Case Name: David Wexhler v. Steve Weinstein, et al.
Case No.: 1-14-CV-263436

Plaintiff David Wexhler (“Plaintiff”) alleges that defendant Steve Weinstein (“Defendant”) asked Plaintiff, his childhood friend, for a $450,000 loan in early 2008. (Complaint, ¶¶ 8-9.) From 2008 to 2013, Defendant promised to repay the loan on various terms, but made only one payment of $5,000 in April 2011. (Complaint, ¶¶ 10-18.) On April 8, 2014, Plaintiff filed this action to recover the money he had loaned, asserting claims against Defendant for: (1) breach of contract; (2) fraud and deceit; (3) common counts; (4) breach of contract; (5) unlicensed investment advisor; and (6) conversion. Currently before the Court are Defendant’s demurrer to Plaintiff’s complaint and motion to strike portions thereof.

Demurrer

Defendant demurs to each cause of action asserted by the complaint on the ground that it fails to state a cause of action (Code Civ. Proc., § 430.10, subd. (e)), including because each claim is barred by the applicable statute of limitations, and to the second and third causes of action on the ground that they are uncertain (Code Civ. Proc., § 430.10, subd. (f)).

First and Fourth Causes of Action

The demurrer to the first and fourth causes of action for breach of contract is OVERRULED.

In the first cause of action, Plaintiff alleges that the $450,000 he loaned to Defendant was initially agreed to be “payable on demand,” but Defendant memorialized the parties’ agreement in a March 2008 email stating that the loan would be repaid over a period of two years. (Complaint, ¶¶ 8 and 10.) Defendant subsequently made a number of promises to repay the loan at later times, up to and including by January 2014. (Complaint, ¶¶ 12-18.) In April 2011, Defendant sent Plaintiff a payment in the amount of $5,000, noting on the check that the payment was based on the loan Plaintiff made to Defendant. (Complaint, ¶ 17.)

The statute of limitations for a breach of contract claim is four years where a written contract is at issue (Code Civ. Proc., § 337(1)) and two years where an oral contract is alleged (Code Civ. Proc., § 339(1)). Based on the allegations of the complaint, it is unclear whether the parties’ original agreement concerning the loan was made orally or in writing. (See Complaint, ¶ 8 [“[t]he loan was founded upon several writings”].) Given these unclear allegations, the Court must assume the parties’ agreement was in writing. (See Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010 48 Cal. 4th 32, 42 [demurrer based on statute of limitations will lie only where bar appears “clearly and affirmatively … on the face of the complaint”]).
The statute of limitations on a claim for breach of contract commences to run at the time of the breach (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 221). The breach here occurred when the loan was made in 2008 if the “on demand” payment period alleged in paragraph 8 of the complaint is assumed (see Buffington v. Ohmert (1967) 253 Cal.App.2d 254, 256 [“For purposes of the statute of limitations, loans payable on demand are deemed payable at their inception, and the statute begins to run from such time.”]), or else in March 2010 if the two-year repayment period following Defendant’s email, alleged in paragraph 10 of the complaint, is used. Thus, the statutory period would have expired either in early 2012 or in March 2014 in the absence of any extensions of the limitations period.

However, Plaintiff alleges that in April 2011, Defendant sent him a payment in the amount of $5,000, noting on the check that the payment was based on the loan Plaintiff made to Defendant. (Complaint, ¶ 17.) A signed written acknowledgment of a debt takes the case out of the operation of the statute of limitations, even in the absence of new or additional consideration. (See Foristiere v. Alonge (1929) 98 Cal.App. 563, 566-567, citing Code Civ. Proc., § 360 [“No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title, unless the same is contained in some writing, signed by the party to be charged thereby….”) Given that the check was sent within the assumed four-year statutory period, this allegation establishes that Defendant waived so much of the period as had already run, and the statutory period has continued to run from April 2011 for another four years and will expire in April 2015. (See Vassere v. Joerger (1938) 10 Cal. 2d 689, 692 [“When a debtor makes a new promise before an action is barred upon the original contract, … he … waives so much of the period of limitations as has run in his favor.”].) Consequently, it does not appear from the face of the complaint that the first cause of action is barred by the statute of limitations.

