For the reasons set forth below, the Demurrer to the First Amended Complaint brought by Defendant Chuong Ngoc Tran is OVERRULED, as to the First, Second, Third, Fourth, Sixth, Seventh and Ninth Causes of Action. The Demurrer to the Fifth Cause of Action is SUSTAINED, without leave to amend.
With respect to the First Cause of Action for Fraud, Plaintiffs allege Defendant represented on December 4, 2019, “[t]hat the property has only $550,000 approximately in debt encumbered against the Subject Property in favor of PHH.” (¶42 of FAC). Thereafter, Plaintiffs allege this fact was false as, “[i]n addition to the PHH Lien, there were Tax liens and Judgment liens, and the existence of a note secured by a deed of trust in second position after PHH in the amount of $76,000.00, all recorded against the Subject Property, which were never disclosed to Plaintiffs…” (¶43 of FAC).
In demurring to this claim, Defendant asserts Plaintiff failed to specifically plead knowledge of the falsity or intent to defraud; however, the Complaint alleges Defendant Tran “clearly knew of the existence of liens attached to the Subject Property before the time of sale in December 2019,” as Defendant had previously gone through “several bankruptcies.” (¶44 of FAC). Similarly, the Complaint alleges “Tran clearly knew Subject Property had substantially more debts than the disclosed amount $550,000.00 to PHH yet chose not to disclose to Plaintiffs these debts attached to Subject Property.” (¶44 of FAC).
The Court finds the above is sufficient to allege a knowing misrepresentation.
Additionally, Defendant demurs to the First Cause of Action, on the basis “the payoff on the DOT was dated August 12, 2020, and states that the loan is current, and the $76k line of credit has been released.” (Demurrer: 10:27-11:1, citing Exhibit 3 of the FAC and Exhibit 1 of the RJN). In asserting this argument, Defendant seeks to challenge the truth of the allegations in the Complaint, via judicially noticeable documents. Defendant provides a recorded Full Reconveyance, as to a Deed of Trust dated December 29, 2017 (Exhibit 1 to Notice of Errata [ROA No. 60]); however, this document does not address the tax and judgment liens, alleged in the Complaint. (¶43 of FAC).
Of note, the Complaint, additionally, appears to allege fraud in connection with a “Commitment Document” and the “Junior DOT.” (¶51-¶53 of FAC). The Complaint alleges Defendant “fraudulently convey[ed] to Plaintiffs that this Commitment Document and Junior DOT was a payment arrangement for Plaintiffs to pay the PHH mortgage and not an additional lien attached to the Subject Property.” (¶52 of FAC). The Complaint appears to allege these documents were prepared in English and translated incorrectly by Defendant, such that Plaintiffs signed the documents without knowing they were signing a Junior DOT. (¶51-¶53 of FAC).
In response to the above, Defendant asserts the Junior DOT cannot form the basis of a claim for fraud, as it was contemplated by the agreement. (See ¶21(d) of Exhibit 2 to the FAC). Additionally, Defendant asserts the Junior DOT cannot support a claim for fraud, as it was necessary to establish consideration for the agreement. (Demurrer: 11:17-12:1).
The above arguments, however, do not address the allegation Defendant misrepresented the very nature of the document, at the time Plaintiff’s signed it. Indeed, Defendant does not attach the above arguments to any specific element for fraud. Consequently, Defendant has not demonstrated that the arguments arising from the Junior DOT defeat any particular element.
Lastly, citing RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089, Defendant asserts he had no obligation to disclose facts that are “within the reach of the diligent attention and observation of the buyer.” (Id. at 1097). Defendant thereafter asserts that Plaintiffs were capable of finding the referenced liens, through a title search.
This argument fails, however, as the Complaint alleges Defendant affirmatively misrepresented the identified liens, rather than concealed them. (¶42-¶44 of FAC). The duty to disclose is not a required element for intentional misrepresentation. (Chapman v. Skype, Inc. (2013) 220 Cal.App.4th 217, 230-231).
The demurrer to the First Cause of Action is OVERRULED.
Similarly, the demurrer to the Second Cause of Action for Cancellation of Deed of Trust is OVERRULED. A claim for Cancellation of an Instrument is properly alleged, when the claim includes a “statement of facts constituting a deed’s invalidity….” (Zakaessian v. Zakaessian (1945) 70 Cal.App.2d 721, 725). “All that is required under section 3412, Civil Code, ‘either in pleading or proof is to show the facts constituting the invalidity of the instrument, whether they involve fraud, duress, accident, mistake.” (Keele v. Clouser (1929) 101 Cal.App. 500, 502).
