Judge: Serena R. Murillo, Case: BC704624, Date: 2023-08-14 Tentative Ruling
Case Number: BC704624 Hearing Date: September 7, 2023 Dept: 31
TENTATIVE
The demurrer to the first amended
cross-complaint is SUSTAINED with 20 days leave to amend.
Request for Judicial Notice
Cross-Defendants
Jin and Zhou request
that the Court take judicial notice of (1) the SACC filed on September 12,
2021, in the mater captioned Jin et, al v. Dragon Dream, LLC et al, case
no. BC704624 (the case to which this one is consolidated); and (2) the request
for dismissal with prejudice of the SACC, filed on November 22, 2021.
The requests for judicial notice
are GRANTED pursuant to Evidence Code § 452(d).
Legal Standard
A demurrer for sufficiency tests
whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)
When considering demurrers, courts read the allegations liberally and in
context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216,
1228.) The court “treat[s] the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law
….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525).) 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. (Code Civ. Proc., §§ 430.30, 430.70.) 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, 147 Cal.App.4th at 747.)
Meet and Confer
The demurrer and motion to strike are
accompanied by the declaration of Alberto J. Campain which satisfies
the meet and confer requirements. (Code Civ. Proc. § 430.41.)
Discussion
Cross-Defendants demur to the
First Amended Cross-Complaint, asserting that the cross-claims alleged against
Cross-Defendants are barred based on three grounds: (1) res judicata; (2)
statute of limitations; and (3) failure to state facts sufficient to constitute
of cause of action.
I.
Res
Judicata
“Res judicata applies if (1) the
decision in the prior proceeding is final and on the merits; (2) the present
proceeding is on the same cause of action as the prior proceeding; and (3) the
parties in the present proceeding or parties in privity with them were parties
to the prior proceeding.” (Fed'n of Hillside & Canyon Associations v.
City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202.)
a.
Final Judgment
As noted above,
res judicata applies if there has been a final judgment on the merits in a
previous decision. (Fed'n of Hillside & Canyon Associations v. City of
Los Angeles, supra, 126 Cal.App.4th at 1202.) A dismissal with
prejudice for purposes of res judicata is equivalent to a final judgment on the
merits. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788,
793.) “The statutory term ‘with prejudice’ clearly means the plaintiff's
right of action is terminated and may not be revived.... [A] dismissal with
prejudice ... bars any future action on the same subject matter.” (Ibid.,
quoting Roybal v. University Ford (1989) 207 Cal.App.3d 1080,
1086-1087.)
As such, the first element is
satisfied.
b.
Cause of Action
When applying res judicata, “the
key issue is whether the same cause of action is involved in both suits.
California law approaches the issue by focusing on the ‘primary right’ at
stake: if two actions involve the same injury to the plaintiff and the same
wrong by the defendant then the same primary right is at stake even if in the
second suit the plaintiff pleads different theories of recovery, seeks
different forms of relief and/or adds new facts supporting recovery.” (emphasis
in original.) (Deleon v. Verizon Wireless (2008) 88 Cal.Rptr.3d 29, 35.)
“As far as its content is concerned, the primary right is simply the
plaintiff's right to be free from the particular injury suffered…” (Villacres
v. ABM Indus. Inc. (2010) 189 Cal.App.4th 562, 575–76.)
All
claims based on the same cause of action must be decided in a single suit; if
not brought initially, they may not be raised at a later date. Res
judicata precludes piecemeal litigation by splitting a single cause of action
or relitigation of the same
cause of action on a different legal theory or for different relief. (Mycogen
Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897.) “Res Judicata is
not a bar to claims arising after the filing of the initial complaint.” A party
may assert new claims in an amended pleading, “but if no such pleading is
filed, a plaintiff is not foreclosed. [Citation.] The general rule that a
judgment is conclusive as to matters that could have been litigated ‘does not
apply to new rights acquired pending the action which might have been, but
which were not, required to be litigated [Citation]’.” (Allied Fire
Protection v. Diede Const., Inc. (2005) 127 Cal.App.4th 150, 155; Planning
and Conservation League v. Castaic Lake Water Agency, supra, 180
Cal.App.4th at p. 226.)
Cross-Complainants argue that instant cross-
complaint now contains additional facts in that 22STCV0942 specifically deals
with the pre-cursor membership agreement purchase by Bo Wang in which
plaintiffs/cross-defendants now seek to prosecute as assignees.
The Court agrees. The FACC at issue here
alleges additional facts that arose after the prior cross-complaint was filed.
For example, it alleges that on March 6, 2018, Cross-Defendants Wang, Jin and
Zhou conspired with one another and made various misrepresentations to Cross-
Complainants Dragon Dream and Huang relating to their alleged attempt to
purchase a property interest in Cross- Complainants Commercial property to induce
Cross-Complainants to sign over a 25% interest to Cross-Defendants in the
subject Commercial Property.
As such, the demurrer is overruled on
this ground.
II.
Statute of Limitations
A cause of action for
fraud bears a three-year statute of limitations. (Code Civ. Proc., § 338.) The statute of limitations for intentional
and negligent interference with contractual relations claims is two years.
