Case Name: Truong v. Chan, et al.
Case No.: 18CV338602

Defendant Vickie Cheung Chan (“Defendant” or “Vickie”) demurs to the First Amended Complaint (“FAC”) filed by plaintiff Andy Truong (“Plaintiff”) and moves to strike portions contained therein.

I. Background

A. Factual

This is an action for breach of contract and fraud, among other things, arising out of a business dispute. In May 2012, Plaintiff and Defendant, his sister, entered into an oral agreement (the “Agreement”) for the purchase and operation of Que Huong FastFood, Inc. (the “Business”). (FAC, ¶ 1.) Pursuant to the Agreement, the parties were to have an equal interest in the ownership, operation and profits of the Business. (Id., ¶ 5.) The parties specifically agreed that only Plaintiff and Defendant would have the right to make decisions relating to the Business and share equally in its profits; Defendant’s husband, defendant Steven Chan (“Steven”) was not to have any such involvement. (Id.)

For the first few years of the Business, the parties operated as equal partners in all facets and shared equally in the profits. (FAC, ¶ 7.) However, beginning in March 2014, Defendant and Steven began excluding Plaintiff from the operation of the Business and denied him access to its books and records, while continuing to acknowledge his right to half of the profits. (Id., ¶ 8.)

In August 2017, the defendants transferred title of the Business to defendant Mary Chan (“Mary”), a relation of Steven’s, from Defendant, who had initially been named registered owner pursuant to the terms of the Agreement. (FAC, ¶ 9.) The transfer was made without Plaintiff’s knowledge and without consideration. (Id.)

Despite Defendant’s acknowledgment of Plaintiff’s entitlement to 50% of the profits, Plaintiff is informed and believes that the defendants have engaged in fraudulent business practices, including failing to report cash payments, commingling funds and converting the Business’ money for their own benefit, and transferring title to Mary to avoid potential liability. (FAC, ¶ 10.) Plaintiff has not been permitted to access the books and records of the Business despite numerous requests to do so. (Id., ¶ 11.)

B. Procedural

Based on the foregoing allegations, Plaintiff initiated the instant action on November 28, 2018. On April 15, 2019, Plaintiff filed the FAC, asserting the following causes of action: (1) breach of contract (against Vickie); (2) promissory estoppel (against Vickie); (3) intentional interference with contractual relations (against Steven and Mary); (4) conversion (against all defendants); (5) declaratory relief (against all defendants); (6) appointment of receiver (against all defendants); (7) fraud (against all defendants); (8) constructive trust (against Mary); (9) accounting (against all defendants); and (10) conspiracy (against all defendants).

On May 17, 2019, Defendant filed the instant demurrer to the FAC and eight of the ten causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) Defendant also filed a motion to strike portions of the FAC. Plaintiff opposes both motions. The Court has considered all papers filed by the parties, including Defendant’s reply papers.

II. Discussion

A. Demurrer

Defendant’s demurrer is predicated on the following arguments: (1) eight of the claims asserted in the FAC are untimely; (2) the FAC fails to allege any amount of damages in the first, second, fourth and seventh causes of action, rendering the claims deficient; and (2) Plaintiff fails to plead facts sufficient to assert eight of the ten causes of action.

1. Timeliness

Defendant first asserts that eight of the ten claims in the FAC is barred by the applicable statute of limitations. In order to sustain a demurrer on the basis of the statute of limitations, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint show that the action might be barred. (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1317.) “In assessing whether claims are time-barred, two basic questions drive [the] analysis: (a) [w]hat statutes of limitations govern the plaintiff’s claims? (b) [w]hen did the plaintiff’s causes of action accrue?” (Id. at 1316.) Generally, a cause of action accrues at the time when the claim is complete with all its elements. (Id. at 1317.)

