Case Name: 801 Boggs LLC v. Golden Bay Properties, LLC, et al.
Case No.: 17-CV-309039

This action initiated by plaintiff 801 Boggs LLC (“Plaintiff”), assignee of James Lowder (“Lowder”), against defendants Golden Bay Properties, LLC (“Golden Bay”), Raymond Vuong, Paul Vuong (“Paul”), Son Vuong (“Son”), and Ho Vuong (collectively “Sellers”) arises out of the sale of property.

According to the complaint (“Complaint”), on October 12, 2016, Plaintiff entered into a written Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (“Contract”) with Sellers, whereby Sellers agreed to sell Plaintiff the property located on 1466 Seareel Place, San Jose, California (“Property”). (Complaint, ¶¶ 1, 5.) Several days later, on October 18, 2016, Plaintiff received a Seller’s Mandatory Disclosure Statement signed by Sellers and a Property Information Sheet (collectively “Disclosure”). (Id. at ¶ 6.) Sellers omitted certain defects from the Disclosure, including a shared water service with the neighboring property owner and a non code-compliant fire suppression system. (Id. at ¶ 8.) Additionally, Sellers had removed several circuit breakers from the Property that were present prior to the close of escrow. (Ibid.) In reliance on the accuracy and completeness of information provided in the Disclosure, Plaintiff took title to the Property on December 12, 2016. (Id. at ¶ 11.)
Plaintiff asserts four causes of action for failure to make written disclosures when transferring real property, intentional failure to disclose, negligent failure to disclose, breach of contract, and conversion.

Golden Bay, Paul, and Son (collectively “Defendants”) presently demur to the Complaint on the grounds of misjoinder, uncertainty, and failure to state sufficient facts to constitute a cause of action.

I. Misjoinder

A party may demur to a pleading on the ground “[t]here is a defect or misjoinder of parties.” (Code Civ. Proc., § 430.10, subd. (d).) A demurrer on this ground is implicated in two situations: an improperly joined party or the nonjoinder of a necessary party. (See Anaya v. Superior Court (1984) 160 Cal.App.3d 228, 231, fn. 1; see also Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1105.) Defendants’ argument is based on the first situation.

Pursuant to Code of Civil Procedure section 379. “[a]ll persons may be joined in one action as defendants if there is asserted against them:” (1) a right to relief jointly arising out of the same transaction or occurrence, or (2) a claim, right, or interest adverse to them in the property which is the subject of the action.

Defendants assert Paul and Son did not own the Property and are not parties to the Contract. They contend that the Contract and Disclosure, attached as exhibits to the Complaint, demonstrate the Property’s seller and former owner is Golden Bay and not Paul and Son. Defendants argue that as a result, they are not proper parties to this action.

“While the ‘allegations [of a complaint] must be accepted as true for purposes of demurrer,’ the ‘facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.’” (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1145–46.) The express language of the Contract does not appear to be contrary to the allegations in the pleading. As stated above, the Complaint alleges Defendants owned the Property and entered into the Contract with Plaintiff. The Contract reflects both Paul and Son signed it as “Owners.” (Complaint, Exh. A., p. 11.) In opposition, Plaintiff states the term “Owners” represents Paul and Son were owners of the Property. This appears to be a reasonable interpretation of the Contract because there is no description of what Paul and Son own or how they are related to Golden Bay, who is listed as the selling entity. As the Contract was to sell real estate, it is reasonable to interpret “owners” as applying to the Property, which was the subject of the agreement.

In reply, Defendants contend they signed the Contract as “Owners” of Golden Bay and not as owners of the Property. Defendants’ argument is unavailing for two reasons. First, the argument is improper because it is raised for the first time in reply. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [points raised for first time in a reply brief will ordinarily be disregarded because other party is deprived of the opportunity to counter the argument].) Even if this argument were properly asserted in the moving papers, it is not apparent from the Contract that “Owners” refers to ownership of Golden Bay and not the Property. The signature lines with the names of Paul and Son do not state they are signing on Golden Bay’s behalf as officers or directors; they simply provide they are “Owners.” When the construction of a contract is susceptible to more than one interpretation, the meaning alleged by the plaintiff is accepted as correct if reasonable. (Sweet v. Vista Irr. Dist. (1933) 134 Cal.App. 518, 521; Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.) Here, Plaintiff’s interpretation is reasonable for the reasons stated above, and thus controls over Defendants’ interpretation.

As the pleading reflects Son and Paul were “owners” of the Property, they are properly joined as defendants in this action relating to its sale. Their interests as owners of the disputed Property are related to the subject transaction or occurrence, i.e. its sale. In addition, the Court observes that it does not appear every cause of action is predicated on the individual defendants being party to the Contract in the first instance. For example, the second and third causes of action are predicated on allegations that all Defendants leased back the Property and indicated they would allow Plaintiff access to it. However, according to the Complaint, Defendants did not actually allow Plaintiff access to it. Thus, their alleged liability in this instance is not directly connected to their being party to the Contract.

In light of the above, the demurrer to each cause of action on the ground of misjoinder is OVERRULED.

II. Uncertainty

Defendants demur to the first cause of action for failure to make written disclosures when transferring real property on the ground of uncertainty. Defendants contend the first cause of action alleges there is a “statutory” duty to disclose, yet Plaintiff does not cite any statute in connection with that cause of action. Defendants assert that as a result, it is impossible to understand the allegation or respond.

