Judge Bruce G. Iwasaki

Department 58

Hearing Date: January 31, 2025

Case Name: Cavdek v. Metal Fabrication and Art LLC

Case No.: 24STCV26980

Matter: Demurrer

Moving Party: Defendants Metal Fabrication and Art LLC and Landon Ryan

Responding Party: Plaintiff Dana Cavdek

Tentative Ruling: The Demurrer to the Complaint is sustained.

This action arises from a breach of promissory note. On October 15, 2024, Plaintiff Dana Cavdek (Plaintiff) filed a Complaint for a breach of contract against Defendants Metal Fabrication and Art LLC and Landon Ryan.

Defendants Metal Fabrication and Art LLC and Landon Ryan (Defendants) demur to the Complaint. Plaintiff opposes the demurrer.

The demurrer is sustained.

Legal Standard for Demurrers

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading by raising questions of law. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Analysis

Demurrer to Cause of Action for Breach of Contract:

Defendants demur to this cause of action on the grounds that it is barred by the statute of limitations.

A cause of action for breach of contract requires alleging “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.)

For breach of a written contract, that period is four years from the time the claim accrues. (Code Civ. Proc., § 337.) Traditionally, a claim accrues “ ‘ “when [it] is complete with all of its elements”–those elements being wrongdoing [or breach], harm, and causation.’ ” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191; accord, Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 815 [statute of limitations runs from occurrence of the last element essential to the cause of action].)

Here, the Complaint alleges that Defendants failed to make any further payment under the Note as of June 2019. (Compl., ¶ 19.) The Complaint, however, also alleges the Note’s maturity date of August 1, 2022 is the date the claim began to accrue. (Compl., ¶¶ 12, 20.)

As a preliminary matter, the Court need not accept this legal conclusion – the accrual date – as true. (Doe v. Roman Catholic Archbishop of Los Angeles (2016) 247 Cal.App.4th 953, 960 [explaining that courts “need not accept allegations containing “legal conclusions,” “adjectival descriptions” or “unsupported speculation.”].)

Rather, the Court finds that the claim began to accrue upon the breach of the monthly payment obligation in June 2019. In reaching this conclusion, the Court finds Defendants’ reliance on Piedmont Capital Management, L.L.C. v. McElfish (2023) 94 Cal.App.5th 961 instructive.

In Piedmont Capital Management, L.L.C. v. McElfish, the defendant obtained a homeowners equity line of crecit (HELOC) on his property from National City Bank. On April 1, 2011, the defendant failed to make his monthly HELOC payment. Then, in December 2012, MortgageIt, Inc. foreclosed on its deed of trust and sold the defendant’s property; the foreclosure sale did not net any surplus funds that could pay off the HELOC debt.

On October 10, 2019, the plaintiff—a debt buyer—purchased the HELOC debt and, on that same day, the plaintiff sent defendant a “Notice of Acceleration of Debt and 30-Day Demand for Payment,” which formally notified the defendant that the plaintiff was accelerating the full amount of the HELOC debt owed because he was “in default ... for failing to pay the required monthly Loan installments when due.” (Piedmont Capital Management, supra, 94 Cal.App.5th at p. 966.)

On April 13, 2020, the plaintiff filed a breach of contract alleging that the full amount of the HELOC debt was owed, totaling $186,587.26; the defendant demurred on statute of limitation ground claiming the claim had accrued on April 1, 2011 and not when the plaintiff exercised the acceleration clause in October 2019.

In finding that the statute of limitations did not run until the plaintiff triggered the acceleration clause in 2019, the court explained that the statute of limitations issue “ turn[ed] on whether the various contractual duties are divisible.” (Piedmont Capital Management, supra, 94 Cal.App.5th at p. 968.)

In Piedmont, the defendant debtor's breach of duty to make separate monthly payments under a HELOC agreement was divisible from the duty to pay the full loan amount on demand based upon the lender's exercise of the agreement's acceleration clause. (Piedmont Capital Management, supra, 94 Cal.App.5th at pp. 969-970.)

Thus, to determine whether breach of an agreement to repay a debt gives rise to one or multiple limitations periods, a court must first examine whether the contract requires periodic payments. (Id. at p. 971.) If it does, then the court must then “determine whether or not the duty to make a monthly payment is divisible from the duty to pay the full amount of the debt.” (Ibid.)

Here, the Complaint alleges Defendant failed to make any payments on the Note after June 2019. (Compl., ¶ 18.) Specifically, the Note states: “The entire unpaid balance of this Unsecured Note . . . shall be due and payable without notice or demand on August 1, 2022 (the “Due Date”).” (Compl., Ex. A, ¶ 1.) The Note continues by stating: “This Note will be repaid on the first of each month following the end of each calendar year fiscal quarter until the Due Date . . .. (Compl., Ex. A, ¶ 3.)

That is, the Note itself sets out the contractual obligation to make quarterly payments. (Compl., Ex. A, ¶ 3.) Moreover, unlike in Piedmont Capital, the Note does not contain any separate acceleration provision, and, most importantly to the statute of limitations analysis, the maturity date provision does not create a contractual duty separate from the monthly payments.

Thus, the factual allegations in the Complaint show the breach of contract claim was “complete” as of June 2019 and there was no separate breach on August 1, 2022.

The Complaint was not filed until October 15, 2024 – more than four years after the June 2019 breach.

Conclusion

The demurrer is sustained. Plaintiff shall have leave to amend the Complaint. An amended pleading shall be filed on or before March 3, 2025.