Banc vs. Plaza Continental Group LLC

Consequently, the public interest weighs in favor of Mexico.

Based on all the above, the Motion is GRANTED, with the limitation that this action shall be stayed, rather than dismissed.

50 Banc vs. Plaza Continental Group LLC

25-01496549 Demurrer to Amended Cross-Complaint

The Demurrer to the First Amended Cross Complaint brought by Cross- Defendant Nano Banc is SUSTAINED, in whole, with 20 days leave to amend.

Cross-Defendant’s Request for Judicial Notice is GRANTED, with the limitation that the Court notices only the existence of the Notice of Default and not the truth of any factual statements therein. (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)

The demurrer to the First Cause of Action for Breach of Contract is SUSTAINED, as the Cross-Complaint does not adequately allege performance, as required. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The Cross-Complaint alleges Borrower fully performed all obligations required under the Loan Agreements or was excused from further performance due to Cross-Defendant’s breaches.” (¶48 of FACC.) While the above general allegation would typically suffice (See Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1389 and Code Civ. Proc., § 457), “general pleadings are controlled by specific allegations.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1389.) “Thus, a general allegation of due performance will not suffice if the plaintiff also sets forth what has actually occurred and such specific facts do not constitute due performance.” (Id. at pp. 1389-1390.)

In contrast to the allegations of performance, several allegations within the Cross-Complaint suggest Cross-Complainant did not pay the loan before the maturity date and, instead, continued tendering monthly payments “expecting the Bank to implement the promised restructuring...” (See ¶74 of FACC; See also ¶30, ¶31.)

In light of the above specific allegations which contradict the general assertion of performance, Cross-Complainant has not adequately alleged this element of its claim.

Similarly, Cross-Complainant has not adequately alleged a breach. While the opposition suggests that pre-maturity breaches have been alleged,

which survive demurrer (See Opposition: 4:9-13), no such breaches are clearly identified.

The claim only alleges Cross-Defendant breached the Loan Agreements by “willfully and unreasonably refusing to accept valid loan payments and improperly placing Borrower in default.” (¶49 of FACC.) The Cross- Complaint does not identify the date of the alleged breach.

Per judicially noticeable documents, a Notice of Default was not recorded until May 20, 2025, a date which falls after maturity. (See Exhibit 2 of RJN.) While the Cross-Complaint alleges Defendant sent a “notice[] of default and reservation-of-rights letter” on March 10, 2025 (See ¶29 of FACC), the Complaint does not allege this letter breached the Loan Agreements or resulted in any damage to Complainant.

Instead, the alleged damages appear tied to default: “Borrower has suffered damages in an amount to be proven at trial, including, but not limited to, damage to Borrower’s credit, lost business opportunities, and increased default interest and fees.” (¶51 of FACC.)

To the extent Cross-Complainant intended to allege pre-maturity breaches, the same have not been clearly stated: “Facts alleging a breach, like all essential elements of a breach of contract cause of action, must be pleaded with specificity.” (Levy v. State Farm Mut. Auto. Ins. Co. (2007) 150 Cal.App.4th 1, 6.)

The demurrer to the Second Cause of Action for Breach of the Implied Covenant is SUTAINED, on the basis the claim is duplicative or insufficiently alleged. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.) Here, the Second Cause of Action alleges Cross-Defendant “interfered with Borrower’s right to receive the benefits of the Loan Agreements by refusing to accept or properly credit valid payments and by taking steps designed to create a false record of arrears or default,” an allegation which mirrors the breach of contract claim. (See ¶49 and ¶55 of FACC.)

While the Cross Complaint proceeds to allege that “Cross-Defendant also manipulated internal risk and impairment classifications and used those manufactured issues to justify punitive servicing and enforcement positions against Borrower” (¶56 of FACC), this appears to merely restate the allegation of a wrongful default. To the extent “punitive servicing and enforcement positions” is not a reference to default, it is wholly unclear what Complainant is referring to. To the extent the above is a reference to the allegation Defendant “engineer[ed] widespread loan impairments, falsely classifying performing loans as non-performing, and obstructing legitimate restructurings” (¶36 of FACC), the allegation appears to go beyond the scope of the Loan Agreements, to which the identified covenant is tied: The covenant cannot “be endowed with an existence independent of its

contractual underpinnings” and “cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of the agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349-350.)

To allege a breach of the implied covenant, the allegations must “demonstrate[] a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purpose and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 13711395.)

