Judge Kerry Bensinger, Case Number: 22STCV32458, Date: 2024-02-02 Tentative Ruling

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MOVING PARTY: Defendants PLM Lender Services, Inc., and Secured Income Fund-II, LLC

On October 4, 2022, Plaintiff, Bay Area Development Co., filed this action against Defendants Secured Income Fund-11, LLC (“Secured Income”); PLM Lender Services, Inc. (“PLM Lender”); Mo Taxon; and Fedora Taxon. The operative complaint is the First Amended Complaint (FAC). The FAC alleges causes of action for (1) Intentional Interference with Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Declaratory Relief, (4) Unjust Enrichment, (5) Breach of Implied Terms of Written Forbearance, (6) Breach of Implied Covenant of Good Faith and Fair Dealing, (7) Interference with Contract, and (8) Declaratory Relief. The Fifth, Sixth, Seventh, and Eighth Causes of Action are asserted against Secured Income and PLM Lender only.

The FAC alleges as follows. Plaintiff obtained a loan in the amount of $725,000 from Secured Income, the repayment of which was secured by a Deed of Trust recorded against the real property located at 419 North Highland Ave., Los Angeles, CA. Within two years, Plaintiff defaulted on its obligations owing on the loan. In August 2021, Plaintiff, Secured Income, through its agent, PLM Lender, entered into a forbearance agreement whereby the latter agreed to refrain from foreclosing for a period of ninety (90) days. On July 13, 2022, the parties entered into another forbearance agreement providing for the foreclosure to remain on hold until at least August 1, 2022.

Later in July 2022, Plaintiff entered into a written agreement with a third-party buyer of the Property, which would have resulted in the balance owing on the Loan being paid in full. In order to buy time for the sale to close before the foreclosure sale, Plaintiff negotiated a further postponement on the foreclosure sale by offering to immediately pay down the balance due by $100,000. PLM Lender accepted the agreement. Pursuant to the agreement, the parties executed a new (third) forbearance agreement which provided in relevant part that (1) PLM Lender must be in receipt of the (third) signed forbearance agreement before August 2, 2022; and (2) PLM must be in receipt of the sum of $100,475 on or before August 2, 2022. Satisfaction of both terms would trigger a postponement of the foreclosure sale. However, Plaintiff did not return the signed forbearance agreement nor tender the payment before the forbearance deadline. On August 4, 2022, Secured Income and PLM Lender proceeded with the foreclosure sale and sold the subject property for half its value. Plaintiff alleges the failure to tender the $100k payment was due to Secured Income and PLM Lender proceeding to foreclosure before Plaintiff could convince the buyer/escrow to release $100,000 to Plaintiff. As a result, Plaintiff lost equity of approximately one million dollars.

On October 27, 2023, PLM Lender and Secured Income (collectively, “Defendants”) filed this demurrer to the First Amended Complaint.

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face.¿ (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.)¿ “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law.¿ We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed.¿ [Citation.]”¿ (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].)¿ Allegations are to be liberally construed.¿ (Code Civ. Proc., § 452.)¿ In construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations.¿ (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3rd 764, 769.)¿¿

A demurrer may be brought if insufficient facts are stated to support the cause of action asserted.¿(Code Civ. Proc., § 430.10, subd. (e).)¿“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.)¿¿¿

Where the complaint contains substantial factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty will be overruled or plaintiff will be given leave to amend.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)¿ Leave to amend must be allowed where there is a reasonable possibility of successful amendment.¿ (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)¿¿

Defense counsel has complied with the meet and confer requirement.¿ (See Declaration of Demurring or Moving Party Regarding Meet and Confer, 10/27/23.)

The FAC alleges the Fifth, Sixth, Seventh, and Eighth Causes of Action against Defendants only. Defendants argue the allegations asserted against them are uncertain. The court agrees. The gravamen of Plaintiff’s claims against Defendants is that Defendants frustrated the third-party sale of the subject property by proceeding with the foreclosure sale before Plaintiff could secure $100,000 from the third-party sale so that Defendants could provide the money to satisfy the forbearance agreement. As alleged, return of a signed forbearance agreement and payment of the $100,000 by August 2, 2022 was required to postpone the foreclosure sale long enough to permit the pending third-party sale of the subject property. (FAC, ¶ 49.) Plaintiff did not return a signed forbearance agreement by August 2, 2022. (FAC, ¶ 51.) Plaintiff did not tender the $100,000 payment by August 2, 2022. (Id.) Plaintiff did not satisfy the terms of the agreement. Under these allegations, any defendant would be hard-pressed to understand what allegations they are called to answer. Plaintiff does not explain how Defendants frustrated the satisfaction of the forbearance agreement if Plaintiff intended to obtain the $100,000 from escrow but the house was to close after the expiration of the forbearance agreement. Hence, the uncertainty.

Plaintiff argues it was understood Defendants would be flexible with meeting payment deadlines and had every reason to believe there would not be any problem if payment were received on August 3 or 4, 2022. However, Defendants proceeded to the foreclosure sale without notifying Plaintiff that the forbearance agreement had not been completed.

Plaintiff’s argument is unpersuasive. First, these allegations do not appear anywhere in the FAC and therefore may not be considered in ruling on this demurrer. Second, the allegations clearly state the terms of agreement: return of the signed agreement and payment of $100,000 by August 2, 2022. Plaintiff did not comply with those terms. As pleaded, the Demurrer must be sustained, but leave to amend is granted.

Defendants PLM Lender’s and Secured Income’s demurrer to the First Amended Complaint is SUSTAINED. Leave to amend is GRANTED.

Plaintiff is ordered to serve and file its Second Amended Complaint within 20 days of this order.

Kerry Bensinger

Judge of the Superior Court