Tindell v. Shaw

 

 

 

 

 

 

 

Filed 6/13/13  Tindell v. Shaw CA3

 

 

 

 

 

 

NOT TO BE PUBLISHED

 

California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b).  This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

 

 

 

 

 

IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE
DISTRICT

(Lassen)

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>

RANDY TINDELL et al.,                           Plaintiffs and Appellants,               v.   JOHN SHAW et al.,                           Defendants and Respondents.

C068453   (Super. Ct. No. 50512)

 

 

 

            Plaintiffs
Randy and Linda Tindell bought a house listed by defendant real estate agents
John Shaw, Kari Moore, and Susanville Real Estate (defendants) in 2005 for
$320,000.  In 2009 the Tindells were
unable to refinance the mortgage because it is a manufactured home, not a
modular home.  The Tindells filed a href="http://www.fearnotlaw.com/">second amended complaint against defendants
for fraud, negligent misrepresentation, and constructive fraud.  The trial court sustained defendants’
demurrer to the second amended complaint without leave to amend.  The Tindells appeal, arguing the trial court
erred in sustaining the demurrer and in doing so without leave to amend.  We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

            In
reviewing an order sustaining a demurrer, we assume the truth of all material
facts properly pleaded in the complaint. 
(Howard Jarvis Taxpayers Assn. v.
City of La Habra
(2001) 25 Cal.4th 809, 814.)  We also
consider facts pleaded in earlier iterations of the complaint that contradict
the facts pleaded in the last amended complaint.  (Berman
v. Bromberg (1997) 56 Cal.App.4th 936, 945-946.)  With those principles in mind, we summarize
the basic facts of the real estate transaction here at issue, and the
procedural history of this case, as gleaned from plaintiffs’ pleadings.

The Purchase

            Susanville
Real Estate, agent Moore, and real estate broker Shaw listed a property for
sale in December 2004.  The listing
stated the approximate age of the property was 26 years and described the
construction as “Manufactured.”  The
Tindells made arrangements to see the property and subsequently made an offer
to purchase the property for $320,000; the offer was accepted.

            In the
process of purchasing the property, the Tindells hired loan broker Kim
Keith.  Keith told the Tindells she
believed the property was a manufactured home and that they might not be able
to obtain financing.

            The
Tindells also hired appraiser Christine Bradley to appraise the property.  When Bradley appraised the home, she
designated it a modular home constructed around 1972.  Following the appraisal, Keith told the
Tindells she could finance the property.href="#_ftn1" name="_ftnref1" title="">[1]

            In 2009 the
Tindells sought to refinance their mortgage. 
In connection with the refinancing, an appraiser inspected the
property.  According to the appraisal for
the refinancing, the property was a manufactured home and not a modular
home.  The Tindells were unable to
refinance their mortgage.

Original Complaint

            The
Tindells filed a complaint against defendants, loan broker Keith, and appraiser
Bradley, alleging causes of action for (1) declaratory
relief, (2) violation of Civil Code section 1102 et seq., (3) fraud, and
(4) breach of fiduciary duty.  In their complaint, the Tindells argued that
defendants, broker Keith, and appraiser Bradley failed to disclose the property
was a manufactured home, preventing a refinancing of the mortgage.  Defendants, broker Keith, and appraiser
Bradley all retained separate counsel.

            According
to the Tindells, defendants, broker Keith, and appraiser Bradley fraudulently
misrepresented the property as “modular.” 
In addition, the Tindells argued, defendants, Keith, and Bradley “failed
to undertake an inquiry as to the condition of Subject Property to determine
whether the Subject Property was ‘manufactured’ or ‘modular.’ ”

            Broker
Keith filed a demurrer to the Tindells’ complaint.  The trial court sustained the demurrer
without leave to amend.  As they
acknowledge, the Tindells did not file a timely appeal of that order.

            Defendants
filed a demurrer to the Tindells’ complaint, arguing the allegations in the
complaint were contradicted by exhibits attached to the complaint.  The agent’s inspection disclosure, signed by
the Tindells and attached to the complaint, stated the house was a “manufactured
home.”  In addition, defendants’ listing
described the house as “Manufactured.”

