Judge Douglas W. Stern, Case 21STCV29839 2022-08-17 Tentative Ruling

Judge: Douglas W. Stern, Case: 21STCV29839, Date: 2022-08-17 Tentative Ruling

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Case Number: 21STCV29839 Hearing Date: August 17, 2022 Dept: 52

Tentative Ruling:

Defendant Epyon LLC and Christopher Alarcon’s Motion for Judgment on the Pleadings

Defendants Epyon LLC and Christopher Alarcon move for judgment on the pleadings on the first five causes of action alleged in plaintiff Victor Alarcon’s complaint.

Evidentiary Objections

Defendants Christopher Alarcon and Epyon LLC make five objections to the declaration of Stephanie C. Goldstein in support of plaintiff Victor Alarcon’s opposition to the motion. “Presentation of extrinsic evidence is … not proper on a motion for judgment on the pleadings.” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) The declaration is an improper attempt to introduce extrinsic evidence.

All five objections are sustained.

Summary of the Complaint’s Allegations

This action primarily concerns commercial property at 6228 Fulton Avenue, Unit 108, Van Nuys, California 91401. (Comp., ¶ 2.) Plaintiff Victor Alarcon acquired a partial interest in the property in 1993. (¶ 11.) In 2000, the property was sold to non-party Benjamin Williams via a trustee’s deed upon sale. (¶¶ 15-16.) Plaintiff and Williams entered an agreement for plaintiff to buy the property back after the foreclosure sale. (¶ 17.) Williams’ attorney “advised Plaintiff against taking legal title to the Property and instead, to have someone else hold legal title to the Property on his behalf.” (Ibid.)

Plaintiff followed that advice. Defendants Jorge Torres and Susana Torres agreed to “hold bare legal title to the Property for the benefit of Plaintiff (essentially as trustees), who would retain a one hundred percent (100%) beneficial ownership in the Property despite not being on title.” (Comp., ¶ 17.a.) Plaintiff provided the funds for the $76,000 down payment. (¶¶ 17.b, 18.) The balance was paid by a carryback loan, and “Plaintiff would be responsible for making all payments to satisfy” it. (¶ 17.c-d.) Plaintiff made those payments as “rent” to the Torreses under a “fictional lease” designed to mask plaintiff’s status as the equitable owner. (¶ 20.) Plaintiff also agreed to pay “all expenses associated with the Property,” including utilities, taxes, insurance, and maintenance. (¶ 17.f.)

In 2007, the Torreses paid off the balance of the carryback loan using their own money, then lent that amount to plaintiff at a lower interest rate. (Comp., ¶¶ 21-22.) Plaintiff continued to pay fictional “rent” on the property. (¶¶ 21-23.) After years of payments, plaintiff paid off the Torreses’ loan to him in 2016 or 2017. (¶ 24.) Then, plaintiff began paying the Torreses rent for the property through his auto shop—which the Torreses returned to him in cash. (Ibid.)

The Torreses decided to end the arrangement and divest themselves of title to the property in 2017 or 2018. (Comp., ¶ 26.) Because “plaintiff still believed that he should not hold legal title to the Property” (ibid.), he made a holding agreement (like the one with the Torreses) agreement with his son, defendant Christopher Alarcon. (¶ 28.)

The complaint alleges, “During their in-person discussions at Plaintiff’s residence, in or about the end of 2017 or the beginning of 2018, Christopher orally represented to Plaintiff that until Plaintiff decided otherwise, Christopher would hold bare legal title to the Property through an LLC created for that purpose, essentially as a trustee, for the benefit of Plaintiff, who would continue to retain a 100 percent beneficial ownership interest in the Property despite not being on title.” (¶ 28.) “The Torreses agreed to cooperate, subject to” treating the transfer as if it were a normal sale for $400,000. (Ibid.) Plaintiff also agreed to pay the Torreses $100,000 “to satisfy purported outstanding taxes the Torres incurred or would incur in connection with the Property.” (Ibid.)

Plaintiff paid Christopher Alarcon the initial $50,000 down payment for the purchase. (Comp., ¶¶ 29.a-b., 30.) As in his agreement with the Torreses, plaintiff paid monthly “rent” to Epyon, who gave it to the Torreses, who gave it back to plaintiff. (¶ 29.)

In 2021, plaintiff and Christopher Alarcon had a falling out. (Comp., ¶ 34.) Christopher Alarcon repudiated plaintiff’s interest in the subject property. (¶¶ 34-35.) Christopher Alarcon also denied plaintiff’s ownership of over $200,000 in gold and cash stored in a safety deposit box under Christopher’s name. (¶ 34.)

