Judge: Michael E. Whitaker, Case: 23SMCV05186, Date: 2024-03-11 Tentative Ruling

Case Number: 23SMCV05186    Hearing Date: March 11, 2024    Dept: 207

TENTATIVE RULING

MOTION

On November 1, 2023, Plaintiff Victory 14827, LLC (“Plaintiff”) brought suit against Defendant Evergreen Advantage Management, Inc. (“Defendant”) alleging a single cause of action for “Damages for Illegal Liquidated Damages Charge Breaching Written Contract.” 

Defendant now demurs to the Complaint on the grounds that it fails to state facts sufficient to constitute a cause of action and is uncertain pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f), respectively.

Plaintiff opposes the demurrer and Defendant replies.

REQUEST FOR JUDICIAL NOTICE

            Plaintiff requests the Court to take judicial notice of: 

1.     Exhibit 1: A Promissory Note Secured by Deed of Trust dated September 1, 2021.

2.     Exhibit 2: A Deed of Trust recorded with the Los Angeles County Recorder’s Office on September 21, 2021, as Instrument No. 20211440404.

3.     Exhibit 3: A Balloon Payment Disclosure Notice dated September 1, 2021.

4.     Exhibit 4: A Demand Loan Payoff dated November 15, 2022.

In regard to Exhibit 2, courts can take judicial notice of the existence and recordation of real property records, including deeds, if authenticity is not reasonably disputed.  (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265.)  “The official act of recordation and the common use of a notary public in the execution of such documents assure their reliability, and the maintenance of the documents in the recorder’s office makes their existence and text capable of ready confirmation, thereby placing such documents beyond reasonable dispute.”  (Ibid.)  Moreover, courts can take judicial notice not only of the existence and recordation of recorded documents but also matters that can be deduced from the documents, including the parties, dates, and legal consequences of recorded documents relating to real estate transactions.  (Ibid.)  Therefore, the Court takes judicial notice of the recorded documents and their legal effect, but not necessarily the truth of the matters asserted therein.

            With regard to the other exhibits, “Judicial notice may not be taken of any matter unless authorized or required by law.”  (Evid. § 450.)  Evidence Code, section 452 outlines the matters of which a Court may take judicial notice as follows:

(a)   The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state.

(b)   Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.

(c)   Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.

(d)   Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(e)   Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(f)    The law of an organization of nations and of foreign nations and public entities in foreign nations.

(g)   Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.

(h)   Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.

Plaintiff contends that the remaining exhibits are properly the subject of judicial notice because they are incorporated into the Complaint by reference.  In support, Plaintiff cites to Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285, fn. 3 (hereinafter Ingram); Align Technology, Inc. v. Bao Tran (2009) 179 Cal.App.4th 949, 956, fn. 6 (hereinafter Align) and Salvaty v. Falcon Cable Television (1985) 165 Cal.App.3d 798, 800, fn. 1 (hereafter Salvaty.)

In Ingram, the court took judicial notice of a copy of a letter and media release distributed by the District Attorney’s office.  The court took judicial notice of the letter under Evidence Code section 452, subdivision (h) because “the complaint excerpted quotes from the letter and summarized parts of it in some detail[,] “both sides referred to the letter and quoted from it[,]” and the appellant did not oppose the request.  (Ingram, supra, 74 Cal.App.4th at p. 1285, fn. 3.)

In Salvaty, the court took judicial notice of an attachment agreement that was not certified, and therefore there was no proof that it had actually been filed with the Public Utilities Commission because “appellants referred repeatedly to the agreement throughout their complaint, and alleged on information and belief that it had been approved by the commission” and “[t]he trial court was given no reason to believe otherwise.”  (Salvaty, supra, 165 Cal.App.3d at p. 800, fn. 1.)

In Align, the court took judicial notice of the parties’ prior settlement agreement, which “resulted in the dismissal of the prior suit,” noting the settlement agreement was referred to in the complaint, citing Ingram and Salvaty for support.  (Align, supra, 179 Cal.App.4th at p. 956, fn. 6.)

The Court declines to take judicial notice of Exhibits 1, 3, and 4.  Unlike the private agreements in Salvaty and Align, the documents here are not “capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” 

            And unlike the letter and media release publicly distributed by the District Attorney’s office in Ingram, the uncertified attachment agreement alleged to have been approved by the Public Utilities Commission, or the settlement agreement that resulted in the dismissal of a prior lawsuit, the private documents between the parties here are neither official acts of the legislative, executive, or judicial branches, nor are they capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.

            Moreover, the documents are unauthenticated by declaration or otherwise. 

ANALYSIS

1.     DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if one consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A.    UNCERTAINTY

A demurrer for uncertainty will be sustained only where the pleading is so bad that the responding party cannot reasonably respond - i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what claims are directed against him or her.  (Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.)  Where a demurrer is made upon the ground of uncertainty, the demurrer must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears by reference to page and line numbers.  (See Fenton v. Groveland Comm. Services Dist. (1982) 135 Cal.App.3d 797, 809.) 

Although Defendant asserts the demurrer in part on the basis of uncertainty, Defendant does not demonstrate that any portions of the Complaint are so bad that Defendant cannot reasonably determine what issues must be admitted or denied, or what claims are directed against it.  The Court thus declines to sustain Defendant’s demurrer on the basis of uncertainty. 

B.    FAILURE TO STATE A CAUSE OF ACTION

                                                       i.          First Cause of Action – Damages for Illegal Liquidated Damages Charge Breaching Written Contract

Plaintiff alleges that Defendant loaned Plaintiff $3,575,000 (Compl. ¶ 6); that Plaintiff “did not pay defendants the principal balance when it was due on October 1, 2022” (Compl. ¶ 7) but Plaintiff “did pay the entire debt by its payment of approximately $3,691,503.16 on or about December 1, 2022.”  (Compl. ¶ 8.)  Plaintiff further alleges “Defendants included in their payoff demand a $357,500 Balloon Late Fee in addition to charging 16.50% per annum interest on a daily basis for each day the balance was not paid off.  The lender then gave a voluntary credit of $282,500 which was not provided for in the promissory note that had the 10% late fee on the entire balance as a contractual term.”  (Compl. ¶ 9.)

As such, Plaintiff alleges that even with the $282,500 discount, the balloon late fee “was an illegal penalty and not a legal liquidated damage” and the contractual late fee of 10% on the entire balance due “was an illegal penalty” as a matter of law.  (Compl. ¶¶ 11, 15, 17, 19.)

Defendant argues that based on the unauthenticated documents of which the Court has declined to take judicial notice, the 10% was only charged on each late payment, not the entire loan balance, as alleged, the 16.5% default interest rate was only charged upon Plaintiff’s default of the entire loan, and Plaintiff’s entire case is barred by accord and satisfaction, when Plaintiff agreed to pay the reduced balloon late fee of $75,000.

Having declined to take judicial notice of Defendant’s unauthenticated private documents, the Court cannot say that Plaintiff fails to state a cause of action at this stage of the litigation.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Defendant’s Demurrer in its entirety.

Further, the Court orders Defendant to file an Answer to the Complaint on or before March 29, 2024. 

Defendant shall provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  March 11, 2024                                                      ___________________________

                                                                                    Michael E. Whitaker

                                                                                    Judge of the Superior Court