Case Name: Robert Hays v. Washington International Insurance Company, et al.

Case No.: 16CV304295

Demurrer by Washington International Insurance Company

Factual and Procedural Background

On or about September 28, 2012, plaintiff Robert Hays (“Hays”) purchased a partially restored classic 1940 Cadillac Capone from Bryan Shisler doing business as VIP Motors (“Shisler”) for over $98,000. (First Amended Complaint (“FAC”), ¶¶4 – 5.) Written advertisements for the vehicle stated the vehicle had a keyless entry system. (FAC, ¶6.) The vehicle does not have a keyless entry system. (Id.) At the time of sale, Shisler agreed to install an air conditioning and heating system for $500 and agreed to make cosmetic and paint repairs, but failed to do so. (FAC, ¶7.) Shisler verbally promised to make the vehicle safe and street legal. (FAC, ¶8.) As a licensed vehicle dealer, Shisler had a responsibility to make the vehicle safe and street legal. (Id.)

On December 18, 2012, plaintiff Hays had not taken possession of the vehicle. (FAC, ¶9.) Shisler told plaintiff that the work previously promised could not be completed without an additional payment of $2,432.54 which plaintiff Hays paid. (Id.) Shisler altered the VIN and used the falsified VIN on the contract and to issue title. (FAC, ¶10.) The VIN identified in the sale contract belongs to a junked car located in Southern California. (FAC, ¶12.)

In April 2014, Shisler represented to plaintiff that the vehicle was in its promised condition, but when plaintiff went to recover the vehicle, the vehicle was not drivable. (FAC, ¶11.) On June 21, 2014, Shisler informed plaintiff the vehicle was ready and available for when plaintiff went to take possession, the vehicle was not drivable. (FAC, ¶13.) On June 8, 2016, plaintiff obtained entry of judgment against Shisler in the amount of $109,830.19.

As a condition of obtaining a license to sell vehicles, Shisler was required to obtain a surety bond in the amount of $50,000. (FAC, ¶18.) Shisler obtained a $50,000 surety bond (number 9146582) from defendant Washington International Insurance Company. (FAC, ¶¶4, 19, and 20.) While the bond was in effect, Shisler defrauded plaintiff. (FAC, ¶20.) Throughout the fall of 2016, plaintiff Hays demanded defendant Washington tender the amount of the bond, but defendant Washington has refused to do so. (FAC, ¶¶15 – 16.)

On December 15, 2016, plaintiff Hays filed a complaint against defendant Washington. On February 21, 2017, defendant Washington filed its answer to plaintiff’s complaint. On September 27, 2017, pursuant to a stipulation and order, plaintiff Hays filed the operative FAC asserting causes of action for:

(1) Breach of Contract
(2) Violation of Vehicle Code 11711

On November 22, 2017, defendant Washington filed a demurrer to plaintiff Hays’ FAC.

On February 13, 2018, plaintiff Hays filed opposition to the demurrer.

I. Procedural violation.

As a preliminary matter, the court notes that plaintiff Hays’ opposition is untimely filed. Code of Civil Procedure section 1005, subdivision (b) states, “All papers opposing a motion … shall be filed with the court and a copy served on each party at least nine court days … before the hearing.” Based on a hearing date of February 20, 2018 and two interim holidays, plaintiff’s opposition was due on February 5, 2018. Plaintiff did not file his opposition until February 13, 2018, five court days late.

California Rules of Court, rule 3.1300, subdivision (d) states, “No paper may be rejected for filing on the ground that it was untimely submitted for filing. If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.” Since the court has discretion to consider a late filed paper, since defendant has not shown any real prejudice from the late filing, and to avoid the expenditure of any further judicial resources, the court will look past this procedural deficiency and consider the opposition on its merits. However, plaintiff Hays and plaintiff’s counsel are hereby admonished for the procedural violation. Any future violation may result in the court’s refusal to consider the untimely filed papers.

II. Defendant Washington’s demurrer to plaintiff Hays’ FAC is SUSTAINED, in part, and OVERRULED, in part.

“Where the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2017) ¶7:50, p. 7(I)-31 citing Saliter v. Pierce Bros. Mortuaries (1978) 81 Cal.App.3d 292, 300 (Saliter), et al.) In Saliter, the court wrote, “Where the complaint discloses that the statute of limitations bars the action, the general demurrer has long been held an appropriate means to assert such a facial defect.” (Saliter, supra, 81 Cal.App.3d at p. 300, fn. 2.)

The running of the statute must appear “clearly and affirmatively” from the dates alleged. It is not sufficient that the complaint might be barred. [Citation.] If the dates establishing the running of the statute of limitations do not clearly appear in the complaint, there is no ground for general demurrer. The proper remedy “is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment ….” [Citation.]

(Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324 – 325; italics original.)

Washington demurs to plaintiff Hays’ FAC on the basis that it is barred by the three year statute of limitations for “[a]n action upon a liability created by statute, other than a penalty or forfeiture.” (Code Civ. Proc., §338, subd. (a).) According to defendant Washington, its liability is as a surety on a bond which is statutorily required by Vehicle Code section 11710.

Vehicle Code section 11710, subdivision (a) states, “Before any dealer’s or remanufacturer’s license is issued or renewed by the department to any applicant therefor, the applicant shall procure and file with the department a bond executed by an admitted surety insurer, approved as to form by the Attorney General, and conditioned that the applicant shall not practice any fraud or make any fraudulent representation which will cause a monetary loss to a purchaser, seller, financing agency, or governmental agency.” (Emphasis added.)

