Lott v. Coldwell Banker
Filed 9/17/08 Lott v. Coldwell Banker CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
WILLIAM LOTT, Cross-Complainant and Appellant, v. COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANY et al., Cross-Defendants and Respondents. | D050162 (Super. Ct. No. GIC836210) |
APPEAL from a judgment of the Superior Court of San Diego County, Jay M. Bloom, Judge. Reversed and remanded.
William Lott appeals a judgment entered in favor of Coldwell Banker Residential Brokerage Company and its agents Linda Westcott and Shirley Ramey (collectively, Coldwell Banker) after the superior court sustained without leave to amend their demurrers to his second amended cross-complaint against them for breach of contract, negligence, equitable indemnity and breach of fiduciary duty. Lott contends that the court erred in concluding that his amended allegations were so inconsistent with his prior pleadings that they were a sham, and thus to be disregarded, and sustaining the demurrers without leave to amend based on that conclusion. We agree with Lott's contention and reverse the judgment and remand the matter for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
In accordance with the standards for reviewing a trial court decision sustaining a demurrer without leave to amend, the following factual recitation is based on the allegations of the operative pleading, Lott's second amended cross-complaint (see Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126):
In early 2004, Lott entered into an exclusive listing agreement (the Listing Agreement) with Coldwell Banker to sell a three-unit residential property in San Diego that he owned with his sister. The Listing Agreement provided that Coldwell Banker would "market and solicit offers to purchase or exchange" the property, would "exercise reasonable effort and due diligence to achieve the purposes of this Agreement" and would act as Lott's agent in any transaction thereunder. The agreement did not provide any further specifics about Coldwell Banker's obligations to Lott in connection with the sale of the property.
Lott informed Coldwell Banker that two of the three units were occupied, unit #1 by Elizabeth Altamerano and her family and unit #3 by his daughter, Adjekai Kuma, and her fianc, Barron Taylor. He also informed it that any contract for the sale of the property had to include a term allowing him 30 days after the close of escrow to remove his personal property, as well as the personal property belonging to Kuma and Taylor (both of whom were in the military and stationed overseas), from the premises.
Coldwell Banker found a buyer for the property and in May 2004, Lott entered into an agreement to sell the property to Jo Ann Jaffe. The sale agreement included a provision allowing the existing tenants to remain in possession of their units for 60 days after the close of escrow. Coldwell Banker informed Jaffe that unit #1 was occupied, but failed to notify her that unit #3 was also.
Escrow on the sale closed in June 2004 and Lott was given a set of keys to permit him to retrieve personal property from the premises. A week later, Jaffe (or her agent, Andre Hardy, who is referred to collectively with Jaffe herein) removed the personal property belonging to Lott, Kuma and Barron from unit #3 and the premises' storage area and disposed of it. Lott discovered this when he went to the premises to remove that personal property himself a few weeks later.
In September 2004, Lott, Kuma and Taylor filed the underlying action against Jaffe, asserting numerous causes of action, including breach of contract, forcible entry, constructive eviction, trespass, conversion and intentional and negligent misrepresentation, based on Jaffe's removal of the personal property and subsequent demolition work in unit #3 within the 60 day grace period. Jaffe cross-complained against Coldwell Banker and Lott for intentional and negligent misrepresentation, intentional and negligent infliction of emotional distress, breach of contract, equitable indemnity, comparative contribution, and declaratory relief.
Although Lott had not made any formal claims against Coldwell Banker, it offered to pay him $83,200 to resolve his claims against Jaffe. Lott accepted the offer, which was contingent on the court's approval of the settlement under Code of Civil Procedure section 877.6 and its determination that the settlement would bar any claims by Jaffe against Lott or Coldwell Banker. In support of its motion seeking such approval, Coldwell Banker submitted a declaration admitting that, in listing the property on the multiple listing service, it had erroneously identified unit #3, as well as unit #2, as being vacant.
The court granted Coldwell Banker's motion in part, finding that the settlement was in good faith as required by statute, but held that, in accordance with the law, the settlement did not bar Jaffe's cross-claims against Lott or certain of her claims against Coldwell Banker. Based on this ruling, the proposed settlement was not consummated and the action proceeded as to all parties.
