Yun v. Hong CA2/3 ( 2022 )

Filed 8/15/22 Yun v. Hong CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
SOK HUN YUN et al., B314201
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. 20STCV09255)
v.
CHRIS YONG HONG et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Michael L. Stern, Judge.
Affirmed in part and reversed in part with directions.
Mark Waecker for Plaintiffs and Appellants.
Lee & Associates, Yong Bom Lee and Hyong C. Kim for
Defendant and Respondent Sang Ur.
Safarian Choi & Bolstad, David C. Bolstad and Christopher
A. Johnson for Defendants and Respondents Chris Yong Hong,
Jamie Park, Audrey Jung & Propent Real Estate, Inc.
Prindle, Goetz, Barnes & Reinholtz, Jack R. Reinholtz and
Gopal S. Patel for Defendants and Respondents Eon Escrow, Inc.
and Deborah Koh.
Law Offices of Alex Cha and Alex Cha for Defendant and
Respondent NMSI, Inc.
Christopher G. Weston, in pro. per., for Defendant and
Respondent.
‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗
This case arises out of an alleged fraudulent transfer of real
property. In prior litigation, plaintiffs Sok Hun Yun and Sung
Yun Ahn (plaintiffs) obtained a verdict of nearly $5.5 million
against defendants Bae Guen Song and Jung Sook Song (the
Songs). Before a judgment was entered in that case, the Songs
allegedly sold their sole asset, a parcel of real property located in
Los Angeles, California, in a private sale and transferred the
proceeds of the sale to bank accounts in South Korea. When
plaintiffs learned of the sale, they sued the Songs, the Songs’
attorney, the buyers of the property, and individuals who assisted
with the sale (the real estate agents, escrow agent, and lender)
for fraudulent transfer, fraud, and quiet title. The Songs did not
appear in that action, but the remaining defendants demurred,
and the trial court sustained the demurrers without leave to
amend. Plaintiffs have appealed from the resulting judgment of
dismissal.
We reverse in significant part. As we discuss, although
plaintiffs have not adequately pled fraud or quiet title, they have
2
stated a claim for conspiracy to violate the Uniform Voidable
Transfers Act, Civil Code1 section 3439 et seq., against the
buyers, the Songs’ attorney, the real estate agents, and the
escrow agent. We therefore will reverse as to those parties.
Plaintiffs have not adequately stated a claim against the buyers’
lender, and thus we will affirm the judgment of dismissal as to
the lender.
FACTUAL AND PROCEDURAL BACKGROUND
I. The personal injury action.
In 2017, Sok Hun Yun was severely injured on property
owned by the Songs. Yun and his wife, Sung Yun Ahn, sued the
Songs for personal injury (the personal injury action). The
parties agreed to separately try liability and damages, and in
September 2019, a jury found the Songs liable for plaintiffs’
injuries.
The damages portion of the trial was set to begin on
November 15, 2019. However, on November 14, 2019, the Songs’
attorney, Christopher Weston, advised the court through an
associate that he had suffered a heart attack and could not
proceed as scheduled. The court twice continued the trial, to
December 9, 2019, and then to January 14, 2020. Trial resumed
in January 2020, and on January 16, 2020, the jury returned a
verdict for plaintiffs of nearly $5.5 million. The trial court
subsequently entered a judgment for plaintiffs of more than
$6 million.
1 All subsequent undesignated statutory references are to
the Civil Code.
3
II. The fraudulent conveyance actions.
In November 2019, plaintiffs filed a fraudulent conveyance
action against the Songs and others. That action (the first
fraudulent conveyance action) alleged that after plaintiffs’ injury,
the Songs fraudulently transferred a piece of real property (the
Victoria Street property) to make it unavailable to creditors,
including plaintiffs.
Plaintiffs filed the present action against the Songs and
others on March 6, 2020 (the present action). The operative first
amended complaint (FAC) alleges that after the jury returned a
liability verdict in the personal injury action, the Songs began
making efforts to secretly sell their sole remaining asset, a parcel
of real property located at 1125 Third Avenue in Los Angeles (the
Third Avenue property or the property). The Songs privately
listed the property and, on December 27, 2019, sold it to Chris
Wong Hong and Jamie Park (the buyers) for $1.72 million, which
was several hundreds of thousands of dollars less than the
property was worth. The grant deed transferring the property to
the buyers was recorded on January 6, 2020.
