Case Name: Sunming Cheung v. Gleaming International Company Limited, et al.
Case No.: 1-14-CV-272501

This action arises from an ownership dispute concerning real property located in Los Altos (the “Residence”). Plaintiff Sunming Cheung (“Plaintiff”) brings this action as administrator of the estate of Helen Yung Chang (“Helen”), his deceased wife, and as trustee of the Helen Yung Chang Revocable Trust. (Complaint, ¶ 1.)

Plaintiff alleges that Helen’s father, Peter Chi Yu Chang (“Peter”), incorporated defendant Gleaming Investment Company Limited (“GIC”) in Hong Kong in 1977 in order to hold title to the Residence as an “ancestral” home for the benefit of his children and grandchildren should they choose to live in California. (Complaint, ¶ 11.) Peter purchased the Residence in 1978, and GIC has held title since that time. (Id., ¶ 13.) Defendants Lilian Chang Wai (“Lilian”), Paul Chu Kong Chang (“Paul”), and Lincoln Chu Shing Chang (“Lincoln”), as well as Helen, are Peter’s children from his marriage to Yao Liang Chang (“Yao Liang”). (Id., ¶ 11.) When he purchased the Residence, Peter gifted a 15% interest in GIC to each of these four children and a 20% interest to Yao Liang, retaining 20% ownership himself. (Id., ¶¶ 12-14.) Peter’s interest passed to Paul’s son, defendant Chris Chao Yuan Chang (“Chris”), upon Peter’s death in 1989. (Id., ¶ 16.)

Helen passed away in 1998, and her beneficial and legal interests in GIC and the Residence passed to her heirs to be administered through her estate and trust. (Id., ¶ 17.) In 1999, Lilian, Yao Liang, Paul, and Lincoln’s shares in GIC were transferred to a British Virgin Islands entity, defendant Pacific Grace Limited (“PGL”). (Id., ¶¶ 7, 19.) Plaintiff is informed and believes that in 2002, Peter’s shares in GIC and corresponding interest in the Residence were purportedly transferred to PGL by Lilian and Helen’s shares and interest were purportedly transferred to Lilian individually; however, these transfers were unauthorized and without consideration. (Complaint, ¶ 21.) The wrongful transfers gave Lilian absolute control over GIC and the Residence in her individual capacity and through PGL, a shell. (Id., ¶ 22.) The defendants now intend to sell the Residence and keep the entire proceeds for themselves. (Id., ¶ 23.)

On October 29, 2014, Plaintiff filed this action for: (1) declaratory relief; (2) conversion; (3) breach of fiduciary duty; (4) imposition of constructive trust; (5) quiet title to real and personal property; and (6) injunctive relief. Currently at issue are GIC, Lilian, Paul, Chris, and PGL’s (collectively, the “Foreign Defendants”) motion to quash service of the summons and complaint or, in the alternative, to dismiss on the ground of inconvenient forum and Lincoln’s motion for judgment on the pleadings.

I. The Foreign Defendants’ Motions

A. Motion to Quash

1. Objections to Evidence

The Court issues the following rulings with respect to the Foreign Defendants’ objections to evidence submitted with Plaintiff’s opposition: Objection nos. 1 and 3 are SUSTAINED for lack of foundation. Objection no. 2 is SUSTAINED, given that both Lincoln’s and Peter’s statements are hearsay.

2. Analysis

Plaintiff argues that the Court has specific personal jurisdiction over each of the Foreign Defendants, as well as in rem jurisdiction over the action.

A court may assume specific jurisdiction over a defendant in an action if the following criteria are met: (1) the defendant purposefully avails itself of the forum state, (2) the action arises out of the defendant’s contacts with the forum state, and (3) the exercise of jurisdiction would be fair and reasonable. (Goehring v. Super. Ct., supra, 62 Cal.App.4th at p. 904.) Courts cannot exercise “in rem” jurisdiction over parties to an action unless the parties have the required minimum contacts with California. (Shaffer v. Heitner (1977) 433 U.S. 186, 207.) However, “when claims to … property itself are the source of the underlying controversy between the plaintiff and the defendant, it would be unusual for the State where the property is located not to have jurisdiction.” (Id.)

