Case Number: BC603651 Hearing Date: July 20, 2016 Dept: 51

BC603651

Demurrer to First Amended Complaint and Motion to Strike Punitive Damages

Background

According to the allegations, in September 2013, the parties formed a “partnership” involving a joint performance and collaboration for a dance event called “Brush Up.” The parties agreed to apply for a 2014 grant and share the “profit.” On October 18, 2013, defendant wrote to plaintiff, “we will absolutely share the budget with you when it is complete.” The following year, 2014, defendant asked plaintiff Yamano if she could resubmit the application for the 2015 grant. Defendant then applied for the grant. In 2015, defendant told plaintiff she received a grant from another entity in the amount of $10,000. On February 20, 2015, defendant emailed plaintiffs a written contract, which the parties signed on March 15, 2015. The written contract mentioned nothing about sharing “profit.” On June 13, 2015, the dance event took place. The audience gave cash donations. One of the plaintiffs (unidentified) requested an accounting, but defendant never responded. Defendant expressed that she wanted to continue working with plaintiff Hirano and buy her artwork, but Hirano declined. Defendant’s attitude toward plaintiffs then changed, and defendant stopped responding to an unidentified plaintiff’s class and emails, including a request for an accounting, bank information, and amounts of grants. Defendant failed to return some items belonging to Hirano and Hirano’s portfolio.

On April 19, 2016, plaintiffs filed the operative first amended complaint (FAC) for (1) breach of fiduciary duty, (2) dissolution of partnership, (3) constructive trust, (4) accounting, (5) conversion, (6) fraud, (7) quantum meruit, (8) breach of agreement, (9) Labor Code violations, and (10) unfair competition. (The fifth and sixth causes of action and seventh and eighth causes of action are transposed in the body of the FAC. The Court refers to the causes of action by their numbering on the caption page). Defendants’ counsel filed a compliant meet and confer declaration. CCP § 430.41; Zhang Decl. ¶¶ 2-4. Plaintiffs oppose.

On May 19, 2016, defendant filed the instant demurrer on the ground that the complaint states insufficient facts, and a motion to strike punitive damages.

The Court considered the moving and opposition papers, and rules as follows.

Request for Judicial Notice

Defendant’s request for judicial notice is DENIED. The purported written contract is unexecuted. The purported grant application and denial letter are private, non-judicially noticeable matters.

Failure to File Demurrer

Defendant submitted only a notice of hearing and memorandum of points and authorities, but no actual demurrer. CRC, rule 3.1320. Nonetheless, plaintiffs do not oppose on these grounds, and the direction of the purported demurrer is clear.

Demurrer Standard

The sole issue on demurrer is whether the facts pleaded, if true, state a valid cause of action, i.e., if the complaint pleads facts that would entitle the plaintiff to relief. Garcetti v. Superior Court (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins (1997) 52 Cal.App.4th 326, 339. The question of plaintiff’s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47. 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. Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates (1995) 36 Cal.App.4th 698, 709. Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action. Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92.

First COA: Breach of Fiduciary Duty

The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damages proximately caused by the breach. Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086. “… [A] fiduciary relationship is a recognized legal relationship such as guardian and ward, trustee and beneficiary, principal and agent, or attorney and client …. ‘ “[a] confidential relation may exist although there is no fiduciary relation ….” ’ [citation.] Unlike confidential relations, fiduciary relations arise out of certain canonical relationships that are legally defined and regulated.” Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271.
Here, the FAC fails to plead facts showing the parties were in a fiduciary relationship. It pleads no such legally recognized relationship. As discussed below, the FAC fails to plead a partnership. No basis for a fiduciary relationship is pled.

