Judge: Theresa M. Traber, Case: 23STCV09430, Date: 2023-11-30 Tentative Ruling
Case Number: 23STCV09430 Hearing Date: November 30, 2023 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department
47
HEARING DATE: November, 30, 2023 TRIAL
DATE: TBD
CASE: Sung Sik Lim v. Peter Eunsang Kim
CASE NO.: 23STCV09430
Defendant
Peter Eunsang Kim’s Demurrer and Motion to Strike Portions of Plaintiff’s
Complaint
MOVING PARTY: Defendant Peter Eunsang Kim
RESPONDING PARTY(S): Plaintiff
Sung Sik Lim
CASE
HISTORY:
·
04/27/2023: Complaint filed
·
07/21/2023: Demurrer and Motion to
Strike filed
·
11/09/2023: Opposition Papers filed
STATEMENT OF
MATERIAL FACTS AND/OR PROCEEDINGS:
Peter Eunsang Kim (“Plaintiff”) filed a Complaint on
April 27, 2023 containing six causes of action against Sung Sik Lim
(“Defendant”). The causes of action are:
1. Breach of Contract
2. Fraud
3. Negligent Misrepresentation
4. Unjust Enrichment
5. Breach of Fiduciary Duty
6. Fraud in the Purchase of
Securities – Damages
The
Complaint stems from when Plaintiff and Defendant were co-owners of Concerto
Restaurant (the “Restaurant”), with each owning a 50% interest in the
corporation – Papilion, Inc. – whose sole asset was the Restaurant. (Complaint,
¶ 7.) On January 31, 2020, the Restaurant’s original lease expired, and an
unlawful detainer action was commenced against Plaintiff. (Complaint, ¶¶ 9-10.)
As Defendant wanted to contest the unlawful detainer, Plaintiff and Defendant
entered into two separate contracts: (1) the “Agreement” and (2) the Stock
Purchase Agreement (“SPA”). (Id.
¶¶ 11-12.)
The
Agreement provided that Defendant would defend the unlawful detainer action,
retain an attorney, and be responsible for attorney’s fees. (Complaint, ¶ 13.)
Separately, the SPA provided that Defendant would pay Plaintiff $100,000 for
Plaintiff’s 50% interest in Papilion Inc. By the terms of the SPA, Defendant
agreed to pay Plaintiff $5,000 upon execution, and thereafter, $5,000 on the
first of every month until the amount was fully paid.
It was
further agreed that, if Defendant or Papilion, Inc. entered into a new lease with
the landlord for the Restaurant, Defendant would pay the Plaintiff $10,000 per
month toward the purchase price of the interest in Papilion, Inc. (Complaint,
¶¶ 14-15.)
Plaintiff
alleges that no payments have been made by Defendant even though the Restaurant
is open and operating. Plaintiff then filed their Complaint. Defendant filed
the instant Demurrer and Motion to Strike on July 21, 2023. Plaintiff filed
Opposition Papers on November 9, 2023.
TENTATIVE
RULING:
Defendant’s Demurrer to Plaintiff’s Complaint is SUSTAINED
in its entirety. The Motion to Strike is DENIED as moot. Leave to
amend the Complaint is GRANTED. Plaintiff shall have 20 days from
this Order to amend his complaint.
PRELIMINARY MATTERS:
Meet and Confer
“Before filing a demurrer…the demurring party shall meet and
confer in person or by telephone with the party who filed the pleading that is
subject to demurrer for the purpose of determining whether an agreement can be
reached that would resolve the objections to be raised in the demurrer.” (CCP §
430.41(a); see also CCP § 435.5 (imposing similar requirements for a motion to
strike).) The moving party has made no showing that the requirements of both
CCP §§ 430.41(a) and 435.5 were satisfied. Per CCP § 430.41(a)(4), however, “A
determination by the court that the meet and confer process was insufficient
shall not be grounds to overrule or sustain a demurrer.” (See CCP § 435.5(a)(4),
applying the same principle for a motion to strike.)
Judicial Notice
Plaintiff has filed a request for judicial notice in support
of his opposition to the Demurrer and Motion to Strike. Plaintiff requests that
this Court take judicial notice of (1) the initial Complaint and (2) all of the
contents of this Court’s files regarding this case. Pursuant to CEC 452(d)(1),
the Court will grant judicial notice as to the aforementioned items.
DISCUSSION:
Legal Standard for Demurrer
“[A] demurrer tests the legal sufficiency of the allegations
in a complaint.” (Lewis v. Safeway, Inc.
(2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge
defects that appear on the face of the pleading under attack or from matters
outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in
ruling on a demurrer, a court may not consider declarations, matters not
subject to judicial notice, or documents not accepted for the truth of their
contents].) For purposes of ruling on a demurrer, all facts pleaded in a
complaint are assumed to be true, but the reviewing court does not assume the
truth of conclusions of law. (Aubry v.
Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)
Analysis for Demurrer
Second,
Third, and Sixth Causes of Action
“The elements of fraud are (a) a
misrepresentation (false representation, concealment, or nondisclosure); (b)
scienter or knowledge of its falsity; (c) intent to induce reliance; (d)
justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)
The facts constituting the alleged
fraud must be alleged with factual specificity as to every element of fraud, as
the policy of “liberal construction” of the pleadings will not ordinarily be
invoked. (Lazar v. Superior Court (1996)
12 Cal.4th 631, 645.) In
California, fraud must be pled specifically; general and conclusory allegations
do not suffice. (Ibid.) Defendant demurs to the second, third, and sixth
causes of action, arguing that Plaintiff has failed to plead the causes of
action with the requisite specificity. The Court agrees.