Defendant maintains that based on what is alleged in the FAC, i.e., that “[s]ince about March 2014, [Vickie] and [Steven] began excluding Plaintiff from The Business operations and decisions and denying Plaintiff access to the books and records of the Business; however [Vickie] continued to acknowledge Plaintiff’s right to 50% of the profits of The Business.” (FAC, ¶ 8.) Despite the inclusion of the March 2014 date in the pleadings, it is not clear precisely when each of Plaintiff’s claims accrued and thus when the limitations periods were triggered. For example, even if it is Plaintiff’s contention that Defendant initially breached the Agreement in March 2014, subsequent breaches of the agreement (based on allegations that Defendant continued to exclude Plaintiff from the Business) could each trigger a new limitations period. (See, e.g., Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1199 [discussing the theory of continuous accrual].) Further, a claim such as fraud accrues and thus the limitations period commences when “the plaintiff suspects or should suspect that her injury was caused by wrongdoing.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal. 3d 1103, 1110; see also Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal. 4th 797, 807 [“we look to whether the plaintiffs have reason to suspect that a type of wrongdoing has injured them”].) Based on what is pleaded in the FAC, there is no way for the Court to know when Plaintiff suspected or should have suspected that he was a victim of fraud by defendants. Again, a demurrer based on statute of limitations grounds can only be sustained where the dates alleged in the complaint show “clearly and affirmatively” that the action is time-barred. (Geneva Towers Ltd. Partnership v. City & County of San Francisco (2003) 29 Cal.4th 769, 781.) The Court is not persuaded that that this is the case with the FAC and therefore Defendant’s demurrer will not be sustained on this basis.

2. Damages

Next, Defendant contends that her demurrer to the first, second, fourth and seventh causes of action should be sustained because Plaintiff has failed to allege any amount of money or damages that he is owed and therefore fails to comply with Code of Civil Procedure section 425.10 (“Section 425.10), subdivision (a)(2), which provides that: “A complaint or cross-complaint shall contain…[a] demand for judgment for the relief to which the pleader claims to be entitled. If the recovery of money or damages is demanded, the amount demanded shall be stated.” Defendant’s contention is flawed because it is understood that a “demand for judgment” within the meaning of Section 425.10 is a prayer for relief, which consists of separate paragraphs at the end of the pleading. Critically, “the prayer for relief is not part of the statement of the cause of action.” (Merlino v. West Coast Macaroni Mfg. Co. (1949) 90 Cal.App.2d 106, 112.) Thus, the damages requirement of 425.10, subdivision (a)(2), does not apply to Plaintiff’s individual causes of action and the demurrer to the first, second, fourth and seventh causes of action cannot be sustained on this basis.

3. Sufficiency of Facts Pleaded

a. Breach of Contract (1st Cause of Action)

Defendant maintains that Plaintiff has failed to adequately plead a claim for breach of contract because (1) he has not set forth the terms of the oral agreement, (2) he fails to plead what his ownership interest is, (3) he fails to plead performance and (4) he fails to allege any acts or omissions that either party was obligated to perform under the Agreement and thus that there was consideration.

In order to state a claim for breach of contract, a plaintiff must plead the following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach. (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Here, Plaintiff has alleged that existence of an oral agreement between himself and Vickie for the purchase and operation of the Business. An oral contract can be pleaded generally as to its effect, because it is rarely possible to allege the exact words. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Defendant contends that Plaintiff has not sufficiently set forth the terms of the Agreement; a complaint is subject to a general demurrer if the allegations fail to show the nature of the contract with certainty. (See, e.g., Hills Trans. Co. v. Southwest Forest Industries (1968) 266 Cal.App.2d 702, 706.) The Court does not find this argument persuasive considering the allegations contained in the fifth and sixth paragraphs of the FAC, which sets forth a variety of the Agreement’s terms:

5. Pursuant to the agreement of The Parties, The Parties were to have an equal interest in the ownership, operation, and profits of The Business. The Parties Agreed that they were to act as equal business partners in the operation and management of The Business. The Parties agreed that only [Plaintiff] and [Defendant] would have the right to make decisions relating to The Business and to share equally in profits; The Parties specifically agreed that [Defendant]’s husband, [Steven], was not to have any involvement with the operation and management of The Business.

