Li Guan v. Yongmei Hu

FACTUAL AND PROCEDURAL SUMMARY

In 2010, Hu became romantically involved with Qi Wei Chen. At Chen's request, *172 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 Chen 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…

The trial court reached the right result (a judgment in favor of Li Guan (Guan) and against Yongmei Hu Hu)), but for the wrong reasons. Contrary to what the trial court found, Guan proved his rescission cause of action. Guan's rescission cause of action had two prongs, one based on fraud and one based on a failure of consideration. The trial court correctly found that Guan had not proved his fraud theory of rescission. The trial court, however, failed to consider the second potential basis for the rescission cause of action when crafting its statement of decision. The evidence unequivocally established the failure of consideration basis for rescission. The court's error was compounded by Guan, who, instead of advising the trial court of its omission, attempted to resuscitate his breach of contract claim which had been dismissed with prejudice from the case months before trial.

Similarly, while the majority correctly determines that the judgment for Guan *183 should be affirmed, its Sherlockian efforts to conclude that a cause of action which the trial court had expressly dismissed had not really been dismissed undermine the sacrosanct principles of procedural due process, notice,…