Filed 8/22/16 Liun v. River Forest Financial CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

HELEN LIN,

Plaintiff and Appellant,

v.

RIVER FOREST FINANCIAL, LLC,

Defendant and Respondent.

 B267167

 (Los Angeles County

 Super. Ct. No. EC058565 )

APPEAL from a judgment of the Superior Court of Los Angeles County, Donna 

Fields Goldstein, Judge. Reversed and remanded with directions.

Kaladjian Law Office, Hrair Kaladjian, for Plaintiff and Appellant.

No appearance for Defendant and Respondent.

_______________________
2

Plaintiff and appellant Helen Lin appeals from a judgment of dismissal following 

an order sustaining a demurrer without leave to amend in favor of defendant River Forest 

Financial LLC (River Forest) in this action for real estate investment fraud.1 On appeal, 

Lin contends her third amended complaint states causes of action for fraud and 

constructive fraud. We agree, and therefore, we reverse with directions.

FACTS

In November 2008, Lin’s friend Grace Hu said she had been investing with 

partners to purchase property at foreclosure auctions. She recommended Lin invest with 

them, too. Hu offered to act as an intermediary between her partners and Lin. At Lin’s 

office, Hu said if Lin invested $150,000 with these partners to purchase property at 

foreclosure, the partners would maintain the property, pay the taxes, and perform all the 

necessary legal work to evict existing tenants or owners. Once the property was sold, 

after deducting any maintenance costs or taxes advanced on Lin’s behalf, the remaining 

profit would be split by the partners. Hu said she had entered into similar arrangements 

with the same investors and profited from sales.

On November 18, 2008, Hu called Lin and said to purchase a cashier’s check for 

an upcoming foreclosure auction to buy property with the partners. She instructed Lin to 

make the cashier’s check payable to Lin or Hu’s employee David Chung in the amount of 

$150,000. Lin purchased a cashier’s check in her own name in the amount of $150,000, 

and provided it to Hu.

A foreclosure auction was held on November 26, 2008. Gene Kucherov is a 

managing agent and partner of both River Forest and Elevation Investments LLC. 

Kucherov purchased a property at the auction for $250,000, which he paid for with Lin’s 

cashier’s check and $100,000 provided by a partnership of River Forest and Elevation. 

Lin did not attend the auction. The trustee, Cal-Western Reconveyance Corporation, 

 

1 No respondent’s brief has been filed on appeal.
3

accepted and endorsed Lin’s cashier’s check for the purchase.

Kucherov provided information to Cal-Western to complete a declaration of 

trustee’s sale. The declaration provided the trustee’s sale number, but did not state the 

property’s address. The declaration stated that the property was sold to Kucherov and 

vested as follows: “River Forest Financial 75%, Elevation Investments 25%, Helen 

Lin[.]” The declaration was executed by Cal-Western and witnessed by Kucherov.

Chung called Lin to tell her that a property had been successfully purchased at the 

foreclosure auction. The trustee gave the declaration of trustee’s sale to Chung, who kept 

it at Hu’s office. Hu and Chung believed the vesting information on the declaration 

showed Lin had an interest in the property and confirmed Lin’s purchase of the property 

with partners, which is what they told her.

On November 29, 2008, the trustee provided a deed to Kucherov with instructions 

for recording. In the trustee’s deed, the trustee granted and conveyed the property to the 

following grantees: on one line, it listed “RIVER FOREST FINANCIAL LLC 75%, 

ELEVATION INVESTMENTS 25%” and on a second line it listed “HELEN LIN[.]” 

Kucherov erased Lin’s name from the trustee’s deed and recorded it on December 

30, 2008. River Forest executed a quitclaim deed relinquishing its interest in the property 

to Elevation, which was recorded on January 6, 2009.

On February 24, 2009, Elevation sold the property to Mireya Coronado. 

Kucherov executed the grant deed as general partner of Elevation to convey the property 

to Coronado. The grant deed was recorded on March 26, 2009.

In April of each year from 2009 to 2012, Lin called Hu and inquired about the 

status of the property. Hu confirmed that she had spoken with the investment partners, 

who said Lin would recoup her investment upon the sale of the property, and that the 

property was being maintained by the purchasing partners until an economic recovery, 

when the property could be sold.

