Judge Peter A. Hernandez, Case Number: 23STCV27905, Date: 2025-04-02 Tentative Ruling

Plaintiff HSG (HK) Trading Limited’s Motion for Summary Judgment is DENIED. Plaintiff’s Motion for Summary Adjudication is GRANTED in part and DENIED in part.

On November 14, 2023, Plaintiff HSG (HK) Trading Limited (“Plaintiff”) filed its complaint against Defendants Vanilla Bay, Jong Gook Lee, and Derek Heo (“Defendants”) arising from Defendants alleged failure to pay for multiple garment orders purchased from Plaintiff alleging causes of action for:

On December 20, 2023, Defendants Vanilla Bay and Jong Gook Lee filed their answer to Plaintiff’s complaint.

On August 7, 2024, Plaintiff filed its Motion for Summary Judgment or, in the alternative, Summary Adjudication. On October 15, 2024, Defendants Vanilla Bay and Jong Gook Lee filed their opposition to Plaintiff’s motion. On October 25, 2024, Plaintiff filed a reply.

On August 15, 2024, the court granted in part Plaintiff’s Application for Writ of Attachment in the amount of $306,165.35.

On October 31, 2024, the court continued the hearing on Plaintiff's Motion for Summary Judgment ordering Plaintiff to provide a code compliant separate statement and a supplemental brief addressing the issue of abatement found in the opposition.

On December 9, 2024, Plaintiff filed a separate statement and a supplemental reply regarding abatement.

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding. The motion may be made at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct.” (Code Civ. Proc., § 437c, subd. (1)(a).)

“[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of fact and that he is entitled to judgment as a matter of law. That is because of the general principle that a party who seeks a court’s action in his favor bears the burden of persuasion thereon. There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 850, citation omitted.)

“[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Aguilar, supra, at p. 850; Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1474, [applying the summary judgment standards in Aguilar to motions for summary adjudication].)

“On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. Only when the inferences are indisputable may the court decide the issues as a matter of law. If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839, citation omitted.)

“The trial court may not weigh the evidence in the manner of a fact finder to determine whose version is more likely true. Nor may the trial court grant summary judgment based on the court's evaluation of credibility.” (Binder, supra, at p. 840, citations omitted; see also Weiss v. People ex rel. Dep’t of Transp. (2020) 9 Cal.5th 840, 864 [“Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party”].)

Defendants Vanilla Bay and Jong Gook Lee’s (“Responding Defendants”) request for judicial notice is granted. “A court may properly take judicial notice of its own records. (Evid. Code, § 452, subd. (e).)” (Garcia v. Sterling (1985) 176 Cal.App.3d 17, 21.) Judicial notice may also be taken of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code §§ 452, subd. (c) and (h).)

Plaintiff moves for summary judgment of Plaintiff’s FAC, or in the alternative, summary adjudication of Plaintiff's causes of action for breach of contract, fraud, and unjust enrichment.[1]

Plaintiff, a Hong Kong corporation, is a garment manufacturer for wholesale businesses. (Undisputed Material Fact (“UMF”), No. 1.) Defendant Vanilla Bay (“Vanilla”), a California corporation, made multiple orders to purchase garments from Plaintiff from August 5, 2022, to June 23, 2023. (Id., Nos. 1-2.) Vanilla failed to render payment for such orders, invoices numbered 28-1 and 40 through 60, which total a sum of $308,665.35. (Id., No. 2.)[2]

A foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification. (Corp. Code § 2105(a).) If a corporation transacting intrastate business is not currently registered with California, it cannot maintain an action in California courts. (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1740.)

When failure to register is raised in pending litigation, defendants must show that “the action arises out of the transaction of intrastate business by a foreign corporation; and the action was commenced by the foreign corporation prior to qualifying to transact business. (United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001, 1007.) “Transact Intrastate Business means entering into repeated and successive transactions of its business in this State, other than interstate or foreign commerce.” (Thorner v. Selective Cam Transmission Co. (1960) 180 Cal.App.2d 89, 94.)

In opposition, Responding Defendants argue that Plaintiff cannot maintain this action as it is a foreign corporation not qualified to transact intrastate business in California pursuant to Corporations Code section 2105. (Opp., at p. 7.) First, Responding Defendants contend that Plaintiff was engaged in intrastate commerce as Plaintiff entered into a series of transactions with Vanilla that were performed within California as defined by Corporations Code section 191(a). (Id., at pp. 7-8.) Second, Responding Defendants contend that Plaintiff was not issued a Certificate of Qualification by California’s Secretary of State as evidenced in a business search of the Secretary of State portal. (Id., at pp. 8-9; RJN, Exhs. B-D.)

Corporations Code section 191(a) defines “transact intrastate business” as entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce. (Corp. Code § 191(a) [emphasis added].)

In reply, Plaintiff contends that exporting or selling goods from outside of California to a corporation in California would be considered interstate commerce rather than intrastate commerce. (Supp. Reply, at p. 2.) As such, Plaintiff argues that Responding Defendants have failed to establish that the transactions at issue constituted “intrastate” business as the transactions were not entirely conducted in California. (Id., at p. 3.)

The court finds that Responding Defendants failed to show that Plaintiff engaged in intrastate business as defined in section 191(a) to bar Plaintiff from maintaining its action. Although Plaintiff did engage in repeated and successive transactions with Vanilla, as shown by the invoices at issue here, the transactions were not entirely conducted in California as the garments purchased were ordered, manufactured, and fulfilled outside of California. The mere fact that Plaintiff transacted with a California corporation is insufficient to constitute intrastate business and Responding Defendants do not provide any evidence to find otherwise. Thus, section 2105 is inapplicable.

