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1 REICKER, PFAU, PYLE & McROY LLP ELECTRONICALLY FILED
1421 State Street, Suite B Superior Court of California
2 Santa Barbara, CA 93101 County of Santa Barbara
Tel (805) 966-2440
3 Fax (805) 966-3320 Darrel E. Parker, Executive Officer
Kevin R. Nimmons (State Bar No. 261577) 10/7/2021 1:06 PM
4 knimmons@rppmh.com By: Johnny Aviles, Deputy
Cory T. Baker (State Bar No. 315763)
5 cbaker@rppmh.com
6 Attorneys for Defendants
Andrew Waters and FCP Private, LLC,
7 and FCP Corporation, Ltd.
8
9 SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF SANTA BARBARA—ANACAPA DIVISION
11
12 MARK SCHAUB, an individual; TLG LTD., Case No.: 20CV02113
a Hong Kong limited Liability company Assigned to: Hon. Donna D. Geck
13
Plaintiffs,
14 DEFENDANTS ANDREW WATERS,
v. FCP PRIVATE, LLC, AND FCP
15 CORPORATION, LTD.'S REPLY
ANDREW WYLES WATERS, an individual;
16 FCP CORPORATION LTD., a Hong Kong TO OPPOSITION TO DEMURRER
limited liability company; FCP PRIVATE, TO SECOND AMENDED COMPLAINT
17 LLC, a California limited liability corporation;
and DOES 1 through 10, inclusive, [Filed concurrently herewith: Reply to
18 Opposition to Motion to Strike Second
Defendants. Amended Complaint; Memorandum]
19
Date: October 15 2021
20 Time: 10:00 a.m.
Dept.: 4
21
Amended Complaint filed: June 14, 2021
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REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 1
1
2 MEMORANDUM OF POINTS AND AUTHORITIES
3 I. INTRODUCTION
4 Plaintiffs' Second Amended Complaint ("SAC") and Opposition to the Demurrer
5 ("Opposition" or "Opp'n") make it plain that this is not a case of fraud. Rather, this is an alleged
6 case of conversion of funds, or "a simple case of theft," as Plaintiffs previously described it in their
7 First Amended Complaint ("FAC")—Plaintiffs noticeably removed this allegation in the SAC.
8 (FAC, 1:3.) As described below, the Opposition's "Factual Background" section contains "facts"
9 that are not set forth in the SAC. (See, Opp'n, 2:1-3:23.) This is entirely improper. Even ignoring
10 Plaintiffs' attempts to mischaracterize the allegations in the SAC, it is clear that Plaintiffs'
11 arguments fail.
12 Plaintiff cannot contend that both Plaintiff Schaub and TLG are proper plaintiffs. To allow
13 both as plaintiffs would be to ignore the legal distinction between corporate entities and individuals.
14 Plaintiffs cannot allege fraud. The funds were transferred "by mistake", as the SAC alleges,
15 and the Opposition alleges that "[i]n July 2019, a bank error led to the transfer of approximately
16 $2 million (instead of the intended $50,000) from Mr. Schaub's TLG account to the Waters-
17 controlled FCP Corporate account." (Opp'n, 3:4-6 [bold added].) The verified SAC and the
18 Opposition in defense of the SAC are judicial admissions that there was no fraud and that the funds
19 were transferred by a mistake. Plaintiffs cannot be given leave to contradict these admissions.
20 Plaintiffs have now improperly added two causes of action for breach of contract, despite the
21 Court not granting them leave to do so. Despite these unauthorized additions, Plaintiffs still fail to
22 allege any valid cause of action for breach of contract against Defendants. Even if the Court permits
23 Plaintiffs' Fourth Cause of Action for Breach of Contract and Fifth Cause of Action for Breach of
24 Contract (which it should not), those causes of action are only against Defendants Waters and FCP
25 Corporate. While the Sixth Cause of Action for Unjust Enrichment is asserted "Against All
26 Defendants," the Unjust Enrichment Cause of Action cannot be made against Defendant FCP
27 Private where there are no associated Breach of Contract causes of action against it.
28 ///
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 2
1 Plaintiffs have taken the Court's leave to amend and stretched it well beyond its limits,
2 ultimately highlighting that this case truly is a case of alleged conversion—not one of fraud, breach
3 of contract, or unjust enrichment. Therefore, Defendants' demurrer should be sustained.
4 II. SCHAUB DOES NOT HAVE STANDING TO SUE IN THE NAME OF TLG.
5 Only the real party in interest has standing to bring a cause of action. Schaub is not that
6 party. Plaintiffs contend that: (1) "Mr. Schaub is the 100% beneficial owner of TLG" (Opp'n, 4:22);
7 (2) "[t]he TLG bank account was used as a saving account for employment bonuses received by Mr.
8 Schaub" (id., 4:24-25); (3) [w]hatever injury TLG suffers is consequently suffered by Mr.
9 Schaub…" (id., 4:25-26); and (4) "Waters is well aware that the funds he stole were Mr. Schaub's
10 personal funds, as he later 'returned' $750,000 to Mr. Schaub's personal bank account." (Id., 5:1-3.)
11 These "facts" are not alleged in the SAC. Paragraph 10 of the SAC does not allege Schaub
12 is the "100% beneficial owner" of TLG. Even if that were true based on the allegation that TLG is
13 "owned by Mr. Schaub," the funds were TLG's (SAC ¶ 27, 6:11-12; ¶ 32, 8:3; and ¶ 41, 9:15) and
14 not Schaub's funds.
15 Plaintiffs try to save Schaub's lack of standing by arguing facts not alleged in the SAC:
16 "The TLG bank account was used as a savings account for employment
bonuses received by Mr. Schaub. Whatever injury TLG suffers is
17 consequently suffered by Mr. Schaub—the money was his money. (See
SAC ¶ 4 (stating that Mr. Schaub has pleaded with "Defendants to return
18 the funds that rightfully belong to him").)" (Opp'n, 4:24-28.)
19 This is not alleged in the SAC. Even if it was, it is not sufficient to create standing in
20 Schaub. To do so would be to ignore the legal distinction between corporate entities and
21 individuals. (E.g., Cal. Corp. Code § 17701.04(a) [[a] limited liability company is an entity distinct
22 from its members"]; see also, Sonora Diamond Corp. v. Superior Ct. (2000) 83 Cal.App.4th 523,
23 538 ["[o]rdinarily, a corporation is regarded as a legal entity, separate and distinct from its
24 stockholders, officers and directors, with separate and distinct liabilities and obligations"].) Owners
25 of corporations and their employees do not have standing to sue in the name of the corporation by
26 virtue of their relationship with the corporation, even if Schaub does own 100% of TLG.
27 Whether Schaub "pleaded" with Defendants to return the funds does not make him the true
28 party in interest. Instead, Schaub was making a plea on behalf of TLG. That funds were eventually
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 3
1 transferred to Schaub's account does not establish that the funds transferred were Schaub's personal
2 funds; they were TLG's funds, as the SAC alleges.
