Judge: David A. Hoffer, Case: 30-2021-01203469, Date: 2022-09-26 Tentative Ruling
Defendant Rick Tarnutzer’s (“Defendant”) Motion for Summary Judgment, or Alternatively Summary Adjudication (“Motion”) against plaintiff Mark J. Hillgren, Trustee of The Seaward Partners Profit Sharing Plan & Trust’s (“Plaintiff”) Complaint is DENIED.
Defendant brings his Motion as to all four causes of action (“COA”).
1) COA No. 1 – Breach of Oral Contract
Defendant moves for judgment based solely on the statute of limitations on an oral contract having passed. The statute of limitations on breach of oral contracts is two years. (Civ. Proc. Code § 339.) The key is the breach of the contract, not the date the contract was actually made. “The statute of limitations in a contract action, however, does not run before the breach of contract in question has occurred.” (Mullins v. Rockwell Internat. Corp. (1997) 15 Cal. 4th 731, 740–41.) “In light of the numerous variables arising in “missed statute” cases, we conclude, consistent with the general rule, that “the determination of the time when plaintiff suffered damage raises a question of fact.” [Citation.] If the material facts are undisputed, the court may, however, resolve the issue of when the plaintiff suffered manifest and palpable injury as a matter of law.” (Adams v. Paul (1995) 11 Cal. 4th 583, 585–86.)
“To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant's breach and resulting damage.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal. App. 4th 299, 307.) “All contracts may be oral, except such as are specially required by statute to be in writing.” (Civ. Code § 1622.)
Plaintiff alleged the terms of the contract were that Plaintiff lent Defendant $130,000 at a 10% interest rate (“Second Loan”), with the principal amount payable contingent upon the first combined loan of $300,000 (“First Loan”) being paid in full. Plaintiff has sufficiently pled the existence of a contract and Plaintiff’s performance (funding the Second Loan) on the contract. Plaintiff has also pled the First Loan was paid off in 2020, causing the Second Loan to become due, and that Plaintiff has made multiple demands on Defendant to repay the Second Loan, but Defendant has refused. (FAC ¶ 1.)
The breach of the Second Loan (and the oral contract at issue) occurred when Defendant refused or failed to make repay the Second Loan. The two-year statute of limitations began to run upon Plaintiff’s refusal/failure to pay the Second Loan following the 02/14/20 pay off date (Hillgren Decl. ¶ 15) of the First Loan. As this lawsuit was filed on 06/01/21, it was filed within the two-year statute of limitations period.
Defendant argues the Second Loan had no specific due date, which made it a payable on demand loan. If Defendant’s contention were correct, then the two-year statute of limitations would run from the date of the loan and not from the date of the alleged breach. (Clunin v. First Fed. Tr. Co. (1922) 189 Cal. 248, 249.) However, lack of a specific date does not automatically make a loan payable on demand. If an agreement expressly makes the loan payable upon a certain event, then the loan is not considered due until such event has occurred. (Crocker-Woolworth Nat. Bank v. Carle (1901) 133 Cal. 409 [Where a loan is payable on or before completion of a specific contract, the promise to pay is absolute and the complete of the contract merely fixes the time for payment]; (Hathaway v. Patterson (1873) 45 Cal. 294.) Under the alleged terms of the Second Loan, the Second Loan was not due and owing until such time as the First Loan had been paid off. (Hillgren Decl. ¶ 8.) Until such time as the First Loan was paid off, Plaintiff was unable to make a demand for payment on the Second Loan. As the First Loan was not paid off until 02/14/20, the Second Loan did not become due until 02/14/20 and the statute of limitations had not run by the time this action was filed.
Defendant also argues the Second Loan is barred pursuant to the statute of frauds as, “it was not performed within one year.” (Motion, 5:27-8:1) This is an incorrect statement of the statute of frauds. The statute of frauds cited by Defendant is:
“(a) The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent:
(1) An agreement that by its terms is not to be performed within a year from the making thereof.” (Civ. Code § 1624.)
“This statute of frauds provision has been interpreted literally and narrowly by California courts. [Citation.] Only those contracts which expressly preclude performance within one year are unenforceable.” (Multifamily Captive Grp., LLC v. Assurance Risk Managers, Inc., 578 F. Supp. 2d 1242, 1248 (E.D. Cal. 2008).) “The test for determining whether an oral contract is not to be performed within a year lies wholly within its terms. [Citation.] The terms of the oral agreement may by express provision specify that the duty is not to be performed within a year, or by clear implication make it evident from the subject matter of the contract that a period longer than one year was contemplated by the parties. (Lacy v. Bennett (1962) 207 Cal. App. 2d 796, 809 (“Lacy”).) If, “[i]t is possible within the terms of such an agreement that the money might be repaid within one year. The fact that performance within one year is not probable under the terms of the agreement does not bring it within the statute of frauds.” (Id., at 800-01.)
