Judge Gail Killefer, Case Number: 20STCV40408, Date: 2024-02-20 Tentative Ruling

TENTATIVE: The demurrer to the first, second, third, fourth, ninth, and twelfth causes of action is sustained without leave to amend. The demurrer to the sixth, eighth, tenth, and eleventh causes of action is sustained with leave to amend. The demurrer to the fifth and seventh causes of action is overruled. The Plaintiff is given 20 days leave to amend. OSC re Amended Complaint set for __.

This action was filed on October 21, 2020, and arises in connection with the sale of real property located at 3943 Fredonia Drive, Los Angeles, California (the “Property.”) Plaintiff Vadim Levotman (“Levotman”) alleges that Defendant Alexander Tishelman (“Tishelman”) failed to perform on an Option Agreement dated August 16, 2019 (the “Agreement”) by not placing the Property on the market and disbursing 50 percent (50%) of the profits to Plaintiff as agreed. The Complaint seeks a judgment granting sale of the Property.¿

Defendant/Cross-Complainant Tishelman filed a Third Amended Cross-Complaint (“TACC”) alleging three causes of action: (1) Breach of Fiduciary Duty, (2) Constructive Fraud, and (3) Declaratory Relief.

The Second Amended Complaint (“SAC”) alleges six causes of action: (1) Breach of Written Contract, (2) Specific Performance, (3) Declaratory Relief with Request for Temporary Preliminary and Permanent Injunctive Relief, (4) Violation of Penal Code 496, (5) Fraudulent Transfer and Avoidance of Mechanic’s Lien, and (6) Breach of Contract and Failure to Return Deposit.

On June 16, 2023, Defendant/Cross-Complainant Tishelman filed a Demurrer with a Motion to Strike Plaintiff’s SAC. On July 28, 2023, the court sustained Defendant’s demurrer to the fourth cause of action with leave to amend and overruled the demurrer as to the fifth and sixth causes of action.

On September 26, 2023, the parties stipulated to the filing a Third Amended Complaint (“TAC”) and adding new causes of action.

Defendants Tishelman and TF Trust (collectively “Defendants”) now demur to the TAC. Plaintiff opposes the Motion. The matter is now before the court.

Discussion

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

On September 19, 2022, the parties entered into a Joint Stipulation Re Trial Bifurcation. Phase One of the trial pertained to the interpretation of the parties' rights and responsibilities with regard to the Option Agreement. (Lau Decl. Ex. 1.) Phase Two is a jury trial set to be heard on April 2, 2024; the jury will decide all remaining claims.

On February 21, 2023, as to Phase One of the trial, the court made the following findings: 1) Plaintiff Levotman has the right to purchase 50% of the Property for $750,000.00; 2) Plaintiff has the right to sell the Property if he exercises the option to purchase the Property for a total of $750,000.00; and (3) if the Property is sold the profit or loss from the sale will be divided equally between Plaintiff and Defendant Tishelman. (Lau Decl. Ex. 1.) The court also found that Plaintiff had already deposited $150,000.00 towards the option to purchase 50% of the Property and needed to pay an additional $600,000.00 to obtain 50% ownership and exercise the option to sell the Property. (Id.)

The February 21, 2023, Order reflects the findings of facts by the court pursuant to a trial on the merits. Paragraph 4 of the Option Agreement states in the relevant part:

Either Optionor and Optionee have the right to cause a sale of Fredonia Property upon a 90-day written notice to the other party. Optionor and Optionee shall have a right to first refusal following such notice. It is agreed that the basis (value) of Fredonia Property is $1,500,000. Any income or loss from the sale of the property shall be divided equally between the parties, subject to mortgages, liens, encumbrances and the like.

The court found that “Levotman must own one-half in the Property in order to exercise the Option set forth in ¶ 4, the sale of the Fredonia Property. Levotman has already deposited $150,000 with Tishelman for this purpose. (Acknowledgment Receipt.) He must therefore deposit an additional $600,000 to exercise the option in ¶ 3 before exercising the option in ¶ 4.” (Lau Decl. Ex. 1 at pp. 3-4.)

The TAC asserts that Plaintiff “provided $150,000 and other valuable consideration to Defendant” pursuant to the Option Agreement. (TAC ¶ 15.) The TAC asserts that Defendant failed to “reasonably share” any proceeds from the Property despite having done so previously. (TAC ¶ 18.) Plaintiff now elects “to give notice of his intent to sell the Property and has invoked the sale provision, paragraph 4 on October 20, 2020. (TAC ¶ 18.) “Plaintiff seeks a Judgment from this Court granting sale, not to occur prior to 90 days after October 20, 2020.” (TAC ¶ 19.)

