Judge: John J. Kralik, Case: 23BBCV00060, Date: 2023-08-25 Tentative Ruling

Case Number: 23BBCV00060    Hearing Date: August 25, 2023    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff LVNV Funding LLC (“Plaintiff”) alleges that it is a debt buyer (with its California Debt Collector license application currently pending) and is the sole owner of the debt at issue.  Plaintiff alleges that the subject credit account was purchased by the various entitles after charge-off and was eventually transferred to Plaintiff.  Plaintiff alleges that Defendant Arbi Vartazarian Argentini (“Defendant”) executed and delivered a credit card application to the original creditor, SoFi Lending Corp., or made such application over telephone or internet.  Plaintiff alleges that pursuant to the application, SoFi Lending Corp. provided Defendant with a credit account and granted use privileges on the same account number ending in -4602.   Plaintiff alleges that the date of last payment on the account was October 26, 2020 and that within the last 4 years, Defendant failed to make payments as agreed.  It alleges the debt balance at charge-off was $36,284.50. 

The complaint, filed January 11, 2023, alleges causes of action for: (1) account stated; and (2) open book account.

B.     Motions on Calendar

On March 20, 2023, Defendant filed a demurrer and a motion to strike portions of the complaint.

The Court is not in receipt of an opposition brief.  On August 15, 2023, Defendant filed a notice of non-opposition, stating that Defendant is not in receipt of an opposition brief.

DISCUSSION RE DEMURRER

            Defendant demurs to the complaint, arguing that Plaintiff is acting as a debt collector, but its California license application is currently pending.  (Compl., ¶2.)  Plaintiff alleges that it is the successor in interest to the original creditor, SoFi Lending Corp., is a debt buyer, and is the sole owner of the debt at issue.  (Id., ¶¶1-2.)  Plaintiff alleges that the charge-off creditor at the time of charge-off is SoFi Consumer Loan Program Grantor Trust and that the subject credit account was purchased by the following entities after charge-off: Sherman Originator III LLC and Sherman Originator LLC, then transferred to Plaintiff.  (Id., ¶¶3-4.) 

Defendant argues that as of this date, Plaintiff is unauthorized to conduct business in California as a debt collector and that it cannot act as a debt collector on behalf of a third entity.  Pursuant to Henson v. Santander Consumer USA Inc. (2017) 582 U.S. 79, an entity that regularly purchases debts originated by someone else and then seeks to collect those debts for their own account are not “debt collectors.”  (See Henson, supra, 582 U.S. at 83.)  Currently, Plaintiff’s complaint alleges that while it is a debt purchaser, it is currently undergoing the license application process to be a debt collector.  There is no opposition or amended complaint by Plaintiff to apprise Defendant or the Court regarding whether Plaintiff’s license has been approved so that it qualifies a debt collector. 

At this time, it is not entirely clear under what capacity Plaintiff is bringing this action, making the complaint uncertain.  Plaintiff alleges that it is a debt buyer, an entity undergoing the debt collector license application, the successor in interest to the original creditor, and the sole owner of the debt.  As pointed out by Defendant, it is unclear whether Plaintiff is suing in its capacity as the sole and current owner of the debt, whether it is collecting the debt on behalf of Sherman (the prior debt buyer), or whether it is collecting the debt on behalf of SoFi (as SoFi’s successor in interest).  (Dem. at p.2.)  On the one hand, if Plaintiff is alleging that it is a debt collector (i.e., collecting a debt on behalf of another), then it would lack standing to sue at this time because it is currently undergoing the application process to be a licensed debt collector.  However, if Plaintiff is claiming to be the sole owner of the debt who validly purchased it from another entity, thereby seeking to collect on the debt on its own account (i.e., stepping into the shoes of the original debt owner), then Plaintiff would need to allege facts showing that the debt was validly assigned or transferred to Plaintiff.  Plaintiff may have a claim against Defendant as a debt buyer if it can support its allegations with additional facts and/or documentary exhibits showing that it purchased the entirety of the debt and is the sole owner of the debt at issue.  The complaint should be clarified to allege under what capacity Plaintiff is bringing its claims against Defendant.

