Case Number: GC049025    Hearing Date: April 25, 2014    Dept: A

Yang v J.T. Thompson USA

MOTION FOR SUMMARY ADJUDICATION

Calendar: 19
Case Number: GC049025
Date: 4/25/14

MP: Plaintiff, Mei Yun Yang
RP: Defendant, Chieh Lin Tsai aka Jack Tsai

RELIEF REQUESTED
Summary Adjudication of eighth and twenty-third causes of action

ALLEGATIONS IN THIRD AMENDED COMPLAINT:
The Defendants engaged in a scheme to defraud the Plaintiff by borrowing $350,000 and then failing to repay the money.

CAUSES OF ACTION IN THIRD AMENDED COMPLAINT:
1) Breach of Contract
2) Common Counts
3) Breach of Fiduciary Duty
4) Constructive Fraud
5) Inducing Breach of Contract
6) Conversion
7) Fraudulent Transfer of Real Property
8) Fraudulent Transfer of Property
9) Civil Conspiracy
10) Aiding and Abetting Breach of Contract
11) Fraud
12) Fraud
13) Fraud
14) Negligent Management
15) Unfair Business Practice
16) Accounting
17) Declaratory Relief
18) Breach of Fiduciary Duty
19) Fraud
20) Negligent Misrepresentation
21) Negligence
22) Fraudulent Transfer
23) Embezzlement
24) Monies Had and Received

DISCUSSION:
Trial is set for May 27, 2014.

This hearing concerns the Plaintiff’s motion for summary adjudication of the eighth and twenty-third causes of action in the Third Amended Complaint. CCP section 437c(f) authorizes the Court to grant summary adjudication of a cause of action. Under CCP section 437c(p)(1), the Plaintiff’s burden of proof is to prove each element of her causes of action.

The Plaintiff’s eighth cause of action is for fraudulent transfer of property. This cause of action is directed at Defendants, JTT, Chin Ming Tsai, Pao Ching Tsai, and Chieh Lin Tsai. The Plaintiff alleges that Chin Ming Tsai and Pao Ching Tsai fraudulently transferred assets to Chieh Tsai to thwart the creditors of JTT. The Plaintiff seeks to void the transfer of the property at 231 E. Camino and 48th Street as fraudulent transfers.
The Plaintiff’s twenty-third cause of action is for embezzlement. This cause of action is directed at Defendants, Chin Ming Tsai, Pao Ching Tsai, and Chieh Lin Tsai. The Plaintiff alleges that the Defendants took possession of the assets of JTT and distributions from SGSG and Rosemead S.G., LLC and transferred the assets and distributions to their own accounts. The Plaintiff seeks damages in excess of $500,000 and punitive damages.

Defendants, JT Thompson USA, Chin Ming Tsai, and Pao Ching Tsai are in default on the Second Amended Complaint (see default entered on February 18, 2014). Defendant, Chieh Lin Tsai, filed an answer to the Third Amended Complaint.
The Plaintiff’s motion is flawed because three of the Defendants, JT Thompson USA, Chin Ming Tsai, and Pao Ching Tsai are in default. Since they are in default, the Plaintiff must seek a default judgment against these Defendants. There is no legal authority for granting summary adjudication or summary judgment against a party in default.
Further, the Plaintiff cannot use these defaults to establish any elements against the Defendant who is not in default, Chieh Lin Tsai. The Defendants, JT Thompson USA, Chin Ming Tsai, and Pao Ching Tsai admitted the truth of the allegations in the Third Amended Complaint by permitting the default to be entered against them. Martin v. General Finance Co. (1966) 239 Cal. App. 2d 438, 443 (holding that a defendant in default has confessed the truth of all the material allegations in the complaint). However, this does not apply to Chieh Lin Tsai and the default entered against the other Defendants does not demonstrate that he admitted any allegations. See Western Heritage Ins. Co. v. Superior Court (2011) 199 Cal. App. 4th 1196, 1211 (admissions implied from the default of one defendant ordinarily are not binding upon a codefendant who, by answering, expressly denies and places in issue the truth of the allegations thus admitted by the absent party). Further, Chieh Lin Tsai filed an answer to the Third Amended Complaint. Accordingly, the truth of the allegations in the Plaintiff’s causes of action were not admitted by Chieh Lin Tsai.
In addition, the Plaintiff has served requests for admissions against the parties in default, i.e., JTT, Chin Ming Tsai, Pao Ching Tsai, and Chieh Lin Tsai. Under CCP section 2033.410, these admissions are binding only on these Defendants and may not be used for any other purpose, i.e., they do not establish any facts against Chieh Lin Tsai.
In the reply papers, the Plaintiff argues that Chieh Lin Tsai did not “object” to the motions directed at the other Defendants. This is irrelevant because under CCP section 2033.410, the admissions by the other Defendants cannot be used against Chieh Lin Tsai whether or not he objected to them.
Further, the Plaintiff cannot use the admissions by the other Defendants to meet her burden of proof. Accordingly, Chieh Lin Tsai has no burden under CCP section 437c to offer any evidence to controvert them.