6. Pursuant to the agreement of the Parties, [Defendant] would be named as the registered owner of The Business although The Parties were to have an equal interest in the ownership operation and profits of The Business.

Defendant’s next arguments, that Plaintiff fails to plead what his ownership interest is (i.e., common stock holder, preferred stockholder, etc.) and fails to plead his own performance, are easily disposed of. First, Defendant cites no authority which provides that Plaintiff must plead his ownership interest in the Business with the heightened level of specificity she suggests. Second, Plaintiff has alleged that he “performed all conditions, covenants and promises required on his part, except to the extent that [Vickie, Steven and Mary] have excluded him from the operations and decisions of The Business, and denied him access to the books and records ….” (FAC, ¶ 13.) This is sufficient to plead the element of performance because Code of Civil Procedure section 457 makes it unnecessary to set forth the facts of a plaintiff’s performance, with he or she able to adequately meet this requirement by alleging, in general terms, that he or she “duly performed” all the required conditions on his or her part. Given that Plaintiff has sufficiently pleaded performance, Defendant’s remaining argument that there is no properly pleaded consideration can be rejected because the argument is predicated on Defendant’s incorrect assertion that Plaintiff has not pleaded the element of performance.

b. Promissory Estoppel (2nd Cause of Action)

Next, Defendant contends that Plaintiff has failed to state a claim for promissory estoppel because he does not plead what promise, if any, was made to him, and also fails to sufficiently plead reliance.

In order to state a claim for promissory estoppel, a plaintiff must plead the following elements: (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. (US Ecology, Inc. v. California (2005) 129 Cal App 4th 887, 901-902.) Promissory estoppel is “a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.’ Because promissory estoppel is an equitable doctrine to allow enforcement of a promise that would otherwise be unenforceable, courts are given wide discretion in its application.” (Id., internal citations and quotations omitted.)

In the FAC, Plaintiff pleads that the parties reached agreement on various components of the Business, including its operation and management, as well as agreeing to split the profits equally. (FAC, ¶ 5.) These agreements also serve as the promises upon which the second cause of action is based. (Id., ¶ 16.) Thus, Defendant’s contention that Plaintiff fails to plead what promise was made to him is without merit. Also without merit is Defendant’s second argument that Plaintiff has failed to plead reliance; Defendant cites no authority which provides that reliance cannot be pleaded generally in order state a claim for promissory estoppel, as Plaintiff has done here. (FAC, ¶ 18.)

c. Conversion (4th Cause of Action)

Defendant argues that Plaintiff’s claim for conversion fails because (1) a general claim for unspecified “profits” is not actionable as a conversion claim, (2) without alleging consideration or performance, Plaintiff has failed to allege ownership or right to possession of any “profits” and (3) Plaintiff’s claim is barred by the economic loss rule.

“Conversion is the wrongful exercise of dominion over the property of another.” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.) The elements of conversion are: (1) the plaintiff’s ownership of right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. (Id.) “The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious.” (Id.) Plaintiff’s conversion is predicated on allegations that the defendants converted his 50% share of the Business’ profits to their own use. (FAC, ¶ 32.) Generally, money cannot be the subject of a conversion claim unless a specific sum capable of identification is involved. (Software Design & Application, Ltd. v. Hoefer & Arnett, Inc. (1996) 49 Cal.App.4th 472, 485.) Here, Plaintiff has identified such a sum- the 50% of the profits of the Business that he had an ownership interest in that was misappropriated by the defendants.