As the only conduct which alleges a clear injury to a contractual benefit mirrors the First Cause of Action, the demurrer to this claim is sustained.

The demurrer to the Third Cause of Action for Breach of Implied Contract is SUSTAINED, on the basis the claim is barred by the statute of frauds.

Pursuant to Civil Code section 1624, subdivision (a)(3), an agreement for an interest in property is invalid, “unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent.”

“That includes a promissory note and a deed of trust securing performance under the note.” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1503.) “An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds.” (Ibid.) Where a contract subject to the statute of frauds is alleged, the pleader “must allege a written contract signed by [Defendant].” (Id. at p. 1503.) The failure to do so, “is a legal issue properly decided on demurrer.” (Ibid.)

In responding to the demurrer, Complainant concedes the statute of frauds applies (Opposition: 5:22-24), but asserts the allegations are sufficient to avoid the bar created by the same.

“To satisfy the ‘writing’ requirement of the statute of frauds, the writing may be cobbled together from various documents [citation], but must still ‘identif[y] the subject of the parties’ agreement, show[] that they made a contract, and state[] the essential contract terms with reasonable certainty.” (Smyth v. Berman (2019) 31 Cal.App.5th 183, 197.)

The allegation the “agreement was evidenced by the parties’ course of conduct and communications during the negotiations” (¶63 of FACC), is insufficient to meet the above standard.

Similarly, Complainant has not alleged sufficient facts to invoke equitable estoppel: “A party may be estopped from asserting the statute of frauds as a defense to a contract in order to ‘prevent fraud that would result from refusal to enforce [an] oral contract.” (Smyth v. Berman (2019) 31 Cal.App.5th 183, 198.) “Before estoppel applies, the party so pleading must allege that refusal to enforce the oral contract will result in (1) ‘unconscionable injury’ because the party pleading estoppel ‘seriously...chang[d] its position in reliance on the [oral] contract,’ or (2) the ‘unjust enrichment’ of the party pleading the statute of frauds as a defense because that party ‘receiv[ed] the benefits of the other’s performance.’” (Ibid.)

Of note, the Court in Smyth held that “[t]he payment of money is not ‘sufficient part performance to take an oral agreement out of the statute of frauds’” and “‘the alleged loss of opportunities to purchase other land does not amount to a change of position’ sufficient to excuse noncompliance with the statute of frauds.” (Smyth v. Berman (2019) 31 Cal.App.5th 183, 199.)

Here, Complainant relies on allegations which assert “Borrower and other Continuum-related borrowers complied with the interim requirements the bank demanded...including executing interim loan documents and facilitating reserve set-asides,” however, the above allegation appears to improperly refer to the reliance of third-parties. (See ¶27 of FACC.)

Notably, the allegations specific solely to Complainant allege only that Complainant maintained performance of the existing Loan Agreements and refrained from pursuing alternative refinancing or restructuring options. (See ¶30 and ¶64 of FACC.)

The above allegations are insufficient to allege, either, a serious change in position or unjust enrichment of Cross-Defendant. Indeed, rather than alleging a change in position, the above allegations assert Complainant maintained the status quo, under the existing Loan Agreements.

Additionally, the demurrer to the Third Cause of Action is SUSTAINED, as Cross-Defendant persuasively asserts the claim fails to allege the parties agreed on all necessary terms.

“The general rule is that if an ‘essential element’ of a promise is reserved for the future agreement of both parties, the promise gives rise to no legal obligation until such future agreement is made.” (City of Los Angeles v. Superior Court of Los Angeles County (1959) 51 Cal.2d 423,

433.) Additionally, “[a] loan commitment is not binding on the lender unless it contains all of the material terms of the loan, and either the lender’s obligation is unconditional or the stated conditions have been satisfied. When the commitment does not contain all of the essential terms...the prospective borrower cannot rely reasonably on the commitment, and the lender is not liable for either a breach of the contract or promissory estoppel.” (Peterson Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 115.)

While the Cross-Complaint alleges an agreement which provided for an extension, a partial paydown of the outstanding loan balance, “the release of certain loan reserves,” lower interest rates and a revised repayment schedule (¶24 of FACC), the specific amounts and terms are not identified.

The demurrer to the Fourth and Fifth Causes of Action for Fraudulent and Negligent Misrepresentation is SUTAINED.