The court notes that while the facts in the pleading are taken as true, “judicially noticeable facts may supersede any inconsistent factual allegations contained in a complaint.” (City of Chula Vista v. County of San Diego (1994) 23 Cal.App.4th 1713, 171.) Here, the court may take judicial notice of the contents of its own records. (Dwan v. Dixon (1963) 216 Cal.App.2d 260, 265; Foster v. Gray (1962) 203 Cal.App.2d 434, 439.) Accordingly, the findings of fact in the February 21, 2023, Order are subject to judicial notice and take precedence over any inconsistent facts in the TAC. (See Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 (Del. E. Webb Corp.) [“The courts, however, 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”].)

A. First, Second, and Third Causes of Action - (1) Breach of Written Contract, (2) Specific Performance, (3) Declaratory Relief with Request for Temporary Preliminary and Permanent Injunctive Relief

As to the first cause of action, the TAC alleges that considering COVID-19, Plaintiff invoked Paragraph 4, and that Defendant breached the Agreement (Option Agreement) by refusing to allow the Property to be sold “and has refused paragraph 4 in an anticipatory act and repudiation.” (TAC ¶¶ 23-25.) “Plaintiff performed all of his obligations and covenants under the Agreement, except for any obligations and covenants for which performance was excused.” (TAC ¶ 26.) As to the second cause of action, Plaintiff seeks specific performance permitting the Property to be sold and the proceeds divided 50/50. (TAC ¶ 37.)

As to the third cause of action, “Plaintiff specifically prays that the Court determine that the Property must be sold before the market falls.” (TAC ¶ 40.) “Plaintiff requests that this Court issue temporary, preliminary and permanent injunctive relief, which prohibits Defendants from taking any action to transfer right, title, interest, or possession to the Property during the pendency of these proceedings, including but not limited to hypothecating, encumbering, transferring, selling, or otherwise dissipating the Property.” (TAC ¶ 41.)

Defendants assert that first, second, and third causes of action are barred by the February 21, 2023, Order wherein the court found that Plaintiff “must own one-half interest in the Property in order to exercise the Option set forth in ¶ 4, the sale of the Fredonia Property” and that Plaintiff “must therefore deposit an additional $600,000 in ¶ 3 before exercising the option in ¶ 4.” (Lau Decl. Ex. A at pp. 3-4.) The TAC fails to allege that Plaintiff has deposited the additional $600,000.00, therefore, Plaintiff does not have the right to exercise the option in ¶ 4. Accordingly, the first and second causes of action fail. The third cause of action also fails because the February 1, 2023, Order already determined the rights of the parties under the Option Agreement and Plaintiff fails to articulate was additional rights or obligations the court needs to determine between the parties.

While it is true that the February 21, 2023, Order did not make a finding on Plaintiff’s entitlement to his pro rata share of rents, the first, second, and third cause of action are devoid of facts that show that said causes of action concern the Plaintiff’s pro rata share of rents or that Plaintiff seeks to adjudicate this issue in the first, second, and third causes of action. (See Schick v. Lerner (1987) 193 Cal.App.3d 1321, 1327 [¿F]acts not alleged are presumed not to exist”].)

The Plaintiff states he “performed all of his obligations and covenants under the Agreement, except for any obligations and covenants for which performance was excused.” (TAC ¶ 26.) However, the statement is a legal conclusion that is not supported by facts. “It is settled law that a pleading must allege facts and not conclusions, and that material facts must be alleged directly and not by way of recital.” (Ankeny v. Lockheed Missiles and Space Co. (1979) 88 Cal.App.3d 531, 537.) Furthermore, even if Plaintiff’s performance under the Option Agreement was excused, Plaintiff fails to case law to show the excuse of performance gives him an enforceable interest in the Property at issue.

Accordingly, the demurrer to the first, second, and third causes of action is granted without leave to amend.

B. Fourth Cause of Action - Declaratory Relief with Request for Temporary Preliminary and Permanent Injunctive Relief RE: Recorded Mechanic’s Lien

In the fourth cause of action, “Plaintiff specifically prays that the Court determine that the Property must be sold before the market falls.” (TAC ¶ 44.) “Plaintiff requests that this Court issue temporary, preliminary, and permanent injunctive relief, which declares the rights of a mechanic’s lien holder, and specifically to determine such mechanic’s lien to be reconveyed, void, and/or no legal force or effect.” (TAC ¶45.)