The FAC asserts four causes of action. The first cause of
action, for fraudulent transfer against the Songs and the buyers,
alleges that the Songs fraudulently transferred the property to
the buyers in violation of section 3439 et seq., and the buyers are
not bona fide purchasers for value because they purchased the
property for less than its fair market value and knew or should
have known about the underlying personal injury judgment. The
second cause of action, for fraud against attorney Christopher
Weston and Western Law Connection, Corp. (collectively,
Weston), alleges that Weston intentionally mispresented his
health condition to plaintiffs and the court, assisted the Songs in
4
fraudulently marketing and selling the property, collected a
portion of the sale proceeds, and falsely represented to the court
in January 2020 that the Songs still owned the property. The
third cause of action, for fraud, is asserted against a variety of
third parties alleged to have assisted with the sale and transfer
of the property: Eon Escrow, Inc. and Deborah Koh (escrow
agents); NMSI, Inc. (lender); Propent Real Estate, Inc., B&B
Investment Properties, LLC, and Audrey Jung (buyers’ agent);
and Sang Ur and Sang Ur Realty Company, Corp. (sellers’ agent)
(collectively, the real estate defendants).2 The third cause of
action alleges that each of the real estate defendants assisted in
transferring the property, which transfer they knew or should
have known was fraudulent. Finally, the fourth cause of action,
for quiet title against the buyers, seeks a declaration that
plaintiffs are entitled to possession of the property in partial
satisfaction of their judgment.
III. Demurrers; present appeal.
The Songs did not file an answer to the FAC, and plaintiffs
sought a default judgment against them.3 The remaining
defendants demurred. As to the first and fourth causes of action,
the buyers asserted that the FAC failed to state a claim against
them for fraudulent conveyance because it did not allege that
plaintiffs attempted to collect on the final judgment against the
2 The FAC also named AMP Management Company (AMP)
and Provident Title Company (Provident) as defendants. AMP
and Provident appear not to have demurred to the FAC and are
not parties to this appeal.
3 The Songs are not parties to the present appeal.
5
Songs, that the Songs or the buyers knew or should have known
that the property’s value would be less than the personal injury
judgment, or that the buyers conspired with the Songs. The
buyers further asserted that plaintiffs lacked standing to assert a
quiet title claim because the FAC did not allege that plaintiffs
held title to the property. As to the second and third causes of
action, attorney Weston and the real estate defendants asserted
that the fraud causes of action were not alleged with sufficient
particularity, and Weston asserted that plaintiffs had failed to
comply with the prefiling provisions of section 1714.10, which
requires court leave to file a claim alleging a conspiracy between
an attorney and a client.
Plaintiffs opposed the demurrers and sought leave to file a
second amended complaint (SAC). Plaintiffs asserted that when
they filed their original complaint in March 2020, they knew very
little about the transfer of the property to the buyers, but they
since had learned more through discovery “and are now prepared
to address all the concerns raised by all Defendants in their
Motions in a proposed Second Amended Complaint.” The
proposed SAC alleged just two causes of action: (1) fraudulent
conveyance against the Songs, the buyers, Weston, and the real
estate defendants; and (2) quiet title against the buyers and
lender.
The trial court sustained the demurrers without leave to
amend on June 15, 2021. As to the first cause of action
(fraudulent conveyance), the court found that the only factual
allegations against the buyers “are that [the buyers] bought the
property and . . . asked for a loan. Plaintiffs have not alleged
specific facts as to each defendant.” As to the second cause of
action (fraud against attorney Weston), the court found that
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plaintiffs “emphasize in their pleadings and represented to the
Court in oral arguments that this is a conspiracy case,” but failed
comply with the pre-filing requirements of section 1714.10. As to
the third cause of action (fraud against the real estate
defendants), the court found that plaintiffs had not alleged
specific factual allegations regarding each defendant. As to the
fourth cause of action (quiet title), the court found that plaintiffs
lacked standing to seek to quiet title. Finally, the court denied
plaintiffs leave to amend, explaining that “there are no valid
causes of action against these defendant parties. Even while
proposing an amended complaint, plaintiffs have not sought leave
of court to comply with . . . section 1714.10. The general
allegation of a fraud conspiracy with multiple spokes all causing
the wheel of conspiracy to be spinning is not presently
sustainable nor is it likely to function for liability purposes.”
The court entered a judgment of dismissal as to the buyers,
Weston, the buyers’ agent, and the Songs’ agent on June 15,
2021. Plaintiffs timely appealed.
DISCUSSION
Plaintiffs contend the trial court erred by sustaining the
demurrers because all of the claims were properly pled and the
SAC corrected any defects in the FAC. As we discuss, we agree
with plaintiffs in part.
I. Standard of review.
It is well established that a demurrer tests the legal
sufficiency of a complaint. On appeal from a dismissal entered
after an order sustaining a demurrer, “ ‘we review the order
de novo, exercising our independent judgment about whether the
[complaint] states a cause of action as a matter of law.
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[Citations.] We give the [complaint] a reasonable interpretation,
reading it as a whole and viewing its parts in context.
[Citations.] We deem to be true all material facts that were
properly pled. [Citation.] We must also accept as true those facts
that may be implied or inferred from those expressly alleged.
[Citation.] We may also consider matters that may be judicially
noticed, but do not accept contentions, deductions or conclusions
of fact or law.’ ” (Simonyan v. Nationwide Ins. Co. of America
(2022) 78 Cal.App.5th 889, 896.) (Simonyan).)