Here, it is undisputed that GIC holds title to the Residence, which is located in California. In his declaration, Plaintiff authenticates the corporation grant deed through which GIC took title, which is attached to his complaint as Exhibit 1. (Decl. of Sunming Cheung ISO Opp., ¶ 10.) Plaintiff also introduces evidence of Lilian’s and Paul’s interests in GIC (id. at ¶ 4, Ex. 1) and Chris’s direct interest in the Residence via Peter’s will (id. at ¶ 5, Ex. 2). Thus, Plaintiff has shown that all of the Foreign Defendants, with the exception of PGL, have asserted an interest in the California property at issue, whether through GIC or directly. This establishes GIC’s, Lilian’s, Paul’s, and Chris’s purposeful availment of California with respect to the Residence. Given that this action pertains to a dispute over the parties’ relative interests in the Residence, it arises from these contacts, and the Court’s exercise of jurisdiction is supported. (See Shaffer v. Heitner, supra, 433 U.S. at p. 207; see also Bell v. Am. Title Ins. Co. (1991) 226 Cal.App.3d 1589, 1611 [owners of California real property “have the requisite contacts with the state to satisfy the traditional minimum contacts test for personal jurisdiction”].) In addition, Plaintiff provides evidence that Lilian and her husband have traveled to California at least twice in the past five years and have visited the Residence, most recently in the summer of 2013. (Id., ¶ 11.) This evidence further supports the exercise of personal jurisdiction over Lilian in a dispute related to the Residence. Plaintiff thus meets his burden to establish facts supporting the Court’s exercise of jurisdiction over the Foreign Defendants other than PGL.

In reply, the Foreign Defendants characterize this dispute as one concerning Plaintiff’s ownership in GIC, a Hong Kong corporation, rather than his claim to the Residence. However, Plaintiff alleges that his ownership in GIC entitles him to a proportional ownership stake in the Residence. The Foreign Defendants cite no authority supporting the proposition that the Court lacks jurisdiction over individuals and entities who have asserted a claim to real property located in this county merely because title is held by a foreign corporation.

Further, Plaintiff provides evidence that the Foreign Defendants committed tortious activities concerning Plaintiff’s ownership in GIC, aiming to harm Plaintiff in California with respect to his interest in the Residence. (See Pavlovich v. Super. Ct. (DVD Copy Control Association, Inc.) (2002) 29 Cal.4th 262, 273 [evidence showing a defendant aimed tortious conduct at California supports the exercise of specific personal jurisdiction].) Plaintiff provides GIC’s annual return dated December 28, 2002. (See Cheung Decl., ¶ 7, Ex. 4.) The return shows a transfer of Helen’s GIC shares to Lilian. The return itself reflects that Helen lived in Saratoga, California at the time her shares were transferred, and GIC’s title to the Residence supports the conclusion that the aim of the transfer was to impart control over the Residence. This evidence shows the Foreign Defendants’ purposeful direction of tortious activities towards California, providing a further basis for the exercise of jurisdiction.

In light of this showing, it is the Foreign Defendants’ burden to establish that exercise of jurisdiction over GIC, Lilian, Paul, and Chris would be unreasonable. (See Goehring v. Super. Ct., supra, 62 Cal.App.4th at p. 903; Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477 [“[W]here a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that … would render jurisdiction unreasonable.”].) The Foreign Defendants introduce virtually no evidence to that end, relying solely on the fact that they are located abroad. (See Decl. of Lilian Chang Wai ISO Mot. to Quash, ¶¶ 2-3.) Considering the factors relevant to the fairness inquiry (see Fisher Governor Co. v. Super. Ct. (Prestwich) (1959) 53 Cal.2d 222, 225-226 [listing factors]), it would appear that evidence in this case will be located in both California and Hong Kong, as well as in Ontario, Canada, given that parties to the case are located in each of these places. Consequently, this factor is neutral. Relatedly, certain parties will be burdened regardless of where the litigation proceeds. Given that two individual parties reside in California and two individual parties reside in Ontario, Canada, while only one individual defendant and two corporate defendants are located in Hong Kong, California would appear to be a less burdensome forum overall. This is particularly true in light of Plaintiff’s evidence that Lilian, the individual Hong Kong defendant, does travel to California to visit the Residence. As discussed further below, it is unclear whether a suitable alternative forum exists, which favors the Court’s exercise of jurisdiction. Finally, California has a strong interest in adjudicating disputes related to real property located within its borders. (See Shaffer v. Heitner, supra, 433 U.S. at p. 208 [“[t]he State’s strong interests in assuring the marketability of property within its borders and in providing a procedure for peaceful resolution of disputes about the possession of that property would also support jurisdiction” over cases pertaining to property located in the state].) Consequently, the Court finds that it would be fair to exercise jurisdiction over GIC, Lilian, Paul, and Chris.

