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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA BARBARA
Dated and Entered: 06/04/2021 Time: 10:00 AM
Judicial Officer: Donna D Geck
Deputy Clerk: Kristi Temple Dept: SB Dept 4
Deputy Sheriff: Marco Diaz
Court Reporter: Michelle Sabado Case No: 20CV02113
Mark Schaub et al vs Andrew Wyles Waters et al
Parties Present:
NATURE OF PROCEEDINGS: Demurrer and Motion to Strike
No appearances.
The Court adopted the tentative ruling as follows:
RULING: For the reasons stated herein, defendants’ demurrer to the second, third, and fourth causes
of action in plaintiffs’ first amended complaint is granted with leave to amend. Any amended pleading
shall be filed on or before June 14, 2021. Defendants’ motion to strike the portions of plaintiffs’ prayer for
attorneys’ fees and injunctive relief is granted.
BACKGROUND:
This is an action for alleged conversion of funds. Plaintiffs are Mark Schaub and his limited liability
company, TLG Ltd. Defendants are Andrew Waters and his limited liability company, FCP Corporate Ltd.
Schaub and Waters are long-time friends and business associates. In July 2019, approximately $1.9
million in funds belonging to plaintiffs were transferred to two separate accounts controlled by defendants
at Citibank. Plaintiffs allege that the funds were transferred by mistake, were not a loan or a gift, and that
defendants have refused to return the funds. The operative pleading is plaintiffs’ verified first amended
complaint (“FAC”), filed on February 2, 2021. In the FAC, plaintiffs allege causes of action for (1)
conversion, (2) intentional misrepresentation – fraud, (3) concealment, and (4) unjust enrichment.
Defendants now demur to plaintiffs’ second, third, and fourth causes of action for failure to state facts
sufficient to constitute a valid claim. Defendants also move to strike portions of the FAC. Plaintiffs oppose
the demurrer, but have not filed opposition to the motion to strike.
ANALYSIS:
1. Demurrer to FAC
The grounds for demurrer are set forth in Code of Civil Procedure Section 430.10, which provides, in
relevant part:
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“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or
answer as provided in Section 430.30, to the pleading on any one or more of the following grounds:
“(e) The pleading does not state facts sufficient to constitute a cause of action.
“(f) The pleading is uncertain. As used in this subdivision, ‘uncertain’ includes ambiguous and
unintelligible.”
The court’s task in ruling on a demurrer is to determine whether the complaint states a cause of
action. People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300. The court assumes the truth
of all allegations in the complaint that have been properly pleaded, but not contentions, deductions, or
conclusions of fact or law. Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Porten v. University of San
Francisco (1976) 64 Cal.App.3d 825, 827. The court also assumes the truth of all reasonable inferences
that may be drawn from the properly pleaded facts in the complaint. Reynolds v. Bement (2005) 36
Cal.4th 1075, 1083.
Defendants challenge plaintiffs’ second cause of action for intentional misrepresentation, or fraud. To
state a cause of action for fraud, a plaintiff must allege (1) that the defendant made a representation to
the plaintiff, (2) that the representation was false, (3) that the defendant knew the representation was
false, (4) that the defendant intended that the plaintiff rely on the representation, (5) that the plaintiff did
reasonably rely on the representation, and (6) that as a result, the plaintiff was damaged. Engalla v.
Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974. Fraud must be pled with specificity as
general or conclusory allegations are insufficient. Lazar v. Superior Court (1996) 12 Cal.4th 631, 645. As
the court stated in Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, “the policy of liberal construction
of the pleadings . . . will not ordinarily be invoked to sustain a [fraud] pleading defective in any material
respect. [¶] This particularity requirement necessitates pleading facts which show how, when, where, to
whom, and by what means the representations were tendered.”
