Case Name: Ampro Systems, et al. v. Da Guan, et al.

Case No.: 17CV311868

I. Factual and Procedural Background

This is an embezzlement action filed by plaintiffs Ampro Systems, Inc. (“Ampro”) and Consolitech Electronics, Inc. (“Consolitech”) (collectively “Plaintiffs”) against defendants Charlene Qian (“Qian”), Xian Li aka James Li (“Li”), Thomas Zdimal, Kent Wang, Kathleen Wang, Xiao Rong Zhou, Ruo (Laura) Li, Zhengmao Zhu, LXRZ, Inc., Firetide, Inc. (“Firetide”), George Zhu (“Zhu”), Xin Liu (“Liu”), and Da Yong Guan (“Guan”) (collectively “Defendants”).

As alleged in the Third Amended Complaint (“TAC”), Ampro and Consolitech are circuit board assembly and manufacturing companies owned by Elliot Wang (“Wang”) and located in Fremont, CA. (TAC, ¶¶ 1-2, 23.) As Wang lived in Taiwan, he relied on individuals in California to run his companies. (Id. at ¶ 24.) Around 2004 and 2005, Wang hired Qian and Li (“Employee Defendants”) to manage Plaintiffs and entrusted all operations to them. (Id. at ¶ 25-26.) The Employee Defendants, however, abused the trust and discretion they had been given. (Id. at ¶ 27.) Among other things, they made numerous unauthorized payments to themselves, Qian’s family members (defendants Thomas Zdimal, Kent Wang, Kathleen Wang), Li’s family members (defendants Rong Zhou, Ruo (Laura) Li, and Zhengmao Zhu), and Li’s sham corporation (LXRZ, Inc.); used company funds for personal expenses such as vacations and a home remodel; misappropriated a company-wide manufacturing bonus instead of distributing it to Plaintiffs’ employees; made unauthorized contributions to their retirement and life insurance accounts; and misused Plaintiffs’ unemployment insurance account. (Id. at ¶¶ 28-29, 31-32.) They also conspired with Zhu, an employee of Firetide, to provide favorable pricing to Firetide and kickbacks to Zhu through straw persons Liu and Guan, and arranged to use Consolitech funds to remodel the private residence of Zhu and Liu. (Id. at ¶ 33.)

Wang received regular financial reports from the Employee Defendants but these did not indicate theft of any kind and he had no reason to question their loyalty. (Id. at ¶ 43.) In August 2015, however, red flags were raised when a consultant hired by Wang in Taiwan traveled to California, inquired about the manufacturing bonuses he saw on the financial reports, and was met with resistance from the Employee Defendants regarding his inquiries. (Id. at ¶¶ 44-45.) This resulted in a second trip by the consultant to California, which led to an investigation that uncovered the theft. (Ibid.)

The TAC asserts nine causes of action for: (1) conversion; (2) breach of fiduciary duty; (3) fraud by intentional misrepresentation; (4) fraud by concealment; (5) negligent misrepresentation; (6) violation of Penal Code section 496; (7) money had and received; (8) negligence; and (9) breach of contract.

Currently before the Court is: (1) Qian, Thomas Zdimal, Kent Wang, and Kathleen Wang’s (collectively “Qian Defendants”) demurrer to the TAC; (2) Guan, Zhu and Liu’s (collectively “Firetide Defendants”) demurrer to the TAC; and (3) the Firetide Defendants’ motion to strike portions of the pleading. Both demurrers are accompanied by requests for judicial notice. Plaintiffs oppose both demurrers and the motion to strike.

II. Requests for Judicial Notice

The Qian Defendants and Firetide Defendants seek judicial notice of Plaintiffs’ complaint, first amended complaint (“FAC”), second amended complaint (“SAC”), and a declaration by Wang filed in this case in support of Plaintiffs’ prior application for a writ of attachment.

These documents are judicially noticeable under Evidence Code section 452, subdivision (d), which permits judicial notice of court records. Moreover, they are relevant to resolving issues raised in the demurrers. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [a precondition to taking judicial notice is that the matter to be noticed is relevant to an issue in the case].) As such, they are proper subjects of judicial notice.

Accordingly, the requests for judicial notice are GRANTED as to all the documents.

III. Demurrer by Qian Defendants

The Qian Defendants demur to each cause of action and advance arguments applicable to all claims as well as arguments specific to individual ones. The Court will first address the contentions applicable to all causes of action.

A. Arguments Applicable to All Claims

The Qian Defendants argue each cause of action is barred by the statute of limitations. They also allege Plaintiffs’ conspiracy and aiding and abetting allegations are insufficiently pled.

Preliminarily, the Qian Defendants do not adequately state the grounds for their demurrer relative to these issues. Code of Civil Procedure section 430.60 states that a demurrer must distinctly specify the grounds on which it is based. In the Qian Defendants’ demurrer, they state they are demurring to each cause of action because Plaintiffs “fail[] to adequately plead around the statute of limitations” and “fail[] to plead specific facts to support conspiracy and aiding and abetting.” (Dem. at p. 2:7-8, 2:26-27.) But these are not enumerated grounds for demurrer. (See Code Civ. Proc., § 430.10.) They cite Code of Civil Procedure section 430.10, subdivisions (e) and (f), which recite the grounds of failure to state sufficient facts and uncertainty, in connection with the above statements but do not affirmatively state they are demurring on these grounds. With that said, because subdivisions (e) and (f) are referenced, the Court will construe the Qian Defendants’ arguments as being advanced in support of the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty.

