Judge Armen Tamzarian, Case Number: 24STCV02206, Date: 2024-09-30 Tentative Ruling

Judge: Armen Tamzarian, Case: 24STCV02206, Date: 2024-09-30 Tentative Ruling

Please notify Department 52 via email at smcdept52@lacourt.org and indicate that the parties are submitting on the tentative ruling. Please provide the attorney's name and represented party. Please notify the opposing side via email if submitting on the Court's tentative ruling.

Case Number: 24STCV02206 Hearing Date: September 30, 2024 Dept: 52

Defendants Union Adjustment Co., Inc. and Nathan Rubinfeld’s Demurrer to Second Amended Complaint

Defendants Union Adjustment Co., Inc. and Nathan Rubinfeld (collectively, “Union”) demur to the first through 10th causes of action alleged in the second amended complaint by plaintiff A-L Financial Corp.

Statutes of Limitations and Uncertainty

Union argues several causes of action are barred by the statute of limitations or are uncertain because plaintiff did not allege when events happened. “ ‘When a ground for objection to a complaint, such as the statute of limitations, appears on its face or from matters of which the court may or must take judicial notice, a demurrer on that ground is proper.’ ” (Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1482.)

The second amended complaint alleges defendant Union Adjustment Co., Inc. “filed a Certificate of Dissolution with the California Secretary of State.” (SAC, ¶ 23.) Union requests judicial notice of the certificate of dissolution filed with the Secretary of State on November 15, 2018. (Jamison Decl., Ex. B.) The certificate, the date of its filing, and its legal effects are subject to judicial notice as official government acts (Evid. Code, § 452, subd. (c); see Belen v. Ryan Seacrest Productions, LLC (2021) 65 Cal.App.5th 1145, 1161, fn. 2) and as matters of public record not reasonably subject to dispute and capable of immediate and accurate determination by resort to the Secretary of State’s website (Evid. Code, § 452, subd. (h)).

Plaintiff filed this action on August 25, 2023. The longest statute of limitations for any of its causes of action is four years. Plaintiff’s claims are untimely if its causes of action accrued before August 25, 2019. The second amended complaint conspicuously does not allege a single date of the events giving rise to this case—not even the year.

Normally, a demurrer based on the statute of limitations should be overruled unless the defect “clearly and affirmatively appear[s] on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.) But when a demurrer argues both “the cause of action is barred by the statute of limitations” and “the complaint is uncertain,” those “grounds may be considered together, since the alleged uncertainty relates to allegations intended to relieve the cause of action from the bar of the statute.” (Simpson v. Dalziel (1902) 135 Cal. 599, 601.)

A demurrer can be sustained when the complaint’s allegations “create[] an uncertainty as to” when the cause of action accrued, such that the complaint omits that information to “avoid the effect of the statute of limitations.” (Tillson v. Peters (1940) 41 Cal.App.2d 671, 674; accord Corum v. Hartford Acc. & Indem. Co. (1945) 67 Cal.App.2d 891, 894 [“the failure to allege a date, which appears to be material, such as the date of an accident, known to plaintiff, and as to which it may be assumed plaintiff’s knowledge is superior to that of defendant, is subject to special demurrer”].)

As a leading practice guide advises, “While the authorities appear to support a conclusion that the demurrer cannot be sustained, requiring the defendant to make a later motion for summary judgment, there are times when a demurrer for uncertainty as to the date of occurrence or breach may be made. This is especially true when it is apparent the plaintiff purposely omitted the date to avoid a bar by the statute of limitations and it would require the parties to go through expensive discovery to find this information.” (Finley & McGuire, Cal. Summary Judgment and Related Termination Motions (The Rutter Group 2024) § 2:70.) Plaintiff’s second amended complaint is a paradigmatic example of a pleading that purposely omits dates in an apparent attempt to avoid the statute of limitations.

The opposition makes only the following response to Union’s arguments on the statute of limitations: The causes of action are not “barred by the statute of limitations because, among other reasons, Union Defendants’ wrongful conduct remains ongoing, as alleged in the Complaint. For example, to this day, Union Defendants continue to fail to give A-L ownership and control of the Collection Matters. Further, to this day, Union Defendants continue to fail to pay A-L its share of amounts collected in the Collection Matters.” (Opp., p. 5.)

