Case Number: BC685530 Hearing Date: June 05, 2018 Dept: 73

6/5/18
Dept. 73
Rafael Ongkeko, Judge presiding

ENRIQUE VALLE v. PATRICIA VALLE, et al. (BC685530)

Counsel for plaintiff/opposing party: Hilda Garzon-Ayvazian
Counsel for defendant/moving party Patricia Valle: J.P. Pak (L.O. Pak)
Counsel for defendants/moving parties Nancy De Mayo and Saphire Investments, LLC: Lillian Kim (L&S, etc.)

Matters:

Demurrers to first amended complaint:
1. By Defendant Patricia Valle (filed 5/11/18)
2. By Defendants De Mayo and Saphire (filed 5/9/18)

TENTATIVE RULING

Demurrer of Patricia Valle:
1. Defendant’s Request for Judicial Notice is granted.
2. Plaintiff’s Request for Judicial Notice is granted.
3. Defendant’s demurrer to the first, second and third causes of action is SUSTAINED WITHOUT LEAVE TO AMEND.
4. Defendant’s demurrer to the fifth cause of action is OVERRULED. Patricia Valle shall file and serve her answer to the FAC no later than June 15, 2018.

Demurrer of De Mayo and Saphire:
1. Defendants’ Request for Judicial Notice is granted.
2. Plaintiff’s Request for Judicial Notice is granted.
3. Defendants’ demurrer to the first, second and fourth causes of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Discussion

Factual and procedural background

The FAC alleges: Plaintiff Enrique Valle (“Enrique”) and Defendant Patricia Valle (“Patricia”) are siblings. Enrique and Patricia’s parents acquired certain parcels of property. Following the death of their father, Enrique alleges Patricia convinced their mother to deed a number of properties to her, which she sold or rented.

Enrique subsequently filed a probate action on grounds that Patricia was manipulating her mother, who suffered from dementia. On November 30, 2011, the probate court issued an injunction enjoining Patricia from selling, transferring or otherwise encumbering any properties owned by the parties’ parents. The injunction at 840 S. Grandview was dissolved in March 2017, but Enrique contends the injunction remains binding on the remainder of the properties, here, specifically two properties on Kenmore Ave.

Prior to the injunction, on April 26, 2011 Patricia signed a $100,000 Short Form Deed of Trust encumbering 1326 S. Kenmore in favor of Defendant Saphire Investments, LLC (“Saphire”; see Ex. A to FAC). As shown somewhat ambiguously on Ex. A, the Deed of Trust was not recorded until July 21, 2014. Defendant Nancy De Mayo (“De Mayo”) is a member of Saphire. De Mayo’s spouse, Joseph Klemash, is also a member and defendant, but apparently still unserved.

During a December 11, 2015 mediation session, Patricia represented that she was “current on all payments” for the Kenmore properties. Based on said representation, Enrique accepted title to the properties with all existing liens as of December 11, 2015 along with $357,000 in cash from Patricia in settlement of the claims.

Patricia signed the deeds conveying the properties on March 16, 2016. On the same day, Patricia signed and notarized a $2.75 million Deed of Trust to Saphire. On May 3, 2016, Patricia “filed” another Deed of Trust dated from 2009 for $50,000 in favor of Saphire. Plaintiff alleges the execution of the Deeds of Trust violated the Probate Court injunction of November 30, 2011.

On July 15, 2017, Enrique received a Notice of Default and Election to Sell under Deed of Trust from Saphire. (Ex. C) The notice listed an outstanding debt of $170,651.39 based on the July 21, 2014 recorded Deed of Trust against the 1326 S. Kenmore property.

On January 5, 2018, the court denied Plaintiff’s motion for preliminary injunction enjoining the sale of 1326-1328 S. Kenmore Ave., Los Angeles, or changing or transferring the beneficiary of the deed of trust. Enrique paid off the two Saphire Deeds of Trust, the $100,000 2014 Deed of Trust and $50,000 2016 Deed of Trust, including interest and attorney fees, following the denial of the motion for preliminary injunction.

In the original complaint, Plaintiff brought causes of action for:

1. Fraud
2. Conspiracy to Commit Fraud
3. Benefit of the Bargain
4. Quiet Title
5. Civil Contempt, and
6. Injunctive Relief.