With respect to the ground of uncertainty, the Qian Defendants do not address it. The standard for finding a pleading uncertain is that the allegations of the pleading must be so unintelligible the defendant cannot reasonably respond, i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) The Qian Defendants do not address this standard in any way. To the extent they believe the arguments advanced support both the grounds of uncertainty and failure to state sufficient facts, they are mistaken. It is well-established a “[special] demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.” (Bacon v. Wahrhaftig (1950) 97 Cal.App.2d 599, 605; People v. Lim (1941) 18 Cal.2d 872, 883.) Here, the statute of limitations argument goes to the issue of whether the claims have been adequately stated. (See, e.g., E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315 (“E-Fab”).) As for the contention regarding the conspiracy and aiding and abetting allegations, it pertains to whether sufficient facts have been incorporated in the pleading. (See, e.g., Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823 (“Berg”).) As such, the demurrer on the ground of uncertainty is OVERRULED.

The Court will now address the subject arguments relative to the ground of failure to state sufficient facts.

1. Statute of Limitations

The Qian Defendants state all causes of action in the TAC are barred by the statute of limitations.

“The defense of statute of limitations may be asserted by general demurrer if the complaint shows on its face that the statute bars the action.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) But it is not enough that a pleading shows an action might be time-barred; in order for a cause of action to be disposed of at the pleading stage, it must clearly and affirmatively appear untimely. (Id. at 1315-1316.) In evaluating whether an action is time-barred, the two critical inquiries are: (1) what statute of limitations applies; and (2) when the action accrued. (Id. at p. 1316.)

With respect to the applicable limitations period, the Qian Defendants reference the three-year limitations period for fraud-based actions, which is prescribed by Code of Civil Procedure section 338. They do not, however, explain why this statute of limitations applies to every cause of action in the TAC or explain how each claim is based on fraud. Moreover, it is not obvious to the Court every claim is predicated on fraud. For example, the ninth cause of action is for breach of contract and it is not apparent such claim relates to fraud. Thus, the Qian Defendants do not substantiate the contention each cause of action is time-barred.

With respect to the claims that are explicitly based on fraud (i.e. the third through fifth causes of action for intentional misrepresentation, fraudulent concealment, and negligent misrepresentation), the three-year statute of limitations applies. (See Code Civ. Proc., § 338, subd. (d).)

As for the issue of accrual, the Qian Defendants assert the claims accrued in 2008, when the wrongful conduct by the defendants commenced. Though they acknowledge the TAC does not allege when the acts at issue occurred, they point out that prior versions of the complaint indicate the wrongful conduct commenced in 2008. They conclude Plaintiffs’ filing of this action on June 16, 2017 was untimely as it occurred well after the three-year limitations period expired.

“Generally speaking, a cause of action accrues at the time when the cause of action is complete with all of its elements.” (E-Fab, supra, 153 Cal.App.4th at 1317, internal citations and quotation marks omitted.) An exception to this general principle is the discovery rule, which postpones accrual of a cause of action until the plaintiff discovers or has reason to discover the claim. (Id. at 1317-18.) By statute, the discovery rule applies to actions based on fraud. (Id. at 1318.) Specifically, Code of Civil Procedure section 338, subdivision (d) states that a claim for fraud “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” But in order to benefit from application of the discovery rule, a plaintiff must specifically plead facts demonstrating (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. (E-Fab, supra, 153 Cal.App.4th at 1319.)

Here, the TAC does not include facts indicating when the fraudulent conduct occurred. With that said, as the Qian Defendants point out, prior versions of the pleading aver the conduct at issue took place around 2008. (See RJN, Exh. A, ¶ 1; Exh. B, ¶ 40; Exh. C, ¶ 82.) Under the sham pleading doctrine, Plaintiffs may not omit these potentially harmful allegations from the TAC to avoid a possible statute of limitations bar. (See Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425 [“Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations…from previous complaints to avoid attacks raised in demurrers[.]”) Moreover, under this doctrine, omitted allegations may be read into the operative pleading. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1043, fn. 25.) As such, the Court reads into the TAC Plaintiffs’ prior allegations the wrongful conduct occurred in 2008. Because this conduct occurred more than three years before Plaintiffs’ action was filed, delayed discovery must be pled to avoid a statute of limitations bar.

Here, Plaintiffs plead facts regarding delayed accrual. Specifically, they allege they did not discover the fraudulent conduct until August 2015, plead the discovery occurred when a consultant hired by Wang investigated the manufacturing bonuses during his trip to California, and further allege they could not have made an earlier discovery because Wang resided in Taiwan, implicitly trusted the Employee Defendants, and received financial reports that did not reveal any theft. (TAC, ¶¶ 44-45.)

The Qian Defendant assert these facts do not support application of the delayed discovery rule because Wang’s failure to discover Qian’s theft was manifestly unreasonable. This argument is not persuasive. “When a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if…the allegations in the complaint and facts properly subject to judicial notice…can support only one reasonable conclusion.” (Broberg v. The Guardian Life Ins. Co. of Am. (2009) 171 Cal.App.4th 912, 921.) Here, the Court finds the facts pled do not necessitate the conclusion Wang should have discovered Defendants’ fraud before 2015. Rather, the facts Wang resided abroad, had no reason to mistrust his employees, and received regular financial reports that did not alert him to any issue, indicate it was not unreasonable for him to discover the fraud until later. These facts as pled support application of the delayed discovery rule and the accrual of the fraud claims in August 2015. Thus, it does not appear from the face of the pleading that the fraud-based claims are time-barred.

Accordingly, the demurrer to each cause of action is not sustainable on the basis it is barred by the statute of limitations.

2. Conspiracy and Aiding and Abetting Allegations

The Qian Defendants contend the conspiracy and aiding and abetting allegations are insufficiently pled.

At the outset, this argument is problematic. First, not all of the causes of action are predicated solely on conspiracy and aiding and abetting theories of liability. For example, in the first cause of action for conversion, Plaintiffs additionally aver all of the defendants were directly liable for converting their money. (See, e.g., TAC, ¶ 47 [“Defendants, including all of them, wrongfully exercised control over [Plaintiffs’] personal property]”.) In the same way, the sixth and seventh causes of action also allege direct liability by the Qian Defendants. As such, even if the conspiracy and aiding and abetting allegations in the first, sixth and seventh causes of action were inadequately pled, this would not render these claims as a whole deficient as it is well-established a demurrer does not lie to a portion of a cause of action. (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682; see also Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778.) Second, with respect to Qian in particular, she is alleged to be directly liable for all of the causes of action pled against her. As such, for the same reasons articulated, the demurrer to these claims as they relate to her is not sustainable on the basis the vicarious liability allegations are insufficient because another basis for liability is pled.

