XUE ZHONG LIU ET AL VS. YU XIN AN

Tentative Rulings

Case Number: EC064414    Hearing Date: February 26, 2021    Dept: A

Demurrer

ALLEGATIONS:

Plaintiffs Xue Zhong Liu (“Zhong”), Xue Xin Liu (“Xin”), Norman AA, Inc. (“Norman AA”), and CBA International Trade Inc. (“CBA”) (collectively, “Plaintiffs”) allege that in a series of covert actions beginning around 2011, Defendant Yu Xin An (“An”), with the advice and assistance of her mother Zhang Shuhua, acting in connection with other Defendants, conspired to take steps to orchestrate the unauthorized and illegal theft of money and property belonging to Plaintiffs in separate schemes totaling over $30,000,000.00 USD in value.

The action was commenced on September 09, 2015. The Eighth Amended Complaint (“8AC”), filed June 14, 2018, alleges causes sounding in (1) Common Count for Money Lent by Xin against An; (2) Conversion by Zhong against An; (3) Fraudulent Concealment by Zhong against An; (4) Breach of Fiduciary Duty by Zhong against An; (5) Fraudulent Concealment by Xin and Norman AA against An, Halit James Ma (“Ma”), Jack Shao aka Chuang Shao (“J. Shao”), Fei Zhou aka Pandora Shao aka Pandora Feizhou Shao (“P. Shao”), and Alliance Global (“Alliance”); (6) Fraudulent Concealment by Xin and CBA against An, Ma, Alliance, J. Shao, P. Shao; (7) Fraudulent Concealment by Xin and CBA against An; (8) Breach of Fiduciary Duty by Xin and CBA against J. Shao, Ma, Alliance, Global Escrow Services, Inc. (“Global”); (9) Fraudulent Concealment by Xin and CBA against Ma, Alliance; (10) Breach of Fiduciary Duty by CBA against Global; (11) Quiet Title by Norman AA against An and East West Bank ("EWB") re: Arcadia Home; (12) Quiet Title by CBA against An re: Arcadia Land; (13) Quiet Title by CBA against An re: Covina Land; (14) Constructive Trust in favor of Xin, Norman AA, and CBA; (15) Conversion by Xin and CBA against J. Shao; (16) Conversion by Xin against An and Zhang; (17) Common Count for Money Lent by Zhong against An; and (18) Negligence or Negligence Per Se by Xin, CBA, and Norman AA against Global.

PRESENTATION:

On June 07, 2019, the Honorable Judge John Kralik recused himself from the case, and it was transferred to Department A and set for hearing on August 09, 2019.

The Court received the instant demurrer filed by Global on December 28, 2020; an opposition filed by Plaintiffs on February 17, 2021; and a reply filed by Global on February 18, 2021.

RELIEF REQUESTED:

Global demurs to the 8AC as to the Eighth, Tenth, Eleventh, Twelfth, Thirteenth, and Eighteenth causes of action.

DISCUSSION:

Standard of Review – Demurrer – The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.  (Code Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Ibid.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.  App. 3d 593, 604.) But this does not include contentions; deductions; conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.  (Blank, supra, 39 Cal. 3d at p. 318.)

Pursuant to Code Civ. Proc. §§ 430.10(e) and (f), the party against whom a complaint has been filed demur to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action, or that the pleading is uncertain, ambiguous and/or unintelligible. It is an abuse of discretion to sustain a demurrer if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1082, as modified (Dec. 23, 2003).)

Meet and Confer – CCP § 430.41(a) requires that the demurring party meet and confer with the party who filed the pleading that is subject to the demurrer at least 5 days before the date the responsive pleading is due, by telephone or in person, for the purpose of determining if the parties can resolve the objections to be raised in the demurrer. (Code Civ. Proc., § 430.41.) The demurring party must file and serve a declaration detailing their meet and confer efforts.

Failure to meet and confer is not grounds to overrule or sustain a demurrer, or grant or deny a motion to strike. (Code Civ. Proc., §§ 430.41, subd. (a)(4); 435.5 subd. (a)(4).)

Global's counsel attests in the Declaration of Barry G. Florence that the parties participated in a meet and conferral. (Decl. Florence, ¶ 2) In opposition, Plaintiffs' counsel attests in the Declaration of Mark F. Von Esch that the parties did not meet and confer regarding issues other than the issue of Quiet Title verifications for Norman AA and CBA (Decl. Von Esch, ¶ 4). In reply, Global attaches a meet and confer letter sent to Plaintiffs' counsel. (Reply, Decl. Florence.)

The Court finds that meet and confer requirements have been satisfied.

Merits – Eleventh, Twelfth, Thirteenth Causes of Action – In the reply briefing, Global concedes that the demurrer as to the above causes of action is mooted due to Plaintiffs having served verifications.

