Ruling
TIERNAN VS. DIABLO COMMUNITY SERVSApr 25, 2025 |MSC17-02529
MSC17-02529CASE NAME: TIERNAN VS. DIABLO COMMUNITY SERVS *HEARING ON MOTION IN RE: CONSOLIDATE MATTERSFILED BY:*TENTATIVE RULING:*Before the Court is a motion filed by the intervenors Jeff Mini and others more fully identified belowto consolidate this case with a related case, Hammond et al. v. U.S. Bank, et al., MSC23-2529. For thereasons set forth, the motion is denied.BackgroundThis case arises out of disputes among homeowners/residents of Diablo and homeowners/residentsand non-residents over the public and others accessing Mr. Diablo through portions of the Diablocommunity. The motion for relief from stay is brought by Intervenors Jeff Mini, Christine Mini, DeeGeisler Anthony Geisler, Peter Schmidt, Catherine Schmidt, Bert Barstad, Barbara Barstad, Joseph Slavonia, Marguerite Slavonia Robert Field, Marcia Field, Christopher Harney, Christina Harney,Richard Steffens, Caren Steffens, Russell Vrankovich, Judith Vrankovich, George Birdsong, RobertCanepa, Eric Griffin, Catherine Griffin, Blake Field, Lisa Field, Robert Beratta, Barbara Beratta, ManuelDel Arroz, Juanita Del Arroz, Rebecca Brick, Particia Miller and Mary Fairman (collectively"Intervenors").The current procedural status of this action is that (1) there is a judgment in the main action (Tiernanv. Diablo Community Services District et al.), which generally held that the street Calle Arroyo is aprivate road owned by the Diablo homeowners (see Judg. filed 7/11/2019); (2) a first amended cross-complaint filed by Winston Cervantes against Diablo Community Services District ("DCSD") and twoother residents, Omid Bahrami and Mojdeh Salehomoum, who owned the residential propertylocated at 2354 Alameda Diablo ("Disputed Property") over which an alleged public easement (the"Cut-Through") passes as a means of access to Mt. Diablo, was dismissed voluntarily by Cervantes onFebruary 28, 2023, after a separate judgment in favor of defendant DCSD was entered on December9, 2020; and (3) a first amended complaint-in-intervention ("FACII") by the Intervenors on November20, 2020, asserting claims for private nuisance and for declaratory relief that there is no publiceasement over the Cut-Through is pending solely against U.S. Bank as a defendant, but stayed.Hammond and Seibert's opposition state the declaratory relief cause of action is the only remainingclaim, but both causes of action remain pending, as the nuisance cause of action was dismissed in theUS Bank Stipulated Judgment which was vacated and set aside by the Court's Set Aside Order.Intervenors entered into two separate stipulated judgments attempting to resolve their FACII, aStipulated Judgment entered on July 26, 2023 against Bart Wooten, as Trustee of the 1998 Frederickand Jane M. Wooten Trust, as a defendant in the FACII ("Wooten Stipulated Judgment"), and aStipulated Judgment entered on November 3, 2023 against U.S. Bank (the "US Bank StipulatedJudgment").David Hammond and Hal Seibert made a motion to set aside the US Bank Stipulated Judgment thatwas heard by the Court and granted by order filed on July 17, 2024 (the "Set Aside Order"). Themotion to consolidate incorrectly states the Wooten Stipulated Judgment was vacated or set aside.The motion to set aside did not seek to set aside the Wooten Stipulated Judgment, only the US BankStipulated Judgment, and the Set Aside Order was similarly limited to the US Bank StipulatedJudgment.As part of the Set Aside Order, the Court stayed this action pending further order of the Court. Thestay was based on the existence of related litigation brought by David Hammond and Hal Seibertagainst U.S. Bank and Wooten and others, Hammond et al. v. U.S. Bank, et al., Case No. C23-02578("Hammond Action"). The Hammond Action alleges causes of action for quiet title, declaratory relief,and interference with an easement. The defendants in that action are U.S. Bank, DeEtte R. Sipos, thecurrent owner of the Disputed Property, and Bart Wooten, as Trustee of the Bart Wooten. The Courtobserves that though the motion to consolidate indicates that Wooten has been dismissed from theHammond Action, the Court's review of the records in the Hammond Action show only that Wootenwithdrew an opposition to the renewed motion for preliminary injunction in the Hammond Action.Wooten remains a