First Cause of Action: Quiet Title

Plaintiff alleges sufficient facts to constitute a cause of action for quiet title based on equitable title to the property. Generally, “the holder of equitable title cannot maintain a quiet title action against the holder of legal title. [Citation.] But an exception exists ‘when legal title has been acquired through fraud.’ [Citation.] In that case, available ‘remedies include quieting title in the defrauded equitable title holder’s name and making the legal title holder the constructive trustee of the property for the benefit of the defrauded equitable titleholder.’ ” (Liberty National Enterprises, L.P. v. Chicago Title Ins. Co. (2013) 217 Cal.App.4th 62, 81, citing Warren v. Merrill (2006) 143 Cal.App.4th 96, 113-114.)

Involuntary trusts include both constructive and resulting trusts. (Martin v. Kehl (1983) 145 Cal.App.3d 228, 238 (Martin) [distinguishing the two forms of trust which “have often been confused by attorneys, as well as some courts”].) “Ordinarily a resulting trust arises in favor of the payor of the purchase price of the property where the purchase price, or a part thereof, is paid by one person and the title is taken in the name of another.” (Ibid.) “ ‘The trust arises because it is the natural presumption in such a case that it was their intention that the ostensible purchaser should acquire and hold the property for the one with whose means it was acquired.’ ” (Ibid.)

The complaint’s allegations are analogous to the circumstances described in Martin. In 2001, plaintiff paid the purchase price for the Torreses to buy the property from Benjamin Williams. (Comp., ¶¶ 17-18.) They held legal title to the property on behalf of plaintiff. (Ibid.) By operation of law, the Torreses therefore were trustees of a resulting trust on plaintiff’s behalf.

In 2018, plaintiff paid the purchase price for Epyon to buy the property from the Torreses. (Comp., ¶ 29.) Again, he did so with the intent that Epyon hold bare legal title for him. (Ibid.) Once more, by operation of law, Epyon became trustee of a resulting trust on plaintiff’s behalf. Plaintiff therefore alleges sufficient facts to constitute quiet title via his equitable ownership of the property.

Defendants contend the statute of frauds bars plaintiff’s cause of action for quiet title because he relies on an oral agreement to transfer property. Both constructive and resulting trusts “are involuntary trusts implied by law and exempt from the statute of frauds.” (Martin, supra, 145 Cal.App.3d at p. 238; accord Calistoga Civic Club v. City of Calistoga (1983) 143 Cal.App.3d 111, 117–118.)

Defendants also argue that, as Epyon’s tenant, plaintiff is estopped from denying Epyon’s title to the property. “A tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation.” (Evid. Code, § 624.) Two exceptions apply here.

First, plaintiff was in possession of the property before entering the lease with Epyon. “[T]he owner of real property who accepts a lease thereof from another claimant, while he himself is in possession, and who has not at any time received the possession from the lessor, is not estopped by the lease from asserting his title as against such lessor.” (Strong v. Baldwin (1908) 154 Cal. 150, 161; accord Davidson v. Ellmaker (1890) 84 Cal. 21, 23.)

Second, plaintiff alleges defendants acquired title through fraud. “Fraud or misrepresentations used to induce the lessee to enter into the lease relieve him from the estoppel to dispute the lessor’s title.” (Sands v. Eagle Oil & Refining Co. (1948) 83 Cal.App.2d 312, 321.)

Finally, defendants contend the transfer from the Torreses to Epyon prohibits plaintiff from claiming at interest in the property. “Every grant of an estate in real property is conclusive against the grantor, also against every one subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded.” (Civ. Code, § 1107.)

This section does not apply because plaintiff is not the grantor or “one subsequently claiming under him.” Civil Code section 1107 is a “race-notice” provision. “[A] subsequent purchaser obtains priority for a real property interest by (1) acquiring the interest as a bona fide purchaser for valuable consideration with neither actual knowledge nor constructive notice of (2) a previously created interest and (3) ‘first duly record[ing]’ the interest, i.e., recording before the previously-created interest is recorded.” (First Bank v. East West Bank (2011) 199 Cal.App.4th 1309, 1313.) In other words, it applies to (a) the grantor, or (b) others to whom the grantor transferred the property.

Here, plaintiff was neither the grantor and nor a different grantee of grantor. Plaintiff did not grant the property to anyone during the relevant period. The Torreses never granted the property to plaintiff. Plaintiff alleges facts showing he acquired equitable title concurrently with the Torreses acquiring legal title. He thus held equitable title before the Torreses granted the property to Epyon. He is not claiming “under” the Torreses; his equitable claim is superior to the Torres’s bare legal title.

