Case Name:??? C-M Hope Street Station, LLC, et al. v. Edmund Y. Sun, et al.?
Case No.:??????? 2015-1-CV-288062
- Background
??????????? This is an action for breach of contract and fraud arising out of a dispute over the sale of commercial real estate brought by C-M Hope Street Station, LLC (?Hope Street?) and Calvano Development, Inc. (?Calvano?) (collectively, ?Plaintiffs?) against defendants Edmund Y. Sun (?Edmund?), Jane V. Sun (?Jane?), John S. Sun (?John?), and Christopher S. Sun (?Christopher?) (collectively, ?Defendants?).[1]? Edmund is named in his capacity as trustee of the Los Altos Holding Trust, the Auburn Holding Trust, and the JL Stanford Holding Trust.? Jane is named in her individual capacity and as trustee of the Los Altos Holding Trust and Gunnhi Holding Trust.? John is named in his individual capacity and as trustee of the Gunnhi Holding Trust.? Christopher is named in his capacity as trustee of the Auburn Holding Trust.
According to the allegations in the first amended complaint (?FAC?), Calvano executed a contract for the purchase of commercial real estate located at 278 Hope Street and 280 Hope Street in Mountain View, California.[2]? (FAC, ?? 9-15.)? The Los Altos Holding Trust and the Gunnhi Holding Trust each own a 33 percent undivided interest in 278 Hope Street and John individually owns a 34 percent undivided interest in 278 Hope Street.? (FAC, ?? 3-5.)? The Auburn Holding Trust and the JL Stanford holding trust each own a 33 percent undivided interest in 280 Hope street and John individually owns a 34 percent undivided interest in 280 Hope Street.? (FAC, ?? 6-8.)? The Los Altos Holding Trust, Gunnhi Holding Trust, and Auburn Holding Trust entered into the purchase agreement with Calvano and a deposit for the sale was placed in escrow.? (FAC, ?? 15-17.)? Subsequently, however, Jane, John, and Christopher informed Calvano that Edmund, trustee of the JL Stanford Holding Trust, did not consent to the terms of the purchase agreement and the sale would not therefore include the 33 percent interest held by the JL Stanford Holding Trust in 280 Hope Street.? (FAC, ? 23.)
In addition to informing Calvano of the outstanding 33 percent interest held by the JL Stanford Holding Trust, Jane, John, and Christopher failed to turn over all of the requisite documents and certifications for the properties and entered into new leases with commercial tenants without Plaintiffs? knowledge or consent in direct violation of the purchase agreement.? (FAC, ?? 20-22.)? While Jane, John, and Christopher subsequently offered to sell their collective 100 percent interest in 278 Hope Street and two-thirds interest in 280 Hope Street, they offered the property for the original price of $15 million dollars, refusing to reduce the price based on their inability to convey the outstanding one-third interest in the 280 Hope Street property.? (FAC, ? 24.)
Based on the foregoing allegations, Hope Street asserts causes of action against Defendants for (1) specific performance; (2) breach of contract; (3) intentional misrepresentation; and (4) declaratory relief.? Calvano asserts causes of action against Defendants for (1) intentional misrepresentation and (2) fraudulent inducement.
Currently before the Court are two motions to quash service of the summons and FAC by Edmund and a demurrer to the third, fourth, and sixth causes of action by Jane, John, and Christopher.[3]
- Motions to Quash
??????????? Edmund moves to quash service of the summons and FAC on the ground the Court lacks jurisdiction over him because he was not properly served.? ?When a defendant challenges the court?s personal jurisdiction on the ground of improper service of process ?the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.?? [Citation.]?? (Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413.)? A?valid proof of service creates a rebuttable presumption that papers were properly served and therefore received.? (Dill v. Berquist Construction Co., Inc. (1994) 24 Cal.App.4th 1426, 1441-42.)? A defendant may attempt to dispel this rebuttable presumption by presenting contradictory evidence.? (Craig v. Brown & Root (2000) 84 Cal.App.4th 416, 421.)
