Case Name: Greenleaf Mutual Benefits Assoc. v. Oh, et al.
Case No.: 1-14-CV-261230

Plaintiff Greenleaf Mutual Benefits Association (“Greenleaf”) asserts claims for: (1) declaratory relief, (2) conspiracy to commit fraud, (3) conversion, (4) constructive trust, (5) unjust enrichment, and (6) money had and received. Greenleaf alleges that defendants Tae W. Oh and the Stanzler Law Group (collectively, “Defendants”) filed an interpleader (1-12-CV-234143 [“Kang Action”]) in its name against a group of its members with adverse interests (“the Faction”), but actually represented the Faction and—as part of a conspiracy with the Faction to wrongfully obtain funds from its bank account—submitted a fraudulent stipulated settlement to the court without the knowledge or consent of Greenleaf or its counsel Eugene Flemate (“Flemate”). (Compl., ¶¶ 8-17, 25-30, 36-48, & Exs. 1 & 2.)

Defendants move for judgment on the pleadings for failure to state a claim and make a request for judicial notice in support thereof. (See Code Civ. Proc. [“CCP”], § 438.) Greenleaf makes a request for judicial notice in support of its opposition.

Defendants’ request for judicial notice of four minute orders from the Kang Action and the complaint in Greenleaf’s action against Flemate (1-14-CV-269052 [“Flemate Action”]) is GRANTED. (See Evid. Code, § 452, subd. (d); see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn.2 [“Shamrock Foods”]; see also Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882; see also Fremont Indemnity Co. v. Fremont General Co. (2007) 148 Cal.App.4th 97, 114 [hearing cannot be turned into an evidentiary hearing].)
Greenleaf’s request for judicial notice of a prior tentative ruling (“Prior Tentative”) and a prior order (“Prior Order”) is GRANTED. (See Evid. Code, § 452, subd. (d); see also Shamrock Foods, supra, at p. 422, fn.2.)

Greenleaf argues that the motion should be summarily denied because Defendants re-assert issues raised in a prior demurrer. (See CCP, § 438, subd. (g)(1).) Although the Court indicated in the Prior Tentative that it would overrule Defendants’ demurrer, a tentative ruling is not final. (Cal. Rules of Court, rule 3.1308(a).) Due to a factual issue raised by Defendants at the hearing, the Court took the matter off calendar. As a result, the Court has not overruled the demurrer, and CCP section 438 does not preclude this motion. Greenleaf further contends that Defendants’ arguments are the same unpersuasive arguments they raised in support of other matters, and thus the Court should summarily deny the motion to “discourage” additional “frivolous motions.” Greenleaf cites no legal basis for the Court to summarily deny the motion for this reason. Therefore, the Court will consider the substantive merits of the motion.

Defendants argue that Greenleaf’s claims are barred by the Flemate Action, the Kang Action, the litigation privilege, the fact that the Kang Action was an interpleader, and the agency-immunity rule; and also contends that Greenleaf does not allege sufficient facts to state claims for conspiracy to commit fraud and conversion.

I. The Flemate Action

Since Defendants assert that the Flemate Action “estops” Greenleaf’s claims, it is presumed that they argue that the claims are barred by judicial estoppel. Judicial estoppel precludes a party from taking a position where it has taken a totally inconsistent position in a prior judicial proceeding, and the first position was successful—i.e. the tribunal adopted the position as true—and not taken due to ignorance, fraud, or mistake. (Minish v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 448-449 [“Minish”].) Judicial estoppel typically cannot “be determined on a motion for judgment on the pleadings” unless the facts pleaded and judicially noticed indicate “that a court has adopted or accepted as true the inconsistent position.” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1018-1019; Swahn Group, Inc. v. Segal (2010) 183 Cal.App.4th 931, 844.) Since no court has adopted a position taken in the Flemate Action, judicial estoppel does not apply.