In May 2012, Hu told Lin that she had learned the address of the property and 

discovered it had been sold. Chung and Hu gave the declaration of trustee’s sale to Lin. 

Lin believed the vesting information provided in the declaration showed she had an 
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interest in the property. Lin and Hu brought the declaration of trustee’s sale to an 

attorney, who did not realize the document was in Hu’s possession until May 2012. In 

May 2012, Lin obtained a copy of the recorded trustee’s deed and discovered her name 

had been omitted. On July 23, 2012, Cal-Western provided documents showing the 

trustee’s deed that Cal-Western prepared and provided to Kucherov for recording had 

included Lin’s name as a grantee.

Kucherov, Elevation and River Forest, ratified Hu’s representations to Lin, 

because they knew of Hu’s relationship with Lin, accepted Lin’s cashier’s check through 

Hu, and benefitted financially. Hu’s representations were false, which the defendants 

knew were false, because they intended to defraud Lin and sell the property without 

payment to Lin, while continuing to represent that the property had not been sold. Lin 

reasonably relied on Hu’s representations, as a long-time trusted friend who said she had 

done similar business transactions with these partners in the past.

PROCEDURAL BACKGROUND

Lin filed a complaint on May 29, 2012. She filed an amended complaint for quiet 

title against Coronado, for fraud and constructive fraud against Elevation, and for 

negligence against Cal-Western. She added Kucherov and River Forest in place of Doe 

defendants. The trial court sustained a demurrer without leave to amend as to the quiet 

title cause of action against Coronado. Judgment was entered in favor of Coronado. Lin 

appealed. On December 18, 2014, this appellate court affirmed the judgment in favor of 

Coronado on the cause of action for quiet title. (Lin v. Coronado (2014) 232 Cal.App.4th 

696, 698.)

Lin filed the operative third amended complaint on March 12, 2015, alleging 

causes of action against Kucherov, River Forest, and Elevation, for fraud and 

constructive fraud. River Forest filed a demurrer on the ground that the complaint failed 

to plead fraud with particularity. Lin opposed the demurrer. The trial court sustained the 

demurrer without leave to amend on the ground that Lin had failed to allege fraud with 
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particularity. The trial court entered a judgment of dismissal as to River Forest on 

August 7, 2015. Lin filed a timely notice of appeal from the judgment in favor of River 

Forest.

DISCUSSION

Standard of Review

“We independently review the ruling on a demurrer and determine de novo 

whether the complaint alleges facts sufficient to state a cause of action. [Citation.] We 

assume the truth of the properly pleaded factual allegations, facts that reasonably can be 

inferred from those expressly pleaded, and matters of which judicial notice has been 

taken. [Citation.] We construe the pleading in a reasonable manner and read the 

allegations in context.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 

Cal.App.4th 97, 111.)

Pleading Requirements for Fraud

Lin contends the complaint states causes of action against River Forest for fraud 

and constructive fraud. After de novo review, we conclude the allegations of the 

complaint are sufficient to state causes of action for fraud based directly on Kucherov’s 

conduct, as well as based on theories of agency and ratification related to Hu’s 

representations, and for constructive fraud.

“The elements of a cause of action for fraud are well established and not in 

dispute: (1) a misrepresentation or actionable concealment of fact; (2) knowledge of 

falsity or the duty of disclosure; (3) intent to defraud or induce reliance; and (4) actual 

reliance by the plaintiff. [Citations.] The plaintiff must allege and prove that he actually 

relied upon the misrepresentations, and that in the absence of fraud, would not have 

entered into the contract or other transaction. [Citation.]” (The MEGA Life & Health Ins. 
6

Co. v. Superior Court (2009) 172 Cal.App.4th 1522, 1530.)

“‘In California, fraud must be pled specifically; general and conclusory allegations 

do not suffice. [Citations.] “Thus ‘“the policy of liberal construction of the pleadings . . . 

will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ 

[Citation.] [¶] This particularity requirement necessitates pleading facts which ‘show 

how, when, where, to whom, and by what means the representations were tendered.’”’

[Citation.]” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 

Cal.App.4th 821, 837-38.) 

There are exceptions to the specificity requirement, however. (Committee On 

Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217

(Committee).) “Less specificity is required when ‘it appears from the nature of the 

allegations that the defendant must necessarily possess full information concerning the 

facts of the controversy,’ [citation]; ‘[e]ven under the strict rules of common law 

pleading, one of the canons was that less particularity is required when the facts lie more 

in the knowledge of the opposite party . . . .’ [Citation.]” (Ibid.)

