Court Opinion

ID: 4679862
Source: CourtListenerOpinion
Date Created: 2021-04-22 00:02:33.814005+00
Date Added: 2024-06-11T08:03:51.458741
License: Public Domain

Filed 4/21/21 Mims v. Bank of America, N.A. CA2/4
               NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
           California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying
 on opinions not certified for publication or ordered published, except as specified by rule 8.1115(a).
     This opinion has not been certified for publication or ordered published for purposes of rule
                                                8.1115(a).

         IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                    SECOND APPELLATE DISTRICT
                           DIVISION FOUR

 JAMES MIMS et. al.,                                            B308571

       Plaintiffs and Appellants,                               Los Angeles County
                                                                Super. Ct. No.
       v.                                                       19STCV24305
 BANK OF AMERICA, N.A.,

       Defendant and Respondent.

      APPEAL from a judgment of the Superior Court of Los
Angeles County, Barbara Marie Scheper, Judge. Affirmed.
      Terran T. Steinhart for Plaintiffs and Appellants.
      Severson & Werson, Kerry W. Franich and Jan T. Chilton
for Defendant and Respondent.
                        INTRODUCTION

      Plaintiffs and appellants James Mims and Bettie Mims1
appeal from a judgment of dismissal entered after the trial court
granted a motion for judgment on the pleadings brought by
defendant and respondent Bank of America, N.A. (“the Bank”).
The Mims’ complaint against the Bank asserted a single claim for
declaratory relief. Specifically, they sought a judicial declaration
that no balance was due on a home equity line of credit
(“HELOC”) they opened with the Bank in 2006.
      In granting the Bank’s motion, the trial court determined
the Mims’ claim is barred by the statute of limitations.
Specifically, it found the claim is predicated on the Bank’s alleged
breaches of the contracts governing the parties’ rights and
responsibilities pertaining to the Mims’ HELOC account, which
occurred outside the four-year limitations period set forth in Code
of Civil Procedure,2 section 337, subdivision (a).
      On appeal, the Mims contend: (1) the trial court erred by
finding their claim is time-barred, as it is based on a book
account, and accrued within the limitations period set forth in
section 337, subdivision (b); (2) even if their claim is governed by
section 337, subdivision (a), it is not time-barred due to the
equitable doctrine of setoff; and (3) the trial court abused its
discretion by denying their request for leave to amend. We affirm.

1     Because they refer to themselves collectively as the Mims,
rather than the Mimses, we will do the same.

2     All statutory references are to the Code of Civil Procedure.

                                 2
                        BACKGROUND

       The Mims co-own a parcel of residential real property
located in Los Angeles (“the Property”). In July 2004, they opened
a $95,000 HELOC account with the Bank, which was secured by
a deed of trust encumbering the Property (“Loan 9199”). Loan
9199 was allegedly paid in full in 2005.
       In April 2006, the Mims opened a $150,000 HELOC
account with the Bank, again secured by a deed of trust on the
Property (“Loan 6799”). Sometime in 2016, the Bank informed
the Mims they had defaulted on Loan 6799.
       Between October 2017 and January 2019, the parties,
through their counsel, exchanged written correspondence, in
which the Mims disputed the accuracy of the Bank’s records
regarding the amounts owed on their HELOC accounts. In their
letters, the Mims asserted the Bank improperly: (1) charged them
for withdrawals they did not make on Loans 9199 and 6799; (2)
failed to credit them for payments made on both loans; and (3)
“created a third loan account” without their knowledge or
consent, and charged them for withdrawals and fees on that
account. Thus, the Mims argued that rather than owing any
money to the Bank, they were entitled to a refund for
overpayments made on the allegedly improper charges related to
all three loans. In its responses, the Bank stated the Mims failed
to substantiate their claims. Apparently, the parties never
entered into a tolling agreement.
       While the parties exchanged correspondence, in April 2018,
the Bank recorded a notice of default under the deed of trust on
Loan 6799 and commenced foreclosure proceedings.

