Judge: Peter A. Hernandez, Case: 21PSCV01059, Date: 2022-09-13 Tentative Ruling

Case Number: 21PSCV01059    Hearing Date: September 13, 2022    Dept: O

1.         See below.

2.         Defendants Kuei-Lin Hsieh aka Wainny Hsieh’s, Nating Cai aka Shelly Cai’s, Articouture, Inc.’s, All Ambitions Corp.’s and Closet Depot, Inc.’s Motion to Strike Portions of Plaintiffs’ First Amended Complaint is DENIED as MOOT.

Background   

Plaintiffs Kimberly Zhou Tang (“Tang”), Ximing Zhou (“Zhou”) and Shuying Yang (“Yang”) (collectively, “Plaintiffs”) allege as follows:

Zhou and Yang are married; Tang is their daughter. Defendants Kuei-Lin Hsieh aka Wainny Hsieh (“Hsieh”) and Nating Cai aka Shelly Cai (“Cai”) are married. Hsieh and/or Cai wholly or partially owned Articouture, Inc. (“Articouture”), All Ambitions Corp. (“All Ambitions”) and Closet Depot, Inc. (“Closet Depot”). Tang became good friends with Hsieh and Cai. Hsieh and Cai began to pitch a business investment venture with Tang, which Tang discussed with her parents. In or about February 2011, Plaintiffs and Defendants entered into a verbal agreement, wherein it was agreed that Plaintiffs would invest $500,000.00 into Closet Depo, that Tang and her husband would be entitled to work at Closet Depot and another new company that was being started (i.e., Articouture) at a set monthly salary and that Defendants would pay Plaintiffs profits and bonus in the approximate amount of 15% of the investment sum of $500,000.00 per annum as long as the business was doing well. In or about February 2011, Plaintiffs remitted $500,000.00. Defendants thereafter asked Plaintiffs to wait on the 15% profit sharing and bonus because they were trying to expand the business, and Plaintiffs agreed. On or about March 9, 2012, Plaintiffs and Defendants entered into a written agreement wherein Defendants would secure purchase orders from clients and locate factories in China to source the merchandise to fulfill the purchase orders, Plaintiffs would finance all payments to factories in China up to the sum of $320,000.00 and the parties would split the profits after deducting costs and fees. Plaintiffs remitted payments to 6 separate factories in China at Defendants’ direction totaling $320,840.27. In or about the end of March 2012, Plaintiffs and Defendants entered into a verbal agreement, wherein Plaintiffs would invest $320,000.00 with Defendants to explore business opportunities in China and, depending on the business opportunities that Plaintiffs procured, the parties would discuss how to proceed.

Pursuant to this verbal agreement, Plaintiffs remitted $322,376.82 between March 28, 2012 and July 2, 2012. On or about December 16, 2019, Plaintiffs and Defendants entered into a written agreement wherein the parties agreed that the balance owed on the first agreement was $304,718.00, that the balance owed on the second agreement was $320,000.00 and that the balance owed on the third agreement was $270,000.00. The parties agreed to a payment plan for

the balances owed. Defendants have since breached the agreement by failing to make payments.

The current balance owed is $630,969.80.

On June 1, 2022, Plaintiffs filed a First Amended Complaint (“FAC”), asserting causes of action against Hsieh, Cai, Articouture, All Ambitions, Closet Depot and Does 1-100 for:

1.                  Intentional Misrepresentation

2.                  Negligent Misrepresentation

3.                  Breach of Contract

4.                  Declaratory Relief

5.                  Conversion

6.                  Accounting

7.                  Constructive Trust

A Case Management Conference is set for September 13, 2022.

1.         Demurrer

Legal Standard

A demurrer may be made on the grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action and is uncertain. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

Hsieh, Cai, Articouture, All Ambitions, and Closet Depot (hereinafter collectively, “Defendants”) demur, pursuant to Code of Civil Procedure § 430.10, subdivisions (e) and (f), to the third and sixth causes of action in Plaintiffs’ FAC, on the basis that they fail to state facts sufficient to constitute causes of action and are uncertain.

Scope of Leave to Amend

At the outset, the court notes that Plaintiffs’ original complaint, filed December 17, 2021, contained causes of action for (1) Intentional Misrepresentation, (2) Negligent Misrepresentation, (3) Unjust Enrichment, (4) Declaratory Relief, (5) Conversion, (6) Fraudulent Transfer and (7) Constructive Trust. On May 4, 2022, the court sustained Defendants’ demurrer to the first through third, sixth and seventh causes of action in Plaintiffs’ complaint, with 20 days’ leave to amend, and overruled Defendants’ demurrer as to the fourth and fifth causes of action.

Plaintiffs’ FAC, filed June 1, 2022, contains the same first, second, fourth, fifth and seventh causes of action as the original complaint, but omits the former third and sixth causes of action (i.e., for Unjust Enrichment and Fraudulent Transfer, respectively) and adds new third and sixth causes of action (i.e., for Breach of Contract and Accounting, respectively).

“[W]here the trial court sustains a demurrer to a pleading but grants leave to amend. . . such granting of leave to amend must be construed as permission to the pleader to amend the cause of action which he pleaded in the pleading to which the demurrer has been sustained.” (People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785.) The plaintiff may not amend the complaint to add a new cause of action without the court’s permission, unless the new cause of action “directly responds to the court’s reason for sustaining the earlier demurrer.” (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.)

The court previously sustained Defendants’ demurrer to Plaintiffs’ third cause of action on the basis that “[a]s a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract” and that “Plaintiffs have alleged the existence of an enforceable express contract.” Accordingly, Plaintiffs’ newly asserted Breach of Contract cause of action “directly responds” to the court’s ruling. Plaintiffs’ newly asserted Accounting cause of action, however, does not “directly respond” to the court’s prior ruling; accordingly, the court, on its own motion, orders the sixth cause of action stricken.

Third Cause of Action (i.e., Breach of Contract)

“It is essential to the existence of a contract that there should be: 1. Parties capable of contracting; 2. Their consent; 3. A lawful object; and, 4. A sufficient cause or consideration.” (Civ. Code, § 1550.)

Defendants assert that Plaintiffs’ third cause of action otherwise fails on the basis that Plaintiffs fail to plead any consideration provided to Defendants. Defendants, without more, generically reference Paragraphs 51-53 and 98-102 in support of their assertion. Plaintiffs have alleged that on or about December 16, 2019, Plaintiffs entered into a written agreement with all defendants, wherein, inter alia, Plaintiff “agree[d] to waive interest” if Defendants timely remitted all monthly payments and that the balance on Plaintiffs’ $320,840.27 investment “may be reduced if Defendants timely remitted all payments under the agreement.” (FAC, ¶ 51.) The foregoing, at a minimum, constitutes consideration.

Defendants’ demurrer to the third cause of action is overruled.

2.         Motion to Strike

Defendants move the court for an order striking out the third and sixth causes of action, on the basis that they were added without leave of court.

Defendants’ demurrer is denied as moot, based upon the ruling made on the demurrer.