Defendants further insist that allegations in the complaint are inconsistent with “admissions” alleged in the Flemate Action and should be disregarded. This argument is unpersuasive for several reasons. First, the facts alleged in the Flemate Action and in the complaint are consistent. (See Prior Order, p. 3:20-25.) Second, even if the allegations were inconsistent, allegations in the Flemate Action would not be conclusive in this case. (See Minish, supra, at p. 456 [judicial admission is conclusive only in the same case]; see also Prior Order, p. 3:23-24.) Third, Defendants reliance on Manti v. Gunari (1970) 5 Cal.App.3d 442, 449 (“Manti”) is misguided, as the proposition that courts must accept as true the “allegations which bear most strongly against the pleader” only applies to facts alleged in support of the same claim. (Manti, supra, at pp. 449-450.) Although allegations may be disregarded if they contradict allegations in an earlier case (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877), Greenleaf filed the Flemate Action after filing this complaint. Finally, while allegations in another case may be used as evidence, such evidence is immaterial. (See Com. on Children’s Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 213–214; see also Schabarum v. Cal. Leg. (1998) 60 Cal.App.4th 1205, 1216 [“judgment on the pleadings must be denied where there are material factual issues that require evidentiary resolution”].) Thus, Defendants’ arguments pertaining to the Flemate Action lack merit.

II. The Kang Action

Defendants argue that the claims are barred by collateral estoppel and/or res judicata. Res judicata and collateral estoppel share three elements: (1) a claim or issue in the present proceeding is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. (Zevnik v. Super. Ct. (2008) 159 Cal.App.4th 76, 82-83.) While the decision in the Kang Action was final and on the merits, the only claim litigated in that case was the interpleader. Here, Greenleaf asserts claims for conspiracy, declaratory and equitable relief, and conversion. Since nothing in the stipulated settlement of the Kang Action suggests that the parties intended to preclude all possible claims, an element of res judicata is absent. (See Landeros v. Pankey (1995) 39 Cal.App.4th 1167, 1172 [res judicata may bar claims not raised in litigation if a stipulated settlement manifests the parties’ intent to settle all possible claims].) Likewise, an element of collateral estoppel cannot be established because issues concerning conspiracy, conversion, and fraud were not raised, submitted, or decided in the Kang Action. (See Hernandez v. City of Pomona (2009) 46 Cal.4th 501, 511 [an issue was actually litigated if it was properly raised, submitted, and determined].) Accordingly, neither res judicata nor collateral estoppel bars Greenleaf’s claims.

In any event, res judicata and/or collateral estoppel would only apply if Greenleaf was a party or in privity with a party to the Kang Action, and Defendants concede that Greenleaf was not a party to that case. Defendants contend that Greenleaf is in privity with a party because it retained Flemate, but since Flemate was not a party to the Kang Action, whether Greenleaf was in privity with counsel is of no consequence. In reply, Defendants insist that Greenleaf is in privity with the Faction because they share members. However, privity cannot be based solely on such a relationship. (See Dillard v. McKnight (1949) 34 Cal.2d 209, 214 [partners are not privity for purposes of res judicata based solely on their status as partners].) Instead, privity “involves a person so identified in interest with another that he represents the same legal right”; “[d]ue process requires that the nonparty have had an identity or community of interest with, and adequate representation by,” a party, and circumstances must be such that the nonparty “should reasonably have expected to be bound by the prior adjudication.” (Zaragosa v. Craven (1949) 33 Cal.2d 315, 318; Lynch v. Glass (1975) 44 Cal.App.3d 943, 948.) Greenleaf alleges that the Faction has adverse interests and that its interests were not represented in the Kang Action. Thus, privity cannot be established. Accordingly, res judicata and collateral estoppel do not bar Greenleaf’s claims.