Defendant asserts Plaintiffs failed to allege a basis for setting aside the Junior DOT. In support of this argument, Defendant references language in the Purchase Agreement which contemplates a Junior DOT. (Demurrer: 14:4-19). Additionally, Defendant asserts the Junior DOT was necessary as Defendant is essentially financing the purchase of the property. (Demurrer: 14: 20-28). Again, however, Defendant fails to address the allegation Defendant concealed the nature of the document, at the time of signing. (¶51-¶53 of FAC). These allegations are incorporated into the Second Cause of Action. (¶66 of FAC).
The demurrer to this claim is OVERRULED, given Defendant’s failure to address all relevant allegations therein.
As to the Third Cause of Action for Breach of Contract, Defendant challenges the allegation Plaintiffs performed under the agreement, (¶102 of FAC), asserting Plaintiffs have not remitted the whole purchase price of the property. (Demurrer: 15:20-24, citing ¶46 of the FAC and Exhibit 2 thereto).
The Complaint alleges Plaintiffs fully performed the contract, by paying Defendant $237,846.49 on September 29, 2020. (¶91 of FAC). The Complaint additionally alleges Plaintiffs paid a total of $342,143.49, “as full payment for the purchase of the Subject Property according to the Purchase Contract.” (¶99 of FAC). In contrast to these allegations, however, Exhibit 1 to the Complaint identifies the purchase price as $860,000. (See Exhibit 1 of FAC).
“While the ‘allegations [of a complaint] must be accepted as true for purposes of demurrer,’ the ‘facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.’” (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1145-1146).
Additionally, “a general allegation of due performance will not suffice if the plaintiff also sets forth what has actually occurred and such specific facts do not constitute due performance.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1389-1390).
Based on the above, the Complaint does not sufficiently allege performance by Plaintiffs; however, “[p]revention of performance by one party to a contract excuses performance by the other party.” (Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1387, disapproved in part on other grounds, as stated in Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 986, fn. 15).
Within this Demurrer, Defendant asserts the allegations are insufficient to allege excuse from performance (Demurrer: 16:19-17:6); however, Defendant offers no analysis of the factual allegations. Per the Complaint, “Tran made it extremely difficult or almost impossible to close the refinance” by “refus[ing] to sign certain documents, such as a statement of information and uninsured affidavit required by title” and “refus[ing] to pay off all the tax liens and abstract judgments from his credit card debts.” (¶100 of FAC).
While it is true the Complaint references the Junior DOT as an obstacle to Plaintiffs’ ability to refinance (¶100 of FAC) and, while Defendant continues to assert entitlement to record a Junior Deed of Trust on the property, Defendant once again fails to address the entirety of the factual allegations relevant to this claim. Consequently, Defendant has not demonstrated that the allegations are insufficient to allege excuse for performance.
Thereafter, Defendant asserts Plaintiffs cannot allege a breach of the contract, asserting the Agreement did not require a transfer of title, free of all encumbrances. (Demurrer: 17:7-22). Significantly, however, Defendant addresses only one alleged breach.
A review of the claim indicates Plaintiffs are alleging Defendant breached the Purchase Agreement in the following ways: (1) By creating a Promissory Note and DOT in his favor, attached to the Subject Property. (¶94 and ¶97 of FAC); (2) Failing to disclose additional liens on the property and by failing to provide “good and marketable title.” (¶95 of FAC); (3) By pocketing rent money and failing to pay the December 2021 mortgage payment to PHH. (¶96 of FAC); and (4) Requesting an additional $100,000 “with no intention to remove the Junior DOT nor pay off other liens caused by him.” (¶101 of FAC).
As Defendant failed to address all alleged breaches in the Demurrer, the Demurrer is OVERRULED as to the third cause of action.
Lastly, Defendant asserts Plaintiffs cannot allege damages, as they have “paid approximately $340,000 for property that is worth more than $885,000,” (Demurrer: 17:24-26); however, the allegations in the Complaint demonstrate that the property is encumbered and Plaintiffs have been prevented from refinancing, to pay the same.
With respect to the Fourth Cause of Action for Breach of the Implied Covenant of Good Faith, Defendant asserts the claim fails due to Plaintiff’s lack of performance on the underlying contract; however, as indicated above, this argument fails.