- Waiver
As an initial matter, Hope Street argues Edmund waived any defect in service by making a general appearance by demurrer.
??????????? A general appearance constitutes consent to personal jurisdiction, obviates the need for service of process, and operates as a waiver of objections based on defective service.? (Fireman?s Fund Insurance Co. v. Sparks Construction, Inc. (2004) 114 Cal.App.4th 1135, 1145.)? ?Service of the summons is required in order to give the defendant notice of the action, as due process demands.?? (Id. at p. 1147.)? ?But once the defendant appears in the action, this purpose has been served.?? (Ibid.)
A demurrer is a general appearance.? (McDonald v. Agnew (1898) 122 Cal. 448, 450; see also Code Civ. Proc., ? 1014.)? ?Failure to make a motion [to quash] at the time of filing a demurrer or motion to strike constitutes a waiver of the issues of lack of personal jurisdiction, inadequacy of process, inadequacy of service of process, inconvenient forum, and delay in prosecution.?? (Code Civ. Proc., ? 418.10, subd. (e)(3); see also McDonald v. Agnew, supra, 122 Cal. at p. 450 [?A special appearance may be made for the purpose of quashing the summons or proof of service, but a demurrer to the complaint, raising, as it does, an issue of law in the case, to be tried by the court, is necessarily a submission to its jurisdiction over the parties.?]? However, filing a demurrer contemporaneously with a motion to quash neither constitutes an appearance in the action nor waives a party?s right to object to defects in service.? (Code Civ. Proc., ? 418.10, subd. (e)(1); see also Roy v. Superior Court (2005) 127 Cal.App.4th 337, 345 [?Nothing could be clearer: a defendant may move to quash coupled with any other action without being deemed to have submitted to the court?s jurisdiction.?])
Here, Jane, John, and Christopher generally appeared in this action by filing a demurrer because they did not contemporaneously move to quash service of the summons and complaint based on lack of personal jurisdiction.? Edmund, however, did not file a demurrer or explicitly join in the demurrer filed by Jane, John, and Christopher.? Hope Street?s position is predicated on the argument that the demurrer filed by Edmund?s co-defendants may be imputed to him.
Jane and Christopher filed the demurrer in their capacity as trustees of the Los Altos Holding Trust and Auburn Holding Trust, respectively.? While Edmund is named as a defendant in his capacity as co-trustee of the Los Altos Holding Trust and Auburn Holding Trust, he is also named in his capacity as trustee of the JL Stanford Holding Trust, of which he is the sole trustee.? Consequently, a general appearance by his co-trustees with respect to the Los Altos Holding Trust and Auburn Holding Trust could not result in a general appearance by Edmund to the extent he is proceeding as trustee of the JL Holding Trust.
Moreover, Hope Street does not provide any authority in support of its argument that a general appearance by a co-trustee on behalf of one trust may be imputed to a trustee who is also named in his capacity as a trustee of an entirely separate trust that has not made an appearance in the action.? Hope Street has not adequately substantiated its argument and Edmund is not deemed to have joined in the demurrer.? Hope Street?s argument that Edmund made a general appearance and waived the right to object to service therefore lacks merit.? The Court will therefore consider whether Edmund was properly served.
- Substitute Service
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??????????? Edmund argues Hope Street did not properly effectuate substitute service upon him because the summons and complaint were left at Christopher?s house in California, which is not his dwelling house or usual place of abode.
