Judge: Nathan Vu, Case: 30-2020-01173623, Date: 2022-10-24 Tentative Ruling

Please Note: The hearing on this matter has been changed to 8:30 A.M.

Demurrer

Defendants Charles Kingan’s and Reiko Kingan’s Demurrer to the second cause of action of the Second Amended Complaint is SUSTAINED, with 15 days leave to amend.

Leave to amend is limited to the second cause of action and is granted only to cure the defects addressed in this ruling. Plaintiff must bring a motion for leave to amend if he wishes to add new causes of action, including those made out in the first and third causes of action of the Second Amended Complaint.

Defendants Charles Kingan and Reiko Kingan (Kingan Defendants) demur to the second cause of action of the Second Amended Complaint (SAC).

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 Civil Proc. Code, § 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 Civil Proc. Code, § 425.10, subd. (a).)

2nd Cause of Action (Voidable Transfer)

The second cause of action of the SAC alleges that the Kingan Defendants engaged in a voidable transfer in violation of Arizona Revised Statutes sections 44-1001 set seq.

The voidable transfer statute states that:

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation under any of the following:

1.    With actual intent to hinder, delay or defraud any creditor of the debtor.

2.    Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either: (a) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. (b) Intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due

(A.R.S. § 44-1004(A).)

The SAC pleads that Plaintiff Kurt Hughes has a right to the “net proceeds in the sale of Rainbow Court” and that said right constitutes a “claim” within the meaning of Arizona Revised Statues section 44-1001(2). (SAC, ¶ 23.) Plaintiff also alleges that he is a “creditor” within the meaning of Arizona Revised Statutes section 44-1001(3) because the Kingan Defendants “stole all of the net proceeds from the sale of Rainbow Court.”(SAC, ¶ 24.)

The conclusory allegations that the Arizona Uniform Fraudulent Transfer Act applies to this case, without alleging underlying facts, are insufficient to support a cause of action. There are no factual allegations explaining the basis of Plaintiff’s “claim”, how the Kingan Defendants stole the net proceeds, or how the alleged theft lead to Plaintiff becoming a “creditor”.

These deficiencies appear to arise from Plaintiff’s effort to avoid the court’s prior ruling from 06/30/2022 that Plaintiff’s claims “concern[] the internal affairs of trusts” and therefore must be brought in the probate court. (Probate Code, § 17000(a); see ROA #158.) Plaintiff has responded to the court’s prior ruling by removing the allegations in the First Amended Complaint that reveal that his dispute arises from the administration of the Midori Hughes Trust and the Last Will and Testament of Midori Hughes.

Plaintiff may not “cure” a pleading defect by removing the factual allegations that reveal the defect. (See Hendy v. Losse (1991) 54 Cal.3d 723, 742–743 [affirming order sustaining defendants' demurrer without leave to amend when the plaintiff filed an amended complaint omitting harmful allegations from original unverified complaint]; Colapinto v. County of Riverside (1991) 230 Cal.App.3d 147, 151 [“If a party files an amended complaint and attempts to avoid the defects of the original complaint by either omitting facts which made the previous complaint defective or by adding facts inconsistent with those of previous pleadings, the court may take judicial notice of prior pleadings and may disregard any inconsistent allegations.”]; Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425–426 [“Allegations in the original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation in the amended pleading. The policy against sham pleadings requires the pleader to explain satisfactorily any such omission.”], citation omitted.)

Thus, the demurrer is sustained as to the second cause of action because it fails to state a cause of action. The demurrer is also sustained because Plaintiff has simply omitted factual allegations from the First Amended Complaint that reveal that Plaintiff’s claims should have been filed in the probate court.

Motion to Strike

Defendants Reiko Kingan’s and Charles Kingan’s Motion to Strike is GRANTED as to the first cause of action of the Second Amended Complaint and DENIED as moot as to the second cause of action.

The first cause of action of the Second Amended Complaint is STRICKEN.

The Kingan Defendants also move to strike the first cause of action for aiding and abetting statutory theft pursuant to Penal Code section 496 and the second cause of action for voidable transfer pursuant to Arizona Revised Statutes sections 44-1001, et seq.

