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REICKER, PFAU, PYLE & McROY LLP
1421 State Street, Suite B
Santa Barbara, CA 93101 ELECTRONICALLY FILED
Tel (805) 966-2440 Superior Court of California
Fax (805) 966-3320 County of Santa Barbara
Kevin R. Nimmons (State Bar No. 261577) Darrel E. Parker, Executive Officer
knimmons: mh.com 7/30/2021 12:38 PM
Cory T. Baker (State Bar No. 315763) By: Sarah Sisto, Deputy
cbaker@rppmh.com
Attorneys for Defendants
Andrew Waters, FCP Private, LLC, and
FCP Corporation, Ltd.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF SANTA BARBARA—ANACAPA DIVISION
11 MARK SCHAUB, an individual; TLG LTD., Case No.: 20CV02113
a Hong Kong limited Liability company Assigned to; Hon. Donna D. Geck
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Plaintiffs, NOTICE OF DEMURRER AND
13 DEMURRER TO SECOND AMENDED
Vv.
COMPLAINT; MEMORANDUM OF
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ANDREW WYLES WATERS, an POINTS AND AUTHORITIES;
15 individual; FCP CORPORATION LTD., a DECLARATION OF KEVIN R.
Hong Kong limited liability company; FCP NIMMONS REGARDING MEET AND
16 PRIVATE, LLC, a California limited CONFER AND EXHIBITS THERETO
liability corporation; and DOES 1 through
17 10, inclusive, [Filed concurrently herewith: Notice of
Motion and Motion to Strike Second
18 Defendants. Amended Complaint; Memorandum;
Declaration]
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Date: October 15 2021
20 Time: 10:00 a.m.
Dept.: 4
21
Amended Complaint filed: June 14, 2021
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23 TO THE COURT, ALL PARTIES, AND THEIR COUNSEL OF RECORD:
24 NOTICE IS HEREBY GIVEN that on October 15, 2021, at 10:00 a.m., or as soon thereafter
25 as counsel can be heard, in Department 4 of the above-entitled Court, located at 1100 Anacapa
26 Street, Santa Barbara, California 93101, Defendants ANDREW WYLES WATERS, an individual,
27 FCP PRIVATE, LLC, a California limited liability company (erroneously named as a
28 "corporation"), and FCP CORPORATION LTD., a Hong Kong limited liability company, will
DEMURRER TO SECOND AMENDED COMPLAINT: Page 1
move the Court for an order sustaining a demurrer to Plaintiffs’ verified Second Amended
Complaint ("SAC").
This demurrer is made pursuant to Code of Civil Procedure § 430.10, subdivision (e), on the
grounds that the First, Second, Third, Fourth, Fifth and Sixth Causes of Action of the SAC fail to
state facts sufficient to constitute a cause of action, and on the grounds set forth in the attached
Memorandum of Points and Authorities in support thereof, the attached Declaration of Kevin R.
Nimmons in support thereof, the records and files of this action, and any such further oral and
written arguments as may be submitted to the Court at the hearing.
10 DATED: July 30, 2021 REICKER, PFAU, PYLE & McROY LLP
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Kevin R. Nimmons
13 Cory T. Baker
Attorneys for Defendants
14 Andrew Waters, FCP Private, LLC, and
FCP Corporation, Ltd.
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DEMURRER TO SECOND AMENDED COMPLAINT: Page 2
GENERAL DEMURRER TO SECOND AMENDED COMPLAINT
Pursuant to Code of Civil Procedure ("CCP") § 430.10(e), ANDREW WYLES WATERS,
an individual ("Waters"), FCP PRIVATE, LLC, a California limited liability company
("FCP Private"), and FCP CORPORATION LTD., a Hong Kong limited liability company
("FCP Corporate") (collectively, "Defendants"), hereby demur generally to the verified Second
Amended Complaint ("SAC") filed by MARK SCHAUB ("Schaub"), an individual, and TLG
LTD, a Hong Kong limited liability company (""TLG") (collectively, Plaintiffs").
DEMURRER TO FIRST CAUSE OF ACTION
Defendants hereby demur to the First Cause of Action for Conversion alleged by Plaintiffs
10 against Defendants on the grounds that it fails to state facts sufficient to constitute a cause of action.
ll (See CCP § 430.10(e).)
12 Every action must be prosecuted in the name of the real party in interest. (See CCP § 367.)
13 Generally, "[a] litigant's standing to sue is a threshold issue to be resolved before the matter can be
14 reached on the merits." (Blumhorst v. Jewish Family Services of Los Angeles (2005)
15 126 Cal.App.4th 993, 1000.) Moreover, because standing "goes to the existence of a cause of
16 action," lack of standing may be raised by demurrer. (/d.) "Where the complaint shows the plaintiff
17 does not possess the substantive right or standing to prosecute the action, ‘it is vulnerable to a
18 general demurrer on the ground that it fails to state a cause of action. m (Schauer v. Mandarin Gems
19 of Cal., Inc. (2005) 125 Cal.App.4th 949, 955; see also Carsten v. Psychology Examining Com.
20 (1980) 27 Cal.3d 793, 796.) Only the real party in interest has standing to bring a cause of action.
21 Here, the conversion cause of action is by Avo Plaintiffs (Schaub and TLG). However, the
22 Complaint admits that the allegedly converted funds belong to TLG, and not Schaub. (SAC, 6:11-
23 12, 8:3, 9:15.) Therefore, Schaub is not a proper party to the conversion cause of action.
24 DEMURRER TO SECOND CAUSE OF ACTION
25 Defendant Waters (the only Defendant to which this Cause of Action is directed) hereby
26 demurs to the Second Cause of Action for Fraud based on Intentional Misrepresentation alleged by
27 Plaintiffs against Waters on the grounds that it fails to state facts sufficient to constitute a cause of
28 action (see CCP § 430.10(e).)
DEMURRER TO SECOND AMENDED COMPLAINT: Page 3
"The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation
(false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c)
intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar
v. Sup. Ct. (1996) 12 Cal.4th 631, 638.)
First, the SAC claims the funds allegedly converted were TLG's and not Schaub's funds.
(SAC, 6:11-12, 8:3, 9:15.) Therefore, Schaub is not a proper party to the fraud causes of action.
Second, it is clear that Defendant Waters’ alleged misrepresentations caused TLG to intend
to send only $50,000. (SAC, 6:11-22.) "Mr. Schaub believed Defendant Waters’ misrepresentation
and intended to transfer approximately $50,000 to the FCP Corporate (HK) account controlled by
10 Waters. However, after TLG investment instruments were redeemed, HSBC mistakenly transferred
ll all the funds to the FCP Corporate (HK) account, not just the $50,000." (/d.) The cause of the
12 mistaken transfer was not Defendant Water's alleged fraud but was: "bank error [that] led to the
13 transfer of approximately $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG
14 account to Defendant FCP Corporate (HK)'s Citibank account in Hong Kong." (/d., 7:28-8:10.)
15 Therefore, the alleged misrepresentations did not cause TLG to transfer $1.9 million and therefore
16 Defendants did not acquire the funds by any fraudulent means. Rather, Defendants acquired the
17 funds by "bank error." (id., 7:28.) The Second Cause of Action fails to state a cause of action for
18 $1.9 million in damages based on fraud.
19 Rather, this case is exactly as Plaintiffs described it in their First Amended Complaint: "This
20 is a simple case of theft." Plaintiffs have removed this allegation, but the case is still one of alleged
21 "theft" or conversion, but not fraud. However, Plaintiffs improperly attempt to piggyback their
22 conversion claim with a fraud claim. Plaintiffs' case is that they "by mistake" the bank transferred
23 funds to Defendants’ bank accounts; that Defendants refused to transfer the monies to Plaintiffs;
24 and that Defendant Waters lied about the reasons why they could not transfer the funds. This is not
25 a case of fraud.
26 DEMURRER TO THIRD CAUSE OF ACTION
27 Defendants hereby demur to the Third Cause of Action for Fraud based on Concealment
28 alleged by both Plaintiffs against all Defendants because, like the Second Cause of Action for Fraud
DEMURRER TO SECOND AMENDED COMPLAINT: Page 4
based on Intentional Misrepresentation, the Third Cause of Action fails to state facts sufficient to
constitute a cause of action (see CCP § 430.10(e).)
The elements of an action for fraud and deceit based on concealment are: (1) the defendant
must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to
disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed
the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact
and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a
result of the concealment or suppression of the fact, the plaintiff must have sustained damage.
(Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.)
10 Here, like the defective Second Cause of Action for Fraud based on Intentional
ll Misrepresentation, the Third Cause of Action for Fraud based on Concealment also fails to state a
12 cause of action. Schaub is not a proper party to this cause of action because the alleged fraudulently
13 stolen funds were not his funds; they were TLG's funds. (SAC, 6:11-12, 8:3, 9:15.) Moreover, it
14 was "bank error" that caused the transfer of the funds and not Defendant Waters’ alleged
15 misrepresentations. (/d., 7:28.)
16 DEMURRER TO FOURTH CAUSE OF ACTION
17 Defendants Waters and FCP Corporate (the Defendants to which this Cause of Action is
18 directed) hereby demur to the Fourth Cause of Action for Breach of Contract for $1,940,000 in
19 damages alleged by both Plaintiffs against Waters and FCP Corporate for failure to state facts
20 sufficient to constitute a cause of action. Moreover, the Court in sustaining the previous demurrer to
21 the First Amended Complaint ("FAC") did not grant Plaintiffs leave to add new causes of action. (/f)
22 the Court grants Defendants' accompanying motion to strike, the demurrer to the fourth and fifth
23 causes of action for breach of contract are moot.)