On 9/12/22, Tishelman and/or Renaissance Construction Group, Inc., caused to be filed a mechanic’s lien against the property in the face amount of $564,980 purportedly owed to Renaissance Construction Group, Inc. (“Mechanic’s Lien”). The signing party is now the “TF Trust.” This Mechanic’s Lien was filed to frustrate the exercise of the Option and to steal and convert Plaintiff’s right to the proceeds thereunder. This recordation of the lien renders the entire exercise of the Option futile and is intentional conversion. In the Tishelman Deposition, he testified there were no other liens against the property, mortgages or deeds of trust on 5/13/22. Depo Tr. 67:1-9.

(TAC ¶ 46.) The TAC alleges that despite Defendant stating that the mechanic’s lien has expired as a matter of law and will not impede the exercise of the purchase, “Mechanic’s Lien because the proposed title company will not permit a sale of the Property irrespective of Defendants’ belief that the Mechanic’s Lien has expired, and/or is of no force and effect.” (TAC ¶ 48.) Plaintiff seeks “a Court Ordered adjudication that the Mechanic’s Lien is of no force and effect as a matter of law and if necessary that the Clerk of the Court, or the Court sign an Order that may be recorded in the Los Angeles County Recorder’s Office determining that the Mechanic’s Lien is of no force and effect, is not validly owed against the Property, and should be determined to be reconveyed. Alternatively, Plaintiff requests that the Clerk of the Court be appointed to execute any necessary documents to cause the Property to be reconveyed.” (TAC¶ 50.)

Defendants assert that the declaratory relief requested under the fourth cause of action is not available by law because under Civ. Code § 8560^{^[2]}, the lien expired 90 days from its recording on September 12, 2022. The fact that no action has been commenced to enforce the lien within 90 days, makes the lien unenforceable as a matter of law. The language of section 8460 “makes it clear that a failure to timely commence the action terminates the substantive right to a lien. It is not merely a statute of limitations.” (Automatic Sprinkler Corp. v. Southern Cal. Edison Co. (1989) 216 Cal.App.3d 627, 635, fn. 4.)

Defendants argue only the original contractor, Defendant Renaissance Construction Group, Inc., may waive its lien and not Defendants. (Moorefield Construction, Inc. v. Intervest-Mortgage Investment Co. (2014) 230 Cal.App.4th 146, 157.) Therefore, the fourth cause of action is not properly pled against Defendants Tishelman and TF Trust.

Plaintiff argues that under Civ. Code § 8480, he may obtain a court order to release the property from the claim of lien. However, a section 8480 action can only be brought by “[t]he owner of the property or the owner of any interest in the property.” (Civ. Code, § 8489.) Plaintiff has failed to cite case law to show that paying a portion of the price to exercise an option contract for real property gave him an ownership interest in the Property. However, Civ. Code § 8490 gives the court the power to issue an “order dismissing a cause of action to enforce a lien or releasing property from a claim of lien, or a judgment that no lien exists[.]” “A motion to remove a mechanic's lien is recognized as a device that allows the property owner to obtain speedy relief from an unjustified lien or a lien of an unjustified amount without waiting for trial on the action to foreclose the lien.” (Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314, 318.)

Accordingly, an action to remove the lien under Civ. Code § 8490 must be brought by the owner of the Property, a fact that Plaintiff cannot establish given the February 21, 2023, Order that he has not fully exercised the Option under Paragraph 3 of the Option Agreement and has not acquired an interest in the Property. Defendants further argue that removal of the mechanic’s lien is required to covey free and clear title under Paragraph 1 of the Option Agreement, the fourth cause of action is action fails to contain such facts. (TAC Ex. 1, ¶ 1.) Therefore, until Plaintiff pays the Option Price, Defendant is not required to perform and covey title “free and clear,” and Plaintiff lacks standing to require the removal of the mechanic’s lien.

Accordingly, the demurrer to the fourth cause of action is sustained without leave to amend.

C. Fifth Cause of Action – Breach of Implied Covenant of Good Faith and Fair Dealing

“Every contract contains an implied covenant of good faith and fair dealing providing that no party to the contract will do anything that would deprive another party of the benefits of the contract.¿The implied covenant protects the reasonable expectations of the contracting parties based on their mutual promises.” (Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885; see also Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349–350.)