In the introduction to their FAC, plaintiffs allege that “[i]n July 2019, through a series of unforeseen
events, approximately . . . $1.9 million was transferred from Plaintiffs to two different accounts in
Defendants’ control.” (FAC, p. 1:5-7.) Plaintiffs allege that the funds were transferred “by mistake.” (FAC,
p. 3:4.) When plaintiff Schaub asked defendant Waters to return the funds to him, Waters allegedly “lied
about the following: (1) that the bank had frozen the accounts where the funds had been transferred to;
(2) that the bank believed the funds were from an illegitimate source; and (3) that [Waters] would have to
go to Hong Kong to resolve the situation with the frozen accounts.” (FAC, p. 1:10-13.) Months later,
Schaub discovered that Waters had been lying to him and that Waters had been withdrawing the funds
from the allegedly frozen accounts until nothing remained. (FAC, p. 1:14-16.)
Plaintiffs’ fraud cause of action incorporates these allegations and additionally alleges:
● Defendant Waters induced plaintiffs into sending the funds to the accounts controlled by defendants on
the basis that they were trust accounts.
● Waters caused plaintiffs to believe that the funds could not be withdrawn because the accounts had
been frozen by the bank when, in fact, they were not frozen.
● Waters’s assertions were not true and Waters did not believe they were true.
● Waters intentionally suppressed from plaintiffs the true facts that the accounts were not frozen and that
the funds in defendants’ accounts had been transferred to other accounts under Waters’s control or to
make payments to parties unknown to plaintiffs.
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● Waters made promises to plaintiffs to facilitate the transfer of the funds to defendants, which he had no
intention of honoring as he intended to keep the funds for his own personal use.
● Waters’s acts, communications, and representations regarding the frozen accounts were knowingly
false and made with the intent that plaintiffs rely on his false representations.
● All of Waters’s acts, communications, and representations regarding the unavailability of the funds
were knowingly false and made with the intent that plaintiffs rely on his false representations so that
Waters could misappropriate plaintiffs’ funds.
● Based on their longtime business association and friendship, plaintiffs justifiably relied on Waters’s
representations and promises.
● Plaintiffs have been damaged as defendants have refused to return the funds.
(FAC, ¶¶ 39-47.)
Defendants’ demurrer to plaintiffs’ fraud cause of action will be sustained for three reasons. First, the
allegations are conflicting or, at a minimum, ambiguous. Plaintiffs allege that “by mistake” and/or “through
a series of unforeseen events” they transferred funds to “two different accounts under Defendants’
control” while at the same time they allege that defendant Waters “induced [them] into sending . . . the
funds to accounts under his control on the basis that it was a trust account” and that Waters “made
promises to Plaintiffs to facilitate the transfer of the funds.” (FAC, pp. 1:5-7, 3:4, 6:7-8, 6:25-26.) Second,
plaintiffs allege that defendant Waters misrepresented that the accounts were frozen and that the funds
could not be transferred back to plaintiffs. (FAC, pp. 1:10-13, 3:16-18, 6:8-11.) However, even if
defendant made the alleged misrepresentations that the accounts were frozen and could not be
transferred, plaintiffs have failed to allege how they relied on the misrepresentations to their detriment
since the funds had already been transferred to defendants. (FAC, p. 1:5-7.)
Lastly, plaintiffs’ conclusory allegations that defendant Waters “induced [them] into sending . . . the funds
to accounts under his control on the basis that it was a trust account” and that Waters “made promises to
Plaintiffs to facilitate the transfer of the funds” (FAC, pp. 1:5-7, 3:4, 6:7-8, 6:25-26) are too general to
meet the particularity requirement of a fraud claim. Stansfield v. Starkey, supra, 220 Cal.App.3d 59, 73
(“This particularity requirement necessitates pleading facts which show how, when, where, to whom, and
by what means the representations were tendered.”) There are no allegations as to what defendant
Waters asserted or promised, whether the representation was oral or written, to whom the representation
was made, or when it was made. Similarly, plaintiffs do not allege how they specifically relied on any
alleged misrepresentation.
