Judge Mark A. Young, Case 21SMCV01693 2023-03-01 Tentative Ruling

Judge: Mark A. Young, Case: 21SMCV01693, Date: 2023-03-01 Tentative Ruling

Case Number: 21SMCV01693 Hearing Date: March 1, 2023 Dept: M

CASE NAME: Beroukhim, et al., v. Beroukhim

CASE NO.: 21SMCV01693

MOTION: Demurrer to the Complaint

HEARING DATE: 3/1/2023

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. 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. (CCP §§ 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 special demurrer for uncertainty is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

“Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to show in what manner plaintiff can amend the complaint, and how that amendment will change the legal effect of the pleading. (Id.)

MEET AND CONFER

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (CCP §§ 430.41, 435.5.) Counsel’s declaration regarding a single email sent to Plaintiff’s counsel does not satisfy Section 430.41(a)’s requirement that the parties meet and confer in person or by telephone. (Ferrante-Alan Decl. ¶¶ 2-3.) On this occasion, the Court will proceed to address the merits of the demurrer despite the insufficiency of the meet and confer. The Court cautions the parties that a code-compliant meet and confer effort is required for each demurrer and motion to strike on subsequent pleadings.

Analysis

Defendant demurs on the grounds that, under the terms of the proffered promissory note, the complaint does not allege that any amounts are due. To withstand demurrer, a plaintiff must plead the contract, plaintiff’s performance or excuse for non-performance, defendant’s breach, and damage to plaintiff therefrom. (Acoustics, Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887, 913.)

Contract interpretation, even though it involves what might properly be called questions of fact, is essentially a judicial function, exercised by the court pursuant to accepted canons of interpretation, unless the interpretation turns on the credibility of extrinsic evidence. (Sanchez v. Bally’s Total Fitness Corporation (1998) 68 Cal.App.4th 62, 69.) Contract interpretation involves the jury only if the court makes three determinations: (1) The wording of the instrument is reasonably susceptible of the interpretation urged by the proponent of the extrinsic evidence; (2) The extrinsic evidence is relevant to prove the proposed meaning; and (3) The credibility of the proponent’s parol evidence is disputed. (Equitable Life Assurance Society v. Berry (1989) 212 Cal.App.3d 832, 838.) “The question as to the intent of the parties to an ambiguous agreement that does not clearly express their intention is one of fact.” (Lewis Food Co. v. Fireman's Fund Ins. Co. (1962) 207 Cal.App.2d 515, 524-525.)

“On a demurrer, the court must consider the sufficiency of the allegations, including any parol evidence allegations, to determine whether the contract is reasonably susceptible to the plaintiff’s alleged interpretation.” (George v. Automobile Club of So. Cal. (2011) 201 Cal.App.4th 1112, 1128.) A pleader’s legal characterization of a contract is not controlling, particularly when the contract is attached to the pleading. (Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1314.) However, courts will defer to plaintiffs’ reasonable interpretations. (Performance Plastering v. Richmond American Homes of Cal., Inc.¿(2007) 153 Cal.App.4th 659, 672.)

Defendant borrowed the principal sum of $1,200,000 from Plaintiffs on March 11, 2019. (Compl., ¶ 6.) The Note bears interest at the rate of four and three quarters percent (4.75%) per annum. (Id.) The Note sets forth the Maturity Date and payment terms as follows:

This Note shall mature on the ten (10) year anniversary of the date of this Note (the "Maturity Date"). Any principal and interest then unpaid shall be due on the Maturity Date. All payments of interest and principal shall be made in lawful money of the United States of America by check or by wire transfer of immediately available funds to Behrouz Benouni or Sormani and The LA County Property Tax Department. Currently, Kian Beroukhim is the Borrower of $600,000 secured by the property at 9430 Readcrest Drive, Beverly Hills, CA 90210 (the "Property"). Once the $600,000 loan was paid off in full, the subject Promissory Note will be reduced to a $600,000 value. Further, when the $600,000 balance is paid in full, Kian Beroukhim would no longer be responsible to pay for the property taxes for the Property.