            The trial
court sustained the demurrer to the first and second causes of action without
leave to amend.  The court sustained the
demurrer to the fraud and breach of fiduciary duty causes of action with leave
to amend, noting those causes of action were not pleaded with particularity and
were uncertain.

First Amended Complaint

            Subsequently,
the Tindells filed a verified first amended complaint alleging causes of action
for fraud, negligent misrepresentation,
and constructive fraud.  The amended
complaint alleged defendants’ listing declared the property to be 26 years old
and “manufactured in 1979,” but the Tindells later discovered the property was
manufactured in 1976.  According to the
Tindells, homes manufactured prior to June 1976 are “practically worthless”
because of lack of building standards and cannot be financed.

            The first
amended complaint alleged defendants failed to disclose that the property was a
1972 manufactured home that could not be financed.  Instead, defendants represented that the
property was manufactured in 1979. 
According to the Tindells, although defendants “initially did state the
Subject Property was a manufactured home, they did not question Bradley’s
appraisal designating [it] as [a] modular home.”  The Tindells also stated defendants coerced
them to use Keith as their loan processor.

            Defendants
filed a demurrer to the first amended complaint, asserting the Tindells could
not show defendants misrepresented the age of the home and could not allege
justifiable reliance.  Defendants’
listing, attached to the first amended complaint, stated the approximate age of
the house was 26 years.

            In
addition, defendants argued the handwritten year “1979” on the listing was not
part of the original listing, but must have been added by the Tindells.  In opposing the demurrer, the Tindells
conceded the handwritten “1979” was not part of defendants’ original listing.

            The trial
court sustained the demurrer to the first amended complaint with leave to
amend.  The court found the Tindells
failed to allege defendants’ intent to deceive, knowledge of falsity, intent to
induce reliance, breach of fiduciary relationship, or justifiable reliance.

Second Amended Complaint

            The
Tindells filed a second amended complaint alleging fraud, negligent
misrepresentation, and constructive fraud. 
Again, the Tindells alleged defendants’ listing stated the property was
26 years old and manufactured in 1979, but the Tindells discovered the property
was manufactured in 1976.  According to
the Tindells, defendants failed to disclose during the href="http://www.fearnotlaw.com/">negotiation process that the property was
manufactured in 1972 and could not be financed.

            The second
amended complaint added new allegations. 
The complaint alleged defendants had special knowledge of the property
and intentionally concealed the property’s true age.  The Tindells also claimed that although
defendants stated in February 2005 that the property was a manufactured home,
they concealed the known fact that the property was built prior to 1976.  In addition, the Tindells argued that if
appraiser Bradley had disclosed the true age of the property, it would have
enabled them to make an informed decision about the purchase.

            Defendants
again demurred, arguing the Tindells were bound by the allegations contained in
their original complaint.  Defendants
also argued the Tindells failed to establish the elements of fraud, and
defendants had no duty to inspect public records to establish the age of the
property.  The Tindells failed to file a
written opposition to the demurrer but did oppose the demurrer in oral
argument.

            The trial
court sustained the demurrer without leave to amend.  The court considered the fraud cause of
action and determined defendants’ listing did not state the home was
manufactured in 1979, but stated the approximate age was 26 years.  The court also noted the Tindells admitted
they added the handwritten “1979” date to the listing.

            The court
found the Tindells were bound by the allegations in their original complaint
that they were not informed the house was manufactured.  As stated by the court, “Plaintiffs cannot
avoid these factual allegations by simply filing a new Complaint.  Material factual allegations in verified
pleadings that are admitted in subsequent pleadings without adequate
explanation are to be considered by the Court in ruling on a Demurrer to a
later pleading[.]  [Citation.]  In the original Complaint Plaintiffs asserted
that they were injured based on the Defendant’s failure to disclose that the
home was manufactured.  They cannot now
claim to have relied on a representation that the home was manufactured in a
specific year.”