Lott thereafter sought leave of court to file a separate cross-complaint against Coldwell Banker. Over Coldwell Banker's objection, the court granted that request. After Coldwell Banker filed various challenges to the new pleadings, the parties stipulated to the filing of a first amended cross-complaint.
Coldwell Banker filed a demurrer to the first amended cross-complaint, arguing in part that the allegations that it agreed to inform any buyer that unit #3 was occupied constituted an oral modification of the written listing agreement was (1) unenforceable in accordance with Civil Code section 1698, and (2) inconsistent with the allegations of Lott's original cross-complaint that the Listing Agreement itself provided the basis for the duty to inform Jaffe that unit #3 was occupied and thus the court should disregard them. Lott opposed the demurrer on the grounds that Civil Code section 1698 did not apply in light of his allegations that Coldwell Banker had fully performed the contract as orally modified. He also argued that the first amended cross-complaint superseded his prior pleadings and thus any inconsistency between his amended allegations and the original allegations did not trigger the application of the sham pleading doctrine.
The superior court overruled Coldwell Banker's demurrer to Lott's cross-claim for equitable indemnity, but sustained the demurrers to Lott's cross-claims for breach of contract, negligent performance of a contract and breach of fiduciary duty with leave to amend. In its ruling, the court reasoned that the alleged oral modification of the Listing Agreement was contradicted by Lott's prior allegations (in his third amended complaint) that the listing agreement itself required Coldwell Banker to notify a buyer that unit #3 was occupied, although it also noted that the listing agreement contained no express provision requiring such a disclosure and further provided that it was subject to modification only in writing. The court also concluded that those allegations were unenforceable under Civil Code section 1698, which generally provides that a written agreement can only be modified in writing, but creates an exception for an oral modification that is thereafter fully performed, and in addition that Lott's allegations regarding Coldwell Banker's breach of the Listing Agreement as orally modified were contradicted by other allegations in the first amended cross-complaint that Coldwell Banker had fully performed the oral modification.
Lott filed a second amended cross-complaint, which alleged that the listing agreement created an implied duty on Coldwell Banker's part to notify Jaffe about the occupancy of unit #3 and that Coldwell Banker had failed to perform this duty. Coldwell Banker filed a demurrer to Lott's second amended cross-complaint on similar grounds as it raised to the first amended cross-complaint. Lott again opposed the demurrer, arguing that the allegations of the amended pleading replaced the earlier allegations and, to the extent the two sets of allegations were contradictory, they were nonetheless permissible.
After concluding that the allegations of an implied duty were inconsistent with Lott's prior allegations and violated the integration clause of the Listing Agreement, the superior court sustained the demurrers to all of Lott's cross-claims without leave to amend. (At the same hearing, the court approved an agreement by Coldwell Banker to settle Jaffe's claims against Coldwell Banker for $100,000.) Lott appeals the judgment entered on the demurrers to his second amended cross-complaint.
DISCUSSION
On an appeal from a judgment of dismissal entered after the superior court sustains a demurrer without leave to amend, the appellant must show either that the demurrer was sustained erroneously or that the court's denial of leave to amend constituted an abuse of discretion. (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829-1830.) Where the appeal arises from a ruling on a general demurrer, the issue raised -- whether the facts set forth in the challenged pleading are sufficient to constitute a cause of action -- presents a question of law that is subject to our de novo review. (Leko v. CornerstoneBuilding Inspection Service (2001) 86 Cal.App.4th 1109, 1114; see Code Civ. Proc., 430.10, subd. (e).)
In determining whether a demurrer is well taken, we must accept as true all well-pleaded allegations of material fact, "but not contentions or conclusions of fact or law." (Berry v. City of Santa Barbara (1995) 40 Cal.App.4th 1075, 1082.) Likewise, we need not accept the truth of allegations that are contradicted or inconsistent with matters subject to judicial notice, including allegations made in earlier pleadings or exhibits attached to such pleadings. (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.)