Plaintiff moves for summary adjudication of its breach of contract cause of action against Vanilla.[3]

To prevail on a cause of action for breach of contract, Plaintiff must establish the following elements: “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. 5 Goldman (2011) 51 Cal.4th 811, 821.)

Plaintiff has met its burden of establishing the existence of a series of contracts between the parties. Plaintiff submits copies of all of Vanilla’s purchase orders and invoices at issue. (FAC, ¶ 13, Exhs. 1-2.) Moreover, Plaintiff provides evidence of Vanilla’s admission that Vanilla issued such purchase orders and received the invoices. (Plaintiff’s Exhibits List, Exhs. 7-8.) There is also no triable issue of material fact as to whether Plaintiff has performed its obligations under the contracts, whether Vanilla breached, nor whether Plaintiff suffered damages. Plaintiff submits evidence demonstrating that Vanilla has admitted it owes the amount stated in every invoice at issue totaling $308,665.35. (Ibid.)

Nevertheless, Vanilla disputes the amount due arguing that it should be reduced by $5,000 due to the excess product that was delivered but could not be sold. (Id., Exh. 9, Form Interrogatory No. 17.1; Exh. 11, Lee Depo., at pp. 36-37.) To the extent that Vanilla disputes $5,000, Plaintiff reduces the amount sought to recover to $303,665.35 plus prejudgment interests of 10% per year. (MSJ, at pp. 5, 10-11.)

The court finds that these facts are sufficient to meet Plaintiff’s moving burden. As Responding Defendants failed to submit any contradictory evidence, they fail to overcome their burden of raising a triable issue of material fact.

Plaintiff moves for summary adjudication of its fraud cause of action against Responding Defendants.

“The elements of fraud, which give rise to the tort action for deceit, 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.” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1239, citations and internal quotation marks omitted.)

Plaintiff provides evidence that Vanilla, through Defendants Jong Gook Lee (“Lee”) and Derek Heo (“Heo”), made misrepresentations that Vanilla was able to pay for the garment orders made to Plaintiff as Vanilla became insolvent by summer of 2022. (Plaintiff’s Exhibits List, Exh. 11, Lee Depo., 20:3-10.) Such evidence also showcases Lee’s knowledge of Vanilla’s inability to pay Plaintiff. Moreover, Plaintiff submits evidence showing that Lee concealed that Heo did not work for Vanilla since summer 2022 although Plaintiff continued to report to Heo. (Id., Lee Depo., 26:19-23, 27:9-12; Exhs. 4, 6.) The court finds that these facts are sufficient to meet Plaintiff’s moving burden. Plaintiff has shown that a misrepresentation was made by Responding Defendants reasonably inducing Plaintiff to deliver the garments resulting in damages.

In opposition, Responding Defendants argue that Plaintiff’s fraud claim is barred by the economic loss rule as it is predicated on Defendants’ alleged breach of contract. (Opp., at pp. 12-16.) However, “[t]ort damages have been permitted in contract cases where a breach of duty directly causes physical injury [Citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [Citation]; for wrongful discharge in violation of fundamental public policy [Citation]; or where the contract was fraudulently induced. [Citation.] In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552 [emphasis added].) Here, Plaintiff’s fraud claim is based on Defendants’ fraudulent conduct separate from the breach of contract claim. As such, Responding Defendants fail to overcome their burden of raising a triable issue of material fact.

Plaintiff moves for summary adjudication of its unjust enrichment cause of action against Responding Defendants.

The premise of Plaintiff’s unjust enrichment cause of action is that Defendants received a benefit in the form of garments from Plaintiff, that the unjust retention of the garments was at the expense of Plaintiff, and that Plaintiff was never compensated for the garments. (MSJ, at p. 14.)

In opposition, Responding Defendants argue that unjust enrichment is not a cause of action. (Opp., at p. 18.)

Notwithstanding, California courts have impliedly construed unjust enrichment claims as being causes of action for quasi-contract seeking restitution. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231; City of Oakland v. Oakland Raiders (2022) 83 Cal.App.5th 458, 477 (a claim based on unjust enrichment may also be called “quasi-contract” or “quantum meruit.”).) However, “unjust enrichment does not lie where… express binding agreements exist and define the parties’ rights.” (Cal. Medical Ass'n v. Aetna U. S. Healthcare of Cal. (2001) 94 Cal.App.4th 151, 172.) Restitution may be awarded in lieu of contract damages where the parties’ express contract “is unenforceable or ineffective for some reason.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 388.)

As the court has granted summary adjudication as to Plaintiff’s breach of contract claim, the court denies summary adjudication as to Plaintiff's unjust enrichment claim.

Plaintiff HSG (HK) Trading Limited’s Motion for Summary Judgment is DENIED. Plaintiff’s Motion for Summary Adjudication is GRANTED in part and DENIED in part.

[1] Plaintiff contends that it has dismissed its causes of action for account stated, open book account, quantum valebant, and conversion. (MSJ, at p. 14.)

[2] It appears the invoices at issue (Nos. 28-1 and 40 to 60) add up to $368,665.35.

[3] In opposition, Responding Defendants argue that Plaintiff’s moving brief is uncertain as the breach of contract claim was asserted against all Defendants but Plaintiff seems to seek summary adjudication as to Vanilla only. (Opp., at p 9.) Moreover, Responding Defendants argue solely against summary adjudication as to Defendant Jong Gook Lee. (Id., at pp. 9-12.) In reply, Plaintiff clarifies that it only seeks summary judgments against Vanilla for breach of contract. (Reply, at p. 2.) As such, the court will only consider the parties’ arguments as to the breach of contract claim asserted against Vanilla.