            The court
also noted that, under Civil Code section 2079.3, a listing agent has no duty
to inspect public records to determine a property’s age.  Moreover, the misrepresentation that the home
was modular was made by the appraiser, not defendants.  Nor did the Tindells allege that defendants
received a copy of the appraisal or that they had a duty to review the adequacy
of the appraisal.  Therefore, the
Tindells failed to show a misrepresentation, justifiable reliance, or damages
arising from defendants’ conduct, and the court sustained the demurrers to the
first and second causes of action without leave to amend.

            The third
cause of action, for constructive fraud, required that the Tindells show a
breach of duty without actual fraudulent intent resulting in an advantage to
the person at fault by misleading another to his prejudice.  The court sustained defendants’ demurrer to
this cause of action, also without leave to amend, finding the Tindells could
not show a breach of duty, justifiable
reliance, or damages.

Motion for Reconsideration and Appeal

            The
Tindells filed a motion for leave to file an amended complaint and a motion for
reconsideration.  According to the
Tindells, due to a lack of communication, their former counsel failed to oppose
the demurrer to the second amended complaint. 
In their proposed third amended complaint, the Tindells added the seller
of the property, Linda Murphy, as a defendant and added causes of action for
unjust enrichment, breach of fiduciary duty, negligence, and rescission.

            The court
denied the motion for reconsideration,
finding the Tindells failed to plead new facts or a change in the law.  The court found the motion “nothing more than
an attempt by [the Tindells] to get an opposition to the demurrer to the 2nd
amended complaint heard after the demurrer . . . was sustained
without leave to amend . . . .” 
The court granted leave to amend as to Bradley and Murphy, but not
defendants.  Subsequently, the Tindells
filed a third amended complaint against Bradley and Murphy.

            The trial
court entered judgment in favor of defendants and awarded costs.  The Tindells filed a timely href="http://www.fearnotlaw.com/">notice of appeal.

DISCUSSION

I

            The
function of a demurrer is to test the sufficiency of the complaint by raising
questions of law.  We give the complaint
a reasonable interpretation and read it as a whole with its parts considered in
their context.  A general demurrer admits
the truth of all material factual allegations. 
We are not concerned with the plaintiff’s ability to prove the
allegations or any possible difficulties in making such proof.  We are not bound by the construction made by
the trial court of the pleadings; instead, we make our own independent
judgment.  (Herman v. Los Angeles County Metropolitan Transportation Authority (1999)
71 Cal.App.4th 819, 824.)

            When the
trial court sustains the demurrer without leave to amend, we must decide
whether there is a reasonable possibility the plaintiff can cure the defect
with an amendment.  If we find that an
amendment could cure the defect, we must find the court abused its discretion
and reverse.  If not, the court has not
abused its discretion.  The plaintiff
bears the burden of proving an amendment would cure the defect.  (Gomes
v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 (>Gomes).)

II

            In
sustaining defendants’ demurrer without leave to amend as to the first cause of
action for fraud, the trial court relied in part on the Tindells’ allegation in
their original complaint that they were injured by defendants’ failure to
inform them the house was manufactured and not modular.  The court found the Tindells, in a subsequent
complaint, could not now claim to have relied on a misrepresentation that the
home was manufactured in a specific year.

            The
Tindells argue the fact that they had “allegedly been impeached regarding their
statement that the defendants had failed to inform them that they were getting
a manufactured home was irrelevant.” 
According to the Tindells, the alleged impeachment “did not prevent them
from adding facts that elaborated on the Respondents[’] conduct and the harm
caused.”  They characterize their
allegation that defendants misled them as to the true nature of the home “the
result of a mere drafting error.”

            The
totality of the second amended complaint, the Tindells contend, made clear that
the crux of their case was defendants’ failure to disclose the true age of the
manufactured home.  Therefore, as long as
they can set forth an actionable claim, they should have been allowed to amend
their complaint and not have been penalized because their second amended
complaint was unclear on certain facts.