Second Cause of Action: Declaratory Relief

This cause of action is superfluous. When the “issues invoked in” a cause of action for declaratory relief “already [are] fully engaged by other causes of action,” “declaratory relief [is] unnecessary and superfluous.” (Hood v. Superior Court (1995) 33 Cal.App.4th 319, 324.) Quiet title is a specific type of declaratory relief for rights in real property. (See Deutsche Bank National Trust Co. v. Pyle, supra, 13 Cal.App.5th at p. 524 [its purpose is “to finally settle and determine, as between the parties, all conflicting claims to the property in controversy”].)

Plaintiff seeks a judicial declaration “that he is the true owner of 100% of the beneficial interest in the Property and that the Torres-Epyon DOT should be re-conveyed.” (Comp., ¶ 48.) Succeeding on his quiet title action would constitute a judicial declaration that he owns 100% of the property and would result in him gaining legal title to the property.

Furthermore, declaratory relief “operates prospectively” and is not proper “where there is an accrued cause of action for an actual breach of contract or other wrongful act.” (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407.) Plaintiff alleges defendants committed wrongful acts before he filed this action and is therefore entitled to various remedies. This controversy has “crystallized into a cause of action for past wrongs.” (Cardellini v. Casey (1986) 181 Cal.App.3d 389, 396.)

Third Cause of Action: Fraud

Plaintiff alleges sufficient facts for this cause of action. Fraud requires: (1) a misrepresentation of fact; (2) knowledge of falsity; (3) an intent to defraud; (4) justifiable reliance; and (5) resulting damages. (Ryder v. Lightstorm Entertainment, Inc. (2016) 246 Cal.App.4th 1064, 1079.)

Plaintiff alleges promissory fraud, which is “fraud or deceit based on a promise made without any intention of performing it.” (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1453; see also Civ. Code, § 1710(4).) To satisfy the misrepresentation element, the plaintiff must allege “(1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060 (Beckwith).)

Plaintiff alleges defendant Christopher Alarcon falsely promised to hold bare legal title in the property on plaintiff’s behalf. (Comp., ¶¶ 29, 51-52.) He alleges Christopher Alarcon “knew his representations were false when he made them with the intent to deprive Plaintiff of his beneficial interest in the Property.” (¶ 52.)

Plaintiff alleges justifiable reliance. “[T]he reasonableness of the reliance is ordinarily a question of fact. [Citations.] However, whether a party’s reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.” (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.)

Plaintiff alleges that, in reliance on his son’s promise, he permitted the Torreses to transfer the property (Comp., ¶ 53.a), he paid the Torreses $100,000 (¶ 53.b), and he paid his son $50,000 (¶ 29). Reasonable minds could disagree on whether plaintiff justifiably relied on his son’s promise. It is a question of fact that cannot be resolved on the pleadings.

Plaintiff alleges resulting damages. He paid $100,000 to the Torreses and $50,000 to Christopher Alarcon in reliance on Christopher’s promise. (Comp., ¶¶ 29, 53.) He alleges he did not get what he paid for: maintaining equitable title to the property. Plaintiff also alleges that, in reliance on his son’s promise, plaintiff paid for the property’s expenses. (¶¶ 31, 53.d.) And plaintiff alleges that, but for his son’s promise, he would have found “another third party to hold title” or taken “title in his own name.” (¶ 53.)

Defendants argue plaintiff fails to “allege facts showing that” the defendants did not intend to perform the promise. (Motion, p. 12.) Plaintiff must only allege ultimate facts, not evidentiary facts. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6; C.W. Johnson & Sons, Inc. v. Carpenter (2020) 53 Cal.App.5th 165, 169.)

For promissory fraud, “the falsity of that promise is sufficiently pled with a general allegation the promise was made without an intention of performance. [Citation.] ‘The representation (implied) is that of the intention to perform [citation]; the truth is the lack of that intention. Purely evidentiary matters—usually circumstantial evidence or admissions showing lack of that intention—should not be pleaded. Hence, the only necessary averment is the general statement that the promise was made without the intention to perform it, or that the defendant did not intend to perform it.’ ” (Beckwith, supra, 205 Cal.App.4th at p. 1060.)

Defendants also contend plaintiff failed to allege fraud with the required specificity. “[F]raud must be pled specifically.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “ ‘This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ ” (Ibid.)

Plaintiff alleges each of those details: “During their in-person discussions at Plaintiff’s residence, in or about the end of 2017 or the beginning of 2018, Christopher orally represented to Plaintiff that until Plaintiff decided otherwise, Christopher would hold bare legal title to the Property.” (Comp., ¶ 28.)