On March 15, 2018, Plaintiff filed the first amended complaint:

1. Fraud (All defendants)
2. Conspiracy to Commit Fraud (All defendants)
3. Benefit of the Bargain of the Settlement Agreement of December 11, 2015 (Defendant Patricia Valle)
4. Unjust Enrichment (De Mayo, Saphire, Klemash), and
5. Violation of Injunction of December 2011/Civil Contempt (Defendant Patricia Valle)

Demurrer of Patricia Valle:

Defendant Patricia filed the subject demurrer to all four causes of action alleged against her (fraud, conspiracy to commit fraud, benefit of the bargain and civil contempt causes of action). She contends that no basis of fraud can be pled against her, due to the terms of the settlement agreement. The agreement required the dismissal of the underlying probate action with prejudice. The instant action is therefore barred under the doctrine of res judicata and/or collateral estoppel. The settlement agreement also bars any action pursuant to Civil Code section 1542.

Furthermore, Enrique took title the properties “as is,” and lacks any facts regarding with the concealment of information.

On the contempt action, Patricia contends no violation of the injunction occurred. The $100,000 Deed of Trust was signed and notarized on April 26, 2011, which is before the imposition of the November 30, 2011 injunction.

Enrique in opposition counters that the first amended complaint addresses claims separate and apart from the probate action, and therefore are not precluded under the doctrines of res judicata and/or collateral estoppel.

Enrique states that the fraud claim is sufficiently articulated, when Patricia concealed the Deeds of Trust as an inducement into the settlement agreement, and that the underlying Deeds of Trust are “bogus” documents.

Enrique argues that the civil contempt cause of action is not based on the deed of trust executed in 2011, but, instead on its “filing” in 2014. Further, Enrique contends that Patricia also executed the $50,000 Deed of Trust in May 2016.

Patricia filed her reply, reasserting Enrique’s failure to get past the settlement agreement. (The reply incorrectly states that Judge Strobel’s order “has already ruled that the $100,000 deed of trust was filed and recorded in April 2011, not April 2014 as claimed by Plaintiff.” See footnote 1 of the 1/5/18 minute order, stating it was “signed and notarized on April 25, 2011” and page 15 of the minute order confirming that this DOT “was apparently notarized the next day.”)

Merits (re: Patricia Valle demurrer)

First Cause of Action – Fraud

“‘The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

The fraud cause of action depends on allegations that Patricia failed to disclose and/or misrepresented certain debts to which Enrique relied on to his detriment during the settlement agreement. [FAC, ¶¶ 39-41, 43 & 45.] Enrique also challenges the validity of the debts. [FAC, ¶ 42.]

Moving Defendants’ argument first depends on the December 11, 2015 hearing transcript regarding the settlement between Enrique and Patricia. Nothing in the transcript indicates any representation from Patricia regarding encumbrances to the property. The agreement provides for the terms of the transfer and payment of an additional $357,000. According to the transcript, “Enrique Valle also takes those properties subject to any new (sic) now existing indebtedness against those properties and accepts responsibility for payment, if necessary, of those liens against the property of the estate.” [RJN, Ex. A, Transcript, 3:2-6. The Judgment language states: “Enrique Valle also takes those properties subject to the existing indebtedness against those properties, as of December 11, 2015, and accepts responsibility for payment, if necessary, of those liens against the properties.” Pltf RJN, Ex. A]

Enrique cannot challenge the above language and instead seeks to effectively allege fraud in the inducement into the settlement agreement based upon the alleged prior representation of Patricia regarding the lack of any debt. In other words, Enrique entered into the agreement based on a certain representation of facts from Patricia, and relied to his detriment.

Nevertheless, the fraud allegations and opposition provide insufficient response to the argument regarding the conclusive effect of Civil Code section 1542, collateral estoppel and res judicata. The parties entered into the agreement, which included a waiver of “unknown claims under Code 1542 except for the obligations created in this agreement.” [RJN, Ex. A, Transcript, 3:21-24.] Civil Code section 1542 provides: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” (Civ. Code § 1542.)

The doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy. It seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration. 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. Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit. All claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897.) “Res Judicata is not a bar to claims arising after the filing of the initial complaint.” A party may assert new claims in an amended pleading, “but if no such pleading is filed, a plaintiff is not foreclosed. [Citation.] The general rule that a judgment is conclusive as to matters that could have been litigated ‘does not apply to new rights acquired pending the action which might have been, but which were not, required to be litigated [Citation]’.” (Allied Fire Protection v. Diede Const., Inc. (2005) 127 Cal.App.4th 150, 155; Planning and Conservation League v. Castaic Lake Water Agency, supra, 180 Cal.App.4th at p. 226.)
“In general, collateral estoppel precludes a party from relitigating issues litigated and decided in a prior proceeding. (Citations.) ‘Traditionally, we have applied the doctrine only if several threshold requirements are fulfilled. First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. (Citation.)’” (Gikas v. Zolin (1993) 6 Cal.4th 841, 848–849.)

The acknowledgment and waiver of Civil Code section 1542 protections bars the subject claim regardless of the basis of the action. The settlement agreement was incorporated into the judgment, and is therefore complete and enforceable. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1173.) Claims of fraud in the original transaction were subsumed and waived upon the execution of the settlement including all known and unknown claims. The agreement and reduction of the claims to judgment on the particular properties renders the claims barred under the doctrine of res judicata.

Patricia Valle’s demurrer to the first cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Second Cause of Action – Conspiracy to Commit Fraud

Conspiracy claims depend on the commission of an underlying tort. (Moran v. Endres (2006) 135 Cal.App.4th 952, 954-955.) As the claim underlying Plaintiff’s conspiracy cause of action has been deemed insufficient, it necessarily follows that the conspiracy claim must fail as well.

Patricia Valle’s demurrer to the second cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Third Cause of Action – Benefit of the Bargain

The subject cause of action depends on a finding of the frustration of the purpose of the settlement agreement. [FAC, ¶¶ 53-55.] Enrique alleges that had he “known Patricia was in fact lying to him and the judge about being current on the mortgages on the two properties, he would have asked for more funds to cover the arrears.” [Id., ¶ 59.]

For the same reasons addressed above, the subject action constitutes an improper challenge to the settlement agreement, and is therefore barred.

Patricia Valle’s demurrer to the third cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Fifth Cause of Action – Civil Contempt

Patricia contends that Enrique lacks factual evidence of a violation of the November 30, 2011 preliminary injunction. The argument depends on reference to the January 5, 2018 order denying preliminary injunction. The January 5, 2018 order of the court makes no binding factual finding regarding whether the $100,000 Deed of Trust was notarized in 2011 or 2014 for purposes of ruling on the subject demurrer. The order of the court states that Patricia and Saphire submitted evidence of notarization of the Deed of Trust in 2011, which is not contested by Enrique, and was therefore relied upon by the Court in at least in partly denying the injunction. [Minute Order, p. 15 of 20.]

Regardless of the factual discrepancy, Enrique emphasizes a direct violation of the injunction order based on the execution of the $2.75 million dollar Deed of Trust on March 16, 2016. [FAC, ¶¶ 24, 69.] Judgment in the underlying action was not entered until May 26, 2016. [RJN, Ex. B.] The injunction remained operative at least until entry of judgment. There is no admissible evidence regarding the dismissal of the action and dissolving of the injunction prior to March 16, 2016. The subject allegation sufficiently supports the claim for civil contempt based on the violation of the injunction. (Civ. Code § 1209.)

Patricia Valle’s demurrer to the fifth cause of action is OVERRULED.

Demurrer of De Mayo and Saphire:

Defendants Saphire and De Mayo demur to the 1st, 2nd, and 4th causes of action (fraud, conspiracy to commit fraud and unjust enrichment). Moving Defendants contend that no basis of fraud can be pled against them, due to the actions and representations of Patricia. Enrique took title the properties “as is,” based on the representations of Patricia, and signed a release waiving both known and unknown claims, including any loans owed to Saphire. Defendants further argue that Patricia never violated the injunction, since the $100,000 Deed of Trust was executed before the imposition of the injunction on April 25, 2011, and recorded on July 21, 2014—15 months prior to the settlement agreement. Moving Defendants were not part of, and therefore are not bound, by any settlement agreement.