Defendants’ argument is not well-taken. Uncertainty is a disfavored ground for demurrer and is typically sustained only where the pleading is so unintelligible and uncertain the responding party cannot reasonably respond or recognize the claims against it. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) The law is settled that “[a] special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequeira (1950) 100 Cal.App.2d 143, 145–146.) The failure to plead the exact statutory basis for the cause of action does not render it unintelligible. In any event, the pleading does not even reflect the first cause of action is “statutory” in nature. The Complaint alleges “California law imposes a duty upon the sellers of real property to disclose known facts to prospective purchasers” and Defendants failed to comply with “California disclosure requirements.” (Complaint, ¶¶ 14, 16.) Additionally, “[a] real estate seller has both a common law and statutory duty of disclosure.” (Calemine v. Samuelson (2009) 171 Cal.App.4th 153, 161.) Thus, this cause of action is not necessarily predicated on a statutory violation and may be predicated on a common law violation. Therefore, Defendants’ demurrer to the first cause of action on the ground of uncertainty is OVERRULED.

III. Failure to State Sufficient Facts to Constitute a Cause of Action

Defendants argue Plaintiff lacks standing to assert all causes of action and inadequately pleads the first cause of action.
As to the issue of standing, Defendants contend Plaintiff is not a party to the Contract because the document reflects it was entered into by Lowder. “Standing is a threshold issue, because without it no justiciable controversy exists. Standing goes to the existence of a cause of action. Pursuant to Code of Civil Procedure section 367, ‘[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.’” (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 813, internal citations and quotation marks omitted.) Defendants insist Plaintiff lacks standing because it does not allege privity of contract, the right to assign the Contract, or any details of the assignment.

In opposition, Plaintiff argues it adequately alleges it is the assignee of Lowder and thus is a proper party to this action. “An assignment is a manifestation to another person by the owner of the right indicating his [or her] intention to transfer, without further action or manifestation of intention, the right to such other person, or to a third person.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 988–89, internal citations and quotation marks omitted.) A violation of a property right or an obligation or contract may be assigned, and such assignment passes legal title to the assignee who is the real party in interest and may sue in his or her name. (California Ins. Guarantee Assn. v. Workers’ Comp. Appeals Bd. (2012) 203 Cal.App.4th 1328, 1335.) Thus, Plaintiff has standing to sue if it adequately alleges it is Lowder’s assignee.

In the Complaint, Plaintiff alleges it is, as assignee of Lowder, the owner of the Property. (Complaint, ¶ 1.) The Contract reflects the “Buyer” is “Lowder and/or related assignee.” (Id. at Exh. A.) As stated above, when the language of a contract is ambiguous, the Court follows the plaintiff’s interpretation if reasonable. (See Sweet v. Vista Irr. Dist., supra, 134 Cal.App. at p. 521.) Here, the Contract may be reasonably interpreted to state Plaintiff is a buyer as it lists Lowder and his assignee. Additionally, the Contract explicitly provides the rights of the buyer may be assigned. (Complaint, Exh. A, pg. 1.) This interpretation is reasonable in light of the allegation Plaintiff is an owner of the Property as Lowder’s assignee.

Defendants insist Plaintiff must allege additional facts supporting the existence of the assignment and it may not solely plead it is the assignee. Defendants apparently argue Plaintiff must allege evidentiary facts instead of ultimate facts establishing the existence of the assignment. In general, the pleading need only allege ultimate facts in stating a cause of action. (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) A plaintiff need not allege “‘each evidentiary fact that might eventually form part of the plaintiff’s proof . . . .’” (Ferrick v. Santa Clara University (2014) 231 Cal.App.4th 1337, 1341.) Ultimate facts are essential facts notifying a defendant of the nature, source, and extent of a claim, as opposed to evidentiary facts that might ultimately prove the claim. (See Doheny Park Terrace Homeowners Association, Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099.) Defendants cite no legal authority supporting the departure from the standard pleading standard in this instance. As such, there is no apparent defect in Plaintiff’s allegation that it is Lowder’s assignee.

Accordingly, Defendants fail to advance a meritorious argument that Plaintiff lacks standing, and the demurrer is not sustainable on that basis.

Turning to the arguments made specifically in connection with the first cause of action, Defendants assert Plaintiff has not alleged “how the cause of action is distinguishable from the Second and Third causes of action which cover both negligent and intentional failure to disclose without a statutory basis.” (Mem. Ps. & As., p. 4: lis. 18-20.) This is the entirety of Defendants’ argument. They provide no legal authority stating two causes of action cannot be similar or predicated on the same facts. In any event, the first cause of action is limited to disclosures that must have been made at the time of purchasing the Property. In contrast, the second and third causes of action are not limited in the same way; they are also partly based on Defendants’ failure to allow Plaintiff on the Property while leasing it, whereas the first cause of action is not. Defendants’ argument is thus meritless.

Defendants additionally argue Plaintiff has not alleged any withheld facts upon which the first cause of action is predicated. This argument is without merit. The Complaint clearly alleges Sellers omitted certain defects from the Disclosure, including a shared water service with the neighboring property owner and a non code-compliant fire suppression system, and removed several circuit breakers from the Property. (Complaint, ¶ 8.) Therefore, Defendants fail to establish the first cause of action is in any way defective.

In light of the above, the demurrer to all causes of action on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.

The Court will prepare the order.