Judge Ronald F. Frank, Case 22TRCV00541 2022-12-09 Tentative Ruling

Judge: Ronald F. Frank, Case: 22TRCV00541, Date: 2022-12-09 Tentative Ruling

Case Number: 22TRCV00541 Hearing Date: December 9, 2022 Dept: 8

Tentative Ruling

HEARING DATE: December 9, 2022¿

CASE NUMBER: 22TRCV00541

CASE NAME: Strategic Funding Source, Inc. d/b/a Kapitus v. Marshall Horizons LLC, et al.

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MOTIONS:¿ (1) Plaintiff’s Demurrer to Defendant’s First Amended Answer and Counterclaim

(2) Plaintiff’s Motion to Strike Defendant’s Counterclaim + Answer

(3) Defendant’s Motion to Dismiss Plaintiff’s Complaint

Tentative Rulings: (1) Plaintiff’s Demurrer to Defendant’s First Amended Answer and Cross-Complaint is SUSTAINED

(2) Plaintiff’s Motion to Strike Defendant’s Cross-Complaint and Answer is GRANTED

(3) Defendant’s Motion to Dismiss Plaintiff’s Complaint is DENIED without prejudice to defendant bringing a properly noticed motion

I. BACKGROUND¿

A. Factual¿

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On July 5, 2022, Plaintiff, Strategic Funding Source, Inc. d/b/a Kapitus (“Plaintiff”) filed a verified complaint against Defendants Lemar Marshall a/k/a Le’Mar Marshall and Marshall Horizons LLC (Collectively, “Defendants”) for an alleged breach of a business loan agreement (“Agreement”) entered into by Marshall Horizons as a borrower and by Mr. Marshall as guarantor. The Complaint is verified by an officer of Plaintiff, a Vice President of Underwriting. Defendants filed a verified Affidavit of Revocation of Signature, which appears to be in answer to the Plaintiff’s verified Complaint, on August 1, 2022. Among other things, the Affidavit of Revocation of Signature contains assertions by Mr. Marshall that he was defrauded into giving his January 20, 2022 signature in Plaintiff’s loan documents.

On October 25, 2022, Marshall untimely attempted to remove this case to federal court. After the federal district judge remanded this case back to this Court, Defendant filed on October 25, 2022 “Defendants First Amended Answer to Complaint and Counterclaim” without first obtaining leave of court. Unlike the original response to Plaintiff’s Complaint in August of 2022, Defendants’ October 2022 document is not a verified pleading. In response to the October filing, Plaintiff has filed both a demurrer and motion to strike Defendant’s First Amended Answer to Complaint and Counterclaim.

Subsequently, on December 2, 2022, Defendant filed a motion to dismiss Plaintiff’s entire complaint, seeking a December 9 hearing date. Plaintiff has not had a reasonable opportunity to respond to that Motion given the improperly short period of notice.

B. Procedural

On November 8, 2022, Plaintiff filed a demurrer and motion to strike. To date, no opposition has been filed. On December 6, 2022, Defendant filed a “Bill of Complain[t] in Equity” but that lengthy document does not appear to address or be responsive to either the Demurrer nor the Motion to Strike.

¿II. ANALYSIS ¿

A. Demurrer

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿

A pleading is uncertain if it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) However, “[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.)¿

Here, Plaintiff assert’s that Defendant Marshall’s recent filing entitled “Defendants First Amended Answer to Complaint and Counterclaim,” is improperly filed and is further unintelligible and fails for uncertainty.

In Defendant’s counterclaim, it appears that he is making a claim for fraud. “The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Here, the counterclaim alleges that: “Fraudulent inducement was presented when there was no full disclosure of the loan agreement. I was deceived into signing the contract after a phone call with a KAPITUS employee named ‘Damian Beck’.” (Counterclaim, ¶ 8.) Concealment can satisfy the first element of fraud, and although not clearly, it appears that Defendant is doing so here. Defendant does not, however, allege sufficient damages to show that Plaintiff had scienter or knowledge of the falsity of their alleged actions.

