M ORE L AW
LEXAPEDIA
Salus Populi Suprema Lex Esto

Information
About MoreLaw
Contact MoreLaw

Please E-mail suggested additions, comments and/or corrections to Kent@MoreLaw.Com.

Help support the publication of case reports on MoreLaw

Date: 01-13-2018

Case Style: Li Guan v. Yongmei Hu

Case Number: B276546

Judge: Rothschild, P.J.

Court: California Court of Appeals Second Appellate District Division One on appeal from the Superior Court, Los Angeles County

Plaintiff's Attorney: Malcolm McNeil, Allan Anderson and Ismael Bautista

Defendant's Attorney: Dominic Surprenant, and Dan Bromberg

Description: Plaintiff Li Guan and defendant Yongmei Hu entered into a
contract under which Guan paid the purchase price for a Malibu
residence (the property) to be held by Hu as the “nominal owner.”
Hu agreed to sell the property upon receiving instructions to
do so, and to distribute the sale proceeds between the parties
according to a mathematical formula in the contract. After
receiving instructions to sell, Hu failed to sell the property.
Guan sued Hu for causes of action arising from Hu’s breach of
the contract, and for fraud. Guan sought, among other relief,
rescission of the contract, the return of the money Guan paid to
purchase the property, a declaration that Hu is a constructive
trustee of the property for Guan’s benefit, and damages.
The case was tried to the court, which rejected Guan’s fraud
claim, but found that Hu had breached the contract. The trial
court denied Guan’s request for rescission, but ordered that
the property be sold and the proceeds apportioned between the
parties in accordance with the contract. The trial court charged
Hu’s share with imputed rent and credited to Hu the payments
she made for property-related expenses.
Hu contends that the court could not grant any relief to
Guan because it had determined that Guan had failed to prove
fraud or the right to rescission, and that the judgment violates
Hu’s right to due process. Hu further contends that the court
erred with respect to determinations regarding the date of
breach, the value of the property, and the award of imputed rent.
We reject these contentions and affirm the judgment.
Guan also appealed, challenging an order denying his
motion for leave to file an amended complaint to conform to proof
at trial to add a breach of contract claim for damages. Because
we affirm the judgment, Guan’s appeal is moot.
3
FACTUAL AND PROCEDURAL SUMMARY
In 2010, Hu became romantically involved with Qi Wei
Chen. At Chen’s request, Guan, 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 Guan 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.
4
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
5
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,
through 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,