Defendant’s argument that the first cause of action otherwise fails to state a claim is unclear, and the Court finds that Plaintiff has pleaded facts supporting each of the elements of a claim for breach of contract with adequate specificity to state a claim.
In the fourth cause of action, it is alleged that Defendant acknowledged his debt to Plaintiff in January 2013, when he promised to repay Plaintiff by January 2014, “thereby creating a new promise to repay the obligation.” (Complaint, ¶ 32.) Plaintiff does not allege that any consideration supported this promise as would be required to create a new contract, and an acknowledgement in writing, which is not currently alleged by Plaintiff in this cause of action, is otherwise required to revive a time-barred contract against the statute of limitations. This allegation standing alone consequently does not state a claim. (See Kurokawa v. Blum (1988) 199 Cal.App.3d 976, 990 [oral promises unsupported by consideration inadequate to avoid statute of limitations], citing Code Civ. Proc., § 360.) However, the fourth cause of action incorporates by reference the first cause of action, which does state a claim as discussed above. (See Complaint, ¶ 31.)

Second Cause of Action

The demurrer to the second cause of action for fraud and deceit is OVERRULED.

A three-year statute of limitations applies to an action for fraud, which accrues upon “the discovery, by the aggrieved party, of the facts constituting the fraud.” (Code Civ. Proc., § 338, subd. (d).) Plaintiff alleges that he learned Defendant’s promises related to repayment of the loan were false in January 2014. (Complaint, ¶ 23.) His complaint further alleges that in June 2010, Defendant “disputed the terms of the 2008 email and said it was never the agreement the parties had made” and the $450,000 was not a loan but “was transferred to [Defendant] to invest in common stocks, there was never to be any interest payments, and the money was for ‘investments in the market to try to seek higher returns.’” (Complaint, ¶ 14.) Defendant contends that this statement should have put Plaintiff on inquiry notice that Defendant may not intend to keep his alleged promises with respect to the loan, triggering the statute of limitations. (See Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 [“The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.”].) However, reasonable minds could disagree, and this issue is thus not appropriately resolved on demurrer. (See Broberg v. Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 921 [discovery of a claim is generally a question of fact and is properly decided as a matter of law only where the allegations in the complaint can support only one reasonable conclusion].)

Defendant’s argument that the second cause of action otherwise fails to state a claim or is uncertain is lacks merit. Plaintiff has alleged with adequate specificity that Defendant promised to repay the $450,000 loan on demand at 3% interest plus half of all stock market earnings, and that Plaintiff transferred these funds to Defendant in reliance on his promises. (Complaint, ¶¶ 8 and 9.) Plaintiff also alleges that Defendant knew his representations were false and made them with the intent to induce Plaintiff’s reliance. (Complaint, ¶¶ 25 and 27.)

Third Cause of Action

The demurrer to the third cause of action for common counts is OVERRULED.

The common counts are merely pleading devices, and are subject to whatever statute of limitations governs the claims upon which they are based. (See Costerisan v. DeLong (1967) 251 Cal.App.2d 768, 769 [common count claims to recover balance due for deliveries of hay governed by four-year statute of limitations for claim for breach of written agreement].) Here, Plaintiff seeks the same recovery in his claim for common counts as in his other claims, and this claim is based upon the same facts as the others. Given that Plaintiff’s claims for breach of contract and fraud survive demurrer, his claim for common count does as well. (See McBride v. Boughton (2004) 123 Cal. App. 4th 379, 394 [“[w]hen a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable” and “must stand or fall” with the other claim]; Carlton Browne & Co. v. Super. Ct. (Charterhouse Investment Co.) (1989) 210 Cal. App. 3d 35, 39 [trial court properly overruled demurrer to claims for breach of contract and common count where statute of limitations was waived pursuant to Code of Civil Procedure section 360.5]; cf. Iverson, Yoakum, Papiano & Hatch v. Berwald (1999) 76 Cal. App. 4th 990, 996 [“where services have been rendered under a contract which is unenforceable because not in writing, an action generally will lie upon a common count for quantum meruit” subject to a two-year statute of limitations], italics added.)

Defendant’s argument that the third cause of action otherwise fails to state a claim or is uncertain is entirely conclusory and lacks merit. (See Farmers Ins. Exchange v. Zerin (1997) 53 Cal. App. 4th 445, 460 [“the allegation of claims using common counts is good against special or general demurrers” and “[a] cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff”], internal citations and quotations omitted.)

Fifth Cause of Action

The demurrer to the fifth cause of action for “unlicensed investment advisor” is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND on the ground that this claim fails to state facts sufficient to constitute a cause of action.

