Case Number: BC530251 Hearing Date: May 12, 2014 Dept: 34

Moving Party: Defendants Wells Fargo Bank, N.A. (“Wells Fargo”) and Ashley Thomas III (“Thomas”)

Resp. Party: Plaintiffs Claudia America Flores, Cristobel Lopez Herrera, and Flor Gonzalez (“plaintiffs”)

Defendants’ demurrers are OVERRULED.

The Court GRANTS Wells Fargo’s, Thomas’, and plaintiffs’ Request for Judicial Notice. (See Evid. Code, § 452(c), (d), (h).)

BACKGROUND:

Plaintiffs commenced this action on 12/11/13 against defendants for nuisance, negligence, and breach of implied warranty of habitability. Plaintiffs moved into the subject property in 2007 pursuant to oral leases with the former owner, Ernesto Reyes. (Compl., ¶ 13.) On 5/31/12, Wells Fargo acquired the property in a foreclosure sale and thereby became the owner and landlord of the property. (Ibid.) Wells Fargo contracted with Thomas to assist in managing and maintaining the property. (Id., ¶ 14.) Plaintiffs allege that defendants failed to properly maintain the property; the property has no heaters, no smoke detectors, intermittent electrical service, and a vermin infestation. (Id., ¶ 15.) Plaintiffs allege that Wells Fargo has known about the conditions since at least June 2012. (Ibid.) Plaintiffs allege that, instead of fixing the property, Wells Fargo decided to conduct a non-judicial eviction of plaintiffs and thus intentionally failed to repair the property in an effort to force plaintiffs to move. (Id., ¶ 16.)

ANALYSIS:

Wells Fargo demurs to the entire complaint and the three causes of action contained therein on the grounds that plaintiffs fail to allege sufficient facts and the complaint is uncertain. Thomas demurs to the entire complaint and the first and second causes of action on the grounds that plaintiffs fail to allege sufficient facts.

Defendants’ Argument that this is a “Sham” or “Frivolous” Pleading is Not Supported by the Complaint or the Judicially-Noticed Documents

The Court rejects defendants’ arguments that the instant action is a sham because plaintiffs’ counsel has filed similar complaints in other actions. In particular, defendants indicate that Plaintiffs’ counsel has filed similar complaints in Pascual v US Bank, Case BC489519 (DRJN Exh. 5), Ingles v. HSBC Bank USA, Case BC489730 (WF RJN Exh. 6), Linares v. Aurora Bank, FSB, Case BC489792 (WF RJN Exh. 7). Rios v. Deutsche Bank National Trust, Case BC490880 (WF RJN Exh. 8) and Jimenez v. US Bank, Case BC491426 (WF RJN Exh. 9.)

While the Court has taken judicial notice of the existence of these other cases, they are not relevant to the sufficiency of the pleading in this action – i.e., to the only issue that is presented in these demurrers.

Nonetheless, the Court does find it interesting to note that demurrers were filed in three of the five other cases that Defendants have brought to the Court’s attention:

· In Pascual v US Bank, Case BC489519, the Court, Hon. Rita Miller presiding, overruled the demurrer to the complaint on January 9, 2013.

· In Ingles v. HSBC Bank USA, case BC489730, the Court, Hon. Ernest Hiroshige presiding, overruled the demurrer to the complaint on April 23, 2013.

· In Rios v. Deutsche Bank National Trust, Case BC490880, the Court, Hon. Richard Rico presiding, overruled the demurrer to the complaint on April 26, 2013.

(No demurrer was filed in Linares v. Aurora Bank, FSB, Case BC489792.)

In Jimenez v. US Bank, Case BC491426, no demurrer was filed, but a motion to strike was granted in part and denied in part. The court, Hon. Barbara Scheper presiding, struck three allegations that the court found to be “irrelevant” and “inflammatory.” However, the court denied the motion to strike the claim for punitive damages. According to the court, “the first amended complaint adequately alleges facts to support a finding that defendants acted with malice and/or oppression in failing to make repairs at the property after notice of the need for such repairs and maintenance.”

Thus, in all three of the other cases in which there were demurrers, the demurrers were overruled and in a fourth case, the court found the allegations sufficient to support a prayer for punitive damages. There is nothing in the complaint or in the judicially-noticed documents that supports defendants’ claim that this is a frivolous or sham pleading.