1 All further statutory references are to the Civil Code
unless otherwise indicated.
2 In overruling Hu’s general demurrer, the court stated
that Guan had “adequately allege[d] the contractual basis” for
the rescission claim. The court also overruled a special demurrer
that was based on Code of Civil Procedure section 430.10,
subdivision (g), which provides: “In an action founded upon a
contract, it cannot be ascertained from the pleading whether the
contract is written, is oral, or is implied by conduct.” The court
overruled the demurrer stating that “[t]he claim is for rescission,
not for breach of contract; therefore, this isn’t an ‘action on a
contract,’ as to which this ground for demurrer could apply.”
6
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
7
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 the 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.)
One week later, Guan filed his trial brief, and asserted that
he was entitled to rescission of the contract and damages for
money had and received because Hu “breached the Contract by
failing and refusing to take any steps to sell the Property after
two written instructions from [Chen].” Guan further argued that
the facts support his cause of action for promissory estoppel “in
the event that [he] cannot establish a cause of action for breach
of contract.” In addition, Guan asserted that he is entitled to
damages based on fraud in the inducement.
8
At the outset of the bench trial, the court asked Guan’s
counsel whether Guan was asserting breach of contract or
“simply going for broke and asserting that the contract was [void
ab initio] because of fraud.” Counsel stated: “We do have the
rescission claim, there had been an earlier contract claim the
court struck. So we have promissory estoppel and the rescission,
which we believe is a contract claim. In our opinion, . . . Hu
breached the agreement and the arrangement by not doing
anything to sell the house once instructed. So yes, we’re seeking
breach of contract. This is not a go-for-broke claim.”
Hu’s counsel responded to this point by asserting that
“[t]here’s no breach of contract in the fourth amended
[complaint]. What there is, . . . is a fraud inducement. There’s
a cancellation claim for canceling the facially valid but void
agreement, void because of fraud. . . . There’s promissory estoppel
which is a weak form of fraud. There was a promise, the promise
on intended reliance. There’s rescission. Now, rescission—
breach of contract cannot support rescission. What triggers
rescission is extensively and exclusively set forth in Civil Code
section 1689. Breach of contract is not one of them. Now, the
fourth amended complaint only alleges breach of contract to
support rescission, but should [the court] during the trial decide
to exercise [its] discretion and conform the pleadings to proof, a
claim of fraud could in some circumstance, although I think not
this one, give rise to rescission.” He added: “I do think this is
entirely a fraud claim. That’s what plaintiff told you in
opposition to motions in limine [and] the only way to read their
claims.”
9
Hu’s defense at trial was based on three theories. First,
Chen, as Guan’s agent, failed to fulfill his obligations under the
contract to make the arrangements necessary to sell the house;
therefore, Hu’s contractual obligation to sell the property was
never triggered and she did not breach the contract. Second, Hu
intended to perform when she entered into the contract and,
therefore, did not commit fraud. Third, the money used to
purchase the house was Chen’s, not Guan’s, and, therefore, Guan
has suffered no damage. Regarding rescission, Hu’s counsel
acknowledged that the claim was based on breach of contract, but
he asserted that rescission cannot be based on that theory. This
case, he asserted, “is entirely a fraud claim.”
At trial, evidence was adduced regarding the negotiation
and formation of the contract, Hu’s intent in entering into the
contract, the parties’ understanding of the contract’s terms, the
purchase of the house, the source of the purchase money, Chen’s
instructions to Hu to sell the property, Hu’s failure to sell the
property after receiving such instructions, and the value and
rental value of the property at different times. Hu testified that
she had an obligation under the contract to sell the property if
she received an “adequate and a proper—serious written
instruction to sell the house,” but believed that she never
received such instructions. She further testified that she paid the
property taxes, property insurance, and maintenance expenses
for the property.
In closing argument, Guan’s counsel argued that the
evidence established that Hu had done nothing to “demonstrate
that she performed in any fashion . . . under the contract.” After
the court questioned Guan’s counsel regarding the fraud claim,
counsel pointed out that “only the fifth cause of action is for fraud
10
[in] the inducement.” Even if the court does not find fraud, he
explained, the other four causes of action are “all based on failure
of consideration.” Thus, he stated, “all roads in this case lead to
rescission.” By this, Guan’s counsel explained, he meant that
each of Guan’s “causes of action invoke the court’s equitable
authority, and the court can take whatever action it deems
appropriate and equitable under the law to make sure that
[Guan] is protected and gets his money back.”
At the outset of Hu’s counsel’s closing argument, counsel
stated that he would address the lack of evidence that Hu did not
intend to perform the contract. The court interjected that he
must also “address whether or not there was a breach of the
contract once the contract was made.” Counsel stated that he
would do so, and acknowledged that “most of [Guan’s] . . . case
put on at trial was a breach of contract.” He asserted, however,
that there was “no breach of contract claim” and that “all of
[Guan’s] claims are fraud-based.”
The trial court issued a tentative decision and, after
considering Hu’s objections, a final statement of decision. The
court found that Guan had failed to prove his fraud allegations,
and that the evidence was insufficient “to support rescission of
the contract on the statutory grounds.” The court further found
that Hu breached the contract in August 2012 by “failing, after
receiving Chen’s instruction in his July 21, 2012 email to her, to
sell the house and remit the proceeds, net of her share, to Guan.”
The court stated that “a party asserting the right to rescind a
contract may recover damages for its breach if rescission is not
found.”
11
Based on the findings that Hu had breached the contract,
the court granted the following relief: The court declared Guan
the beneficial owner of the property, and appointed a receiver to
sell the property; Hu was to receive 20 percent of the value of the
property; Hu should be reimbursed $274,400 for her payment of
property taxes, insurance, and maintenance expenses for the
property; and Hu would be charged with $10,000 per month fair
rental value for the 43 months that she possessed the property
after her breach, for a total of $430,000. These remedies, the
court later explained, were based “upon the allegations and
prayer” of the fourth amended complaint, which “provide[d]
adequate notice of plaintiff’s claims against defendant.”
On June 18, 2016, the court entered an amended judgment
in accord with its statement of decision. Hu and Guan each
appealed. Guan challenged only the court’s order denying his
motion for leave to amend to conform to proof.
DISCUSSION
I. The Court Did Not Err in Granting
Guan Relief Based on Hu’s Breach of the
Contract.
Hu contends that the court, after finding that Guan failed
to prove fraud or the right to rescission, erred by granting Guan
relief based on Hu’s breach of the contract. We disagree.
A.
According to Hu, each of the causes of action asserted in
Guan’s fourth amended complaint “failed because [Guan] failed
to prove that Hu did not intend to perform her contractual
obligation to sell [the property] when she entered into the
February 2011 contract.” The argument is without merit because
12
the only cause of action in the fourth amended complaint that
alleged that Hu did not intend to perform her obligations at the
time she entered into the contract agreement was the fifth cause
of action for fraudulent inducement. None of the first four causes
of action—labeled rescission, cancellation, common count for
money had and received, and promissory estoppel—included any
allegation of Hu’s fraudulent intent.
With respect to Guan’s first cause of action, labeled
“Rescission,” Guan alleged: The parties had entered into the
contract; Guan performed his duties under the contract; Hu
breached the contract by failing to perform her obligation to sell
the property as instructed; and Hu’s breach caused Guan harm.
A plain reading of the allegations reveals that the rescission
cause of action is unrelated to, and independent of, the allegation
of Hu’s fraudulent intent asserted in the fifth cause of action.
The court’s conclusion that Guan failed to prove such intent,
therefore, is irrelevant to the merits of the first cause of action.
Nor was an allegation or proof of Hu’s fraud necessary for
Guan’s first cause of action. In that cause of action Guan sought
rescission. Although fraudulent inducement is one ground for
rescission (§ 1689, subd. (b)(1)), a party to a contract is also
entitled to rescission when the other party’s breach constitutes
a material failure of consideration. (Id., subd. (b)(2); Wyler v.
Feuer (1978) 85 Cal.App.3d 392, 403-404; Crofoot Lumber,
Inc. v. Thompson (1958) 163 Cal.App.2d 324, 332-333; 1 Witkin,
Summary of Cal. Law (11th ed. 2017) Contracts, § 877,
pp. 922-923.)
3 With one possible exception (discussed below),

