Case Name:   Cheung v. Tse

Case No.:       1-13-CV-252171

This is an action for breach of contract.  In early September 2011, plaintiff Levania Yue Juan Cheung (“Cheung” or “Plaintiff”) offered to lend $40,000 to defendant Kent Kin Sun Tse (“Tse” or “Defendant”).  (See first amended complaint (“FAC”), ¶ 10.)  Defendant accepted Plaintiff’s offer, and on September 14, 2011, Plaintiff tendered the check to Defendant and it was deposited on September 23 2011.  (See FAC, ¶¶ 10-11.)  Defendant refuses to pay back any amount of the loan.  (See FAC, ¶ 16.)  On April 2, 2014, plaintiff filed a first amended complaint, asserting causes of action for: breach of oral contract; money lent; restitution; and, money had and received.

On May 12, 2014, Tse filed a cross-complaint (“XC”) against Cheung, asserting causes of action for fraud and intentional/negligent misrepresentation.  The cross-complaint alleges that the first amended complaint seeking to recover $40,000 is premised on false allegations regarding her expenses and contributions toward family trips, causing Tse to incur substantial damages.  (See XC, ¶¶ 27, 38.)

Cheung moves for judgment on the pleadings as to each cause of action of the XC, arguing that they fail to allege a misrepresentation and that the litigation privilege bars Tse’s claims.

As Cheung argues, the alleged conduct and statements is the filing of the lawsuit.  (See XC, ¶ 19 (alleging that “Plaintiff did not file a complaint for Breach of Oral Contract until August 29, 2013, almost two years after she had contributed the $40,000 for family expenses… [and] alleged in the original complaint that the $40,000 was a loan to Defendant for the down payment on the new residence based on contract but has since amended her complaint to add causes of action for Money Lent, Restitution and Money Had and Received”), ¶ 27 (alleging that “Plaintiff has filed the instant lawsuit seeking to recover $40,000.00 that she falsely represented to Defendant was a contribution toward family trips and expenses… [b]y her fraudulent conduct, Plaintiff has caused Defendant/ Cross-complainant to incur substantial damages”), ¶ 38 (alleging same as ¶ 27).)

Civil Code section 47, subdivision (b) outlines the litigation privilege, and it is clear that the litigation privilege applies to the alleged conduct and statements as they were made in a judicial proceeding; had some connection or logical relation to the action; were made to achieve the objects of the litigation; and involved litigants or other participants authorized by law.  (See Alpha & Omega Development, LP v. Whillock Contracting, Inc. (2011) 200 Cal.App.4^th 656, 664-665 (stating that “[t]he purposes of section 47, subdivision (b), are to afford litigants and witnesses free access to the courts without fear of being harassed subsequently by derivative tort actions, to encourage open channels of communication and zealous advocacy, to promote complete and truthful testimony, to give finality to judgments, and to avoid unending litigation”; also stating that “[t]o further these purposes, the privilege has been broadly applied”; also stating that “[i]t is absolute and applies regardless of malice; also stating that “the privilege has been extended to any communication, whether or not it is a publication, and to all torts other than malicious prosecution”); see also Walsh v. Bronson (1988) 200 Cal. App. 3d 259, 269 (stating that the litigation privilege applies if “the publication (1) was made in a judicial proceeding; (2) had some connection or logical relation to the action; (3) was made to achieve the objects of the litigation; and (4) involved litigants or other participants authorized by law”).)

In opposition, Tse contends that “Plaintiff misinterprets Defendant’s Cross-Complaint as alleging the misrepresentation occurred when Plaintiff filed her Complaint… [h]owever, Plaintiff’s misrepresentation occurred when Plaintiff gave Defendant a $40,000 check, knowing Defendant believed Plaintiff’s representations that it was a contribution toward joint expenses and further knowing said contribution would induce Defendant to expend further monies on Plaintiff, and finally, knowing that should an event occur (i.e. separation of Plaintiff and Defendant), Plaintiff would demand repayment of, among other things, the $40,000.”  (Tse’s opposition to motion for judgment on the pleadings (“Opposition”), p.8:10-16.)

However, as currently alleged, that is not what the XC alleges.  Moreover, here, Tse’s damages—an element of a fraud and negligent misrepresentation claims—are dependent on Cheung’s filing of the complaint.  (See Lazar v. Super. Ct. (Rykoff-Sexton, Inc.) (1996) 12 Cal. 4^th 631, 638; see also Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4^th 513, 519 (stating that resulting damages is an element for fraud and negligent misrepresentation causes of action).)  Tse is alleged to have received Cheung’s $40,000.  (See XC, ¶ 17.)  If Cheung had merely made statements to Tse in August 2013 that she thought that the $40,000 was a loan and had not filed any complaint, Tse would still have the $40,000, and would not be damaged in any manner.  Rather, as the XC alleges, Tse’s damages arose once Cheung filed the initial complaint on August 29, 2013.  (See XC, ¶¶ 19, 27, 38.)

The XC also asserts that Tse “is entitled to offset all funds that he has expended on the support of Plaintiff over the last ten years against any contribution that Plaintiff made toward family expenses.”  (XC, ¶ 20.)  However, this is not an allegation that would support damages for any fraud cause of action, but rather would be a defense to the FAC itself.  (See Newhall Land & Farming Co. v. McCarthy Constr. (2001) 88 Cal.App.4^th 769, 774 (recognizing the “affirmative defense of an offset”); see also Keith G. v. Suzanne H. (1998) 62 Cal.App.4^th 853, 859 (stating that “[a] setoff is founded on the equitable principle that ‘either party to a transaction involving mutual debts and credits can strike a balance, holding himself owing or entitled to the net difference’… [and] are routinely allowed in actions to enforce a money judgment”).)  Accordingly, the litigation privilege bars Tse’s causes of action.

Further, as Cheung also argues, Tse has not alleged any misrepresentation—and certainly, not one pled with requisite specificity.  In opposition, Tse asserts that less specificity is required here since Cheung should possess full information regarding the facts of the controversy.  (See Opposition, p.6:6-24.)  However, to the extent that either claim is premised on any misrepresentations made prior to writing the $40,000 check, those misrepresentations are not contained anywhere in the XC.  (See Lazar v. Super. Ct. (Rykoff-Sexton, Inc.) (1996) 12 Cal. 4^th 631, 638 (requiring a misrepresentation as an element for a fraud cause of action; see also Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4^th 513, 519 (stating that a misrepresentation is also an element for a negligent misrepresentation cause of action).)  Tse alleges only that Cheung wrote a $40,000 check and then filed a complaint for breach of oral contract.  (See XC, ¶ 17.)  This is insufficient for a fraud claim.  (See Lazar, supra, 12 Cal.4^th at 645 (stating that a fraud cause of action must “allege… what they said or wrote, and when it was said or written”).)

The motion for judgment on the pleadings as to the XC is GRANTED without leave to amend.

The Court will prepare the order.