Judge: Theresa M. Traber, Case: 21STCV40184, Date: 2022-07-27 Tentative Ruling
Case Number: 21STCV40184 Hearing Date: July 27, 2022 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: July 27, 2022 TRIAL DATE: NOT
SET
CASE: Minghui Zheng v. California Investment
Regional Center, LLC, et al
CASE NO.: 21STCV40184 
(1)
DEMURRER
TO COMPLAINT
(2)
MOTION
TO STRIKE PORTIONS OF COMPLAINT
MOVING PARTY: (1) (2) Defendants Daquin Zhang and Law Offices of
Deacon Zhang, P.C.
RESPONDING PARTY(S): (1) (2) Plaintiff
Minghui Zheng
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
This is an action for fraud, breach of contract, and professional
negligence filed on November 1, 2021. Plaintiff alleges that the parties
contracted to participate in the Immigration Investor Visa Program so that
Plaintiff could invest in a piece of property, and conspired to forge Plaintiff’s
signature on immigration documents for the purpose of diverting Plaintiff’s
invested funds to a different property.
Defendants Daquin Zhang and the Law
Offices of Deacon Zhang, P.C., demur to the first, second, third, fourth,
seventh, ninth, and tenth causes of action in the complaint and move to strike
portions of the complaint.
TENTATIVE RULING:
Defendants’ demurrer to the
Complaint is OVERRULED in its entirety. Defendants are to serve and file an
answer only within 30 days of the date of this order.
Defendants’
motion to strike is GRANTED IN PART as to paragraphs 41, 43, 64, and 66 of the
Complaint and otherwise DENIED.
//
//
DISCUSSION:
Demurrer to Complaint
Defendants
Daquin Zhang and the Law Offices of Deacon Zhang, P.C., demur to the first,
second, third, fourth, seventh, ninth, and tenth causes of action on the
grounds that they fail to state facts sufficient to constitute a cause of
action, and are uncertain.
Legal Standard
A demurrer 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.) 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, 147 Cal.App.4th at p. 747.) The
ultimate facts alleged in the complaint must be deemed true, as well as all
facts that may be implied or inferred from those expressly alleged. (Marshall
v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields
v. County of San Diego (1984) 155 Cal.App.3d 103, 133 [stating, “[o]n
demurrer, pleadings are read liberally and allegations contained therein are
assumed to be true”].) “This rule of liberal construction means that the
reviewing court draws inferences favorable to the plaintiff, not the
defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th
1228, 1238.)
Meet and Confer
Before filing a demurrer, the
demurring party shall meet and confer in person or by telephone with the party
who has filed the pleading subject to the demurrer and file a declaration
detailing their meet and confer efforts. (Code Civ. Proc., § 430.41(a).)
However, an insufficient meet and confer process is not grounds
to overrule or sustain a demurrer. (Code Civ. Proc., §
430.41(a)(4).)
The
declaration of David Rubaum, counsel for Defendants, states that he “met and
conferred” with Plaintiff by sending a meet and confer letter. (Declaration of
David Rubaum ISO Demurrer ¶ 2, Exh. A.) This is not a satisfactory meet and
confer process under the statute. A single letter, with no further details of
any subsequent discussion, is not indicative of reasonable, good-faith efforts
to resolve the dispute without motion practice. Nevertheless, the Court will
review the demurrer on its merits.
//
First Cause of Action for Intentional Misrepresentation
Defendants
demur to the first cause of action for intentional misrepresentation for
failure to state facts sufficient to constitute a cause of action.
“The elements of fraud, which give
rise to the tort action for deceit, are (a) misrepresentation (false
representation, concealment, or nondisclosure); (b) Knowledge of falsity (or
‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable
reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12
Cal.4th 631, 638.) Each element “must be alleged in full, factually and
specifically, and the policy of liberal construction of pleading will not
usually be invoked to sustain a pleading that is defective in any material
respect.” (Wilhem v. Pray, Price, Williams, & Russel (1986) 186
Cal.App.3d 1324, 1331.) The particularity requirement “necessitates pleading facts
which ‘show how, when, where, to whom, and by what means the representations
were tendered.” (Lazar v. Superior Court, supra, 12 Cal.4th at 645,
quoting Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [italics
original].) The purpose of the particularity requirement is to apprise the
opposite party of what they are called on to answer, and to enable the Court to
determine whether there is any foundation for the claim of fraud. (See Scafidi
v. Western Loan & Bldg. Co. (1946) 72 Cal.App.2d 550, 553.)
