Case Number: BC656279 Hearing Date: March 23, 2018 Dept: 74

ROSA COJULUN,

Plaintiff,

vs.

LIRIA MELENDEZ, ET AL.,

Defendants

Case No.: BC656279

[TENTATIVE] ORDER SUSTAINING DEMURRER

TENTATIVE RULING: Defendant Javier Perez’s demurrers to the first, third, and fourth causes of action are SUSTAINED without leave to amend. Defendant’s demurrers to the second and fifth causes of action are SUSTAINED with 10 days leave to amend.

DISCUSSION

Request for Judicial Notice

Defendant’s request for judicial notice of the FAC and the court’s ruling on the demurrer to the FAC is GRANTED.

Plaintiff’s Request for judicial notice of Cross-Complainant Liria Melendez’s Cross-Complaint filed on February 7, 2018 is granted. However, the Court does not take judicial notice of the truth of the matters asserted within the Cross-Complaint.

Demurrer

First Cause of Action for Fraud and Deceit

Defendant asserts Plaintiff lacks standing to assert this cause of action. Defendant’s assertion is well-taken.

CCP section 367 provides that “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” (Code Civ. Proc., § 367.) “Only the real party in interest has ‘an actual and substantial interest in the subject matter of the action,’ and stands to be ‘benefited or injured’ by a judgment in the action.” (City of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 60.)

Plaintiff claims to have been defrauded by Defendant’s false statements that he would invest money required to conduct phase 1 of the joint venture project. (See SAC, ¶ 34.) As Plaintiff is claiming injury from fraud, this would generally mean Plaintiff has standing to bring the claim. However, Plaintiff’s injuries here are based on inducement into assenting to the joint venture agreement. Plaintiff thus must show that she is a party to the agreement in order to have standing to bring this clam. It is undisputed that the agreement was entered into between Liria and Defendant. The issue is whether Plaintiff has sufficiently shown that she is a third party beneficiary of the agreement to have standing to bring this fraudulent inducement claim.

As discussed in the prior ruling, although Plaintiff alleges Liria entered into the agreement for her benefit (see SAC, ¶ 33), there are no indications from the attached agreement demonstrating such. While a third party may enforce a contract where he or she shows that he or she is a member of a class of persons for whose benefit it was made even where he or she is not named or identified individually (see Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1023), Plaintiff has failed to allege sufficient facts to show such. All indications are that the agreement was to benefit the owner of the property. Plaintiff has failed to allege sufficient facts showing that, despite title being in Liria’s name, Defendant believed Plaintiff was the owner of the property and not Liria or otherwise understood the agreement was made to benefit Plaintiff. (See Schauer v. Mandarin Gems of California, Inc. (2005) 125 Cal.App.4th 949, 957-58 (stating that a promisor’s understanding that the promisee had an intent to make the obligation inure to the benefit of the third party is sufficient to show that a contract was expressly made for that third party’s benefit).) In opposition, Plaintiff asserts this understanding is reflected in Defendant’s updates to Plaintiff regarding the process of obtaining permits. Plaintiff’s assertion is unavailing, given Plaintiff allegedly inquired as to this progress. (See SAC, ¶ 16.) Furthermore, to the extent Plaintiff relies on Liria’s Cross-Complaint, this also fails. As discussed, the Court is not taking judicial notice of the truth of the matters asserted with in the Cross-Complaint, meaning any allegations in the Cross-Complaint with respect to the parties’ understanding that Plaintiff was the owner of the property cannot be used to support Plaintiff’s claims in the SAC. As Plaintiff has failed to allege sufficient facts showing she was the intended beneficiary of the agreement, Plaintiff has failed to show she has standing to assert this fraud cause of action.

Defendant asserts this cause of action is barred by the statute of limitations. Defendant’s assertion is well-taken. To sustain a demurrer based on statute of limitations, it must appear on the face of the complaint that the statute of limitations is applicable to bar the cause of action. (See Union Carbide Corp. v. Superior Court (1984) 36 Cal.3d 15, 25-26.) “The statute of limitations that applies to an action is governed by the gravamen of the complaint, not the cause of action pled.” (City of Vista v. Robert Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 889.) The three-year statute of limitations for fraud does not accrue until the facts constituting the fraud are discovered. (See Civ. Code, § 338(d).) While Plaintiff has not explicitly pled when the fraud was discovered, Plaintiff’s allegation that she discovered there was a lien recorded on the properly in 2013 suggests that the fraud was discovered in 2013. (See SAC, ¶ 17.) To this extent, it would appear Plaintiff’s fraud cause of action is barred by the statute of limitations. Plaintiff has failed to allege facts showing delayed discovery. While Plaintiff repeatedly requested information, this all allegedly occurred in 2012 and thus cannot support delayed discovery after Plaintiff’s discovery in 2013.

