Case Name: Douglas Ross v. Scott Miley

Case No.: 16-CV-291554

Demurrer by Defendant Scott Miley to the Complaint of Plaintiff Douglas Ross

Factual and Procedural Background

This action arises out of defendant Scott Miley’s (“Defendant”) alleged failure to repay monies lent to him. In 2007, Defendant executed a promissory note in the amount of $275,000 in favor of Douglas Ross Construction, Inc. (“DRC”), agreeing to repay the principal with interest at the annual rate of seven percent by December 26, 2012 (the “Note”). (Complaint, ¶ 3, Ex. A.) The maturity date of the Note was later extended to October 31, 2015. (Id., at ¶ 4.) Palo Alto High Street Partners, LLC (“PAHSP”) also loaned Defendant $200,000 (the “PAHSP Loan”), which Defendant agreed to repay “plus interest on the same loan terms as the Note.” (Id., at ¶ 9, Ex. B.) Additionally, “the Ross Trust Dated Sept. 17, 1998 [(“Ross Trust”)] loaned Defendant … the sum of $125,000” (the “Ross Trust Loan”), which Defendant agreed to repay “plus interest [on] the same loan terms as the Note.” (Id., at ¶ 13, Ex. C.)

Several years later, in 2016, DRC, PAHSP, and the Ross Trust each transferred and assigned their respective rights, titles, and interests in the Note, PAHSP Loan, and Ross Trust Loan to plaintiff Douglas Ross (“Plaintiff”). (Complaint, ¶¶ 5, 10, 14, Ex. D.) Despite demands for payment, Defendant has not repaid any of the amounts due and owing under the loans. (Id., at ¶¶ 6, 9, 13.)

On February 16, 2016, Plaintiff filed a complaint against Defendant, alleging three common counts for money lent.[1]

On March 24, 2016, Defendant filed the instant demurrer to the complaint. Plaintiff filed papers in opposition to the demurrer on May 18, 2016.

Discussion

Defendant demurs to each and every cause of action of the complaint on the grounds of defect or misjoinder of parties, failure to allege facts sufficient to constitute a cause of action, and uncertainty. (See Code Civ. Proc., § 430.10, subds. (d), (e), (f).)

  1. Meet and Confer

As an initial matter, though not raised by the parties, the Court notes that Defendant failed to comply with Code of Civil Procedure section 430.41 (effective January 1, 2016), which provides that the moving party must meet and confer prior to filing a demurrer and must provide a declaration regarding the parties’ meet and confer efforts. Here, the instant demurrer was filed on March 24, 2016. Defendant failed to provide the required meet and confer declaration and there is no indication that he attempted to meet and confer as required by the statute. In the interest of addressing the issues raised by the demurrer and moving the case forward, the Court will overlook—in this instance only—Defendant’s failure to meet and confer. Defendant is admonished to remain apprised of, and to comply with, newly applicable law going forward.

  1. Legal Standard

“In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.’ ” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214 (“Committee”).)

III. First Cause of Action

The first cause of action seeks to recover the outstanding principal balance and interest due and owing under the terms of the Note. (Complaint, ¶¶ 3-6.)

Defendant argues that the first cause of action is uncertain and fails to state a claim because Plaintiff alleges that the Note was dated and executed on December 27, 2007, but the Note attached to the complaint as Exhibit A is dated December 21, 2012, and was signed on November 2, 2011. Defendant also argues that the first cause of action is deficient because Plaintiff failed to join a necessary party, DRC. Defendant contends that DRC is a necessary party because DRC assigned its interest in the Note to Plaintiff; Plaintiff is the primary owner of DRC and “remains the California Contractors State License Board licensee for [DRC]”; “the alleged written assignment assigns multiple debts from multiple parties that Plaintiff is the primary representative or benefactor of, without any evidence of consideration in exchange for the assignment”; “all assignments … were executed at the same time in the same document”; and the assignments were executed by Plaintiff as a managing member of PAHSP and president of the Ross Trust. (Mem. Ps. & As., pp. 3-4.)

 

In opposition, Plaintiff states that the original Note “has not yet been found” and the document attached to the complaint as Exhibit A is actually “a new promissory note” that is “dated as of December 26, 2007, but executed by Defendant on November 2, 2011 for the purpose of confirming and ratifying the terms of the original December 26, 2007 promissory note ….” (Opp’n., pp. 2-3.) Plaintiff concedes that “the First Cause of Action may be ambiguous in its reference to Exhibit A” and requests leave to amend the complaint “to clarify the ambiguity related to the reference to Exhibit A and to insert with specificity Defendant’s failure to pay the DRC Loan.” (Id., at p. 3.) Plaintiff also contends that Defendant’s remaining argument on demurrer regarding the nonjoinder of DRC lacks merit because Defendant cites no authority supporting his assertion that an assignor such as DRC is a necessary party to a lawsuit.

 

Since Plaintiff concedes that the first cause of action is uncertain, the demurrer to the first cause of action on the ground of uncertainty is SUSTAINED, with 10 days’ leave to amend.

 

With respect to the remaining grounds for demurrer, Defendant does not demonstrate that the claim fails to state a cause of action or that DRC is a necessary party. First, assuming that Plaintiff intended to allege a common count for money lent, the only essential allegations 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.) The first cause of action contains facts supporting each of these elements. (See Complaint, ¶¶ 3-6.) Consequently, Plaintiff adequately pleads a common count for money lent.

 

Second, to the extent Defendant intended to argue that the assignment is invalid for lack of consideration, his argument lacks merit because the subject assignment is a written instrument and “[a] written instrument is presumptive evidence of a consideration.” (See Civ. Code, § 1614.)

