ERICH SCHULTZ vs THE KILROY COMPANIES LLC

1. CASE # CASE NAME HEARING NAME ERICH SCHULTZ vs THE DEMURRER ON 1ST AMENDED CVPS2505353 KILROY COMPANIES COMPLAINT LLC Tentative Ruling:

Defendant’s Demurrer is overruled.

A general demurrer lies where the pleading does not state facts sufficient to constitute a cause of action. (C.C.P. § 430.10(e).) In evaluating a demurrer, the court gives the pleading a reasonable interpretation by reading it as a whole and all of its parts in their context. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) The court assumes the truth of all material facts which have been properly pleaded, of facts which may be inferred from those expressly pleaded, and of any material facts of which judicial notice has been requested and may be taken. (Crowley v.

Katleman (1994) 8 Cal.4th 666, 672.) However, a demurrer does not admit contentions, deductions or conclusions of fact or law. (Daar v. Yellow Cab Company (1967) 67 Cal.2d 695, 713.) If the complaint fails to state a cause of action, the court must grant the plaintiff leave to amend if there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Kilroy demurs to the breach of personal guaranty cause of action on the following grounds: he did not consent to the loan modifications, so he is exonerated pursuant to Civ. Code § 2819; he did not waive his surety defenses; and the original guaranty does not apply to the restructured (modified) loan. (Demurrer, pp. 4:9-20, 7:2-12:8.) There does not appear to be any dispute that the loan was modified and Kilroy did not waive his surety defenses. Thus, his entire argument turns on whether or not Plaintiffs have sufficiently pled that Kilroy consented to guaranty the modified loan.

Civ. Code § 2819 states that “[a] surety is exonerated, except so far as he or she may be indemnified by the principal, if by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, in any way impaired or suspended.”

In the present case, Plaintiffs allege that on January 15, 2021, the parties entered into a promissory note to secure a $2 million loan, which Kilroy guaranteed. (FAC at ¶¶ 6-8, Ex. 1 [“This note is secured by the personal guarantee of Michael J. Kilroy”].) The loan/promissory note was modified twice, once in October 2022 to extend the maturity date, and once in April 2023 to split the original loan into two separate loans with different maturity dates. (FAC at ¶¶ 10-11, Exs. 2-5.) Both modifications were negotiated and agreed to by Plaintiffs and Kilroy. (FAC, Exs. 2-3.) Both modifications were then handwritten onto the original promissory note and signed by the parties. (FAC at ¶¶ 4-5.) While Kilroy argues that he did not consent to guaranty the modified loans, this is a factual issue that cannot be resolved on demurrer.