Judge Margaret L. Oldendorf, Case Number: 23AHCV01586, Date: 2024-04-10 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 23AHCV01586, Date: 2024-04-10 Tentative Ruling

Plaintiffs Shirley Feng and Alice Fu Chen Huang allege that in 2010 they entered into a loan agreement with Defendant Brown Wen Tsui in which Tsui agreed to extend a loan to Plaintiffs secured by a deed of trust on Plaintiffs’ home. Plaintiffs allege that they paid off the loan in full in 2014. Plaintiffs further allege that Tsui recorded the deed of trust on the property and is now seeking to foreclose.

On cross-complaint, Tsui alleges that the 2010 loan was not paid off in full and he is within his rights to foreclose on the property. The cross-complaint alleges four causes of action on this basis: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) fraud and (4) declaratory relief.

Before the Court is Plaintiffs and Cross-Defendants’ special motion to strike, filed November 9, 2023. Cross-Complainant Tsui filed an opposition on April 2, 2024. Cross-Defendants filed a reply on April 3, 2024.

Code Civ. Proc. §425.16, the anti-SLAPP statute, provides for a special motion to strike. “The anti-SLAPP statute does not insulate defendants from any liability for claims arising from the protected rights of petition or speech. It only provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384, italics in original.)

The anti-SLAPP statute applies where a party is being sued for an act in furtherance of the person’s right of petition or free speech including, “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” (Section 425.16(e).)

“[W]e may summarize a court’s task in ruling on an anti-SLAPP motion to strike as follows. Section 425.16, subdivision (b)(1) requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

a. Merits of the Motion

The statement at issue in this motion is “Cross-Defendants have intentionally misrepresented to the Cross-Complainant and this Court that the 06/03/2010- Secured Loan had been paid in full…” (Cross-Complaint, p. 11:1-2.) Disputing the allegations in a pleading is not an allegation of protected activity as the basis for an injury; it is litigation. (See CCP § 428.10(a).) Under Contreras v. Dowling (2016) 5 Cal.App.5th 394, the statement at issue in this case does not violate the anti-SLAPP statute but is, in fact, protected by the statute.

Further, in determining whether a cause of action is based on protected activity, we “examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies.” (Optional Capital, Inc. v. Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 110, citation omitted.) “We assess the principal thrust by identifying ‘[t]he allegedly wrongful and injury-producing conduct... that provides the foundation for the claim.’” (Id. at 111, bold emphasis added, citation omitted.) In other words, section 425.16 does not apply if Defendant’s constitutionally protected activity is “merely incidental” or “collateral” to the unprotected activity. (Baral v. Schnitt (2016) 1 Cal.5th 376, 395.) “Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.”¿(Ibid.)

The complaint is not the injury-producing conduct alleged in the cross-complaint, rather the statements regarding the loan status are. The constitutionally protected activity, filing a complaint, is collateral to the unprotected activity. (See Opposition p. 6: 13-28.) Thus, the gravamen of the cross-complaint is not protected activity.

A prevailing plaintiff on a special motion to strike is entitled to attorney’s fees if the Court finds that the motion to strike was frivolous or solely intended to cause unnecessary delay. (CCP § 425.16(c)(1).) This Court does not conclude that the motion to strike is frivolous or intended to cause unnecessary delay. The request for attorney’s fees is denied.

Plaintiffs and Cross-Defendants' Demurrer

Plaintiffs Shirley Feng and Alice Fu Chen Huang allege that
in 2010, they entered into a loan agreement with Defendant Brown Wen Tsui in
which Tsui agreed to extend a loan to Plaintiffs secured by a deed of trust on
Plaintiffs’ home. Plaintiffs allege that they paid off the loan in full in
2014. Plaintiffs allege that Tsui recorded the deed of trust on the property
and is now seeking to foreclose on the property.

On cross-complaint, Tsui alleges that the 2010 loan was not
paid off in full and he is within his rights to foreclose on the property. The
cross-complaint alleges four causes of action: (1) breach of contract; (2)
breach of the implied covenant of good faith and fair dealing; (3) fraud; and
(4) declaratory relief.

Before the Court are Plaintiffs and Cross-Defendants’
challenges to the Cross-Complaint. Cross-Defendants demur to all causes of
action on the grounds that (1) all causes of action are time barred; (2) the
cause of action for fraud lacks the requisite specificity and/or is uncertain
and/or fails to plead sufficient facts.

