Filed 12/7/05 Lamb v. Santa Barbara Montessori School CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

This case concerns the application of the statute of frauds to a proposed sale of modular classrooms by a school to a merchant who deals in such buildings. Ed Lamb appeals from the judgment of the trial court dismissing the case after it sustained the demurrer of respondent, Santa Barbara Montessori School (Montessori or school), to the first amended complaint without leave to amend. The trial court concluded that appellant's claim was barred by the statute of frauds. We affirm.

FACTS AND PROCEDURAL HISTORY

Montessori planned to move its Santa Barbara campus and decided to sell five modular classrooms. Ed Lamb, a merchant in the business of buying, selling, and leasing such buildings, found out that Montessori intended to sell the classrooms. On July 28, 2004, he called James Fitzpatrick, the principal of the school. The next day, Fitzpatrick returned the unsolicited call, and Lamb offered to buy the buildings for $55,000. During the call, Fitzpatrick indicated interest in the offer but said he would need to discuss it with his board of directors. On August 4, 2004, Fitzpatrick called Lamb and stated that the board agreed to accept the offer. Fitzpatrick said he would prepare a "Letter of Agreement."

On August 5, 2004, Fitzpatrick faxed a tentative letter of agreement, and increased the price to $65,000 because pedestrian ramps would be included in the sale. Fitzpatrick signed only the cover letter to this fax. Several hours later, Lamb called Fitzpatrick and offered $60,000 for the buildings. During the call, Fitzpatrick accepted Lamb's latest offer. About 20 minutes thereafter, Fitzpatrick e-mailed Lamb, pointing out the changes to which he had agreed, and attaching a revised letter of agreement. But, Fitzpatrick asked Lamb whether the agreement "still needs work," and typed his name only on the e-mail. Indeed, in a signed letter transmitted with the e-mail, Fitzpatrick wrote, "There are a few details that may have to be resolved before we sign . . . ." The letter requested that Lamb provide information about the name and address of Lamb's corporation, and asked when he would hear from Lamb again. Immediately after receiving this faxed letter, Lamb provided the requested information by handwriting it on a copy of Fitzpatrick's prior letter. Lamb initialed each page of the revised agreement, signed and dated it, and returned it to Fitzpatrick by fax together with the annotated letter. Fitzpatrick never signed the signature page of the agreement.

On August 17, 2004, Lamb placed two telephone calls to Fitzpatrick, leaving messages requesting that Fitzpatrick sign and send a fully executed copy of the letter of agreement. On August 18, 2004, Lamb called Fitzpatrick again. During the conversation, Fitzpatrick told Lamb that the signed letter of agreement was at his new school's location and that he would send it to Lamb as soon as possible. Over the next two days, Lamb "sold" two of Montessori's modular classrooms to another school, and sold two leases for other classrooms to raise funds for the purchase from Montessori.

On August 23, 2004, Lamb left several more telephone messages requesting that Fitzpatrick provide a signed copy of the letter of agreement. The next day, Fitzpatrick returned the call while he was in Oregon, and said he would send the signed agreement when he returned to Santa Barbara. On August 31, 2004, Lamb called Fitzpatrick four times to obtain routing numbers to wire transfer the $60,000 sales price to Montessori's bank account.

On September 1, 2004, Lamb called Fitzpatrick. Fitzpatrick informed Lamb that another buyer had approached him about purchasing the classrooms, but if the new buyer backed out, he would expect Lamb to fulfill the agreement. Lamb stated that the Montessori classrooms were no longer for sale, that he was negotiating with third parties to purchase or lease the classrooms, and that if Fitzpatrick sold the buildings to others he would be in breach of the agreement. Fitzpatrick informed Lamb that he had not signed the agreement and that he had the right to negotiate with others. The same day, Lamb traveled to Santa Barbara and personally presented a cashier's check for $60,000, but Fitzpatrick refused the tender. Lamb alleged that he is informed and believes the classrooms are worth $325,000.

