Judge: Andrew E. Cooper, Case: 24CHCV02232, Date: 2024-12-16 Tentative Ruling

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Case Number: 24CHCV02232    Hearing Date: December 16, 2024    Dept: F51

DEMURRER

Demurrer Filed: 8/6/24

MOVING PARTY: Defendant EBF Holdings, LLC, dba Everest Business Funding (“Defendant”)

RESPONDING PARTY: Plaintiff Yizhaq Vaknin, in pro per (“Plaintiff”)

NOTICE: OK

RELIEF REQUESTED: Defendant demurs against Plaintiff’s entire complaint.

TENTATIVE RULING: The unopposed demurrer is sustained without leave to amend.

BACKGROUND

This is a commercial action in which Plaintiff alleges that he is the sole shareholder and officer of nonparty Socal Green Roofing & Builders, Inc. (the “Company”). (Compl. ¶ 1.) Plaintiff alleges that on 10/17/23, he personally guaranteed a $80,000.00 loan from Defendant to Socal Green. (Id. at ¶ 8.) Plaintiff alleges that he ultimately defaulted on the loan due to its 137.85% interest rate. (Id. at ¶¶ 10–12.)

On 6/17/24, Plaintiff filed his complaint, alleging against Defendant the following causes of action: (1) Violation of California Unfair Competition Law; (2) Unjust Enrichment; and (3) Money Had and Received.

On 8/6/24, Defendant filed the instant demurrer. No opposition has been filed to date.

ANALYSIS

As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

Here, Defendant demurs to Plaintiff’s entire complaint on the basis that Plaintiff fails to allege facts sufficient to constitute any of the causes of action therein.

A.    Meet and Confer

Before filing its demurrer, “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.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)

Here, Defendant’s counsel declares that on 7/17/24 and 7/25/24, he wrote to Plaintiff in an attempt to resolve the issues raised in the instant demurrer, but received no response. (Decl. of Marshall F. Goldberg ¶¶ 3–9.) Based on the foregoing, the Court finds that counsel has satisfied the preliminary meet and confer requirements set forth under Code of Civil Procedure section 430.41, subdivision (a).

B.     Standing

As a preliminary matter, Defendant asserts that Plaintiff lacks the necessary standing to bring the instant breach of contract action. All civil actions must be prosecuted in the name of the real party in interest, except as otherwise provided by statute. (Code Civ. Proc. § 367.) A party who is not the real party in interest does not have standing to sue, because the claim belongs to someone else. In such a case, the complaint is subject to a general demurrer. (City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 504; The H.N. & Frances C. Berger Found. v. Perez (2013) 218 Cal.App.4th 37, 42.)

Here, Defendant argues that “there are no charging allegations in any of the three causes of action which contend that Plaintiff is entitled to sue in his individual capacity and there is nothing that shows Plaintiff was damage because the payments made to Defendant under the Purchase Agreement were made by the Company under the Company’s obligation.” (Dem. 5:25–6:2.)

While the demurrer is unopposed, the Court finds it sufficient that Plaintiff alleges that he is the sole shareholder and officer of the Company, and the signatory and personal guarantor of the subject agreement. (Compl. ¶¶ 1, 8; Ex. A to Compl.) Accordingly, the Court finds that Plaintiff has alleged facts sufficient to show that he has standing to bring the instant action.

C.    Unfair Competition

Plaintiff’s first cause of action alleges Violation of California Unfair Competition Law (the “UCL”) against Defendant. To succeed on a claim for unfair business practices in violation of the UCL, a plaintiff must establish that the defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) “In essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 515.) A plaintiff alleging an “unfair” business practice under the UCL must show that the defendant’s conduct is “tethered to an underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 613.) “‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618.)

Here, Plaintiff essentially alleges that Defendant engaged in unfair business practices in charging a usurious interest rate of 137.85% on the loan. (Compl. ¶¶ 15–17.) “Usury is the charging of interest for a loan or forbearance on money in excess of the legal maximum.” (11 Cal. Real Est. § 37:1 (4th ed.).) “The essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction.” (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 798.)