Eighth Cause of Action (Breach of Fiduciary Duty) – The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary duty, (2) breach, and (3) damages proximately caused by the breach. (Stanley v. Richmond (1995) 35 Cal. App. 4th 1070, 1086.)

On review of the 8AC, the Court finds that the pleadings fail to allege damages proximately caused by Global's breach. The Court will thus sustain the demurrer as to the eighth cause of action. As Plaintiffs make no request for leave to amend, and as the instant pleading represents the eighth iteration, the Court will sustain without leave to amend.

Tenth Cause of Action (Breach of Fiduciary Duty) – Global argues that the 8AC improperly alleges that Global breached its duty to conduct an independent investigation of the facts, and advise CBA accordingly. Global cites to Summit Financial Holdings, Ltd. V. Continental Lawyers Title Company (2002) 27 Cal.4th 705, 711 and Lee v. Title Insurance and Trust Co. (1968) 264 Cal. App. 2d 160, 162-164, contending that these allegations are contrary to law, and that it had no such duty.

In opposition, Plaintiffs argue that the 8AC alleges that Global failed to act in accordance with escrow instructions and contend the circumstances are more analogous to Kirby v. Palos Verdes Escrow Co. (1986) 183 Cal App 3d. 57.

In reply, Global argues that Summit is an opinion from a higher court and a more recent date than Kirby, and that Summit explicitly disapproved the holding in Kirby. (Summit Financial, supra, 27 Cal.4th at p. 714.)

Summit provides that when an escrow holder fails to carry out a contracted instruction, the injured party has a cause of action for breach of contract. (Summit, supra, 27 Cal.4th at p. 711.) An escrow holder has a fiduciary duty to comply strictly with the instructions of the parties but "has no general duty to police the affairs of its depositors". (Ibid.) "Absent clear evidence of fraud, an escrow holder's obligations are limited to compliance with the parties' instructions." (Ibid.) The Supreme Court in Summit further disproved Kirby's holding insofar as Kirby created a duty to honor contracts made by the creditors of the principal when the escrow holder had no agency relationship with the creditor.

Although Plaintiffs argue that the 8AC alleges that Global failed to act in accordance with escrow instructions, a review of the 8AC finds that the 8AC actually alleges that Global failed to "expand" its duties "beyond strict compliance with the parties' escrow instructions." (8AC, ¶ 183.) In essence, Plaintiffs allege in the 8AC that Global breached its fiduciary duty by strictly complying with the parties' escrow instructions. This is directly contrary to the holding in Summit.

The Court will thus sustain the demurrer as to the tenth cause of action. As Plaintiffs make no request for leave to amend, and as the instant pleading represents the eighth iteration, the Court will sustain without leave to amend.

Eighteenth Cause of Action (Negligence or Negligence Per Se) – A complaint for damages for negligent injury to person or property must allege: (1) defendant's legal duty of care toward plaintiff; (2) defendant's breach of duty, i.e., the negligent act or omission; (3) injury to plaintiff as a result of the breach, i.e., proximate or legal cause; and (4) damage to plaintiff. (Pultz v. Holgerson (1986) 184 Cal. App. 3d 1110, 1117.)

Under the negligence per se doctrine, which is codified at Evidence Code § 669, negligence is presumed if a plaintiff establishes four elements: (1) The defendant violated a statute or regulation; (2) the violation caused the plaintiff's injury; (3) the injury resulted from the kind of occurrence the statute or regulation was designed to prevent; and (4) the plaintiff was one of the class of persons the statute or regulation was intended to protect. The first two elements are normally questions for the trier of fact. The last two elements are determined by the trial court as a matter of law. (Daum v SpineCare Medical. Group, Inc. (1997) 52 Cal. App. 4th 1285; Norman v Life Care Centers of America, Inc. (2003) 107 Cal. App. 4th 1233, 1246)

Global argues that the 8AC fails to properly allege a negligence claim against it as well, citing to the same reasoning used as to the tenth cause of action.

The Court finds that the allegations for the eighteenth cause of action again contradict themselves and Plaintiffs' own arguments: paragraph 260 alleges "GLOBAL has a duty to strictly comply with the escrow instructions" while paragraph 261 alleges that, due to "clear evidence of fraud", "GLOBAL's duties, as the escrow holder, expand beyond strict compliance with the parties' escrow instructions." Pursuant to the Court's discussion of Summit, supra, the Court will sustain the demurrer as to the eighteenth cause of action sounding in negligence for failure to state a duty that Global allegedly breached. The Court will also sustain the demurrer as to the eighteenth cause of action sounding in negligence per se for failure to state a statute or regulation that was violated. As Plaintiffs make no request for leave to amend, and as the instant pleading represents the eighth iteration, the Court will sustain without leave to amend.

