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Yu Fang v. Ying Hua Shao

Court of Appeals of California
Oct 8, 2021
E073065 (Cal. Ct. App. Oct. 8, 2021)




YU FANG, Plaintiff and Respondent, v. YING HUA SHAO et al., Defendants and Appellants.

Law Offices of Vincent Y. Lin, Vincent Y. Lin and Vincent C. Chan for Defendants and Appellants. King Cheng Miller & Jin and Sheng Jin for Plaintiff and Respondent.


APPEAL from the Superior Court of San Bernardino County No. CIVDS1716085. John M. Tomberlin, Judge. Reversed in part; affirmed in part.

Law Offices of Vincent Y. Lin, Vincent Y. Lin and Vincent C. Chan for Defendants and Appellants.

King Cheng Miller & Jin and Sheng Jin for Plaintiff and Respondent.


McKINSTER Acting P. J.

In this lawsuit, plaintiff Yu Fang (Fang) sued her ex-husband, defendant Kevin Chuang Liu (Liu), and her ex-mother-in-law, Ying Hua Shao (Shao). Fang alleged defendants fraudulently induced her to transfer almost $300, 000 of her own money to buy a home in California for Fang and Liu to live in. At the conclusion of a bench trial, the trial court entered judgment for Fang and awarded her general and punitive damages.

Defendants appeal and argue: (1) the judgment must be reversed because Fang's causes of action were barred by the applicable three-year statutes of limitations; (2) Fang waived her claims against Liu when she stipulated that the monetary award in a prior dissolution judgment would be characterized as reimbursement; (3) Fang pursued the same claims against Liu to a final judgment in the divorce proceeding, and her election of remedies barred this lawsuit against him; and (4) the punitive damages award must be reversed because Fang introduced no evidence of defendants' financial condition. We conclude Fang's claims are not time-barred, and nothing about the divorce judgment precluded her from suing Liu for fraud and related causes of action. However, because Fang introduced no credible evidence of defendants' net worth, we must reverse the award of punitive damages.



A. Complaint.

In her verified complaint filed on August 21, 2017, Fang alleged that in June 2012, she and Liu met with Lui's mother, Shao, in New Orleans. Shao offered to sell her apartment in China to Fang for $97, 901 so Fang and Liu could live there. While still in New Orleans, Fang withdrew $97, 901 from her bank and gave it to Shao, who deposited the funds into her own bank account the same day. Shao never transferred title to the apartment to Fang. Fang and Liu were married on May 22, 2013. The next month, Liu filed an “immigration case” on behalf of Fang.

From September 2013 to March 2014, the couple discussed buying a home in California to permanently settle there once Fang received her “immigrant visa.” In furtherance of that plan, Fang and Lui “reached an agreement and understanding” that the $97, 901 Fang had already transferred to Shao would be used to buy the California home, and that Liu would “see to the transfer of the money from Shao” for that purpose. Fang alleged that Shao participated in these discussions and “explicitly agreed” to transfer back the $97, 901 so the couple could buy a home in California. “In reliance of the agreement and promise of Shao and Liu, and upon Liu's request, ” Fang transferred an additional $210, 000 to Liu to buy a home in California, for a total of $307, 901 transferred “to Liu or Shao.”

On or about August 4, 2014, Fang learned that Liu had been with another woman for three years. And, on August 30, 2014, Fang learned that the previous October Liu had secretly withdrawn the immigration application “while continuing to affirm his love” to Fang “and representing... that her immigration process was on going and she would soon be able to live with him in their home in California.” Liu filed for divorce in September 2014.

In May 2015, Liu or Shao (the complaint does not specify) purchased a home in Montclair, California, in Shao's name, using Fang's money. Liu lived in the house since then and had treated it “as his own house.”

In a first cause of action for fraud and deceit, Fang alleged Liu committed fraud when he “continued to affirm his love” for her, represented his desire to establish a home with her in California, and asked her to transfer money to buy a home, after he had already “secretly canceled” Fang's immigration application and concealed that fact from her. Fang also alleged Shao committed fraud when she promised to apply the $97, 901 Fang had already given her to buy a home in California, because Shao had no intent to honor that promise and she conspired with Liu to misappropriate Fang's money and to buy a home in Shao's name.

The second cause of action alleged Shao's interests in the Montclair home were void or voidable because they were obtained without adequate consideration.

In a third cause of action, Fang alleged all the money she had transferred and the Montclair home, in whole or in part, were conveyed without her consent and, therefore, were unlawful gifts under the Family Code.

Fang's fourth cause of action alleged Liu's dissipation of her separate property violated his fiduciary duty under the Family Code.

The fifth cause of action alleged Liu and Shao converted Fang's separate property.

Finally, the sixth cause of action prayed for a declaratory judgment regarding the parties' interests in the Montclair home.

Fang prayed for a judgment quieting title to the Montclair home and vesting title in Fang's name, general and specific damages, and punitive damages.

B. Demurrer and Answer.

Defendants demurred to the complaint but did not argue Fang's causes of action were time-barred. The trial court overruled the demurrer, and defendants filed an answer. Their 10th affirmative defense stated: “Plaintiff's claims are barred, in whole or in part, by the applicable statute of limitations and/or repose.”

