Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-5_13-ap-05118/USCOURTS-canb-5_13-ap-05118-0/pdf.json

Parties Involved:
John P. McDonnell
Plaintiff
Willie John Riley
Defendant

Document Text:

UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re ] Case No. 13-52521-ASW

]

WILLIE JOHN RILEY, ] Chapter 13

]

Debtor. ]

]

]

JOHN P. MCDONNELL, ] Adv. Pro. No. 13-05118-ASW

]

Plaintiff, ] 

]

v. ]

] Hrg. Date: Jan. 22, 2015

WILLIE JOHN RILEY, ] Hrg. Time: 3:00 p.m.

]

Defendant. ]

___________________________________]

MEMORANDUM DECISION RE: DEFENDANT’S

MOTION FOR SUMMARY JUDGMENT

Before the Court is the motion of Defendant Willie Riley for

summary judgment of dismissal of Plaintiff John McDonnell’s claim

for nondischargeability under § 523(a)(2)(A). Defendant is

represented by attorney Steven Miyake. Plaintiff, who opposes the

motion, is pro se.

In the motion, Defendant contends that Plaintiff’s

nondischargeability claim is barred by the statute of limitations

under Cal. Civ. Proc. Code § 338, which provides for a three-year

IT IS SO ORDERED.

Signed January 21, 2015

Arthur S. Weissbrodt

U.S. Bankruptcy Judge

________________________________________

Entered on Docket 

January 21, 2015

EDWARD J. EMMONS, CLERK 

U.S. BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 1 of 7 
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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limitations period for actions for relief on the ground of fraud or

mistake. The statute also provides that a cause of action for fraud

“is not deemed to have accrued until the discovery, by the

aggrieved party, of the facts constituting the fraud . . . .” Cal.

Civ. Pro. Code § 338(d).

Here, this Court found in its Tentative Decision issued

November 13, 2014, that under Banks v. Gill Distrib. Ctrs., Inc.,

263 F.3d 862, 868 (9th Cir. 2001), so long as Plaintiff had taken

some steps to establish the debt within the limitations period by,

for example, filing a state court complaint for breach of contract,

Plaintiff need not have pleaded a claim for fraud in that complaint

in order to be entitled to bring a nondischargeability claim in

bankruptcy.

As noted in the Tentative Decision, the parties dispute

whether the cause of action accrued when Defendant made a payment

to Plaintiff in May 2009, or on February 19, 2010, when Plaintiff

received $42,000 of funds from the State Bar Client Security Fund

that would have otherwise gone to Defendant.

This Court found that Mr. McDonnell’s state court complaint,

which was filed February 15, 2013, had been timely filed under Cal.

Civ. Proc. Code § 337, which provides for a four-year limitations

period on an action for breach of a written contract. Because

Plaintiff’s state court complaint was filed less than four years

from the earliest date alleged, May 2009, the Court found the

complaint timely and did not reach the issue of when the cause of

action accrued.

At oral argument on the Tentative Decision, Mr. Miyake

correctly pointed out that there was no written contract between

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 2 of 7 2
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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Mr. McDonnell and Mr. Riley – thus, the applicable statute of

limitations is two years pursuant to Cal. Civ. Proc. Code § 339.

Based on this, Mr. Miyake argued that the state court complaint was

untimely. However, Mr. McDonnell argued that his state court

complaint also included a claim for account stated, which has a

four-year statute of limitations under Cal. Civ. Proc. Code § 337.

The Court permitted the parties to submit further briefing.

The Court has reviewed the supplemental briefing. For the reasons

set forth below, the motion for summary judgment is denied.

Under California law, the elements of an account stated are:

(1) previous transactions between the parties

establishing the relationship of debtor and creditor; (2)

an agreement between the parties, express or implied, on

the amount due from the debtor to the creditor; (3) a

promise by the debtor, express or implied, to pay the

amount due.

. . . .

The agreement of the parties necessary to establish an

account stated need not be express and frequently is

implied from the circumstances. In the usual situation,

it comes about by the creditor rendering a statement of

the account to the debtor. If the debtor fails to object

to the statement within a reasonable time, the law

implies his agreement that the account is correct as

rendered.

