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DEMURRER to COMPLAINT
Matter on the Law & Motion / Discovery calendar for Tuesday, October 14, 2025, Line 14. [Part 1 of 2 of the tentative ruling.]
DEFENDANTS ELINOR LEARY's DEMURRER to COMPLAINT. Defendant Elinor Leary demurs to the second cause of action in plaintiff William F. Veen P.C.'s complaint, a claim for breach of loan agreement. The demurrer is sustained with leave to amend.
A demurrer tests whether the challenged cause of action necessarily fails to state a claim for relief. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In assessing whether the complaint states a cause of action, the court accepts all properly pleaded material facts, but not contentions, deductions, or conclusions of fact or law. (Minton v. Dignity Health (2019) 39 Cal.App.5th 1155, 1161.) The court liberally construes the complaint pursuant to Code of Civil Procedure, section 452.
Veen alleges that it lent $200,000 to Leary in December 2022 while it was negotiating the Asset Purchase Agreement (APA) to cover bonus advances. (Compl., para. 10.) This loan was agreed to be repaid by May 31, 2023, if the APA closed, and "by fees and costs recovered by the LEARY team" if the APA did not close. (Id., para. 11.) Veen alleges that Leary has not made payments on the loan (id., para. 25), which she was required to do upon the closing of the sale of the Veen firm (id., para. 35). Veen also alleges that Leary has breached the APA and its addendum by failing to make payments out of fees earned.
The complaint (via an errata) attaches the APA and addendum but no separate agreement reflecting the December 2022 loan. The Asset Purchase Agreement discusses the payment obligation of buyers at p. 3 of the APA, describing a true-up process. It states with respect to a "bonus advance" made to Leary in 2022: "The [otherwise applicable true-up] calculations shall exclude the $200,000 bonus advance extended from Shareholder to Leary in 2022 and the $240,000 deficit owed by the Leary Team to Shareholder as of December 31, 2022 (collectively, the "Additional Leary Team True Up"), which will be paid by the Leary Team to Seller over time pursuant to Section 2.4(b)(ii) below." The referenced Section 2.4(b)(ii) requires buyers to make payments as they generate fees.
Leary offers two grounds for her demurrer: that the contract fails to state expressly whether it is oral or written (see Code Civ. Proc., section 430.10, subd. (g)), and that the complaint is uncertain as to whether the loan agreement is the same loan as the bonus advance described in the APA or some other loan agreement. The court sustains with leave to amend on the second ground only.
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Technical pleading requirements have given way to a modern approach that requires the plaintiff to "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.) The court will not insist on a specification of an oral or written contract where the pleading as a whole sufficiently explains the legal effect of the contract and therefore gives notice of the basis for the alleged breach.
Here, however, the legal effect of the contracts at issue is ambiguous. Veen does not state whether the $200,000 loan for bonus advances is the same as the bonus advance discussed in the APA. If it is, Veen does not say why it was due at the closing date rather than "over time" as provided in Section 2.4(b)(ii). Although demurrers for uncertainty are disfavored, Leary is entitled to know Veen's theory of her breach and that theory is ambiguous as pled. Veen has leave to amend. [End of part 1 of 2 of the tentative ruling]. =(301/CVA) | |