Case Name: Westlake Flooring Company LLC v. Friendly Wholesalers of Cal.
Case No.: 17CV314864

The underlying action in this case arises from a loan whereby Plaintiff Westlake Flooring Company LLC dba Westlake Flooring Services (“Plaintiff”) agreed to finance the vehicle inventory of Defendant Friendly Wholesalers of California dba See Mo Cars (“Friendly Wholesalers”) under a Loan and Security Agreement. As alleged in the underlying complaint, Plaintiff is in the business of financing vehicle inventory for car dealerships. Defendants Azzam Abdo and Jalal Shreim signed individual personal guaranties for all amounts owed by Friendly Wholesalers to Plaintiff under the Loan and Security Agreement. Friendly Wholesalers subsequently entered into two promissory notes with Plaintiff, acknowledging receipt of $250,000 and $1,000,000, agreeing to repay these amounts with interest. The funds were used to purchase vehicles. Defendants Friendly Wholesalers, Azzam Abdo and Jalal Shreim (“Defendants”) failed to repay the funds. Plaintiff filed suit, seeking immediate possession of the vehicles purchased by Friendly Wholesalers with the loaned money as security for the debt. Plaintiff alleges breach of contract, breach of personal guaranty, declaratory relief, and recovery and possession of personal property.

The matter currently before the Court is another challenge to the cross-action filed by Defendant/Cross-Complainant Azzam Abdo (“Abdo”). Abdo’s original cross-complaint was filed in October 2017. This was followed by a verified first amended cross-complaint (“FACC”) filed April 19, 2018 alleging eighteen cross-claims against various parties, including Wells Fargo Bank (“Wells Fargo”) and Pinnacle Bank (“Pinnacle”). Among other things the FACC alleged that Abdo “never became an actual investor, president or officer of [Friendly Wholesalers],” he “refused to sign any personal guaranty . . . as he was not an officer or investor in [Friendly Wholesalers],” he “refused to be a guarantor as he is not an officer or investor in [Friendly Wholesalers],” and he “is not an officer or investor in [Friendly Wholesalers] and has no control over any actions that [Friendly Wholesalers] may take.” (FACC at ¶¶ 17, 19 & 22-23.) Wells Fargo brought a demurrer to the FACC which was sustained by the Court (Hon. Zayner) on September 25, 2018 without leave to amend in part and with leave to amend in part. The Court’s order cautioned that “[t]he general rule . . . is that material factual allegations in a verified pleading that are omitted in a subsequent amended pleading without adequate explanation will be considered by the court in ruling on a demurrer to the later pleading.” (Shoemaker v. Myers (1990) 52 Cal.3d 1, 12-13.)

Abdo filed the operative verified Second Amended Cross-Complaint (“SACC”) on October 2, 2018, again alleging eighteen cross-claims against various parties. The ninth cross-claim for fraud and deceit, the eleventh cross-claim for negligent misrepresentation and the twelfth cross-claim for intentional misrepresentation, and the thirteenth cross-claim for breach of the implied covenant of good faith and fair dealing are the only ones alleged against Cross-Defendants Wells Fargo and Pinnacle. Various allegations in these cross-claims contradict verified allegations made in the FACC.

Wells Fargo brought a demurrer against the SACC on March 28, 2019. The Court (Hon. Rudy) sustained Wells Fargo’s demurrer to all four cross-claims without further leave to amend (Abdo conceded as to the thirteenth cross-claim but opposed the demurrer to the other cross-claims). In its March 29, 2019 final order the Court noted that Abdo “fails to allege sufficient facts establishing the elements of reliance and resulting damages. In the ninth, eleventh and twelfth cause of action, Abdo alleges that he relied on Wells Fargo’s alleged misrepresentations when he converted his loan to an investment and he sustained damages because his loan was converted to an investment. (SACC at ¶54.) However, Abdo expressly alleges that ‘[w]hile [he] acted as an investor and president during the short lived relationship with [Friendly Wholesalers] until [his August 21, 2015] resignation, in reality [he] never became/treated as an actual investor, president or officer of [Friendly Wholesaler] . . . .’ (Id. at ¶16, italics added.) Abdo’s express allegations that he never actually became an investor of Friendly Wholesalers directly contradicts his allegations that his loan was eventually converted to an investment in Friendly Wholesalers. Moreover, Abdo’s allegations that his loan was eventually converted to an investment in Friendly Wholesalers directly contradicts the allegations in the FACC” at ¶¶ 17, 29 & 22-23. (See March 29, 2019 demurrer Order at pp. 5:25-6:8.) The Court sustained Wells Fargo’s demurrer without further leave to amend, finding that “[b]ecause Abdo is bound by his allegation that he never actually became an investor in Friendly Wholesalers, he cannot now allege that he relied on Wells Fargo’s alleged misrepresentation to his detriment because his loan was converted to an investment in Friendly Wholesalers.” (March 29, 2019 Order at p. 6:22-25.)

Currently before the Court is Pinnacle’s demurrer to the SACC’s ninth, eleventh, twelfth and thirteenth cross-claims. Pinnacle makes essentially the same arguments that Wells Fargo did, that these claims fail as alleged against it because (among other things) Abdo lacks standing to sue it for alleged harm to Friendly Wholesalers.