C. Summary Judgment Motion and First Amended Answer.

Defendants moved for summary judgment/summary adjudication on all six causes of action, arguing Fang had already litigated the same issues to a final judgment in a prior dissolution proceeding, and her claims were therefore barred by res judicata. The motion did not seek an adjudication of the statute of limitations defense pleaded in the answer.

Before the trial court heard the motion, defendants filed an amended answer in which they once more pleaded as a 10th affirmative defense, “Plaintiff's claims are barred, in whole or in part, by the applicable statute of limitations and/or repose.”

The trial court granted the motion for summary adjudication with respect to Fang's third through fifth causes of action, but denied the motion as to the first, second, and sixth causes of action.

Fang did not file her own notice of appeal from the judgment, so the summary adjudication of those causes of action is not at issue here.

D. Trial Brief.

In their trial brief, defendants once more argued Fang had raised the same claims during the dissolution proceeding and she was barred under the doctrine of res judicata from raising them again. In addition, they argued, “Some of Fang's claims may be shown to be barred by the applicable statutes of limitations.”

In her brief on appeal, Fang erroneously stated defendants' trial brief “did not mention any defense of statute of limitations.”

E. Trial Evidence.

1. Fang's case-in-chief.

Fang and Liu met in 2009. After the two discussed marriage, they traveled to Louisiana in June 2012 so Fang could meet Shao. Shao offered to sell Fang an apartment in Shenyang, China, so the couple could live there. Fang agreed, and that same month she transferred $97, 901.87 to Shao for that purpose. “At that time the promise was after the house was built, the title [would] be transferred under [Fang's] name.” Fang believed the apartment would be built sometime in 2013, and title would be transferred to her that year. Instead of transferring title to the Shenyang apartment to Fang, however, Shao sold it to a third party and did not return Fang's money.

In June 2013, Liu filed a “Petition for Alien Relative” with the United States Citizenship and Immigration Services (INS) on behalf of Fang. Fang returned to China and stayed there for a year while she waited for a decision on the petition. However, on October 7, 2013, the INS received a request to withdraw the petition. Liu did not tell Fang he had withdrawn the petition. To the contrary, every time Fang asked about the status of the petition, Liu told her “that the case was still ongoing” and she needed “to continue waiting.”

Fang and Liu were married in September 2013. At the wedding, Fang, Liu and Shao discussed purchasing a home in California for the couple to live in. Fang testified all three agreed the money she had already transferred to Shao would be used to pay for the California home. Between October 2013 and December 2013, she made several more transfers to Liu and Shao totaling almost $200, 000, to purchase a home in Los Angeles. Liu told Fang their American bank account had been “closed, ” so he told her to make some of the transfers to a bank account for his company, Blue Sea Enterprise. And, at Liu's request, in March 2014 Fang transferred an additional $50, 000 to Qiang, Hu, the brother-in-law of Liu's friend. She testified all the transfers she made were for the purchase of a home. Fang was still in China during this period, while Liu was in California “handling all issues regarding the purchase.”

In May and June 2014, the couple honeymooned in Europe. Fang still had no idea Liu had withdrawn the petition with the INS. Sometime after the honeymoon, however, Liu suddenly returned to China. And, in July 2014, Fang (who was herself back in China) received a telephone call from a woman who said she had been Liu's girlfriend for a year. Fang testified a friend of hers who speaks English helped her check the status of her immigration application online, and she learned the application “had been withdrawn.” Because she now “knew [Liu] had deceived” her, on August 9, 2014, Fang sent him a message and asked why he had withdrawn the petition. Liu responded the next day and denied that he had withdrawn the petition. He told her he had been “running around like my legs are broken” to “get you permanent status.”

Liu filed for divorce in September 2014. Sometime thereafter, Fang sent a message to Tony Zhu, another friend of Liu who was also related to Qiang, Hu, and asked if the $50, 000 she had transferred to Qiang, Hu, had been given to Liu or Shao. Zhu replied he had written a check to Shao. And, when Fang asked if Shao had purchased a home yet, Zhu replied, “Seems she didn't. She tried to buy one but failed.”

The family court (Super. Ct. Los Angeles County) entered a judgment of dissolution (Nov. 2015) and a judgment on reserved issues (Feb. 2018). Liu was ordered to reimburse Fang for seven transfers she had made to Liu and Shao, totaling $297, 901.87. Fang testified she had not yet received “even a penny” of that judgment.

On cross-examination, Fang testified she had presented to the family court “all the claims” about the money she had transferred to Liu and Shao. She had testified in the family court that Liu and Shao cheated her out of more than $290, 000, and that Liu had withdrawn the immigration petition and lied about it. Fang also acknowledged she had signed the judgment on reserved issues in the dissolution action, and she had expressly waived her right to appeal the categorization of the money judgment in her favor as “reimbursement.”

By the time she agreed to transfer funds to buy a house in California, Fang no longer expected that Shao would transfer title to the Shenyang apartment. Fang did not know what happened to the money she transferred to Blue Sea Enterprise, though at the time she assumed all the money she had transferred had been used to buy the California home in her name.

Fang retained a forensic accountant to determine how much of her separate property she had transferred to Liu and Shao; how much of those funds were misappropriated and how much was used to purchase the Montclair home; and to determine how much of Liu's community earnings were misappropriated by Shao. The accountant made four conclusions: (1) $112, 221 of Fang's separate property was used to purchase the home; (2) $122, 419 of Fang's separate property was transferred to Liu's separate property business, Blue Sea Enterprise; (3) $62, 575 of Fang's separate property was misappropriated; and (4) $30, 091 of Liu's community earnings were misappropriated by Shao.