In sum, only the demurrer to the second through fifth causes by Qian’s family members, namely Thomas Zdimal, Kent Wang, Kathleen Wang (i.e. all of the Qian Defendants apart from Qian herself) could be sustained on the basis the conspiracy and aiding liability allegations are insufficiently pled as those are the only claims that are predicated solely on theories of vicarious liability as to those defendants. With that in mind, the Court will now turn to address the merits of the Qian Defendants’ argument.

To adequately allege a civil conspiracy, a plaintiff must plead a “defendant had knowledge of and agreed to both the objective and the course of action that resulted in the injury, that there was a wrongful act committed pursuant to that agreement, and that there was resulting damage.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823.) As for aiding and abetting liability, it arises when a “person (a) knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a breach of duty to the third person.” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.)

Here, the Qian Defendants assert the vicarious liability allegations are inadequately pled because Plaintiffs do not identify who was part of the conspiracy, who aided and abetted, and what conduct each individual defendant engaged in. This contention is not well-taken.

First, the assertion Plaintiffs do not identify the individuals who conspired and/or aided and abetted is clearly contradicted by the allegations in the TAC. Specifically, paragraphs 38 through 42 allege the Employee Defendants conspired with Qian’s family members, Li’s family members, and the Firetide Defendants, and enumerates the specific individuals who aided and abetted in the wrongful conduct. For example, Plaintiffs plead the “Employee Defendants and the Qian Conspirators [i.e. Qian’s family members] agreed to use the companies’ funds to pay them despite [the family members] providing no meaningful goods or services warranting such payments,” and the “Qian Conspirators [i.e. Qian’s family members] provided substantial assistance…in carrying out the plan.” (TAC, ¶ 38.) As such, it is apparent which individuals were purportedly involved in the conspiracy and which ones aided and abetted.

Second, as for Plaintiffs’ purported failure to plead what conduct each individual defendant engaged in and when, the Qian Defendants cite no authority supporting the proposition each individual’s conduct relative to the conspiracy must be alleged with this type of specificity. As such, their position is unsubstantiated. (See People v. Dougherty (1982) 138 Cal.App.3d 278, 282 [a point asserted without citation to authority will be disregarded].)

Thus, the demurrer is not sustainable on the basis the conspiracy and aiding and abetting allegations are inadequately pled.

B. Arguments Applicable to Individual Causes of Action

The Qian Defendants demur to the first through sixth causes of action on the ground of failure to state facts sufficient to constitute a cause of action (see Code Civ. Proc., § 430.10, subd. (e)) and to the ninth cause of action on the grounds of uncertainty and inability to ascertain whether the contract between the parties was written, oral, or implied by conduct (see Code Civ. Proc., 430.10, subds. (f), (g)).

1. First Cause of Action

The first cause of action for conversion alleges Defendants converted money from Plaintiffs’ business operations.

The Qian Defendants argue no claim can be stated because money cannot be the subject of a conversion claim unless there is an identifiable sum involved. In opposition, Plaintiffs contend they are not required to plead an identifiable sum of money that was converted; rather, they need only prove a specific sum at trial. Plaintiffs’ argument is not well-taken.

If money is the subject of a cause of action for conversion, a specific, identifiable sum must be pled. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 397; Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 235.) Plaintiffs cite no authority to the contrary or for the proposition the sum of money that is the subject of a conversion claim is solely a matter of proof at trial. As such, their position is unsubstantiated.

Plaintiffs next contend that, even if such sum must be pled, the declaration of Wang that was judicially noticed indicates $3,725,224.41 was converted. This argument is flawed. Though it is true this Court took judicial notice of Wang’s declaration, the purpose for which Plaintiffs seek to use it is highly unusual and based on a misunderstanding of the purpose of judicial notice. When employed in the context of a demurrer, judicial notice may be taken of facts that would indicate a defect in the pleading. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) It is not a means by which the pleader may bring in extrinsic matter to supplement deficient allegations in the complaint.

As such, the demurrer to the first cause of action is sustainable on the basis Plaintiffs do not plead a specific, identifiable sum of money. The Qian Defendants’ demurrer to this claim on the ground of failure to state sufficient facts is therefore SUSTAINED with 10 days’ leave to amend. The time to amend shall run from the date of service of this Order.

2. Second Cause of Action

The second cause of action for breach of fiduciary duty pleads the Employee Defendants breached their fiduciary duties to Plaintiffs when they acted against Plaintiffs’ interests, and the other defendants conspired with and aided and abetted their actions.

The Qian Defendants contend no claim has been stated as to Qian’s family members, namely Thomas Zdimal, Kent Wang, Kathleen Wang, because they did not personally owe Plaintiffs a fiduciary duty. In support, they cite Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39 in support of the proposition a coconspirator who was not personally bound by the duty violated cannot be liable for conspiring to breach such a duty. This argument is not persuasive.

Though it is generally true a party cannot be held liable for civil conspiracy if he or she did not personally owe the duty violated, “an exception to this rule exists when the participant acts in furtherance of [his or her] own financial gain.” (Mosier v. S. California Physicians Ins. Exch. (1998) 63 Cal.App.4th 1022, 1048; see also Skarbrevik v. Cohen, England & Whitfield (1991) 231 Cal.App.3d 692, 709.) This exception was acknowledged even in Doctors (see Doctors, supra, 49 Cal.3d at 47), which the Qian Defendants rely on. As such, even if Qian’s family members did not personally owe Plaintiffs a fiduciary duty, liability can still attach if there are facts demonstrating they acted in furtherance of their own financial gain. Here, Plaintiffs allege Qian’s family members acted to advance their own financial interests, including their interest in receiving the unauthorized payments the Employee Defendants were making to them. (TAC, ¶¶ 32, 38.) These averments are sufficient to support a claim for breach of fiduciary duty relative to Qian’s family members based on conspiracy liability.

