Demurrer
Case No. 25CV474904 Demurrer Before the court is defendants Wei-Chih Chen and Yield Engineering Systems, Inc.’s Demurrer to First Amended Complaint. Pursuant to California Rule of Court 3.1308, the court issues its tentative ruling as follows.
I. BACKGROUND On September 16, 2023, plaintiff Jaron Julius Toilolo (“Plaintiff”) was stopped at a red light on Brokaw Road waiting to make a left turn on to Zanker Road. (First Amended Complaint (“FAC”), ¶6). When the light turned green, Plaintiff proceeded to make a left turn when defendant Wei-Chih Chen (“Chen”), driving at a high rate of speed, suddenly ran the red light at the intersection and struck Plaintiff’s vehicle on the driver’s side. (Id). Plaintiff sustained serious injuries, property damage to his vehicle, and wage loss due to this accident. (FAC, ¶¶8 – 10).
On or about May 22, 2025, Plaintiff and defendant Chen entered into a written settlement agreement relating to the accident of September 16, 2023, whereby, in exchange for a payment of $15,000 from the insurer of the rental vehicle defendant Chen was driving, Plaintiff released defendant and other parties from all liability for the accident. (FAC, ¶12 and Exh. A). At the time of signing the release, Plaintiff was ignorant of the existence of any other insurance policy covering defendant and believed the $15,000 policy provided by the car rental company to defendant was the only insurance policy covering defendant that was available to Plaintiff. (FAC, ¶13). Plaintiff intended to file a claim for underinsured motorist benefits under his own automobile insurance policy. (Id).
Thereafter, on July 11, 2025, Plaintiff discovered defendant Chen had valid liability coverage through Travelers Insurance. (FAC, ¶14). Had Plaintiff known this fact, he would not have signed the release. (Id). Plaintiff’s signature on the release was the result of Plaintiff’s unilateral mistake of fact. (Id). Defendant Chen knew of or suspected the
above-described mistake at the time of execution of the written release in that defendant Chen knew he had an insurance policy with Travelers Insurance which might provide coverage for Plaintiff’s damages. (FAC, ¶15).
On September 11, 2025, Plaintiff filed a complaint against defendant Chen asserting causes of action for: (1) Negligence (2) Rescission of Release
On October 24, 2025, Plaintiff filed the now operative FAC which continues to assert the same two causes of action.
On November 26, 2025, Plaintiff filed a Doe amendment substituting defendant Yield Engineering Systems, Inc. (“YESI”) for a Doe defendant. The FAC alleges defendant Chen was acting within the scope of agency and/ or employment of defendant YESI. (FAC, ¶1).
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On March 16, 2026, defendants Chen and YESI filed the motion now before the court, a demurrer to Plaintiff’s FAC.
II. LEGAL STANDARD Pursuant to Code of Civil Procedure section 430.10, a party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e)). A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn)). When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078). In ruling on a demurrer, the Court treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank)).
“A general demurrer will lie where the complaint ‘has included allegations that clearly disclose some defense or bar to recovery.’ [Citation.]” (Cryolife, Inc. v. Superior Court (2003) 110 Cal.App.4th 1145, 1152). Defendants Chen and YESI generally demur to Plaintiff’s first cause of action for negligence because the FAC includes allegations that Plaintiff released defendant Chen and other parties from all liability for the accident. (FAC, ¶12 and Exh. A). “The existence of a valid release is a complete defense to a tort action against the releasee.” (Rodriguez v. Oto (2013) 212 Cal.App.4th 1020, 1026 (Rodriguez)).
Where the complaint's allegations or judicially noticeable facts reveal the existence of an affirmative defense, the "plaintiff must 'plead around' the defense, by alleging specific facts that would avoid the apparent defense. Absent such allegations, the complaint is subject to demurrer for failure to state a cause of action . . . .” (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 824).
III. ANALYSIS In the FAC, Plaintiff attempts to plead around the release by alleging, as his second cause of action, a basis for rescission of the release. Defendants Chen and YESI contend, however, that Plaintiff has not sufficiently stated a claim for rescission, at least not against the moving defendants because they are not parties to the release agreement despite the FAC’s allegation that “Plaintiff and Defendant Chen entered into a written settlement agreement and release of all claims.” (See FAC, ¶12).