Optionee may deposit various sums with Optionor or into an escrow…All of such deposits shall be credited to the purchase price…

Optionee shall derive benefits from the Fredonia Property based on Optionee’s pro rata share of the deposits.

Defendant Tishelman, however, breached his covenant of good faith and fair dealing therein by, among other things, (a) failing to pay any portion of the pro rata rents received, (b) failure to return the deposit which was advanced on credit, (c) failure to sign real property contract documents so that the Agreement could be effectuated, (d) depriving Plaintiff of the benefits of his interest in the Property and the past, present, and future proceeds therefrom and by obstructing Plaintiff’s right to manage and conduct management of the Property, and by failing to account to Plaintiff with respect thereto, and by concealing the true nature of its acts and omissions from Plaintiff.

Defendants argue that the TAC is devoid of any allegations that Defendants derived any benefit from the Property and the allegation that Defendants “paid rental income alone is insufficient to demonstrate that there is any profit in the Property to which Plaintiff is entitled a pro rata share. If Plaintiff intended to get a pro rata share of the rents, regardless of the costs to maintain the Property, he could have used the term “rents” instead of “benefits” when he drafted the Agreement -- he did not.” (Demurrer at p. 4:23-26.) The court finds that whether Plaintiff is entitled to rental income, and if such rental income is a “benefit” or “profit” given Defendant’s expenditures in paying the mortgage, taxes, repairs or improvements is a disputed question of fact. At this stage in the pleadings, there is no factual determination that after Defendants pay the taxes and maintenance on the property, such expenses exceed the rental income such that there is no benefit derived from the property.

Defendants oppose the contention that the $150,000 paid in consideration of the option to purchase is a “credit” that is refundable. “A purported option agreement that gives the optionee the right to a full refund of a cash deposit in the event the optionee decides not to exercise the option is not based on any consideration and thus is not an enforceable option contract.” (Options to Purchase, Cal. Prac. Guide Real Prop. Trans. Ch. 8-B, Options to Purchase, § 8:66 [italics original].) In Allen v. Smith (2002) 94 Cal.App.4th 1270, the appellate court held that if the optionee “was entitled to a return of her initial $20,000 deposit. [] [T]he deposit cannot be considered independent consideration for an option.” Therefore, if the $150,000 deposit paid by Plaintiff was “credit” then no consideration exists for the Option contract itself.

Defendants further maintain the allegation that Defendants failed to “sign real property contract documents so that the Agreement could be effectuated” is uncertain because it does not state what specific real property documents Defendant failed to sign sufficient for Defendants to form a response. Lastly, Defendants assert the Plaintiff fails to state what the “past, present and future proceeds” he was deprived of other than the self-made spreadsheet alleging rental income. (TAC Ex. 2.)

The court finds that the Plaintiff’s allegation that the deposit was advanced as credit is conclusory and inconsistent with the facts stated in the TAC. If Plaintiff seeks to argue that the payment of the deposit was based on an “implied” promise like the plaintiff in Rutherford Holdings, LLC v. Plaza Del Rey (2014) Cal.App.4th 223, 230, such that Plaintiff is entitled to return of the deposit, then the TAC must allege such facts. Similarly, if Plaintiff wishes to allege that the nonrefundable $150,000 paid towards the deposit is a liquidated damages provision and is unenforceable, Plaintiff must allege such facts and incorporate them by reference in the fourth cause of action. Furthermore, without specific facts as to what “real property contract documents” the Defendants failed to sign; the fourth cause of action is uncertain. The fact that Plaintiff claims Defendant refused to sign the purchase and sale agreement, is not a fact that is in the fourth cause of action, nor is there a sentence that incorporates these facts into the fourth cause of action.

However, Plaintiff pleads a viable cause of action for breach of the implied covenant of good faith and fair dealing regarding the Plaintiff’s entitlement to a portion of the pro rata rents. “‘A general demurrer challenges only the sufficiency of the cause of action pleaded, and must be overruled if any valid cause of action is pleaded; a demand for improper relief does not vitiate an otherwise valid cause of action.’ [Citations.]” (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 385 [italics original].) As Defendants’ demurrer to the fifth cause of action does not depose of the entire cause of action and no motion to strike has been filed, the demurrer to the fifth cause of action is overruled.

To plead a cause of action for conversion, one must allege (1) the plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “The unauthorized transfer of property constitutes a conversion. [Citation.] Money may be the subject of conversion if the claim involves a specific, identifiable sum; it is not necessary that each coin or bill be earmarked. [Citation.]” (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 209.)