                                3
Subsequently, the Bank recorded a notice of trustee’s sale, which
was scheduled for July 18, 2019.
       The notice of trustee’s sale prompted the Mims to file their
complaint against the Bank on July 15, 2019. The complaint
reiterated the allegations set forth in the Mims’ letters to the
Bank, as discussed above. Based on those allegations, the Mims
asserted a single claim for declaratory relief. Specifically, they
alleged “[a] controversy exists between [the] Bank and the Mims,”
in that the Bank “contends . . . Loan 6799 went into default [in
2016,] with a total balance due in the neighborhood of $150,000,”
while “the Mims contend that they paid off Loan 6799 in full and
that it did not go into default.” They sought “a judicial
declaration vindicating [their] contention that Loan 6799 is not in
default and/or has been paid in full.”
       The Bank filed a motion for judgment on the pleadings,
arguing the Mims’ claim is barred by the statute of limitations. In
support of this position, the Bank contended “the gravamen of the
action is that [the Bank] breached the promissory note and/or
Deed of Trust [securing Loan 6799] by failing to credit payments
they made to [it] and/or assessing [the Mims] with withdrawals
that did not actually occur.” Consequently, the Bank argued, the
four-year limitations period for breach of contract claims set forth
in section 337, subdivision (a) applies, and the Mims’ claim
accrued the moment the Bank’s wrongful acts took place. Because
the improper transactions allegedly occurred no later than 2014,
the Bank asserted the claim is time-barred.
       In opposition, the Mims contended section 337, subdivision
(a) does not apply. Instead, they argued, the limitations period for
claims on book accounts, set forth in section 337, subdivision (b),
governs their claim, as “the loan history and/or monthly loan

                                 4
statements provided by [the Bank] c[a]me squarely within the
definition of a ‘book account’” provided in section 337a. The Mims
therefore contended their claim is not time-barred, as it did not
accrue until the date of the last entry on the book account, which
occurred within four years of their complaint being filed. In the
alternative, the Mims argued that even if their claim is governed
by section 337, subdivision (a), it is not time-barred due to “the
case law equitable rule of set-off, or the statutory application of
that rule” provided in section 431.70.
       After the Bank filed its reply, the Mims obtained the trial
court’s permission to file a sur-reply. Among other things, the
Mims argued that if the trial court were to grant the Bank’s
motion, it should do so with leave to amend for purposes of
allowing them to attach a copy of the “Bank of America Equity
Maximizer Agreement and Disclosure Statement” (“Maximizer
Agreement”) to the complaint. According to the Mims, the
Maximizer Agreement demonstrated Loan 6799 is a book account
within the meaning of section 337a.
       The trial court granted the Bank’s motion. In so doing, the
court first ruled that, as a matter of law, the Mims’ claim is not
based on a book account, because it is predicated on “monies
due . . . under an express contract,” i.e., the deed of trust securing
Loan 6799.3 Subsequently, the trial court determined the Mims
could not “save[ ] their claim” through application of section

3     The trial court referenced only the deed of trust, not the
Maximizer Agreement, perhaps because the Bank’s motion for
judgment on the pleadings only attached the deed of trust, and
contended that the Mims’ claims arose out of breaches of that
contract. The Maximizer Agreement was attached to the Mims’
sur-reply, and on appeal, both parties rely on the Maximizer
Agreement in support of their respective positions.

                                  5
431.70 or “case authority allowing for a claim of set-off if equity
demands.” On this point, the court noted: (1) section 431.70, by
its terms, may only be used by defendants, not plaintiffs; and (2)
the primary case on which the Mims relied in support of their
equitable setoff argument, Plut v. Fireman’s Fund Ins. Co. (2000)
85 Cal.App.4th 98, was distinguishable, as it involved a
defendant’s assertion of setoff against a judgment entered in the
plaintiff’s favor. Lastly, the trial court denied the Mims’ request
for leave to amend, finding the Maximizer Agreement “would not
establish an open book account as [the Mims] contend.” The
Mims appealed from the ensuing judgment.

                          DISCUSSION

I.    The trial court did not err by granting the Bank’s
      motion for judgment on the pleadings.

       “In an appeal from a motion granting judgment on the
pleadings, we accept as true the facts alleged in the complaint
and review the legal issues de novo. ‘A motion for judgment on
the pleadings, like a general demurrer, tests the allegations of
the complaint or cross-complaint, supplemented by any matter of
which the trial court takes judicial notice, to determine whether
plaintiff or cross-complainant has stated a cause of action.
[Citation.] Because the trial court’s determination is made as a
matter of law, we review the ruling de novo, assuming the truth
of all material facts properly pled.’ [Citation.]” (Angelucci v.
Century Supper Club (2007) 41 Cal.4th 160, 166.)