Defendant’s remaining arguments lack merit. As stated above, Plaintiff has sufficiently articulated an ownership interest in half of the profits of the Business pursuant to the Agreement, and the economic loss rule, the purpose of which is to prevent the law of contracts and the law of torts from dissolving into one another, applies to sales transactions between manufacturers and consumers. (See Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) The instant action does not involve such transactions and therefore the rule is inapplicable.

d. Declaratory Relief (5th Cause of Action)

Defendant contends that Plaintiff’s fifth cause of action for declaratory relief is deficient because he has not pleaded the existence of an actual controversy between the parties since Defendant is not alleged to be a current owner of the corporation.

Code of Civil Procedure section 1060 (“Section 1060”), which governs actions for declaratory relief, provides: “Any person interested under a written instrument …, or under a contract, or who desires a declaration of his or her rights or duties with respect to another … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action … for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.” Importantly, declaratory relief only “operates prospectively, serving to set controversies at rest before obligations are repudiated, rights are invaded or wrongs are committed. Thus the remedy is to be used to advance preventive justice, to declare rather than execute rights.” (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 59, internal citation omitted.) In order to state a claim for declaratory relief, the complaint must show the following: (1) a proper subject of declaratory relief within the scope of Section 1060; and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party. (Tiburon v. Northwestern Pac. R. Co. (1970) 4 Cal.App.3d 160, 170.)

In the FAC, Plaintiff requests a declaration that he is entitled to 50% of the Business’ profits as well as access to the corporate books and records, and that he is not responsible for the acts of the defendants since they excluded him operation of the Business. (FAC, ¶¶ 38-40.) Defendant argues that no actual controversy between her, in her individual capacity, and Plaintiff has been or can be alleged because as set forth in the FAC, she is no longer an owner of the Business. This argument is unavailing because it ignores allegations in the FAC which suggest that Defendant is still operating, at least in practice, as the owner of the Business along with Steven, or otherwise maintaining access to and/or control over the Business’ books and records, such that an actual controversy exists between her and Plaintiff. (See, e.g., FAC, ¶ 11.)

e. Appointment of Receiver (6th Cause of Action) and Accounting (9th Cause of Action)

Next, Defendant maintains that Plaintiff cannot assert claims for the appointment of a receiver and an accounting because he has not properly alleged an interest in the Business and his underlying claims fail. Given the preceding analysis, both of these arguments are without merit.

f. Fraud (7th Cause of Cause)

Defendant next argues that Plaintiff’s fraud claim is deficiently pleaded for the following reasons: (1) it lacks the requisite specificity; and (2) the FAC fails to plead any facts

In order to state a claim for fraud, a plaintiff must plead the following elements: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or ‘scienter’); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) This requirement “necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Lazar, supra, 12 Cal.4th at 645.)

Defendant generally argues that the fraud cause of action lacks the required specificity, but fails to articulate how and thus her argument is without merit. As to the issue of the sufficiency of Plaintiff’s allegation regarding intent to defraud, intent is a fact, and therefore a general allegation that a representation was made with the intent to deceive is sufficient to plead this particular element. (Hall v. Mitchell (1922) 59 Cal.App. 743, 749.) Thus, neither of the arguments offered by Defendant in support of her demurrer to the seventh cause of action are persuasive.

g. Conspiracy (10th Cause of Action)

Finally, Defendant asserts that her demurrer to the tenth cause of action for conspiracy should be sustained because (1) conspiracy is not a cause of action and (2) the FAC fails to set forth facts establishing a conspiracy on the part of the defendants.

Defendant is correct that conspiracy is not a cause of action. Rather, it is “a legal doctrine that imposes liability on persons who, although not actually committing the tort themselves, share with the immediate tortfeasors a common plan or design in its perpetuation. By participation in a civil conspiracy, a co-conspirator effectively adopts as his or her own the torts of other co-conspirators within the ambit of the conspiracy. In this way, a co-conspirator incurs tort liability co-equal with the immediate tortfeasors.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511, internal citations omitted.) Nevertheless, because Plaintiff has adequately pleaded numerous underlying predicate torts, the Court can evaluate the sufficiency of his conspiracy “cause of action” to determine whether he has adequately pleaded conspiracy as a basis for vicarious liability.

