Judge: Lee W. Tsao, Case: 23NWCV00682, Date: 2024-08-06 Tentative Ruling
Case Number: 23NWCV00682 Hearing Date: August 6, 2024 Dept: C
Creditors Adjustment Bureau,
Inc. vs Champion Power Equipment, Inc.
Case No.: 23NWCV00682
Hearing Date: August 6, 2024 @ 10:30 a.m.
#8
Tentative Ruling
I.
Defendant Champion Power Equipment, Inc.’s
Motion to Strike is DENIED in part and GRANTED in part as set forth below.
II.
Defendant’s Demurrer is SUSTAINED with 20
days leave to amend.
Defendant to give notice.
BACKGROUND
In the original Complaint filed on March 6, 2023, Plaintiff
CREDITORS ADJUSTMENT BUREAU, INC. (“Plaintiff”) alleged causes of action for 1)
Open Book Account, 2) Account Stated, and 3) Reasonable Value against Defendant
CHAMPION POWER EQUIPMENT, INC. (“Defendant”).
The Complaint listed the Plaintiff’s Assignor as SUZHOU AAVIX GARDEN
EQUIPMENT CO., LTD. (Complaint, ¶1.)
“The Debt” referred to a sum of $401,760.00 (Id., ¶2) with a “Due
Date” of May 20, 2020 (Id., ¶3).
In the operative First Amended Complaint (“FAC”) filed on October
23, 2023, Plaintiff alleges the same causes of action against Defendant. However, the FAC now lists the Plaintiff's
Assignor as CHINA EXPORT & CREDIT INSURANCE CORPORATION. (FAC, ¶1.) The
amount of the “The Debt” remains unchanged (Id., ¶2), but the “Due Date”
is changed to August 9, 2022. (Id., ¶3.)
The FAC also alleges: “[o[n June 1, 2022, SUZHOU WARRIOR
MACHINERY CO., LTD assigned to SUZHOU AAVIX GARDEN
EQUIPMENT CO., LTD. the balance due and owing from CHAMPION POWER
EQUIPMENT, INC. in the amount of $401,760.00.” (Id., ¶4.) “On June 6,
2022, SUZHOU AAVIX GARDEN EQUIPMENT, INC. assigned the balance due by CHAMPION
POWER EQUIPMENT, INC. in the amount of $401,760.00 to CHINA
EXPORT & CREDIT INSURANCE CORPORATION for collection.” (Id.,
¶5.)
Defendant demurs to the
First, Second, and Third Causes of Action in the FAC on the grounds that they
fail to state facts sufficient to constitute a cause of action. Defendant also demurs to the Third Cause of
Action on the grounds that it is barred by the applicable statute of
limitations. Defendant moves to strike:
1) the FAC on the grounds that it is a sham pleading, and 2) the prayer for
attorney’s fees.
REQUEST FOR JUDICIAL NOTICE
Defendant requests judicial notice of the original complaint.
The Court GRANTS the Request for Judicial Notice under California Evidence Code
§ 452(d).
LEGAL STANDARD
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.¿¿(Taylor
v. City of Los Angeles Dept. of Water and Power¿(2006) 144 Cal.App.4th
1216, 1228.)¿¿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.”¿¿(SKF Farms v. Superior Court¿(1984) 153 Cal.App.3d 902,
905.)¿¿“The only issue involved in a demurrer hearing is whether the complaint,
as it stands, unconnected with extraneous matters, states a cause of
action.”¿¿(Hahn,¿supra,¿147 Cal.App.4th at¿p.¿747.)
DISCUSSION
Motion to
Strike
Defendant contends that the FAC should be stricken as a sham
complaint because it alleges a different assignment, regarding a different
debt, owed to a different company, with a different due date.
“Under
the sham pleading doctrine, plaintiffs are precluded from amending complaints
to omit harmful allegations, without explanation, from previous complaints to
avoid attacks raised in demurrers or motions for summary judgment.” (Deveny
v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) “‘Generally,
after an amended pleading has been filed, courts will disregard the original
pleading. However, an exception to this rule is found ... where an amended
complaint attempts to avoid defects set forth in a prior complaint by ignoring
them. The court may examine the prior complaint to ascertain whether the
amended complaint is merely a sham.’ Moreover, any inconsistencies with prior
pleadings must be explained; if the pleader fails to do so, the court may
disregard the inconsistent allegations. [Citation.] Accordingly, a court is
‘not bound to accept as true allegations contrary to factual allegations in
former pleading in the same case.’ [Citation.]” (Larson v. UHS of
Rancho Springs, Inc. (2014) 230 Cal.App.4th 336, 343; quoting Vallejo
Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.)¿¿
In
opposition, Plaintiff explains that SUZHOU
AAVIX GARDEN EQUIPMENT CO., LTD. (“Aavix”) manufactured the
goods which were sold to Defendant. (Opp., p. 2:1.) SUZHOU WARRIOR
MACHINERY CO., LTD. (“Warrior”) acted as Aavix’s agent, directly contracted
with Defendant for the sale of the goods, and issued invoices to Defendant for
the goods manufactured by Aavix. (Opp., p.2:2-4.) CHINA EXPORT & CREDIT
INSURANCE CORPORATION (“CECIC”) insured Aavix against the risk of non-payment
on those invoices. (Opp., p. 2:4-5.)
Plaintiff contends that the
original complaint mistakenly identified Aavix as the assignor of the claims. Plaintiff argues the FAC correctly alleges
the chain of assignments: Warrior (the agent) assigned its claims to Aavix (the
manufacturer) which assigned its claims to CECIC (the insurer). CECIC assigned its claims to Plaintiff. The Court determines that Plaintiff has
sufficiently explained why the assignor in the FAC (CECIC) is different than
the assignor in the original complaint (Aavix).