“ ‘If the court sustained the demurrer without leave to
amend, as here, we must decide whether there is a reasonable
possibility the plaintiff could cure the defect with an amendment.
[Citation.] If we find that an amendment could cure the defect,
we conclude that the trial court abused its discretion and we
reverse; if not, no abuse of discretion has occurred. [Citation.]
The plaintiff has the burden of proving that an amendment
would cure the defect.’ (Schifando v. City of Los Angeles (2003)
31 Cal.4th 1074, 1081.)” (Simonyan, supra, 78 Cal.App.5th at
p. 896.)
II. Fraudulent conveyance (first cause of action).
Plaintiffs’ first cause of action seeks to void the Songs’
transfer of the property to the buyers as a fraudulent transfer in
violation of the Uniform Voidable Transactions Act (UVTA),
section 3439 et seq.4 We conclude plaintiffs adequately stated a
claim for a violation of the UVTA against the buyers, and thus
4 The UVTA formerly was known as the Uniform Fraudulent
Transfer Act. (See Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th
33, 36 & fn. 2.)
8
the trial court erred by sustaining the demurrer to the first cause
of action.
The UVTA was intended “ ‘ “to prevent debtors from
placing property which legitimately should be available for the
satisfaction of demands of creditors beyond their reach . . . .” ’
[Citation.]” (Optional Capital, Inc. v. DAS Corp. (2014)
222 Cal.App.4th 1388, 1401 (Optional Capital).) It provides that
a transfer is voidable as to a creditor if the transfer was made
with actual or constructive fraudulent intent. Actual fraud, as
defined in section 3439.04, subdivision (a)(1), is “actual intent to
hinder, delay, or defraud any creditor of the debtor.” Constructive
fraud, as defined in section 3439.04, subdivision (a)(2), requires a
showing that the debtor did not receive “reasonably equivalent”
value for the transfer, and the transfer was made when the
debtor either “(A) [w]as 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” or (B) the debtor “[i]ntended to incur, or believed or
reasonably should have believed that the debtor would incur,
debts beyond the debtor’s ability to pay as they became due.”
Section 3439.04 has been construed to mean that a transfer is
fraudulent if the provisions of either subdivision (a)(1) or
subdivision (a)(2) are satisfied. (Optional Capital, supra,
222 Cal.App.4th at pp. 1401–1402; Monastra v. Konica Business
Machines, U.S.A., Inc. (1996) 43 Cal.App.4th 1628, 1635; Lyons v.
Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1020.)
In determining actual intent under section 3439.04,
subdivision (a)(1), “consideration may be given, among other
factors, to any or all of the following:
“(1) Whether the transfer or obligation was to an insider.
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“(2) Whether the debtor retained possession or control of
the property transferred after the transfer.
“(3) Whether the transfer or obligation was disclosed or
concealed.
“(4) Whether before the transfer was made or obligation
was incurred, the debtor had been sued or threatened with suit.
“(5) Whether the transfer was of substantially all the
debtor’s assets.
“(6) Whether the debtor absconded.
“(7) Whether the debtor removed or concealed assets.
“(8) Whether the value of the consideration received by
the debtor was reasonably equivalent to the value of the asset
transferred or the amount of the obligation incurred.
“(9) Whether the debtor was insolvent or became
insolvent shortly after the transfer was made or the obligation
was incurred.
“(10) Whether the transfer occurred shortly before or
shortly after a substantial debt was incurred.
“(11) Whether the debtor transferred the essential assets
of the business to a lienor that transferred the assets to an
insider of the debtor.” (§ 3439.04, subd. (b).)
The FAC pleads actual fraud, alleging that the Songs
“transferred the subject real property to [the buyers] with the
actual intent to hinder, delay, and/or defraud Plaintiffs in
violation of [section] 3439 et seq.” (Italics added.) It further
alleges five of the indicia of fraud specified in section 3439.04,
subdivision (b)––namely, that the transfer was concealed (¶ 41
[Songs “began their effort to secretly sell the subject real property
with the aid and assistance of [the buyers]”]); the transfer was
made after the debtor was sued (¶ 36 [Songs marketed the
10
property “after the first jury verdict [was] rendered”]); the
property transferred was substantially all of the debtor’s assets
(¶ 53 [the property was “the only asset of [the Songs] to which
Plaintiffs could look to satisfy their judgment”]); the property was
sold for less than its fair market value (¶¶ 37, 46 [the property
was worth more than $2 million, but was sold for $1.72 million]);
and the transfer was made shortly before a substantial debt was
incurred (¶¶ 33, 46 [the property was transferred in late
December 2019, less than a month before a jury returned a
$5.5 million judgment against the Songs]). (§ 3439.04,
subds. (b)(3), (4), (5), (8), (10).) Finally, the complaint alleges that
the buyers did not take the property “in good faith” (§ 3439.08,
subd. (a)), but instead “knew or should have known about
Plaintiffs’ underlying judgment and nonetheless purchased the
subject real property for less than the fair market value.”