            The sham
pleading doctrine prevents a plaintiff from attempting to breathe life into a
complaint by omitting relevant facts from an amended complaint that made the
plaintiff’s previous complaint defective. 
However, the doctrine is not intended to prevent a plaintiff from
correcting erroneous allegations or clarifying ambiguous facts.  Instead, the doctrine seeks to enable courts
to prevent an abuse of process.  (>Deveny v. Entropin, Inc. (2006) 139
Cal.App.4th 408, 426 (Deveny); >Vallejo Development Co. v. Beck Development
Co. (1994) 24 Cal.App.4th 929, 946.)

            Under the
sham pleading doctrine, a plaintiff cannot avoid allegations that are
determinative to a cause of action simply by filing an amended complaint which
omits the problematic facts or pleads facts inconsistent with those alleged in
the original complaint.  This doctrine
precludes a plaintiff from amending a complaint to omit harmful allegations,
without explanation, from previous complaints to avoid attacks raised in
demurrers.  Instead, the plaintiff must
satisfactorily explain such an omission. 
Failure to provide such an explanation allows the court to disregard the
inconsistent allegations and read into the amended complaint the allegations of
the superseded complaint.  (>Deveny, supra, 139 Cal.App.4th at pp. 425-426.)

            In their
original complaint, the Tindells alleged defendants misrepresented that the
property they purchased was a modular, not a manufactured, home.  Attached to the complaint was the agent’s
inspection disclosure, signed by the Tindells, stating the home was manufactured.  Defendants’ listing also specified the home
was manufactured.

            Following
the trial court’s order sustaining defendants’ demurrer to the original
complaint, the Tindells alleged in their first amended complaint that
defendants failed to disclose the home was manufactured in 1972 and instead
represented that the home was 26 years old and manufactured in 1979.  According to the second amended complaint,
defendants had special knowledge of the property and intentionally concealed
the age of the property.

            Omitted
from the amended complaint is any allegation that defendants misrepresented
that the home was modular and concealed that the home was manufactured.  The Tindells provide no explanation for the
disappearance of this allegation, central to their original complaint.

            Instead,
the Tindells argue the trial court abused its discretion in referencing the
prior inconsistent allegations in sustaining the brokers’ demurrer to their
second amended complaint.  We disagree.

            In
sustaining the demurrer to the first cause of action in the second amended
complaint, the court initially noted the listing for the home the Tindells
purchased does not state the home was manufactured in 1979, but states the
approximate age is 26 years.  In
addition, the court pointed out the handwritten note with the date “1976” was
admittedly added by the Tindells.href="#_ftn2"
name="_ftnref2" title="">[2]

            The court
then found the Tindells were bound by the allegations in their original
complaint, which alleged their injury stemmed from defendants’ failure to
inform them that their home was manufactured and not modular.  The court also noted the alleged
misrepresentation that the home was modular was made not by defendants but by
appraiser Bradley, and the Tindells failed to allege that the listing agent
received a copy of the appraisal or had a duty to confirm the age of the home.

            Despite the
Tindells’ attempt to cast the court’s order sustaining defendants’ demurrer as
solely the product of the court’s reference to their prior inconsistent
allegations, the record reveals the court considered the inconsistent
allegations as only part of its rationale for sustaining the demurrer, not as
the exclusive basis for the court’s ruling. 
The prior inconsistent allegations were but one factor the trial court
considered in sustaining the demurrer to the first cause of action.

III

            The
Tindells also contend the court erred in finding they could not establish
defendants made misrepresentations or owed them a fiduciary duty in connection
with their cause of action for fraud.  To
establish a cause of action for fraud, the Tindells must allege
misrepresentation, knowledge of falsity, intent to defraud, justifiable
reliance, and damage.  (>Lazar v. Superior Court (1996) 12
Cal.4th 631, 638.)

            In their
second amended complaint, the Tindells hinge their fraud allegation on defendants’
alleged misrepresentation of the age of the home, which made refinancing
impossible.  However, as the trial court
found, defendants’ listing does not state the home was manufactured in 1979,
but plainly states the “Approx. Age” of the home is “26” years.  The Tindells acknowledged adding the
handwritten notation “1979” to the listing; the date was not part of the
original listing.

