Judge Upinder S. Kalra, Case Number: 23STCV12878, Date: 2023-10-04 Tentative Ruling

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DEFENDANTS MORTGAGE VINTAGE, INC.’S AND ALEXANDER MACDOUGALL A/K/A SANDY MACDOUGALL’S (ERRONEOUSLY NAMED SANDY MCDOUGALL) DEMURRER TO COMPLAINT WITHOUT MOTION TO STRIKE

MOVING PARTIES: Defendants Mortgage Vintage, Inc. and Alexander MacDougall a/k/a Sandy MacDougall (erroneously named Sandy McDougall)

1. Moving Defendants demurrer to the entire Complaint as to Defendant Alexander MacDougall a/k/a Sandy MacDougall (erroneously sued as Sandy McDougall) as a matter of law.

2. Moving Defendants also demurrer to the Second Cause of Action, Fourth Cause of Action, Fifth Cause of Action, and Sixth Cause of Action for failing to state facts sufficient to constitute a cause of action pursuant to Code Civ. Proc. § 430.10(e).

1. Demurrer is SUSTAINED without leave to amend as to Defendant Alexander MacDougall a/k/a Sandy MacDougall (erroneously sued as Sandy McDougall)

2. Demurrer is SUSTAINED without leave to amend as to the Second Cause of Action, Fourth Cause of Action, Fifth Cause of Action, and Sixth Cause of Action.

Plaintiff David Posner ("Plaintiff") filed suit against Defendants Hector Salgado, Juan Manuel Gonzalez, Diana Lopez, Four Seasons International Group LLC, Upper Case Construction, Mortgage Vintage Inc., Sandy McDougall, and Does 1 through 20, inclusive.

The Moving Defendants are Mortgage Vintage, Inc. and Alexander MacDougall a/k/a Sandy MacDougall (erroneously sued as Sandy McDougall) (Moving Defendants). The remaining defendants have not yet appeared.

Plaintiff filed a Complaint on June 7, 2023, alleging six (6) causes of action: (1) breach of contract, (2) unjust enrichment, (3) breach of fiduciary duty, (4) breach of unfair business practices act § 17200, (5) intentional infliction of emotional distress, and (6) fraud and misrepresentation. The causes of action at issue for Moving Defendants’ demurrer are 2, 4, 5, and 6.

Plaintiff alleges that he executed a Deed of Trust with Defendant Hector Salgado on September 20, 2021 for real property located at 42653 Sierra Hwy, Lancaster, CA 93535. This Deed of Trust was purportedly to keep this property from foreclosure sale by Defendant Four Seasons International Group LLC. Plaintiff contends he relied on the Deed of Trust as his security interest in the property and then paid off the arrears to prevent foreclosure. After Plaintiff’s Deed of Trust, Defendant Hector Salgado allegedly transferred the property back to Four Seasons International Group LLC who subsequently defaulted on the property again. The property was sold at an April 23, 2023 foreclosure sale that Plaintiff claims he was unaware. The only allegations noting moving Defendants is paragraph 24 which alleges moving Defendants executed a trust deed with defendant Four Seasons on July 29.l 2019.

Moving Defendants filed their Demurrer on July 11, 2023 for hearing on October 4, 2023. It was timely filed and served pursuant to Code of Civ. Proc. § 1005. Plaintiff did not file an Opposition. Moving Defendants did not file a Reply.

The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civ. Proc. § 430.30(a); Blank v. Kirwan(1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Ibid.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the 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.) But this does not include contentions; deductions; 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 demur 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 if there is a reasonable probability that the defect can be cured by amendment. (Hahn v. Mirda, supra, 31 Cal. 4th at p. 745.)

CCP § 430.41(a) requires that the demurring party meet and confer with the party who filed the pleading that is subject to the demurrer at least 5 days before the date the responsive pleading is due, by telephone or in person, for the purpose of determining if the parties can resolve the objections to be raised in the demurrer. (Code Civ. Proc., § 430.41.) The demurring party must file and serve a declaration detailing their meet and confer efforts. Failure to meet and confer is not grounds to overrule or sustain a demurrer, or grant or deny a motion to strike. (Code Civ. Proc., §§ 430.41, subd. (a)(4); 435.5 subd. (a)(4).)

The submitted declaration facially complies with the meet and confer requirements and the Judicial Council did not include additional space requiring declarant to indicate the details of meet and confer discussions. Therefore, Moving Defendants met the meet and confer requirement.[1]

The court has reviewed the proof of service attached to the demurrer and it appears service was properly performed by U.S. Mail.

The court grants Moving Defendants’ request for judicial notice as to Exhibits 1 through 9. (Evid. Code § 452(c), (h); See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23,37.) However, the court only takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)

As a threshold matter, the court notes that the first and third causes of action do not apply to Moving Defendants.