Moreover, in addition to conspiracy liability, Plaintiffs allege aiding and abetting liability and the Qian Defendants cite no authority supporting the proposition such liability only arises when the aiding and abetting defendant owes a duty to the plaintiff. The Court otherwise observes aiding and abetting liability has been permitted in the absence of a duty owed directly to the plaintiff. (See, e.g., Am. Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1476.)

Therefore, the Qian Defendants’ demurrer to the second cause of action on the ground of failure to state sufficient facts is OVERRULED.

3. Third, Fourth and Fifth Causes of Action

The third cause of action for intentional misrepresentation alleges the Employee Defendants knowingly sent fraudulent financial reports to Wang that overstated expenses and understated profits. The fourth cause of action for fraudulent concealment pleads the Employee Defendants concealed facts relating to their theft. The fifth cause of action for negligent misrepresentation alleges the Employee Defendants negligently misrepresented facts relating to Plaintiffs’ income, expenses, profits, and losses. Each claim also pleads the other defendants conspired with and aided and abetted the Employee Defendants in their actions.

The Qian Defendants first assert these causes of action fail because they lack requisite specificity.

“Each element of a fraud count must be pleaded with particularity.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231.) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal citations and quotation marks omitted.)

Here, the Qian Defendants assert the allegations in the third through fifth causes of action fail to allege “when…[the] allegedly fraudulent financial statements [were] sent to Wang.” (See Dem. at p. 10:7-23.) This contention is wrong. The TAC clearly pleads that “financial reports were sent…to Mr. Wang via e-mail on an [sic] monthly, and in some cases more frequent, basis[.]” (FAC, ¶ 63.) As such, the Qian Defendants do not substantiate their contention these claims as pled lack the requisite particularity.

Next, the Qian Defendants argue the third through fifth causes of action fail because there are no facts to support reasonable reliance on the misrepresentations or concealment, an element which must be pled to state a fraud claim (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845). In support, they point to the general allegations of reasonable reliance in paragraphs 66 and 84, which they claim are conclusory.

Though it is true a demurrer to a fraud claim may be sustained where a plaintiff does not allege facts showing it was “reasonable for plaintiff to accept defendant’s statements without an independent inquiry or investigation” (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363), here, Plaintiffs do allege circumstances demonstrating reasonable reliance. In particular, they plead Wang was located in Taiwan, had developed a relationship of trust and loyalty with the Employee Defendants, and received regular financial reports that did not indicate any theft. (TAC, ¶¶ 24, 26, 43.) Thus, the demurrer to the third through fifth causes of action is not sustainable on the basis Plaintiffs do not plead facts supporting reasonable reliance.

Finally, although not clearly articulated, the Qian Defendants appear to additionally contend Plaintiffs’ reliance was actually not reasonable because, as reflected in Wang’s declaration in support of the writ of attachment application, Plaintiffs’ payroll records and issued checks reflected overpayments to the defendants. This argument is flawed.

As an initial matter, the Qian Defendants rely on Wang’s declaration to establish the truth of statements therein, namely that Plaintiffs’ records and checks indicated overpayments to Defendants. But it is well-established that judicial notice may not be taken of the truth of facts asserted in court records. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 886.) As such, the Qian Defendants’ reliance on Wang’s declaration is misplaced. In any event, the issue of whether a plaintiff’s reliance on a misrepresentation was reasonable is a question of fact inappropriate for resolution on demurrer. (All. Mortg. Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239; see also Blankenheim v. E. F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1475.)

For the reasons stated, the Qian Defendants’ demurrer to the third, fourth and fifth causes of action on the ground of failure to state sufficient facts is OVERRULED.

6. Sixth Cause of Action

The sixth cause of action is for violation of Penal Code section 496 (“Section 496”), which prohibits the knowing purchase or receipt of stolen property. Plaintiffs allege Defendants received, sold, concealed, or aided in the sale or concealment of property they knew was stolen. They therefore seek treble damages under the statute (see Code Civ. Proc., § 496, subd. (c) [a plaintiff may bring a civil action for three times the amount of actual damages sustained]).

The Qian Defendants contend no cause of action has been stated for the reasons articulated in an unpublished district court case, Grouse River Outfitters Ltd v. NetSuite, Inc. (N.D. Cal. Oct. 12, 2016, No. 16-CV-02954-LB) 2016 WL 5930273.

In Grouse, an outdoor equipment retailer brought an action against a commercial software system provider based on the latter’s failure to provide it with the promised comprehensive software system. (Grouse, supra, 2016 WL 5930273 at * 1.) Among other things, the retailer alleged the software provider mispresented the capabilities of its software, its experience in installing such a system, and ultimately its ability to provide a system that could perform as promised. (Ibid.) The complaint included fraud-based causes of action as well as a claim for violation of Section 496 based on the software provider’s theft of the retailer’s money by false pretense and consequent receipt of the stolen money. (Ibid.) The district court held no cause of action under Section 496 had been stated because: (1) it had otherwise found the fraud claims were insufficiently pled; (2) the money at issue did not have the “character of having been stolen” when the software provider received it; (3) there cannot be dual civil liability for fraud in the taking of money and receiving that money as stolen property; and (4) the retailer did not allege the provider knew the money was stolen when it was received, which is an essential element of a Section 496 claim. (Id. at * 14.)

The Court finds these reasons do not provide a basis on which to sustain the Qian Defendants’ demurrer to Plaintiffs’ claim.

With respect to the first basis for the Grouse decision, it does not apply here because this Court did not find the fraud claims were insufficiently pled.

As for second rationale, the Court finds the Grouse court inadequately explains why money obtained through false pretense does not have the character of having been stolen. The Grouse court merely states the following with respect to this issue:

The property in question is Grouse River’s money. NetSuite allegedly defrauded Grouse River of that money. By extension, maybe it can be said that NetSuite committed theft by false pretense. But it cannot be said that NetSuite thereby received stolen goods in violation of § 496(a).

