Judge Salvatore Sirna, Case 20PSCV00120 2022-11-14 Tentative Ruling

Judge: Salvatore Sirna, Case: 20PSCV00120, Date: 2022-11-14 Tentative Ruling

Case Number: 20PSCV00120 Hearing Date: November 14, 2022 Dept: A

Plaintiff China National Materials Industry Import and Export Corporation’s APPLICATION FOR DEFAULT JUDGMENT

Respondent: NO OPPOSITION

TENTATIVE RULING

Plaintiff China National Materials Industry Import and Export Corporation’s application for default judgment against ESI, Yue, Beyace, and Wang is DENIED without prejudice on the following grounds: (1) Plaintiff failed to establish the court’s personal jurisdiction over ESI and/or Yue, and (2) Plaintiff failed to adequately plead a cause of action against Beyace or Wang.

BACKGROUND

In this contractual fraud action, China National Materials Industry Import and Export Corporation (Plaintiff), doing business as the Sinoma Group, entered into a series of contracts with Extra Shunmei, Inc. (ESI) in which ESI agreed to purchase and ship 28 new luxury vehicles to Plaintiff in China for a price of $4,452,570. However, Plaintiff alleges ESI conspired with Straight Forwarding, Inc. (SFI); Ailing & Jason C Corporation, doing business as Tstone Logistics Inc. (Tstone); and Beyace Inc. (Beyace) to provide Plaintiff with used high-mileage cars instead.

On November 13, 2020, Plaintiff filed a Second Amended Complaint against ESI, Xingchen Yue (Yue), SFI, Yi-Hsiang Wu, Tstone, Nelson Yang, Hang Chu, Beyace, Yuwei Wang (Wang), Hsinmei Chen, Xiaonuo Wang, Hongyu Wang, Wenjun Pan, Tianjin Chen Feng, Lijuan Huang, Tiecheng Zhang, Yimei Xiang, Nan Cai, Nuoyu LLC, and Does 1-10, alleging the following causes of action:

1. Fraudulent Concealment (against all)

2. Breach of Contract (against ESI)

3. Aiding and Abetting Fraud (against all except ESI)

4. Violations of Unfair Competition Law (against all)

Plaintiff received entries of default against Beyace on January 21, 2021, Wang on February 2, 2021, and both Yue and ESI on June 25, 2021. On May 6, 2022, Plaintiff submitted an application for default judgment against Beyace, Wang, Yue, and ESI (collectively Defendants). CMC and hearing on application for default is set for November 14, 2022.

ANALYSIS

Legal Standard

Code of Civil Procedure section 585 permits entry of a judgment after a party has filed to timely respond or appear. A party seeking judgment on the default by the court must file a Request for Court Judgment, and: (1) a brief summary of the case; (2) declarations or other admissible evidence in support of the judgment requested; (3) interest computations as necessary; (4) a memorandum of costs and disbursements; (5) a proposed form of judgment; (6) a dismissal of all parties against whom judgment is not sought or an application for separate judgment under CCP § 579, supported by a showing of grounds for each judgment; (7) exhibits as necessary; and (8) a request for attorneys’ fees if allowed by statute or by the agreement of the parties. (Cal. Rules of Court 3.1800.)

Discussion

Plaintiff applies for a default judgment against Defendants in the amount of $4,452,570 along with costs in the amount of $1,878. For the following reasons, Plaintiff’s application is denied without prejudice:

Plaintiff failed to demonstrate that the court has personal jurisdiction over ESI and Yue. Because a default judgment is void if the court lacks personal jurisdiction over the defendant, courts may review the issue of jurisdiction on their own before entering a default judgment. (Brue v. Shabaab (2020) 54 Cal.App.5th 578, 586-587.) In this case, Plaintiff specifically pled that ESI “is a Canada corporation whose principal place of business is Ontario, Canada.” (Complaint, ¶ 2.) Plaintiff also pled that Yue “is a director of ESI and is a resident of Ontario, Canada.” (Complaint, ¶ 3.) Additionally, Plaintiff is “a China corporation whose principal place of business is Beijing, China.” (Complaint, ¶ 1.)

