Judge: Theresa M. Traber, Case: 22STCV26877, Date: 2022-12-15 Tentative Ruling
Case Number: 22STCV26877 Hearing Date: December 15, 2022 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: December 15, 2022 TRIAL DATE: NOT
SET
CASE: Jane Gibson v. Cheng Ment Lam, et al.
CASE NO.: 22STCV26877 
DEMURRER
TO COMPLAINT
MOVING PARTY: Defendant IFS Infosure, Inc.
RESPONDING PARTY(S): Plaintiff Jane
Gibson
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
This is an action for fraud and breach of contract that was filed on June
20, 2022. Plaintiff alleges that Defendant Lam entered into a settlement
agreement with Plaintiff in January 2022 to resolve an action for breach of
contract and domestic tort. Plaintiff contends that Defendant refused to pay
Plaintiff the money owed under the settlement agreement.
Defendant IFS Infosure, Inc.,
demurs to the Complaint as to each cause of action asserted against it.
TENTATIVE RULING:
Defendant’s Demurrer is SUSTAINED with
leave to amend as to the fourth, seventh, thirteenth, and fourteenth causes of
action, SUSTAINED without leave to amend as to the eleventh cause
of action as a freestanding cause of action, and otherwise OVERRULED.
Plaintiff is granted thirty days
leave to amend the Complaint from the date of this order.
DISCUSSION:
Defendant
IFS Infosure, Inc. demurs to the third, fourth, sixth, seventh, eleventh,
thirteenth, and fourteenth causes of action asserted against it.
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 Michael F. Frank states that Defendant’s counsel attempted to
meet and confer with Plaintiff, first in writing on September 5, 2022, and then
by telephone on September 7, 2022. (Declaration of Michael F. Frank ISO
Demurrer ¶¶ 2-5.) Plaintiff’s counsel declined to address the demurrer in their
communications with Defendant’s counsel. (Id.) The Court therefore finds
that Defendant satisfied the statutory meet and confer requirements.
Third Cause of Action: Conversion
Defendant
demurs to the third cause of action for conversion for failure to state facts
sufficient to constitute a cause of action.
“Conversion
is the wrongful exercise of dominion over the property of another. The elements
of a conversion claim are: (1) the plaintiff’s ownership or right to possession
of the property; (2) the defendant’s conversion by a wrongful act or
disposition of property rights; and (3) damages.” (Lee v. Hanley (2015)
61Cal.4th 1225, 1240.) “‘Money cannot be the subject of a cause of action for
conversion unless there is a specific, identifiable sum involved, such as where
an agent accepts a sum of money to be paid to another and fails to make the
payment.’ A ‘generalized claim for money [is] not actionable as conversion.’” (PCO,
Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
(2007) 150 Cal.App.4th 384, 395 [internal citations omitted].)
“[A] mere contractual right of
payment, without more, will not suffice” to support a claim for conversion. (Farmers
Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)
For example, in Imperial Valley Co. v. Globe
Grain and Milling Co. (1921) 187 Cal. 352, 202 P. 129, the tenant entered
into an agreement to raise crops on leased land and to pay the landlord
one-fourth of the crop as rental. However, the tenant sold the entire crop and
the proceeds were used to pay other debts of the tenant. The landlord brought
an action for conversion. The Supreme Court concluded no claim was stated
because the rental agreement established no title to or lien upon the crop but
only established the measure of damages for breach of contract. (Id. at pp. 353–354, 202 P.
129.)
(Farmers Ins. Exch. v. Zerin, at p. 452.) In contrast, the plaintiff in Sanowicz v.
Bacal (2015) 234 Cal. App. 4th 1027, 1041, adequately stated a claim for
conversion based on an agreement that the defendant would sell real property
and split the commissions with the plaintiff.
Because the plaintiff had an immediate right to possession of his share
of the commissions, the defendant’s failure to pay that share constituted a
conversion. (Id., at pp.
1041-1042.)
Defendant
argues that the third cause of action fails to state facts sufficient to
constitute a cause of action because it contains no allegations that any
property, money or otherwise, was improperly appropriated, and, further,
because the Complaint only alleges a generalized claim for money. In
opposition, Plaintiff asserts that the Complaint states the elements of
conversion based on allegations that the Corporate Defendants misappropriated
the sum of money owed to Plaintiff pursuant to the Settlement Agreement so as
to deprive her of access to that money. (Complaint ¶ 69-71.) Construing the
allegations in the light most favorable to Plaintiff, the Court finds that this
theory is sufficient to maintain a cause of action for conversion, as Plaintiff
has alleged that IFS has taken possession of specific sums to which Plaintiff
is entitled, at least in part.