It is not apparent to this Court why money once stolen through fraud does not immediately take on the character of having been stolen, such that it can be the subject of a claim for receiving stolen property in violation of Section 496.

With respect to the third basis regarding the purported unavailability of dual civil liability for fraud and violations of Section 496, the Grouse court misinterpreted that statute and adopted a position contrary to California law.

First, the Grouse court asserts the “plain language of § 496(a) prevents [the plaintiff] from leveraging…[fraud by theft] into a damages-trebling § 496(a) violation.” (Grouse, supra, 2016 WL 5930273 at * 15.) This is inaccurate. Section 496, subdivision (a) provides in relevant part: “A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.” As such, this subdivision merely states a person who obtains property by theft may not be convicted for both the theft and receipt of stolen property. (See People v. Allen (1999) 21 Cal.4th 846, 857-861.) The plain language in this provision does not bar dual civil liability for fraud and violations of Section 496.

Second, the Grouse court’s position is contradicted by California law. As the court itself acknowledges, at least one California case, Bell v. Feibush (2013) 212 Cal.App.4th 1041, upheld civil liability for both fraud-based claims and a claim for violation of Section 496. (Grouse, supra, 2016 WL 5930273 at * 15.) Grouse attempts to distinguish Bell by stating the defendant there did not merely receive the property obtained by fraud but also withheld it when the plaintiff asked for it back and this “small additional conduct was enough, in Bell’s view to avoid [Section 496’s] dual liability bar.” (Ibid.) But this analysis is problematic because there is no statutory bar against civil dual liability in the first instance and nothing in the Bell decision indicated dual liability was upheld because the defendant there committed “additional conduct” that violated Section 496. (See Bell, supra, 212 Cal.App.4th at 1048-50.)

Finally, as for the issue of the Qian Defendants’ knowledge the property they received was stolen, Plaintiffs allege the defendants had such knowledge in paragraph 93 of the TAC. The Qian Defendants assert this averment is meritless because property cannot be stolen if it is received directly from the plaintiffs but cite no authority in support of this proposition. And they do not otherwise indicate why Plaintiffs’ allegation of knowledge is deficient.

As such, the Qian Defendants do not demonstrate the sixth cause of action has been inadequately pled. Accordingly, their demurrer to this claim on the ground of failure to state sufficient facts is OVERRULED.

7. Ninth Cause of Action

The ninth cause of action for breach of contract pleads the Employee Defendants breached the written employment contracts they entered into with Ampro and under which Consolitech was a third-party beneficiary.

The Qian Defendants demur to this claim on the grounds of uncertainty and inability to ascertain whether the contract between the parties was written, oral, or implied by conduct. (See Code Civ. Proc., 430.10, subds. (f), (g).)

With respect to the ground of uncertainty, the Qian Defendants do not address it or explain how the TAC is so uncertain they cannot reasonably respond. (See Khoury, supra, (1993) 14 Cal.App.4th at 616.) As such, their demurrer on this ground is unsubstantiated.

As for the ground of inability to ascertain the nature of the contract, the Qian Defendants argue they cannot discern whether Qian had multiple employment agreements with Ampro or whether Qian and Li had individual employment agreements. This assertion is not well-taken.

Under Code of Civil Procedure section 430.10, subdivision (g), a demurrer may be sustained if, “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 98.) Here, Plaintiffs explicitly allege the contract was written. (TAC, ¶ 105.) Nothing is more is required.

The Qian Defendants also argue Plaintiffs do not attach a copy of the agreement or set out its terms in detail. The Court presumes this is the basis for their demurrer on the ground of uncertainty since it could not possibly be the basis for a demurrer on the ground of inability to ascertain the nature of a contract. The Qian Defendants, however, do not discuss the standard for uncertainty in any way or explain how Plaintiffs’ failure to attach a contract or set out its terms in detail renders them unable to reasonably respond to this claim. (See Khoury, supra, 14 Cal.App.4th at 616.) And to the extent the Qian Defendants are trying to assert this claim is inadequately stated because of these purported defects, this position is controverted by California law which states “a plaintiff may plead the legal effect of the contract rather than its precise language.” (Miles v. Deutsche Bank Nat’l Tr. Co. (2015) 236 Cal.App.4th 394, 402; Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199.)

For the reasons stated, the Qian Defendants’ demurrer to the ninth cause of action on the grounds of uncertainty and inability to ascertain the nature of the contract is OVERRULED.

IV. Demurrer by Firetide Defendants

The Firetide Defendants collectively demur to the TAC on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10., subd. (e).) Zhu also individually demurs on that same ground. (See Ibid.) The Court will address the defendants’ collective demurrer before discussing Zhu’s individual demurrer.

A. Firetide Defendants’ Demurrer

The Firetide Defendants advance arguments specific to individual causes of action but also state in their demurrer that they are demurring to “All Causes of Action” based on various arguments. (See, e.g., Dem. at p. 3:2-13.) In their memorandum, however, the arguments the Firetide Defendants represent in their demurrer as being directed to all claims are only discussed relative to some of them. As such, the Court will construe these contentions as being only in support of the claims they are discussed in connection with.

In advancing their arguments, the Firetide Defendants do not address each cause of action sequentially. Accordingly, the Court will address the claims in the order they are presented in their memorandum of points and authorities.

1. Second through Fifth Causes of Action

As previously stated, the second cause of action is for breach of fiduciary duty, the third cause of action is for fraud by intentional misrepresentation, the fourth cause of action is for fraud by concealment, and the fifth cause of action is for negligent misrepresentation. The Firetide Defendants are not identified as the direct tortfeasors relative to these claims. Rather, their purported liability is based on conspiracy and aiding and abetting theories of liability.