Based on the available evidence presented by the parties, the motion to quash is consequently DENIED as to those defendants.

On the other hand, Plaintiff introduces no evidence whatsoever concerning PGL’s status or connection to this case. Based on the available evidence presented by the parties, the motion to quash is consequently GRANTED as to PGL.

B. Motion to Dismiss for Inconvenient Forum

“In determining whether to grant a motion based on forum non conveniens, a court must first determine whether the alternate forum is a ‘suitable’ place for trial. If it is, the next step is to consider the private interests of the litigants and the interests of the public in retaining the action for trial in California.” (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751.) The defendant bears the burden to show that the doctrine applies. (See National Football League v. Fireman’s Fund Ins. Co. (2013) 216 Cal.App.4th 902, 926.) Where, as here, a plaintiff is a California resident, there is a “strong presumption” in favor of the plaintiff’s choice of forum. (Ibid.)

An alternative forum is suitable where it would have jurisdiction over a potential action and such action would not be barred by the statute of limitations. (See Guimei v. General Elec. Co. (2009) 172 Cal.App.4th 689, 696.) Here, the Foreign Defendants argue that the courts in China would have jurisdiction over the parties and issues in dispute. In support of this argument, they offer evidence that both GIC and PIC have their principal places of business in Hong Kong, and the individual parties, including Plaintiff, are all from Hong Kong originally and either continues to live in China or travel there frequently. (See Chang Wai Decl., ¶¶ 2-3.) However, the Foreign Defendants cite no authority supporting the proposition that a Chinese court could exercise jurisdiction over the parties based on these circumstances. In particular, they do not support their argument that a Chinese court would have jurisdiction over Chris and Paul, who reside in Ontario, Canada. (See Mot. to Quash, p. 2.; Cheung Decl., ¶ 11.) Where there are multiple defendants, it must be shown that each of the defendants is subject to personal jurisdiction in the alternative forum for it to be deemed a suitable alternative. (See American Cemwood Corp. v. American Home Assur. Co. (2001) 87 Cal.App.4th 431, 440.) The Foreign Defendants have thus failed to establish that a Chinese court would have jurisdiction over them, and they do not even address whether an action by Plaintiff would be timely if filed in China.

The Foreign Defendants thus have not established that a suitable alternative forum exists, and their motion to dismiss for inconvenient forum is DENIED.

II. Lincoln’s Motion

A. The First Cause of Action for Declaratory Relief

Lincoln urges that judgment should be entered as to the first cause of action because any actual controversy between the parties pertains to Plaintiff’s ownership in GIC rather than the Residence. This argument appears to pertain to the Court’s jurisdiction over this action, as opposed to the issue of whether the first cause of action states a claim, and is rejected for the reasons already discussed with respect to the Foreign Defendants’ motion.

In addition, Lincoln argues that if the Court grants the Foreign Defendants’ motion, necessary and indispensable parties to the action will have been dismissed, and the action should not proceed against Lincoln alone. As an initial matter, nonjoinder of parties is not appropriately raised by a motion for judgment on the pleadings where, as here, the moving party has answered without raising this objection. (See Code Civ. Proc., § 430.80 [objections waived by failure to object in demurrer or answer].) Furthermore, here, the Foreign Defendants’ motion has largely been denied. In particular, it was denied as to GIC, the only party Lincoln contends is indispensable. Consequently, the action will not proceed without indispensable parties.

Lincoln’s arguments as to the first cause of action thus lack merit, and his motion is DENIED as to this claim.