3 “Failure of consideration is the failure to execute a
promise, the performance of which has been exchanged for
13
Guan consistently asserted Hu’s breach and the resulting failure
of consideration as a basis for his rescission cause of action. In
opposing both Hu’s demurrer to the rescission cause of action in
the third amended complaint and Hu’s motion for summary
judgment on the fourth amended complaint, Guan relied on the
failure of consideration basis for rescission. Guan reasserted
Hu’s breach of the contract in his trial brief and, as Hu’s counsel
acknowledged, “most of [Guan’s] case put on at trial was a breach
of contract.”
The one exception, which Hu emphasizes, is language in
Guan’s opposition to a motion in limine in which Guan stated
that this “case is now about [Hu’s] fraudulent conduct, . . . and
not about whether or not the Contract required [Hu] to sell the
property.” Even if that statement, when viewed in isolation,
arguably narrowed Guan’s theory of rescission, Guan’s trial brief,
filed one week later, clarified that he was seeking rescission on
the ground that Hu “breached the Contract by failing and
refusing to take any steps to sell the Property after two written
instructions from [Chen].”

performance by the other party.” (Bliss v. California Cooperative
Producers (1947) 30 Cal.2d 240, 248.) Not every breach or failure
to perform, however, will warrant the remedy of rescission; the
failure “must be ‘material,’ or go to the ‘essence’ of the contract.”
(Wyler v. Feuer, supra, 85 Cal.App.3d at pp. 403-404; see
also Crofoot Lumber, Inc. v. Thompson, supra, 163 Cal.App.2d
at pp. 332-333; Taliaferro v. Davis (1963) 216 Cal.App.2d
398, 411-412; Medico-Dental etc. Co. v. Horton & Converse (1942)
21 Cal.2d 411, 433; Wilson v. Corrugated Kraft Containers (1953)
117 Cal.App.2d 691, 696.)
14
Any doubt as to Guan’s theories at trial was removed when
the court inquired at the outset of trial as to whether Guan was
“going for broke” based on the theory of fraudulent inducement,
and Guan’s counsel clarified that he was not; the rescission
claim, he stated, was based on the theory that “Hu breached the
agreement and the arrangement by not doing anything to sell
the house once instructed. . . . [W]e’re seeking breach of contract.
This is not a go-for-broke claim.” In light of the otherwise
consistent assertion that Guan was pursuing a contract-based
theory of rescission, as well as the allegations in the operative
pleading, the lone statement in Guan’s opposition to a motion in
limine did not alter the nature of Guan’s first cause of action.
4
Hu also relies on the trial court’s language in its statement
of decision that each of Guan’s “causes of action allege[s] that Hu
had no intention when she signed the contract to comply with a

