Opinion
E064197 E065211
08-07-2017
VICTOR VOSS et al., Plaintiffs and Appellants, v. JOAN C. FONTAINE et al., Defendants and Respondents; VICTOR VOSS et al., Plaintiffs and Appellants v. BERKSHIRE HATHAWAY HOMESERVICES CALIFORNIA PROPERTIES et al., Defendants and Respondents.
Prenovost, Normandin, Bergh & Dawe, Michael G. Dawe for Plaintiffs and Appellants. Cates Peterson, Mark D. Peterson and Kathleen O. Peterson for Defendant and Respondent Joan C. Fontaine. Obrand Law Group, Jesse D. Obrand and Michael F. Obrand for Defendant and Respondent Berkshire Hathaway Homeservices California Properties. Hershorin & Henry, Lori C. Hershorin for Defendant and Respondent Eugene Shay.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. RIC1402189) OPINION APPEAL from the Superior Court of Riverside County. Gloria Connor Trask, Judge. Affirmed. Prenovost, Normandin, Bergh & Dawe, Michael G. Dawe for Plaintiffs and Appellants. Cates Peterson, Mark D. Peterson and Kathleen O. Peterson for Defendant and Respondent Joan C. Fontaine. Obrand Law Group, Jesse D. Obrand and Michael F. Obrand for Defendant and Respondent Berkshire Hathaway Homeservices California Properties. Hershorin & Henry, Lori C. Hershorin for Defendant and Respondent Eugene Shay.
Plaintiff, Victor Voss (Victor), purchased real property in Moreno Valley, but never recorded the deed. In 2012, he needed money to avoid foreclosure. So he had the original grantor transfer title to his former significant other, Joan Fontaine (Fontaine), which deed was recorded, and she paid all arrearages, agreeing to allow Victor's father, Robert Voss (Robert), to remain on the property. Victor was supposed to resume mortgage payments in a year, but did not do so, so Fontaine listed the property for sale with defendant Berkshire Hathaway Home Services California (Berkshire), and it was purchased by Eugene Yi Chun Shay (Shay). When Shay attempted to evict Robert, the Vosses filed suit for breach of contract, declaratory relief, promissory estoppel, quiet title, fraud, and negligent misrepresentation. The complaint was subsequently amended to add several claims against Berkshire and Shay, including allegations that the grant deed to Fontaine was but a mortgage and that Robert Voss held a life estate in the property, but demurrers were filed by all three defendants. The trial court sustained the demurrers without leave to amend. Plaintiffs appealed.
On appeal, plaintiffs argue the trial court erred in sustaining the demurrers on the grounds that (a) the second amended complaint (SAC) did not allege changed facts, it merely pled changed legal theories; (b) Fontaine's statement in a declaration filed in support of Shay's motion to expunge the lis pendens supports the theory that the agreement and deed were a mere mortgage and not a transfer of title; and (c) the doctrine of judicial estoppel does not preclude plaintiff from alleging the existence of a security interest as an alternative legal conclusion. We affirm.
BACKGROUND
This appeal arises from the sustaining of a demurrer, where, ordinarily, we would assume the complaint's properly pleaded material allegations are true, and summarize the underlying facts as they are stated in the operative pleading. (Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 240.) But where the SAC omitted or pleaded facts inconsistent with those previously alleged, and failed to explain the omission or inconsistency, we must read the omitted or inconsistent facts into the current complaint. (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.) We therefore summarize the pleaded facts of the SAC, pointing out inconsistencies as they appear.
In 1996, Victor purchased real property from Clifton Hair, obtaining a grant deed which was never recorded. The property is located in Moreno Valley, and Robert resided there. Beginning in 2000, Victor and Fontaine were engaged in a romantic relationship; Austin Voss is the son of Victor and Fontaine.
According to the original complaint, in December 2012, Victor and Fontaine entered into an agreement whereby Victor agreed to transfer title, but not possession, of the property to Fontaine in exchange for her agreeing to (1) allow Robert to live there for the remainder of his natural life, or until he elected to vacate the property, and (2) upon Robert's death or vacating of the property, transfer the property into a trust for the benefit of Austin, the son of Victor and Fontaine. The complaint alleged that the contract was memorialized by Fontaine on December 12, 2012. Although the grant deed in favor of Fontaine includes no restrictions or limitations on title or possession, it was alleged that at no time was Fontaine granted absolute fee rights or possessory rights to the property. Instead, the contract was alleged to create a life estate in favor or Robert, with a non-contingent, vested remainder interest in fee simple in favor of Austin. Robert and Austin were alleged to be intended third party beneficiaries of the agreement between Victor and Fontaine.
