VIDEO SYMPHONY, LLC VS SCOTT LITTLE

Tentative Rulings

Case Number: 19CHLC27575    Hearing Date: March 30, 2021    Dept: 25

HEARING DATE: Tue., March 30, 2021 JUDGE /DEPT: Blancarte/25

CASE NAME: Video Symphony, LLC v. Little COMPL. FILED: 07-19-19

CASE NUMBER: 19CHLC27575 DISC. C/O: NONE

PROCEEDINGS: DEMURRER TO PLAINTIFF’S COMPLAINT

MOVING PARTY: Defendant and Cross-Complainant Scott Little

RESP. PARTY: Cross-Defendant Michael Flannagan

DEMURRER

(CCP § 430.10, et seq.)

TENTATIVE RULING:

Cross-Defendant Michael Flannagan’s Demurrer to the First Amended Cross-Complaint is OVERRULED.

SERVICE:

[X] Proof of Service Timely Filed (CRC, rule 3.1300) OK

[X] Correct Address (CCP §§ 1013, 1013a) OK

[X] 16/21 Court Days Lapsed (CCP §§ 12c, 1005(b)) OK

OPPOSITION: Filed on March 17, 2021 [ ] Late [ ] None

REPLY: None filed as of March 26, 2021 [ ] Late [X] None

ANALYSIS:

1. Background

On July 19, 2019, Plaintiff Video Symphony, LLC (“Plaintiff”) filed an action against Defendant and Cross-Complainant Scott Little (“Cross-Complainant”) for breach of a promissory note. Cross-Complainant Little filed an Answer on December 17, 2019 and a Cross-Complaint against Plaintiff and its attorney, Michael G. Flannagan (“Flannagan”) (“collectively, “Cross-Defendants”) for violations of the FDCPA, breach of contract, unfair business practices, and declaratory relief.

Cross-Defendants filed a demurrer to the Cross-Complaint on February 20, 2020. On December 10, 2020, the Court sustained the initial demurrer with 20 days’ leave to amend as to the first and second causes of action and without leave to amend as to the third and fourth causes of action. (12/10/20 Minute Order.)

Cross-Complainant Little filed a First Amended Cross-Complaint (the “FACC”) only alleging violations of the FDCPA against Cross-Defendants. Cross-Defendant Flannagan filed the instant Demurrer to the First Amended Cross-Complaint (the “Demurrer”) on February 8, 2021 and Cross-Complainant filed an Opposition on March 17. No reply brief was filed.

1. Legal Standard

“The primary function of a pleading is to give the other party notice so that it may prepare its

case [citation], and a defect in a pleading that otherwise properly notifies a party cannot be said to

affect substantial rights.” (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)

“A demurrer tests the legal sufficiency of the factual allegations in a complaint.” (Ivanoff v. Bank of

America, N.A. (2017) 9 Cal.App.5th 719, 725.) The Court looks to whether “the complaint alleges

facts sufficient to state a cause of action or discloses a complete defense.” (Id.) The Court does not

“read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the

complaint ‘as a whole and its parts in their context.’ [Citation.]” (West v. JPMorgan Chase Bank,

N.A. (2013) 214 Cal.App.4th 780, 804.) The Court “assume[s] the truth of the properly pleaded

factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of

which judicial notice has been taken.” (Harris, supra, 56 Cal.4th p. 240.) “The court does not,

however, assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Durell v.

Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)

A general demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted or under section 430.10, subdivision (a), where the court has no jurisdiction of the subject of the cause of action alleged in the pleading. All other grounds listed in Section 430.10, including uncertainty under subdivision (f), are special demurrers. Special demurrers are not allowed in limited jurisdiction courts. (Code Civ. Proc., § 92, subd. (c).)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)

Finally, Code of Civil Procedure section 430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc., § 430.41, subd. (a)(2).) Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 430.41, subd. (a)(3).)

1. Request for Judicial Notice

Cross-Defendant Flannagan’s request that the Court take judicial notice of the Minute Order dated November 25, 2019 in the case entitled Video Symphony, LLC v. Vicari, Case No. 18CHLC22097, is GRANTED. (Evid. Code, § 452, subd. (d).)