defendant as of April 23, 2025 when this ruling was prepared.In summary, the only pending action in this case is the FACII, and the sole remaining defendant in theFACII is U.S. Bank, a former lienholder, and briefly, the former owner of the Disputed Property whichis subject to the Cut-Through easement claim in the Hammond Action.Legal Standards Applicable to Motion for Consolidation Code of Civil Procedure § 1048 provides, "When actions involving a common question or law or factare pending before the court, it may order a joint hearing or trial of any or all of the matters in issuein the actions; it may order all the actions consolidated and it may make such orders concerningproceedings therein as may tend to avoid unnecessary costs or delay." (Code Civ. Proc. § 1048(a).)The decision to consolidate is left to the discretion of the trial court. (Todd Steinberg v. Dalkon ShieldClaimants Trust (1996) 48 Cal.App.4th 976, 978-979 ["Code of Civil Procedure section 1048 grantsdiscretion to the trial courts to consolidate actions involving common questions of law or fact. Thetrial court's decision will not be disturbed on appeal absent a clear showing of abuse of discretion."];National Electric Supply Co. v. Mt. Diablo Unified School District (1960) 187 Cal. App. 2d 418, 421 [noabuse of discretion in severing issues of complaint and cross-complaint].)AnalysisThe Court has found some discrepancies in each side's factual account of the status of the action andclaims asserted in the FACII as noted above. The Court does not need to address, and neither acceptsor takes issue with, the opposing parties' characterizations of Judge Mockler's ruling denying themotion for preliminary injunction in the Hammond Action, and their positions regarding the merits ofIntervenors' position regarding the public easement, or whether Intervenors may have grounds forintervening in the Hammond Action. Those issues are not ones the Court has to address or resolve torule on the Consolidation Motion.The FACII alleges declaratory relief and private nuisance against a single remaining defendant, U.S.Bank, which is no longer a stakeholder in anyway with respect to the Disputed Property or the Cut-Through. Hammond and Seibert's opposition state the declaratory relief cause of action is the onlyremaining claim, but both causes of action remain pending, as the nuisance cause of action wasdismissed in the US Bank Stipulated Judgment which was vacated and set aside by the Court's SetAside Order.The relief sought on the claims asserted by Intervenors are in a sense the "flip side" of the claimsalleged in the Hammond Action, but this case has essentially no remaining defendants with aninterest or incentive to defend Intervenors' claims. The current property owner is not a party to thisaction, nor are Hammond and Seibert, those advocating in favor of the easement. It is not clear thatthe claims against the remaining defendant in this case will warrant a hearing or trial. Intervenors'Reply itself acknowledges that the Intervenors could potentially intervene in the Hammond Action,just as they contend Hammond and Seibert did by intervening in the Tiernan case. (Reply p. 4, ll. 13-16.) If intervention is granted, a party may intervene by filing an answer in intervention if the party'sinterest is in defending against the plaintiff's claims, a complaint in intervention if the party seeksaffirmative relief, or both. (Code Civ. Proc. §§ 387(b)(2), 387(c) [motion to intervene to beaccompanied by answer in intervention or complaint in intervention], and 387(e)(1) [if leave tointervene is granted, the intervenor shall "[s]eparately file the complaint in intervention, answer inintervention, or both."].)For these reasons, the Court concludes consolidation of the actions, given the remaining claims anddefendant in this case, is not warranted or appropriate.
Ruling
OIC Investment Agent, LLC vs. BlackGem Investments, LLCApr 28, 2025 |C24-02488