In opposition, Plaintiff asserts that she could not have discovered the fraud until September 2016, when Defendant initiated foreclosure proceedings. Plaintiff’s assertion is unavailing. While the date of foreclosure process is alleged in the SAC, this is not alleged as the date of discovery of fraud. Furthermore, as discussed, Plaintiff discovered in 2013 that there was a lien recorded that she did not authorize. To this extent, it appears Plaintiff should have been on notice of the alleged fraud in 2013. There are no allegations showing otherwise. Plaintiff also asserts in the opposition that Defendant is estopped from arguing her claims are time-barred. Plaintiff’s assertion is unavailing. For equitable estoppel to apply, there must be some showing that Defendants induced Plaintiff to refrain from bringing a timely action by Defendants’ fraud, misrepresentation or deceptions. (See Ateeq v. Najor (1993) 15 Cal.App.4th 1351, 1356.) Plaintiff’s assertion is based on Defendant’s continued assurances that he was making efforts to obtain engineering plans and permits. However, as discussed, the allegations show that these assurances were made in 2012. There are no allegations showing that Defendant continued these assurances even after Plaintiff discovered the lien or otherwise prevented Plaintiff from bringing a timely action for fraud.

Defendant also asserts this cause of action is barred by the doctrine of unclean hands. Defendant’s assertion is unavailing. “The doctrine of unclean hands requires unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy.” (Mendoza v. Ruesga (2008) 169 Cal.App.4th 270, 279.) “Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action.” (Id.) Whether the unclean hands doctrine applies depends on whether the unclean conduct directly relates to the transaction upon which the complaint is made, i.e., the subject matter involved. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 681.) As unclean hands is generally an affirmative defense, a demurrer may only be sustained upon unclean hands if this defense clearly appears on the face of the complaint. (See CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 635.) “A demurrer based on an affirmative defense cannot properly be sustained where the action might be barred by the defense, but is not necessarily barred.” (Id.)

Defendant asserts Plaintiff’s hands are unclean because she committed bank fraud by transferring the title of the property to Liria in order to obtain a loan to refinance the mortgage on the property. The Court finds that Plaintiff’s conduct does not directly relate to the subject matter of this action. Plaintiff’s fraud claim is based on the joint venture agreement that led to Defendant wrongfully foreclosing on the property she allegedly owns. Any purported bank fraud does not appear to relate to the agreement and subsequent wrongful foreclosure. As such, the doctrine of unclean hands does not bar Plaintiff’s claim.

Based on the SAC and Plaintiff’s opposition, the Court finds that while Plaintiff may be able to successfully amend to allege standing, it is unlikely Plaintiff can successfully amend to overcome the statute of limitations.

Accordingly, Defendant’s demurrer to the first cause of action is sustained without leave to amend, unless Plaintiff offers proof at the hearing of how she can successfully amend this cause of action to overcome the statute of limitations.

Second Cause of Action for Accounting

Defendant asserts Plaintiff lacks standing to bring this cause of action. Defendant’s assertion is well-taken. Plaintiff’s accounting cause of action is based on the contractual relationship pursuant to the joint venture agreement. As discussed, Plaintiff has failed to allege sufficient facts showing that she is an intended beneficiary of the agreement. As such, Plaintiff has failed to allege sufficient facts showing she has standing to bring this claim.

Defendant also asserts this cause of action is barred by the statute of limitations. Defendant’s assertion is unavailing for the purposes of this demurrer. As discussed, this cause of action is based on the joint venture agreement. To this extent, the statute of limitations that would apply would be the four-year statute of limitations for breach of written contract. Given the gravamen of this claim is that Defendant never funded phase one of the joint venture project, it would appear to accrue upon Defendant’s breach of the agreement. It is unclear when Defendant breached by refusing to provide the funds to develop the property. Based on the allegations, it would appear that Plaintiff may have at least been on notice of Defendant’s intention not to perform when Plaintiff discovered the lien in 2013. As there is no specific date alleged, it is unclear whether the four-year statute of limitations applies. As such, the demurrer cannot be sustained on this ground.

The Court notes that Defendant’s argument regarding sham pleading is unavailing. Defendant asserts Plaintiff has omitted allegations that she was aware of the breach of agreement in 2005. The paragraphs of the FAC Defendant references do not support any such knowledge of breaches in 2005 and the allegations in the FAC do not otherwise indicate such knowledge.

As for Defendant’s unclean hands argument, it is also unavailing. As discussed, Plaintiff’s conduct does not directly relate to the subject matter of this action.

Accordingly, Defendant’s demurrer to the second cause of action is sustained with leave to amend.

Third Cause of Action for Wrongful Foreclosure

Defendant asserts Plaintiff lacks standing to bring this cause of action. Defendant’s assertion is well-taken.

In order to bring a wrongful foreclosure claim, Plaintiff must allege facts showing that she has ownership of the property. Plaintiff has failed to do so. It is undisputed that title was transferred to Lira. The issue is whether Plaintiff may bring a wrongful foreclosure claim as an alleged equitable owner of the property. Plaintiff has failed to provide any legal authority showing that an equitable owner has standing to bring a wrongful foreclosure claim. The Court is also unaware of any cases providing equitable owners with standing to assert wrongful foreclosure claims in this situation. The cases Plaintiff cites in the opposition do not provide sufficient support for showing she can bring a wrongful foreclosure claim in this instance as they deal with quiet title and enforcement of a trust.