This demurrer was filed November 9, 2023. Tsui filed a late
opposition on April 2, 2024. Cross-defendants filed a reply on April 3, 2024. The
Court considers Tsui’s opposition.

The demurrer to the first, second and fourth causes of
actions is sustained without leave to amend. The demurrer to the third cause of
action is sustained with leave to amend.

Code
Civ. Proc. Section 430.10(e) provides for a demurrer on the basis that a
complaint fails to state a cause of action. (CCP § 430.10(e).) A demurrer tests
the legal sufficiency of a complaint. (Donabedian
v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer is treated as “admitting all
material facts properly pleaded,” but not the truth of “contentions, deductions
or conclusions of law.” (Aubry v. Tri-City Hospital Dist. (1992) 2
Cal.4th 962, 966-967.) The general rule on demurrer is that the pleadings are
“deemed to be true, however improbable they may be.” (Del E. Webb Corp. v.
Structural Materials Co. (1981) 123 Cal.App.4th 593, 604.) Questions
of plaintiff’s ability to prove unlikely allegations are of no concern. (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
213-214.)

Allegations
need not be accepted as true if they are contradicted by judicially noticeable
facts. (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1474.)

“We
treat the demurrer as admitting all the properly pleaded material facts and
consider matters which may be judicially noticed, but we do not treat as
admitted contentions, deductions, or conclusions of fact or law. (Align
Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958 [102 Cal.Rptr.3d
343].) Further, ‘ “ ‘we give the complaint a reasonable interpretation, reading
it as a whole and its parts in their context.’ ”’ (Ibid.) Because a
demurrer tests only the legal sufficiency of the pleading, we accept as true
even the most improbable alleged facts, and we do not concern ourselves with
the plaintiff's ability to prove its factual allegations. (Ibid.)
‘“Facts appearing in exhibits attached to the first amended complaint also are
accepted as true and are given precedence, to the extent they contradict the
allegations.”’ (Paul v. Patton (2015) 235 Cal.App.4th 1088, 1091.)
Although a demurrer does not ordinarily reach affirmative defenses, it ‘“will
lie where the complaint ‘has included allegations that clearly disclose some
defense or bar to recovery.’ ”’ (Casterson v. Superior Court (2002) 101
Cal.App.4th 177, 183, Nolte v. Cedars-Sinai Medical Center (2015) 236
Cal.App.4th 1401, 1406. )

The Declaration of Heidi M. Cheng is offered in support of
counsel’s compliance with Code Civ. Proc. Section 430.41. Cheng declares that she
met and conferred with Tsui’s Counsel on the phone on October 23, 2023. (Cheng
Decl. ¶ 3.)She further declares that parties did not reach a resolution. (Id.)
Consequently, the meet and confer requirement has been met.

C.
First Cause of Action for Breach of Contract

Paragraph
31 of the Cross-Complaint alleges that Tsui and Cross-Defendants entered into
a loan agreement on June 3, 2010. (CC ¶ 31.) ¶ 32 alleges that Tsui performed
all obligations under the agreement. (CC ¶ 32.) ¶ 33 alleges that
Cross-Defendants breached the contract namely by failing to pay back Tsui’s
loan. (CC ¶ 33.) ¶ 34 alleges Tsui has sustained damages as a result. (CC ¶
34.) In
their demurrer, Cross-Defendants urge that this cause of action fails for
violation of the statute of limitations. Causes of action for breach of
contract have a four-year statute of limitations, which begins to run when the
breach occurs. (CCP § 337.) Despite the cross-complaint's absence of allegations as to when the breach occurred, the promissory note is attached to the cross-complaint as Exhibit 1 and is judicially noticeable. The promissory note provided for 56 monthly payments, one per month from June 2010. This would mean that the last payment was due in February 2015. The cross-complaint was not brought until November 2023. The breach alleged by Cross-Complainant, namely failure to repay the loan, must have occurred in February 2015 or before, over eight years before the cross-complaint was filed. This cause of action is time-barred.

The
Court sustains the demurrer to the first cause of action for breach of contract
without leave to amend.