The fifth cause of action alleges that “Defendant has intentionally taken possession of, transferred, and/or prevented Plaintiff from having access to proceeds, including pro rata share of rents.” (TAC ¶ 61.) “Defendant Tishelman’s actions were willful and malicious in that they did not intend to pay Plaintiff pro rata share of rents, and instead intended to use credit and willfully and maliciously harm Plaintiff.” (TAC ¶ 63.)

The court finds that the above allegations are conclusory and fail to state sufficient facts to state a cause of action for conversion. The fact that the Property has a Mechanic Lien does not mean that the Property has been transferred. Moreover, for Plaintiff to state he is entitled to pro rata share of rents, Plaintiff must state a specific monetary amount. To the extent that Plaintiff’s opposition argues that the $150,000 paid in consideration of the Option Contract has been converted because it is non-refundable, such allegation is not in the sixth cause of action and no facts are alleged that the deposit is refundable.

“Civil Code section 1710 defines one species of deceit as ‘[a] promise, made without any intention of performing it.” A cause of action for promissory fraud requires the plaintiff to allege that the promissor did not intend to perform at the time the promise was made, that the promise was intended to deceive and induce reliance, that it did induce reliance, and that this reliance resulted in damages.’ [Citations.]” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1411.)

The seventh cause of action alleges that “[o]n the date of the execution of the Agreement (and prior thereto), Defendant promised that the Property was in good condition, lien-free other than a first trust deed, and that by selling the Property, Levotman could at minimum earn back the amount in his initial deposit and subsequent full Option Price. All of these representations turned out to be false as a matter of fact and as a matter of law, and in fact, the Property has a Mechanic’s Lien that encumbered any available equity, and the Property is apparently in very bad condition.” (TAC ¶ 68.) The TAC further alleges that “Defendant previously made representations to Plaintiff on or about the date of the execution of the Agreement, acknowledging that the pro rata share of rents belonged to Plaintiff or the proceeds would be remitted to Plaintiff.” (TAC ¶ 69.) The representations were false because “Defendant did not intend to provide pro rata share of rents or repay Plaintiff, or permit the Property to be sold at an amount that would reimburse or allow Plaintiff to make any profit. Defendant Tishelman did not intend to perform as represented.” (TAC ¶ 70.) The Plaintiff relied on the representations by providing the $150,000. (TAC ¶ 72.)

Defendants assert that Plaintiff fails to allege that at the time Defendant Tishelman made the representation that the property was “in good condition” the property was not in fact in good condition. Defendants argue that the suggestion that the property may not currently be in good condition, is conclusory and insufficient to show that the promise was false at the time it was made. Similarly, there are no facts to show that on the date the Agreement was signed, the property was not lien free, and the Mechanic’s lien was filed on September 12, 2022, over two years after the Agreement was executed. (TAC ¶¶ 15, 46.) Defendants further contend that the TAC fails to allege justifiable reliance because the Agreement contains no provisions showing that the Property will be delivered according to the promises set forth above as the only condition is that “[t]he subject real property will be purchased AS IS, WHERE IS AND WITH ALL DEFECTS and subject to all easements and leases of record.” (TAC Ex. 1, ¶ 3.)

“But where a plaintiff himself sets forth the contract in the terms in which it is written, and then proceeds by averment to put a false construction upon the terms, the allegations, as repugnant to the terms, should be regarded as surplusage, to be struck out on motion.” (Stoddard v. Treadwell (1864) 26 Cal. 294, 303.) Plaintiff cannot circumvent the terms of the contract and argue that the Property must be sold in good condition, when (1) the property has not yet been sold, and (2) Plaintiff has agreed to purchase the Property as is.

As to the allegation that “Defendant did not intend to provide pro rata share of rents or repay Plaintiff,” Defendant fails to show that the allegation is not pled with the requisite specificity. Because a demurrer must dispose of an entire cause of action to be sustained, the demurrer to the seventh cause of action is overruled. (See PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682.)

F. Eight Cause of Action – Breach of Written Contract, Frustration of Purpose, Impracticability, and Return of Deposit

The TAC alleges that the eighth cause of action is pled in the alternative to exercise the Option. (TAC ¶ 78.) The TAC asserts that under Paragraph 2 of the Agreement, Defendant as the Optionor agreed “to furnish Optionee with such information as Optionee may request from time to time concerning the Fredonia Property and its physical condition, including all information concerning the status of any hazardous materials upon and under said property, and any litigation pending concerning such hazardous materials.” (TAC ¶ 80.) Defendant breached the Agreement “by failing to make Plaintiff aware of material physical conditions of the Fredonia Property, including without limitation, structural defects pertaining to the structure, and substructure of the Property.” (TAC ¶ 81.)

