neighboring defendants, since the benefit conferred on their property was
incidental to the plaintiff’s permit request. Defendants were not “unjustly”
enriched since the access road was a condition of the permit issued by the
Department. (Id.)
Here, Plaintiffs expressly allege that the Blazevichs conveyed an interest in
THC to Chacon, although they had no authority to do so, and Chacon knew or
should have known of that fact. (5AC ¶ 19.) Therefore, Plaintiffs seek an order
that Chacon does not have any rights to THC and seeks an order restoring
Plaintiffs’ ownership rights.
The third cause of action also seeks imposition of a
constructive trust against Chacon because he is the current owner of THC, which
interest Plaintiffs contend was wrongfully obtained. A constructive trust is a remedy “tied” to
unjust enrichment and is defined as “an involuntary equitable trust created by
operation of law as a remedy to compel the transfer of property from the person
wrongfully holding it to the rightful owner. [Citations.] The essence of the
theory of constructive trust is to prevent unjust enrichment and to prevent a
person from taking advantage of his or her own wrongdoing." (Campbell
v. Superior Court (2005) 132 Cal.App.4th 904, 920.) It may be imposed where
a complaining party has the right to property and the existence of some
wrongful acquisition or detention of the res by another party who is not
entitled to it. (Id.) For
the same reasons, this claim is well pleaded.
D. Conclusion
For
the foregoing reasons, the demurrer is OVERRULED. Defendant Chacon is ordered
to answer within 10 days.
III. MOTION TO STRIKE
A.
Arguments
Defendant, David Welch (“Welch”),
separately moves to strike his name entirely as a defendant in this action
because Plaintiffs did not seek leave of court. Plaintiffs’ claims are based on
an alleged civil conspiracy with the co-defendants and therefore, Plaintiffs
are required by statute to seek an order to file this action against Welch.
In opposition, Plaintiffs argue
that the Court denied Welch’s motion for judgment on the pleading as to the
claims for fraud and unfair competition alleged in the Fourth Amendment
Complaint. Welch previously raised the same issues as raised here. No changes
were made against Welch in the 5AC. Civil Code § 1714.10 does not apply to the
facts alleged in the 5AC.
In reply, Welch argues that he
first raised this issue in mid-2018 in a special appearance. However, the 5AC
supersedes the previous four complaints. Welch did not waive his right to assert
this defense.
B.
Legal standards
The
court may, upon motion or at any time in its discretion and upon terms it deems
proper: (1) strike out any irrelevant, false, or improper matter inserted in
any pleading; or (2) strike out all or any part of the pleading not drawn or
filed in conformity with the laws of California, a court rule, or an order of
the court. (Code Civ. Procedure §436 subd. (a)-(b); Stafford v.
Schultz (1954) 42 Cal.2d 767, 782 [“matter in a
pleading which is not essential to the claim is surplusage; probative facts are
surplusage and may be stricken out or disregarded.”])¿
The Court’s file
does not reflect that any prior judicial officer ruled substantively on whether
Plaintiffs were required to request leave to file suit against Defendant Welch
pursuant to Civil Code section 1714.10 although Welch previously raised the
issue as a “specially appearing party” in opposition to Plaintiffs’ motion for
leave to file a second amended complaint (“2AC”). The Hon. Maurice Leiter
denied the Plaintiffs’ motion without reference to any substantive issue. (Min.
Ord. 6/14/18.) The parties subsequently stipulated to the filing of the 2AC. (Stip.
filed 2/27/19.) While Defendants, including Welch, demurred to the 2AC, the
parties did not raise section 1714.10 as a basis for the demurrer. Plaintiffs
do not cite any persuasive authority that would preclude Welch from raising this
issue in response to the 5AC.
Civil Code section
1714.10 requires a plaintiff to seek leave of court to file an action against
an attorney for "civil conspiracy with his or her client arising from any
attempt to contest or compromise a claim or dispute, and which is based upon
the attorney's representation of the client." Civ. Code, § 1714.10. The alleged misconduct
by Welch does not fall within the limited scope of Section 1714.10. Plaintiffs
allege Welch offered to provide Munoz “amicus curiae” services at the time
Munoz was being criminally prosecuted for improper transfers of THC’s
dispensary license. (5AC, ¶ 16.) Instead, Plaintiffs allege Welch used that
relationship to obtain confidential information from Munoz that was used to
divest Munoz of his ownership interest in THC and transfer corporate title to
the Blazevichs. (5AC 5:28 – 6:8.)
The 5AC expressly asserts
that the alleged misconduct against Welch does not arise out of a civil
conspiracy with his clients, nor is it based on Welch’s representation of any
clients. Welch allegedly made a false promise to represent Munoz’s interests in
the criminal proceeding. (5AC, 6:13, ¶¶ 55-58). Moreover, the statute excepts
from its requirements claims against an attorney where the “attorney has an
independent legal duty to the plaintiff, … .” Civ. Code, § 1714.10 subd. (c); Rickley v.
Goodfriend (2013) 212 Cal.App.4th 1136, 1151 ["It is well established that an attorney has an independent
legal duty to refrain from defrauding nonclients."])
Accordingly, the
motion to strike is DENIED.
IV.
MOTION TO
CONTINUE TRIAL
Defendant Chacon
moves to continue trial on grounds Plaintiffs filed their 5AC on March 2, 2023,
and Defendant needs more time to conduct discovery. Defense counsel believes
both parties require more time. Decl. of Whittemore, ¶ 6.
Defendant, Anna
Blazevich, joins in the motion, and asks that trial be reset for early 2024. Defendant
recently obtained new counsel who substituted in on May 2, 2023. Plaintiffs’
counsel requested a three-month continuance, however, that will not be enough
time. Decl. of Rozmus, ¶5.) No opposition has been filed.
This case was
filed on May 3, 2017. The matter was appealed from 10/21/19 through March 3,
2021, when the Court of Appeal reversed Judge Leiter’s decision to sustain Welch’s
and the Blazevich’s demurrer to the third amended complaint without leave to
amend. Upon remand and after numerous continuances of the status conference,
the Hon. Thomas Long set trial for October 3, 2022. On September 26, 2022, this
Court continued trial to July 3, 2023, pursuant to the parties’ stipulation.
(Min. Ord. 9/26/22.)
Trial
continuances are ordinarily disfavored, however, each request for a continuance
is considered on its own merits. The court may grant a continuance only upon an
affirmative showing of good cause requiring the continuance. Cal. Rules of
Court, Rule 3.1332. In ruling on a motion, the court considers all facts and
circumstances relevant to that determination including, in relevant part, (1)
the proximity of the trial date, (2) prior continuances, (3) the length of the
continuance requested, (4) the availability of alternative means to address the
problem giving rise to the motion to continue, (5) any prejudice that parties
or witnesses will suffer as a result of the continuance, (6) the court's
calendar and the impact of granting a continuance on other pending trials, (7) whether all parties have stipulated to a
continuance, (8) whether the interests of justice are best served by a
continuance, by the trial of the matter, or by imposing conditions on the
continuance, and (9) any other fact or circumstance relevant to the fair
determination of the motion. Cal Rules of Court, Rule 3.1332.
Given that Defendant
Chacon has yet to file his answer to the 5AC and because of the retention of
new counsel for A. Blazevich, there is good cause to continue trial.