B. The Second Cause of Action for Conversion and the Fourth Cause of Action for Constructive Trust

Lincoln contends that Plaintiff’s second cause of action fails to state a claim against him, because Plaintiff has not alleged any facts supporting the conclusion that Lincoln interfered with Helen’s shares in GIC. However, Plaintiff alleges that Lilian acted as Lincoln’s agent in converting the shares. (Complaint, ¶ 9.) This conclusion is supported by Plaintiff’s additional allegations that Lilian and Lincoln both indicated they were considering selling the Residence (id., ¶ 21) and Defendants as a group intend to use their control over GIC to sell the Residence and keep the entire proceeds for themselves (id., ¶ 23). These allegations are more than adequate to state a claim against Lincoln on an agency theory. (See City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 212-213 [on demurrer, “[a]n allegation of agency is an allegation of ultimate fact that must be accepted as true”]; Garton v. Title Ins. & Trust Co. (1980) 106 Cal.App.3d 365, 376 [“Generally, an allegation of agency is an allegation of ultimate fact and is, of itself, sufficient to avoid a demurrer.”].)

Similarly, Lincoln urges that Plaintiff’s fourth cause of action fails to state a claim because no facts are alleged concerning Lincoln’s wrongful acquisition or detention of Helen’s shares. (See Burlesci v. Petersen (1998) 80 Cal.Rptr.2d 704, 708 [wrongful acquisition or detention of the res by the defendant is a required element of a claim for constructive trust].) This argument also fails in light of Plaintiff’s agency allegations.

Consequently, the motion for judgment on the pleadings is DENIED as to the second and fourth causes of action.

C. The Third Cause of Action for Breach of Fiduciary Duty

Lincoln argues that the third cause of action does not state facts supporting the conclusion that he owed or breached a fiduciary duty to Plaintiff. This argument has merit, given that the complaint alleges that Lincoln, like Plaintiff, has always been a minority shareholder of GIC and that it was Lilian and her husband Donald who owed Plaintiff fiduciary duties as directors of GIC. (See Complaint, ¶¶ 19, 23, 37.)

In opposition to Lincoln’s motion, Plaintiff argues that Lilian and Donald “and the subsequent directors of GIC” owed him fiduciary duties. However, Plaintiff does not allege or argue that Lincoln was ever a director of GIC. Plaintiff also argues in general terms that his claims against Lincoln are stated on an agency theory. However, he provides no support for the proposition that duties owed by an agent directly to a fiduciary can somehow be imputed to a principal.

The motion for judgment on the pleadings is thus GRANTED WITH 30 DAYS’ LEAVE TO AMEND as to the third cause of action.

D. The Fifth Cause of Action for Quiet Title and the Sixth Cause of Action for Injunctive Relief

Plaintiff seeks to quiet title to the Residence and possibly to Helen’s GIC shares through his fifth cause of action. (See Complaint, ¶¶ 44-48 [setting forth Plaintiff’s interest in both the shares and two parcels of real property comprising the Residence; stating that Defendants claim an adverse interest as to “both of the above-described properties”].)

Lincoln contends that Plaintiff fails to state a claim as to the Residence because he alleges that GIC holds legal title to the Residence, and claims an interest therein only through his interest in GIC. However, an action to quiet title may be brought to establish any kind of legal interest in real property. (See Code Civ. Proc., § 760.010, subd. (a) [claim “includes a legal or equitable right, title, estate, lien, or interest in property or cloud upon title”].) This argument consequently fails.

Lincoln also urges that Plaintiff fails to allege that Lincoln claims any interest in Helen’s shares in GIC. As already discussed, however, Plaintiff states a claim against Lincoln based upon Lincoln’s claim to the Residence, and the Court should not grant Lincoln’s motion as to a portion of a claim. (PH II, Inc. v. Super. Ct. (Ibershof, et al.) (1995) 33 Cal.App.4th 1680, 1682 [a demurrer does not lie as to a portion of a cause of action].)

Finally, Lincoln argues that the sixth cause of action fails because the fifth cause of action fails. As already discussed, the fifth cause of action states a claim against Lincoln, and this argument consequently lacks merit.

Lincoln’s motion is accordingly DENIED as to the fifth and sixth causes of action.