Judge Thomas D. Long, Case Number: 24STCV15920, Date: 2025-01-16 Tentative Ruling

On October 7, 2024, Plaintiff Constance Spahn filed a first amended complaint (“FAC”) against Defendants Kirk R. Spahn and ICL Academy LLC (“ICL”). The FAC alleges (1) breach of written contract; (2) breach of oral contract; (3) declaratory relief; and (4) accounting.

“The parties and relevant individuals share a last name. For clarity, convenience, and in order to avoid confusion, we refer to them by their first names and intend no disrespect.” (Cruz v. Superior Court (2004) 120 Cal.App.4th 175, 188, fn. 13.)

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, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) Courts also consider exhibits attached to the complaint and incorporated by reference. (See Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.)

Defendants argue that the contract claims are barred by the statutes of limitations. (Demurrer at pp. 2-3.) “‘In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.’” (Geneva Towers Ltd. Partnership v. City of San Francisco (2003) 29 Cal.4th 769, 781.)

An action based on a written contract must be brought within four years. (Code Civ. Proc., § 337.) An action based on an oral contract must be brought within two years. (Code Civ. Proc., § 339.)

Plaintiff alleges that Kirk asked her for funding for his company (Defendant ICL, then known as Youth Performance Academy LLC) and memorialized the request in a July 29, 2019 email. (FAC ¶ 10.) On August 27, 2019, Plaintiff gave Kirk a check for the company. (FAC ¶ 11.) On May 30, 2024, Plaintiff’s agent demanded repayment. (FAC ¶ 13.)

Plaintiff alleges that the loan was payable on demand. (FAC ¶¶ 16-18, 24.) “For purposes of the statute of limitations, loans payable on demand are deemed payable at their inception, and the statute begins to run from such time.” (Buffington v. Ohmert (1967) 253 Cal.App.2d 254, 256.) Accordingly, the statutes of limitations began to run on August 27, 2019, and claims based on the oral (two years: August 27, 2021) or written (four years: August 27, 2023) contract are now time-barred.

Plaintiff argues that the statute of limitations did not run until demand was made. (Opposition at pp. 5-6.) Plaintiff’s cited authority is distinguishable and actually supports Defendants’ argument.

Plaintiff quotes Woollomes v. Gomes (1938) 26 Cal.App.2d 461, 465 (Woollomes): “‘Where a demand is an integral part of a cause of action, the statute of limitations does not run until demand is made. The plaintiff cannot, however, indefinitely suspend the running of the statute by delaying to make a demand.’” That quotation continues with, “‘The general rule is that where an actual demand is necessary to perfect a right of action and no time therefor is specified in the contract, such demand must be made within a reasonable time after it can lawfully be made.’” (Ibid.) There, the promissory note contained a condition that the creditor could “upon ten days notice to party of the second part resort to any legal action for the collection of said note.” (Id. at p. 462.)

There is no allegation that the contract here contained a demand as a condition precedent to legal action. Instead, the loan was merely payable on demand. (FAC ¶¶ 16-18, 24.) “‘Where a right has fully accrued except for some demand to be made as a condition precedent to legal relief, which the claimant can at any time make, if he so chooses, the cause of action has accrued for the purpose of setting the statute of limitations running. Since a creditor is able at any time to bring an action when he can by his own act fix the time of payment, it is no stretch of language to say the cause of action accrues for the purpose of setting the statute in motion as soon as he, by his own act and in spite of the debtor, can make the demand payable.’” (Woollomes, supra, 26 Cal.App.2d at p. 465.)

Plaintiff cannot amend to allege that the contract was not payable on demand to avoid her claims being time-barred. (See Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1272 [“An admission in a pleading is conclusive on the pleader.”].) However, Plaintiff argues that she should be allowed to amend the FAC to allege estoppel. (Opposition at p. 7.)

It is Plaintiff’s burden to prove a reasonable possibility that they can cure pleading defects by amendment. (San Diego Unified School Dist. v. Yee (2018) 30 Cal.App.5th 723, 742.) Plaintiff “must affirmatively demonstrate how the complaint can be amended and how the amendment will cure the deficiencies.” (Ibid.)

According to Plaintiff, “[t]he emails attached to the Complaint show that Kirk made representations to Constance about how and when he would be able to repay her. Plaintiff can and will expand on these facts to allege that Kirk made these and other representations intending to induce her and Stephen to defer seeking repayment of the loan and that Constance and Stephen reasonably relied on these representations to defer seeking repayment.” (Opposition at p. 7.)

This does not explain how the FAC can be successfully amended. There are no clear representations about Kirk’s repayment plan. Kirk’s July 29, 2019 email to Plaintiff makes no mention of repayment. (See FAC, Ex. B.) Stephen’s August 28, 2019 email expresses his desire for any additional funding for Kirk’s business “be in the form of an interest free demand note” and “be repaid as your company succeeds.” (FAC, Ex. E.) On October 18, 2019, Kirk responded, “I have read the email and will always follow your and my mother’s wishes.” (Ibid.) Plaintiff does not demonstrate how this or similar representations can toll any time for the loan that was admittedly payable on demand.

