Judge: Salvatore Sirna, Case: 18PSCV00182, Date: 2024-08-12 Tentative Ruling

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Case Number: 18PSCV00182    Hearing Date: August 12, 2024    Dept: G

Defendant Sunny Way Corporation’s Motion to Lift Bankruptcy Stay

Respondent: Defendants Xuefei Zhang, Lihong Liu, and Juan Liu, and Plaintiffs Lingzhi Ma, Yunhan Chen, and Topstar Freight Inc.

TENTATIVE RULING

Defendant Sunny Way Corporation’s Motion to Lift Bankruptcy Stay is DENIED as the Court exercises its discretion to stay proceedings.

BACKGROUND

This is an action for contractual fraud. Plaintiffs Lingzhi Ma and Yunhan Chen are Chinese nationals. In 2015, they entered into an agreement with Defendants Xuefei Zhang, Lihong Liu, and Juan Liu in which they agreed to form and invest funds in Plaintiff Topstar Freight Inc. (Topstar) for the purpose of obtaining an EB-5 investor visa for Chen. Pursuant to the agreement, Ma and Chen invested $800,000 in Topstar. Subsequently, Ma and Chen allegedly discovered Zhang and the Lius had managed Topstar for their own benefit and were transferring Topstar’s profits to Defendant Sunny Way Trucking Inc. (Sunny Way Trucking). They also allege Zhang and the Lius refused to return their investments.

On December 12, 2018, Ma, Chen, and Topstar (collectively, the Topstar Plaintiffs) filed a complaint against Zhang, the Lius, Sunny Way Trucking, and Does 1-20, alleging the following causes of action: (1) anticipatory breach of contract, (2) money had and received, (3) conversion, (4) breach of contract, (5) money had and received, (6) conversion, (7) intentional misrepresentation, (8) negligent misrepresentation, (9) fraudulent concealment, (10) breach of fiduciary duty, (11) constructive fraud, (12) unfair competition, and (13) declaratory relief.

On July 7, 2021, the Topstar Plaintiffs filed an amendment to the Complaint that replaced Doe 4 with Defendant Sunny Way Corporation (Sunny Way).

On May 28, 2024, the Court stayed the present action following notice of pending bankruptcy proceedings that involve Sunny Way Trucking.

On June 10, 2024, Sunny Way Corporation filed the present motion.

A hearing on the present motion is set for August 12, 2024, along with a status conference re: bankruptcy and a hearing on motions to be admitted pro hac vice.

ANALYSIS

Sunny Way Corporation (Sunny Way) moves to lift the pending stay of proceedings as to Sunny Way. For the following reasons, the court DENIES their motion.

Legal Standard

“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.)  They also have inherent powers to manage and fashion procedures to control litigation and ensure the orderly administration of justice. (Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1376-79; see also Code Civ. Proc., § 128, subd. (a)(3) and (a)(5).) But when a defendant commences bankruptcy proceedings in federal court, all civil proceedings against that defendant are automatically stayed. (Higgins v. Superior Court (2017) 15 Cal.App.5th 973, 979.) This automatic stay “does not apply to non-debtor codefendants.” (Cross v. Cooper (2011) 197 Cal.App.4th 357, 365, fn. 2.)

Discussion

In this case, Sunny Way argues the court should lift the stay for Sunny Way because Sunny Way is not involved in Sunny Way Trucking’s bankruptcy proceedings. (Motion, p. 3:18-24.) But while Sunny Way is correct in arguing the automatic bankruptcy stay is inapplicable to Sunny Way as a non-debtor defendant, the court nonetheless retains the discretion to stay proceedings to manage and fashion procedures to control litigation and ensure the orderly administration of justice.

Here, the Complaint alleges thirteen (13) causes of action against Defendant Sunny Way Corporation.  Sunny Way Trucking was Zhang and the Lius’ company. (Complaint, ¶ 26.) It alleges Zhang and the Lius required Ma and Chen to funnel some of their investments to Topstar through Sunny Way Trucking. (Complaint, ¶ 27.) It further alleges Zhang and the Lius siphoned off Topstar’s profits by creating an agency agreement between Topstar and Sunny Way Trucking. (Complaint, ¶ 28.) And last, the Complaint alleges each defendant, including Sunny Way Trucking and Sunny Way Corporation, is the agent, employee, representative, or alter ego of the other defendants. (Complaint, ¶ 14.)

Since Defendant Sunny Way Corporation is identified in multiple causes of action and allegations, the court finds there is a significant risk of duplicative proceedings if the stay is lifted against Sunny Way Corporation while proceedings against Sunny Way Trucking remain stayed.

Therefore, the court exercises its discretion to keep proceedings stayed against Sunny Way Corporation.

Accordingly, Sunny Way’s motion is DENIED.

CONCLUSION

Based on the foregoing, Sunny Way’s motion to lift the stay of proceedings as to Sunny Way is DENIED.