Judge: Ronald F. Frank, Case: 22TRCV00541, Date: 2023-03-07 Tentative Ruling
Case Number: 22TRCV00541 Hearing Date: March 7, 2023 Dept: 8
Tentative
Ruling
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HEARING DATE: March 7, 2022¿
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CASE NUMBER: 22TRCV00541
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CASE NAME: Strategic
Funding Source, Inc. d/b/a Kapitus v. Marshall Horizons LLC, et al.
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MOVING PARTY: Plaintiff,
Strategic Funding Source, Inc. d/b/a Kapitus
RESPONDING PARTY: No
response or opposition was filed by the LLC or the individual
MOTION:¿ (1) Plaintiff’s Demurrer to
Defendant’s Counterclaim
(2) Plaintiff’s Motion to Strike Defendant’s Counterclaim
(3) Plaintiff’s Motion to Strike Unverified Second Amended Answer
Tentative Rulings: (1)
Plaintiff’s Demurrer to Defendant’s counterclaim is SUSTAINED with 20 days
leave to amend
(2)
Plaintiff’s Motion to Strike is GRANTED
(3)
Plaintiff’s motion to strike the unverified Answer is GRANTED
Mr. Marshall, under California law you must
have an attorney to represent an LLC and file a valid answer or Cross-Complaint
on behalf of your LLC. Also, you must submit
a verification, i.e., a declaration under penalty of perjury, for an answer by
an individual or an LLC in response to a verified Complaint
I. BACKGROUND¿
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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 was not a verified pleading. In response to the October
filing, Plaintiff filed both a demurrer and motion to strike Defendant’s First
Amended Answer to Complaint and Counterclaim. On December 9, 2022, this Court sustained the demurrer
with leae to amend and granted the motion to strike the first amended answer.
On
January 10, 2023, Defendant filed a counterclaim. The counterclaim alleges
causes of action for: (1) Fraud; (2) Mail Fraud; (3) Racketeering &
Extortion; (4) Breach of Contract; (5) Falsifying Statement; and (6) Breach of
Copyright. On the same date, Marshall filed a Second Amended Answer, but failed
to include or attach a verification.
B. Procedural
On
January 24, 2023, Plaintiff filed a motion to strike the unverified Second
Amended Complaint. On February 7, 2023,
Plaintiff filed a demurrer to the counter-claim and a motion to strike the
counter-claim. To date, no opposition has been filed to any of the three
pending challenges to Marshall’s pleadings.
¿II. ANALYSIS ¿
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A.
Motion
to Strike Unverified Second Amended Answer
Code of
Civil Procedure section 446 requires that an answer to a verified complaint be
verified. (DeCamp v. First Kensington Corp. (1978)
83 Cal.App.3d 268, 275 (DeCamp ).) In view of that requirement,
California courts often have stated that when defendants file an unverified answer to
a verified complaint, plaintiffs may file a motion to strike the answer. Strategic Funding did just that here, and the
motion to strike is thus granted. Whether
on behalf of himself as a natural person or for his LLC, Mr. Marshall must
verify under penalty of perjury the contentions raised in an answer or amended answer
to the Complaint.
Further, in
any answer, cross-complaint, motion, or other pleading filed on behalf of an
LLC, California law requires that a corporate or LLC party be represented by
counsel and that counsel sign such documents filed with the court. In California a corporation may not sue or
respond to a suit as a self-represented litigant, i.e., in propria persona. Paradise
v. Nowlin (1948), 86 Cal.App.2d 897, 898 so holds: “A natural person may represent himself and
present his own case to the court although he is not a licensed attorney. A
corporation is not a natural person. It is an artificial entity created by law
and as such it can neither practice law nor appear or act in person. Out of
court it must act in its affairs through its agents and representatives and in
matters in court it can act only through licensed attorneys. A corporation cannot
appear in court by an officer who is not an attorney and it cannot appear in
propria persona.” See Himmel v. City
Council of Burlingame (1959) 169 Cal.App.2d 97, 100 (granting motion
to strike an amended complaint filed without a lawyer by an entity plaintiff.) The same rule holds for LLCs.
B.
Demurrer
Discussion
Here, Plaintiffs argue that all
causes of action in Defendant’s counterclaim fail to state a cause of action,
and that each cause of action is vague, ambiguous, and unintelligible. Plaintiff asserts that Defendant Marshall’s
recent filing entitled “Defendants Second Amended Answer to Complaint,” is
improperly filed because it is not verified, and for other reasons. Plaintiff is correct and Mr. Marshall needs
to take heed of the reasons for the Court’s rulings so he can correct the
defects in his filings.
Fraud
& Mail Fraud
Here, Defendant claims that Strategic Funding
Source engaged in fraud because employee, Damian Becker lied to Defendants
about the loan repayment terms. (Complaint, ¶ 17.) Defendant further alleged
that this induced him into signing the loan agreement without a full disclosure
of the contract. (Complaint, ¶ 17.) Additionally, Defendant claims that the
actual loan agreement did not provide full disclosure of the loan terms.
(Complaint, ¶ 17.) Here, Defendant does not meet the specificity requirement to
state a cause of action for fraud. Defendant does not indicate scienter or
knowledge of falsity, intent to induce reliance, or justifiable reliance. As
such, the demurrer is sustained as to the first cause of action for Fraud.
