Judge: Peter A. Hernandez, Case: 22PSCV01000, Date: 2023-07-10 Tentative Ruling

Case Number: 22PSCV01000    Hearing Date: September 5, 2023    Dept: K

1.         Defendant Zhongliang Wang’s Motion to Correct the Record is DENIED.

2.         Plaintiffs Aknine Group Inc.’s, Key Ecommerce Inc.’s and Yizhong Chen’s Motion for Preliminary Injunction is DENIED.

3.         Plaintiffs Aknine Group Inc.’s, Key Ecommerce Inc.’s and Yizhong Chen’s Motion—Other for an Order Voiding Zhongliang Wang’s [Transfer of] Community Property Interest in Subject Property is DENIED.

Background[1]  

Plaintiffs Aknine Group Inc. (“Aknine”), Key Ecommerce Inc. (“KEI”) and Yizhong Chen (“Chen”) (together, “Plaintiffs”) allege as follows:

Plaintiffs’ former employee, Zhongliang Wang (“Wang”), embezzled at least $4.5 million (“Stolen Funds”) from Plaintiffs’ various business bank accounts between August 26, 2022 and September 9, 2022 and transferred the Stolen Funds to various bank accounts solely controlled and managed by him, including those opened in the names of AZ Express Group Inc. (“AZ Express”), KB Int’l Inc. (“KB Int’l”), Luckie Trading LLC (“Luckie Trading”) and EZ Supply Group LLC (“EZ Supply”).

On September 12, 2022, Plaintiffs filed a First Amended Complaint, asserting causes of action against Wang, AZ Express, KB Int’l., Luckie Trading, EZ Supply and Does 1-50 for:

1.                  Breach of Contract

2.                  Conversion

3.                  Breach of Fiduciary Duty

4.                  Theft and Misappropriation Under California Penal Code § 496(c)

5.                  Unjust Enrichment

On May 2, 2023, Wang, Luckie Trading, EZ Supply and Maxplus Parcel LLC filed a First Amended Cross-Complaint, asserting causes of action against Aknine, KEI, Ainien, Inc. (“Ainien”), Chen and Roes 1-50 for:

1.                  Breach of Written Contract

2.                  Breach of Implied Covenant of Good Faith and Fair Dealing

3.                  Breach of Fiduciary Duty

4.                  Fraud

5.                  Promissory Estoppel

6.                  Negligent Misrepresentation

7.                  Accounting

8.                  Failure to Pay Minimum and Overtime Wages

9.                  Failure to Provide Accurate Wage Statement

10.              Failure to Provide Rest and Meal Breaks

11.              Failure to Keep Accurate Records

12.              Failure to Comply with Labor Code § 226

13.              Conversion

14.              Constructive Trust

15.              Injunctive Relief—Mandatory Relief

16.              Conversion

17.              Constructive Trust

18.              Injunctive Relief—Mandatory Relief

19.              Conversion

20.              Constructive Trust

21.              Injunctive Relief—Mandatory Relief

A Case Management Conference is set for November 29, 2023.

1.         Motion to Correct Record

Legal Standard

“Every court shall have the power to do all of the following: . . . (8) To amend and control its process and orders so as to make them conform to law and justice. . .” (Code Civ. Proc., § 128, subd. (a)(8).)

Discussion

Wang moves the court for an order to correct and amend the record as reflected in the February 9, 2023, March 14, 2023 and March 15, 2023 Reporter’s Transcripts of Proceedings.

Wang seeks the above relief on the basis that “the transcripts do not accurately reflect what occurred in this action” (Motion, 2:9-10); more specifically, Wang argues that (1) the February 9, 2023 and March 14, 2023 transcripts should be corrected and amended to reflect that Wang did not appear and testify in open court and that (2) the February 9, 2023, March 14, 2023 and March 15, 2023 transcripts should be corrected and amended to reflect that there was no agreement between counsel to allow Plaintiffs to keep the funds improperly released by Chase Bank.

First, Wang asserts that he “has NEVER appeared before this Court and most certainly NEVER testified in open court admitting to liability.” (Motion, 7:8-9 [emphasis added].) The court’s problem with this assertion is that it is supported by an English-only declaration from Wang when it has simultaneously been represented to the court that “Wang did not understand the [October 5, 2022] Declaration[2] he was signing as he does not read English and the Declaration was not provided to him in Mandarin.” (Motion, 13:4-5 [emphasis added].) Further, while attorney Paul Cheng (“Cheng”) attests that Wang has never appeared or testified before the court, Cheng acknowledges that he did not attend the September 7, 2022 and September 14, 2022 hearings or apparently any further hearings post November 1, 2022. (Cheng Decl., ¶¶ 2, 3 and 9).

The court further notes that the procedural history reflects that there was a hearing held in this matter on September 27, 2022. Wang’s motion does not address this hearing date.

At any rate, it is unclear to the court, to the extent that Judge Falls recalled that Wang testified in open court “admitting liability,” how any such statement would be prejudicial to Wang going forward. Any such statement by Judge Falls constituted an observation rather than an express factual finding, and thus would not be something that this court would or could rely upon.

