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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
Document Scanning Lead Sheet
Nov-07-2011 3:47 pm
Case Number: CGC-10-500934
Filing Date: Nov-07-2011 3:47
Juke Box: 001 Image: 03377175
OPPOSITION
CATHAY BANK, A CALIFORNIA BANKING CORPORATION VS. RAYMOND XIANG ZHANC
001003377175
Instructions:
Please place this sheet on top of the document to be scanned.LAW OFFICE OF
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(810) 832-1686
Chijeh Hu (SBN 241271)
LAW OFFICE OF CHIJEH HU FI
456 8" Street San Francs.
Oakland, California 94607
Telephone: (510) 832-1686
Fax: (510) 893-0155
ch@cjhulaw.com
Attorney for Defendants/Cross-Complainants,
Raymond Xiang Kai Zhang et al.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
CATHAY BANK, a California banking Case No. CGC-10-500934
Corporation,
OPPOSITION TO PLAINTIFF’S
Plaintiff, DEMURRER TO SECOND AMENDED
CROSS-COMPLAINT
Vv.
Date: November 21, 2011
RAYMOND XIANG KAI ZHANG, et al., Time: 9:30a.m.
Dept.: 302
Defendants. 400 McAllister St.
San Francisco, CA 94102
RAYMOND ZHANG, an individual; CINDY
ZHANG, an individual; ZHANGS, LLC, a
California limited liability company; and
RAY KAI, LLC, a California limited liability
company,
Cross-Complainants,
Vv.
CATHAY BANK, a California banking
corporation; and DOES 201-230, inclusive,
Cross-Defendants.
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaintio me OND
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LAW OFFICE OF
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832-1686
XIANG KAI, LLC, a California limited
liability company,
Cross-Complainant,
Vv.
CATHAY BANK, a California banking
corporation; and DOES 231-260, inclusive,
Cross-Defendants.
INTRODUCTION
Defendants/Cross-Complainants Raymond Xiang Kai Zhang, aka Raymond Kai Zhang,
aka Raymond Zhang, aka Xiang Kai Zhang, aka Xiang Zhang, aka Zhang Xiang (“Raymond”),
Cindy Zhang (“Cindy”), Ray Kai, LLC (“Ray Kai”), and Zhangs LLC (“Zhangs”) (collectively
“Cross-Complainants”) hereby submit through their attorney of record the following
Memorandum of Points and Authorities in Support of their Opposition to Plaintiff Cathay Bank
(“Plaintiff’ or “Bank”)’s Demurrer to Cross-Complainants’ Second Amended Cross Complaint
(“SACC”).
FACTUAL BACKGROUND
Raymond and Cindy are the sole members of Ray Kai and Zhangs LLCs. They created
the LLCs because their trusted long time accountant, who is and was not a lawyer, advised them
that the LLCs would protect them from losing their personal properties for business dealings.
Raymond and Cindy immigrated to the United States in the 1980’s from China. Both
Raymond and Cindy are obviously unsophisticated by casual observation. Raymond graduated
from high school in China and Cindy did not. With limited adult school education after they
arrived in the United States, they have managed to speak basic conversational English but neither
can read much English or comprehend English sentence structure.
Raymond and Cindy built up their businesses by working as laborers in the 80’s and 90’s,
saving as much as they could, and being honest and fair with people they dealt with, doing
business mostly on verbal agreements as they had very limited English reading comprehension.
By the mid 1990’s, Raymond and Cindy began to invest their savings by purchasing
residential building lots and building single family residences, financing the construction costs
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintLAW OFFICE OF”
CHIJEH HU
456 8" STREET
OAKLAND, CA 94607
(510) 832-1686
using construction loans from local bank lenders. They knew these local bank lenders personally
and have been successful in profiting from the sales of the residences after completion of the
construction. Their cash flow began to stabilize and their financial situation appeared secure.
During the summer of 2005, their long time accountant introduced them to a Cantonese-
speaking employee of the Bank. Raymond subsequently commenced negotiations with the Bank,
through the employee, to obtain a business loan to provide for long-term working capital for their
businesses. The negotiations of the loan between the Bank, through its Chinese-Cantonese-
speaking employees, and Raymond, were entirely conducted in Cantonese, a dialect of Southern
China.
