Defendant Wei Li’s demurrer to the third amended complaint (“TAC”) of plaintiffs Gui Fang Zhang and Sun Star Office Inc. is overruled.
First Cause of Action for Fraud
The court previously overruled Defendant’s demurrer to Plaintiffs’ fraud cause of action. Defendants do not claim or show that the current pleading is different in any material respect to that already considered by the court. Defendant has provided no basis or reason for the court to reconsider its prior ruling. See also Code Civ. Proc. § 430.41(b).
Second Cause of Action for Conversion
The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. Mendoza v. Rast Produce Co., Inc. (2006) 140 Cal. App. 4th 1395, 1404-05.
Where money, rather than an item of property, is involved, a cause of action for conversion can be stated only where the defendant is alleged to have interfered with the plaintiff’s possessory interest in a specific, identifiable sum. Kim v. Westmoore Partners, Inc. (2011) 201 Cal. App. 4th 267, 284. This generally occurs where an agent accepts a sum of money to be paid to another and fails to make the payment. Id. (citations and quote marks omitted).
A generalized claim for money is not actionable as conversion. Id. (citations and quote marks omitted).
Plaintiffs have alleged specific sums of money were taken from a specific bank account belonging to Star Sun. This is sufficient for pleading purposes.
Here, defendants other than the demurring Defendant are alleged to have removed money from the Sun Star account without right or permission. As alleged in the TAC, Defendant permitted other defendants to use his identity to purchase real property with the money they had taken from the Sun Star accounts. [TAC ¶ 39.] It is also alleged in the TAC, though, that Defendant knowingly used Plaintiffs’ money to buy property for himself without Plaintiffs’ consent.
Accepting either allegation (or treating them as not contradictory), it appears Plaintiffs have at least stated a cause of action for conspiracy to convert money.
The elements of civil conspiracy are (1) the formation and operation of the conspiracy, (2) a wrongful act done in the furtherance of the conspiracy, and (3) the resulting damage to the plaintiff. Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal. 4th 503, 510-11.
Fifth Cause of Action for Fraudulent Conveyance
A fraudulent transfer may be intentional (Civ. Code § 3439.04(a)(1)) or constructive. Civ. Code §3439.04 (a)(2); Mejia v. Reed (2003) 31 Cal. 4th 657, 669–70; Yaesu Electronics Corp. v. Tamura (1994) 28 Cal. App. 4th 8, 13.
The essential elements for a fraudulent transfer claim are as follows:
Intentional: transfer made (1) by the “debtor” (one who is liable on a claim)(2) with actual intent to hinder, delay or defraud any creditor of the debtor. Civ. Code §§ 3439.01(e), 3429.04(a)(1). “Actual intent” may be determined from a number of factors enumerated by statute, commonly referred to as “badges” of fraud. Civ. Code §3439.04(b)(1)-(11); Filip v. Bucurenciu (2005) 129 Cal. App. 4th 825, 834.
Constructive: transfer made (1) by the “debtor” (2) without receiving a reasonably equivalent value in exchange for the transfer, and (3) while the debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. Civ. Code §3439.04(a)(2).
As this is a claim sounding in fraud, the plaintiff must plead the essential elements with particularity. See Wald v. Truspeed Motorcars, LLC (2010) 184 Cal. App. 4th 378, 393-94; Thompson v. Moore (1937) 8 Cal. 2d 367, 372;Albertoli v. Branham (1889) 80 Cal. 631, 633.
Where a plaintiff seeks to unwind a fraudulent transfer, the transferee is a necessary party. Diamond Heights Village Ass’n, Inc. v. Financial Freedom Senior Funding Corp. (2011) 196 Cal. App. 4th 290, 304 (citing Heffernan v. Bennett & Armour (1952) 110 Cal. App. 2d 564, 586-87).
Lastly, when suing the transferee, the plaintiff must further plead that the transferee acted in bad faith: collusion or active participation with the debtor, coupled with actual subjective knowledge of the deceit. Civ. Code §3439.08;Lewis v. Superior Court (1994) 30 Cal. App. 4th 1850, 1858-59; McKnight v. Superior Court (1985) 170 Cal. App. 3d 291, 299. In other words, there must be allegations of “deliberate wrongful conduct” on the part of the transferee. Id.
Read liberally, the TAC alleges that the other defendants took Plaintiffs’ money and (i) bought real property in Defendant’s name, with his knowledge and agreement, to hinder Plaintiffs from either reclaiming their money or claiming the real property or (ii) gave it to Defendant and he, with knowledge of the scheme, used it to buy real property in his name, with everyone’s intent being the same as under scenario (i).
Sufficient facts have been alleged in the TAC to state the above-stated causes of action.
Plaintiffs to give notice.