Second, Cheng attests that he “never agreed to allow the Plaintiffs to keep the funds from Chase [B]ank that were improperly released by Chase [B]ank.” (Cheng, ¶ 9.) Regardless, Wang’s then-counsel expressly agreed to the “Stipulated Order Granting Plaintiffs’ Motion for Preliminary Injunction” filed May 2, 2023 in which “the Restrained Defendants and Related Parties [including Wang] are required to return to Plaintiffs all proceeds, monies, funding, cash, and savings obtained by Restrained Defendants, provided that Plaintiffs maintain and provide to Restrained Defendants a detailed accounting of the receipt and usage of any funding returned by Restrained Defendants and that the funds were used in the normal course of business including, but not limited to, bank statements, financial statements, balance sheets, profit and loss statements, and statements of cash flow.” (Wells Decl., ¶ 4, Exh. 6, ¶ 2, 2:18-25; see also, ¶ 5, Exh. 7).

The motion is denied.

2.&3.   Motion for Preliminary Injunction and Motion to Void [Transfer of] Community Property Interest

Legal Standard

“An injunction is a writ or order requiring a person to refrain from a particular act. It may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court.” (Code Civ. Proc., § 525.) “The general purpose of such an injunction is the preservation of the status quo until a final determination of the merits of the action.” (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528.)

“In determining whether to issue a preliminary injunction, the trial court considers two related factors: (1) the likelihood that the plaintiff will prevail on the merits of its case at trial, and (2) the interim harm that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.” (14859 Moorpark Homeowner’s Ass’n v. VRT Corp. (1998) 63 Cal.App.4^th 1396, 1402.) “The trial court’s determination must be guided by a ‘mix’ of the potential-merit and interim-harm factors; the greater the plaintiff’s showing on one, the less must be shown on the other to support an injunction.” (Butt v. State of California (1992) 4 Cal.4^th 668, 678.) “Generally, weighing these factors lies within the broad discretion of the superior court.” (County of Kern v. T.C.E.F., Inc. (2016) 246 Cal.App.4^th 301, 315.)

Discussion

Plaintiffs move the court for an order restraining and enjoining Wang, his agents, assigns, partners, employees and any individual or entity acting in concert with him from selling, transferring, alienating, encumbering or otherwise diminishing the value of the real property located at 23450 Amberwick Place, Diamond Bar, CA 91765 (“subject property”). Plaintiffs also request that the court declare that Wang’s attempted conversion of his share of the subject property to his wife Xixi Li’s (“Li”) separate property to be a fraudulent voidable transfer under Code of Civil Procedure § 3439, et seq.

Evidentiary Objections

The court rules on Wang’s evidentiary objections as follows: Sustained as to No. 1 in part (i.e., as to “But” and “because Wang changed the passwords”) and otherwise Overruled; Sustained as to No. 2 in part (i.e., as to “and later discovered Wang’s embezzlement” and “phony”) and otherwise Overruled; and Sustained as to No. 3 in part (i.e., as to “which I presume he embezzled from me and my companies”) and otherwise Overruled.

Merits

At the outset, the court summarily denies the motion as to Plaintiff’s request that the court void a transfer of Wang’s community property interest in the subject property to Li on the basis that it is not a proper basis for a preliminary injunction pursuant to Code of Civil Procedure § 526[3]. Plaintiffs concede that this purported transfer is a completed act, in that the quitclaim deed was recorded April 6, 2022. (Wells Dec., ¶ 5, Exh. 6.) The court cannot issue an injunction requiring a person to refrain from an act that has already been completed.

Plaintiff’s remaining request fails on the basis that Plaintiff has not made any showing of interim harm. “Typically, the trial court's evaluation of the relative balance of harms compares the interim harm plaintiff is likely to sustain if the injunction is denied to the harm the defendant is likely to suffer if the preliminary injunction is issued.” (Tulare Lake Canal Company v. Stratford Public Utility District (2023) 92 Cal.App.5^th 380, 396.)

On August 7, 2023, Plaintiffs filed their “Ex Parte Application for Temporary Restraining Order Preventing Sale of Defendant’s Residence and Order Compelling Wang to Attend his Deposition in California” (“Ex Parte Application”); on August 8, 2023, Judge Salvatore Sirna denied Plaintiff’s request as to the TROs but ordered that the issues proceed as a “Motion for Preliminary Injunction” and a “Motion—Other for an Order Voiding Zhongliang Wang’s Community Property Interest in Subject Property,” respectively.

Judge Sirna’s August 8, 2023 minute order states, in relevant part, that “Plaintiffs provide the court with no evidentiary support for the claim that Defendant’s ‘threat’ to sell or encumber the property is ‘great.’ Plaintiffs presented no evidence that the property is currently subject to sale or an impending encumbrance.” This remains unchanged. At any rate, there is no evidence that Wang even has the legal right or ability to sell or encumber the subject property. The court need not address the likelihood of prevailing on the merits factor due to the lack of interim harm.

The motions are denied.