The second
cause of action for fraud requires that the Complaint identify all facts that
fulfill the elements of the cause of action. Plaintiff contends that the
Complaint adequately performs this task. However, although the Complaint points
to the failed obligation to pay Plaintiff for their 50% ownership of Papilion,
it is unclear what false representation, concealment, or nondisclosure took
place. Even if Plaintiff argues, as they do in their Complaint and Opposition
Papers, that Defendant knew he could not pay, but entered into the SPA anyway,
the Complaint does not indicate how this was known or that he entered into the
contract to induce Plaintiff’s reliance. Although Plaintiff reasonably relied
on the SPA, intent to induce reliance has not been demonstrated in the
Complaint.
Plaintiff’s
Complaint as phrased asks the Court to take the SPA as the misrepresentations
made by Defendant. Plaintiff points to no case law showing why the Court should
take this step, and even if it did, it only fulfills the first element. The
second element of scienter, and the third element of intent to induce reliance
are still absent from the Complaint. Therefore, the Demurrer to the second
cause of action is sustained. Likewise, the Demurrer is also sustained as to
the third and sixth causes of action for the same reasons.
//
Fourth
Cause of Action for Unjust Enrichment
“The
elements for a claim of unjust enrichment are receipt of a benefit and unjust
retention of the benefit at the expense of another. The theory of unjust
enrichment requires one who acquires a benefit which may not justly be
retained, to return either the thing or its equivalent to the aggrieved party
so as not to be unjustly enriched.” (Lyles
v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, quotation marks and
citations omitted.)
Notably,
“[u]njust enrichment is not a cause of action”; it is simply “a restitution
claim.” (Hill v. Roll International Corp.
(2011) 195 Cal.App.4th 1295, 1307; see also Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779,
793 [“there is no cause of action in California for unjust enrichment”].)
Plaintiff may ask for restitution as part of the requested relief, however, a
cause of action for unjust enrichment cannot stand. The Demurrer to the fourth
cause of action is sustained.
Fifth
Cause of Action for Breach of Fiduciary Duty
“The
elements of a cause of action for breach of fiduciary duty are the existence of
a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011)
51 Cal.4th 811, 820.) “[E]xamples of relationships that impose a fiduciary
obligation to act on behalf of and for the benefit of another are ‘a joint
venture, a partnership, or an agency.’” (Cleveland v. Johnson, (2012)
209 Cal.App.4th 1315, 1339.)
Here, the
Complaint fails to allege the existence of a fiduciary relationship. Although
Plaintiff argues that the parties were “coventurers and acted as partners in
the operation of their enterprise” (Opposition Papers, 8:5-7), the Complaint
makes clear that Plaintiff and Defendant were co-owners and therefore shareholders
of Papilion, Inc., a California corporation, each owning 50% of the corporation.
(Complaint, ¶ 7. Also see Exh. A, p. 1.) It is true that a partnership comes with
several fiduciary duties, principle among them, loyalty and care. (See 9
Witkin, Summary 11th Partn § 34 (2023) [“A partner owes to the partnership and
other partners the fiduciary duties of loyalty and care…”].) In addition, majority
shareholders have a fiduciary responsibility to minority shareholders. (See
Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108.) Plaintiff points to no equivalent, however,
for when shareholders of a corporation hold equal amounts of ownership within
the corporation.
Plaintiff
makes one final argument in their Opposition Papers, that when Defendant kept
the Restaurant proceeds while refusing to pay Plaintiff for Plaintiff’s stock
in Papilion, Inc., that Defendant became a trustee and was charged with the
duties of a trustee per Civil Code § 2224, including fiduciary duties. That
section reads as follows:
One who
gains a thing by fraud, accident, mistake, undue influence, the violation of a
trust, or other wrongful act, is, unless he or she has some other and better
right thereto, an involuntary trustee of the thing gained, for the benefit of
the person who would otherwise have had it.
To
rely on this proposition, Plaintiff would first need to show that the shares
were in fact gained by fraud, which as aforementioned, has not yet been
demonstrated. Without the existence of a fiduciary relationship, the fifth
cause of action fails. The Demurrer to the fifth cause of action for breach of
fiduciary duty is sustained.
Legal Standard for Motion to Strike
The court
may, upon 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.
(CCP § 436, subd. (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. (CCP § 436, subd. (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. (CCP § 436.)
The grounds for moving to strike must appear on the face of the pleading or by
way of judicial notice. (CCP § 437.)
A
motion to strike any pleading must be filed “within the time allowed to respond
to a pleading”—e.g., 30 days after service of the complaint or cross-complaint
unless extended by court order or stipulation. [CCP § 435(b)(1)]. This does not
affect the court's power to strike sua sponte. Courts are specifically
authorized to strike a pleading upon a motion or at any time in the court's
discretion. (CCP § 436)
The
Court notes that motions to strike punitive damages may be granted, where the
alleged facts do not support conclusions of malice, fraud or oppression. (Turman
v. Turning Point of Central Calif., Inc. (2010) 191 Cal.App.4th 53, 63.)
Analysis for Motion to Strike
As the demurrer to the second, third, fourth, fifth, and
sixth causes of action has been sustained, the Motion to Strike is moot.
Leave to Amend
Leave to
amend must be allowed where there is a reasonable possibility of successful
amendment. (See Goodman v. Kennedy
(1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to
amend if there is any reasonable possibility that the defect can be cured by
amendment”]. Here, because there is reasonable possibility of successful
amendment, the Court will grant leave to amend.
Conclusion
Accordingly, Defendant’s Demurrer to Plaintiff’s Complaint
is SUSTAINED in its entirety. The Motion to Strike is DENIED
as moot. Leave to amend the Complaint is GRANTED. Plaintiff shall
have 20 days from this Order to amend his complaint.
IT IS SO ORDERED.
Dated: November 30,
2023
___________________________________
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.