Lingxiao Yang v. Mengxiong Liu et al.

This is an action for breach of contract and declaratory relief arising out of a failed business relationship. Plaintiff Lingxiao Yang (Yang) sued defendants Mengxiong Liu, MoveSpace Limited (MoveSpace), and Doe defendants.

Yang’s original complaint, alleging breach of contract and declaratory relief, was filed in September 2024. Defendants Liu and MoveSpace (hereafter, Defendants) demurred to the original complaint. Because Yang did not oppose the demurrer, it was sustained as to both causes of action with 10 days’ leave to amend. (See September 4, 2025 minute order.)

The operative first amended complaint (FAC) alleges causes of action for (1) breach of contract and (2) declaratory relief. The FAC alleges that Yang, defendant Liu, and nonparties Hanqing Lu (Lu) and Zhengnan Zhao (Zhao) formed defendant MoveSpace as a “crypto company.” Liu, Lu, and Zhao (but not Yang) caused MoveSpace to breach a contract with the Sui Foundation in 2023. (See FAC, ¶¶ 14-24.) The Sui Foundation threatened to sue over this breach. After this occurred, Lu and Zhao left MoveSpace.

Liu, on behalf of himself and MoveSpace, then allegedly “entered into an oral settlement” with Yang. In exchange for Liu and MoveSpace both transferring their interest in tokens they had received from the Sui Foundation to Yang, Yang would agree not to sue them and would persuade the Sui Foundation not to sue them. Yang was able to persuade the Sui Foundation not to sue, but Lui and MoveSpace refused to transfer their tokens to Yang. (Id. at ¶¶ 25-52.) Attached to the FAC as exhibit 1 is a copy of an unsigned agreement drafted by the Sui Foundation, which Yang alleges is a copy of the contract MoveSpace entered into with the Sui Foundation. (See FAC at ¶ 18.)

At issue is Defendants’ demurrer to the FAC, opposed by Yang.

REQUEST FOR JUDICIAL NOTICE

Defendants have submitted a request for judicial notice in support of the demurrer. “Judicial notice may not be taken of any matter unless authorized or required by law.” (Evid. Code, § 450.) A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the court. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307 [citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2].) Evidence Code section 453, subdivision (b), requires a party seeking notice to “[furnish] the court with sufficient information to enable it to take judicial notice of the matter.”

As there is no authority permitting the filing of separate briefs in support of or in opposition to a request for judicial notice, the court has not considered Yang’s opposition to Defendants’ request filed with Yang’s opposition to the demurrer.

Defendants request judicial notice of a copy of an article purportedly posted on a portion of the website of the Sui Foundation (referred to as a blog) in July of 2023, attached to the request as exhibit 1. Defendants assert that the article can be noticed pursuant to Evidence Code section 452, subdivision (h). The request is denied because that subdivision does not 4

apply to the document. (See Gould v. Md. Sound Indus. (1995) 31 Cal.App.4th 1137, 1145 [“Judicial notice under Evidence Code section 452, subdivision (h) is intended to cover facts which are not reasonably subject to dispute and are easily verified. These include, for example, facts which are widely accepted as established by experts and specialists in the natural, physical, and social sciences which can be verified by reference to treatises, encyclopedias, almanacs and the like or by persons learned in the subject matter.”]; see also Jolley v.

Chase Home Finance LLC (2013) 213 Cal.App.4th 872, 889 [“[W]e know of no ‘official web site’ provision for judicial notice in California.”]; Huitt v. Southern California Gas Co. (2010) 188 Cal.App.4th 1586, 1605, fn. 10 [“Simply because information is on the Internet does not mean that it is not reasonably subject to dispute.”]) In addition, a demurrer cannot be turned into an evidentiary hearing through a request for judicial notice. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114-115, internal citations omitted; see also New Livable California v.

Assoc. of Bay Area Governments (2020) 59 Cal.App.5th 709, 716 [citing Fremont Indemnity Co. among other decisions].) As judicial notice is denied, the article does not render the FAC defective, as Defendants claim.

LEGAL STANDARDS FOR DEMURRERS

In ruling on a demurrer, the court accepts as true all properly pleaded material factual allegations but does not accept as true contentions, deductions or conclusions of fact or law. (Valero v. Spread Your Wings, LLC (2023) 88 Cal.App.5th 243, 253.) Code of Civil Procedure section 430.60 states that “[a] demurrer shall distinctly specify the grounds upon which any of the objections to the complaint, cross-complaint, or answer are taken. Unless it does so, it may be disregarded.” The California Rules of Court also require that the demurrer itself (distinct from a supporting memorandum) specify the target of any objection and the grounds. (See Cal.

Rules of Court, rules 3.1103(c), 3.1112(a), 3.1320(a) [“Each ground of demurrer must be in a separate paragraph and must state whether it applies to the entire complaint, cross-complaint, or answer, or to specified causes of action or defenses.”].)

Where a demurrer is to an amended complaint or cross-complaint, the court “may consider the factual allegations of prior complaints, which a plaintiff may not discard or avoid by making contradictory averments, in a superseding, amended pleading.” (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034, internal quotations omitted; see also Doe v. United States Youth Soccer Assoc. (2017) 8 Cal.App.5th 1118, 1122.)

The court cannot consider extrinsic evidence when ruling on a demurrer. This includes declarations. The court has considered the two declarations from Defendants’ counsel Matthew Gurvitz only to the extent that they address the meet and confer efforts required by statute. Finally, “points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before.” (Proctor v. Vishay Intertechnology, Inc. (2013) 213 Cal.App.4th 1258, 1273.)

