Case Number: 19LBCV00495 Hearing Date: February 25, 2020 Dept: S27

TENTATIVE RULING

The demurrer is OVERRULED as to the first, second, third, and fourth causes of action.

The demurrer is SUSTAINED without leave to amend as to the fifth cause of action.

The motion to strike is DENIED.

ALLEGATIONS IN THE COMPLAINT

Plaintiff Martha Lydia Linero (“Plaintiff”) commenced this action on August 9, 2019, against Defendants Fernando Hernandez, d/b/a Puerto Vallarta Construction, Ruth Leticia Ramirez, Del Sol Realty and Associates, Andalucia Lending Institution, Inc., and Spectrum Lighting Services (“Defendants.”) The action arises out of the alleged breach of promissory notes made by Defendant Hernandez as borrower where Lydia Rojas, Plaintiff’s predecessor-in-interest, was the beneficiary. (Compl., ¶ 1.)

Defendant Hernandez, a real estate broker, issued a series of promissory notes beginning in 1993 whereby he was the borrower and Lydia Rojas was the beneficiary. Notes issued between 1993 and 2001 for the benefit of Lydia Rojas culminated into one note issued by Defendant Hernandez (hereinafter “Note A”) on June 13, 2001 for $200,000, which was “equal to prior Notes and accrued interest.” (Compl., ¶ 16; see also Compl., Exh. A.) Note A states that the amount of the loan was to become due within one year, with a monthly extension until paid in full or within two months if Ms. Rojas or her heirs needed the money. (Compl., Exh. A.)

Thereafter, Defendant Hernandez issued a separate note payable to Lydia Rojas on July 23, 2002 for $60,000 to build a house (hereinafter “Note B”). That note was replaced with a second note on January 10, 2003, for the new amount of $70,000. (Compl., Exh. B.) Note B states that Defendant Hernandez was to make monthly payments on the amount with a 15% yearly interest. (Id.) Payments on both Note A and Note B were made by Defendant Hernandez, Del Sol Realty, Ruth Leticia Ramirez, and Puerto Vallarta Construction, Inc. until August 10, 2017, at which time all payments ceased. (Compl., ¶ 25.) Ms. Rojas passed away in April of 2018. (Id. ¶ 31.)

Plaintiff brings the instant action based upon the alleged breach of Note A and Note B. The complaint alleges the following causes of action:

Breach of Promissory Note as against Defendant Hernandez

Open Book Account as against Defendant Hernandez

Money Lent as against Defendant Hernandez

Alter Ego Liability as against all Defendants

Unjust Enrichment as against all Defendants.

DISCUSSION

REQUEST FOR JUDICIAL NOTICE

Defendants request that the court take judicial notice of Plaintiff’s complaint in the instant action. The Court notes that such a request is not necessary as the complaint is already part of the record. Additionally, Defendants’ attached copy of the complaint contains handwritten alterations that were not present in the original. Accordingly, the Court denies Defendants’ request.

DEMURRER

Demurrer Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be.

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan 39 Cal.3d 311 (1985).) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under CCP § 430.10 [grounds], § 430.30 [as to any matter on its face or from which judicial notice may be taken], and § 430.50(a) [can be taken to the entire complaint or any cause of action within]. Specifically, a demurrer may be brought per CCP § 430.10(e) if insufficient facts are stated to support the cause of action asserted. Per CCP §430.10(a) a demurrer may be brought where the court has no jurisdiction of the subject of the cause of action alleged in the pleading. Furthermore, demurrer for uncertainty will be sustained only where the complaint is so bad that the defendant cannot reasonably respond. (CCP § 430.10(f).)

However, in construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations. (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3rd 764, 769.) And, if the facts pled in the complaint are inconsistent with facts which are incorporated by reference from exhibits attached to the complaint, the facts in the incorporated exhibits control. Further, irrespective of the name or label given to a cause of action by the plaintiff, a general demurrer must be overruled if the facts as pled in the body of the complaint state some valid claim for relief. Special demurrers are not allowed in limited jurisdiction courts. (CCP § 92(c).)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)

Finally, CCP section 430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (CCP § 430.41(a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (CCP § 430.41(a)(2).) Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts. (CCP § 430.41(a)(3).)

Meet and Confer

The Court finds that Defendants have complied with the meet and confer requirements pursuant to Code of Civil Procedure section 430.41 by communicating telephonically with Plaintiff’s counsel and sending correspondence regarding deficiencies in Plaintiff’s complaint. (Vega Decl., ¶ 5-7.) While the declaration provided by defense counsel does not specify whether the parties actually communicated over the phone, Plaintiff’s opposition confirms that a telephone conversation between the parties took place. (Opp., p. 2.)

Demurrer Analysis

Defendants demur to all five causes of action alleged in the complaint.

Privity of Contract

Defendants argue that the instant demurrer should be sustained because Plaintiff has failed to allege that any of the Defendants were a party to or in privity with a party to the promissory notes at issue in the action. A review of the evidence provided with the complaint demonstrates that Defendant Hernandez was a signatory to both promissory notes at issue and is thus directly in privity of contract with Ms. Rojas. (Compl., Exhs. A – B.) Defendants’ demurrer does not elaborate on how issues regarding privity of contract is applicable to Defendant Del Sol Realty, who is only subject to the fourth cause of action for Alter Ego Liability and the fifth cause of action for Unjust Enrichment.

Accordingly, the demurrer is overruled on this ground.