D.
Second Cause of Action for Breach of the Covenant of Good Faith and Fair
Dealing

Paragraph
36 of the Cross-Complaint alleges that Tsui and Cross-Defendants entered into
a loan agreement on June 3, 2010. (CC ¶ 36.) ¶ 37 alleges that Tsui performed
all obligations under the agreement. (CC ¶ 37.) ¶¶ 38-41 alleges that
Cross-Defendants then filed this lawsuit frivolously in 2023. (CC ¶¶ 38-41.) ¶ 42 alleges Tsui has
sustained damages as a result. (CC ¶ 42.)

In
their demurrer, Cross-Defendants urge that this cause of action fails for
violation of the statute of limitations. Causes of action for breach of the
covenant of good faith based on a written contract have a four-year statute of
limitations, which begins to run when the breach occurs. (CCP § 337, Freeman
& Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 91, internal
citations omitted.) This cause of action relies on the promissory note attached
to the Cross-Complaint. (See CC ¶¶ 36, 38; Exh. 1 to Cross-Complaint.) The last
payment was due in February 2015. The Cross-Complaint was not brought until
November of 2023. Under the four-year statute of limitations for breach of good
faith and fair dealing, this cause of action is time-barred. Indeed, even if
the longer statute of limitations for promissory notes is applied, this cause
of action is still time-barred. (See Commercial Code § 3118(a).)

The
Court sustains the demurrer on the second cause of action for breach of the
covenant of good faith and fair dealing without leave to amend.

Fraud
is subject to a heightened pleading standard. Each element must be pleaded with
particularity. (Glaski v. Bank of America (2013) 218 Cal.App.4th 1079,
1090; Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th
972, 989.)Fraud actions are subject to “strict requirements of particularity in
pleading. . . . Accordingly, the rule is everywhere followed that fraud
must be specifically pleaded. The effect of this rule is twofold: (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.” (Committee on Children’s Television, Inc. v. General Foods Corp.
(1983) 35 Cal.3d 197, 216, superseded by statute on other grounds.) A
fraud cause of action must contain: “(1) a knowingly false representation by
the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance
by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v.
Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.) “This particularity
requirement necessitates pleading facts which show how, when, where, to whom,
and by what means the representations were tendered.” (Stansfield v. Starkey
(1990) 220 Cal.App.3d 59, 73, citations omitted.)

Here,
the Cross-Complaint alleges that Cross-Defendants misrepresented the status of
the loan, and these misrepresentations were fraudulent and intended to deceive
Cross-Complainant Tsui. (CC ¶¶ 44-45.) Nowhere is it alleged how, when, where,
to whom and by what means the allegedly fraudulent representations were made.
(See Demurrer p. 7: 24- p.8: 1.) This issue may be solved on amendment.

The
Court sustains the demurrer to the third cause of action for fraud with leave
to amend.

The fourth cause of action alleges that there is a dispute
as to ownership of the subject property and seeks a judicial determination or
declaratory relief to resolve it. (CC ¶¶ 46-48.)

In their demurrer, Cross-Defendants allege that this cause
of action is barred by either the four-year statute of limitations on actions
arising from a contract (CCP § 337) or the six-year statute of limitations for
enforcement of a promissory note. (Commercial Code § 3118(a).) Commercial Code
Section 3118(a) provides that “[e]xcept as provided in subdivision (e), an
action to enforce the obligation of a party to pay a note payable at a definite
time shall be commenced within six years after the due date or dates stated in
the note or, if a due date is accelerated, within six years after the
accelerated due date.” (CC § 3118(a).)

Here, the promissory note is attached to the
cross-complaint as Exhibit 1 and is judicially noticeable. The
promissory note provided for 56 monthly payments, one per month from June of
2010. This would mean the last payment was due in February 2015. This
cross-complaint was not brought until November of 2023. Under either the
statute of limitations for breach of contract or the six-year statute of
limitations for promissory notes, this cause of action is time barred.

In opposition, Tsui
urges that the ten-year statute of limitations for a non-judicial foreclosure
applies. However, this is not supported, as Tsui is seeking a judicial
determination of who owns the property.

Cross-Defendants’ demurrer to the first,
second and fourth causes of action on the Cross-Complaint is sustained without
leave to amend. The demurrer is sustained with leave to amend as to the third
cause of action.

Tsui
is ordered to file a first amended cross-complaint as to the fraud cause of action only, within
20 days’ notice of this ruling.