Although the buyers assert that these allegations do not
adequately state a claim against them under the UVTA, they do
not identify any statutory element of the cause of action that is
missing. We have independently reviewed the complaint and are
satisfied that it adequately pleads the essential elements of
intentional fraudulent transfer under section 3439.04.
The buyers further assert that the fraudulent transfer
claim fails because plaintiffs have not alleged that they tried to
collect on the judgment. But Rossen v. Villanueva (1917) 175 Cal.
632 and Thomas v. Lavery (1932) 125 Cal.App. 666, 667, on which
the buyers rely for this proposition, are no longer good law. As
our Supreme Court has explained, California law previously
permitted a transfer to be set aside only by a creditor who had a
specific lien on the property or had prosecuted his claim to
judgment, but “[u]nder the Uniform Fraudulent Conveyance Act
11
[now, the UVTA] now in force in this state no judgment or lien is
necessary.” (In re Estate of Kalt (1940) 16 Cal.2d 807, 811, italics
added; see also Weisenburg v. Cragholm (1971) 5 Cal.3d 892, 896
[“it is no longer necessary that a creditor reduce his claim to
judgment before seeking the benefit of the remedy”]; Rupp v.
Kahn (1966) 246 Cal.App.2d 188, 197 [“California law originally
permitted proceedings by way of creditors’ bills to attack
fraudulent conveyances only where the plaintiff had a specific
lien on the property or had reduced his claim to judgment. But
under [current law], it is sufficient that the claims have
matured. . . . In fact even the holder of an unmatured claim may
. . . bring an action for protective relief.”]; Liuzza v. Bell (1940)
40 Cal.App.2d 417, 429 [to state a claim for fraudulent
conveyance, “[i]t [is] not necessary that [creditors] should have
impressed a lien upon the property prior to the institution of the
fraudulent conveyance action. All that is necessary is that the
creditor be in a position to levy execution.”]; see also Strangman
v. Duke (1956) 140 Cal.App.2d 185, 191 [noting California’s
adoption of Uniform Fraudulent Conveyance Act in 1939];
Leg. Com. com. (1986), West’s Ann. Civ. Code, foll. § 3439.07,
com. 6 [noting “ ‘old practice’ ” of requiring creditor to obtain
judgment and attempt to execute before proceeding in equity to
set aside a transfer; current law provides an “ ‘ additional
optional remedy’ ”].)
Next, citing section 3439.04, subdivision (a)(2)(B), the
buyers assert that the fraudulent transfer claim fails because
plaintiffs did not allege that the buyers or sellers “knew or should
have known that the Property’s value would be less than the
Monetary Verdict.” But as we have said, a fraudulent
conveyance plaintiff may allege either actual fraud under
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section 3439.04, subdivision (a)(1) or constructive fraud under
section 3439.04, subdivision (a)(2)––it need not allege both.
Because the first amended complaint alleged actual fraud,
plaintiffs were not required to also allege the elements of
constructive fraud, including that the sellers and buyers
“believed or reasonably should have believed that the debtor
would incur . . . debts beyond the debtor’s ability to pay as they
became due.” (§ 3439.04, subd. (a)(2)(B).)
Finally, the buyers assert that the fraudulent conveyance
claim fails because plaintiffs have not alleged that the buyers
conspired with the Songs to defraud them. But conspiring to
defraud creditors is not an element of a creditor’s fraudulent
conveyance cause of action against a transferee. (See § 3439.04
[describing elements of fraudulent conveyance claim].) Instead,
the transferee’s good faith is an affirmative defense as to which
the transferees (here, the buyers), not the plaintiffs, have the
burden of proof. (See § 3439.08, subds. (a), (f)(1) [transfer not
voidable against a transferee who took in good faith and for a
reasonably equivalent value; burden of proving these factors is on
“[the] party that seeks to invoke” them]; see also Filip v.
Bucurenciu (2005) 129 Cal.App.4th 825, 838 [conspiracy
allegations may “bolster and explain [a] plaintiff’s claims under
the UFTA,” but they “ha[ve] no effect on the judgment”].)
For all of these reasons, we conclude that the first cause of
action adequately states a claim against the buyers for
fraudulent transfer.
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III. Fraud claims.
A. Fraud by attorney Weston (second cause of
action).
The second cause of action alleges fraud by attorney
Weston. Specifically, it alleges that Weston “intentionally
misrepresented his health condition to Plaintiffs and the Court to
further the fraud of his clients,” “conspired with and assisted [the
Songs] in fraudulently marketing and conveying the subject real
property to [the buyers],” “falsely represented to the Court [in
January 2020] that [the Songs] still owned the subject real
property,” and “made multiple fraudulent misrepresentations to
[the real estate defendants] and their agents in order to facilitate
the fraudulent conveyance of the subject real property.”
