Case Name: Jeffrey Hodges v. Patrick Sullivan, et al.

Case No.: 17CV312560

Defendant Patrick Sullivan’s Motion for Summary Judgment or, in the Alternative, Summary Adjudication Pursuant to Cal. Code Civ. Proc. §437c

Factual and Procedural Background

Plaintiff Jeffrey Hodges (“Plaintiff”) filed this action against defendant Patrick Sullivan (“Defendant”) due to a dispute over real property.

According to the complaint, Defendant owned property located at 107 Madrone Avenue in Morgan Hill, California (the “Property”) and Plaintiff was the caretaker of it. Defendant approached Plaintiff in 2004 and suggested he rent the Property at an above-market price for twelve years, at which point Defendant would convey it to him. Plaintiff agreed and made every payment for twelve years. However, Defendant never intended to convey the Property to him; he only wanted to induce Plaintiff to pay the above-market price in rent. When Plaintiff demanded that Defendant convey the Property to him, Defendant instead evicted Plaintiff for technical violations of the lease that he had tacitly approved of for years.

On July 3, 2017, Plaintiff filed a complaint against Defendant asserting causes of action for: (1) intentional misrepresentation; (2) false promise; (3) conversion; and (4) intentional infliction of emotional distress.

On January 2, 2018, Defendant filed an answer and a cross-complaint against Plaintiff alleging breach of lease and waste.

On January 29, 2018, Plaintiff filed an answer to Defendant’s cross-complaint.

On December 12, 2018, Defendant filed the instant motion for summary judgment/ adjudication.

On February 25, 2019, Plaintiff filed opposition in which Plaintiff requested a continuance of the hearing of Defendant’s motion for summary judgment/ adjudication.

On March 12, 2019, the court continued the hearing of Defendant’s motion for summary judgment/ adjudication to June 11, 2019.

I. Defendant’s motion for summary adjudication of the first and second causes of action [intentional misrepresentation/ false promise] of Plaintiff’s complaint is DENIED.

A. Res judicata/ collateral estoppel.

“‘The doctrine of res judicata rests upon the ground that the party to be affected, or some other with whom he is in privity, has litigated, or had an opportunity to litigate the same matter in a former action in a court of competent jurisdiction, and should not be permitted to litigate it again to the harassment and vexation of his opponent. Public policy and the interest of litigants alike require that there be an end to litigation.’ [Citation.] ‘[R]es judicata benefits both the parties and the courts because it “seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration.” ’ [Citation.]” (Villacres v. ABM Industries, Inc. (2010) 189 Cal.App.4th 562, 575 (Villacres).) “Under the doctrine of res judicata, a valid, final judgment on the merits is a bar to a subsequent action by parties or their privies on the same cause of action.” (Villacres, supra, 189 Cal.App.4th at p. 575.)

“Collateral estoppel is a doctrine which prevents relitigation of issues previously argued and resolved in a prior proceeding. [Citation.] In order to apply this principle: (1) the issue must be identical to that decided in the prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue must have been necessarily decided in the prior proceeding; (4) the decision must have been final and on the merits; and (5) preclusion must be sought against a person who was a party or in privity with a party to the prior proceeding. [Citation.]” (Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223, 1233 (Alvarez).) “In deciding whether to apply collateral estoppel, the court must balance the rights of the party to be estopped against the need for applying collateral estoppel in the particular case, in order to promote judicial economy by minimizing repetitive litigation, to prevent inconsistent judgments which undermine the integrity of the judicial system, or to protect against vexatious litigation.” (Alvarez, supra, 143 Cal.App.4th at p. 1233.)

“Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, ‘precludes relitigation of issues argued and decided in prior proceedings.’ [Citation.]” [Citation. Footnote.] Res judicata precludes the relitigation of a cause of action only if (1) the decision in the prior proceeding is final and on the merits; (2) the present action is on the same cause of action as the prior proceeding; and (3) the parties in the present action or parties in privity with them were parties to the prior proceeding. [Citation.] Res judicata bars the litigation not only of issues that were actually litigated in the prior proceeding, but also issues that could have been litigated in that proceeding. [¶] Collateral estoppel precludes the relitigation of an issue only if (1) the issue is identical to an issue decided in a prior proceeding; (2) the issue was actually litigated; (3) the issue was necessarily decided; (4) the decision in the prior proceeding is final and on the merits; and (5) the party against whom collateral estoppel is asserted was a party to the prior proceeding or in privity with a party to the prior proceeding.

(Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82; emphasis added.)

In moving for summary adjudication of the first two fraud-based causes of action, Defendant contends Plaintiff could have asserted fraud as an affirmative defense to the unlawful detainer action that Defendant filed against Plaintiff to recover possession of the Property and since Plaintiff did not do so, he is now barred from asserting fraud in the instant action. According to Defendant, an unlawful detainer concerns the right to possession and Plaintiff could have asserted a right to possession based upon the same act(s) of fraud he is now asserting in the present action. However, contrary to Defendant’s assertion , Plaintiff’s fraud based claims do not assert a right to possess the Property; rather, Plaintiff’s fraud based claims seek monetary damages. Plaintiff would not have been able to seek such affirmative relief in the UD action. (See D’Amico v. Riedel (1949) 95 Cal.App.2d 6—trial court properly refused to permit defendants to raise issues of fraud as defense to unlawful detainer.)