24 Generally, where a Court grants leave to amend after sustaining a demurrer, the scope of
25 permissible amendment is limited to the cause(s) of action to which the demurrer has been
26 sustained: "[S]uch granting of leave to amend must be construed as permission to the pleader to
27 amend the cause of action which he pleaded in the pleading to which the demurrer has been
28 sustained." (People v, Clausen (1967) 248 Cal.App.2d 770, 785-786 (emphasis added); see Harris
DEMURRER TO SECOND AMENDED COMPLAINT: Page 5
v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [plaintiff may not amend the
complaint to add a new cause of action without having obtained permission to do so].) Therefore,
the Fourth Cause of Action for Breach of Contract is not permissible.
The breach of contract cause of action also fails because the funds were TLG's (SAC, 6:11-
12, 8:3, 9:15) and not Schaub's funds so Schaub has no standing, as set forth above.
The breach of contract cause of action further fails because there is no consideration by
Defendants to support their breach of contract cause of action. There is no mutual promise or other
consideration for Defendants to accept the funds and hold them for no benefit to Defendants.
Furthermore, as Plaintiffs allege, Defendants agreed that $50,000 could be deposited, not
10 $1.9 million. (SAC, 6:17-22, 8:1.) Therefore, based on the express allegations of the SAC, Plaintiff
11 did not perform the terms of the contract when it transferred $1.9 million and not the much smaller
12 sum of $50,000 that was the subject of the alleged "contract," so TLG cannot recover on any under
13 a breach of contract theory.
14 DEMURRER TO FIFTH CAUSE OF ACTION
15 Defendant Waters (the only Defendant to which this Cause of Action is directed) hereby
16 demurs to the Fifth Cause of Action for Breach of Contract for $400,000 in damages against Waters
17 for failure to state facts sufficient to constitute a cause of action. This is a brand new claim and a
18 brand new cause of action to which the Court did not grant leave to amend. As set forth directly
19 above, it is entirely improper for the SAC to add an entirely new cause of action, especially one
20 based on new and different facts and legal theories.
21 Even assuming Plaintiffs may add an entirely new cause of action to the SAC, this breach of
22 contract action also suffers from its own defects. The alleged breach of contract fails because it
23 violates the statute of frauds under Civil Code § 1624(a), which provides: "(a) The following
24 contracts are invalid, unless they, or some note or memorandum thereof, are in writing and
25 subscribed by the party to be charged or by the party's agent: ... [{] (7) A contract, promise,
26 undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than
27 one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes,
28 made by a person engaged in the business of lending or arranging for the lending of money or
DEMURRER TO SECOND AMENDED COMPLAINT: Page 6
extending credit. For purposes of this section, a contract, promise, undertaking or commitment to
loan money secured solely by residential property consisting of one to four dwelling units shall be
deemed to be for personal, family, or household purposes." This was an alleged contract to loan
money in an amount greater than $100,000. It is subject to the statute of frauds pursuant to Civil
Code § 1624(a).
Moreover, where a contract has been fully performed by one party, the remaining promise is
taken out of the statute of frauds, and the party who performed may enforce it against the other.
(See, Dutton v. Interstate Inv. Corp. (1941) 19 Cal.2d 65, 70.) However, this “performance"
exception to the statute of frauds does not apply when the performance is the payment of money.
10 The principle that full performance takes a contract out of the statute of frauds applies only where
11 performance consists of conveying property, rendering personal services, or doing something other
12 than payment of money. (Secrest v. Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th
13 544, 556 [even if borrowers fully performed their obligations under purported foreclosure
14 forbearance agreement by wire-transferring downpayment to creditor, such performance did not
15 estop transferees of note and deed of trust from asserting statute of frauds as defense to enforcement
16 of agreement, because borrowers’ performance consisted only of payment of money].) While there
17 may be some remedy for this alleged transfer of $400,000, it is not pursuant to an alleged breach of
18 contract cause of action.
19 Furthermore, there is no allegation that Plaintiff Schaub performed the terms of the alleged
20 oral agreement or was excused from performing them. (See, CACI No. 303. Breach of Contract -
21 Essential Factual Elements.) Therefore, the cause of action fails to satisfy all of the elements of
22 breach of contract.
23 DEMURRER TO SIXTH CAUSE OF ACTION
24 Defendants Waters and FCP Corporate (the only Defendants to which the Breach of
25 Contract causes of action are directed) hereby demur to the Sixth Cause of Action for Unjust
26 Enrichment against all Defendants in the SAC for failure to state facts sufficient to constitute a
27 cause of action. "Unjust enrichment" is not a cause of action in California. (Levine v. Blue Shield of|
28 Calif. (2010) 189 CalApp.4th 1117, 1138.) Rather, this is an alleged case of conversion and cannot
DEMURRER TO SECOND AMENDED COMPLAINT: Page 7
be re-cast as a fraud claim or as a cause of action for unjust enrichment that does not exist under
California law.
THIS DEMURRER IS TIMELY
As set forth in the appended declaration of attorney Kevin R. Nimmons, Plaintiffs' counsel
stipulated to extend the date for Defendants to file responsive pleadings to the SAC to July 30,
2021. Therefore, this Demurrer is timely.
DATED: July 30, 2021 REICKER, PFAU, PYLE & McROY LLP
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DEMURRER TO SECOND AMENDED COMPLAINT: Page 8
MEMORANDUM OF POINTS AND AUTHORITIES
I INTRODUCTION
This Court previously sustained Defendants! ANDREW WYLES WATERS, an individual
("Waters"), FCP PRIVATE, LLC's, a California limited liability company ("FCP Private")
demurrer to Plaintiffs MARK SCHAUB's ("Schaub") and TLG LTD's, a Hong Kong limited
liability company ("TLG") (collectively, "Plaintiffs") First Amended Complaint ("FAC"),
Plaintiffs efforts to attempt to cure their defects that the FAC suffered from have resulted in
additional defects and improper causes of action alleged in their Second Amended Complaint
("SAC"). All of Plaintiffs! Six Causes of Action fail to state facts sufficient to constitute a cause of
10 action. This case is indeed an alleged conversion cause of action. Plaintiffs’ attempts to plead this
11 case as fraud or breach of contract has only exposed further defects.
12 The SAC now reveals that the funds allegedly converted were TLG's funds, not Schaub's
13 funds. (SAC, 6:11-12, 8:3, 9:15.) Therefore, Schaub is not a proper party to this cause of action nor
14 to the other causes of action.
15 The fraud claims are also problematic because it is clear that Waters’ alleged
16 misrepresentations caused Plaintiffs to intend to send only $50,000.The cause of the "mistaken"
17 transfer of $1.9 million was not Defendants’ alleged fraud but was: "bank error [that] led to the
18 transfer of approximately $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG
19 account to Defendant FCP Corporate (HK)'s Citibank account in Hong Kong." (/d., 7:28-8:10.)
20 Rather, this case is exactly as Plaintiffs described it in their FAC: "This is a simple case of theft."
21 Plaintiffs have removed this allegation, but the case is still one of alleged "theft" or conversion and
22 not fraud. However, Plaintiffs improperly attempt to piggyback their conversion claim with a fraud
23 claim, Plaintiffs' case is that they, "by mistake" of the HSBC bank, transferred funds to Defendants!
24 bank accounts; that Defendants refused to transfer the monies to Plaintiffs; and that Waters lied
25 about the reasons why they could not transfer the funds. This is not a case of fraud.
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27 ' FCP CORPORATION LTD., a Hong Kong limited liability company ("FCP Corporate")
was recently served with the SAC and hereby responds to the SAC with Defendants Waters and
28 FCP Private (all collectively, "Defendants").
DEMURRER TO SECOND AMENDED COMPLAINT: Page 9
Further, the Court did not grant Plaintiffs leave to add new causes of action for breach of
contract—and even assuming it did, the breach of contract causes of action are defective. By the
SAC, Plaintiffs attempt to improperly broaden the scope of their claims against Defendants,
beyond that which was originally alleged in the FAC, specifically, they add (1) a Fourth Cause of
Action for Breach of Contract for $1,940,000 against Waters and FCP Corporate; and (2) a Fifth
Cause of Action for Breach of Contract for $400,000 against Waters only. Despite these
unauthorized additions, Plaintiffs still fail to allege any valid cause of action against Defendants.
The Fourth Cause of Action for Breach of Contract against Defendants Waters and FCP
Corporate fails because: (a) the funds were TLG's (SAC, 6:11-12, 8:3, 9:15) and not Schaub's
10 funds, so Schaub has no standing; (b) there is no consideration by Defendants for TLG to transfer
I funds to Defendants' accounts, and thus, there is no mutual promise or other consideration for
12 Defendants to accept the funds and hold them for no benefit to Defendants; and (c) as Plaintiffs
13 allege, Defendants agreed that $50,000 could be deposited, not $1.9 million. (SAC, 6:17-22, 8:1.)
14 Therefore, based on the express allegations of the SAC, Plaintiff did not perform the terms of the
15 contract when it transferred $1.9 million and not the much smaller sum of $50,000 that was the
16 subject of the alleged "contract," so TLG cannot recover on any under a breach of contract theory.
17 The Fifth Cause of Action for Breach of Contract against Waters also fails because: (a) it
18 violates the statute of frauds under Civil Code § 1624(a), because, as Plaintiffs alleged, this was a
19 contract to loan money in an amount greater than $100,000, ant thus, it is subject to the statute of
20 frauds pursuant to Civil Code § 1624(a); (b) the "performance" exception to the statute of frauds
21 does not apply, as is the case here, when the performance is the payment of money; and (c) there is
22 no allegation that Schaub performed the terms of the alleged oral agreement or was excused from
23 performing them, and thus, fails to satisfy all of the elements of breach of contract.
