Judge Jill Feeney, Case Number: 23STCV12575, Date: 2024-02-06 Tentative Ruling

This is an action for breach of contract, negligence, fraud, and common counts. Plaintiff alleges that Defendant Network Capital Funding (“Network”) misrepresented that money for a mortgage would be coming from its own asset account. Rather, Network had no money to lend and no loan transaction ever took place.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., section 430.41(a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., section 430.41(a)(2).) A failure to meet and confer does not constitute grounds to sustain or overrule a demurrer. (See Code Civ. Proc., sections 430.41 (a)(4).)

Here, Defendant’s counsel testifies that he attempted to meet and confer with Plaintiff regarding his deficient complaint. (Price Decl., ¶¶3-9.) Plaintiff responded after many failed attempts to contact him and stated he would not be amending the Complaint. (Id.) Defendant satisfies meet and confer requirements.

The elements of a claim for breach of contract are: “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal. 4th 811, 821.) In addition, the complaint must demonstrate damages proximately caused by the breach. (St. Paul Ins. v. American Dynasty (2002) 101 Cal.App.4th 1038, 1060.)

For a written contract, the plaintiff may plead it “by its terms – set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference – or by its legal effect.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489 abrogated on other grounds in Freeman v. Quicken Loans Inc. (2012) 566 U.S. 624.) To plead a contract’s legal effect the plaintiff’s pleading must include “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.” (Id.)¿

Here, the Complaint alleges that Defendant concealed the fact that it would be using Plaintiff’s promissory note to clear all liens and encumbrances to convey clear title to another buyer and obtain money from another financial institution. (Compl., p. 1.) Plaintiff failed to set forth the terms of any contract between the parties or attach a contract to the Complaint. The Complaint does not contain the legal effect of any contract between Plaintiff and Defendant.

Additionally, the Complaint fails to describe Plaintiff’s performance under any contract or excuse for nonperformance. The Complaint also fails to state Plaintiff suffered damages as a result of Defendant’s breach of a contract.

“The elements of a cause of action for negligence are well established. They are (a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917, internal quotations omitted.) “The first element, duty, may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship.” (Doe v. United States Youth Soccer Assn., Inc. (2017) 8 Cal.App.5th 1118, 1128, internal quotations omitted.) “[T]he existence of a duty is a question of law for the court.” (Ky. Fried Chicken of Cal. v. Superior Court (1997) 14 Cal.4th 814, 819.)

Here, the Complaint states Defendant led Plaintiff to believe the money going to a seller would be coming from its own assets. In reality, Defendant had no money to lend and no loan transaction ever took place. (Compl., p.2.) When a buyer (presumably Plaintiff) gave Defendant collateral for the purchase of unspecified property, Defendant used Plaintiff’s promissory note to convey free title to Plaintiff from the seller. (Id.) Defendant then converted the promissory note to a mortgage-backed security. (Id.) Defendant never intended to give Plaintiff valuable consideration. (Id.)

The Complaint fails to state facts which would establish Defendant owed Plaintiff any duty of care. Although it can be inferred that Plaintiff is suing over a mortgage, the facts do not state what Plaintiff’s relationship with Defendant is.

The Complaint fails to state whether Plaintiff was the buyer or the seller and what duty Defendant owed Plaintiff. Additionally, there are no facts showing Defendant breached any duty of care it owed to Plaintiff by converting the promissory note or using the promissory note to transfer property from a seller to a buyer.

Finally, there are no facts stating how Plaintiff was injured as a result of any breach of duty. Because the Complaint fails to state facts sufficient to support the elements of negligence, the demurrer is sustained as to this cause of action.

The necessary elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity (scienter), (3) intent to defraud (i.e., to induce reliance), (4) justifiable reliance, and (5) resulting damage. Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239. Fraud causes of actions must be pled with specificity in order to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216, superseded by amendments to the Unfair Competition Law contained in Proposition 64 on unrelated grounds.) “(a) General pleading of the legal conclusion of ‘fraud’ is insufficient; the facts constituting the fraud must be alleged. (b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.” (Ibid.)

Here, the Complaint alleges that Defendant led Plaintiff to believe that the money going to a seller would be coming from its own assets in the form of a loan. (Compl., p. 3.) However, Defendant had no money and never completed a loan transaction. (Id.) Defendant violated its corporate charter by lending credit and charging interest on a fictitious loan. (Id.) Defendant used Plaintiff’s promissory note to clear title and purchase property from a seller. (Id.) Defendant concealed these facts with the intent to defraud and induce Plaintiff to act and Plaintiff would not have acted if he had known the facts. (Id.)

The facts alleged in the Complaint state that Defendant made a misrepresentation that the funds for what appears to be a mortgage would come from its own assets. However, no money was ever loaned to a buyer (again, presumably Plaintiff) and Defendant began charging interest on a loan that did not exist. These facts fail to state what action Plaintiff took in reliance of this misrepresentation, why the reliance was reasonable, and howe Plaintiff was harmed as a result of this reliance. The Complaint is insufficient to support a cause of action for fraud because the facts do not support the elements of fraud. Therefore, the demurrer is sustained as to this cause of action.

A cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Farmers Insurance Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.) A claim for money had and received can be based upon money paid by mistake, money paid pursuant to a void contract, or a performance by one party of an express contract. (Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1623, 33 Cal.Rptr.2d 276.)

Here, the facts stated throughout the Complaint appear to state that Defendant was to lend money in the form of a mortgage to Plaintiff, the presumed buyer. Therefore, Plaintiff was indebted to Defendant as a mortgagee. Additionally, it appears that any money Plaintiff paid Defendant was to be used as collateral for the alleged loan. Because the Complaint states Plaintiff was indebted to Defendant, the facts do not support a cause of action for Common Counts, which requires that Defendant be indebted to Plaintiff. Therefore, the demurrer is sustained on this ground.

“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.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) “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.” (Weil & Brown, Civil Procedure Before Trial (The Rutter Group) § 7:85 (emphasis in original).) “The objection of uncertainty does not go to the failure to allege sufficient facts.” (Brea v. McGlashan (1934) 3 Cal.App.2d 454, 459.) “It goes to the doubt as to what the pleader means by the facts alleged.” (Id.) “Such a demurrer should not be sustained where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet.” (People v. Lim (1941) 18 Cal.2d 872, 882.)

Here, the Complaint fails to state what relationship exists between Plaintiff and Defendant. The Complaint also refers to a buyer and a seller without specifying who these individuals are. Additionally, there are no facts showing Defendant’s alleged conduct breached any contractual duty or duty of care. There are no allegations that Plaintiff suffered any harm as a result of Defendant’s conduct. Because the Complaint lacks significant facts, the Court finds that the Complaint is fatally uncertain because it is so bad that Defendant cannot determine what issues it is to meet.

Plaintiff has not opposed the motion and has not provided any indication as to how the complaint could be amended to fix these difficulties. Based on Plaintiff's statements to Defendant's counsel, Network Capital Funding sold Plaintiff's home loan to Wells Fargo. Plaintiff apparently believes that he is entitled to a share of any money made by Defendant in that sale. (Demurrer at page 5.) Under these circumstances and absent any information provided by Plaintiff, the Court does not see a viable cause of action.