1. Discussion

The Demurrer is accompanied by a meet and confer declaration as required by Code of Civil Procedure section 430.41, subdivision (a). (Dem., Flannagan Decl., ¶¶ 4-7, Exhs., A, B, C.)

A. Violations of the FDCPA

Cross-Defendant Flannagan filed this Demurrer on the basis that the FACC does not state sufficient facts to constitute a cause of action against him. (Dem., p. 3:4-7.)

“[T]o prevail on an FDCPA claim, a plaintiff must prove that (1) [he] was the object of collection activity arising from consumer debt, (2) the defendant is a debt collector within the meaning of the statute, and (3) the defendant engaged in a prohibited act or omission under the FDCPA. [Citation.]” (O’Neil-Rosales v. Citibank (South Dakota) N.A. (2017) 11 Cal.App.5th Supp. 1, 7.) A debt collector may not use any false, deceptive, or misleading representation or means to collect a debt. (15 U.S.C. § 1692e, subd. (10).)

Cross-Complainant Little alleges the following: (1) that Cross-Defendant Flannagan operated Video Symphony EnterTraining, Inc. (“VSE”) as a mere alter ego; (2) that Cross-Complainant Little signed an enrollment agreement with VSE on or about June 11, 2010; (3) that Cross-Complainant Little signed two documents entitled “Student Loan, Installment Note, and Disclosure Agreemen [sic]” (the “Installment Notes”); (4) that with these documents, VSE and Cross-Defendant Flannagan created the illusion that money had been loaned when in fact none had been; (5) that the interest rate charged on these “loans” was arbitrary and usurious; (6) that Cross-Defendant Flannagan is a debt collector as defined by 15 U.S.C. § 1692a(6) and has filed approximately 500 cases against former students as the “Debt Enforcement Group” ; (7) that Cross-Defendant Flannagan’s contact with Cross-Complainant Little consisted of attempts to collect a disputed tuition debt allegedly owed to VSE, a private for-profit school founded by Cross-Defendant Flannagan; (8) that the alleged tuition debt falls within the definition of consumer debt as defined by 15 U.S.C. § 1692a(5); (9) that Cross-Defendant Flannagan violated the FDCPA by suing on a time-barred debt; (10) that by filing a Complaint against Cross-Complainant Little, Cross-Defendant Flannagan used false representations and deceptive means to collect or attempt to collect a time-barred debt; and (11) that by filing a Complaint against Cross-Complainant Little, Cross-Defendant Flannagan used unfair and unconscionable means to collect an alleged debt. (FACC, ¶¶ 6-24.)

As demonstrated above, the Cross-Complaint is based, in part, on Cross-Defendant Flannagan’s filing of the Complaint against Cross-Complainant Little to collect on an allegedly time-barred debt. (FACC, ¶ 22.) Cross-Complainant Little argues that the Installment Notes prepared by Cross-Defendant Flannagan do not meet the requisites of negotiability under Commercial Code sections 3104 and 3106 and therefore, a four-year statute of limitations under Code of Civil Procedure section 337 applies. (Id.) Because Cross-Complainant Little’s breach occurred well before the filing of this lawsuit in July 2019, he argues, the action is barred. (Id.)

The Complaint alleges the Installment Notes are subject to a six-year statute of limitations under Commercial Code section 3118. (Compl., ¶ 26.) This chapter defines a negotiable instrument, in part, as an unconditional promise to pay a fixed amount of money. (Cal. U. Comm. Code, § 3104, subd. (a).) (Italics added.) A promise is not unconditional if it states that it is subject to or governed by another writing. (Cal. U. Comm. Code, §. 3106, subd. (a).)

Here, the Installment Notes that are the subject of this action state, in pertinent part: “This Note is part of and subject to the terms and conditions contained in any written agreement between Buyer and Seller made in connection with this Note.” (Compl., Exh. C.) Thus, the Installment Notes are not an unconditional promise to pay and are not subject to the six-year statute of limitations in Commercial Code section 3118. The Installment Notes are instead governed by the four-year statute of limitations for breach of contracts set forth in Code of Civil Procedure section 337.

