Judge Christian R. Gullon, Case Number: 23PSCV02986, Date: 2024-03-25 Tentative Ruling

Judge: Christian R. Gullon, Case: 23PSCV02986, Date: 2024-03-25 Tentative Ruling

(1) DEFENDANT CHRISTIAN COMMUNITY CREDIT UNION’S NOTICE OF DEMURRER AND DEMURRER TO COMPLAINT is SUSTAINED with leave to amend so that Plaintiffs can properly plead breach of contract.

(2) DEFENDANT CHRISTIAN COMMUNITY CREDIT UNION’S APPLICATION TO FILE DOCUMENTS UNDER SEAL IN SUPPORT OF DEMURRER TO COMPLAINT is GRANTED.[1]

This is a contracts case. GILROY FOURSQUARE CHURCH, d/b/a FOOTHILLS FOURSQUARE CHURCH (“Gilroy Foursquare”), a California unincorporated association; and THE FOOTHILLS CHURCH OF GILROY (“Successor”), a California nonprofit corporation, as Successor in Interest (collectively, “Plaintiffs”) allege the following against Defendant CHRISTIAN COMMUNITY CREDIT UNION: In October 2022, Gilroy Foursquare disaffiliated from International Church of the Foursquare Gospel (“ICFG”). Thereafter, ICFG advised Gilroy Foursquare that it would seize all of Gilroy Foursquare’s assets and property. Plaintiffs believe, and therefore allege, the change to Plaintiffs’ Accounts with the Defendant were made by ICFG. Plaintiffs have made demand on the Defendant to remove the ICFG signors from Plaintiffs’ Accounts, but the Defendant has refused to restore Plaintiffs’ authorized signors to Plaintiffs’ Accounts.

1.     Breach Of Contract

2.     Breach Of Covenant Of Good Faith And Fair Dealing

3.     Breach Of Fiduciary Duties

4.     Declaratory Judgment And

5.     Injunctive Relief

On October 20, 2023, a proof of service (POS) was filed indicating that Defendant was served via substituted service on 10/10/23.

A demurrer, in pertinent part, may be asserted when the pleading does not state facts sufficient to constitute a cause of action or when the pleading is uncertain (“uncertain” includes ambiguous and unintelligible). (Code of Civ. Proc., §430.10 subds. (e), (f).) Accordingly, a demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code of Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Defendant asks the court to take judicial notice of 11 Exhibits, including the alleged agreements.

A written instrument attached to a pleading and properly incorporated by reference may be examined by the court on a motion for judgment on the pleadings (similar legal standard as a demurrer), in lieu of the pleader's allegations of the instrument's legal effect. (Cohen v. Ratinoff (1983) 147 Cal.App.3d 321, 327, quoting Washer v. Bank of America (1943) 21 Cal.2d 822, 829-830 [“When, however, ‘a written instrument is attached to a pleading as an exhibit and incorporated into it by proper reference, the court may, upon demurrer [or motion for judgment on the pleadings], examine the exhibit and treat the pleader's allegations of its legal effect as surplusage.’”]; see also Lumbermens Mut. Cas. Co. v. Vaughn (1988) 199 Cal.App.3d 171, 178 [extending rule to approve consideration of document whose legal effect was merely alleged in complaint, where certified copy was attached to plaintiff's trial brief, defendant's brief quoted document, and parties evidently approved of trial court's consideration].)

In fact, when there is an inconsistency between the complaint and writing incorporated by reference, a court may strike any allegations of a complaint that are inconsistent with an unambiguous written instrument incorporated by reference into the complaint (Pacific States Enters v. City of Coachella (1993) 13 Cal.4th 1414, 1426, fn. 8, quoting Nichols v. Canoga Industries (1987) 83 Cal.App.3d 956, 965) because the terms of that agreement take precedence over any contradictory allegations in the body of the complaint. (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.4th 267, 282, internal citation omitted [“In support of that claim, Kim incorporates by reference seven written promissory notes which reflect defendants' alleged indebtedness to him. And that is where the trouble begins. When a plaintiff attaches a written agreement to his complaint, and incorporates it by reference into his cause of action, the terms of that written agreement take precedence over any contradictory allegations in the body of the complaint. ‘If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.’”], emphasis added.)