In the First Amended Complaint (FAC), plaintiffs added Berkshire Hathaway HomeServices and its realtor Diane Cannon (Cannon) as defendants. The FAC alleged that Victor purchased the property in 1996, but added Robert to the title at a later date. In December 2012, both plaintiffs, Victor and Robert, entered into the agreement by which they both agreed to transfer title, but not possession, of the property to Fontaine, subject to the same conditions set out in the original complaint. As alleged in the original complaint, the FAC provided that as a result of the contract, a life estate was created in favor of Robert, with a non-contingent, vested remainder interest in fee simple in favor of Austin. Austin was the intended third party beneficiary to the contract between the plaintiffs (Victor and Robert) and Fontaine. The agreement was allegedly memorialized by Fontaine on December 12, 2012.
In the SAC, plaintiffs alleged that they own fee title to the property subject to the encumbrance of a mortgagee's interest held by Fontaine in accordance with the terms of a loan contract. This version again avers that Victor purchased the property in 1996, adding Robert to the title later, although no deed was recorded. In December 2012, plaintiffs entered into a loan contract with Fontaine, whereby, in exchange for plaintiffs' causing a grant deed to be executed by Hair in favor of Fontaine, Fontaine would permit Robert to continue to live at the property for the remainder of his natural life or until he elected to vacate the property, without having to pay rent; Fontaine would confirm in writing her intent that the property would be preserved in trust for Austin Voss, the minor son of Victor and Fontaine; and that Fontaine would be responsible for mortgage payments and insurance until paid in full. The agreement included oral provisions that Fontaine would loan Victor approximately $20,000 to stop a foreclosure sale that was scheduled to take place on December 19, 2012, and that Victor would pay back the loan within one year and resume making mortgage payments. The SAC states that the contract was partially memorialized in an email from Fontaine, dated December 14, 2012.
However, the exhibit to which the SAC (and all prior versions of the complaint) refers is an email from Fontaine to a third party, sent on December 14, 2012, in which she stated she was purchasing the property to regain some of the funds borrowed by Victor in the form of promissory notes, in the approximate amount of $164,000.00. Fontaine went on to state in the email that she agreed Robert could remain on the property as a tenant until he decided not to, and that he would be responsible only for the payment of utilities and upkeep, while she would be responsible for the mortgage and insurance.
Thus, in December 2012, plaintiffs caused Hair, the original grantor, to execute and deliver a grant deed to Fontaine. Plaintiffs alleged "as a legal conclusion" that, though prior pleadings in this matter contended that the transmittal of the grant deed had the effect of creating a life estate in Robert, the actual legal effect of the grant deed was to create a security interest constituting a mortgage in favor of Fontaine pursuant to Civil Code, section 2924.
On November 15, 2013, Victor advised Fontaine by email that he would take over the expenses of the property and commenced making monthly payments on the mortgage encumbering the property in December 2013, continuing to February 2014. However, without prior statutory notice, Fontaine listed the property for sale. Diane Cannon, an employee of Berkshire Hathaway HomeServices Properties, listed the property, acting as agent and broker for the sale of the property. On February 25, 2014, Fontaine informed plaintiffs there was an offer pending on the property and that she intended to accept it.
Plaintiffs filed their original complaint on March 7, 2014 and recorded a lis pendens. The original complaint named only Fontaine as defendant, and comprised six causes of action: (1) Breach of Contract; (2) Declaratory Relief; (3) Promissory Estoppel; (4) Quiet Title; (5) Fraud; and (6) Negligent Misrepresentation.
On January 9, 2015, plaintiffs filed their FAC, adding Shay, Berkshire and Cannon as defendants. The first six causes of action in the FAC were basically the same as those in the original complaint, against Fontaine, although the Second and Fourth Causes of Action were now directed against all defendants except Cannon and Berkshire, and added five new claims: a cause of action for Intentional Inducement of Breach of Contract against Berkshire and Cannon (7th Cause of Action); Intentional Interference with Contract against Berkshire and Cannon (8th Cause of Action); Negligence against all named defendants except Shay (9th Cause of Action); Interference with Prospective Economic Advantage against Cannon and Berkshire (10th Cause of Action); and Negligent Interference with Prospective Economic Advantage against Cannon and Berkshire (11th Cause of Action).