C24-02488CASE NAME: OIC INVESTMENT AGENT, LLC VS. BLACKGEM INVESTMENTS, LLC HEARING ON DEMURRER TO: FIRST AMENDED CROSS-COMPLAINT. FILED BY OIC INVESTMENTAGENT,LLCFILED BY:*TENTATIVE RULING:*Department 9 will be dark on 4/28/25. If any party contests the tentative ruling, argument will takeplace on Monday, May 19, 2025 at 9:00 a.m. Plaintiff demurs to the First Amended Cross-Complaint and the First Amended Answer bydefendant and cross-complainant, BlackGem Investments, LLC. The demurrer to the FACC is sustained.The demurrer to the FAA is sustained. BlackGem has leave to amend as to both pleadings. Suchamended pleadings shall be filed and served on or before May 30, 2025. I. Factual and Procedural Background Plaintiff / cross-defendant, OIC Investment Agent, LLC (“OIC”), and defendant / cross-complainant, BlackGem Investments, LLC (“BlackGem”), were investors in Occurrent, a powerdeveloper that developed, constructed and owned tidal power generation projects to generateelectricity from tidal power. (Cross-Complaint, ¶8.) Occurrent entered into a Credit Agreement with,among others, OIC, in July of 2022 (Ex. B to plaintiff’s complaint). (Cross-Complaint, ¶9.) Under theCredit Agreement, the Lenders agreed to provide up to $40,000,000 in credit for Occurrent to help itdevelop, construct, own and operate the tidal power generating projects. (Cross-Complaint, ¶10.)Because the projects were at an early stage, the Credit Agreement provided that funds thereunderwould be released over time, subject to satisfaction of certain conditions and milestones. (Ibid.)Lenders began to provide funding to Occurrent under that Credit Agreement, beginning with a releaseof $2.5 million. (Ibid.) Approximately one year later, in June 2023, Occurrent required additional funds to addressdelays and cost overruns in fabrication and deployment of its first power generating unit, but had notyet met the milestones required for release of additional funds under the Credit Agreement. (Cross-Complaint, ¶11.) The Lenders agreed to release an additional $1.5 million, purportedly based onreceiving an executed Sponsor Guaranty from BlackGem. (Ex. A to plaintiff’s complaint). (Cross-Complaint, ¶¶3, 11.) In October 2023, Occurrent again required capital, but had not met fundingconditions under the Credit Agreement. (Cross-Complaint, ¶12.) The Lenders released an additional$100,000, which was conditioned on a guarantee by BlackGem for the additional amount by way of anAmendment to the Sponsor Guaranty. (Ex. C to plaintiff’s complaint.) (Ibid.) In April of 2024, Occurrent still had not caught up to the contractual milestones andthresholds and undertook a restructuring and simplification of its capitalization structure. (Cross-Complaint, ¶13.) OIC was an integral and driving force in the redefinition of Occurrent’s business plan,materially changing the terms, engineering requirements, thresholds, and metrics required, materiallyraising the investment capital need and thereby materially altering the investment in Occurrent, uponwhich BlackGem detrimentally relied. (Ibid.) BlackGem detrimentally relied on OIC’s promise that it would convert its debt to equity andforgive over three hundred thousand dollars of the Sponsor Guaranty, with the balance to be coveredby the separate entities RZR, Red Dock Capital, and affiliates. (Cross-Complaint, ¶14.) On April 15, 2024, Jeremy Glick at OIC emailed Nick Ott, COO of Highshore Holdings, LLC, regarding a purportedcall on the Sponsor Guaranty, asserting that there were multiple continuing events of default byBorrower under the Credit Agreement, and that OIC had the right to call the Sponsor Guaranty at anytime including on acceleration, at which point BlackGem must pay guaranteed obligations in five (5)business days. (Cross-Complaint, ¶15.) Mr. Ott apparently informed BlackGem about the commentsand sent return comments from BlackGem to OIC. (Cross-Complaint, ¶16.) BlackGem’s comments noted that if OIC was taking the position that Borrower was in ongoingdefault, that such default was either not disclosed, or effectively waived, in order to entice and induceBlackGem into executing the Sponsor Guaranty. (Cross-Complaint, ¶17.) BlackGem took the positionthat it was induced into and relied upon OIC’s affirmative representations regarding OIC’s financialcondition, product performance and viability, and ability to meet multiple threshold milestones underthe Credit Agreement and Sponsor Guaranty. (Cross-Complaint, ¶18.) OIC responded that OICdisagreed with the accuracy of BlackGem’s statements, and that the Sponsor Guaranty was “anabsolute and unconditional guarantee.” (Cross-Complaint, ¶19.) Despite this purported disagreement, on April 26, 2024, an OIC email was circulated tovarious