                                 6
      The Mims contend the trial court erred by finding their
declaratory relief claim is time-barred. In support of this position,
they advance two arguments. We address each in turn below.

      A.    The Mims’ claim is not governed by section 337,
            subdivision (b).

       “A claim for declaratory relief is subject to the same statute
of limitations as the legal or equitable claim on which it is based.
[Citation.]” (Bank of New York Mellon v. Citibank, N.A. (2017) 8
Cal.App.5th 935, 943.) Accordingly, “if declaratory relief is sought
with reference to an obligation which has been breached and the
right to commence an action for ‘coercive’ relief upon the cause of
action arising therefrom is barred by the statute [of limitations],
the right to declaratory relief is likewise barred.” (Maguire v.
Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 734.)
        “To determine the statute of limitations which applies to a
cause of action it is necessary to identify the nature of the cause
of action, i.e., the ‘gravamen’ of the cause of action. [Citations.]
‘[T]he nature of the right sued upon and not the form of action
nor the relief demanded determines the applicability of the
statute of limitations . . . .’ [Citation.]” (Hensler v. City of
Glendale (1994) 8 Cal.4th 1, 22-23.) “What is significant for
statute of limitations purposes is the primary interest invaded by
[the] defendant’s wrongful conduct. [Citation.]” (Barton v. New
United Motor Manufacturing, Inc. (1996) 43 Cal.App.4th 1200,
1207.)
       Per section 337, subdivision (a), a breach of contract claim
must be brought within four years of its accrual. (§ 337, subd. (a);
see also Gilkyson v. Disney Enterprises, Inc. (2016) 244

                                  7
Cal.App.4th 1336, 1341 (Gilkyson).) “Traditionally, a claim
accrues ‘“‘when [it] is complete with all of its elements’—those
elements being wrongdoing [or breach], harm, and causation.”’
[Citations.]” (Gilkyson, supra, 244 Cal.App.4th at p. 1341.)
       Pursuant to section 338, subdivision (b), “[a]n action to
recover . . . upon a book account . . . consisting of one or more
entries” must be brought within four years of “the date of the last
item.” Section 337a defines “book account” as follows: “[A]
detailed statement which constitutes the principal record of one
or more transactions between a debtor and a creditor arising out
of a contract or some fiduciary relation, and shows the debits and
credits in connection therewith, and against whom and in favor of
whom entries are made, is entered in the regular course of
business as conducted by such creditor or fiduciary, and is kept in
a reasonably permanent form and manner . . . .”
       “‘An express contract, which defines the duties and
liabilities of the parties, whether it be oral or written, is not, as a
rule, an open account.’ [Citation.]” (Eloquence Corp. v. Home
Consignment Center (2020) 49 Cal.App.5th 655, 665. (Eloquence).)
This “general rule,” however, “is subject to the exception that an
open book account cause of action may lie where the parties had
agreed to treat money due under an express contract as items
under open book account. [Citation.]” (Ibid.) Accordingly, “monies
which become due under an express contract . . . cannot, in the
absence of a contrary agreement between the parties, be treated as
items under an open book account so as to allow [a party] to
evade or extend the statutory limitations period. [Citations.]”
(Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57
Cal.App.4th 1334, 1343-1344 (Tsemetzin).)