Lamb sued Montessori for breach of contract. After a demurrer to the complaint was sustained with leave to amend, Lamb filed a first amended complaint that contained further causes of action for breach of an oral contract, promissory estoppel, and fraud. Montessori's demurrer to the instant, first amended complaint was sustained without leave to amend.

The trial court concluded that Montessori is not a merchant of such merchandise under California law, so that the unsigned agreement would not satisfy the statute of frauds. (Cal. U. Com. Code, §§ 2201, subd. (1), 2104.)[1] As to the cause of action for fraud, the trial court concluded that although Lamb alleges a "sharp practice," he did not allege justifiable, detrimental reliance.[2] The court granted Montessori's motion for dismissal and entered judgment accordingly. This appeal ensued.

DISCUSSION

Standard of Review

"'A demurrer tests the legal sufficiency of factual allegations in a complaint. . . .' . . . In reviewing an order sustaining a demurrer to a cause of action, we exercise independent judgment in determining whether the complaint's factual allegations are sufficient to state a cause of action as a matter of law. . . . We treat the demurrer as admitting all material facts properly pleaded. . . . However, we do not assume the truth of contentions, deductions, or conclusions of fact or law. . . . We also consider matters that may be judicially noticed." (Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1168.) We independently review questions of law. (International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 611; Walker v. Allstate Indem. Co. (2000) 77 Cal.App.4th 750, 754.) We consider evidentiary facts that are in the exhibits attached or which are incorporated by reference in the complaint. (Satten v. Webb (2002) 99 Cal.App.4th 365, 374-375.) Such facts take precedence over conflicting facts alleged in the complaint. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447; Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955 [same as to judicially noticeable facts].)

Statute of Frauds

Section 2201 provides, in pertinent part, that "a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action . . . unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought . . . ." Between merchants, such a contract is enforceable if a writing in confirmation of the contract and sufficient against the sender is received within a reasonable time. (Id., subd. (2).) Appellant contends that the documents referred to in the complaint constitute writings sufficient to establish that a valid oral contract for the sale of goods between merchants was entered into by the parties, satisfying California's statute of frauds.

Appellant argues that Montessori is a merchant for purposes of the statute of frauds, so that a formal, signed contract is not necessary for enforcement of the agreement. For purposes of California's Uniform Commercial Code, the term "merchant" is defined to mean "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed

. . . ." (§ 2104, subd. (1).)

Although Lamb pled the conclusion that Montessori is a merchant, the school does not meet the definition of one. Fitzpatrick is the principal of a school which is in the business of educating children. The complaint identifies only one instance in which Montessori bought such classrooms – when it purchased the very classrooms it was attempting to resell here. There are no allegations that Fitzpatrick held himself out as a dealer of such goods, or that his occupation indicates his skill or knowledge about the sales or leasing practices typically used for the goods involved here. It is apparent on the face of this complaint that Fitzpatrick had no idea what these modular classrooms were worth. But Lamb knew the buildings were worth approximately $325,000, or more than five times the proposed price.

Thus, we consider whether the documents at issue constitute a contract under section 2201, subdivision (1). We conclude they do not. Where it is claimed that a name appearing on a document is intended to be a signature satisfying the statute of frauds, that intention must appear on the face of the document itself. The sales agreement itself must be final and self-authenticating; parol evidence is not permitted. (Marks v. Walter G. McCarty Corp. (1949) 33 Cal.2d 814, 820-821 [carbon copy of writing on letterhead stationery without signature insufficient to support sale]; In re Kossack (S.D.Cal. 1953) 113 F.Supp. 884, 889; California Trust Co. v. Bennett (1949) 33 Cal.2d 694, 699; see also Marx & Rawolle v. Standard Soap Co. (1919) 42 Cal.App. 32, 33-34, 36 [exchange of telegrams and letters insufficient; signed final writing clearly contemplated]; California Canneries Co. v. Scatena (1897) 117 Cal. 447, 449-450 [signature in body of otherwise complete contract for sale of 150 tons of peaches held sufficient].)[3] Where there is no signature on the contract of the party to be charged, parol evidence about its validity is irrelevant. (In re Kossack, supra, at pp. 889-890.) The reason for this "four corners" rule is simple – to implement the policy behind the statute of frauds. (Id., at p. 889, citing Marks, supra, at pp. 822-823.)