individuals summarizing proposed modifications to the Sponsor Guaranty. (Cross-Complaint,¶20.) The summary included: (i) BlackGem would fund $1.28 million (80% of the purported $1.6 million Sponsor Guaranty) into BigMoon (Occurrent); (ii) For each dollar that BlackGem funded, the Sponsor Guaranty would be reduced on a dollar-for-dollar basis; (iii) That BlackGem fund $125,000 by April 29, 2024 in addition to balances and amounts in a payment schedule attached to the correspondence; (iv) That on funding the last dollar of the $1.28 million referenced above, that “the guarantee [sic] will be considered satisfied and released”; and (v) That OIC purportedly retained rights to enforce the Sponsor Guaranty. The correspondence also stated: “Note that any amounts funded by Red Dock or RZR inaccordance with the schedule above shall count towards the guarantee reduction mechanismdescribed above” and requested confirmation of agreement to the terms listed in principle. (Cross-Complaint, ¶21.) Further written correspondence took place about the terms on April 27 and 28,2024. (Cross-Complaint, ¶22.) (It does not appear that the communications involved BackGem, onlyOIC and other third parties.) Over the next few months, Occurrent’s ongoing restructuring efforts could not move forwardwithout OIC finalizing the agreement, upon which all parties relied based upon their representations,and in July 2024, Occurrent informed OIC that it would be winding down its business, due to itsinability to raise capital. (Cross-Complaint, ¶24.) Occurrent’s inability to raise capital was the result ofOIC not finalizing the equitization of their debt. (Ibid.) On August 14, 2024, OIC issued a purported “Notice of Acceleration” to Occurrent, thecreditors, and BlackGem, alleging multiple purported events of default under the Credit Agreementand Sponsor, including Occurrent’s purported failure to achieve contractual thresholds. (Cross-Complaint, ¶25.) On the same day, OIC issued a purported “demand notice” to BlackGem, demandinga nine hundred-thousand-dollar ($900,000) payment within five (5) days. (Cross-Complaint, ¶26.) Following the above correspondence, on August 15, 2024, BlackGem sent a letter in response to OIC’s purported demand, detailing BlackGem’s objections to OIC’s demand and its purportedenforceability, and noting BlackGem’s ongoing willingness to engage in efforts to resolve the issuesbetween the parties. (Cross-Complaint, ¶¶27-29.) OIC took no further action to correct or mitigate theissues raised by BlackGem or to further enhance the liquidity of the debtor under the CreditAgreement as it was obligated to do through equitization of their debt. (Cross-Complaint, ¶30.) OIC filed its Complaint on September 17, 2024, alleging breach of the Sponsor Guaranty.(Cross-Complaint, ¶31.) BlackGem initially answered the complaint on October 28, 2024, andsimultaneously filed a Cross-Complaint. The First Amended Cross-Complaint (“FACC”) was filed two days later, on October 30, 2024. Italleges causes of action for (1) Fraud in the Inducement; (2) Negligent Misrepresentation; (3) Breachof Oral Contract; (4) Breach of the Covenant of Good Faith and Fair Dealing; and (5) Declaratory Relief. On November 6, 2024, BlackGem filed its First Amended Answer (“FAA”). The FAA consists of ageneral denial, as well as 12 “affirmative defenses” as follows: (1) Failure to State Cause of Action; (2)Substantial Performance; (3) Lack of Standing; (4) Equitable Indemnity/Contribution; (5) EquitableSubrogation/Contribution; (6) Set Off/Reduction/Recoupment; (7) Fraud; (8) NegligentMisrepresentation; (9) Concealment; (10) False Promise; (11) Barred by Applicable Statute ofLimitations; and (12) Reservation of Additional Affirmative Defenses. After efforts to meet and confer (see Declaration of Matthew S. Warren), OIC brought thepresent demurrers. II. Demurrer to the FACC a. Demurrer Summary OIC demurs to each cause of action in the FACC on the grounds that each fails to plead factssufficient to constitute a cause of action under section 430.10 (e) of the California Code of CivilProcedure. b. Standard The limited role of a demurrer is to test the legal sufficiency of a complaint. It raises issues oflaw, not fact, regarding the form or content of the opposing party's pleading. (Donabedian v. MercuryIns. Co. (2004) 116 Cal.App.4th 968, 