III. Litigation Privilege, Effect of an Interpleader, and Agency-Immunity

The litigation privilege bars claims based on communications made in a judicial proceeding. (Civ. Code, § 47; Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241 [“Action”].) The “threshold issue” is whether the gravamen of the claim is based on communicative or non-communicative conduct. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1058.) The gravamen of a claim for conspiracy to enforce a judgment obtained by perjured statements is non-communicative. (Id., at p. 1059.) Likewise, the gravamen of a claim for conspiracy to convert funds by a fraudulent settlement is non-communicative where the plaintiff alleges that the defendants used a fraudulent settlement as a means to access its account. (Optional Capital, Inc. v. DAS Corp. (2014) 222 Cal.App.4th 1388, 1395-1397, 1401-1405 [“Optional”].) Defendants insist that Greenleaf’s claims are based on communications to the court. To the contrary, the only connection between the communications in the Kang Action and Greenleaf’s claims is that the settlement was used as a device to persuade Greenleaf’s bank to release its funds as part of a conspiracy. Thus, the basis of Greenleaf’s claims is an independent, non-communicative, wrongful act. The litigation privilege therefore does not apply.

Next, Defendants argue that all tort claims arising from the Kang Action are barred because the Kang Action was an interpleader. However, Defendants’ assertion presupposes a valid interpleader. It is alleged that the Kang Action was a device used in a conspiracy to fraudulently settle an unauthorized action in Greenleaf’s name, and these allegations are accepted as true for purposes of judgment on the pleadings. (See Shea Homes, supra, at p. 1254.) Accordingly, Defendants’ argument is not well-taken.

Furthermore, Defendants contend that the complaint is barred by the agency-immunity rule because “an attorney acting only within the scope of his or her official duties who is not personally bound by the duty violated may not be held liable for civil conspiracy even though he or she may have participated in the agreement underlying the injury.” (Defendants’ P&A, p. 9:4-9, citing Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 825 [“Berg”].) However, agency-immunity does not protect against fraud, since “attorneys, like anyone else, have an independent duty to avoid” committing fraud. (Berg, supra, at p. 825.) Given that Defendants allegedly conspired to commit fraud, the agency-immunity rule does not apply.

IV. Sufficiency of Claims for Conspiracy to Commit Fraud & Conversion

Defendants assert that Greenleaf has not stated a claim for conspiracy to commit fraud because it does not specifically allege facts about the false statements. To the contrary, Greenleaf particularly pleads facts about the false statements by attaching the allegedly false statements to the complaint. (Compl., Exs. 1 & 2; see also Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 638 [elements of fraud].) In any event, the claim is for conspiracy to commit fraud, not actual fraud. Conspiracy requires that the conspirators have actual knowledge that a tort is planned, concur in the tortious scheme with knowledge of its unlawful purpose, and intend to aid in its commission. (Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1582 [“Kidron”].) Greenleaf alleges that that Defendants knew of the planned tort to obtain a fraudulent settlement, concurred in the scheme with knowledge of the unlawful purpose, and intentionally aided in the commission. Thus, Greenleaf adequately states a claim for conspiracy to commit fraud.

Defendants also argue that Greenleaf has not stated a claim for conversion because they cannot be liable for filing an interpleader. As discussed above, this assertion lacks merit. Moreover, Greenleaf adequately states a claim for conversion based on conspiracy. (See Kidron, supra, at p. 1582; see also Optional Capital, supra, at p. 1401 [elements of conversion].)
Lastly, Defendants contend that they represented the Faction, not Greenleaf, and “[n]on-clients are generally not entitled to bring an action against attorneys.” (Defendants’ P&A, p. 3:6-9, citing Moore v. Anderson Zeigler Disharoon Gallagher & Gray P.C. (2003) 109 Cal.App.4th 1287, 1294 [“Moore”].) However, this proposition only applies to malpractice claims. (Moore, supra, at p. 1294.) Defendants’ arguments therefore lack merit.

V. Conclusion

In light of the foregoing, Defendants’ motion for judgment on the pleadings is DENIED.