Case Number: TC028694??? Hearing Date: May 23, 2017??? Dept: A
# 4. Creditors Adjustment Bureau v. Herrera Trucking & Transportation Inc., et al.
Case No.: TC028694
Matter on calendar for: Demurrer, motion to strike
Tentative ruling:
- Background
Plaintiff Creditors Adjustment Bureau (?CAB?), a collection agency and assignee of State Compensation Insurance Fund, has sued Defendant Herrera Trucking & Transportation Inc., et al. for allegedly due but unpaid workers compensation insurance premiums in the amount of $427,278.67.
CAB?s alleged assignor, State Compensation Insurance Fund, allegedly issued to Herrera a worker?s compensation insurance policy (Policy No. 9087877-14) covering the period of February 1, 2014 to February 1, 2015. (Complaint, ? 10.) Herrera allegedly breached its written agreement with the State Compensation Insurance Fund on November 30, 2015 by failing to pay the required premiums. (Id.,? 13.) CAB claims Herrera has yet to pay such premiums, despite demand for payment. (Id.)
There is no written agreement attached to the Complaint.
CAB alleges the following causes of action against Herrera:
(1)??? Breach of contract;
(2)??? Open book account;
(3)??? Account stated; and
(4)??? Reasonable value;
Presently before the Court is Herrera?s demurrer to CAB?s Complaint and motion to strike portions of the Complaint. Timely opposition and reply papers have been filed.
- Analysis
The Court overrules the demurrer because the Complaint adequately apprises Herrera of the factual basis of CAB?s claims. The Court denies the motion to strike because it is untimely, the grounds for the motion do not appear on the face of the complaint, and CAB is entitled to plead alternative theories of liability. The Court imposes sanctions against Herrera in the amount of $3,250 as sanctions under CCP ? 128.5 for a frivolous demurrer filed solely for purposes of delay or to drive up cost of litigation.
- Applicable law
(1)??? Demurrer
Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. (Code of Civ. Proc. (?CCP?) ? 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) In ruling on a demurrer, the Court shall accept all material allegations in the Complaint as true. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The Court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638.) Because a demurrer tests the legal sufficiency of a complaint, the plaintiff must show that the complaint alleges facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) The Court makes no factual findings. (Id.)
A plaintiff must allege the ?essential facts? with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.? (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.)
Under CCP ? 430.10(f), a demurrer may also be sustained if a complaint is ?uncertain.? Uncertainty exists where a complaint?s factual allegations are confusing and do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)
(2)??? Motion to strike
Under CCP ? 436(a), a court may strike from a pleading ?any irrelevant, false, or improper matter?? Under CCP ? 436(b), a court may strike from a pleading anything ?not drawn or filed in conformity with the laws of this state, a court rule, or any order of the court.?
Under CCP ? 437(a), the grounds for a motion to strike must appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.
- Demurrer
(1)??? The Complaint adequately apprises Herrera of the factual basis of CAB?s claims
Herrera argues that CAB has failed to plead its claims with sufficient specificity to apprise Herrera of the factual basis of its claims. Herrera contends that CAB has failed to allege the specific terms and conditions of the alleged contract for payment of premiums, particularly 1) when the alleged premiums were due, and 2) how the debt for the balance due was calculated.
Herrera?s arguments are unavailing. The Complaint alleges that State Compensation Insurance Fund, CAB?s alleged assignor, issued to Herrera a worker?s compensation insurance policy (Policy No. 9087877-14) covering the period of February 1, 2014 to February 1, 2015. (Complaint, ? 10.) Herrera allegedly breached its agreement with the State Compensation Insurance Fund on November 30, 2015 by failing to pay the required premiums. (Id., ? 13.) CAB claims Herrera has yet to pay such premiums, despite demand for payment. (Id.) Herrera allegedly owes CAB $427,278.67. Such factual allegations properly ?acquaint the defendant with the nature, source, and extent of [plaintiff?s] cause[s] of action,? especially in light of the apparent simplicity of this matter. (Gressley, 193 Cal.App.2d at 643-644.)
CAB is not obligated to attach the alleged written contract between the State Compensation Insurance Fund and Herrera, or plead its terms verbatim. (See Miles v. Deutsche Bank National Trust Company (2015) 236 Cal.App.4th 394, 401-402 (?[P]laintiff?s failure either to attach or to set out verbatim the terms of the contract was not fatal to his breach of contract cause of action.?).) The correct rule is that ?a plaintiff may plead the legal effect of the contract rather than its precise language.? (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199.) CAB has done just that.
In sum, the Complaint is properly pled. The Court overrules Herrera?s demurrer.
(2)??? The demurrer is untimely
Under CCP ? 430.40(a), a defendant may demur to a complaint within 30 days of service, unless extended by stipulation or court order.