Weston asserted two grounds for his demurrer: (1) the trial
court lacked jurisdiction over the causes of action because
plaintiffs failed to comply with the prefiling procedures of
section 1714.10, and (2) the fraud cause of action was not alleged
with sufficient particularity. The trial court sustained the
demurrer based on the first ground only, finding that plaintiffs
failed to comply with the prefiling requirements of section
1714.10. We consider both issues.
1. Prefiling requirement of section 1714.10.
Section 1714.10, subdivision (a) provides: “No cause of
action against an attorney for a civil conspiracy with his or her
client arising from any attempt to contest or compromise a claim
or dispute, and which is based upon the attorney’s representation
of the client, shall be included in a complaint or other pleading
unless the court enters an order allowing the pleading that
includes the claim for civil conspiracy to be filed after the court
14
determines that the party seeking to file the pleading has
established that there is a reasonable probability that the party
will prevail in the action.” Failure to obtain a court order where
required by subdivision (a) “shall be a defense to any action for
civil conspiracy filed in violation thereof.” (Id., subd. (b).) This
section does not apply to a cause of action against an attorney for
civil conspiracy with his client where “(1) the attorney has an
independent legal duty to the plaintiff, or (2) the attorney’s acts
go beyond the performance of a professional duty to serve the
client and involve a conspiracy to violate a legal duty in
furtherance of the attorney’s financial gain.” (Id., subd. (c).)
Plaintiffs assert that section 1714.10 does not apply
because the second cause of action did not allege conspiracy and
the alleged conduct went well beyond Weston’s performance of a
professional duty to serve his client. We agree in part.
As noted above, the prefiling requirements of section
1714.10, subdivision (a) apply only to a “cause of action against
an attorney for a civil conspiracy with his or her client arising
from any attempt to contest or compromise a claim or dispute, and
which is based upon the attorney’s representation of the client.”
(Italics added.) Plaintiffs’ allegations that Weston assisted the
Songs “in fraudulently marketing and conveying the subject real
property to [buyers] and collected part of the sale proceeds” and
made fraudulent misrepresentations to the real estate defendants
to facilitate the fraudulent conveyance of the property do not
arise out Weston’s attempt to contest or compromise a claim or
dispute. They thus are not subject to section 1714.10’s prefiling
requirements. (See, e.g., Cortese v. Sherwood (2018)
26 Cal.App.5th 445, 457 [allegations that attorneys siphoned off
estate’s assets through fraudulent estate planning, including the
15
misappropriation of estate assets through the diversion of those
assets to entities created and controlled by the defendants, were
not subject to § 1714.10]; Aghaian v. Minassian (2020)
59 Cal.App.5th 447, 460 [§ 1714.10 did not apply where attorney
was alleged to have acted for his own personal gain by helping
his father quitclaim real property to his mother, and then helping
his mother sell the real property and purchase new property].)
We reach a different conclusion with regard to the
allegations that Weston intentionally misrepresented to the court
in November and December 2019 that he could not begin the
second stage of trial because he had suffered a heart attack, and
in January 2020 that the Songs still owned the property. These
alleged misrepresentations plainly were made during an attempt
“to contest . . . a claim or dispute”: They were made to the court,
in connection with a case then being tried. As such, they are
subject to the prefiling requirements of section 1714.10. Because
plaintiffs did not comply with section 1714.10, these allegations
cannot form the basis for a fraud cause of action.
2. Specificity of fraud allegations.
“ ‘The elements of fraud . . . are (a) misrepresentation (false
representation, concealment, or nondisclosure); (b) knowledge of
falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance;
(d) justifiable reliance; and (e) resulting damage.’ ” (Lazar v.
Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).)
“ ‘In California, fraud must be pled specifically; general and
conclusory allegations do not suffice. [Citations.] “Thus ‘ “the
policy of liberal construction of the pleadings . . . will not
ordinarily be invoked to sustain a pleading defective in any
material respect.” ’ [Citation.] [¶] This particularity
requirement necessitates pleading facts which ‘show how, when,
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where, to whom, and by what means the representations were
tendered.’ ” ’ (Lazar, supra, 12 Cal.4th at p. 645.)” (Tenet
Healthsystem Desert, Inc. v. Blue Cross of California (2016)
245 Cal.App.4th 821, 837–838.) “The specificity requirement
serves two purposes. The first is notice to the defendant, to
‘furnish the defendant with certain definite charges which can be
intelligently met.’ [Citations.] The pleading of fraud, however, is
also the last remaining habitat of the common law notion that a
complaint should be sufficiently specific that the court can weed
out nonmeritorious actions on the basis of the pleadings. Thus
the pleading should be sufficient ‘ “to enable the court to
determine whether, on the facts pleaded, there is any foundation,
prima facie at least, for the charge of fraud.” ’ ” (Committee on
Children’s Television, Inc. v. General Foods Corp. (1983)
35 Cal.3d 197, 216–217, superseded by statute on other grounds
as stated in Californians for Disability Rights v. Mervyn’s, LLC
(2006) 39 Cal.4th 223, 228.)
