Judge William A. Crowfoot, Case Number: 19GDCV00602, Date: 2023-10-30 Tentative Ruling

Judge: William A. Crowfoot, Case: 19GDCV00602, Date: 2023-10-30 Tentative Ruling

On May 14, 2019, plaintiff Jenny Zhang (“Plaintiff”) and her son, Z.D. filed this action against defendants Janice Yen (“J. Yen”), Leslie Yen (“L. Yen”), Jenny Chan (“Chan”), Vivien Djeu (“Djeu”), and Steps Academy, Inc. (“Steps”).

On April 18, 2023, Plaintiff filed a First Amended Complaint (“FAC”). The FAC removed Z.D.’s claims and added Arroyo Pacific, Inc. (“Arroyo Pacific”) as a Doe defendant.

On October 30, 2023, the Court granted defendant Arroyo Pacific’s motion for judgment on the pleadings (“MJOP”) on Plaintiff’s 4th, 5th, 9th, 10th, and 11th Causes of Action, and only allowed Plaintiff leave to amend her 12th Cause of Action for accounting) and 13th Cause of Action for violation of Penal Code section 496 against Arroyo Pacific.

Plaintiff filed the Second Amended Complaint (“SAC”) on November 9, 2023. In violation of the Court’s ruling on Arroyo Pacific’s MJOP, Arroyo Pacific was not removed from the 4th, 5th, 9th, 10th, and 11th Causes of Action. Accordingly, the Court sua sponte strikes Arroyo Pacific as a defendant from those causes of action.

On November 16, 2023, Arroyo Pacific filed a demurrer to the entire SAC and a motion to strike.

Plaintiff submitted opposition briefs to the demurrer, motion to strike, and the summary judgment motion on January 29, 2024.

Arroyo Pacific’s motion for summary judgment, demurrer, and motion to strike are scheduled for hearing on the same day. In the interest of judicial economy, the Court addresses Arroyo Pacific’s summary judgment motion first.

1. Plaintiff’s Objections to the Declaration of Thomas P. Clarke (“Clarke Declaration” or “Clarke Decl.”)

Plaintiff’s objections do not adhere to CRC rule 3.1354(b) because they are not numbered. Nevertheless, the objections are overruled. Plaintiff’s objections to the Declaration of Thomas P. Clarke are not evidentiary objections, but challenges to Clarke’s testimony as factually incomplete. These objections are overruled.

Similarly, Plaintiff’s objection to “[a]ny and all statements of ‘fact’” in Defendant’s memorandum of points and authorities and separate statement is overruled.

2. Arroyo Pacific’s Objections to the Declaration of Jenny Zhang (“Zhang Declaration” or “Zhang Decl.”)

Pursuant to Code of Civil Procedure section 437c(q), the Court rules only on those objections to evidence that the Court deems material to its disposition of this motion as follows:

Objection No. 1: Overruled, this is not improper opinion testimony or a legal conclusion, but a statement reflecting Plaintiff’s understanding of the facts.

3. Arroyo Pacific’s Objections to the Declaration of Long Z. Liu (“Liu Declaration” or “Liu Decl.”)

In reviewing a motion for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).)

“Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . 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)(2).) The plaintiff may not merely rely on allegations or denials of its pleadings to show that a triable issue of material fact exists, but instead, “shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action.” (Ibid.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)

California Penal Code Section 496 allows an injured party to sue for treble damages and attorney's fees against anyone who obtains or receives or aids in obtaining or receiving any property that has been stolen or that has been obtained in any manner constituting theft. (Penal Code § 496(a) and (c).) Plaintiff broadly alleges on information and belief that Arroyo Pacific “stole, misappropriated, embezzled, converted, and diverted monies from Steps’ belonging to [her]” and “obtained or received, or aided in obtaining or receiving, monies belonging to [her] that were stolen, misappropriated, embezzled, converted, and diverted.” (SAC, ¶¶ 165-166.) Plaintiff alleges the theft was made through false representations and pretense and claims that Arroyo Pacific owed her a fiduciary duty. (SAC, ¶ 167.)