994.) A complaint will be upheld if it provides the defendant with“notice of the issues sufficient to enable preparation of a defense.” (Doe v. City of Los Angeles (2007)42 Cal.4th 531, 549-550.) The grounds for a demurrer must appear on the face of the challengedpleading, or from matters subject to judicial notice. (Code Civ. Proc. § 430.30(a).) In evaluating thesufficiency of the challenged pleading, all material facts properly pleaded are treated as true, but notcontentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638,citing Serrano v. Priest (1971) 5 Cal.3d 584, 491.) c. Discussion (1) Fraud in the Inducement OIC challenges the sufficiency of BlackGem’s first cause of action for fraud. “The elements of fraud that will give rise to a tort action for deceit are: (a) misrepresentation(false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intentto defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalla v.Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974, internal quotation marks omitted; see also Civ. Code, §§ 1709-1710.) Fraud must be pled specifically; general and conclusory allegations do not suffice. (Lazar v.Superior Court (1996) 12 Cal.4th 631, 645.) The policy of liberal construction of the pleadings willtherefore not ordinarily be invoked with respect to fraud. (Ibid.) This particularity requirementnecessitates pleading facts which 'show how, when, where, to whom, and by what means therepresentations were tendered.' (Ibid.) Here, the FACC contains allegations about conduct and statements that spans more than ayear. Multiple agreements and modifications thereof, whether valid or invalid, are mentioned. OICargues, among other things, that the conduct described in this cause of action took place after theSponsor Guaranty was executed. BlackGem’s opposition argues that OIC mischaracterizes its promisesas modifications of the Sponsor Guaranty, rather than promises made to induce BlackGem to enterinto the Sponsor Guaranty. This dispute over what is, in fact, alleged highlights the need for specificity with respect to theprecise statements (or conduct) at issue, the timing of such statements (or conduct), the person whomade the fraudulent statements (or engaged in the conduct), if known, etc. While BlackGem’s 33rdparagraph states BlackGem’s “consent [to the Sponsor Guaranty] was obtained by fraud,” the SponsorGuaranty to which the referenced “consent” appears to relate, was in 2023, while the changesreferenced in the following paragraph (stating fraud was in the change of “terms, operationalrequirements, and metrics”) appear to have been made in April of 2024. (FACC, ¶13.) Accordingly, aspointed out in the demurrer, BlackGem could not have detrimentally relied upon the fraudulentconduct at the time of entering into (i.e. being induced to enter into) the Sponsor Guaranty. BlackGem’s first cause of action fails to meet the specificity standards for pleading fraud.What actions were induced by what fraudulent statements are unclear. The demurrer to the firstcause of action is sustained, with leave to amend. (2) Negligent Misrepresentation OIC makes similar arguments as those discussed above with respect to the negligentmisrepresentation cause of action. The second cause of action is subject to the same analysis as thefirst cause of action because it relies on the same allegations and the standard for pleading negligentmisrepresentation only differs in the requirement of intent to induce reliance. (Cadlo v. Owens-Illinois,Inc. (2004) 125 Cal.App.4th 513, 519.) The demurrer to the second cause of action is sustained, withleave to amend. (3) Breach of Oral Contract The third cause of action alleges breach of an oral contract. OIC demurs based on a baragainst oral modifications contained in the Sponsor Guaranty. BlackGem opposes the demurrer partlybased on its contention that taking notice of the contents of a contract is tantamount to improperlyconsidering evidence on demurrer. But the contract here is attached to OIC’s complaint, and isreferenced in the FACC. Therefore the contract is the proper subject of judicial notice. Further, “[w]here a written contract is pleaded by attachment to and incorporation in acomplaint, and where the complaint fails to allege that the terms of the contract have any specialmeaning, a court will construe the language of the