If a plaintiff has been unable to personally serve a defendant despite exercising reasonable diligence in an effort to do so, the plaintiff may serve the defendant with the summons and complaint through substitute service.? (Evartt v. Superior Court (1979) 89?Cal.App.3d 795, 801-802.)? A plaintiff will be deemed to have exercised reasonable diligence if he or she makes two or three attempts to personally serve the defendant.? (American Express Centurion Bank v. Zara (2011) 199 Cal.App.4th 383, 389.)? Then, the plaintiff may utilize the process for substitute service, which requires him or her to (1) leave a copy of the summons and complaint at the individual?s dwelling house, usual place of abode, usual place of business, or usual mailing address (other than a post office box) (2) with an adult ?competent member of the household? or person ?apparently in charge,? who must be told what the papers are, and (3) follow-up by mailing copies of the summons and complaint to the address where the copies were left.? (See Code Civ. Proc., ? 415.20, subd. (b).)
Edmund owns a house located at 1 Atherton Oaks Lane, Atherton, California (the ?Atherton house?).? (Merritt Decl., Exh. H.)? Hope Street hired a private investigator who confirmed the Atherton house as Edmund?s address.? (Merritt Decl., ? 5.)? Edmund and his family moved into the Atherton house in 1996.? (Seegal Decl., Exh. B.)? Hope Street attempted to serve Edmund at the Atherton house on nine separate occasions.? (Seegal Decl., Exh. C.)? On the third attempt, Edmund?s adult son, Christopher, informed the process server that his father did not live there, but did not provide any additional information.? (Seegal Decl., Exh. C.)? On the fifth attempt, the process server was informed that neither Christopher nor Edmund were home.? (Seegal Decl., Exh. C.)? On the ninth attempt, Christopher answered the intercom at the gate to the Atherton house, but refused to grant the process server access to the front door to hand him copies of the summons and FAC, so the process server left the copies under the gate and thereafter mailed the same to the Atherton house.? (Seegal Decl., Exh. C.)? At his deposition, Christopher represented that Edmund now lives in Hong Kong.? (Seegal Decl., Exh. B.)
The record reflects and Edmund does not dispute that Hope Street exercised reasonable diligence in attempting to personally serve him prior to resorting to substitute service.? Even so, the record reflects Edmund does not live at the Atherton house, and that it is not his dwelling house or usual place of abode.? As stated above, however, substitute service is proper if copies of the summons and complaint are left at the defendant?s usual mailing address.? In his motion, Edmund does not establish that the Atherton house is not his usual mailing address.? Edmund concedes he has accumulated mail at the Atherton house, but does not state he has attempted to change his address, directed his mail to be forwarded, or established a new usual mailing address.? (Reply at p. 6:19.)? Additionally, given the Atherton house is the address listed for mailing of the deed and tax statements for the property, which Edmund owns, the Atherton house is his usual mailing address.? (Merritt Decl., Exh. H.)? Incidentally, Edmund concedes he ?has actual notice of this lawsuit.?? (Reply at p. 10:3-5.)? Substitute service at the Atherton house was therefore proper.
- Hague Convention Service
In his first motion, Edmund stated he was amenable to service in Hong Kong and must be served through the Hague Convention.? Hope Street attempted to serve him in compliance with the Hague Convention.? In his second motion, Edmund now argues this service was improper as well.
First, Edmund argues it is unclear whether a defendant in Hong Kong may be served by mail under the Hague Convention.? To the contrary, Article 10(a) of the Hague Convention permits service of process upon foreign defendants by mail.? (Denlinger v. Chinadotcom Corp. (?Denlinger?) (2003) 110 Cal.App.4th 1396, 1402.)? Hong Kong did not object to Article 10(a), and a defendant in Hong Kong may therefore be served with process by mail.? (Id. at p. 1405.)
The cases cited by Edmund in support of his argument that the Hague Convention does not authorize service by mail, such as Bankston v. Toyota Motor Corp. (8th Cir. 1989) 889 F.2d 172, predate Denlinger and were expressly rejected by the court in that case based on their flawed interpretation of the language of the treaty, guidance from the State Department, and a special report prepared by a panel of experts from the signatory countries.? (Id. at p. 1403 [??. . . the decision of the Court of Appeals in Bankston is incorrect to the extent it suggests that the Hague Convention does not permit as a method of service the sending of a copy of the summons and complaint by registered mail to a defendant in a foreign country. . . .?? [Citation.]?])? Edmund?s argument therefore lacks merit.