                                  8
      The Mims contend the applicable statute of limitations is
section 337, subdivision (b), rather than subdivision (a), because
the account histories and billing statements for Loan 6799 satisfy
section 337’s definition of “book account.” Relying on Warda v.
Schmidt (1956) 146 Cal.App.2d 234 (Warda) and In re Roberts
Farms, Inc. (9th Cir. 1992) 980 F.2d 1248 (Roberts Farms), they
argue they did not have to show the parties agreed to treat the
money due on their HELOC account as items in a book account,
because the Maximizer Agreement “does not set the time and
amount of payments.” (Bolded text and italics in original.)
      In response, the Bank contends Warda and Roberts Farms
are distinguishable from this case. Instead, it analogizes this case
to Eloquence, arguing that because the Maximizer Agreement
“fixed the time for payment” as “once a month” and “set forth the
formulas by which the amount of each monthly payment would
be calculated[,]” the monies due and at issue are governed by a
contract. Consequently, the Bank asserts, the Loan’s account
histories and billing statements did not create a book account;
rather, they illustrated the Bank’s “‘incidental keeping of
accounts under an express contract[.]’” It therefore argues that
because the Mims did not plead or otherwise establish the parties
agreed to treat the monies due on the HELOC account as items
in a book account, section 337, subdivision (b) does not apply.
      As discussed below, we agree with the Bank that this case
is more analogous to Eloquence than Warda and Roberts Farms.
Accordingly, we conclude the trial court correctly found the Mims’
claim is based on the Bank’s alleged breaches of the contracts
governing Loan 6799, rather than a book account, and is subject
to the limitations period provided in section 337, subdivision (a).

                                 9
       In Warda, the plaintiff entered into a written contract with
the defendant to perform plastering work on 171 homes in a
subdivision the defendant was developing. (Warda, supra, 146
Cal.App.2d at p. 235.) The contract set the plaintiff’s rate of pay,
and stated payment was to be made in three installments based
on his completion of various stages in the plastering process. (Id.
at pp. 235-236.) Subsequently, however, deviations from the
defendant’s building plans required the plaintiff to do more
plastering than originally anticipated. (Id. at p. 236.) Thus, the
parties entered into an oral agreement, whereby the defendant
agreed to compensate the plaintiff for the extra work. (Ibid.) The
parties did not agree on payment terms. (Ibid.) Later, the
plaintiff billed the defendant for the additional plastering. (Ibid.)
       Several years later, the plaintiff sued the defendant to
recover the balance due for the work performed. (Warda, supra,
146 Cal.App.2d at p. 236.) Following a bench trial, the trial court
entered judgment in the plaintiff’s favor, finding he had proven a
book account existed between the parties, on which the defendant
owed $23,592.64. (Ibid.) On appeal, the defendant contended the
plaintiff’s loose-leaf ledger book did not, as a matter of law,
constitute a book account within the meaning of section 337. (Id.
at p. 237.) The defendant argued the plaintiff’s claim arose out of
the parties’ oral and written contracts, and therefore was barred
by the statute of limitations. (Id. at pp. 236-237)
       The Court of Appeal affirmed. (Warda, supra, 146
Cal.App.2d at p. 240.) In support of its holding, the Court of
Appeal first acknowledged that, in general, “[t]he mere recording
in a book of transactions or the incidental keeping of accounts
under an express contract does not itself create a book account.
[Citations.] Such memoranda cannot be utilized under the guise

                                 10
of a book account as a device to extend the statute of limitations
beyond the time it would run on the contractual obligation.
[Citation.]” (Id. at p. 237.) It further noted, “[h]owever, the
parties to a written or oral contract may, by agreement or
conduct, provide that monies due under such contract shall be the
subject of an account between them. [Citations.] In that event a
cause of action arising therefrom is on the account and not on the
underlying contract. [Citation.]” (Ibid.)
       Applying these principles, the Court of Appeal held the
evidence at trial showed the parties agreed to treat payments for
the plastering work as monies due on an account between them,
as opposed to being governed by their contracts. (See Warda,
supra, 146 Cal.App.2d at pp. 237-238.) Specifically, the Court of
Appeal observed: (1) the plaintiff and his foreman, who was also
his bookkeeper, testified “the installment-payment provisions of
[the parties’ written] contract were never followed and that all
payments made by [the] defendant to [the] plaintiff were on
account”; (2) the defendant’s bookkeeper likewise testified that
payments to the plaintiff “were on account”; and (3) the parties’
oral contracts did not contain any payment provisions. (Ibid.)
       In Roberts Farms, a law firm and a corporation entered into
an oral contract, in which the law firm agreed to defend the
corporation against a lawsuit in exchange for timely payment for
services rendered. (Roberts Farms, supra, 980 F.2d at p. 1250.)
Under that contract, the firm represented the corporation from
April 1985 to January 1987, and billed for its services by mailing
monthly statements. (Ibid.) The corporation failed to pay for
services rendered from July 1985 through January 1987. (Ibid.)
       In December 1987, the corporation filed a voluntary
Chapter 11 petition pursuant to 11 U.S.C. § 1121(a). (Roberts

