Judge Olivia Rosales, Case 20NWCV00475 2022-12-06 Tentative Ruling

Judge: Olivia Rosales, Case: 20NWCV00475, Date: 2022-12-06 Tentative Ruling

Case Number: 20NWCV00475 Hearing Date: December 6, 2022 Dept: SEC

RUANO v. EQUITY SMART HOME LOANS, INC., et al.

CASE NO.: 20NWCV00475

HEARING: 12/6/22 @ 1:30 PM

JUDGE: OLIVIA ROSALES

TENTATIVE RULING

I. Defendant Equity Smart Home Loans, Inc.’s demurrer to the second amended complaint is OVERRULED.

II. Defendant Equity Smart Home Loans, Inc.’s motion to strike is GRANTED in part, with 10 days leave to amend.

Moving Party to give NOTICE.

Defendant Equity Smart Home Loans, Inc. demurs to the 3^rd – 5^th causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action, and are uncertain.

The operative Second Amended Complaint (“SAC”) alleges that in July 2017,

“Plaintiff began to provide loan origination services to Defendant. Then, on or about October 2018, Plaintiff and Defendants entered into an oral agreement whereby Defendants promised to pay Plaintiff a fee for loan services for each loan that was originated by the Plaintiff through self-generated clients for the benefit of Defendants' business. Defendants promised to pay Plaintiff a fee for loan services as follows: on the correspondence side, once escrow closed Defendants were to receive $595 per loan with the remaining fees to Plaintiff; on the broker side, for each loan Defendants were to receive $695 with the remaining fees to be paid to Plaintiff.” (SAC, ¶ 15.) “The loan services that Plaintiff provided on approximately six (6) completed loans remain unpaid by the Defendants.” (Id., ¶ 16.) In addition, “Defendants also owe Plaintiff for loan services on loans that were completed but not fully paid.” (Id.) Based thereon, the SAC asserts causes of action for:

1. Breach of Oral Contract

2. Common Counts

3. Breach of Covenant of Good Faith and Fair Dealing

4. Fraud

5. Declaratory Relief

UNCERTAINTY

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) A demurrer for uncertainty will be sustained only where the complaint is so bad that a defendant cannot reasonably respond. (Ibid.)

The court finds that the SAC is not so uncertain that Defendants cannot reasonably respond. Demurrer based on uncertainty is OVERRUED.

Res Judicata

A dismissal with prejudice constitutes res judicata with regard to the claims dismissed. “[F]or purposes of applying the doctrine of res judicata, however, a dismissal with prejudice is the equivalent of a final judgment on the merits, barring the entire cause of action. [Citations omitted.]… ‘The statutory term ‘with prejudice’ clearly means the plaintiff's right of action is terminated and may not be revived. ... [A] dismissal with prejudice... bars any future action on the same subject matter.’” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 793.)

On September 1, 2022, Plaintiff dismissed “with prejudice” the identical claims in the Cross-Complaint to Cross-Complaint as the instant 3^rd and 4^th causes of action in the SAC. Defendant contends the 3^rd – 5^th causes of action are barred by res judicata because Plaintiff dismissed these identical claims with prejudice.

In opposition, Plaintiff explains that Plaintiff sought leave to amend the complaint to assert these claims instead of prosecuting the uncommon cross-complaint to cross-complaint. The court granted Plaintiff’s motion to amend on August 30, 2022, allowing the new claims to be pled in the SAC. Plaintiff thereafter dismissed the cross-complaint to the cross-complaint since it was duplicative of the claims in the SAC. Based on these facts, the court finds that res judicata does not bar the claims. Plaintiff had already re-asserted the claims in the SAC prior to dismissing the cross-complaint to cross-complaint. Demurrer is OVERRULED.

Statute of Frauds

“The following contracts are invalid, unless they, or some note or
memorandum thereof, are in writing and subscribed by the party to be
charged or by the party’s agent: (1) An agreement that by its terms is not to be performed within a year from the making thereof.” (CC § 1624(a)(1).)

Defendant contends that the contract alleging that Plaintiff was to be given a 50% share of Defendants’ business violates the statute of frauds. However, it is not clear from the terms that performance cannot be performed within a year. This assumption is based on conjecture, and not part of any terms outlined in the pleading. Accordingly, demurrer is OVERRULED.

Statute of Limitations

Defendant contends the oral agreement to transfer half of Defendant’s business to Plaintiff is barred by the 2-year statute of limitations pursuant to CCP § 339(1).

¶ 31 alleges that on or about August 2018 and continuing through March 2020, Defendant represented that Defendants' business (Equity Smart) would merge with Plaintiff and Plaintiff would own fifty percent (50%) of Equity Smart, which included entitlement to 50% of the profits of Equity Smart.”

The court finds that this claim relates back to the FAC, filed on April 13, 2021, wherein Plaintiff alleges that “[i]n late 2019, in furtherance of Plaintiff performing loan services and to increase the volume of loans, Defendant, Pablo Martinez, requested Plaintiff recruit at least sixty (60) loan officers. Pablo Martinez also represented to Plaintiff that when Plaintiff increased his loan officers, Defendants' business would merge with Plaintiff whereby Plaintiff would own a fifty percent (50%) equity ownership interest in Defendant EQUITY SMART HOME… Defendants breached the agreement on March 11, 2020, when Defendants terminated the oral agreement and refused to pay Plaintiff for services rendered.”

The claim was made on April 13, 2021, within 2 years of the breach on March 11, 2020. The running of the statute of limitations must appear “clearly and affirmatively” from the face of the complaint. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) Here, the running of the statute of limitations does not appear clearly and affirmatively from the face of the complaint. Accordingly, the demurrer is OVERRULED.

4^th CAUSE OF ACTION

FRAUD: The elements are: 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See CC § 1709.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.)

¶ 38 alleges that in August 2018, Defendants requested Plaintiff to recruit more than 40 loan officers and represented to Plaintiff that when Plaintiff increased his loan officers, Defendant’s business would merge with Plaintiff and Plaintiff would own 50% of Equity Smart. ¶ 39 alleges reliance. ¶¶ 40-41, 46-48 allege scienter and intent to defraud. ¶ 50 alleges resulting damages. The court finds the claim is sufficiently particular.

Accordingly, the demurrer is OVERRULED.

The accompanying motion to strike punitive damages is GRANTED in part, with 10 days leave to amend.

Plaintiff acknowledges a scrivener’s error in the Prayer that refers to the “second” cause of action instead of the “fourth” cause of action. The court otherwise finds that punitive damages is adequately pled based on the fraud cause of action, and the portion seeking to strike punitive damages is denied.

Plaintiff failed to oppose the motion to strike ¶ 33 (lines 8-17) and ¶ 42 (lines 9-18), which contain irrelevant allegations of Reg Z violations. Accordingly, these lines are ordered stricken.