Second, Edmund argues the proofs of service for the copies of the summons and FAC sent to Hong Kong are not code-compliant because they do not show the age of the person that served the papers.? Specifically, Edmund argues the proofs of service must state the process server?s exact age and may not merely indicate the process server is at least 18 years old.? This argument is specious.
?A summons may be served by any person who is at least 18 years of age and not a party to the action.?? (Code Civ. Proc., ? 414.10.)? The Judicial Council Form POS-010 or proof of service of summons, which was used by Hope Street in this case, requires the individual serving process to declare under penalty of perjury that ?[a]t the time of service I was at least 18 years of age and not a party to this action.?? (See Seegal Decl., Exh. A.)? Edmund provides no statutory authority or case law whatsoever, and the Court is otherwise unaware of any such authority, in support of the proposition that a proof of service must reflect the process server?s actual age instead of the fact he or she is a non-party of at least 18 years of age.
Edmund?s reliance on the Judicial Council Comment to Code of Civil Procedure section 417.20, the statute governing proofs of service for service made outside of California, is misplaced.? The Judicial Council states that if service is made by registered or certified mail, the proof of service must show, among other things, ?the name, age, etc., of the person who deposited the papers in the United States post office or mailbox, as in the case of personal service.?? (Judicial Council of Cal., com., reprinted at West?s Ann. Code Civ. Proc. (2016 ed.) foll. ? 417.20, italics added.)? Edmund does not explain how this comment reflects anything other than the requirement that a proof of service for process served by mail must, as with a proof of service for personal service, demonstrate the process server was a non-party of at least 18 years of age.? In essence, Edmund suggests that the Judicial Council adopted for mandatory use a form that is not code-compliant and inconsistent with its own commentary.? (See Cal. Rules of Court, rule 1.31(a)-(b) [forms adopted for mandatory use].)? The?proofs of service of the summons and FAC reflect they were mailed by an individual at least 18 years of age and are therefore code-compliant.? (See Seegal Decl., Exh. A.)
Finally, Edmund argues the proofs of service for the copies of the summons and FAC sent to Hong Kong are not code-compliant because they do not include a signed return receipt or other evidence of actual delivery.
When a party serves an individual outside of California, the proof of service must include ?evidence satisfactory to the court establishing actual delivery to the person to be served, by a signed return receipt or other evidence.?? (Code Civ. Proc., ? 417.20, subd. (a); see also Floveyor International, Ltd. v. Superior Court (1997) 59 Cal.App.4th 789, 795-96.)? A return receipt signed by the person to be served is not the only evidence from which a court can conclude actual delivery to an out-of-state defendant.? (In re Marriage of Tusinger (1985) 170 Cal.App.3d 80, 83 [service valid where mother of defendant accepted delivery].)
On June 1, 2016, Kathy Campion mailed copies of the summons and FAC to Edmund at three different addresses in Hong Kong.? (Merritt Decl., Exhs. B-E.)[4]? Copies of the summons and FAC were sent to a residential address and two business addresses.? (Merritt Decl., Exhs. B-E; Chu Decl., ? 4.)? According to the USPS tracking information, the copies of the summons and FAC addressed to Edmund and mailed in the care of Woskan Limited to Office G2, 17/F, Legend Tower, No. 7 Shing Yip Street, Kowloon, Hong Kong were delivered on June 6, 2016.? (Merritt Decl., Exh. E.)? Edmund is the director of Woskan Limited.? (Chu Decl., ? 4.)? The USPS tracking information indicates delivery attempts were made at the other two addresses, but the parcels were held for pick-up at the post office.? (Merritt Decl., Exh. E.)