24 Finally, Plaintiffs' sixth cause of action for unjust enrichment is not a recognized cause of
25 action in California. (Levine v. Blue Shield of Calif. (2010) 189 Cal.App.4th 1117, 1138.) This
26 Court already sustained a demurrer to this exact same cause of action; yet, Plaintiffs did not
27 remove it from their SAC.
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DEMURRER TO SECOND AMENDED COMPLAINT: Page 10
Plaintiffs have taken the Court's leave to amend and stretched it well beyond its limits,
ultimately highlighting that this case truly is a case of alleged conversion—not one of fraud, breach
of contract, or unjust enrichment. Therefore, Defendants’ demurrer should be sustained.
IL. MATERIAL FACTS ALLEGED IN THE SECOND AMENDED COMPLAINT
The following are the material facts as pleaded in the SAC, which Defendants treat as true
solely for the purposes of this demurrer.” Plaintiffs allege that Schaub transferred approximately
$1,950,000 million to Defendants' Citibank account due to "a bank error" (SAC, 7:28-8:10) and
further allege that Defendants have only returned $750,000 of the almost $2 million, have refused to
return the balance of the money, and have transferred the money to other accounts controlled by
10 Defendants. (/d., 9:14-11:13.)
ll Plaintiffs first allege a cause of action for conversion against Defendants. (Jd., 13:25-14:19.)
12 Plaintiffs allege that the converted funds were plaintiff TLG's funds. (SAC, 6:11-12, 8:3, 9:15.)
13 Plaintiffs then allege that Defendants committed fraud against Plaintiffs based on (i)
14 Intentional Misrepresentation (id., 14:20-16:14) and (ii) Concealment (/d., 16:15-17:14). Plaintiffs
15 admit that the alleged fraud caused them to intend to send only $50,000, not $1,940,000, which the
16 bank transferred due to the bank's error.
17 Plaintiffs then allege two breach of contract causes of action. Plaintiffs allege that Plaintiffs
18 and Defendants "agreed" to the transfer of "a sum of money" of $50,000 that would be held in trust
19 by FCP Corporate until requested by Plaintiffs. (SAC, 17:20-22.) Plaintiffs further allege that they
20 "performed by transferring approximately $1,940,000 to Defendant FCP Corporate (HK)" despite
21 the fact that there was never any agreement to the transfer of $1,940,000. (/d., 17:25-26.) Finally,
22 Plaintiffs conclude that "Defendants have breached the oral contract by refusing to return Plaintiffs’
23 funds upon request". (/d., 17:27-18:3.)
24 As to the second breach of contract cause of action, Plaintiffs’ allege that "[i]Jn May 2010,
25 Plaintiff and Defendants orally agreed that Mr. Schaub would loan to Defendant Waters
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? The Court is familiar with the majority of the allegations in the SAC as the majority are
27 identical from the FAC and the original Complaint and were previously ruled upon in the prior
Demurrer. As such, the previously pled facts will only be summarized herein and only the new
28 facts will be discussed in detail.
DEMURRER TO SECOND AMENDED COMPLAINT; Page 11
approximately $400,000" and that "[iJn 2016, Mr. Schaub agreed that the $400,000 he loaned to
China Network Logistics would be invested into a different company controlled by Defendant
Waters." Plaintiffs then allege, that "Plaintiffs contract damages are $400,000" because
"Defendants have breached the oral contract by refusing to repay Mr. Schaub." (/d., 18:18-20.)
Plaintiffs do not allege that they performed this alleged contract or were excused from performing.
Plaintiffs then allege, as in the FAC, a cause of action for unjust enrichment. (/d., 19:1-7.)
IIT. LEGAL ARGUMENT FOR DEMURRER
A. Legal Standard for Demurrer
California Code of Civil Procedure ("CCP") § 430.10 provides in pertinent part as follows:
10 "The party against whom a complaint . . . has been filed may object, by demurrer . . . as provided in
11 Section 430.30, to the pleading on any one or more of the following grounds: «i (@),. + the
12 pleading does not state facts sufficient to constitute a cause of action." (CCP § 430.10(e); see also,
13 CCP § 430.30(a).) For the purposes of a demurrer, a court will assume the truth of allegations
14 which are found on the face of the complaint. (C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.
15 App. 4th 1094, 1102-03.) "However, the assumption of truth does not apply to contentions,
16 deductions, or conclusions of law and fact." (/d. [citations omitted].)
17 B. Plaintiff Schaub's First Cause of Action for Conversion Fails Because the Real
18 Party in Interest is Plaintiff TLG and Not Schaub
19 Every action must be prosecuted in the name of the real party in interest. (See CCP § 367.)
20 Generally, "[a] litigant's standing to sue is a threshold issue to be resolved before the matter can be
21 reached on the merits." (Blumhorst v. Jewish Family Services of Los Angeles (2005) 126
22 Cal.App.4th 993, 1000.) Because standing goes to the existence of a cause of action, lack of
23 standing may be raised by demurrer. (/d.) "Where the complaint shows the plaintiff does not
24 possess the substantive right or standing to prosecute the action, ‘it is vulnerable to a general
25 demurrer on the ground that it fails to state a cause of action."" (Schauer v. Mandarin Gems of Cal.,
26 Inc. (2005) 125 Cal.App.4th 949, 955; see also Carsten v. Psychology Examining Com. (1980) 27
27 Cal.3d 793, 796.) Only the real party in interest has standing to bring a cause of action.
28 ‘TI
DEMURRER TO SECOND AMENDED COMPLAINT: Page 12
Here, the conversion cause of action is by two Plaintiffs (Schaub and TLG). However, the
Complaint admits that the funds belong to TLG, and not Schaub. (SAC, 6:11-12, 8:3, 9:15.)
Therefore, Schaub is not a proper party to the conversion cause of action. Therefore, the First Cause
of Action for Conversion fails as to Plaintiff Schaub and this demurrer thereto should be sustained.
Cc Plaintiffs' Second Cause of Action for Fraud Based on Intentional
Misrepresentation Fails to State Facts Sufficient to Constitute a Cause of Action
"The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation
(false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter');
(c) intent to defraud, ice. to induce reliance; (d) justifiable reliance; and (e) resulting
10 damage." (Lazar v. Sup. Ct. (1996) 12 Cal.4th 631, 638.)
11 1 Schaub is Not a Proper Party to the Fraud Cause of Action
12 The allegations in the SAC do not state facts sufficient to constitute a cause of action for
13 fraud. Schaub is not a proper party to this cause of action because, as the SAC alleges, the accounts
14 were TLG's accounts—not Plaintiffs. (/d., 6:19, 8:3-5, 9:17, 11:13.) Therefore, as with the First
15 Cause of Action for Conversion, the Fraud Cause of Action cannot be brought by Schaub.
16 2 The Fraud Cause of Action is Defective Because No Fraud Resulted in
17 Conversion of the $1,950,000 Plaintiffs Claim
18 Waters' alleged misrepresentations caused TLG to intend to send only $50,000. (SAC, 6:11-
19 22.) "Mr. Schaub believed Defendant Waters' misrepresentation and intended to transfer
20 approximately $50,000 to the FCP Corporate (HK) account . . . . However, after TLG investment
21 instruments were redeemed, HSBC mistakenly transferred all the funds to the FCP Corporate (HK)
22 account, not just the $50,000." (/d.) The cause of the mistaken transfer was not Defendant Waters'
23 alleged fraud but was: "bank error [that] led to the transfer of approximately $1,950,000 (instead of
24 the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP Corporate (HK)'s
25 Citibank account in Hong Kong." (/d., 7:28-8:10.) Therefore, the alleged misrepresentations did not
26 cause TLG to transfer $1.9 million and therefore Defendants did not acquire the funds by any
27 fraudulent means. Rather, Defendants acquired the funds by "bank error.” (id., 7:28.) The Second
28 Cause of Action fails to state a cause of action for $1.9 million in damages based on fraud.
DEMURRER TO SECOND AMENDED COMPLAINT: Page 13
Assuming arguendo that Defendant made the alleged misrepresentations, Plaintiffs failed to
allege how they relied on the misrepresentations to their detriment since the funds had already been
transferred to defendants. Thus, where the essential elements of justifiable reliance and resulting
damage are missing, Plaintiffs do not sufficiently plead a fraud cause of action, Rather, this case is
exactly as Plaintiffs described it in their FAC: "This is a simple case of theft." Plaintiffs have
removed this allegation, but the case is still one of alleged "theft" or conversion and not fraud.
Therefore, the Second Cause of Action for Fraud based on Intentional Misrepresentation
fails and this demurrer thereto should be sustained.
D. Plaintiffs' Third Cause of Action for Fraud Based on Concealment Fails to State
10 Facts Sufficient to Constitute a Cause of Action
ll The elements of an action for fraud and deceit based on concealment are: (1) the defendant
12 must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to
13 disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed
14 the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact
15 and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a
16 result of the concealment or suppression of the fact, the plaintiff must have sustained damage.
17 (Marketing West, Inc. v Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.)
18 1. Schaub is Not a Proper Party to the Fraud Cause of Action
19 Here, like the defective Second Cause of Action, the Third Cause of Action for Fraud based
20 on Concealment fails to state a cause of action. Schaub is not a proper party to this cause of action.
21 The alleged fraudulently stolen funds were not his; they were TLG's. (SAC, 6:11-12, 8:3, 9:15.)
22 2 The Fraud Cause of Action is Defective Because No Fraud Resulted in
23 Conversion of the $1,950,000 Plaintiffs Claim
24 Plaintiffs allege it was "bank error" that caused the transfer of the funds and not Defendant
25 Waters’ alleged misrepresentations. (/d., 7:28.) That "Plaintiffs would have behaved differently" had
26 Defendants disclosed the omitted information, is of no import. Like above, Plaintiffs improperly
27 attempt to piggyback their conversion claim with a fraud claim. Plaintiffs’ case is that they, due to
28 the bank's "mistake," transferred funds to Defendants’ bank accounts; that Defendants refused to
DEMURRER TO SECOND AMENDED COMPLAINT: Page 14
transfer the monies to Plaintiffs; and that Waters lied about the reasons why they could not transfer
the funds. This is not a case of fraud.
