Judge: Shirley K. Watkins, Case: 22VECV01113, Date: 2023-05-09 Tentative Ruling

If ALL parties submit on the tentative, then no appearance is necessary unless some other matter (i.e., Case Management Conference) is on calendar. It is not necessary to call the court to request oral argument. Oral argument is permitted on all tentative rulings.

Case Number: 22VECV01113    Hearing Date: May 9, 2023    Dept: T

22VECV01113 CHRISTINE ROCHA vs DON CHAVA FOODS,

[TENTATIVE] ORDER:  Defendants Don Chava Foods, Inc., Daniel Reynoso, Christian Reynoso, and Humberto Reynoso’s Demurrer to the First Amended Complaint is OVERRULED.  Whether there shall be a responsive pleading will depend on the outcome of the motion to strike.

Defendants Don Chava Foods, Inc., Daniel Reynoso, Christian Reynoso, and Humberto Reynoso’s Motion to Strike is CONTINUED to ____________, 2023.  The Opposition and Reply are required to be filed and served per Code based upon the new hearing date. 

              Defendants Don Chava Foods, Inc., Daniel Reynoso, Christian Reynoso, and Humberto Reynoso’s Requests for Judicial Notice in support of their Demurrer is GRANTED as to the existence of the documents but not as to hearsay or facts in dispute. 

              Plaintiff Christine Rocha’s Request for Judicial Notice is GRANTED as to the existence of the document but not as to hearsay or facts in dispute. 

Introduction

              Defendants Don Chava Foods, Inc. (Don Chava,) Daniel Reynoso (Daniel ,) Christian Reynoso (Christian,) and Humberto Reynoso (Humberto) (collectively, Defendants) demurrer to Plaintiff Christine Rocha (Plaintiff) First Amended Complaint (FAC.)  The FAC alleged two causes of action (COA) for fraudulent transfer under the Uniform Voidable Transfers Act (UVTA) and conspiracy to defraud.  Defendants also moved to strike Plaintiff’s second COA and her request for compensatory and punitive damages. 

Discussion 

Defendants argued that the first COA under the UVTA failed to plead sufficient facts because the COA did not plead specific and particular facts, as is required under a common law fraud claim.  (Grayson Services, Inc. v. Wells Fargo Bank (2011) 199 Cal.App.4th 563, 566 (Grayson.))  The pin citation to the Grayson case points only to the introduction of the opinion, which was citing to the unpublished portion of the opinion.  The Court expressly stated: “In the unpublished portions, we conclude … . In addition, we conclude that the allegations in the conspiracy claim (1) were insufficient to allege a violation of the Uniform Fraudulent Transfer Act (Civ.Code, §§ 3439–3439.12) and (2) failed to allege with the requisite particularity all the elements of a general fraud claim based on false representations or concealment.”  (Ibid.)  The Court of Appeal did not opine that the pleading requirements of specificity and particularity for fraud applied to claims under the UVTA (formerly the Uniform Fraudulent Transfer Act.)  The Court of Appeal merely opined that Grayson Services, Inc.’s second amended complaint’s COA for conspiracy to fraudulent transfer failed to allege an underlying claim of general fraud with specificity and particularity.  The opinion does not support the contention that fraud’s specificity and particularity pleading requirement applies to a UVTA COA.  Defendants’ contention that the specificity and particularity pleading requirement under a common law fraud tort be applied to a UVTA claim is unpersuasive.

As to Defendants’ citation to Kelleher v. Kelleher (N.D. Cal. Jan. 9, 2014 No. 13-CV-05450-MEJ) 2014 WL 94197, at *5, the Court exercised its discretionary authority and refused to follow the federal case law.  The federal court applied Federal Rule of Civil Procedure 9(b) to a UVTA COA “because a claim for actual fraudulent transfer involves an allegation of fraud or mistake.”  (Ibid.)  However, this Court did not read the UVTA to include the common law tort of fraud as a pleading element.  In order to plead UVTA, Plaintiff was required to plead “an actual intent to hinder, delay, or defraud any creditor.”  (Civ. Code sec. 3439.04(a)(1) (italics added.))  Although fraud is referenced in the statute, the entirety of the pleading requirement is the “actual intent to hinder, delay, or defraud” and not common law fraud.  The statute provided eleven factors to aid in determining “actual intent.” (see Civ. Code sec. 3439.04(b).)  In the instant FAC, Plaintiff alleged that the debtors from Rocha v. La Corona Bar & Grill et al. (Los Angeles Superior Court case no. BC686367) (Underlying Action) were Horacio Reynoso, La Corona Bar & Grill, and Salvador Reynoso Corp. (collectively, Debtors.)  (FAC. par. 7.)  Plaintiff alleged that Defendants were the transferees of Debtors assets and Defendants were insiders; Debtors were sued prior to the transfer; Defendants received substantially all of Debtors’ assets; and Debtors were insolvent or became insolvent shortly after the transfer. (see Civ. Code sec. 3439.04(b)(1), (4), (5), and (9).) (FAC. par. 15.)  With these allegations, Plaintiff sufficiently plead Debtors “actual intent to hinder, delay, or defraud” Plaintiff, a creditor.  The Court did not agree with Defendants’ contention that the specificity and particularity requirement under common law fraud is applicable to UVTA.  The Court finds that Plaintiff sufficiently pled facts to support the actual intent element of UVTA.

