Case Number: EC067364 Hearing Date: August 24, 2018 Dept: A

KUWASHIMA V GLOBAL RESTAURANT GROUP.

DEMURRER to FIRST AMENDED COMPLAINT

Calendar: 7

Case No: EC067364

Hearing Date: 8/24/18

Action Filed: 11/3/17

Trial: 1/14/19

MP: Defendant Vy Nguyen

RP: Plaintiff Brent Kuwashima, Nien Chu Chen, Kevin Cheng, Danny Wong, James Tran, and The CW Group, LLC

ALLEGATIONS:

This case arises from Plaintiffs’ claims that Defendants fraudulently induced Plaintiffs to make investments for the construction and operation of two restaurants: the Oyster Bar #101 and the Oyster Bar #102. Plaintiffs allege that Defendants misused funds, converted property, and breached their fiduciary duties.

The first amended complaint (“FAC”), filed June 8, 2018, alleges causes of action for: (1) breach of contract; (2) breach of fiduciary duty; (3) dissolution/expulsion; (4) dissolution; (5) conversion; (6) breach of contract; (7) fraud in the inducement; (8) breach of fiduciary duty; (9) unfair competition; (10) violation of Corporations Code, §25401; (11) unjust enrichment; (12) breach of the implied covenant of good faith and fair dealing; (13) violation of Penal Code, §496(c); (14) receivership pendent lite; (15) accounting; (16) declaratory relief; (17) constructive trust; (18) injunctive relief; and (19) fraudulent transfer.

Defendants/Cross-Complainants Robert Phan and Victoria Le filed a cross-complaint against Linh Nguyen, Jay Tran, and Johnny Nguyen for: (1) indemnification; (2) apportionment of fault; and (3) declaratory relief.

Defendant/Cross-Complainant Linh Nguyen filed a first amended cross-complaint on March 18, 2018, alleging causes of action for: (1) indemnification; (2) apportionment of fault; (3) declaratory relief; and (4) accounting.

RELIEF REQUESTED:

Defendant Vy Nguyen demurs to the 7th, 11th, and 17th causes of action on the ground that each of these causes of action fail to state sufficient facts to constitute a cause of action against her.

DISCUSSION:

A. 7th cause of action for Fraud in the Inducement

To allege a cause of action for fraud, the requisite elements are: (1) a representation, usually of fact, which is false; (2) knowledge of its falsity; (3) intent to defraud; (4) justifiable reliance upon the misrepresentation; and (5) damage resulting from that justifiable reliance. (Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.) This cause of action is a tort of deceit and the facts constituting each element must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Since the claim must be pleaded with particularity, the cause of action based on misrepresentations must allege facts showing how, when, where, to whom, and by what means the misrepresentations were tendered. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

In the 7th cause of action, Plaintiffs allege that Defendants provided Plaintiffs with a business plan that explained that the funds invested would be used to build and operate 2 restaurants in Pasadena and San Diego. (FAC, ¶¶109-111.) Plaintiffs allege that the representations made about the business plan’s goals and costs were false and that Defendants used the investments to construct and operate a restaurant in Anaheim. (Id., ¶¶112-113, 115.) Plaintiff allege they do not have any ownership interest in the Anaheim location. (Id., ¶114.) Plaintiffs allege the representations were false and that this caused damages to Plaintiffs. (Id., ¶¶115-120.)

This cause of action fails to allege, with particularity, a claim for fraud in the inducement against Vy Nguyen. In fact, specific allegations regarding Vy Nguyen are sparse. (See FAC, ¶17.) Plaintiff allege that various Defendants are the alter egos of Defendant Global Restaurant Group, Inc. and Defendant Accumax Holdings, Inc., but Vy Nguyen is not named as one of those alter ego defendants. (See FAC, ¶¶25-32.) Although the fraud cause of action alleges that Defendants (generally) made false representations, there are no allegations showing that Vy Nguyen was involved in making the representations or that she was the alter ego of the corporate defendants.

In addition, the fraud cause of action fails to allege particular facts showing how, when where, to whom, and by what means the representations were tendered. Further, to the extent that the representations were made by the corporate defendants, the pleading must allege the names of the persons at the corporation and their authority to act on behalf of the corporation. (Tarmann v. State Farm Mutual Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Accordingly, the Court will sustain the demurrer to the 7th cause of action with 20 days leave to amend.

B. 11th cause of action for Unjust Enrichment

Under California law, unjust enrichment is not a cause of action. (Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794.) Instead, it is the failure to make restitution under circumstances where it is equitable to do so. (Id.) Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself. (Id.) It is synonymous with restitution. (Id.) This is the basis for the general rule in California, which finds that unjust enrichment is not a cause of action, but a claim for restitution. (Hill v. Roll Int’l Corp. (2011) 195 Cal. App. 4th 1295, 1307.)
Therefore, the Court will sustain the demurrer to the 11th cause of action because there is no cause of action for unjust enrichment. Further, it is not possible to correct this by amendment because unjust enrichment is not a cause of action. Accordingly, the Court will not grant leave to amend.

C. 17th cause of action for Constructive Trust

In the demurrer, Vy Nguyen argues that there is no allegations against her regarding constructive fraud. A cause of action for constructive fraud is different from a cause of action for constructive trust.

In the 17th cause of action, Plaintiffs seek a constructive trust pursuant to Civil Code, §2224. (FAC, ¶184.) Plaintiffs allege that as a result of Defendants’ wrongful acquisition of the interests of Plaintiffs, the Oyster Bar #101, LLC, and the Oyster Bar $102, LLC, they have no legal or equitable right, claim or interest therein, but that Defendants are involuntary trustees holding said property and profits in a constructive trust for Plaintiffs. (Id., ¶185.)

A constructive trust cause of action is based on Civil Code, §2224, which states: “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.” In order to create a constructive trust, 3 conditions must be satisfied: “the existence of a res (property or some interest in the property); the plaintiff’s right to that res; and the defendant’s acquisition of the res by some wrongful act.” (Optional Capital, Inc. v. DAS Corp. (2014) 222 Cal.App.4th 1388, 1402.)

In contrast, a constructive fraud cause of action is defined in Civil Code, §1573. It arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. (Estate of Gump (1991) 1 Cal.App.4th 582, 601.) Generally, it is comprised of “all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damages to another.” (Id.)

Thus, Vy Nguyen’s demurrer does not address the actual 17th cause of action alleged against her.

In the reply, Vy Nguyen argues that the elements of a constructive trust are not met. Although this is raised for the first time in reply, the Court briefly addresses the arguments since Plaintiffs addressed the legal sufficiency of their 17th cause of action in opposition. As stated in the elements above, Plaintiffs must allege that Vy Nguyen obtained a thing by fraud or other wrongful act. As the fraud cause of action is not adequately pled against her, this cause of action too fails to state sufficient facts.

The Court will sustain the demurrer to the 17th cause of action with 20 days leave to amend.

RULING:

Sustain Vy Nguyen’s demurrer to the 7th and 17th causes of action with 20 days leave to amend.

Sustain Vy Nguyen’s demurrer to the 11th cause of action without leave to amend.