Therefore, the Third Cause of Action for Fraud based on Concealment fails and this
demurrer thereto should be sustained.
E Plaintiffs' Fourth Cause of Action for Breach of Contract for$1,940,000 Fails to
State Facts Sufficient to Constitute a Cause of Action
1 The Court Did Not Grant Plaintiffs Leave to Add New Causes of Action
Generally, where a Court grants leave to amend after sustaining a demurrer, the scope of
permissible amendment is limited to the cause(s) of action to which the demurrer has been sustained
10 (People v. Clausen (1967) 248 Cal.App.2d 770, 785-786 (emphasis added); see Harris v. Wachovia
il Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [plaintiff may not amend the complaint to add a
12 new cause of action without having obtained permission to do so].) The Court in sustaining the
13 previous demurrer did not grant Plaintiffs leave to add new causes of action. Thus, the Fourth Cause
14 of Action is not permissible and subject of Defendants’ separate motion to strike.
15 2 Schaub is Not a Proper Party to the Breach of Contract Cause of Action
16 To the extent it can be distinguished from the previously alleged cause of action for fraud,
17 this new cause of action fails for a number of reasons. Putting aside that fact that it was not asserted
18 in the FAC, the breach of contract cause of action fails because the funds were TLG's (SAC, 6:11-
19 12, 8:3, 9:15) and not Schaub's funds so Schaub has no standing, as set forth above.
20 3 The Breach of Contract Cause of Action is Defective Because There is No
21 Consideration by Defendants for TLG to Transfer Funds
22 The elements of a breach of contract cause of action are: (1) existence of the contract; (2)
23 plaintiff's performance or excuse; (3) defendant's breach; and (4) damages to plaintiff as a result of
24 the breach." (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Moreover,
25 consideration is an essential element of a contract, (Civ. Code § 1550.) For consideration to be
26 valid, "[t]he promisee must confer . . a benefit or must suffer. . ." and the benefit or prejudice
27 "must actually be bargained for as the exchange for the promise." (Steiner v, Thexton (2010)
28 48 Cal.4th 411, 420-21; Civ. Code § 1605.) The breach of contract cause of action fails because
DEMURRER TO SECOND AMENDED COMPLAINT: Page 15
there is no consideration by Defendants for TLG to transfer funds to Defendants’ accounts merely
for Defendants to hold and transfer when Plaintiffs request it. Defendants received no benefit.
Rather, this arrangement was a favor by a "friend" (SAC, 94, 17, 21, 72) and is not a contract.
4, The "Agreement" Was for the Transfer of $50,000, Not $1.9 Million
Finally, as Plaintiffs allege, Defendants agreed that $50,000 could be deposited, not $1.9
million. (SAC, 6:17-22, 8:1.) Therefore, based on the express allegations of the SAC, Plaintiff did
not perform the terms of the contract when it transferred $1.9 million and not the much smaller sum
of $50,000 that was the subject of the alleged "contract." Therefore, TLG cannot recover under a
breach of contract theory and the cause of action fails,
10 F. Plaintiffs' Fifth Cause of Action for Breach of Contract—$400,000 Fails to State
11 Facts Sufficient to Constitute a Cause of Action
12 1 The Court Did Not Grant Plaintiffs Leave to Add New Causes Of Action
13 Like the improperly added Fourth Cause of Action, the Fifth Cause of Action for Breach of
14 Contract is a brand new cause of action to which the Court did not grant leave to amend. As argued
15 above, it is improper to add a new cause of action.
16 2 The Breach of Contract Cause of Action Violates the Statute of Frauds
17 Even assuming the Court had permitted Plaintiffs to add an entirely new cause of action to
18 the SAC, this breach of contract action suffers from its own defects. The alleged breach of contract
19 fails because it violates the statute of frauds under Civil Code § 1624(a), which provides:
20 "(a) The following contracts are invalid, unless they . . . are in writing
and subscribed by the party to be charged or by the party's agent: . .
21 - [{] (7) A contract, promise, undertaking, or commitment to loan
money or to grant or extend credit, in an amount greater than one
22 hundred thousand dollars ($100,000), not primarily for personal,
family, or household purposes, made by a person engaged in the
23 business of lending or arranging for the lending of money or extending
credit..."
24
25 The contract alleged here is a contract to loan money in an amount greater than $100,000, b:
26 Schaub who was in the business of loaning money and had loaned money to Waters previously,
27 (SAC, 4:23, 5:8-12.) Thus, it is subject to the statute of frauds pursuant to Civil Code § 1624(a),
28 Because the contract is not in writing subscribed by Waters, the cause of action fails.
DEMURRER TO SECOND AMENDED COMPLAINT: Page 16
3. The "Performance" Exception to the Statute of Frauds Does Not Apply
When the Performance is the Payment of Money
The breach of contract cannot be saved by any exception to the statute of frauds. Where a
contract has been fully performed by one party, the remaining promise is taken out of the statute of
frauds, and the party who performed may enforce it against the other. (See, Dutton v. Interstate Inv.
Corp. (1941) 19 Cal.2d 65, 70,) However, this "performance" exception to the statute of frauds does
not apply when the performance is payment of money. The principle that full performance takes a
contract out of the statute of frauds applies only where performance consists of conveying property,
rendering personal services, or doing something other than payment of money. (Secrest v. Security
10 Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556 [even if borrowers fully performed
11 their obligations under purported foreclosure forbearance agreement by wire-transferring
12 downpayment to creditor, such performance did not estop transferees . . . from asserting statute of
13 frauds as defense to enforcement of agreement, because borrowers’ performance consisted only of
14 payment of money].) Here, it does not matter that Schaub may have performed by paying money to
15 Waters. The alleged contract is not in writing signed by Waters. Therefore, the breach of contract
16 cause of action fails.
17 4. Schaub Neither Performed Nor Was He Excused From Performing the
18 Terms of the Alleged Oral Agreement
19 To recover damages for breach of contract, the plaintiff must prove that: (1) the plaintiff and
20 defendant entered into a contract; (2) plaintiff did all, or substantially all, of the significant things
21 that the contract required him to do, or plaintiff was excused from having to do those things; (3) all
22 conditions required by the contract for defendant's performance occurred, or condition(s) did not
23 occur, or were waived or excused; (4) defendant failed to do something that the contract required
24 him to do, or defendant did something that the contract prohibited him from doing; (5) plaintiff was
25 harmed; and (6) defendant's breach of contract was a substantial factor in causing plaintiff's harm.
26 (See, CACI No. 303. Breach of Contract - Essential Factual Elements.) There is no allegation that
27 Plaintiffs performed the terms of the alleged contract or were excused from performing them.
28 Therefore, the cause of action fails to satisfy all of the elements of breach of contract.
DEMURRER TO SECOND AMENDED COMPLAINT: Page 17
G Plaintiffs’ Sixth Cause of Action for Unjust Enrichment Fails to State Facts
Sufficient to Constitute a Cause of Action
There is no separate cause of action in California for unjust enrichment. (Levine, supra, 189
C.A.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"); Low v. LinkedIn Corp. (N.D.
Cal. 2012) 900 F.Supp.2d 1010, 1031 (quoting Hill v. Roll Intern. Corp. (2011) 195 Cal.App.4th
1295, 1307) ["California does not recognize a stand-alone cause of action for unjust enrichment."].)
Therefore, because the Sixth Cause of Action for Unjust Enrichment fails to state a cause of
action, this demurrer thereto should be sustained without leave to amend.
10 Iv. MEET AND CONFER EFFORTS FAILED TO RESOLVE THE DEMURRER.
11 Prior to filing this demurrer, lead counsel for Defendants, Mr. Kevin Nimmons, sent
12 Plaintiffs’ counsel a meet and confer letter on June 24, 2021, attached hereto as Exhibit 1 to Mr.
13 Nimmons' declaration. The meet and confer letter explained the deficiencies with the First Cause of
14 Action for Conversion and the Second and Third Causes of Action for Fraud. (/d. at § 2.) The letter
15 also explained that the Fourth and Fifth Causes of Action for Breach of Contract are not permitted
16 because the Court did not grant Plaintiffs leave to add new causes of action. (/d.) The letter also
17 explained that "unjust enrichment" (Plaintiffs' "Sixth" Cause of Action) was not a recognized cause
18 of action under California law. (/d.) In response, Plaintiffs’ counsel, Ms. Diane Bang, sent a meet
19 and confer letter by e-mail and mail on July 15, 2021, attached hereto as Exhibit 2 to Mr. Nimmons'
20 declaration. (Jd. at § 4.) Despite the Parties' meet and confer efforts, the parties were unable to reach
21 an agreement resolving the objections raised in this demurrer. (/d. at § 6.)
22 V. CONCLUSION
23 Accordingly, the Court should sustain Defendants! demurrer to Plaintiffs’ SAC.
24
25 Dated: July 30, 2021 REICKER, PFAU, PYLE AND McROY LLP
26 he
VY
27 By
Kevin R. Nimmons
28 Cory T. Baker
Attorneys for Defendants
DEMURRER TO SECOND AMENDED COMPLAINT: Page 18
DECLARATION OF KEVIN R. NIMMONS
I, Kevin R. Nimmons, declare that:
1 I am an attorney at law duly licensed to practice before all Courts of the State of
California. I am a partner of the law firm of Reicker, Pfau, Pyle & McRoy LLP, attorneys of record
for Defendants Andrew Waters, FCP Private, LLC and FCP Corporate, Ltd. (collectively
"Defendants") in this action. | have personal knowledge of the matters stated herein, except as to
those matters stated on information and belief, and as to those matters, I believe them to be true. If
called to testify, I could and would competently testify to the facts stated herein.