4 The concurring and dissenting opinion (the
concurrence/dissent) relies on the statement in Guan’s
opposition to a motion in limine for the conclusion that Guan’s
“claim . . . was not based on Hu’s breach of a valid contract,”
but rather “on Hu’s fraudulently inducing Guan to enter into
an invalid contract.” (Conc. & dis. opn. post, at p. 6.) The
concurrence/dissent implies that Guan asserted a single “claim,”
not multiple claims, and that Guan changed that claim from a
rescission claim based on breach of contract to a rescission claim
based on fraudulent inducement. The implication is belied by the
record. Guan asserted five causes of action, only one of which is
based upon an allegation of fraud. Moreover, Guan’s operative
complaint, his discovery responses, his trial brief, his counsel’s
statements to the court at the outset of trial, and the evidence
at the trial show that Guan pursued both the contract-based
rescission claim and the fraudulent inducement claim.
15
written instruction to sell the house.” The court’s mistaken belief
that all causes of action included a fraud allegation was trivial
and not consequential; the important point was that Guan did
allege breach of contract, and the court was aware of it.
B.
Hu further contends that Guan’s “contract claim was
dismissed long before trial, [and he] had no right to advance that
claim at trial.” She points to the court’s order sustaining the
demurrer without leave to amend to the breach of contract cause
of action in the second amended complaint. That ruling, Hu
contends, puts that claim “at rest” and barred Guan from
reviving it at trial. For the reasons that follow, we reject this
argument.
We agree with the position Hu took in the trial court
proceedings that Guan’s rescission cause of action was “actually
a claim for breach of contract.” Generally, a cause of action is
the “right to obtain redress for a harm suffered, regardless of the
specific remedy sought or the legal theory . . . advanced.” (Boeken
v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798, italics
added.) Thus, although a breach of contract may be redressed in
various ways, such as by rescission, specific performance,
declaratory relief, the payment of damages, or injunctive relief
(see 1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts,
§ 878, pp. 924-925), the remedy is not the cause of action. And
where various remedies are sought for the same breach, there is
a single cause of cause of action for breach of contract; the
“ ‘seeking of different kinds of relief does not establish different
causes of action.’ ” (Marden v. Bailard (1954) 124 Cal.App.2d
458, 465.)
16
Here, Guan labeled his first cause of action “Rescission.”
“Rescission,” however, “is not a cause of action; it is a remedy.”
(Nakash v. Superior Court (1987) 196 Cal.App.3d 59, 70.)
To determine the nature of Guan’s cause of action, we look at
the facts alleged, not its label. (See, e.g., Saunders v. Cariss
(1990) 224 Cal.App.3d 905, 908; McBride v. Boughton (2004)
123 Cal.App.4th 379, 387.) It is “an elementary principle of
modern pleading that the nature and character of a pleading is to
be determined from its allegations, regardless of what it may be
called, and that the subject matter of an action and issues
involved are determined from the facts alleged rather than from
the title of the pleadings or the character of the damage recovery
suggested in connection with the prayer for relief.” (McDonald v.
Filice (1967) 252 Cal.App.2d 613, 622; accord, Ananda Church
of Self-Realization v. Massachusetts Bay Ins. Co. (2002)
95 Cal.App.4th 1273, 1281; Lovejoy v. AT&T Corp. (2001)
92 Cal.App.4th 85, 98.) As set forth above, and as Hu asserted
below, the allegations in Guan’s first cause of action for
“rescission” establish a cause of action for breach of contract,
regardless of its label or the remedies he sought.
To the extent that the court’s rulings allowing Guan to
proceed with his contract-based rescission cause of action are
inconsistent with its prior ruling sustaining Hu’s demurrer to the
second amended complaint’s breach of contract cause of action
without leave to amend, the later rulings supersede the prior
ruling. The trial court’s inherent power to do so is well-settled.
(See Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107; Kerns v.
CSE Ins. Group (2003) 106 Cal.App.4th 368, 388; Nave v. Taggart
(1995) 34 Cal.App.4th 1173, 1177.) If the rule were otherwise, a
court that “ ‘realizes it has misunderstood or misapplied the law,
17
[would be] prohibited from revisiting its ruling, whether it
realize[d] its mistake 10 minutes or 10 days later, and no matter
how obvious its error or how draconian the effects of its misstep.
“A court could not operate successfully under the requirement
of infallibility in its interim rulings. Miscarriage of justice
results where a court is unable to correct its own perceived legal
errors.” ’ ” (Le Francois v. Goel, supra, 35 Cal.4th at p. 1105; see
also Greenberg v. Superior Court (1982) 131 Cal.App.3d 441, 445
[trial court has inherent power to “correct a ruling which it
believes to have been erroneous”].)
This rationale applies forcefully here. Guan had
adequately pleaded a cause of action for breach of contract in
his second amended complaint, and the trial court erroneously
sustained Hu’s demurrer to that cause of action. Guan’s
allegations of the elements of breach of contract in the third
amended complaint were not substantially different from the
allegations in the second amended complaint; each made
identical allegations regarding the parties’ entry into the
contract, the terms of the contract, Guan’s performance, and Hu’s
breach of the contract. The only material change Guan made was
to add the remedy of rescission.5 Indeed, as Hu argued, the third
amended complaint was essentially a “rehash of the exact same
allegations” that failed to support a cause of action in the second
amended complaint. The court, however, correctly determined
that Guan had adequately pleaded a contractual basis for the
claim and, having “realize[d] its mistake” (Case v. Lazben