In February 2015, Fontaine and Shay demurred to the FAC on the grounds of failure to state a claim and uncertainty because the complaint fails to indicate whether the contract was written or oral, and judicial estoppel, based on the fact that verified pleading contains material averments contradicting the original complaint and sworn statements in Victor's bankruptcy filings. Each defendant requested judicial notice of Victor's petition in bankruptcy, filed in 2013, in which Victor denied owning any interest whatsoever in any property, and denied having any creditors with secured claims.
Plaintiffs opposed the demurrer, arguing that the inconsistencies in the original complaint were attributed to a rush to file the complaint to avert Fontaine's effort to sell the property and that Fontaine's declaration, filed in support of Shay's Motion to Expunge Lis Pendens, admits the existence of a loan contract. Unfortunately, the statements on which plaintiffs relied did not acknowledge the existence of a mortgage, a life estate for Robert, or a trust. The trial court sustained the demurrers with leave to amend.
On March 27, 2015, plaintiffs filed the SAC. The SAC included the following causes of action: (1) Breach of Contract against Fontaine, (2) Declaratory Relief against all defendants, (3) Promissory Estoppel against Fontaine, (4) Quiet Title against all defendants except Berkshire and Cannon, (5) Negligent Misrepresentation against Fontaine, (6) Intentional Inducement of Breach of Loan Contract against Berkshire and Cannon, (7) Intentional Interference with Contract against Berkshire and Cannon, (8) Negligence against all defendants except Shay, (9) Intentional Interference with Prospective Economic Advantage against Berkshire and Cannon, (10) Negligent Interference with Prospective Economic Advantage against Berkshire and Cannon, and (11) Slander of Title against all defendants.
Attached to the SAC as exhibits were copies of various documents, including the email from Fontaine to Clark Smith explaining that her reason for purchasing the property was to regain lost funds lent to Victor in the approximate amount of $164,000, with the understanding that Robert could remain in the property as a tenant, and that Fontaine wanted to "have this property for Austin Voss, less any and all costs [. . .] incurred to obtain and maintained [sic] the property." The exhibits also included a declaration executed by Fontaine in support of Shay's Motion to Expunge the lis pendens, wherein she acknowledged that Victor had borrowed large sums of money from her, and that Victor informed her the property had $200,000 in equity which could be used to pay her back. However, Fontaine did not want to speak to Victor, although she was willing to speak with Victor's realtor friend, Clark Smith.
The declaration goes on to explain that Clark Smith forwarded a Proposed Letter of Understanding to Fontaine by email, but Fontaine refused to sign it because she did not agree to its terms. She denied that there was a loan contract, or an agreement to create a life estate for Robert, or a trust agreement for Austin. The declaration also referred to a letter from Fontaine to Victor's attorney, Kristin Godeke, explaining that there was never any agreement regarding the future of the property, that she stepped in to save it from foreclosure as a temporary arrangement until the Vosses could secure the property, but that she was the sole owner of the property and her son was not involved in the situation.
On April 21, 2015, Fontaine demurred to the SAC on grounds that it was uncertain, failed to state facts sufficient to constitute a cause of action as to any claim, and based on principles of judicial estoppel. With respect to the judicial estoppel ground, Fontaine submitted a request for judicial notice of Victor's voluntary petition in bankruptcy. In that petition, Victor denied having any creditors or assets and denied having any legal, equitable, or future interest in any property owned as a cotenant, community property, or in which the debtor has a life estate. In opposition to Fontaine's demurrer, plaintiffs asserted that the material alleged facts remained unchanged although the legal theories had changed.
On April 28, 2015, Berkshire and Cannon demurred to the second, sixth, seventh, eighth, ninth, tenth, and eleventh causes of action in the SAC on the grounds that the pleading did not state sufficient facts to constitute a cause of action, and that the pleading was uncertain because plaintiffs' allegations were contradicted by their prior judicial admissions. Berkshire and Cannon also requested that the trial court take judicial notice of Victor's voluntary petition in bankruptcy and related proceedings. In opposition, plaintiffs again averred that the material facts had not changed, only the legal theories pled.
