VIDEO SYMPHONY, LLC VS JASON WHITTON

Tentative Rulings

Case Number: 19CHLC28878    Hearing Date: November 05, 2020    Dept: 26

Video Symphony, LLC v. Whitton, et al.

DEMURRER

(CCP §§ 430.31, et seq.)

TENTATIVE RULING:

Cross-Defendants Video Symphony, LLC and Michael Gerard Flanagan’s Demurrer to the Cross-Complaint is OVERRULED AS TO THE FIRST CAUSE OF ACTION AND SUSTAINED WITHOUT LEAVE TO AMEND AS TO THE SECOND AND THIRD CAUSE OF ACTION.

ANALYSIS:

On July 25, 2019, Plaintiff Video Symphony, LLC (“VSLLC”) filed the instant action for breach of loan agreement against Defendant Jason Whitton (“Whitton”). On December 19, 2019, Whitton filed the Cross-Complaint against Cross-Defendants VSLLC and Michael Gerard Flanagan (“Flanagan”) (collectively “Cross-Defendants”) for (1) violation of the Fair Debt Collection Practices Act; (2) unfair business practices; and (3) declaratory relief.

On February 21, 2020, Cross-Defendants filed the instant Demurrer to the Cross-Complaint. On September 9, 2020, Whitton filed an opposition and Cross-Defendants replied on October 15, 2020.

Discussion

The Demurrer demonstrates compliance with the requirements of Code of Civil Procedure section 430.41. The demurring party is required to meet and confer in person or telephonically at least five days before the responsive pleading is due. (Code Civ. Proc., § 430.41, subd. (a).) The Demurrer is accompanied by a declaration demonstrating a prior meet and confer effort. (Meet and Confer Decl., filed 1/21/20.)

Allegations in the Pleadings

VSLLC’s Complaint alleges that it is an assignee of Video Symphony EnterTraining, Inc., which was a TV, film and audio vocational college. (Compl., ¶¶2-3.) Whitton allegedly entered into an educational services contract and promissory note (“the Enrollment Agreement”) with VSE on March 10, 2011. (Id. at ¶¶4-5 and Exh. A.) VSE allegedly performed all obligations required under the Enrollment Agreement until Whitton’s graduation in May 2012. (Id. at ¶¶7-8 and Exh. B.) Whitton allegedly ordered optional equipment from VSE that was not included with the program and agreed to authorize VSE to apply his Federal Student Aid (“FSA”) funds toward payment for the items. (Id. at ¶9 and Exh. C.) In order to cover the balance of the program cost that was not covered by FSA and a down payment, Whitton allegedly signed two promissory notes. (Id. at ¶¶10-13 and Exhs. D-F.) Following VSE’s receipt of FSA and non-FSA payments, Whitton allegedly had an unpaid balance remaining on his student account. (Id. at ¶¶15-19 and Exhs. G-H.) VSLLC brings a single cause of action for breach of promissory note against Whitton and alleges the statute of limitations is six years under Civil Code section 3118. (Id. at ¶¶21-28.)

The Cross-Complaint alleges Whitton was persuaded to sign the two loan documents that falsely created the illusion that VSE had loaned him money for the program. (Cross-Compl., ¶¶8-9.) Whitton alleges that the false loan documents were to cover up a tuition credit from VSE and that in 2013, the Department of Education’s review of VSE reported systematic non-compliance with applicable Title IV regulations. (Id. at ¶¶10-12.) Despite being given an opportunity by the Department of Education to respond to the report, VSE and Flanagan never did so. (Id. at ¶¶13-15.) VSE was then compelled to involuntary bankruptcy. (Id. at ¶16.) Whitton brings claims for (1) violation of the Fair Debt Collection Practices Act (“FDCPA”); (2) unfair business practices; and (3) declaratory relief against Cross-Defendants.

Demurrer to Cross-Complaint

Insofar as Whitton’s opposition does not address the second and third causes of action, the Court sustains the Demurrer to the those causes of action without leave to amend. The first cause of action for violation of the FDCPA is brought only against Flanagan. (Cross-Compl., p. 5:6-8.) Flanagan demurs to the first cause of action for failure to allege facts sufficient to state any cause of action. (Code Civ. Proc., §430.10, subd. (e).) The first cause of action broadly alleges that Flanagan violated the FDCPA by, including, but are not limited to, using false representations and deceptive, unfair and/or unconscionable means to collect a debt. (Cross-Compl., ¶19.) The Cross-Complaint goes on to specify that these debt collection means were violations of the FDCPA because the Complaint in this action was filed after the four-year statute of limitations for breach of promissory notes had run. (Id. at ¶20.) According to the Cross-Complaint, “Whitton’s breach well preceded four years before the July, 2019, filing of [VSLLC]’s lawsuit.” (Ibid.)

The Complaint, on the other hand, makes different allegations regarding the statute of limitations. Specifically, that Whitton was to make payments from May 20, 2012 to May 20, 2016 pursuant to the schedule in the loan documents. (Compl., Exh. D.) The date of breach, therefore, is alleged by the Complaint to be May 20, 2016 as of which Whitton had an outstanding balance on his student account. (Id. at ¶28.) The Demurrer reiterates the allegation in the Complaint that the cause of action for breach of promissory note is subject to a six-year statute of limitations under Civil Code section 3118. (See ibid.)

Due to the fact that the pleadings make contradictory allegations regarding the applicable statute of limitations, the Court cannot find that the Complaint is not barred by the statute of limitations without making a factual determination, which would inappropriate on demurrer. Resolution of the statute of limitations requires a determination of the date of Whitton’s alleged breach of the loan agreement, which is more suited to a motion for summary judgment.

Conclusion

Based on the foregoing, Cross-Defendants Video Symphony, LLC and Michael Gerard Flanagan’s Demurrer to the Cross-Complaint is OVERRULED AS TO THE FIRST CAUSE OF ACTION AND SUSTAINED WITHOUT LEAVE TO AMEND AS TO THE SECOND AND THIRD CAUSE OF ACTION.

Moving party to give notice.