3 III. THE DEMURRER TO THE SECOND CAUSE OF ACTION FOR FRAUD SHOULD
4 BE SUSTAINED BECAUSE FRAUD IS NOT ADEQUATELY PLED.
5 The fraud causes of action fail as to Schaub because he lacks standing, as set forth above.
6 Assuming he has standing the fraud causes of action still fail as to Schaub and TLG.
7 A. The Second Cause of Action for Fraud Fails to State a Cause of Action.
8 The Demurrer asserted that: The cause of the mistaken transfer was not Defendant Water's
9 alleged fraud but was: "bank error [that] led to the transfer of approximately $1,950,000 (instead of
10 the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP Corporate (HK)'s
11 Citibank account in Hong Kong." (SAC, 7:28-8:10.) The Opposition only addresses this argument
12 briefly:
13 "Defendants attempt to skirt around the claim for intentional misrepresentation by
arguing that the alleged misrepresentations were made to induce Plaintiffs to send
14 $50,000, not $1,940,000. The SAC alleges no such thing." (Opp'n, 6:5-7.)
15 "The amount of funds Plaintiffs were induced into sending was not specified and did
not play a part in Plaintiffs’ inducement. Nowhere does the SAC state that Waters
16 induced Plaintiffs into sending just $50,000. Whether $50,000 or $1,940,000,
Plaintiffs transferred the funds because they thought the funds would be held in
17 trust." (Id., 6:9-13.)
18 Once again the Opposition misstates what is actually alleged in the SAC. The SAC alleges
19 that Plaintiffs intended to transfer $50,000. "[B]ank error led to the transfer of approximately
20 $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP
21 Corporate (HK)'s Citibank account in Hong Kong." (SAC., 7:28-8:10.) Plaintiffs did not transfer
22 $1,950,000 in reliance on any misrepresentation; rather, the bank mistakenly did. Therefore, the
23 alleged misrepresentations did not cause TLG to transfer $1.9 million and therefore Defendants did
24 not acquire the funds by any fraudulent means.
25 Plaintiffs' case is that they "by mistake" the bank transferred funds to Defendants’ bank
26 accounts; that Defendants refused to transfer the monies to Plaintiffs; and that Defendant Waters lied
27 about the reasons why they could not transfer the funds. This is not a case of fraud.
28 1. Misrepresentation that Funds were Frozen Did Not Induce the Transfer.
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 4
1 Plaintiffs rely on the following allegations in the SAC (and paraphrase allegations):
2 "[T]he SAC specifically states how Defendant Waters also made the
following additional misrepresentations after the funds were transferred
3 over email and Wechat: (1) that the bank had frozen the accounts where
Plaintiffs’ funds were transferred to (SAC ¶ 40); and (2) that the bank
4 believed the funds were from an illegitimate source (SAC ¶¶ 36-39).
Waters knew these representations were false when he made them because
5 around the same time he made these false representations, he drained the
FCP Citibank accounts of all funds. (SAC ¶ 41.) Plaintiffs were induced
6 not to act, or to alter their position, based on Waters’ false representations
that the funds were frozen in the FCP Corporate (HK) accounts." (Opp'n,
7 6:20-28.)
8 The alleged misrepresentations that Plaintiffs claim they justifiably relied upon were that
9 Defendants' accounts, to which Plaintiffs had already transferred funds, were frozen, and because
10 they were frozen, Defendants could not return the funds to Plaintiffs. (SAC, 14:27-15:5; 15:10-11;
11 15:24; and 16:8.) Whether the accounts were frozen or not, this did not harm Plaintiffs because by
12 the time the accounts were allegedly frozen, Defendants were in control of Plaintiffs' funds and
13 allegedly failed and refused to return them to Plaintiffs. Therefore, Plaintiffs did not rely on the
14 alleged misrepresentation that the accounts were "frozen" because this occurred after Plaintiffs
15 transferred the funds and lost control of their funds to Defendants.
16 Where the essential elements of justifiable reliance and resulting damage are missing,
17 Plaintiffs do not sufficiently plead a fraud cause of action. Therefore, the Second Cause of Action
18 for Intentional Fraud fails and the Demurrer thereto should be sustained.
19 IV. THE DEMURRER TO PLAINTIFFS' THIRD CAUSE OF ACTION FOR FRAUD
20 BASED ON CONCEALMENT SHOULD BE SUSTAINED.
21 Here, like the defective Second Cause of Action for Fraud based on Intentional
22 Misrepresentation, the Third Cause of Action for Fraud based on Concealment also fails to state a
23 cause of action. Schaub is not a proper party to this cause of action because the alleged fraudulently
24 stolen funds were not his funds; they were TLG's funds. (SAC, 6:11-12, 8:3, 9:15.) Moreover, it
25 was "bank error" that caused the transfer of the funds and not Defendant Waters' alleged
26 misrepresentations. (Id., 7:28.) Because the Third Cause of Action for Fraud based on Concealment
27 fails to state a cause of action, the Demurrer should be sustained.
28
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 5
1 V. THE DEMURRER TO THE FOURTH CAUSE OF ACTION FOR BREACH OF
2 CONTRACT SHOULD BE SUSTAINED —WITHOUT LEAVE TO AMEND.
3 A. Both Breach of Contract Causes of Action Are Not Permitted and Do Not
4 Respond to the Court's Reasoning for Sustaining the Earlier Demurrer to the
5 Fraud and Unjust Enrichment Causes of Action.
6 In sustaining Defendants' demurrers to the FAC as to Plaintiffs' Second, Third and Fourth
7 Causes of Action, the Court's June 4, 2020 Order did not permit Plaintiffs leave to add two entirely
8 new causes of action, but instead, granted them leave to amend the second, third and fourth causes
9 of action. The Court's rationale for sustaining the initial Demurrer to the fourth cause of action for
10 unjust enrichment was as follows:
11 "Thus, a party to an express contract can assert a claim for restitution based on unjust
enrichment by alleging in that cause of action that the express contract is void or
12 was rescinded. . . . A claim for restitution is permitted even if the party
inconsistently pleads a breach of contract claim that alleges the existence of an
13 enforceable agreement.” [Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223
Cal.App.4th 221 (citations and internal quotes omitted]
14 ¶
Here, plaintiffs have not asserted a contract or implied contract claim. Rather,
15 plaintiffs allege that they transferred funds belonging to them to defendants by
mistake and that defendants have refused to return the funds." (June 4, 2020 Order
16 Sustaining Demurrer and Granting Motion to Strike.)
17 Here, Plaintiffs were not permitted to amend the FAC to include a breach of contract cause
18 of action. Moreover, the breach of contract cause of action does not allege that an "express contract
19 is void or was rescinded," which Rutherford authorized, as this Court noted in its ruling above.
20 (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221.) So, not only do
21 Plaintiffs' contract causes of action violate the Court's order allowing leave to amend, the contract
22 causes of action do not support an unjust enrichment theory due to a void or rescinded contract;
23 rather, Plaintiffs seek damages for an alleged breach of contract.
