Judge: Richard Y. Lee, Case: 30-2022-01254464, Date: 2022-09-08 Tentative Ruling
Defendant Joon Kang (“Defendant”) demurs to the operative complaint pursuant to Code of Civil Procedure section 430.10 and 1170. (ROA # 17.) The operative complaint alleges the following causes of action against Defendant: (1) breach of contract, (2) fraud, (3) conversion, (4) unjust enrichment, (5) common count, and (6) account stated. (ROA # 2, Complaint.)
I. INSUFFICIENT MEET AND CONFER
As an initial matter, the court notes that Defendant failed to meet and confer, which violates Code of Civil Procedure section 430.41(a). However, a “determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc., § 430.41, subd. (a)(4).) Here, the court admonishes Defendant for failing to meet and confer. Notwithstanding the above, the court concludes that it is unlikely that a meet and confer will reduce the number of issues or eliminate the need for a demurrer. (Dumas v. Los Angeles County Bd. of Supervisors (2020) 45 Cal.App.5th 348, 355.)
II. BREACH OF CONTRACT
“A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367.)
A contract may be written or oral. (Code Civ. Proc., §§ 337 and 339.) “[T]he complaint must indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458–459 [citing Code Civ. Proc., § 430.10, subd. (g).)
Here, Plaintiff alleges that Plaintiff and Defendant entered into an oral agreement on August 30, 2020 wherein Plaintiff agreed to lease its warehouse to Defendant. (Complaint at ¶¶ 9 and 29.) Pursuant to the agreement, Defendant was permitted to store his sanitary spray bottles and would pay a monthly storage at the rate of $1/pallet/day. (Complaint, ¶ 9.) Payments would be due at the beginning of each month. (Complaint, ¶ 9.)
Defendant began storing the bottles at Plaintiff’s warehouse on August 30, 2020. (Complaint, ¶ 10.) At all relevant times, Plaintiff performed under the contract and permitted Defendant to store his bottles at the warehouse. (Complaint, ¶¶ 11-18.) Defendant breached the agreement when he stopped making payments pursuant to the agreement and refused to pick up the bottles. (Complaint, ¶¶ 11-16 and 18-19.) As a result, Plaintiff sustained $119,994 in outstanding storage fees. (Complaint, ¶ 21.)
Defendant does not raise a statute of frauds argument and it is not apparent on the face of the complaint whether the statute of frauds applies. (See Civ. Code, § 1624.)
As such, the demurrer to the first cause of action for breach of contract is OVERRULED.
III. FRAUD
An action for relief on the ground of fraud or mistake is subject to a three-year statute of limitations and is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake. (Code Civ. Proc., § 338, subd. (d).)
In California, the essential elements of a fraud cause of action are “(a) 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.” (In re Estate of Young (2008) 160 Cal.App.4th 62, 79 [(citations omitted].)
In California, fraud must be pled specifically; general and conclusory allegations do not suffice. (Alfaro v. Community Housing Imp. System & Planning Ass’n, Inc. (2009) 171 Cal.App.4th 1356, 1384.) The facts supporting a fraud cause of action must be pled with particularity, showing how, when, where, to whom, and by what means the representations were tendered. (Id.) In addition, specific pleading requires facts that clearly allege every element of fraud. (Starfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)
Here, Plaintiff appears to allege that Defendant committed fraud by a knowingly false representation, concealment, and promise made with no intent to perform.
Knowingly False Representation
Pursuant to Civil Code section 1710(1) fraud by a knowingly false representation is “the suggestion, as a fact, of that which is not true, by one who does not believe it to be true.” (Civ. Code, § 1710, subd. (1).)
Here, Plaintiff alleges that Defendant used the company name Warranty Refund, Inc. or Warranty Refund LLC (“the Company”) when negotiating the storage lease agreement with Plaintiff. (Complaint, ¶¶ 24-25.) During negotiations, Defendant deliberately concealed and failed to disclose that the Company dissolved in November of 2013 and therefore did not exist. (Complaint, ¶ 28.)
