Case Number: EC069360    Hearing Date: January 11, 2019    Dept: A

Macias v Quickfix Investments

DEMURRER; MOTION TO STRIKE;

MOTION FOR CCP §128.7 SANCTIONS

Calendar:         13

Case No:         EC069360

Hearing Date:  1/11/19

Action Filed:   9/11/18

Trial:               Not set

MP:                 Defendant Quickfix Investments, LLC

RP:                  Plaintiff Alma Macias

ALLEGATIONS:

Plaintiff Alma Macias alleges that in 2000, Ruben Lopez, Jr. (“Lopez”), then a real estate broker, owed money to Plaintiff.  As a favor, Lopez asked Plaintiff’s husband, Carlos Macias (now deceased), to secure a loan against his home, and Lopez promised he would pay off the loan to the lender.  In August 2002, Lopez took Plaintiff to lender, MRA Funding, and signed a “hard money” loan for $84,335.64.  Plaintiff alleges that in May or June 2017, she discovered that Defendant Quickfix Investments (Quickfix), a sister company of MRA Funding, received payments on the loan in the amount of $21,800.00.  Plaintiff alleges that she is a co-owner of the property, but was not present for any verbal or written agreement including a deed of trust with assignment of rents and was never providing a copy of the note secured by the deed of trust.  She alleges that though the deed of trust appears to have been drafted on March 22, 2002, it was signed on March 26, 2004 and her signature was forged.

She alleges that on April 29, 2009, a notice of trustee’s sale for $389,008.69 was recorded.  Plaintiff alleges that she made payments on the loan and that Quickfix received payments and profited from the loan. The trustee’s deed upon sale shows that the amount of the unpaid debt was $265,625.44, and that the property was sold for $270,100.00.

Plaintiff and Mr. Macias filed a complaint in EC063747 against MRA Funding, Leslie Wilson, and Lopez.  She alleges that Craig Triance, her attorney at that time, dismissed the underlying case with prejudice without Plaintiff’s consent.  She alleges that because EC063747 was filed on March 25, 2015 and she lost her property on March 29, 2012, she has no reason to fear monetary sanctions and is within the statute of limitations to bring her non-frivolous case.

The complaint, filed September 11, 2018, alleges causes of action for: (1) fraud; (2) financial elder abuse; (3) unconscionability (Civil Code, §1688 et seq.); and (4) unfair business practices in violation of Business & Professions Code, §17200.

RELIEF REQUESTED:

Quickfix filed a demurrer and motion to strike portions of the complaint.

Quickfix also moves for CCP §128.7 sanctions against Plaintiff.

DISCUSSION:

Demurrer

            Quickfix demurs to each cause of action in the complaint, on the grounds that they are barred by the statute of limitations and the Court lacks subject matter jurisdiction.

            This appears to be Plaintiff’s third action filed based on the allegations of the complaint:

  1. Plaintiff and Mr. Macias filed the first action in the Burbank Courthouse on March 25, 2015 (EC063747), which was dismissed with prejudice on January 11, 2016, as to Defendants Leslie Wilson and MRA Funding Corporation. (Def.’s RJN, Exs. 1-2.)
  2. Plaintiff and Mr. Macias filed the second action in the Glendale Courthouse on January 18, 2017 (EC066233).  A judgment of dismissal without leave to amend was entered on February 27, 2018, in favor of MRA Funding and Dolores Wilson (with an award of $30,521.00 in attorney’s fees and costs), and against Plaintiff.  (Def.’s RJN, Exs. 3-6.)
  3. Plaintiff filed this third action in the Burbank Courthouse on September 11, 2018 (EC069360).

Statute of Limitations

Quickfix argues that this action is barred by the 3 to 4 year statute of limitations that apply to the causes of action in this case. In opposition, Plaintiff argues that equitable tolling applies.

The statute of limitations for a fraud cause of action is 3 years.  (CCP §338(d).)  A fraud cause of action is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.  (Id.)

The statute of limitations period for a financial elder abuse cause of action is 4 years after the plaintiff discovers or, through the exercise of reasonable diligence, should have discovered the facts constituting financial abuse.  (Welf. & Inst. Code, §15657.7.)

The statute of limitations period for rescission based on unconscionability is 4 years, pursuant to CCP §337.  (Ferguson v. Yaspan (2014) 233 Cal.App.4th 676, 682-83.)

The statute of limitations period for an unfair business practices claim is 4 years.  “Any action to enforce any cause of action pursuant to this chapter shall be commenced within four years after the cause of action accrued.”  (Bus. & Prof. Code, §17208.)