(Code Civ. Proc., § 339.)
A cross-complaint
“relates back” to when the action was commenced for statute of limitations
purposes. (Trindade v. Superior Court, supra 29 Cal.App.3d at 859-860; Sidney
v. Superior Court (1988) 198 Cal.App.3d 710, 714.) This action
was initiated on March 17, 2022. As alleged in the FACC, the alleged conduct
occurred no later than March 2018. The general rule
is that the statute of limitations begins to run when “no later than the time
the plaintiff learns, or should have learned, the facts essential to [his or
her] claim.” (Gutierrez v. Mofid (1985) 39 Cal.3d 892, 897.) The FACC alleges that,
“On March 6, 2018, Cross-Defendants Wang, Jin and Zhou conspired with one
another and made various misrepresentations to Cross- Complainants Dragon Dream
and Huang relating to their alleged attempt to purchase a property interest in
Cross- Complainants Commercial property to induce Cross-Complainants to sign
over a 25% interest to Cross-Defendants in the subject Commercial Property.”
(FACC, ¶ 13.)
Thus, given the passage of more than four years, it appears the claims are
time barred.
Cross-Complainants argue that the fraud
and intentional and negligent interference with contractual relations continued
up to and included the assignment which gives rise to case no. 22STCV0942. For
this assertion, Cross-Complainants rely on the allegation in the FACC that on
the eve of trial, on March 17, 2022, cross-defendants surreptitiously
filed the instant suit and following a motion to consolidate were forced to
continue trial and consolidate the two cases. Cross-Complainants thus contend
that the final act that gives rise to causes of action one, three and four was
not completed until plaintiffs brought the surreptitious lawsuit in 22STCV0942
literally on the eve of trial in Case No BC704624.
Based upon the allegations in the FACC, the
Court finds that all the wrongdoing occurred at the latest in 2018. After
which, there are only allegations relating to filing another lawsuit, which
does not appear to be a continuing violation.
However, the accrual of a cause of action can be postponed
under the delayed discovery rule. “Under the delayed discovery rule, a cause of
action accrues and the statute of limitations begins to run when the plaintiff
has reason to suspect an injury and some wrongful cause” (Fox v. Ethicon
Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 803.) “[P]laintiffs
are required to conduct a reasonable investigation after becoming aware of an
injury, and are charged with knowledge of the information that would have been
revealed by such an investigation.” (Id. at 808.) When relying on
the delayed discovery rule, specific facts must be pleaded showing “‘(1) the
time and manner of discovery and (2) the inability to have made earlier
discovery despite reasonable diligence.’” (E-Fab, Inc. v. Accountants, Inc.
Services, 153 Cal.App.4th 1308, 1319.) Even assuming there is a fiduciary
relationship between the parties, it does not completely eliminate a
plaintiff’s duty to investigate or to exercise diligence. (See Eisenbaum v.
Western Energy Resources, Inc. (1990) 218 Cal.App.3d 314, 324; WA
Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th
148, 157; Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.5th
411, 418.)
There are no specific facts pled in the
FACC showing “‘(1) the time and manner of discovery and (2) the inability to
have made earlier discovery despite reasonable diligence.’” Cross-Complainants
argue that they can adequately plead that they become aware of the fraud,
intentional interference with contractual relations and negligent interference
with contractual relations within the applicable statute of limitations and
that there was an inability to have made earlier discovery despite reasonable
diligence.
As a result, the demurrer is
SUSTAINED on statute of limitations grounds with 20 days leave to amend.
III.
Failure to State Sufficient Facts
a. Fraud
A
claim for fraud must plead all of the following
elements: (1) misrepresentation; (2) knowledge of falsity; (3) intent to induce
reliance; (4) justifiable reliance; and (5) resulting damage. (Odorizzi
v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 128; Wilhelm v.
Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.)
Moreover, allegations of fraud “must be pled with more detail than other causes
of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC
(2007) 158 Cal.App.4th 226.) “Every element of the cause of action for fraud
must be alleged . . . factually and specifically[,] and the policy
of liberal construction of the pleadings . . . will not ordinarily be invoked
to sustain a pleading defective in any material respect. [Citations.]” (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216.)
Here, Cross-Complainants do not
allege that they ever conveyed any interest in the property as a result of the alleged
misrepresentations. Accordingly, Cross-Complainants never took any act of
reliance on Cross-Defendants’ alleged misrepresentation. While
Cross-Complainants allege that they were damaged, they have not pled any facts
as to how they were damaged. In addition, the fraud cause of action is not pled
with specificity.