B. Misrepresentation/ False Promise.

“‘Promissory fraud’ is a subspecies of fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973 – 974; see also CACI, No. 1902.) In Tarmann v. State Farm Mutual Automobile Ins. Co. (1991) 2 Cal.App.4th 153, 159, the court explained, “To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing.”

Defendant argues additionally that the fraud based causes of action fail because Defendant did not make a misrepresentation or false promise to convey the Property to Plaintiff and, instead, entered into a lease agreement with Plaintiff. However, in opposition, Plaintiff proffers evidence which would present a triable issue of material fact with regard to whether Defendant made such a misrepresentation/ false promise. Plaintiff proffers his own declaration in which he states, “[Defendant] proposed that I pay him $5,000 a month for 12 years and dared me to take his offer saying that he didn’t believe I could make those payments for such a long period of time. [Defendant] said if, and only, if I made every payment at the elevated amount, he would convey the property to me. I agreed on those terms.”

C. Intent to perform.

Something more than nonperformance is required to prove the defendant’s intent not to perform his promises. “A promise of future conduct is actionable as fraud only if made without a present intent to perform. (Civ. Code, §1710, subd. 4; [Citation omitted.]) “ ‘A declaration of intention, although in the nature of a promise, made in good faith, without intention to deceive, and in the honest expectation that it will be fulfilled, even though it is not carried out, does not constitute a fraud. [Citation.]’ ” [Citation omitted.] Moreover, “ ‘something more than nonperformance is required to prove the defendant’s intent not to perform his promise.’ [Citations.] … [I]f plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury.” (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481.)

As a further basis for summary adjudication of the fraud based causes of action, Defendant contends there is no evidence of his intent not to perform. While Defendant is correct that Plaintiff will have to show something more than nonperformance to prevail, the burden on a motion for summary adjudication/ judgment lies initially with Defendant. Defendant must affirmatively demonstrate how Plaintiff lacks any evidence of any intent not to perform. Defendant has not done so here.

Summary judgment law in this state, however, continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence. … For the defendant must “support[]” the “motion” with evidence including “affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice” must or may “be taken.” (Code Civ. Proc., § 437c, subd. (b).) The defendant may, but need not, present evidence that conclusively negates an element of the plaintiff’s cause of action. The defendant may also present evidence that the plaintiff does not possess, and cannot reasonably obtain, needed evidence-as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.

(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854–855.)

Even if Defendant had met his initial burden, Plaintiff offers evidence in opposition which would create a triable issue of material fact with regard to Defendant’s intent. “[F]raudulent intent is an issue for the trier of fact to decide.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.)

D. Justifiable Reliance.

Defendant argues next that Plaintiff could not justifiably rely on a promise to convey the Property because he could have easily ascertained the truth by reading the lease agreement, but did not do so here despite having the opportunity to do so. “‘Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.’” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) In Guido v. Koopman (1991) 1 Cal.App.4th 837, 843 (Guido), the court stated that, “Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact. 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.” Even if this court were to accept Defendant’s evidence on this issue at face value, the court cannot state that, as a matter of law, Plaintiff could not reasonably rely.

The Guido court also wrote, “In determining whether one can reasonably or justifiably rely on an alleged misrepresentation, the knowledge, education and experience of the person claiming reliance must be considered.” (Guido, supra, 1 Cal.App.4th at 843.) Defendant proffers evidence that Plaintiff speaks, reads and writes English with ease. However, evidence proffered by Plaintiff in opposition conflicts and therefore a triable issue of material fact exists.

E. Damages.

Finally, Defendant contends Plaintiff did not suffer any damage as a result of any fraud. Defendant’s contention is based upon his assertion that Plaintiff admitted the rental amount he paid for the Property was a fair rental value in the unlawful detainer action. Defendant’s contention is also based on the asserted fact that Plaintiff benefitted from renting the Property and that Plaintiff paid the rent despite his belief that the rent amount was “crazy.”

A triable issue of material fact exists with regard to whether Plaintiff suffered any damage because even if the trial court in the unlawful detainer action determined the fair rental value to be the amount that Plaintiff paid at the time of the judgment, there exists evidence that the market rent was less than that amount at the inception of the lease in 2004. The evidence submitted by Defendant also does not affirmatively demonstrate that Plaintiff subleased the Property for the entire duration of his leasehold possession of the Property.

Accordingly, Defendant’s motion for summary judgment is DENIED. Defendant’s alternative motion for summary adjudication of the first and second causes of action of Plaintiff’s complaint is DENIED.

II. Defendant’s motion for summary adjudication of the third cause of action [conversion] of Plaintiff’s complaint is treated as a motion for judgment on the pleadings and GRANTED.