“The well-known elements of a cause of action for fraud are: (1) a misrepresentation, which includes a concealment or nondisclosure; (2) knowledge of the falsity of the misrepresentation, i.e., scienter; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance; and (5) resulting damages.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519 [emphasis added].) “The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of intent to induce reliance.” (Ibid.) “In both causes of action, the plaintiff must plead that he or she actually relied on the misrepresentation.” (Ibid.)

“Each element in a cause of action for fraud or negligent misrepresentation must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.)

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

To support this claim, Complainant directs the Court to ¶23 and ¶24 of the Cross-Complaint, which allege in relevant part: “In early 2025, Conitnuum Analytics, Inc. (‘Continuum’), consultant to Borrower, Guarantors, and a number of other Bank borrowers, and the Bank began negotiating a loan extension and reserve funding for loans issued to Skolem Group, LLC (‘Skolem Group’) and Hilbert Group, LLC (‘Hilbert Group’)....” (¶23 of FACC.) Per the Complaint, Cross-Defendant “expressly agreed that in exchange for initially modifying the Skolem and

Hilbert Loans on terms that were highly favorable to the Bank...the Extending Loans would all be restructured shortly thereafter.” (¶24 of FACC.) Per the Complaint, the instant loans are included within the “Extending Loans.” (¶23 of FAC.)

The Cross-Complainant alleges the above misrepresentations were made “to Borrower (conveyed through Continuum and its representatives.” (¶69 of FACC.)

While the Complaint alleges the speakers on behalf of Cross-Defendant were Max Prendergast and Andrew Meitzen (¶23-¶24 of FACC), the Cross-Complaint does not identify to whom within Continuum, the representations were allegedly made.

Additionally, as noted by Cross-Defendant, the allegations do not specify whether the alleged misrepresentations were oral or written, nor do they specify the exact restructuring terms purportedly promised. (See ¶23-¶24 and ¶69 of FACC.)

While it is true that “the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158), the Complaint alleges the misrepresentations were communicated to Complainant, via a third-party. Necessarily Cross-Defendant does not have full information concerning this third party nor full information, as to what this third-party communicated to Complainant (purportedly on its behalf.)

In addition to the above, the demurrer to the Fifth Cause of Action for Negligent Misrepresentation is SUSTAINED, as Cross-Complainant concedes it is attempting to allege a variation of a “false promise.” (Opposition: 6:23-7:10 and 7:28-8:3.) However, “[t]he specific intent requirement...precludes pleading a false promise claim as a negligent misrepresentation.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159.” “Simply put, making a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise. Moreover, we decline to establish a new type of actionable deceit: the negligent false promise.” (Ibid.)

Lastly, the demurrer to the Sixth Cause of Action brought under the UCL is SUSTAINED, on the basis Cross-Complainant has failed to plead any unlawful, unfair or fraudulent conduct with particularity.

“California’s unfair competition law ‘prohibits unfair competition, which is defined as ‘any unlawful, unfair or fraudulent business act or

practice...” (Bernardo v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322, 351.)

The Sixth Cause of Action alleges: “Cross-Defendant has engaged in unlawful, unfair, and fraudulent business practices in violation of Business & Professions Code § 17200 et seq. by its conduct as detailed herein, including: a. making false promises of a loan restructuring; b. misrepresenting the existence of borrower defaults; c. refusing to accept valid loan payments; and d. engaging in internal loan impairment manipulation.” (¶84 of FACC.)

While Cross-Complainant attempts to invoke all three varieties of unfair competition, it plainly fails to allege unlawful conduct: “[A] violation of another law is a predicate for stating a cause of action under the UCL’s unlawful prong.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554.) Here, Complainant does not allege Cross- Defendant violated any law.

“Under the UCL’s unfairness prong, courts consider either: (1) whether the challenged conduct is ‘tethered to any underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law,’ [citation]; (2) whether the practice is ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,’ [citation]; or (3) whether the practice’s impact on the victim outweighs ‘the reasons, justifications and motives of the alleged wrongdoer.’” (Naranjo v. Doctors Medical Center of Modesto, Inc. (2025) 111 Cal.App.5th 408, 437.)

“The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud.” (Capito v. San Jose Healthcare System, LP (2024) 17 Cal.5th 273, 291.) “Historically, the term ‘fraudulent,’ as used in the UCL, has required only a showing that members of the public are likely to be deceived.” (Ibid.) “It may be based on representations to the public which are untrue, and ‘also those which may be accurate on some level, but will nonetheless tend to mislead or deceive....” (Naranjo v. Doctors Medical Center of Modesto, Inc. (2025) 111 Cal.App.5th 408, 435.) “The determination as to whether a business practice is deceptive is based on the likely effect such practice would have on a reasonable consumer.” (Ibid.)