Accordingly,
Defendant’s demurrer to the third cause of action is OVERRULED.
Fourth Cause of Action: Fraud
Defendant
demurs to the fourth cause of action for fraud for failure to state facts sufficient
to constitute a cause of action.
“The
elements of fraud that will lead to a tort action are: (a) misrepresentation;
(b) knowledge of falsity; (c) intent to defraud, i.e., to induce reliance; (d) justifiable
reliance; and (e) resulting damage. (Engalla v. Permanente Medical Group,
Inc. (1997) 15 Cal.4th 951, 974.) Every element of the cause of
action for fraud must be alleged in the proper manner and the facts
constituting the fraud must be alleged with sufficient specificity to allow
defendant[s] to understand fully the nature of the charge made. (Stansfield
v. Starkey (1990) 220 Cal.App.3d 59, 73.) “This particularity requirement
necessitates pleading facts which show how, when, where, to whom, and by
what means the representations were tendered.” (Ibid.) “[G]eneral
and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996)
12 Cal.4th 631, 645.)
Defendant
contends, as a threshold matter, that it cannot be held liable for any alleged
fraud because it is not a party to the settlement agreement at issue, and
because no allegations are made specifically against Defendant IFS as to any
fraudulent representations. The Complaint extensively alleges that each of the
corporate entities is the alter ego of Defendant Lam. The Court of Appeal has
explained the alter-ego doctrine as follows:
"Ordinarily, a corporation is
regarded as a legal entity separate and distinct from its stockholders,
officers and directors. Under the alter ego doctrine, however, where a
corporation is used by an individual or individuals, or by another corporation,
to perpetrate fraud, circumvent a statute, or accomplish some other
wrongful or inequitable purpose, a court may disregard the corporate entity and
treat the corporation's acts as if they were done by the persons actually
controlling the corporation. [Citations.] [¶] In general, the two
requirements for applying the alter ego doctrine are that (1) there is such a
unity of interest and ownership between the corporation and the individual or
organization controlling it that their separate personalities no longer exist,
and (2) failure to disregard the corporate entity would sanction a fraud or
promote injustice. [Citations.] The doctrine is applicable where some innocent
party attacks the corporate form as an injury to that party's interests. The
issue is not so much whether the corporate entity should be disregarded for all
purposes or whether its very purpose was to defraud the innocent party, as it
is whether in the particular case presented, justice and equity can best be
accomplished and fraud and unfairness defeated by disregarding the distinct
entity of the corporate form. [Citations.] [¶] Nevertheless, persons who
themselves control a corporation, who have used the corporate form of doing
business for their benefit, who have dealt with and treated the corporation as
a separate entity, or who have otherwise by their actions expressly or
impliedly recognized its corporate existence, may be estopped to deny the
corporation's separate legal existence. [Citations.] 'Parties who determine to
avail themselves of the right to do business by means of the establishment of a
corporate entity must assume the burdens thereof as well as the privileges. The
alter ego doctrine is applied to avoid inequitable results not to eliminate the
consequences of corporate operations. [Citations.]' [Citation.] Thus, alter ego
is used to prevent a corporation from using its statutory separate corporate
form as a shield from liability only where to recognize its corporate status
would defeat the rights and equities of third parties; it is not a doctrine
that allows the persons who actually control the corporation to disregard the
corporate form." (Id., at pp. 993-994.) In other words,
'Alter ego is a limited doctrine, invoked only where recognition of the
corporate form would work an injustice to a third person. [Citation.]'
[Citation.]" (Id., at p. 995.)
(Webber v. Inland Empire Invs. (1999) 74 Cal.App.4th
884, 900-901 [bold emphasis and underlining added].)
Defendant
contends that Plaintiff has not properly pled sufficient allegations to
establish that IFS is the alter-ego of Defendant Lam because the Complaint
makes repeated boilerplate references to other unknown Defendants, and
therefore contradicts other allegations that the Corporate Defendants have a
unity of officers, directors, and shareholders. (See, e.g., Complaint ¶ 51.)
