Judge: Cherol J. Nellon, Case: 23STCV03326, Date: 2024-03-18 Tentative Ruling

Case Number: 23STCV03326    Hearing Date: March 18, 2024    Dept: 14

Jackson v Rasco

Case Background

Plaintiff Dietra Jackson (“Jackson”) and Defendant Kevin L. Rasco (“Rasco”) were previously romantic partners. They lived together in a house in Lancaster, which they owned as joint tenants. When they broke up, they made an agreement about how to divide the property.

According to Plaintiff, they agreed that Plaintiff would give up her interest in the property in exchange for $30,000 up front and a ½ share of any eventual sale proceeds (from which the $30,000 “down payment” would be subtracted). According to Defendant, they agreed that Defendant would simply buy Plaintiff out for $30,000 flat.

Complaint

On February 14, 2023, Plaintiff Jackson filed her Complaint for (1) Breach of Contract, (2) Promissory Estoppel, and (3) Unjust Enrichment against Defendants Rasco and DOES 1-25.

On October 20, 2023, Defendant Rasco filed his Answer.

Cross-Complaint

On October 20, 2023, Defendant Rasco filed his Cross-Complaint for (1) Rescission, (2) Reformation, and (3) Unjust Enrichment against Cross-Defendant Jackson and ROES 1-25.

Trial Date

            No trial date has yet been set.

Instant Pleading

            Cross-Defendant Jackson now demurs to the entire Cross-Complaint on the grounds that it fails to state facts sufficient to constitute any cause of action and is uncertain.

Decision

            The demurrer is OVERRULED. Cross-Defendant Jackson is to file an Answer within 10 days.

First Cause of Action: Rescission

            Rescission is a statutory process for “extinguishing” a contract. Civil Code § 1688. As provided in Civil Code § 1689:

            “(b) A party to a contract may rescind the contract in the following cases:

(1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.”[1]

The rescinding party may bring a claim to enforce that rescission and claim the return of anything that they have already paid under the contract. Civil Code § 1692. However, the rescinding party must also be willing to return anything which they have already received under the contract. Civil Code §§ 1691 and 1693.

            Jackson argues that rescission is impossible in this case because the real property which was the subject of the contract has already been re-sold. Because Rasco has already transferred the property to someone else, he can no longer return Jackson’s interest in it, and therefore cannot rescind the contract. This argument might be persuasive if the court accepted Jackson’s view of the facts. However, on a demurrer to Rasco’s Cross-Complaint, the court must accepting Rasco’s version of events as true.

            Jackson alleges in her complaint that there was one agreement between the parties which was “partially oral and partially written.” (Complaint ¶ 14). But Rasco alleges that there were actually two agreements: first an oral agreement by which he bought Jackson’s interest in the property for $30,000, then a later written agreement in which he agreed to pay Jackson ½ of the sale proceeds (minus the $30,000 already received). (Cross-Complaint ¶¶ 12-19; Complaint Exhibit B). Rasco only seeks to rescind the written agreement. (Cross-Complaint ¶ 31).

            On reply, Jackson argues that this theory flies in the face of the exhibits submitted in her Complaint and relied on by Rasco in his Cross-Complaint. It does not. Both parties agree that Rasco paid Jackson $30,000 prior to signing the written agreement, which is dated February 12, 2003, and acknowledges the payment. (Complaint Exhibit B). The quitclaim deed by which Jackson transferred her interest to Rasco was prepared on January 10, 2003, and executed on February 11, 2003. (Complaint Exhibit C). This was before the written agreement was executed.

            Based on the information in the exhibits, either party’s story could be correct. The written agreement could be one part of a single transaction. Or it could be a second transaction undertaken after a prior one was completed. The court cannot decide which story is true on a demurrer.

Second Cause of Action: Reformation

Civil Code § 3399 provides:

“When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.”

“Reformation is not the court creating a new agreement but rather enforcing the actual agreement already made by the parties.” Panterra GP, Inc. v. Superior Court (2022) 74 Cal.App.5^th 697, 713-714 (emphasis removed).

            Here once again Jackson’s demurrer depends upon the court adopting her version of events. She argues that the court cannot simply write a new contract for the parties. And that is true. But Rasco alleges that the written agreement was executed by mistake and does not reflect the actual deal they reached. (Cross-Complaint ¶ 34). The court cannot decide these factual questions on a demurrer.

Third Cause of Action: Unjust Enrichment

            While “unjust enrichment” is a legal principle rather than a concrete cause of action, when a party uses that label, the court should construe the claim as one for restitution. Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4^th 221, 231. Restitution is a form of alternative pleading which allows a party to recover for breach of an agreement even if the agreement itself turns out to be unenforceable as written. Id.

            Rasco pleads that, if the agreement is enforced, Jackson will receive the benefit of all the work and money Rasco has put into the house in the 20 years since Jackson moved out. (Cross-Complaint ¶¶ 23, 25, 37-38). Rasco pleads that this amounts to $654,000.00. (Cross-Complaint ¶ 23). His theory appears to be that, if the court finds there is no enforceable agreement of any kind between the parties, then the court should proceed as if Jackson had never ceased being a joint tenant, and Jackson should then reimburse him for all the upkeep and expenses he bore on their behalf.

            Given that oral contracts for the transfer of real property are not generally enforceable (see Civil Code § 1624(a)(3)), and that the writing attached to the Complaint may lack consideration, this is not an unreasonable alternative to plead. To be clear, the court is making no findings about enforceability, or about whether there was one contract or two. The court is merely spotting issues, which cannot have escaped counsel on either side.

Conclusion

            Cross-Complainant Rasco has properly pled entitlement to rescission and reformation. Cross-Complainant Rasco has also properly pled an alternative theory in case the court finds that the parties have no enforceable agreement at all. Therefore, the demurrer is OVERRULED. Cross-Defendant Jackson is to file an Answer within 10 days.