Thereafter, the Demurrer asserts this claim fails as the contract did not create an obligation for Tran to disclose all liens on title or to convey property “free and clear of all liens.” (Demurrer: 18:16-26). As noted in connection with the claim for breach of contract, however, the Complaint alleges Tran made it extremely difficult or almost impossible to close the refinance by “refus[ing] to sign certain documents, such as a statement of information and uninsured affidavit required by title” and “refus[ing] to pay off all the tax liens and abstract judgments from his credit card debts.” (¶100 of FAC). These allegations are incorporated into the Fourth Cause of Action and allege Defendant “unfairly frustrat[ed] the [Plaintiffs’] right to receive the benefits of the agreement actually made.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1369).
As Defendant has not addressed the above, the Demurrer is OVERRULED as to the fourth cause of action.
As to the Fifth Cause of Action for Breach of Fiduciary Duty, however, the Demurrer is SUSTAINED, without leave to amend.
“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820). Additionally, “[t]he allegation of a fiduciary relationship must be supported by either a contract, or a relationship that imposes it as a matter of law.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1558). “The mere allegation that [Defendant] assumed fiduciary duties to [Plaintiff] is a legal conclusion, not a well-pled fact.” (Id.).
“’[F]iduciary’ and ‘confidential’ have been used synonymously to describe ‘…any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.” (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 270). “Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidences is reposed, if he [or she] voluntarily accepts or assumes to accept the confidence, can take no advantage from his [or her] acts relating to the interest of the other party without the latter’s knowledge or consent.” (Id.).
“The vagueness of the common law definition of the confidential relation that gives rise to a fiduciary duty, and the range of relationships that can potentially be characterized as fiduciary, led one court to usefully distill the essential elements as follows: ‘1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself.” (Id. at 272).
“A confidential relationship cannot be imposed on an individual, but must be voluntarily accepted.” (Richelle, supra, 106 Cal.App.4th at 272, fn. 6).
Here, to establish a fiduciary duty against Defendant Tran, Plaintiff cites ¶129 and ¶130 of the FAC. Pursuant to these allegations, Plaintiffs viewed Defendant Tran as a “blood uncle,” “trusted mentor,” “father figure,” and Grandpa figure to Plaintiffs’ children. (¶129 and ¶130 of FAC). While these allegations demonstrate the existence of a close familial relationship, they do not establish a relationship which, by law, creates fiduciary duties. In particular, these allegations do not allege Defendant Tran consented to act as a fiduciary.
At best, the Complaint proceeds to allege Defendant Tran “accept[ed] the position of the sole successor trustee to Plaintiff Truong, during the creation and singing of [a living trust].” (¶129 of FAC). The Complaint alleges Defendant agreed “to manage the assets and take care of Truong’s wife and children upon Truong’s death,” however, any such obligation is limited and unrelated to the allegations herein.
As Plaintiffs cite no authority which supports the existence of a fiduciary relationship in this scenario, the Demurrer to this claim is SUSTAINED, without leave to amend.
“[T]he burden is on the Plaintiff to show the manner in which she may amend, and how the amendment will change the legal effect of the pleading.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349). A court should sustain a demurrer without leave to amend where there is no “reasonable possibility that the defect can be cured by amendment.” (Chiatello v. City and County of San Francisco (2010) 189 Cal.App.4th 472, 480-481). Additionally, leave to amend should be denied where the facts are not in dispute and the nature of the claim is clear, but no liability exists under substantive law. (Lawrence v. Bank of Am. (1985) 163 Cal.App.3d 431, 436).
Here, Plaintiffs have failed to demonstrate any ability to amend and, as this is their second attempt to plead this claim, leave to amend is DENIED.
As to the Sixth Cause of Action for Specific Performance, Defendant demurs to this claim, asserting Plaintiffs have not alleged a breach of contract; however, as indicated above, Plaintiffs have sufficiently alleged excuse for performance and Defendant failed to address the entirety of the alleged breaches.
Thereafter, Defendant asserts this claim fails, as a condition of performance was payment of the entire purchase price; however, the sole authority cited by Defendant is distinguishable. In Beverly Way Associates v. Barham (1990) 226 Cal.App.3d 49, the Court found that a buyer could not state a claim for specific performance, as the buyer had earlier cancelled the agreement. (Id. at 55-56). The Court noted: “Under the California rule, the holder of a formal option loses the right to exercise it once it has communicated a formal rejection, and this is so even though the purported exercise occurs within the time specified in the option agreement.” (Id. at 55). “It is hornbook law that an unequivocal rejection by an offeree, communicated to the offeror, terminates the offer; even if the offeror does no further act, the offeree cannot later purport to accept the offer and thereby create enforceable contractual rights against the offeror.” (Id.).
Here, Defendant cites no allegations which indicate Plaintiffs cancelled the purchase agreement.
