Demurrer
Case No. 23CV428385 Demurrer Before the court is defendant Rak Gyu “Robert” Chung dba SVR Real Estate & Management’s demurrer to third amended complaint. Pursuant to California Rule of Court 3.1308, the court issues its tentative ruling as follows.
I. BACKGROUND In 2020, plaintiff SB Novus Ltd (“Novus”), based in South Korea, decided to purchase real estate in the United States through its subsidiary companies, plaintiffs Soulbrain CA, LLC (“SBCA”) and SB 125 Rio Robles, LLC (“SB125”) (collectively, SBCA and SB125 are hereafter referred to as “California Subsidiaries;” collectively, Novus, SBCA, and SB125 are hereafter referred to as “Soulbrain”). (Third Amended Complaint (“TAC”), ¶12).
Novus’s management team in Korea did not have expertise in US real estate transactions. (TAC, ¶14). The Novus management team relied on advice of defendant Seung Pyo (Dominic) Lee (“Lee”), who held himself out as an expert in US commercial real estate investments, to properly structure and capitalize the California Subsidiaries. (Id.).
Plaintiffs Soulbrain identified three buildings in Santa Clara located at 125 Rio Robles Drive (“Soulbrain B1”), 80 West Tasman Drive (“Soulbrain B2;” Soulbrain B1 and Soulbrain B2 are collectively referred to as the “Soulbrain Property”), and 10 W Tasman Drive (“Heritage Property;” the Heritage Property and Soulbrain Property are collectively referred to as the “Properties”). (TAC, ¶17).
To ensure the California Subsidiaries were adequately capitalized to purchase and manage the Properties, defendant Lee prepared and submitted to Novus’s management presentations and emails containing the amounts necessary to adequately capitalize plaintiff SBCA. (TAC, ¶19). Once capitalized, the funds to purchase the Properties were transferred to plaintiff SB125, a wholly owned subsidiary of SBCA, to purchase and hold title to the Properties. (Id.).
Defendant Lee was the sole employee of plaintiff SBCA during the relevant time periods. (TAC, ¶20). If defendant Lee needed additional capitalization for plaintiff SBCA, Lee needed to submit a request to Novus who would determine whether the amount requested was reasonable and transfer additional capital to SBCA. (Id.). Once SBCA had capital, defendant Lee had full autonomy to disperse funds for SBCA’s benefit. (Id.). Novus’s management would monitor SBCA’s cash balance, but Lee was trusted to act in the best interest of the California Subsidiaries. (Id.). On September 22, 2020, Novus wired $9 million to SBCA based on Lee’s representations about the funds he needed authorization to spend on behalf of the California Subsidiaries. (Id.).
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In Korea, the typical practice in commercial real estate transactions is for both buyer and seller to pay a broker’s fee. (TAC, ¶24). In the United States, it is typical for the seller to pay the brokers’ commissions from the final purchase price. (Id.) Lee knew Novus management would be unaware of this distinction and expect to pay a broker’s fee in connection with purchasing real property. (Id.) Lee took advantage of this difference to build in a second, fake “broker’s fee” into an authorization request to Novus for cash on behalf of the California Subsidiaries. (Id.).
Novus relied on Lee’s representation that the California Subsidiaries would owe $1.6 million to Jones Lang LaSalle (“JLL”), the broker acting on behalf of SBCA as buyer of the Properties. (TAC, ¶¶23 and 25). In reliance, Novus sent SBCA $53 million on October 20, 2020. (TAC, ¶25). Once Lee received authorization and funds from Novus,
on October 29, 2020, unknown to Soulbrain, Lee sent $1.6 million to defendant Rak Gyu (Robert) Chung dba SVR Real Estate & Management (“SVR”), a friend of Lee’s family, under an arrangement for SVR to immediately send all but $20,000 of the funds to Lee’s personal company, defendant CMD Advisor, LLC (“CMD”). (TAC, ¶¶26, 58, and 60). SBCA never paid a broker’s fee to JLL. (TAC, ¶¶58).
To justify the $1.6 million payment to SVR, Lee points to an agreement purportedly dated February 2, 2020 where CMD appointed SVR as a real estate agent and broker for CMD. (TAC, ¶59). This purported agreement has nothing to do with the California Subsidiaries’ acquisition of the Properties, and neither Novus nor the California Subsidiaries ever authorized any agreement with SVR. (Id.). SVR never provided any services to Soulbrain and played no role in the purchase of the Properties. (Id.). SVR never entered into a contract with Soulbrain and Soulbrain never signed an agreement to make any payment to SVR. (Id.).