Under the terms of the oral contract alleged, the Second Loan was not due until the First Loan had been paid. The only terms of the First Loan were that Defendant owed 10% annual interest on the $300,000 loan. There is no evidence that the First Loan was for a specific minimum number of years; that is, Defendant could, in theory, have paid off the First Loan within one-year of obtaining the Second Loan, then the Second Loan could also, in theory, have been paid off within one year of the oral contract. “[O]ral contracts invalidated by the statute because not to be performed within a year include those only which cannot be performed within the period.” (Connelly v. Venus Foods, Inc. (1959) 174 Cal. App. 2d 582, 586.) Again, the terms of the Second Loan do not expressly preclude Defendant from paying off the Second Loan within one year. Additionally, Plaintiff’s declaration indicates Defendant had numerous assets (real property, a yacht, exotic luxury vehicles) that could have been sold to pay off the loans at any time, which could, in theory, have paid off both loans within one-year from the time the oral contract was made. (Hillgren Decl. ¶¶ 4, 9.)
Defendant has not met his burden of showing the statute of limitations has run on this COA.
The Motion is denied as to this COA.
2) COA No. 2 – Common Counts / Money Lent; and No. 3 – Accounts Stated In Writing
When the basis for common counts is factually identical to a contract claim, the statute of limitations is based on the contract limitations. (Leighton v. Forster (2017) 8 Cal. App. 5th 467, 494.) As noted above, the statute of limitations likely did not start running on the breach of oral contract COA until 2020, and therefore does not appear to have run on the common count COAs.
The Motion is denied as to this COA.
3) COA No. 4 – Unjust Enrichment
“California courts appear to be split on whether a standalone cause of action for unjust enrichment is anything more than “a general principle, underlying various legal doctrines and remedies.” (Mattel, Inc. v. MGA Entm't, Inc. & Consol. Actions, 782 F.Supp.2d 911, 1014 (C.D.Cal.2011) [noting that “stand alone claims for unjust enrichment are simply redundant of relief already available under other existing law”].) Courts in this district [U.S.D.C. Northern District] have held that California law permits unjust enrichment claims, in which “restitution may be awarded either (1) in lieu of breach of contract damages, where an asserted contract is found to be unenforceable or ineffective, or (2) where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct, but the plaintiff has chosen not to sue in tort.” (Oracle Corp. v. SAP AG, No. C 07–1658 PJH, 2008 WL 5234260, at *8 (N.D.Cal. Dec. 15, 2008) (citing McBride v. Boughton (2004) 123 Cal.App.4th 379, 388); see also Wolf v. Wells Fargo Bank, N.A., 2011 WL 4831208, *8 [“Restitution [under an unjust enrichment theory may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.”.] (citing McBride 123 Cal.App.4th at 388). ‘ “ (Ellsworth v. U.S. Bank, N.A., 30 F. Supp. 3d 886, 914 (N.D. Cal. 2014).)
Plaintiff has properly pled facts sufficient to support a cause of action for unjust enrichment, if it is a cause of action. If it is not a stand-alone cause of action, but rather a theory of recovery, Plaintiff has still pled facts sufficient to support that theory. The court will not foreclose a potential avenue of recovery of money lent to Defendant at this point in the lawsuit as, “generally, one who is unjustly enriched at the expense of another is required to make restitution.” (Pro. Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal. App. 5th 230, 238.) “[A] cause of action for unjust enrichment is not based on, and does not otherwise arise out of, a written contract. Rather, unjust enrichment is a common law obligation implied by law based on the equities of a particular case and not on any contractual obligation. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 388–389.) Whether termed unjust enrichment, quasi-contract, or quantum meruit, the equitable remedy of restitution when unjust enrichment has occurred “is an obligation (not a true contract [citation] ) created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his or her former position by return of the thing or its equivalent in money.” (Fed. Deposit Ins. Corp. v. Dintino (2008) 167 Cal. App. 4th 333, 346.)
Defendant’s only arguments in the Motion against the breach of oral contract COA was that it was barred by the statute of limitations, which does not appear to be the case (supra). The issues of whether the contract actually existed, the terms thereof, and whether there was a breach have not been adjudicated as of yet. If, at trial, the trier of fact determines there is a valid contract that was breached, then recovery under the unjust enrichment would be improper. If the trier of fact determines there was no valid contract or no breach, then recovery under unjust enrichment may be an available form of recovery to potentially restore Plaintiff to his former position. To foreclose on an avenue of potential recovery when there are triable issues regarding the other COA would be improper.
The statute of limitations period on unjust enrichment COA is three years. (Fed. Deposit Ins. Corp. v. Dintino (2008) 167 Cal. App. 4th 333, 354.) As with the other COA, Plaintiff was not made aware of Defendant’s refusal to pay on the contract until 02/14/20, when the First Loan was paid off and the demand for payment of the Second Loan was made and refused. This action was filed within that three-year limitation period.
The Motion is DENIED as to this COA.
Finally, the court notes Defendant improperly made new points and arguments in his reply brief that do not relate to the issues raised in the Motion. Those new arguments will not be considered. (Am. Drug Stores, Inc. v. Stroh (1992) 10 Cal. App. 4th 1446, 1453; San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal. App. 4th 308, 316.)
4) Objections
Sustained as to No. 1 from “Late May 2004. . .” to the end as it is hearsay and double hearsay, and as to Ex. 1 as no foundation and authentication of the document was provided.
Overruled as to No. 1 for the first two sentences.
Overruled as to No. 2 as Defendant has not cited a valid evidentiary objection.
Plaintiff is ordered to give notice of this ruling.