Judge: Peter A. Hernandez, Case: 24STCV30773, Date: 2025-04-22 Tentative Ruling

Case Number: 24STCV30773    Hearing Date: April 22, 2025    Dept: 34

1.               Defendants Hector Reza Gonzalez and Marisela Fraire Gonzalez’ Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED as to the second and sixth causes of action, and OVERRULED as to the first, third through fifth, and seventh causes of action.

2.               Defendants Hector Reza Gonzalez and Marisela Fraire Gonzalez’ Motion to Strike Portions of Plaintiff’s First Amended Complaint is DENIED.

The court will inquire at the hearing whether leave to amend should be granted.

I.                Background

            On November 21, 2024, Plaintiff Alfredo Gonzalez (“Plaintiff”) filed a complaint against Defendants Hector Reza Gonzalez and Marisela Fraire Gonzalez (“Defendants”) arising from transactions involving the property located at 3900 W. Avenue 41, Los Angeles, CA 90065 (“Subject Property”) alleging causes of action for:

1.               Breach of Oral Contract;

2.               Unjust Enrichment;

3.               Conversion;

4.               Fraud;

5.               Negligent Misrepresentation; and

6.               Accounting.

On February 19, 2025, Plaintiff filed a First Amended Complaint (“FAC”) against Defendants alleging causes of action for

1.               Breach of Oral Contract;

2.               Unjust Enrichment;

3.               Conversion;

4.               Fraud;

5.               Negligent Misrepresentation;

6.               Accounting; and

7.               Constructive Trust.

On March 11, 2025, Defendants filed this Demurrer and Motion to Strike. On April 9, 2025, Plaintiff filed oppositions. On April 15, 2025, Defendants filed replies.

II.             Demurrer

A.              Legal Standard

            “The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of” various grounds listed in statute. (Code Civ. Proc., § 430.10.)

            When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pled or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

            Where a demurrer is sustained, 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 plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

B.              Discussion

            Defendants demur to all seven causes of action in Plaintiff’s FAC pursuant to Code of Civil Procedure section 430.10.

1.               First Cause of Action – Breach of Oral Contract

            To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

a.                Statute of Limitations

“A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.” (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.) The statute of limitations for breach of an oral agreement is two years. (Code Civ. Proc., § 339.) Furthermore, the period in which to commence an action does not begin “until ‘the last element essential to the cause of action’ occurs.” (Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1040, quoting Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 187.)¿ 

Defendants argue that the transaction at issue here is alleged to have occurred in 2013 which would be barred by the statute of limitations set forth in Code of Civil Procedure section 339. (Demurrer, at p. 7.)

In this case, Plaintiff alleges that the parties entered into an oral agreement in which Plaintiff transferred title of the Subject Property to Defendants. (FAC, ¶ 22.) Defendants agreed to hold title of the Subject Property in trust for Plaintiff’s benefit with the understanding that either all proceeds from a sale of the Subject Property would belong to Plaintiff or Defendants would return title of the Subject Property to Plaintiff upon request. (Ibid.) The agreement also allowed Defendants to refinance the Subject Property to extract $100,000 in cash from the equity owed by Plaintiff. (Ibid.) Subsequently, Defendants received such payment, and Plaintiff performed all his obligations under the contract. (Id., ¶¶ 22-23.) Plaintiff alleges that in April 2024, Defendants breached the agreement by failing to return the full sale proceeds of the Subject Property to Plaintiff. (Id., ¶ 24.) As such, Plaintiff’s FAC alleges that the breach did not occur until 2024, the same year this action was filed. Ultimately, because grounds for the statute of limitations must “clearly and affirmatively appear on the face of complaint,” the court finds Plaintiff’s cause of action for breach of contract is not barred by the applicable statute of limitations. (Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1155.) 

b.               Statute of Frauds

            Pursuant Civil Code section 1624, certain enumerated “contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent.” (Civ. Code, § 1624, subd. (a).) One such agreement is “[a]n agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged. (Civ. Code, § 1624, subd. (a)(3).)