24 Plaintiffs contend that Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 permits
25 them to add a new cause of action because it "directly responds to the court's reasoning for
26 sustaining the earlier demurrer." Plaintiffs argue that their breach of contract claim for $1,940,000
27 should be allowed because it responds to the Court's issue in its June 4, 2021 Minute Order that
28
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 6
1 "plaintiffs have not asserted a contract or implied contract claim." (Opp'n, 8:14-24.) Plaintiffs' broad
2 reading of the holding in Patrick is not only incorrect, but inapplicable here.
3 In Patrick, a shareholder derivative action, the trial court sustained demurrers, with leave to
4 amend, for the plaintiff's failure to properly allege standing as a beneficial shareholder to bring a
5 derivative claim. (Patrick, 167 Cal.App.4th at 1015.) In response, the plaintiff added a new cause of
6 action for declaratory relief in her amended complaint seeking a declaration that she had a
7 community property interest in defendant's shares, and therefore, sufficient standing. (Id. at 999-
8 1000, 1015.) While the defendant argued that the trial court's order did not grant the plaintiff leave
9 to add a new claim, the Court of Appeal held that the addition of this claim was permissible because
10 it "directly responds to the court's reason for sustaining the earlier demurrer" – namely, the lack of
11 standing. (Id. at 1015.)
12 In permitting the addition of the new claim, the Court of Appeal recognized the well-
13 established rule that when a court sustains a demurrer to a complaint with leave to amend, a plaintiff
14 may only amend as authorized by the Court's order. (Id.; see also Harris v. Wachovia Mortg., FSB
15 (2010) 185 Cal.App.4th 1018, 1023 ("[f]ollowing an order sustaining a demurrer…the plaintiff may
16 amend his or her complaint only as authorized by the court's order. The plaintiff may not amend the
17 complaint to add a new cause of action without having obtained permission to do so, unless the new
18 cause of action is within the scope of the order granting leave to amend."). The Court of Appeal
19 held this rule inapplicable to the facts in Patrick, however, because it found that the new declaratory
20 relief claim, which established the plaintiff's standing, was clearly within the scope of the trial
21 court's order permitting leave to amend to assert the plaintiff's standing. (Patrick, 167 Cal.App.4th
22 at 1015.) The trial court permitted the plaintiff leave to establish standing, and her new claim did so.
23 Patrick, supra, does not assist Plaintiffs. The breach of contract causes of action are entirely
24 improper.
25 B. Even if the Court Grants Plaintiffs Leave to Add an Entirely New Cause of Action,
26 the Fourth Cause of Action for Breach of Contract Still Fails to State Facts
27 Sufficient to Constitute a Cause of Action.
28
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 7
1 Plaintiffs' Fourth Cause of Action fails for three reasons: (1) Schaub is not a proper party to
2 this cause of action; (2) the alleged contract lacks consideration; and (3) the "agreement" was for the
3 transfer of $50,000, not $1.9 million.
4 First, Schaub has no standing to bring this claim. As the SAC alleges, the funds were TLG's
5 (SAC, 6:11-12, 8:3, 9:15) and not Schaub's funds. Plaintiff do not dispute this in their Opposition.
6 Second, consideration—the essential element for a breach of contract cause of action—is
7 lacking. Plaintiffs rely on Chrisman v. S. Cal. Edison Co. (1972) 83 Cal.App. 249, 254 for the
8 proposition that there is adequate consideration even where the benefit is "trifling." The option
9 contract to purchase water in Chrisman is not comparable to the "agreement" alleged here. The
10 Chrisman Court found $1 to be valuable "consideration" where it supplied mutuality of obligation
11 because it is "common knowledge that where a consideration of $1 is mentioned in a contract, other
12 considerations usually pass between the parties to the agreement." (Id.) However, the $1 was
13 mentioned in the written contract that was signed by the parties. This was a bargained-for exchange.
14 There was no bargain here. Instead, Plaintiffs argue that there is adequate consideration to the oral
15 agreement because: (1) Waters and Schaubs "were long-time friends." (Opp'n, 9:23-24); and (2)
16 Defendants "obtained a benefit by receiving the funds" (id., 9:24-25) because: (a) "this was Waters'
17 opportunity to return a favor to an old friend, who had made occasional loans to Waters in the past"
18 (id., 9:27-28) and (b) "Waters was able to ingratiate himself to a past and potentially future investor,
19 Mr. Schaub." (Id., 9:28-10:1.) Putting aside the glaring issue that these are not "facts" alleged in the
20 SAC, an opportunity to "return a favor" or to "ingratiate" oneself is not tantamount to even a morsel
21 of consideration. This was simply a favor, not a contract.
22 Plaintiffs' reliance on Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767, 783
23 is not helpful either. In Beatrice, the Court held that a subsidiary corporation's assumption of
24 liability for a corporate parent's debts, in exchange for the transfer of tangible personal property by
25 parent corporation, qualified as "consideration" for the transfer; thus, the transfer was subject to
26 California sales tax. Here, there was no assumption of liability, nor a bargained-for exchange.
27 VI. THE DEMURRER TO THE FIFTH CAUSE OF ACTION FOR BREACH OF
28 CONTRACT SHOULD BE SUSTAINED —WITHOUT LEAVE TO AMEND.
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 8
1 Without seeking leave to amend, Plaintiffs attempt to add another breach of contract cause
2 of action. This is improper as addressed above. This breach of contract action also suffers from its
3 own defects: (1) it violates the Statute of Frauds; (2) the "performance" exception to the Statute of
4 Frauds does not apply; and (3) there is no allegation that Plaintiff Schaub performed the terms of the
5 alleged oral agreement or was excused from performing them. (See, CACI No. 303. Breach of
6 Contract - Essential Factual Elements.)
7 Plaintiffs argue that Civil Code § 1624(a)(7) requiring certain contracts to be in writing,
8 does not apply here. Plaintiffs conclude without citing any authority that "[n]either party to this
9 agreement was 'in the business of lending or arranging for the lending of money or extending
10 credit.'" However, the SAC evidences that Schaub was in the business of lending money and had a
11 history of lending money. The SAC does not allege that "Schaub was, and is, a practicing
12 attorney"—only the Opposition argues this. (Opp'n, 10:20-22.) The statute of frauds applies and
13 therefore the breach of contract cause of action fails.
14 Plaintiffs argue that Defendants are estopped from asserting the statute of frauds defense.
15 (Id., 10:24.) Plaintiffs rely on a single case, Monarco v. Lo Greco (1950) 35 C.2d 621, to support
16 their contention that Civil Code § 1624(a)(7) is not a bar to their claims based upon the “Oral
17 Agreement” (an alleged oral agreement to loan money in an amount greater than $100,000, by
18 Schaub who was in the business of loaning money and had loaned money to Waters previously.
19 (SAC, 4:23, 5:8-12).) Plaintiffs do not discuss Defendants' case cited in the Demurrer: (Secrest v.