Defendant used the Company name with the intent to induce Plaintiff to “attach more credibility and legitimacy to Defendant Kang and his business” and “conduct business with him and allow him to keep the Bottles in Plaintiff’s warehouse.” (Complaint, ¶¶ 28 and 31.) At all times, Defendant knew that the Company dissolved. (Complaint, ¶ 30.) Plaintiff reasonably relied on Defendant’s misrepresentations when entering into the storage lease agreement and would not have entered into the agreement if it knew Defendant’s business dissolved. (Complaint, ¶¶ 32-33.) As a result of the misrepresentation, Plaintiff sustained $119,944 in damages.
As such, Plaintiff sufficiently pleads a cause of action for fraud by a knowingly false representation. The Demurrer is OVERRULED as the Plaintiff’s second cause of action for fraud by a knowingly false representation.
Concealment
Pursuant to Civil Code section 1710(3) fraud by concealment is the “suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact.” (Civ. Code, § 1710, subd. (3).) To state a fraud by concealment cause of action, the plaintiff must allege: (1) the defendant concealed a material fact; (2) the defendant had a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed the fact with the intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would not have acted as he did if he had known of the concealed fact; and (5) as a result of the concealment of the fact, the plaintiff sustained damage. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.)
There are four circumstances in which concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. (Limandri v. Judkins (1997) 52 Cal.App.4th 326, 336-337; CACI 1901.) Circumstances two through four presupposes the existence of some relationship between the plaintiff and defendant in which a duty to disclose can arise. (Id. at 337.) “[A] duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.” (Id.)
Here, Plaintiff does not allege that Defendant had a duty to Plaintiff to disclose that the Company was dissolved and no longer in existence. As such, the Demurrer is SUSTAINED with leave to amend as to Plaintiff’s second cause of action for fraud by concealment cause of action.
Promise Made with No Intent to Perform
Pursuant to Civil Code section 1710(4) fraud by a promise made with no intent to perform is “a promise, made without any intention of performing it.” (Civ. Code, § 1710, subd. (4).)
Here, Plaintiff does not allege that Defendant made a promise without any intent of performing that promise. In its opposition, Plaintiff alleges that Defendant repeatedly reassured Plaintiff that he was going to pay for the storage fees owed but did not make any payments after November 18, 2020. This allegation does not establish the requisite element that Defendant did not intend to perform. As such, the Demurrer is SUSTAINED with leave to amend as to Plaintiff’s second cause of action for fraud by a promise made with no intent to perform cause of action.
IV. CONVERSION
“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 551.)
“A generalized claim for money is not actionable as conversion.” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395 [internal citations omitted].) “California cases permitting an action for conversion of money typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others.” (Id. at p. 396.)
“[T]he simple failure to pay money owed does not constitute conversion.” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 284.)
Here, Plaintiff alleges that Defendant failed to pay money owed under their alleged agreement wherein Plaintiff would store Defendant’s sanitary spray bottles in exchange for money. This is not conversion. As such, the demurrer to Plaintiff’s third cause of action for conversion is SUSTAINED without leave to amend.
V. UNJUST ENRICHMENT
“There is no cause of action in California for unjust enrichment.” (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1138; Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) Rather, “[u]njust enrichment is synonymous with restitution.” (Ibid.)
However, on a demurrer, the test is whether the complaint states any valid claim entitling plaintiff to relief, even if plaintiff’s cause of action is improperly titled, or an improper remedy is stated. (Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 38 [“If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.”].) Thus, although Plaintiff cannot bring an unjust enrichment cause of action, the cause of action will be sufficient on demurrer if the complaint establishes a cause of action for restitution.
“There are several potential bases for a cause of action seeking restitution.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) “For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (Ibid.) “Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct.” (Ibid.) “In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory.” (Ibid.) “In such cases, where appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to the parties’ intent, in order to avoid unjust enrichment.” (Ibid.)
“Under the law of restitution, an individual is required to make restitution if he or she is unjustly enriched at the expense of another.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) “A person is enriched if the person receives a benefit at another’s expense.” (Ibid.) “However, the fact that one person benefits another is not, by itself, sufficient to require restitution.” (Ibid.) “The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.” (Ibid.) “As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract.” (Ibid. [citing California Medical Assn. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172].)