Moving defendants direct the court’s attention to the copy of the release agreement attached to the FAC noting that the release agreement is signed only by Plaintiff and his attorney. 4 Defendants Chen and YESI are not signatories to the release agreement. That moving defendants are not parties to the release agreement can further be inferred from Plaintiff’s allegation that the $15,000 Plaintiff received in consideration for the release was paid by “the insurer of the rental automobile that defendant [Chen] was driving;”
4 “[F]acts contained in the exhibit take precedence over and supersede any inconsistent or contrary allegations in the pleading.” (Nealy v. County of Orange (2020) 54 Cal.App.5th 594, 597). 15
Plaintiff’s allegation that “the $15,000 policy [was] provided by the car rental company;” and the release agreement’s identification of “SIXT RENT-A-CAR LLC” and “EMPIRE FIRE AND MARINE INSURANCE COMPANY” as the first two releasees. (See FAC, ¶¶12 and 13 and Exh. A).
By seeking to enforce the release agreement and citing to Rodriguez, supra, 212 Cal.App.4th 1020, it is clear defendants Chen and YESI recognize they are third party beneficiaries of the release agreement, even if they are not one of the contracting parties thereto.
The governing substantive principle is that a nonparty who claims benefits under the contract is entitled to do so as long as the claimed benefit does not flow to him as a mere incident of the agreement, but is one the contracting parties intended to confer. (Rest.2d Contracts, § 302; see Civ. Code, § 1559 [contract “made expressly for the benefit” of third person “may be enforced by him at any time before the parties thereto rescind it”](Rodriguez, supra, 212 Cal.App.4th at p. 1028).
Here, defendants Chen and YESI seek to enforce the release as third party beneficiaries of the release agreement and, as Rodriguez states, moving defendants may do so “at any time before the parties [to the release agreement] rescind it.” (See also Civ. Code, §1559—“A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”) In opposition, Plaintiff claims to be ignorant of the identity of the other contracting part(ies) to the release agreement. The court would presume the other named releasees identified above, but will leave it to Plaintiff to make that determination.
Plaintiff also suggests a release agreement need only be signed by the releasor. However, “Release agreements are governed by the generally applicable law of contracts.” (Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348). And, “It is essential to the existence of a contract that there should be parties capable of contracting.” (Civ. Code, §1550). Consequently, the court will agree with moving defendants that Plaintiff has not properly stated a cause of action for rescission directed at the moving defendants.
Moving defendants argue, additionally, that although rescission may be based upon a unilateral mistake, such unilateral mistake must be accompanied by a shared misunderstanding or the other contracting party must contribute to the mistake by misrepresentation, even if innocently. (Civ. Code, §1689, subd. (b)(1); Crocker-Anglo Nat'l Bank v. Kuchman (1964) 224 Cal.App.2d 490, 496 – 497). Plaintiff, at paragraph 15 of the FAC, has alleged defendant Chen “knew of or suspected [Plaintiff’s mistake as defendant Chen] knew that he had an insurance policy with Travelers Insurance which might provide coverage for Plaintiff’s damages.” Plaintiff, in opposition, cites the full relevant text of Civil Code section 1689, subdivision (b)(1), which states:
A party to a contract may rescind the contract in the following cases: (1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party. (Emphasis added).
As discussed above, defendant Chen is not a party to the release agreement but rather an intended third party beneficiary. To obtain rescission, Plaintiff must allege that his unilateral mistake was induced by or known to a contracting party, not a third party beneficiary.
As to the moving defendants’ last argument that Plaintiff has not restored “to the other party everything of value which he has received from him under the contract,” as is required to effect a rescission pursuant to Civil Code section 1691, the court agrees with Plaintiff that Civil Code section 1691 gives a rescinding party the option of
“offer[ing] to restore” the consideration received and allows “the service of a pleading in an action or proceeding that seeks relief based on rescission [to] be deemed to be such notice [of rescission] or offer [to restore] or both.”
IV. CONCLUSION Based on the foregoing, defendants Chen and YESI’s demurrer to Plaintiff’s FAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is SUSTAINED with 10 days’ leave to amend. The Court will prepare the formal Order.
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