In the second half of 2006, Ray Kai, through Raymond and Cindy, started negotiating
with the Bank to obtain a construction loan for a four story residential condominium and one
story commercial unit on MacArthur Boulevard in Oakland, California. They entered into a
construction loan agreement with the Bank in the amount of Seven Million Two Hundred Thirty-
Eight Thousand dollars ($7,238,00.00) in October 2006, secured by a Bank Deed of Trust
against the MacArthur project property, allowing for an Eighteen (18) month construction time,
and maturing on or about May 1, 2008.
The construction at the MacArthur project experienced unforeseen delays outside the
control of Raymond, Cindy or Ray Kai: PG&E took more than a year to relocate a high-voltage
power line crossing over the Ray Kai project. Construction was halted as a result. The power
line issue was finally resolved about mid to late October 2008. Understanding that the delay was
beyond the control of Raymond, Cindy, and Ray Kai, the Bank represented that it would extend
the maturity date for the construction loan first from May 1, 2008 to February 1, 2009, and then
from February 1, 2009 to October 1, 2009 at no cost to Cross-Complainants.
At each extension, Raymond and Cindy were approached by Bank employees and were
told to execute signature pages presented to them within minutes. Significantly, and without the
knowledge of Raymond and Cindy, some of the signature pages were attached to extension
documents which included a nondescript provision entitled “Conditions Precedent” that
purportedly secured the loan modification with Raymond and Cindy’s real property located at
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintfF win
LAW OFFICE OF
CHIJEH HU
456 87 STREET
OAKLAND, CA 94607
(510) 832-1686
4900 Third Street, San Francisco, California. Neither Raymond nor Cindy signed any of these
documents in the presence of a notary.
At this time, around October 2009, the MacArthur project was about 90% complete, the
project team was working on the completion certificate and final punch list items. Raymond was
actively marketing the project condo units and had promising prospects. Ray Kai’s contractors
submitted payment requests to the Bank but no funds were disbursed. Faced with a dreary
economic free fall dominating the news at the time, Ray Kai’s contractors demanded prompt
payment or threatened to stop work. Upon inquiry, Raymond was told by the Bank that their
payment requests were being processed but it would “take some time.” If Raymond needed
funds promptly, the Bank told Raymond, he should put up his own funds. To keep the project
from halting, Raymond advanced approximately $150,000 needed for payments to the
contractors. In the meantime, the Bank again extended the maturity date for the construction loan
from October 1, 2009 to February 1, 2010 to allow Raymond to market the condos.
Raymond and Cindy were again approached by Bank employees and told to execute
signature pages presented to them within minutes. Significantly, and again without the
knowledge of Raymond and Cindy, some of the signature pages were attached to extension
documents which included a nondescript provision entitled “Conditions Precedent” that
purportedly secured the loan modification with Raymond and Cindy’s real properties located at
480 Potrero Street, San Francisco, California and 229-255 International Boulevard, Oakland,
California.
In December 2009, the MacArthur project was approximately 95% complete, and the
pending progress payments were still being processed by the Bank, and remain unpaid to this
date. Raymond, however, had solid leads for multiple buyers for the project condos, some from
the Bay Area, and some from China as employment based investment immigrants. Raymond’s
immigration attorney advised him that it would take up to 18 months to complete the investment
immigration process. In late November 2009, Raymond, for the first time at his own initiative,
approached the Bank, asking for an 18-month extension of the maturity date to accommodate the
immigration process. The Bank told Raymond that he needed to provide additional collateral to
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintoO mem N DH HW FF WwW N |
NN NY N NN ee a a a
NRBRR BBR FSCS WU RFAREEHRS
LAW OFFICE OF.
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
($10) 832-1686
get the 18-month extension. Raymond agreed and delivered guarantee trust deeds against real
properties located at 480 Potrero Street, San Francisco, California and 229-255 International
Boulevard, Oakland, California. Shortly after the meeting with the Bank, Raymond left for
China to solidify the condo sales.
Raymond returned from China in January, believing that the maturity of the construction
loan had been extended for 18-month, and was devastated to be notified by the Bank that his
collateral on the Potrero and International properties bought him a mere 2-month extension as
opposed to the agreed upon 18-month extension.