Cross-Defendant Flannagan argues that when a contract is payable in installments, the cause of action accrues when each installment becomes due and payable. (Dem., pp. 5:17-6:7:2.) The Court agrees. “ ‘When an instrument is payable in installments, the cause of action on each installment accrues on the day following the date the installment is due.’ ” (White v. Moriarty (1993) 15 Cal.App.4th 1290, 1299.) Thus, any payments that fell due four years before this action was filed, that is, on or after July 19, 2015, are not time-barred. Because the Complaint alleges the Installment Notes had a maturity date of January 2016 (Compl., Exh. H), at least 7 payments are presumably actionable. Thus, the pleadings do not demonstrate the action is entirely time-barred.

However, the Complaint does not only seek to collect only seven months’ worth of payments. According to the ledger attached to the Complaint as Exhibit H, Cross-Defendants seek to collect payments that became due on or after January 21, 2013. (Compl., Exh. H.)

Attempting to collect amounts no longer enforceable on statute of limitations grounds may constitute a false representation of the character, amount, and legal status of the alleged debt under the FDCPA. (See Afewerki v. Anaya Law Group (9th Cir. 2017) 868 F.3d 771, 776-77 [finding that a defendant’s overstatement of the amount due and interest rate charged was material and actionable under the FDCPA].)

Based on the above, the Court finds that Cross-Complainant Little sufficiently alleged a cause of action based on violations of the FDCPA against Cross-Defendant Flannagan. Accordingly, the Demurrer is OVERRULED.

1. Conclusion & Order

For the foregoing reasons, Cross-Defendant Michael Flannagan’s Demurrer to the First Amended Cross-Complaint is OVERRULED.

Moving party is ordered to give notice.

Case Number: 19CHLC27575    Hearing Date: December 10, 2020    Dept: 25

HEARING DATE:    Thu., December 10, 2020 JUDGE /DEPT: Blancarte/25

CASE NAME:  Video Symphony, LLC v. Little COMPL. FILED: 07-19-19

CASE NUMBER: 19CHLC27575 DISC. C/O:  NONE

PROCEEDINGS:     DEMURRER TO CROSS-COMPLAINT

MOVING PARTY:   Cross-Defendants Video Symphony, LLC and Michael G. Flanagan

RESP. PARTY: Cross-Complainant Scott Little

DEMURRER

(CCP § 430.10, et seq. )

TENTATIVE RULING:

Cross-Defendants’ Demurrer to the Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND as to the third and fourth causes of action, and SUSTAINED WITH LEAVE TO AMEND as to the first and second causes of action. Cross-Complainant is GRANTED 20 DAYS’ LEAVE TO AMEND the first and second causes of action.

SERVICE: 

[X] Proof of Service Timely Filed (CRC, rule 3.1300) OK

[X] Correct Address (CCP §§ 1013, 1013a) OK

[X] 16/21 Court Days Lapsed (CCP §§ 12c, 1005(b)) OK

OPPOSITION: Filed on September 9, 2020 [   ] Late [   ] None

REPLY: Filed on September 15, 2020 [   ] Late [   ] None

ANALYSIS:

1. Background

On July 19, 2019, Plaintiff Video Symphony, LLC (“Plaintiff”) filed an action against Defendant and Cross-Complainant Scott Little (“Cross-Complainant”) for breach of a promissory note. Cross-Complainant filed an Answer on December 17, 2019 and a Cross-Complaint against Plaintiff and its attorney, Michael G. Flannagan (“Flanngan”) (“collectively, “Cross-Defendants”) for violations of the FDCPA, breach of contract, unfair business practices, and declaratory relief.

Cross-Defendants filed the instant Demurrer to Cross-Complaint (the “Demurrer”) on February 20, 2020. Cross-Complainant filed an Opposition on September 9 and Cross-Defendants filed a Reply on September 15.

Department F43 at the Chatsworth Courthouse transferred this action to Department 1 at the Stanley Mosk Courthouse for reassignment on September 22, 2020. The following day, the case was assigned to this department and a hearing on the Demurrer was scheduled.

1. Legal Standard

“The primary function of a pleading is to give the other party notice so that it may prepare its

case [citation], and a defect in a pleading that otherwise properly notifies a party cannot be said to

affect substantial rights.” (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)

“A demurrer tests the legal sufficiency of the factual allegations in a complaint.” (Ivanoff v. Bank of

America, N.A. (2017) 9 Cal.App.5th 719, 725.) The Court looks to whether “the complaint alleges

facts sufficient to state a cause of action or discloses a complete defense.” (Id.) The Court does not

“read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the

complaint ‘as a whole and its parts in their context.’ [Citation.]” (West v. JPMorgan Chase Bank,

N.A. (2013) 214 Cal.App.4th 780, 804.) The Court “assume[s] the truth of the properly pleaded

factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of

which judicial notice has been taken.” (Harris, supra, 56 Cal.4th p. 240.) “The court does not,

however, assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Durell v.

Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)

A general demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted or under section 430.10, subdivision (a), where the court has no jurisdiction over the subject of the cause of action alleged in the pleading. Special demurrers are not allowed in limited jurisdiction courts. (Code Civ. Proc., § 92, subd. (c).)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)  The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)

Finally, Code of Civil Procedure section 430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc., § 430.41, subd. (a)(2).) Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 430.41, subd. (a)(3).)

1. Discussion

First, the Court notes that Cross-Defendants’ meet and confer efforts are insufficient. Specifically, Code of Civil Procedure section 430.41, subdivision (a), requires that the demurring party meet and confer in person or by telephone.(Emphasis added.) Thus, Cross-Defendants’ meet and confer efforts via e-mail are insufficient. However, “[a]ny determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc., § 430.41, subd. (a)(4).) In the interest of judicial economy, the Court proceeds to make a ruling on the merits.

1. First Cause of Action – Violation of the Fair Debt Collection Practices Act as

The First Cause of action is for violation of the Fair Debt Collection Practices Act. Cross-Defendants demur to the first cause of action on the basis that it fails to state a cause of action against either Cross-Defendant. (Dem., p. 3:4-23.)

“[T]o prevail on an FDCPA claim, a plaintiff must prove that (1) [he] was the object of collection activity arising from consumer debt, (2) the defendant is a debt collector within the meaning of the statute, and (3) the defendant engaged in a prohibited act or omission under the FDCPA. [Citation.]” (O’Neil-Rosales v. Citibank (South Dakota) N.A. (2017) 11 Cal.App.5th Supp. 1, 7.) A debt collector may not use any false, deceptive, or misleading representation or means to collect a debt. (15 U.S.C. § 1692e, subd. (10).)

Cross-Complainant alleges Cross-Defendant Flannagan is a debt collector as defined by 15 U.S.C. § 1692a, subdivision (6), that each Cross-Defendant used false representations and deceptive means to collect or attempt to collect a debt, in violation of 15 U.S.C. § 1692f, that Cross-Defendant Flannagan violated this act, inter alia, by filing a Complaint against Cross-Complainant despite being barred by the applicable statute of limitations, and that as a result, Cross-Complainant has suffered damages including, but not limited to, anguish, frustration, humiliation, anxiety, and stress. (Cross-Compl., ¶¶ 17-21.)

However, Cross-Complainant has not alleged that the collection activity he was subject to arose from a consumer debt. (O’Neil-Rosales v. Citibank (South Dakota) N.A., supra, 11 Cal.App.5th at p. 7.) It is also unclear whether this cause of action is asserted against both Cross-Defendants as it states that it is alleged only against Cross-Defendant Flannagan (Cross-Compl., p. 5:15-16) but also that each Cross-Defendant violated the FDCPA (id. at p.5:23-25). Furthermore, Cross-Complainant must do more than allege Cross-Defendants violated the FCDPA, by “inter alia,” filing an action that was barred by the statute of limitations. If Cross-Complainant has additional factual allegations demonstrating how Cross-Defendants violated the FDCPA, he must set them forth in his Cross-Complaint.

For the reasons noted above, the Demurrer as to the first cause of action is SUSTAINED. Cross-Complainant is granted 20 DAYS’ LEAVE TO AMEND.

1. Second Cause of Action -  Breach of Contract

Cross-Complainant alleges a breach of contract cause of action against Cross-Defendant Video Symphony. Without citing any authority, in one sentence, Cross-Defendants argue this cause of action is time-barred. (Dem., p. 8:4-5.) “To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff. [Citation.] ‘In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.’  [Citation.]” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.)