5 The request for compensatory damages remained, but
was moved to the prayer for relief in the fourth amended
complaint.
18
Financial Co. (2002) 99 Cal.App.4th 172, 185), allowed the
restated claim to proceed.
The concurrence/dissent takes the untenable position
that once the court sustains a demurrer without leave to
amend a cause of action it can never change its mind. The
concurrence/dissent would, in effect, hold that interim orders are
final judgments—a principle contrary to settled law, as discussed
earlier. The concurrence/dissent’s reliance on Smith v. City
of Los Angeles (1948) 84 Cal.App.2d 297 (Smith) for this
proposition does not withstand scrutiny. Citing to Smith, the
concurrence/dissent states “that ‘orders sustaining demurrers
without leave to amend’ effectively ‘constitute a trial on the
merits’ and, as such, ‘must be considered as judgments after
trial.’ ” (Conc. & dis. opn. post, at p. 19, quoting Smith, supra,
84 Cal.App.2d at p. 302.) Smith, however, actually states:
“The judgments rendered herein, being upon orders sustaining
demurrers without leave to amend, constitute a trial on the
merits, based upon issues of law raised by such demurrers,
and must be considered as judgments after trial.” (Ibid.) By
selectively quoting only portions of the relevant sentence, the
concurrence/dissent conjures a completely new and unworkable
legal principle—that interim orders constitute final judgments.
The concurrence/dissent cites Roybal v. University Ford
(1989) 207 Cal.App.3d 1080 for the proposition that a dismissal
with prejudice “ ‘clearly means the plaintiff ’s right of action
is terminated and may not be revived.’ ” (Conc. & dis. opn.
post, at p. 19, quoting Roybal v. University Ford, supra,
at pp. 1086-1087.) In that case, the court held that a plaintiff’s
voluntary dismissal of a complaint with prejudice operated as a
retraxit and barred a subsequent action on the same cause under
19
the doctrine of res judicata. (Id. at pp. 1085-1087.) Here,
the order sustaining the demurrer to Guan’s second amended
complaint was not a retraxit, and res judicata does not apply
to interim, interlocutory rulings. (See Imperial Beverage Co. v.
Superior Court (1944) 24 Cal.2d 627, 634; Phillips v. Sprint PCS
(2012) 209 Cal.App.4th 758, 770; 7 Witkin, Cal. Procedure
(5th ed. 2008) Judgment, § 363, p. 985; 6 Witkin, Cal. Procedure
(5th ed. 2008) Proceedings Without Trial, § 308, p. 763.)
The concurrence/dissent states that our opinion “would
invite havoc” (conc. & dis. opn. post, at p. 21) by allowing a trial
court to countenance a plaintiff’s realleging a claim after the
court sustains a demurrer without leave to amend to that claim.
There will be no havoc. Indeed, if the court continued to believe
that the reasserted claim had no merit, the court could sustain
a demurrer filed by a defendant so pointing out, strike the new
claim on its own motion, and sanction the plaintiff if the pleading
was filed in bad faith or for an improper purpose. (See Code Civ.
Proc., §§ 128.5, 128.7; cf. Janis v. California State Lottery Com.
(1998) 68 Cal.App.4th 824, 829; Ricard v. Grobstein, Goldman,
Stevenson, Siegel, LeVine & Mangel (1992) 6 Cal.App.4th
157, 162.) Here, however, the realleged claim gave the court
an opportunity to correct its earlier error—the sustaining of the
demurrer to the contract cause of action in the second amended
complaint—and conformed to the commendable purpose of
making interim orders changeable.
The concurrence/dissent’s complaint that the trial court did
not give Hu notice that it was considering allowing the stricken
claim relies on form over substance. Whether the court or
Guan gave that notice is immaterial. What matters is that Hu
had notice of Guan’s contract claim upon service of the fourth
20
amended complaint and an opportunity to oppose the claim’s
resurrection, which she did more than once.
C.
Although Guan’s “rescission” cause of action was, in
substance, a breach of contract cause of action, the question
remains whether the court, having found that Guan was not
entitled to the remedy of rescission, could nevertheless award
damages based upon Hu’s breach. We conclude that it could.
In the fourth amended complaint, Guan sought rescission
and compensatory damages, among other relief. The alternative
remedies may be asserted in the same action. (§ 1692; Wong v.
Stoler (2015) 237 Cal.App.4th 1375, 1385; Karapetian v. Carolan
(1948) 83 Cal.App.2d 344, 351-352; see generally 1 Witkin,
Summary of Cal. Law (11th ed. 2017) Contracts, § 966,
pp. 1015-1017.) A party may thus seek “rescission first and
damages if he cannot have it.” (Bancroft v. Woodward (1920)
183 Cal. 99, 102.)6 Here, Guan expressly sought rescission and