The Firetide Defendants argue these claims are insufficiently pled because they lack requisite specificity and are barred by the statute of limitations.

a. Adequacy of Factual Allegations

First, the Firetide Defendants assert the fraud claims are insufficiently detailed because Plaintiffs “fail[] to identify any specific misrepresentation, or identify the maker of any specific misrepresentation,” and only plead sparse allegations regarding their conduct. (Mem. of Pts. and Auth. at p. 3:11-17, emphasis in original.) Their contention is predicated on the rule a plaintiff must plead facts showing how, when, where, to whom, and by what means the representations were tendered (see Lazar, supra, 12 Cal.4th at 645). Their argument is not well-taken.

At the outset, with respect to the breach of fiduciary duty claim, it is not predicated on any misrepresentations made, but rather on the Employee Defendants acting against Plaintiffs’ interests in breach of their fiduciary duties; thus, the Firetide Defendants’ contention does not apply. With respect to the third through fifth causes of action, there is no basis for concluding the pleading requirement has not been meet. Contrary to the Firetide Defendants’ assertion, the TAC does allege the misrepresentations made and the individuals who made them. Plaintiffs plead the Employee Defendants misrepresented Plaintiffs’ expenses and net profits by overstating one and understating the other. (See TAC, ¶¶ 63, 82.) The Firetide Defendants assert Plaintiffs are required to identify specific financial reports or statements within the reports. However, they cite no authority in support of the proposition this level of detail is required. As such, their position is unsubstantiated. Finally, with respect to the assertion these claims fail because there are sparse allegations regarding their conduct, the Firetide Defendants do not explain why this fact makes the fraud claims insufficiently specific. Thus, the demurrer to the second through fifth causes of action is not sustainable on the basis Plaintiffs’ allegations lack the requisite specificity.

Second, the Firetide Defendants argue the conspiracy and aiding and abetting allegations in these claims are inadequately pled because “no detail [is] provided, and no allegations [are] separately made against any one defendant that does not apply to all defendants.” (Mem. of Pts. and Auth. at p. 6:20-22.) They also assert Plaintiffs do not plead they had actual knowledge of the specific primary wrong they substantially assisted in. These contentions are not well-taken.

The Firetide Defendants cite no authority supporting the proposition a plaintiff must plead what each individual defendant did relative to a conspiracy or aiding and abetting claim or discussing the precise level of detail required to support such allegations. Thus, their argument is unsubstantiated. Further, the Firetide Defendants’ assertion Plaintiffs do not plead they had knowledge of the wrongdoing at issue lacks merit. Plaintiffs clearly plead “[t]he Firetide Conspirators knowingly engaged in a scheme with the Employee Defendants to obtain manufacturing services from Plaintiffs at rates significantly below market…[and] knew that this scheme and transactions were illegitimate and would be misrepresented and/or the truth about them concealed in the Employee Defendants’ financial reporting[.]” (TAC, ¶¶ 67, 76, 85, emphasis added.) As such, the Firetide Defendants do not demonstrate the vicarious liability allegations are defectively pled.

Third, with respect to the second claim for breach of fiduciary duty in particular, the Firetide Defendants assert it fails because the TAC does not plead they owed Plaintiffs a duty. For the same reasons previously discussed, this argument lacks merit. A party may, in fact, be held liable for conspiring in the breach of a fiduciary duty when he or she acted in furtherance of his or her financial gain. (Mosier, supra, 63 Cal.App.4th at 1048.) Here, Plaintiffs plead facts indicating the Firetide Defendants acted in furtherance of their own financial interests, namely to “obtain manufacturing services…at rates significantly below market.” (TAC, ¶ 67.)

In sum, the Firetide Defendants’ demurrer to the second through fifth causes of action is not sustainable on the basis these claims are inadequately pled.

b. Statute of Limitations

The Firetide Defendants contend the second through fifth causes of action fail because, though the TAC omits facts regarding when the wrongful conduct occurred, prior pleadings demonstrate on their face that Plaintiffs’ claims are barred by the limitations period for fraud.

As previously discussed, in evaluating whether an action is time-barred, the two critical inquiries are: (1) what statute of limitations applies; and (2) when the action accrued. (E-Fab, supra, 153 Cal.App.4th at p. 1316.)

Here, the Firetide Defendants discuss the three-year statute of limitations period for fraud under Code of Civil Procedure section 338, subdivision (d). They do not, however, explain how the second cause of action for breach of fiduciary duty is necessarily based on fraud such that this three-year limitations period applies. As such, relative to that claim, the Firetide Defendants do not substantiate their contention it is time-barred.

Turning to the third through fifth claims which explicitly state they are based on fraud or misrepresentation, as previously discussed, a three-year statute of limitations applies. (See Code. Civ. Proc., § 338, subd. (d).)

As for the issue of accrual, the Firetide Defendants observe the TAC only indicates the theft begin in 2008 but prior pleadings indicate their conduct concluded by 2013. Based on the 2008 date, they assert that the limitations period expired in 20011.

As stated, a cause of action generally accrues when a cause of action is complete with all of its elements. (E-Fab, supra, 153 Cal.App.4th at 1317.) Here, the TAC does not indicate when the claims were completed; instead, it only alleges the theft began in 2008. (TAC, ¶ 24.) However, Plaintiffs’ prior pleadings allege Guan’s conduct occurred from 2011-2013, and Zhu and Liu’s conduct concluded in 2013. (See Plaintiffs’ RJN, Exh. A at ¶ 14, Exh. B at ¶¶ 18, 69.) Under the sham pleading doctrine, the Court may read these omitted allegations into the TAC. (See Berg, supra, 178 Cal.App.4th at 1043, fn. 25.) Because this wrongful conduct occurred more than three years before the Plaintiffs’ action was filed on June 16, 2017, Plaintiffs must plead delayed discovery to avoid the statute of limitations bar.

Here, as previously discussed, Plaintiffs plead facts supporting application of the delayed discovery rule. But the Firetide Defendants assert these allegations are insufficient for two reasons.