                               11
Farms, supra, 980 F.2d at p. 1250.) In February 1988, the law
firm filed a claim in the bankruptcy proceeding, asserting the
corporation was indebted to it in the amount of $144,898.14 for
legal services. (Ibid.) The corporation objected to the claim,
arguing it was barred by the statute of limitations. (Ibid.) The
bankruptcy court determined the law firm’s claim was not time-
barred because the firm’s records constituted an open book
account under section 337a. (Id. at p. 1251.) The Bankruptcy
Appellate Panel (BAP) affirmed the trial court’s decision. (Ibid.)
       The Ninth Circuit affirmed the trial court’s and the BAP’s
decisions, holding the law firm’s ledger cards, time sheets, and
billing statements constituted an open book account. (Roberts
Farms, supra, 980 F.2d at pp. 1252-1253.) In so doing, the Ninth
Circuit rejected the corporation’s argument that “both the
creditor and debtor must expressly intend to be bound by the
book account before a book account is created.” (Id. at p. 1252, fn.
3.) The Ninth Circuit observed: “California courts only require
that the parties expressly intend to be bound by an open book
account when there is an express contract that sets the time and
amount of payment. [Citations.]” (Ibid.) The Ninth Circuit held
that, on the facts before it, no such intention was required,
because the parties’ “oral contract . . . did not fix a time for
payment or a monthly amount payable,” and “[t]he amount owing
and the time for payment depended on what services [were]
performed and on what dates these services were rendered[.]”
(Ibid.) Consequently, the law firm’s record keeping “was not the
mere incidental recording of debts accruing from an entirely
independent source,” as those records “were the only source
available to determine what and when [the corporation] owed
payment.” (Ibid.)

                                12
       In Eloquence, two consigners agreed to consign jewelry and
loose diamonds to a consignee for resale. (Eloquence, 49
Cal.App.5th at p. 658.) The agreement required the consignee to
provide the consignors with a monthly sales report, showing the
items sold. (Ibid.) Upon receiving the report, the consignors
prepared an invoice setting forth the payment due, which, per the
agreement, the consignee was required to pay within 30 days.
(Ibid.) The agreement also provided for a biannual reconciliation
of the inventory of consigned goods, and required the consignee to
pay any invoice stemming from the reconciliation within 30 days.
(Id. at p. 659.) The agreement was amended once while it was in
place to reflect the consignors’ merger into a single entity. (Ibid.)
       Subsequently, the consignor sued the consignee and its
general partners to recover monies due on two unpaid invoices
following a reconciliation, asserting claims for breach of contract
and recovery on an open book account. (Eloquence, 49
Cal.App.5th at p. 659.) The defendants moved for summary
judgment, arguing: (1) both claims were barred by the statute of
limitations; and (2) the consignor failed to show the existence of
an open book account between the parties. (Ibid.) The trial court
agreed and granted the defendants’ motion. (Id. at p. 660.)
       The Court of Appeal affirmed. (Eloquence, supra, 49
Cal.App.5th at p. 667.) With respect to the consignor’s open book
account claim, the Court of Appeal determined “the [a]greement
is an express contract that specifically defines [the consignee’s]
obligation to pay the specified amount of each invoice within a
specified time period[.]” (Id. at p. 665.) Thus, the Court of Appeal
determined the consignor was required to demonstrate the
parties agreed to treat money due under the agreement as items
on an open book account. (See ibid.) Subsequently, the Court of

