Judge Daniel M. Crowley, Case Number: 23STCV06104, Date: 2023-10-04 Tentative Ruling

Defendants JHPDE SPV II, LLC [erroneously sued as JHPDE SVP II, LLC] (“SPV II”), Paradigm Assets Management, LLC (“PAM”), and Headway Capital, LLC (“Headway”) (collectively, “Defendants”) demur unopposed to pro per Plaintiff Wook Kim’s (“Kim”) (“Plaintiff”) second amended complaint (“SAC”) on the ground that each of the purported causes of action fail to state facts sufficient to constitute causes of action and are uncertain. (Notice of Demurrer, pgs. 1-2; C.C.P. §§430.10(e), (f).)

Defendants’ 2/8/23 request for judicial notice of the California Department of Business Oversight’s Active License to Headway, issued on January 19, 2016, License No. 60DBO 44216, is granted. (D-RJN, Exh. 1.)

Before filing a demurrer, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer. (C.C.P. §430.41.)

Defendants’ counsel filed a declaration stating that Plaintiff is proceeding pro se and speaks little to no English making any meet and confer attempts nearly impossible. (Decl. of Kane ¶5.) Defendant’s counsel declares that Defendants believe that any meet and confer attempts with Plaintiff would more than likely be futile. (Decl. of Kane ¶7.) Defendants’ counsel’s declaration is insufficient per the requirements of C.C.P. §430.41(a). (C.C.P. §430.41(a).) However, a determination by the court that the meet and confer process was insufficient is not grounds to overrule a demurrer. (C.C.P. §430.41(b).) Therefore, the Court will consider the instant demurrer.

Plaintiff filed his initial Complaint against Defendants on March 20, 2023. On October 17, 2023, this Court ruled on Defendants’ demurrer to Plaintiff’s Complaint, sustaining the 1st, 2nd, 4th, 5th, 6th, 7th, and 8th causes of action with 20 days leave to amend, and sustaining the demurrer to the 3rd cause of action without leave to amend.

On November 6, 2023, Plaintiff filed his first amended complaint (“FAC”). On January 9, 2024, this Court ruled on Defendants’ demurrer to Plaintiff’s FAC, sustaining the 1st, 2nd, 4th, 5th, 6th, 7th, and 8th causes of action with 20 days leave to amend, and sustaining the demurrer to the 7th cause of action without leave to amend as to Headway, and the 3rd cause of action without leave to amend as to all Defendants.

On January 29, 2024, Plaintiff filed the operative SAC alleging eight causes of action: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) negligence; (4) negligent misrepresentation; (5) violation of the Fair Credit Reporting Act (“FCRA”); (6) violation of California’s unfair competition law and Business and Professions Code §17200; (7) violation of usury law; and (8) fraud. Plaintiff’s causes of action stem from Defendants’ alleged attempts to collect a debt from Plaintiff. (SAC, pg. 3.)

On February 8, 2024, Defendants filed the instant demurrer. As of the date of this hearing no opposition has been filed.

Defendants demur on the basis that Plaintiff’s 1st through 8th causes of action fail to state facts sufficient to constitute causes of action against Defendant and are uncertain. (Demurrer, pgs. 1-2; C.C.P. §§430.10(e), (f).)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

Breach of Contract & Breach of Covenant of Good Faith and Fair Dealing (1st & 2nd COAs)

A cause of action for breach of contract requires the following elements: (1) the existence of a contract; (2) plaintiff’s performance or non-performance; (3) defendant’s breach of the contract; and (4) damages suffered by plaintiff. (Reichert v. General Insurance Co. (1968) 68 Cal.2d 822, 830.)

Plaintiff must plead the contract, plaintiff’s performance or excuse for non-performance, defendant’s breach, and damage to plaintiff therefrom. (Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.) Although a written contract is usually pleaded by alleging its making and attaching a copy which is incorporated by reference, a written contract can also be pleaded by alleging the making and the substance of the relevant terms. (Construction Protective Services, Inc. v. TIG Specialty Insurance Co. (2002) 29 Cal.4th 189, 198-199; Perry v. Robertson (1988) 201 Cal.App.3d 333, 341.) “An oral contract may be pleaded generally as to its effect, because it is rarely possible to allege the exact words. [Citation.] A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures. [Citations.]” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) That plaintiff could not allege with specificity the exact terms of the contract does not preclude statement of a cause of action. (Id.)

Plaintiff alleges Defendants breached their contract by failing to give him the necessary evidence, denying him an opportunity to dispute the debt, and hurting his credit score without cause. (SAC, pg. 6.) Plaintiff alleges that as a debtor, he contracted with defendants to furnish him with an itemized billing or invoice to verify the debt’s veracity and challenge it. (SAC, pg. 6.) Plaintiff alleges he sent a demand letter to Defendant dated February 20, 2023. (SAC, pg. 6, Exh. 1.)[1]

Plaintiff fails to allege his performance or non-performance of the contract and which defendants breached the contract, and facts regarding the breach of the contract. (Reichert, 68 Cal.2d at pg. 830.)