Plaintiffs are not Judicially Estopped from Claiming that Wells Fargo is their Landlord

Defendants argue that plaintiffs are judicially estopped from alleging that Wells Fargo was their landlord because they took a contrary position in a previous unlawful detainer action. The doctrine of judicial estoppel applies when “ ‘ “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake. [Citations.]” ’ [Citation.]” (Thomas v. Gordon (2000) 85 Cal.App.4th 113, 118.)

In a motion for judgment on the pleadings in the unlawful detainer action, plaintiffs argued: “Following a Trustee’s Sale, the existing lease and all obligations thereunder were extinguished. [citing Dover.] [¶] Thus, in the instant case there is no land lord [sic] tenant relationship in place and thus the Tenant Defendants cannot be evicted based on a right to allow entry which is a right which exists only as to landlords if written as an express term of the lease.” (WF RJN, Exh. 4, p. 5:1-7.) Further, this section of plaintiffs’ brief is entitled “In California only a landlord may evict a tenant for the breach of the covenant and the landlord teant [sic] relationship here was extinguished by the foreclosure.” (WF RJN, Exh. 4, p.4:18-19.)

Plaintiffs’ attempt to argue that they didn’t really make this claim is unconvincing. Thus, plaintiffs’ statements are sufficient to satisfy the first, second, and fourth prongs of judicial estoppel. However, defendants fail to show that the court in the unlawful detainer action adopted plaintiff’s argument. Defendants do not provide the court’s ruling on the motion; however, plaintiffs do provide the ruling. (See Pl. RJN, Exh. A.)

The court found that the initial “complaint was defective in that (1) no landlord-tenant relationship was alleged . . . (2) section 1954 could not be an implied covenant of the tenant . . . and (3) even if there were an implied covenant to permit entry, the allegations do not show that the breach was sufficient to warrant the forfeiture of the lease.”

The landlord-plaintiff “then filed the first amended complaint for unlawful detainer. . . . The significant amended allegations are that the parties stand in the relation of landlord and tenant by operation of law. . .”

Significantly, the court then goes on to state that the tenants “again challenge the basis for the plaintiff’s unlawful detainer action as now framed in the first amended complaint, but only pressed the second prong of the earlier ruling, that there is no implied covenant of the lease requiring the tenant to allow the landlord entry to the unit.” (See Pl. RJN, Exh. A, p. 1.)

Thus, the court did not base its ruling on the argument that there is no landlord-tenant relationship; in fact the court implied that the tenants were no longer pursuing this argument. (See ibid.) Nothing in the ruling suggest that the court adopted this argument that was no longer being “pressed” by the tenants.

Therefore, defendants fail to establish all of the elements of judicial estoppel.

Plaintiffs’ Counsel’s Previous Statement Does Not Constitute a Judicial Admission

The Court rejects defendants’ assertion that plaintiffs’ argument in the motion for judgment on the pleadings in the unlawful detainer action constitutes a judicial admission. A judicial admission may occur where a party alleges facts in a defense in one action and such facts are inconsistent with a position taken by the same party in a later action between the parties. (See Jones v. Tierney-Sinclair (1945) 71 Cal.App.2d 366, 374.) However, judicial admissions only pertain to statements of fact, and not legal arguments. (See Walker v. Dorn (1966) 240 Cal.App.2d 118, 120 [“ ‘It should be remembered that no judicial admission results from the permissible use of inconsistent counts or defenses unless they involve contradictions of fact in a verified pleading.’”].) The various cases cited in Wells Fargo’s reply are not to the contrary. (See Reply, p. 6:8-17.) According to Defendant, these cases stand for the proposition that a “plaintiff may not avoid a demurrer by . . . suppressing facts”; courts “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”; “facts judicially noticed from letters
. . . demonstrate the insufficiency of the claims. . .” Plaintiffs may well have alleged inconsistent legal theories or conclusions in a prior hearing. However, there is no showing that plaintiffs have alleged inconsistent facts in previous proceedings.