2 On June 24, 2021, which was at least five days before any responsive pleading wa
Preview
REICKER, PFAU, PYLE & McROY LLP 1421 State Street, Suite B Santa Barbara, CA 93101 ELECTRONICALLY FILED Tel (805) 966-2440 Superior Court of California Fax (805) 966-3320 County of Santa Barbara Kevin R. Nimmons (State Bar No. 261577) Darrel E. Parker, Executive Officer knimmons: mh.com 7/30/2021 12:38 PM Cory T. Baker (State Bar No. 315763) By: Sarah Sisto, Deputy cbaker@rppmh.com Attorneys for Defendants Andrew Waters, FCP Private, LLC, and FCP Corporation, Ltd. SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SANTA BARBARA—ANACAPA DIVISION 11 MARK SCHAUB, an individual; TLG LTD., Case No.: 20CV02113 a Hong Kong limited Liability company Assigned to; Hon. Donna D. Geck 12 Plaintiffs, NOTICE OF DEMURRER AND 13 DEMURRER TO SECOND AMENDED Vv. COMPLAINT; MEMORANDUM OF 14 ANDREW WYLES WATERS, an POINTS AND AUTHORITIES; 15 individual; FCP CORPORATION LTD., a DECLARATION OF KEVIN R. Hong Kong limited liability company; FCP NIMMONS REGARDING MEET AND 16 PRIVATE, LLC, a California limited CONFER AND EXHIBITS THERETO liability corporation; and DOES 1 through 17 10, inclusive, [Filed concurrently herewith: Notice of Motion and Motion to Strike Second 18 Defendants. Amended Complaint; Memorandum; Declaration] 19 Date: October 15 2021 20 Time: 10:00 a.m. Dept.: 4 21 Amended Complaint filed: June 14, 2021 22 23 TO THE COURT, ALL PARTIES, AND THEIR COUNSEL OF RECORD: 24 NOTICE IS HEREBY GIVEN that on October 15, 2021, at 10:00 a.m., or as soon thereafter 25 as counsel can be heard, in Department 4 of the above-entitled Court, located at 1100 Anacapa 26 Street, Santa Barbara, California 93101, Defendants ANDREW WYLES WATERS, an individual, 27 FCP PRIVATE, LLC, a California limited liability company (erroneously named as a 28 "corporation"), and FCP CORPORATION LTD., a Hong Kong limited liability company, will DEMURRER TO SECOND AMENDED COMPLAINT: Page 1 move the Court for an order sustaining a demurrer to Plaintiffs’ verified Second Amended Complaint ("SAC"). This demurrer is made pursuant to Code of Civil Procedure § 430.10, subdivision (e), on the grounds that the First, Second, Third, Fourth, Fifth and Sixth Causes of Action of the SAC fail to state facts sufficient to constitute a cause of action, and on the grounds set forth in the attached Memorandum of Points and Authorities in support thereof, the attached Declaration of Kevin R. Nimmons in support thereof, the records and files of this action, and any such further oral and written arguments as may be submitted to the Court at the hearing. 10 DATED: July 30, 2021 REICKER, PFAU, PYLE & McROY LLP 11 he VY 12 Kevin R. Nimmons 13 Cory T. Baker Attorneys for Defendants 14 Andrew Waters, FCP Private, LLC, and FCP Corporation, Ltd. 1S 16 17 18 19 20 21 22 23 24 25 26 27 28 DEMURRER TO SECOND AMENDED COMPLAINT: Page 2 GENERAL DEMURRER TO SECOND AMENDED COMPLAINT Pursuant to Code of Civil Procedure ("CCP") § 430.10(e), ANDREW WYLES WATERS, an individual ("Waters"), FCP PRIVATE, LLC, a California limited liability company ("FCP Private"), and FCP CORPORATION LTD., a Hong Kong limited liability company ("FCP Corporate") (collectively, "Defendants"), hereby demur generally to the verified Second Amended Complaint ("SAC") filed by MARK SCHAUB ("Schaub"), an individual, and TLG LTD, a Hong Kong limited liability company (""TLG") (collectively, Plaintiffs"). DEMURRER TO FIRST CAUSE OF ACTION Defendants hereby demur to the First Cause of Action for Conversion alleged by Plaintiffs 10 against Defendants on the grounds that it fails to state facts sufficient to constitute a cause of action. ll (See CCP § 430.10(e).) 12 Every action must be prosecuted in the name of the real party in interest. (See CCP § 367.) 13 Generally, "[a] litigant's standing to sue is a threshold issue to be resolved before the matter can be 14 reached on the merits." (Blumhorst v. Jewish Family Services of Los Angeles (2005) 15 126 Cal.App.4th 993, 1000.) Moreover, because standing "goes to the existence of a cause of 16 action," lack of standing may be raised by demurrer. (/d.) "Where the complaint shows the plaintiff 17 does not possess the substantive right or standing to prosecute the action, ‘it is vulnerable to a 18 general demurrer on the ground that it fails to state a cause of action. m (Schauer v. Mandarin Gems 19 of Cal., Inc. (2005) 125 Cal.App.4th 949, 955; see also Carsten v. Psychology Examining Com. 20 (1980) 27 Cal.3d 793, 796.) Only the real party in interest has standing to bring a cause of action. 21 Here, the conversion cause of action is by Avo Plaintiffs (Schaub and TLG). However, the 22 Complaint admits that the allegedly converted funds belong to TLG, and not Schaub. (SAC, 6:11- 23 12, 8:3, 9:15.) Therefore, Schaub is not a proper party to the conversion cause of action. 24 DEMURRER TO SECOND CAUSE OF ACTION 25 Defendant Waters (the only Defendant to which this Cause of Action is directed) hereby 26 demurs to the Second Cause of Action for Fraud based on Intentional Misrepresentation alleged by 27 Plaintiffs against Waters on the grounds that it fails to state facts sufficient to constitute a cause of 28 action (see CCP § 430.10(e).) DEMURRER TO SECOND AMENDED COMPLAINT: Page 3 "The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Sup. Ct. (1996) 12 Cal.4th 631, 638.) First, the SAC claims the funds allegedly converted were TLG's and not Schaub's funds. (SAC, 6:11-12, 8:3, 9:15.) Therefore, Schaub is not a proper party to the fraud causes of action. Second, it is clear that Defendant Waters’ alleged misrepresentations caused TLG to intend to send only $50,000. (SAC, 6:11-22.) "Mr. Schaub believed Defendant Waters’ misrepresentation and intended to transfer approximately $50,000 to the FCP Corporate (HK) account controlled by 10 Waters. However, after TLG investment instruments were redeemed, HSBC mistakenly transferred ll all the funds to the FCP Corporate (HK) account, not just the $50,000." (/d.) The cause of the 12 mistaken transfer was not Defendant Water's alleged fraud but was: "bank error [that] led to the 13 transfer of approximately $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG 14 account to Defendant FCP Corporate (HK)'s Citibank account in Hong Kong." (/d., 7:28-8:10.) 15 Therefore, the alleged misrepresentations did not cause TLG to transfer $1.9 million and therefore 16 Defendants did not acquire the funds by any fraudulent means. Rather, Defendants acquired the 17 funds by "bank error." (id., 7:28.) The Second Cause of Action fails to state a cause of action for 18 $1.9 million in damages based on fraud. 19 Rather, this case is exactly as Plaintiffs described it in their First Amended Complaint: "This 20 is a simple case of theft." Plaintiffs have removed this allegation, but the case is still one of alleged 21 "theft" or conversion, but not fraud. However, Plaintiffs improperly attempt to piggyback their 22 conversion claim with a fraud claim. Plaintiffs' case is that they "by mistake" the bank transferred 23 funds to Defendants’ bank accounts; that Defendants refused to transfer the monies to Plaintiffs; 24 and that Defendant Waters lied about the reasons why they could not transfer the funds. This is not 25 a case of fraud. 26 DEMURRER TO THIRD CAUSE OF ACTION 27 Defendants hereby demur to the Third Cause of Action for Fraud based on Concealment 28 alleged by both Plaintiffs against all Defendants because, like the Second Cause of Action for Fraud DEMURRER TO SECOND AMENDED COMPLAINT: Page 4 based on Intentional Misrepresentation, the Third Cause of Action fails to state facts sufficient to constitute a cause of action (see CCP § 430.10(e).) The elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.) 10 Here, like the defective Second Cause of Action for Fraud based on Intentional ll Misrepresentation, the Third Cause of Action for Fraud based on Concealment also fails to state a 12 cause of action. Schaub is not a proper party to this cause of action because the alleged fraudulently 13 stolen funds were not his funds; they were TLG's funds. (SAC, 6:11-12, 8:3, 9:15.) Moreover, it 14 was "bank error" that caused the transfer of the funds and not Defendant Waters’ alleged 15 misrepresentations. (/d., 7:28.) 16 DEMURRER TO FOURTH CAUSE OF ACTION 17 Defendants Waters and FCP Corporate (the Defendants to which this Cause of Action is 18 directed) hereby demur to the Fourth Cause of Action for Breach of Contract for $1,940,000 in 19 damages alleged by both Plaintiffs against Waters and FCP Corporate for failure to state facts 20 sufficient to constitute a cause of action. Moreover, the Court in sustaining the previous demurrer to 21 the First Amended Complaint ("FAC") did not grant Plaintiffs leave to add new causes of action. (/f) 22 the Court grants Defendants' accompanying motion to strike, the demurrer to the fourth and fifth 23 causes of action for breach of contract are moot.) 24 Generally, where a Court grants leave to amend after sustaining a demurrer, the scope of 25 permissible amendment is limited to the cause(s) of action to which the demurrer has been 26 sustained: "[S]uch granting of leave to amend must be construed as permission to the pleader to 27 amend the cause of action which he pleaded in the pleading to which the demurrer has been 28 sustained." (People v, Clausen (1967) 248 Cal.App.2d 770, 785-786 (emphasis added); see Harris DEMURRER TO SECOND AMENDED COMPLAINT: Page 5 v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so].) Therefore, the Fourth Cause of Action for Breach of Contract is not permissible. The breach of contract cause of action also fails because the funds were TLG's (SAC, 6:11- 12, 8:3, 9:15) and not Schaub's funds so Schaub has no standing, as set forth above. The breach of contract cause of action further fails because there is no consideration by Defendants to support their breach of contract cause of action. There is no mutual promise or other consideration for Defendants to accept the funds and hold them for no benefit to Defendants. Furthermore, as Plaintiffs allege, Defendants agreed that $50,000 could be deposited, not 10 $1.9 million. (SAC, 6:17-22, 8:1.) Therefore, based on the express allegations of the SAC, Plaintiff 11 did not perform the terms of the contract when it transferred $1.9 million and not the much smaller 12 sum of $50,000 that was the subject of the alleged "contract," so TLG cannot recover on any under 13 a breach of contract theory. 