Accordingly, the Court will sustain the demurrer without leave to amend.

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RULING: below,

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records.

ORDER

Defendant Global Escrow Services, Inc.'s Demurrer came on regularly for hearing on February 26, 2021, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows:

THE DEMURRER IS SUSTAINED.

DATE: _______________ _______________________________

JUDGE

Case Number: EC064414    Hearing Date: August 14, 2020    Dept: A

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Liu v An

Discovery Motions

ALLEGATIONS:

Plaintiffs Xue Zhong Liu (“Zhong”), Xue Xin Liu (“Xin”), Norman AA, Inc. (“Norman AA”), and CBA International Trade Inc. (“CBA”) (collectively, “Plaintiffs”) allege that in a series of covert actions beginning around 2011, Defendant Yu Xin An (“An”), with the advice and assistance of her mother Zhang Shuhua, acting in connection with other Defendants, conspired to take steps to orchestrate the unauthorized and illegal theft of money and property belonging to Plaintiffs in separate schemes totaling over $30,000,000.00 USD in value.

The action was commenced on September 09, 2015. The Seventh Amended Complaint (“7AC”), filed June 14, 2018, alleges causes sounding it (1) Common Count for Money Lent by Xin against An; (2) Conversion by Zhong against An; (3) Fraudulent Concealment by Zhong against An; (4) Breach of Fiduciary Duty by Zhong against An; (5) Fraudulent Concealment by Xin and Norman AA against An, Halit James Ma (“Ma”), Jack Shao aka Chuang Shao (“J. Shao”), Fei Zhou aka Pandora Shao aka Pandora Feizhou Shao (“P. Shao”), and Alliance Global (“Alliance”); (6) Fraudulent Concealment by Xin and CBA against An, Ma, Alliance, J. Shao, P. Shao; (7) Fraudulent Concealment by Xin and CBA against An; (8) Breach of Fiduciary Duty by Xin and CBA against J. Shao, Ma, Alliance, Global Escrow Services, Inc. (“Global”); (9) Fraudulent Concealment by Xin and CBA against Ma and Alliance; (10) Breach of Fiduciary Duty by CBA against Global; (11) Quiet Title by Norman AA against An re: Arcadia Home; (12) Quiet Title by CBA against An re: Arcadia Land; (13) Quiet Title by CBA against An re: Covina Land; (14) Constructive Trust in favor of Xin, Norman AA, and CBA; (15) Conversion by Xin and CBA against J. Shao; (16) Conversion by Xin against An and Zhang; (17) Common Count for Money Lent by Zhong against An; and (18) Negligence or Negligence Per Se by Xin, CBA, and Norman AA against Global.

PRESENTATION:

On June 07, 2019, the Honorable Judge John Kralik recused himself from the case, and it was transferred to Department A and set for hearing on August 09, 2019.

Defendant East West Bank (“EWB”) filed the instant motions on July 14, 2020, Plaintiffs filed oppositions to both motions on August 3, 2020, and EWB filed replies to both motions on August 7, 2020.

On July 16, 2020, EWB filed a joint stipulation by and between all parties to continue the trial date to January 25, 2021, or to a date convenient to the Court's calendar, with all trial, discovery, motion, and expert discovery cut-off dates continued according to code.

RELIEF REQUESTED:

EWB moves for an order compelling Plaintiffs to provide responses without objection to (1) EWB's requests for production, set two, to Zhong; (2) EWB's requests for production, set two, to Norman; (3) EWB's supplemental request for production, number one, to Norman; and (4) EWB's supplemental request for production, number one, to Zhong. EWB further requests associated sanctions against Zhong, Norman, and their counsel, Mark Von Esch, in the amount of $1560.

EWB moves for an order compelling Plaintiffs to provide responses without objection to (1) EWB's special interrogatories, set two, to Zhong; (2) EWB's supplemental interrogatory, number one, to Norman; and (3) EWB's supplemental interrogatory, number one, to Zhong. EWB further requests associated sanctions against Zhong, Norman, and their counsel, Mark Von Esch in the amount of $2,460.