In the complaint, Plaintiff alleges that a notice of trustee’s sale was filed on November 1, 2004 against her property.  (Compl., ¶16, Ex. B.) She alleges that by April 29, 2009, a second notice of trustee’s sale was filed.  (Id., ¶17, Ex. C.)  She alleges that she paid forbearance and installment fees after the property went through numerous foreclosure between March 2002 to March 2012.  (Id., ¶¶19, 22, Ex. E.)  The trustee’s deed upon sale is dated March 29, 2012.  (Id., ¶23, Ex. F.)  With regard to the fraud cause of action, Plaintiff alleges that in August 2002, Quickfix fraudulently forged her signature and made false representations to her—which is conduct that allegedly occurred nearly 16 years prior to the filing of the complaint.  (Compl., ¶¶29-30.)  Based on the allegations of the complaint, Plaintiff’s causes of action accrued latest in 2012 when her home was foreclosed upon, as this is the latest date she should have known that she was damaged.  This action was filed on September 11, 2018—nearly 6 years later, which is untimely.

In opposition, Plaintiff does not appear to argue that her causes of action would generally be considered untimely.  In an attempt to avoid such time-barred arguments, she relies on the doctrine of equitable tolling.

The equitable tolling of the statute of limitations is a judicially created, nonstatutory doctrine.  (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 99.)  It is designed to prevent unjust and technical forfeitures of the right to a trial on the merits when the purposes of the statute of limitations (i.e., timely notice to the defendant of the plaintiff’s claims) has been satisfied.  (Id.)  The doctrine is used to suspend or extend the statute of limitations as necessary to ensure fundamental practicality and fairness.  (Id.)  To determine whether equitable tolling should be applied, 3 elements must be established: (1) timely notice to the defendant; (2) lack of prejudice to the defendant; and (3) reasonable and good faith conduct on the part of plaintiff.  (Id. at 102 [[quoting Addison v. State of California (1978) 21 Cal.3d 313, 319].)  Cases involving the application of the equitable tolling doctrine do not depend on whether there was a voluntary or involuntary dismissal of the first proceeding; in other words, “voluntary abandonment does not categorically bar application of equitable tolling, but it may be relevant to whether a plaintiff can satisfy the three criteria for equitable tolling.”  (Id. at 111.)

With regard to the first factor, Plaintiff argues that when she filed the first EC063747 action on March 25, 2015, Quickfix would have been on notice as of mid-2015 of alleged wrongs committed by it.  (Opp. at p.6.)  However, not only are such facts not alleged in the complaint, but Plaintiff provides no other facts showing that she can truthfully allege that actual, timely notice was provided to Quickfix regarding the two prior actions or that Plaintiff and her husband intended to sue Quickfix.

With regard to the second factor, Plaintiff argues that Quickfix will not prejudiced in gathering evidence to defend itself since the matter is “straight-forward” and involves a claim it is familiar with.  Again, such facts are not alleged in the complaint.  Even if they were, Plaintiff has not provided further facts she may allege in the complaint (if amended) to show that Quickfix does in fact will not be prejudiced, can gather evidence of matters that occurred over a decade ago, and that it is familiar with the facts of this case (or the prior cases).

Finally, with regard to the third factor, Plaintiff argues that she acted reasonably and in good faith in filing her claim after her prior cases were dismissed without her knowledge.  However, again, these facts are not alleged and Plaintiff has not provided further facts showing that the equitable tolling doctrine should apply to this case.

Here, the Court will sustain the demurrer to the complaint in its entirety on the basis that each cause of action is time-barred and the equitable tolling doctrine does not apply.  Although Plaintiff raises the equitable tolling doctrine for the first time in the opposition papers, she fails to allege the elements to apply the equitable tolling doctrine in her complaint.  Even if the arguments/”facts” raised in her opposition were alleged in the complaint, they would still be insufficient to show that the equitable tolling doctrine applies to the facts of this case.  Plaintiff has the burden of showing the manner in which Plaintiff can amend the pleadings to correct this defect and how that amendment will change the legal effect of the pleading.  (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

            Quickfix also argue that the doctrine of res judicata applies to bar Plaintiff’s claims.

Res judicata, or claim preclusion, prevents the relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.  (Gabriel v. Wells Fargo Bank, N.A. (2010) 188 Cal.App.4th 547, 556.)  Res judicata applies if: “(1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.”  (Boekenn v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.)
Though Quickfix was not a party in the prior two actions, Plaintiff alleges that Quickfix was the sister company of MRA Funding and that Quickfix had been receiving payments on the loan at issue.  (Compl., ¶7.)  As such, Quickfix may have been in priivty with a party in the prior proceedings.

Also, the fraud and financial elder abuse causes of action were alleged in the prior EC063747 and EC066233 actions, such that the only new claims are the unconscionability and unfair business practices causes of action.  However, “If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment[sic] is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged. The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable.”  (Interinsurance Exchange of the Auto. Club v. Superior Court (1989) 209 Cal.App.3d 177, 182 [italics in original].)  These latter claims could have arguably been brought in the prior action(s) as they are related to subject matter at issue regarding the loan, payments made, the interest rate, and foreclosure.

