Filed 5/3/21 Residual Income Opportunities v. Cybersource Corp. CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
RESIDUAL INCOME B304534
OPPORTUNITIES, INC., et al.,
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. BC627326)
v.
CYBERSOURCE
CORPORATION,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los
Angeles County, Yolanda Orozco, Judge. Affirmed in part,
reversed in part, and remanded with directions.
Catanzarite Law Corporation, Kenneth J. Catanzarite and
Brandon E. Woodward for Plaintiffs and Appellants.
Farella Braun + Martel, Carly O. Alameda, Sushila
Chanana and Kelly M. Matayoshi for Defendant and Respondent.
The parties accepted the trial court’s offer to submit on the
tentative ruling, which sustained defendant’s demurrer to two
causes of action without leave to amend but overruled it as to a
third cause of action. The promise was that if the parties
submitted on the tentative, that would be the ruling. However,
the final order was different. It sustained the demurrer in its
entirety without leave to amend and dismissed the moving
defendant from the action; and it did so in this critical pretrial
matter without affording plaintiffs oral argument as to that part
of the ruling that was being changed.
We reverse only that portion of the order that was different
than the tentative and remand the matter to the trial court with
directions to allow plaintiffs a fair opportunity to orally argue the
demurrer as to the third cause of action.
BACKGROUND
Unable to satisfy a judgment, plaintiffs Residual Income
Opportunities, Inc. and Reuven Cypers brought this action
against numerous defendants seeking to reach various assets
they believed had been fraudulently transferred away to make
the debtor judgment-proof. Believing that Cybersource
Corporation, dba Authorize.net (Cybersource) was one of the
entities that helped in that effort, plaintiffs added it as a Doe
defendant to their first amended complaint. Cybersource
successfully demurred on the ground of uncertainty.
The second amended complaint named Cybersource in the
second cause of action (to set aside a fraudulent transfer), the
third cause of action (for conspiracy to defraud), and the fourth
cause of action (for declaratory relief). Cybersource filed a
general demurrer. Although plaintiffs had notice, they failed to
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file any opposition to the demurrer because of counsel’s admitted
calendaring error.
The trial court issued a tentative ruling stating its
intention to sustain the demurrer to the second and fourth causes
of action without leave to amend, but to overrule the demurrer to
the third cause of action. The court attached a notice that the
parties could submit on the tentative ruling by email and that if
“all parties to the motion submit, this tentative ruling will become
the final ruling after the hearing date and it will be memorialized
in a minute order.” (Italics added.) Both parties submitted on
the tentative.1
But after the hearing date, the trial court entered a
different order: It sustained the demurrer as to all three causes
of action. The trial court denied leave to amend because
plaintiffs had not filed opposition indicating how they would cure
the defects. Plaintiffs timely appealed Cybersource’s dismissal
from the lawsuit.
DISCUSSION
There is no absolute right to oral argument on every law
and motion matter. (Diaz-Barba v. Superior Court (2015)
236 Cal.App.4th 1470, 1490.) However, parties are “entitled to
oral argument in ‘critical pretrial matters’ where there is a ‘real
and genuine dispute.’ ” (Medix Ambulance Service, Inc. v.
Superior Court (2002) 97 Cal.App.4th 109, 114 (Medix)
[demurrer]; see Brannon v. Superior Court (2004)
114 Cal.App.4th 1203, 1210–1211 [motion for summary
1We deny plaintiffs’ motion filed July 6, 2020, for leave to
produce additional evidence or to take judicial notice.
3
judgment]; TJX Companies, Inc. v. Superior Court (2001)
87 Cal.App.4th 747, 751 (TJX) [demurrer]; Titmas v. Superior
Court (2001) 87 Cal.App.4th 738, 742 [motion to quash].)
A demurrer has been held to be a critical pretrial matter for
which oral argument is required. (Medix, supra, 97 Cal.App.4th
at p. 115; TJX, supra, 87 Cal.App.4th at p. 753.) Of course,
parties may elect to waive argument. Courts may by local rule
offer a tentative ruling procedure in which the parties may
decline oral argument. (See Cal. Rules of Court, rule 3.1308(a) &
(b).) But basic principles of due process require that parties who
want to exercise their right to oral argument on a demurrer be
afforded that opportunity.
Here, the trial court issued a tentative ruling on
Cybersource’s demurrer. Pursuant to the California Rules of
Court and the Local Rules of Los Angeles County Superior Court,
it offered the parties the opportunity to waive oral argument but
with the promise that, if they submitted, the tentative would
become the final ruling. The parties accepted that offer when, as
the minute order reflects, they both “submit[ted] to the Court’s
tentative ruling via e-mail.” But the court apparently had a
change of mind, concluded that its tentative ruling on the third
cause of action was incorrect, and not only sustained the
demurrer as to that cause of action but sustained it without leave
to amend. Further, it made the change without affording
plaintiffs an opportunity to engage the court in oral argument
and, if necessary, to request leave to amend.
Although the Local Rules of Los Angeles County Superior
Court in effect at the time provided that the “court is not bound
by a tentative ruling, whether or not a party has submitted the
case based on the stated tentative ruling” (Super. Ct. L.A.
4
County, Local Rules, rule 9.7(e)), a local rule may not supersede
controlling state law. (See, e.g., Cal. Rules of Court, rule 3.20(a)
[Judicial Council has preempted all local rules relating to
demurrers].) More specifically, local rules may not deprive a
party of basic due process.
Further, we note that the final ruling, and the dismissal of
Cybersource, were entered immediately. Plaintiffs were
effectively precluded from challenging the new ruling in the trial
court. Plaintiffs had no opportunity to seek reconsideration or
relief from counsel’s admitted inexcusable failure to file
opposition. They had no opportunity to advise the court as to
how they could cure the claimed deficiencies in the amended
complaint.2 A court may always change its mind to correct its
own error. But having promised to enter the tentative ruling as
its final order if the parties submitted, the court could not,
without adequate notice and a fair opportunity to be heard, enter
a different order. Plaintiffs’ victory here may well be pyrrhic, but
they must be given the chance to object to the change in the
ruling and, if necessary, explain how they might amend.
2 The court undergirded its order sustaining the demurrer
to the third cause of action without leave to amend on the ground
plaintiffs did not file opposition or indicate how they could cure
the deficiencies. But having accepted the tentative, plaintiffs had
no reason to seek relief from their failure to file opposition or to
propose amendments to cure any defects in that count. In
briefing and at oral argument before us, plaintiffs’ counsel
suggested the third cause of action was sufficiently pled, but he
could cure any supposed defects if leave were granted. We
express no opinion on the merits of the demurrer to the third
cause of action or any request for leave to amend if the trial court
concludes the demurrer to that count should be sustained.
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DISPOSITION
That portion of the order sustaining the demurrer to the
third cause of action for conspiracy to defraud is reversed and the
matter remanded to the trial court to afford the parties oral
argument on the demurrer as to that cause of action only.3 In all
other respects, the order is affirmed. Plaintiffs are awarded their
costs on appeal.
NOT TO BE PUBLISHED.
SALTER, J.*
We concur:
LAVIN, Acting P. J.
EGERTON, J.
3Our disposition does not preclude the plaintiffs from filing
a motion for relief for failure to file opposition.
* Judge of the Orange County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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Residual Income Opportunities v. Cybersource Corp. CA2/3
Combined Opinion