Case Name: Cheung v. Tse
Case No.: 1-13-CV-252171

After full consideration of the evidence, the separate statements submitted by each party, and the authorities submitted by each party, the court makes the following rulings:

This is an action for breach of contract and common counts. 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 third amended complaint (“TAC”), ¶ 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 TAC, ¶¶ 10-11, exh. 1.) Defendant refuses to pay back any amount of the loan. (See TAC, ¶ 16.) On October 13, 2015, Plaintiff filed the TAC, asserting causes of action for: breach of oral contract; money lent; restitution; money had and received; and, breach of implied-in-fact contract. On April 4, 2016, Defendant filed a first amended answer to the TAC, alleging 21 affirmative defenses, including a defense of offset. Plaintiff moves for summary adjudication of the affirmative defense of offset as to monies expended on Plaintiff while the parties lived together pursuant to Code of Civil Procedure section 437c, subd. (t). The parties have indeed stipulated to such a motion and have filed the requisite declarations in support of the motion. (See Code Civ. Proc. § 437c, subd. (t).)

Plaintiff’s burden on summary adjudication

A plaintiff moving for summary adjudication of an affirmative defense “has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action.” (Code Civ. Proc. § 437c, subd. (p)(1); see also S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, 388 (Sixth District stating that “where the plaintiff has also moved for summary judgment—or, as in this case, summary adjudication—that party has the burden of showing there is no defense to a cause of action… [t]hat burden can be met if the plaintiff ‘has proved each element of the cause of action entitling the party to judgment on that cause of action’”).) “Once the plaintiff… has met that burden, the burden shifts to the defendant… to show that a triable issue of one or more material facts exist as that… defense thereto.” (Code Civ. Proc. § 437c, subd. (p)(1); see also S.B.C.C., Inc., supra, 186 Cal.App.4th at p.388.)

Plaintiff meets her initial burden

Plaintiff moves to summarily adjudicate the third affirmative defense of offset as to monies expended on Plaintiff while the parties lived together. Defendant’s third affirmative defense states:

This answering Defendant alleges that he has suffered damage by reason of Plaintiff’s conduct and that he has the right of offset if any amount of money is owed to Plaintiff or due Plaintiff by way of damages. Defendant supported Plaintiff and their children for the entirety of their cohabitation, without contribution by Plaintiff except for the provision of the $40,000.00 at issue herein. Despite Defendant paying for all of Plaintiff’s expenses, including food, housing, clothing, transportation, elective eye-lid augmentation for Plaintiff and multiple trips overseas, Plaintiff was still unsatisfied. From this dissatisfaction came a demand by the Plaintiff to the Defendant that he make improvements to the home he had just purchased. As a condition to Defendant making such improvements, Defendant asked Plaintiff to contribute to the costs of ongoing family expenses. Plaintiff gave $40,000.00 to the Defendant without requesting repayment of such $40,000.00 and without Defendant ever saying that he would repay that amount to Plaintiff. Defendant continued to solely pay for all of Plaintiff’s expenses, their children’s expenses, and made Plaintiff’s requested improvements to the family home. Defendant relied on Plaintiff’s provision of the $40,000.00 because he continued to expend personal monies on Plaintiff that would not have been spent, but for such provision, and is therefore entitled to an offset for those sums subsequently spent in reliance on Plaintiff’s tendering of $40,000.00 to be spent on family expenses.

(Def.’s verified first amended answer to TAC, third affirmative defense, p.3:2-20.)

The affirmative defense of offset requires “cross-demands for money [to] have existed between persons at any point in time when neither demand was barred by the statute of limitations.” (Code Civ. Proc. § 431.70.)

Plaintiff argues that:

Defendant cannot offset any recovery by Plaintiff herein against past expenses because he lacks the legal prerequisite to do so: an agreement by Plaintiff allowing Defendant to recover expenses incurred on her behalf should the parties separate. During the almost three years this case has been pending, Defendant has never once alleged the existence of such an agreement, not in a pleading, not in a motion, not in discovery, and not at his deposition. He has simply asserted that he is “entitled” to offset a recovery by Plaintiff against past expenses, but provided no persuasive authority for such claimed “entitlement.”

(Pl.’s memorandum of points and authorities in support of motion for summary adjudication (“Pl.’s memo”), p.2:22-28.)

In support of Plaintiff’s motion, Plaintiff relies on Defendant’s cross-complaint, certain pleadings filed by the parties with regards to other motions, the July 25, 2014 order regarding Plaintiff’s demurrer to the cross-complaint, the June 12, 2015 order regarding Plaintiff’s motion for judgment on the pleadings, and the August 5, 2015 order regarding Defendant’s motion to compel further responses to discovery requests and Plaintiff’s request for issue sanctions. The first two undisputed material facts are that:

• Defendant has argued herein that he is entitled to offset monies he spent on Plaintiff during the parties’ multi-year relationship against any recovery Plaintiff may obtain in this action. (See Def.’s separate statement of undisputed material facts in opposition to motion for summary adjudication, no. (“UMF”) 1.)
• Plaintiff has argued herein that Defendant is not entitled to offset monies he spent on Plaintiff during the parties’ multi-year relationship against any recovery Plaintiff may obtain in this action. (UMF 2.)