6 The concurrence/dissent cites Akin v. Certain
Underwriters at Lloyd’s London (2006) 140 Cal.App.4th 291, 296,
for the statement that an “ ‘action for rescission and an action
for breach of contract are alternative remedies,’ ” and that the
“ ‘election of one bars recovery under the other.’ ” (Conc. & dis.
opn. post, at p. 18, italics omitted.) If the concurrence/dissent
is suggesting that a plaintiff who is harmed by a defendant’s
breach of contract cannot pursue each of the alternative remedies
of damages and rescission at trial, it is incorrect. Although
a plaintiff cannot obtain both rescission and damages for the
same wrong, it is well-settled that he or she can seek each in the
alternative. (See Williams v. Marshall (1951) 37 Cal.2d 445, 457;
21
compensatory damages, among other relief. Although rescission
may have been his preferred remedy, he was entitled to recover
damages if, as the court determined in this case, “he cannot have
it.” (Ibid.)
The concurrence/dissent asserts the trial court found
that there was a failure of consideration and thus Guan had
prevailed on his rescission claim on that basis. (Conc. & dis.
opn. post, at p. 10.) First, the trial court made no such finding.
Rather, it expressly rejected that conclusion and found the
opposite true, that the evidence did not establish grounds for
rescission. Second, as the court found, Hu partially performed
under the contract by “protecting the property” and paying
the property taxes, insurance, and maintenance expenses
during her possession of the property. Lastly, we note that the
concurrence/dissent’s theory was not even proposed by either
party.
D.
Hu argues that the judgment violated her right to due
process. In particular, she contends that she “went to trial
reasonably believing that she would win if [Guan] did not prove
that she had a fraudulent intent not to perform because the
claims in the operative complaint were all premised on such an
intent.” She argues that she also “believe[d] that that contract
claim could not be an issue because [Guan’s] breach of contract
claim had been dismissed long before trial at the pleadings stage,
and [Guan] had adamantly asserted that there were no contract