Moreover, for the reasons discussed below, Plaintiff has not sufficiently alleged any breach of contract.

C. The First and Second Causes of Action Do Not Sufficiently Allege a Contract.

The standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) “A written contract may be pleaded by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) To plead a contract by its legal effect, a plaintiff must “allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.” (Ibid.)

Defendants argue that the FAC “clearly fail[s] to disclose which manner of contract is being alleged, as well as the essential terms of such a contract.” (Demurrer at p. 5.)

Plaintiff alleges that “Kirk’s July 29, 2019 email to Constance (Exhibit B); Contance’s August 27, 2019 check for $500,000 to Youth Performance Academy (Exhibit C); and Kirk’s October 18, 2019 email to Stephen and Constance (Exhibit E) constitute a written contact under which Constance lent Kirk and ICL Academy $500,000 without interest and Kirk, individually and in his capacity as ICL Academy’s managing member, agreed to repay Constance on demand.” (FAC ¶ 18.) Plaintiff also alleges an oral contract based on the same. (FAC ¶ 24.)

Kirk’s July 29, 2019 email states, in part, “If you have Uncle Mickeys account $ in an interest bearing account or investment account and want to wire money periodically into [the company] that works as well. . . . Aside from your generous support, I will need to raise some more outside capital but want to do that only when we are fully up and running. Thank you again for the love and support and below are the wiring instructions for the account.” (FAC, Ex. B.) There is no mention of a loan or repayment.

The August 27, 2019 check was made out to the company, not to Kirk individually. (FAC, Ex. C.) There is no other information.

Non-party Stephen’s August 28, 2019 email to Kirk and Blake was to “memorialize our meeting so certain issues are clear. I am cc’ing Connie, Mordy and Michael so they understand my wishes.” (FAC, Ex. E.) Relevant to the claims here, Stephen stated, “Kirk, I gave you a million dollar loan to build your business. You should not ask me for anything else unless you have repaid that loan. If Connie wants to provide you or your company funding it should be in the form of an interest free demand note. The money should be repaid as your company succeeds.” On October 18, 2019, Kirk responded, “I have read the email and will always follow your and my mother’s wishes.” This representation was made to Stephen, not Plaintiff.

The FAC’s exhibits do not allege the existence of a contract, any terms, or acceptance of terms. (See Demurrer at pp. 8-9.) Plaintiff’s allegations that there was “a written contact under which Constance lent Kirk and ICL Academy $500,000 without interest and Kirk, individually and in his capacity as ICL Academy’s managing member, agreed to repay Constance on demand” (FAC ¶ 18; see FAC ¶ 24) are contradicted by the exhibits that purportedly made up the contract. “Facts appearing in exhibits attached to a complaint will also be accepted as true and will be given precedence over any contrary allegations in the pleadings.” (Banis Restaurant Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1044-1045.)

Defendants argue that the third cause of action for declaratory relief is time-barred because it is based on the alleged breach of contract. (Demurrer at pp. 9-10.)

“The duration of the limitations period applicable to a declaratory relief action is determined by the nature of the underlying obligation sought to be adjudicated.” (Snyder v. California Ins. Guarantee Assn. (2014) 229 Cal.App.4th 1196, 1208.) “If declaratory relief is sought with reference to an obligation which has been breached and the right to commence an action for ‘coercive’ relief upon the cause of action arising therefrom is barred by the statute, the right to declaratory relief is likewise barred.” (Pena v. City of Los Angeles (1970) 8 Cal.App.3d 257, 262.)

Plaintiff alleges that she “is entitled to a membership interest in ICL Academy LLC commensurate with the $500,000 she provided to Defendant Kirk to fund that entity.” (FAC ¶ 30.) She seeks a determination of the respective ownership interests in ICL. (FAC ¶¶ 31-32.) This ownership determination is based on the underlying contractual obligation. Because the breach of contract causes of action are time-barred, declaratory relief arising from the contractual obligations is also time-barred.

“A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant, such a fiduciary relationship, that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.) “A right to an accounting is derivative; it must be based on other claims.” (Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 833.)

Defendants argue that this claim fails because it is derivative of the breach of contract claims. (Demurrer at p. 11.) Defendants also argue that Plaintiff has an adequate remedy at law for the $500,000.00 in damages, so an accounting is not necessary. (Ibid.)

Plaintiff alleges that, “[t]o the extent Plaintiff is entitled to a membership interest in ICL Academy LLC . . . Plaintiff does not know and cannot determine by calculation the percentage of her membership interest in ICL Academy LLC, the current balance of her capital account, and her share of prior distributions.” (FAC ¶ 25.)

The alleged membership interest in ICL arises from the time-barred claims for breach of contract and declaratory relief. Because the underlying claims fail, there is no basis for a derivative right to an accounting.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court