The third material fact—“To date, the Court has not ruled on this issue”—is disputed by Defendant. (See UMF 3.) However, Defendant relies on the October 24, 2014 order regarding Plaintiff’s motion for judgment on the pleadings as to the cross-complaint, in which it stated:

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.4th 769, 774 (recognizing the “affirmative defense of an offset”); see also Keith G. v. Suzanne H. (1998) 62 Cal.App.4th 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.

(October 24, 2014 order re: motion for judgment on the pleadings as to XC, p.4:3-12.)

Here, Defendant’s assertion that “The Court ruled that an allegation 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” would be a valid defense to the Complaint” (UMF 3) is without merit. First, the Court’s October 24, 2014 order concerned whether the allegations of the XC stated facts sufficient to constitute a cause of action, not whether his first amended answer to the TAC stated facts sufficient to constitute an affirmative defense of offset. Second, the Court was merely stating that an allegation of offset is not an allegation supporting a cause of action because offset is an affirmative defense. Third, the Court granted Plaintiff’s motion without leave to amend as to the XC; Defendant cannot possibly have been the prevailing party such that he can assert that the Court has ruled in his favor. Fourth, Defendant stipulated to this fact in bringing the motion. (See Stipulation of the parties to move for summary adjudication regarding the scope of the affirmative defense of offset, ¶ 2, p.2:5 (stating that “[t]o date. The Court has not ruled on this issue”).)

Plaintiff also presents Defendant’s memorandum of points and authorities in opposition to Plaintiff’s motion for leave to file a second amended complaint, in which Defendant’s counsel stated:

As can be seen from the numerous items Plaintiff paid for over the entirety of the parties’ relationship, there was absolutely no agreement for Defendant to “pay [Plaintiff’s] expenses” as asserted by Plaintiff and her counsel. The fact is, Defendant paid for a substantial amount of the parties’ expenses because Plaintiff did not work.

(Def.’s memorandum of points and authorities in opposition to Pl.’s motion for leave to file SAC, p.6:8-11.)

Based on the evidence and the undisputed material facts, Plaintiff meets her initial burden to demonstrate that Defendant’s third affirmative defense of offset is without merit as to monies expended on Plaintiff while the parties lived together.

In opposition, Defendant fails to demonstrate the existence of a triable issue of material fact.

With regards to the law regarding setoff, Defendant relies principally on Keith G. v. Suzanne H. (1998) 62 Cal.App.4th 853, which stated:

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….’ [Citations.] Setoffs are routinely allowed in actions to enforce a money judgment. [Citations.] Indeed, “The offset of judgment against judgment is a matter of right absent the existence of facts establishing competing equities or an equitable defense precluding the offset.” [Citation.]…

A setoff… is not a claim for relief. It occurs at the end of litigation and “is a means by which a debtor may satisfy in whole or in part a judgment or claim held against him out of a judgment or claim which he has subsequently acquired against his judgment creditor.”

(Keith G., supra, 62 Cal.App.4th at p.859-861.)

In opposition, Defendant concedes that his claim of offset is premised on monies spent while the parties lived together. (See Def.’s memorandum of points and authorities in opposition to motion for summary adjudication (“Opposition”), p.5:14-20 (stating that “[i]n the instant matter, Defendant diligently supported his family, almost exclusively on his own, for a considerable period of time, without financial assistance from Plaintiff”); see also Def.’s first amended answer to TAC, third affirmative defense, p.3:2-20.) However, Defendant’s own case authority does not support his position that such monies would be a valid basis to support his affirmative defense for offset. Keith G., supra, involved a judgment of child support in California and a child support order in Missouri. Defendant has not obtained any such judgment or order. In fact, Defendant does not contend that he made any cross-demand for repayment, but instead asserts that “[i]t would simply be an injustice to allow Plaintiff to receive her $40,000.00 back without some offset for the monies spent in her favor, which would not otherwise have been spent in her favor, but for the provision of such $40,000.00.” (Opposition, p.5:21-24.)

The Court agrees that “a setoff is based upon the equitable principle that parties to a transaction involving mutual debts and credits can strike a balance between them.” (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 753.) However, critical to this determination is that there are mutual debts and credits. Here, Defendant does not demonstrate that there are such debts and credits. Instead, Defendant seeks credits based solely on equity because “Plaintiff has been unable to establish that the $40,000 was a loan rather than a contribution to family expenses just like the many contributions made by Defendant over the years that they lived together.” (Opposition, p.6:7-10.) Whether Plaintiff is able to establish the $40,000 was a loan is not before the Court in the instant motion; rather, this motion seeks to summarily adjudicate the affirmative defense of offset as to monies expended by Defendant on Plaintiff while the parties lived together. Defendant has failed to demonstrate a triable issue of material fact as to this affirmative defense. Accordingly, Plaintiff’s motion for summary adjudication of Defendant’s third affirmative defense of offset as to monies expended on Plaintiff while the parties lived together is GRANTED.