Defendants argue plaintiff must allege the specific amount of damages. Defendants’ reliance on Nagy v. Nagy (1989) 210 Cal.App.3d 1262 and Abbot v. Stevens (1955) 133 Cal.App.2d 242 is misplaced. Both cases state, “An allegation of a definite amount of damage is essential to stating a cause of action.” (Nagy, supra, 210 Cal.App.3d at pp. 1268-1269; Abbot, supra, 133 Cal.App.2d at p. 247.) Defendants misinterpret the rule.

For that proposition, Abbot cites Munson v. Fishburn (1920) 183 Cal. 206, 220, which better explains the rule. “[T]he exact amount of damage need not be shown, provided it be in an ‘appreciable’ sum. Where the action is for damages, however, the plaintiff must allege and prove that by reason of the fraud he has suffered damage in a definite amount.” (Id. at pp. 219-220.) Thus, the plaintiff does not need to allege he suffered a specific dollar amount of damages. He must allege he has suffered an amount of damages capable of being made certain—i.e., not a speculative or unmeasurable amount.

To the extent those opinions state the plaintiff must allege an exact dollar amount of damages, those statements are dicta. In Nagy, a husband sued his wife for misrepresenting that he was her child’s father. (210 Cal.App.3d at p. 1268.) The court held, “[A]llowing a non-biological parent to recover damages for developing a close relationship with a child misrepresented to be his and performing parental acts is not a ‘damage’ which should be compensable under the law.” (Id. at pp. 1269-1270.) The issue was the nature of the misrepresentation and of the resulting damage, not the amount.

In Abbot, the issue also was not the exact amount of damages. Rather, the plaintiff alleged no actionable damages. “The only specific damage alleged at bar is the payment of the bonus, and that could not serve the desired purpose unless it was usurious; payment of a lawful exaction cannot constitute a legal injury.” (Abbot, supra, 133 Cal.App.2d at p. 247.)

Moreover, plaintiff alleges two specific sums of damages: in reliance on the promise, he paid his son $50,000 for the down payment and he paid the Torreses $100,000 they demanded. (Comp., ¶¶ 29, 53.)

Finally, defendants argue plaintiff fails to allege facts showing Christopher Alarcon had authority to speak on behalf of Epyon. Plaintiff alleges “Christopher is the sole member and chief executive officer of Epyon.” (Comp., ¶ 3.) He further alleges, “Christopher organized and registered Epyon as the holding company for the Property.” (¶ 30.) Finally, he alleges his son organized Epyon specifically for the purpose of holding title to the property. (Comp., ¶¶ 28, 29.c.) These allegations suffice to show Christopher Alarcon’s authority to speak on behalf of Epyon.

Fourth Cause of Action: Negligent Misrepresentation

Plaintiff fails to allege sufficient facts for negligent misrepresentation. “To be actionable, a negligent misrepresentation must ordinarily be as to past or existing material facts. ‘[P]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud.’ ” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.) There is no cause of action for a “negligent false promise.” (Id. at p. 159.)

Plaintiff alleges defendant Christopher Alarcon falsely promised to hold bare legal title in the property on plaintiff’s behalf. (Comp., ¶ 58.) This allegedly false promise not an actionable negligent misrepresentation. Plaintiff alleges no misrepresentation of a past or existing material fact.

In the opposition, plaintiff erroneously claims, “Victor did not allege negligent misrepresentation in his Complaint. … Moreover, Victor’s fourth cause of action against Christopher is Conversion.” (Opp., p. 13.)

Page 15 of the complaint, lines 14 to 16, provides:

FOURTH CAUSE OF ACTION

(Negligent Misrepresentation)

Against Christopher, Epyon, and Does 11 through 15, inclusive, and each of them

Plaintiff shows no reasonable possibility of amending this cause of action. Instead of attempting to do so, plaintiff mistakenly denies that his complaint includes it. In addition, as a matter of substantive law, plaintiff cannot bring this cause of action. The court therefore shall not grant plaintiff leave to amend the fourth cause of action for negligent misrepresentation.

Fifth Cause of Action: Promissory Estoppel

Plaintiff alleges sufficient facts for this cause of action. “The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225, internal quotes and alterations omitted.)

Defendants’ arguments on this cause of action mirror those on the third cause of action for fraud. The court rejects those arguments for the same reasons discussed above. Plaintiff alleges defendants promised to hold bare title to the property on his behalf. He relied on the promise by paying his son and the Torreses. His reliance cannot be found unreasonable and unforeseeable on the pleadings. And due to his reliance, plaintiff lost at least $150,000 and his real property.

Disposition

Defendants Epyon LLC and Christopher Alarcon’s motion for judgment on the pleadings is denied as to the first, third, and fifth causes of action. Defendants’ motion for judgment on the pleadings is granted with leave to amend as to the second cause of action for declaratory relief. The motion is granted without leave to amend as to the fourth cause of action for negligent misrepresentation.