Judge: Upinder S. Kalra, Case: BC683554, Date: 2023-02-03 Tentative Ruling

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Case Number: BC683554    Hearing Date: February 3, 2023    Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE:   February 3, 2023                                            

CASE NAME:           John Dian Lei v. Shan Shen et al. 

CASE NO.:                BC683554

MOTION FOR SUMMARY ADJUDICATION

MOVING PARTY: Plaintiffs in Intervention Stephen E. Gallup and SJB Capital, Inc. 401(k) Profit Sharing Plan

RESPONDING PARTY(S): Defendants Lei, Shen, and 1804 Bannister, LLC

REQUESTED RELIEF:

1.      An order granting summary adjudication as to the 6^th, 7^th and 8^th causes of action

TENTATIVE RULING:

1.      Motion for Summary Adjudication is DENIED, as to the 6^th, 7^th and 8^th causes of action

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On November 14, 2017, John Dian Lei (“Plaintiff”) filed a Complaint against Defendants Shan Shen, Fa Chan Chuong, Joan Huang, 1804 Bannister, LLC, Bannis Corporation and Does 1 through 10. The complaint alleged 19 causes of action: (1) Battery; (2) Intentional Infliction of Emotional Distress, (3) Negligence, (4) Intentional Misrepresentation, (5) Negligent Misrepresentation, (6) Concealment, (7) Civil Conspiracy, (8) Breach of Fiduciary Duty, (9) Abuse of Control, (10) Corporate Waste, (11) Unjust Enrichment, (12) Breach of Contract, (13) Common Count: Goods And Services Rendered, (14) Common Count: Money Had and Received, (15) Common Count: Open Book, (16) Trespass to Chattel, (17) Conversion, (18) Alter Ego, and (19) Request for Preliminary Injunction. The complaint alleges that the Plaintiff grew Jujube and Lychee trees on the Subject Property and was a majority shareholder of Bannis. Plaintiff later entered into a lease agreement with Zhu, which allowed the cultivation of the trees. The complaint further alleges that the Defendants conspired to defraud the Plaintiff, specifically to take control of Bannis.

On December 18, 2017, Defendant 1804 Bannister, LLC filed a Cross-Complaint.

On April 6, 2018, Defendant Joan Huang filed an Answer.

On June 22, 2018, Plaintiff filed a Second Amended Complaint.

On December 20, 2018, Joan Huang, Defendant in matter No. BC683554, filed a complaint against Defendant Shan Shen, 1804 Bannister, LLC, Fung Liu, a.k.a. John Dian Lei as well as Bannis Corporation – as a nominal defendant. This is Case No. 18PSCV00205.

On February 14, 2019, a Notice of Related Case indicated that matter BC683554 is related to case No. 18PSCV00205.

On May 24, 2019, Defendant Bannister filed a Demurrer without a Motion to Strike.

On October 17, 2019, Plaintiff filed an Amended Complaint.

On January 8, 2020, Plaintiff filed an Answer.

On January 17, 2020, Defendant Bannister filed a Demurrer without Motion to Strike.

On February 28, 2020, Defendant Shen filed a Demurrer without a Motion to Strike.

On November 13, 2020, Defendant Bannister and Shen filed an Answer.

On July 23, 2021, Plaintiff filed an Amendment to Complaint, Fictious/Incorrect Name, naming Doe 1 as ABC Green Farm, Inc.

On April 22, 2022, Defendant Bannister filed a Motion for Leave to Amend Cross-Complaint.

On September 15, 2022, Plaintiffs in Intervention Stephen E. Gallup and SJB Capital, Inc. 401(k) Profit Sharing Plan filed a Motion for Leave to file an Amended Complaint in Intervention.

On November 16, 2022, Plaintiffs in Intervention Stephen E. Gallup and SJB Capital, Inc., 401(K) Profit Sharing Plan filed a Motion for Summary Adjudication. Defendant Lei filed an Opposition on January 18, 2023. Defendants Shen and 1804 Bannister, LLC filed an Opposition on January 20, 2023. Plaintiffs reply was filed on January 27, 2023.

REQUEST FOR JUDICIAL NOTICE

Granted

EVIDENTIARY OBJECTIONS 

The court rules on Defendant 1804 Bannister’s and Shen’s evidentiary objections as follows:

The court overrules Objections: 1-, 6

The court sustains Objections Nos. 4-5

LEGAL STANDARD:

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  For the purposes of motion for summary judgment and summary adjudication, “[a] plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action.”  (Code Civ. Proc., § 437c, subd. (p)(1).)  “Once the plaintiff . . . has met that burden, the burden shifts to the defendant . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”  (Code Civ. Proc., § 437c, subd. (p)(1).)  “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467; Code Civ. Proc., § 437c, subd. (c).)

ANALYSIS:

Plaintiffs in Intervention Stephen E. Gallup and SBJ Capitol, Inc., 401(K) Profit Sharing Plan (“Plaintiffs” for purposes of this motion) move for summary adjudication as to the sixth, seventh, and eighth causes of action.

a.       Sixth Cause of Action: Breach of Fiduciary Duty as to Defendant John Lei

“The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.” (O'Neal v. Stanislaus County Employees' Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215).