The court will also sustain defendants’ demurrer to plaintiffs’ third cause of action for fraudulent
concealment. The elements of a cause of action for fraudulent concealment are (1) the defendant
concealed or suppressed a material fact, (2) the defendant was under a duty to disclose the fact to the
plaintiff, (3) the defendant intentionally concealed the fact with the intent to defraud the plaintiff, (4) the
plaintiff was unaware of the fact and would have acted differently had he or she known of the concealed
fact, and (5) resulting damage. Kaldenbach v. Mutual of Omaha Life Insurance Company (2009) 178
Cal.App.4th 830, 850. Like fraud actions generally, an action for fraudulent concealment must be pled
with specificity as general or conclusory allegations are insufficient. Conrad v. Bank of America (2014)
224 Cal.App.4th 1462, 1472.
In their fraudulent concealment claim, plaintiffs allege that defendants intentionally failed to disclose that
the funds transferred from plaintiffs’ accounts to defendants’ accounts were not frozen and could be
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withdrawn, that plaintiffs did not know of the concealed facts, that plaintiffs would have behaved
differently had they known the truth, and that as a result of defendants’ concealments plaintiffs sustained
damages. (FAC, ¶¶ 49, 50, 51.) However, again, plaintiffs fail to allege how they relied on the alleged
concealments to their detriment since they had already transferred the funds to defendants’ accounts
and the accounts were always under defendants’ control. Nowhere do plaintiffs assert that the alleged
concealment that the accounts were in fact not frozen caused them additional damages. While plaintiffs
allege in conclusory fashion that they “would have behaved differently” had they known the truth (FAC, ¶
50), they allege no specific facts to support this contention.
Plaintiffs’ fourth cause of action for unjust enrichment is also subject to demurrer. California does not
recognize a stand-alone cause of action for unjust enrichment. Levine v. Blue Shield of California (2010)
189 Cal.App.4th 1117, 1138; see also, Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th
779, 793 (“there is no cause of action in California for unjust enrichment”). Plaintiffs rely upon the case
of Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, but Rutherford does not help
them. In Rutherford, the court noted that unjust enrichment is not a cause of action, but a remedy
synonymous with restitution and may be awarded in a contract or implied contract action where the
defendant obtained a benefit from the plaintiff by fraud or similar conduct. Id., at 231. The court stated:
“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 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 enforceable agreement.”
Ibid. (citations and internal quotes omitted).
Here, plaintiffs have not asserted a contract or implied contract claim. Rather, plaintiffs allege that they
transferred funds belonging to them to defendants by mistake and that defendants have refused to return
the funds.
Based on the foregoing, defendants’ demurrer to plaintiffs’ second, third, and fourth causes of action will
be sustained. The demurrer will be sustained with leave to amend. Any amended pleading shall be filed
on or before June 14, 2021.
2. Motion to Strike Portions of FAC
Code of Civil Procedure Section 435, subdivision (b)(1), provides that “[a]ny party, within the time
allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part
thereof.” The grounds for a motion to strike are set forth in Code of Civil Procedure Section 436, which
provides:
“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon
terms it deems proper:
“(a) Strike out any irrelevant, false, or improper matter inserted in any pleading.
“(b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a
court rule, or an order of the court.”
For purposes of a motion to strike, “irrelevant” matter includes a “demand for judgment requesting relief
not supported by the allegations of the complaint.” Code Civ. Proc. §431.10, subds. (b)(3), (c).
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In this unopposed motion, defendants ask the court to strike the portions of plaintiffs’ prayer requesting
attorneys’ fees and injunctive relief. Specifically, defendants request that the following items in the prayer
be stricken:
1. “Equitable relief in the form of an injunction prohibiting the illicit conduct described herein.”
2. “For an award of . . . reasonable attorneys’ fees . . . .”
(FAC, Prayer, Items (3) and (4), p. 9.)
The motion to strike will be granted. Plaintiffs have alleged no basis for attorneys’ fees, either by contract
or statute. Code Civ. Proc. §1033.5 (a prevailing party may recover attorney’s fees when authorized by
law, contract, or statute). Further, plaintiffs have alleged no basis for equitable relief. “[A]n injunction lies
only to prevent threatened injury and has no application to wrongs which have been completed.” Gold v.
Los Angeles Democratic League (1975) 49 Cal.App.3d 365, 372. There is no allegation in the FAC of
threatened or future similar acts by defendants.
DARREL E. PARKER, EXECUTIVE OFFICER Minutes Prepared by:
Kristi Temple , Deputy
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