contract on its face to determine whether, as amatter of law, the contract is reasonably subject to a construction sufficient to sustain a cause ofaction for breach.” (Hillsman v. Sutter Cmty. Hosps. (1984) 153 Cal.App.3d 743, 749-750.) Similarly,here we may look to whether BlackGem can allege modification of the Sponsor Guaranty contrary toparagraph 5.3 of the agreement (“None of the terms or provisions of this Sponsor Guaranty may be waived, amended, supplemented or otherwise modified except with the written consent of all of theparties hereto.”), the meaning of which BlackGem does not contradict in its FACC. BlackGem does argue that the Sponsor Guaranty is not valid due to it being fraudulentlyinduced, but the Court is sustaining the demurrer to the fraudulent inducement causes of action, andthe FACC lacks any other bases for invalidating the Sponsor Guaranty. Because the Sponsor Guaranty prohibits oral modifications, and breach of an “oral contract” isprecisely what BlackGem alleges, the demurrer is sustained. The demurrer to this cause of action is sustained, with leave to amend. (4) Breach of the Covenant of Good Faith and Fair Dealing BlackGem alleges OIC breached the implied covenant of good faith and fair dealing withrespect to the alleged oral contract discussed above. OIC demurs, arguing that there is no oralcontract, but if there is, this cause of action is merely duplicative of the breach cause of action. In California, implied in every contract is a covenant of good faith and fair dealing whichrequires that neither party do anything which will deprive the other of the benefits of the agreement.(Ocean Services Corp. v. Ventura Port Dist. (1993) 15 Cal.App.4th 1762, 1780.) Breach of the covenantrequires a showing of a valid contract. (See CACI 325.) It appears that Delaware law, which applieshere, generally parallels California law in this respect. (Memorandum of Points and Authorities inSupport of Demurrer, 14:9-17.) Because the demurrer is sustained with respect to the oral contract cause of action, there ispresently no contract alleged that could support a breach of the covenant of good faith and fairdealing. The demurrer is sustained to this cause of action, with leave to amend. (5) Declaratory Relief Declaratory relief here is derivative of BlackGem’s pleading of an oral contract, discussedabove. The demurrer to the fifth cause of action is also sustained, with leave to amend. III. Demurrer to the FAA a. Summary OIC demurs to the second, fourth, fifth, seventh, eighth, ninth, tenth, and eleventh affirmativedefenses on the grounds that they fail to plead facts sufficient to constitute a defense under section430.20(a) of the California Code of Civil Procedure. b. Standard A party against whom an answer has been filed may object by demurrer on the followinggrounds: (a) the answer does not state facts sufficient to constitute a defense, (b) the answer isuncertain, or (c) where the answer pleads a contract, it cannot be ascertained from the answerwhether the contract is written or oral. (Code Civ. Proc., § 430.20.) Unlike the usual general demurrerto a complaint, the inquiry in a demurrer to an answer is not into the statement of a cause of action;instead it is whether the answer raises a defense to the plaintiff's stated cause of action. (TimberidgeEnterprises, Inc. v. City of Santa Rosa (1978) 86 Cal.App.3d 873, 879-880.) c. Discussion Plaintiff demurs to the following affirmative defenses for their failure to plead sufficient factsto constitute a defense: 2, 4-5, 7-11. The demurrer is a general demurrer to specified affirmativedefenses. The notice of demurrer states that, “Plaintiff OIC Investment Agent, LLC will and hereby does demur to the second, fourth, fifth, seventh, eighth, ninth, tenth, and eleventh affirmativedefenses alleged in Defendant BlackGem Investments, LLC’s [Answer].” The following page, entitled“Demurrer,” also clarifies that the demurrer targets “the second, fourth, fifth, seventh, eighth, ninth,tenth, and eleventh affirmative defenses on the grounds that they fail to plead facts sufficient toconstitute a defense under section 430.20(a) of the California Code of Civil Procedure.” BlackGem appears to argue, contrary to the statements mentioned above, that the demurrertargets the entire answer, and must therefore be overruled. The demurrer does