Defendants contend that Plaintiff
has failed to allege facts sufficient to support a fraud claim against
Defendants because the Complaint alleges only a series of misrepresentations by
an individual named only as “Miss Yuan,” who is alleged to be an agent of all
Defendants. (See Complaint ¶ 16.) Defendants’ contentions are not well taken. “It
is a settled rule of the law of agency that a principal is responsible to third
persons for the ordinary contracts and obligations of his agent with third
persons made in the course of the business of the agency and within the scope
of the agent’s powers as such, although made in the name of the agent and not
purporting to be other than his own personal obligation or contract.” (Daniels
v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1178.)
The Complaint alleges that in July
of 2015, Miss Yuan, agent for all Defendants, acting in her capacity as an
agent, represented to Plaintiff that he could invest $500,000 into CIRC for the
El Monte project in exchange for a 1% equity interest in the hotel, without the
intent to perform on that promise. (Complaint ¶¶ 23-24.) The Complaint does not
allege where or by what means the representations were tendered. However,
considering the purpose of the particularity requirement, the Court finds that
these allegations are sufficient to put Defendants on notice of what they are
called on to answer: whether Miss Yuan, acting as an agent for Defendants,
represented to Plaintiff that he could invest the money into CIRC for the El
Monte hotel with the intent not to perform. Therefore, the Court finds that
Plaintiff has stated facts sufficient to constitute a cause of action.
//
//
Second Cause of Action for Negligent Misrepresentation
Defendants
demur to the second cause of action for negligent misrepresentation for failure
to state facts sufficient to constitute a cause of action.
For the
foregoing reasons in connection with the first cause of action, the Court finds
that Plaintiff has stated facts sufficient to constitute a cause of action for
negligent misrepresentation.
Third Cause of Action for Fraudulent Concealment
Defendants demur to the third cause
of action for fraudulent concealment for failure to state facts sufficient to
constitute a cause of action.
To succeed on a claim for
fraudulent concealment, a plaintiff must establish (1) concealment or failure by the
defendant to disclose a material fact; (2) that the defendant had a duty to
disclose that fact to the plaintiff; (3) that the defendant intentionally
concealed, omitted, or suppressed that fact with the intent to defraud the
plaintiff; (4) that the plaintiff was unaware of the fact and would not have
acted as they did had they known of the concealed fact; and (5) as a result of
the concealment or suppression of the fact, the plaintiff sustained damage. (Boschma
v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)
Defendants contend that Plaintiff
has not adequately alleged any form of concealment. Defendants are mistaken.
The Complaint, on its face, alleges Defendants were aware that they intended to
redirect Plaintiff’s investment to a different project and intended to forge
his signature on immigration documents. (Complaint ¶ 47.) The Complaint alleges
that this concealment was done deliberately to deprive Plaintiff of his money.
(Complaint ¶ 51-52.) The Complaint does not clearly allege that Plaintiff would
have acted differently had he known. However, it does allege that Plaintiff
made the payment because of the concealment by Defendants, which, construing
the allegations in the light most favorable to Plaintiff, can be read to mean
that Plaintiff would not have made the payment but for the concealment.
(Complaint ¶ 48.) These allegations are sufficient to support a cause of action
for fraudulent concealment.
Fourth Cause of Action: Breach of Implied Covenant of
Good Faith and Fair Dealing
Defendants demur to the fourth cause
of action for failure to state facts sufficient to constitute a cause of
action.
“There is an implied covenant of good faith and fair
dealing in every contract that neither party will do anything which will injure
the right of the other to receive the benefits of the agreement.” (Comunale
v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658.) However,
there must be an enforceable contract for the implied covenant to exist. (Peterson
Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 116 [“An
underlying contract is required” to state a cause of action for breach of the
covenant of good faith and fair dealing]; Jones v. Aetna Casualty &
Surety Co. (1994) 26 Cal.App.4th 1717, 1722 [“While an action for breach of
the covenant of good faith and fair dealing sounds in tort, the duty of good
faith and fair dealing arises from and exists solely because of the contractual
relationship between the parties”].)
Defendants contend that there can be no breach of implied
covenant of good faith and fair dealing because Plaintiff has not adequately
pled the existence of a written contract nor attached one to the Complaint.
However, as to the moving Defendants, Plaintiff alleges that there was an oral
contract not codified in writing for Defendants to provide legal representation
to Plaintiff in handling the EB-5 immigration application, in exchange for
compensation of an indeterminate sum of attorney’s fees in an amount to be paid
out of the $566,600 to be spent on the investment and immigration process.