            Defendants argue that as Plaintiff’s alleged oral contract involves real property, Plaintiff’s breach of oral contract claim is barred by the statute of frauds. (Demurrer, at p. 7.)

            The court finds that the contract at issue here falls within the statute of frauds.

            In opposition, Plaintiff argues that the FAC supports exceptions to the statute of frauds, including estoppel and part performance. “A party is estopped to assert the statute of frauds as a defense ‘where [the] party, by words or conduct, represents that he will stand by his oral agreement, and the other party, in reliance upon that representation, changes his position, to his detriment.’” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1040, fn. 10, quoting Associated Creditors’ Agency v. Haley Land Co. (1966) 239 Cal.App.2d 610, 617.) This is because “such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract [Citations.], or in the unjust enrichment that would result if a party who has received the¿benefits of the other's performance were allowed to rely upon the statute.” (Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624.)¿ 

Furthermore, “where assertion of the statute of frauds would cause unconscionable injury, part performance allows specific enforcement of a contract that lacks the requisite writing.” (In re Marriage of Benson (2005) 36 Cal.4th 1096, 1108.) Part performance occurs when the actions refer to the contract or are in clear relation to its terms as “[s]uch conduct satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached.” (Id., at p. 1109.) “The payment of money is not sufficient part performance to take an oral agreement out of the statute of frauds [citation], for the party paying money under an invalid contract . . . has an adequate remedy at law.” (Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 555, quoting Anderson v. Stansbury (1952) 38 Cal.2d 707, 715-716.) 

In this case, Plaintiff pleads sufficient allegations to establish both exceptions to the statute of frauds defense. In reliance on the alleged oral agreement, Plaintiff transferred title of the Subject Property to Defendants in trust for Plaintiff’s benefit. (FAC, ¶ 22.) As evidence of Plaintiff’s performance under the agreement, the FAC alleges that Plaintiff continued managing the Subject Property, controlled the finances, and paid Defendants $100,000 from the equity receive when refinancing the Subject Property. (Id., ¶¶ 9, 10, 22.) Thus, Plaintiff has established Plaintiff’s partial performance under the oral agreement. Additionally, because Defendants received the benefit of the contract, Plaintiff has established enforcing the statute of frauds to deny Plaintiff’s compensation would be to Plaintiff’s detriment. As a result, the statute of frauds does not bar the enforcement of the oral agreement. 

Lastly, Defendants argue that Plaintiff’s claim is uncertain and fails to state facts sufficient to constitute a breach of contract claim. (Demurrer, at p. 8.) However, for the reasons stated above, the court finds that Plaintiff’s claim is not uncertain and is sufficiently pled.

Accordingly, Defendants’ demurrer to Plaintiff’s first cause of action is overruled.

2.         Second Cause of Action – Unjust Enrichment

            “The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, quotation marks and citations omitted.) 

            Defendants demur to Plaintiff’s unjust enrichment claim on the grounds that it is not a stand-alone cause of action in California. (Demurrer, at p. 9.) Some California courts have held that unjust enrichment is not a stand-alone cause of action, but a principle underlying various legal doctrines and remedies. (Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 336.) Other courts, including courts within the second appellate district, recognize unjust enrichment as a cause of action with its own set of elements. (Prof'l. Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.) 

While the court acknowledges some authorities support Defendants’ position, other binding precedent upholds unjust enrichment as a separate cause of action. Presented with this split in authority, the court chooses to follow the rule that most promotes expedience and judicial efficiency and treats unjust enrichment as a valid, separate cause of action. Nevertheless, the court still finds the cause of action is subject to demurrer.  