 

Third, while Defendant insists that DRC is an indispensable party, he fails to cite any legal authority whatsoever on the subject of nonjoinder of indispensable parties. The absence of any citation to legal authority and meaningful discussion of the same, standing alone, is reason to overrule the demurrer. (See Cal. Rules of Court, rule 3.1113(b) [memorandum in support of motion must contain statement of law and discussion of the same in support of position advanced].) Additionally, when the basis for demurrer is the nonjoinder of a necessary and indispensable party, Code of Civil Procedure section 389 controls and it is not readily apparent that any of the tests under that statute for determining if a party is indispensable are implicated here. (See Countrywide Home Loans v. Super. Ct. (1999) 69 Cal.App.4th 785, 791-793 (“Countrywide”); see also Code Civ. Proc., § 389.)

 

For the foregoing reasons, the demurrer to the first cause of action on the grounds of defect or misjoinder of parties and failure to allege facts sufficient to state a claim is OVERRULED.

 

 

 

  1. Second Cause of Action

 

The second cause of action seeks to recover the outstanding principal balance and interest due and owing under the PAHSP Loan. (Complaint, ¶¶ 8-11.)

 

Defendant argues that his demurrer to the second cause of action “should be sustained … for the same arguments and reasons stated in the Demurrer to the First Cause of Action.” (Mem. Ps. & As., p. 5.) Additionally, Defendant argues that the second cause of action fails to state claim because the document attached to the complaint as Exhibit B is merely a check payable to him; Plaintiff does not otherwise “include evidence of a written loan”; the check “reflects that the source of [the funds] is a liquidating trust and not [PAHSP]”; and the assignment on behalf of PAHSP was signed by Plaintiff. (Ibid.) Lastly, Defendant asserts in a conclusory manner that “[t]here is no way that the issues raised by Plaintiff can [be] resolve[d] without the joinder of [PAHSP] ….” (Ibid.)

 

In opposition, Plaintiff concedes that the demurrer on the ground of uncertainty has merit to the extent the second cause of action incorporates the allegations of the first cause of action pertaining to Exhibit A. Plaintiff otherwise asserts that Defendant’s remaining arguments lack merit because Exhibit B is evidence of a writing documenting the loan; Exhibit B is consistent with the allegations of the complaint; Defendant cites no legal authority providing that an assignor is a necessary and indispensable party.

 

Since Plaintiff concedes that the second cause of action is uncertain, the demurrer to the second cause of action on the ground of uncertainty is SUSTAINED, with 10 days’ leave to amend.

 

With respect to the remaining grounds for demurrer, Defendant does not demonstrate that Plaintiff fails to state a cause of action or that PAHSP is a necessary party. First, the arguments presented by Defendant in connection with the first cause of action as to these grounds for demurrer lack merit for the reasons set forth above.

 

Second, at the pleading stage, Plaintiff need not present any evidence whatsoever supporting his allegation that PAHSP loaned Defendant $200,000 plus interest. (See Committee, supra, 35 Cal.3d at pp. 213–214 [on demurrer, the question of the plaintiff’s ability to prove the allegations or the possible difficulty in making such proof does not concern the court].) Therefore, Defendant’s arguments lack merit to the extent they are based on the contention that Plaintiff must present evidence of a writing reflecting the PAHSP Loan.

 

Third, Defendant fails to cite any legal authority showing that PAHSP is an indispensable party and it is not readily apparent that any of the tests under Code of Civil Procedure section 389 for determining if a party is indispensable are implicated here. (See Cal. Rules of Court, rule 3.1113(b) [memorandum in support of motion must contain statement of law and discussion of the same in support of position advanced]; see also Countrywide, supra, 69 Cal.App.4th at pp. 791-793; Code Civ. Proc., § 389.)

Accordingly, the demurrer to the second cause of action on the grounds of defect or misjoinder of parties and failure to allege facts sufficient to state a claim is OVERRULED.

  1. Third Cause of Action

The third cause of action seeks to recover the outstanding principal balance and interest due and owing under the Ross Trust Loan. (Complaint, ¶¶ 12-15.)

 

Defendant argues that his demurrer to the third cause of action should be sustained for the same arguments and reasons previously stated in connection with the demurrer to the first and second causes of action. (Mem. Ps. & As., pp. 5-6.) Additionally, he argues that the third cause of action fails to state a claim because Plaintiff does not attach a copy of a promissory note reflecting the loan.

 

In opposition, Plaintiff concedes that the demurrer on the ground of uncertainty has merit to the extent the third cause of action incorporates the allegations of the first cause of action pertaining to Exhibit A.

 

Since Plaintiff concedes that the third cause of action is uncertain, the demurrer to the third cause of action on the ground of uncertainty is SUSTAINED, with 10 days’ leave to amend.

 

With respect to the remaining grounds for demurrer, Defendant does not demonstrate that Plaintiff fails to state a cause of action or that the Ross Trust is a necessary party. First, the arguments presented by Defendant in connection with the first and second causes of action as to these grounds for demurrer lack merit for the reasons set forth above.

 

Second, Defendant cites no legal authority, and the Court is aware of none, providing that Plaintiff must attach a copy of a promissory note evidencing the Ross Trust Loan to the complaint.

 

Therefore, the demurrer to the third cause of action on the grounds of defect or misjoinder of parties and failure to allege facts sufficient to state a claim is OVERRULED.

[1] Plaintiff did not label the claims in compliance with California Rules of Court, rule 2.112, which provides that each cause of action in a complaint must identify the nature (e.g., fraud or breach of contract) of the cause of action. Nevertheless, the substantive allegations of the complaint indicate that Plaintiff seeks recovery under the theory of common count for money lent.