California courts may only exercise jurisdiction consistent with the state constitution or the United States Constitution. (Code of Civ. Proc., § 410.10.) Thus, to exercise personal jurisdiction over a nonresident defendant, the defendant must have “such minimum contacts with the state that the assertion of jurisdiction does not violate traditional notions of fair play and substantial justice.” (Bombardier Recreational Products, Inc. v. Dow Chemical Canada ULC (2013) 216 Cal.App.4th 591, 597, quoting Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444.) The minimum contacts test looks at “whether the quality and nature of the defendant's activity is such that it is reasonable and fair to require him to conduct his defense in that State.” (Ibid, quoting Kulko v. California Superior Court (1978) 436 U.S. 84, 92.)

Plaintiff failed to provide any argument to support this court’s personal jurisdiction over ESI and Yue. In the facts alleged in Plaintiff’s complaint and supported by Plaintiff’s declarations, there are only two instances of ESI and Yue’s contact with California. First, while Plaintiff has not provided any contract or agreement between ESI and Beyace, Beyace was the source of the vehicles exported to Plaintiff and received a payment of $4,444,980 from ESI. (Zhang Decl., ¶ 3, 10, Ex. B, Ex. G.) Beyace is alleged to be a California corporation with its principal place of business in Hacienda Heights, where Wang (Beyace’s chief executive officer) is also a resident. (Complaint, ¶ 9, 11.) However, merely purchasing goods from a party in California is insufficient to establish minimum contacts when the defendant maintains no economic presence or does no business in California. (Futuresat Industries, Inc. v. Superior Court (1992) 3 Cal.App.4th 155, 161.) Plaintiff pled no facts to suggest ESI does business or maintains an economic presence in California beyond the one transaction in this case.

Second, the vehicles were shipped from Los Angeles and roughly two-thirds of the vehicles had titles issued in California. (Ex. B, Ex. D.) However, in a similar case, the Ninth Circuit held shipments of rice between foreign companies through California ports did not constitute minimum contacts with California. (Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co. (9th Cir. 2002) 284 F.3d 1114, 1124-1125; see also World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 296-297.) Again, Plaintiff did not pled any facts that established any other minimum contacts between ESI, Yue, and California. Thus, the court lacks personal jurisdiction over ESI and Yue, making any default judgment against them improper.

Although personal jurisdiction is not an issue as to defendants Beyace and Wang, Plaintiff failed to adequately plead causes of action against them for fraudulent concealment, aiding and abetting fraud, and violations of the Unfair Competition Law. Like fraud, fraudulent concealment must be pled with specificity. (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.) While Plaintiff pleads that defendants generally “perpetrated a fraud on Plaintiff by promising to provide the New Luxury Cars without intention of doing so,” “had exclusive knowledge of, but actively concealed the fact that the vehicles they intended to purchase . . . were not New Luxury Cars,” and “knowingly conspired to defraud [Plaintiff],” Plaintiff does not plead specific facts as to either Beyace or Wang. (Complaint, ¶ 42-46.)

With regards to Beyace and Wang, the only evidence Plaintiff provides is that Beyace exported the used cars and later received a payment from ESI. (Zhang Decl., ¶ 3, 10, Ex. B, Ex. G.) Plaintiff did not plead Beyace made any misrepresentations or was aware the shipment of used cars did not conform to Plaintiff’s contract with ESI, to which there is no evidence Beyace was a party. Plaintiff’s only evidence of wrongdoing as to Beyace is the claim that it is common knowledge China bans the import of used cars. (Zhang Decl., ¶ 4, Ex. C.) However, even if Beyace knew the import of used cars was illegal in China, that would still be insufficient to establish a claim for fraud as Plaintiff did not plead facts establishing Beyace intentionally made false representations to Plaintiff to induce Plaintiff to pay ECI. (See Walter H. Leimert Co. v. Woodson (1954) 125 Cal.App.2d 186, 192 [mere breach of contract alone is not proof of fraud]; American Psychometric Consultants, Inc. v. Workers; Comp. Appeals Bd. (1995) 36 Cal.App.4th 1626, 1646 [noting in dicta that “violation of a statute does not necessarily constitute the intentional misrepresentation which is the principal element of charged and proven fraud.”].)

Thus, Plaintiff’s application for default judgment against ESI, Yue, Beyace, and Wang is denied without prejudice on grounds that (1) Plaintiff failed to establish the court’s personal jurisdiction over ESI and/or Yue, and (2) Plaintiff failed to adequately plead a cause of action against Beyace or Wang.