First, the Firetide Defendants contend that, when compared with the prior pleadings, it appears the date of discovery is “quite fluid.” (Mem. of Pts. and Auth. at p. 9:18.) In support, they point out that Plaintiffs allege in the present pleading they discovered the theft in 2015 but prior pleadings indicate the discovery occurred anywhere from February 2016 to February 23, 2018. However, they cite no authority in support of the proposition delayed discovery cannot be pled when different dates of discovery are alleged in different versions of a pleading. As such, their position is unsubstantiated.

Second, the Firetide Defendants contend Plaintiffs’ belated discovery of the embezzlement was manifestly unreasonable because the payroll records indicated large discrepancies between what the Employee Defendants were entitled to and what they were receiving. They conclude Wang’s failure to discover these facts was the result of a lack of reasonable diligence. For the reasons previously discussed in connection with the identical argument made by the Qian Defendants, this contention is not well-taken.

Finally, for the first time in reply, the Firetide Defendants assert Plaintiffs do not plead delayed discovery with requisite particularity because the TAC merely states the consultant’s inquiries in August 2015 led to the eventual discovery of the fraud. It is not entirely what the crux of this argument is but it appears the Firetide Defendants are arguing Plaintiffs must plead the specific date of discovery. Regardless, because this contention was not advanced in the demurrer, the Court will not consider it. (See REO Broadcasting Consultants v. Martin (1999) 69 Cal.App.4th 489, 500 [courts generally do not consider arguments raised for the first time on reply for the simple reason that opposing counsel is deprived of an opportunity to address them]; Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [same]; In re Tiffany Y. (1990) 223 Cal.App.3d 298, 302-303 [same].)

Accordingly, the demurrer to the second through fifth causes of action is not sustainable on the basis they are barred by the statute of limitations.

2. First Cause of Action

The Firetide Defendants first assert the first cause of action for conversion fails because Plaintiffs previously alleged the monies taken were in Plaintiffs’ bank account and money from a bank account is “not susceptible of the ‘specific identifiable sum’ exception to the general rule that the taking of money does not establish a conversion claim.” (Mem. of Pts. and Auth. at p. 12:18-21.) They do not explain why a sum of money cannot be identified when it sits in a bank account nor do they cite authority in support of this proposition. As such, their position is unsubstantiated.

With that said, though not clearly articulated, the Firetide Defendants are essentially asserting this claim is defective because Plaintiffs do not identify a specific sum of money that was converted. As previously stated, this is a basis on which a demurrer to the conversion claim can be sustained.

The Firetide Defendants additionally contend a depositor of money in a bank account has no immediate right of possession in the deposited money. Because a plaintiff’s ownership or right to possession to the property at issue is an element of a conversion claim (see Fremont Indem. Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 119), they conclude no cause of action has been stated. This argument is not well-taken.

The authority cited by the Firetide Defendants does not support the position they advance. Instead, they make a few disjointed references to cases (e.g. Watson v. Stockton Morris Plan Co. (1939) 34 Cal.App.2d 393 and Farmers Ins. Exch. v. Zerin (1997) 53 Cal.App.4th 445, 451) discussing the general unavailability of a conversion claim against a bank relative to the funds it holds for a depositor or the principle a mere contractual right of payment cannot form the basis of a conversion action. These cases are completely inapposite as, here, Plaintiffs’ cause of action for conversion is not brought against the bank in which their funds were held and there is no indication its right to those funds was a mere contractual right of payment as opposed to an actual ownership interest with right to immediate possession.

In sum, the demurrer to the conversion claim is sustainable solely on the basis Plaintiffs do not identify a specific, identifiable sum of money that was converted. As such, the Firetide Defendants’ demurrer to the first cause of action on the ground of failure to state sufficient facts is SUSTAINED with 10 days’ leave to amend. The time to amend shall run from the date of service of this Order.

3. Sixth Cause of Action – Violation of Section 496

The Firetide Defendants argue no claim for violation of Section 496 has been stated because the property at issue was not stolen. In support, they point to Wang’s declaration in support of Plaintiffs’ application for writ of attachment which they assert shows Qian was authorized to write the checks at issue. This contention is flawed.

It is well-established courts may take judicial notice of the existence of court records but not of the truth of allegations in affidavits or declarations contained therein because such matters are reasonably subject to dispute and therefore require formal proof. (Lockley, supra, 91 Cal.App.4th at 882; Magnolia Square Homeowners Ass’n v. Safeco Ins. (1990) 221 Cal.App.3d 1049, 1056-1057; Kilroy v. State of California (2004) 119 Cal.App.4th 140, 145.)

Accordingly, the Firetide Defendants’ demurrer to the sixth cause of action on the ground of failure to state sufficient facts is OVERRULED.

4. Seventh Cause of Action – Money Had and Received

The seventh cause of action is a common count for money had and received and alleges Defendants received money intended to be used for Plaintiffs’ benefit and did not return it.

The Firetide Defendants argue no claim has been stated because Plaintiffs do not plead a specific sum of money that was received by them. This assertion is well-taken. To state a common count for money had and received, a plaintiff must allege the “defendant is indebted to the plaintiff in a certain sum for money had and received.” (Farmers Ins. Exch. v. Zerin (1997) 53 Cal.App.4th 445, 460, emphasis added, internal citations and quotation marks omitted; Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1623.) Here, Plaintiffs do not plead a certain sum of money they claim is owed. Rather, they merely state a general indebtedness exists. As such, this claim as pled is deficient.

Therefore, the Firetide Defendants’ demurrer to the seventh cause of action for money had and received is SUSTAINED with 10 days’ leave to amend. The time to amend shall run from the date of service of this Order.

B. Zhu’s Demurrer

Zhu asserts the TAC is a sham pleading as it relates to him because prior pleadings indicate another defendant, Yun Feng Chang (“Chang”), was responsible for the conduct the TAC charges him with.

