Filed 9/11/19 Moody v. Carlson CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Siskiyou)

—-

WALTER MOODY,

Plaintiff and Appellant,

v.

CURT W. CARLSON,

Defendant and Respondent.

C088632

(Super. Ct. No. SC CV PO 1800138)

Plaintiff Walter Moody appeals from the judgment entered after the trial court sustained without leave to amend defendant Curt Carlson’s demurrer to the first amended complaint based on the four-year statute of limitations of Code of Civil Procedure section 337, subdivisions (a) and (b). The trial court found that the first amended complaint alleged the date for both the breach of contract and the common count for account stated was February 1, 2014, more than four years prior to the filing of the original complaint on February 5, 2018. The court relied on the sham pleading doctrine to preclude amendment. Moody contends the court erred because the required reasonable reading of the complaint shows there was no breach until March 1, 2014, when Carlson failed to make the March 2014 payment.

We reverse with directions. As to the cause of action for breach of contract, we find the trial court erred in relying on the sham pleading doctrine where a reasonable reading of the complaint shows the date given for the breach was a mistake. As to the common count for account stated, we find no abuse of discretion in sustaining the demurrer without leave to amend. Moody has not suggested how he could amend that cause of action to survive the statute of limitations; thus, we must conclude the facts will not support an amendment.

PROCEDURAL BACKGROUND

On February 5, 2018, Moody filed a complaint against Carlson, individually and dba Carlson Construction, for general negligence. The complaint alleged that in January 2010, Moody sold a residence in Yreka to Carlson for $165,000 pursuant to an oral agreement. Carlson took possession of the residence and made regular payments of $1,200 every month, ending on February 3, 2014. Carlson failed to properly maintain the premises and allowed the property to be damaged by frost and freeze, resulting in ruptured pipes that caused severe damage to the interior. The date of the negligence alleged was December 2013 through February 2014. The complaint further alleged that due to the consistent payments for four years, Carlson “induced [Moody] to consider” all matters were in order and there were no disputes between the parties as to the oral contract.

Carlson demurred to the complaint, contending that on its face it showed it was barred by the three-year statute of limitations for injury to real property contained in section 338, subdivision (b).

In opposition, Moody contended he first learned of the damage in March 2014 when Carlson first failed to make a payment. He asserted the complaint was sufficient to state a cause of action because the discovery rule delayed the commencement of the statute of limitations until the date Carlson breached the sales agreement (by failing to make the March payment) and the date Moody learned of the water damage. The statute of limitations for breach of the agreement, evidenced by writings, was four years, pursuant to section 337.

The trial court sustained the demurrer with leave to amend, noting the possibility of an amendment to allege alternative legal theories.

Moody filed an amended complaint alleging two causes of action, breach of contract and a common count for an account stated. The amended complaint alleged Moody and Carlson had an oral agreement for the purchase and sale of a residence in Yreka for $165,000. This agreement was evidenced by negotiable checks and account records kept by Moody’s bookkeeper. An exhibit provided a record of payments made “between January 4, 2010 and February 1, 2014 when [Carlson] breached the contract by failing to make any more payments.” The amended complaint further alleged that in December 2013 to January 2014, water pipes ruptured causing severe water damage that was not fully or timely repaired. Moody suffered loss of interest and unpaid principal on the note. After he took back possession, the house required additional repairs and insurance did not cover the entire cost of repairs.

The second cause of action alleged an account was stated in writing between the parties in which it was agreed Carlson was indebted to Moody. It sought the amount due (not specified) and interest from February 1, 2014 forward. It repeated the allegation that the consistent payments induced Moody to believe there were no disputes.

Moody attached two exhibits to the amended complaint: a financial log of payments made by Carlson from December 31, 2009, until February 1, 2014, showing an outstanding balance of $152,316.70, and a copy of the February 1, 2014 check–the last payment–and deposit slip.

Carlson again demurred, contending the action was barred by the four-year statute of limitations contained in section 337, subdivision (a) and (b).

In opposition, Moody argued there was no breach of the contract until Carlson first failed to make a payment in March 2014. He argued the amended complaint should be given a reasonable interpretation and liberally construed. If a cause of action was imperfectly stated, the trial court should give leave to amend.

The trial court sustained the demurrer without leave to amend. The court found there were no facts alleged as to any breach of the contract after February 1, 2014. There were no allegations as to the terms of payment, either the amount or the due dates. The account was stated as of February 1, 2014, and this cause of action was barred by the four-year statute of limitations. The court noted that under the sham pleading doctrine, a plaintiff cannot avoid defects in pleading by simply omitting problematic facts without explanation, and any amendment to change the date of the breach would be subject to the sham pleadings doctrine.

The court entered judgment for Carlson and Moody appealed.

