Motion for judgment on the pleadings
Case No.: 24CV444671
Defendant Capital Asset Exchange and Trading, LLC (“Capital Asset”) has brought a motion for judgment on the pleadings (“JOP motion”) as to the first, second, third, fourth, fifth, and seventh causes of action alleged in the complaint filed by Plaintiff XH Industrial Co., LTD (“XH”).
A JOP motion “is equivalent to a belated general demurrer.” (Sprague v. County of San Diego (2003) 106 Cal.App.4th 119, 127.) It has the same function as a general demurrer, but it is made after the time for demurrer has expired.
The court GRANTS Capital Asset’s JOP motion as to the complaint’s fourth and seventh causes of action with 20 days’ leave to amend. “[A]n action based on an implied-in-fact or quasicontract cannot lie where there exists between the parties a valid express contract covering the same subject matter. However, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231, internal citations and quotation marks omitted.)
“A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement.” (Ibid., internal citation omitted; see also Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388-1389 (Klein) [“A plaintiff may not, however, pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter. . . . Although a plaintiff may plead inconsistent claims that allege both the existence of an enforceable agreement and the absence of an enforceable agreement, that is not what occurred here. Instead, plaintiffs’ breach of contract claim pleaded the existence of an enforceable agreement and their unjust enrichment claim did not deny the existence or enforceability of that agreement.”].)
Looking for case law or statutes not cited here? Search published authorities
Examples: “Why did the court rule this way?” · “What were the procedural grounds?” · “Is appearance required?”
Here, the complaint’s fourth and seventh causes of action are “quasi-contract” in nature. Similar to Klein, the complaint alleges the existence of an enforceable contract. (Complaint, ¶¶ 52-57.) However, the complaint’s fourth and seventh causes of action do not “deny the existence or enforceability of that agreement.” (Klein, supra, 202 Cal.App.4th at p. 1389.) XH has not asserted any reason that the alleged agreement is unenforceable. As in Klein, XH’s complaint does “not provide any explanation as to why the . . . agreement referenced in [its] breach of contract claim might be unenforceable or otherwise not qualify as a contract.” (Ibid.)
The court GRANTS Capital Asset’s JOP motion as to the complaint’s first, second, and third causes of action with 20 days’ leave to amend. First, the court notes that it does not find Capital Asset’s economic loss rule arguments persuasive as to the first, second, and third causes of action. California permits recovery of tort damages in certain types of contract cases where the duty giving rise to tort liability “is either completely independent of the contract or arises from conduct which is both intentional and intended to harm,” such as where the contract was fraudulently induced—the complaint’s first, second, and third causes of action are premised upon a theory of fraudulent inducement. (Erlich v.
Menezes (1999) 21 Cal.4th 543, 552 (Erlich), internal citation omitted; see also Complaint, ¶¶ 16-41; Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 833 (Dhital) [“We conclude that, under California law, the economic loss rule does not bar plaintiffs’ fraudulent inducement claim.”].)
On reply, Capital Asset discusses Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1 (Rattagan). (Reply, pp. 5:5- 7:16.) The plaintiff in Rattagan alleged tort claims based on conduct “committed during the contractual relationship” rather than conduct that allegedly induced a party to enter into the contract. (Rattagan, supra, 17 Cal.5th at pp. 40-41, fn. 12, emphasis original.) The Supreme Court was careful to distinguish Dhital on these grounds. (Ibid.; see also id. at p. 13 [“Under California law, may a plaintiff assert a tort claim for fraudulent concealment arising from or related to the performance of a contract? . . .”], emphasis added.)
Second, the court finds that the complaint has sufficiently alleged “intent” and “knowledge.” (See Memorandum of Points and Authorities in Support of JOP Motion, pp. 12:18-13:17; see also Complaint, ¶¶ 20, 29, 38; Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060-1062 (Beckwith).) Capital Asset is correct that each element in a fraud cause of action must be pled with specificity. (See Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 518-519 [outlining the elements of a fraud cause of action and noting they must be “specifically alleged”]; SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 154 [outlining the elements of a negligent misrepresentation cause of action].)