In this claim, Plaintiff alleges that Defendant “acted as securities brokers and investment advisors without a license within this State in violation of the qualification provisions of the Corporate Securities Law, and other relevant statutes” (sic), and cites to provisions of the Corporations Code defining “Investment Adviser” and “Broker-Dealer” and establishing the statute of limitations for claims under several sections of the Code not otherwise cited by Plaintiff. (Complaint, ¶¶ 37-40.) It is not clear from these allegations which specific statutory provision or provisions Plaintiff contends that Defendant violated and what actions by Defendant are at issue in this claim. Consequently, the fifth cause of action fails to state a claim. (See Covenant Care, Inc. v. Super. Ct. (Inclan) (2004) 32 Cal.4th 771, 790 [noting the general rule that statutory causes of action must be pleaded with particularity]; Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619 [demurrer properly sustained where the “complaint identifies no particular section of the statutory scheme which was violated and fails to describe with any reasonable particularity the facts supporting violation”].)

Defendant contends that the demurrer to this claim should be sustained without leave to amend on the basis that the claim was filed outside the statute of limitations. As described above, while Plaintiff does not state precisely which statutory provisions authorize this claim, he cites Corporations Code section 25506, subdivision (b) as the authority governing its statute of limitations. That section provides that claims must be “brought before the expiration of five years after the act or transaction constituting the violation or the expiration of two years after the discovery by the plaintiff of the facts constituting the violation, whichever shall first expire.” (Corp. Code, § 25506, subd. (b).) Defendant contends that Plaintiff’s claim is time-barred in light of the June 2010 email putting him on notice that Defendant disputed his obligations concerning the loan. However, given that it is unclear how Plaintiff contends Defendant violated the Corporations Code, it cannot be determined whether Defendant’s repudiation of the loan “constitut[ed] the violation” at issue, and whether the email consequently caused the two-year statute of limitations established by Corporations Code section 25506, subdivision (b) to commence to run. Plaintiff is accordingly permitted leave to amend this claim to more clearly allege the statutory violation at issue.
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Sixth Cause of Action

The demurrer to the sixth cause of action for conversion is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

To state a claim for conversion, a plaintiff must allege ownership or a right to possession of the property at issue above and beyond a contractual right of payment. (See Farmers Ins. Exchange v. Zerin, supra, 53 Cal. App. 4th at p. 452 [“a mere contractual right of payment, without more, will not suffice” to state a claim for conversion]; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App. 4th 221, 233 [purchaser of real property did not state a claim for conversion of deposit where title to deposit had passed to seller and deposit was not paid into escrow].) Here, Plaintiff alleges that Defendant is in possession of $450,000 loaned to him by Plaintiff (Complaint, ¶¶ 48-49), but does not allege an ownership interest in or a right to possession of the funds other than that provided by the parties’ alleged agreement (for example, he does not allege that he retained title to the funds or there is a lien on the funds). The sixth cause of action consequently fails to state a claim.

Motion to Strike

Defendant’s motion to strike the language at paragraph 17 of the complaint is DENIED. As an initial matter, Defendant’s request is based upon a document of which he seeks judicial notice (assertedly, the April 2011 check alleged by Plaintiff), but he did not file a separate request for judicial notice of this document as required by the California Rules of Court. (See Cal. Rules of Court, rule 3.1113(l).) Furthermore, while Defendant argues that this document shows, contrary to Plaintiff’s allegation, that “[t]here is no notation on the check” (Motion to Strike, p. 3), the document in fact shows an illegible notation in the “memo” line of the check depicted, as well as a series of numbers written above the amount of the check. Since it is impossible to decipher these notations from the face of the document, the document does not necessarily contradict Plaintiff’s allegation.

Defendant’s motion to strike is also DENIED as to the allegation at paragraph 29. The allegation that Defendant became indebted to Plaintiff within the past four years is supported by Plaintiff’s allegation concerning the April 2011 check.

The motion to strike is deemed MOOT as to the allegations in paragraphs 44, 45, and 47 of the complaint in light of the Court’s rulings sustaining Defendant’s demurrer to the fifth and sixth causes of action.

The motion to strike is DENIED as to paragraphs 3 and 4 of Plaintiff’s prayer for relief. Defendant argues that Penal Code section 496 specifies the criminal punishment for receiving stolen property and “has nothing whatsoever to do with the allegations of the complaint.” (Motion to Strike, p. 5.) However, subdivision (c) of that section provides that “[a]ny person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.” (Penal Code, § 496, subd. (c); see also Bell v. Feibush (2013) 212 Cal. App. 4th 1041, 1043 [affirming default judgment for breach of contract, fraud, and treble damages under Penal Code section 496, subdivision (c) where plaintiff alleged defendant used false pretenses to
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induce her to loan him money].) Defendant does not contend that the complaint fails to allege facts supporting the conclusion that he violated subdivisions (a) or (b) of section 496.