“[T]he defendant will not escape liability if he makes a misrepresentation to one 

person intending that it be repeated and acted upon by the plaintiff. [Citations.]” 

(Geernaert v. Mitchell (1995) 31 Cal.App.4th 601, 605.) “Restatement Second of Torts, 

section 533, states that ‘[t]he maker of a fraudulent misrepresentation is subject to 

liability . . . to another who acts in justifiable reliance upon it if the misrepresentation, 

although not made directly to the other, is made to a third person and the maker intends 

or has reason to expect that its terms will be repeated or its substance communicated to 

the other, and that it will influence his conduct.’” (Committee, supra, 35 Cal.3d at p. 

219.)

In addition, “a cause of action based in fraud may arise from conduct that is 

designed to mislead, and not only from verbal or written statements. (See Thrifty–Tel, 

Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1567 [‘A misrepresentation need not be oral; 

it may be implied by conduct.’]; Universal By–Products, Inc. v. City of Modesto (1974) 

43 Cal.App.3d 145, 151 [‘A misrepresentation need not be express but may be implied by 
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or inferred from the circumstances.’].)” (Tenet Healthsystem Desert, Inc. v. Blue Cross 

of California, supra, 245 Cal.App.4th at p. 839.)

In this case, the allegations are sufficient to state a cause of action for fraud against 

River Forest based directly on the acts of its agent Kucherov. Kucherov conducted the 

investment transaction with Lin through an intermediary, so Kucherov necessarily 

possesses greater knowledge than Lin about specific representations he made to the 

intermediary to induce investments. However, Kucherov’s representations can be 

inferred from his conduct and the circumstances of the purchase transaction. Kucherov 

accepted and used Lin’s funds to purchase property. Kucherov told the trustee at the 

foreclosure auction that Lin was a grantee who had an interest in the property, along with 

River Forest and Elevation. It can be inferred from these circumstances that Kucherov 

agreed on behalf of River Forest to invest in property with Lin. But Kucherov did not 

accurately reflect Lin’s interest in the documentation. Kucherov altered the grantees 

listed on the deed by removing Lin’s name before recording the deed. It can be inferred 

from these circumstances that the representations about the investment arrangement were 

false. The property was sold to a third party, but none of the proceeds were paid to Lin. 

In fact, the defendants reported for several years that the partners were maintaining the 

property and had not sold it. These allegations are sufficient to state a cause of action for 

fraud against River Forest based on Kucherov’s actions.

We note that the allegations are also sufficient to state a cause of action for fraud 

against River Forest based on Hu’s representations to Lin as an agent of River Forest and 

River Forest’s ratification of her representations. The complaint alleges that Hu made 

representations to Lin as an agent of River Forest. “An allegation of agency is an 

allegation of ultimate fact that must be accepted as true for purposes of ruling on a 

demurrer. [Citation.]” (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 

212.)

“An agency is either actual or ostensible.” (Civ. Code, § 2298.) Actual agency 

requires the principal to designate in some way that the agent acts for the principal, and 

the agent to agree to act on the principal’s behalf and subject to the principal’s control. 
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(UFCW & Employers Benefit Trust v. Sutter Health (2015) 241 Cal.App.4th 909, 931.)

An agency relationship can be created by written authorization, oral consent, or by 

implication from the parties’ conduct. (Flores v. Evergreen at San Diego, LLC (2007) 

148 Cal.App.4th 581, 587.) However, words or conduct by both the principal and the 

agent are required to form an agency relationship. (Id. at pp. 587-588.)

“Ostensible authority is such as a principal, intentionally or by want of ordinary 

care, causes or allows a third person to believe the agent to possess.” (Civ. Code, 

§ 2317.) “Ostensible authority must be established through the acts or declarations of the 

principal and not the acts or declarations of the agent. [Citation.] However, the doctrine 

of ostensible authority extends to subagents; hence the principal is similarly liable to third 

persons for representations made by subagents. [Citation.] Also, where the principal 

knows that the agent holds himself out as clothed with certain authority, and remains 

silent, such conduct on the part of the principal may give rise to liability. [Citation.]” 

(Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 761.)

