Case Name: Treble v. Hariri, et al.
Case No.: 18CV321891

This is an action for breach of an oral loan agreement. In December 2007, plaintiff Christopher Treble (“Plaintiff”) entered into an oral loan agreement with defendants Urban Dynamic, LLC (“Urban”) and Perry Hariri (“Hariri”) (collectively, “Defendants”) in which Plaintiff would loan Defendants $500,000 in exchange for repayment on demand with 10% interest per annum, with the condition that the demand could not be made before the occurrence of an Urban liquidity event creating distributable cash resources in such an amount sufficient to fully repay the loan. (See second amended complaint (“SAC”), ¶ 9.) On January 18, 2016, Plaintiff was informed of an Urban liquidity event, and Plaintiff made a written demand for repayment in May 2016. (See SAC, ¶ 10.) On December 19, 2017, Plaintiff made a payment of $124,000, leaving a balance due of $858,365, but Defendants now refuse to make any further payments. (See SAC, ¶ 11; see also complaint, exh. A.) On January 17, 2018, Plaintiff filed a complaint against Defendants, asserting causes of action for breach of contract and common counts. On December 28, 2018, Plaintiff filed the SAC, asserting causes of action against Defendants for breach of contract and common counts. Defendant Hariri demurs to the SAC on the ground that the alleged oral contract is invalid under the statute of frauds. Defendant Urban seeks to join in Hariri’s demurrer.

Defendant Urban’s request for joinder is GRANTED.

Defendants argue that the alleged oral agreement violates both Civil Code section 1624, subdivisions (a)(1) and (a)(7). Subdivision (a)(1) states that an oral contract is invalid if it is “[a]n agreement that by its terms is not to be performed within a year from the making thereof,” and subdivision (a)(7) states that an oral contract is invalid if it is “[a] contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit.”

As to subdivision (a)(1), Defendants argue that the SAC alleges that “the parties knew… that it would take some time before a Sufficient Liquidity Event occurred for the loan to be repayable… potentially years.” However, the alleged agreement does not by its terms state that it is not to be performed within a year from the making. (See Lacy v. Bennett (1962) 207 Cal.App.2d 796, 800–801 (in action for breach of oral loan agreement, stating that “[t]he fact that performance within one year is not probable under the terms of the agreement does not bring it within the statute of frauds”; also stating that the term “‘[l]ong term’ does not of itself denote any specific length of time” and thus does not, by its terms demonstrate a period of longer than one year); see also Keller v. Pacific Turf Club (1961) 192 Cal.App.2d 189, 19 (stating that “[e]ven though a promise may not by its terms be performed within a year, yet, it is not inhibited by the statute if there is a possibility that it may be”).) Defendants’ argument as to subdivision (a)(1) lacks merit.

Defendants also argue that “the alleged oral agreement violates Civil Code section 1624(a)(7), under which a ‘contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000)’ must be in writing and ‘subscribed by the party to be charged’ or else the contract is invalid. It does appear that subdivision (a)(7) applies. However, this argument ignores the allegation that Defendants made a payment towards the balance, thereby partly performing, and Plaintiff fully performed his portion of the contract by providing the loaned amount. (See Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 555 (stating that “[p]art performance allows enforcement of a contract lacking a requisite writing in situations in which invoking the statute of frauds would cause unconscionable injury… [s]uch conduct satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached”); see also Dallman Co. v. Southern Heater Co. (1968) 262 Cal.App.2d 582, 588 (stating that “[a]n oral agreement (otherwise within the statute of frauds) will be held enforceable if… the defendant, having accepted the benefit of the contract, would be unjustly enriched by its nonenforcement”); see also Goble v. Dotson (1962) 203 Cal.App.2d 272, 279 (stating that “[w]here a party accepts the benefits of an oral contract which he has agreed to perform, he will be unjustly enriched if the contract is not enforced; and the statute of frauds will not be applied to such contract”); see also Estate of Housley (1997) 56 Cal.App.4th 342, 352 (stating that “[t]he oral agreement will be held binding, regardless of the absence of any representation by the defendant [that no writing is required], if … the defendant, having accepted the benefits of the oral contract, would be unjustly enriched by nonenforcement”).) The demurrer to the SAC is OVERRULED in its entirety.