After the two months had lapsed, the Bank locked Cross-Complainants out from the
MacArthur property, despite the Bank having no legal right to the control of the property. The
Bank further deceived and made false statements to Raymond, by telephoning him directly, and
not through legal counsel, dissuaded Raymond from showing up at a hearing to object to the
appointment of a receiver for the collateralized properties. The lockout at MacArthur, guarantee
trust deeds, and subsequent foreclosure, deterred and terminated various deals to sell the condos
and properties, costing Cross-Complainants millions of dollars. The Bank is in the process of
foreclosing on the International property.
Put in perspective, the Bank has loaned Ray Kai a total of approximately $6.4 million, as
the Bank never disbursed the payment requests from Ray Kai’s contractors. Presumably they are
still being processed and may “take some time.” But the Bank wasted no time in collecting, from
ill-gotten collaterals including the MacArthur property, 480 Potrero, and 4900 3" Street
properties, approximately $12.75 million from the Cross-Complainants. The foreclosure of the
International property in Oakland, if carried out as scheduled on November 10, 2011, would
increase the profitability of the Bank further.
ARGUMENT.
A. Cross-Complainants Have Alleged Facts Sufficient to Sustain The First Cause of Action
for Breach of Fiduciary Duty.
In order to survive a demurrer challenge, a complaint or cross-complaint shall contain
statements of fact in ordinary and concise language. CCP §425.10(a)(1). The facts stated should
5
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaint1 |} be only the ultimate facts essential to the plaintiff's claims, but not the evidence by which
2 || plaintiff proposes to prove those facts. Green v. Palmer (1860) 15 C 411, 415. “If defendants
3 || require further specifics in order to prepare their defense, such matters may be the subject of
discovery proceedings.” People v. Superior Court (1973) 9 Cal.3d 283, 287. A judge deciding
whether to sustain or overrule a demurrer is guided by a number of general principles. Material
4
5
6 || facts alleged in a pleading are treated as true for the purpose of ruling on the demurrer.
7 || Gruenberg v Aetna Ins. Co. (1973) 9 C3d 566, 572, 108 CR 480. The judge also takes as true
8 || facts that may be inferred from those expressly alleged. Harvey v City of Holtville (1969) 271
9 || CA2d 816, 76 CR 795.
10 “The elements of a cause of action for breach of fiduciary duty are: (1) existence of a
11 || fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach.
12 |} [Citation.] ” (Mosier v. Southern California Physicians Insurance Exchange (1998) 63 Cal. App.
13 || 4th 1022, 1044 [74 Cal. Rptr. 2d 550]. In their SACC, Cross-Complainants have pled the
14 || existence of a fiduciary duty (SACC Para.29), breach (SACC Para. 30), and cause (SACC
15 |) Para.30).
16 Because Cross-Complainants have alleged the necessary elements to support this cause of
17 |) action, Plaintiff's Demurrer should be overruled. Alternatively, should this Court sustain
18 || Plaintiff's Demurrer, a leave to amend should be granted to Cross-Complainants as allowed by
19 || CCP §472a(c) because facts in this case are sufficient to support such allegations. For example,
20 || the Bank induced the Cross-Complainants to trust the integrity of the Bank, assumed such trust,
21 |} and eventually violated that trust, resulting in the Cross-Complainants’ damages. Citing Witkin,
22 || the court in Minsky v City of Los Angeles, (1974) 11 Cal.3d 113 states that: “It is axiomatic that if
23 || there is a reasonable possibility that a defect in the complaint can be cured by amendment or that
24 || the pleading liberally construed can state a cause of action, a demurrer should not be sustained
25 || without leave to amend.” To ask this Court to sustain the demurrer without leave to amend is to
26 || ask this Court to abuse its discretion. La Sala v American Sav. & Loan Ass'n, (1971) 5 C3d 864,
27 || 876, 97 CR 849 (demurrer sustained without leave to amend when reasonable possibility existed
that complaint could have been cured). As the possibility for Cross-Complainant to cure the
Law orrice oF
CHIJEH HU
456 0” STREET 6
OAKLAND, CA 94607
(510) 632-1686
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintLAW OFFICE OF”
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832-1686
alleged defects is reasonable, an order granting leave to amend should be issued if Plaintiff's
Demurrer is sustained.