not target the entirecomplaint, however. The confusion may lie in the terms “general demurrer” and “special demurrer,”which do not appear in the statutory language. These terms are, however, distinctions commonly usedby courts and counsel. A “general demurrer” is a demurrer to a complaint or cross complaint on theground the challenged pleading fails to state facts sufficient to constitute a cause of action (Code Civ.Proc. § 430.10(e)) or, alternatively, a demurrer to an answer on the ground it does not state factssufficient to constitute a defense (Code Civ. Proc. § 430.20(a)). A “special demurrer,” on the otherhand, is one that is based on any of the other grounds for objection set out in Code Civ. Proc.§§ 430.10 and 430.20. (See Timberidge Enterprises, Inc., supra, 86 Cal.App.3d at 879–880 [discussingdemurrers to answers]; Buss v. J.O. Martin Co. (1966) 241 Cal.App.2d 123, 133 [discussing demurrersto a complaint or cross complaint].) Moving on to the specific affirmative defenses targeted by the demurrer, the Court notes “ananswer to a complaint shall contain: (1) [t]he general or specific denial of the material allegations ofthe complaint controverted by the defendant, and (2) [a] statement of any new matter constituting adefense.” (Code of Civ. Proc., § 431.30(b).) “The phrase ‘new matter’ refers to something relied on bya defendant which is not put in issue by the plaintiff. Thus, where matters are not responsive toessential allegations of the complaint, they must be raised in the answer as ‘new matter.’” (State FarmMut. Auto. Ins. Co. v. Superior Court (1991) 228 Cal.App.3d 721, 725, internal citations omitted.) Such“new matter” is also known as “an affirmative defense.” (Advantec Group, Inc. v. Edwin’s PlumbingCo., Inc. (2007) 153 Cal.App.4th 621, 627.) A defendant must set forth only the “essential facts” of theaffirmative defense, “sufficient to acquaint [plaintiff] with the nature, source and extent” of thedefense. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.) This is known asthe “fair notice” test. Affirmative defenses cannot be “proffered in the form of terse legal conclusions.” (FPIDevelopment, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 384.) Rather, affirmative defenses mustaver facts “as carefully and with as much detail as the facts which constitute the cause of action andwhich are alleged in the complaint.” (Ibid.; South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d725, 732 [“Generally speaking, the determination whether an answer states a defense is governed bythe same principles which are applicable in determining if a complaint states a cause of action.”])What is required are ultimate facts. (See Doe v. City of Los Angeles (2007) 42 Cal. 4th 531, 550; FPIDevelopment Inc., supra, at 384.) Even where a defense is defectively pled, it may be allowed if thedefendant's pleading gives sufficient notice to enable the plaintiff to prepare to meet the defense, inpart because un-pled defenses are waived. (See Harris v. City of Santa Monica (2013) 56 Cal. 4th 203,240.) Substantial Performance (Second Affirmative Defense) OIC demurs to the second affirmative defense, which states as follows: Defendant has, in good faith, performed substantive terms; funded five hundred thousand dollars ($500,000), plus an additional two hundred thousand dollars ($200,000) through RZR, into the Sponsor Guaranty in good faith based on Plaintiff’s promises to equitize debt and release the balance of the Sponsor Guaranty on the funding of Defendant and other guarantors’ payments; and has not willfully departed from the terms of the Sponsor Guaranty; and any defect alleged by Plaintiff in the Complaint is easily remedied by equitizing its debt, releasing the balance of the Sponsor Guaranty, and obtaining the necessary capital for the Occurrent project, to which it had agreed in communications with Defendant. OIC points out that this defense relies on “a purported modification to the Sponsor Guaranty,”and that the Sponsor Guarantee (Ex. A to OIC’s complaint) contains a “no-oral modification clause.”While the defense is labeled “substantial performance,” what is alleged hints at modification. In any event, “substantial performance” would not be an affirmative defense because it is not“new matter” for the purposes of answering a complaint about breach. The defense