Weston asserts that the allegations that he assisted the
Songs in fraudulently marketing and conveying the real property
and made fraudulent misrepresentations to the real estate
defendants to facilitate the fraudulent conveyance of the property
are not pled with sufficient particularity, and we agree. Plaintiffs
do not specifically allege what the nature of Weston’s alleged
misrepresentations were or when and to whom they were made.
Nor do plaintiffs allege that the real estate defendants relied on
the alleged misrepresentations in marketing and conveying the
property to the buyers. Accordingly, the allegations are not
sufficiently specific to satisfy California’s pleading requirements.
For all of these reasons, the trial court properly sustained
the demurrer to the second cause of action.
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B. Fraud by the real estate defendants (third
cause of action).
The third cause of action alleges fraud by the real estate
defendants. Specifically, it alleges that these defendants
“conspired with and/or assisted [the Songs, the buyers, and
Weston] in executing and completing the fraudulent transfer of
the subject real property,” including by assisting with the
marketing of the property, lending $900,000 to the buyers,
opening and closing escrow, notarizing the grant deed, and
preparing indemnity agreements. Plaintiffs further allege that
the real estate defendants “knew or should have known that the
representations made by [Weston] were false and that the
transfer of the subject real property was fraudulent.”
Plaintiffs assert that the trial court erred in sustaining the
demurer to this cause of action because the complaint alleged “in
painstaking detail” the conduct that resulted in the fraudulent
transfer. We do not agree. As described above, to survive a
demurrer, a plaintiff must plead the elements of fraud—a
misrepresentation, knowledge of falsity, intent to defraud,
justifiable reliance, and resulting damage––with specificity.
Plaintiffs did not do so. While they specifically alleged Weston’s
asserted misrepresentations, they did not allege any specific
misrepresentations made by the real estate defendants. Further,
the allegations that the real estate defendants conspired with
Weston to defraud the plaintiffs cannot survive because plaintiffs
did not adequately plead fraud by Weston. Accordingly, the trial
court properly sustained the demurrer to the third cause of
action.
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C. Leave to amend.
Concurrently with their opposition to defendants’
demurrers, plaintiffs sought leave to file a SAC, which eliminated
the fraud causes of action entirely, but expanded the fraudulent
transfer cause of action to include Weston and the real estate
defendants. In brief, the amended fraudulent transfer cause of
action alleged that all defendants conspired to assist the Songs in
surreptitiously selling the property and transferring the sale
proceeds to an account in South Korea. For the reasons that
follow, we conclude that the SAC adequately pled conspiracy to
fraudulently transfer as to many of the defendants, and thus the
trial court erred by denying leave to amend as to them.
“ ‘Conspiracy is not a cause of action, but a legal doctrine
that imposes liability on persons who, although not actually
committing a tort themselves, share with the immediate
tortfeasors a common plan or design in its perpetration.’ (Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th
503, 510–511.)” (AREI II Cases (2013) 216 Cal.App.4th 1004,
1021 (AREI II).) “To support a conspiracy claim, a plaintiff must
allege the following elements: ‘(1) the formation and operation of
the conspiracy, (2) wrongful conduct in furtherance of the
conspiracy, and (3) damages arising from the wrongful conduct.’
[Citations.]” (Id. at p. 1022.)
“It is well settled that ‘ “[b]are” allegations and “rank”
conjecture do not suffice for civil conspiracy.’ [Citation.] A party
seeking to establish a civil conspiracy ‘must show that each
member of the conspiracy acted in concert and came to a mutual
understanding to accomplish a common and unlawful plan, and
that one or more of them committed an overt act to further it.
[Citation.] It is not enough that the [conspirators] knew of an
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intended wrongful act, they must agree—expressly or tacitly—to
achieve it.’ [Citation.] It must be recognized, however, that
because of the very nature of a conspiracy, ‘its existence must
often be inferentially and circumstantially derived from the
character of the acts done, the relations of the parties and other
facts and circumstances suggestive of concerted action.’
[Citation.] While a complaint must contain more than a bare
allegation the defendants conspired, a complaint is sufficient if it
apprises the defendant of the ‘character and type of facts and
circumstances upon which she was relying to establish the
conspiracy.’ [Citations.]” (AREI II, supra, 216 Cal.App.4th at
p. 1022.)
There is no real dispute that the SAC adequately alleges
the second and third elements of a conspiracy claim––that is,
that the Songs fraudulently conveyed the property to avoid
plaintiffs’ collection efforts, and the plaintiffs were damaged as a
result. Weston and each of the real estate defendants contend,
however, that the complaint does not allege with sufficient
specificity their participation in the alleged conspiracy—i.e., that
they entered into agreements with the Songs and the buyers to
assist in the alleged fraudulent transfer.
We agree that the SAC does not adequately allege
conspiracy to commit a fraudulent transfer against the lender.
