Li Guan v. Yongmei Hu

228 Cal. Rptr. 3d 169
CourtCalifornia Court of Appeal, 5th District
DecidedJanuary 12, 2018
DocketB276546
StatusPublished

This text of 228 Cal. Rptr. 3d 169 (Li Guan v. Yongmei Hu) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Li Guan v. Yongmei Hu, 228 Cal. Rptr. 3d 169 (Cal. Ct. App. 2018).

Opinions

FACTUAL AND PROCEDURAL SUMMARY

In 2010, Hu became romantically involved with Qi Wei Chen. At Chen's request, *172Guan, a Chinese businessman and friend of Chen's, loaned $2.55 million to Hu so that she could purchase a house in Malibu. The parties documented the transaction in two separate, but related, documents, each dated February 23, 2011: a one-page "Agreement" signed by Guan, Hu, and Chen; and a one-page "Arrangement" signed by Chen and Hu only. Together, the two documents constituted the parties' contract (the contract).

The contract provided that Hu would hold title to the house as its "nominal owner," and that Hu would sell the house when and if instructed to do so by Chen. Hu was required to complete the sale of the house within six months after Chen's instruction. Upon the sale of the house, Hu was entitled to receive a percentage of the property's fair market value. Specifically, Hu would "get 20%" if the house was "sold from Jan[uary] 1[,] 2012," and her percentage would increase by 20 percent each year the house was not sold until January 1, 2016. Thereafter, Hu would receive "100%" of the house "as a gift from Mr. Guan."

Escrow closed in early March 2011, and Hu moved into the house shortly thereafter. In November 2011, Chen emailed Hu telling her that "[i]t is very sad now both of us realized the relationship [cannot] work," and advising her that she was "not qualified to own the house." A month later, in December 2011, Chen visited Hu at the Malibu house, gave her gifts, and said nothing about selling the house.

By April 2012, Chen and Hu's romantic relationship had ended. On July 21, 2012, Chen emailed Hu telling her that " '[i]t is over! Don't you re[a]lize [ ] it with normal sense?! S[ell] the house as instructed by [Guan] so that you could stil[l] be benefited from the deal.' " Hu, however, did not sell the house or take any steps to sell it.

In February 2015, Guan filed a complaint against Hu, alleging breach of a written contract, fraud, and other claims. In a second amended complaint, Guan alleged causes of action for breach of contract, fraud, and rescission based on breach of contract, among others. The court sustained Hu's demurrer as to each cause of action, allowing leave to amend as to the rescission cause of action only.

In September 2015, Guan filed a third amended complaint asserting three causes of action styled as "Rescission," "Cancellation," and "Common Count for Money Had and Received." The rescission cause of action was based upon the same facts Guan had previously pled in his breach of contract cause of action.

Hu thereafter propounded interrogatories concerning the contract allegations. In response to the question whether there was a breach of the contract, Guan answered "yes," and described the breach as Hu's refusal to sell the property and pay the proceeds to Guan. In response to an interrogatory regarding the nature and amount of damages, Guan identified "[m]onetary damages caused by misrepresentations and breach of contract" in the amount of "$2.655 million."

In a demurrer to the third amended complaint, Hu again asserted that Guan failed to plead any ground for rescission, and that the cause of action was "an even worse version of the already-dismissed-with-prejudice breach of contract claim." In opposing the demurrer, Guan explained that he was relying in part on Civil Code section 1689, subdivision (b)(2),1 which provides that a contract may be rescinded "[i]f the consideration for the obligation of the rescinding party fails, in whole or in part, *173through the fault of the [nonrescinding] party." Guan argued that rescission was thus adequately pled by the allegation that Hu had "breached the written Contracts by total failure to perform her obligations to sell the Property." The court overruled the demurrer.2

