Procedural Posture

Defendant film producer sought review of the judgment of the Superior Court of Los Angeles County (California), which entered an order sustaining plaintiff principal for a film developer’s general demurrers to the producer’s answer and cross-complaint, without leave to amend. The producer’s cross-complaint to the principal’s action to collect on a promissory note alleged that the principal had breached a contract and charged usurious interest.

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The principal and the producer agreed that the producer would use the principal’s laboratory to develop films on Eastman film stock for five years, and the producer executed a series of promissory notes . The producer did not pay and the principal brought an action to collect upon one note. The producer’s answers and cross-complaints alleged that the notes were part of a contract, that principal had breached the contract by using inferior film stock, and that the interest rate of the notes and the contract was usurious. At trial, the principal’s demurrers were sustained without leave to amend. On appeal, the court found that extrinsic evidence was admissible when a party claimed violations of the usury law, 1919 Cal. Stat. para. lxxxiii, and that intent to evade the usury law was a question of fact. The court found that Cal. Civ. Proc. Code § 438 required only that a counterclaim tend to diminish a plaintiff’s recovery and abolished other pleading limitations based on form, and that a party could demand treble damages on a counterclaim. The court noted that the code pleading system allowed for equitable defenses in actions at law.


The court reversed the judgment sustaining the principal’s general demurrers to the producer’s counterclaims, and directed the trial court to overrule the demurrers.