Judge: Theodore R. Howard, Case: 20-1169357, Date: 2022-08-18 Tentative Ruling

The Demurrers of Cross-Defendants, Calculated Risk Analytics, LLC (“CRA”) and Michael Thompson (“Thompson”) to Cross-Complainant’s Third Amended Cross-Complaint (“TACC”) are OVERRULED in their entirety.

 

Motion 1: CRA’s Demurrer

 

A.       First Cause of Action – Breach of Contract

CRA argues that the breach of contract claim fails to state a cause of action because CRA is not a party to the Option Agreement (Ex. 1 to TACC).  However, the terms of the Option Agreement may reasonably support an inference that CRA was in fact a party to the Option Agreement.  As Parman points out, the Option agreement contains representations and warranties specifically being made to CRA and by CRA, not Thompson.  (TACC Ex. 1, ¶ 8.)  The TACC also alleges that Parman and CRA and Thompson entered into the Option Agreement.  (TACC ¶ 85.)  Given the ambiguity raised on the face of the documents, the Court finds CRA’s argument to be a factual issue that should not be resolved on demurrer.  Further, if a contract set out in the complaint (or attached as an exhibit) is ambiguous, plaintiff's interpretation must be accepted as correct in testing the sufficiency of the complaint: “[A] general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.”  (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229.)

 

Because the Option Agreement is reasonably subject to an interpretation sufficient to sustain a cause of action for breach of contract, the general demurrer to this cause of action is OVERRULED.

 

B.       Second Cause of Action – Reformation

“In a suit for reformation of a contract for mutual mistake, in the absence of a clear recitation of facts showing how, when and why the mistake occurred, the pleading is inadequate as against a general and special demurrer. [Citations.]”  (McClure v. Cerati (1948) 86 Cal.App.2d 74, 83.) 

 

Specifically, a complaint for reformation of a contract “’should allege “what the real agreement was, what the agreement as reduced to writing was, and where the writing fails to embody the real agreement.”’” (Ibid.) Thus, “’it is necessary to aver facts showing how the mistake was made, whose mistake it was, and what brought it about, so that the mutuality may appear’” (Ibid.; emphasis in original.)

 

The second cause of action alleges that Addendum A (Ex. 2 to TACC), signed three days after the Option Agreement, mistakenly made reference to an agreement signed in 2015 (Exhibit 4 to TACC) rather than the Option Agreement.  The TACC alleges that the reference to Ex. 4 was a mistake by Thompson in confusing the contracts, which had similar names, and Parman did not catch that mistake when she signed Exhibit 2.  (TACC ¶ 96, 101, 108.)  The TACC further alleges that Exhibit 2 was meant to supplement Exhibit 1, not extinguish Exhibit 1, and that the parties intended that Exhibits 1 and 2 would constitute the universe of agreements among the parties.  (TACC ¶ 102, 111.)  The reformation claim seeks to reform Exhibit 2 to strike the language referring to the 2015 agreement and replace it with language referring to Exhibit 1.  (TACC ¶ 114.)

 

The Court finds these factual allegations sufficiently allege a cause of action for reformation.  (McClure v. Cerati (1948) 86 Cal.App.2d 74, 83.) Thus, the general demurrer to the second cause of action is OVERRULED.

 

C.       Third Cause of Action – Accounting

A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.  (Teselle v. McLaughlin (2009) 173 Cal.App.4th 156, 179.)

 

CRA’s argument that the accounting claim fails because Parman’s claims for damages can be made certain by calculation is not well-taken.  As Parman notes, the TACC alleges that CRA agreed to make payments in monthly installments, which monthly payments were to include “five basis points on the entire loan volume of all mortgage loans sold by CRA into the secondary market during that calendar month.”  (TACC ¶ 77.)  Accordingly, the TACC properly demonstrates that the amount of the monthly payments owed to Parman cannot be ascertained without an accounting from CRA.

 

Therefore, the general demurrer to the third cause of action is OVERRULED.

 

D.       Fourth Cause of Action – Common Counts

The common count for “money had and received” exists “wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.”  (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 937.)  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.)

 

In the present demurrer, CRA argues that Parman’s allegation that the “money invested in CRA was always to be held for the benefit of Parman” (TACC ¶ 124) cannot be reconciled with the allegation that CRA could “use that money … to strengthen its balance sheet in the event of an audit.” (Id. ¶ 122.)  This argument fails.  As Parman notes, the TACC alleges in detail that it is common in the mortgage industry for companies like CRA to use Parman’s money to strengthen its balance sheet to borrow more money from warehousing lenders without using the money as working capital.  (TACC ¶ 122,125.)  Thus, it cannot be said that the allegations with respect to this cause of action are contradictory in the manner that CRA contends.  Accordingly, the general demurrer to the fourth cause of action is OVERRULED.