Under Paragraph 3 of the Agreement, Defendant had the obligation to conduct the purchase and sale “contingent upon the following: (a) Optionee’s ability to obtain ALTA title insurance coverage (b) Optionor’s execution of a recordable Deed conveying the subject real property (c) Optionee’s approval of the Preliminary Title Report and (d) Optionee’s ability to obtain a new first trust deed.” (TAC ¶ 82.) The Defendant breached Paragraph 3 by failing to execute the recordable deed. (TAC ¶ 83.) “The Agreement is impossible under paragraph 3 because no borrower can obtain a TD loan while another first TD loan is outstanding, and Tishelman has refused to retire the deed of trust. No financial institution will give a first TD loan on 50% of the undivided property.” (TAC ¶ 83.) “Defendant Tishelman has breached the Agreement by failing to sign escrow instructions, failing to sign a real estate purchase agreement when presented with one, and failure to sign all necessary documents referred to in the Agreement at ¶ 3.” (TAC ¶ 86.)

Defendant “entirely frustrated the purpose and/or rendered performance of the Option impossible based on Transfer No. 1, and therefore, must provide the benefit of restitution and/or return and/or rescission, and/or remit the deposit of $150,000 to Plaintiff.” (TAC ¶ 93.) “Defendant has entirely frustrated the purpose and/or rendered performance of the Option impossible based on Transfer No. 2, and therefore, must provide the benefit of restitution and/or return and/or rescission, and/or remit the deposit of $150,000 to Plaintiff.” (TAC ¶ 94.) “By its acts and omissions stated above, Defendant Tishelman is in breach of the Agreement, in that he refuses to allow the Property to be sold and has refused paragraph 4 in an anticipatory act and repudiation, and he has refused to refund the deposit, last demanded in March of 2023.” (TAC ¶ 95.)

The court notes that the doctrines of frustration of purpose and impossibility are affirmative defenses, not causes of action. (See SVAP III Poway Crossings, LLC v. Fitness International, LLC (2023) 87 Cal.App.5th 882, 886 [“Fitness filed an answer asserting 37 affirmative defenses to the complaint, including the equitable doctrines of frustration of purpose, impossibility, and impracticability”].)

The Defendants argue that under Paragraph 2 of the Agreement, Defendants have no obligation to furnish information until the Optionee makes the request. (TAC Ex. 1 ¶ 1.) Defendant asserts the TAC fails to allege that Plaintiff made such a request, such that the absence of the request did not trigger Defendants’ obligation to provide such information. “In contract law, a ‘condition precedent’ is ‘either an act of a party that must be performed or an uncertain event that must happen before the contractual right accrues or the contractual duty arises.’ [Citation.]” (Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882, 885, fn. 1.)

“It is hornbook law that where one contracting party prevents the other's performance of a condition precedent, the party burdened by the condition is excused from performing it, and the benefited party's duty of performance becomes unconditional.” (City of Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 490.) Here, any condition precedent that Plaintiff was obligated to fulfill but whose execution was hindered by Defendant’s conduct, is excused. Defendant’s obligation to execute “a recordable Deen conveying the real property” is contingent “[u]pon the exercise of the Option by Optionee” and until that condition is met, Defendants have no obligation to perform. (TAC Ex. 1, ¶ 3.)

The allegation that Plaintiff cannot “obtain a TD loan while another first TD loan is outstanding” and because “Tishelman has refused to retire the deed of trust” such that “[n]o financial institution will give a first TD loan on 50% of the undivided property” is a condition that is waived due to Defendant’s conduct. However, it does not waive Plaintiff’s obligation to tender the full purchase price of $750,000.00 to exercise the Option.

The court is also unclear what Transfer No. 1 and Transfer No. 2 are and how such transfer prevents Plaintiff from paying the full purchase price to Exercise the Option. Plaintiff fails to show how the allegation that Defendant frustrated or rendered certain provisions under the Agreement, contract impossible to perform, excuses his performance to tender the full purchase price. The fact that “Plaintiff did not get a loan” due to Defendant’s conduct, waives the condition precedent, the requirement to get a loan, but it does not waive Plaintiff’s obligation to tender the full purchase under the Agreement.