To support the claim brought pursuant to the UCL, Complainant directs the Court to ¶32 through ¶44, which purports to allege “targeted sabotage,” “coordinated loan manipulation,” and “fabricated defaults.” (See Opposition: 9:10-12.) Initially, the majority of the relied upon allegations are made on “information and belief.” Such allegations are improper, where a Complaint fails to allege “such information that

lead[s] [the plaintiff] to believe that the allegations are true.” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 551, fn. 5.)

Thereafter, the Cross-Complaint alleges Cross-Defendant has “actively worked to undermine Bank borrowers with ties to Continuum” (¶33 of FACC) and “sought to force the sale of certain loans – specifically those associated with Continuum and its stakeholders.” (¶34 of FACC.) To that end, the Cross-Complaint alleges Cross-Defendant “fabricated grounds for impairment or default.” (¶34 of FACC.) The purpose was to “enable internal repricing of loan assets and mask the former chief credit officer’s prior mismanagement...” (¶37 of FACC.)

The Cross-Complaint alleges the tactics “reflect a coordinated scheme to impair loan performance on paper, thereby engineering a financial narrative favorable to insiders and prospective purchasers and hostile to the Borrowers and borrowers of the Extending Loans.” (¶41 of FACC.) Finally, this portion of the Cross-Complaint repeats the allegation that Cross-Defendant refused to deposit payments from Complainant. (¶43 of FACC.)

In addition to being vague, the above allegations neither identify conduct likely to deceive the public, conduct substantially injurious to consumers, or conduct tethered to any underlying constitutional, statutory or regulatory provision. Instead, the allegations appear to allege an internal scheme to hide mismanagement.

“A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal. App. 4th 612, 619.)

Additionally, while “fraudulent” for purposes of the UCL is distinct from common-law fraud, both the Cross-Complaint and the opposition suggest Complainant is relying on its previously stated claims, to support a violation of the UCL. (See Opposition: 9:13-16.) “Where a UCL claim is derivative of another claim that fails as a matter of law, the UCL claim must similarly fail.” (Nein v. HostPro, Inc. (2009) 174 Cal.App.4th 833, 841.)

Further, for the same reasons stated above in connection with the claim for Fraud, Cross-Complainant has not alleged fraudulent conduct with particularity.

Based on all the above, the demurrer is SUSTAINED; however, as this is the first pleading challenge to be considered by the Court and as Cross- Complainant has represented an ability to amend, leave to amend is granted. Cross-Complainant has 20 days leave to amend.

Moving party to give notice

51 Sheehan vs. Sheehan

26-01546405 Demurrer to Complaint

Defendant Carol Sheehan’s Demurrer to Complaint is SUSTAINED IN PART with 20 days leave to amend.

Request for Judicial Notice Defendant requests judicial notice of various exhibits.

The Request for Judicial Notice is DENIED as to the deposition transcript (Ex. 4).

The Request for Judicial Notice is GRANTED as to Exs. 1, 6-10, & 12. “[S]uch notice is limited to the existence of the documents and is not the same as taking notice of the truth of any matters or facts stated therein.” (In re Christian P. (2012) 208 Cal.App.4th 437, 445, fn. 4, abrogated on other grounds in In re R.T. (2017) 3 Cal.5th 622, 628, 637, fn. 6.)

A court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments (Day v. Sharp (1975) 50 Cal.App.3d 904, 914.) A court cannot take judicial notice of hearsay allegations as being true simply because they are part of a court record or file. (Ibid.)

“The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113.)

A Demurrer is a Non-Speaking Motion

In addition to the request for judicial notice, the demurrer is also accompanied by the Declaration of Cody M. Leventhal and exhibits attached thereto.

But demurrers are “non-speaking” motions and no other extrinsic evidence can be considered, except for the pleadings at issue and such matters subject to judicial notice. (See, Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) The function of a demurrer is therefore limited to testing the sufficiency of a complaint. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “In reviewing the ruling on a demurrer, a court cannot consider...the substance of declarations, matter not subject to judicial notice, or documents judicially noticed but not accepted for the truth of their contents.” (Ibid.)