Defendant also asserts this cause of action is barred by the statute of limitations. Defendant’s assertion is unavailing for the purposes of this demurrer. Defendant’s claim appears to arise from the wrongful execution and recording of the Notice of Default. This allegedly occurred on September 14, 2016. It is unclear whether the three-year statute of limitations or four-year statute of limitations applies in this case as it is unclear whether Plaintiff is asserting the NOD was fraudulently obtained or wrongfully obtained because of Defendant’s breach of the agreement. Regardless, as the NOD was executed and recorded on September 14, 2016, the cause of action would be timely under either statute of limitations.

With respect to Defendant’s unclean hands argument, the argument is unavailing. As discussed, Plaintiff’s conduct does not directly relate to the subject matter of this action.

Based on the SAC and opposition, the Court finds it is unlikely Plaintiff can successfully amend to show standing to bring this claim.

Accordingly, Defendant’s demurrer to the third cause of action is sustained without leave to amend, unless Plaintiff offers proof at the hearing of how she can successfully amend to show she has standing to bring this cause of action.

Fourth Cause of Action for Quiet Title

Defendant asserts Plaintiff lacks standing to bring this cause of action. Defendant’s assertion is well-taken.

Plaintiff is bringing this cause of action as an equitable owner of the property. (See SAC, ¶ 65.) “[T]he general rule is that the holder of equitable title cannot maintain a quiet title action against the holder of legal title.” (Liberty National Enterprises, L.P. v. Chicago Title Insurance Company (2013) 217 Cal.App.4th 62, 81.) “But an exception exists ‘when legal title has been acquired through fraud.’” (Id. (quoting Warren v. Merrill (2006) 143 Cal.App.4th 96, 114).) “In that case, available ‘remedies include quieting title in the defrauded equitable title holder’s name and making the legal title holder the constructive trustee of the property for the benefit of the defrauded equitable titleholder.’” (Id.) Plaintiff has failed to allege sufficient facts showing this is the case. Plaintiff’s allegations are that she transferred title to Liria. There are no allegations showing legal title was acquired through fraud. With respect to the allegations that Defendant defrauded Plaintiff, the allegations do not show that Defendant fraudulently acquired legal title from Plaintiff, especially given title had already transferred to Liria. As such, Plaintiff has failed to allege sufficient facts showing she has standing to bring this claim.

In opposition, Plaintiff asserts Liria was holding title in trust for her. However, Plaintiff has failed to provide legal authority showing Plaintiff may bring a quiet title claim in such a situation, absent fraud in the acquisition of title.

Defendant asserts this cause of action is barred by the statute of limitations. Defendant’s assertion is unavailing. The statute of limitations for quiet title does not begin to run until the plaintiff is not in exclusive and undisputed possession of the property. (See Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476.) “[M]ere notice of an adverse claim is not enough to commence the owner’s statute of limitations.” (Id.) Although the SAC alleges the property had been sold to Defendant on April 11, 2017 (see SAC, ¶ 67), there are no indications that Plaintiff is not in possession of the property. As such, the statute of limitations does not appear to bar the quiet title cause of action.

As discussed, Defendant’s unclean hands argument is unavailing.

Based on the SAC and opposition, the Court finds it is unlikely Plaintiff can successfully amend to show standing to assert this claim.

Accordingly, Defendant’s demurrer to the fourth cause of action is sustained without leave to amend, unless Plaintiff offers proof at the hearing of how she can successfully amend to state this cause of action against Defendant.

Fifth Cause of Action for Declaratory Relief

Defendant asserts Plaintiff lacks standing to bring this cause of action. Defendant’s assertion is well-taken.

Plaintiff’s declaratory relief claim seeks a determination of the duties and obligations under the joint venture agreement, promissory Note and Deed of Trust. (See SAC, ¶ 81.) Plaintiff’s claim is thus based on the agreement. As discussed, Plaintiff has failed to show that she is a party or intended beneficiary of the agreement. As such, Plaintiff has failed to allege sufficient facts showing she has standing to bring this declaratory relief claim.

Defendant also asserts this cause of action is barred by the statute of limitations. Defendant’s assertion is unavailing for the purposes of this demurrer. “A claim for declaratory relief is subject to the same statute of limitations as the legal or equitable claim on which it is based.” (Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 943.) As this cause of action is based on the alleged breach of agreement, the statute of limitations would be four years. As discussed, it is unclear when Defendant breached the agreement. To the extent Plaintiff may have been on notice of the breach in 2013, it is unclear when the discovery was specifically made. As such, the demurrer cannot be sustained on such grounds.

As discussed, Defendant’s unclean hands argument is unavailing.

Accordingly, Defendant’s demurrer to the fifth cause of action is sustained with leave to amend.