As to the discrepancy in the
due date, Plaintiff contends that the date listed in the original complaint
(May 20, 2020) was likely a typographical error. Plaintiff points out that the due date listed
in the FAC (August 9, 2022) is also listed in two other paragraphs in the
original complaint (¶¶14 and 17). After reviewing the original complaint and
the FAC, the Court determines that the discrepancies relied upon by Defendant do
not establish that the FAC is a sham pleading.
Defendant urges this Court to
strike the FAC based upon its claim that Exhibit 1 to the FAC (the assignment
from Warrior to Aavix) is fraudulent.
However, the grounds for a motion to strike shall appear on the face of
the challenged pleading or from any matter of which the court is required to
take judicial notice. (CCP § 437.) Defendant’s argument relies upon extrinsic
evidence which may not be considered by the Court at this stage of the
proceedings.
The motion to strike is not
granted on the grounds that the FAC is a sham pleading.
Defendant’s
motion to strike the prayer for attorney’s fees is GRANTED as to the second and
third causes of action. The FAC alleges
that attorney’s fees are recoverable in all three causes of action pursuant to
Civil Code § 1717.5. However, this
section only pertains to an action on a contract based on a book account. The prayer for attorney’s fees as to the
first cause of action for open book account is not stricken.
Accordingly,
the motion to strike is DENIED in part and GRANTED in part as set forth above.
Demurrer
First
Cause of Action: Open Book Account
Defendant
demurs to the first cause of action for open book account on the grounds that
it fails to allege facts sufficient to state a cause of action. Plaintiff does not oppose the demurrer on
this ground.
To
establish an open book account claim, a plaintiff must establish (1) that the
parties had financial transactions, (2) that plaintiff kept an account of the
debits and credits involved in the transactions, (3) that defendant owes
plaintiff money on the account, and (4) the amount of money that defendant owes
plaintiff. (CACI 372.)
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, and against whom and in favor of whom entries are made,
is entered in the regular course of business as conducted by such creditor or
fiduciary, and is kept in a reasonably permanent form and manner and is (1) in
a bound book, or (2) on a sheet or sheets fastened in a book or to backing but
detachable therefrom, or (3) on a card or cards of permanent character, or is
kept in any other reasonably permanent form and manner.’” (Eloquence
Corporation v. Home Consignment Center (2020) 49 Cal.App.5th 655, 664
(quoting CCP section 337a).) “A book account is ‘open’ where a balance
remains due on the account.” (Id. at 664-65.)
Here, the FAC does not adequately plead the elements of an
open book account. For example, the FAC
is devoid of any facts tending to establish the existence of a “detailed
statement” or “contract or some fiduciary relation” between Warrior and
Defendant.
Accordingly, the demurrer to the first cause of action is SUSTAINED
with 20 days leave to amend.
Second
Cause of Action: Account Stated
“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; [and] (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; see CACI 373.)
“An
account stated is ‘an agreement, based on prior transactions between the
parties, that the items of an account are true and that the balance struck is
due and owing.’” (Professional Collection Consultants v. Lauron
(2017) 8 Cal.App.5th 958, 968 (quoting Maggio, Inc. v. Neal (1987) 196
Cal.App.3d 745, 752).) “‘[A]n element essential to render the account
stated is that it receive the assent of both parties, but the assent of the
party sought to be charged may be implied from his conduct.’” (Id.
(quoting Hansen v. Fresno Jersey Farm Dairy Co. (1934) 220 Cal. 402,
408) (alteration in original).) “For example, ‘[w]hen a statement is
rendered to a debtor and no reply is made in a reasonable time, the law implies
an agreement that the account is correct as rendered.’” (Id.
(quoting Maggio, supra, 196 Cal.App.3d at 753).)
Here, the FAC does not
adequately plead the elements of the second cause of action for account stated.
For example, Plaintiff does not allege an
agreement between the parties, express or implied, on the amount due.
Accordingly, the demurrer
to the second cause of action is SUSTAINED with 20 days leave to amend.
Third Cause of Action: Reasonable
Value (Quantum Meruit)
Defendant demurs to the third cause of action for reasonable
value (quantum meruit) on the grounds that it is uncertain as to the existence
of a written contract and it is barred by the statute of limitations. Plaintiff does not oppose the demurrer on these
grounds.
The statute of limitations for quantum meruit claims is two
years. (CCP § 339.) Defendant argues that the third cause of action is barred
by the statute of limitations because the actual due date for the debt, as
alleged in the original complaint, was May 20, 2020, and the original complaint
was filed on March 6, 2023. As indicated
above, Defendant has failed to establish that the FAC is a sham pleading. Because the running of the statute does not
appear “clearly and affirmatively” from the face of the FAC, the demurrer to
the third cause of action is not sustained on this basis. (Stueve Bros.
Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 321.)
To recover on a claim for the reasonable value of services
under a quantum meruit theory, a plaintiff must establish both that he or she
was acting pursuant to either an express or implied request for services from
the defendant and that the services rendered were intended to and did benefit
the defendant. (Day v.
Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.)
Here, the Court determines that the third cause of action
for reasonable value is not adequately pleaded.
The FAC does not allege the existence of an express or implied request
for services from the defendant, and that the services rendered were intended
to and did benefit the defendant.
Accordingly, the demurrer to the third cause of action is
SUSTAINED with 20 days leave to amend.