The elements of a civil conspiracy are: (1) the formation and operation of the conspiracy; (2) the wrongful act or acts done pursuant thereto; and (3) the damage resulting. (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1048.) General allegations of agreement have been held sufficient and the conspiracy averment has even been held unnecessary, providing the unlawful acts or civil wrongs are otherwise sufficiently alleged. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47.) Given the existence of the underlying torts in the FAC and Plaintiff’s allegations that the defendants conspired to deprive him of his rights in the Business (see FAC, ¶¶ 65-67), Defendant’s argument is unpersuasive and does not provide a basis upon which to sustain her demurrer to the tenth cause of action.

Given the foregoing, Defendant’s demurrer to the first, second, fourth, fifth, sixth, seventh, ninth and tenth causes of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

B. Motion to Strike

With the instant motion, Defendant moves to strike the first, second, fourth, fifth, sixth, seventh, ninth and tenth causes of action in their entirety, as well as various paragraphs requesting damages in each cause of action (paragraphs 15, 20, 34, 35, 51, 68), Plaintiff’s requests for punitive damages and attorney’s fees and for all other forms of damages requested in the prayer.

Defendant’s request to strike individual causes of action is easily disposed of because the argument underlying the request- that the claims are deficient because Plaintiff has not pleaded the specific amount of damages suffered- is without merit for the reasons explained above, i.e., he is not required to do so. Further, to the extent that it is Defendant’s contention that these claims are defectively pleaded, the proper instrument of attack is a demurrer and not a motion to strike. (See Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528.) Accordingly, there is no basis to strike the individual causes of action.

As to punitive damages, the right to recover such damages requires proof of “oppression, fraud, or malice” on the part of the defendant by “clear and convincing evidence.” (Civ. Code, § 3294, subd. (a).) For pleading purposes, in order to support a prayer for punitive or exemplary damages, the complaint must allege “ultimate facts of the defendant’s oppression, fraud or malice.” (Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-317.) Simply pleading the statutory terms “oppression, fraud or malice” is insufficient to adequately allege punitive damages, but only to the extent that the complaint pleads facts to support those allegations. (Blegen v. Superior Court (1986) 176 Cal.App.3d 503, 510-511.) Therefore, specific factual allegations demonstrating oppression, fraud or malice are required. (Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872.) However, the complaint will be read as a whole so that even conclusory allegations may suffice when read in context with facts alleged as to the defendant’s wrongful conduct. (Perkins v. Super. Ct. (1981) 117 Cal.App.3d 1, 6-7; Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255). Here, the basis of Plaintiff’s request is malicious, oppressive and fraudulent conduct on the part of the defendants. Although the use of these terms by themselves is generally insufficient to support an award of punitive damages, Plaintiff has a fraud claim in the FAC that survives demurrer. A properly pleaded fraud claim is by itself sufficient to support a request for punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610.) Consequently, Defendant’s request to strike punitive damages must be denied.

Finally, under California law, attorney’s fees are not recoverable unless authorized by contract, statute, or law. (Code Civ. Proc., § 1021; Trope v. Katz (1995) 11 Cal.4th 274, 279.) Here, Plaintiff has not pleaded a basis which permits him to recover attorney’s fees and thus his request is stricken. Plaintiff’s assertion in his opposition that damages sought in the prayer are not properly subject to a motion to strike is flatly incorrect. (See Eldorado Bank v. Lytle (1983) 147 Cal.App.3d Supp. 17.)

In accordance with the foregoing analysis, Defendant’s motion to strike is GRANTED IN PART and DENIED IN PART. The motion is GRANTED as to the request for attorney’s fees and otherwise DENIED.