Nevertheless, fraudulent “intent is an issue for the trier of fact to decide. [Citation.]” (Beckwith, supra, 205 Cal.App.4th at p. 1061.) Moreover, “fraudulent intent has been inferred from such circumstances as [a] defendant’s insolvency, his hasty repudiation of the promise, his failure even to attempt performance, or his continued assurances after it was clear he would not perform. [Citation.]” (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30.) The complaint alleges circumstances suggesting fraudulent intent and knowledge.
Specifically, the complaint alleges that Capital Asset allegedly never made the machine that XH ordered available for pickup, XH repeatedly “followed up” with Capital Asset but was given “the runaround,” Capital Asset “continued to impress upon Plaintiff that the machine [would] be made ready for Plaintiff,” and Capital Asset ignored XH’s requests for a refund. (Complaint, ¶¶ 10-15.)
Finally, the complaint alleges that in or about October 2023, Grace Shen (“Shen”) from Capital Asset represented “via email and telephone call” to XH that Capital Asset had a 1996 vintage laser machine for sale for $70,000 and that Capital Asset could and would make the machine available for pick-up within 45 calendar days upon receipt of payment. (Complaint, ¶ 17.) These allegations state what was said, who said it, how they said it, and when they said it. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 (Lazar); Beckwith, supra, 205 Cal.App.4th at pp. 1060-1061.)
However, these allegations do not specify Shen’s “authority to speak” on behalf of Capital Asset. (Lazar, supra, 12 Cal.4th at p. 645.) Nor does the complaint appear to allege who Shen specifically made any representations to. (Ibid.) Therefore, the court grants Capital Asset’s JOP motion as to the first, second and third causes of action alleged in the complaint.
The court GRANTS Capital Asset’s JOP motion as to the complaint’s fifth cause of action with 20 days’ leave to amend. Unlike the first, second, and third causes of action, the court finds that the economic loss rule does bar the complaint’s fifth cause of action, as currently alleged. (Robinson Helicopter Company v. Dana Corporation (2004) 34 Cal.4th 979, 988 [“The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. [Citation.]”].)
Again, the first, second, and third causes of action are premised upon a theory of fraudulent inducement. (See Erlich, supra, 21 Cal.4th at p. 552; Dhital, supra, 84 Cal.App.5th at p. 833; Complaint, ¶¶ 16-41.) The complaint’s fifth cause of action, however, is not, instead alleging that “Defendants [sic] improperly, fraudulently and without proper authorization, wrongfully misappropriated Plaintiff’s money for their own personal benefit without any legal justifiable reasons,” and then seeks $70,000 in damages, the same amount XH allegedly paid Capital Asset under the terms of a written contract. (Complaint, ¶¶ 49-50, 52-57.)
For similar reasons, the court agrees with Capital Asset that the allegations underlying the complaint’s fifth cause of action are insufficient. “Money can be the subject of an action for conversion if a specific sum is capable of identification is involved. Neither legal title nor absolute ownership of the property is necessary. A party need only allege it is entitled to immediate possession at the time of conversion. However, a mere contractual right of payment, without more, will not suffice.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452 (Farmers), internal citations, emphasis, and quotation marks omitted omitted.)
The complaint alleges that XH has a “clear legal ownership and right to possession of its $70,000.00 but for the illicit actions undertaken by Defendants. . . . Defendants improperly, fraudulently and without proper authorization, wrongfully misappropriated Plaintiff’s money for their own personal benefit without any legal justifiable reasons . . .” (Complaint, ¶¶ 48-49.) Given that the complaint alleges a cause of action for breach of contract on the basis that XH and Capital Asset entered into a written contract in which Capital Asset agreed to sell XH a 1996 “laser machine” for $70,000, the court struggles to see how the complaint’s conversion allegations do not involve a “mere contractual right of payment.” (Farmers, supra, 53 Cal.App.4th at p. 452; Complaint, ¶¶ 52-57.)
Line 3 Calendar Line 3
Case Name: Daniel Skelton et al. v. FCA US, LLC et al.