(Complaint, ¶ 20(g).) Plaintiff alleges that, instead, Defendants prepared
false immigration documents and forged Plaintiff’s signature on those
documents, causing Plaintiff to be denied the EB-5 visa application. (Complaint
¶ 20(j).) The Complaint therefore alleges that Defendants acted to prevent
Plaintiff from receiving the very benefits for which Defendants were hired. Defendants
cite no law requiring that a contract for legal services be in writing, nor
that the implied covenant of good faith does not apply to a contract for legal
services. The Court therefore finds that the Complaint states facts sufficient
to constitute a cause of action for breach of the implied covenant of good
faith and fair dealing.
Seventh Cause of Action: Breach of Written Agreement
Defendants demur to the seventh cause of action for breach
of written agreement for failure to state facts sufficient to constitute a
cause of action.
To state a cause of action for breach of contract, a
Plaintiff must plead the contract, the Plaintiff’s performance of the contract
or excuse for nonperformance, Defendant’s breach, and finally the resulting
damage. (Otworth v. Southern Pac.
Transportation Co. (1985) 166 Cal.App.3d 452, 458.)
Further, the complaint must indicate whether the contract is written, oral, or
implied by conduct. (Code Civ.Proc. § 430.10(g).) General allegations stating
that defendants violated a contract are insufficient, and plaintiffs must state
facts showing a breach. (Levy v. State Farm Mutual
Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 5-6.) For
breach of a written contract, the terms must be set out verbatim in the body of
the complaint or a copy of the written instrument must be attached and
incorporated by reference. (Otworth v. Southern Pac.
Transportation Co., supra, 166 Cal.App.3d at 459.)
Defendants contend that this cause of action fails because
Plaintiff has not adequately pled the terms of a written contract, and that
Defendants were not a party to the contract. The Complaint alleges a written
contract signed by one of the other defendants, but not by Defendant Zhang.
(Complaint ¶ 86.) The Complaint only alleges that Defendant Zhang conspired
with the other defendants to breach the written contract. (Complaint ¶ 87.) However,
the Complaint also incorporates the preceding factual paragraphs by reference,
which alleges the existence of an unwritten contract for legal services.
(Complaint ¶ 85.) The seventh cause of action alleges an implied agreement of
legal representation, which was breached by Defendants forging Plaintiff’s signature,
failing to disclose conflicts of interest, and depriving Plaintiff of the
opportunity to secure an immigration visa. (Complaint ¶¶ 20(g)-(m); 87.) These
allegations are sufficient to support a breach of contract claim against
Defendants, construing the Complaint in the light most favorable to Plaintiff,
as required on demurrer.
Ninth
Cause of Action: Unjust Enrichment
Defendants demur to the ninth cause of action for unjust
enrichment on the grounds that no cause of action exists and, even if it does,
the Complaint does not allege that Defendants have been unjustly enriched.
The traditional claim of unjust enrichment no longer
exists. (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th
779, 793 (“[T]here is no cause of action in California for unjust enrichment.”)
“Unjust Enrichment does not describe a theory of recovery, but an effect: the
result of a failure to make restitution under circumstances where it is
equitable to do so.” (Id.). “Unjust enrichment is ‘a general principle,
underlying various legal doctrines and remedies,’ rather than a remedy itself.”
(Id.). The holding that unjust enrichment no longer exists as a separate
claim has been repeatedly upheld by both state and federal courts. (See, e.g., Hill
v. Roll Intern. Corp. (2011) 195 Cal.App.4th 1295; McKell v. Washington
Mutual Inc. (2006) 142 Cal.App.4th 1457; Lauriedale Associates, Ltd. v.
Wilson (1992) 7 Cal.App.4th 1439; Dinosaur Development, Inc. v. White (1989)
216 Cal.App.3d 1310, 1315; Walker v. USAA Casualty Insurance Co., 474 F.
Supp. 2d 1168 (E.D. Cal. 2007), affd by Walker v. Geico Gen. Ins. Co.,
558 F.3d 1025 (9th Cir. 2009), cert. denied Walker v. Geico Gen. Ins.
Co., 130 S. Ct. 400 (2009).)