of substantialperformance would be encompassed by the general denial. Addressing the parties’ contentions as to modification, OIC argues an oral modification is notpermitted by the terms of the Sponsor Guaranty and Blackgem argues the Court may not look to themeaning of contractual terms on demurrer. The statement is not an accurate statement of the lawgoverning demurrers, as noted above with respect to the demurrer to the FACC. The SponsorGuaranty, being attached to OIC’s complaint, is properly considered, particularly in light of BlackGem’sown reference to the same exhibit in its cross-complaint. (See Cross-Complaint, ¶3.) Paragraph 5.3 ofthat agreement bars oral amendments. On the face of the pleadings, the alleged modification is, at least in part, written. However, asset forth in the demurrer, BlackGem’s own allegations do not support that it performed in accordancewith said modification. The demurrer is sustained with respect to this affirmative defense, with leave to amend. Equitable Indemnification / Equitable Subrogation (Fourth and Fifth Affirmative Defenses) The fourth and fifth affirmative defenses are entitled “Equitable Indemnity/Contribution” and“Equitable Subrogation/Contribution,” respectively. OIC argues these defenses allege no facts tosupport that OIC should be precluded from recovery as against BlackGem, even if BlackGem were tohave rights against other entities or individuals. BlackGem’s opposition asserts that ultimate facts areall that is needed at this stage, not any identification of who or which entity might be liable to it. It isunclear which the defenses are alleging OIC is liable or whether the defenses are referring tononparties. To the extent BlackGem might be capable of joining other unnamed entities, or to theextent a necessary party has not been named, OIC is entitled to that information. If BlackGem has noevidence of this, but acquires it later, it may move for leave to amend the answer based on that newinformation. The demurrer to the fourth and fifth affirmative defenses is sustained, with leave to amend. Affirmative Defenses Based on Fraud (Seventh to Tenth) OIC demurs to the seventh fraud-based affirmative defense, arguing lack of specificity, andthat the statements identified postdated BlackGem’s execution of the Sponsor Guaranty so they couldnot possibly have been the basis of reliance when BlackGem entered into the agreement. As to theeighth through tenth affirmative defenses, OIC simply avers they are “conclusory and duplicative ofthe Seventh.” (Demurrer, 5:10-13.) Duplication, as BlackGem points out, is not a basis to sustain a demurrer. Further the Courtacknowledges authorities that hold “[t]he requirement of specificity is relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of thecontroversy or when the facts lie more in the knowledge of the opposite party.” (See, e.g., Tarmann v.State Farm Mutual Auto-Mobile Ins. Co. (1992) 2 Cal.App.4th 153, 158; Alfaro v. Community HousingImprovement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384-85.) Still, fraud must be pled specifically; general and conclusory allegations do not suffice. (Lazar,supra, 12 Cal.4th at 645.) Based on the detailed allegations contained in the FACC, the challengeddefenses should be more specifically pleaded. (See, e.g., FACC, ¶¶15-18, 21-24, 34.) The demurrer is sustained with respect to these affirmative defenses, with leave to amend. Statute of Limitations (Eleventh Affirmative Defense) OIC demurs to the eleventh cause of action, arguing insufficient facts. “In pleading the statute of limitations, it is not necessary to state the facts showing thedefense, but it may be stated generally that the cause of action is barred by the provisions of section(giving the number of the section and subdivision thereof, if it is so divided, relied upon) of the Codeof Civil Procedure; and if such allegation be controverted, the party pleading must establish, on thetrial, the facts showing that the cause of action is so barred.” (Code Civ. Proc., § 458.) Here, BlackGem has not cited any provision of the CCP, any Delaware statute, or elsewhere,that provides the relevant statute of limitations. Accordingly, it has failed to comply with Code of CivilProcedure, section 458. The demurrer is sustained with respect to the eleventh affirmative defense, with leave toamend.