Entire Complaint by Defendant Alexander MacDougall a/k/a Sandy MacDougall (erroneously named Sandy McDougall)

Moving Defendants argue that Plaintiff did not allege any facts that Defendant Alexander MacDougall, in his individual capacity, participated in conduct outside of his corporate duties or that any of his actions were unlawful.

Corporate directors cannot be held vicariously liable for the corporation’s torts in which they do not participate. (Asahi Kasei Pharma Corp. v. Actelion Ltd. (2013) 222 Cal.App.4th 945, 966; United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595.) However, a corporate director’s participation in tortious conduct may be shown by direct action, knowing consent to or approval of unlawful acts, and even when they failed to stop tortious conduct they knew about. (Asahi Kasei Pharma Corp. v. Actelion Ltd., supra, 222 Cal.App.4th at p. 966.)

Here, a review of the Complaint indicates that Plaintiff did not sufficiently allege facts that Defendant Alexander MacDougall, in his individual capacity, acted unlawfully, knew or consented to unlawful acts, or failed to stop tortious conduct he knew about. The only allegations in the Complaint addressing Defendant Alexander MacDougall state that he is President of Defendant Mortgage Vintage, Inc. and that Mortgage Vintage, Inc. foreclosed on the subject property on April 25, 2023. (Compl. ¶¶ 8,24.) While Plaintiff claims that he “should’ve been notified” about the April 25, 2023 sale, he also states that his September 20, 2021 Deed of Trust was not recorded until “almost 3 years after being executed.” (Compl. ¶¶ 1, 17, 24.) Even reading these facts as true, they do not describe how Defendant Alexander MacDougall as an individual acted unlawfully.

Accordingly, the court sustains the demurrer as to Defendant Alexander MacDougall a/k/a/ Sandy MacDougall (erroneously sued as Sandy McDougall) in its entirety.

Moving Defendants argue that Plaintiff has not alleged facts that Moving Defendants received a benefit from Plaintiff or subsequently retained a benefit at Plaintiff’s expense. Specifically, Moving Defendants contend that they did not receive a benefit from Plaintiff due to the April 25, 2023 foreclosure action. Additionally, Moving Defendants claim that they were not required to give Plaintiff notice of the foreclosure action pursuant to Civil Code § 2924b.

Unjust enrichment is a restitution claim, not a cause of action. (De Havilland v. FX Networks, LLC (2018) 21 Cal.App.5th 845, 870; McBride v. Coughton (2004) 123 Cal.App.4th 379, 387-88.) A valid restitution claim for unjust enrichment requires the following elements: “’‘receipt of a benefit and unjust retention of the benefit at the expense of another.’ [Citation.] ‘The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.’ [Citation.]” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769.)

Here, a review of the Complaint indicates that Plaintiff did not sufficiently plead unjust receipt of a benefit from Moving Defendants. Plaintiff claims that he should be reimbursed by Moving Defendants because he was “deprived of his finances” because “the subject property was sold at a Trustee Sale without his knowledge.” (Compl. ¶ 44.) Plaintiff alleges he was the beneficiary of a deed of trust from Defendant Salgado on September 20, 2021, (Complaint ¶1, Exhibit B.) However, nowhere does Plaintiff allege that this Deed of Trust was recorded prior to any foreclosure sale. As such, Plaintiff has not alleged that Moving Defendants acted unlawfully by failing to provide him notice Without these facts, Plaintiff has not alleged that Moving Defendants unlawfully received a benefit from him.

Accordingly, the court sustains Moving Defendants’ demurrer to the second cause of action ..

Moving Defendants argue that Plaintiff has not alleged facts demonstrating unlawful, fraudulent, or unfair business conduct by Moving Defendants.

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) A business practice is unfair when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." (Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886, 894.) A business practice is unlawful if it violates another law. (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554.) A business practice is fraudulent if “members of the public are likely to be deceived." (See Wang v. Massey Chevrolet (2002) 97 Cal. App. 4th 856, 871.) “A plaintiff alleging unfair business practices . . . must state with reasonable particularity the facts supporting the statutory elements of the violation.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)

Here, a review of the Complaint indicates that Plaintiff did not sufficiently plead facts that Moving Defendants violated Business & Professions Code section 17200. Notably, Plaintiff does not identify what the unlawful practices were, but alleges in a conclusory fashion that “Defendants’ scheme to defraud, breach of contract, which have resulted in unjust enrichment . . . and a loss of Plaintiff’s funds.” (Compl. ¶ 55.)

Accordingly, the court sustains Moving Defendants’ demurrer to the fourth cause of action.