Notwithstanding, taking judicial notice of the documents does not require the court to accept the truth of factual matters which might be deduced therefrom. (Plaintiffs’ Objections p. 6, citing Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063-1064; see also Plaintiffs’ Objections p. 6, quoting Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374 [“Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning. [internal citation omitted.] On a demurrer a court's function is limited to testing the legal sufficiency of the complaint. [internal citation omitted.] ‘A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.’ The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable.”], emphasis added.)

Here, while Plaintiffs concede that the documents are referred to in the complaint (Plaintiffs’ Objections to RJN, p. 2:11-12), absent more facts (which the complaint needs to establish any purported inconsistency), making any comparison between the complaint and exhibits is premature at this stage.

Therefore, considering this is the first demurrer to the original complaint, the court DENIES the RJN.[2]

1. The Complaint fails to state facts sufficient to state a cause of action because no such contractual relationship exists.

2. It cannot be ascertained from the Complaint whether the contract at issue for these claims is written, is oral or is implied by conduct, or, more importantly, the terms of the alleged contract which has not been attached to the complaint, alleged verbatim or alleged by its legal effect.

3. The cause of action for breach of fiduciary duty fails as a matter of law, as a credit union owes no fiduciary duty to its depositors.

The court will focus on the second point as that is dispositive of the motion and involves no determinations of fact, hence, making it appropriate to resolve on a demurrer.

Here, the court agrees with Defendant that Plaintiffs have not adequately pled breach of contract. Plaintiffs do not plead whether their purported contractual relationship with the Credit Union is based on an oral, written or implied contract, and, if written, fail to attach the purported contract to the Complaint, allege its terms verbatim or plead the legal effect of the contract. (See Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718; see also Demurrer pp. 9-10, quoting Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.) “In order to plead a contract by its legal effect, plaintiff must allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.” (Ibid., internal citations omitted.)

All that is alleged is that Gilroy Foursquare has a contractual relationship with the Credit Union that was “memorialized by the signature card and other account documents and agreements, signed by Gilroy Foursquare’s authorized signors.” (Complaint at ¶¶ 18, 22.)

For one, though the complaint appears to allege a written contract, it appears that are multiple documents and agreements. How many? Are three agreements, one per each bank account? Are three documents, one per each bank account? Or does the signature card the contract? The pleading does not provide answers to these basic questions as the ultimate facts required in a complaint.

Next, the complaint alleges that the said material was signed by Gilroy Foursquare’s authorized signors or users, but there is no reference as to the identity of these parties. To the extent that Plaintiffs allege in opposition that those individuals are “Pastor Mark Wilson, Reba Taylor, Mark Stewart and Angel Ruiz,” that fact is not found within the four corners of the complaint. (Melikan v. Truck Ins. Exchange (1955) 133 Cal.App.2d 113, 114 [“In approaching that issue we are bound, just as the trial court was bound, by the allegations in the verified complaint and cannot consider the outré-judicial statements of counsel nor the additional facts found in the briefs.”].)

Therefore, as it cannot be ascertained from Plaintiffs’ complaint whether the contract at issue is written, oral or implied by conduct, the demurrer is SUSTAINED with leave to amend as to the breach of contract COA.

As to the second COA for breach of implied covenant of good faith and fair dealing, that cannot survive without a contract. (See Reply p. 9, citing Racine &Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032 [“There is no obligation to deal fairly or in good faith absent an existing contract.”].)

However, in opposition, Plaintiffs concede that “a bank does not owe a depositor a fiduciary duty.” (Opp. p. 10; see also Demurrer p. 13, quoting Kurtz-Ahlers, LLC v. Bank of America, NA (2020) 48 Cal.App.5th 952, 956 [quoting Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 537 [“banks ‘are not fiduciaries for their depositors’”].)

Therefore, as Plaintiffs’ contentions concerning the possible existence of other duties are irrelevant to its alleged duty, the demurrer is sustained WITH leave to amend (to change the duty/duties).

As this COA is predicated upon the purported contractual agreement, the court sustains the demurrer WITH leave to amend.

[1] Though the documents lodged under seal will not be used in adjudication of the demurrer, the motion is granted because it complies with California Rules of Court, Rule 2.550, subd. (d) and is otherwise unopposed.

[2] That said, should it be necessary, on a subsequent demurrer, the court would likely take judicial notice of the documents because they are incorporated by reference.