Construing the Complaint in the light most favorable to Plaintiff, as required
on demurrer, the Court rejects Defendant’s contention. The Complaint
specifically alleges that the corporate Defendants have the same officers,
directors, and shareholders, all operate under the control of Defendant Lam,
and have commingled their corporate assets with his personal assets. (Complaint
¶¶ 51-55.) Further, the crux of the allegations is that the corporate
Defendants operate so as to hide Defendant Lam’s assets so that Plaintiff
cannot collect the money she contends she is owed. (Complaint ¶ 50.) The Court
construes this allegation as showing that failure to disregard the corporate
entity would, at minimum, promote injustice, whether or not Plaintiff can
maintain a claim for fraud on these facts. The Court therefore finds that
Plaintiff has adequately pled the alter ego doctrine. Thus, if the allegations
against Defendant Lam are sufficient to state a claim for fraud, they will also
be sufficient as to Defendant IFS.
That said,
a review of the Complaint reveals no representations that are alleged with
specificity concerning the Settlement Agreement which is the basis of this
Complaint. Plaintiff contends in opposition that she has alleged numerous false
representations made by Defendant Lam to Plaintiff over the course of their
relationship. However, these statements, true or not, are irrelevant to this
action. The only allegations that are relevant to this cause of action in this
case concern statements made in connection with the Settlement Agreement, as it
is that agreement which is the basis of the fraud claim as alleged. (See
Complaint ¶ 75.) Even construing the allegations in the light most favorable to
Plaintiff, the Court can find no allegations of any representations concerning
the Settlement Agreement that describe who made them, when they were made or
where, or how or by what means those representations were made. The allegations
are, therefore, not sufficient to maintain a cause of action for fraud.
Accordingly,
Defendant’s Demurrer to the fourth cause of action for fraud is SUSTAINED.
//
Sixth Cause of Action: Common Counts
Defendant
contends that the sixth cause of action fails to state facts sufficient to
constitute a cause of action.
Defendant
argues that this cause of action is not sufficiently pled because there is no
privity between Plaintiff and Defendant, because Defendant IFS is not an
alter-ego to Defendant Lam. As the Court has rejected this argument for the
reasons detailed above, the Court finds that Defendant has not shown that the
Complaint is insufficient with respect to the sixth cause of action.
Accordingly,
Defendant’s Demurrer to the sixth cause of action is OVERRULED.
Seventh Cause of Action: Civil Conspiracy
Defendant
demurs to the seventh cause of action for civil conspiracy for failure to state
facts sufficient to constitute a cause of action.
“Conspiracy
is not a separate tort, but a form of vicarious liability by which one
defendant can be held liable for the acts of another. . . . A conspiracy
requires evidence ‘that each member of the conspiracy acted in concert and came
to a mutual understanding to accomplish a common and unlawful plan, and that
one or more of them committed an overt act to further it.’ Thus, conspiracy
provides a remedial measure for affixing liability to all who have ‘agreed to a
common design to commit a wrong’ when damage to the plaintiff results. The
defendant in a conspiracy claim must be capable of committing the target tort.”
(IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 652.)
Defendant
contends that the seventh cause of action is inadequately pled because the
underlying claim for fraud is defective.
In opposition, Plaintiff asserts that the cause of action for conspiracy
is properly pled by mistakenly reciting the elements for a claim for negligent
misrepresentation, rather than conspiracy. (Friedman v. Merck & Co.
(2003) 107 Cal.App.4th 454, 476.) Further, turning to the factual allegations
presented, Plaintiff relies upon the same allegations asserted in connection
with the fourth cause of action for fraud. As these allegations were not
sufficient to maintain the fourth cause of action, they are likewise
insufficient here.
Accordingly,
Defendant’s Demurrer to the seventh cause of action is SUSTAINED.
Eleventh Cause of Action: Constructive Trust
Defendant
demurs to the eleventh cause of action for constructive trust for failure to
state facts sufficient to constitute a cause of action.
A
constructive trust is an involuntary equitable trust created by operation of
law as a remedy to compel the transfer of property from the person wrongfully
holding it to the rightful owner. (Pacific Lumber Co. v. Superior Court
(1990) 226 Cal.App.3d 371, 377.) A constructive trust is not a separate claim
for relief. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil
& Shapiro (2007) 150 Cal.App.4th 384, 398.)
Defendant
contends that this cause of action fails because a constructive trust is not a
separate claim for relief, and, further, that there are no allegations
establishing what property is to be transferred or what wrong was committed. As
the Court has found that the Complaint states sufficient facts to support a
claim for conversion, and the allegations concern the payments owed to
Plaintiff under the Settlement Agreement (see Complaint ¶ 122), Defendant’s
latter argument is not persuasive. Defendant is correct, however, that a
request for the imposition of a constructive trust is not a separate cause of
action. The Court therefore agrees that this claim fails to state sufficient
facts to constitute a cause of action. However, the Court emphasizes that this
conclusion is without prejudice to Plaintiff’s ability to seek this relief in
connection with other causes of action.