As the eighth cause of action fails to allege that Defendants’ obligations under the Agreement were due and Defendants breached those obligations, the demurrer to the eighth cause of action is sustained with leave to amend.

G. Ninth, Tenth, and Eleventh Causes of Action – Recission Based on Failure of Consideration; Fraud in the Inducement, Misrepresentation (Innocent or Otherwise); and Mistake of Fact and Mistake of Law

“A rescission is enforced by a civil action for relief based on rescission (Civ. Code, § 1692) or by asserting rescission as a defense.” (Southern Ins. Co. v. Workers' Comp. Appeals Bd. (2017) 11 Cal.App.5th 961, 963–964.) “The remedy of rescission extinguishes the contract (Civ. Code, § 1688) and restores the parties to their former positions by requiring them to return whatever consideration they have received.” (Koenig v. Warner Unified School Dist. (2019) 41 Cal.App.5th 43, 59–60.) “If appellants were mistaken as to the legal effect of their compromise agreement and the release, rescission cannot be effected now without showing the mistake was mutual [citation] or arose from an unrectified misrepresentation of which the other was aware [citation].” (Larsen v. Johannes (1970) 7 Cal.App.3d 491, 503 (Larsen).)

Defendants argue that Plaintiff is estopped from alleging recission because Plaintiff waited until after the court adjudicated the first phase of this trial. However, the court agrees that phase one of the trial only decided the parties' rights under the Agreement, and Plaintiff may elect to rescind the contract as a remedy.

The ninth, tenth, and eleventh causes of action are led in the alternative to the breach of contract claim. (TAC ¶ 102.) Plaintiff alleges recession due to failure of consideration due to the “representation that the Property was in good condition, or that even in the best-case valuation scenario, Plaintiff could make back the deposit and credit he put up for the property. In fact, no full deposit was ever made, but only the $150,000. It was represented that Plaintiff would be protected in the event of sale by receiving at minimum his investment, and assuming the high market, which for residential real estate, has not fallen from when this Agreement was executed. The Court has found the entire required sum to be an additional $600,000. Because the agreement has failed for complete consideration and the $600,000 has not been funded to date, there has been a failure of consideration.” (TAC ¶ 103.)

“‘Failure of consideration is the failure to execute a promise, the performance of which has been exchanged for performance by the other party.’ [Citation.]” (Taliaferro v. Davis (1963) 216 Cal.App.2d 398, 410.) “Accordingly, the rationale of the cases dealing with failure of consideration is that where the consideration fails in whole or in part through the fault of a party whose duty it is to render it, the other party may invoke such failure as a basis for rescinding or terminating the contract, provided the failure or refusal to perform constitutes a breach in such an essential particular as to justify rescission or termination.” (Id. at p. 412.)

The court agrees that Plaintiff cannot rescind a contract for failure of consideration where his payment is the consideration required to make the contract enforceable. The fact that Plaintiff did not get the benefit of his bargain, does not excuse his failure to tender the full purchase price, which is the consideration required to exercise the Option. By failing to perform and tender the consideration, Plaintiff cannot, now, seek to rescind the contract.

Accordingly, the demurrer to the ninth cause of action is sustained without leave to amend.

The claim for rescission due to fraud alleges that Defendant made false representations “that the Property was in good condition, or that even in the best-case valuation scenario, Plaintiff could make back the deposit and credit he put up for the property. It was represented that Plaintiff would be protected in the event of sale, and assuming the high market, which turned out to be false. Tishelman’s representations as to the condition of the Property, including its condition and the requirement to disclose condition were false, even though the Property has significant structure defects. Tishelman knew of the significant problems with the Property. Tishelman induced the payment of $150,000, all the well knowing the property would be lined up with a bogus Mechanic’s Lien, that no deed of trust could be obtained because he had no intention or willingness to retire the first deed of trust, and other facts according to proof.” (TAC ¶ 106.) At the time the agreement was entered into, Plaintiff was unaware that the representations were false, and Plaintiff believed that the representations were true, and riled on said representations.

Defendants assert that the fraud cause of action is not pled with the requisite specificity and that the Agreement specifically state that the Property is sold “AS IS, WHERE IS and WITH ALL DEFECTS.” (TAC Ex. 1, ¶ 3.) Defendants further allege that the representation that: “Plaintiff could make back the deposit and credit he put up for the property. It was represented that Plaintiff would be protected in the event of sale, and assuming the high market, which turned out to be false” is not a representation that can support a claim for fraud because it is a predication of a future event and is a mere opinion. “The law is well established that actionable misrepresentations must pertain to past or existing material facts. [Citation.] Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) The court agrees.