2. Defendants' evidence.

Liu testified the $97, 901 transfer from Fang to Shao was “payment for my company.” He explained that in 2012, he and Fang were going to return to China, so Fang transferred the money to Shao “for her to take care of it.” Later, Liu asked Shao to transfer the money to his company, and she did so. Liu denied that he had had any discussion with Shao about transferring title to an apartment in China to Fang. The apartment in question had not even been built when Shao had allegedly discussed selling it to Fang.

Liu filed an immigration petition on Fang's behalf about a year after they were married. When asked why he withdrew the application six months later, Liu testified the two had fought “a lot” and Fang told him, “she did not want to stay in the United States anymore.” He testified it was Fang who had asked him to withdraw her immigration application, but he did not tell her he had done it. When Fang returned to China, Liu followed suit and tried to reconcile with her, and the two traveled together. But, they were unable to work out their differences, so Liu returned to the United States and filed for divorce. When Fang asked why he had withdrawn her immigration petition, he denied doing it because he was still trying to reconcile with her.

Liu and Fang discussed buying a home in California and saving money to do so, and he had gone to look at houses. The Montclair home that Shao purchased in 2015 was not one of the houses he had looked at. Some of the money used to buy the Montclair home came from Liu's father.

On cross-examination, Liu admitted he had lied to Fang when he told her the immigration application had been denied and that he was appealing the decision. He and Fang continued to discuss buying a home in California even after he withdrew the application, but he did not ask her to transfer money to him to buy one. Liu denied that he had a girlfriend while he was still married to Fang. He again testified the $97, 901 was not Fang's money. Instead, he testified it was money from Blue Sea Enterprise's customers. He had asked Fang “to take care of it, ” then later asked Fang to transfer it to Shao for safekeeping when the couple were going to return to China.

In his responses to Fang's form interrogatories in the dissolution proceeding, Liu stated the additional $210, 000 Fang had transferred to Shao was also Blue Sea Enterprise's money, and that Fang was merely transferring it back to the company through Shao.

Shao testified that in June 2012, Fang and Liu visited her in Louisiana and said they were getting married and going on their honeymoon. Fang and Liu told Shao about an “amount of money payment from clients that they wanted me to take care of.” Liu told Shao that “when he needed it [the $97, 901] he would call me, and I would transfer to whatever bank account that he tells me to.” She agreed to hold the money for Liu, and subsequently “he would tell me he needed X amount of money in this account, ” and “I would wire [the] amount of money to that account.” Shao never discussed selling an apartment in China to Fang. Shao bought the home in Montclair in 2015 for more than $400, 000 with a down payment of $250, 000. Except for $50, 000 from her ex-husband, the rest of the down payment came from her own account. None of it came from Fang.

On cross-examination, Shao testified she participated in Fang and Liu's September 2013 wedding in China. She did not discuss with them buying a home in California. Shao returned the $97, 901 to Liu's company before he married Fang. She transferred no funds to Fang.

Liu and Shao retained their own forensic accountant, who testified the down payment on the Montclair home came from Shao's own funds and not from Fang's separate property.

3. Fang's rebuttal.

In rebuttal, Fang testified that in April and May 2014 she and Liu lived in Shao's Shenyang apartment. Shao allowed them to live there while Fang waited for her immigration application to be resolved, and Fang moved out once she learned Liu was cheating on her. Fang denied that she had ever asked Liu to withdraw her immigration application.

The reporter's transcript of Fang's rebuttal testimony reads “Shen Yun, ” but clearly her testimony was about the apartment in Shenyang.

4. Closing arguments.

During closing argument, defendants' attorney moved for nonsuit and once more argued Fang's causes of action were barred under the doctrine of res judicata because she had already litigated the same claims to final judgment in the dissolution proceeding. In addition, counsel argued Fang's causes of action were time-barred under the applicable three-year statutes of limitations.

F. Judgment and Notice of Appeal.

The trial court orally found for Fang and awarded her $297, 901.87 in damages. The court expressly found Fang's testimony “to be highly credible” and defendants' testimony “to be incredible” and “lacking in credibility.” The court overruled defendants' nonsuit. Addressing their statute of limitations defense, the court noted, “The fact of the matter is that it seems like there was a conspiracy that specifically existed between both Mr. Liu and Ms. Shao to hide the ball on what was going on.”

When the court asked Fang's attorney about evidence of “financial ability” for purposes of punitive damages, he replied Liu had testified about Blue Sea Enterprise's income but there was no evidence in “the official record” about either defendants' net worth. Counsel noted, however, there was “circumstantial evidence to show they have large... income in cash hidden everywhere.” The court found by clear and convincing evidence that defendants had acted fraudulently. The court indicated it would have made a larger punitive damages award had it been presented with “more knowledge of the financial position of both Mr. Liu and Ms. Shao, ” but it found “there should be a punitive damages award that is equal to the amount of the judgment of $297, 901.87.” The court indicated the judgment of general and punitive damages was against defendants jointly and severally. Finally, the court quieted title to the Montclair property in Fang's name alone.

