Judge: Maurice A. Leiter, Case: 23AHCV01023, Date: 2023-11-13 Tentative Ruling

Case Number: 23AHCV01023    Hearing Date: November 13, 2023    Dept: 54

Hearing Date: November 13, 2023

Department 54, Judge Maurice A. Leiter

Demurrer to Complaint and Motion to Strike

Moving Party: Defendant Macoy Capital Mortgage, LLC

Responding Party: Plaintiffs Pasadena Ho, LLC and Wolfe Air Aviation, Ltd

T/R:      DEFENDANT’S DEMURRER IS OVERRULED.

DEFENDANT’S MOTION TO STRIKE IS DENIED.

DEFENDANT TO FILE AND SERVE AN ANSWER TO THE COMPLAINT WITHIN 30 DAYS OF NOTICE OF RULING.

DEFENDANT TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing. 

The Court considers the moving papers, opposition, and reply.

BACKGROUND

On May 8, 2023, Plaintiffs Pasadena Ho, LLC and Wolfe Air Aviation, LTD sued Defendants, asserting causes of action for (1) fraud; (2) conversion; (3) quiet title; (4) reformation; (5) cancellation of instrument; (6) fraud and deceit; and (7) conversion. Plaintiffs allege Defendants converted the proceeds of loans secured against Plaintiffs’ real properties, the Raymond Property and Patrician Property.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. Fraud and Deceit

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent misrepresentation, must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) 

Defendant demurs to the causes of action for fraud and deceit on the ground that Plaintiffs have failed to allege facts with the requisite specificity and failed to allege any misrepresentations. Plaintiffs allege that Macoy and its principal, Mitch O., represented to Wolfe that they would assist Pasadena Ho, LLC in refinancing a $550,000 encumbrance against Pasadena Ho’s 50% interest in the Raymond Ave. Property, and that Wolfe could use excess loan proceeds for business purposes. Macoy represented that it would lend $725,000 to PH LLC. (Complaint, ¶25.) Instead, Macoy issued a fraudulent loan to Defendants in the amount of $812,500 without Wolfe’s required approval and signature. Macoy also encumbered 100% of the Raymond Ave. Property and Wolfe received none of the excess loan proceeds. (Complaint, ¶28.)

As to the Patrician property, Plaintiffs allege Macoy falsely represented that it would retain $72,000 of WAA’s loan proceeds and make interest-only monthly payments for the first twelve months on WAA’s behalf. Plaintiffs allege Macoy made this misrepresentation with the intent of inducing WAA to agree to the arrangement, permitting Macoy to obtain $72,000. Macoy allegedly knew its representation was false and did not intend to fulfill its promise. Later, Macoy sold the loan without making the required interest payments.

The above allegations are sufficient to state causes of action for fraud.

B. Conversion, Quiet Title, and Cancellation of Instruments

Defendant asserts the claims for conversion, quiet title, and cancellation of instruments[1] on the ground that Plaintiffs have failed to allege sufficient facts. As discussed, Plaintiffs allege Defendants retained money belonging to Plaintiffs, took out loans greater than what the parties agreed to, and encumbered 100% of a property rather than the agreed upon 50%. These facts support causes of action for conversion, quiet title, and cancellation of instruments.

Defendant’s demurrer is OVERRULED.

C. Motion to Strike

Defendant moves to strike Plaintiffs’ requests for punitive damages and attorney’s fees. As Plaintiffs have stated causes of action for fraud, Plaintiffs have pleaded entitlement to punitive damages. The Court declines to strike the prayer for attorney’s fees as a basis for them may appear later in litigation. The Court notes that a prayer for attorney’s fees does not in itself entitle that party to attorney’s fees.

The motion to strike is DENIED.