Continuing to not fulfill a past obligation does not indefinitely extend the statute of limitations. “Generally speaking, a cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’ ” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) For example, if defendants converted property in 2016 and never returned it, that defendants still have the property does not permit plaintiff to sue for conversion in 2023.

Union does not specifically assert that every cause of action is uncertain and untimely. Nonetheless, this defect in the second amended complaint applies equally to all causes of action.

2nd, 3rd, & 4th Causes of Action: Concealment, Fraud, & Negligent Misrepresentation

Plaintiff does not allege sufficient facts for these causes of action for another reason. These claims are forms of fraud, which “must be pled specifically.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) This requirement applies to “ ‘[e]very element of the cause of action for fraud.’ ” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

Plaintiff does not specifically allege facts showing it relied on any concealment or misrepresentation and that its reliance resulted in damages. For fraud, the plaintiff’s damages must be “caused by the actions he took in reliance on the defendant’s misrepresentations.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1064.) When damages result solely from the defendant’s failure to perform its contractual obligations, those constitute “breach of contract damages, not reliance damages” and therefore do not satisfy the element of damages for fraud. (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1819; accord Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.)

For these elements, plaintiff relies solely on conclusory allegations: “Had the omitted information been disclosed, Plaintiff reasonably would have behaved differently. Plaintiff was harmed. Defendants’ concealment was a substantial factor in causing Plaintiff’s harm.” (SAC, ¶¶ 61-63.) “If Plaintiff had been aware of such facts, Plaintiff would have acted differently.” (¶¶ 71, 81.) These allegations fall far short of the required specificity for pleading fraud. Plaintiff does not allege what it would have done differently, what it did in reliance on the alleged fraud, or how any actions it took in reliance on the fraud caused plaintiff’s damages. Plaintiff does not allege facts showing it suffered any damages other than those resulting from alleged breaches of contract.

5th Cause of Action: Conversion

Plaintiff also does not allege sufficient facts for conversion for an independent reason. “The gravamen of” conversion “is the defendant’s hostile act of dominion or control over a specific chattel to which the plaintiff has the right of immediate possession.” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) “[A] mere contractual right of payment, without more, will not suffice” for conversion. (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)

The second amended complaint alleges defendant converted “Plaintiff’s interest in the Collection Matters.” (SAC, ¶ 87.) “The Collection Matters” are debts owed to plaintiff. (¶ 18.) Those are contractual rights to payment. Plaintiff provides no authority permitting a cause of action for conversion of intangible rights to collect debts.

10th Cause of Action: Negligence

This cause of action also fails for an independent reason. The economic loss rule bars plaintiff’s claim for negligence. “In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.) “[T]he rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Ibid.)

“ ‘[T]he economic loss rule requires a [contractual party] to recover in contract for purely economic loss due to disappointed expectations, unless [the party] can demonstrate harm above and beyond a broken contractual promise.’ ” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20.) “[T]he economic loss doctrine applies when the parties have entered into a contract; the plaintiff sues for tort damages, alleging the defendant failed to perform as the contract requires; and negligently caused economic losses flowing from the breach. In such a case, the plaintiffs are generally limited to recovery of those economic damages and cannot seek to expand their remedies beyond those available in contract. The doctrine does not apply if the defendant’s breach caused physical damage or personal injury beyond the economic losses caused by the contractual breach and the defendant violated a duty flowing, not from the contract, but from a separate, legally recognized tort obligation.” (Id. at p. 44.)

The second amended complaint’s 10th cause of action merely incorporates the prior allegations (¶ 110) and asserts defendants “were negligent in their handling of the Collection Matters, as described above” (¶ 112). Handling the collection matters was the subject of the parties’ contract. Plaintiff does not allege Union breached an independent tort obligation, caused any physical damage or personal injury, or caused any losses beyond a broken contractual promise. Plaintiff alleges no more than that Union negligently breached the contract. The economic loss rule bars this claim.

Other Grounds for Demurrer

Union also demurs to several causes of action on additional grounds. Because the court will sustain the entire demurrer, it need not and does not address the other grounds asserted in Union’s demurrer.

Disposition

Defendants Union Adjustment Co., Inc. and Nathan Rubinfeld’s demurrer to plaintiff A-L Financial Corp.’s first through 10th causes of action is sustained with 20 days’ leave to amend.