With regards to the breach of covenant of good faith and fair dealing, Plaintiff fails to allege he did all, or substantially all, of the significant things that the contract required him to do, or that he was excused from having to do those things; that all conditions required for defendant’s performance had occurred, or were excused; and that by doing so, defendant did not act fairly and in good faith. (See CACI 325.)

Accordingly, Defendants’ demurrer to Plaintiff’s 1st and 2nd causes of action for breach of contract and breach of the covenant of good faith and fair dealing, respectively, is sustained without leave to amend.

To state a negligence claim, a plaintiff must allege: (1) the defendant owed the plaintiff a duty of care; (2) the defendant breached that duty; and (3) the breach proximately caused the plaintiff’s damages or injuries. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62.) “The existence of a duty of care owed by a defendant to a plaintiff is a prerequisite to establish a claim for negligence.” (Nymark v. Heart Federal Savings & Loan Ass’n (1991) 231 Cal.App.3d 1089, 1096.)

This Court already sustained Defendants’ demurrer to Plaintiff’s 3rd cause of action without leave to amend. (10/17/23 Minute Order.) Plaintiff is precluded from realleging this cause of action in his amended complaint.

“Negligent misrepresentation requires an assertion of fact, falsity of that assertion, and the tortfeasor’s lack of reasonable grounds for believing the assertion to be true. It also requires the tortfeasor’s intent to induce reliance, justifiable reliance by the person to whom the false assertion of fact was made, and damages to that person. An implied assertion of fact is ‘not enough’ to support liability.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 154, internal citation omitted.)

“The elements of fraud that will give rise to a tort action for deceit are: ‘(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974, internal quotation marks omitted.)

Plaintiff alleges Defendants represented he owed a debt without providing him detailed bills or receipts to verify that debt and without allowing him to challenge the debt. (SAC, pg. 9.) Plaintiff alleges Defendants have no evidence that Plaintiff owed the sum they claimed, and Plaintiff justifiably relied on these deceptive representations to his harm. (SAC, pg. 9.) Plaintiff alleges he paid the Defendants because he believed he owed the amount, and due to the lack of paperwork and opportunity to dispute his debt, he was obligated to rely on Defendants’ assertion of the debt’s veracity. (SAC, pg. 9.) Plaintiff alleges his credit score and loan applications suffered due to this reliance. (SAC, pg. 9.)

Plaintiff alleges Defendants withheld the debt information they were required to provide. (SAC, pg. 10.) Plaintiff alleges Defendants failed to warn Plaintiff that they would report the supposed debt to credit reporting agencies, which would hurt his credit score and ability to get credit. (SAC, pg. 10.) Plaintiff alleges his credit score and ability to get loans were damaged by Defendants’ careless misrepresentations and omissions, and Plaintiff paid to rehabilitate his credit and lost his reputation. (SAC, pg. 10.)

Plaintiff fails to allege his causes of action for negligent misrepresentation and fraud because the claims are not stated with the requisite particularity; Plaintiff fails to state “how, when, where, to whom, and by what means the representations were tendered,” and in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar, 12 Cal.4th at pg. 645.)

FCRA (15 U.S.C. §1681 et seq.) was adopted by Congress to ensure accuracy and fairness in credit reporting and to protect the rights of individual consumers. (See 15 U.S.C. §1681(b).) “Section 623 of the FCRA imposes two general requirements: the duty to provide accurate information (15 U.S.C. §1681s–2)(a)) and the duty to investigate the accuracy of reported information upon receiving notice of a dispute (15 U.S.C. §1681s–2(b)).” (Sanai v. Saltz (2009) 170 Cal.App.4th 746, 763-765, as modified on denial of reh’g (Feb. 18, 2009).) “To trigger the latter set of duties, however, notice to the furnisher of information must be given pursuant to section 611(a)(2) of the FCRA (15 U.S.C. § 1681i(a)(2)), which requires a consumer credit reporting agency to reinvestigate the current accuracy of information in its files after being notified by the consumer of a dispute and to notify the person who furnished it with the information about the dispute. That is, to activate the duties imposed by section 623(b) of the FCRA, notice of the dispute must come to the furnisher of the information . . . from the credit reporting agency . . . not directly from the consumer . . . himself. [Citation.] ‘This means that a furnisher of credit information . . . has no responsibility to investigate a credit dispute until after it receives notice from a consumer reporting agency. Under the statutory language notification from a consumer is not enough.’ [Citations.].” (Sanai, 170 Cal.App.4th at 764-765.)