                                 13
Appeal held the consignor failed to “show agreement or conduct
evidencing an open book account[.]” (Id. at p. 666.) Specifically, it
concluded the documents submitted by the consignor were
“merely secondary or incidental records” that “serv[ed] to track
the status” of the unpaid invoices issued under the agreement,
which could not be used to “attempt[ ] an end-run around the
statute of limitations for written contract. [Citations.]” (Ibid.)
       Here, the parties do not dispute that the Maximizer
Agreement governs the Mims’ HELOC account. That account is
defined as “a revolving credit arrangement in which [the Bank]
make[s] loans to [the Mims] by advancing funds (‘Advances’) at
[their] direction [and] allow[s] [them] to repay those
Advances . . . subject to the terms of [the Maximizer Agreement].”
(Bolded text in original.) The Maximizer Agreement specifies the
maximum total amount the Mims could borrow on their account,
and permits the Mims to take Advances during the 120-month
period commencing from the date the account was opened, known
as the “Draw Period.”
       Similar to the consignment agreement in Eloquence, and in
contrast with the oral contracts in Warda and Roberts Farms, the
Maximizer Agreement defines the Mims’ payment obligations.
During the Draw Period, the Maximizer Agreement required the
Mims to make a “Minimum Payment” each month they had an
outstanding balance on their account. After the Draw Period
ended, the Maximizer Agreement required them to make a
Minimum Payment (as defined) “each month.” The Maximizer
Agreement then set forth, in detail, the various formulas used to
calculate the Minimum Payments, which depended on when
payments were due (i.e., during or after the Draw Period) and the
payment option the Mims selected. According to the Maximizer

                                 14
Agreement, Minimum Payments were due as shown on “Billing
Statements” sent by the Bank.
        Through these terms, the Maximizer Agreement, like the
consignment agreement in Eloquence, “specifically defines [the
Mims’] obligation to pay the specified amount of each [Billing
Statement],” and delineates when those payments were required.
(Eloquence, supra, 49 Cal.App.5th at p. 665.) Thus, the monies
due on the Mims’ HELOC account do not, as a matter of law,
constitute items in a book account unless the record reflects the
parties agreed—either expressly or by their conduct—to treat
them in that manner. (See id. at pp. 665-666; Tsemetzin, supra,
57 Cal.App.4th at pp. 1343-1344.)
        As the Bank correctly points out, however, none of the
documents in the record reflect the parties expressly agreed to
treat the payments due on Loan 6799 as items in a book account.
Moreover, the Mims do not plead any facts establishing the
parties made such an agreement through their conduct. For
example, in contrast with Warda, the Mims do not allege (or
argue they could allege) the parties did not follow the provisions
defining the Mims’ payment obligations under their written
contract, i.e., the Maximizer Agreement, and instead made
payments and credits on an independent account. (See Warda,
supra, 146 Cal.App.2d at pp. 237-238.) Thus, Loan 6799’s account
history and billing statements reflect the Bank’s “incidental
keeping of [an] account[ ] under an express contract,” which “do[ ]
not . . . create a book account” and “cannot be utilized . . . as a
device to extend the statute of limitations beyond the time it
would run on the contractual obligation. [Citation.]” (Id. at p.
237.)

                                15
       Accordingly, we conclude the Mims’ claim for declaratory
relief is not predicated on a book account. Rather, the claim is
based upon the Bank’s alleged failure to comply with its
obligations under Maximizer Agreement and the deed of trust
securing Loan 6799, which required it to credit the Mims for
payments made, and enumerated the circumstances in which it
could issue advances on the HELOC account. Consequently,
section 337, subdivision (b) does not apply, and the proper statute
of limitations is section 337, subdivision (a).

      B.    The Mims have not shown the equitable
            doctrine of setoff saves their claim.

       Next, the Mims argue that even if their claim is governed
by section 337, subdivision (a), their claim is not time-barred due
to the equitable doctrine of setoff. Specifically, they appear to
contend: (1) unlike the statutory right of setoff codified in section
431.70, the equitable doctrine of setoff is not limited to use by
defendants, and can be invoked by plaintiffs; and (2) the
equitable doctrine of setoff operates in the same manner as
statutory setoff, and therefore permits the Mims to rely on time-
barred breach of contract claims to seek declaratory relief
discharging any balance owed on Loan 6799. As discussed below,
we are not persuaded by the Mims’ argument.
       At the outset, we note the Bank does not appear to dispute
the equitable doctrine of setoff may be utilized by plaintiffs.
Moreover, caselaw appears to be in accord with the Mims’
position on this point. (See, e.g., Harrison v. Adams (1942) 20
Cal.2d 646, 647 [plaintiff filed original action in equity seeking to
set off the amount of a judgment against him and in favor of