On May 1, 2015, Shay demurred to the second, fourth, and eleventh causes of action of the SAC on grounds of failure to state a cause of action, uncertainty, and judicial estoppel, asserting the SAC was a sham. Shay requested judicial notice of the grant deed from Hair to Fontaine, the grant deed from Fontaine to Shay, and Victor's voluntary petition in bankruptcy, among other filings. Plaintiffs opposed this demurrer by asserting that only the legal theories, not the material facts, had changed, and that allegations contained Fontaine's declaration, filed in support of Shay's Motion to Expunge Lis Pendens constituted an admission that there was a secured loan agreement.
On May 27, 2015, the trial court conducted the hearing on the demurrers. The court took judicial notice of all the documents proffered by defendants, sustaining all demurrers without leave to amend, on grounds of failure to state sufficient facts to constitute a cause of action and uncertainty. The court did not sustain the demurrers on the ground of judicial estoppel because it did not find there had been a judicial admission. Orders were filed sustaining Fontaine's and Shay's demurrers on June 25, 2015, followed by entries of judgment as to Fontaine and Shay on July 7, 2015. Plaintiffs filed notice of appeal from those judgments on August 11, 2015. On May 29, 2015, Notice of Ruling on the demurrer by Berkshire and Cannon was filed, although judgment was not entered until November 23, 2015. Plaintiffs appealed the judgment on January 12, 2015.
This appeal was filed under case No. E065211, which was consolidated with the current appeal.
DISCUSSION
On appeal, plaintiffs argue that the allegations of the SAC were the result of verified admissions by Fontaine, and that, while the legal conclusions reached by plaintiffs' counsel had evolved over time, with the discovery of additional facts, the core facts giving rise to those conclusions did not change. Plaintiffs also posit the argument that Fontaine's failure to comply with statutory requirements for notice of default, right of reinstatement and notice of sale as a holder of a security interest in real property, invalidated the transfer to Shay. We do not reach the last issue, which was not preserved for review because it was not raised in the trial court. (Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417.)
We recognize we have discretion to address issues of pure law raised for the first time on appeal (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 24), but the basis for the court's rulings in this case was the legal effect of inconsistent and contradictory factual allegations, that is, disputed facts. Thus, we do not have discretion to entertain the new theory here.
In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) We also consider matters which may be judicially noticed. (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) In addition, we consider the complaint's exhibits. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.) Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, citing Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 42.)
When a complaint contains allegations that are fatal to a cause of action, a plaintiff cannot avoid those defects simply by filing an amended complaint that omits the problematic facts or pleads facts inconsistent with those alleged earlier. (Banis Restaurant Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1044, citing Hendy v. Losse (1991) 54 Cal.3d 723, 742-743.) In such a case, the original defect infects the subsequent pleading so as to render it vulnerable to a demurrer, unless the allegation was omitted by mistake or inadvertence. (Hendy v. Losse, supra, at p. 743.) Likewise, a plaintiff may not plead facts that contradict the facts or positions that plaintiff pleaded in earlier actions or suppress facts that prove the pleaded facts false. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877.)
Thus, where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings, the rule requiring us to assume the truth of factual allegations of the complaint does not apply. (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383-384.) "In these circumstances, the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency." (Id. at p. 384.) If the plaintiff fails to do so, the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint. (Ibid.)
When a demurrer is sustained without leave to amend, we must decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, citing Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) "'The burden of proving such reasonable possibility is squarely on the plaintiff.'" (Zelig, supra, citing Blank v. Kirwan, supra.) We examine the complaint de novo to determine if it alleges facts sufficient to constitute a cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.)
a. Contradictory or Inconsistent Facts
All causes of action alleged against all defendants flow from the alleged existence of an enforceable contract between plaintiffs and Fontaine, and the demurrers by all defendants were grounded on the uncertainty of the complaint which does not establish whether the contract was written or oral.
To state a cause of action for breach of contract, the plaintiffs must plead the contract, plaintiffs' performance of the contract or excuse for nonperformance, defendant's breach and resulting damage. (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458.) Further, the complaint must state on its face whether the contract is written, oral, or implied by conduct. (Id., at pp. 458-459.) An action founded upon a contract is subject to demurrer if it cannot be ascertained from the pleading whether the contract is written, oral, or implied by conduct. (Code Civ. Proc., § 430.10, subd. (g); Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 98-99.) "If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by references." (Otworth, supra, at p. 459, citing Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 59 [overruled on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510, 521].)
