Judge Stephen Morgan, Case Number: 23AVCV00581, Date: 2023-12-12 Tentative Ruling

This is a fraud action. Plaintiff Amir Edwards (“Plaintiff”) alleges that Defendant New American Funding, LLC, erroneously sued as Broker Solutions dba New American Solutions (“NAF”), concealed from Plaintiff that it would be using his promissory notes to clear all liens and encumbrances order to convey clear title to Plaintiff and a secondary promissory note to obtain more funding from the Federal Reserve Bank or other institutions that buy and sell mortgage-backed security. Plaintiff alleges that NAF received up to three times the amount of money required to purchase the property and kept the proceeds to itself.

On June 02, 2023, Plaintiff filed his Complaint alleging four causes of action for: (1) Breach of Contract, (2) General Negligence, (3) Fraud, and (4) Common Counts.

On October 12, 2023, NAF and Defendants Rick Arvielo (“Rick”)[1] and Patty Arvielo (“Patty” and collectively “Defendants”) filed their Demurrer.

No Opposition has been filed. “All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days. . .before the hearing.” (Cal. Code Civ. Proc. § 1005(b).) “Section 1013, which extends the time within which a right may be exercised or an act may be done, does not apply to a notice of motion, papers opposing a motion, or reply papers governed by this section.” (Ibid.) The hearing is set for December 12, 2023. Accordingly, an Opposition was due by November 29, 2023. Should an Opposition be filed, it is now untimely.

Standard for Demurrer – A demurrer for sufficiency tests whether the complaint states a cause of action.¿ (Hahn v.¿Mirda¿(2007) 147 Cal. App. 4th 740, 747.) ¿When considering demurrers, courts read the allegations liberally and in context.¿ (Taylor v. City of Los Angeles Dept. of Water and Power¿(2006) 144 Cal. App. 4th 1216, 1228.)¿ In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.¿ (Cal. Code Civ. Proc. § 430.30(a).)¿A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.¿ (SKF Farms v. Superior Court¿(1984) 153 Cal. App. 3d 902, 905.)¿ Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.¿¿(Ibid.)¿¿The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.¿ (Hahn,¿supra,¿147 Cal.App.4th at 747.)¿¿¿¿¿¿¿¿¿¿¿

A general demurrer admits the truth of all factual, material allegations properly pled in the challenged pleading, regardless of possible difficulties of proof.¿¿(Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿ Thus, no matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer.¿¿(Del E. Webb Corp. v. Structural Materials Co.¿(1981) 123 Cal.App.3d 593, 604.)¿ Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken.¿¿(Vance v. Villa Park¿Mobilehome¿Estates¿(1995) 36 Cal.App.4th 698, 709.)¿A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿¿¿¿¿¿¿¿¿¿¿¿

Pursuant to¿Code Civ. Proc.¿§430.10(e), the party against whom a complaint has been filed may object by demurrer to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action.¿ It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment.¿¿(Schifando¿v. City of Los Angeles¿(2003) 31 Cal.4th 1074, 1082,¿as modified (Dec. 23, 2003).)¿¿¿¿¿¿¿¿¿¿¿¿

Meet and Confer Requirement – Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer.¿ (Cal. Code Civ. Proc. §§ 430.41 and 435.5.)¿The Court notes that this requirement has not been satisfied. (See Decl. Ryan C. Thomason ¶ 3.) However, “[a] determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Cal. Code Civ. Proc. § 430.31(a)(4).) Accordingly, the Court determines the Demurrer on its merits.

Application – As an initial matter, Defendants argue that there is no location given for the property at issue. This is correct. The Complaint fails to include an address. (See Complaint [generally].) Plaintiff has provided an address in the Civil Case Cover Sheet Addendum for the location of where the cause of action arose: “1012 E Ave.” However, this address is not complete. Further, as a fact and proposition that is not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy, the Court takes judicial notice of the address. (See Cal. Evid. Code § 452(h).) As written, “1012 E Ave” is not an address that exists. Thus, as pled, the Complaint is uncertain as defined in Cal. Civ. Code § 430.10 as Defendants cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (See Weil & Brown, Civil Procedure Before Trial (The Rutter Group) § 7:85.)

As to the First Cause of Action (Breach of Contract), Defendants argue that Plaintiff is relying on the “vapor money” theory where “no enforceable debt accrues from a lender that does not fund a loan through hard cash” and such a theory has been found to be frivolous by various courts. (Demurrer 6:9-10 [citing Kenny Family Trust v. World Savings Bank FSB (N.D.Cal. Jan. 19, 2005) 2005 U.S. Dist. LEXIS 2403].) Defendants further argue that the Complaint fails to allege any element of a breach of contract claim.