Defendant also demurs to the complaint on the grounds that it is barred by the statute of limitations.  Defendant argues that the complaint fails to attach a copy of the agreement to show the date of the contract to establish the statute of limitations period.  However, the statute of limitations would not accrue at the time the contract was entered by the parties (or in this case, between Defendant and SoFi), but rather when Defendant breached the contract terms.  As alleged in the complaint, Defendant’s date of last payment was October 26, 2020.  (Compl., ¶14.)  Defendant also argues that because a copy of the written agreement is not provided, the statute of limitations would bar Plaintiff’s claim based on an oral contract.  However, the absence of an exhibit with the written contract terms will not automatically convert Plaintiff’s claims to claims based on an oral agreement.  In the 1^st cause of action, Plaintiff alleges that the account was stated in writing and that Defendant agreed to the debt amount.  (Compl., ¶25.)  “In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.”  (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315-16.)  At this time, the defect is not clearly and affirmatively apparent on the face of the complaint, such that the demurrer to the complaint on statute of limitations grounds will be overruled. 

            Defendant also demurs to the 1^st cause of action, arguing that Plaintiff has not alleged whether the agreement was written or oral.  “The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due.”  (Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600.)  While Plaintiff does not allege the nature of the underlying agreement between SoFi and Defendant, Plaintiff alleges facts that the indebtedness was in writing and that Defendant agreed to the indebtedness amount.  The Court accepts the facts alleged in the complaint as true; whether they will be proven will depend upon the presentation and consideration of the parties’ evidence beyond the pleading stage.  However, the allegations regarding the elements that Defendant agreed to the indebtedness amount and agreed to pay the amount due are sparse.  Plaintiff has not alleged facts regarding whether Defendant expressly or impliedly made such agreements. (To the extent Defendant seeks facts alleged with specificity, an account stated cause of action does not require a heightened pleading standard.  Such facts can be uncovered through the discovery process.)  The demurrer to the 1^st cause of action is sustained with leave to amend. 

            Defendant demurs to the 2^nd cause of action, arguing that Plaintiff has not complied with Civil Code, § 1788.52(b)-(d) showing with specificity that it complied with its obligations as a debt buyer prior to collecting on the debt.  A “book account” is “a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith ....”  (Professional Collection Consultants v. Lujan (2018) 23 Cal.App.5th 685, 690–691.)  “The creditor must keep these records in the regular course of its business and ‘in a reasonably permanent form,’ such as a book or card file. (Code Civ. Proc., § 337a.) ‘A book account is “open” where a balance remains due on the account.’”  (Id. at 691.)   Civil Code, § 1788.52(b)-(d) lays out requirements for a debt buyer to collect on a consumer debt, such as having access to a copy of the contract/document evidencing the debtor’s agreement to the debt, providing the information/documents to the debtor without charge within 15 calendar days of receipt of a debtor’s written request, and including with its first communication with the debtor a prominent notice with specific language.  However, section 1788.52 does not require Plaintiff to allege that it complied with these requirements prior to bringing an open book account claim.  Rather, whether Plaintiff complied with these requirements (if Plaintiff is suing as a debt buyer) may be a defense that Defendant can present beyond the pleading stage. 

Further, to the extent Defendant argues that a copy of the contract and exhibits are not attached to the complaint to show a valid open book account, an express contract (whether oral or written) is not, as a rule, an open book account unless the parties agree to treat the money due under an express contract as items under an open book account.  (Eloquence Corporation v. Home Consignment Center (2020) 49 Cal.App.5th 655, 665-666.)  Instead of providing the underlying written agreement between SoFi and Defendant (if there is one), Plaintiff provides a billing statement provided to Defendant (dated September 20, 2020) and the final billing statement (dated March 31, 2021).  (Compl., ¶¶21-22, Exs. A-B.) 

As these are the only grounds upon which Defendant demurred to the 2^nd cause of action, the demurrer on these grounds is overruled.  However, as discussed above, there are issues regarding Plaintiff’s standing to sue, which apply to the entirety of the complaint. 

            For the reasons stated above, the demurrer to the complaint is sustained with leave to amend. Upon amendment, Plaintiff should clarify under what capacity it is bringing its claims against Defendant.

DISCUSSION RE MOTION TO STRIKE

            In light of the ruling on the demurrer, the motion to strike is taken off-calendar as moot.  As stated in the ruling on the demurrer, Plaintiff should amend the complaint so that it clarifies under what capacity it is suing for the purpose of standing. 

CONCLUSION AND ORDER

Defendant Arbi Vartazarian Argentini’s demurrer to the complaint is sustained with 20 days leave to amend.

            Defendant shall provide notice of this order.