Judge Walter P. Schwarm, Case 30-2021-01200189 2022-12-13 Tentative Ruling

Judge: Walter P. Schwarm, Case: 30-2021-01200189, Date: 2022-12-13 Tentative Ruling

Motion No. 1:

Defendants’ (Ronald Lee Peterman Jr., C.N.A., Foreclosure Services, Inc. and Unified Mortgage Service, Inc.) Demurrer to Second Amended Complaint (Demurrer), filed on 8-9-22 under ROA No. 265, is SUSTAINED in part and OVERRULED in part.

“A demurrer tests the pleading alone, and not the evidence or the facts alleged. . . . To the extent there are factual issues in dispute, however, this court must assume the truth not only of all facts properly pled, but also of those facts that may be implied or inferred from those expressly alleged in the complaint. [Citations.]” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) Code of Civil Procedure section 452, states, “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” Perez v. Golden Empire Transportation Transit District (2012) 209 Cal.App.4th 1228, 1238, provides, “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant. [Citations.]” C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872 (C.A.), provides, “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged. [Citation.]”

The Demurrer challenges the third cause of action contained in Plaintiffs’ (Heather Clark and Logan McMillian) Second Amended Complaint (SAC), filed on 7-14-22 under ROA No. 257, pursuant to Code of Civil Procedure section 430.10, subdivision (e).

Third Cause of Action (Fraudulent Misrepresentation):

The Demurrer states, “Plaintiffs’ SAC does not comply with pleadig [sic] each of these elements. Simply stating that Defendants acted willful and maliciously does not rise to a sufficiently pled fraud cause of action. Plaintiffs have completely bypassed the actions that led to the current status of the Property by blaming these Defendants for the actions that involved them. The only specificity contained in the pleading of this cause of action is as to the alleged actions and alleged statements of Gino Cirson. Plaintiff attempts to bring in Peterman by alleging Peterman “allowed” Gino Cirson to communicate with Plaintiff’s directly but there are no facts or allegations about that ‘convenient’ allegation. How, when, where, was this in writing or in person? Without such specificity, Plaintiff fails in their attempt to impute liability for Gino Çirson’s alleged statements, to Peterman. There are no fact and no allegations and no specificity as to what Gino Cirson told Plaintiffs that can be attributed to Peterman who neither know what Gino Cirson allegedly said, sanctioned it, or joined it.” (Demurrer; 7:11-22.)

Plaintiffs’ Opposition to Defendants Ronald Peterman Jr., C.N.A. Foreclosure Services, Inc., and Unified Mortgage Service, Inc. Demurrer to Plaintiff’s Second Amended Complaint (Opposition), filed on 11-28-22 under ROA No. 303, responds, “It is not necessary that a principal be a party to the fraud or authorize an agent to make misrepresentations, although a finding that a principal authorized or ratified the misrepresentation will support a principal’s liability. If the authority granted to an agent puts the agent in a position to commit a fraud while apparently acting within his or her authority, the agent’s knowledge of the falsity of his or her representations will be imputed to the principal even if the agent is acting adversely to the principal. Therefore, the principal may be held liable for the fraud of his or her agent against an innocent third party, and it is immaterial that the principal received no benefits from the transaction . . . .” (Opposition; 10:26-11:5.)

Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar), states, “ ‘The elements of fraud, which give rise to the tort action for deceit, 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.’ [Citations.]” “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] ‘Thus “ ‘the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.’ ” [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.] A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ [Citation.]” (Id., at p. 645.) Italics in Lazar; See also, Robinson Helicopter Co., Inc. v. Dana Corp. (Robinson) (2004) 34 Cal.4th 979, 993.) “The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representation, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. [Citations.]” (Tarmann v. State Farm Mut. Auto. Ins. Co., (1991) 2 Cal.App.4th 153, 157.)

Civil Code section 2295 states, “An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.”