“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.)

For this cause of action, Plaintiff alleges: “NAF concealed the fact from the buyer [Plaintiff] that it would be using the buyer’s promissory notes; first to clear all the liens and encumbrances in order to convey clear title to the buyer and then use the second promissory note to obtain more money from the Federal Reserve Bank or other institutions that buy and sell mortgage-backed security. NAF received up to three times the amount of money required to purchase the property and kept the proceeds to itself.” Notably, the allegations do not address any element of a claim for breach of contract. Further, as Defendants correctly point out, Plaintiff’s pleading is a variant of the “ ‘vapor money’ ” theory. That is, the “vapor money” theory is “the convoluted and nonsensical argument that a plaintiff does not owe the money advanced by the lender on [his or her] loan because the indebtedness was not funded by the lender with actual money.” (Tonea v. Bank of Am., N.A. (N.D. Ga. Mar. 18, 2014) 6 F.Supp.3d 1331, 1344.) No court of which this Court is aware has accepted this theory, and it is more often than not rejected as not only without merit, but frivolous. (See Id. [“Courts in this district have routinely rejected the ‘vapor money’ theory as frivolous. See Thomas, 2010 U.S. Dist. LEXIS 29553, 2010 WL 1328644, at *2 (collecting cases); see also, Montoya v. Branch Banking & Trust Co., No. 1:11-CV-1869, 2012 U.S. Dist. LEXIS 31786, 2012 WL 826993, at * 8 (N.D. Ga. Mar. 9, 2012) (dismissing plaintiff's "frivolous" claims based on plaintiff's ‘vapor money’ allegations); Yeboah v. Bank of New York Mellon, No. 1:12-CV-02139, 2012 U.S. Dist. LEXIS 144909, 2012 WL 4759246, at *5 (N.D. Ga. Aug. 30, 2012) (same); Buckley v. Bayrock Mortg. Corp., No. 1:09-CV-1387-TWT, 2010 U.S. Dist. LEXIS 10636, 2010 WL 476673, at *7-9 (N.D. Ga. Feb. 5, 2010) (same). Therefore, any claim that Plaintiff alleges based on the "vapor money" theory must be dismissed.”]; See also Miner v. JPMorgan Chase Bank (N.D.Cal. 2013) 2013 U.S. Dist. LEXIS 36362, *5 [“ ‘Such claims have been brought and rejected across the United States for over 25 years.’ Davis v. Citibank West, FSB, No. 10-CV-04477-LHK, 2011 U.S. Dist. LEXIS 30861, at *11-12, 2011 WL 1086055 (N.D. Cal. Mar. 24, 2011) (citing Nixon v. Individual Head of St. Joseph Mortg. Co., 615 F. Supp. 898, 900 (C.D. Ind. 1985); Frances Kenny Family Trust v. World Sav. Bank FSB, No. C 04-03724 WHA, 2005 U.S. Dist. LEXIS 2403 at *15, 2005 WL 106792 (N.D. Cal. Jan. 19, 2005) (‘[P]laintiffs' “vapor money” theory has no basis in law. It has been squarely addressed and rejected by various courts throughout the country for over twenty years.’); Vollmer v. Present, No. CV 10-1182, 2010 U.S. Dist. LEXIS 127446 at *18-19 (D. Ariz. Dec. 1, 2010) (‘this theory is entirely implausible and meritless’)).”]; Kuder v. Wash. Mut. Bank (E.D.Cal. Sep. 1, 2009, No. CIV S-08-3087 LKK DAD PS) 2009 U.S.Dist.LEXIS 78924, at *6 [“As defendants accurately observe, plaintiff's claims are premised on the so-called ‘vapor money’ theory which has been consistently rejected by federal courts as frivolous. See Rodriguez v. Summit Lending Solutions, Inc., No. 09cv773 BTM (NLS), 2009 U.S. Dist. LEXIS 83522, 2009 WL 1936795, *2 (S.D. Cal. July 7, 2009); Gentsch v. Ownit Mortgage Solutions Inc., No. CV F 09-0649 LJO GSA, 2009 U.S. Dist. LEXIS 45163, 2009 WL 1390843, *4-5 (E.D. Cal. May 14, 2009) (and cases cited therein); Alejo v. Mozilo, No. CV 09-680 PSG (CTx), 2009 U.S. Dist. LEXIS 24686, 2009 WL 692001, *3 (C.D. Cal. Mar. 16, 2009); Frances Kenny Family Trust v. World Savings Bank FSB, No. C 04-03724 WHA, 2005 U.S. Dist. LEXIS 2403, 2005 WL 106792, *5 (N.D. Cal. Jan. 19, 2005) (and cases cited therein).”].) This Court sees no reason to deviate from long-standing precedent though they are persuasive and not binding on this Court.