Second COA: Dissolution of Partnership

A partner of a partnership may seek a judicial dissolution of the partnership on the grounds that “[a]nother partner has engaged in conduct relating to the partnership business that makes it not reasonably practicable to carry on the business in partnership with that partner.” Corp. Code §16801(5)(B). “… [T]he association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” Corp. Code § 16202(a).
Here, the FAC fails to plead the existence of a partnership. While it pleads that the parties joined forces on a single “joint performance,” it pleads no facts that, if true, could establish that the parties intended to carry on some kind of business. Although the parties’ purported contract uses the words “partner” and “partnership,” a more precise reading of the contract’s terms as alleged reveal that the parties were, if anything, actually contracting for the service of Hirano to perform in a one-time performance. The FAC pleads no facts that could establish that the parties made any agreement about the management and control of a purported business or even the one-off performance. See Corp. Code §16401(f) (providing, “Each partner has equal rights in the management and conduct of the partnership business.”) Instead, the purported contract merely defines specific duties with respect to the single performance. FAC ¶¶ 18-20. Accordingly, there is no partnership to dissolve, and plaintiffs have no power to seek dissolution.
Third COA: Constructive Trust

Although not explicitly raised in the papers, there is a split of authority on whether a constructive trust is a cause of action. On one hand, the Court of Appeal has found that a constructive trust cause of action is allowed if it incorporates by reference the underlying claim. Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1114; Douglas v. Sup. Ct. (1989) 215 Cal.App.3d 155, 160; Signal Hill Aviation Co. v. Stroppe (1979) 96 Cal.App.3d 627, 638-639; Weiss v. Marcus (1975) 51 Cal.App.3d 590, 600. On the other hand, the Court of Appeal and other authorities have concluded that a constructive trust is a remedy, and not a substantive cause of action. Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023; Embarcadero Mun. Improvement Dist. v. County of Santa Barbara (2001) 88 Cal.App.4th 781, 793; Stansfield v. Starky (1990) 220 Cal.App.3d 59, 76; 4 Witkin, Cal. Pro. (4th ed. 1997) Pleading §796.

Where there is a split of authority, the trial courts have discretion to choose between the decisions. Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456.

The Court finds the latter position more persuasive. A constructive trust is not a cause of action but a remedy. “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. [Citations.] The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing.” Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1069.
Fourth COA: Accounting

The elements of an accounting cause of action are (1) facts showing the existence of a relationship that requires an accounting (e.g., fiduciary) and (2) a statement that some un-liquidated and unascertained balance is due to the plaintiff. Raymond v. Independent Growers, Inc. (1955) 133 Cal.App.2d 154, 160. An accounting claim is a suit in equity, and such a claim “will not lie where it appears from the complaint that none is necessary or that there is an adequate remedy at law.” St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352, 359.

Here, the FAC alleges that plaintiffs are entitled to an accounting based on their partnership relationship with defendant. FAC ¶¶ 54, 55. As discussed above, however, the FAC fails to plead a partnership. Additionally, the FAC alleges that defendant received a $10,000 grant and that defendants had costs of $30,000. FAC ¶¶ 17, 23. Thus, plaintiffs admit they were aware of the “balances,” obviating the need for an accounting. Further, the basis on which plaintiffs believe they are owed any amount is unclear.

Fifth COA: Conversion

Conversion is any act of dominion wrongfully exerted over another’s personal property in denial of or inconsistent with his rights therein. It is unnecessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.

The elements of a conversion cause of action are (1) plaintiff’s ownership or right to possession of the property at the time of the conversion; (2) defendant’s conversion by a wrongful act or disposition of plaintiffs’ property rights; and (3) damages. Hartford Financial Corp. v. Burns (1979) 96 Cal.App.3d 591, 598.

A plaintiff is not required to allege or prove that the defendant applied the property in question to his or her own use or benefit, so long as the plaintiff shows an assumption of control or ownership of the property inconsistent with the plaintiff’s possessory or ownership rights. Igauye v. Howard (1952) 114 Cal.App.2d 122.