Soulbrain already had a broker, JLL, whose fee was to be paid by the seller of the Properties out of the total purchase price as is typical in US real estate transactions. (Id.). Soulbrain neither used SVR as a broker nor owed SVR any amount as a broker’s fee in connection with the purchase of the Properties. (Id.).
Lee communicated with SVR through his personal email to make it more difficult for Soulbrain to discover his fraudulent scheme. (TAC, ¶61). This scheme was difficult for Soulbrain to detect because a buyer does pay a broker’s fee in a typical Korean commercial real estate transaction. (Id.). Because Soulbrain had expected to make this payment, SBCA’s books were balanced and the expenditure was not further reviewed by Novus. (TAC, ¶64). It was not until November 2023 that Soulbrain first discovered the $1.6 million payment had been an act of fraud and theft. (Id.).
By participating in this scheme, SVR was aware he had done nothing to act as a broker for Soulbrain and had no right to receive any funds from Soulbrain. (TAC, ¶63). SVR participated in this scheme knowing he was facilitating fraud and Lee’s breach of fiduciary duty and theft of these funds and that he would be paid a small fee ($19,975.00) for his role in assisting Lee’s acts of fraud and theft from Soulbrain. (Id.) .
On December 29, 2023, plaintiffs Soulbrain filed a complaint against defendants Lee, CMD, Chung, and others asserting causes of action for: (1) Breach of Fiduciary Duty (2) Fraud (3) Conspiracy to Commit Fraud (4) Breach of Contract (5) Breach of Contract (6) Conversion (7) Unjust Enrichment
On April 2, 2024, defendants Lee, CMD, and Chung filed a demurrer and motion to strike the plaintiffs’ complaint.
On May 29, 2024, plaintiffs filed a first amended complaint (“FAC”) which asserted causes of action for: (1) Breach of Fiduciary Duty [against defendant Lee] (2) Fraud [against defendant Lee] (3) Conspiracy to Commit Fraud [against defendants Heritage, CMD, Interstellar, and SVR] (4) Breach of Contract (Payment Agreement) [by plaintiff SB125 against defendant Heritage] (5) Breach of Contract (Property Lease Agreement) [by plaintiff SB125 against defendant Heritage] (6) Conversion [against defendants Lee, Chung, CMD, Heritage, and Interstellar] (7) Unjust Enrichment
On July 22, 2024, defendants Lee, CMD, and Chung filed (1) a demurrer to the second, third, sixth, and seventh causes of action of the FAC and (2) motion to strike time-barred and punitive damages allegations against defendant Chung.
On October 31, 2024, the court issued an order sustaining defendants’ demurrer with leave to amend and granting, in part, the motion to strike.
On November 15, 2024, plaintiffs Soulbrain filed a second amended complaint (“SAC”) asserting the same causes of action asserted in the FAC with the exception of the seventh cause of action for unjust enrichment which was deleted.
On December 17, 2024, defendants Lee, CMD, and Chung filed a demurrer to the second, third, and sixth causes of action of plaintiffs’ SAC.
On June 12, 2025, the court issued an order sustaining defendants’ demurrer to the SAC with leave to amend.
On June 27, 2025, plaintiffs Soulbrain filed the now operative TAC which asserts the following causes of action: (1) Breach of Fiduciary Duty [by plaintiffs California Subsidiaries against defendant Lee] (2) Fraud [by plaintiffs Soulbrain against defendant Lee] (3) Fraud (Conspiracy) [by plaintiffs Soulbrain against defendants CMD and SVR, et al.] (4) Breach of Contract (Payment Agreement) [by plaintiff SB125 against defendant Heritage] (5) Breach of Contract (Property Lease Agreement) [by plaintiff SB125 against defendant Heritage] (6) Conversion [by plaintiffs Soulbrain against defendants Lee, CMD, SVR, et al.]
On October 29, 2025, defendant SVR filed the motion now before the court, a demurrer to the third and sixth causes of action of plaintiffs’ TAC.
II. LEGAL STANDARD Pursuant to Code of Civil Procedure section 430.10, a party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e)). A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn)). When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078). In ruling on a demurrer, the Court treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank)).
III. ANALYSIS A. FRAUD (CONSPIRACY) A court may sustain a demurrer on the ground of failure to state sufficient facts if “the complaint shows on its face the statute [of limitations] bars the action.” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315 (E-Fab)). A demurrer is not sustainable on statute of limitations grounds if there is only a possibility that the cause of action is time-barred; the defense must be clearly and affirmatively apparent from the allegations of the pleading [and matters of which the court may properly take judicial notice]. (Id., at pp. 1315-1316).1 When evaluating
1 See also Heshejin v. Rostami (2020) 54 Cal.App.5th 984, 992-993: “‘[A] demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense.’” (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 191 [213 Cal. Rptr. 3d 850]; accord, Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191 [151 Cal. Rptr. 3d 827, 292 P.3d 871] [application on demurrer of affirmative defense of statute of limitations based on facts alleged in a complaint 23
whether a claim is time-barred, the court must determine: (1) which statute of limitations applies, and (2) when the claim accrued. (Ibid.).