Zinn v. Fred. R. Bright Co., 271 Cal. App. 2d 597, 600 (1969)

(citations omitted). See also Davis & Cox v. Summa Corp., 751 F.2d

1507, 1515 (9th Cir. 1985).

Because the last bill for services performed was dated in

February of 2010, Plaintiff argues that the state court complaint

was timely, having been filed less than four years later on

February 15, 2013. On the face of it, this argument appears to have

merit.

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 3 of 7 3
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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However, in Filmservice v. Bernhard, et al., 208 Cal. App. 3d

1297 (1989), cited by Defendant, the plaintiff’s original complaint

contained two causes of action, one for an open book account and

the other for oral contract. After the defendant’s first demurrer

was sustained, the plaintiff filed an amended complaint omitting

the contract claim and pleading claims for book account, account

stated, and foreclosure of an equitable lien. There was no

explanation as to why the oral contract claim had been deleted. Two

more amended complaints were subsequently filed; the trial court

sustained defendant’s demurrer to the third amended complaint on

grounds that the claims were barred by the two-year statute of

limitations applicable to oral contracts, despite the fact that the

amended complaint no longer contained a contract claim. 

The Court of Appeals affirmed. On appeal, the plaintiff argued

that the original pleading of an oral contract should be

disregarded because that pleading was superseded by the pleading of

an open book account and an account stated. The Court of Appeals

rejected that argument, noting that the allegations of the third

amended complaint did not give rise to a reasonable inference that

the oral contract had been superseded by an open book account or

account stated. In fact, in the third amended complaint the

plaintiff had alleged that the parties had “contracted to perform

the obligation upon which this action is sought,” essentially

admitting to the existence of an oral contract. The Court of

Appeals concluded that the plaintiff was attempting to transmute a

time barred action for breach of an oral contract into a timely

action under common counts. Id. at 1307-08.

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 4 of 7 4
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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Defendant contends the record “clearly establishes” that

Plaintiff in this case also attempted to transmute his untimely

breach of oral contract claim into a timely action based on common

counts, and that the facts in the state court complaint did not

give rise to a reasonable inference that the oral contract was

superseded by an open book account or account stated. However,

Defendant has not provided a copy of the state court complaint, so

the Court cannot analyze of whether Filmservice controls here.

Also, but for the automatic stay, Plaintiff could move to amend his

state court complaint. The parties have not addressed whether such

a motion might affect the legal analysis of these issues.

Summary judgment shall be rendered by the Court if the

pleadings, depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56,

applicable in bankruptcy via Fed. R. Bank. P. Rule 7056; Matsushita

Electric Industrial Co., Ltd. v. Zenith Radio Corporation, 475 U.S.

574, 584-85 (1985). The moving party has the burden of showing the

absence of a genuine issue as to any material fact, and all

inferences must be drawn against the moving party. Adickes v. S.H.

Kress & Co., 398 U.S. 144, 158-59 (1970); United States v. Diebold,

Inc., 369 U.S. 654, 655 (1962). 

Here, Defendant has not met his burden to show that there is

no genuine issue as to any material fact entitling him to judgment

as a matter of law. To the contrary, the parties’ assertions and

evidence raise a genuine issue of fact as to whether the state

court complaint was timely filed. The parties dispute whether the

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 5 of 7 5
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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allegations of the state court complaint are sufficient to render

the complaint timely filed, but Defendant, who has the burden of

proof, has not provided any evidence to support his argument that

the circumstances here are analogous to those in the Filmservice

case.

For this reason, and the reasons set forth in the Court’s

Tentative Decision, summary judgment is denied without prejudice.

The hearing scheduled for January 22, 2015 is off calendar.

Plaintiff may submit a proposed form of order.

*** END OF MEMORANDUM DECISION ***

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 6 of 7 6
UNITED STATES BANKRUPTCY COURT

 For The Northern District Of California

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Court Service List

Parties to be served electronically.

Case: 13-05118 Doc# 37 Filed: 01/21/15 Entered: 01/21/15 12:05:45 Page 7 of 7 7