As a preliminary matter, Defendant asserts that “the question of whether the Purchase Agreement is a loan subject to usury law is properly determined under New York law.” (Dem. 6:21–22, citing Ex. A to Compl., p. 7, para. 4.5 [“Except as set forth in Arbitration Section, this Agreement shall be governed by and construed in accordance with the laws of the state of New York, without regards to any applicable principals of conflicts of law.”].) Under New York law, the elements for usury are similar to those under California law: “(1) a loan or forbearance of money (2) that requires interest in violation of a usury statute (3) charged by the holder or payee with the intent to take interest at a greater rate than allowed by law.” (N.Y.Prac., Com. Litig. in New York State Courts § 100:89 (5th ed.).)

Here, Defendant argues that “the transaction was not a loan and could not be usurious.” (Dem. 7:3–4.) Defendant argues that Plaintiff mischaracterizes the agreement as a loan agreement, where it is in fact a purchase agreement of future accounts. (Dem. 2:3–11.) Based on the face of the agreement, as proffered by Plaintiff, the Court agrees. The first page of the “Offer Summary,” attached as Exhibit A to Plaintiff’s complaint, lists the 137.85% figure cited by Plaintiff as an “Estimated Annual Percentage Rate (APR),” explicitly stating that “APR is not an interest rate.” (Ex. A to Compl.) The first page of the subject agreement states that “Seller hereby sells, assigns and transfers to Purchaser, without recourse, upon payment of the Purchase Price, the Purchased Amount of Future Receipts by delivering to Purchaser the Specified Percentage of the proceeds of each future sale by Seller.” (Id. at p. 1.) “There is no interest rate or payment schedule and no time period during which the Purchased Amount must be collected by Purchaser. Seller going bankrupt or going out of business, in and of itself, does not constitute a breach of this Agreement. Purchaser is entering into this Agreement knowing the risks that Seller’s business may slow down or fail, and Purchaser assumes these risks based on Seller’s representations warranties and covenants in this Agreement, which are designed to give Purchaser a reasonable and fair opportunity to receive the benefit of its bargain.” (Id. at p. 2.)

Defendant further argues that Plaintiff cannot state a UCL claim because “an out of state choice of law clause preempts a California UCL claim.” (Dem. 11:1, citing S & J Rentals, Inc. v. Hilti, Inc. (E.D. Cal. 2018) 294 F.Supp.3d 978 [granting a motion to dismiss a UCL claim under a valid contractual forum selection clause choosing Oklahoma as the proper forum].)

Based on the foregoing, the Court finds that it lacks the jurisdiction to hear Plaintiff’s UCL claim. Accordingly, the demurrer is sustained against Plaintiff’s first cause of action.

D.    Unjust Enrichment; Money Had and Received

Plaintiff’s second cause of action alleges Unjust Enrichment against Defendant. “The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769 [quotations and citations omitted.])

Plaintiff’s third cause of action alleges Money Had and Received against Defendant. The required elements of a common count claim are “(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment. A cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Farmers Insurance Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460 [citations and quotations omitted].)

Here, Plaintiff alleges that Defendant has been unjustly enriched by receiving “money which belongs to Plaintiff and should rightfully be returned. Such amount is equal to all the receivables that Defendants taken from Plaintiff and his business in an amount according to proof at trial.” (Compl. ¶¶ 23, 26.) Defendant argues that because the purchase agreement was not a usurious loan, Defendant “has not been unjustly enriched nor has [Defendant] received any money [Plaintiff] alleges belongs to him.” (Dem. 13:2–3.) The Court agrees, and again notes that Plaintiff has failed to oppose the instant demurrer or otherwise respond to meet and confer efforts.

Based on the foregoing, the Court finds that Plaintiff has failed to allege facts sufficient to constitute causes of action for Unjust Enrichment or Money Had and Received. Accordingly, the demurrer is sustained against Plaintiff’s second and third causes of action.

E.     Leave To Amend

Where a demurrer is sustained, 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 plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Here, the Court finds that in failing to oppose the instant demurrer, Plaintiff makes no showing of a reasonable possibility that he may successfully remedy the underlying deficiencies in the complaint. Accordingly, the demurrer is sustained without leave to amend.

CONCLUSION

The unopposed demurrer is sustained without leave to amend.