Judge Salvatore Sirna, Case 20PSCV00120 2023-01-30 Tentative Ruling

Judge: Salvatore Sirna, Case: 20PSCV00120, Date: 2023-01-30 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 20PSCV00120 Hearing Date: January 30, 2023 Dept: G

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 is DENIED.

BACKGROUND

In this contractual fraud action, the 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 twenty-eight 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 (SAC) against ESI, Xingchen Yue (Yue), SFI, Yi-Hsiang Wu, Tstone, Nelson Yang, Hang Chu, Beyace, Yuwei Wang (Wang), Hsinmei Chen (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); and (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 the present application for default judgment against Beyace, Wang, Yue, and ESI (collectively Defendants). At a hearing on November 14, the court ordered Plaintiff to brief the issue of jurisdiction.

A hearing on the application for default judgment and a case management conference are set for January 30, 2023.

LEGAL STANDARD

Code of Civil Procedure section 585 permits entry of a default 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.)

ANALYSIS

Plaintiff seeks default judgment against Defendant in the total amount of $4,454,448, including $4,452,570 in damages and $1,878 in costs. For the following reasons, the court DENIES Plaintiff’s application without prejudice.

Jurisdictional Defects

Plaintiff has failed to demonstrate 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 has specifically pled that ESI “is a Canada corporation whose principal place of business is Ontario, Canada.” (SAC, ¶ 2.) Plaintiff has also pled that Yue “is a director of ESI and is a resident of Ontario, Canada.” (SAC, ¶ 3.) Additionally, Plaintiff is “a China corporation whose principal place of business is Beijing, China.” (SAC, ¶ 1.) Accordingly, the court must determine if has personal jurisdiction over ESI and Yue as non-resident defendants.

“Personal jurisdiction may be either general or specific.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445 (Vons Companies).) “A nonresident defendant may be subject to the¿general¿jurisdiction of the forum if his or her contacts in the forum state are ‘substantial . . . continuous and systematic.’” (Ibid, quoting Perkins v. Benguet Consol. Mining Co. (1952) 342 U.S. 437, 445-446.) “In that situation, the cause of action need not be related to the defendant's contacts.” (Thomson v. Anderson (2003) 113 Cal.App.4th 258, 266.) “Such a defendant's contacts with the forum are so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction.” (Vons Companies, supra, 14 Cal.4th at p. 446.)

“Specific jurisdiction results when the defendant's contacts with the forum state, though not enough to subject the defendant to the general jurisdiction of the forum, are sufficient to subject the defendant to suit in the forum on a cause of action related to or arising out of those contacts.” (Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th 556, 569-570, quoting Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 536 (Sonora Diamond).) “Specific jurisdiction exists if: (1) the defendant has purposefully availed itself of forum benefits with respect to the matter in controversy; (2) the controversy is related to or arises out of the defendant's contacts with the forum; and (3) the assertion of jurisdiction would comport with fair play and substantial justice.” (Id., at p. 570, quoting Sonora Diamond, supra, 83 Cal.App.4th at p. 536.) “[C]ourts must additionally evaluate ‘the burden on the defendant of appearing in the forum, the forum state's interest in adjudicating the claim, the plaintiff's interest in convenient and effective relief within the forum, judicial economy, and the shared interest of the several states in furthering fundamental substantive social policies.’” (Id., quoting Vons Companies, supra, 14 Cal.4th at p. 447-448.)

In the facts alleged in the 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 the 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. (SAC, ¶ 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 (Futuresat Industries).) “[W]hen an action is against a nonresident buyer, the same strong interest of the forum state which protects resident buyers who receive defective products by assuring them a local forum also requires protecting those buyers against being forced to go to a foreign state to defend an action to collect on a contract.” (Id., at p. 160.)

Second, the vehicles were shipped from Los Angeles and roughly two-thirds of the vehicles had titles issued in California. (Zhang Decl., 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 (Glencore Grain); see also World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 296-297.) In Glencore Grain, the court noted the shipments did not “arise out of conduct directed at or related to California” as the contracts were “negotiated abroad, involved foreign companies, and required performance (i.e., delivery of rice) in India.” (Glencore Grain, supra, 284 F.3d at p. 1124.) Similarly here, this action arises from an agreement between two foreign companies in Canada and China and required performance (delivery of luxury cars) in China.

Because this a tort action, Plaintiff argues this court should apply a “forum benefits test” instead of the “effects” test and cites to Gilmore Bank v. AsiaTrust New Zealand Ltd. (2014) 223 Cal.App.4th 1558 (Gilmore Bank). However, the court there noted “the test for purposeful availment does not hinge mechanically on whether the plaintiff's claim sounds in tort or contract.” (Id., at p. 1571.) In Gilmore Bank, the court held the nonresident New Zealand trust company purposefully availed itself of California’s forum benefits when it (1) conducted due diligence on a California resident, (2) sent promotional materials to California resident to market forming a New Zealand trust, (3) drafted a trust contract with California residents, (4) communicated via email and telephone with California residents, (5) sent invoices to California residents, (6) received funds from California and sent funds to California, and (7) ultimately formed a lifetime trust with a California resident. (Id., at p. 1572.)

While the present action involves fraud claims, it arises from a vehicle purchasing agreement between a nonresident Plaintiff and nonresident defendants (ESI and Yue). The present case does not involve the web of forum contacts that the creation of a New Zealand trust caused in Gilmore Bank. Furthermore, the transaction in Gilmore Bank involved ongoing forum contacts linked to the creation of a trust that would have lasted for the lifetime of the California resident, while the present case only involved one transaction between Beyace and ESI. As noted in Futuresat Industries, merely making a one-time purchase of goods from a California seller is insufficient to establish jurisdiction as continuous and substantial buying activity is required to establish purposeful availment. (Futurestat Industries, supra, 3 Cal.App.4th at 159.) Thus, the one-time transaction between Beyace and ESI is insufficient to establish ESI and Yue purposefully availed themselves of California’s forum benefits and specific jurisdiction cannot be established.

Pleading Defects

Although personal jurisdiction is not an issue as to defendants Beyace and Wang, Plaintiff has 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 the 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.”].)

CONCLUSION

Based on the foregoing, Plaintiff’s application for default judgment is DENIED.