Here, the complaint alleges the agreement was partially memorialized, but the writings that purport to constitute the written portion of the agreement are inconsistent with each other, contradict the allegations of the complaint, and negate the key contract provisions alleged in the pleading. Under the doctrine of truthful pleading, the courts will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed. (Hoffman v. Smithwoods RV Park, LLC, supra, 179 Cal.App.4th at p. 400; see also Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767.) 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. (Brakke v. Economic Concepts, Inc., supra, at p. 767.) Inconsistent and unexplained allegations may not be ignored. (Ivanoff v. Bank of America, N.A. (2017) 9 Cal.App.5th 719, 726.)
Plaintiffs argue that the modified allegations contained in the SAC reflected only altered legal theories, rather than contradictory facts. However, as we have pointed out, plaintiffs are required to plead the existence or nonexistence of a contract as a factual matter. The existence of a contract is a matter of fact. (Fair v. Bakhtiari (2006) 40 Cal.4th 189, 202; see also Unilab Corp. v. Angeles-IPA (2016 244 Cal.App.4th 622, 636 [implied in fact contract].) Determining the contract's terms is also a question of fact. (Coltran v. Rollins Hudig Hall Internat., Inc. (1998) 17 Cal.4th 93, 112 citing Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) As factual matters, inconsistency or contradiction in the rendition of the terms of the agreement or the nature of the agreement is subject to the rule requiring truthfulness in pleading.
Here, the parties to the alleged contract varied from the original complaint to the SAC, as did the terms of the agreement: In the original complaint, only Victor (alone) entered into an agreement with Fontaine and the agreement admittedly involved a transfer of title to Fontaine. In the SAC, the agreement was a loan contract that was partially written, and the deed constituted a mortgage, pursuant to a loan agreement which was partially written. However, the written portion reflects Fontaine's intent to purchase the property and allow Robert to remain on the property, whereas the oral portion purports to set out the terms of a secured loan agreement.
Because the breach of contract action depends on the nature and terms of the agreement to set out the defendant's breach, and because the alleged agreement with Fontaine is at the heart of all plaintiffs' causes of action, the contradictions and inconsistencies between the SAC and prior versions of the complaint, as well as the contradictory facts set forth in the exhibits attached to the SAC, do not pertain to revised legal theories; they are factual assertions essential to the causes of action.
Plaintiffs also argue that a deed absolute on its face may be shown by parol to be intended as a mortgage, quoting from Vance v. Anderson (1896) 113 Cal.532, 538, "It may be stated, as a general proposition, that in this state, at least, every conveyance of real property made as security for the performance of an obligation is, in equity, a mortgage, irrespective of the form in which it is made." (Ibid.) We agree with that general statement. However, the presumption is that a deed absolute in form is just what it purports to be, unless it appears from the grant that a lesser estate was intended. (Civ.Code, § 1105; Develop-Amatic Engineering v. Republic Mortgage Co. (1970) 12 Cal.App.3d 143, 148.)
The effect of this presumption is to impose upon plaintiffs the burden of rebutting the presumption. (Develop-Amatic, supra, 12 Cal.App.3d at p. 148.) For purposes of a demurrer, this means there is a requirement that such facts be pled with sufficient certainty. While this may be accomplished by parol evidence (through the exhibits incorporated by reference into the complaint), clear and convincing evidence is required. (Develop-Amatic, supra, at p. 148, citing Beeler v. American Trust Co. (1944) 24 Cal.2d 1, 7.) An exhibit which refutes the allegations of the complaint does not overcome the presumption. Moreover, the alleged mortgage must be intended to secure a continuing debt. (Mealy v. Sunland Refining Corp. (1950) 96 Cal.App.2d 700, 703.) A secretive intent cannot be used to belie the apparent status of the conveyance transaction. (Develop-Amatic, supra, at p. 148; see also Workmon Constr. Co. v. Weirick (1963) 223 Cal.App.2d 487, 492.)
Here, according to the allegations of the complaint and the exhibits attached thereto, the grant deed was executed in favor of Fontaine respecting a past indebtedness (to recover some of the funds lent to Victor in the form of promissory notes), not a continuing debt. (See Workmon Constr. Co. v. Weirick, supra, 223 Cal.App.2d at p. 493 [if there is no debt, there is no mortgage].) Without a promise by plaintiffs to repay a current loan, there is no mortgage. (Ibid.)
