Judge Monica Bachner, Case 22STCV32265 2023-02-22 Tentative Ruling

Defendants Blue Lagoon Textile, Inc. (“Blue Lagoon”) and Kamran Amirianfar (“Amirianfar”) (collectively, “Defendants”) demur to the first (breach of contract), sixth (dishonored check) and seventh (breach of contract by dishonored check) causes of action in the complaint of Plaintiff Payman Fabric, Inc. (“Plaintiff”). Defendants demur to all three causes of action on grounds that Plaintiff fails to allege sufficient facts to state claim. (Dem. p. 3; C.C.P. § 430.10(e).) Defendants also demur to the first cause of action on the grounds that it is uncertain and fails to establish whether the alleged contract is written, oral, or implied by conduct. (Dem. p. 3; C.C.P. § 430.10(f), (g).)

Plaintiff filed its complaint on September 30, 2022, for (1) breach of written agreement, (2) money had and received, (3) goods and services rendered, (4) account stated, (4) open book account, (6) insufficient funds check (Civ. Code § 1719), (7) breach of written contract arising from a dishonored check, and (8) statutory enforcement of a dishonored check. Plaintiff alleges Defendants agreed to purchase goods from it for $126,680.40 in June 2019. (Comp., ¶ 13.) Plaintiff alleges it delivered the goods that month, and Defendants issued Plaintiff payment in the form of a $120,000.00 check in January 2020. (Ibid.) The check was returned for insufficient funds on January 21, 2020. (Ibid.)

On November 8, 2022, Defendants filed the instant demurrer and motion to strike. Plaintiff filed its oppositions to both on February 7, 2023. Defendants filed their reply on February 7, 2023.

Also on February 7, 2023, Plaintiffs filed a “Notice of Errata Regarding Plaintiff’s Complaint” purporting to correct several minor, but material, errors in its factual allegations: specifically, (1) that the check payment referred to in the complaint was for $120,000.00, not $126,000.00, both amounts having been stated in separate places in the Complaint; and (2) that the check was returned for insufficient funds on January 21, 2020, rather than January 21, 2022, as erroneously alleged.

In support of their demurrer to Plaintiff’s three causes of action, Defendants argue, primarily, that Plaintiff fails to sufficiently allege the nature of the contract underlying their complaint (oral or written) or its relevant terms. (Dem. 4:15-18.) Defendants also argue that the one-year statute of limitations in Civil Code section 340, subdivision (1) bars Plaintiff’s claim for statutory damages in their sixth cause of action. (Dem. 7:19-26.) Finally, Defendants argue Plaintiff’s seventh cause of action for a dishonored check should be brought under the Uniform Commercial Code provisions applicable to negotiable instruments, and is therefore either time-barred or duplicative of their eighth cause of action for insufficient check funds under the Uniform Commercial Code. (Dem. 8:16-17.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186; see also Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) The plaintiff need not plead the terms of the contract in haec verba, but may instead plead its legal effect, regardless of whether the contract is oral or written. (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199; Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 401-402.)

In the case of a written contract, however, pleading according to legal effect “is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions ….” (4 Witkin, Cal. Procedure (6th ed. 2022) Pleading, § 527.)

Plaintiff alleges the parties “entered into an agreement, which was confirmed in writing … .” (Compl. ¶ 13.) Defendants argue this allegation fails to clearly state whether the agreement was oral or written. (Dem. 6:18-19.) The court agrees that the nature of the contract should be clarified by amendment to the pleading. Plaintiff’s cause of action also fails because it fails to allege the legal effect of the parties’ contract. Plaintiff alleges only two terms from the parties’ contract: that Defendants would pay Plaintiff approximately $126,000.000, and in return Plaintiff would deliver “certain goods.” (Compl. ¶ 13.)

Accordingly, Defendants demurrer is sustained with leave to amend as to the first cause of action.[1]

“[A]ny person who passes a check on insufficient funds shall be liable to the payee for the amount of the check … .” (Civ. Code § 1719, subd. (a)(1).) The person “shall [also] be liable to the payee for damages equal to treble the amount of the check if a written demand for payment is made” according to Civil Code section 1719. (Id. § 1719, subd. (a)(2).)

Defendants argue the claim is barred by a one-year statute of limitations. On the one hand, a check is a negotiable instrument governed by the Commercial Code, which provides that “an action to enforce the obligation of a party to an unaccepted draft to pay the draft shall be commenced within three years after dishonor of the draft … .” (Com. Code § 3118, subd. (c).) However, Civil Code section 1719 also applies a statutory penalty of treble damages (not to exceed $1,500) to those who pass dishonored checks. “[T]he settled rule in California is that statutes which provide for recovery of damages additional to actual losses incurred, such as double or treble damages, are considered penal in nature …, and thus governed by the one-year period of limitations stated in [Code of Civil Procedure] section 340, subdivision (1).” (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 277, citations omitted.) However, section 340 “does not apply if the award of a penalty is discretionary, rather than mandatory.” (Hypertouch, Inc. v. ValueClick, Inc. (Hypertouch) (2011) 192 Cal.App.4th 805, 842.) Here, section 1719 is mandatory, and the Court is not persuaded otherwise by federal authorities. However, this issue would also relate to a motion to strike, as the action to enforce the obligation is three years. (Comm. Code § 3118, subd. (c).)

The court may properly sustain a demurrer without leave to amend where a cause of action adds nothing to the complaint by way of fact or theory of recovery. (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290; Rodrigues v. Campbell Industries (1978) 87 Cal.App.3d 494, 501.)

Defendants argue in their demurrer, and reiterate in their reply, that Plaintiff’s seventh cause of action duplicates others in the complaint. (Dem. 8:14-17; Reply 5:26-6:3.) Defendants are correct. The duplication is even seen in the title of Plaintiff’s seventh cause of action. Earlier in its complaint Plaintiff pleads a cause of action for breach of contract (albeit insufficiently); later in the complaint it pleads a cause of action for a dishonored check. The seventh cause of action reiterates these others.

The court sustains Defendants’ demurrer to Plaintiff’s seventh cause of action without leave to amend.

[1] Defendants also argue in their demurrer that “Plaintiff’s claim for attorneys’ fees pursuant to [Civil Code section] 1717.5 is inappropriate” because “[section] 1717.5 only applies to a book account or a contract based upon a book account[, and] the only cause of action based upon a book account is the fifth cause of action… .” (Dem. 6:24-7:3, emphasis added and omitted.) This claim is improperly part of a demurrer rather than a motion to strike.