14 DEMURRER TO FIFTH CAUSE OF ACTION 15 Defendant Waters (the only Defendant to which this Cause of Action is directed) hereby 16 demurs to the Fifth Cause of Action for Breach of Contract for $400,000 in damages against Waters 17 for failure to state facts sufficient to constitute a cause of action. This is a brand new claim and a 18 brand new cause of action to which the Court did not grant leave to amend. As set forth directly 19 above, it is entirely improper for the SAC to add an entirely new cause of action, especially one 20 based on new and different facts and legal theories. 21 Even assuming Plaintiffs may add an entirely new cause of action to the SAC, this breach of 22 contract action also suffers from its own defects. The alleged breach of contract fails because it 23 violates the statute of frauds under Civil Code § 1624(a), which provides: "(a) The following 24 contracts are invalid, unless they, or some note or memorandum thereof, are in writing and 25 subscribed by the party to be charged or by the party's agent: ... [{] (7) A contract, promise, 26 undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than 27 one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, 28 made by a person engaged in the business of lending or arranging for the lending of money or DEMURRER TO SECOND AMENDED COMPLAINT: Page 6 extending credit. For purposes of this section, a contract, promise, undertaking or commitment to loan money secured solely by residential property consisting of one to four dwelling units shall be deemed to be for personal, family, or household purposes." This was an alleged contract to loan money in an amount greater than $100,000. It is subject to the statute of frauds pursuant to Civil Code § 1624(a). Moreover, where a contract has been fully performed by one party, the remaining promise is taken out of the statute of frauds, and the party who performed may enforce it against the other. (See, Dutton v. Interstate Inv. Corp. (1941) 19 Cal.2d 65, 70.) However, this “performance" exception to the statute of frauds does not apply when the performance is the payment of money. 10 The principle that full performance takes a contract out of the statute of frauds applies only where 11 performance consists of conveying property, rendering personal services, or doing something other 12 than payment of money. (Secrest v. Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 13 544, 556 [even if borrowers fully performed their obligations under purported foreclosure 14 forbearance agreement by wire-transferring downpayment to creditor, such performance did not 15 estop transferees of note and deed of trust from asserting statute of frauds as defense to enforcement 16 of agreement, because borrowers’ performance consisted only of payment of money].) While there 17 may be some remedy for this alleged transfer of $400,000, it is not pursuant to an alleged breach of 18 contract cause of action. 19 Furthermore, there is no allegation that Plaintiff Schaub performed the terms of the alleged 20 oral agreement or was excused from performing them. (See, CACI No. 303. Breach of Contract - 21 Essential Factual Elements.) Therefore, the cause of action fails to satisfy all of the elements of 22 breach of contract. 23 DEMURRER TO SIXTH CAUSE OF ACTION 24 Defendants Waters and FCP Corporate (the only Defendants to which the Breach of 25 Contract causes of action are directed) hereby demur to the Sixth Cause of Action for Unjust 26 Enrichment against all Defendants in the SAC for failure to state facts sufficient to constitute a 27 cause of action. "Unjust enrichment" is not a cause of action in California. (Levine v. Blue Shield of| 28 Calif. (2010) 189 CalApp.4th 1117, 1138.) Rather, this is an alleged case of conversion and cannot DEMURRER TO SECOND AMENDED COMPLAINT: Page 7 be re-cast as a fraud claim or as a cause of action for unjust enrichment that does not exist under California law. THIS DEMURRER IS TIMELY As set forth in the appended declaration of attorney Kevin R. Nimmons, Plaintiffs' counsel stipulated to extend the date for Defendants to file responsive pleadings to the SAC to July 30, 2021. Therefore, this Demurrer is timely. DATED: July 30, 2021 REICKER, PFAU, PYLE & McROY LLP B we — 10 Kevin R. Nimmons 11 Attorneys for Defendants 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEMURRER TO SECOND AMENDED COMPLAINT: Page 8 MEMORANDUM OF POINTS AND AUTHORITIES I INTRODUCTION This Court previously sustained Defendants! ANDREW WYLES WATERS, an individual ("Waters"), FCP PRIVATE, LLC's, a California limited liability company ("FCP Private") demurrer to Plaintiffs MARK SCHAUB's ("Schaub") and TLG LTD's, a Hong Kong limited liability company ("TLG") (collectively, "Plaintiffs") First Amended Complaint ("FAC"), Plaintiffs efforts to attempt to cure their defects that the FAC suffered from have resulted in additional defects and improper causes of action alleged in their Second Amended Complaint ("SAC"). All of Plaintiffs! Six Causes of Action fail to state facts sufficient to constitute a cause of 10 action. This case is indeed an alleged conversion cause of action. Plaintiffs’ attempts to plead this 11 case as fraud or breach of contract has only exposed further defects. 12 The SAC now reveals that the funds allegedly converted were TLG's funds, not Schaub's 13 funds. (SAC, 6:11-12, 8:3, 9:15.) Therefore, Schaub is not a proper party to this cause of action nor 14 to the other causes of action. 15 The fraud claims are also problematic because it is clear that Waters’ alleged 16 misrepresentations caused Plaintiffs to intend to send only $50,000.The cause of the "mistaken" 17 transfer of $1.9 million was not Defendants’ alleged fraud but was: "bank error [that] led to the 18 transfer of approximately $1,950,000 (instead of the intended $50,000) from Mr. Schaub's TLG 19 account to Defendant FCP Corporate (HK)'s Citibank account in Hong Kong." (/d., 7:28-8:10.) 20 Rather, this case is exactly as Plaintiffs described it in their FAC: "This is a simple case of theft." 21 Plaintiffs have removed this allegation, but the case is still one of alleged "theft" or conversion and 22 not fraud. However, Plaintiffs improperly attempt to piggyback their conversion claim with a fraud 23 claim, Plaintiffs' case is that they, "by mistake" of the HSBC bank, transferred funds to Defendants! 24 bank accounts; that Defendants refused to transfer the monies to Plaintiffs; and that Waters lied 25 about the reasons why they could not transfer the funds. This is not a case of fraud. 26 27 ' FCP CORPORATION LTD., a Hong Kong limited liability company ("FCP Corporate") was recently served with the SAC and hereby responds to the SAC with Defendants Waters and 28 FCP Private (all collectively, "Defendants"). DEMURRER TO SECOND AMENDED COMPLAINT: Page 9 Further, the Court did not grant Plaintiffs leave to add new causes of action for breach of contract—and even assuming it did, the breach of contract causes of action are defective. By the SAC, Plaintiffs attempt to improperly broaden the scope of their claims against Defendants, beyond that which was originally alleged in the FAC, specifically, they add (1) a Fourth Cause of Action for Breach of Contract for $1,940,000 against Waters and FCP Corporate; and (2) a Fifth Cause of Action for Breach of Contract for $400,000 against Waters only. Despite these unauthorized additions, Plaintiffs still fail to allege any valid cause of action against Defendants. The Fourth Cause of Action for Breach of Contract against Defendants Waters and FCP Corporate fails because: (a) the funds were TLG's (SAC, 6:11-12, 8:3, 9:15) and not Schaub's 10 funds, so Schaub has no standing; (b) there is no consideration by Defendants for TLG to transfer I funds to Defendants' accounts, and thus, there is no mutual promise or other consideration for 12 Defendants to accept the funds and hold them for no benefit to Defendants; and (c) as Plaintiffs 13 allege, Defendants agreed that $50,000 could be deposited, not $1.9 million. (SAC, 6:17-22, 8:1.) 14 Therefore, based on the express allegations of the SAC, Plaintiff did not perform the terms of the 15 contract when it transferred $1.9 million and not the much smaller sum of $50,000 that was the 16 subject of the alleged "contract," so TLG cannot recover on any under a breach of contract theory. 17 The Fifth Cause of Action for Breach of Contract against Waters also fails because: (a) it 18 violates the statute of frauds under Civil Code § 1624(a), because, as Plaintiffs alleged, this was a 19 contract to loan money in an amount greater than $100,000, ant thus, it is subject to the statute of 20 frauds pursuant to Civil Code § 1624(a); (b) the "performance" exception to the statute of frauds 21 does not apply, as is the case here, when the performance is the payment of money; and (c) there is 22 no allegation that Schaub performed the terms of the alleged oral agreement or was excused from 23 performing them, and thus, fails to satisfy all of the elements of breach of contract. 