 

E.       Fifth Cause of Action – Fraudulent Misrepresentation

Contrary to CRA’s argument, Parman has alleged the basic elements of a fraud cause of action with the requisite specificity.  (See TACC ¶¶ 129-146; see also, Lamar v. Superior Court (1996) 12 Cal.4th 631, 638 [elements of fraud].)  The Court finds the factual allegations in the TACC to be sufficient to meet the heightened pleading standard; thus, the fraud cause of action is properly pled. 

 

CRA’s sham pleading argument likewise fails.  Here, there does not appear to be any inconsistent or sham pleading involved in the prior cross-complaints and the TACC.  The pleadings all refer to the exact same agreement and exact same addendum.  The TACC seems to merely clarify ambiguities and assert a new legal theory based on the same general set of facts.  Such changes do not indicate a sham pleading.  (See Berman v. Bromberg (1997) 56 Cal.App.4th 936, 945-46.) 

 

Parman’s opposition also effectively disposes of CRA’s sham pleading arguments for the specific allegations to which CRA references.  (See Opposition 16:4-18:27.) 

 

Accordingly, the general demurrer to the fifth cause of action is OVERRULED.

 

F.       Uncertainty

A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond—i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her.  (Khoury v. Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

 

Here, the causes of action pled against CRA are not so unclear as to render them indecipherable.  The allegations in the TACC appear to adequately put CRA on notice of the causes of action pled against it.  Furthermore, discovery can clear up any ambiguities.

 

Thus, the special demurrer based on uncertainty as to the first, second, fourth and fifth causes of action in the TACC is OVERRULED.

 

Motion 2: Thompson Demurrer

 

A.       First Cause of Action – Breach of Contract

Thompson argues that because the TACC alleges that Thompson is not a party to Addendum A (Exhibit 2 to the TACC), he cannot be held liable for any alleged breach of Addendum A.  However, the terms of Addendum A may reasonably support an inference that Thompson was in fact a party to said Addendum.  As Parman points out, Addendum A is alleged to be an addendum to the Option Agreement (to which there is no dispute that Thompson is a party).  (See Exhs. 1 and 2 to TACC; TACC ¶ 85.)  The Addendum is titled: “Addendum A to The Agreement to Purchase Membership Interest in Calculated Risk Analytics, LLC.”  TACC also alleges that Parman and CRA and Thompson entered into the Option Agreement, which was amended by Addendum A, and that pursuant to the agreements, CRA and Thompson agreed to make specified payments to Parman.  (TACC ¶ 85-86.)

 

Given the ambiguity raised on the face of the documents, the Court finds Thompson’s argument to be a factual issue that should not be resolved on demurrer.  Further, “a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.”  (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229.)

 

Because Addendum A is reasonably subject to an interpretation sufficient to sustain a cause of action for breach of contract, the demurrer on this ground is OVERRULED.

 

Thompson also alleges that the breach of contract claim against him fails because of the sham pleading doctrine.  As discussed above in connection with CRA’s demurrer, there does not appear to be any inconsistent or sham pleading involved in the prior cross-complaints and the TACC.  The pleadings all refer to the exact same Option Agreement and exact same Addendum.  The pleadings have all been consistent in alleging that Thompson and CRA breached both agreements.  The TACC seems to merely clarify ambiguities and assert a new legal theory based on the same general set of facts.  Such changes do not indicate a sham pleading.  (See Berman v. Bromberg (1997) 56 Cal.App.4th 936, 945-46.) 

 

Thus, the demurrer on this ground is OVERRULED.

 

B.       Fifth Cause of Action – Fraudulent Misrepresentation

Thompson’s arguments regarding the fraud claim mirror CRA’s arguments.  Thompson’s general demurrer to the fifth cause of action is OVERRULED for the same reasons that CRA’s general demurrer to this cause of action is overruled.

 

C.       Uncertainty

Here, the causes of action pled against Thompson are not so unclear as to render them indecipherable.  The allegations in the TACC appear to adequately put Thompson on notice of the causes of action pled against him.  Furthermore, discovery can clear up any ambiguities.  (Khoury v. Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

 

Thus, Thompson’s special demurrer based on uncertainty as to the first and fifth causes of action in the TACC is OVERRULED.

 

CRA’s and Thompson’s requests for judicial notice are GRANTED. (Evid. Code § 452(d).)

 

CRA and Thompson are to file Answers to the TACC within 15 days.

 

Counsel for Parman to give notice.