1. The Bank Has A Fiduciary Duty To Ray Kai.
True, absent special circumstances, a loan transaction is at arm's length and there is no
fiduciary relationship between the borrower and lender. (Oaks Management Corporation
v.Superior Court(2006)145 Cal.App.4th 453,466[51 Cal.Rptr.3d 561]. However, special
circumstances here have been alleged.
A fiduciary duty undertaken by agreement arises when one person enters into a confidential
relationship with another. (GAB Business Services, Inc. v. Lindsey & Newsom Claim Services,
Inc.(2000) 83 Cal.App.4th 409,416-417[99 Cal.Rptr.2d 665], disapproved on another point in
Reeves v. Hanlon (2004) 33 Cal.4th 1140,1154[17 Cal.Rptr.3d 289,95 P.3d 513].) A confidential
relationship is created when "a confidence is reposed by one person in the integrity of another,
and .. . the party in whom the confidence is reposed . . . voluntarily accepts or assumes to accept
the confidence. .. .""" (Barbara A. v. John G.(1983)145 Cal.App.3d 369,382[193 Cal.Rptr. 422].)
Cross-Complainants put their trust in the Bank. The Bank spoke to and negotiated with
Raymond and Cindy in Cantonese. Raymond and Cindy are not sophisticated individuals upon
casual observation. They relied on Bank to tell them the implications of the loan terms, trusted
that the loan documents presented to them in English reflected the terms as they were told and
understood, which was discussed only in Cantonese. They shared confidential information with
the Bank. They believed, as represented by the bank employees with whom they dealt, that the
Bank had integrity and trusted it when dealing with it. In light of these special circumstances,
which have been alleged in the active pleading, the Bank owed Cross-Complainants a fiduciary
duty.
2. The Newly Added Causes of Action Should Not Be Stricken Because Judicial Policy
Favors Deciding Litigation on its Merits.
The Bank further argues that Cross-Complainants were only allowed to amend the causes of
action addressed by the ruling sustaining the Bank’s demurrer, not add entirely new causes of
action, unless, of course, Cross-Complainants obtain a leave to amend to add the new causes of
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintLAW OFFICE OF
CHIJEH HU
436 8™ STREET
OAKLAND, CA 94607
(510) 832-1686
action. That argument loses sight of a maxim of jurisprudence: “The law respects form less than
substance.” (See California Civil Code §3528) California judicial policy has always favored
deciding litigation on its merits. An order denying relief runs counter to the law's policy
encouraging trial and disposition on the merits. Daley v. County of Butte, 227 Cal.App.2d. 380
(1964). To the extent, however, that this Court deems that the lack of a motion for leave to
amend the second amended cross-complaint is a technical obstacle to allowing the first cause of
action, Cross-Complainants hereby respectfully request such leave to amend, adding the first
cause of action. It is beyond dispute that this Court has discretion under CCP §426.50 to allow
leave to amend new causes of action absent a showing of bad faith. As there is no showing of
Cross-Complainants’ bad faith, the new cause of action should be allowed, and the issue the
cause of action seeks to raise should be decided on its merits.
B. Cross-Complainants Have Alleged Facts Sufficient to Sustain a Cause of Action for
Breach of Implied Covenant of Good Faith and Fair Dealing.
1, SACC Pleads Facts Sufficient to Sustain a Cause of Action Against Bank.
Plaintiff argues that Raymond, Cindy, and Zhangs have no standing to bring this cause of
action. As to Ray Kai, Plaintiff apparently concedes that it has stated sufficient facts to sustain
this cause of action. Plaintiff, however, neglected to take into consideration that Raymond and
Cindy are the sole managers of both Ray Kai. The Bank knew that Raymond and Cindy were the
real party in interest, ultimately responsible for the dealings of Ray Kai. Facts show that Plaintiff
negotiated with Raymond directly regarding Ray Kai’s construction loan, obtained various
signatures from Raymond and Cindy to gather real estate properties as guaranties to maintain Ray
Kai’s construction loan from parties with whom Ray Kai has no relationship, and clearly
understanding that Raymond and Cindy are the ultimate intended beneficiary of Ray Kai’s loan.
As third-party beneficiaries, Raymond and Cindy have standing to bring this cause of action.
