Case Number: EC057603 Hearing Date: May 16, 2014 Dept: B

23. EC057603
SUNHEE K. WALL v JUNG SE PARK, ET AL
Demurrer

The Plaintiff obtained a judgment in bankruptcy court of $477,000 plus prejudgment interest against the Defendant, Jeff Lee. The Complaint alleges that Jeff Lee has transferred assets to Jung Park or JSP Entertainment, Inc. in an effort to hinder, delay, or defraud the Plaintiff in the Plaintiff’s efforts to enforce a judgment against Jeff Lee. The Plaintiff brought this action to set aside these fraudulent transfers and to seek damages.

THE CAUSES OF ACTION IN SECOND AMENDED COMPLAINT are:
1) Intentional Fraudulent Transfer
2) Constructive Fraudulent Transfer
3) Constructive Fraudulent Transfer
4) Express Trust
5) Resulting Trust
6) Tortious Acts to Hinder, Deter, and Defraud Creditor
7) Fraudulent Transfers/Conspirator Liability

Trial is set for September 8, 2014.

This hearing concerns the demurrer of the Defendants, K&T Enterprises, Heeun Lee, and Steve Kim, to each cause of action in the Second Amended Complaint. These Defendants were identified as the following DOE Defendants:

1) DOE Defendant 1 – K&T Enterprises;
2) DOE Defendant 4 – Heeun Lee; and
3) DOE Defendant 5 – Steve Kim.

1. Demurrers to First Through Sixth Causes of Action
First, the Defendants demurrer to the first through sixth causes of action on the ground that the Court granted their judgment on the pleadings to each of these causes of action without leave to amend. On November 27, 2013, the Court heard the Defendants’ motion for a judgment on the pleadings. The Court granted the motion without leave to amend with regards to the first, second, third, fourth, and fifth causes of action. The Court granted leave to amend with regards to the sixth and seventh causes of action.
On January 15, 2014, the Court heard the Defendants’ demurrer to the First Amended Complaint. The Court sustained the demurrer without leave to amend with regards to the sixth cause of action. The Court granted leave to amend only as to the seventh cause of action. Accordingly, when the Plaintiff filed the Second Amended Complaint, she had leave to plead only the seventh cause of action at these Defendants.
A review of the first through sixth causes of action in the Second Amended Complaint reveals that they are directed at all the Defendants. Since the Plaintiff cannot bring these claims against the moving Defendants, the Court sustains the demurrers to the first through sixth causes of action without leave to amend.
The Plaintiff acknowledges in her opposition that the first through sixth causes of action should not be directed at the Defendants. The Plaintiff fails to explain why she made the same mistake that the Court noted in her First Amended Complaint on January 15, 2014 (see minute order, pages 4 to 5).

Accordingly, the Court sustains the demurrers to the first through sixth causes of action without leave to amend.

2. Demurrer to Seventh Cause of Action for Fraudulent Transfer/Conspirator Liability
The Defendants argue that this cause of action fails to state sufficient facts and that the Plaintiff’s attempt to plead this as a fraudulent transfer claim is barred. However, a review of the cause of action reveals that it is a conspiracy cause of action in which the alleged wrongful act is a fraudulent transfer. As noted below, a civil conspiracy cause of action must be based on a civil wrong. Further, a cause of action for conspiracy can be based on the civil wrong of a fraudulent transfer. Monastra v. Konica Business Machs, U.S.A. (1996) 43 Cal. App. 4th 1628, 1645 (finding that individuals who participated in a conspiracy to hinder and delay a creditor through fraudulent transfers were jointly liable with the person making the fraudulent transfers).
A cause of action for conspiracy must include the following:

1) the formation and operation of the conspiracy;
2) the wrongful act or acts done pursuant thereto; and
3) the damage resulting.
Unruh v. Truck Insurance Exchange (1972) 7 Cal. 3d 616, 631.

A civil conspiracy does not give rise to a cause of action unless a civil wrong has been committed resulting in damage; the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity. Id.
The Plaintiff’s conspiracy theory is that Jung Park developed a scheme to hide his true interest in the business at the premises by fraudulently transferring the collateral and Karaoke business to straw men and then to pretend to have himself evicted from the premises so that the landlord would enter into a new lease with the straw men. The straw men are the moving Defendants.
The Plaintiff alleges in paragraph 60 that the Defendants agreed to conspire with Jung Park to defraud the Plaintiff in accordance with Jung Park’s scheme to hide his true interest in the business through the fraudulent transfer. This is sufficient to plead the element of the formation of the conspiracy.
In paragraph 62, the Plaintiff alleges that Jung Park and JSP fraudulently transferred property to the Defendants. In paragraph 65, the Plaintiff alleges that the Defendants received the property with knowledge that the actual intent for the transfer was to hinder, defraud, or delay the Plaintiff in the recovery of amounts owed by Park and JSP. The Plaintiff alleges in paragraph 66 that the Defendants obtained the premises without having “to pay a fair, or any, consideration”. The Plaintiff alleges in paragraph 62(g), that the moving Defendants operated a Karaoke business that was ostensibly owned by Heeun and Kim, but that the business was owned and operated for the benefit of Jung Park.
These allegations plead that the Defendants assisted Jung Park in the fraudulent transfer by receiving the property with the knowledge that Jung Park was making the transfer with the intent to defraud the Plaintiff. Further, the allegations demonstrate that the Defendants assisted Jung Park by receiving the premises without paying fair or any consideration and by operating a business for the benefit of Jung Park. This pleads the wrongful acts done pursuant to the conspiracy.
Finally, in paragraph 67, the Plaintiff alleges that as a result, she has been damaged and that the damages are not less than $100,000. This pleads the damages resulting from the conspiracy.

Therefore, the Court overrules the demurrer to the seventh cause of action because the Plaintiff has pleaded sufficient facts to constitute a claim for conspiracy in which the Defendants are liable to the Plaintiff.