Walters v. Marler (1978) 83 Cal.App.3d 1, 16; 1 Witkin, Summary
of Cal. Law (11th ed. 2017) Contracts, § 936, pp. 986-987.)
22
issues left in the case.” These arguments are generally refuted
by the conclusions we reached above: Guan’s first four causes of
action were based on Hu’s breach of contract, not her alleged
fraudulent intent; and Guan’s breach of contract claim was
indisputably in play in the fourth amended complaint.
Moreover, even if Guan’s first cause of action as pleaded
was ambiguous as to the nature of his claim or remedies he
sought, the record reveals that Hu had ample notice of the breach
of contract claim and potential remedies. As described above,
Guan represented his rescission cause of action as one based on
breach of contract and Hu responded to it as such. In opposing
Hu’s demurrer to that cause of action in the third amended
complaint, Guan explained he was relying on the allegation
that Hu had “breached the written Contracts by total failure
to perform her obligations to sell the Property.” After Guan
realleged the rescission cause of action in substantially the same
form in the fourth amended complaint, Hu, in her answer,
expressly characterized the claim as “a cause of action for breach
of contract,” and asserted numerous affirmative defenses to
breach of contract. Hu’s motion for summary judgment again
asserted that Guan’s first cause of action was “actually a claim
for breach of contract,” and argued that the court should grant
summary adjudication of the cause of action because the court
had previously sustained a demurrer to Guan’s breach of contract
claim.
Hu propounded interrogatories concerning Guan’s contract
allegations, to which Guan affirmed he was seeking damages for
breach of contract and identified “[m]onetary damages caused by
misrepresentations and breach of contract” in the amount of
“$2.655 million.” (Italics added.)
23
In his trial brief, Guan stated that his rescission claim was
based on Hu’s breach of the contract, and his counsel informed
the court at the outset of trial that “we’re seeking breach of
contract,” and that the rescission claim “is a contract claim.” The
evidence at trial presented by both sides was focused primarily
on issues related to the breach of contract claim. In particular,
the parties testified about the negotiations concerning the
contract and their understanding of its terms, Guan and Chen
were examined about the source of the funds used to purchase
the property, and evidence was introduced concerning the
communications from Guan and Chen to Hu, which Guan argued
were instructions to sell and Hu argued were not. Evidence that
Hu had done nothing to sell the property, as well as evidence of
the rental value of the property and Hu’s payments of property
expenses, was also introduced. The evidence related to Hu’s
alleged fraudulent intent, by contrast, was remarkably brief; in
essence, Hu testified that she intended to perform, and Guan
attempted to impeach her with her deposition testimony that she
considered the contract to be a “joke” or a “fiction.” The record of
the trial, in short, reveals a trial focused almost exclusively on
Guan’s breach of contract claim and Hu’s defenses thereto.7

7 We note that the statement of facts and procedural
history in Hu’s opening brief omitted almost all of the relevant
facts bearing upon the question whether Guan’s claims were
based on breach of contract and Hu’s notice thereof. The brief
thus violates rule 8.204(a)(2)(C) of the California Rules of Court,
which requires that opening briefs “[p]rovide a summary of the
significant facts.” (See Hjelm v. Prometheus Real Estate Group,
Inc. (2016) 3 Cal.App.5th 1155, 1166; Eisenberg et al., Cal.
Practice Guide: Civil Appeals and Writs (The Rutter Group
24
E.
Hu further contends that the court erred in relying on
section 1692 in fashioning the remedy for Hu’s breach. The
second paragraph of that section provides: “If in an action or
proceeding a party seeks relief based upon rescission and the
court determines that the contract has not been rescinded, the
court may grant any party to the action any other relief to which
he may be entitled under the circumstances.” Hu contends that
the language, “any other relief to which [the plaintiff] may be
entitled under the circumstances,” limits the court’s ability to
grant “other relief” to cases where the plaintiff sought rescission
along with other claims and is entitled to relief on the other
claims. It cannot be applied, she argues, when the plaintiff
“failed to prove any of the claims in the operative complaint.”
The flaw in this argument is that Hu erroneously assumes
the success of her earlier argument that all of Guan’s claims were
based upon fraud and that Guan had failed to prove fraud. As
explained above, only Guan’s fifth cause of action was based on
Hu’s alleged fraud, and his first cause of action was indisputably
based on Hu’s breach of contract. Because the court found that
Hu had breached the contract and thereby caused Guan harm,
the court reasonably determined that although Guan was
not entitled to rescission, he was entitled to relief under the
circumstances. (§ 1692; see, e.g., FDIC v. Air Florida System,
Inc. (9th Cir. 1987) 822 F.2d 833, 841 [under section 1692, “a
breach [of contract] insufficiently material to form the basis for