Instead, a claim for unjust enrichment could be construed
as a cause of action for quasi-contract seeking a remedy of restitution. A
quasi-contract is not based on the intention of the parties, but arises from a
legal obligation imposed on the defendant. (Unilab Corp. v. Angeles-IPA (2016)
244 Cal.App.4th 622, 639.) “) “The right to restitution or quasi-contractual
recovery is based upon unjust enrichment. Where a person
obtains a benefit that he or she may not justly
retain, the person is unjustly enriched. The quasi-contract, or
contract ‘implied in law,’ is an obligation ... created by the
law without regard to the intention of the parties, and is designed to restore
the aggrieved party to his or her former position by return of the thing or its
equivalent in money.” (Id. emphasis original.) “[O]ne who confers
benefits on another officiously, i.e., by unjustified
interference in the other's affairs, is not entitled to restitution. It must
ordinarily appear that the benefits were conferred by mistake, fraud,
coercion or request; otherwise, though there is enrichment, it is not
unjust.” (Dinosaur Development Inc. v. White, supra 216 Cal.App.3d at
1316, citing (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 97, p.
126 [original emphasis].)
Here, the Complaint alleges that Plaintiff paid Defendants
$566,600. (Complaint ¶17.) $500,000 of these funds were intended to be invested
in CIRC for the construction of a Hilton-branded hotel in El Monte, California.
(Complaint ¶¶ 16-17.) CIRC is alleged to be owned by all Defendants in this
action. (Complaint ¶ 2.) The Complaint alleges that the money was redirected by
Defendants to a different project. (Complaint ¶ 96.) These allegations are
sufficient at the pleading stage to establish a claim for restitution on the
basis that Defendants were unjustly enriched through fraud.
Tenth
Cause of Action: Money Had and Received
Defendants
demur to the tenth cause of action for money had and received for failure to
allege facts sufficient to constitute a cause of action.
Money had and received is a common
count. When a common count is used as an alternative way of seeking the same
recovery demanded in a specific cause of action, and is based on the same
facts, the common count is demurrable if the cause of action is demurrable. (McBride
v. Boughton (2004) 123 Cal.App.4th 379, 394.) Therefore, since the ninth
cause of action is not demurrable for the foregoing reasons, the tenth cause of
action is also not demurrable.
Uncertainty
Defendants also demur to the
Complaint in its entirety on the ground that it is uncertain.
"A demurrer for uncertainty is
strictly construed, even where a complaint is in some respects uncertain,
because ambiguities can be clarified under modern discovery
procedures." (Khoury v. Maly's of California, Inc. (1993)
14 Cal.App.4th 612, 616.) "A demurrer for uncertainty will be
sustained only where the complaint is so bad that defendant cannot
reasonably respond--i.e., he or she cannot reasonable determine what issues
must be admitted or denied, or what counts or claims are directed against him
or her." (Weil & Brown, Civil Procedure Before Trial (The Rutter
Group) § 7:85 (emphasis in original).) "The objection of uncertainty does
not go to the failure to allege sufficient facts." (Brea v.
McGlashan (1934) 3 Cal.App.2d 454, 459.)
Defendants have not addressed their
uncertainty contentions in the body of the demurrer. Even a generous reading of
Defendants’ moving papers does not show that the complaint is so defective as
to prevent Defendants from reasonably responding. Indeed, that Defendants have
been able to identify the contentions raised against them and dispute whether
those contentions entitle Plaintiff to relief appears to defeat this line of
argument. The Court therefore finds that the Complaint is not uncertain.
Conclusion
Accordingly,
Defendants’ demurrer to the Complaint is OVERRULED in its entirety.
//
Motion to Strike
Defendants
move to strike portions of the Complaint as improper.
Legal Standard
The court may, upon a motion, or at
any time in its discretion, and upon terms it deems proper, strike any
irrelevant, false, or improper matter inserted in any pleading. Code Civ.
Proc., § 436(a). The court may also strike all or any part of any pleading not
drawn or filed in conformity with the laws of this state, a court rule, or an
order of the court. Id., § 436(b). The grounds for a motion to strike
are that the pleading has irrelevant, false or improper matter, or has not been
drawn or filed in conformity with laws. Id.§ 436. The grounds for moving to
strike must appear on the face of the pleading or by way of judicial notice. Id.§
437. “When the defect which justifies striking a complaint is capable of cure,
the court should allow leave to amend.” Vaccaro v. Kaiman (1998)
63 Cal.App.4th 761, 768. A motion to
strike can be used where the complaint or other pleading has not been drawn or
filed in conformity with applicable rules or court orders. Code Civ.
