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Case Name: Meridian Financial Services, Inc., et al. v. Phan, et al.

Case No.: 1-13-CV-254980

Defendant Chicago Title Company (“Chicago Title”) demurs to the complaint (“Complaint”) filed by plaintiffs Meridian Financial Services, Inc. and Mark Yazdani (collectively, “Plaintiffs”) and moves to strike portions contained therein.

On October 22, 2013, Plaintiffs filed a complaint against Chicago Title, Lananh Phan (“Phan”) and Diane Do (“Do”) asserting claims for (1) breach of contract, (2) fraud, (3) fraud in the inducement, (4) negligent misrepresentation, (5) violation of unfair business practices act, (6) escrow negligence, (7) negligent supervision and (8) breach of fiduciary duty.  According to the allegations of the Complaint, from April 12, 2012 to June 26, 2013, Plaintiffs invested over $5 million with Phan in a gold investment scheme that she touted.  (Complaint, ¶ 16.)  Phan purportedly guaranteed Plaintiffs a monthly return of 5%-6% plus full return of their principal.  (Id.)  As they reinvested their guaranteed monthly returns, the total amount of money invested with Phan was over $9 million as of October 22, 2013.  (Id., ¶ 18.)

Plaintiffs’ investments operated without incident throughout 2012, during which time Phan verbally confirmed that their monthly returns were “reinvested” into the venture.  (Complaint, ¶ 23.)  However, in 2013, Phan informed Plaintiffs that she could not return their money to them because it was located in offshore accounts controlled by her unidentified colleagues.  (Complaint, ¶ 24.)  

Plaintiffs’ allege that Phan, Do and Do’s employer, Chicago Title, formed and operated a conspiracy to defraud them out of their money.  (Complaint, ¶¶ 43-45.)  Plaintiffs further allege that the deeds of trust and promissory notes purportedly executed by certain property owners as security for a portion of the funds invested that were notarized and processed by Chicago Title as escrow holder were not in fact signed by those individuals.  (Id., ¶ 26.)  

On December 9, 2013, Chicago Title filed the instant demurrer to each of the seven claims asserted against it in the Complaint, i.e., the second through eighth causes of action, on the grounds of uncertainty and failure to state facts sufficient to constitute a cause of action.  (See Code Civ. Proc., § 430.10, subds. (e) and (f).

Chicago Title’s demurrer on the ground of uncertainty is OVERRULED.  A demurrer for uncertainty is disfavored and sustained only where the allegations of the pleading are so unintelligible that the defendant cannot reasonably respond to them.  (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616; see also Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)  The allegations of the Complaint do not qualify as such.

As an initial matter, Chicago Title maintains that no claim has been stated against it in the Complaint because (1) as an escrow company, its only obligation was to follow the escrow instructions provided to it and thus it had no general duty to police the affairs of the parties involved and (2) Do’s investment activities with Phan were outside the course and scope of her duties and thus it has no respondeat superior liability for her conduct.  The Court finds only the former of these arguments to be persuasive.

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