As an initial matter the Court, on its own motion, takes judicial notice of the FACC, the September 25, 2018 Order of the Court (Hon. Zayner) on Wells Fargo’s demurrer to the FACC and the March 29, 2019 Order of the Court (Hon. Rudy) on Wells Fargo’s demurrer to the SACC pursuant to Evidence Code §452(d) (court records). The Court orders may be noticed as to their contents and legal effect. As to the FACC, where a demurrer is to an amended pleading, the Court “may consider the factual allegations of prior complaints [or cross-complaints], which a plaintiff [or cross-complainant] may not discard or avoid by making contradictory averments, in a superseding amended pleading.” (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034 [internal quotations omitted, brackets added].)

The Court in ruling on a demurrer treats it “as 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.) Pinnacle demurrers to the SACC’s ninth, eleventh, twelfth and thirteenth cross-claims on the grounds that Abdo lacks standing to allege them against Pinnacle, that they each fail to state sufficient facts against Pinnacle and are uncertain. (See Pinnacle’s Demurrer at p. 2:4-21.)

As was the case with his opposition to Wells Fargo’s demurrer to the SACC, in his opposition to Pinnacle’s demurrer Abdo states that he “agreed to drop the Breach of Covenant of Good Faith and Fair [D]ealing.” (See Opp. at p.6:12-13.) Accordingly the demurrer to the thirteenth cross-claim as alleged against Pinnacle is SUSTAINED without further leave to amend.

Demurrer to ninth, eleventh, and twelfth cross-claims
Uncertainty
Pinnacle’s demurrer to these three cross-claims on grounds of uncertainty is OVERRULED. Demurrers for uncertainty “are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135; see also Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”]) While the SACC is not a model of clarity it is apparent from Pinnacle’s more substantive arguments that it understands what the SACC attempts to allege and there is no true uncertainty.

Lack of standing; Failure to state sufficient facts

Pinnacle argues that Abdo lacks standing to bring claims against it because he “again admits in the SACC that he is not a customer of Pinnacle Bank, and he admits that he is not an officer, owner, or investor in the corporate entity that was Pinnacle Banks’ customer, [Friendly Wholesalers]. . . . In addition to the lack of standing . . . the fraud and deceit, intentional misrepresentation, and negligent misrepresentation claims fail to meet the heightened pleading specificity requirement, and further the SACC does not and cannot plead ‘actual’ or ‘detrimental’ reliance by Mr. Abdo on any statement by Pinnacle’s employees. The negligent misrepresentation [claim] is fatally deficient because Mr. Abdo does not plead the existence of any duty owed by Pinnacle to Mr. Abdo.” (Memo. of Points & Authorities at p. 1:8-18.)

Pinnacle’s demurrer to the ninth, eleventh, and twelfth cross-claims as alleged against it on the ground that they all fail to state sufficient facts is SUSTAINED as Abdo both lacks standing to sue Pinnacle for alleged wrongs to Friendly Wholesalers and also cannot show that he had a relationship with Pinnacle that gave rise to a duty of care or that he detrimentally relied on any statement from Pinnacle.

As was the case with Wells Fargo’s demurrer to the SACC, Abdo remains bound by his verified allegations in the FACC (at ¶¶ 17, 19 & 22-23) that he was “never” an investor or officer of Friendly Wholesalers and refused to sign any guaranty. These allegations contradict the claims in the SACC (and the arguments in the Abdo’s opposition to this demurrer) that Abdo had any relationship with Pinnacle through which it owed him a duty of care and the allegations that Abdo reasonably relied on any statement(s) by Pinnacle in giving funds to Friendly Wholesalers that he claims were later converted to an investment. As the Court’s March 29, 2019 Order noted the SACC itself is internally inconsistent and contradicts Abdo’s arguments that at some point his loan to Friendly Wholesalers was transformed into an investment. As an example the SACC at ¶16 alleges in pertinent part that “[w]hile Abdo acted as an investor and president during the short lived relationship with [Friendly Wholesalers], in reality Abdo never became/treated as an actual investor, president or officer of [Friendly Wholesalers] since Jalal was challenging his authority.” (Emphasis and brackets added.)

Despite prior leave to amend to address this issue it is clear that Abdo lacks standing to bring claims against Pinnacle that are based on the relationship between Friendly Wholesalers and Pinnacle and that Abdo cannot claim that any financial injury Friendly Wholesalers allegedly suffered due to its relationship with Pinnacle was a injury to him personally that was proximately caused by Pinnacle’s alleged misrepresentations.

Further leave to amend is DENIED as it is now apparent that Abdo cannot amend to allege claims against Pinnacle without contradicting his prior verified allegations, made under penalty of perjury, stating he was “never” an investor or officer with Friendly Wholesalers. Other that citing to general authority for leave to amend, Abdo’s opposition offers no explanation as to how he could amend the ninth, eleventh or twelfth cross-claims to state sufficient facts to support them as alleged as against Pinnacle without continuing to contradict the prior verified allegations he is bound by.