Further, even assuming that Raymond, Cindy, and Zhangs are guarantors and, therefore, not
parties to Ray Kai’s construction loan, they are parties to their respective guaranty agreements.
Facts in this case support that the Bank had breached the implied covenant of good faith and fair
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-ComplaintLAW OFFICE OF
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832-1686
dealing arising from the guaranty agreements. Essential facts show that the Bank has
fraudulently acquired the guarantors’ signatures through various untrue statements, that the Bank
misrepresented the nature of the guaranty agreements, that the Bank committed acts in bad faith
and unfair dealings. Simply put, there are sufficient facts to sustain this cause of action. If
Plaintiff's Demurrer is sustained as to Raymond, Cindy, and Zhangs due to Cross-Complainants’
inadvertent omission of allegations, this Court should grant leave to amend as requested above
and not forfeit Cross-Complainants’ cause of action. There are sufficient facts to sustain this
cause of action.
2. Second Cause of Action is Certain
The Bank argues the SACC does not allege that the Bank did anything other than pursue its
legal rights and remedies under the contract (Plaintiff's Demurrer to SACC Pg. 12 line 14), and
that the SACC fails to allege the Bank did anything in breach of the agreement (Pg. 12 lines 24-
25). The SACC did so allege.
In paragraph 23 of the SACC, Cross-Complainants allege that the Bank negotiated with them
solely in Cantonese, yet presented loan documents to them written solely in English. Paragraph
24-27 puts forth the theory that the Bank used misrepresentations and predatory tactics in the
performance of the loan to gain, in bad faith and unfairly, additional collaterals. Paragraph 31 of
the second cause of action incorporates all the prior allegations made, and thus Cross-
Complainants have alleged wrong doing, and put forth the allegations and facts sufficient to
sustain this cause of action.
Facts in this case support the theory that the Bank had breached the implied covenant of good
faith and fair dealing arising from Ray Kai’s construction loan agreement. Essential facts show
that the Bank has, in the course of performance of the construction loan, in bad faith and unfairly,
acquired various guarantors’ signatures through untrue statements. The Bank misrepresented the
nature of the guaranty agreements and committed acts in bad faith and unfair dealings. Simply
put, there are sufficient facts to sustain this cause of action. If Plaintiff's Demurrer is sustained
due to Cross-Complainants’ inadvertent omission of allegations, this Court should grant leave to
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaint28
LAW OFFICE OF”
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832-1686
amend as requested above and not forfeit Cross-Complainants’ cause of action. There are
sufficient facts to sustain this cause of action.
C. Cross-Complainants Have Alleged Facts Sufficient to Sustain a Cause of Action for
Violation of the Unfair Competition Law (“UCL”) §17200.
“Section 17200 borrows violations of other laws and treats them as unlawful practices” that
the unfair competition law makes independently actionable. Ce/-Tech Communications, Inc. v
L.A. Cellular Tel. Co. (1999) 20 Cal. 4'" 180, and that plaintiff must allege acts or practices that
are either unlawful, unfair, or deceptive. Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.
App. 4"" 1158, 1169.
As argued above, the SACC alleges that the Bank negotiated with Cross-Complainants
solely in Cantonese, yet presented them loan documents written solely in English (SACC
Para.23), inferring inherently that the documents signed do not reflect the agreements reached
verbally, an unfair and deceptive act. The SACC alleges that the Bank used predatory lending
tactics and misrepresentations (SACC Para. 24-27), again, unfair and deceptive acts, to acquire
liens on additional collaterals. Paragraph 35 of this cause of action incorporates all prior
allegations. Thus, Cross-Complainants have alleged facts sufficient to sustain this cause of
action.
Most importantly, facts in this case support the theory that the Bank had acted unlawfully,
unfairly, or deceptively in the course of its performance and execution of Cross-Complainants’
various agreements, resulting in damages to the Cross-Complainants. Essential facts show that
the Bank has, in the course of performance of the construction loan, acquired various guarantors’
signatures through untrue statements. There were fraudulent acts in the inducement and in the
inception of various agreements. The Bank misrepresented the nature of the guaranty agreements
and committed unlawful, unfair and deceptive acts. The Bank also deliberately prevented Cross-
Complainants from performing the construction by withholding construction loan disbursements
without justification. Simply put, there are more than sufficient facts to sustain this cause of
action. If Plaintiff's Demurrer is sustained due to Cross-Complainants’ inadvertent omission of
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Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaint28
LAW OFFICE OF”
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832.1686
allegations, this Court should grant leave to amend as requested above and not forfeit Cross-
Complainants’ cause of action. There are sufficient facts to sustain this cause of action.