In this case, the superior court based its decision sustaining Coldwell Banker's demurrers to the cross-claims for breach of contract, negligence, equitable indemnity and breach of fiduciary duty on the ground that the allegations that Coldwell Banker had an implied duty under the listing agreement to notify prospective buyers that unit #3 was occupied were inconsistent with, and contradicted by, Lott's prior allegations that (a) such a duty arose from an oral contract or an oral modification to the Listing Agreement, (b) Coldwell Banker had fully performed its obligation under the oral agreement or modification, and (c) that Jaffe knew Lott had his personal property on the premises and was entitled to 60 days after the close of escrow to retrieve it therefrom.
Preliminarily, we cannot help but observe that the practical effect of the court's ruling was to dismiss from this action the one party that, by its own repeated admissions, was responsible for the mistake that provided the basis for all of the claims herein. Disregarding that practical reality, we in any event conclude that, under the circumstances of this case, the court's determination that the allegations of Lott's second amended cross-complaint were sham pleading and thus appropriately disregarded was in error.
When an amended complaint omits facts that had previously rendered it defective or pleads allegations that are inconsistent with earlier pleadings or exhibits, "the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so[,] the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint." (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384.) However, a party may properly plead alternative theories of liability, even where those theories (or the facts underlying them) appear to be inconsistent, without violating this policy. (See 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, 363-369, pp. 466-471.)
The allegations in question specify that the Listing Agreement created an implied duty on the part of Coldwell Banker to inform Jaffe that unit #3 was occupied and that Lott intended to retain the right to enter that unit within 60 days of the close of escrow to remove the personal property in that unit. Although the superior court concluded otherwise in ruling on Coldwell Banker's prior demurrer, these allegations are entirely consistent with the terms of the Listing Agreement, which obligated Coldwell Banker to "exercise reasonable effort and due diligence to achieve the purposes of this Agreement," to wit, the sale of Lott's property on terms acceptable to him. (See also Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, 25 [acknowledging a real estate broker's fiduciary duty to its client requiring the highest good faith and undivided service and loyalty]; Smith v. Rickard (1988) 205 Cal.App.3d 1354, 1364 [recognizing a real estate agent's duty to its client to exercise reasonable skill and care for the principal's benefit in performing agency duties].) Further, as this duty was created by virtue of the Listing Agreement, Civil Code section 1698 is completely inapplicable.
Moreover, these allegations are merely a variation on Lott's prior allegations that Coldwell Banker's duty arose from his oral instructions to it regarding the necessary terms of any contract for a sale of the property to a buyer. As such, the allegations set forth a different legal theory as to the basis for Coldwell Banker's duty, but not different underlying facts (i.e., that the duty arose based on Coldwell Banker's obligations under the Listing Agreement and his oral instructions to it regarding the terms to include in the sale agreement).
Finally, to the extent that Coldwell Banker reiterates its argument that the challenged allegations must fail in light of the prior allegations that it had fully performed its obligations under the oral modification to the Listing Agreement, we reject that argument. It is apparent from the proceedings and rulings that preceded the first amended cross-complaint that the "full performance" allegations were added to the first amended cross-complaint in an attempt to plead around the bar of Civil Code section 1698, which was, as described above, inapplicable given that Lott was no longer alleging an oral modification of the Listing Agreement. Under these circumstances, the initial inclusion of the "full performance" allegations in the first amended cross-complaint, although at best inartful, did not establish that Lott's second amended cross-complaint was subject to the sham pleading doctrine. (See generally Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 426-427 [holding that plaintiffs' provision of sufficient evidence in opposition to a motion for summary judgment to demonstrate that a mistake was made in drafting the original pleading precluded the application of the sham pleading doctrine].)
For these reasons, we hold that the superior court erred in sustaining Coldwell Banker's demurrers to the causes of action asserted in Lott's second amended cross-complaint and accordingly reverse the judgment based thereon.
DISPOSITION
The judgment is reversed and the matter is remanded with directions to the superior court to vacate its order sustaining Coldwell Banker's demurrers without leave to amend, to enter a new order overruling the demurrers in their entirety and to conduct further proceedings consistent herewith. Lott is entitled to recover his costs on appeal.
McINTYRE, Acting P.J.
WE CONCUR:
O'ROURKE, J.
IRION, J.
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