Edmund argues the USPS tracking information is insufficient evidence because it demonstrates delivery to Woskan Limited as opposed to him specifically.? Edmund relies on Stamps v. Superior Court (?Stamps?) (1971) 14.Cal.App.3d 108 and Dill v. Berquist Construction Co. (?Dill?) (1994) 24 Cal.App.4th 1426 in support of this argument.? Edmund?s reliance on Stamps is misplaced because that case involved a situation in which the parcel could not be delivered and the return receipt stated the parcel was ?unclaimed.?? (Stamps, supra, 14 Cal.App.3d at pp. 110-11.)? Edmund?s reliance on Dill is similarly misplaced because, in that case, the plaintiff failed to correctly address the documents to be served to the specific individual authorized to receive service.? (Dill, supra, 24 Cal.App.4th at pp. 1435-36.)? Neither of these circumstances are implicated in the present case and Edmund provides no authority demonstrating the USPS tracking information is insufficient to establish actual delivery under the circumstances actually presented.? Furthermore, Edmund does not dispute he is the director of Woskan Limited, does not dispute the accuracy of the addresses to which copies of the summons and FAC were mailed, or provide any evidence to contradict the proofs of service or USPS tracking information.? The Court therefore concludes Hope Street has presented sufficient evidence of actual delivery to Edmund and that service upon him in Hong Kong was therefore valid.
- Conclusion
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??????????? Based on the foregoing, both motions to quash service of the summons and FAC are DENIED.? Edmund shall have 15 calendar days from service of this order to file a responsive pleading.
III.?????? Demurrer
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??????????? Christopher, Jane, and John demur to the third cause of action by Hope Street and the fourth and sixth causes of action by Calvano on the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty.? Both Calvano and Hope Street filed oppositions to the demurrer.? As a preliminary matter, Calvano and Hope Street note Christopher, Jane, and John failed to adequately meet and confer before filing their demurrer as required by Code of Civil Procedure section 430.41.? Even assuming this to be true, a court may not sustain or overrule a demurrer based on deficiencies in the meet and confer process. ?(Code Civ. Proc., ? 430.41, subd.,?(a)(4).) ?The Court will therefore reach the merits of the demurrer. ?All parties and counsel are expected to comply with section 430.41 in the future.
?
- Failure to State a Claim
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- Fourth and Sixth Causes of Action
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??????????? Christopher, Jane, and John argue Calvano may not maintain its fourth and sixth causes of action for fraud because its first cause of action is for specific performance and it cannot seek inconsistent remedies.? Christopher, Jane, and John argue Calvano has elected to pursue the remedy of specific performance because it recorded a notice of lis pendens in connection with its specific performance claim.[5]? They argue it may not pursue its fraud claims for which it seeks damages.
?The doctrine of election of remedies is but a specific application of the doctrine of equitable estoppel.?? (Glendale Federal Savings & Loan Assn. v. Marina View Heights Dev. Co. (?Glendale?) (1977) 66 Cal.App.3d 101, 137.)? ?Election of remedies is a harsh doctrine and is [?] looked upon with disfavor by courts and commentators.?? (Id. at p. 138.)? ?The doctrine rests on the rationale that when plaintiff has pursued a remedy which is inconsistent with an alternative remedy and thereby causes the defendant substantial prejudice, plaintiff should be estopped from pursuing the alternative remedy.?? (Id. at p. 137.)? A plaintiff is allowed to plead and pursue inconsistent theories of recovery for fraud and breach of contract.? (See id. at pp. 137-38 [rejecting argument that ?one who obtains an attachment in pursuit of a contract remedy is estopped to pursue a tort remedy based on the same set of facts? when there are multiple causes of action or the violation of more than one primary right].)? ?Ordinarily, a plaintiff need not elect, and cannot be compelled to elect, between inconsistent remedies [?] prior to judgment.? ?(Roam v. Koop (1974) 41 Cal.App.3d 1035, 1039.)
