Judge: Melissa R. Mccormick, Case: White v. Hay, Date: 2022-08-25 Tentative Ruling

Defendants Sheldon Hay and Michael Hay’s Demurrer to First Amended Complaint

Defendants Sheldon Hay and Michael Hay demur to plaintiff Mark White’s first amended complaint.  For the following reasons, defendants’ demurrer is overruled.

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint.  Blank v. Kirwan (1985) 39 Cal.3d 311, 318.  A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations.  Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.  Questions of fact cannot be decided on demurrer.  Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.  Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice.  Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.

Plaintiff alleges defendant Sheldon Hay breached an oral agreement to sell plaintiff a residence in Yorba Linda, California.  Plaintiff alleges that rather than honoring the alleged oral agreement, Sheldon Hay transferred title to the property to Sheldon Hay’s brother Michael Hay.  Plaintiff alleges causes of action for promissory estoppel against Sheldon Hay, quiet title against Michael Hay, and avoidance of fraudulent transfer and unjust enrichment against Sheldon Hay and Michael Hay.

Defendants’ unopposed request for judicial notice is granted.  Exhibit A to the request for judicial notice is a grant deed recorded June 26, 2003 reflecting transfer of the property from Gyula Kerkai and Emma Kerkai to Roland E. Hay and Doris L. Hay, trustees of the Hay Family Trust established April 1, 1999.  Plaintiff does not dispute that Roland E. Hay and Doris L. Hay are Sheldon Hay’s and Michael Hay’s parents.  Exhibit B to the request for judicial notice is a grant deed recorded January 16, 2004 reflecting transfer of the property from Roland E. Hay and Doris L. Hay, trustees of the Hay Family Trust established April 1, 1999, to the Hay Family Limited Partnership, a California limited partnership.  Exhibit C to the request for judicial notice is a grant deed recorded March 29, 2019 reflecting transfer of the property from Sheldon Hay and Michael Hay as successor co-trustees of the Hay Family Trust dated April 1, 1999, as to its undivided 41.822% interest, and Sheldon Hay and Michael Hay as successor co-trustees of the Doris L. Hay Bypass Trust established September 25, 2005, as to its undivided 58.178% interest, to Michael Hay, a married man, as his sole and separate property. 

Plaintiff’s first cause of action for promissory estoppel alleges sufficient facts to state that claim.  “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.”  Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734. 

Sheldon Hay contends he could not have promised to sell plaintiff the property in 2003 because he did not own the property at that time.  Exhibits A and B to defendants’ request for judicial notice reflect that in 2003 Roland E. Hay and Doris L. Hay, as trustees of the Hay Family Trust established April 1, 1999, owned the property.  This fact does not, however, necessarily mean plaintiff cannot state a claim for promissory estoppel.  Defendants cite no law holding that an alleged agreement to sell property one does not currently own negates the agreement or renders it invalid.  In addition, the court cannot adjudicate on this record at this stage whether the statute of frauds defeats plaintiff’s promissory estoppel claim.  See, e.g., Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1040 n.10.  Plaintiff has also alleged sufficient facts demonstrating justifiable reliance to overcome demurrer.  See First Amended Complaint ¶¶ 15, 16, 26, 27, 28.  Defendants’ demurrer to the first cause of action is overruled.

Plaintiff’s second cause of action for fraudulent conveyance alleges sufficient facts to state that claim.  Under the Uniform Fraudulent Transfer Act (Cal. Civ. Code § 3439 et seq.), a fraudulent conveyance is a transfer of an asset or interest by the debtor to a third person undertaken with the intent to prevent a creditor from reaching the transferred interest to satisfy its claim.  Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 13.  A transfer is fraudulent, both as to present and future creditors, when it is made “[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.”  Even absent actual fraudulent intent, a transfer may be deemed fraudulent if the debtor did not receive “a reasonably equivalent value in exchange for the transfer.”  Mejia v. Reed (2003) 31 Cal.4th 657, 664; see also Cal. Civ. Code, §§ 3439.04, 3439.05. 

The first amended complaint alleges that, with knowledge of the alleged 2003 agreement between plaintiff and Sheldon Hay, Sheldon Hay transferred his interests in the property to Michael Hay with the actual intent of hindering, delaying, or defrauding plaintiff.  First Amended Complaint ¶¶ 30, 31.  Plaintiff also alleges Sheldon Hay did not receive reasonably equivalent consideration in exchange for transferring his interests in the property to Michael Hay.  Id. ¶¶ 21, 32.  Defendants’ demurrer to the second cause of action is overruled.

Plaintiff’s third cause of action for quiet title alleges sufficient facts to state that claim.  The elements of a cause of action for quiet title are:  (i) a description of the property including both its legal description and its street address or common designation; (ii) the plaintiff’s title and the basis upon which it is asserted; (iii) the adverse claims as against which a determination is sought; (iv) the date as of which a determination is sought and, if other than the date the complaint is filed, a statement why the determination is sought as of that date; and (v) a prayer for determination of plaintiff’s title against the adverse claims.  Cal. Civ. Proc. Code § 761.020.

Plaintiff verified the first amended complaint, and the first amended complaint alleges facts supporting each of the required elements to state a quiet title claim.  Cal. Civ. Proc. Code § 761.020.  Defendants’ demurrer to the third cause of action is overruled. 

Defendant’s demurrer to the fourth cause of action for unjust enrichment is overruled.  “Unjust enrichment is not a cause of action . . . or even a remedy, but rather a general principle, underlying various legal doctrines and remedies. . . .  It is synonymous with restitution.  [Citations.]  Unjust enrichment has also been characterized as describing the result of a failure to make restitution . . . .”  McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 (citations and quotations omitted).  A court may construe an unjust enrichment claim as one for restitution.  Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231; see also McBride, 123 Cal.App.4th at 387-88. 

The first amended complaint alleges sufficient facts to state a claim for restitution based on plaintiff’s allegation that he expended more than $200,000 to maintain and upgrade the property.  First Amended Complaint ¶¶ 22, 40, 42, 43. 

Defendants are ordered to file and serve an answer by September 6, 2022.

Plaintiff to give notice.