2016) ¶ 9:27, pp. 9-8 to 9-9, ¶ 9:126, pp. 9-38 to 9-39.) It was only
after this court granted a motion for rehearing that Hu was more
forthcoming.
25
rescission may entitle the aggrieved party to . . . damages”];
Kulawitz v. Pacific etc. Paper Co. (1944) 25 Cal.2d 664, 672
[plaintiff’s failure “to establish his right to rescission did not
preclude him from any other relief that might be open to him”].)
II. Hu’s Contentions Regarding Particular
Relief
Hu also challenges particular provisions of the judgment.
We address each in turn.
A.
Hu contends that the court should have applied 40 percent,
instead of 20 percent, to the value of the property in determining
Hu’s share. We disagree.
Under the contract, Hu is to receive 20 percent of the
property’s fair market value if the property “is sold from
Jan[uary] 1[,] 2012 on,” and 40 percent “if it is sold from
Jan[uary] 1[,] 2013 on.” Hu was required to “complete all the
procedure[s] to sell [the property] within 6 months” after
receiving Chen’s instruction to sell. Hu’s duty to sell the property
was triggered by Chen’s July 21, 2012 email to her. According
to the contract, Hu then had six months within which to sell
the property. The court awarded Hu an amount based on the
20 percent figure because, the court explained, “Hu should have
initiated procedures to sell, for instance, by interviewing or hiring
a real estate broker, or advertising the house for sale, not later
than August, 2012. Because Hu did not take any steps to initiate
a sale she is not entitled to a reasonable period, much less the
6 months specified in the contract, to complete the sale.”
26
The court did not err. Because Hu did not sell the property,
there is no date of sale from which the court could determine
which percentage should be applied. The inability to determine a
date of sale was, of course, because Hu breached the contract by
failing to sell the property. Indeed, as the court found, Hu did
not merely fail to sell the property, she did not even take any
steps to do so. The trial court determined that Hu should not
profit by her wrongdoing. We agree.
B.
Hu contends that she is entitled to a percentage of the
actual sale proceeds, not the percentage of the property’s value
at the time of the breach. We disagree. If Hu had performed her
contractual obligation, she would have received no more than
20 percent of the proceeds from a sale that should have taken
place in 2012. According to Hu, however, she should receive the
benefit of any appreciation in the property after her breach. She
cites no authority to support her argument, and her position is
contrary to the maxim that one may not benefit by his or her own
wrong. (§ 3517; Post v. Jacobsen (1960) 180 Cal.App.2d 297, 303.)
Hu argues that the property should have been valued as
of the time of breach. We agree that that would have been the
ideal valuation date. But neither party presented evidence
of that value. In the absence of evidence of the value at the
time of breach—August 2012—the court reasonably used the
closest-in-time valuation presented—March 2011.
27
C.
Lastly, Hu contends that the court erred by charging her
with $430,000 of imputed rent because Guan waived any right to
such rent by failing to identify such damages prior to trial. We
disagree. Although Guan did not specifically ask for imputed
rent in his prayer for relief or pretrial discovery, he introduced
evidence of the property’s rental value at trial without a
relevance objection from Hu. Moreover, when the court asked
Hu’s counsel during closing argument whether Hu should have to
pay rent “for the holdover period [while] she’s lived in that house
without paying rent,” counsel only asserted that requiring her to
pay rent would be unfair because neither Guan nor Chen ever
asked her to vacate the property. Counsel also stated that
any payment of rent should be apportioned based upon the
apportionment of the sale proceeds in the contract. Significantly,
counsel did not assert that Guan’s claim for rent was made
too late or violated Hu’s right to due process. Nor did counsel
request a continuance to counter the fair rental amount. Hu thus
waived any claim of error by not asserting it timely.
III. Guan’s Appeal from Order Denying His
Motion for Leave to Amend Is Moot.
Because we conclude that the judgment should be affirmed
based on the court’s application of section 1692, Guan’s appeal
challenging the order denying his motion for leave to amend is
moot.

Outcome: The amended judgment is affirmed. Guan is awarded his costs on appeal.

Plaintiff's Experts:

Defendant's Experts:

Comments:



 
 
Home | Add Attorney | Add Expert | Add Court Reporter | Sign In
Find-A-Lawyer By City | Find-A-Lawyer By State and City | Articles | Recent Lawyer Listings
Verdict Corrections | Link Errors | Advertising | Editor | Privacy Statement
© 1996-2018 MoreLaw, Inc. - All rights reserved.