Case Number: VC067223 Hearing Date: November 27, 2018 Dept: SEC

JATUPORN v. MUAKTHONG

CASE NO.: VC067223

HEARING: 11/27/18

JUDGE: LORI ANN FOURNIER

#6

TENTATIVE ORDER

Defendants HARRY MUAKTHONG and ARUN MUAKTHONG’s demurrer to Plaintiff’s Complaint is SUSTAINED with 30 days leave to amend. CCP §430.10(e).

Moving Party to give Notice.

This action for quiet title was filed by Plaintiff VINIJCHAI JATUPORN on June 21, 2018. The relevant facts, as alleged, are as follows: “In mid, 2011, Plaintiff was having difficulties making the payment on his residence and consulted a real estate broker for advice regarding a loan modification or other ways to reduce the payment. At said time defendants and each of them were residing in a portion of the property and paying rent in the amount of $700 per month. Subsequently, the real estate broker recommended that plaintiff process a ‘Short Sale’ and allow Defendant as his friend to become the actual ‘legal’ owner and that this would cause the lender to reduce and discount the principal balance so that defendant could qualify as the borrower and obtain a new loan. The understanding was that plaintiff was to be the equitable and true owner of the property.” (Complaint ¶8.) Plaintiff further alleges that Defendants made a number of representations to Plaintiff in 2011 in order to defraud Plaintiff of his ownership interest in the Subject Property.

Plaintiff’s Complaint asserts the following causes of action: (1) Fraud; (2) Quiet Title; and (3) Declaratory Relief.

The general rule, with exceptions, is that courts will not lend their assistance to enforcement of contracts that are illegal or against public policy. (Schaffter v. Creative Capital Leasing Group, LLC (2008) 166 Cal.App.4th 745, 755.) Whether an illegal agreement is enforceable depends on the particular circumstances, and a variety of factors, including relative moral fault, moral turpitude, unjust enrichment and the policy of the violated law. (Wald v. Truspeed Motorcars, LLC (2010) 184 Cal.App.4th 378, 390-91.) A general demurrer lies where the terms of the contract alleged are illegal and thus void. (Beck v. American Health Group, Int’l, Inc. (1989) 211 Cal.App.3d 1555, 1563.)

Here, the contract between Plaintiff and Defendants appears to be illegal on its face in that the object of the alleged contract was for Plaintiff to avoid foreclosure by creating a fraudulent short sale. (See 18 U.S.C. § 1014.) Accordingly, as the first cause of action is based on a seemingly illegal contract, Plaintiff has not alleged the required element of “justifiable reliance” in order to maintain a cause of action for fraud. In the interests of justice, Plaintiff is permitted leave to cure these deficiencies, i.e. to explain why/how the subject agreement was entered— for reasons that do not involve defrauding the lender. If the Plaintiff cannot make such allegations, and the contract between Plaintiff and Defendant was indeed executed to skirt a lender’s requirement that the short sale be an arm’s length transaction, then the Court will have to find the contract illegal or in violation of public policy. The demurrer is sustained with 30 days leave to amend.