20 Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556 [even if borrowers fully
21 performed their obligations under purported foreclosure forbearance agreement by wire-transferring
22 downpayment to creditor, such performance did not estop transferees . . . from asserting statute of
23 frauds as defense to enforcement of agreement, because borrowers' performance consisted only of
24 payment of money].) Here, it does not matter that Schaub may have performed by paying money to
25 Waters. The alleged contract is not in writing signed by Waters. Therefore, the breach of contract
26 cause of action fails.
27 The principle that full performance takes a contract out of the statute of frauds applies only
28 where performance consists of conveying property, rendering personal services, or doing something
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 9
1 other than payment of money. Plaintiffs' case, Monarco v. Lo Greco (1950) 35 C.2d 621, does not
2 address this principle or the payment of money as performance. Moreover, the breach of contract
3 cause of action does not allege facts giving rise to estoppel nor allege that estoppel to assert the
4 statute of frauds has occurred in this case.
5 VII. THE DEMURRER TO THE SIXTH CAUSE OF ACTION FOR UNJUST
6 ENRICHMENT SHOULD BE SUSTAINED WITHOUT LEAVE TO AMEND.
7 Plaintiffs rely upon the case of Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223
8 Cal.App.4th 221 to attempt to plead around the well-established law in California that there is no
9 cause of action in California for unjust enrichment. Rutherford Holdings, LLC v. Plaza Del Rey,
10 supra, does not apply to the facts and legal theories alleged here, and the court in that case
11 explained when unjust enrichment can be construed as a claim for restitution.
12 "Thus, a party to an express contract can assert a claim for restitution based on unjust
enrichment by alleging in that cause of action that the express contract is void or
13 was rescinded. [Citation.] A claim for restitution is permitted even if the party
inconsistently pleads a breach of contract claim that alleges the existence of an
14 enforceable agreement." [Citation.] (Id. at 231 [citations and quotations omitted;
bold added].)
15
16 The court in the Rutherford case then went on to explain why the facts alleged and legal
17 theories in that case allowed the unjust enrichment claim to remain:
18 "[W]e conclude that Rutherford stated a quasi-contract claim for restitution based on
unjust enrichment. In particular, we conclude Rutherford adequately alleged a
19 reasonable interpretation of the purchase agreement under which section 1.2 is void
to the extent it permits PDR to retain the deposit when Rutherford has not breached,
20 and that PDR has been unjustly enriched by retaining the deposit. Accordingly, we
conclude the trial court erred in sustaining the demurrer as to the claim for restitution
21 based on unjust enrichment. (Id. at 232.)
22 Here, Rutherford does not apply because Plaintiffs do not allege a void contract. Plaintiffs
23 seek contract damages. In fact, as set forth above, each breach of contract cause of action fails for
24 other reasons and cannot be the basis for unjust enrichment.
25 The demurrer to the sixth cause of action for unjust enrichment should be sustained without
26 leave to amend because there is no separate cause of action in California for unjust enrichment.
27 (Levine v. Blue Shield of Calif. (2010) 189 Cal.App.4th 1117, 1138; see also, Melchior v. New Line
28 Productions, Inc. (2003) 106 Cal.App.4th 779, 793 ["there is no cause of action in California for
REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 10
1 unjust enrichment"]; Hill v. Roll Intern. Corp. (2011) 195 Cal.App.4th 1295, 1307) ["California
2 does not recognize a stand-alone cause of action for unjust enrichment."].)
3 Even if the Court permits Plaintiffs' Fourth Cause of Action for Breach of Contract and Fifth
4 Cause of Action for Breach of Contract (which it should not), those causes of action are only
5 against Defendants Waters and FCP Corporate. While the Sixth Cause of Action for Unjust
6 Enrichment is asserted "Against All Defendants," the Unjust Enrichment Cause of Action cannot be
7 made against Defendant FCP Private where there are no associated Breach of Contract causes of
8 action against it.
9 Finally, there is no allegation in the Fifth Cause of Action for Breach of Contract that
10 Plaintiff Schaub performed the terms of the alleged oral agreement or was excused from performing
11 them. (See, CACI No. 303. Breach of Contract - Essential Factual Elements.) Therefore, the breach
12 of contract cause of action fails to state sufficient facts to constitute a cause of action.
13 VIII. CONCLUSION
14 Accordingly, the Court should sustain Defendants' Demurrer to Plaintiffs' SAC without
15 leave to amend.
16
17 Dated: October 7, 2021 REICKER, PFAU, PYLE AND McROY LLP
18
19 By ___________________________________
Kevin R. Nimmons
20 Cory T. Baker
Attorneys for Defendants
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REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 11
1 PROOF OF SERVICE
2 I, the undersigned, say that I am a citizen of the United States, over 18 years of age, and
not a party to the within action. I am employed by the law firm of Reicker, Pfau, Pyle & McRoy
3
LLP, 1421 State Street, Ste. B, Santa Barbara, California 93101.
4
On October 7, 2021, I served the within: DEFENDANTS ANDREW WATERS,
5 FCP PRIVATE, LLC, AND FCP CORPORATION, LTD.'S REPLY TO OPPOSITION
TO DEMURRER TO SECOND AMENDED COMPLAINT [Filed concurrently herewith:
6 Reply to Opposition to Motion to Strike Second Amended Complaint; Memorandum]
7 on the interested parties listed below, as follows:
8 Matthew Donald Umhofer
Diane H. Bang
9 SPERTUS, LANDES & UMHOFER, LLP
1990 South Bundy Dr., Suite 705
10 Los Angeles, California 90025
Telephone: (310) 826-4700
11 Facsimile: (310) 826-4711
Email: matthew@spertuslaw.com
12 Email: diane@spertuslaw.com
13
( ) (By Mail) I caused such document to be mailed in a sealed envelope, by first-class mail,
14 postage fully prepaid. I am “readily familiar” with this firm’s practice of collection and
processing correspondence for mailing. It is deposited with the U.S. postal service on
15 that same day in the ordinary course of business. I am aware that on motion of party
served, service is presumed invalid if the postal cancellation date or postage meter date is
16 more than one (1) day after the date of deposit for mailing as stated in this declaration.
17 ( ) (By Personal Service) I caused such document to be delivered by hand.
18 ( ) (By FAX) I caused such document to be sent via facsimile transmission to the above-
listed addressee(s) and FAX number(s). This transmission was reported as complete and
19 without error.
20 (X) ((By E-MAIL [CCP § 1010.6(a)(2)) On the date indicated on this Proof of Service, at
the time indicated on in the header of my electronic mail, I transmitted the foregoing
21 document(s) by electronic mail to one or more of the recipients at each firm indicated on
this Proof of Service. I caused the my computer to print or maintain a record of the
22 electronic mail to the recipients named in this Proof of Service, a true and correct copy of
which has been retained by Reicker, Pfau, Pyle & McRoy LLP in either hard copy or
23 electronic format in the ordinary course of business and is available for inspection if
necessary.