The limitations period for a claim predicated on fraud is three years from the date of “the discovery, by the aggrieved party, of the facts constituting the fraud.” (Code Civ. Proc., § 338, subd. (d); see Britton v. Girardi (2015) 235 Cal.App.4th 721, 734). “The discovery rule ‘postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.’ [Citations.] . . . By statute, the discovery rule applies to fraud actions. (Code Civ. Proc., § 338, subd. (d)).” (E-Fab, supra, 153 Cal.App.4th at p. 1318).
“A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (E-Fab, supra, 153 Cal.App.4th at p. 1319).
In demurring, defendant SVR improperly focuses on the date the purportedly fraudulent commissions were paid, October 29, 2020 (see TAC, ¶60), despite plaintiffs’ affirmative allegation that they did not discover the fraud until November 2023 (see TAC, ¶64), to argue that the statute of limitations expired on October 29, 2023 and plaintiffs did not commence this action until December 29, 2023.
That misconception aside, defendant SVR contends there are allegations made within the TAC which suggest the cause of action accrued earlier than November 2023. Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her. [Footnote.] . . . the limitations period begins once the plaintiff "'"has notice or information of circumstances to put a reasonable person on inquiry . . . ."'" (Gutierrez, supra, 39 Cal.3d at pp. 896- 897, quoting Sanchez, supra, 18 Cal.3d at p. 101 (italics added by the Gutierrez court)).
A plaintiff need not be aware of the specific "facts" necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-1111).
Defendant SVR highlights the allegations that Novus had an internal auditor in charge of supervising and monitoring the activities of defendant Lee and that it was a sophisticated business organization formed to purchase $160 million worth of real estate. (See TAC, ¶¶12 – 13). Defendant SVR contends such factual allegations place plaintiffs on inquiry notice and plaintiffs should have suspected wrongdoing and discovered the double commission in October 2020. 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 evidence (or, in this case, the allegations in the complaint and facts properly subject to judicial notice) can support only one reasonable conclusion. (Stella v.
Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 193).
is a legal question subject to de novo review]; Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 224 [115 Cal. Rptr. 3d 274] [“‘It must appear clearly and affirmatively that, upon the face of the complaint [and matters of which the court may properly take judicial notice], the right of action is necessarily barred.’”]). 24
Here, the court does not agree with defendant SVR’s contention that the highlighted facts placed plaintiffs on inquiry notice. Moreover, defendant SVR wholly ignores the allegations made by plaintiffs explaining why they were unable to have made earlier discovery of the fraud despite reasonable diligence.
Defendant SVR argues, additionally, that plaintiffs have not alleged justifiable reliance again focusing on the allegations that plaintiffs were, themselves, sophisticated business entities. “‘Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact.’” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239). In Guido v. Koopman (1991) 1 Cal.App.4th 837, 843, the court stated that, “Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact.
However, whether a party’s reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.” Even with the allegations cited by defendant SVR, the court cannot say as a matter of law that only one conclusion can be drawn from those facts with regard to the reasonableness of plaintiffs’ reliance.
Accordingly, defendant SVR’s demurrer to the third cause of action of plaintiffs’ TAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for fraud (conspiracy) is OVERRULED.
B. CONVERSION Defendant SVR demurs to the sixth cause of action of plaintiffs’ TAC (conversion) on essentially the same grounds as he demurred to the third cause of action, i.e., the conversion cause of action is barred by a three year statute of limitations. Defendant SVR contends a cause of action for conversion accrues at the time of the wrongful act of conversion, but acknowledges the statute of limitations is tolled where there is fraudulent concealment by the defendant.
In light of the ruling above, the court does not agree with defendant SVR’s contention that plaintiffs have not sufficiently alleged delayed discovery of the fraud here. For that reason, defendant SVR’s demurrer to the sixth cause of action of plaintiffs’ TAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for conversion is OVERRULED.
IV. CONCLUSION Based on the foregoing, the Court ORDERS the following:
Defendant SVR’s demurrer to the third cause of action of plaintiffs’ TAC on the ground that the pleading does not state facts sufficient to constitute a cause of action for fraud (conspiracy) is OVERRULED.
Defendant SVR’s demurrer to the sixth cause of action of plaintiffs’ TAC on the ground that the pleading does not state facts sufficient to constitute a cause of action for conversion is OVERRULED.
The Court will prepare the formal Order.
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