Case Number: EC061347 Hearing Date: May 02, 2014 Dept: B

ATTENTION: THE COURT WILL BE DARK ON MAY 2, 2014.

TO ALL COUNSEL AND UNREPRESENTED PARTIES:
PLEASE REVIEW THE TENTATIVES BELOW, AND ADVISE THE CLERK OF THE COURT AT (818) 557-3472 WHETHER YOU SUBMIT TO THE TENTATIVE OR WISH TO SCHEDULE ANOTHER HEARING DATE. IF YOU WISH TO SCHEDULE ANOTHER HEARING DATE, PLEASE CONTACT ALL OPPOSING PARTIES AND AGREE ON EITHER MAY 16, MAY 23, OR MAY 30, AND INFORM THE CLERK OF THE SELECTED DATE.

Demurrer

Case Management Conference

The Plaintiff alleges that Defendant, Mike Thomassian, executed a credit line application on behalf of National Fire Systems & Services, Inc. The Defendant signed a personal guaranty for the performance of National Fire Systems & Services, Inc. Plaintiff alleges that Defendant breached the personal guarantee by not paying the money due.

The Causes of action in the First Amended Complaint are for:
1) Common Count – Open Book Account
2) Common Count – Account Stated
3) Breach of Contract
4) Reformation of Contract

This hearing concerns the Defendant’s demurrer to each cause of action in the First Amended Complaint.

1. Demurrer to First and Second Causes of Action Based on Common Counts

The Defendant argues that the causes of action for common count are subject to a demurrer because the third cause of action for breach of contract is subject to a demurrer. This argument is based on the legal principle that if a plaintiff is not entitled to recover under one count in a complaint, it is proper to sustain a demurrer to a common count set forth in the complaint when it is obviously based on the set of facts specifically pleaded in the first count. Zumbrun v. University of Southern California (1972) 25 Cal. App. 3d 1, 14. The first and second causes of action in common count are based on the same facts pleaded in the third cause of action for breach of contract because they seek the same remedy, i.e., $127,993.89 is damages.

However, as the following analysis demonstrates, there are no grounds for a demurrer to the third cause of action for breach of contract. The Defendant argues that there is a misjoinder of parties and that the Plaintiff has no standing to bring any claim regarding the contract. These arguments offer no basis for a demurrer to the third cause of action. Since there are no grounds for a demurrer to the breach of contract cause of action, it is not proper to sustain a demurrer to the common count causes of action.

Accordingly, the Court overrules the demurrers to the first and second causes of action.

2. Demurrer Based on Misjoinder of Parties

The Defendant argues that the Plaintiff should name National Fire Systems because it was the recipient of the line of credit. CCP section 430.10(d) authorizes the Court to sustain a demurrer when there is a defect or misjoinder of parties. A demurrer for a defect of parties exists when a third person is necessary or indispensable to the action and must be joined before the action may proceed. For example, when a number of persons have an undetermined interest in the same property, each is an indispensable party to any action by another to obtain a share of the property. Bank of California v. Superior Court (1940) 16 Cal.2d 516, 521. The demurrer will require the plaintiff to amend the complaint and name the necessary or indispensable party.

A review of the First Amended Complaint reveals that the Plaintiff did not bring any claim for the repayment of the line of credit. Instead, the Plaintiff’s claims are based on the personal guaranty agreement with the Defendant and the Defendant’s breach of the personal guaranty. Since the personal guaranty agreement was between the Plaintiff and the Defendant, it is not necessary to add any other party to resolve the Plaintiff’s claim.

Accordingly, the Court overrules the demurrer based on a misjoinder of parties.

3. Demurrer Based on Legal Capacity

The Defendant argues that the Plaintiff lacks legal capacity because it is not a party to the contract. This is actually an argument based on standing because it concerns the real party in interest.

The capacity to sue differs from standing to sue. Color-Vue, Inc. v. Abrams (1996) 44 Cal. App. 4th 1599, 1603-1605. Lack of capacity is merely a legal disability, such as infancy, insanity, or the failure to pay corporate taxes, which deprives a party of the right to come into court. A plaintiff’s capacity to sue is not an element of a cause of action. Id. Standing and the right to relief, on the other hand, goes to the existence of a cause of action. Id.

The Defendant argues that the Plaintiff is not a party to the agreement. The third cause of action for breach of contract is based on a promissory note, a copy of which is attached as exhibit D. A review of the promissory note reveals that it is between National Fire Systems & Services, Inc. and Haron Shabatian and David Akhavan.

However, the Plaintiff also alleges that this promissory note should be reformed because it mistakenly identified Haron Shabatian and David Akhavan as parties. The Plaintiff alleges in paragraph 20 that Haron Shabatian and David Akhavan are the principals of the Plaintiff. Further, the Plaintiff alleges in paragraph 22 that the money lent under the promissory note was an extension of the ongoing open book account which the Defendant was obligated to repay.

This open book account is the line of credit that the Plaintiff provided to National Fire Systems (see untabbed exhibit A). The Defendant’s obligation to pay arises from the personal guaranty agreement in which the Defendant agreed to guaranty the performance of National Fire Systems (see untabbed exhibit B).

These allegations indicate that the promissory note should be reformed to reflect that the Plaintiff was a party and not its principals. Since the Plaintiff alleges facts to demonstrate that the contract should be reformed to reflect that the Plaintiff is the actual party to the contract, the Plaintiff has alleged sufficient facts to demonstrate that it is the real party in interest and has standing to sue on the contract.

Accordingly, the Court overrules the demurrer to the third cause of action based on lack of standing.

4. Demurrer to Fourth Cause of Action for Reformation of Contract

The Defendant argues that the Plaintiff has failed to provide clear and convincing evidence of what the agreement was, what the mistake was, or what brought about the mistake. This offers no grounds for a demurrer because the Plaintiff is not required to provide any evidence in its pleadings. Instead, the Plaintiff’s allegations are assumed true and the Plaintiff’s ability to prove the allegations is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.

As noted above, the Plaintiff has alleged that the contract should be reformed because there was a mistake in the identification of the parties. The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing. Lemoge Electric v. County of San Mateo (1956) 46 Cal. 2d 659, 663. The Plaintiff alleges in paragraph 20 that its principals, Haron Shabatian and David Akhavan, were mistakenly identified as the parties and that the contract should be reformed to indicate that the Plaintiff is the party. This is sufficient to plead a claim for reformation.

Accordingly, the Court overrules the demurrer to the fourth cause of action.