As to the Second Cause of Action (Negligence), Defendants argue that (1) no facts alleged in the Complaint support a negligence claim; (2) Plaintiff merely asserts nonsensical arguments that no actual money was used to purchase the real property at issue and why is there a need for mortgage loans if that is the case; (3) Plaintiff alleges that Defendants “breached all of its fiduciary duties to the buyer and is therefore guilty of criminal breach of trust by failing in its good faith requirement” (Complaint, General Negligence Attachment); and (4) Plaintiff attempts to lead the Court down the “rabbit hole” with theories about how obligations and other securities of the United States should be used and how there was any lack of consideration for the alleged transaction complained about.

“ ‘The elements of a cause of action for negligence are well established. They are “(a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c)the breach as the proximate or legal cause of the resulting injury.” ’ ” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917.)

Here, Plaintiff’s Complaint does not discuss duty, breach, or causation. Rather, Plaintiff provides further allegations stemming from the “vapor money” theory, contract law, “criminal breach of trust” (see Complaint, General Negligence Attachment), and “obligations of the United States” (ibid.).

As to the Third Cause of Action (Fraud), Defendants present that the Complaint fails to allege facts supporting a claim for fraud. Defendants focus on the allegation: “NAF led me to believe that the money going to the seller would be coming from its own asset account in the form of a ‘Loan.’ ” (Complaint, Fraud Attachment.) Defendant highlights that Plaintiff’s allegations are conclusory.

It appears that Plaintiff is alleging fraudulent concealment. “[T]he elements of an action for fraud and deceit based on a concealment are:(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3)the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

Here, Plaintiff once again alleges the “vapor money” theory. (See Complaint, Fraud Attachment [“They lied because they knew, or ought to have known, that their own book or ledger would show that NAF does not have any money to lend and that their records will show that no such loan transaction ever took place. . .[NAF] violated its corporate charter by lending “credit” or “nothing at all” and then charging on this make-believe loan. . .”].) No elements of fraud are addressed.

As to the Fourth Cause of Action (Common Counts), Defendants argue that Plaintiff has not pled any facts to show that money was received by Defendants that belonged to Plaintiff or was intended to be used for the benefit of Plaintiff and why this money should be returned for him.

“In the common law action of general assumpsit, it is customary to plead an indebtedness using ‘common counts.’ In California, it has long been settled the allegation of claims using common counts is good against special or general demurrers. The only essential allegations of a common count are ‘(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.’ ” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.) Moroever, "[w]hen a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable." (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394-395.)

Here, the Plaintiff has checked off that a claim for common counts applies as “an account was stated in writing by and between plaintiff and defendant in which it was agreed that defendant was indebted to plaintiff,” “within the last four years for money had and received by defendant for the use and benefit of plaintiff,” and “for money lent by plaintiff to defendant at defendant’s request.” (Complaint, Common Counts Attachment.) However, there is no further information. That is there is no exhibit supporting that an account was stated in writing, no evidence of the $315,000 requested by Plaintiff, no evidence of the 3.99% interest rate written in by Plaintiff, or otherwise. Further, a reasonable inference drawn by the Complaint is that the Fourth Cause of Action is premised on the same allegations as an alternate way of seeking recovery from Defendants as that demanded in the breach of contract causes of action and is based on the same facts. As the causes of actions were demurrable for reasons ante, so too is the Fourth Cause of Action.

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy¿(1976), 18 Cal.3d 335, 348.) While under California law leave to amend is liberally granted, “leave to amend should not be granted where, in all probability, amendment would be futile.” (Vaillette v. Fireman's Fund Ins. Co. (1993), 18 Cal. App. 4th 680, 685).¿ “A trial court does not abuse its discretion when it sustains a demurrer without¿leave to amend¿if either (a) the facts and the nature of the claims are clear and no liability exists, or (b) it is probable from the nature of the defects and previous unsuccessful attempts to plead that the plaintiff cannot state a claim.” (Cantu v. Resolution Trust Corp.¿(1992)¿4 Cal.App.4th 857, 889.)¿Plaintiff cannot rectify the pleadings by an amendment as it is premised on the “vapor money” theory which has been rejected by various courts as frivolous.

Defendants Rick Arvielo, Patty Arvielo, and New American Funding, LLC’s Demurrer is SUSTAINED without leave to amend.

[1] Defendants Rick Arvielo and Patty Arvielo share the same surname. The Court addresses each individually by their first name for the purpose of clarity. No disrespect is meant.