“[A]s a matter of law, a quasi-contract action for unjust enrichment does not lie where, as here, express binding agreements exist and define the parties’ rights.” (California Medical Ass’n, Inc. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172; see also Wal-Noon Corp. v. Hill (1975) 45 Cal.App.3d 605, 650)

Here, Plaintiff alleges that the rights and obligations of the parties are expressly governed by the oral contract between them. Plaintiff has alleged no obligation born by Defendants which does not derive from the contract between them. Plaintiff alleges that Defendants were unjustly enriched when they retained funds from the sale of the Subject Property which belonged to Plaintiff according to the terms of the agreement. (FAC, ¶¶ 27-28.) This same conduct is the basis for Plaintiff’s breach of contract claim. The court notes that Plaintiff also alleges a secret transfer of the Subject Property from both Defendants to only Defendant Marisela Fraire Gonzalez (“Marisela”) and Defendants’ false claims of tax liability. (Id., ¶¶ 14, 39.) Nevertheless, such allegations are not independently violations from those to the obligations imposed by the oral contract between the parties.

Accordingly, Defendants’ demurrer to Plaintiff’s second cause of action is sustained.

3.               Third Cause of Action – Conversion

            “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) 

            Defendants argue that Plaintiff’s FAC concedes that the Subject Property was transferred to Defendants consensually and thus, Defendants did not control the property of another. (Demurrer, at p. 10.)

            The court disagrees. Even though Plaintiff transferred title of the Subject Property to Defendants voluntarily, such transfer was subject to certain terms, including Plaintiff’s ownership over the sale proceeds from the Subject Property. (FAC, ¶ 7.) Plaintiff subsequently alleges that Defendants wrongfully retained the sale proceeds which belonged to Plaintiff. (Id., ¶ 17.) Moreover, Plaintiff also alleges that Defendants exercised control over the Subject Property by secretly transferring title solely to Defendant Marisela when the contract terms stated title should be transferred back to Plaintiff. (Id., 7, 14.) As such, Plaintiff has sufficiently pled a cause of action for conversion.

            Accordingly, Defendants’ demurrer to Plaintiff’s third cause of action is overruled.

4.               Fourth and Fifth Causes of Action – Fraud and Negligent Misrepresentation

            “The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)

            The elements of a cause of action for negligent misrepresentation include “[m]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.)

            The facts constituting the alleged fraud or misrepresentation must be alleged factually and specifically as to every element, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

            Defendants argue that Plaintiff’s allegations are not pled with the required specificity. (Demurrer, at pp. 10-11.)

            The court finds that Plaintiff sufficiently pled his causes of action for fraud and negligent misrepresentation. Plaintiff alleges that Defendant Hector Reza Gonzalez made the misrepresentation that Defendants would hold title of the Subject Property in trust for Plaintiff’s benefit. (FAC, ¶ 38.) As such, Plaintiff transferred title to Defendants according to the terms of the oral agreement. Subsequently, Plaintiff alleges that Defendants secretly transferred title for the Subject Property to Defendant Marisela in violation of the oral agreement and made deliberate overstatements regarding their tax obligations to retain more sale proceeds which belonged to Plaintiff. (Id., ¶¶ 14, 39.)

            Accordingly, Defendants’ demurrer to Plaintiff’s fourth and fifth causes of action is overruled.

5.               Sixth Cause of Action – Accounting

            “A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting. An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, citations and paragraph break omitted.) 

            Defendants argue that Plaintiff alleges a sum certain which is owed by Defendants. (Demurrer, at p. 12.)

            In opposition, Plaintiff argues that the FAC demonstrates the need for an accounting given the complex, decade-long financial relationship between the parties, and Defendants’ exclusive control over all financial records and transactions. (Opp., at p. 6.)