DISCUSSION:

Standard of Review – Motion to Compel RFP

A motion to compel responses may be brought where a responding party fails to timely respond to written discovery. (Code Civ. Proc., § 2031.300.) No meet and confer is necessary where a party fails to respond to written discovery. (See Leach v. Superior Court (1980) 111 Cal. App. 3d 902, 906.) Sanctions are mandatory for a party making or opposing a motion, except when the party making or opposing the motion is determined by the Court to have been acting with substantial justification, or that other circumstances would render the imposition of sanctions unjust. (Code Civ. Proc., § 2031.300, subd. (c).) Under the Civil Discovery Act, the Court is only entitled to impose monetary sanctions in the amount of “reasonable expenses, including attorney’s fees, incurred by anyone as a result of” the misuse of discovery. (Code Civ. Proc., § 2023.030, subd. (a).) The purpose of discovery sanctions is “not to provide a weapon for punishment, forfeiture and the avoidance of a trial on the merits, but to prevent abuse of the discovery process and correct the problem presented.” (Parker v. Wolters Kluwer U.S., Inc. (2007) 149 Cal. App. 4th 285, 301.) Consequently, “[t]he trial court cannot impose sanctions for misuse of the discovery process as a punishment.” (Doppes v. Bentley Motors, Inc. (2009) 174 Cal. App. 4th 967, 992.)

Standard of Review – Motion to Compel Responses to Interrogatories

A motion to compel responses to interrogatories may be brought where a responding party fails to timely respond to written discovery. Code of Civ. Proc. §2030.290. No meet and confer is necessary where a party fails to respond to written discovery. See Leach v. Superior Court (1980) 111 Cal. App. 3d 902, 906. An untimely responding party waives all objections, including privilege, unless they subsequently serve responses in substantial compliance with the Civil Discovery Act and demonstrate that their failure is the result of mistake, inadvertence, or excusable neglect. (Code Civ. Proc., § 2030.290, subd. (a).) Sanctions are mandatory for a party making or opposing a motion, except when the party making or opposing the motion is determined by the Court to have been acting with substantial justification, or that other circumstances would render the imposition of sanctions unjust. (Code Civ. Proc., § 2030.290, subd. (c).) Under the Civil Discovery Act, the Court is only entitled to impose monetary sanctions in the amount of “reasonable expenses, including attorney’s fees, incurred by anyone as a result of” the misuse of discovery. (Code Civ. Proc., § 2023.030, subd. (a).) The purpose of discovery sanctions is “not to provide a weapon for punishment, forfeiture and the avoidance of a trial on the merits, but to prevent abuse of the discovery process and correct the problem presented.” (Parker v. Wolters Kluwer U.S., Inc. (2007) 149 Cal. App. 4th 285, 301.) Consequently, “[t]he trial court cannot impose sanctions for misuse of the discovery process as a punishment.” (Doppes v. Bentley Motors, Inc. (2009) 174 Cal. App. 4th 967, 992.)

Merits

A portion of the both motions has been mooted as per Plaintiffs' Declaration of Mark Von Esch, which states that the relevant responses and interrogatories have been served as of July 30, 2020 and August 3, 2020, respectively.

Sanctions

EWB admits the service of the responses but (1) maintains its request for monetary sanctions and (2) further argues for an order compelling code-compliant responses. EWB argues that sanctions should still apply as to both motions, as Defendants failed to act with substantial justification or circumstances making sanctions unjust. EWB contends that Plaintiffs were served with the requests for production, set one, and set two, on December 23, 2019 and February 24, 2020, respectively. (Decl. Slater, Exh. A, B, C, D.) EWB contends the responses were served on August 3, 2020, making the delay seven and five months, respectively, for set one and set two. EWB further argues it attempted to meet and confer with Plaintiffs regarding both discovery requests three times in March and June without a response. (Decl. Slater, ¶¶ 5, 6, 7.) Defendants state in the Declaration of Mark Von Esch that Ms. Jennifer Slater's June email was placed in the spam folder regarding both discovery motions, and that the interrogatory request was propounded during a time it was unavailable.

The Court finds that Defendants fail to show "substantial justification, or that other circumstances would render the imposition of sanctions unjust" pursuant to CCP § 2031.300(c) and CCP § 2030.290(c). Thus, the Court will award Plaintiffs sanctions (1) for the requests for production motion in the amount of $1,560, representing 5 hours of work at $300 per hour plus a $60 filing fee; and (2) for the interrogatory motion in the amount of $2,460, representing 8 hours of work at $300 per hour plus a $60 filing fee.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records.

ORDER

Defendant East West Bank’s Motion to Compel Requests for Production and Motion to Compel Interrogatories came on regularly for hearing on August 14, 2020, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows:

THE MOTION TO COMPEL REQUESTS FOR PRODUCTION IS MOOTED, WITH SANCTIONS AWARDED FOR PLAINTIFFS IN THE AMOUNT OF $1,560.

THE MOTION TO COMPEL INTERROGATORIES IS MOOTED, WITH SANCTIONS AWARDED FOR PLAINTIFFS IN THE AMOUNT OF $2,460.

DATE: _______________ _______________________________

JUDGE