Judge: Nathan Vu, Case: 2021-01229534, Date: 2023-05-15 Tentative Ruling

Demurrer

Defendant Beom & Eun Investment, LLC’s Demurrer is SUSTAINED with 10 days leave to amend.

Defendant Beom & Eun Investment, LLC’s Request for Judicial Notice is GRANTED. (See Evid. Code, § 452, subd. (d).)

On its own motion, the court takes judicial notice of the case files in Kea v. Hong, Case No. 30-2011-00534180, and Hong v. Kea, Case No. 2014-00745940, including any appellate opinions filed therein. (See Evid. Code, § 452, subd. (d).)

Defendant Beom & Eun Investment, LLC (Defendant BEI) demurs to all 5 causes of action plead in the Complaint filed by Plaintiff Linda Hong.

Background

This litigation revolves around the Imperial Spa located in Garden Grove, California (Spa). Plaintiff and her deceased husband, Howard Kea, founded the Spa in 2002 and the two of them managed and owned the Spa together with Defendants Joung Hee Kea (Defendant Kea) and Won Beom Lee (Defendant Lee). (Hong v. Lee, December 29, 2015, G050737 [nonpub. opn. at p. 3].)

In May 2010, Howard Kea passed away and in June 2010, the Spa’s landlord claimed that the Spa had not paid rent for 5 months and evicted the Spa from the premises. (Id. at p. 4.) Defendants Kea’s and Lee’s daughter Eun Joo Lee then signed a new lease with the Spa’s former landlord and Defendants Kea and Lee, along with Eun Joo Lee, operated a spa at the same location. (Ibid.) In April 2011, Defendant Lee and Eun Joo Lee formed Defendant BEI to own and operate the new spa and the new lease was assigned to Defendant BEI. (Hong v. Lee, June 5, 2019, G054880 [nonpub. opn. at p. 7].)

In previous litigation, Kea v. Hong, Case No. 30-2011-00534180, Plaintiff and Defendants Kea and Lee litigated several issues, including Plaintiff’s ownership interest in the Spa prior to the creation of Defendant BEI. The court either granted a directed verdict or summary judgment as to all of Plaintiff’s claims in that action, and the parties eventually settled the entire matter. (See Hong v. Lee, December 29, 2015, G050737 [nonpub. opn. at pp. 2, 25]; Kea v. Hong, Case No. 30-2011-00534180, ROA #395, #420, #421.)

In a 2nd case, Hong v. Kea, Case No. 2014-00745940, Plaintiff and Defendants Lee and BEI, as well as Eun Joo Lee, litigated the issue of whether Plaintiff owned a 50% interest in Defendant BEI and was entitled to 50% of the profits from Defendant BEI. At trial, Plaintiff pursued claims for declaratory relief, constructive trust, breach of fiduciary duty, and conversion. (Hong v. Lee, June 5, 2019, G054880 [nonpub. opn. at p. 6.]) The parties stipulated that Plaintiff owned a 50% interest in the Spa until 2010, when the new spa began operating in the same location. (Ibid.)

After the trial, the court rendered a verdict in favor of Plaintiff on the equitable claims for declaratory relief and constructive trust, and the jury rendered a special verdict of $2.750 million in favor of Plaintiff on the conversion and breach of fiduciary causes of action. (Id. at p. 7.)

However, the Court of Appeal reversed the judgment on the basis that the breach of fiduciary duty and conversion claims were barred by res judicata because Plaintiff had litigated and lost on these claims in the 1st case. (Id. at pp. 14-15.) Although the causes of action had been framed slightly differently between the 1st and 2nd cases, the Court of Appeal held that the claims in the 1st and 2nd cases alleged a violation of the same primary right – Plaintiff’s 50% interest in the spa business. (Ibid.)

In addition, the Court of Appeal held that Plaintiff’s claim for conversion (as well as the related claims for declaratory relief and constructive trust) were barred by the statute of limitations. (Id. at pp. 15-19.)

In this 3rd action, Plaintiff again asserts that she has a 50% ownership interest in the spa business and/or Defendant BEI and that she is entitled to 50% of the profits therefrom. Plaintiff pleads causes of action for inspection of records, accounting, conversion, constructive trust, and unjust enrichment. Defendants BEI demurs to all of Plaintiff’s causes of action on the basis that they are barred by res judicata.

Standard for Demurrer

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.)

Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.) Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 fn.7.)

Although courts should take a liberal view of inartfully drawn complaints, (see Code Civ. Proc., § 452), it remains essential that a complaint set forth the actionable facts relied upon with sufficient precision to inform the defendant of what plaintiff is complaining, and what remedies are being sought, (Leek v. Cooper (2011) 194 Cal.App.4th 399, 413). Bare conclusions of law devoid of any facts are insufficient to withstand demurrer. (Schmid v. City and County of San Francisco (2021) 60 Cal.App.5th 470, 481; see Code Civ. Proc., § 425.10, subd. (a).)

Meet and Confer

Before filing a demurrer, the demurring party is required to meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer, to determine whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (See Code Civ. Proc., § 430.41, subd. (a).) As part of the meet-and-confer process, the demurring party “shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies.” (Code Civ. Proc., § 430.41, subd. (a)(2).)