Judgment was entered on June 11, 2019, and defendants timely filed their notice of appeal on June 24, 2019.



A. Defendants Properly Appealed from the Judgment.

As an initial matter, Fang argues this court lacks jurisdiction to consider defendants' appeal from the judgment because they supposedly only appealed from a postjudgment order. Because appellate jurisdiction is a fundamental prerequisite, we are dutybound to address any doubts about our jurisdiction, whether addressed by the parties or not. (Olson v. Cory (1983) 35 Cal.3d 390, 398 [“[S]ince the question of appealability goes to our jurisdiction, we are dutybound to consider it on our own motion.”].) We agree with defendants that, although they checked the wrong box on their form notice of appeal, they properly appealed from the judgment.

As indicated, ante, after hearing closing arguments on the last day of trial, the trial court orally found for Fang on her remaining causes of action. Defendants had not requested a statement of decision before trial, so the trial court directed Fang to prepare and file an order and judgment. (See Cal. Rules of Court, rule 3.1590(h).) Fang filed her proposed judgment and a notice of entry of judgment on May 28, 2019. Three days later, defendants timely filed their objections to the proposed judgment. (See Cal. Rules of Court, rule 3.1590(j).) The trial court overruled the objections in the judgment entered June 11, 2019. Finally, on June 24, 2019, defendants filed an optional form notice of appeal (Judicial Council Forms, form APP-002), stating they were appealing from a “judgment or order” entered “6/11/2019.” When indicating precisely what they were appealing, rather than check the box for “Judgment after court trial, ” defendants checked the box for “An order after judgment under Code of Civil Procedure section 904.1(a)(2).”

“A notice of appeal ‘is sufficient if it identifies the particular judgment or order being appealed.' (Cal. Rules of Court, rule[] 8.100(a)(2)....) ‘“Our jurisdiction on appeal is limited in scope to the notice of appeal and the judgment or order appealed from.” [Citation.] We have no jurisdiction over an order not mentioned in the notice of appeal.'” (In re J.F. (2019) 39 Cal.App.5th 70, 75.) “Generally, we must liberally construe a notice of appeal in favor of its sufficiency. (Cal. Rules of Court, rule[] 8.100(a)(2)....) A notice of appeal shall be ‘“liberally construed so as to protect the right of appeal if it is reasonably clear what [the] appellant was trying to appeal from, and where the respondent could not possibly have been misled or prejudiced.”'” (In re J.F., at pp. 75-76.)

Fang argues defendants appealed only from a postjudgment order overruling their objections to the proposed judgment, and not from the judgment itself. There are two flaws in her argument. First, the trial court entered no separate order on the objections. Instead, the court addressed the objections in the judgment itself, stating, “The Court has considered the Defendants' written objections to [the] Proposed Judgment, and they are overruled.” And last, defendants properly appealed from the judgment because their notice of appeal clearly stated they were appealing from the “judgment or order” entered June 11, 2019. The sole entry for that date in the register of actions is the judgment itself.

“The clerk of the superior court may keep a register of actions in which shall be entered the title of each cause, with the date of its commencement and a memorandum of every subsequent proceeding in the action with its date.” (Gov. Code, § 69845.) Absent evidence to the contrary, we must presume the superior court clerk correctly entered all orders and proceedings into the register of actions. (Evid. Code, § 664 [rebuttable presumption “that official duty has been regularly performed”]; Estate v. Crabtree (1992) 4 Cal.App.4th 1119, 1125 [“This presumption applies to the duties of clerks of court.”].)

Defendants' mistake of checking the box on the notice of appeal for a postjudgment order, instead of the box for a judgment, would not have misled Fang about what was being appealed. “Consequently, the notice of appeal was sufficient even if the wrong box was checked to identify the particular subdivision of Code of Civil Procedure section 904.1 that authorizes this appeal.” (Ellis Law Group, LLP v. Nevada City Sugar Loaf Properties, LLC (2014) 230 Cal.App.4th 244, 251 [notice of appeal adequate to appeal order awarding attorney fees, despite appellant's error in checking box for other types of postjudgment orders because “the notice of appeal clearly indicated the subject of the appeal was the order entered on September 10, 2012, which can only refer to the order granting attorney fees”].)

Therefore, we have jurisdiction to decide defendants' appeal from the judgment.

B. Fang's Causes of Action Are Not Barred by the Applicable Three-year Statutes of Limitations.

Defendants argue Fang's causes of action for fraud, conversion, and to quiet title were all barred by the applicable three-year statutes of limitations and, therefore, the judgment for Fang must be reversed. (See Code Civ. Proc., § 338, subds. (c)(1) [3-year statute for conversion] & (d) [same, for fraud]; Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476 [there is no unified statute of limitations for actions to quiet title to property, so courts look to underlying theory or gravamen of the case to determine applicable statute of limitations].)

Fang responds defendants “waived” their statute of limitations defenses by not properly asserting them in the trial court. Defendants counter they timely and properly asserted the statute of limitations defenses in their answer and again at trial. We conclude defendants did not forfeit their statute of limitations defenses, but that Fang's causes of action are not time-barred.

“[T]he correct term is ‘forfeiture' rather than ‘waiver,' because the former term refers to a failure to object or to invoke a right, whereas the latter term conveys an express relinquishment of a right or privilege. [Citations.] As a practical matter, the two terms on occasion have been used interchangeably.” (In re Sheena K. (2007) 40 Cal.4th 875, 880, fn. 1.)