CAB submits evidence that on April 10, 2017, 47 days after service of summons on Herrera on February 22, 2017, CAB?s counsel sent a cautionary letter to Herrera stating that over 30 days had elapsed since the service of the summons and that default would be requested in 7 days if Herrera failed to file an answer to the complaint. (Opposition, Freed Decl., Ex. 2.) On April 14, 2017, Herrera?s counsel contacted CAB?s counsel and requested an extension. There is a dispute about whether defense counsel was given an extension of time to answer, or an extension of time to respond (i.e., file a demurrer). (Opposition, Weeks Decl., ?? 2-3, Exhibit 5.)
Here, the available evidence shows that there was no stipulation or court order allowing the late filing of Herrera?s demurrer. Accordingly, the demurrer is untimely by about 30 days under CCP ? 430.40(a).
- Motion to strike
First, the motion to strike is untimely for substantially the same reasons the demurrer is untimely. (See CCP ? 435(b)(1) (?Any party, within the time allowed to respond to a pleading may serve and file a notice of a motion to strike the whole or any part thereof??).) The parties did not stipulate to a late-filed motion to strike.
Next, Herrera moves to strike the Complaint?s claims for attorney fees under Civil Code ? 1717.5 in ?? 16, 19, 22, and Prayer, ? 3. Herrera argues that Plaintiff fails to allege that the purported written contract/insurance policy provides for attorney fees under Civil Code ? 1717.5 (as ? 1717.5 requires).
Civil Code ? 1717.5 states in relevant part: ?If there is a written agreement between the parties signed by the person to be charged, the fees provided by this section may not be imposed unless that agreement contains a statement that the prevailing party in any action between the parties is entitled to the fees provided by this section.? (Emphasis added.) There is no written agreement attached to the Complaint.
Herrera?s motion to strike is improper here, because 1) the alleged irrelevant, false, or improper matter does not appear on the face of the complaint (rather, Herrera muses about the content, or lack of content, in an alleged written contract), and 2) CAB is permitted to plead inconsistent or alternative theories of liability. (See Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 29.)
- The Court imposes sanctions against Herrera
In opposition to the demurrer, CAB requests $3,250 ? the amount of its attorneys? fees incurred responding to the demurrer ? as sanctions against Herrera for filing what CAB perceives to be a frivolous and untimely demurrer and motion and strike. CCP ? 128.5 provides for attorneys? fees and reasonable expenses ?incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay.? As noted above, the parties submited conflicting declarations regarding their meet and confer efforts. But one thing is clear from the Court?s review of the attached correspondence: defendant never claimed that it was unaware of the terms of the insurance policy, or lacked a copy of the policy. Indeed, by its very nature, it is clear that this is a long-running dispute and that defendant is fully apprised of the contract terms. Thus, the demurrer, which claims the complaint is defectively uncertain because the contract is not attached and the contract terms are not explicitly recited, can only have been filed for purposes of delay, or to drive up the cost of the litigation.
Prior to the recent statutory amendments requiring counsel to meet and confer before filing a demurrer, more than 30,000 demurrers were filed each year in the Los Angeles County Superior Court. Many were unmeritorious, and most ? if they were sustained ? were sustained with leave to amend. In some cases, the demurrers weeded out unmeritorious claims. Mostly, however, they educated the plaintiff about potential weaknesses, prompting the plaintiff to streamline his, her, or its case. And in some cases, of course, the demurrers ended the litigation. Particularly in an era of reduced fiscal resources, however, continued filing of large numbers of unmeritorious demurrers places unsustainable burdens on the court system. The courts asked the Legislature to impose the meet and confer requirements in an effort to reduce the number of needless demurrers.
The statute does not seem to have worked in this case. Here, if there were any actual uncertainty on the part of Herrera concerning its obligations under the policy, defense counsel could have ? and doubtless would have ? asked plaintiff?s counsel for a copy of the policy and an explanation about when the premiums were due and how they were calculated. If there were genuine disagreement on that score, defense counsel could have engaged plaintiff?s counsel in a substantive discussion on that topic. If there were still a legitimate dispute, the parties could have and likely would have discussed resolution through an audit, mediation, or other means. Instead, defense counsel filed a frivolous and untimely demurrer.
Filing a demurrer necessarily imposes costs. Here, the Court believes it is appropriate that the defendant bear not only its own attorney?s fees, but also those of the plaintiff.
III.??????????????? Ruling
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For the above reasons, the Court overrules the demurrer and denies the motion to strike. Herrera must file and serve an answer to the Complaint within 15 days, along with a check made payable to plaintiff?s counsel in the amount of $3,250.00 as sanctions.
Next dates: CMC, OSC re: failure to prosecute ? 6.21.17
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Notice: CAB to give notice