            Here, Plaintiff alleges that “[d]ue to the complicated nature of the transactions surrounding the sale of the Subject Property, including multiple refinances, withdrawals, and the calculation of capital gains taxes, the exact amount of proceeds to which Plaintiff is entitled is unknown and cannot be ascertained without a proper accounting.” (FAC, ¶ 49.) The issue, however, is that Plaintiff fails to allege any facts indicating that Plaintiff’s damages can only be ascertained by an accounting. Plaintiff clearly alleges that Defendants took $100,000 in equity from the home, that the total mortgage after the cash out refinance was $290,000, that the home was sold at $750,000 with $454,398 remaining after paying off the mortgage, that Defendants delivered $180,000 to Plaintiff from those proceeds, that Defendants retained $272,398, and that Defendants were withholding $180,000 to cover capital gain taxes. (Id., ¶¶ 11, 17, 18.) Thus, it is not clear why Plaintiff’s recovery cannot be “made certain by calculation.”

Accordingly, Defendants’ demurrer to Plaintiff’s sixth cause of action is sustained.

6.               Seventh Cause of Action – Constructive Trust

            A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner. The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing. (Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990; Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 920.)¿

            To allege a constructive trust, a plaintiff must plead: (1) a wrongful act (underlying claim incorporated into the cause of action); (2) specific, identifiable property or property interest, or excuse for inability to describe it; (3) plaintiff’s right to the property; and defendant has title thereto. (Communist Party, supra, 35 Cal.App.4th at 990.) “[T]he wrongful act giving rise to a constructive trust need not amount to fraud or intentional misrepresentation. All that must be shown is that the acquisition of the property was wrongful and that the keeping of the property by the defendant would constitute unjust enrichment.” (Calistoga Civic Club v. City of Calistoga (1983) 143 Cal.App.3d 111, 116.) 

            Defendants argue that there was no fiduciary duty owed to Plaintiff regarding the property as Plaintiff concedes to owe Defendants $100,000. (Demurrer, at pp. 12-13.)

            The court finds that Plaintiff sufficiently pled a constructive trust claim. Plaintiff alleges Defendants’ wrongful acts of retaining title to the property, retaining the sale proceeds, and secretly transferring the property title to Defendant Marisela. (FAC, ¶¶ 14, 17, 32.) Plaintiff also identifies his property interest in the Subject Property and his right to it under the oral contract. Moreover, a fiduciary relationship between the parties was created when Defendants accepted to hold title of the Subject Property in trust for Plaintiff’s benefit. (Id., ¶ 7.)

            Accordingly, Defendants’ demurrer to Plaintiff’s seventh cause of action is overruled.

III.           Motion to Strike

A.              Legal Standard

Pursuant to Code of Civil Procedure section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437.)

B.              Discussion

            Defendants seek to strike Plaintiff’s demand for punitive damages. (Motion, at pp. 4-5.)

Punitive damages may be awarded in an action for the breach of an obligation not arising from contract upon clear and convincing evidence that a defendant has been guilty of oppression, fraud, or malice. (Civ. Code § 3294, subd. (a).)

“Malice” is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code § 3294, subd. (c)(1).) “Oppression” is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code § 3294, subd. (c)(2).) “Fraud” is defined as “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code § 3294, subd. (c)(3).)

The court finds that Plaintiff’s FAC includes sufficient allegations to warrant punitive damages. As discussed above, Plaintiff sufficiently pleads a claim for fraud. Moreover, the court notes that Plaintiff’s allegations regarding Defendants’ wrongful conduct of misrepresenting that they would hold title of the Subject Property in trust for Plaintiff, wrongfully retaining sale proceeds, misrepresenting their tax obligations, and secretly transferring title of the Subject Property to Defendant Marisela is the type of fraudulent conduct subject to punitive damages. (FAC, ¶¶ 7, 14, 17.)

Accordingly, Defendants’ motion is denied.

IV.           Conclusion

1.               Defendants Hector Reza Gonzalez and Marisela Fraire Gonzalez’ Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED as to the second and sixth causes of action, and OVERRULED as to the first, third through fifth, and seventh causes of action.

2.               Defendants Hector Reza Gonzalez and Marisela Fraire Gonzalez’ Motion to Strike Portions of Plaintiff’s First Amended Complaint is DENIED.

The court will inquire at the hearing whether leave to amend should be granted.