Harley-Davidson v. Franchise Tax Bd. (2015) 237 Cal.App.4th 193, 214 (Harley-Davidson), explains, “ ‘ “[T]he existence of an agency relationship is usually a question of fact, unless the evidence is susceptible of but a single inference.” ’ [Citation.] ‘An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.’ [Citations.] ‘An agency relationship “may be implied based on conduct and circumstances.” ’ [Citation.]” (Italics in Harley-Davidson.) Violette v. Shoup (1993) 16 Cal.App.4th 611, 620 (Violette), provides, “ ‘An agent “is anyone who undertakes to transact some business, or manage some affair, for another, by authority of and on account of the latter, and to render an account of such transactions.” (3 Cal.Jur.3d, Agency, § 1, p. 10.) “The chief characteristic of the agency is that of representation, the authority to act for and in the place of the principal for the purpose of bringing him or her into legal relations with third parties. [Citations.]”

Reusche v. California Pacific Title Insurance Company (1965) 231 Cal.App.2d 731, 736-737 (Reusche), provides, “A principal who puts an agent in a position that enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud. The principal is liable although he is entirely innocent, although he has received no benefit from the transaction, and although the agent acts solely for his own purposes. Liability is based upon the fact that the agent's position facilitates the consummation of the fraud, in that, from the point of view of the third persons, the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him [citations]. The law reasons that where one of two innocent parties must suffer, the loss should be accepted by the principal who is responsible for the selection of the agent and for the definition of his authority [citation].”

Plaintiffs’ Opposition directs the court to paragraphs 34, 35, 37, 38, 39, 46, 83, 85, 110, 111, 112, 115-121 of the SAC as setting forth the sufficient facts. (Opposition; 8:2-9:14.) The preceding paragraphs do not adequately allege intentional misrepresentation with the required specificity. However, paragraphs 3, 9, 19, 139, 142, 143, and 144 of the SAC sufficiently plead the elements of fraud under Lazar based on an agency theory as to Defendant—Ronald Peterman Jr. Therefore, the court OVERRULES the Demurrer as to Defendant—Ronald Peterman Jr.

As to Defendants—C.N.A., Foreclosure Services, Inc. and Unified Mortgage Service, Inc., it does not appear that the SAC sufficiently pleads fraud or agency. For example, paragraphs 132-147 of the SAC allege conduct pertaining to Defendants—Ronald Peterman Jr., Alan Cirson, and Gino Cirson. As to the acts alleging fraudulent misrepresentation directed to Plaintiffs, the SAC does not sufficiently plead that Defendant—C.N.A. Foreclosure Services as Trustee under the Deed of Trust (SAC, ¶ 46 and Exhibit E) and Defendant—Unified Mortgage Service, Inc. as the loan services (SAC, ¶ 63 and Exhibit I) participated in these acts under an agency theory. Therefore, the court SUSTAINS the Demurrer as to Defendants—C.N.A., Foreclosure Services, Inc. and Unified Mortgage Service, Inc.

Based on the above, the court SUSTAINS Defendants’ (Ronald Lee Peterman Jr., C.N.A., Foreclosure Services, Inc. and Unified Mortgage Service, Inc.) Demurrer to Second Amended Complaint, filed on 8-9-22 under ROA No. 265, as to Defendants—C.N.A., Foreclosure Services, Inc. and Unified Mortgage Service, Inc. The court requests the parties to appear at the hearing on 12-13-22 to determine whether Plaintiffs intend to file an amended complaint. (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 994.) The court OVERRULES the Demurrer as to Defendant—Ronald Peterman Jr.

Defendants are to give notice.

Motion No. 2:

Defendants’ (Alan Cirson and Eugene Cirson) Demurrer to Second Amended Complaint (Demurrer), filed on 8-12-22 under ROA No. 281, is OVERRULED.

The court GRANTS Defendants’ Request for Judicial Notice (RJN), filed on 8-12-22 under ROA No. 273, pursuant to Evidence Code section 452, subdivision (d).

The Demurrer challenges the third cause of action and the Finance Code violations contained in Plaintiffs’ (Heather Clark and Logan McMillian) Second Amended Complaint (SAC), filed on 7-14-22 under ROA No. 257, pursuant to Code of Civil Procedure section 430.10, subdivision (e). (Demurrer; 3:1-14.)