Moving Defendants argue that foreclosing on a senior deed of trust which wipes out junior lied is not unlawful or extreme and outrageous conduct.Additionally, Moving Defendants allege that Plaintiff cannot recover damages because his damages arise solely from economic injury.[2]

The elements of an intentional infliction of emotional distress (IIED) cause of action are: (1) extreme and outrageous conduct by the defendant; (2) intention to cause or reckless disregard of the probability of causing emotional distress; (3) severe emotional suffering; and (4) actual and proximate causation of the emotional distress. (See Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 780.) To satisfy the element of extreme and outrageous conduct, defendant’s conduct “‘must be so extreme as to exceed all bounds of that usually tolerated in a civilized society.’” (Ibid.) (internal citations omitted.)

While there is no bright-line as to what constitutes outrageous conduct and thus this involves a case-by-case analysis, courts can determine whether conduct was sufficiently outrageous at the demurrer stage. (Cochran v. Cochran (1998) 65 Cal.App.4th 488, 494.) Recovery for emotional distress caused by injury to property is permitted in IIED claims. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 203-04.) (internal citations omitted.)

Here, a review of the Complaint indicates that Plaintiff did not sufficiently allege facts showing "extreme and outrageous" conduct by Moving Defendants. Plaintiff alleges that failing to notify him of the foreclosure action was extreme and outrageous. (Compl. ¶ 24.) But, foreclosure alone does not necessarily lead to extreme and outrageous conduct. (Wilson v. Hynek (2012) 207 Cal.4th 999, 1009 (no allegations that lenders threatened, insulted, abused, or humiliated borrower in conducting foreclosure proceedings.) In addition to failing to allege facts that Defendants owed him a duty to inform him of the sale, Plaintiff has not alleged that Moving Defendants intended to cause his distress.

The court does not need to reach Moving Defendants’ damages argument because Plaintiff did not sufficiently plead IIED.

Moving Defendants argue that Plaintiff did not allege any specific fraudulent acts by Moving Defendants, that they did not communicate or have contact with Plaintiff, and that they did not know Plaintiff existed because he did not record his junior lien.

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469; Perlas v. GMAC Mort., LLC (2010) 187 Cal.App.4th 429, 434 [requiring plaintiffs who claim fraud against a corporation to allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written.]) Fraud allegations need not be liberally construed, general pleading of the legal conclusion of fraud is insufficient, and every element of the cause of action for fraud must be alleged fully, factually and specifically. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal. App. 3d 1324, 1331.)

Here, a review of the Complaint indicates that Plaintiff does not sufficiently allege, with particularity, facts supporting the knowledge of falsity element or the intent to defraud elements of an intentional misrepresentation claim. Plaintiff alleges fraud in a conclusory fashion only and does not satisfy heightened particularity requirements. (Compl. ¶¶ 63-69.) In particular, the Complaint refers to “the Representations” but does not state what those representations were, who said them, when they were said, or how they were said. (Compl. ¶ 63.)

Leave to amend should be liberally granted if there is a reasonable possibility an amendment could cure the defect. (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.) The Plaintiff has the burden of demonstrating that leave to amend should be granted, and that the defects can be cured by amendment. (“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.” Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Here, Plaintiiff has not offered any explanation on he could cure the defects. Indeed, Plaintiff has not even filed an opposition seemingly conceded moving Defendants’ assertions that he did not record his junior deed. If that is the case, he would be unable to cure any of the noted defects in a subsequent pleading. The Court will give Plaintiff an opportunity to be heard at the hearin on this issue. Absent a showing of a reasonable possibility of being able to amend the pleadings to cure the noted defects, the Demurrer will be sustained without leave to amend as to the moving defendants.

1. Demurrer to the entire Complaint as to Defendant Alexander MacDougall a/k/a Sandy MacDougall (erroneously sued as Sandy McDougall) is SUSTAINED without leave to amend.

2. Demurrer to the Second Cause of Action, Fourth Cause of Action, Fifth Cause of Action, and Sixth Cause of Action is SUSTAINED without leave to amend.

Pursuant to CCP § 581d, this written order of dismissal constitutes a judgment and shall be effective for all purposes. The Clerk shall note this judgment in the register of actions in this case.

[1]Here, Moving Defendants filed CIV-140 indicating counsel met and conferred “by telephone” with Plaintiff at least five court days before the hearing. (Decl. of Dem. Party Meet and Confer.) However, the submitted declaration is unclear as to whether Plaintiff answered the telephone call, whether Moving Defendants tried to meet and confer on multiple occasions, whether Moving Defendants sent Plaintiff follow-up letters, or any other details about the meet and confer discussion itself.

[2] Moving Defendants reliance on Butler-Rupp v. Lourdeaux (2005) 134 Cal.App.4th 1220, 1229 is misplaced since the issue there involved negligent infliction of emotional distress and negligent misrepresentation since the jury found no IIED.