Statute of Limitations Claim as to All Causes of Action

Defendants argue that Plaintiff’s first cause of action for Breach of Promissory note is barred by the statute of limitations because Plaintiff was required to bring suit within four years of the dates for completion in the promissory notes or the “last purported breach,” which was in 2002. (Demurrer, p. 13.) Additionally, Defendants contend that since the first cause of action is based on the same set of circumstances as the remaining causes of action for open book account, money lent, alter ego liability, and unjust enrichment, all causes of action are thus time-barred. (Id., p. 14.) In opposition, Plaintiff argues that the causes of action in her complaint are not time-barred because payments on the notes on behalf of Defendant Hernandez continued until August 10, 2017. (Opp., p. 3.)

Under Code of Civil Procedure section 337, an action upon “any contract, obligation or liability founded upon an instrument in writing” must generally be brought within four years. Code of Civil Procedure section 360, which Plaintiff relies upon in opposition, addresses when an acknowledgment or promise to pay can constitute a new or continuing contract for purposes of taking a cause of action on contract out of the statute of limitations:

“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, provided that any payment on account of principal or interest due on a promissory note made by the party to be charged shall be deemed a sufficient acknowledgment or promise of a continuing contract to stop, from time to time as any such payment is made, the running of the time within which an action may be commenced upon the principal sum or upon any installment of principal or interest due on such note, and to start the running of a new period of time, but no such payment of itself shall revive a cause of action once barred.”

Notably, part payments made on a note are “deemed to be a sufficient acknowledgment of a ‘continuing contract’ to take the case out of the statute of limitations.” (Eilke v. Rice (1955) 45 Cal.2d 66, 73). Further, the “acknowledgement of a debt already barred by the statute gives rise to a new contract and a new cause of action dating from the acknowledgement.” (Id.)

Here, given that the applicable notes were issued in 2001 and 2003, the statute of limitations on Note A and Note B has run unless, pursuant to Code of Civil Procedure section 360, the continued payments described by Plaintiff constitute a “new or continuing contract” subject to a new statute of limitations. Notably, the causes of action for breach of promissory note and related claims are directed only at Defendant Hernandez. The Court finds that Plaintiff’s allegations stating that Defendant Hernandez continued to make part payments on the notes until August of 2017 are sufficient to take the causes of action outside of the four-year statute of limitations. Ms. Rojas’ acknowledgment in accepting part payments from him until August 10, 2017 after the original debt was barred by the statute of limitations, “gives rise to a new contract and a new cause of action dating from the acknowledgment.” (Eilke at 73.)

Accordingly, the demurrer is overruled on this ground.

Fourth Cause of Action: Alter Ego Liability

Defendants demur to the fourth cause of action for alter ego liability on the ground that Plaintiff has failed to establish “the two main requirements for alter ego liability.” (Demurrer, p. 15.) In order to establish an alter ego theory, a plaintiff must allege: (1) such a unity of interest and ownership between the corporation and its equitable owner that no separation actually exists, and (2) an inequitable result if the acts in question are treated as those of the corporation alone. (Leek v. Cooper (2011) 194 Cal.App.4th 399; Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523.) Whether a party is liable under an alter ego theory is a question of fact. (Leek at 418.) In pleading an alter ego theory, one is required to allege only “ultimate rather than evidentiary facts.” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236; quoting Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.)

Here, the Court finds that, assuming the allegations in Plaintiff’s complaint are true, the complaint states sufficient facts to support a cause of action for alter ego liability as against Moving Defendants. Plaintiff states that payments on the promissory notes were made by a variety of entities, including Defendant Del Sol. As such, Plaintiff has sufficiently alleged that an inequitable result would occur if the breach of promissory note in question are not treated as an act of Defendant Hernandez in his individual capacity.

Accordingly, the demurrer is overruled as to the fourth cause of action on this ground.

Fifth Cause of Action: Unjust Enrichment

Defendants demur to the fifth cause of action for unjust enrichment on the ground that it does not constitute a valid cause of action. Notably, “there is no cause of action in California for unjust enrichment.” (Melchior v. New Line Prods., Inc. (2003, 2nd Dist.) 106 Cal.App.4th 779, 793; McKell v. Wash. Mut., Inc. (2006, 2nd Dist.) 142 Cal.App.4th 1457, 1490; Jogani v. Superior Court (2008, 2nd Dist.) 165 Cal.App.4th 901, 911.) Unjust enrichment is “not a cause of action … or even a remedy, but rather a principle, underlying various legal doctrines and remedies. It is synonymous with restitution.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.)

Accordingly, Defendants’ demurrer is sustained without leave to amend as to the fifth cause of action.

MOTION TO STRIKE

Defendants filed a motion to strike concurrently with the demurrer on September 30, 2019. Subsequently, after Plaintiff’s oppositions to the demurrer and motion to strike had been filed, Defendants filed an “Amended Motion to Strike” on February 18, 2020. The Court notes that the amended motion is untimely and Plaintiff has not had a viable opportunity to review or respond to the contents prior to the hearing. California Rule of Court 3.1322, subdivision (b) requires in relevant part that a motion to strike “must be given within the time allowed to plead…” Accordingly, the Court declines to consider the Amended Motion filed on February 18, 2020, and instead considers the Motion to Strike properly filed on September 30, 2019.

Defendants’ motion to strike appears to restate the arguments made in the demurrer and additionally seeks to strike “references to the terms and derivatives of the words ‘defraud,’ ‘commit fraud,’ ‘misrepresentation and wrongdoing,’ ‘promote injustice,’ and ‘perpetuating fraud’” from the complaint. Pursuant to California Rule of Court 3.1322, subdivision (a), a “notice of motion to strike a portion of a pleading must quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count, or defense. Specifications in a notice must be numbered consecutively.” (emphasis added.) Defendants have not observed these requirements in the Motion to Strike, and accordingly it is denied.

CONCLUSION

The demurrer to the first, second, third, and fourth causes of action is OVERRULED.

The demurrer to the fifth cause of action is SUSTAINED without leave to amend.

The motion to strike is DENIED.