Cross-Complainant alleges (1) that Cross-Defendant Video Symphony is the assignee of  Video Symphony Entertaining, Inc. (“VSE”); (2) that Cross-Complainant signed an enrollment agreement with VSE on or around June 11, 2010; (3) that at a certain point, Cross-Complainant withdrew from the school with their authorization and approval; (4) that VSE agreed to provide him with a particular course of study; (5) that when he returned to VSE following an approved leave of absence, VSE no longer offered the course he signed up for; (6) that VSE failed to provide him with the withdrawal credits he was entitled to under their agreement; and (7) that as a result of this breach, he has suffered damages subject to proof. (Cross-Compl., ¶¶ 3, 12, 22-25.)

However, Cross-Complainant has not clearly alleged that he performed all of his obligations under the parties' alleged agreement. In addition, Cross-Complainant does not specify when the alleged breach occurred, so the Court is unable to determine whether it is time-barred by the four-year statute of limitations for written contracts. (Code Civ. Proc., § 337.)

For these reasons, the Demurrer is SUSTAINED as to the second cause of action. Cross-Complainant is granted 20 DAYS’ LEAVE TO AMEND.

1. Third Cause of Action – Unfair Business Practices

Without citing any authority, Cross-Defendants argue this cause of action is time-barred. (Dem., p. 8:7-23.)

“To bring a [Unfair Competition Law] claim, a plaintiff must show either an (1) ‘unlawful, unfair, or fraudulent business practice’ or (2) ‘unfair, deceptive, untrue, or misleading advertising.’ [Citation.]  (Adhav v. Midway Rent a Car, Inc. (2019) 37 Cal.App.5th 954, 970.) “Any action to enforce any cause of action pursuant to [the UCL] shall be commenced within four years after the action accrued.” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1192; Bus. & Prof. Code § 17208.)

Cross-Complainant alleges (1) that Cross-Complainant signed an enrollment agreement with VSE on or around June 11, 2010; (2) that Cross-Defendant Video Symphony is the assignee of VSE; (3) that at the time Cross-Complainant enrolled in VSE, he was persuaded to sign two documents entitled “Student Loan, Installment Note, and Disclosure Agreemen [sic]”; (4) that these documents created the illusion that Cross-Complainant obtained two loans from VSE to fund part of his education; (5) that no money was loaned; (6) that the loan documents were bogus and created to falsely portray a tuition credit from VSE as a loan; (7) that the sham loan documents included an arbitrary interest rate, disbursement date, and charged two unnecessary loan fees; and (8) that VSE’s business practices were “unfair, deceptive, and unconscionable.” (Cross-Compl., ¶¶ 26-31.)

Here, the events that give rise to this cause of action occurred in June 2010, almost ten years before this Cross-Complaint was filed. There are no allegations that would indicate the statute of limitations was tolled or should otherwise be extended, and the Opposition does not address this argument. Thus, Court finds that the third cause of action is time-barred.

For this reason, the Demurrer as to the third cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

1. Fourth Cause of Action – Declaratory Relief

Without citing any authority, Cross-Defendants argue that Cross-Complainant fails to allege any facts as to Video Symphony and that no controversy exists as to Flannagan under the fourth cause of action. (Dem., p. 9:1-15.)

Cross-Complainant alleges that a controversy has arisen between himself and Cross-Defendant Flannagan in that Flannagan contends that Commercial Code section 3318’s six-year statute of limitations applies to the allegations in Plaintiff’s Complaint, while Cross-Complainant maintains that the four-year limitation under Code of Civil Procedure section 337 applies and that it would be just and proper for the Court to now issue a ruling establishing the respective rights and obligations of the parties thereto. (Cross-Compl., ¶¶ 32-34.)

A request for declaratory relief is properly invoked to “declare rights and not to determine or try issues.” (Loomis Fruit Growers’ Assn. v. California Fruit Exchange (1932) 128 Cal.App. 262, 281.) Here, Cross-Complainant does not seek to determine the parties’ respective rights, but rather to determine a legal issue. Thus, declaratory relief is improper. For this reason, the Demurrer as to the fourth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

1. Conclusion & Order

For the foregoing reasons, Cross-Defendants’ Demurrer to the Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND as to the third and fourth causes of action, and SUSTAINED WITH LEAVE TO AMEND as to the first and second causes of action. Cross-Complainant is GRANTED 20 DAYS’ LEAVE TO AMEND the first and second causes of action.

Moving party is ordered to give notice.