Accordingly,
Defendant’s demurrer to the eleventh cause of action is SUSTAINED.
Thirteenth and Fourteenth Causes of Action: Fraudulent
Transfer
Defendant
demurs to the thirteenth and fourteenth causes of action for failure to state
facts sufficient to constitute a cause of action for fraudulent transfer.
Specifically, Defendant contends that these allegations are insufficiently pled
because they do not clearly and specifically set forth the statutory basis or
the elements under which relief is sought.
There are
two statutes governing fraudulent transfer claims under the Uniform Voidable
Transfer Act. The first is Civil Code section 3439.04, which states:
(a) A transfer made or obligation
incurred by a debtor is voidable as to a creditor, whether the creditor’s claim
arose before or after the transfer was made or the obligation was incurred, if
the debtor made the transfer or incurred the obligation as follows:
(1) With actual intent to hinder,
delay, or defraud any creditor of the debtor.
(2) Without receiving a
reasonably equivalent value in exchange for the transfer or obligation, and the
debtor either:
(A) Was engaged or was about to
engage in a business or a transaction for which the remaining assets of the
debtor were unreasonably small in relation to the business or transaction.
(B) Intended to incur, or
believed or reasonably should have believed that the debtor would incur, debts
beyond the debtor’s ability to pay as they became due.
(Civ. Code § 3439.04(a).) In contrast, the other provision,
section 3439.05, states:
A transfer made or obligation incurred
by a debtor is voidable as to a creditor whose claim arose before the transfer
was made or the obligation was incurred if the debtor made the transfer or
incurred the obligation without receiving a reasonably equivalent value in
exchange for the transfer or obligation and the debtor was insolvent at that
time or the debtor became insolvent as a result of the transfer or obligation.
(Civ. Code § 3439.05(a).) In opposition, Plaintiff contends
that the latter section is applicable to the thirteenth cause of action, and
the former to the fourteenth cause of action. However, no such allegations are
present in the Complaint itself. Statutory causes of action must be pled with
particularity. (Lopez v. Southern Cal. Rapid Transit Dist. (1985) 40
Cal.3d 780, 795.) These causes of action are therefore defective because they
do not identify the statutes which entitle Plaintiff to the relief sought.
Accordingly,
Defendant’s demurrer is SUSTAINED as to the thirteenth and fourteenth causes of
action.
Leave to Amend
When a demurrer is sustained, the
Court determines whether there is a reasonable possibility that the defect can
be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311,
318). When a plaintiff “has pleaded the general set of facts upon
which his cause of action is based,” the court should give the plaintiff an
opportunity to amend his complaint, since plaintiff should not “be deprived of
his right to maintain his action on the ground that his pleadings were
defective for lack of particulars.” (Reed v. Norman (1957) 152
Cal.App.2d 892, 900.) Accordingly, California law imposes the burden on
the plaintiffs to demonstrate the manner in which they can amend their
pleadings to state their claims against a defendant. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) “Denial of leave to amend constitutes
an abuse of discretion unless the complaint shows on its face it is incapable
of amendment. [Citation.] Liberality in permitting amendment is the
rule, if a fair opportunity to correct any defect has not been given."
(Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.)
Here,
Plaintiff has not set forth how the Complaint might be amended to address all the
defects identified. However, in light of the broad presumption in favor of
leave to amend, the Court is inclined to exercise its discretion to permit
Plaintiff leave to amend the Complaint, except with respect to the eleventh
cause of action as stated above. An exception to this permission to amend
applies to Plaintiff’s alleged cause of action for imposition of a constructive
trust, which is not a freestanding cause of action but rather a possible prayer
for relief in connection with other causes of action asserted by Plaintiff.
CONCLUSION:
Accordingly, Defendant’s Demurrer is
SUSTAINED with leave to amend as to the fourth, seventh, thirteenth, and
fourteenth causes of action, SUSTAINED without leave to amend as
to the eleventh cause of action as a freestanding cause of action, and
otherwise OVERRULED.
Plaintiff shall have thirty days
leave to amend the Complaint from the date of this order.
Moving Party to give notice.
IT IS SO ORDERED.
Dated: December 15,
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.