1. Defendants did not forfeit their statute of limitations defenses.

A statute of limitations is an affirmative defense that is forfeited if it is not timely and properly asserted in a general demurrer or pleaded in an answer. (Minton v. Cavaney (1961) 56 Cal.2d 576, 581; PGA West Residential Ass'n Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 176-178 [discussing distinctions between garden variety statutes of limitations, that may be forfeited, and statutes of repose, that may not]; Vitkievicz v. Valverde (2012) 202 Cal.App.4th 1306, 1314.) When a statute of limitations bar appears on the face of the complaint, it is properly raised by general demurrer. (Code Civ. Proc., §§ 430.10, subd. (e), 430.30, subd. (a).) If a general demurrer asserting a statute of limitations defense is overruled, or if the statute of limitations bar does not appear on the face of the complaint (id., § 430.30, subd. (b)), it is a new matter that may be pleaded in an answer (id., § 431.30, subd. (b)(2)).

“There are two ways to properly plead a statute of limitations [in an answer]: (1) allege facts showing that the action is barred, and indicating that the lateness of the action is being urged as a defense and (2) plead the specific section and subdivision.” (Martin v. Van Bergen (2012) 209 Cal.App.4th 84, 91; see Code Civ. Proc., § 458.) A properly pleaded statute of limitations defense is deemed to be controverted as a matter of law (Code Civ. Proc., § 431.20, subd. (b)), and “the party pleading [the defense] must establish, on the trial, the facts showing that the cause of action is so barred” (id., § 458).

When they demurred to the complaint, defendants did not assert the three-year statutes of limitations had run on Fang's fraud, conversion, and quiet title claims. Assuming the statute of limitations bar was not apparent on the face of the complaint, and that defendants could not have argued the defense in their demurrer, they were required to plead it in their answer. In their answer, and again in their amended answer, defendants denied most of the pertinent facts alleged in the verified complaint but they did not allege any new facts to support statute of limitations defenses, such as when Fang learned or should reasonably have learned of the alleged fraud and conversion. Instead, the answers included the following boilerplate affirmative defense: “Plaintiff's claims are barred, in whole or in part, by the applicable statute of limitations and/or repose.”

Generally, failure to set forth the applicable statute-and, if the statute is subdivided and includes more than one statute of limitations, the specific subdivision-forfeits the defense. (Davenport v. Stratton (1944) 24 Cal.2d 232, 246-247; see Code Civ. Proc., § 458.) But, our Supreme Court long ago held “‘[t]he rule as to the proper plea of the statute of limitations is not self-operating but depends for its enforcement on the diligence of the plaintiff in objecting to the insufficiency of the plea either by demurrer to the answer or by timely objection at the trial.'” (Davenport, at p. 248.)

Because Fang did not timely object (by demurrer or otherwise) to defendants' failure to plead additional facts demonstrating her causes of action were time-barred and their failure to plead the appropriate code section or subdivision for their statute of limitations defenses, Fang's ability to rely on the defects in the answer is itself forfeited. (Davenport v. Stratton, supra, 24 Cal.2d at pp. 247-248; Southern California Edison Co. v. Severns (2019) 39 Cal.App.5th 815, 826-827; Choi v. Sagemark Consulting (2017) 18 Cal.App.5th 308, 322, fn. 7; Coy v. County of Los Angeles (1991) 235 Cal.App.3d 1077, 1086, fn. 5; see Code Civ. Proc., § 430.80, subd. (b).)

2. Fang's causes of action are not time-barred.

Resolution of a statute of limitations defense is normally a question of fact. (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 810; Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 487.) The trial court's findings about when a cause of action accrued is reviewed for substantial evidence. (Institoris v. City of Los Angeles (1989) 210 Cal.App.3d 10, 17.) When the facts are undisputed, however, the issue is a question of law we review de novo. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191; Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112.)

In their opening brief, defendants contend the facts are not in dispute and this court must review the record de novo for errors of law. Fang argues that, because defendants did not request a statement of decision, under the doctrine of implied findings, our review of the judgment “is effectively limited to questions of law, ” and this court cannot review the record for substantial evidence. In their reply brief, defendants contend they appeal from legal errors that are reviewed de novo; the doctrine of implied findings does not apply to legal errors; and, to the extent the doctrine does apply, it does not preclude substantial evidence review of the trial court's implied factual findings.

“Generally, a plaintiff must file suit within a designated period after the cause of action accrues. (Code Civ. Proc., § 312.) A cause of action accrues ‘when [it] is complete with all of its elements'-those elements being wrongdoing, harm, and causation.” (Pooshs v. Philip Morris USA, Inc. (2011) 51 Cal.4th 788, 797.) “The most important exception to that general rule regarding accrual of a cause of action is the ‘discovery rule,' under which accrual is postponed until the plaintiff ‘discovers, or has reason to discover, the cause of action.' [Citation.] Discovery of the cause of action occurs when the plaintiff ‘has reason... to suspect a factual basis' for the action. [Citations.] ‘The policy reason behind the discovery rule is to ameliorate a harsh rule that would allow the limitations period for filing suit to expire before a plaintiff has or should have learned of the latent injury and its cause.'” (Id. at pp. 797-798.)