The general rule is that the liability of a surety accrues at the same time as that of the principal. (Bloom v. Bender, supra., 48 Cal.2d at p. 799; Brock v. Western Nat. Indem. Co. (1955) 132 Cal.App.2d 10, 16 [281 P.2d 571]; County of Los Angeles v. Security Ins. Co. (1975) 52 Cal.App.3d 808, 817 [125 Cal.Rptr. 701]; Civ. Code, § 2807.) A cause of action upon a bond conditioned to do a certain act, accrues as soon as there is a default in performance. (Brock v. Western Nat. Indem. Co., supra., 132 Cal.App.2d at p. 16.) A cause of action accrues when a creditor is entitled to commence and maintain an action thereon and a remedy is available. (Bogart v. George K. Porter Co. (1924) 193 Cal. 197, 208 [223 P. 959, 31 A.L.R. 1045].)

(Winick Corp. v. General Ins. Co. (1986) 187 Cal.App.3d 142, 148–149; emphasis added.)

Here, defendant Washington’s bond is, as specified in Vehicle Code section 11710, subdivision (a), conditioned on Shisler not doing a certain act, i.e., “the applicant shall not practice any fraud or make any fraudulent representation which will cause a monetary loss to a purchaser.” Thus, the cause of action accrues when Shisler defaulted in performance, i.e., when Shisler engaged in fraud.

Washington contends the fraud accrued here no later than December 2012 when Hays alleged he last made a payment to Shisler. If the claim accrued in December 2012, the instant action filed December 15, 2016 is beyond the three year statute of limitations. The court does not agree with this premise. “With respect to torts, generally speaking, a claim accrues and the statute of limitations ‘begins to run upon the occurrence of the last event essential to the cause of action, even if the plaintiff is unaware that a cause of action exists. [Citation.] The infliction of actual and appreciable harm will commence the limitations period. [Citation.]’ [Citation.]” (Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 979–980 (Shamsian).)

However, the discovery rule “postpones commencement of the limitation period until the plaintiff discovers or should have discovered the facts essential to his cause of action. [Citation.] Under this rule, ‘[p]ossession of ”presumptive“ as well as ”actual “ knowledge will commence the running of the statute.’ [Citation.] A plaintiff is charged with ‘presumptive’ knowledge so as to commence the running of the statute once he or she has ‘ ”notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his investigation ….“ ‘ [Citations.]” [Citation.]

(Shamsian, supra, 107 Cal.App.4th at p. 980.)

With regard to fraud, “The cause of action … is not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud.” (Code Civ. Proc. §338, subd. (d).) Here, the FAC alleges, in relevant part, that, “In April of 2014, Plaintiff sent Shisler a demand letter.” The reasonable inference to be drawn from this allegation is that plaintiff Hays did not discover the fraud until April 2014. If so, plaintiff’s FAC remains timely. There is nothing on the face of the pleading which “clearly and affirmatively” demonstrates plaintiff Hays had any earlier actual or inquiry notice of the fraud such that the statute of limitations has run.

Accordingly, defendant Washington’s demurrer to plaintiff Hays’ FAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)], i.e., the FAC is barred by the statute of limitations, is OVERRULED.

Defendant Washington separately demurs to plaintiff Hays’ second cause of action which alleges a violation of Vehicle Code section 11711.

If any person (1) shall suffer any loss or damage by reason of any fraud practiced on him or fraudulent representation made to him by a licensed dealer or one of such dealer’s salesmen acting for the dealer, in his behalf, or within the scope of the employment of such salesman and such person has possession of a written instrument furnished by the licensee, containing stipulated provisions and guarantees which the person believes have been violated by the licensee, or (2) if any person shall suffer any loss or damage by reason of the violation by such dealer or salesman of any of the provisions of Division 3 (commencing with Section 4000) of this code, or (3) if any person is not paid for a vehicle sold to and purchased by a licensee, then any such person shall have a right of action against such dealer, his salesman, and the surety upon the dealer’s bond, in an amount not to exceed the value of the vehicle purchased from or sold to the dealer.

(Veh. Code, §11711, subd. (a).)

Plaintiff Hays alleges, “Fraud within the meaning of Vehicle Code § 11711 is the same as the common definition of fraud and/or a misrepresentation under California Civil Code Section 1760 et seq.” (FAC, ¶29.) However, Vehicle Code section 11711, subdivision (a)(1), on its face, imposes a further requirement that plaintiff “has possession of a written instrument furnished by the licensee, containing stipulated provisions and guarantees which the person believes have been violated by the licensee.” As Washington points out, plaintiff has not alleged possession of such a written instrument, any provisions or guarantees contained therein, or a belief that such provisions or guarantees have been violated. Plaintiff Hays does not address this argument in opposition.

Washington argues further that it is not apparent from the face of the FAC that plaintiff Hays is asserting a violation of Vehicle Code section 11711, subdivision (a)(2). Nor are there any allegations which give rise to a violation of Vehicle Code section 11711, subdivision (a)(3). Again, plaintiff Hays does not address these points in his opposition.

Accordingly, defendant Washington’s demurrer to the second cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for violation of Vehicle Code section 11711 is SUSTAINED with 10 days’ leave to amend.