Money can be the subject of an action for conversion if a specific sum capable of identification is involved. Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599; Fischer v. Machado (1996) 50 Cal.App.4th 1069, 1072.

Here, the FAC alleges defendant wrongfully took possession of personal property and profits, including Hirano’s portfolio, recordings of the event, paint brush, and a blanket. FAC ¶¶ 33, 67, 68. The FAC also pleads Hirano voluntarily submitted a portfolio to defendant and pleads no facts suggesting the portfolio ultimately belonged to Hirano or that the parties agreed to portfolio would be returned. FAC ¶ 13. Additionally, the parties’ alleged contract governs possession of the recordings, making the conversion claim impermissibly duplicative. FAC ¶ 20. Plaintiffs cannot bootstrap a contract claim into a tort. See Aas v. Superior Court (2000) 24 Cal.4th 627, 643. Further, the FAC pleads no facts suggesting that plaintiffs are entitled to some kind of “profits” from the event, which they admit had a loss. FAC ¶¶ 17, 23. Finally, the FAC pleads no facts that defendant exercised control over the paint brush or blanket, only that plaintiffs asked for their return. FAC ¶ 33.

Sixth COA: Fraud

The elements of a cause of action for fraud are (1) a misrepresentation, which includes false representation, concealment, or nondisclosure, (2) knowledge of the falsity of the misrepresentation, i.e., scienter, (3) intent to induce reliance on the misrepresentation, (4) justifiable reliance, and (5) resulting damages. Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519; Lazar v. Superior Court (1996) 12 Cal.4th 631, 638. Fraud must be specifically pled, which means that the allegations in such an action need not be liberally construed, general pleading of the legal conclusion of fraud is insufficient, and every element of the cause of action for fraud must be alleged fully, factually and specifically. Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.

Here, the FAC appears to plead that defendant knowingly misrepresented “that she would share the profit once she obtains the grant.” FAC ¶¶ 12, 58. The FAC further pleads in the next sentence, however, “In fact, on October 18, 2012, Defendant wrote to Plaintiff … stating that ‘we will absolutely share the budget with you when it is complete.’” FAC ¶ 12. These allegations are insufficient and ambiguous. The allegation using the term “profit” is not pled with specificity. The allegations using the term “budget” refers to “Plaintiff” but fails to specify which one. Plaintiffs’ use of the term “profit” is ambiguous. Plaintiffs’ allegations concerning defendant’s grant-seeking and donations appears to indicate that defendant’s business entity was actually a non-profit. FAC ¶¶ 11, 26. Additionally, as mentioned above, the FAC pleads the event actually took a loss. FAC ¶¶ 17, 23. Also, the FAC pleads no facts indicating that defendant actually received “the grant.” It appears to indicate the opposite. FAC ¶ 14. Finally, the only clear promise alleged is defendant’s promise to share the budget. Plaintiffs indicate they were aware of the budget submitted on the second grant application. FAC ¶ 16. The FAC pleads no facts indicating that plaintiffs relied on defendant’s promise to share the budget or that defendant failed to do so.

Seventh COA: Quantum Meruit

“First of all, in order to recover under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant …. [¶] The second prong is that there must be either an explicit or implicit request for the services. As one court framed this requirement: ‘[A] recipient of services performed either requested or acquiesced in them ….’ [Citation.] Indeed, when the services are rendered by the plaintiff to a third person, the courts have required that there be a specific request therefor from the defendant: ‘[C]ompensation for a party’s performance should be paid by the person whose request induced the performance.’ [Citations.]” Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248-249 (citations omitted).