Defendant’s counterclaim also alleges that “Plaintiff violated promises when I was lied to about the repayment of the loan in order to induce me to take the loan for his commission.” (Counterclaim, ¶ 19.) Here, it appears that Defendant seeks to allege that Plaintiff had an intent to induce his reliance in order for Plaintiff to receive a commission. However, Defendant does not allege sufficient facts with regard to his justifiable reliance on the misrepresentation. Here, Defendant pleads damages in his prayer.

There are a number of deficiencies with the Defendant’s First Amended Answer and Counterclaim. For one, the amended answer is not verified, which an answer to a verified Complaint must be. Second, the amended answer was filed without first obtaining leave of court. Third, the Counterclaim uses federal nomenclature rather than the label used under California’s Code of Civil Procedure for a defendant’s pleading that seeks affirmative relief, i.e., a “cross-complaint.” Fourth, the amended answer and counterclaim are contained in a single document. Details on these deficiencies are set forth below in the section of this ruling addressing the motion to s trike. Because of these deficiencies, Plaintiff’s demurrer is sustained with leave to amend. Mr. Marshall is granted 20 days leave to amend to correct the deficiencies.

B. Motion to Strike

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (Code Civ. Proc., § 435, subd. (b)(1).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].) The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)¿¿

Plaintiff moves to strike Defendant’s “First Amended Answer to Complaint and Counterclaim on the grounds that they are not drawn in conformity with the law, as neither an amended answer nor a cross-complaint are permitted at this time without leave of court, the amended answer is not verified, the corporate defendant is not represented by counsel and may not appear in pro per, and that the “counterclaim” does not separately state each cause of action. The Motion to Strike has merit and is GRANTED.

1. Counterclaim/cross-complaint

Code of Civil Procedure § 428.40 specifically provides that “[t]he cross-complaint shall be a separate document.” A cross-complaint is a pleading separate and apart from the answer, is required to be complete and sufficient in itself, and cannot be aided by averments of the answer. (Luse v. Peters (1933) 219 Cal. 625, 630.) Here, Defendant filed a cross-complaint (erroneously named a counterclaim) in the same document as an unverified amended answer to Plaintiff’s complaint. That is improper and creates grounds for Plaintiff’s Motion to Strike Defendant’s “counterclaim.”

2. Defendant’s Answer

Plaintiff also has filed a Motion to Strike Defendant’s Amended Answer. Code of Civil Procedure §¿446 provides that "[w]hen the complaint is verified, the answer shall be verified." Here, Defendant’s amended answer is not verified. That is improper and creates grounds for Plaintiff’s Motion to Strike Defendant’s Amended Answer.

C. Defendant’s Motion to Dismiss

Defendant moves for the court to dismiss Plaintiff’s entire claim because Defendant asserts that Plaintiff has not stated a claim upon which relief can be granted. However, the motion to dismiss was filed on December 2, seeking a December 9 hearing date consistent with the Plaintiff’s demurrer and motion to strike hearing date. A week’s notice is too short a period of time for a noticed motion where a party has not first obtained an order shortening time. Code of Civil Procedure Section 1005(b) provides as follows: “Unless otherwise ordered or specifically provided by law, all moving and supporting papers shall be served and filed at least 16 court days before the hearing. The moving and supporting papers served shall be a copy of the papers filed or to be filed with the court. However, if the notice is served by mail, the required 16-day period of notice before the hearing shall be increased by five calendar days if the place of mailing and the place of address are within the State of California . . . .” (emphasis added.) The defense motion to dismiss also lacks a notice of motion, lacks a memorandum of points and authorities, and contains other deficiencies. The Court will DENY the defense motion to dismiss at this time and as filed, without prejudice to a later noticed motion filed in proper format that gives proper notice and time to respond as required by the California Code of Civil Procedure.

III. CONCLUSION¿

Based on the foregoing, Plaintiff’s Demurrer to Defendant’s Cross-Complaint is sustained with leave to amend. Additionally, Plaintiff’s Motion to Strike Defendant’s Amended Answer and Cross-Complaint is GRANTED bu Defendant’s Motion to Dismiss is DENIED without prejudice to being re-filed in proper form and with proper notice in the future.

Plaintiff is to give notice of the rulings.