Lastly, the first action resulted in a voluntary dismissal by Plaintiff.  The second action resulted in a dismissal following Plaintiff’s failure to file an amended complaint after the Glendale Court sustained a demurrer on the basis that the action was time-barred.  (See Def.’s RJN Exs. 5-6.)  As the judgment of dismissal was entered on the merits of the demurrer, this is sufficient for res judicata.

In opposition, Plaintiff argues that her action is not barred by the doctrine of res judicata because Quickfix was not a party to the prior actions and she did not discover Quickfix’s identity until after husband’s death.  However, Plaintiff has not alleged or identified any facts in the complaint regarding her ignorance of Quickfix’s identity, or that she diligently sought to identify any Doe defendants alleged in her prior complaints in order to identify parties like Quickfix.  For example, even in the context of Doe defendants, a plaintiff must show she proceeded in good faith and was genuinely ignorant of that party’s identity or liability when the action was commenced. (See Rutter Guide, Cal. Prac. Guide Civ. Pro. Before Trial (June 2018 Update) Ch. 6-E, §6:740.)

Thus, the Court will sustain the demurrer on this basis as well.

Motion to Strike

In light of the ruling on the demurrer, the Court will take the motion to strike off calendar as moot.

Motion for CCP §128.7 Sanctions

According to CCP §128.7(c)(1), a motion for sanctions shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subsection (b).  Notice of the motion must be served pursuant to CCP §1010, but shall not be filed with the Court until 21 days (or any other period as the court may prescribe) after it has been served.  (CCP §128.7(c)(1).) “This allows the party against whom sanctions are sought an opportunity—i.e., a ‘safe harbor’—to withdraw or correct the challenged paper and thereby avoid sanctions.”  (Rutter Guide, Cal. Prac. Guide Civ. Pro. Before Trial (June 2018 Update) Ch. 9(III)-C, §9:1196.)

            As a preliminary matter, Quickfix has complied with the 21-day safe harbor provision.  The motion was served on October 30, 2018 on Plaintiff’s counsel and was thereafter filed on December 6, 2018, which is more than 21 days.

A violation of any of the conditions of CCP § 128.7(b), which includes: (1) improper purpose; (2) frivolous claims, defenses or contentions; (3) lack of evidentiary support or likely support; and (4) lack of evidentiary support or reasonable bases on lack of information as to denials), may support an award of sanctions.  (Eichenbaum v. Alon (2003) 106 Cal. App. 4th 967, 976.)  Whether a claim, defense or contention is frivolous is measured objectively.  (Bockrath v. Aldrich Chem. Co. (1999) 21 Cal.4th 71, 82; CCP §128.5 [defining “frivolous” as being totally and completely without merit or for the sole purpose of harassing an opposing party].) Furthermore, CCP §128.7 requires bad faith conduct by the person to be sanctioned.  (Interstate Specialty Marketing, Inc. v. ICRA Sapphire, Inc. (2013) 217 Cal.App.4th 708, 710 [“attaching the wrong draft of a contract … to a … complaint does not appear to be, under the particular circumstances of this case …, sanctionable at all…. Only lamentable inattention was shown ….”].)

Quickfix moves for CCP §128.7 sanctions, arguing that this complaint is frivolous on the grounds that Plaintiff voluntarily dismissed her first action in EC063747 and her second action in EC066233 was dismissed following a demurrer.  The arguments in the sanctions motion is similar to the arguments made in Quickfix’s demurrer and motion to strike—i.e., that Plaintiff’s claims are time-barred and the doctrine of res judicata applies.  Similarly, Plaintiff’s arguments in opposition to this motion are similar to her arguments in her opposition to the demurrer and motion to strike.

According to the analysis above regarding the demurrer (and the motion to strike, which is moot in light of the ruling on the demurrer), it appears that Plaintiff’s action at the pleading stage lacks merit.  This is also Plaintiff’s third attempt to bring this lawsuit, though this third lawsuit is alleged against Quickfix only, which was not a party in Plaintiff’s prior two actions.

However, CCP §128.7 sanctions are discretionary and the Court need not impose a monetary sanction or any sanctions at all. Plaintiff will be given another opportunity to try to allege her claims and may be able to allege viable claims. Sanctions will be denied at this time.

RULING:

Sustain the demurrer to the entirety of the complaint.  The Court may deny leave to amend based upon the authority cited below, but will entertain arguments by parties at the hearing whether leave to amend should be allowed.  Plaintiff has the burden of showing the manner in which Plaintiff can amend the pleadings to correct this defect and how that amendment will change the legal effect of the pleading.  (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

Take the motion to strike off calendar as moot.

Deny the motion for CCP §128.7 sanctions.