As such, the demurrer to the fraud cause of
action is also sustained, with 20 days leave to amend, on this basis.
b. Third Cause
of Action for Intentional Interference with Contractual Relations and Fourth
Cause of Action for Negligent Interference with Contractual Relations
The
elements of an intentional interference with contractual relations claim are
“(1) a valid contract between plaintiff and a third party; (2) defendant’s
knowledge of this contract; (3) defendant’s intentional acts designed to
induce a breach or disruption of the contractual relationship; (4) actual
breach or disruption of the contractual relationship; and (5) resulting
damage.”¿ (I-CA Enterprises, Inc. v. Palram Americas,
Inc. (2015)
235 Cal.App.4th 257, 289.)¿
The elements of negligent
interference with contract or prospective economic advantage are (1) the
existence of a valid contractual relationship or other economic relationship
between the plaintiff and a third party containing the probability of
future economic benefit to the plaintiff; (2) the defendant’s knowledge (actual
or construed) of the relationship; (3) the defendant’s knowledge that the
relationship would be disrupted if the defendant failed to act with reasonable
care; (4) the defendant's failure to act with reasonable care; (5)
actual disruption of the relationship; and (6) resulting economic harm. (Venhaus
v. Shultz (2007) 155 Cal.App.4th 1072, 1077–1078; SCEcorp v.
Superior Court (1992) 3 Cal.App.4th 673, 677.)
“[A] plaintiff seeking to recover for alleged interference with
prospective economic relations has the burden of pleading and proving that the
defendant's interference was wrongful ‘by some measure beyond the fact of the
interference itself.’ [Citation.]” (Della Penna v. Toyota Motor
Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393-393.) “[A]n act is
independently wrongful if it is unlawful, that is, if it is proscribed by some
constitutional, statutory, regulatory, common law, or other determinable legal
standard.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29
Cal.4th 1134, 1159.)
Cross-Defendants argue that the conduct attributed to
Cross-Defendants, which forms the basis of the third and fourth causes of
action in the FACC, is not wrongful by some legal measure other than
the fact of interference itself and is absolutely privileged and
non-actionable pursuant to Civil Code § 47(b).
Cross-Complainants do not respond
to these arguments in their opposition.
The Court agrees that there are no
factual allegations as to any wrongful conduct on the part of Cross-Defendants
other than conclusory allegations. Therefore, the demurrer is also sustained on
this ground.
Lastly, Civil Code section 47(b) provides an absolute privilege for
communications made in any legislative proceeding, in any judicial proceeding,
in any other official proceeding authorized by law, or in the initiation or
course of any other proceeding authorized by law. (See Civ. Code, § 47(b); Hagberg
v. California Federal Bank FSB (2004) 32 Cal.4th 350, 360.) “‘The usual
formulation is that the privilege applies to any communication (1) made in
judicial or quasi-judicial proceedings; (2) by litigants or other participants
authorized by law; (3) to achieve the objects of the litigation; and (4) that
[has] some connection or logical relation to the action.’” (Kenne v. Stennis
(2014) 230 Cal.App.4th 953, 964 (quoting Silberg v. Anderson (1990) 50
Cal.3d 205, 212).) The privilege “protects any statements or writings that have
‘some relation’ to a lawsuit,” meaning that “communications made both during
and in anticipation of litigation are covered by the statute.” (Id. at
965 (quoting Rubin v. Green (1993) 4 Cal.4th 1187, 1193-94).) “‘The privilege is broadly applied to protect most
publications within lawsuits provided there is some connection between the
lawsuit and the publication.’” (Obos¿v. Scripps Psychological Associates, Inc.¿(1997) 59 Cal.App.4th 103, 108 (quoting¿Adams v. Superior
Court¿(1992) 2 Cal.App.4th 521, 529).)¿
The FACC alleges that the Cross-Complaints
engaged in the following three acts:
First, on March 6, 2018, Cross-Defendants
“made various representations to Cross-Complainants relating to their
alleged attempt to purchase an interest in Cross- Complainants’ Commercial
property to induce Cross-Complainants to sign over a 25% interest
to Cross-Defendants in the subject Commercial Property.” (FACC, ¶ 13).
Second, on May 11, 2018, Cross-Defendants filed the First Complaint. (Id.,
¶ 15). Third, on March 17, 2022, Cross-Defendants filed the Second
Complaint. (Id., ¶ 17).
However, assuming without deciding the
litigation privilege applies here, a demurrer does not lie only as to a portion
of a cause of action.
If there are sufficient allegations to entitle plaintiff to relief, other allegations
cannot be challenged by general demurrer. (Daniels v. Select Portfolio
Servicing, Inc. (2016) 246 Cal.App.4th
1150, 1167; See also Sheehan v. San Francisco 49ers, Ltd.
(2009) 45 Cal.4th 992, 998 (stating that the sustaining of a demurrer may only
be upheld if the complaint fails to state a cause of action under any possible
legal theory).) As
Cross-Defendants concede, the FACC also alleges that Cross-Defendants “made
various representations to Cross-Complainants relating to their alleged
attempt to purchase an interest in Cross- Complainants’ Commercial
property to induce Cross-Complainants to sign over a 25% interest
to Cross-Defendants in the subject Commercial Property.” Thus, the
demurrer is overruled on this basis.
Conclusion
Based on the foregoing, the demurrer to
the first amended cross-complaint is SUSTAINED with 20 days leave to amend.
Moving party is ordered to give notice.