Judge: Stephen I. Goorvitch, Case: 20STCV47075, Date: 2022-08-24 Tentative Ruling

Case Number: 20STCV47075    Hearing Date: August 24, 2022    Dept: 39

Sean Suh v. Royce Clayton, et al.

Case No. 20STCV47075

Demurrer to Answer to Cross-Complaint

            Sean Suh (“Suh”) filed this action against Royce Clayton (“Clayton”) and the California Marijuana Company, Inc. (“CMC”), among others, asserting causes of action for breach of contract, fraudulent misrepresentation, and quantum meruit.  Suh alleges that Clayton breached an agreement executed in December 2018, pursuant to which Suh would invest $200,000 and would receive a 20 percent interest in CMC.  (Complaint, ¶¶ 14-19, 21.)  Plaintiff also alleges that after he executed the contract in 2018, Clayton and another defendant, Donald Anderson, demanded that he “invest additional funds into the business, as well as invest substantial time and money setting up the growing and processing aspects of the business.”  (Complaint, ¶ 27.)  Suh alleges that he complied with their requests, believing that they could give him the promised 20% of the business.  (Ibid.)  Suh alleges that at the time Clayton and Anderson demanded additional money, they had no intention of giving him any ownership or profit interest.  (Id., ¶ 28.)  Suh alleges that as a result, he paid more than $800,000 in cash, and invested hundreds of hours of his time.  (Id., ¶ 30.) 

            Clayton and CMC filed a cross-complaint on March 9, 2022, asserting causes of action for breach of an oral agreement and conversion.  The cross-complaint alleges that Suh’s contribution of $200,000 was a loan, not an investment, and that he worked at CMC.  The cross-complaint alleges that “Suh was caught stealing from CMC, Inc. over a period of time, approximately $1,000,000 worth of marijuana product commonly known as ‘crude.’”  (Cross-Complaint, ¶ 2.)  The cross-complaint alleges that Suh admitted the theft, agreed to have his employment terminated, and agreed that the balance of the loan would be restitution and would not be repaid.  (Ibid.) 

            Suh filed an answer to the cross-complaint on May 23, 2022, in which he raises the following affirmative defenses: (1) Failure to state a cause of action, (2) Equitable estoppel, (3) Waiver, (4) Unclean hands, (5) Laches, (6) Excuse, (7) Lack of Damages, (8) Justification, (9) Extinguishment of obligation, (10) No duty or obligation, (11) Intentional conduct of other persons or entities, (12) Statute of limitations, (13) Good faith, (14) Failure to act in good faith, (15) Failure to mitigate, (16) Comparative negligence, (17) Lack of standing, (18) Lack of jurisdiction, (19) Assumption of risk, (20) Accord and satisfaction, (21) Novation, (22) Lack of consideration, (23) Failure of consideration, (24) Frustration of purpose, (25) Statute of frauds, (26) set-off, (27) In pari delicto, (28) Lack of privity, (29) Illegal contract, (30) Fraud in the inducement, and (31) Reservation of additional defenses.  Now, the cross-complainants demur to the answer, arguing that Suh does not allege facts supporting these defenses.  The cross-complainants also move to strike the prayer and the individual defenses.

            A defendant bears the burden of proving a “new matter” raised in the answer.  (California Academy of Sciences v. County of Fresno (1987) 192 Cal.App.3d 1436, 1442.)  “The phrase ‘new matter’ refers to something relied on by a defendant which is not put in issue by the plaintiff.”  (Walsh v. West Valley Mission Community College District (1998) 66 Cal.App.4th 1532, 1546.)  In simple terms, a defendant need not allege facts to support any affirmative defense that negates the elements of Plaintiff’s claims, since Plaintiff will bear the burden of proof on those matters at trial.  (See Bevill v. Zoura (1994) 27 Cal.App.4th 694, 698.)  Rather, a defendant only needs to allege facts to support any matter on which the defendant will bear the burden of proof at trial.  (Ibid.) 

            The Court rules as follows on the demurrer to the answer to the cross-complaint:

            1.         Failure to state a cause of action – Overruled

            2.         Equitable estoppel – Sustained

            3.         Waiver – Sustained

            4.         Unclean Hands – Sustained

            5.         Laches – Sustained

            6.         Excuse – Sustained

            7.         Lack of Damages – Overruled

            8.         Justification – Sustained

            9.         Extinguishment of obligation – Sustained

            10.       No duty or obligation – Sustained

            11.       Intentional conduct of other persons or entities – Sustained

            12.       Statute of limitations – Overruled

            13.       Good faith – Sustained

            14.       Failure to act in good faith – Sustained

            15.       Failure to mitigate – Sustained

            16.       Comparative negligence – Sustained

            17.       Lack of standing – Overruled

            18.       Lack of jurisdiction – Overruled

            19.       Assumption of risk – Sustained

            20.       Accord and satisfaction – Overruled

            21.       Novation – Overruled

            22.       Lack of consideration – Overruled

            23.       Failure of consideration – Overruled

            24.       Frustration of purpose – Sustained

            25.       Statute of frauds – Overruled

            26.       Set-off – Overruled

            27.       In pari delicto – Sustained

            28.       Lack of privity – Overruled

            29.       Illegal contract – Sustained

            30.       Fraud in the inducement – Sustained

            31.       Reservation of additional defenses – Overruled

The Court denies the motion to strike and the motion for sanctions under Code of Civil Procedure section 128.7.  The Court orders Suh to file an amended answer that alleges facts in support of the affirmative defenses for which he bears the burden of proof at trial within thirty (30) days of notice of this order.  The moving party shall provide notice and file proof of such with the Court.