Plaintiffs argue that it is "uncontested" that there was a secured loan agreement between Fontaine and Victor, characterizing the hearsay declaration of Fontaine (submitted in support of Shay's motion to expunge the lis pendens) as an admission that she acquired a mere mortgage with the delivery of the putative grant deed. Yet even this assertion contradicts the averments set forth in the SAC, in which plaintiffs alleged that both Victor and Robert entered an agreement with Fontaine, pointing to certain exhibits, including Fontaine's email describing her reasons for purchasing the property, as evidence of the loan agreement. Even the plaintiffs' appellate brief differs materially from the allegations of the original complaint or the FAC.
Although respondents Fontaine and Shay discuss the doctrine of judicial estoppel at length, pointing to Victor's contradictory assertions in his bankruptcy proceeding, the trial court declined to apply this doctrine, although it took judicial notice of the filings.
And while Fontaine's (hearsay) declaration speaks of lending Victor $20,000 to stop foreclosure proceedings, there is no indication in that document that the deed was security for that debt, as opposed to representing repayment for his prior loans, or that plaintiffs intended to create a security. Attached to Fontaine's declaration was an unsigned "Letter of Understanding" which was apparently drafted by Victor, or on his behalf, for the purpose of "clarifying the terms and conditions of the transfer of title" to the property. That document states that Fontaine will forward money to the existing bank, not to plaintiffs, to stop the foreclosure, and, in return, she would receive a grant deed. But the unexecuted attachments to the declaration and email exchanges do not establish an intent to create a mortgage secured by the deed. Moreover, the declaration of Fontaine on which plaintiffs rely indicates that the letter of understanding was not agreeable to Fontaine. Even under plaintiffs' authority, the complaint fails to properly allege that there existed a secured loan contract.
It is also problematic that the deed was executed by Cliff Hair, not plaintiffs, in favor of Fontaine. To the extent that a deed might be treated as a mortgage as they assert, plaintiffs have offered no parole or other evidence to explain Hair's indebtedness to Fontaine or to plaintiffs, or why he would transfer title to Fontaine as security for a mortgage between plaintiffs and Fontaine.
The original complaint alleged that only Victor made an agreement with Fontaine to borrow money in return for a transfer of title and an agreement to create a life estate for Robert and a remainder interest for Austin. In the FAC and SAC, plaintiffs alleged that both Victor and Robert entered into the agreement, contradicting the original complaint. There are no executed documents attached as exhibits to support an assertion that Robert was party to any loan agreement, or that he ever held title to the property. In the absence of explanation for the inconsistencies or contradictions (other than haste in drafting the original complaint), we are bound to consider the original allegations. (Owens v. Kings Supermarket, supra, 198 Cal.App.3d at p. 384.) The original complaint, verified by Victor, clearly expressed a transaction by which title transferred to Fontaine in return for allowing Robert to reside on the premises; Robert was not a party to the agreement.
In the SAC, the nature of the agreement morphed into a loan contract in which both Victor and Robert were parties. As evidence of the nature of the transaction, plaintiffs incorporated by reference the same email from Fontaine as was appended to all versions of the complaint. In addition, plaintiffs attached a copy of the declaration executed by Fontaine in support of Shay's motion to expunge. In the SAC, plaintiffs allege that the agreements to lend money to plaintiffs to pay off the mortgage delinquency and create a life estate for Robert were oral terms of the loan contract, by which Fontaine would loan Victor approximately $20,000 to stop a foreclosure and that Victor would pay back that loan within one year and resume mortgage payments. As an alleged oral agreement, this allegation in the SAC defeats plaintiffs' argument that the deed, accompanied by a memorandum of agreement, was a security. (See Vance v. Anderson, supra, 113 Cal.532 at pp. 537-538.)
More importantly, the allegations demonstrate that if the oral agreement constituted a loan secured by the deed, it violated the Statute of Frauds, which requires a writing, signed by the party to be charged. (Civ. Code, § 1644, subd. (a).) While plaintiffs may turn to their allegations of fraud to avoid this interpretation, their problem is that the parole and other evidence incorporated by reference into the complaint defeats any suggestion that Fontaine held a security in the property. Indeed, as a contract that was "partially written," none of the essential terms can be ascertained from the exhibits except that Fontaine agreed to buy the property so she could recover some of the money Victor had borrowed from her in the form of promissory notes.