In order to state a cause of action for conversion, a plaintiff must allege the following elements: “(1) Plaintiff’s ownership or right to possession of tangible property at the time of the conversion; (2) Defendant’s conversion (wrongful taking or disposition); [and] (3) Damages.” (5 Witkin, California Procedure (4th ed. 1997) Pleading, §660, p. 116.) “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are the plaintiff’s ownership or right to possession of the property at the time of the conversion; the defendant’s conversion by a wrongful act or disposition of property rights; and damages.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451 (Farmers); see also CACI, No. 2100.) “Money can be the subject of an action for conversion if a specific sum is capable of identification is involved.” (Farmers, supra, 53 Cal.App.4th at pp. 451 – 452.)

Defendant cites McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1492 (McKell) where the court wrote, “plaintiffs did not allege that defendants were holding their payments on behalf of another, in essence in trust for the third party vendors. Plaintiffs cite no authority for the proposition that a cause of action for conversion may be based on an overcharge.” The McKell court upheld a trial court ruling sustaining a demurrer to a conversion claim based upon a lender’s overcharging borrowers for underwriting, tax services, and wire transfer fees in conjunction with home loans and refusing to return the money it overcharged the borrowers.

It appears that the McKell court based its ruling on the lack of an allegation that plaintiff borrowers had an ownership right to monies being held by the defendant. Here, Plaintiff alleges he “had a possessory and ownership interest in the proceeds from his business. Defendant lied to Plaintiff in order to induce him into paying $3000-3500 per month premium from these proceeds for rent.” (Complaint, ¶31.) “By obtaining Plaintiff’s money under a false promise, Defendant unlawfully converted $3000 per month for twelve years from Plaintiff.” (Complaint, ¶33.)

Defendant’s reliance on McKell folds into his next argument which is essentially that Plaintiff no longer had ownership or a right to possess the money he paid to Defendant as rent. Defendant cites French v. Smith Booth Usher Co. (1942) 56 Cal.App.2d 23, 27–28 where the court wrote:

“He who consents to an act is not wronged by it.” (Civ. Code, § 3515.) “To constitute conversion, nonconsent to the possession and disposition of the property by defendant is indispensable. If the owner expressly or impliedly assents to or ratifies the taking, use, or disposition of his property, he cannot recover as for a conversion thereof; …” [Citation.]

Thus, in spite of Plaintiff’s conclusory allegation that he had a possessory and ownership interest in the proceeds from his business, Plaintiff gave up ownership and the right to possess the money when he paid the money to Defendant as rent. In this court’s view, Plaintiff, like the plaintiffs in McKell, does not adequately allege that he continued to maintain an ownership or possessory right to the money paid as rent to Defendant or that Defendant was holding Plaintiff’s rent payment, in trust, on behalf of another. Instead, Plaintiff’s third cause of action sounds in fraud. Plaintiff’s third cause of action does not sufficiently state a cause of action for conversion.

“A defendant’s motion for summary judgment or summary adjudication ‘necessarily includes a test of the sufficiency of the complaint’ and its legal effect is the same as a demurrer or motion for judgment on the pleadings.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2018) ¶10:52, p. 10-26 citing American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.) The court will treat Defendant’s argument as a motion for judgment on the pleadings as to the third cause of action which is hereby GRANTED.

III. Defendant’s motion for summary adjudication of the fourth cause of action [intentional infliction of emotional distress] of Plaintiff’s complaint is treated as a motion for judgment on the pleadings and GRANTED.

“The tort of intentional infliction of emotional distress is comprised of three elements: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff suffered severe or extreme emotional distress; and (3) the plaintiff’s injuries were actually and proximately caused by the defendant’s outrageous conduct.” (Cochran v. Cochran (1998) 65 Cal.App.4th 488, 494 (Cochran); see also Ross v. Creel Printing & Publishing Co., Inc. (2002) 100 Cal.App.4th 736, 744 – 745; see also CACI, Nos. 1600 and 1602.)

“Insofar as the claim for emotional distress is based on the same conduct alleged to show fraud, no recovery is permitted. Emotional distress is not recoverable as an element of damages for fraud.” (Kruse v. Bank of America (1988) 201 Cal.App.3d 354, 67.) Despite this relatively clear pronouncement, Plaintiff argues that fraud may serve as the extreme and outrageous conduct that forms the basis for a claim of intentional infliction of emotional distress. It is clear from Plaintiff’s complaint that his claim for intentional infliction of emotional distress rests entirely on the acts of alleged fraud. “By defrauding Plaintiff and overcharging him for rent for twelve years, Defendant engaged in extreme and outrageous conduct, intended to inflict severe emotional distress upon Plaintiff.” (Complaint, ¶38.) “As a direct and proximate result of Defendant’s conversion, Plaintiff has suffered damages including … emotional distress….” (Complaint, ¶40.) As noted above, Plaintiff’s conversion cause of action sounds in fraud. Since Plaintiff’s fourth cause of action for intentional infliction of emotional distress is premised entirely on fraud and emotional distress damages are not recoverable for fraud, the court will treat Defendant’s argument as a motion for judgment on the pleadings as to the fourth cause of action which is hereby GRANTED