24
(X) (State) I declare under penalty of perjury pursuant to the laws of the State of California
25 that the foregoing is true and correct.
26 Executed October 7, 2021, at Santa Barbara, California.
27
____________________________
28 Susie Hernandez
PROOF OF SERVICE
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1 REICKER, PFAU, PYLE & McROY LLP ELECTRONICALLY FILED 1421 State Street, Suite B Superior Court of California 2 Santa Barbara, CA 93101 County of Santa Barbara Tel (805) 966-2440 3 Fax (805) 966-3320 Darrel E. Parker, Executive Officer Kevin R. Nimmons (State Bar No. 261577) 10/7/2021 1:06 PM 4 knimmons@rppmh.com By: Johnny Aviles, Deputy Cory T. Baker (State Bar No. 315763) 5 cbaker@rppmh.com 6 Attorneys for Defendants Andrew Waters and FCP Private, LLC, 7 and FCP Corporation, Ltd. 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SANTA BARBARA—ANACAPA DIVISION 11 12 MARK SCHAUB, an individual; TLG LTD., Case No.: 20CV02113 a Hong Kong limited Liability company Assigned to: Hon. Donna D. Geck 13 Plaintiffs, 14 DEFENDANTS ANDREW WATERS, v. FCP PRIVATE, LLC, AND FCP 15 CORPORATION, LTD.'S REPLY ANDREW WYLES WATERS, an individual; 16 FCP CORPORATION LTD., a Hong Kong TO OPPOSITION TO DEMURRER limited liability company; FCP PRIVATE, TO SECOND AMENDED COMPLAINT 17 LLC, a California limited liability corporation; and DOES 1 through 10, inclusive, [Filed concurrently herewith: Reply to 18 Opposition to Motion to Strike Second Defendants. Amended Complaint; Memorandum] 19 Date: October 15 2021 20 Time: 10:00 a.m. Dept.: 4 21 Amended Complaint filed: June 14, 2021 22 23 24 25 26 27 28 REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 1 1 2 MEMORANDUM OF POINTS AND AUTHORITIES 3 I. INTRODUCTION 4 Plaintiffs' Second Amended Complaint ("SAC") and Opposition to the Demurrer 5 ("Opposition" or "Opp'n") make it plain that this is not a case of fraud. Rather, this is an alleged 6 case of conversion of funds, or "a simple case of theft," as Plaintiffs previously described it in their 7 First Amended Complaint ("FAC")—Plaintiffs noticeably removed this allegation in the SAC. 8 (FAC, 1:3.) As described below, the Opposition's "Factual Background" section contains "facts" 9 that are not set forth in the SAC. (See, Opp'n, 2:1-3:23.) This is entirely improper. Even ignoring 10 Plaintiffs' attempts to mischaracterize the allegations in the SAC, it is clear that Plaintiffs' 11 arguments fail. 12 Plaintiff cannot contend that both Plaintiff Schaub and TLG are proper plaintiffs. To allow 13 both as plaintiffs would be to ignore the legal distinction between corporate entities and individuals. 14 Plaintiffs cannot allege fraud. The funds were transferred "by mistake", as the SAC alleges, 15 and the Opposition alleges that "[i]n July 2019, a bank error led to the transfer of approximately 16 $2 million (instead of the intended $50,000) from Mr. Schaub's TLG account to the Waters- 17 controlled FCP Corporate account." (Opp'n, 3:4-6 [bold added].) The verified SAC and the 18 Opposition in defense of the SAC are judicial admissions that there was no fraud and that the funds 19 were transferred by a mistake. Plaintiffs cannot be given leave to contradict these admissions. 20 Plaintiffs have now improperly added two causes of action for breach of contract, despite the 21 Court not granting them leave to do so. Despite these unauthorized additions, Plaintiffs still fail to 22 allege any valid cause of action for breach of contract against Defendants. Even if the Court permits 23 Plaintiffs' Fourth Cause of Action for Breach of Contract and Fifth Cause of Action for Breach of 24 Contract (which it should not), those causes of action are only against Defendants Waters and FCP 25 Corporate. While the Sixth Cause of Action for Unjust Enrichment is asserted "Against All 26 Defendants," the Unjust Enrichment Cause of Action cannot be made against Defendant FCP 27 Private where there are no associated Breach of Contract causes of action against it. 28 /// REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 2 1 Plaintiffs have taken the Court's leave to amend and stretched it well beyond its limits, 2 ultimately highlighting that this case truly is a case of alleged conversion—not one of fraud, breach 3 of contract, or unjust enrichment. Therefore, Defendants' demurrer should be sustained. 4 II. SCHAUB DOES NOT HAVE STANDING TO SUE IN THE NAME OF TLG. 5 Only the real party in interest has standing to bring a cause of action. Schaub is not that 6 party. Plaintiffs contend that: (1) "Mr. Schaub is the 100% beneficial owner of TLG" (Opp'n, 4:22); 7 (2) "[t]he TLG bank account was used as a saving account for employment bonuses received by Mr. 8 Schaub" (id., 4:24-25); (3) [w]hatever injury TLG suffers is consequently suffered by Mr. 9 Schaub…" (id., 4:25-26); and (4) "Waters is well aware that the funds he stole were Mr. Schaub's 10 personal funds, as he later 'returned' $750,000 to Mr. Schaub's personal bank account." (Id., 5:1-3.) 11 These "facts" are not alleged in the SAC. Paragraph 10 of the SAC does not allege Schaub 12 is the "100% beneficial owner" of TLG. Even if that were true based on the allegation that TLG is 13 "owned by Mr. Schaub," the funds were TLG's (SAC ¶ 27, 6:11-12; ¶ 32, 8:3; and ¶ 41, 9:15) and 14 not Schaub's funds. 15 Plaintiffs try to save Schaub's lack of standing by arguing facts not alleged in the SAC: 16 "The TLG bank account was used as a savings account for employment bonuses received by Mr. Schaub. Whatever injury TLG suffers is 17 consequently suffered by Mr. Schaub—the money was his money. (See SAC ¶ 4 (stating that Mr. Schaub has pleaded with "Defendants to return 18 the funds that rightfully belong to him").)" (Opp'n, 4:24-28.) 19 This is not alleged in the SAC. Even if it was, it is not sufficient to create standing in 20 Schaub. To do so would be to ignore the legal distinction between corporate entities and 21 individuals. (E.g., Cal. Corp. Code § 17701.04(a) [[a] limited liability company is an entity distinct 22 from its members"]; see also, Sonora Diamond Corp. v. Superior Ct. (2000) 83 Cal.App.4th 523, 23 538 ["[o]rdinarily, a corporation is regarded as a legal entity, separate and distinct from its 24 stockholders, officers and directors, with separate and distinct liabilities and obligations"].) Owners 25 of corporations and their employees do not have standing to sue in the name of the corporation by 26 virtue of their relationship with the corporation, even if Schaub does own 100% of TLG. 27 Whether Schaub "pleaded" with Defendants to return the funds does not make him the true 28 party in interest. Instead, Schaub was making a plea on behalf of TLG. That funds were eventually REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 3 1 transferred to Schaub's account does not establish that the funds transferred were Schaub's personal 2 funds; they were TLG's funds, as the SAC alleges. 3 III. THE DEMURRER TO THE SECOND CAUSE OF ACTION FOR FRAUD SHOULD 4 BE SUSTAINED BECAUSE FRAUD IS NOT ADEQUATELY PLED. 5 The fraud causes of action fail as to Schaub because he lacks standing, as set forth above. 6 Assuming he has standing the fraud causes of action still fail as to Schaub and TLG. 7 A. The Second Cause of Action for Fraud Fails to State a Cause of Action. 