Case Name:   Thu Lam v. Thao Ong, et al.

Case No.:       1-14-CV-261921

After full consideration of the arguments, authorities, and papers submitted by each party, the court makes the following rulings:

This action arises out of the sale of defendant Thao Ong’s (“Ms. Ong”) interest in a spa business, Halona Spa, Inc. (the “Spa”) to plaintiff Thu Lam (“Plaintiff”).  Plaintiff claims that Ms. Ong fraudulently induced her to purchase Ms. Ong’s interest in the Spa by falsely representing the profitability of the Spa and that Ms. Ong owned one hundred percent of the Spa when, in fact, Ms. Ong and defendant Ivy Hai Vo (“Ms. Vo”) were each fifty percent owners of the Spa.

Ms. Vo demurs to the third, fifth, sixth, and seventh causes of action of the first amended complaint (“FAC’) on the ground that they fail to allege facts sufficient to state a cause of action.  (See Code Civ. Proc., § 430.10, subd. (e).)

The demurrer to the third cause of action for conversion is OVERRULED.  Ms. Vo’s argument that Plaintiff lacks standing is without merit as the cases cited by Ms. Vo—Grosset v. Wenaas (2008) 42 Cal.4th 1100 and Sutter v. General Petroleum Corp. (1946) 28 CalApp.2d 525—are inapplicable to the instant case.  (See Grosset v. Wenaas, supra, 42 Cal.4th at p. 1108 [addressing shareholder derivative actions]; see also Sutter v. General Petroleum Corp., supra, 28 Cal.2d at p. 530 [addressing shareholder derivative actions].)  Furthermore, the third cause of action alleges that Ms. Vo has converted a specific, identifiable sum because it states that the defendants “took possession of [Plaintiff’s] … $94,500.00 … and converted the same to their own use, thus substantially interfering with [Plaintiff’s] possession of property.”  (FAC, ¶ 35; see also Fischer v. Machado (1996) 50 Cal. App. 4th 1069, 1072 [money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved].)  The third cause of action also alleges that the taking was wrongful because the funds were owned solely by Plaintiff and the defendants failed to return the same.  (FAC, ¶¶ 34, 36; see also Franklin v. Municipal Ct. (1972) 26 Cal. App. 3d 884, 901 [to state a cause of action for conversion, a plaintiff must allege:  (1) ownership or right to possession of tangible personal property at the time of conversion; (2) defendant’s wrongful taking or disposition; and (3) damages].)

The demurrer to the fifth cause of action for intentional interference with contract is SUSTAINED, with 10 days’ leave to amend.  While the fifth cause of action alleges that Ms. Vo actually disrupted the Contract, the FAC alleges that the Contract was already breached by Ms. Ong at the time of the sale of the Spa given that Ms. Ong only owned a fifty percent interest in the Spa and, consequently, could not sell Plaintiff the Spa in its entirety.  (FAC, ¶ 21.)  Thus, it was Ms. Ong’s breach that disrupted the Contract and prevented the sale of the Spa in its entirety to Plaintiff, not Ms. Vo’s subsequent attempts to manage and operate the Spa.  (FAC, ¶ 21; see also Pacific Gas & Electric v. Bear Stearns & Co. (1990) 50 Cal. 3d 1118, 1126 [the elements that a plaintiff must plead to state the cause of action for intentional interference with contractual relations are: (1) a valid contract between plaintiff and a third party; (2) the defendant’s knowledge of this contract; (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage].)

The FAC does not contain any facts that indicate how Plaintiff might amend this cause of action to state a valid claim for intentional interference with contract.  Additionally, Plaintiff does not articulate in her papers what, if any, amendments she could make to the claim.  Nonetheless, Plaintiff requests leave to amend the FAC and it is possible, though it appears unlikely, that Plaintiff may be able to plead additional facts that might save the cause of action.  (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [it is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action].)

The demurrer to the sixth and seventh causes of action for intentional and negligent interference with prospective business is SUSTAINED, with 10 days’ leave to amend.  The sixth and seventh causes of action adequately allege that Plaintiff and Ms. Ong were in an economic relationship at the time Ms. Vo’s alleged interference took place because the FAC establishes that Plaintiff and Ms. Ong had entered into a contractual relationship regarding the sale of the Spa.  (See Roth v. Rhodes (1994) 25 Cal.App.4th 530, 546 [“[A]n essential element of the tort of … interference with prospective business advantage is the existence of a business relationship with which the tortfeasor interfered. [Citation.] Although this need not be a contractual relationship, an existing relationship is required. [Citation.]”].)

However, the sixth and seventh causes of action do not allege facts establishing that the claimed interference constituted independently wrongful conduct.  (See Stevenson Real Estate Services, Inc. v. CB Richard Ellis Real Estate Services, Inc. (2006) 138 Cal.App.4th 1215, 1220 [“the plaintiff must allege that the defendant’s conduct was wrongful by some measure beyond the fact of the interference itself.  In this context, an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.  The conduct must be independently actionable.”] [internal quotation marks and citations omitted].)  As articulated above, the Contract was already breached by Ms. Ong at the time Plaintiff entered into the Contract with Ms. Ong because Ms. Ong only owned a fifty percent interest in the Spa and could not sell Plaintiff the Spa in its entirety as she had promised.  (FAC, ¶ 21.)  Moreover, as the FAC establishes that Ms. Ong had only a fifty percent interest in the Spa, Plaintiff has not established that she was the sole owner of the Spa or entitled to exclusive control of the same and, therefore, Plaintiff has not demonstrated that Ms. Vo’s refusal to vacate and turn over the Spa to her was wrongful.

Furthermore, with respect to the seventh cause of action, Plaintiff has not established that Defendant owed her a duty of care because Ms. Vo could not have reasonably foreseen the injury to Plaintiff as a result of her continuing operation and management of the Spa because it was not foreseeable that Ms. Ong would enter into a Contract to sell Plaintiff the entire Spa when she only owned a fifty percent interest.  (See J’Aire Corp. v. Gregory (1979) 24 Cal. 3d 799, 806-807 [foreseeability is generally measured by the closeness of the connection or nexus between the defendant’s conduct and the right of injury to the plaintiff.)

The FAC does not contain any facts that indicate how Plaintiff might amend these causes of action to state a valid claim for intentional or negligent interference with business advantage.  Additionally, Plaintiff does not articulate in her papers what, if any, amendments she could make to the claims.  Nonetheless, Plaintiff requests leave to amend the FAC and it is possible, though it appears unlikely, that Plaintiff may be able to plead additional facts that might save the causes of action.  (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [it is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action].)

The Court will prepare the order.