“Generally, after an amended pleading has been filed, courts will disregard the original pleading. However, an exception to this rule is found … where an amended complaint attempts to avoid defects set forth in a prior complaint by ignoring them.” (Larson v. UHS of Rancho Springs, Inc. (2014) 230 Cal.App.4th 336, 343, internal citations and quotation marks omitted.) In this circumstance, the court may “examine the prior complaint to ascertain whether the amended complaint is merely a sham.” (Ibid.) “Moreover, any inconsistencies with prior pleadings must be explained; if the pleader fails to do so, the court may disregard the inconsistent allegations.” (Ibid.)

At the outset, Zhu does not articulate the consequence for finding the TAC is a sham pleading. He asserts the prior purportedly inconsistent allegations about Chang should be read into the current pleading and the demurrer as to him sustained but he does not explicitly address how the inclusion of these allegations would render the first through seven claims susceptible to demurrer.

In any event, the sham pleading doctrine does not render these claims deficient as the Court does not observe any inconsistencies between the prior pleadings and the TAC. Plaintiffs plead in the original complaint that Chang conspired with his co-conspirators to receive unauthorized payments in the amount of $111,674.60; Zhu was not mentioned in this version of the pleading. (Plaintiff’s RJN, Exh. A, ¶ 15.) Then, in the FAC, Plaintiffs alleged Zhu conspired with Chang for the purpose of having Chang receive unauthorized payments in the amount of $111,674.60. (Id., Exh. B, ¶ 70.) In the SAC, Plaintiffs alleged Chang, a contractor, received $111,674.60 to make improvements on the personal residence of Zhu and Liu. (Id., Exh. C, ¶¶ 15, 17.) Finally, in the TAC, Plaintiffs allege the Employee Defendants arranged to use company funds for the remodel of Zhu and Liu’s private residence. (TAC, ¶ 33.) These allegations do not indicate Zhu is now being charged with conduct previously alleged against Chang, namely the receipt of unauthorized payments in the amount of $111,674.60. Nor do there appear to be any inconsistencies between the allegations in the prior pleadings and those in the TAC. Instead, the consistent narrative is that Zhu and Liu received a home remodel funded by unauthorized payments made to Chang as a contractor.

As such, Zhu’s demurrer to the first seven causes of action is not sustainable on the basis the TAC is a sham pleading that inconsistently charges him with conduct previously alleged against another defendant. As such, his demurrer to these claims on the ground of failure to state sufficient facts is OVERRULED.

V. Motion to Strike by Firetide Defendants

The Firetide Defendants move to strike allegations relating to the construction done on Zhu and Liu’s residence, the punitive damages and derivative liability averments in the negligence claim, and the prayer for imposition of a constructive trust , on the grounds they are irrelevant, false or improper. (See Code Civ. Proc., § 436, subd. (a).)

A. Allegations Regarding Construction on Zhu and Liu’s Residence

The Firetide Defendants seek to strike paragraph 33 and paragraphs 41, 67b, 76b, and 85b, which contain averments regarding the remodel done on Zhu and Liu’s residence. In support, they advance the same arguments set forth on demurrer, namely that Zhu is now identified as responsible for conduct previously alleged against Chang. In opposition, Plaintiffs argue the present allegations are not inconsistent with the prior pleadings and consistently allege Chang received unauthorized payments from Plaintiffs for remodeling work he performed on Zhu and Liu’s house. For the reasons previously discussed, the Court agrees. As such, there is no basis for striking these averments.

Accordingly, the Firetide Defendants’ motion to strike allegations regarding the construction on Zhu and Liu’s residence is DENIED.

B. Punitive Damages and Derivative Liability Allegations

The Firetide Defendants move to strike paragraphs 85a, 85b, 85c, and 86 from the seventh cause of action for negligent misrepresentation, arguing a “negligence claim will not support either conspiracy/aiding and abetting claims or punitive damages.” (Mtn. at p. 14:21-22.) They cite no authority in support, and merely state this is “hornbook law” and “no citation to authority is needed for [this] proposition.” (Mtn. at p. 1:10; 14:20-22.) This is patently insufficient; legal authority, in fact, is needed.

A supporting memorandum must include a discussion of legal authority in support of the position advanced and any unsubstantiated argument may be disregarded. (See Cal. Rules of Court, rule 3.1113(b); Dougherty, supra, 138 Cal.App.3d at 282.) Moreover, as Plaintiffs point out in their opposition with respect to the issue of civil conspiracy, there is California authority holding that conspiracy liability may exist for negligence claims. (See Navarrete v. Meyer (2015) 237 Cal.App.4th 1276, 1293.) Thus, the Firetide Defendants’ contention is not only unsupported but contradicted by California law. Next, with respect to punitive damages, while they are typically not recoverable for negligence claims, there are circumstances in which they may be recovered. (See, e.g., Taylor v. Superior Court (1979) 24 Cal.3d 890, 896-97.) Finally, with respect to paragraph 86 in particular, the Firetide Defendants’ argument does not correspond with the allegations found there as that paragraph does not even include punitive damages or vicarious liability allegations; rather, it is merely an averment Plaintiffs relied upon and were harmed by the misrepresentations at issue.

As such, the Firetide Defendants’ motion to strike paragraphs 85a, 85b, 85c, and 86 is DENIED.

C. Prayer for Imposition of Constructive Trust

The Firetide Defendants argue the prayer for constructive trust should be stricken because specific identifiable property is a prerequisite for imposition of such a trust and no such property is alleged. This contention is well-taken.

“A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner.” (Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 920.) It is a remedy that is only available where a “specific identifiable property” is alleged. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 76.) Here, there is no specific, identifiable property. Instead, there is merely a general allegation that Plaintiffs “lost funds.” (See, e.g., TAC, ¶ 36.) This vague averment does not sufficiently plead a res (i.e. property or some interest in property) that can be the subject of a constructive trust.

Therefore, the Firetide Defendants’ motion to strike the prayer for imposition of a constructive trust is GRANTED with 10 days’ leave to amend. The time to amend shall run from the date of service of this Order.