Defendants’ Claim That the Lease Is Illegal Is Not Sufficient to Sustain the Demurrer

Defendants argue that any lease between plaintiffs and Wells Fargo is void because plaintiffs occupied the property illegally. “Rental agreements involving units that were constructed without building permits or lack a certificate of occupancy are ordinarily regarded as unlawful and void.” (Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1047.) “Generally, ‘the courts … will not enforce an illegal bargain or lend their assistance to a party who seeks compensation for an illegal act.’ [Citation.]” (Ibid.) This rule is not absolute, and plaintiffs are correct that where “the Legislature enacts a statute forbidding certain conduct for the purpose of protecting one class of persons from the activities of another, a member of the protected class may maintain an action notwithstanding the fact that he has shared in the illegal transaction.” (Id. at p. 1048.)

More critically, defendants have not established that the lease is illegal as to all plaintiffs. Though the Substandard Order states that the premises are substandard due to illegal occupancy, it appears that this pertains to the occupancy of the detached garage. (See WF RJN, Exh. 2, pp. 1-2.) Nothing in this exhibit or the language of the complaint establishes which plaintiffs, if any, occupied the detached garage. (See ibid.; Compl., ¶ 1 [stating only that plaintiffs live in “front” and “rear” units on the property].) Therefore, it cannot be determined from the complaint or a judicially noticed item whether the lease is illegal as to all, or any, of the plaintiffs. The Court therefore rejects this argument.

The Statute of Frauds Does Not Bar the Lease

The allegations in the complaint do not establish that the statute of frauds applies to the alleged lease. Civil Code section 1624 provides that a contract “that by its terms is not to be performed within a year from the making thereof” is invalid unless it is writing and subscribed by the person to be charged. (Civ. Code, § 1624(a)(1).) This section “ ‘ “applies only to those contracts which, by their terms, cannot possibly be performed within one year.” [Citation.]’ [Citation.]” (Abeyta v. Superior Court (1993) 17 Cal.App.4th 1037, 1042.) Nothing in the complaint establishes that the lease could not have been performed in less than one year. There is no allegation that the lease had an express term of at least a year; it could have been a month-to-month lease that the parties could have terminated within a year. Therefore, the Statute of Frauds defense is not shown on the face of the pleading.

Plaintiffs Have Sufficiently Alleged the Existence of a Lease

Defendants argue that plaintiffs do not allege particular facts as to the lease, such as the rent to be paid, the time and manner of payment, and the term of the lease. Defendants fail to provide authority which holds that such facts must be alleged at the pleadings stage. There is no showing that a lease must be specifically pleaded; after all, the complaint in this case is not seeking damages for breach of contract. Plaintiffs have sufficiently allege that they entered into an oral lease with the property’s former owner. (Compl., ¶ 13.) To the extent that defendants wish to obtain more information as to the lease, such information may be sought during discovery.

First Cause of Action for Nuisance

Defendants argue that the first cause of action is duplicative of the second cause of action. While a nuisance claim may in some instances improperly seek relief for the same facts as a negligence claim, “negligence is merely one type of conduct which may give rise to a nuisance.” (Van Zyl v. Spiegelberg (1969) 2 Cal.App.3d 367, 373 [internal quotations omitted].) Plaintiffs’ nuisance claim is not merely based on defendants’ negligent acts; instead, plaintiffs allege that defendants failed to correct the conditions despite the fact that it knew, or reasonably should have known, that plaintiffs would be injured. (See Compl., ¶¶ 20, 22.) Plaintiffs allege that defendants intentionally created the substandard conditions on the property. (Id., ¶ 24.) Therefore, plaintiffs’ nuisance claim is not necessarily duplicative of the negligence claim.

Defendants argue that they are not liable for the nuisance because the conditions were created by the previous owner prior to the trustee’s sale. Defendants argue that plaintiffs fail to allege that they had notice of the alleged nuisance. “The creator of a nuisance is presumed to have knowledge of his own acts. But there is no presumption that the successor to the title to realty has knowledge of the acts of his predecessor in interest.” (Reinhard v. Lawrence Warehouse Co. (1940) 41 Cal.App.2d 741, 747.) Defendants are operating under the erroneous assumption that the defects described in the June 2012 Substandard Order are the only bases for the alleged nuisance. (See WF RJN, Exh. 2.) Defendants ignore the fact that plaintiffs’ claims are also based on defendants’ own conduct of intentionally allowing the property to become infested with vermin and refusing to fix the heaters or plumbing. (See Compl., ¶¶ 20, 22, 24.) Because defendants are alleged to have intentionally created the conditions at the property, defendants are presumed to have knowledge of the nuisance. Accordingly, the Court rejects this argument.