Additionally,
Defendant claims that he sent several affidavits by certified mail to the
Plaintiff to address the issue of the loan. (Complaint, ¶ 18.) Defendant
asserts that the affidavits were clearly addressed to Kapitus CEO Andrew Reiser
as “For CEO EYES ONLY.” (Complaint, ¶ 18.) However, Defendants assert that Plaintiff
claims they never received any of the certified mail from the Defendants or
Tax1099. (Complaint, ¶ 18.) Again, this Court does not find that Defendant has
plead with specificity the required elements of fraud, let alone mail fraud. Mail
fraud is a crime, not a civil cause of action.
As such, the demurrer is sustained as to the second cause of action for
Mail Fraud.
Racketeering
& Extortion
A
party alleging a civil RICO violation must state “that the defendant caused
injury to the plaintiff’s business or property by engaging in a pattern of
racketeering activity in connection with an enterprise which affects interstate
commerce.” (Gervase v. Superior Court
(1995) 31 Cal.App.4th 1218, 1232; see also Living
Designs, Inc. v. E.I. Dupont de Nemours and Co. (9th Cir. 2005) 431 F.3d
353, 361 [“The elements of a civil RICO claim are as follows: ‘(1) conduct (2)
of an enterprise (3) through a pattern (4) of racketeering activity (known as
“predicate acts”) (5) causing injury to the plaintiff’s “business or
property.”’”].)
Here,
Defendant asserts that Plaintiff furnished certain deceptive forms designed to
compile and furnish form to create false belief in a consumer, that a person
other than the creditor of such consumer is participating in the collection or
in an attempt to collect a debt such Defendants allegedly owe such creditor,
when in fact such person is not participating. (Complaint, ¶ 19.) Based on the
required elements noted above, this Court does not find that Defendants have
alleged sufficient facts to support a cause for action for racketeering and extortion.
As sch, the demurrer is sustained as to the third cause of action.
Breach
of Contract
If
a breach of contract claim “is based on alleged breach of a written contract,
the terms must be set out verbatim in the body of the complaint or a copy of
the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999)
74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead
the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v.
TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)
Here,
Defendants’ counterclaim alleges that Plaintiff is not the original creditor
and did not state who the original owner of the account was. (Complaint, ¶ 20.)
Defendant does not state the required elements of the existence of the
contract, his performance or excuse of nonperformance, plaintiff’s breach, and
resulting damage. As such, the demurrer to the fourth cause of action for
breach of contract is sustained.
Falsifying
Statement
Here,
cause of action five of Defendants’ counterclaim is for “falsifying statement.”
As plead, Defendants assert Plaintiff hired Nationwide Legal Support, Inc who
contracted Shawn O’Malley who allegedly served Defendant home in Cerritos on
June 5, 2022 at 9:55 p.m. (Complaint, ¶ 21.) The Court is unable to ascertain
what Defendants are pleading here. Is the cause of action for intentional
misrepresentation? Is it for Negligent Misrepresentation? Or is this another
cause of action based on fraud? Because the Court does not have answers to any
of the questions, it is clear that cause of action five is vague, ambiguous,
and/or unintelligible. As such, the Court sustains Plaintiff’s demurrer as to
cause of action five.
Breach
of Copyright
Here, Defendants assert that “the Plaintiff was put
on notice of the copyright infringement. Copyright of trade-name/trademark
LE'MAR MARSHALL® Trust including any and all derivatives and variations in the
spelling, i.e NOT limited to all capitalized names: LEEMAR MARSHALL TRUST©,
MARSHALLO, LEMAR MARSHALLO, MARSHALL LE'MAR®, L MARSHALL®, Lemar Marshall© or
any derivatives thereof are under Copyright 2007. Said common-law
trade-name/trademark LE‘MAR MARSHALL©O TRUST may neither be used nor
reproduced, neither in whole nor in part, in any manner whatsoever, without the
prior, express, written consent and acknowledgment of Trustee/Trust in
writing.” (Complaint, ¶ 22.) Here, the Court is unable to ascertain an alleged
violation federal copyright law.
The 1976 Copyright Act (the Act) extends federal copyright protection to "original works of authorship fixed in any tangible medium of
expression." (17 U.S.C. § 102(a).) However, as noted by Plaintiff, this
cause of action is vague, ambiguous, and unintelligible. Defendants cannot
merely state a conclusory statement that Plaintiff was on notice of a copyright
infringement without further explaining what that violation was. As such, the
Court sustains the demurrer to the sixth cause of action.
III. CONCLUSION¿
Based on the foregoing, Plaintiff’s
Demurrer to Defendant’s Counterclaim is sustained with 20 days leave to amend.
Additionally, to the extent that the Plaintiff’s Motion to Strike the so-called
counterclaim is based on the failure of Mr. Marshall to have an attorney to
represent his LLC, the motion to strike what judges and lawyers refer to in the
state court system as a “cross-complaint,” not a “counterclaim,” as to the LLC
is granted. The motion
to strike the unverified Second Amended Answer is also granted. Mr. Marshall and his LLC are given 20 days to
correct these pleading defects.
Moving party is to give notice.