Although the complaint alleges generally that the defendants
entered into agreements with the Songs “to open a private
escrow, to keep the escrow off the books and hidden from the
public, to not list the property with any public listing service, to
arrange for the proceeds from the transfer to be sent to a hidden
account within the Republic of South Korea . . . and not to
publicize, in any manner, the fact that the [property] was for sale,
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was in escrow, or had been transferred,” it does not allege any
specific acts taken by the lender from which an agreement to
participate in a fraudulent transfer can be inferred. Leave to
amend therefore was properly denied as to the lender.5
We reach a different result with regard to Weston and the
other real estate defendants. In addition to alleging that these
defendants entered into agreements with the Songs to secretly
transfer the property so it could not be used to satisfy plaintiffs’
judgment, the SAC specifically alleges the following:
As to Weston: The SAC alleges that on about November 11,
2019, plaintiffs filed and served the first fraudulent conveyance
action. Weston represented the Songs in that action, which
alleged that after Sok Hun Yun was injured on the Songs’
property, the Songs sold their Victoria Avenue property and
transferred the proceeds of the sale to accounts in South Korea.
Just four days after the first fraudulent conveyance action was
filed, Weston took steps to delay the damages phase of the trial in
the personal injury action by seeking a continuance. Although
Weston was ordered by the court to file a declaration of proof of
his asserted medical condition, he never did so. On December 9,
2019, Weston again took steps to delay the damages phase of the
trial, and he again failed to file a declaration of proof of his
asserted medical condition.
5 Plaintiffs’ counsel suggested at oral argument that
plaintiffs could amend the complaint to allege conspiracy to
commit fraudulent transfer against the lender. Because this
assertion was not timely made, we will not address it on the
merits. (See, e.g., Shimmon v. Franchise Tax Bd. (2010)
189 Cal.App.4th 688, 694.)
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The SAC further alleges that Weston participated in
settlement discussions in plaintiffs’ personal injury action on the
Songs’ behalf, which discussions “became more active” after the
jury’s liability verdict on September 25, 2019. During settlement
discussions, “Weston affirmed that the [Songs] still owned the
[Third Avenue property] and the transfer of this valuable asset
was the centerpiece of these discussions. Weston’s conduct at
this time was not truthful and was designed to cover up the
secret sale moving forward. All settlement discussions stopped
on or about January 6, 2020, when the secret escrow closed and
after the proceeds had been transferred to the hidden bank
accounts in the Republic of South Korea.”
As to the buyers’ and sellers’ agents: The SAC alleges that
the Songs “never listed the [property] in any commercial listing
service on the general real estate market in order to conceal their
efforts to secretly sell the [property].” Further, the Songs sold the
property for $1,720,000, “an amount below fair market value.” In
doing so, they “turned down larger offers and engineered the
transfer to [the buyers] because they were willing to knowingly
facilitate and engage in the [Songs’] scheme and plan.” And, the
sellers agreed in writing to indemnify the buyers and their agents
from any liability “accruing as a result of the transfer in light of
the imminent judgment against the [Songs] in the Personal
Injury case.” For their parts in the sale of the property, Propent
received a commission of $32,000, B&B received a commission of
$2,400, and Ur received a commission of $34,000.
As to the escrow agents: On information and belief, the
escrow agents “had actual knowledge of the Personal Injury case
because [they] demanded and received an indemnity agreement
from the [Songs and the buyers], thereby confirming that they
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were on notice that the [Songs] were parties in pending
litigation.” The escrow was kept “off the books and hidden from
the public,” and the proceeds of the sale were sent “to a hidden
account within the Republic of South Korea.”
We conclude that these allegations are sufficient to state a
conspiracy claim against Weston, the buyers’ and sellers’ agents,
and the escrow agent. While we are mindful that bare
allegations of conspiracy are insufficient, the SAC does more than
merely allege that the defendants conspired to fraudulently
transfer the property. Instead, as we have described, plaintiffs
have pleaded facts––specifically, that Weston intentionally
delayed the damages phase of the personal injury trial, the real
estate agents and escrow agent knowingly participated in an
undisclosed sale of the property for less than market value and
the transfer of the sale proceeds to South Korea, and the real
estate agents demanded written indemnity agreements––from
which we believe a factfinder could infer that Weston, the escrow
agents, the sellers’ agent, and the buyers’ agent agreed to
facilitate a nonpublic sale of the property for the purpose of
defrauding the plaintiffs.