This makes the Plaintiff’s motion impossible to analyze because the Plaintiff failed to distinguish between the Defendants in default and the Defendant who is not in default. Instead, the Plaintiff has combined all the Defendants together and then attempted to establish that plaintiff is entitled to summary adjudication against all of them. There is no attempt to demonstrate that plaintiff can meet her burden of proof against the only party not in default, Chieh Lin Tsai.
For example, a review of the separate statement reveals that the majority of the facts concern the Defendants in default, i.e., JTT, Chin Ming Tsai, Pao Ching Tsai. The Plaintiff cites the pleadings because these Defendants admitted the allegations when they permitted a default to be entered against them, e.g., fact 39 that Chin Ming Tsai made the transfers with the actual intent to hinder, delay, or default the Plaintiff. Since the admission by the defaulting Defendants cannot be used against the non-defaulting Defendant, Chieh Lin Tsai, it is not possible to use this evidence to meet the Plaintiff’s burden of proof. Accordingly, the Plaintiff had not met her burden of proof with regards to Chieh Lin Tsai.

Finally, the Plaintiff did not provide evidence regarding the elements.

The eighth cause of action for fraudulent conveyance has the following elements under section 3439.04:

1) the transfer was made with actual intent to hinder, delay, or defraud any creditor of the debtor.
2) the transfer was made without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:
A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.

The Plaintiff attempts to establish her eighth cause of action for fraudulent conveyance with the default and admissions made by the Defendants in default, e.g., the Plaintiff attempts to establish that the transfer was made with actual intent to hinder with the defaults. As discussed above, this does not meet the Plaintiff’s burden
Therefore, the Plaintiff has not met her burden of proof to establish her eighth cause of action for fraudulent conveyance.

The Plaintiff’s twenty-third cause of action for embezzlement includes the following elements:

1) a fiduciary relation arising because the Plaintiff entrusted property to the Defendant;
2) the fraudulent appropriation of the property by the Defendant.
Breceda v. Superior Court (2013) 215 Cal. App. 4th 934, 956-957.

Fraudulent intent is an essential element of embezzlement. Id.

The Plaintiff claims that Chieh Tsai embezzled money because he was paid $131,700 for wages and salary by H.J. Famous USA without providing services to H.J. Famous USA. H.J. Famous USA is a wholly owned subsidiary of J.T. Thompson USA.
The Plaintiff provides evidence that H.J. Famous USA paid $131,700 to Chieh Tsai as wages and salary (Separate Statement of Facts, the second fact labeled “Fact No. 66”). The Plaintiff provides evidence that Chieh Lin Tsai was not an employee of H.J. Famous USA (Separate Statement of Facts 67). Further, the Plaintiff provides evidence that the money was paid to Chieh Lin Tsai by his father, Chin Ming Tsai (Separate Statement of Facts 69). This does not establish the elements of embezzlement.
First, it is not evidence that the Plaintiff entrusted property to the Defendant. The Plaintiff’s evidence establishes that there was no relationship with the Defendant.
Second, it is not evidence of fraudulent appropriation by the Defendant. There is no evidence that the Defendant had any fraudulent intent. Instead, the evidence indicates that defendant’s father deposited the money into his account.
In the moving papers, the Plaintiff cites to the elements of the tort of conversion. However, the Plaintiff sought relief under the theory of embezzlement. The Plaintiff cited to the Penal Code sections that define embezzlement in paragraphs 245 to 249.
The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings. FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382. Since the pleadings delimit the issues, summary judgment cannot be granted or denied on grounds not raised by the pleadings. Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663.
Here, the Plaintiff pleaded a claim for embezzlement. The Plaintiff cannot obtain relief under a different theory such as conversion.

Further, even if the Plaintiff had pleaded a claim for conversion, the Plaintiff has not established the elements. The cause of action for conversion has the following elements:

1) Plaintiff had the right of ownership and possession to the property converted;
2) Defendant unlawfully took the property, and
3) the value of the property converted.
Taylor v. S & M Lamp Co. (1961) 190 Cal. App. 2d 700, 705.

The Plaintiff offers no evidence that the Defendant unlawfully took the property. Instead, the Plaintiff’s evidence indicates that the Defendant received the money from his father. The Plaintiff offers no evidence that the Defendant acted unlawfully. This does not meet the burden of proof.

Therefore, the Plaintiff has not met the burden of proof to establish her twenty-third cause of action for embezzlement.

Therefore, the Court will deny the Plaintiff’s motion for summary adjudication because the Plaintiff’s motion is flawed. The Plaintiff seeks summary adjudication against parties who are in default. Further, the Plaintiff attempts to use admissions by the defaulting parties to establish the elements of her claim against the non-defaulting Defendant.

RULING:
DENY motion for summary adjudication of the eighth and twenty-third causes of action.