D. Cross-Complainants Have Alleged Facts Sufficient To Sustain a Cause of Action for
Unjust Enrichment.
Plaintiff's Demurrer correctly states the elements for unjust enrichment, and these elements
have been met. Cross-Complainants have alleged that the Bank a) received a benefit, the
additional pieces of property owned by Cross-Complainants used to secure the loan to Ray Kai
(SACC Para. 22-27) and b) unjust retention of a benefit at the expense of another (SACC Para.
22-34,
Plaintiff's current demurrer incorrectly states that Cross-Complainants have “not alleged that
they did not understand the contracts”, that they did not allege misrepresentation, or that the
contract “is unenforceable... for some reason.” (Plaintiff's Demurrer to SACC Pg. 15 lines 1-10).
The SACC alleges that the Bank negotiated solely in Cantonese yet produced loan documents
in English for signing, and that Raymond and Cindy have a limited understanding of English
(SACC Para. 23), providing a reasonable inference that Raymond and Cindy did not understand
the documents they signed. The SACC further alleges that the Bank used misrepresentations and
acted in bad faith (SACC Para. 27) and asks the Court for relief from the void or voidable
transactions resulting in and from the contract (SACC Prayer). Because Cross-Complainants have
alleged facts sufficient to sustain this cause of action, Plaintiff's Demurrer should be overruled.
If the demurrer is sustained, leave to amend should be granted as argued above.
Most importantly, facts in this case support the theory that the Bank had acted fraudulently in
acquiring and execution of the various agreements, and that they are voidable. Essential facts
show that the Bank has, in the course of performance of the construction loan, acquired various
guarantors’ signatures through untrue statements. There were fraudulent acts in the inducement
and in the inception of various agreements. The Bank misrepresented the nature of the guaranty
agreements. The Bank also deliberately prevented Cross-Complainants from performing the
construction by withholding construction loan disbursements without justification. There are
more than sufficient facts to sustain this cause of action. If Plaintiff's Demurrer is sustained due
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Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaint28
LAW OFFICE OF
CHIJEH HU
456 87 STREET
OAKLAND, CA 94607
(510) 832-1686
to Cross-Complainants’ inadvertent omission of allegations, Cross-Complainants ask this Court
to grant leave to amend as requested above and not forfeit Cross-Complainants’ cause of action.
There are sufficient facts to sustain this cause of action.
As for the lack of an explicit order allowing for leave to amend the Cross-complaint to bring
new causes of action, the Bank’s argument loses sight of a maxim of jurisprudence: “The law
respects form less than substance.” (See California Civil Code §3528) California judicial policy
favors deciding litigation on its merits. An order denying relief runs counter to the law's policy
encouraging trial and disposition on the merits. Daley v. County of Butte, 227 Cal.App.2d. 380
(1964). To the extent, however, that this Court deems that the lack of a motion for leave to
amend the second amended cross-complaint is a technical obstacle to allowing the fourth cause of
action, Cross-Complainants hereby respectfully request such leave to amend. It is beyond
dispute that this Court has discretion under CCP §426.50 to allow leave to amend new causes of
action absent a showing of bad faith. As there is no showing of Cross-Complainants’ bad faith,
the new cause of action should be allowed, and the issue the cause of action seeks to raise should
be decided on its merits.
Conclusion
Plaintiff's Demurrer fails to put forth sufficient arguments in support of its positions, and
thus Cross-Complainants ask this Court to overrule the demurrer in its entirety. Alternatively,
should this Court sustain any part of Plaintiff's Demurrer, Cross-Complainants ask that a leave to
amend be granted as stated above.
Dated: November 7, 2011 LAW OFFICE OF CHI,
By:
Chij lu, Esq.
Attorney for Defendants/Cross-
Complainants,
Raymond Xiang Kai Zhang et al.
12
Opposition to Plaintiffs’s Demurrer to Second Amended Cross-Complaint