Plaintiffs repeatedly assert that the contradictory material in the complaints related to legal conclusions, not material facts. We are not required to accept the truth of legal conclusions. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.) Plaintiffs also rely heavily on the declaration executed by Fontaine in support of Shay's motion to expunge the lis pendens, which was incorporated by reference. In that hearsay declaration, Fontaine reiterated that her intent was to purchase the property in order to regain some of the money she had loaned to Victor. Fontaine described exchanging emails with Victor's friend and real estate associate Clark Smith in which she agreed to pay $20,000 to stop the foreclosure from going forward on December 19, 2012. But there is nothing in the declaration describing the deed as security for a new or continuing debt, such as would indicate a mortgage. (Workmon Constr. Co., supra, 223 Cal.App.2d at p. 493.)
Moreover, it is not clear that the $20,000 was to be lent to Victor, because the unexecuted "letter of understanding" that Victor included as an exhibit, indicates that Fontaine would send the money directly to the lending institution to stop the foreclosure. Another unsigned document purports to express Victor's intent to grant deed the property to Fontaine and pay her a "handsome return immediately out of the escrow(s)" he would close, but this document belies any allegation that Robert was a party to any agreement, and does not aid in the interpretation of the agreement because it was not signed or dated, does not refer to a secured loan, and it conflicts with the allegations of the SAC.
All three named defendants demurred on the grounds of uncertainty and failure to state facts sufficient to constitute a cause of action flowing from plaintiffs' inability to allege whether the contract was written or oral or explain its terms with any degree of specificity. It is well settled that to satisfy the statute of frauds, a writing, signed by the party to be charged, is required. (Civ. Code, § 1624, subd. (a).) The writing need not be a formal contract; a memorandum suffices, if it identifies the subject of the parties' agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty. (Sterling v. Taylor (2007) 40 Cal.4th 757, 766.) However, because the memorandum itself must include the essential contractual terms, it is clear that extrinsic evidence cannot supply those required terms. (Id. at p. 767, citing Friedman v. Bergin (1943) 22 Cal.2d 535, 537-539.) It can, however, be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others. (Sterling v. Taylor, supra, 40 Cal.4th at p. 767.)
The trial court explained its reasons for sustaining without leave to amend, pointing to the many factual inconsistencies between the original complaint and the FAC, as well as between the FAC and the SAC. Rather than explain the inconsistencies, plaintiffs offered more and different versions of their separate reality. Because plaintiffs were required to explain the inconsistencies (Hendy v. Losse, supra, 54 Cal.3d at pp. 742-743), and failed to do so, the trial court properly sustained the demurrer without leave to amend.
b. Judicial Estoppel as an Alternate Basis for Ruling
In the trial court, all defendants also raised judicial estoppel as an alternate ground for sustaining the demurrers. At their request, the court took judicial notice of Victor's bankruptcy filings, but it concluded it could not take judicial notice of facts or inferences contained in the documents or the contents of the documents, relying upon Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-114. Because we independently review the court's legal conclusions, we address the merits of this alternate ground.
Judicial estoppel precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position. (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986.) "The doctrine applies when '(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true), (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.' [Citation.]" (Id. at pp. 986-987.)
The doctrine's dual goals are to maintain the integrity of the judicial system and to protect parties from opponents' unfair strategies. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Company, Inc. (2005) 36 Cal.4th 412, 422.) The doctrine maintains the purity and integrity of the judicial process by preventing inconsistent positions from being asserted. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.)
Although a defense of judicial estoppel raises factual issues, it may be applied on demurrer. (The Swahn Group, Inc. v. Segal (2010) 183 Cal.App.4th 831, 842-843.) The application of judicial estoppel tenders a question of fact only if a determination of fact is necessary to make a ruling on the claim. (Id. at p. 843, citing Kelsey v. Waste Management of Alameda County (1999) 76 Cal.App.4th 590, 597.) However, if the facts material to a determination of judicial estoppel are undisputed, a question of law is presented. (The Swahn Group, Inc. v. Segal, supra, 183 Cal.App.4th at p. 843, citing International Engine Parts, Inc. v. Feddersen & Co. (1998) 64 Cal.App.4th 345, 354; Drain v. Betz Laboratories, Inc. (1999) 69 Cal.App.4th 950, 959, fn. 8.) Because, in reviewing a ruling on a demurrer, we must accept as true the facts that are properly pleaded, and must consider those facts of which judicial notice may be taken, those facts are undisputed. (The Swahn Group, Inc., supra, at p. 843, citing Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
Here, the trial court took judicial notice of the bankruptcy petition filed by Victor and the order discharging his debts in bankruptcy. In the schedules attached to the voluntary petition, Victor alleged he had no legal, equitable or future interest in any real property, including property owned as a cotenant, community property, or in which the debtor has a life estate. He also asserted in the bankruptcy petition that there were no creditors holding secured claims. His debts were discharged, successfully concluding the bankruptcy proceeding. This position is diametrically opposed to the allegations of the SAC (as well as the FAC and the original complaint), in which he asserted that he and Robert "own[ed] fee title to the Property," having purchased it from Clifton Hair, and that he had entered into a loan contract using the deed as security.