Proc., § 436(b). This provision is for "the striking of a pleading due to
improprieties in its form or in the procedures pursuant to which it
was filed." Ferraro v. Camarlinghi (2008) 161
Cal.App.4th 509, 528 (emphasis in original).
Meet and Confer
Before filing a motion to strike, the moving
party shall meet and confer in person or by telephone with the party who has
filed the pleading subject to the motion to strike and file a declaration
detailing their meet and confer efforts. (Code Civ. Proc., § 435.5(a).)
However, an insufficient meet and confer process is not grounds to grant or
deny a motion to strike. (Code Civ. Proc., § 435.5(a)(4).)
For the reasons stated above in
connection with the Demurrer, the Court finds that the parties have not
satisfied the meet and confer requirements of section 435.5. However, the Court
will consider the motion on its merits.
Emotional Distress Damages
Defendants
move to strike allegations of emotional distress damages sought via the first,
second, third, and fourth causes of action as improper.
Emotional
distress damages are ordinarily not recoverable for breach of contract claims.
(Erlich v. Menezes (1999) 21 Cal.4th 543, 561.) Similarly, emotional
distress damages cannot be recovered for negligent misrepresentation claims. (Branch
v. Homefed Bank (19920 6 Cal.App.4th 793, 798.) However, emotional distress
damages are available for intentional torts. (See, e.g., Erlich, supra,
21 Ca.4th at 552.) Here, the first and third causes of action are for the
intentional torts of intentional misrepresentation and fraudulent concealment.
Therefore, these claims are sufficient to maintain allegations of emotional
distress damages. However, Defendants are correct that the allegations of
emotional distress damages are improper as to the second and fourth causes of
action, and must therefore be stricken.
Constructive Trust
Defendants
also move to strike allegations relating to imposition of a constructive trust
on the grounds that Defendants have not wrongfully absconded with anything.
However, as stated above in connection with the ninth and tenth causes of
action, the Complaint alleges that Defendants are owners of CIRC, and that the
$500,000 invested in CIRC was redirected to a project other than the one on
which the alleged contract was based. Defendants have therefore failed to
justify the motion to strike on this basis.
Punitive Damages
Defendants
also move to strike allegations of punitive damages on the grounds that the
case “nearly” arises from a breach of contract. This contention is not well
taken. Civil Code section 3294 expressly authorizes punitive damages on a
showing, by clear and convincing evidence, that the defendant is guilty of
fraud. (Civ. Code § 3294.) The Complaint asserts causes of action for
intentional misrepresentation and fraudulent concealment against Defendants,
both of which are under the umbrella of fraud. Defendants have failed to
show that the allegations of punitive damages are improper and should be
stricken.
Attorney’s Fees
Defendants
move to strike a prayer for attorney’s fees.
The
Complaint seeks recovery of attorney’s fees “if it can be established that a
written agreement signed by the Defendant to be charged or by a person on their
behalf provides for attorney’s fees.” (Complaint pp. 27:25-27.) Defendants
contend that this prayer is improper because the Complaint does not adequately
allege a written contract. Defendants cite no law justifying the request to
strike this prayer for relief. As drafted the prayer seeks attorney’s fees if
it can be established that there is an agreement providing for attorney’s fees.
In the Court’s view, this is a matter to be resolved by discovery. If Plaintiff
is unable to establish that there is an agreement providing for attorney’s
fees, Plaintiff will not be able to recover attorney’s fees.
Conclusion
Accordingly,
the Motion to Strike is GRANTED IN PART as to paragraphs 41, 43, 64, and 66 of
the Complaint and otherwise DENIED.
//
//
CONCLUSION:
For
the reasons explained above, Defendants’ demurrer to the Complaint is OVERRULED
in its entirety. Defendants are to serve and file an answer only within 30 days
of the date of this order.
Defendants’
motion to strike is GRANTED IN PART as to paragraphs 41, 43, 64, and 66 of the
Complaint and otherwise DENIED.
Moving
Parties are ordered to give notice,
unless waived.
IT IS SO ORDERED.
Dated: July 27, 2022 ___________________________________
Theresa
M. Traber
Judge
of the Superior Court
Any party may submit on the
tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day
before the hearing. All interested parties must be copied on the email. It
should be noted that if you submit on a tentative ruling the court will still
conduct a hearing if any party appears. By submitting on the tentative you
have, in essence, waived your right to be present at the hearing, and you
should be aware that the court may not adopt the tentative, and may issue an
order which modifies the tentative ruling in whole or in part.