In January 2016, Guan filed a fourth amended complaint, which realleged the causes of action in the third amended complaint and added causes of action for promissory estoppel and fraud in the inducement. The rescission cause of action alleged the parties' entry into the contract, Guan's performance, and the following: "Pursuant to the terms of the contract, between February 20, 2012 and January 1, 2016, on four occasions, Plaintiff either directly, or through his authorized agent, Chen, instructed Defendant by email to sell the Property. Defendant breached the Contract by failing to sell the Property within six months of receiving unequivocal, written instructions to do so." "Plaintiff will suffer substantial harm and injury under the Contract if it is not rescinded in that Plaintiff would lose his investment of $2,550,000 actually made to purchase the Property and lose his interest in the Property." "Plaintiff has served Defendant with a notice of rescission of the Contract by initiating this action, and hereby demands that Defendant restore to him the consideration furnished by Plaintiff in [the] sum of $2,550,000 plus the appreciation of the Property's market value to be proved at the time of trial." The rescission cause of action did not include any allegation of fraud or misrepresentation. Among other relief, Guan sought: rescission of the contract; return of the funds Guan loaned to Hu; "appreciation of the Property's market value"; a declaration that Hu is a constructive trustee of the property for Guan's benefit; compensatory damages of no less than $2,550,000; and such other and further relief as the court deems just and proper.

Hu answered the fourth amended complaint with a general denial and asserted numerous affirmative defenses to the contract claim. The cause of action for rescission, she alleged, "is actually a cause of action for breach of contract [and] has already been dismissed with prejudice." Hu averred that she and Guan had no contractual relationship, and that the alleged contract violated the statute of frauds and is illegal, void, and contrary to public policy. Hu further alleged that if a contract did exist, she had no duty to perform because she did not receive an instruction to sell the property; and, because Guan failed to perform, he repudiated the contract and breached the implied covenant of good faith and fair dealing.

Hu moved for summary judgment. Regarding rescission, Hu pointed out that Guan did not plead fraud as a basis for rescission, and that the claim "is actually a claim for breach of contract." In his opposition, Guan again relied on the "contractual basis for his rescission claim" based upon section 1689, subdivision (b)(2). The court denied Hu's motion.

Before trial, Hu filed a motion in limine to exclude evidence challenging or contradicting *174the terms of the written agreement. Guan filed an opposition to the motion in which he stated that "this case has been narrowed through the pleadings to concern only rescission of the Contract and related theories. The case is now about [Hu's] fraudulent conduct, requiring rescission and a full refund ... of all the money [Guan] provided for the purchase of the property, among other remedies, and not about whether or not the Contract required [Hu] to sell the property." (Fn. omitted.)

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Kulawitz v. Pacific Woodenware & Paper Co.
155 P.2d 24 (California Supreme Court, 1944)
Wilson v. Corrugated Kraft Containers, Inc.
256 P.2d 1012 (California Court of Appeal, 1953)
Runyan v. Pacific Air Industries, Inc.
466 P.2d 682 (California Supreme Court, 1970)
Medico-Dental Building Co. v. Horton & Converse
132 P.2d 457 (California Supreme Court, 1942)
Williams v. Marshall
235 P.2d 372 (California Supreme Court, 1951)
Imperial Beverage Co. v. Superior Court
150 P.2d 881 (California Supreme Court, 1944)
Marden v. Bailard
268 P.2d 809 (California Court of Appeal, 1954)
Bliss v. California Cooperative Producers
181 P.2d 369 (California Supreme Court, 1947)
Committee on Children's Television, Inc. v. General Foods Corp.
673 P.2d 660 (California Supreme Court, 1983)
Smith v. City of Los Angeles
190 P.2d 943 (California Court of Appeal, 1948)
Karapetian v. Carolan
188 P.2d 809 (California Court of Appeal, 1948)
Walters v. Marler
83 Cal. App. 3d 1 (California Court of Appeal, 1978)
Saunders v. Cariss
224 Cal. App. 3d 905 (California Court of Appeal, 1990)
Wyler v. Feuer
85 Cal. App. 3d 392 (California Court of Appeal, 1978)
Nakash v. Superior Court
196 Cal. App. 3d 59 (California Court of Appeal, 1987)
Greenberg v. Superior Court
131 Cal. App. 3d 441 (California Court of Appeal, 1982)
Roybal v. University Ford
207 Cal. App. 3d 1080 (California Court of Appeal, 1989)
McDonald v. Filice
252 Cal. App. 2d 613 (California Court of Appeal, 1967)
Paularena v. Superior Court
231 Cal. App. 2d 906 (California Court of Appeal, 1965)

Cite This Page — Counsel Stack

Bluebook (online)
228 Cal. Rptr. 3d 169, Counsel Stack Legal Research, https://law.counselstack.com/opinion/li-guan-v-yongmei-hu-calctapp5d-2018.