Finally, defendants argue that plaintiffs have not alleged the existence of a nuisance. “Anything which is injurious to health, including, but not limited to, the illegal sale of controlled substances, or is indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property, or unlawfully obstructs the free passage or use, in the customary manner, of any navigable lake, or river, bay, stream, canal, or basin, or any public park, square, street, or highway, is a nuisance.” (Civ. Code, § 3479.) Plaintiffs allege that the nuisance includes the infestation of vermin. (See Compl., ¶¶ 15, 20.) This clearly meets the threshold of “injurious to health.” (See id., ¶ 17.)

Accordingly, defendants’ demurrers to the first cause of action are OVERRULED.

Second Cause of Action for Negligence

“The elements of a cause of action for negligence are (1) a legal duty to use reasonable care, (2) breach of that duty, and (3) proximate cause between the breach and (4) the plaintiff’s injury.” (Mendoza v. City of Los Angeles (1998) 66 Cal.App.4th 1333, 1339.)

The Court rejects defendants argument that they did not owe a duty to plaintiffs. Plaintiffs allege that Wells Fargo owed plaintiffs a duty of care as plaintiffs’ landlord, and that Thomas owed a duty of care because of the agreement with Wells Fargo to act as the landlord and property manager. (Id., ¶¶ 26-27.) Defendants argue that Wells Fargo is not plaintiffs’ landlord because it acquired the property through a trustee’s sale, and thus any lease was extinguished. (See Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1499-1500 [the foreclosure terminates a subordinate lease].) However, a purchaser of a rent-controlled property at a foreclosure sale becomes a successor-in-interest of the landlord and the foreclosure sale does not extinguish a rent-controlled tenancy. (See Gross v. Superior Court (1985) 171 Cal.App.3d 265, 274.) The subject property is in Los Angeles, which has a rent control ordinance. (See L.A. Mun. Code, §§ 151.00, et seq.) Plaintiffs allege facts which suggest that Wells Fargo became the landlord by operation of law pursuant to Gross. (See Compl., ¶ 13; L.A. Mun. Code, § 151.02 [a landlord is an owner who receives rent for use of the property or such owner’s successor].)

Thomas separately argues that plaintiffs fail to allege that she caused plaintiffs’ damages. This argument is not well taken. Plaintiffs clearly allege that Thomas “intentionally failed to repair or maintain the property” and “allowed the Property to become infested with vermin or otherwise fall apart.” (Compl., ¶ 16.) Plaintiffs allege that this caused their injuries. (See id., ¶ 29.)

The Court also rejects Thomas’s assertion that she merely acted as Wells Fargo’s real estate broker. Plaintiffs clearly allege that Wells Fargo assigned Thomas to act as the landlord and property manager. (Compl., ¶ 10.) Nothing in the complaint or a judicially noticed item refutes this allegations. Plaintiffs allege that Thomas personally engaged in wrongdoing. (See, e.g., Compl., ¶ 16.)

Accordingly, defendants’ demurrers to the second cause of action are OVERRULED.

Third Cause of Action for Breach of the Implied Warranty of Habitability

For the reasons discussed above, the Court rejects Wells Fargo’s argument that this cause of action fails because there is no valid lease between the parties.

Wells Fargo next argues that this claim fails because plaintiffs do not allege that they were unaware of the conditions when they took possession of the property, the defects would not be apparent upon a reasonable inspection, they notified defendants of the conditions within a reasonable time, or Wells Fargo was given a reasonable opportunity to correct the defects. (See Quevedo v. Braga (1977) 72 Cal.App.3d Supp. 1, 7-8 [disapproved of by Knight v. Hallsthammar (1981) 29 Cal.3d 46].) The court in Knight expressly rejected a requirement that the plaintiffs not be aware of the defects at the time of possession. (See Knight, 29 Cal.3d at p. 54.) The court also recognized that “where … a landlord has notice of alleged uninhabitable conditions not caused by the tenants themselves,[footnote omitted] a landlord’s breach of the implied warranty of habitability exists whether or not he has had a ‘reasonable’ time to repair.” (Id. at p. 55.) As discussed above, defendants are presumed to have knowledge of the defects that they intentionally caused. Therefore, plaintiffs have sufficiently alleged a claim for breach of the implied warranty of habitability.

Accordingly, Wells Fargo’s demurrer to the third cause of action is OVERRULED.

Defendants to answer within 10 days.