                                 16
defendant by the amount of a promissory note by defendant,
which plaintiff had been assigned for purposes of collection].)
Therefore, we turn to consider whether the Mims have shown the
doctrine applies to save their claim from being time-barred.
       Although the Mims concede it does not apply to them, we
begin our discussion with section 431.70 because, as discussed
above, they still rely on the statute in support of their argument.
Section 431.70 provides, in relevant part: “Where cross-demands
for money have existed between persons at any point in time
when neither demand was barred by the statute of limitations,
and an action is thereafter commenced by one such person, the
other person may assert in the answer the defense of payment in
that the two demands are compensated so far as they equal each
other, notwithstanding that an independent action asserting the
person’s claim would at the time of filing the answer be barred by
the statute of limitations.” This statute “provide[s] partial relief
from the statute of limitations” by allowing a defendant to “assert
[an] expired claim defensively” to “defeat [a] plaintiff’s claim in
whole or in part.” (Construction Protective Services, Inc. v. TIG
Specialty Ins. Co (2002) 29 Cal.4th 189, 195, 198.)
       As noted above, the Mims suggest the equitable doctrine of
setoff is, for all intents and purposes, identical to statutory setoff,
except that it is not limited to use by defendants. Therefore, they
argue that by invoking the doctrine, they may rely on their
expired breach of contract claims to seek declaratory relief from
the debt owed on Loan 6799.
       The Mims, however, do not cite, and we could not locate,
any California appellate court decisions demonstrating the
equitable doctrine of setoff operates in the manner they contend.
Rather, cases applying the doctrine, including the two cited in the

                                  17
Mims’ opening brief,4 reflect it generally applies where a party
against whom judgment has been entered seeks to reduce the
amount owed thereunder by using a judgment or claim that party
held against the other, which is valid at the time setoff was
sought. (See, e.g., Harrison v. Adams, supra, 20 Cal.2d at pp. 647-
648 [plaintiff sought to set off judgment by promissory note]; Wm.
R. Clarke Corp. v. Safeco Ins. Co. of Am. (2000) 78 Cal.App.4th
355, 357-358 [defendant sought to set off judgment by creditors’
claims owed by plaintiff, which defendant acquired by
assignment]; Margott v. Gem Properties, Inc. (1973) 34
Cal.App.3d 849, 852 [defendant sought to set off judgment by
another judgment]; Keith G. v. Suzanne H. (1998) 62 Cal.App.4th
853, 856 [same].) So far as we can tell, there do not appear to be
any cases to support the Mims’ contention. Accordingly, we
conclude the Mims’ argument on this point is unavailing, as they
have not shown it is supported by legal authority.
      In sum, the Mims’ claim for declaratory relief is not based
on a book account; instead, it is predicated on the Bank’s alleged
breaches of the contracts pertaining to Loan 6799. Consequently,
the claim is governed by section 337, subdivision (a). The parties
do not appear to dispute the alleged breaches occurred between
2006 and 2014. Thus, because the complaint was not filed until
2019, the claim is time-barred, and the Mims have not shown the
equitable doctrine of setoff applies to rescue their claim. We
therefore conclude the trial court correctly granted the Bank’s
motion for judgment on the pleadings.

4    The Mims do not cite any authority in support of their main
argument on this point in their reply brief.

                                18
II.   The trial court did not abuse its discretion by
      denying the Mims’ request for leave to amend.

       “We review the trial court’s denial of leave to amend after
granting a motion for judgment on the pleadings for abuse of
discretion. [Citation.]” (Travelers Property Casualty Co. of
America v. Engel Insulation, Inc. (2018) 29 Cal.App.5th 830, 838.)
“To show abuse of discretion, [the] plaintiff must show in what
manner the complaint could be amended and how the
amendment would change the legal effect of the complaint, i.e.,
state a cause of action. [Citations.]” (Buller v. Sutter Health
(2008) 160 Cal.App.4th 981, 992.)
       The Mims contend they should have been afforded leave to
amend to attach a copy of the Maximizer Agreement to their
complaint because it would establish Loan 6799 is a book
account. As discussed in section I.A, supra, however, the
Maximizer Agreement does not demonstrate their claim is based
on a book account; indeed, it actually refutes the Mims’
contention. Accordingly, we conclude the trial court did not abuse
its discretion by denying their request for leave to amend.

                               19
                           DISPOSITION
      The judgment is affirmed. Respondent shall recover its
costs on appeal.

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

           CURREY, J.

           We concur:

           WILLHITE, Acting P.J.

           COLLINS, J.

                               20