Under the discovery rule, the cause of action does not accrue until “the plaintiff discovers or should have discovered all facts essential to his or her cause of action.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184, fn. 13.) The test for whether the plaintiff had reason to suspect there was a factual basis on which to sue is an objective one and, if a reasonably prudent person would have been suspicious, the plaintiff is held to have had “‘“a duty to investigate further and is charged with knowledge of matters which would have been revealed by such an investigation.”'” (Genisman v. Carley (2018) 29 Cal.App.5th 45, 51.) “Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.” (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at p. 1111.)

In their opening brief, defendants argue that, as early December 31, 2013, Fang knew or should have reasonably discovered that Shao committed fraud because she had not yet transferred title to the Shenyang apartment and, therefore, the statutes of limitations for her fraud and related claims began to run on that date. True, Fang testified that in June 2012, Shao promised to transfer title to the Shenyang apartment once it was built; Fang believed the apartment would be completed sometime in 2013; yet Shao never transferred the title to her. But, Fang's complaint alleged defendants committed fraud by not applying the $97, 901 to purchase a home in California for Liu and Fang-she did not allege defendants committed fraud by failing to transfer title to the Shenyang apartment. And, Fang testified that, once it was decided the couple would buy a home in California to live there instead, the parties agreed the money she had transferred to Shao for the Shenyang apartment would be used toward buying the home, and she no longer had any expectation that title to the apartment would be transferred to her.

Defendants also argue that, as early as August 9, 2014, Fang knew Liu had deceived her and withdrawn the immigration application and, therefore, she should have reasonably suspected defendants had defrauded her. True, Fang testified she discovered in July 2014 that Liu “had another girlfriend, ” when the woman called and told Fang “that she had been his girlfriend for already a year.” Fang also testified that she messaged Liu on August 9, 2014, and asked why he had withdrawn her immigration application after she had already discovered “he had deceived” her by withdrawing the application. Liu denied he had withdrawn the application and continued to tell Fang that he was working hard to get her a green card.

But, at most, those facts put Fang on notice that Liu had been unfaithful. Liu did not file for divorce until September 2014, and Fang did not learn of the divorce proceedings until she came to the United States to look for Liu, and he served her with the petition on December 12, 2014. And, as Fang contends, she could not have discovered the essential facts of the fraud-that defendants had taken her money and used it to buy a home in Shao's name instead of Fang's-until May 2015, when Shao actually purchased the Montclair home.

In sum, we conclude Fang's causes of action are not barred by the applicable statutes of limitations.

C. Fang Did Not Waive Her Ability to Pursue Her Civil Claims Against Liu by Agreeing to an Award of Reimbursement of Separate Property in the Dissolution Proceeding.

Liu argues Fang waived her claims against him in the dissolution judgment, and she was therefore barred from suing him for fraud and other causes of action. This argument is rather confusing, in that it throws the concepts of res judicata, finality of judgments, and waiver into a hodgepodge. Focusing on the central theme of this argument, we conclude the judgment in the dissolution proceeding did not constitute a waiver of Fang's right to pursue civil claims against Liu.

“Waiver requires an existing right, the waiving party's knowledge of that right, and the party's ‘actual intention to relinquish the right.' [Citation.] ‘“Waiver always rests upon intent.”' [Citation.] The intention may be express, based on the waiving party's words, or implied, based on conduct that is ‘“so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.”'” (Lynch v. California Coastal Com. (2017) 3 Cal.5th 470, 475.) “‘The burden... is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and “doubtful cases will be decided against a waiver.”'” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.)

In the dissolution proceeding, the family court agreed with Fang that Liu had breached his fiduciary duty not to impair her interest in the community estate (Fam. Code, § 1101), and that she should be awarded $297, 901.87. Liu's attorney objected to an award of that amount for breach of fiduciary duty because $97, 000 of that sum was Fang's separate property, which she had transferred before the marriage and before Liu had any fiduciary duty toward her. The family court indicated it had “no problem” calling the award “reimbursement” of separate property instead, if the parties stipulated to such a characterization and “waive[d] the right to appeal that it is in the wrong category.” Counsel for both parties agreed, and the judgment signed by the parties stated the award to Fang was for reimbursement of separate funds, and that they waived their right to appeal that characterization.

The judgment in the dissolution action clearly includes a knowing waiver of Fang's (and Liu's) right to challenge on appeal the characterization of the award to Fang as reimbursement of separate property, versus an award for breach of fiduciary duty. Neither party tried to appeal that characterization and, had they done so, they undoubtedly would have been held to their waiver. (Cf. In re Marriage of Harrison (1986) 179 Cal.App.3d 1216, 1228 [holding wife was precluded from challenging on appeal an award of cash, instead of proportional interest in husband's stock, that she specifically requested].) But, Fang limited the scope of her waiver. At the same hearing, she expressly stated she would pursue her claims related to the Montclair home “in a separate civil action.” In short, there is nothing in the record to support a finding of waiver.

D. The Doctrine of Election of Remedies Did Not Preclude Fang from Pursuing Her Fraud and Related Claims in This Lawsuit.

Next, defendants argue Fang elected to pursue the remedy of reimbursement in the dissolution proceeding and she was therefore barred from pursuing the same claims in this lawsuit. Because Liu does not and cannot established he was substantially injured by Fang's pursuit of her alternative remedies in this lawsuit, she was not barred from doing so.