Standard for Motion to Strike

A court may strike out any irrelevant, false, or improper matter inserted in any pleading or strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule or an order of the court. (Civil Proc. Code, § 436.)

1st Cause of Action (Statutory Theft)

Plaintiff’s original Complaint asserted three causes of action against the Kingan Defendants: the third cause of action for conversion, the fourth cause of action for breach of fiduciary duty, and the fifth cause of action for voidable transfer. (See Compl. [ROA #2].) On 04/19/21, the court sustained the Kingan Defendants’ demurrer as to the third, fourth, and fifth causes of action and granted Plaintiff leave to “amend the complaint to address the issues herein.” (ROA #36.)

Plaintiff then filed a First Amended Complaint (FAC) on 05/10/21. (See FAC [ROA #49].) Instead of curing the defects in the fourth cause of action for breach of fiduciary duty, Plaintiff substituted a fourth cause of action for statutory theft pursuant to Penal Code sections 484 and 496(c), without leave of the court.

Although the Kingan Defendants did not move to the strike the statutory theft cause of action from the FAC, they filed a demurrer to the third, fourth, and fifth causes of action to FAC. The court’s ruling on 06/30/2022 sustained the demurrer to the FAC, finding that the probate court has exclusive jurisdiction over Plaintiff’s claims, as explained above. (See ROA #158.)

In this same ruling, the court reminded Plaintiff that leave to amend is limited to the issues addressed in the ruling and that Plaintiff must bring a motion for leave to amend if he seeks to add new causes of action. (Id.) Nonetheless, the SAC once again included the cause of action for statutory theft, this time denominated as the first cause of action. (See SAC [ROA #164].)

It is evident from the court’s prior rulings that the scope of leave to amend did not encompass the statutory theft claim that was added to the FAC and SAC without leave of court. The Kingan Defendants’ motion to strike the first cause of action therefore is granted. (See Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1329 [134 Cal.Rptr.3d 899, 908 [“It is the rule that when a trial court sustains a demurrer with leave to amend, the scope of the grant of leave is ordinarily a limited one. It gives the pleader an opportunity to cure the defects in the particular causes of action to which the demurrer was sustained, but that is all.”].)

2nd Cause of Action (Voidable Transfer)

The court has already sustained the Kingan Defendants’ demurrer to second cause of action with leave to amend. The motion to strike the second cause of action is therefore denied as moot.

The Kingan Defendants shall give notice of the rulings on the demurrer and motion to strike.

Joinder

Defendants Tiffany Torgan Phillips’, Prestige Properties Enterprises, Inc. dba Hartcourts Prestige Properties’, and Lindsey Jean-Marie Gates’ Joinder to the Motion to Strike is GRANTED.

The third cause of action of the Second Amended Complaint is STRICKEN.

Defendants Tiffany Torgan Phillips, Prestige Properties Enterprises, Inc. dba Hartcourts Prestige Properties, and Lindsey Jean-Marie Gates (Joining Defendants) join in the Kingan Defendants’ Motion to Strike and request the same relief.

The Joining Defendants did not submit their own arguments as to why the motion to strike should be granted as to them. Therefore, the joinder must rest upon the arguments made by the Kingan Defendants.

The SAC only asserts one cause of action against the Joining Defendants – the third cause of action for aiding and abetting statutory theft pursuant to Penal Code sections 484 and 496(c). The court assumes that the joinder seeks to attack this claim.

The original Complaint only asserted one cause of action against the Joining Defendants – the first cause of action for breach of fiduciary duty. (See Compl. [ROA #2].)

Although the court only sustained the demurrer as to and granted leave to amend to cure the defects contained in the third, fourth, and fifth causes of action of the Complaint, (ROA #36), Plaintiff nonetheless replaced the first cause of action with an aiding and abetting conversion claim against the Joining Defendants without leave of the court. (See FAC [ROA #49].)

When the court again sustained the demurrer to the third, fourth, and fifth causes action of the FAC, (see ROA #158), Plaintiff replaced the aiding and abetting conversion claim with an aiding and abetting statutory theft cause of action against the Jointing Defendants, again without leave to amend, (see SAC [ROA #164]).

As explained above, because the third cause of action of the SAC was added without leave of the court, it must be stricken.

The Joining Defendants shall give notice of the ruling on the joinder.