Default is defined as:

All unpaid principal and all accrued but unpaid interest owed under this Note shall, without any action of Lender, become immediately due and payable upon the occurrence of any of the following (each, a "Default''): (i) Borrower commences any proceeding in bankruptcy or for dissolution, liquidation, winding-up, composition or other relief under state or federal bankruptcy laws; (ii) such proceedings are commenced against Borrower, or a receiver or trustee is appointed for Borrower or a substantial part of its property, and such proceeding or appointment is not dismissed or discharged within thirty (30) days after its commencement; provided, that all interest shall continue to accrue as set forth above until all amount:; owed under this Note are paid in cash in full; (iii) any assignment for the benefit of the creditor· of Borrower; or (iv) Borrower fails to pay when due any principal, interest or other amount•. owing under this Note, which failure to pay is not cured within ten (10) days thereafter.

(Emphasis added.)

The Complaint alleges that Defendant breached his obligations under the Note by “his failure to pay the installments of real property taxes for the property located at 9430 Readcrest Drive, Beverly Hills, California 90210 on December 10, 2020 in the sum of $14,103.97; and (b) his failure to pay interest installment payments for the following months: November and December 2020, and January, February, March, Ap1il, May and June 2021 in the total aggregate sum of $31,666.64.” (Compl., ¶11.) Plaintiffs gave written notice to Defendant in accordance with the Note. (¶12.) Defendant failed and refused to cure. (¶ 13.)

Defendant correctly notes that the pled breach does not match the default terms in the Note. The only relevant default term is found at ¶4(iv), which provides for default when Defendant fails to pay any principal, interest or other amount owing when due, and which remains uncured 10 days after notice. The Note only provides one date when any “principal, interest or other amounts” are due: the maturity date. Plaintiffs do not cite any language in the Note that provides for monthly interest, or other periodic payments due under the Note. Plaintiffs argue that the context of the Note suggests that there would be payments before the maturity date. (Note ¶ 1(a), (d).) However, this ignores the fact that there could be payments prior to the maturity date, whether or not there are monthly installments. A borrower is free to pay the amounts owed prior to the maturity date to Plaintiffs. The Note recognizes this fact, as it “may be prepaid at any time without penalty subject to satisfaction of payment of the Minimum Interest Amount[.]” (Note ¶1(c).) The Note is not ambiguous to this end. Thus, Plaintiff’s construction of the note as requiring monthly payments is untenable.

Plaintiff argues that the Note contemplates the payment of real property taxes. Indeed, the Note explains that Defendant “is the Borrower of $600,000 secured by the property at 9430 Readcrest Drive, Beverly Hills, CA 90210. Once the $600,000 loan is paid off in full, the subject Promissory Note will be reduced to a $600,000 value. Further, when the $600,000 balance is paid in full, Kian Beroukhim will no longer be responsible to pay for the property taxes for the property at 9430 Readcrest Drive, Beverly Hills, CA 90210.” The Note also contemplates that Defendant may make payments under the Note by check or wire to Plaintiffs or the LA County Property Tax Department. The Court concurs that this recognizes that Defendant is responsible for paying property taxes. However, this seems to be recognizing a pre-existing obligation for Defendant to pay property taxes. Importantly, the Note does not provide that if Defendant fails to pay property taxes, there would be a default and the amounts would be accelerated. Certainly, this is not a “clear recognition” that Defendant is responsible for paying property taxes pursuant to this Note, or that non-payment of such taxes would have any significance to this Note. Instead, this Note provides consideration for Defendant that if the other debt is paid in full, Defendant will also be relieved to pay for property taxes. Plaintiff does not allege any extrinsic evidence which would support their interpretation requiring payment of property taxes pursuant to this Note.

Plaintiff insists that any other construction would be an absurdity. However, their interpretation requires that the Court insert language into the Note which simply does not exist. Plaintiffs do not cite any ambiguous language which could tend to show any installment schedules were contemplated. Plaintiffs do not cite any extrinsic evidence which would suggest that the terms regarding tax payments should be interpreted as triggering default or the acceleration clause.

Accordingly, Defendant’s demurrer is SUSTAINED. To be given leave to amend, Plaintiffs must make an offer of proof regarding extrinsic evidence which could support their interpretation and identify any ambiguities in the agreement.