Case Name: Silicon Valley Community Healthcare Resource, Inc. v. Ellen Kim, et al.

Case No.: 1-13-CV-254815

Demurrer to the complaint by defendants Hsiao-Yen Chung and Chi-Ping Chung

Defendants’ demurrer to the first cause of action for conversion, second cause of action for fraud and deceit, third cause of action for breach of confidential relationship, and fourth cause of action for constructive trust on the ground of uncertainty is OVERRULED. A demurrer based on uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) A demurrer for uncertainty should only be sustained when the complaint is so bad that the defendant cannot reasonably respond. (Id.) Here, the causes of action are certain enough to allow Defendants to understand the nature of the allegations and the theory of liability to fashion an appropriate response.

Defendants’ demurrer to the first cause of action for conversion on the ground of failure to state sufficient facts is OVERRULED. “Conversion is the wrongful exercise of dominion over the property of another.” (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 543.) The elements of a conversion claim are: (1) plaintiff’s ownership or right to possession of tangible personal property at the time of conversion; (2) defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. (Mendoza v. Rast Produce Co. Inc. (2006) 140 Cal.App.4th 1395, 1405.) Defendants argue that they could not have converted the $1,270,000 for their own personal use because they are not the owners of defendant International Community Healthcare Resource, Inc. (“International”). Defendants cite no authority supporting their argument that a defendant utilizing another company to embezzle money must be the owners of that other company. Plaintiff sufficiently alleges that Defendants transferred/converted the funds and sent the money to International for their own personal use. (Complaint, ¶ 10, 13.) Defendants also contend that there are no allegations explaining how Chi-Ping Chung (“Ping”) converted funds. This contention is belied by the conspiracy allegations in the complaint. To render defendant liable for wrongs committed by another, the complaint must allege: (1) defendant had knowledge of and agreed to both the objective and course of action to injure the plaintiff; (2) the wrongful act pursuant to such agreement; and (3) resulting damage to plaintiff. (Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 47.) Plaintiff alleges that Ping acted as an agent and/or employee of, and in concert with, the other defendants in embezzling funds. (Complaint, ¶ 9, 16.) Plaintiff further alleges that Ping knowingly and willfully conspired and agreed with the other defendants to embezzle $1,270,000 from Plaintiff, and cooperated with the other defendants in the embezzlement, which damaged Plaintiff in the sum of $1,270,000. (Id., ¶¶ 14, 17, 19.)

Defendants’ demurrer to the second cause of action for fraud and deceit on the ground of failure to state sufficient facts is OVERRULED. Defendants aver that no fiduciary relationship or confidential relationship existed with Ping to maintain this claim. Defendants cite no authority to support their argument that a fiduciary/confidential relationship must exist to maintain this cause of action. In any event, Plaintiff alleges that a fiduciary relationship existed between Hsiao-Yen Chung (“Angela”) and Plaintiff, and that Ping acted as Angela’s agent. (Complaint, ¶¶ 9, 23-24.) Defendants’ contention that the claim is not pled with the requisite specificity because all of the individual defendants are lumped together is misplaced. Plaintiff clearly sets forth that Angela controlled Plaintiff’s books and account, she concealed the withdrawal of funds from Plaintiff’s bank account, and did so on certain dates and in particular amounts. (Id., ¶¶ 10, 17, 23-25, Ex. A.) Defendants’ remaining argument regarding conspiracy as to Ping fails for the same reason detailed above.

Defendants’ demurrer to the third cause of action for breach of confidential relationship on the ground of failure to state sufficient facts is OVERRULED. As noted, the conspiracy allegations as to Ping are sufficiently pled.

Defendants’ demurrer to the fourth cause of action for constructive trust on the ground of failure to state sufficient facts is OVERRULED. Defendants maintain that they do not have the embezzled funds because the complaint alleges that the money was transferred to International. As detailed, Plaintiff sufficiently alleges that Defendants transferred/converted the funds and sent the money to International for their own personal use. (Complaint, ¶ 10, 13.)