Fitzpatrick never signed the actual contract. He delayed doing so while he sought other offers. The documents and allegations show that Lamb understood the need to obtain Fitzpatrick's original signature on the actual sales contract, and he showed up in person with a cashier's check in hand when it was not forthcoming. The tender was rejected.

Fraud

Appellant argues that the documents transmitted between the parties, coupled with Montessori's oral representation that it signed the agreement, establishes a cause of action for fraud. We disagree. A cause of action for fraud must be plead with particularity. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.) Each element of the cause must be alleged in full, with specific factual support. (Ibid.) The elements for fraud include material misrepresentation about the agreement, knowledge of its falsity, intent to defraud, actual, justifiable reliance on the misrepresentation, and resulting damage. (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) One must plead all the facts which show how, when, where, to whom and by what means the representations were made. (Lazar, supra, at p. 645.) The usual liberality extended to pleading causes of action does not apply to an action for fraud. (Id., at pp. 644-645; Wilhelm, supra, at p. 1331.)

The element of justifiable reliance requires plaintiff to plead all the circumstances making it reasonable for him to accept the defendant's material statements about the transaction without further inquiry. (Wilhelm v. Pray, Price, Williams & Russell, supra, 186 Cal.App.3d at p. 1332.) Lamb did not and could not plead this. Lamb pled that Fitzpatrick promised to sell the classrooms to him if he tendered a cashier's check for $60,000 by September 1, 2004, and if he agreed to remove the classrooms from Montessori's former premises by September 30, 2004. Lamb alleged that in reliance on these promises, he justifiably believed he would be the actual buyer of the classrooms. Lamb alleged he was unaware of Montessori's secret intention not to perform, and that he could not have learned this intention by exercising reasonable diligence. The face of the documents show this is not so.

The complaint and its referenced documents establish that Lamb is a merchant in the business of buying and selling modular buildings, and clearly understood the need to obtain a fully executed contract from Montessori. Furthermore, he knew, as early as August 17, 2004, that Fitzpatrick was stalling on providing him with a signed, formal copy of the final agreement. After that, Lamb could not reasonably rely on Fitzpatrick's promise to sign the contract. Indeed, he did not. On August 23, 2004, Lamb left several more messages pleading with Fitzpatrick to provide a signed copy of the agreement. On August 31, 2004, Lamb tried to wire the unrequested funds to Montessori.

We conclude there is no showing of justifiable reliance. Lamb knew or should have known by August 17, 2004, at the latest, that there was a serious problem. This is established by the series of calls he made to get a signed version of the final contract. Those calls went unheeded. (See generally Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 55 [loan applicant could not reasonably rely on bank's failure to disclose possible denial of loan request, as matter of law]; Slivinsky v. Watkins-Johnson Co. (1990) 221 Cal.App.3d 799, 807 [employee could not justifiably rely on oral promises of continued employment in light of parties' integrated employment agreement stating employment at will].)

Accordingly, the judgment of dismissal is affirmed. Costs are awarded to respondent.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

YEGAN, Acting P.J.

COFFEE, J.

James W. Brown, Judge

Superior Court County of Santa Barbara

______________________________

Law Offices of Jeffrey S. Young and Jeffrey S. Young for Plaintiff and Appellant.

Hatch & Parent, James E. Friedhofer, Susan F. Petrovich and Jill Martin for Defendant and Respondent.

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[1] All statutory references are to the California Uniform Commercial Code unless otherwise stated.

[2] Lamb does not appeal as to his cause of action for promissory estoppel.

[3] We note that section 2201, requiring a signed writing for the sale of goods priced over $500, was enacted in 1963, thereby adopting and extending the statute of frauds to such personal property.