Enrique in opposition contends that the first amended complaint sufficiently articulates fraud, due to the failure of moving defendants to disclose the $50,000 Deed of Trust until May 2016—six months after the execution of the settlement agreement. Moving Defendants also delayed filing the Notice of Default until after execution of the settlement agreement. The concealment of the Deed of Trust induced Enrique’s reliance. Furthermore, the deeds of trust were false, in that no loans were actually made.

Demurring Defendants in reply reiterate the lack of facts supporting the fraud cause of action, including the lack of any relationship between the parties and therefore the lack of any basis of reasonable reliance. Defendants also add that unjust enrichment is not a valid independent cause of action.

Merits (re De Mayo and Saphire demurrer):

First Cause of Action – Fraud

The fraud cause of action depends on allegations that Moving Defendants failed to disclose the debts of Patricia, and the delayed filing of the Notice of Default until after execution of the settlement agreement. [FAC, ¶¶ 39, 45.] Enrique also challenges the validity of the debts. [FAC, ¶ 42.]

Moving Defendants’ argument first depends on the December 11, 2015 hearing transcript regarding the settlement between Enrique and Patricia. Nothing in the transcript presents any representation from Patricia regarding encumbrances to the property. The agreement provides for the terms of the transfer and payment of an additional $357,000. According to the transcript, “Enrique Valle also takes those properties subject to any new (sic) now existing indebtedness against those properties and accepts responsibility for payment, if necessary, of those liens against the property of the estate.” [RJN, Ex. 1, Transcript, 3:2-6. The Judgment language states: “Enrique Valle also takes those properties subject to the existing indebtedness against those properties, as of December 11, 2015, and accepts responsibility for payment, if necessary, of those liens against the properties.” Pltf RJN, Ex. A]

The plain language of the transcript and the judgment undermine the allegations in the complaint regarding a basis of fraud against moving defendants. Demurring defendants were not parties to the action, and not part of the settlement agreement. Any and all alleged representations were made by Patricia. Enrique therefore lacks any valid factual basis of justifiable reliance as against De Mayo and Saphire.

Notwithstanding the articulated terms of the agreement, Enrique maintains fraudulent concealment by these moving defendants to disclose any and all encumbrances. A duty to disclose the existence of said Deeds of Trust can occur under certain conditions. “There are ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.’” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336. “All of these relationships are created by transactions between parties from which a duty to disclose facts material to the transaction arises under certain circumstances.” (Id. at p. 337.)

The FAC lacks any allegations establishing a duty of disclosure between Enrique and demurring defendants. The mere existence of the debt executed by Patricia in no way obliged De Mayo and Saphire to contact Enrique prior to the execution of the settlement agreement, to which these defendants were not a party, in order to confirm Enrique’s knowledge of said debts. The fraud cause of action therefore additionally lacks facts of any concealment.

The challenge to the validity of the trust deeds are not properly addressed in a fraud cause of action. Again, these two defendants neither made any representation regarding the actions of Patricia, nor improperly failed to disclose any trust deeds to Enrique thereby supporting a basis of fraud.

De Mayo and Saphire’s demurrer to the first cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Second Cause of Action – Conspiracy to Commit Fraud

Conspiracy claims depend on the commission of an underlying tort. (Moran v. Endres (2006) 135 Cal.App.4th 952, 954-955.) As the claim underlying Plaintiff’s conspiracy cause of action has been deemed insufficient, it necessarily follows that the conspiracy claim must fail as well.
De Mayo and Saphire’s demurrer to the second cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Fourth Cause of Action – Unjust Enrichment

The Second Appellate District no longer recognizes unjust enrichment as a cause of action. (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) “Unjust enrichment is a ‘general principle, underlying various legal doctrines and remedies,’ rather than a remedy itself.” (Ibid.)

Based on the foregoing, the demurrer to the fourth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

CONCLUSION

With the exception of the civil contempt cause of action against defendant Patricia Valle, the court sustains the demurrers without leave to amend as there appears to be no reasonable possibility that the above defects can be cured.

Unless waived, notice of ruling by moving parties.