Third Cause of Action (Fraudulent Misrepresentation):

The Demurrer states, “Plaintiffs' Complaint still fails to allege sufficient facts to constitute the fraudulent misrepresentation cause of action utilizing the factors under Lazar. Rather, Plaintiffs unsuccessfully attempt to shoehorn silence into a fraudulent misrepresentation claim. The Complaint fails to establish a positive assertion by either Alan Cirson or Eugene (Gino) Cirson that Eugene (Gino) Cirson was acting in the capacity of a licensed loan officer. The failure to disclose the capacity in which Eugene (Gino) Cirson was acting is not actionable in the absence of an affirmative representation otherwise.” (Demurrer; 4:1-8.)

Civil Code section 2295 states, “An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.”

Plaintiffs’ Opposition directs the court to paragraphs 34, 35, 37, 38, 39, 46, 83, 85, 110, 111, 112, 117, 115-121 of the SAC as setting forth the sufficient facts. (Opposition; 8:2-9:14.) The preceding paragraphs do not adequately allege intentional misrepresentation with the required specificity. However, paragraphs 3, 9, 19, 139, 142, 143, and 144 of the SAC sufficiently plead the elements of fraud under Lazar based on an agency theory as to Defendants. Therefore, the court OVERRULES the Demurrer as to third cause of action.

Finance Code Violations.

“Defendant demur generally to Plaintiff's allegations regarding California Finance Code violations on the grounds that they fail to state facts sufficient to constitute a cause of action against Defendants because the claim is insufficiently pled. [See, Code Civ. Proc. §§430.10(e) and §430.50(a).]” (Demurrer, 3:10-13.)

Daniels v. Select Portfolio Servicing, Inc., (2016) 246 Cal. App.4th 1150, 1167 (disapproved of on other grounds by Sheen v. Wells Fargo Bank, N.A., (2022) 12 Cal. 5th 905, 948 at footnote 12) (Daniels) provides, “Ordinarily, a general demurrer may not be sustained, nor a motion for judgment on the pleadings granted, as to a portion of a cause of action. [Citation.] PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 40 Cal.Rptr.2d 169 is instructive. There, the complaint asserted a cause of action for legal malpractice based on several distinct incidents. The superior court sustained a demurrer to a portion of the cause of action involving a single incident of alleged malpractice. [Citation.] The First District Court of Appeal reversed, concluding the ‘trial court could not properly sustain the demurrer as to only that portion’ of the legal malpractice claim. [Citation.] The court noted that the defendants may attack any portion of a cause of action that is ‘substantively defective on the face of the complaint . . . by filing a motion to strike.’ [Citation.]”

Here, it is not clear as to which causes of action are the subject of the Demurrer. It appears that the Demurrer is directed to the portions of any cause of action that contains allegations of finance violations. Under Daniels, it is improper to direct a Demurrer to only portions of causes of action. Therefore, the court OVERRULES the Demurrer as directed to Finance Code violations.

Based on the above, the court OVERRULES Defendants’ (Alan Cirson and Eugene Cirson) Demurrer to Second Amended Complaint filed on 8-12-22 under ROA No. 281. The court requests the parties to appear at the hearing on 12-13-22 to determine whether Plaintiffs intend to file an amended complaint. (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 994.)

Plaintiffs are to give notice.

Motion No. 3:

Defendants’ (Alan Cirson and Eugene Cirson) Motion to Strike Portions of Plaintiffs’ Second Amended Complaint (Motion), filed on 8-12-22 under ROA No. 275, is DENIED. The Notice of this Motion (Notice) was filed on 8-12-22 under ROA No. 279.

Code of Civil Procedure section 436, states, “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: [¶] (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. [¶] (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” Code of Civil Procedure section 435, subdivision (b)(1), states, “Any party, within the time allowed to respond to a pleading may serve and file, a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” Pierson v. Sharp Memorial Hospital, Inc. (1989) 216 Cal.App.3d 340, 342, explains, “Preliminarily, we note a motion to strike is generally used to reach defects in a pleading which are not subject to demurrer. A motion to strike does not lie to attack a complaint for insufficiency of allegations to justify relief; that is a ground for general demurrer. [Citation.]”