DISCUSSION

Defendants demur to the entire FAC on the basis that it is a “sham pleading.” They demur to the first cause of action for breach of contract on the ground that it: (1) fails to state sufficient facts because “the alleged facts lack sufficient consideration required for contract formation”; and (2) “fails to allege sufficient facts to support that [Yang] suffered harm as a result of Defendants’ alleged breach.” They contend the second cause of action for declaratory 5

relief also fails to state sufficient facts because it is “wholly derivative of” and “duplicative” of the breach of contract cause of action. They also assert that declaratory relief is not necessary or proper under the circumstances. (See notice of demurrer and demurrer at p. 1:12-23.)

Entire FAC

The sham pleading doctrine applies “where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings. [Citation.] In these circumstances, the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Owens v.

Kings Supermarket (1988) 198 Cal.App.3d 379, 384.) “The purpose of the doctrine is to enable the courts to prevent an abuse of process. [Citation.] The doctrine is not intended to prevent honest complainants from correcting erroneous allegations or to prevent the correction of ambiguous facts.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.) The rule “is intended to prevent sham pleadings omitting an incurable defect in the case.” (Berman v. Bromberg (1997) 56 Cal.App.4th 936, 946.)

Defendants assert that the FAC is a sham pleading because the allegations of an oral agreement are more numerous and detailed than those in the original complaint, and that the FAC’s allegations are contradicted by extrinsic evidence––the article on the Sui Foundation’s website. As already discussed, the court cannot consider extrinsic evidence in deciding a demurrer. And having considered the original complaint, the court finds Yang’s explanation of the amendments in the FAC to be reasonable and within the range of a normal amendment. (See opposition at pp. 6:5-9:19.) Notably, the FAC does not omit a fatal defect from the allegations in the original complaint. The court’s prior order did not identify any such defect. The prior demurrer was sustained primarily because it was unopposed.

First Cause of Action

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) The terms of an “oral contract may be pleaded generally as to its effect because it is rarely possible to allege the exact words.” (Scolinos v. Kolts (1995) 37 Cal.App.4th 635, 640.)

Defendants’ demurrer to the first cause of action on the ground that it fails to state sufficient facts is overruled. First, regardless of whether Lui was personally a party to the original contract with the Sui Foundation, the court accepts as true on demurrer the allegation that he was a party to the separate oral contract between Yang, Lui and MoveSpace on which the first cause of action is based. Second, Defendants’ argument that the first cause of action fails to allege “sufficient consideration” depends upon extrinsic evidence that the court cannot consider on demurrer.

Finally, the argument that the FAC fails to allege that Yang suffered harm from the alleged breach is unpersuasive. The FAC alleges that Yang did not receive the tokens he was promised in return for his own agreement not to sue and for convincing the Sui Foundation not sue. Because it is not apparent from the face of the FAC that the tokens have 6

no value, harm is sufficiently alleged. Defendants also argue that an agreement not to sue on a “worthless” claim cannot be valid consideration. But this supposed worthlessness is not apparent from the face of the FAC. Because Defendants cannot establish at the pleading stage that the alleged claims the Sui Foundation and Yang had against them were invalid or worthless, they cannot show that the alleged agreements not to sue could not serve as consideration.

Second Cause of Action

To qualify for declaratory relief, a plaintiff must demonstrate that his or her action presents two essential elements: (1) a proper subject of declaratory relief, and (2) an actual present controversy involving justiciable questions relating to plaintiff's rights or obligations. (Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1582.) “‘The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.’” (Linda Vista Village San Diego Homeowners Assn., Inc. v. Tecolote Investors, LLC (2015) 234 Cal.App.4th 166, 181.)

Defendants’ demurrer to the second cause of action on the ground that it fails to state sufficient facts is overruled. It is not apparent from the face of the FAC that the second cause of action is “derivative” of a failed cause of action. Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800, is distinguishable. That decision stands for the proposition that where a plaintiff fails to state sufficient facts to support a statutory claim, a demurrer is properly sustained on a claim for declaratory relief that is “wholly derivative” of the statutory claim. It has no application to a common law claim like breach of contract. And Defendants did not “successfully argue” this point in their demurrer to the original complaint. The ruling on the prior demurrer was based on the lack of opposition from Yang.

Any purported redundancy or duplicativeness of the second cause of action is not a basis for a demurrer. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 890 (Blickman); see also Code Civ. Proc., § 430.10 [setting forth the grounds for demurrer].) Duplicativeness “is the sort of defect that, if it justifies any judicial intervention at all, is ordinarily dealt with most economically at trial, or on a dispositive motion such as summary judgment.” (Blickman, supra, 162 Cal.App.4th at p. 890; see also R.L. v. Merced City School Dist. (2025) 114 Cal.App.5th 89, 119 [“Redundancy, however, is not enumerated as one of the statutory grounds on which a demurrer may be sustained.”].)

CONCLUSION

Defendants’ request for judicial notice is denied.

Defendants’ demurrer to the entire FAC on the ground that it is a sham pleading is overruled. Defendants’ demurrer to the FAC’s first and second causes of action on the ground that they fail to state sufficient facts is overruled as to both causes of action. Defendants are ordered to file an answer to the FAC no later than July 23, 2026.

The court will prepare the order.

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