In declining to sustain the demurrer on the ground of judicial estoppel, the trial court observed that it could not take judicial notice of facts or inferences contained in the documents and could not accept as true the contents of pleadings or exhibits in other actions. The court relied on Fremont Indemnity Company v. Fremont General Corp., supra, 148 Cal.App.4th 97.
In that case, Fremont Indemnity, an insurance company that was a subsidiary of defendant Fremont General, sued defendants for misappropriation of net operating losses. In a separate action, plaintiff alleged that the same defendants misappropriated plaintiff's net operating losses that were not acquired through its merger with Comstock Insurance Company. (Fremont Indemnity Co. v. Fremont General Corp., supra, 148 Cal.App.4th at pp. 104-106.) Defendants demurred to the complaint, requesting judicial notice of, among other documents, a letter dated July 2, 2002, purporting to express an agreement between the Department of Insurance, Fremont General, an Insurance Group and plaintiff. The trial court granted judicial notice and sustained the demurrer without leave to amend after interpreting the terms of the letter agreement.
On appeal, the reviewing court held that the trial court erred in taking judicial notice of the proper interpretation and enforceability of the letter agreement, because judicial notice is limited to matters that are reasonably beyond dispute. (Fremont Indemnity Co., supra, 148 Cal.App.4th at pp. 112-113.) The appellate court noted that judicial notice of the existence of the letter would have been proper, but not the truthfulness and proper interpretation of its meaning. (Id. at p. 113.)
We are also familiar with the decision in Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, in which the defendant sought and obtained judicial notice of the plaintiff's bankruptcy filings in connection with a motion for judgment on the pleadings in an action for wrongful termination and sexual harassment against her employer. In that case, the defendants argued judicial estoppel based on the plaintiff's nondisclosure of the claim against her employer. The reviewing court concluded that the defense of judicial estoppel raised a factual issue which could not be decided solely by reviewing the plaintiff's complaint and the matters that could be judicially noticed. The reviewing court there acknowledged decisions applying judicial estoppel where the failure to disclose a claim against a lender-creditor in a bankruptcy action, coupled with adjudication of the lender's claims against the debtor in the bankruptcy action, estopped the debtor from suing that lender later. (Cloud v. Northrop Grumman Corp., supra, 67 Cal.App.4th at pp. 1013-1014.) Relying on Ryan Operations G.P. v. Santiam-Midwest Lumber Co. (3d Cir. 1996) 81 F.3d 355, 362-363, 365-366, it concluded that judicial estoppel should only be applied in egregious cases where the prior inconsistent position was intentional, adopted in bad faith, or a fraud on the court. The court concluded that the bankruptcy filings, standing alone, were insufficient to support the finding of bad faith intent necessary for application of judicial estoppel.
In the present case, the bankruptcy filings reflect more than a passive omission of a debt; to the contrary, the schedules attached to the bankruptcy filings include an affirmative misrepresentation that plaintiff owned no interest in real estate and there were no secured debts. This was an intentional statement, which supports a finding of bad faith necessary for application of judicial estoppel.
The reasoning of Fremont, applicable to judicial notice in general, does not apply when the facts are undisputed. (The Swahn Group, Inc. v. Segal, supra, 183 Cal.App.4th at p. 843.) Significantly, in the Fremont case, there was no claim of judicial estoppel, so that decision is easily distinguished. Further, in the present case, the trial court was not called upon to interpret the meaning of bankruptcy filings, of which it had taken judicial notice. Instead, assuming the truth of the allegations of the complaint and the bankruptcy documents judicially noticed, which were undisputed, the court was only required to determine whether Victor's position in the bankruptcy proceeding was inconsistent with the position asserted in the current complaint.
Although one good reason is sufficient to sustain the order from which the appeal was taken (Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 513), the doctrine of judicial estoppel was also applicable to support the order sustaining the demurrer without leave to amend.
DISPOSITION
The judgment is affirmed. Respondents are entitled to costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J. We concur: McKINSTER
J. CODRINGTON
J.