In the context of their election of remedies arguments, defendants make the rather cursory assertions that (1) the award of money damages and the judgment quieting title in Fang's favor constitute “double recovery, ” and (2) substantial evidence does not support the judgment quieting title to the Montclair home and awarding it entirely to Fang.

“The election of remedies doctrine is based on equitable estoppel. [Citation.] The doctrine generally holds that if a plaintiff elects a particular remedy in lieu of an alternative and inconsistent remedy and thereby gains an advantage to the detriment of the defendant, the plaintiff thereafter is precluded from pursuing the alternative remedy. [Citations.] The doctrine applies only if the defendant suffered a substantial injury as a result of the plaintiff's initial election of remedies. [Citations.] The election of remedies doctrine ordinarily does not preclude a plaintiff who has pled alternative remedies from changing his or her election before the defendant has suffered an injury from the prior election through the application of res judicata or a satisfaction of judgment.” (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 759.) “Whether the facts establish an equitable estoppel is a question for the trial court to decide in the first instance, unless the facts can support only one reasonable conclusion.” (Ibid.)

The type of injury or disadvantage contemplated by the doctrine of election of remedies “must be a real injury, such as would, in contemplation of law, amount to a fraud upon the party invoking the estoppel.” (Mansfield v. Pickwick Stages, Northern Div., Inc. (1923) 191 Cal. 129, 131; accord, Campanella v. Campanella (1928) 204 Cal. 515, 521; City Bank of San Diego v. Ramage (1968) 266 Cal.App.2d 570, 588, fn. 4; Warfield v. Richey (1959) 167 Cal.App.2d 93, 99.) The cost of defending against one remedy does not necessarily amount to sufficient prejudice or injury that will bar the plaintiff from pursuing the alternative remedy. (See Mansfield, at p. 132; Felix v. Workmen's Comp. Appeals Bd. (1974) 41 Cal.App.3d 759, 765.)

As Fang contends, defendants did not mention, let alone address, the element of substantial injury in their opening brief. And, the record simply does not establish that Liu was in any way disadvantaged by Fang pursuing her remedies in the family court rather than prosecuting her fraud and related claims in this lawsuit. And, to repeat, Fang made it known in the family court that she would be pursuing her claims about the Montclair home in a separate lawsuit, so Liu cannot claim he was ignorant or lacked notice this lawsuit would be filed.

Finally, defendants essentially concede the doctrine of election of remedies and their related preclusion arguments do not bar Fang's claims against Shao. A third party who claims an interest in a marital dissolution proceeding may be joined as a party. (Fam. Code, § 2021, subd. (a).) Except for mandatory joinder of persons who have physical custody over the children of the marriage or who claim custody or visitation rights (Cal. Rules of Court, rule 5.24(e)(1)), joinder of persons with other interests is permissive (id., rule 5.24(e)(2)). Permissive joinder is within the discretion of the family court. (Schnabel v. Superior Court (1994) 30 Cal.App.4th 758, 762-763.) Here, Fang tried to join Shao as a party to the dissolution proceeding, but the family court denied her application. Essentially, Fang was prevented from litigating her claims against Shao in the divorce proceedings and, consequently, Fang was not barred from proceeding against her in this lawsuit.

E. The Award of Punitive Damages Must Be Reversed for Lack of Substantial Evidence About Defendants' Net Worth.

Last, defendants contend the award of punitive damages must be reversed because Fang did not introduce sufficient evidence of their financial condition. We agree and reverse the award.

“Where the defendant's oppression, fraud or malice has been proven by clear and convincing evidence, California law permits the recovery of punitive damages ‘for the sake of example and by way of punishing the defendant.' (Civ. Code, § 3294, subd. (a).)... [T]he defendant's financial condition is an essential factor in fixing an amount that is sufficient to serve these goals without exceeding the necessary level of punishment. ‘[O]bviously, the function of deterrence... will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort.' [Citation.] ‘[P]unitive damage awards should not be a routine cost of doing business that an industry can simply pass on to its customers through price increases, while continuing the conduct the law proscribes.' [Citation.] On the other hand, ‘the purpose of punitive damages is not served by financially destroying a defendant.'” (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1184-1185.) “[A]n award of punitive damages cannot be sustained on appeal unless the trial record contains meaningful evidence of the defendant's financial condition.” (Adams v. Murakami (1991) 54 Cal.3d 105, 109.)

“Our Supreme Court has not prescribed a rigid standard for measuring a defendant's ability to pay. [Citations.] Accordingly, there is no one particular type of financial evidence a plaintiff must obtain or introduce to satisfy its burden of demonstrating the defendant's financial condition. Evidence of the defendant's net worth is the most commonly used, but that metric is too susceptible to manipulation to be the sole standard for measuring a defendant's ability to pay. [Citations.] Yet the ‘net' concept of the net worth metric remains critical. ‘In most cases, evidence of earnings or profit alone are not sufficient “without examining the liabilities side of the balance sheet.” [Citations.]' [Citations.] Evidence of a defendant's income, standing alone, is not ‘“meaningful evidence.”' [Citation.] ‘Normally, evidence of liabilities should accompany evidence of assets, and evidence of expenses should accompany evidence of income.' [Citation.] ‘“Without evidence of the actual total financial status of the defendants, it is impossible to say that any specific award of punitive damage is appropriate.” [Citation.]' [Citation.] ‘Thus, there should be some evidence of the defendant's actual wealth' [citation], but the precise character of that evidence may vary with the facts of each case [citations]. The evidence should reflect the named defendant's financial condition at the time of trial.” (Soto v. BorgWarner Morse TEC Inc. (2015) 239 Cal.App.4th 165, 194-195.)