8 The Demurrer asserted that: The cause of the mistaken transfer was not Defendant Water's 9 alleged fraud but was: "bank error [that] led to the transfer of approximately $1,950,000 (instead of 10 the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP Corporate (HK)'s 11 Citibank account in Hong Kong." (SAC, 7:28-8:10.) The Opposition only addresses this argument 12 briefly: 13 "Defendants attempt to skirt around the claim for intentional misrepresentation by arguing that the alleged misrepresentations were made to induce Plaintiffs to send 14 $50,000, not $1,940,000. The SAC alleges no such thing." (Opp'n, 6:5-7.) 15 "The amount of funds Plaintiffs were induced into sending was not specified and did not play a part in Plaintiffs’ inducement. Nowhere does the SAC state that Waters 16 induced Plaintiffs into sending just $50,000. Whether $50,000 or $1,940,000, Plaintiffs transferred the funds because they thought the funds would be held in 17 trust." (Id., 6:9-13.) 18 Once again the Opposition misstates what is actually alleged in the SAC. The SAC alleges 19 that Plaintiffs intended to transfer $50,000. "[B]ank error led to the transfer of approximately 20 $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP 21 Corporate (HK)'s Citibank account in Hong Kong." (SAC., 7:28-8:10.) Plaintiffs did not transfer 22 $1,950,000 in reliance on any misrepresentation; rather, the bank mistakenly did. Therefore, the 23 alleged misrepresentations did not cause TLG to transfer $1.9 million and therefore Defendants did 24 not acquire the funds by any fraudulent means. 25 Plaintiffs' case is that they "by mistake" the bank transferred funds to Defendants’ bank 26 accounts; that Defendants refused to transfer the monies to Plaintiffs; and that Defendant Waters lied 27 about the reasons why they could not transfer the funds. This is not a case of fraud. 28 1. Misrepresentation that Funds were Frozen Did Not Induce the Transfer. REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 4 1 Plaintiffs rely on the following allegations in the SAC (and paraphrase allegations): 2 "[T]he SAC specifically states how Defendant Waters also made the following additional misrepresentations after the funds were transferred 3 over email and Wechat: (1) that the bank had frozen the accounts where Plaintiffs’ funds were transferred to (SAC ¶ 40); and (2) that the bank 4 believed the funds were from an illegitimate source (SAC ¶¶ 36-39). Waters knew these representations were false when he made them because 5 around the same time he made these false representations, he drained the FCP Citibank accounts of all funds. (SAC ¶ 41.) Plaintiffs were induced 6 not to act, or to alter their position, based on Waters’ false representations that the funds were frozen in the FCP Corporate (HK) accounts." (Opp'n, 7 6:20-28.) 8 The alleged misrepresentations that Plaintiffs claim they justifiably relied upon were that 9 Defendants' accounts, to which Plaintiffs had already transferred funds, were frozen, and because 10 they were frozen, Defendants could not return the funds to Plaintiffs. (SAC, 14:27-15:5; 15:10-11; 11 15:24; and 16:8.) Whether the accounts were frozen or not, this did not harm Plaintiffs because by 12 the time the accounts were allegedly frozen, Defendants were in control of Plaintiffs' funds and 13 allegedly failed and refused to return them to Plaintiffs. Therefore, Plaintiffs did not rely on the 14 alleged misrepresentation that the accounts were "frozen" because this occurred after Plaintiffs 15 transferred the funds and lost control of their funds to Defendants. 16 Where the essential elements of justifiable reliance and resulting damage are missing, 17 Plaintiffs do not sufficiently plead a fraud cause of action. Therefore, the Second Cause of Action 18 for Intentional Fraud fails and the Demurrer thereto should be sustained. 19 IV. THE DEMURRER TO PLAINTIFFS' THIRD CAUSE OF ACTION FOR FRAUD 20 BASED ON CONCEALMENT SHOULD BE SUSTAINED. 21 Here, like the defective Second Cause of Action for Fraud based on Intentional 22 Misrepresentation, the Third Cause of Action for Fraud based on Concealment also fails to state a 23 cause of action. Schaub is not a proper party to this cause of action because the alleged fraudulently 24 stolen funds were not his funds; they were TLG's funds. (SAC, 6:11-12, 8:3, 9:15.) Moreover, it 25 was "bank error" that caused the transfer of the funds and not Defendant Waters' alleged 26 misrepresentations. (Id., 7:28.) Because the Third Cause of Action for Fraud based on Concealment 27 fails to state a cause of action, the Demurrer should be sustained. 28 REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 5 1 V. THE DEMURRER TO THE FOURTH CAUSE OF ACTION FOR BREACH OF 2 CONTRACT SHOULD BE SUSTAINED —WITHOUT LEAVE TO AMEND. 3 A. Both Breach of Contract Causes of Action Are Not Permitted and Do Not 4 Respond to the Court's Reasoning for Sustaining the Earlier Demurrer to the 5 Fraud and Unjust Enrichment Causes of Action. 6 In sustaining Defendants' demurrers to the FAC as to Plaintiffs' Second, Third and Fourth 7 Causes of Action, the Court's June 4, 2020 Order did not permit Plaintiffs leave to add two entirely 8 new causes of action, but instead, granted them leave to amend the second, third and fourth causes 9 of action. The Court's rationale for sustaining the initial Demurrer to the fourth cause of action for 10 unjust enrichment was as follows: 11 "Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleging in that cause of action that the express contract is void or 12 was rescinded. . . . A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an 13 enforceable agreement.” [Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221 (citations and internal quotes omitted] 14 ¶ Here, plaintiffs have not asserted a contract or implied contract claim. Rather, 15 plaintiffs allege that they transferred funds belonging to them to defendants by mistake and that defendants have refused to return the funds." (June 4, 2020 Order 16 Sustaining Demurrer and Granting Motion to Strike.) 17 Here, Plaintiffs were not permitted to amend the FAC to include a breach of contract cause 18 of action. Moreover, the breach of contract cause of action does not allege that an "express contract 19 is void or was rescinded," which Rutherford authorized, as this Court noted in its ruling above. 20 (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221.) So, not only do 21 Plaintiffs' contract causes of action violate the Court's order allowing leave to amend, the contract 22 causes of action do not support an unjust enrichment theory due to a void or rescinded contract; 23 rather, Plaintiffs seek damages for an alleged breach of contract. 