DISCUSSION

I

Standard of Review

“In determining whether plaintiffs properly stated a claim for relief, our standard of review is clear: ‘ “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.’ [Citations.]” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)

“California courts have ‘a policy of great liberality in allowing amendments at any stage of the proceeding so as to dispose of cases upon their substantial merits where the authorization does not prejudice the substantial rights of others.’ [Citation.] Indeed, ‘it is a rare case in which “a court will be justified in refusing a party leave to amend his pleading so that he may properly present his case.” ’ [Citation.]” (Douglas v. Superior Court (1989) 215 Cal.App.3d 155, 158.)

The court’s denial of leave to amend based on the sham pleading doctrine is also reviewed for an abuse of discretion. (Sanai v. Saltz (2009) 170 Cal.App.4th 746, 768.)

II

Breach of Contract

“A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.)

The statute of limitations for a breach of contract is four years for a written contract (§ 337, subd. (a)) and two years for an oral contract (§ 339, subd. (1)). Carlson’s demurrer raised the four-year statute of limitations for a written contract. (CT 44) Only the statute pleaded can be relied on in sustaining the demurrer. (Zakaessian v. Zakaessian (1945) 70 Cal.App.2d 721, 725.) The statute of limitations for breach of contract begins to run at the time of the breach. (3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 520, p. 664.)

The amended complaint alleged Carlson breached the agreement on or about February 1, 2014. Since this date was more than four years before February 5, 2018, the date the original complaint was filed, the statute of limitations had run. Moody argued, however, the breach did not occur until the beginning of March 2014, when the next monthly payment was due.

The trial court found an amendment to correct the date of the breach would run afoul of the sham pleading doctrine.

“Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. [Citations.] A noted commentator has explained, ‘Allegations in the original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation in the amended pleading. The policy against sham pleadings requires the pleader to explain satisfactorily any such omission.’ [Citation.]” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425-426.) The purpose of the sham pleading doctrine is to enable the courts to prevent an abuse of process, but it is not intended to prevent honest complainants from correcting erroneous allegations or to prevent the correction of ambiguous facts. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.)

The trial court did not consider whether Moody could provide an explanation for the need to correct the date of the breach of contract. But as Moody has pointed out, many other parts of the complaint and attached evidence support a reading of the date of breach as March 1 rather than February 1. We agree that a reasonable reading of the amended complaint as a whole suggests the date was a mistake that could be cured by amendment. February 1, 2014, was the date of Carlson’s last payment. While the amended complaint is lacking allegations about the terms of the payments, including due dates and amounts, it is reasonable to assume this was the monthly payment for February 2014 and a breach of the obligation to make monthly payments did not occur until March 2014, when the next payment was due but not made.

Given the policy of great liberality in allowing amendments and the likelihood Moody can plausibly explain the date in the amended complaint was inadvertence or a mistake, the trial court abused its discretion in sustaining the demurrer to the first cause of action for breach of contract without leave to amend.

III

Common Count: Account Stated

“An account stated is an agreement, based on prior transactions between the parties, that the items of an account are true and that the balance struck is due and owing. [Citation.] To be an account stated, ‘it must appear that at the time of the statement an indebtedness from one party to the other existed, that a balance was then struck and agreed to be the correct sum owing from the debtor to the creditor, and that the debtor expressly or impliedly promised to pay to the creditor the amount thus determined to be owing.’ [Citation.]” (Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 752.)

“ ‘The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due. [Citations.]’ [Citation.]” (Leighton v. Forster (2017) 8 Cal.App.5th 467, 491.)

A four-year statute of limitations applies to actions on account stated. (§ 337, subd. (b).) “Actions to recover on an account stated or a book account accrue on the date of the last item or entry in the account. (See § 337, subd. [b] [‘where an account stated is based upon an account of more than one item, the time shall begin to run from the date of the last item’]; [citations.].” (Professional Collection Consultants v. Lauron (2017) 8 Cal.App.5th 958, 966.)

The amended complaint alleged the account was stated, and the exhibit showed the last item entered, on February 1, 2014. Since the original complaint was filed more than four years later, on February 5, 2018, the cause of action for account stated was time barred.

“The burden is on the plaintiff to demonstrate how he or she can amend the complaint. It is not up to the judge to figure that out. [Citation.] Plaintiff can make this showing in the first instance to the appellate court. [Citation.]” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 322.) Moody does not indicate how he could amend the second cause of action to survive the statute of limitations. He would have to amend it not only to allege an entry in the account at a later date, but also that Carlson agreed then to the amount due. Given his failure to suggest or even address an amendment, we assume he cannot successfully amend the common count.

The trial court did not abuse its discretion in sustaining the demurrer to the second cause of action without leave to amend.

DISPOSITION

The judgment is reversed and the cause remanded to the trial court with directions to sustain Carlson’s demurrer to the first cause of action with leave to amend and to sustain the demurrer to the second cause of action without leave to amend. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)

/s/

Duarte, J.

We concur:

/s/

Raye, P. J.

/s/

Hull, J.