24 Finally, Plaintiffs' sixth cause of action for unjust enrichment is not a recognized cause of 25 action in California. (Levine v. Blue Shield of Calif. (2010) 189 Cal.App.4th 1117, 1138.) This 26 Court already sustained a demurrer to this exact same cause of action; yet, Plaintiffs did not 27 remove it from their SAC. 28 //1 DEMURRER TO SECOND AMENDED COMPLAINT: Page 10 Plaintiffs have taken the Court's leave to amend and stretched it well beyond its limits, ultimately highlighting that this case truly is a case of alleged conversion—not one of fraud, breach of contract, or unjust enrichment. Therefore, Defendants’ demurrer should be sustained. IL. MATERIAL FACTS ALLEGED IN THE SECOND AMENDED COMPLAINT The following are the material facts as pleaded in the SAC, which Defendants treat as true solely for the purposes of this demurrer.” Plaintiffs allege that Schaub transferred approximately $1,950,000 million to Defendants' Citibank account due to "a bank error" (SAC, 7:28-8:10) and further allege that Defendants have only returned $750,000 of the almost $2 million, have refused to return the balance of the money, and have transferred the money to other accounts controlled by 10 Defendants. (/d., 9:14-11:13.) ll Plaintiffs first allege a cause of action for conversion against Defendants. (Jd., 13:25-14:19.) 12 Plaintiffs allege that the converted funds were plaintiff TLG's funds. (SAC, 6:11-12, 8:3, 9:15.) 13 Plaintiffs then allege that Defendants committed fraud against Plaintiffs based on (i) 14 Intentional Misrepresentation (id., 14:20-16:14) and (ii) Concealment (/d., 16:15-17:14). Plaintiffs 15 admit that the alleged fraud caused them to intend to send only $50,000, not $1,940,000, which the 16 bank transferred due to the bank's error. 17 Plaintiffs then allege two breach of contract causes of action. Plaintiffs allege that Plaintiffs 18 and Defendants "agreed" to the transfer of "a sum of money" of $50,000 that would be held in trust 19 by FCP Corporate until requested by Plaintiffs. (SAC, 17:20-22.) Plaintiffs further allege that they 20 "performed by transferring approximately $1,940,000 to Defendant FCP Corporate (HK)" despite 21 the fact that there was never any agreement to the transfer of $1,940,000. (/d., 17:25-26.) Finally, 22 Plaintiffs conclude that "Defendants have breached the oral contract by refusing to return Plaintiffs’ 23 funds upon request". (/d., 17:27-18:3.) 24 As to the second breach of contract cause of action, Plaintiffs’ allege that "[i]Jn May 2010, 25 Plaintiff and Defendants orally agreed that Mr. Schaub would loan to Defendant Waters 26 ? The Court is familiar with the majority of the allegations in the SAC as the majority are 27 identical from the FAC and the original Complaint and were previously ruled upon in the prior Demurrer. As such, the previously pled facts will only be summarized herein and only the new 28 facts will be discussed in detail. DEMURRER TO SECOND AMENDED COMPLAINT; Page 11 approximately $400,000" and that "[iJn 2016, Mr. Schaub agreed that the $400,000 he loaned to China Network Logistics would be invested into a different company controlled by Defendant Waters." Plaintiffs then allege, that "Plaintiffs contract damages are $400,000" because "Defendants have breached the oral contract by refusing to repay Mr. Schaub." (/d., 18:18-20.) Plaintiffs do not allege that they performed this alleged contract or were excused from performing. Plaintiffs then allege, as in the FAC, a cause of action for unjust enrichment. (/d., 19:1-7.) IIT. LEGAL ARGUMENT FOR DEMURRER A. Legal Standard for Demurrer California Code of Civil Procedure ("CCP") § 430.10 provides in pertinent part as follows: 10 "The party against whom a complaint . . . has been filed may object, by demurrer . . . as provided in 11 Section 430.30, to the pleading on any one or more of the following grounds: «i (@),. + the 12 pleading does not state facts sufficient to constitute a cause of action." (CCP § 430.10(e); see also, 13 CCP § 430.30(a).) For the purposes of a demurrer, a court will assume the truth of allegations 14 which are found on the face of the complaint. (C.R. v. Tenet Healthcare Corp. (2009) 169 Cal. 15 App. 4th 1094, 1102-03.) "However, the assumption of truth does not apply to contentions, 16 deductions, or conclusions of law and fact." (/d. [citations omitted].) 17 B. Plaintiff Schaub's First Cause of Action for Conversion Fails Because the Real 18 Party in Interest is Plaintiff TLG and Not Schaub 19 Every action must be prosecuted in the name of the real party in interest. (See CCP § 367.) 20 Generally, "[a] litigant's standing to sue is a threshold issue to be resolved before the matter can be 21 reached on the merits." (Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 22 Cal.App.4th 993, 1000.) Because standing goes to the existence of a cause of action, lack of 23 standing may be raised by demurrer. (/d.) "Where the complaint shows the plaintiff does not 24 possess the substantive right or standing to prosecute the action, ‘it is vulnerable to a general 25 demurrer on the ground that it fails to state a cause of action."" (Schauer v. Mandarin Gems of Cal., 26 Inc. (2005) 125 Cal.App.4th 949, 955; see also Carsten v. Psychology Examining Com. (1980) 27 27 Cal.3d 793, 796.) Only the real party in interest has standing to bring a cause of action. 28 ‘TI DEMURRER TO SECOND AMENDED COMPLAINT: Page 12 Here, the conversion cause of action is by two Plaintiffs (Schaub and TLG). However, the Complaint admits that the funds belong to TLG, and not Schaub. (SAC, 6:11-12, 8:3, 9:15.) Therefore, Schaub is not a proper party to the conversion cause of action. Therefore, the First Cause of Action for Conversion fails as to Plaintiff Schaub and this demurrer thereto should be sustained. Cc Plaintiffs' Second Cause of Action for Fraud Based on Intentional Misrepresentation Fails to State Facts Sufficient to Constitute a Cause of Action "The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, ice. to induce reliance; (d) justifiable reliance; and (e) resulting 10 damage." (Lazar v. Sup. Ct. (1996) 12 Cal.4th 631, 638.) 11 1 Schaub is Not a Proper Party to the Fraud Cause of Action 12 The allegations in the SAC do not state facts sufficient to constitute a cause of action for 13 fraud. Schaub is not a proper party to this cause of action because, as the SAC alleges, the accounts 14 were TLG's accounts—not Plaintiffs. (/d., 6:19, 8:3-5, 9:17, 11:13.) Therefore, as with the First 15 Cause of Action for Conversion, the Fraud Cause of Action cannot be brought by Schaub. 16 2 The Fraud Cause of Action is Defective Because No Fraud Resulted in 17 Conversion of the $1,950,000 Plaintiffs Claim 18 Waters' alleged misrepresentations caused TLG to intend to send only $50,000. (SAC, 6:11- 19 22.) "Mr. Schaub believed Defendant Waters' misrepresentation and intended to transfer 20 approximately $50,000 to the FCP Corporate (HK) account . . . . However, after TLG investment 21 instruments were redeemed, HSBC mistakenly transferred all the funds to the FCP Corporate (HK) 22 account, not just the $50,000." (/d.) The cause of the mistaken transfer was not Defendant Waters' 23 alleged fraud but was: "bank error [that] led to the transfer of approximately $1,950,000 (instead of 24 the intended $50,000) from Mr. Schaub's TLG account to Defendant FCP Corporate (HK)'s 25 Citibank account in Hong Kong." (/d., 7:28-8:10.) Therefore, the alleged misrepresentations did not 26 cause TLG to transfer $1.9 million and therefore Defendants did not acquire the funds by any 27 fraudulent means. Rather, Defendants acquired the funds by "bank error.” (id., 7:28.) The Second 28 Cause of Action fails to state a cause of action for $1.9 million in damages based on fraud. DEMURRER TO SECOND AMENDED COMPLAINT: Page 13 Assuming arguendo that Defendant made the alleged misrepresentations, Plaintiffs failed to allege how they relied on the misrepresentations to their detriment since the funds had already been transferred to defendants. Thus, where the essential elements of justifiable reliance and resulting damage are missing, Plaintiffs do not sufficiently plead a fraud cause of action, Rather, this case is exactly as Plaintiffs described it in their FAC: "This is a simple case of theft." Plaintiffs have removed this allegation, but the case is still one of alleged "theft" or conversion and not fraud. Therefore, the Second Cause of Action for Fraud based on Intentional Misrepresentation fails and this demurrer thereto should be sustained. D. Plaintiffs' Third Cause of Action for Fraud Based on Concealment Fails to State 10 Facts Sufficient to Constitute a Cause of Action ll The elements of an action for fraud and deceit based on concealment are: (1) the defendant 12 must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to 13 disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed 14 the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact 15 and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a 16 result of the concealment or suppression of the fact, the plaintiff must have sustained damage. 17 (Marketing West, Inc. v Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.) 18 1. Schaub is Not a Proper Party to the Fraud Cause of Action 19 Here, like the defective Second Cause of Action, the Third Cause of Action for Fraud based 20 on Concealment fails to state a cause of action. Schaub is not a proper party to this cause of action. 21 The alleged fraudulently stolen funds were not his; they were TLG's. (SAC, 6:11-12, 8:3, 9:15.) 22 2 The Fraud Cause of Action is Defective Because No Fraud Resulted in 23 Conversion of the $1,950,000 Plaintiffs Claim 24 Plaintiffs allege it was "bank error" that caused the transfer of the funds and not Defendant 25 Waters’ alleged misrepresentations. (/d., 7:28.) That "Plaintiffs would have behaved differently" had 26 Defendants disclosed the omitted information, is of no import. Like above, Plaintiffs improperly 27 attempt to piggyback their conversion claim with a fraud claim. Plaintiffs’ case is that they, due to 28 the bank's "mistake," transferred funds to Defendants’ bank accounts; that Defendants refused to DEMURRER TO SECOND AMENDED COMPLAINT: Page 14 transfer the monies to Plaintiffs; and that Waters lied about the reasons why they could not transfer the funds. This is not a case of fraud. Therefore, the Third Cause of Action for Fraud based on Concealment fails and this demurrer thereto should be sustained. E Plaintiffs' Fourth Cause of Action for Breach of Contract for$1,940,000 Fails to State Facts Sufficient to Constitute a Cause of Action 1 The Court Did Not Grant Plaintiffs Leave to Add New Causes of Action Generally, where a Court grants leave to amend after sustaining a demurrer, the scope of permissible amendment is limited to the cause(s) of action to which the demurrer has been sustained 10 (People v. Clausen (1967) 248 Cal.App.2d 770, 785-786 (emphasis added); see Harris v. Wachovia il Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [plaintiff may not amend the complaint to add a 12 new cause of action without having obtained permission to do so].) The Court in sustaining the 13 previous demurrer did not grant Plaintiffs leave to add new causes of action. Thus, the Fourth Cause 14 of Action is not permissible and subject of Defendants’ separate motion to strike. 