Judge Robert S. Draper, Case 22STCV04061 2023-04-25 Tentative Ruling

Judge: Robert S. Draper, Case: 22STCV04061, Date: 2023-04-25 Tentative Ruling

Case Number: 22STCV04061 Hearing Date: April 25, 2023 Dept: 78

Superior Court of California

County of Los Angeles

Department 78

MONTANO INVESTMENTS, INC.,

Plaintiff;

vs.

USA REAL ESTATE INVESTMENT SERVICES, INC., et al.,

Defendants. Case No.: 22STCV04061

Hearing Date: April 25, 2023

[TENTATIVE] RULING RE:

DEFENDANTS ANCHOR FINANCE, LLC, COREVEST LOANS LLC, AND LIMA LOANS LLC’S DEMURRER TO THE FIRST AMENDED COMPLAINT.

Defendants Anchor Finance, LLC, Corevest Loans, LLC, and Lima Loans LLC’s Demurrer to the Fourth and Fifth Causes of Action in the First Amended Complaint is SUSTAINED.

Plaintiff is granted thirty days leave to amend.

Moving parties to provide notice and to file proof of service of such notice within five court days after the date of this order.

FACTUAL BACKGROUND

This is an action for wrongful foreclosure and fraud. The operative First Amended Complaint (“FAC”) alleges as follows.

Plaintiff Montano Investments, Inc. (“Plaintiff”) worked with Defendant Marc Mendez (“Mendez”) to buy, develop, and sell real estate. (FAC ¶ 17.) Mendez decided he no longer wanted to work with Plaintiff and forced Plaintiff, under duress, to transfer their joint properties to Mendez’s company, Defendant USA Real Estate Investment Services, Inc (“USA”). (FAC ¶ 18.)

Plaintiff maintained possession of property at 2880 W. 14th Street, Los Angeles CA (the “Subject Property”). (FAC ¶ 19.) However, Mendez forced Plaintiff to sign a deed of trust in the amount of $100,000 with USA as the beneficiary. (FAC ¶ 19, Ex. 1.) Shortly thereafter, Mendez forced Plaintiff to sign a second deed of trust on the Subject Property in USA’s name. (FAC ¶ 21; Ex. 2.)

Mendez then forged a promissory note showing that Plaintiff owed USA $540,000 on the Subject Property instead of the $140,000 reflected on the deed of trust Plaintiff signed before a notary. (FAC ¶ 28; Ex. 3.)

Mendez foreclosed on the Subject Property without providing Plaintiff notice, and the foreclosure sale was held outside of Los Angeles County. (FAC ¶ 28.) Defendant Anchor Finance, LLC (“Anchor”) purchased the subject property at this illegitimate foreclosure sale. (FAC ¶ 35.) Additionally, Plaintiff learned that USA assigned the first mortgage to Defendant Lima Loans LLC (“Lima”) and the second mortgage from the Deed of Trust to Defendant Corevest Loans LLC (“Corevest” and together with Lima and Anchor, “Movants”). (FAC ¶ 37.)

PROCEDURAL HISTORY

On February 2, 2022, Plaintiff filed the Complaint asserting seven causes of action:

1. Malicious Prosecution;

2. Quiet Title;

3. Fraud;

4. Recission;

5. Unlawful/Unfair Business Practices;

6. Quasi-Contract/Unjust Enrichment; and

7. Equitable Set Aside of Foreclosure.

On February 7, 2022, Plaintiff filed a Notice of Lis Pendens.

On March 28, 2022, USA filed an Answer.

On June 22, 2022, Plaintiff filed an Ex Parte Application for a Temporary Restraining Order staying two unlawful detainer cases stemming from dispute over proper title to the Subject Property. The Court granted Plaintiff’s Application.

Also on June 22, 2022, Plaintiff filed a Motion to Consolidate the instant action with the Unlawful Detainer actions, and a Motion for Leave to File a First Amended Complaint.

On August 1, 2022, the Court granted Plaintiff’s Motion to Consolidate and Motion for Leave to File a First Amended Complaint.