Plaintiff alleges Defendants violated the FCRA by submitting false information to credit reporting agencies, neglecting to investigate Plaintiff’s objections, and failing to update the information. (SAC, pg. 10.) Plaintiff alleges Defendants knowingly violated the FCRA by reporting incorrect information. (SAC, pg. 10.) Plaintiff alleges Defendants reported the purported debt to credit reporting agencies, hurting Plaintiff’s credit score and ability to get credit. (SAC, pg. 10.) Plaintiff alleges Defendants did not furnish plaintiff with detailed billing or invoices to verify the debt’s veracity or enable him to challenge it. (SAC, pg. 10.) Plaintiff alleges he contested the debt with the Defendants, who had to investigate the disputed facts. (SAC, pgs. 10-11.) Plaintiff alleges Defendants neglected to investigate plaintiff’s objections and continued to disclose false information to credit reporting agencies. (SAC, pg. 11.) Plaintiff alleges Defendants’ inability to rectify the erroneous information has harmed his credit score and ability to get credit. (SAC, pg. 11.)

Plaintiff fails to allege Defendants received notice of a dispute through a consumer reporting agency. (Sanai, 170 Cal.App.4th at 765.)

A cause of action for violation of California’s UCL requires plaintiff to allege the following: (1) a business practice; (2) that is unfair, unlawful or fraudulent; and (3) authorized remedy. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676.)

By proscribing “any unlawful” business act or practice, the UCL “borrows” rules set out in other laws and makes violations of those rules independently actionable. (Zhang v. Superior Court (2013) 57 Cal.4th 364, 370.) A “violation of another law is a predicate for stating a cause of action under the UCL’s unlawful prong.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554.) Plaintiff must allege a violation of law to support a UCL claim. If there is no violation of another law, defendant cannot be held liable for an “unlawful” business practice. (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610 [demurrer to SAC which failed to allege violation of a law was properly sustained without leave to amend].) “When a statutory claim fails, a derivative UCL claim also fails.” (Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, 1185.)

Plaintiff alleges Defendants violated the FDCPA and FCRA. (SAC, pg. 11.) Plaintiff alleges these offences include fraudulently disclosing the purported debt to credit reporting agencies and, without proof, Defendants declared the debt as correct. (SAC, pg. 12.)

Plaintiff fails to allege his underlying cause of action for violation of FCRA, and therefore his derivative cause of action for violation of UCL also fails. (Aleksick, 205 Cal.App.4th at pg. 1185.)

Accordingly, Defendants’ demurrer to Plaintiff’s 6th cause of action is sustained without leave to amend.

Article XV of the Constitution of the State of California establishes usury limits applicable to “the loan or forbearance of any money, goods, or things in action . . . at a rate not exceeding 10 percent per annum.” (Cal. Const., art. XV, §1.) Article XV contains an exemption clause, which provides that “none of the above restrictions shall apply to any obligations of, loans made by, or forbearances of . . . any other class of persons authorized by statute.” (Cal. Const., art. XV, §1(2).) “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 modified on denial of reh’g (Feb. 2, 1995).)

Plaintiff alleges Defendants illegally charged him a high loan interest rate with an APR of 52.29%, which is in excess of California’s 10% limit. (SAC, pg. 12.) Plaintiff alleges Defendants charged him this interest rate without providing him with disclosures or paperwork to explain or contest them. (SAC, pgs. 11-12.)

This Court previously sustained Defendants’ demurrer to this claim without leave to amend with respect to Headway. Headway holds a finance-lender license and is a licensed finance lender. (D-RJN, Exh. 1.) Therefore, as a licensed finance lender, Headway is a member a “class of persons authorized by statute,” namely Financial Code §22002. (Moore v. Hill (2010) 188 Cal.App.4th 1267, 1280, citing Fin. Code §22002.) This exception applies equally to “any successor in interest to any loan or forbearance exempted under this article.” (Montgomery v. GCFS, Inc. (2015) 237 Cal.App.4th 724, 732, citing Cal. Const., art. XV, §1.) Headway is the only Defendant alleged in the SAC to be a lender. (SAC, pgs. 2-3.) Plaintiff’s SAC is silent as to Headway’s relationship with SPV II and PAM; therefore, it is unclear what allegations are made against the entities under the cause of action, despite having two opportunities to provide details on their relationship to Headway. (See SAC.)

A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond—i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

If the complaint contains enough facts to apprise defendant of the issues it is being asked to meet, failure to label each cause of action is not ground for demurrer: “Although inconvenient, annoying and inconsiderate, the lack of labels . . . does not substantially impair [defendant’s] ability to understand the complaint.” (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 n.2.)

Where a demurrer is made upon this ground, it must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears (by reference to page and line numbers of the complaint). (See Fenton v. Groveland Community Services District (1982) 135 Cal.App.3d 797, 809.)

Defendants fail to specify where the uncertainty appears by reference to page line and numbers in the complaint. (See id.)

Hon. Daniel M. Crowley

Judge of the Superior Court

[1] The Court notes no exhibits were filed with the SAC, although Plaintiff refers to exhibits throughout the pleading.