Defendants then argued that despite the FAC’s allegation otherwise (FAC. pars. 7-8, 12, and 14,) Defendants had no knowledge of the Underlying Action’s judgment.  Defendants argued that the transfer to Defendant Don Chava occurred in November 2018, which was prior to Debtor Salvador Corp being named in June 2019.  (Defendants’ Request for Judicial Notice (DRJN,) Exhs. 2-4.)  However, knowledge of the Underlying Action’s judgment is not required and not a pleading element.  The pleading requirement for a UVTA claim only requires a “right to receive payment from the debtor.”  (Civ. Code sec. 3439.01(b), (c).)  The right to payment does not have to be reduced to a judgment or even be the subject of a lawsuit. A creditor's claim is simply a right to payment, whether “liquidated,  unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.”  (Civ. Code sec. 3439.01(b).)  Plaintiff’s Underlying Action showed that it was based upon a personal injury claim wherein Plaintiff was injured at the La Corona Bar & Grill in 2016.  (DRJN, Exh. 1 at par. 7.)  Plaintiff’s alleged right to payment was incurred in 2016.  Plaintiff’s UVTA claim is sufficiently pled with supportive facts. 

Defendants’ Demurrer to the first COA is OVERRULED. 

Defendants Daniel, Christian, and Humberto (Individual Defendants) argued that there are no charging allegations made against them individually.  Plaintiff alleged that Christian and Humberto are officers and directors of Don Chava.  (FAC par. 9.)  Plaintiff further alleged that Daniel is a stockholder in both Debtor Salvador Reynoso Corp., the owner of Debtor La Corona Bar & Grill, and Defendant/Transferee Don Chava.  (Ibid.)  Plaintiff further alleged that Debtor Salvador Reynoso Corp. transferred La Corona Bar & Grill to Defendant Don Chava (FAC par. 12) and, also that the transfer was made to Humberto, Christian and Daniel (i.e., Daniel as stockholder of Don Chava.)  (FAC pars. 12, 15.)  These allegations in the FAC are sufficient to plead charging allegations against the Individual Defendants.  Defendants’ argument based upon the Bulk Sale Notice showing that the conveyance was to Don Chava is insufficient to dispute or negate the allegation that La Corona Bar & Grill was conveyed to Individual Defendants.  The Bulk Sale Notice only publicized the sale to Don Chava and is silent as to Individual Defendants.  Silence is insufficient to show that the transfer was not made to the Individual Defendants.  For demurrer purposes, the allegations of the FAC are deemed true.  There is sufficient fact pleading to show that the fraudulent transfer was also made to Individual Defendants.  The demurrer to the UVTA COA as to the Individual Defendants is unpersuasive and OVERRULED.

Defendants argued that the second COA for conspiracy is insufficiently pled because the conspiracy claim is dependent upon the proper pleading of the first COA.  This argument is unsupported because the Court found the Demurrer to the first COA to be unpersuasive.  The first COA is sufficiently pled and the conspiracy claim based upon the first COA is also sufficiently pled. 

Defendants then argued that the conspiracy COA is duplicative of the first COA.  However, the argument is without merit because UVTA is not the same as conspiring to commit UVTA and require different pleading elements.  The two COA are not duplicative and the argument is unpersuasive. 

The Demurrer to the second COA is OVERRULED.

As to the motion to strike, the Court considered Plaintiff Counsel’s declaration filed on May 3, 2023.  Counsel presented sufficient facts to show his mistake, inadvertence, surprise, or neglect.  Counsel presented good cause for the Court to exercise its discretionary to control its calendar and to grant Plaintiff’s requested relief for a continuance of the motion to strike in order to file an opposition, and to allow for a reply. 

Plaintiff’s request to CONTINUE the Motion to Strike is GRANTED. 

              IT IS SO ORDERED, CLERK TO GIVE NOTICE.