Judge Randolph M. Hammock, Case Number: 23STCV12301, Date: 2024-02-05 Tentative Ruling

Plaintiffs George Rappard, M.D. and Los Angeles Minimally Invasive Surgery Center, LLC, allege they provided medical treatment to Defendant Yuan Luo after an accident. Attorney Defendants Eric Chen and Ying Xu represented Defendant Luo in a personal injury action. Plaintiffs allege they obtained a medical lien for the treatment against all Defendants. After the matter settled, Plaintiffs allege that Defendants have failed to pay the amounts owed under the liens. Plaintiffs bring causes of action for (1) breach of contract, (2) book account, (3) account stated, (4) accounting, (5) interference with prospective economic relations, and (6) conversion.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)

A. Demurrer to First Cause of Action for Breach of Contract; Second Cause of Action for Book Account; Third Cause of Action for Account Stated; Fourth Cause of Action for Accounting

Defendants demurrer to each cause of action in the Complaint. The crux of Defendants’ demurrer is that the underlying medical lien contracts merely require the attorney Defendants to withhold any settlement funds owed to Plaintiffs, but not actually pay such funds.

The Lien Assignments are attached to the Complaint as exhibits. As a signing party, Defendant Yuan Luo, as patient, agreed as follows under the “Remuneration” section of the Lien Assignment:

I hereby authorize and direct you, my attorney, to pay the Los Angeles Minimally Invasive Surgery Center, LLC the accumulated amount due and owing for surgical/interventional services rendered to me by reason of this accident and by reason of any other bills that due and to withhold such sums from any settlement, judgment, or verdict as may be necessary to adequately protect the Los Angeles Minimally Invasive Surgery Center, LLC against any and all proceeds of any settlement, judgment or verdict which may be paid to you, my attorney, or myself as the result of the injuries which I have been treated or injuries in connection therewith.

Under the “Attorney Agreement” section of the Lien Assignments, Attorney Defendants Chen and Xu, as “attorney of record for” Luo, “agree[d] to withhold such from any settlement, judgment or verdict as may be necessary to adequately protect the Los Angeles Minimally Invasive Surgery Center, LLC and pay his charges.” (Id.)

When interpreting a written contract, “[t]he mutual intention of the contracting parties at the time the contract was formed governs. [Citation.] We ascertain that intention solely from the written contract if possible, but also consider the circumstances under which the contract was made and the matter to which it relates. [Citation.] We consider the contract as a whole and interpret the language in context, rather than interpret a provision in isolation.” (Am. Alternative Ins. Corp. v. Superior Ct. (2006) 135 Cal. App. 4th 1239, 1245 [emphasis added].)

Here, under the Lien Assignments, Defendant Attorneys agreed not only to “withhold such sums from” settlement as may be necessary to cover the liens, but also agreed to “pay [Luo’s] charges.” (Compl. Exhs. 1, 2, 3, “Attorney Agreement”.) The Attorneys’ duty to pay is also affirmed earlier in the “Remuneration” section of the Lien Assignments, where Luo “authorize[d] and direct[ed]” the attorneys to “pay the Los Angeles Minimally Invasive Surgery Center, LLC the accumulated amount due and owing for” treatment. (Compl. Exhs. 1, 2, 3, “Remuneration”.)

Reading and considering these provisions together and in their context, they make clear that Defendant Attorneys, along with Defendant Luo, are responsible for money owed under the lien(s).

Defendants’ interpretation of the Lien Assignments defies common sense. Under their reading, Defendants needed to do nothing more than withhold the amounts owed, but could simply choose to never actually pay those sums to Plaintiffs. This would offer no protection to the Plaintiffs, and this court doubts the parties intended such a result. (Am. Alternative Ins. Corp. v. Superior Ct. (2006) 135 Cal. App. 4th 1239, 1245 [“[t]he mutual intention of the contracting parties at the time the contract was formed governs”].) Therefore, Defendants Xu and Chen are proper parties to the action.

Plaintiffs assert a fifth cause of action titled “Unfair Business Practices Act” against attorney Defendants Chen and Xu. Plaintiffs do not cite any provision of the Act on which they rely. However, the Complaint does cite the elements of the tort of intentional interference with prospective economic advantage. (Compl. ¶ 42.) When characterizing a complaint or cross-complaint, it is policy to “emphasiz[e] substance over form” (Ameron Internat. Corp. v. Insurance Co. of State of Pennsylvania (2010) 50 Cal.4th 1370, 1386.) Therefore, this court will construe the fifth cause of action as one for intentional interference with prospective economic relations/advantage.

The elements of a claim for intentional interference with prospective economic relations are “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” ’ [Citations.]” (Marsh v. Anesthesia Servs. Med. Grp., Inc. (2011) 200 Cal. App. 4th 480, 504.)

Defendants argue only that Plaintiffs cannot establish the third element of their cause of action, namely, intentional acts on the part of Defendants designed to disrupt the relationship between Plaintiffs and Luo. However, Plaintiff alleges that Defendants signed the Lien Assignments, thereby acknowledging the money owed to Plaintiffs. (Compl. ¶ 27.) Therefore, Plaintiff has alleged intentional acts by Defendants, in that they failed to pay the liens despite knowledge of an existing obligation to do so.

Accordingly, Defendants’ Demurrer to the Fifth Cause of Action is OVERRULED.

Defendants argue, without citation to authority, that the liens are not “personal property.” The basic elements of the tort of conversion are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. (Regent All. Ltd. v. Rabizadeh (2014) 231 Cal. App. 4th 1177, 1181.)

This argument fails. “The existence of a lien . . . can establish the immediate right to possess needed for conversion. ‘One who holds property by virtue of a lien upon it may maintain an action for conversion if the property was wrongfully disposed of by the owner and without authority . . . .” (Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 45.)

FN 1 - Defendants filed two separate demurrers which appear identical. Because the Defendants are similarly situated for purposes of this demurrer, the court addresses the demurrers together.

FN 2 - The Complaint names two different Plaintiffs: (1) George Rappard, M.D., and (2) Los Angeles Minimally Invasive Surgery Center, LLC. However, it appears the opposition was only filed by “Plaintiff George Rappard M.D., Inc.” Be that as may, since the issues are identical as to all parties, this ruling shall apply to all the parties, including both Plaintiffs, despite the lack of a formal opposition filed by Los Angeles Minimally Invasive Surgery Center, LLC.