“‘We examine the record to determine whether the challenged [punitive damages] award rests upon substantial evidence. [Citations.] If it does not, and if the plaintiffs had a full and fair opportunity to make the requisite showing, the proper remedy is to reverse the award.'” (Farmers & Merchants Trust Co. v. Vanetik (2019) 33 Cal.App.5th 638, 647-648.)

As indicated, after awarding Fang general damages, the trial court inquired of her attorney, “[W]hat evidence do I have for the financial ability to respond to punitive damages?” Counsel responded that Liu had testified about “huge cash transactions in China” by Blue Sea Enterprise, but that “he didn't get any salary from it, ” and that Shao had testified that she largely operated her business in cash that was not reported on her tax returns. The court asked, “Doesn't the law require that if I were to award punitive damages, that I need to establish what the net worth is of the person and make it proportionate?” Counsel agreed. And, when the court asked the follow-up question, “Do I have evidence of the net worth of either Mr. Liu or Ms. Shao?, ” counsel responded, “it's a tough question.” Counsel acknowledged that the “official record” did not contain evidence of defendants' net worth, but he argued there was “circumstantial evidence to show they have large... income in cash hidden everywhere.” After finding by clear and convincing evidence that defendant had acted fraudulently, the trial court noted it would have made a larger award of punitive damages if it “had more knowledge of the financial position of both Mr. Liu and Ms. Shao.” However, the court found “that there should be a punitive damages award that is equal to the amount of the judgment of $297, 901.87.”

Notwithstanding Fang's assertion in her brief to the contrary, RB 45-48} the record on appeal simply does not contain solid and credible evidence of defendants' net worth. To his credit, Fang's attorney forthrightly informed the trial court that the “official record” did not contain evidence of net worth. The “circumstantial evidence” of hidden cash did not, however, begin to address the total financial condition required for imposition of punitive damages, and the trial court erred by implicitly concluding that evidence was enough. Nor does the record demonstrate Fang had attempted to discover admissible evidence of defendants' net worth but was hindered from doing so by defendants' refusal to comply with lawfully served subpoenas, such that the award should be affirmed despite the absence of evidence of net worth. (Soto v. BorgWarner Morse TEC Inc., supra, 239 Cal.App.4th at pp. 193-194.)

Because the record does not contain evidence of defendants' net worth, we must reverse the award of punitive damages.

Defendants do not argue a lack of substantial evidence to support the trial court's finding by clear and convincing evidence that they committed fraud and, we hasten to add, the record amply supported that finding.



The award of punitive damages is reversed. The remainder of the judgment is affirmed. Fang shall recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)

We concur: MILLER J., FIELDS J.

We agree with defendants that, to the extent their claims of error turn on the sufficiency of the evidence to support the trial court's implied findings of fact, their failure to request a statement of decision does not bar a substantial evidence challenge. The doctrine of implied findings requires that we “‘presume that the trial court made all factual findings necessary to support the judgment for which substantial evidence exists in the record.'” (Espinoza v. Shiomoto (2017) 10 Cal.App.5th 85, 100, italics added.) Contrary to the suggestion in Fang's brief, we do not presume the implied findings are, in fact, supported by substantial evidence. Rather, when the doctrine of implied findings applies, “‘the only issue on appeal is whether the implied findings are supported by substantial evidence.'” (Ibid.)

The first argument, that comprise less than two pages of their 45-page opening brief, is undeveloped and is only supported by a single citation to a published decision that sets forth the general rule that a failure to elect between legal and equitable remedies may result in double recovery. The second undeveloped argument, which also comprises less than two pages of their 45-page opening brief, cites no supporting legal authority whatsoever. Therefore, we conclude these arguments have been forfeited. (Cal. Rules of Court, rule 8.204(a)(1)(B) [each point made in brief must be supported “by argument and, if possible, by citation to authority”]; Maral v. City of Live Oak (2013) 221 Cal.App.4th 975, 984-985 [“‘[A]n appellate court is not required to examine undeveloped claims, nor to make arguments for parties.'”].) “They attempt, in their reply brief, to develop the argument, but it is too late. We disregard issues not properly addressed in the appellant's opening brief.” (Aviel v. Ng (2008) 161 Cal.App.4th 809, 821.) We add, however, that to the extent the judgment quieting title to the property may result in a double recovery, this opinion is without prejudice to defendants asserting in a postjudgment enforcement proceeding that Fang cannot enforce both the money judgment and the judgment quieting title.

Summaries of

Yu Fang v. Ying Hua Shao

Court of Appeals of California
Oct 8, 2021
E073065 (Cal. Ct. App. Oct. 8, 2021)
Case details for

Yu Fang v. Ying Hua Shao

Case Details

Full title:YU FANG, Plaintiff and Respondent, v. YING HUA SHAO et al., Defendants and…

Court:Court of Appeals of California

Date published: Oct 8, 2021


E073065 (Cal. Ct. App. Oct. 8, 2021)