On August 4, 2022, Plaintiff filed the operative First Amended Complaint asserting eleven causes of action:

1. Malicious Prosecution against USA and Mendez;

2. Quiet Title against All Defendants;

3. Fraud against USA and Mendez;

4. Civil Conspiracy to Commit Fraud against USA, Mendez, C&H, Anchor, Lima, and Corevest;

5. Aiding and Abetting Fraud against C&H, Lima, and Corevest;

6. Recission against USA;

7. Equitable Set Aside of Foreclosure against USA, C&H, and Anchor;

8. Wrongful Foreclosure against USA, Mendez, and C&H;

9. Abuse of Process against USA, Mendez, and C&H;

10. Violation of Civil Code § 2943 against USA and Mendez; and,

11. Promissory Estoppel against USA and Mendez.

On October 14, 2022, USA filed an Answer to the First Amended Complaint.

On November 1, 2022, the Court vacated its order consolidating this action with the unlawful detainer actions as Plaintiff failed to furnish the Court ordered bond.

Also on November 1, 2022, Movants filed the instant Demurrer to the First Amended Complaint.

On December 6, 2022, Plaintiff untimely filed an Opposition.

On December 7, 2023, a hearing on the Demurrer was held. Plaintiff’s Counsel explained that she was unable to timely file the Opposition due to illness. The Court continued the hearing until February 2, 2023, so that the Court could consider Plaintiff’s Opposition.

No Reply has been filed.

DISCUSSION

I. DEMURRER

Movants demur to the Fourth and Fifth Causes of Action for Conspiracy to Commit Fraud and Aiding and Abetting the Commission of Fraud, respectively.

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) As is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on 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.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Movants demur to both the Fourth and Fifth Causes of Action on the basis that the First Amended Complaint fails to state facts with the requisite particularity to satisfy California’s heightened pleading standards for fraud.

A. Fraud

Both the Fourth and Fifth Causes of Action are based on the allegation that Movants conspired with USA to fraudulently obtain title to the Subject Property from Plaintiff.

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.) In the case of a corporate defendant, “the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

Here, Movants argue that the First Amended Complaint does not allege with particularity how Movants were involved in the alleged fraudulent scheme. Movants note that the First Amended Complaint alleges that Movants’ involvement with the Subject Property began after Plaintiff alleges non-moving Defendants defrauded Plaintiff. Movants contend that the First Amended Complaint alleges Lima and Corevest were merely assignees to notes secured by deeds of trust, while Anchor was a legitimate purchaser of the Subject Property at a trustee’s sale conducted pursuant to a power of sale in the deed of trust.

In Opposition, Plaintiff argues that the First Amended Complaint alleges sufficient circumstantial evidence of Movants’ involvement in the fraudulent scheme to state a cause of action for conspiracy and aiding and abetting.

Plaintiff notes that the First Amended Complaint alleges that Mendez, together with Defendant C&H, held a purportedly public foreclosure sale, at which Anchor purchased the Subject Property for $284,651. (FAC ¶ 35.) Plaintiff alleges he did not receive any notice of this sale date. (FAC ¶ 34.)

Next, the First Amended Complaint alleges that prior to the foreclosure sale, “USA assigned the $100,000 mortgage from the 1st USA Trust Deed to Lima and the $140,000 mortgage from the 2nd USA Trust Deed to Corevest.” (FAC ¶ 37.)

Finally, the First Amended Complaint notes that Anchor, Corevest, and Lima all filed initial Articles of Organization with the California Secretary of State on the same date, a month before the foreclosure sale, and that all three companies have the same managing member, Real Estate Agent Yehia Zakaria. (FAC ¶ 38.)

Though Plaintiff argues that “Mendez and USA could not have orchestrated and successfully pulled off the fraudulent taking of the Property without assistance from sympathetic actors who would also benefit from the foreclosure,” the First Amended Complaint does not allege any specific facts showing that Movants had knowledge of the allegedly fraudulent nature of the transfers, or that Movants engaged in a wrongful act in furtherance of that scheme.

Accordingly, Movants Demurrer to the First Amended Complaint is SUSTAINED. As Plaintiff has alleged indicators of a fraudulent conspiracy, and as this is the first time a Demurrer has been sustained on these grounds, Plaintiff is granted thirty days leave to amend.

DATED: April 25, 2023

___________________________

Hon. Jill T. Feeney

Judge of the Superior Court