We further conclude that the claim as against Weston is
not barred by section 1714.10. As we have said, section 1714.10
does not apply “where (1) the attorney has an independent legal
duty to the plaintiff, or (2) the attorney’s acts go beyond the
performance of a professional duty to serve the client and involve
a conspiracy to violate a legal duty in furtherance of the
attorney’s financial gain.” (§ 1714.10, subd. (c).) Plainly, Weston
had an independent legal duty to the plaintiffs not to participate
in a fraudulent transfer. (See Rickley v. Goodfriend (2013)
212 Cal.App.4th 1136, 1151 [“It is well established that an
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attorney has an independent legal duty to refrain from
defrauding nonclients”]; Tatung Company v. Shu Tze Hsu
(C.D. Cal. 2016) 217 F.Supp.3d 1138, 1185 [same].) Further,
Weston’s alleged acts went well beyond his professional duty to
the Songs to present their defense in the personal injury action,
including helping the Songs sell their sole asset to avoid
plaintiffs’ collection efforts. These allegations are not within the
plain language of section 1714.10, and thus plaintiffs were not
required to seek court approval before filing their claim against
Weston.
For all of these reasons, we conclude that the trial court
abused its discretion by denying plaintiffs leave to amend their
complaint to assert a conspiracy claim against Weston, the
buyers’ agents, the Songs’ agent, and the escrow agent.
IV. Quiet title (fourth cause of action).
The fourth cause of action is asserted against the buyers
and “any and all persons, known or unknown, claiming any legal
or equitable right, title, estate, lien or interest in” the property.
It seeks to quiet title to the property in plaintiffs, asserting that
plaintiffs, “as creditors, are entitled to possession of the subject
real property and [to] execute on this asset as a partial
satisfaction of their judgment.”
The trial court sustained the demurrer to the fourth cause
of action because it found that plaintiffs lacked standing to assert
quiet title. We agree. Code of Civil Procedure section 760.020,
subdivision (a) provides that an action to quiet title “may be
brought under this chapter to establish title against adverse
claims to real or personal property or any interest therein,” and
section 760.010, subdivision (a) defines “claim” to include “a legal
or equitable right, title, estate, lien, or interest in property or
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cloud upon title.” But the FAC does not allege that plaintiffs
have title to or a lien on the property; instead, it asserts that by
virtue of the judgment entered in the underlying case in March
2020, plaintiffs “would have been able to levy on the [property] in
order to partially satisfy their judgment” (italics added) had the
Songs not previously transferred the property to the buyers. In
other words, the first amended complaint alleges the right to
acquire title, not the existence of title.
Plaintiffs do not assert any authority for the proposition
that a claim of this kind supports a cause of action for quiet title,
and we are not aware of any. To the contrary, in Stenzel v.
Kronick (1929) 102 Cal.App. 507, the court considered whether
the plaintiff, who possessed a money judgment against the
defendant, had the right to pursue a quiet title action with regard
to a piece of real property held by the defendant. The court noted
that the plaintiff’s sole claim to the property was by virtue of a
general money judgment that under then–existing law gave him
a statutory lien on all the real property of the judgment debtor
which was situated in the county where the judgment was
entered. (Id. at p. 508.) The court concluded that the statutory
lien was not sufficient to support a cause of action for quiet title,
explaining: “The general lien which is created upon all the real
property of the judgment debtor . . . is not such a vested interest
in a particular piece of real property as authorizes the
maintenance of a suit to quiet title. A specific lien attached by
decree of a court upon a particular property for the satisfaction of
a judgment would suffice for this purpose. But the statutory lien
created by the entry of a mere money judgment is too general in
its nature to furnish such a claim of title as may constitute the
foundation of a suit to quiet title.” (Id. at pp. 508–509; see also
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30 Cal. Jur. 3d Enforcement of Judgments § 61 [judgment lien
does not create an actual interest in the real property; the lien is
“general, not specific.”].)
The present case is analogous to Stenzel. Although
plaintiffs have a judgment against the Songs, that judgment did
not give plaintiffs rights to any particular property owned by the
Songs. Plaintiffs thus do not have an interest in the property
within the meaning of Code of Civil Procedure section 760.020
and, as such, cannot seek to quiet title to it. The trial court
therefore properly sustained the demurrer to the cause of action
for quiet title.
For the same reason, the trial court did not abuse its
discretion by denying plaintiffs leave to amend. The SAC
asserted a cause of action for quiet title against the buyers and
the lender, but it did not allege any additional facts establishing
plaintiffs’ standing to assert this claim. Accordingly, the trial
court properly denied plaintiffs’ request for leave to amend the
cause of action for quiet title.
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DISPOSITION
The judgment of dismissal is reversed as to defendants
Chris Wong Hong, Jamie Park, Christopher Weston, Western
Law Connection, Corp., Eon Escrow, Inc., Deborah Koh, Sang Ur,
Propent Real Estate, Inc., B&B Investment Properties, LLC, and
Audrey Jung. On remand, the trial court is directed to permit
plaintiffs to file a second amended complaint as to these
defendants. As to these defendants, plaintiffs are awarded their
appellate costs.
The judgment is affirmed as to defendant NMSI, Inc.
NMSI is awarded its appellate costs.
Respondents’ requests to augment the record and for
judicial notice, filed January 20, 2022, are denied.
NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS
EDMON, P. J.
We concur:
LAVIN, J.
ADAMS, J.*
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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