Judge: Thomas Falls, Case: 22PSCV00487, Date: 2023-02-07 Tentative Ruling

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Case Number: 22PSCV00487    Hearing Date: February 7, 2023    Dept: O

Hearing date:                          February 7, 2023

RE:                                          Peter Tran v. Michael Lin, et al. (22PSCV00487)

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(1)   DEMURRER OF DEFENDANT MICHAEL LIN TO THE UNVERIFIED FIRST AMENDED COMPLAINT

(2)   DEFENDANT MICHAEL LIN'S MOTION TO STRIKE PORTIONS OF PLAINTIFF'S FAC

Responding Party to Both Motions: Plaintiff, Peter Tran

Tentative Ruling

(1)   DEMURRER OF DEFENDANT MICHAEL LIN TO THE UNVERIFIED FIRST AMENDED COMPLAINT is OVERRULED in part (1^st-6^th causes of action) and Sustained in part (7^th cause of action), without leave to amend because as a matter of law, Plaintiff has not alleged how a loan constitutes as conversion.

(2)   DEFENDANT MICHAEL LIN'S MOTION TO STRIKE PORTIONS OF PLAINTIFF'S FAC is GRANTED in part (only as to usurious interest rates).

Background

This is a contracts case. Plaintiff PETER TRAN (“Plaintiff”) alleges the following against Defendants MICHAEL LIN (“Michael”), an individual; JACK LIN, an individual; ACT CONSTRUCTION, LLC aka ACT CONSTRUCTION, INC., an unregistered entity; ACT HOLDING INVESTMENTS, LLC, a California Limited Liability Company; and DOES 1-20: Plaintiff and Michael have been friends for years. Michael fraudulently induced Plaintiff to make investments in properties, using Act Construction to renovate and sell the properties at an alleged profit.[1] Plaintiff has loaned Defendants $500,000, some secured by promissory notes, which have not been paid.

On May 23, 2022, Plaintiff filed suit against Defendants for:

1.      Breach of Written Contract – Count 1;

2.      Breach of Written Contract – Count 2;

3.      Breach of Written Contract – Count 3;[2]

4.      Fraudulent Inducement;

5.      Intentional Misrepresentation;

6.      Negligent Misrepresentation; and

7.      Conversion

On July 14, 2022, JACK LIN, ACT CONSTRUCTION, LLC aka ACT CONSTRUCTION, INC., and ACT HOLDING INVESTMENTS, LLC (collectively, “Defendants”) filed the Motion to Strike.

On July 15, 2022, Defendants filed a Demurrer, which the court sustained in part.

On November 18, 2022, Defendant Michael filed his demurrer.

I.                   Demurrer

Legal Standard

A demurrer may be made on the grounds that, inter alia, the pleading does not state facts sufficient to constitute a cause of action and/or that the pleading is uncertain. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

When considering demurrers, courts read the allegations liberally and in context. 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 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

Defendants demur to all seven causes of action.

A.     Breach of Contract (First, Second, and Third Causes of Actions)

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Defendant agrees contacts are valid, but only disputes that the interest rate is usurious. The court agrees as discussed in the court’s previous tentative.

Therefore, the demurrer is OVERRULED, and the matter regarding interest rates is deemed stricken (motion to strike).   

B.     Fourth Cause of Action for Fraudulent Inducement

To establish a fraud cause of action, Plaintiff must allege (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud or to induce reliance, (4) justifiable reliance, and (5) resulting damage. (See¿Engalla¿v. Permanente Medical Group, Inc.¿(1997) 15 Cal.4th 951, 974.)  In California, fraud, including negligent misrepresentation, must be pled¿with specificity. (Small v. Fritz Companies, Inc.¿(2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino¿v. Bank of America¿(2014) 224 Cal.App.4th 1462, 1469.)¿ 

“Fraud in the inducement . . . occurs when ‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is¿present¿and a contract is formed, which, by reason of the fraud is¿voidable.” (Rosenthal v. Great Western Financial Securities Corp.¿(1996) 14 Cal.4th 394, 415 (quoting¿Ford v. Shearson Lehman American Express, Inc.¿(1986) 180 Cal.App.3d 1011, 1028).)¿ 

Here, the FAC alleges that:

Michael represented to Tran that Defendants had a competitive advantage. Defendants purchased the residential properties in “all cash,” leading to a quicker escrow closing. Jack, allegedly had a real estate license, which saved costs on purchase, and a contractor’s license for Act Construction with several crews of undocumented workers. This allowed them to maintain large crews, inexpensively, thereby creating extensive profits. Michael also represented that there were many investors with Act Construction. Similarly, Michael made false representations about a further investment in a property located at 3156 Fairmount Street, Los Angeles, California 90063, to induce Plaintiff to enter into the final promissory note with Michael.

(FAC ¶41) (emphasis added).

Therefore, for purposes of a demurrer, Michael made representations. [“Michael Lin also falsely stated that Jack Lin has a real estate license. Michael Lin also fabricated another potential residential purchase by way of text on January 6, 2022, to induce Plaintiff to enter into the third promissory note. Michael Lin made false representations by way of texts on February 10, 2022, and February 19, 2022, with Plaintiff about his failure to repay the loans as a delay tactic to avoid repayment.

Therefore, the court OVERRULES the demurrer as to the fourth cause of action for fraudulent inducement.

C.     Fifth Cause of Action for Intentional Misrepresentation

Intentional misrepresentation requires the defendant to represent a material fact as true when it is actually false and the defendant knew the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth. (See Manderville v. PCG & S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498.)  

Here, as the FAC alleges that false information was conveyed, then the totality of the circumstances indicates that there is a triable issue that Michael made those statement with the intent to deceive. Accordingly, that is not an issue for the court to decide on a demurrer. (See Opp. p. 5, Beckwith v. Dahl, 205 Cal.App.4th 1039, 1061 (2012 “[F]raudulent intent is an issue for the trier of fact to decide.”], see also Yellow Creek Logging Corp. v. Dare 216 Cal.App.2d 50, 55 (1963) [“[F]alse representations made recklessly and without regard for their truth in order to induce action by another are the equivalent of misrepresentations knowingly and intentionally uttered.”].)

Therefore, the court OVERRULES the demurrer as to the fifth cause of action.

D.    Sixth Cause of Action for Negligent Misrepresentation

Negligent misrepresentation differs in that the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief. (Buy v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407.)  

For similar reasons stated above—there are sufficient facts alleged.

Therefore, the court OVERRULES the demurrer as to this cause of action.

E.     Seventh Cause of Action for Conversion

To plead a cause of action for conversion, one must allege (1) the plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)   “Money may be the subject of conversion if the claim involves a specific, identifiable sum . . . .” (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 209.)

Defendants argue that the failure to pay money owed does not constitute conversion. (Demurrer p. 12.) Indeed, “[a] cause of action for conversion of money can be stated only where a defendant interferes with the plaintiff's possessory interest in a specific, identifiable sum, such as when a trustee or agent misappropriates the money entrusted to him.” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 284.)

As the property identified is the loan but the failure to pay does not constitute a sufficient wrongful act to support a claim for conversion, then the complaint fails to state sufficient facts.

Therefore, the court SUSTAINS the demurrer as to this cause of action, without leave to amend. The court declines leave to amend as the issue regarding conversion was previously addressed in the other defendants’ demurrer and court ruling, but Plaintiff failed to make the requisite change.

Conclusion