Arroyo Pacific submits the declaration of Thomas P. Clarke (“Clarke”), who is its CEO and sole owner. Clarke founded and registered Arroyo Pacific in 1998 and declares that Plaintiff is not and has never been a shareholder of Arroyo Pacific, nor has she had any ownership interest in Arroyo Pacific. (Clarke Decl., ¶¶ 1, 4.) Clarke states that neither he nor Arroyo Pacific were involved in Plaintiff’s purchase of shares from Vivien Djeu in June 2015 and have never knowingly received any property of Plaintiff, much less any money or property that was stolen from her. (Clarke Decl., ¶¶ 5-6.) Arroyo Pacific also submits Plaintiff’s responses to special interrogatories in which she is asked to state all facts in support of her claim against Arroyo Pacific for violation of Penal Code section 496. (Motion, King Decl., Exs. A-B.) In response, Plaintiff provides an irrelevant narrative stated upon information and belief claiming that Arroyo Pacific failed to exercise due diligence in its merger with Steps. (Id.)

Additionally, Arroyo Pacific argues that Plaintiff has not shown that she is entitled to an accounting. Arroyo Pacific argues that Plaintiff has no viable underlying claims against Arroyo Pacific and admitted that she does not have any ownership interest in Arroyo Pacific. (Motion, King Decl., Exs. C-D.) Therefore, Arroyo Pacific contends, no basis for an accounting exists.

Last, Arroyo Pacific argues that Plaintiff’s Thirteenth Cause of Action is time-barred. (Motion, pp. 8-9.) Arroyo Pacific argues that the statute of limitations applicable to civil penalties under Penal Code section 496 is either 1 year, under CCP section 340 (for an action upon a statute for a penalty or forfeiture), or 3 years, based on section 338 (for an action based on “taking, detaining, or injuring goods or chattels, including an action for the specific recovery of personal property.” Regardless of which statute of limitations period applies, Plaintiff had to file her cause of action before November 16, 2022, which is well before the date of the FAC which first named Arroyo Pacific.

Based on the foregoing, Arroyo Pacific has met its moving burden to show that: (1) no triable issues of material fact exist and that Plaintiff cannot prevail on her Twelfth and Thirteenth Causes of Action against Arroyo Pacific and (2) an affirmative defense exists to Plaintiff’s Thirteenth Cause of Action.

In opposition, Plaintiff fails to establish a triable issue of material fact. Plaintiff argues that she is entitled to an accounting because she became a “part owner” of Arroyo Pacific after Steps entered into a “merger agreement” with Arroyo Pacific and that her Thirteenth Cause of Action is not time-barred because Arroyo Pacific “continues to conceal [her] rightful ownership of [Arroyo Pacific].” Plaintiff refers to a copy of the Steps-Arroyo agreement, which she characterizes as a merger. (Opposition, Ex. D.) However, in this agreement, Steps is given the option to purchase Arroyo Pacific; Plaintiff cites to no authority showing that the option agreement confers on Plaintiff an “ownership” interest in Arroyo Pacific. (Id.) Plaintiff also appears to argue that Arroyo Pacific is wrongly retaining $203,000 which she paid for her shares in Steps in 2015. (Opp, p. 15.) However, there is no evidence that Arroyo Pacific received any of this money which was paid directly to Djeu in exchange for shares in Steps, and there is no evidence that Djeu paid that money to Steps or Arroyo.

Plaintiff requests a continuance to depose individuals at Arroyo Pacific pursuant to Code of Civil Procedure section 437c(h). In her ex parte application for a continuance, Plaintiff stated that Thomas Clarke was deposed on February 5, 2024, but Plaintiff identified no particular testimony that would be relevant to supporting her opposition brief. Furthermore, this case was initiated on May 14, 2019, and Plaintiff has had adequate time to conduct all necessary discovery to support her case. Therefore, the request for a continuance is denied.

In light o the foregoing, Arroyo Pacific’s demurrer and motion to strike are taken off calendar because its motion for summary judgment is granted,

Arroyo Pacific’s motion for summary judgment is GRANTED. The demurrer and motion to strike is taken off calendar.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.