Judge: Nathan Vu, Case: 30-2022-01290056, Date: 2023-08-07 Tentative Ruling

Demurrer

Defendant Qiaoyun Zhang’s Demurrer to Plaintiffs’ First Amended Complaint is OVERRULED as to the 1st, 2nd, 3rd, 4th, and 5th Causes of Action.

Defendant Qiaoyun Zhang shall file and serve an Answer to the First Amended Complaint within 10 days of service of the notice of ruling. (See Code Civ. Proc., 472b; Cal. Rules of Court rule 1.1320(g).)

Plaintiffs Wei He’s, Xiaoning Ren’s, and Yueli Zhao’s Request for Judicial Notice is GRANTED. (See Evid. Code, § 452(d).)

Defendant Qiaoyun Zhang demurs to the 1st, 2nd, 3rd, 4th, and 5th Causes of Action of the First Amended Complaint (FAC) filed by Plaintiffs Wei He, Xiaoning Ren, and Yueli Zhao.

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).)

1st Cause of Action (Intentional Misrepresentation), 2nd Cause of Action (Negligent Misrepresentation), 3rd Cause of Action (Concealment of Material Fact), and 4th Cause of action (False Promise)

The elements of an intentional misrepresentation or concealment claim are: “(a) misrepresentation, false representation, concealment, or nondisclosure; (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

The elements of a negligent misrepresentation cause of action are: “[M]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage . . . .” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154.)

In order to plead promissory fraud, a plaintiff must allege: “(1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promise to enter into the transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise[e].” (Behnke v. State Far (2011) 196 Cal.App.4th 1443, 1453). 

The 1st, 2nd, 3rd, and 4th Causes of Action of the FAC all sound in fraud and the elements of such claims normally must be plead with specificity. (See Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “[G]eneral and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “Thus ‘the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, quoting Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)

“The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) The purpose of the requirement that fraud be pled specifically is to “provide[] enough information for respondents to know what purported falsehoods they must defend against.” (Murphy v. BDO Seidman, LLP (2003) 113 Cal.App.4th 687, 693.)

In this case, the FAC alleges that certain representations were made in September 2019, and specifically on or about September 20, 2019 and September 26, 2019. (See FAC, ¶ 18.) In addition, the FAC specifies that the representations were made by Defendant Qiaoyun Zhang (Defendant Zhang) to Plaintiffs Wei He (Plaintiff He) and Xiaoning Ren (Plaintiff Ren) through in-person communications at meetings in China and Irvine, or through text communications on WeChat. (See ibid.)

The FAC lays out the substance of the representations:

• An educational facility would be formed in the U.S. that would be operated and managed legally, (see id., ¶¶ 6, 18(A);

• A benefit of this would be that Plaintiff He and Plaintiff Ren could petition to obtain immigration status soi that their children could study in the United States, (see id., ¶¶ 5, 18(B);

• The corporation would be properly and lawfully formed through a shareholders’ agreement, (see id., ¶ 18(C);

• Corporate decisions would be made pursuant to meetings and the consent of all of the shareholders, (see id., ¶ 18(D);

• Defendant Zhang would initially be all of the officers of the corporation, but a board would meet and select permanent directors, (see id., ¶ 18(E);

• Defendant Zhang would be transparent with all corporate affairs, (see id., ¶ 18(F);

The FAC then explains how these representations were false and how the Defendant knew they were false: Defendant Zhang had the ability and authority to do each of the things above, but she did not abide by any of the representations and instead, Defendant formed the company with forged signatures of the Plaintiffs, made herself the sole director using the forged signatures, purchased a different company called Reading Town without Plaintiffs’ consent, and attempted to sell Reading Town without Plaintiffs’ consent, and resisted and evaded Plaintiffs’ inquiries about company operations and company documentation, and commingled company funds with his personal funds. (See id., ¶¶ 7, 10-16, 19, 22.)

The FAC also contains allegations the Defendant Zhang similar misrepresentations to Plaintiff Yueli Zhao (Plaintiff Zhao) on October 10, 2019, which also turned out to be false and that Defendant Zhang knew them to be false and intended for Plaintiff Zhao to rely on the misrepresentations. (See id., ¶¶ 7, 10-16, 20-22.)

Plaintiffs have sufficiently alleged a basis for their fraud claims — namely, that Defendant Zhang represented that Plaintiffs would be investing in a legitimate operated company and would have the opportunity to legitimately obtain legal immigration status; that Plaintiffs relied on Defendant’s representations by transferring money to Defendant to form the company; and that although Defendant had the ability to follow through on her representations, Defendant instead used forged documents and other illegal means to make use of Plaintiffs’ money.

Therefore, the demurrer to the 1st, 2nd, 3rd, and 4th Causes of Action of the FAC must be overruled.

5th Cause of Action (Breach of Contract)

While the Notice of Demurrer states that Defendant Zhang is demurring to the 5th Cause of Action, the Demurrer itself and the Memorandum of Points and Authorities do not address this claim. Defendant has not met her burden to establish that this cause of action is defective.

Thus, the demurrer to the 5th Cause of Action of the FAC must be OVERRULED.

Plaintiffs shall give notice of this ruling.