Here, the FAC pleads the event actually took a loss. FAC ¶¶ 17, 23. Therefore, the FAC fails to plead a benefit to defendant. Moreover, “[w]hen parties have an actual contract covering a subject, a court cannot—not even under the guise of equity jurisprudence—substitute the court’s own concepts of fairness regarding that subject in place of the parties’ own contract.” Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1420 (discussing quantum meruit underlying policy). Thus, because the quantum meruit claim is based on an allegation that Hirano’s services were worth more than $1,000, and because the FAC pleads a written contract providing for $1,000 plus travel costs to Hirano, Hirano cannot claim quantum meruit as a matter of law. FAC ¶ 80.
Eighth COA: Breach of Contract
To plead breach of contract, a plaintiff must allege (1) the existence of a contract, (2) plaintiff’s performance or excuse for non-performance, (3) defendant’s breach, (4) resulting damage to plaintiff. Lortz v. Connell (1969) 273 Cal.App.2d 286, 290. “If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 459. “Facts alleging a breach, like all essential elements of a breach of contract cause of action, must be pleaded with specificity.” Levy v. State Farm Mut. Auto. Ins. Co. (2007) 150 Cal.App.4th 1, 5.
Here, the FAC alleges Hirano and defendant agreed that defendant would provide all visual recordings of Hirano but that defendant failed to do so. FAC ¶¶ 20(d), 34, 72, 74. Hirano pleads in conclusory fashion that the failure to provide the recordings injured her in the amount of $35,000. FAC ¶ 75. How the failure to provide recordings somehow cost Hirano $35,000 is unclear. The FAC pleads no facts supporting this conclusion.
Ninth COA: Labor Code Violations
Here, the FAC alleges only the conclusions that Hirano was entitled to but did not receive meal or rest breaks and accurate itemized wage statements pursuant to Labor Code sections 558 and 226. FAC ¶¶ 84, 85. The FAC pleads no facts that could establish Hirano was entitled to such breaks, such as her number of hours worked in a given period. Moreover, the FAC admits that it was defendant Yamano who was responsible for paying Hirano’s alleged wage. FAC ¶ 20(b). Further, this cause of action is uncertain for combining multiple causes of action.
Tenth COA: Unfair Competition
The elements of an unfair competition law (UCL) claim are (1) a business practice, (2) that is unfair, unlawful or fraudulent, and (3) authorized remedy. Bus. & Prof. Code § 17200; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676. Generally, an unfair competition claim must be supported by a predicate offense. See, e.g., Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176; Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364.

Here, the FAC fails to plead a predicate offense.

Motion to Strike Punitive Damages

The court may, upon a 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(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(b). It may be an abuse of discretion to deny leave to amend after granting a motion to strike a complaint if the defect is curable. CLD Const., Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146-1147.

To succeed on a motion to strike punitive damages allegations, it must be said as a matter of law that the alleged behavior was not so vile, base, or contemptible that it would not be looked down upon and despised by ordinary decent people. Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1228-1229. Civil Code section 3294 provides punitive damages are available in non-contract actions where defendant is guilty of malice, oppression, or fraud, defined as follows:
(c) As used in this section, the following definitions shall apply:

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

A demand for punitive damages for the commission of any tort requires more than the mere allegation of the “wrongfully and intentionally,” “oppression, fraud, and malice” sort of language found in Civil Code section 3294. Perkins v Superior Court (1981) 117 Cal.App.3d 1, 6-7. The allegations of fact must, in their totality, describe a state of mind and a motive that would sustain an award of punitive damages. Ibid. The mere allegation that an intentional tort is committed is insufficient to warrant an award of punitive damages. Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166. Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim. Ibid.

Here, the FAC fails to plead any facts that would establish defendant’s intent to injure plaintiffs or some despicable conduct committed with a conscious disregard of plaintiffs’ rights. The FAC pleads no facts of oppression. The FAC fails to plead fraud. Defendant is correct in that plaintiffs’ contract-based claims cannot be the basis for a request for punitive damages.

Conclusion

The demurrer is SUSTAINED WITH LEAVE. The motion to strike is GRANTED WITH LEAVE.

The next iteration of the complaint is to be served and filed by August 9, 2016.

Defendant to give notice.

DISCOVER MATTERS

To be discussed.