An actual agency may be created by ratification. (Civ. Code, § 2307; van’t Rood 

v. County of Santa Clara (2003) 113 Cal.App.4th 549, 571.) Even if an agent, at the time 

of the doing of an act, is without actual or ostensible authority, “the act may be rendered 

valid and binding on the principal, as of the time the unauthorized act was done, if the 

principal ratifies and thus gives effect to it.” (3 Witkin, Summary of Cal. Law (10th ed. 

2005) Agency and Employment, § 139, p. 184.)

“The liability of the principal for torts of the agent or employee is not always 

based upon the doctrine of respondeat superior. In fraud cases, a principal may be liable 

where he intentionally misinforms or withholds information from the agent and the agent 

thereupon innocently misrepresents. (Rest.2d, Agency, § 256; 1 Witkin, Summary of 

Cal. Law (8th ed. 1973) Agency and Employment, § 153, p. 753.)” (Barrett v. Bank of 

America (1986) 183 Cal.App.3d 1362, 1370.)

In this case, Lin has alleged a cause of action for fraud against River Forest based 

on Hu’s representations as an agent of River Forest, and River Forest’s ratification of her 

representations. The complaint alleges that Hu acted as an actual or ostensible agent of 
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River Forest when she made representations to Lin about purchasing property in 

partnership with River Forest. River Forest knew that the representations Hu made were 

false, and River Forest ratified Hu’s representations by entering into the transaction with 

Lin. These allegations were sufficient at the pleading stage to state a cause of action 

against River Forest based on Hu’s representations. Therefore, in addition to the cause of 

action for fraud based on Kucherov’s actions, the complaint states a cause of action for 

fraud based on Hu’s representations.

The complaint also states a cause of action for constructive fraud. “Constructive 

fraud ‘“‘“is a unique species of fraud applicable only to a fiduciary or confidential 

relationship.”’”’ (Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 763.) 

‘Constructive fraud “arises on a breach of duty by one in a confidential or fiduciary 

relationship to another which induces justifiable reliance by the latter to his prejudice.” 

[Citation.] Actual reliance and causation of injury must be shown. [Citation.]’ (Tyler v. 

Children's Home Society (1994) 29 Cal.App.4th 511, 548, italics omitted; see also 

Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516, fn. 14, [elements of constructive 

fraud cause of action are ‘(1) a fiduciary or confidential relationship; (2) nondisclosure 

(breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury 

(causation)’].) ‘“‘In its generic sense, constructive fraud comprises all acts, omissions 

and concealments involving a breach of legal or equitable duty, trust, or confidence, and 

resulting in damages to another. [Citations.] Constructive fraud exists in cases in which 

conduct, although not actually fraudulent, ought to be so treated—that is, in which such 

conduct is a constructive or quasi fraud, having all the actual consequences and all the 

legal effects of actual fraud.’ [Citation.]”’ (Estate of Gump (1991) 1 Cal.App.4th 582, 

601; see Civ. Code, § 1573; Engalla v. Permanente Medical Group, Inc. (1997) 15 

Cal.4th 951, 981–982, fn. 13.) ‘[W]hether a fiduciary duty has been breached, and 

whether [conduct] constitutes constructive . . . fraud, depends on the facts and 

circumstances of each case.’ (Assilzadeh v. California Federal Bank (2000) 82 

Cal.App.4th 399, 415.)” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 

Cal.App.4th 1105, 1131.)
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Lin alleged that she purchased property in partnership with River Forest and 

Elevation. Kucherov accepted and used Lin’s funds to purchase the property. He 

informed the trustee at the auction that Lin had an interest in the property, but he did not 

provide accurate information about the ownership interests in the property and he altered 

the trustee’s deed to remove Lin as a grantee. River Forest had a fiduciary duty to Lin as 

a partner, which Kucherov breached when he eliminated any record of her interest in the 

property, sold the property without her knowledge, and misrepresented the status of the 

property for years so that she could not discover the fraud committed against her.

DISPOSITION

The judgment and the order sustaining the demurrer without leave to amend are 

reversed. The trial court is directed to enter a new and different order overruling the 

demurrer. Appellant Helen Lin is awarded her costs on appeal.

KRIEGLER, Acting P.J.

We concur:

BAKER, J.

RAPHAEL, J.

 



Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant 

to article VI, section 6 of the California Constitution.