Judge Salvatore Sirna, Case Number: 23PSCV00063, Date: 2023-10-13 Tentative Ruling

Judge: Salvatore Sirna, Case: 23PSCV00063, Date: 2023-10-13 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 a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 23PSCV00063 Hearing Date: October 13, 2023 Dept: G

Defendants Dear John Denim, Inc. and Chiu Fai Yeung’s Demurrer to Plaintiff’s First Amended Complaint

Respondent: NO OPPOSITION

TENTATIVE RULING

Defendants Dear John Denim, Inc. and Chiu Fai Yeung’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED with ten (10) days leave to amend.

BACKGROUND

This is a breach of contract action arising from international shipping agreements. Plaintiff Gladden Makin House, Ltd. (Gladden) is a Hong Kong corporation engaged in the business of exporting textiles from China to the United States. Gladden worked with textile factories in China and an export shipping company in Hong Kong to fulfill orders from California businesses that include Swat Fame, Inc. (Swat Fame), Defendant Dear John Denim, Inc. (Dear John), and Defendant Ashley Mason, LLC (Ashley Mason). Defendant Makin International, Inc. (Makin) served as an intermediary for Swat Fame and Dear John by forwarding their orders and payments to Gladden while Ashley Mason dealt directly with Gladden.

In August 2017, Ashley Mason attempted to cancel a shipment from Gladden but after receiving the shipment, Ashley Mason allegedly accepted it and refused to tender any payment. Makin also allegedly retained payments from Swat Fame that were meant for Gladden. During the same month, Makin’s president and CEO, Defendant Wade Leener, reached out to the Chinese factories and shipping company that worked with Gladden to convince them to work directly with Makin by falsely claiming Gladden was going to shut down.

On January 9, 2023, Plaintiffs Gladden and Derek Wong filed a complaint against Defendants Makin, Ashley Mason, Dear John, Leener, Michelle Mulleneaux, Chiu Fai Yeung, and Does 1-10, alleging the following causes of action: (1) breach of contract, (2) breach of contract with third-party beneficiary, (3) conversion, and (4) intentional interference with contractual relations. On April 18, the court sustained a demurrer by Dear John and Yeung to Gladden and Wong’s Complaint.

On May 8, 2023, Gladden and Wong filed a First Amended Complaint (FAC) against the same defendants and Does 1-20 alleging the same causes of action.

On June 6, 2023, Dear John and Yeung filed the present demurrer. On August 1, the court continued a hearing on their demurrer so parties could further meet and confer. On August 9, counsel for Dear John and Yeung telephonically met and conferred with Gladden and Wong’s counsel. (Tan Suppl. Decl., ¶ 2.)

A hearing on the demurrer is set for October 13, 2023, along with a case management conference, OSC re: Failure to File Proof of Service, and informal discovery conference.

REQUESTS FOR JUDICIAL NOTICE

Dear John and Yeung’s request for judicial notice of discovery responses in this action are GRANTED.

ANALYSIS

Dear John and Yeung demur to Gladden and Wong’s second cause of action for breach of contract with third-party beneficiary. For the following reasons, the court SUSTAINS their demurrer with leave to amend.

Legal Standard

Demurrer

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “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, supra, at p. 747.)

Breach of Contract

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

“Under California law third party beneficiaries of contracts have the right to enforce the terms of the contract under Civil Code section 1559 which provides: ‘A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.’” (Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1086, quoting Civ. Code, § 1559.) “A third party may qualify as a beneficiary under a contract where the contracting parties must have intended to benefit that individual and such intent appears on the terms of the agreement. [Citations.] It is well settled, however, that Civil Code section 1559 excludes enforcement of a contract by persons who are only incidentally or remotely benefited by the agreement.” (Id., at p. 1087.)

Discussion

In this case, Dear John and Yeung argue Gladden was not a third-party beneficiary of alleged sale agreements between Dear John and Makin. But even if Gladden was a third-party beneficiary, the court finds this cause of action remains insufficiently pled. In previously sustaining a demurrer to Gladden’s Complaint, the court noted Gladden had failed to allege allegations that establish Dear John committed a breach of contract. (4/18/2023 Ruling, p. 2.) Gladden’s FAC still fails to cure this defect.

Gladden alleges the existence of a contract between Dear John and Makin where Gladden fulfilled purchase orders from Dear John and received a payment from Dear John through Makin. (FAC, ¶ 34-35, 53.) Gladden alleges it performed its obligations pursuant to the contract by fulfilling Dear John’s orders. (FAC, ¶ 56.) But, Gladden does not allege Dear John breached the contracts by failing to make the required payments. Instead, Gladden alleges Dear John breached the agreement by failing to ensure Gladden received the payments from Makin. (FAC, ¶ 55.) However, because the FAC only alleges Dear John had an obligation to pay Makin and never alleged Dear John agreed to make payments directly to Gladden, Dear John did not breach the agreement.

Furthermore, Gladden appears to suggest that Dear John is liable for Makin’s failure to pass the payments on through joint and several liability. (FAC, ¶ 55.) Joint and several liability applies “when multiple parties promised the same performance.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 820.) Here, however, Makin and Dear John both did not agree to perform by making the same payment to Gladden. Instead, Dear John agreed to pay Makin and Makin agreed to pass the payment on to Gladden in exchange for a commission. (FAC, ¶ 47.) Thus, because Gladden failed to allege Dear John breached its own obligation to make payment to Makin, Gladden’s cause of action fails and Gladden cannot hold Dear John liable for Makin’s separate alleged breach.

Accordingly, Dear John and Yeung’s demurrer is SUSTAINED with leave to amend.

CONCLUSION

Based on the foregoing, Dear John and Yeung’s demurrer to Gladden and Wong’s FAC is SUSTAINED with ten (10) days leave to amend as to the second cause of action.