Defendant BEI’s counsel met and conferred by telephone with Plaintiff’s counsel on February 1, 2023, and “the parties could not resolve the different points of view.” (Decl. of Tom S. Chun (Chun Decl.), ¶¶ 2-4.) Thus, Defendant BEI has met the meet-and-confer requirement.

Waiver of an Argument

The failure to address or oppose an issue in a motion constitutes a waiver on that issue. (See Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 288; see also Wright v. Fireman’s Fund Ins. Companies (1992) 11 Cal.App.4th 998, 1011 [“it is clear that a defendant may waive the right to raise an issue on appeal by failing to raise the issue in the pleadings or in opposition to a . . . motion”].)

Although Defendant BEI brought its objections to the attention of Plaintiff through the meet-and-confer process and then served the instant demurrer on Plaintiff’s counsel, Plaintiff has not filed an opposition to the demurrer. The court thus sustains the demurrer on the basis that Plaintiff has waived any argument in opposition.

Res Judicata

However, even if the court were to address the issue on the merits, it would still sustain the demurrer. The court’s reasoning on the merits may provide some guidance to the parties.

“Under the doctrine of res judicata, a valid, final judgment on the merits is a bar to a subsequent action by parties or their privies on the same cause of action.” (Amin v. Khazindar (2003) 112 Cal.App.4th 582, 589.) In other words, “res judicata bars relitigation of the same cause of action by the same parties . . . .” (Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1517, fn. 17.)

Whether causes of action in two lawsuits are the same for purposes of res judicata depends on whether they involve the same “primary right.” (Crowley v. Katleman (1994) 8 Cal.4th 666, 681; see Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797 [“To determine whether two proceedings involve identical causes of action for purposes of claim preclusion, California courts have ‘consistently applied the primary rights theory’”.], quoting Slater v. Blackwood (1975) 15 Cal.3d 791, 795; (Johnson v. GlaxoSmithKline, Inc., supra, 166 Cal.App.4th at p. 1517, fn. 17 [“[T]he definition of a cause of action for this purpose depends, not on the legal theory or label used, but on the primary right sought to be protected in the two actions.”].)

“[T]he primary right theory provides that a cause of action consists of (1) a primary right possessed by the plaintiff, (2) a corresponding duty devolving upon the defendant, and (3) a delict or wrong done by the defendant which consists of a breach of the primary right.” (Amin v. Khazindar, supra, 112 Cal.App.4th at p. 589.) Pursuant to this theory, “the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.” (Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 798.)

A party may rely on several legal theories to allege liability based on a violation of a single primary right and seek different remedies for the violation. (Crowley v. Katleman, supra, 8 Cal.4th at pp. 681-682.) Regardless, “[t]he most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action.” (Id. at p. 681.) “Even when several defendants cause a single injury to plaintiff, ‘[t]he primary right is determinative. So, if there is only one primary right violated there is only one cause of action, even though there may be two or more wrongdoers, each doing a wrongful act and each individually liable for it.’” (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 575, quoting 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 55, p. 111.)

In the appeal of the 2nd case, the Court of Appeal held that, even though Plaintiff had framed her claims as pertaining to a 50% interest in Defendant BEI, the primary right at issue was really Plaintiff’s 50% interest in the spa business and that Plaintiff had lost on that issue in the 1st case. (Hong v. Lee, June 5, 2019, G054880 [nonpub. opn. at pp. 14-15].) Thus, res judicata barred all of Plaintiff’s claims because they were premised on Plaintiff’s 50% interest in the spa business.

The Court of Appeal also held that Plaintiff was time-barred from asserting a cause of action for conversion of her 50% interest in the spa business and any causes of action based on the alleged conversion were also time-barred. (Id. at pp. 15-19.)

In this 3rd case, Plaintiff’s causes of action for (1) inspection of records, (2) accounting, (3) conversion, (4) constructive trust, and (5) unjust enrichment, are all premised on Plaintiff’s alleged 50% ownership of the spa business and/or Defendant BEI. (See Compl. ¶¶ 2, 26, 31, 37, 41.) The instant action thus involves the same primary right that has been litigated previously and upon which Plaintiff has lost.

In addition, the conversion claim is time-barred by the statute of limitations as determined by the Court of Appeal in the 2nd case. (See Hong v. Lee, June 5, 2019, G054880 [nonpub. opn. at pp. 15-19].) To the extent that they are based on the same conversion that allegedly occurred in 2010, Plaintiff’s other causes of action are time-barred as well.

Although Plaintiff frames this action as being one for relief starting after the filing of the 2nd action in 2014 (e.g., for post-2014 unjust enrichment), that does not change the fact that the primary right asserted here is the same that contained in the prior actions. The court thus must sustain the demurrer.

Leave to Amend

“It is an abuse of the trial court's discretion to sustain a demurrer without leave to amend if there is a reasonable possibility the plaintiff can amend the complaint to allege any cause of action.” (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) “Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.)

It is generally the plaintiff's “burden to establish how the complaint can be amended to state a valid cause of action.” (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1044.) In order to meet this burden, a plaintiff may submit a proposed amended complaint or enumerate facts and demonstrate how those facts establish a cause of action. (See Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 890.)

Here, although Plaintiff has not filed an opposition or stated how she would amend the complaint, Plaintiff did attempt to file an amended complaint with the court clerk. Thus, the court will exercise its discretion and grant leave to amend.

Defendant BEI shall give notice of this ruling.