The Notice seeks to strike the following items from Plaintiffs (Heather Clark and Logan McMillian) Second Amended Complaint (SAC) filed on 8-12-22 under ROA No. 279: (1) “The words ‘California Finance Code’ appearing at page 22, paragraph 157, line 17, of the Complaint. (Notice; 2:19-21.); (2) “The words ‘A person who fails to comply with the provisions of the California Finance Code is civilly liable to the consumer. See California Financial Code Section §4978 (2017) (a)’ appearing at page 22, paragraph 158, lines 22-23, of the Complaint. (Notice; 2:22-24.); (3) “The words ‘California Finance Code’ appearing at page 22, paragraph 159, line 24, of the Complaint.” (Notice; 2:25-26.); (4) “The words ‘California Finance Code Violations’ appearing at page 31, line 17, of the Complaint.” . (Notice; 3:1-2.); and (5) “The words ‘and all other damages recoverable under this code’ appearing at page 16, paragraph 102, line 12, of the Complaint.” (Notice; 3:14-16.)

Relying on the court’s 6-14-22 Minute Order, the Motion states, “Pursuant to the Court’s Minute Order, all the allegations pertaining to the Finance Code should be stricken, especially as Plaintiffs conceded they do not based their causes of action on California Finance Code.” (Motion; 4:19-21.) Plaintiffs’ Opposition to Defendants Motion to Strike Portions of Plaintiffs’ Second Amended Complaint (Opposition), filed on 11-28-22 under ROA No. 305, responds, “However, the allegations made by Plaintiff do not attempt to establish liability under the California Financial Code, rather these allegations are made to establish the violation of a statute(s). To establish Plaintiffs’ entitlement to rescission and disgorgement based upon an unlawful business practice, Plaintiffs have alleged violations of the Truth in Lending Act, Civil Code §2923.5, 15 U.S.C. §361(a), and Business and Professions Code §10130, in addition to violations of the California Finance Code.” (Opposition; 5:26-6:3.)

Bernardo v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322, 351-352 (Bernardo), states, “An ‘unlawful’ business practice or act within the meaning of the UCL ‘is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law. [Citation.]’ [Citation.] The California Supreme Court has explained that ‘[b]y proscribing “any unlawful” business practice, “[Business and Professions Code] section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices” that the unfair competition law makes independently actionable. [Citation.]’ [Citation.]” (Italics in Bernardo.)

Here, the allegations regarding Item Nos. 1, 2, 3, and 4 are relevant as to ninth cause of action. Therefore, the court DENIES the Motion as to Item Nos. 1, 2, 3, and 4.

As to Item No. 5, Plotitsa v. Superior Court (1983) 140 Cal.App.3d 755, 762 (Plotista), states, “ ‘The distinction between general and special damages forms the basis of an important principle of pleading, that the defendant is entitled to notice of what damages are to be claimed at the trial, and should be given such notice in the complaint.’ [Citations.]” (Italics in Plotitsa.)

The Motion asserts, “Although Plaintiff removed the reference to ‘special damages’ on page 16, paragraph 102, line 12 of the Complaint, Plaintiff nonetheless inserted language inferring special damages are recoverable, ‘and all other damages recoverable under this code.’ ” (Motion; 5:27-6:1.) The Opposition responds, “The phrase ‘and all other damages recoverable under this code’ does not seek improper damages. This phrase simple indicates that whatever damages may be recoverable by Plaintiffs under 15 USC §1639 will be sought by them. Clearly, if specific damages are unavailable, this phrase does not demand them as they would be unrecoverable under the code.” (Opposition 6:22-25.)

Since the portion of the SAC identified by Defendants does not specifically request Special Damages, the allegations are proper at this stage. Furthermore, the SAC alleges, “Plaintiffs are entitled to recover all consequential damages arising or resulting from the conduct described herein in an amount to be determined in accordance with proof at trial.” (SAC, ¶ 103.) Defendant does not move to strike this allegation. Thus, striking “and all other damages recoverable under this code” would not have a significant effect. Therefore, the court DENIES the Motion as to Item No. 5.

Based on the above, the court DENIES Defendants’ (Alan Cirson and Eugene Cirson) Motion to Strike Portions of Plaintiffs’ Second Amended Complaint filed on 8-12-22 under ROA No. 275. The court requests the parties to appear at the hearing on 12-13-22 to determine whether Plaintiffs intend to file an amended complaint. (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 994.)

Plaintiffs are to give notice.