Lastly, the allegation that Defendant included Plaintiff to pay $150,000.00 knowing that there would be a mechanic’s lien on the property, is insufficiently pled because it fails to provide facts as to when the representation was made, that it relates to a past or existing fact at the time it was made, and that Defendant intentionally caused the mechanic’s lien to be recorded or made such representation when no reasonable ground existed for believing that the representation was true. The last allegation, that no deed of trust could be obtained, is similarly not pled with requisite specificity to support a finding of fraud.

Based on the above, the demurrer to the tenth cause of action is sustained with leave to amend.

Recession based on mistake of fact alleges that the mistake of fact is that “the condition of the property was in good condition, that Plaintiff could ever realize funds from this transaction, even in a high market, and additional mistakes of fact according to proof.” (TAC ¶ 111.) The mistake of fact also warrants recission because “no borrower can obtain a TD loan while another first TD loan is outstanding. No financial institution will give a first TD loan on 50% of the undivided property.” (TAC ¶ 111.)

Recession is only warranted where the mistake is mutual, not unilateral. (Larsen, supra, 7 Cal.App.3d 491 at p. 503; Guthrie v. Times-Mirror Co. (1975) 51 Cal.App.3d 879, 884 (Guthrie).) “Where parties are aware at the time the contract is entered into that a doubt exists in regard to a certain matter and contract on that assumption, the risk of the existence of the doubtful matter is assumed as an element of the bargain. [Citations.] Otherwise stated, the kind of mistake which renders a contract voidable does not include ‘mistakes as to matters which the contracting parties had in mind as possibilities and as to the existence of which they took the risk.’ [Citations.]” (Gutherie, at p. 885.) The TAC fails to allege that the recording of the mechanic’s lien and the inability to obtain a loan is a mistake that the parties were not aware of at the time of making the contract and is the type of mistake that warrants recission.

“An action for money had and received will lie to recover money paid by mistake, under duress, oppression or where an undue advantage was taken of plaintiffs' situation whereby money was exacted to which the defendant had no legal right.” (Ezmirlian v. Otto (1934) 139 Cal.App. 486, 496.) “It is well established, in the absence of fraud, overreaching or excusable neglect, that one who signs an instrument may not avoid the impact of its terms on the ground that he failed to read the instrument before signing¿it.” (Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1588 [internal citations omitted].) Plaintiff must allege (1) existing indebtedness, (2) immediate right to the funds, (3) defendant's actual possession, and (4) refusal to turn over. (County of San Bernardino v. Sapp (1958) 156 Cal.App.2d 550, 556.)

The TAC alleges that “Defendant Tishelman received money that was intended to be used for the benefit of plaintiff, and specifically $150,000” and “the $150,000 was not used for the benefit of plaintiff, it has not been kept in escrow or segregated, and in fact was spent on other items without notice, and without any contention it was non-refundable and/or subject to forfeiture.” (TAC ¶¶ 116, 117.) The TAC further alleges that Plaintiff has requested the $150,000 and Plaintiff is entitled to the $150,000 plus interest from the date of payment. (TAC ¶¶ 118, 119.)

The court finds that the twelfth cause of action is conclusory as Plaintiff fails to plead facts to show he is entitled to the $150,000. Without a showing that the Plaintiff is entitled to the $150,000.00, the twelfth cause of action fails. To the extent that Plaintiff alleges that there was an “implied” promise, no such allegation appears in the twelfth cause of action, and “there can be no implied contractual term completely at variance with an express term of a contract.” (Wagner v. Glendale Adventist Medical Center (1989) 216 Cal.App.3d 1379, 1393.)

Accordingly, the demurrer to the twelfth cause of action is sustained without leave to amend.

The demurrer to the first, second, third, fourth, ninth, and twelfth causes of action is sustained without leave to amend. The demurrer to the sixth, eighth, tenth, and eleventh causes of action is sustained with leave to amend. The demurrer to the fifth and seventh causes of action is overruled. Plaintiff is given 20 days leave to amend. OSC re Amended Complaint set for __.

[1] Pursuant to CCP § 430.41, the meet and confer requirement has been met. (Lau Decl. ¶ 5, Ex. 4.)

[2] Civ. Code § 8460(a) states “The claimant shall commence an action to enforce a lien within 90 days after recordation of the claim of lien. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable.”