Plaintiffs argue that they are entitled to summary adjudication as to the sixth cause of action for breach of fiduciary duty because it is undisputed that Defendant Lei owed a fiduciary duty to Plaintiffs and breached that duty. First, Defendant Lei was the officer and director of Bannis Corporation, and thus owed Bannis Corp. as well as its shareholders a duty of loyalty. (UMF 1, 21, 22.) Plaintiffs were shareholders of Bannis. (UMF 14-19, 23.) Defendant Lei breached that duty twice. First, that duty was breached when Lei “contractually obligated Bannis to pay his $600,000 personal debt to Shen.” (UMF 29-35.) Second, the duty was breached when he “misappropriated $114,000 that Shen and 1804 paid directly to him for all of Bannis’ farming assets.” (UMF 37-39.)

Defendant Lei argues that this motion is supported by inadmissible evidence and a one side story “perpetuated by Defendant Shan Shen.” The main argument raised by Defendant Lei is that Lei “does not read, write, or understands English with any proficiency.” Therefore, Lei disputes that he signed the agreement concerning the $600,000 funds or the $114,000 misappropriated assets. Defendant Lei was manipulated and deceived by Shan Shen “into executing the English version of the Agreement for Lease and for Payment of Debt.” (Opp. 4: 1-6.)

The court finds that Plaintiffs has met their burden of showing that there is no defense to the first cause of action for breach fiduciary duty because Plaintiff has proved each element of the cause of action entitling Plaintiff to judgment on that cause of action.  First, Plaintiff has presented evidence to prove that there was a fiduciary relationship, as Lei was the CEO and sole director of Bannis and Plaintiffs purchased stock from Lei. (UMF 22-23.) Second, Plaintiff has presented evidence that there was a breach: Defendant Lei executed the agreement on behalf of Bannis which had Bannis pay the $600,000 loan (UMF 29, 31) and misappropriate $114,000 in funds. (UMF 37-39.) As a result, Bannis was unable to make the repayment obligations, and lost the property. (UMF 36.)

Because Plaintiff has established all elements of the cause of action, the burden shifts to the Defendant to show a triable issue of material fact. The court finds that Defendant has met his burden to show that a triable issue of material fact exists. The evidence presented or disputed by Defendant Lei is that he was unable to read or understand English. Here, there is a triable issue of whether Lei breached the duty as the agreement was given to him in English, despite him not knowing how to read or write in English. Thus, without Shan Shen providing this English agreement, which purportedly did not say what Shen stated it did, there is a dispute if Defendant breached his duty. Additionally, “although subject to exceptions, the determination whether a breach of fiduciary duty occurs under a particular set of facts is “ ‘mainly for the trier of facts.’” (O'Neal v. Stanislaus County Employees' Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.)

Therefore, the Motion for Summary Adjudication as to the Sixth Cause of Action against Defendant Lei is DENIED.

b.      Seventh and Eighth Cause of Action: Aiding and Abetting of Breach of Fiduciary Duty as to Defendant Shan Shen

Plaintiffs assert that all elements for aiding and abetting a breach of fiduciary duty have been established as to both Defendants. First, Plaintiffs argue that their argument as to the sixth cause of action indicates that there was a breach of fiduciary duty by Defendant Lei. Second, Plaintiffs argue that both Shen and 1804 Bannister knew of the breach because the agreement contained a paragraph which represented that Banner loan Bannis $600,000. (UMF 28.) Third, both Defendants substantially assisted in these breaches when the deal between the parties was “disguised as rent such that the failure to Bannis to pay the personal debt of Lei allowed 1804 Bannister to evict Bannis.” (UMF 33-36.) Lastly, this conduct substantially caused Plaintiff harm as the loss of property after Bannis was evicted from the property. (UMF 36.)

As a procedural matter, Defendants 1804 Bannister and Shen argue that this motion is improper as it seeks summary adjudication based on liability without damages. Specifically, Plaintiffs seek determination about 1804 Bannister and Shen’s liability with damages “to be asserted at trial.

Second, Defendants assert that Plaintiffs have not demonstrated that the elements of aiding and abetting fraud have been met. Specifically, there is no evidence that the lease was a breach of duty by Lei (DUMF 60-61, 65, 69, 74), that Defendants had actual knowledge of the breach by Lei (DUMF 61-63), that Defendants provided substantial assistance to Lei for that alleged breach (DUMF 61, 69, 71, 72), or that this conduct was a substantial act (DUMF 68, 71-72, 76-78).

“The elements of a claim for aiding and abetting a breach of fiduciary duty are: (1) a third party's breach of fiduciary duties owed to plaintiff; (2) defendant's actual knowledge of that breach of fiduciary duties; (3) substantial assistance or encouragement by defendant to the third party's breach; and (4) defendant's conduct was a substantial factor in causing harm to plaintiff.” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.)

            Here, the Plaintiffs have failed to establish that all the elements for aiding and abetting a breach of fiduciary duty has been established. Most significantly, Plaintiff has admitted that they are unable to establish damages. As such, summary adjudication is not appropriate. (Dep't of Indus. Rels. v. UI Video Stores, Inc. (1997)55 Cal. App. 4th 1084, 1097 [“Because issues of the calculation of damages apparently remain to be determined, it is not appropriate to grant summary judgment for appellant at this time.”].)

            Therefore, Motion for Summary Adjudication as to the Seventh and Eighth Causes of Action as to Defendants 1804 Bannister and Shan Shen is DENIED.

CONCLUSION:

For the foregoing reasons, the Court decides the pending motion as follows:

            Motion for Summary Adjudication is DENIED, as to the 6^th, 7^th and 8^th causes of action

Moving party is to give notice.

IT IS SO ORDERED.

Dated:             February 3, 2023                     __________________________________                                                                                                                Upinder S. Kalra

                                                                                    Judge of the Superior Court