24 Plaintiffs contend that Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 permits 25 them to add a new cause of action because it "directly responds to the court's reasoning for 26 sustaining the earlier demurrer." Plaintiffs argue that their breach of contract claim for $1,940,000 27 should be allowed because it responds to the Court's issue in its June 4, 2021 Minute Order that 28 REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 6 1 "plaintiffs have not asserted a contract or implied contract claim." (Opp'n, 8:14-24.) Plaintiffs' broad 2 reading of the holding in Patrick is not only incorrect, but inapplicable here. 3 In Patrick, a shareholder derivative action, the trial court sustained demurrers, with leave to 4 amend, for the plaintiff's failure to properly allege standing as a beneficial shareholder to bring a 5 derivative claim. (Patrick, 167 Cal.App.4th at 1015.) In response, the plaintiff added a new cause of 6 action for declaratory relief in her amended complaint seeking a declaration that she had a 7 community property interest in defendant's shares, and therefore, sufficient standing. (Id. at 999- 8 1000, 1015.) While the defendant argued that the trial court's order did not grant the plaintiff leave 9 to add a new claim, the Court of Appeal held that the addition of this claim was permissible because 10 it "directly responds to the court's reason for sustaining the earlier demurrer" – namely, the lack of 11 standing. (Id. at 1015.) 12 In permitting the addition of the new claim, the Court of Appeal recognized the well- 13 established rule that when a court sustains a demurrer to a complaint with leave to amend, a plaintiff 14 may only amend as authorized by the Court's order. (Id.; see also Harris v. Wachovia Mortg., FSB 15 (2010) 185 Cal.App.4th 1018, 1023 ("[f]ollowing an order sustaining a demurrer…the plaintiff may 16 amend his or her complaint only as authorized by the court's order. The plaintiff may not amend the 17 complaint to add a new cause of action without having obtained permission to do so, unless the new 18 cause of action is within the scope of the order granting leave to amend."). The Court of Appeal 19 held this rule inapplicable to the facts in Patrick, however, because it found that the new declaratory 20 relief claim, which established the plaintiff's standing, was clearly within the scope of the trial 21 court's order permitting leave to amend to assert the plaintiff's standing. (Patrick, 167 Cal.App.4th 22 at 1015.) The trial court permitted the plaintiff leave to establish standing, and her new claim did so. 23 Patrick, supra, does not assist Plaintiffs. The breach of contract causes of action are entirely 24 improper. 25 B. Even if the Court Grants Plaintiffs Leave to Add an Entirely New Cause of Action, 26 the Fourth Cause of Action for Breach of Contract Still Fails to State Facts 27 Sufficient to Constitute a Cause of Action. 28 REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 7 1 Plaintiffs' Fourth Cause of Action fails for three reasons: (1) Schaub is not a proper party to 2 this cause of action; (2) the alleged contract lacks consideration; and (3) the "agreement" was for the 3 transfer of $50,000, not $1.9 million. 4 First, Schaub has no standing to bring this claim. As the SAC alleges, the funds were TLG's 5 (SAC, 6:11-12, 8:3, 9:15) and not Schaub's funds. Plaintiff do not dispute this in their Opposition. 6 Second, consideration—the essential element for a breach of contract cause of action—is 7 lacking. Plaintiffs rely on Chrisman v. S. Cal. Edison Co. (1972) 83 Cal.App. 249, 254 for the 8 proposition that there is adequate consideration even where the benefit is "trifling." The option 9 contract to purchase water in Chrisman is not comparable to the "agreement" alleged here. The 10 Chrisman Court found $1 to be valuable "consideration" where it supplied mutuality of obligation 11 because it is "common knowledge that where a consideration of $1 is mentioned in a contract, other 12 considerations usually pass between the parties to the agreement." (Id.) However, the $1 was 13 mentioned in the written contract that was signed by the parties. This was a bargained-for exchange. 14 There was no bargain here. Instead, Plaintiffs argue that there is adequate consideration to the oral 15 agreement because: (1) Waters and Schaubs "were long-time friends." (Opp'n, 9:23-24); and (2) 16 Defendants "obtained a benefit by receiving the funds" (id., 9:24-25) because: (a) "this was Waters' 17 opportunity to return a favor to an old friend, who had made occasional loans to Waters in the past" 18 (id., 9:27-28) and (b) "Waters was able to ingratiate himself to a past and potentially future investor, 19 Mr. Schaub." (Id., 9:28-10:1.) Putting aside the glaring issue that these are not "facts" alleged in the 20 SAC, an opportunity to "return a favor" or to "ingratiate" oneself is not tantamount to even a morsel 21 of consideration. This was simply a favor, not a contract. 22 Plaintiffs' reliance on Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767, 783 23 is not helpful either. In Beatrice, the Court held that a subsidiary corporation's assumption of 24 liability for a corporate parent's debts, in exchange for the transfer of tangible personal property by 25 parent corporation, qualified as "consideration" for the transfer; thus, the transfer was subject to 26 California sales tax. Here, there was no assumption of liability, nor a bargained-for exchange. 27 VI. THE DEMURRER TO THE FIFTH CAUSE OF ACTION FOR BREACH OF 28 CONTRACT SHOULD BE SUSTAINED —WITHOUT LEAVE TO AMEND. REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 8 1 Without seeking leave to amend, Plaintiffs attempt to add another breach of contract cause 2 of action. This is improper as addressed above. This breach of contract action also suffers from its 3 own defects: (1) it violates the Statute of Frauds; (2) the "performance" exception to the Statute of 4 Frauds does not apply; and (3) there is no allegation that Plaintiff Schaub performed the terms of the 5 alleged oral agreement or was excused from performing them. (See, CACI No. 303. Breach of 6 Contract - Essential Factual Elements.) 7 Plaintiffs argue that Civil Code § 1624(a)(7) requiring certain contracts to be in writing, 8 does not apply here. Plaintiffs conclude without citing any authority that "[n]either party to this 9 agreement was 'in the business of lending or arranging for the lending of money or extending 10 credit.'" However, the SAC evidences that Schaub was in the business of lending money and had a 11 history of lending money. The SAC does not allege that "Schaub was, and is, a practicing 12 attorney"—only the Opposition argues this. (Opp'n, 10:20-22.) The statute of frauds applies and 13 therefore the breach of contract cause of action fails. 14 Plaintiffs argue that Defendants are estopped from asserting the statute of frauds defense. 15 (Id., 10:24.) Plaintiffs rely on a single case, Monarco v. Lo Greco (1950) 35 C.2d 621, to support 16 their contention that Civil Code § 1624(a)(7) is not a bar to their claims based upon the “Oral 17 Agreement” (an alleged oral agreement to loan money in an amount greater than $100,000, by 18 Schaub who was in the business of loaning money and had loaned money to Waters previously. 19 (SAC, 4:23, 5:8-12).) Plaintiffs do not discuss Defendants' case cited in the Demurrer: (Secrest v. 20 Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556 [even if borrowers fully 21 performed their obligations under purported foreclosure forbearance agreement by wire-transferring 22 downpayment to creditor, such performance did not estop transferees . . . from asserting statute of 23 frauds as defense to enforcement of agreement, because borrowers' performance consisted only of 24 payment of money].) Here, it does not matter that Schaub may have performed by paying money to 25 Waters. The alleged contract is not in writing signed by Waters. Therefore, the breach of contract 26 cause of action fails. 