Case Name: Anritsu Company v. Absolute Analysis, Inc.
Case No.: 2015-1-CV-288282

This is an action for breach of contract between business entities. Currently before the Court is the demurrer by Defendant Absolute Analysis, Inc. (“Absolute”) to the 2nd and 3rd causes of action (for breach of written contract and declaratory relief respectively) alleged in the operative First Amended Complaint (“FAC”).

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.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.) In ruling on a demurrer the Court cannot consider extrinsic evidence.

Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed. Similarly, facts appearing in exhibits attached to the complaint (part of the “face of the pleading”) are given precedence over inconsistent allegations in the complaint. (See Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal.App.4th 1443, 1447; Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[T]o the extent the factual allegations conflict with the content of the exhibits to the complaint, we rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”] See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice §3(3) [“It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.”])

However, a demurrer cannot be turned into an evidentiary hearing through attempts to have the Court take judicial notice of contents of documents. “For a court to take judicial notice of the meaning of a document submitted by a demurring party based on the document alone, without allowing the parties an opportunity to present extrinsic evidence of the meaning of the document, would be improper. A court ruling on a demurrer therefore cannot take judicial notice of the proper interpretation of a document submitted in support of the demurrer. In short, a court cannot by means of judicial notice convert a demurrer into an incomplete evidentiary hearing in which the demurring party can present documentary evidence and the opposing party is bound by what that evidence appears to show.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114-115, internal citations omitted.) “[A] court ruling on a demurrer cannot decide a question that may depend on disputed facts by means of judicial notice. This rule applies not only with respect to the interpretation of a contract, but also with respect to its enforceability.” (Id. at 115.)

Defendant Absolute’s request for judicial notice of four documents (exhibits 1-4) is GRANTED in part and DENIED in part.

Defendant Absolute’s request for judicial notice of purported copies of three written agreements between the parties (exhibits 1-3) pursuant to Evid. Code §452(h) is DENIED. The existence of a contract between private parties generally cannot be established by judicial notice pursuant to Evid. Code §452(h). (See Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137 [in wrongful termination action, trial court erred in sustaining employer’s demurrer by taking judicial notice of existence of written employment agreement between the parties.]) While the FAC at 7-14 alleges that the parties entered into two written agreements (the “Partner” agreement and the “Sales” agreement, the subject of the 2nd cause of action, which is alleged to incorporate terms of a written Memorandum of Understanding) the FAC does not directly quote or expressly incorporate by reference terminology from these alleged agreements. Furthermore, it is clear that Absolute seeks judicial notice of these documents in order to have the Court adopt Absolute’s interpretation of their contents. This is not appropriate on demurrer. Absolute’s reliance on the First District’s decision in Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, as support for its request is unpersuasive. In that decision the Court of Appeal took judicial notice of the existence and legal effect of an agreement, not between two private parties, but between the federal government (as the FDIC) and JPMorgan Chase Bank to establish that the federal government had transferred the assets (but not liabilities) of the insolvent Washington Mutual Bank to JPMorgan Chase as of September 25, 2008, months before the complaint in that case had been filed. The Court of Appeal noted that the document, a Purchase and Assumption (“P&A”) Agreement, was noticeable under Evid. Code §452(c) as an official act of the federal government and under §452(h) in part because its existence had been well publicized, it was published to the public on the FDIC’s web site, and its legal effect had previously been interpreted in several federal court decisions. The present case does not present similar facts.

Defendant Absolute’s request for judicial notice pursuant to Evid. Code §452(d) of a copy of the complaint it filed against Plaintiff Anritsu in Ventura County Superior Court (exhibit 4) on Dec. 11, 2015 is GRANTED. Notice is taken of the existence and filing date of this complaint but not of the truth of its allegations.

Defendant Absolute’s demurrer to the FAC’s 2nd and 3rd causes of action on the ground of another action pending (in Ventura County) is OVERRULED as MOOT. The prior March 1, 2016 Order in this case, stating in part that this Court has exclusive concurrent jurisdiction over the parties’ contractual dispute, has resolved this issue.

Defendant Absolute’s demurrer to the FAC’s 2nd cause of action, Breach of Written Contract (the “Sales Agreement”) on the ground that it fails to state sufficient facts is OVERRULED.

It has been many years since a Plaintiff alleging a breach of written contract has been required to set out the terms of the contract verbatim in the complaint or attach a written copy to the pleading as Absolute argues in its demurrer. “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199. See also Miles v. Deutsche Bank National Trust Company (2015) 236 Cal.App.4th 394, 402.) Absolute’s remaining arguments, based on its interpretation of documents the Court has declined to take judicial notice of, constitute arguments based on extrinsic evidence.

To adequately state a breach of contract claim a plaintiff must allege :1) the existence of a (valid) contract; 2) Plaintiff’s performance or excuse for nonperformance; 3) Defendant’s breach, and; 4) damage to Plaintiff resulting from that breach. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App. 4th 221, 228, citing Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 138.) There is no requirement that the elements of a breach of contract claim be pled with specificity. The allegations of the FAC at 27-36 adequately allege the essential elements of the claim. Anritsu’s ability to prove its allegations is irrelevant on demurrer.

Defendant Absolute’s demurrer to the FAC’s 3rd cause of action, Declaratory Relief, on the ground that it fails to state sufficient facts is OVERRULED.

A general demurrer is usually not an appropriate method for testing the merits of a declaratory relief action because the plaintiff is entitled to a declaration of rights even if it is adverse to the plaintiff’s interest. (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 752.) When a complaint sets forth facts showing the existence of an actual controversy between the parties relating to their respective legal rights and duties and requests that these rights and duties be adjudged, the plaintiff has stated a legally sufficient complaint for declaratory relief. It is an abuse of discretion for a judge to sustain a demurrer to such a complaint and to dismiss the action, even if the judge concludes that the plaintiff is not entitled to a favorable declaration. (Id. at 756.)

Here the FAC at 37-41 adequately alleges that a present controversy exists between the parties as to their respective rights and duties under the alleged Sales Agreement, including the question of whether that agreement has been terminated or remains in effect.