            Nor did
defendants, the listing agents, owe a duty to inspect public records to
determine the age of the home.  Civil Code
section 2079 requires the listing agent to make a visual inspection, but the
agent is not required to inspect public records (Civ. Code, § 2079.3).  The Tindells do not allege defendants
received a copy of the appraisal or were required to verify the appraisal’s
accuracy.  In essence, the Tindells fail
to connect defendants to any alleged misrepresentation as to the age of the
home they purchased.

IV

            The
Tindells’ second amended complaint alleged a second cause of action for
negligent misrepresentation.  The
elements of a negligent misrepresentation are “(1) the misrepresentation of a
past or existing material fact, (2) without reasonable ground for believing it
to be true, (3) with intent to induce another’s reliance on the fact
misrepresented, (4) justifiable reliance on the misrepresentation, and (5)
resulting damage.”  Negligent
misrepresentation does not require knowledge of falsity, unlike a cause of
action for fraud.  (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158
Cal.App.4th 226, 243.)

            The trial
court found the Tindells failed to show a misrepresentation by defendants,
justifiable reliance, or damage.  We
agree.  The Tindells’ cause of action for
negligent misrepresentation restates the factual allegations in support of
their fraud cause of action.  The
Tindells’ complaint fails to allege defendants made false representations,
believing them to be true but having no reasonable ground for such belief.

V

            In their
third cause of action, the Tindells alleged defendants committed constructive
fraud.  To prove such an allegation, the
Tindells must show (1) a fiduciary relationship, (2) nondisclosure, (3) intent
to deceive, and (4) reliance and resulting injury.  Constructive fraud is any breach of duty
that, without fraudulent intent, gains an advantage to the person at fault by
misleading another to his prejudice. 
(Civ. Code, § 1573; Stokes v.
Henson (1990) 217 Cal.App.3d 187, 197.) 
The trial court sustained defendants’ demurrer to the third cause of
action, finding the Tindells could not show a breach of duty, justifiable
reliance, or damages.

            As noted,
defendants had no duty to inspect public records to ascertain the age of the
home the Tindells purchased.  Nor did
defendants have a duty to verify the age set forth in the appraiser’s
report.  The Tindells fail to allege that
defendants knew the age of the home or that they intended to deceive the
Tindells.  Therefore, the Tindells failed
to allege a cause of action for constructive fraud.

VI

            Finally,
the Tindells contend the trial court abused its discretion in denying them
leave to amend.  The Tindells argue their
motion for reconsideration put the trial court on notice that it erred in
failing to grant them leave to amend. 
Instead, the Tindells assert, the court’s dismissal of their complaint
without leave to amend was “nothing more than a punishment for having made a
non-substantive drafting error.”

            In
challenging the court’s sustaining of a demurrer without leave to amend, the
plaintiff bears the burden of proving an amendment would cure the defect.  The plaintiff must identify some legal theory
or state facts that can be added by amendment to change the legal effect of his
pleading.  (Gomes, supra, 192
Cal.App.4th at p. 1153; Hernandez v.
City of Pomona (2009) 46 Cal.4th 501, 520, fn. 16.)

            The
Tindells fail to meet this burden.  As we
have noted, the trial court did not deny leave to amend solely based on their
prior inconsistent allegations.  The
court noted the alleged misrepresentation that the home was modular was made by
appraiser Bradley, and the Tindells failed to allege that the listing agent
received a copy of the appraisal or had a duty to confirm the age of the
home.  The court’s action in denying
leave to amend was not punishment, but the result of a complete consideration
of the allegations set forth in the second amended complaint.

            Nor do the
Tindells point to any legal theory or facts they can add to their allegations
to state a cause of action against defendants. 
Instead, the Tindells merely assert the court dismissed a complaint
“that clearly contained viable causes of action based on the true facts before
the court.”  By failing to explain what
additional information they could provide to support their causes of action against
defendants, the Tindells do not meet their burden and the trial court did not
err in denying leave to amend.

DISPOSITION

            The
judgment is affirmed.  Defendants are
awarded their costs on appeal.

 

 

 

                                                                                                    RAYE                     , P. J.

 

 

 

We concur:

 

 

 

            BLEASE                     , J.

 

 

 

            MAURO                     , J.