“An unjust enrichment theory is inapplicable” where the plaintiff “alleges the parties entered into express contracts.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) However, “[a] claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement.” (Russell City Energy Co., LLC v. City of Hayward (2017) 14 Cal.App.5th 54, 70.)
Here, Plaintiff alleges that Defendant has been unjustly enriched by storing his bottles at Plaintiff’s warehouse without paying any storage fees. (Complaint, ¶¶ 51-54.) While Plaintiff also alleges a breach of contract cause of action, Plaintiff is permitted to inconsistently plead a restitution claim. In addition, Plaintiff alleges that the contract was procured by fraud when Defendant fraudulently represented himself as CEO of the Company when the Company was dissolved and did not exist. (Complaint, ¶¶ 24-35.) Such allegations are sufficient to survive a demurrer. As such, the Demurrer to Plaintiff’s fourth cause of action for unjust enrichment/restitution is OVERRULED.
VI. COMMON COUNT
“The only essential allegations of a common count are (1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.)
Here, Plaintiff alleges that Defendant is indebted to Plaintiff in the amount of $119,944.00 for the use of Plaintiff’s warehouse to store Defendant’s bottles. (Complaint, ¶¶54-56.) Defendant has not paid the amount owed to Plaintiff. (Complaint, ¶¶ 11-16 and 18-19.) This is sufficient for pleading purposes. As such, the Demurrer to Plaintiff’s fifth cause of action for common count is OVERRULED.
VII. ACCOUNT STATED
“An account stated is ‘an agreement, based on prior transactions between the parties, that the items of an account are true and that the balance struck is due and owing.’” (Professional Collection Consultants v. Lauron (2017) 8 Cal.App.5th 958, 968 [citing Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 752].)
“To be an account stated, it must appear that at the time of the statement an indebtedness from one party to the other existed, that a balance was then struck and agreed to be the correct sum owing from the debtor to the creditor, and that the debtor expressly or impliedly promised to pay to the creditor the amount thus determined to be owing.” (Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 752–753.) “[A]n element essential to render the account stated is that it receive the assent of both parties, but the assent of the party sought to be charged may be implied from his conduct.” (Professional Collection Consultants v. Lauron (2017) 8 Cal.App.5th 958, 968.) For example, “[w]hen a statement is rendered to a debtor and no reply is made in a reasonable time, the law implies an agreement that the account is correct as rendered.” (Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 753.)
Here, Plaintiff alleges “Within the past 4 years and prior to the filing of the Complaint, in Los Angeles County, California, an account was stated in writing between Defendant Kang and Plaintiff, where it was agreed that Defendants were indebted to Plaintiff in the amount of $119,944.00 as of December 31, 2021 excluding interest.” (Complaint, ¶ 58.) Moreover, Plaintiff alleges that “Plaintiff has repeatedly requested that Defendant Kang pay the storage fees he owed” and Defendant “kept promising to Plaintiff that he would pay but never made any payments.” (Complaint, ¶ 12.)
This allegation is sufficient to survive a demurrer. As such, Defendant’s demurrer to Plaintiff’s sixth cause of action for account stated is OVERRULED.
VIII. CONCLUSION
In sum, the Court rules on Defendant’s Demurrer to the operative complaint as follows:
• The Demurrer is OVERRULED as to Plaintiff’s first cause of action for breach of contract.
• The Demurrer is OVERRULED as the Plaintiff’s second cause of action for fraud by a knowingly false representation.
• The Demurrer is SUSTAINED with leave to amend as to Plaintiff’s second cause of action for fraud by concealment cause of action.
• The Demurrer is SUSTAINED with leave to amend as to Plaintiff’s second cause of action for fraud by a promise made with no intent to perform cause of action.
• The Demurrer is SUSTAINED without leave to amend as to Plaintiff’s third cause of action for conversion.
• The Demurrer is OVERRULED as to Plaintiff’s fourth cause of action for unjust enrichment.
• The Demurrer is OVERRULED as to Plaintiff’s fifth cause of action for common count.
• The Demurrer is OVERRULED as to Plaintiff’s sixth cause of action for account stated.
Plaintiff is given 20 days leave to file and amended complaint.
Defendant to give notice.