Additionally worth noting, case law expressly indicates that excuse for nonperformance, can support a claim for specific performance: “To obtain specific performance, appellant must establish its own performance or excuse for nonperformance.” (Ninety Nine Investments v. Overseas Courier Service (Singapore) Private (2003) 113 Cal.App.4th 1118, 1126). This indicates that full performance (including, in this case, full payment) is not necessary, prior to alleging a claim for specific performance.
Finally, while Defendant asserts a failure to allege adequate consideration for the agreement, arguing Plaintiffs failed to allege the value of the property, this assertion fails: Per the FAC, “[a]t the time of the execution of the Purchase Contract, the Subject Property referred to had a reasonable value of $860,000.00.” (¶137 of FAC). Additionally, given the Complaint alleges a purchase price of $860,000, adequate consideration is shown. (¶136 of FAC).
The Demurrer is OVERRULED as to the sixth cause of action.
The Demurrer to the Seventh Cause of Action for Reformation is OVERRULED. Defendant demurs to this claim, asserting “Plaintiffs have not set forth any ‘mutual mistake’ of the parties, nor have they established that Tran knew of their mistake.” (Demurrer: 22:25-26); however, reformation may additionally be sought due to fraud. (Civil Code §3399). Notably, Defendant does not address the allegations of fraud, with respect to the “Commitment Document” executed on October 6, 2020. (¶157 of FAC). Once again, as the Demurrer does not address the allegations in the Complaint, the Demurrer is OVERRULED.
Lastly, the Demurrer to the Ninth Cause of Action is OVERRULED, as the demurrer was not supported by legal authority. “Every brief should contain a legal argument with citation to authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.” (People v. Stanley (1995) 10 Cal.4th 764, 793).
Defendant’s unopposed Request for Judicial Notice (ROA No. 60) is GRANTED, pursuant to Evidence Code §452(h).
Plaintiff to give notice.
Motion to Strike
The Motion to Strike brought by Defendant Chuong Ngoc Tran is MOOT, as to the requests for punitive damages included within the Fifth and Eighth Causes of Action (i.e. ¶134 and ¶175 of FAC and ¶7 of Prayer).
Given the court’s order sustaining Defendant’s Demurrer to the Fifth Cause of Action, without leave to amend, the request to strike allegations therein is MOOT. Similarly, as the Eighth Cause of Action is not alleged against the moving Defendant, this portion of the Motion is likewise MOOT.
The Motion is GRANTED, with 15 days leave to amend, as to the request included in the Fourth Cause of Action (i.e. ¶126 of FAC and ¶5 of Prayer). Notably, within the Fourth Cause of Action, Plaintiffs merely allege Defendant’s conduct was “egregious, outrageous and shock the conscience of the average person and, as such, entitle Plaintiffs to an award of punitive damages in an amount to be determined by the court.” (¶126 of FAC).
As Plaintiff does not allege malice, oppression or fraud, with respect to this claim, the request for punitive damages fails. (Civil Code §3294).
The Motion is DENIED, as to the request included in the First Cause of Action (i.e. ¶65 of FAC and ¶2 of Prayer). For the reasons stated in connection with the accompanying Demurrer, Plaintiff has alleged sufficient facts to support a finding of fraud, pursuant to Civil Code §3294(c)(3).
Plaintiff to give notice.
Defendant Paul T. Nguyen filed a Joinder, indicating he seeks to join the Demurrer brought by Defendant Chuong Ngoc Tran, as to the Second and Fifth Causes of Action. (ROA No. 68). Similarly, Defendant Nguyen filed a Joinder, indicating an intent to join in the request to strike ¶134 of the First Amended Complaint. (ROA No. 69).
The Joinders do not add additional argument, but merely seek to join in the arguments raised by Defendant Tran. Consequently, as was the case in Decker v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, “[t]he joinder is not in the form of a motion and does not present any evidence or argument.” (Id. at 1391, overturned in part on another ground, by legislative action, as stated in Hall v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337, 1349).
Per Decker, “a notice of joinder does not alone constitute a motion.” (Id. at 1391). The Court explained that, while a “joinder” allows one party to join in the argument of another, “joining in an argument is different from joining in a motion.” (Id. at 1391). The Court concluded that, because the Defendant therein did not bring its own motion, seeking relief on their own behalf, they were not bound by an order denying an anti-SLAPP motion and had no standing to appeal. (Id.).
Applying the above herein, Defendant Nguyen’s joinders merely joined in the Demurrer and Motion to Strike brought by Tran, which are addressed in the analysis above. Per Decker, no further rulings are necessary, as to the Joinders, as the Joinders do not seek affirmative relief in favor of Nguyen.
Plaintiff to give notice.