27 The principle that full performance takes a contract out of the statute of frauds applies only 28 where performance consists of conveying property, rendering personal services, or doing something REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 9 1 other than payment of money. Plaintiffs' case, Monarco v. Lo Greco (1950) 35 C.2d 621, does not 2 address this principle or the payment of money as performance. Moreover, the breach of contract 3 cause of action does not allege facts giving rise to estoppel nor allege that estoppel to assert the 4 statute of frauds has occurred in this case. 5 VII. THE DEMURRER TO THE SIXTH CAUSE OF ACTION FOR UNJUST 6 ENRICHMENT SHOULD BE SUSTAINED WITHOUT LEAVE TO AMEND. 7 Plaintiffs rely upon the case of Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 8 Cal.App.4th 221 to attempt to plead around the well-established law in California that there is no 9 cause of action in California for unjust enrichment. Rutherford Holdings, LLC v. Plaza Del Rey, 10 supra, does not apply to the facts and legal theories alleged here, and the court in that case 11 explained when unjust enrichment can be construed as a claim for restitution. 12 "Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleging in that cause of action that the express contract is void or 13 was rescinded. [Citation.] A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an 14 enforceable agreement." [Citation.] (Id. at 231 [citations and quotations omitted; bold added].) 15 16 The court in the Rutherford case then went on to explain why the facts alleged and legal 17 theories in that case allowed the unjust enrichment claim to remain: 18 "[W]e conclude that Rutherford stated a quasi-contract claim for restitution based on unjust enrichment. In particular, we conclude Rutherford adequately alleged a 19 reasonable interpretation of the purchase agreement under which section 1.2 is void to the extent it permits PDR to retain the deposit when Rutherford has not breached, 20 and that PDR has been unjustly enriched by retaining the deposit. Accordingly, we conclude the trial court erred in sustaining the demurrer as to the claim for restitution 21 based on unjust enrichment. (Id. at 232.) 22 Here, Rutherford does not apply because Plaintiffs do not allege a void contract. Plaintiffs 23 seek contract damages. In fact, as set forth above, each breach of contract cause of action fails for 24 other reasons and cannot be the basis for unjust enrichment. 25 The demurrer to the sixth cause of action for unjust enrichment should be sustained without 26 leave to amend because there is no separate cause of action in California for unjust enrichment. 27 (Levine v. Blue Shield of Calif. (2010) 189 Cal.App.4th 1117, 1138; see also, Melchior v. New Line 28 Productions, Inc. (2003) 106 Cal.App.4th 779, 793 ["there is no cause of action in California for REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 10 1 unjust enrichment"]; Hill v. Roll Intern. Corp. (2011) 195 Cal.App.4th 1295, 1307) ["California 2 does not recognize a stand-alone cause of action for unjust enrichment."].) 3 Even if the Court permits Plaintiffs' Fourth Cause of Action for Breach of Contract and Fifth 4 Cause of Action for Breach of Contract (which it should not), those causes of action are only 5 against Defendants Waters and FCP Corporate. While the Sixth Cause of Action for Unjust 6 Enrichment is asserted "Against All Defendants," the Unjust Enrichment Cause of Action cannot be 7 made against Defendant FCP Private where there are no associated Breach of Contract causes of 8 action against it. 9 Finally, there is no allegation in the Fifth Cause of Action for Breach of Contract that 10 Plaintiff Schaub performed the terms of the alleged oral agreement or was excused from performing 11 them. (See, CACI No. 303. Breach of Contract - Essential Factual Elements.) Therefore, the breach 12 of contract cause of action fails to state sufficient facts to constitute a cause of action. 13 VIII. CONCLUSION 14 Accordingly, the Court should sustain Defendants' Demurrer to Plaintiffs' SAC without 15 leave to amend. 16 17 Dated: October 7, 2021 REICKER, PFAU, PYLE AND McROY LLP 18 19 By ___________________________________ Kevin R. Nimmons 20 Cory T. Baker Attorneys for Defendants 21 22 23 24 25 26 27 28 REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT: Page 11 1 PROOF OF SERVICE 2 I, the undersigned, say that I am a citizen of the United States, over 18 years of age, and not a party to the within action. I am employed by the law firm of Reicker, Pfau, Pyle & McRoy 3 LLP, 1421 State Street, Ste. B, Santa Barbara, California 93101. 4 On October 7, 2021, I served the within: DEFENDANTS ANDREW WATERS, 5 FCP PRIVATE, LLC, AND FCP CORPORATION, LTD.'S REPLY TO OPPOSITION TO DEMURRER TO SECOND AMENDED COMPLAINT [Filed concurrently herewith: 6 Reply to Opposition to Motion to Strike Second Amended Complaint; Memorandum] 7 on the interested parties listed below, as follows: 8 Matthew Donald Umhofer Diane H. Bang 9 SPERTUS, LANDES & UMHOFER, LLP 1990 South Bundy Dr., Suite 705 10 Los Angeles, California 90025 Telephone: (310) 826-4700 11 Facsimile: (310) 826-4711 Email: matthew@spertuslaw.com 12 Email: diane@spertuslaw.com 13 ( ) (By Mail) I caused such document to be mailed in a sealed envelope, by first-class mail, 14 postage fully prepaid. I am “readily familiar” with this firm’s practice of collection and processing correspondence for mailing. It is deposited with the U.S. postal service on 15 that same day in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if the postal cancellation date or postage meter date is 16 more than one (1) day after the date of deposit for mailing as stated in this declaration. 17 ( ) (By Personal Service) I caused such document to be delivered by hand. 18 ( ) (By FAX) I caused such document to be sent via facsimile transmission to the above- listed addressee(s) and FAX number(s). This transmission was reported as complete and 19 without error. 20 (X) ((By E-MAIL [CCP § 1010.6(a)(2)) On the date indicated on this Proof of Service, at the time indicated on in the header of my electronic mail, I transmitted the foregoing 21 document(s) by electronic mail to one or more of the recipients at each firm indicated on this Proof of Service. I caused the my computer to print or maintain a record of the 22 electronic mail to the recipients named in this Proof of Service, a true and correct copy of which has been retained by Reicker, Pfau, Pyle & McRoy LLP in either hard copy or 23 electronic format in the ordinary course of business and is available for inspection if necessary. 24 (X) (State) I declare under penalty of perjury pursuant to the laws of the State of California 25 that the foregoing is true and correct. 26 Executed October 7, 2021, at Santa Barbara, California. 27 ____________________________ 28 Susie Hernandez PROOF OF SERVICE