15 2 Schaub is Not a Proper Party to the Breach of Contract Cause of Action 16 To the extent it can be distinguished from the previously alleged cause of action for fraud, 17 this new cause of action fails for a number of reasons. Putting aside that fact that it was not asserted 18 in the FAC, the breach of contract cause of action fails because the funds were TLG's (SAC, 6:11- 19 12, 8:3, 9:15) and not Schaub's funds so Schaub has no standing, as set forth above. 20 3 The Breach of Contract Cause of Action is Defective Because There is No 21 Consideration by Defendants for TLG to Transfer Funds 22 The elements of a breach of contract cause of action are: (1) existence of the contract; (2) 23 plaintiff's performance or excuse; (3) defendant's breach; and (4) damages to plaintiff as a result of 24 the breach." (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Moreover, 25 consideration is an essential element of a contract, (Civ. Code § 1550.) For consideration to be 26 valid, "[t]he promisee must confer . . a benefit or must suffer. . ." and the benefit or prejudice 27 "must actually be bargained for as the exchange for the promise." (Steiner v, Thexton (2010) 28 48 Cal.4th 411, 420-21; Civ. Code § 1605.) The breach of contract cause of action fails because DEMURRER TO SECOND AMENDED COMPLAINT: Page 15 there is no consideration by Defendants for TLG to transfer funds to Defendants’ accounts merely for Defendants to hold and transfer when Plaintiffs request it. Defendants received no benefit. Rather, this arrangement was a favor by a "friend" (SAC, 94, 17, 21, 72) and is not a contract. 4, The "Agreement" Was for the Transfer of $50,000, Not $1.9 Million Finally, as Plaintiffs allege, Defendants agreed that $50,000 could be deposited, not $1.9 million. (SAC, 6:17-22, 8:1.) Therefore, based on the express allegations of the SAC, Plaintiff did not perform the terms of the contract when it transferred $1.9 million and not the much smaller sum of $50,000 that was the subject of the alleged "contract." Therefore, TLG cannot recover under a breach of contract theory and the cause of action fails, 10 F. Plaintiffs' Fifth Cause of Action for Breach of Contract—$400,000 Fails to State 11 Facts Sufficient to Constitute a Cause of Action 12 1 The Court Did Not Grant Plaintiffs Leave to Add New Causes Of Action 13 Like the improperly added Fourth Cause of Action, the Fifth Cause of Action for Breach of 14 Contract is a brand new cause of action to which the Court did not grant leave to amend. As argued 15 above, it is improper to add a new cause of action. 16 2 The Breach of Contract Cause of Action Violates the Statute of Frauds 17 Even assuming the Court had permitted Plaintiffs to add an entirely new cause of action to 18 the SAC, this breach of contract action suffers from its own defects. The alleged breach of contract 19 fails because it violates the statute of frauds under Civil Code § 1624(a), which provides: 20 "(a) The following contracts are invalid, unless they . . . are in writing and subscribed by the party to be charged or by the party's agent: . . 21 - [{] (7) A contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one 22 hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the 23 business of lending or arranging for the lending of money or extending credit..." 24 25 The contract alleged here is a contract to loan money in an amount greater than $100,000, b: 26 Schaub who was in the business of loaning money and had loaned money to Waters previously, 27 (SAC, 4:23, 5:8-12.) Thus, it is subject to the statute of frauds pursuant to Civil Code § 1624(a), 28 Because the contract is not in writing subscribed by Waters, the cause of action fails. DEMURRER TO SECOND AMENDED COMPLAINT: Page 16 3. The "Performance" Exception to the Statute of Frauds Does Not Apply When the Performance is the Payment of Money The breach of contract cannot be saved by any exception to the statute of frauds. Where a contract has been fully performed by one party, the remaining promise is taken out of the statute of frauds, and the party who performed may enforce it against the other. (See, Dutton v. Interstate Inv. Corp. (1941) 19 Cal.2d 65, 70,) However, this "performance" exception to the statute of frauds does not apply when the performance is payment of money. The principle that full performance takes a contract out of the statute of frauds applies only where performance consists of conveying property, rendering personal services, or doing something other than payment of money. (Secrest v. Security 10 Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556 [even if borrowers fully performed 11 their obligations under purported foreclosure forbearance agreement by wire-transferring 12 downpayment to creditor, such performance did not estop transferees . . . from asserting statute of 13 frauds as defense to enforcement of agreement, because borrowers’ performance consisted only of 14 payment of money].) Here, it does not matter that Schaub may have performed by paying money to 15 Waters. The alleged contract is not in writing signed by Waters. Therefore, the breach of contract 16 cause of action fails. 17 4. Schaub Neither Performed Nor Was He Excused From Performing the 18 Terms of the Alleged Oral Agreement 19 To recover damages for breach of contract, the plaintiff must prove that: (1) the plaintiff and 20 defendant entered into a contract; (2) plaintiff did all, or substantially all, of the significant things 21 that the contract required him to do, or plaintiff was excused from having to do those things; (3) all 22 conditions required by the contract for defendant's performance occurred, or condition(s) did not 23 occur, or were waived or excused; (4) defendant failed to do something that the contract required 24 him to do, or defendant did something that the contract prohibited him from doing; (5) plaintiff was 25 harmed; and (6) defendant's breach of contract was a substantial factor in causing plaintiff's harm. 26 (See, CACI No. 303. Breach of Contract - Essential Factual Elements.) There is no allegation that 27 Plaintiffs performed the terms of the alleged contract or were excused from performing them. 28 Therefore, the cause of action fails to satisfy all of the elements of breach of contract. DEMURRER TO SECOND AMENDED COMPLAINT: Page 17 G Plaintiffs’ Sixth Cause of Action for Unjust Enrichment Fails to State Facts Sufficient to Constitute a Cause of Action There is no separate cause of action in California for unjust enrichment. (Levine, supra, 189 C.A.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"); Low v. LinkedIn Corp. (N.D. Cal. 2012) 900 F.Supp.2d 1010, 1031 (quoting Hill v. Roll Intern. Corp. (2011) 195 Cal.App.4th 1295, 1307) ["California does not recognize a stand-alone cause of action for unjust enrichment."].) Therefore, because the Sixth Cause of Action for Unjust Enrichment fails to state a cause of action, this demurrer thereto should be sustained without leave to amend. 10 Iv. MEET AND CONFER EFFORTS FAILED TO RESOLVE THE DEMURRER. 11 Prior to filing this demurrer, lead counsel for Defendants, Mr. Kevin Nimmons, sent 12 Plaintiffs’ counsel a meet and confer letter on June 24, 2021, attached hereto as Exhibit 1 to Mr. 13 Nimmons' declaration. The meet and confer letter explained the deficiencies with the First Cause of 14 Action for Conversion and the Second and Third Causes of Action for Fraud. (/d. at § 2.) The letter 15 also explained that the Fourth and Fifth Causes of Action for Breach of Contract are not permitted 16 because the Court did not grant Plaintiffs leave to add new causes of action. (/d.) The letter also 17 explained that "unjust enrichment" (Plaintiffs' "Sixth" Cause of Action) was not a recognized cause 18 of action under California law. (/d.) In response, Plaintiffs’ counsel, Ms. Diane Bang, sent a meet 19 and confer letter by e-mail and mail on July 15, 2021, attached hereto as Exhibit 2 to Mr. Nimmons' 20 declaration. (Jd. at § 4.) Despite the Parties' meet and confer efforts, the parties were unable to reach 21 an agreement resolving the objections raised in this demurrer. (/d. at § 6.) 22 V. CONCLUSION 23 Accordingly, the Court should sustain Defendants! demurrer to Plaintiffs’ SAC. 24 25 Dated: July 30, 2021 REICKER, PFAU, PYLE AND McROY LLP 26 he VY 27 By Kevin R. Nimmons 28 Cory T. Baker Attorneys for Defendants DEMURRER TO SECOND AMENDED COMPLAINT: Page 18 DECLARATION OF KEVIN R. NIMMONS I, Kevin R. Nimmons, declare that: 1 I am an attorney at law duly licensed to practice before all Courts of the State of California. I am a partner of the law firm of Reicker, Pfau, Pyle & McRoy LLP, attorneys of record for Defendants Andrew Waters, FCP Private, LLC and FCP Corporate, Ltd. (collectively "Defendants") in this action. | have personal knowledge of the matters stated herein, except as to those matters stated on information and belief, and as to those matters, I believe them to be true. If called to testify, I could and would competently testify to the facts stated herein. 2 On June 24, 2021, which was at least five days before any responsive pleading wa