Judge: Michael Shultz, Case: 24STCV09682, Date: 2025-03-27 Tentative Ruling

Case Number: 24STCV09682    Hearing Date: March 27, 2025    Dept: 40

24STCV08682 1500 W. Highland, LLC, et al v. Oregon Trail Corporation, et al.

[TENTATIVE] ORDER OVERRULING DEMURRER BY ALL DEFENDANTS TO THE FIRST AMENDED COMPLAINT

[TENTATIVE] ORDER DENYING MOTION TO STRIKE

                                                                                         I.         BACKGROUND

      The first amended complaint alleges that Defendant, Oregon Trail Corporation (“OTC”), through its agents, owners, and employees, Eric Mark Sr., Eric Mark, Jr., and Christopher Mark (“Mark defendants”) issued commercial loans to Plaintiffs secured by Plaintiffs’ real property. Defendants allegedly charged usurious interest rates and inflated origination fees. Plaintiffs allege claims for (1) contractual unconscionability/rescission, (2) unfair competition, (3) negligence per se, (4) violation of DRE Licensing Act, (5) failure to disclose, (6) usury, and (7) cancellation of trust deed.

      On March 18, 2025, Plaintiffs voluntarily dismissed the LLC Plaintiffs, leaving Jose Gonzalez as the only Plaintiff.

      The court has considered the moving papers, the opposition, and Defendants’ reply thereto, and all supporting papers.

                                                                                  II.        LEGAL STANDARDS

      A demurrer tests the sufficiency of a complaint as a matter of law and raises only questions of law. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.) In testing the complaint’s sufficiency, the court must assume the truth of the properly pleaded factual allegations as well as facts that can be reasonably inferred from those expressly pleaded facts. The court may also consider matters properly subject to judicial notice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

      The court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638.) Plaintiff is required to allege facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. Code Civ. Proc., § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)

      Sufficient facts are the essential facts of the case stated, "with reasonable precision and with particularity that is sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.)  Whether the Plaintiff will be able to prove the pleaded facts is irrelevant. (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)

      A demurrer may also be sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s factual allegations are so confusing, they do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2; Code Civ. Proc., § 430.10(f).)

      A pleading is required to assert general allegations of ultimate fact. Evidentiary facts are not required. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 47; Lim v. The.TV Corp. Internat. (2002) 99 Cal. App. 4th 684, 690.)

                                                                                                III.       DISCUSSION

A.     Demurrer

      Defendants demur to all claims on grounds Plaintiffs fail to state a cause of action.

      Plaintiffs argue that the LLC Plaintiffs, 1500 W. Highland, LLC (“Highland”) and 15918 Merrill, LLC, (“Merrill”), (collectively “the LLCs”) have been dismissed leaving Plaintiff, Jose Gonzalez, as the only Plaintiff.  Plaintiff asserts that Defendants’ demur to claims asserted by the LLC Plaintiffs and are no longer at issue. Plaintiff Gonzalez is happy to file a second amended complaint that focuses only on Plaintiff Gonzalez’s claims and removes the claims asserted by the LLCs.

      In reply, Defendants argue that Plaintiff Gonzalez does not have standing to pursue the claims stated in the FAC since the loans were extended to the LLC entities.

B.     Defendants’ request for judicial notice.

      The court grants judicial notice of all documents recorded in the San Bernardino County Recorder’s Office. (Ex. 1-3, 5-8.; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264; Evid. Code, § 452 subd. (c).) Judicial notice is also taken of the first amended complaint filed in this action and the Chapter 11 Petition filed by 1500 W. Highland, LLC bearing Case No. 6:24BK12152 and filed in the U.S. Bankruptcy Court, Central District. (Ex. 4; Evidence Code § 452 (d).)

C.     The LLC Plaintiffs have been dismissed.

      The FAC alleges that Defendants extended loans secured by four parcels of real property on Highland Avenue in San Bernardino, Merrill Avenue in Fontana, Gallatin Road in Downey, and Florence Avenue in Bell. (FAC ¶¶ 10-13.) Plaintiff, Jose Gonzalez (“Gonzalez” or “Plaintiff”) signed the notes as the LLCs’ manager and signed a personal guaranty for each loan. (Id.)  Defendants argue that the demurrer is limited to allegations asserted by the LLC Plaintiffs, who are alleged to be the borrowers. Allegations about other loans secured by borrowers other than Highland and Merrill are not addressed. (Dem. 8:9-14.) 

      Accordingly, as Defendants concede their demurrer is limited to the claims asserted by the LLC Plaintiffs, the demurrer is rendered moot by the voluntary dismissal filed on March 18, 2025.

D.     Plaintiff Gonzalez’s standing.

      Defendants belatedly raise a new issue – that Gonzalez does not have standing to sue for the loans at issue because he is not the borrower. (Reply 2:10-11.)  The issue was raised in Defendants’ reply brief, and Plaintiff Gonzalez did not substantively oppose that issue given the limited reach of Defendants’ demurrer. (Reply 2:10-11.) As such, it is untimely raised.

      Regardless, Plaintiff alleges he signed personal guarantees for the loans at issue. (FAC ¶ 10-13.)

E.     Defendants’ Motion to Strike

      Defendants’ separately move to strike the claim for punitive damages for Plaintiffs’ failure to allege facts to support recovery of that claim. Plaintiffs did not oppose the motion in substance.

      A plaintiff may recover on a claim for exemplary damages where the defendant is guilty of oppression, fraud, or malice. (Civ. Code, § 3294 subd. (a).) The predicate acts to support the claim must be intended to cause injury or must constitute “malicious” or “oppressive” conduct as defined by statute. “Malice” is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294 subd. (c)(1); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 ["malice involves awareness of dangerous consequences and a willful and deliberate failure to avoid them"].) "Oppression" is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294 subd. (a) subd. (c)(2).)

      Plaintiffs can allege ultimate facts. Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255 ["In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff."].)

      Plaintiffs allege that the loans at issue were extended by the Mark defendants. Erik Mark, Jr. had his broker’s license revoked, but continues to be a loan officer for Defendant OTC. (FAC ¶ 2.) Christopher Mark, the nominal loan officer of OTC, knowingly permitted unlicensed brokers to broker loans. (FAC ¶ 3, 16, 27, 30.)

      OTC allegedly admitted to accusations and suffered discipline by the Department of Real Estate (“DRE”) that they charged origination fees for loans of 15 percent although the permitted fee was five percent or less. (FAC ¶ 5.) Defendants allegedly required Plaintiff to swear under penalty of perjury that the loans were for business purposes although at least one of the loans were secured by Plaintiff’s residential real property, allowing Defendants to charge more than the permitted origination fee. (FAC ¶ 10.) Defendants also charged usurious interest rates. (FAC ¶¶ 11-12.) Defendants allegedly required Plaintiff to sign a personal guaranty for these loans although Plaintiff Gonzalez speaks and reads in Spanish. (FAC ¶ 20.) The documents were presented only in English. (Id.) Defendant, Eric Mark, Jr. allegedly brokered these loans although his licensed had been revoked. (FAC ¶ 2.) Other defendants brokered loans without a license. (FAC ¶ 30.)

      These allegations are sufficient to support a finding that Defendants’ acts were “despicable” and subjected Plaintiffs to cruel and unjust hardship in conscious disregard of Plaintiffs’ rights. (Civ. Code, § 3294 subd. (a) subd. (c)(2).)

                                                                                              IV.       CONCLUSION

      Based on the foregoing, the demurrer to Plaintiffs’ first amended complaint is OVERRULED. The motion to strike is DENIED. Defendants are ordered to file an answer within 30 days.