Christopher, Jane, and John provide little to no analysis in support of their election of remedies argument. They fail to explain whether the inconsistent remedies sought by Calvano are based on the same or different operative facts or otherwise address the requirements for invoking the doctrine of election of remedies.? Additionally, they do not address the propriety of forcing an election of remedies at the pleading stage.? Accordingly, they have not substantiated their demurrer to the fourth and sixth causes of action on the ground of failure to state sufficient facts and the demurrer is therefore OVERRULED.
???????????????????????
- Third Cause of Action
?
??????????? Christopher, John, and Jane make the same election of remedies argument in support of their demurrer to the third cause of action for fraud.? For the reasons set forth above, this argument lacks merit and does not provide a basis to sustain their demurrer to the third cause of action.
Next, Christopher, John, and Jane argue Hope Street waived its right to assert the third cause of action for intentional misrepresentation because the purchase agreement states the buyer waives any right to bring an action based on representations or warranties it learns are untrue prior to closing.? Specifically, they argue Hope Street waived the right to pursue claims based on misrepresentations about who had the authority to sell the entire property or enter into leases prior to closing and ?[t]hese issues pertain solely to specific performance of the Purchase Agreement.?? (Mem. of Pts. & Auth. at p. 6:13-14.)
Christopher, John, and Jane provide absolutely no authority in support of their argument and otherwise do not explain the manner in which Hope Street failed to state a claim.
Finally, Christopher, John, and Jane argue the third cause of action is premature because ?the buyer is still not contractually obligated to perform its? [sic] remaining obligations.?? (Mem. of Pts. & Auth. at p. 5:15-17, original emphasis.)? On this basis, they argue the contract is not yet binding and Hope Street could not have detrimentally relied on any alleged misrepresentations or suffered damages.
Once again, there is no authority whatsoever offered to support this argument.? Moreover, Hope Street alleges it detrimentally relied on misrepresentations made during the course of negotiating the sale of the properties when funds were placed in escrow.? Christopher, John, and Jane have not adequately explained or provided authority to support their argument.
None of the arguments advanced in support of the demurrer to the third cause of action on the ground of failure to state sufficient facts are unsubstantiated.? The demurrer to the third cause of action is therefore OVERRULED.
?
- Uncertainty
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??????????? Christopher, Jane, and John cite Code of Civil Procedure section 430.10, subdivision (f), and state their demurrer to the third, fourth, and sixth causes of action is also on the ground of uncertainty.? ?[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.? ?(Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135.)? They do not address the manner in which the allegations on the face of the FAC are uncertain, ambiguous, or unintelligible.? The demurrer to the third, fourth, and sixth causes of action on the ground of uncertainty is therefore OVERRULED.
The Court will prepare the order.
[1]Given all of the defendants have the same last name, the Court will identify each defendant by his or her first name.? No disrespect is intended.
[2] Calvano subsequently assigned its rights under the contract to Hope Street.? (FAC, ? 18.)
[3] Edmund filed his first motion to quash challenging substitute service of the summons and FAC in California on June 20, 2016.? Hope Street filed its opposition to the motion on July 6, 2016.? In the intervening timeframe, Hope Street attempted service on Edmund in Hong Kong pursuant to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (the ?Hague Convention?).? Hope Street filed its proof of service for the Hague Convention service after Edmund filed his first motion.? Consequently, Edmund filed a second motion to quash addressing Hope Street?s additional attempts at service upon him in Hong Kong.
[4] Edmund objects to Exhibit E, which consists of copies of the USPS shipping labels and printouts of the USPS tracking information, on the grounds of lack of foundation, lack of personal knowledge, and hearsay.? These objections, Objection Nos. 1-2, are OVERRULED.? With respect to Objection Nos. 3-5, the subject evidence is unnecessary to the resolution of the instant motion and the Court will not rule on these objections.
[5]The Court observes there is no evidence or basis for concluding a notice of lis pendens was actually recorded and, if so, whether it was recorded ?in connection with? the cause of action for specific performance.