Pladott v. Blankstein
Filed
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF
SECOND APPELLATE DISTRICT
DIVISION FIVE
ALEX PLADOTT, Plaintiff and Appellant, v. JOSEF BLANKSTEIN et al., Defendants and Respondents. | B189283 ( Super. |
APPEAL from a judgment of the Superior Court of Los Angeles County.
Michael Harwin, Judge. Affirmed in part and reversed in part.
Greenberg & Bass, LLP, James R. Felton, and Harold Gutenberg for Plaintiff and Appellant.
Ryan, Brosman & Hammers and Stephen G. Hammers for Defendants and Respondents.
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Factually, this case concerns a house in Woodland Hills which originally belonged to plaintiff and appellant Alex Pladott and now belongs to his sister and brother-in-law, defendants and respondents Josef and Carmella[1] Blankstein. Legally, the case concerns the part performance exception to the statute of frauds.
The Blanksteins bought the house from Pladott on
In any event, there was no repurchase in either time period, and, according to the record before us, no further action until November of 2004, when the Blanksteins served Pladott with a sixty day notice to quit. He did not leave the house, and in February 2005, they filed an unlawful detainer action.[2] Pladott answered and filed this lawsuit, alleging that he and the Blanksteins agreed that he could repurchase within three years for the price the Blanksteins paid on the condition that he pay specified expenses, that he paid those expenses, that in December 1997, he attempted to repurchase the house, and that the Blanksteins breached the oral agreement by refusing to execute a purchase agreement or escrow instructions or to convey the property to him.[3] The complaint brought causes of action for breach of oral contract, promissory estoppel, unjust enrichment, and fraud,[4] and for imposition of a constructive trust, and sought an order compelling the Blanksteins to convey the property pursuant to the agreement.
The Blanksteins demurred, contending, inter alia, that any repurchase contract was invalid under the statue of frauds. Pladott's response relied largely on the theory that his part performance of the repurchase agreement made the contract enforceable. The court sustained the demurrer without leave to amend as to every cause of action but the cause of action for fraud. Pladott later dismissed that cause of action, and the trial court entered judgment for the Blanksteins. We reverse the judgment, although we find that demurrer was properly sustained to two causes of action, for unjust enrichment and for promissory estoppel.
Facts
Because the case comes to us after a demurrer, we are limited to the factual allegations of the complaint, which we accept as true, and to the facts appearing in exhibits attached to the complaint. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)[5] This complaint proceeded largely through exhibits.
The agreement
The operative first amended complaint alleges that on or about February 19, 1996, the parties orally agreed that the Blanksteins would buy the property from Pladott, that he could and would repurchase the property within three years at the same price the Blanksteins paid, and that in consideration, he was to pay a good faith deposit of $15,000 to the Blanksteins to be used as a portion of their down payment on the property. The complaint then alleges that in May of that year, based on the parties' mutual trust of each other and family relationship, the agreement was supplemented with an oral agreement that Pladott would continue to live in the house after the purchase, would pay regular maintenance for the property, and would reimburse the Blanksteins for all out-of-pocket expenses relating to the property.
A November 1997 letter from Carmella to Pladott was attached to the complaint.[6] She wrote that " There are and were no 'Terms' between us," but then wrote " You have asked me, your sister, to do a 'big favor' for you, to help by buying . . . the house in California from you . . . You said that within a year, a year and a half maximum, you make sure you buy it back, you have promised us, that of course we shall have no expenses whatsoever . . . You will cover and pay for everything . . ."
Performance
The complaint alleges that Pladott performed all the terms, conditions, covenants and promises required on his part. Exhibits to the complaint show a $15,000 payment from Pladott to the Blanksteins in February, and payments of $8,730 in June 1996; $8,500 in October 1996; and $8,500 in January 1997. The October 1996 check is marked " per agreement" in the memo line. Pladott also attached evidence of additional payments of $6,477.88 and $508.14 in 1997, and payment of $10,942 in 1998, for the January, February, March, and April 1998 mortgage payments, along with a request for the mortgage payment coupons. Another attachment, a
In yet another attachment, a December 19 letter from Pladott to the Blanksteins, Pladott offered a " detailed, step-by-step accounting" which stated " The $15,000 I paid you became a deposit toward purchasing the property back from you in the future." The letter also detailed the mortgage payments and the amounts paid to the Blanksteins for the mortgage, and concluded " [p]lease review your records and let me know if you have paid any other payments toward the property as of this date."
One more attachment is relevant. It is a
Repurchase
The complaint alleges that Pladott complied with the oral agreement, but that the Blanksteins refused to comply. The relevant attachments begin with a November 1997 letter from Carmella to Pladott, which reads " In order for the house to change ownership at the beginning of January 98, which is the first week of January (which is already the third postpone of the sale as far as we're concerned) we are asking that you commence all arrangements necessary for it, immediately."
The complaint also attaches numerous letters from Pladott to the Blanksteins or their lawyer concerning the repurchase, dated between December 1997 and May 1998. The first of these is a December 12, 1997 letter from Pladott to the Blanksteins, enclosing a Residential Purchase Offer filled in with a purchase price of $475,000, and indicating that $15,000 had already been paid to seller outside of escrow, with buyer to pay $85,000 to the seller and to pay off the outstanding balance on a loan, approximately $375,000. The offer also indicates that escrow will close in August 1998.
The last of these is a
Discussion
The statute of frauds
Thousands of years ago, the Greek poet Hesiod wrote a poem for his brother. Works and Days is a manual on how to conduct business and personal life. Among other things, Hesiod wrote, " pay a fair price to every man, but even if it is your brother, smile and have a witness." We do not expect our words to last as long as Hesiod's, but we venture to add an amendment: Even if it is your brother, smile and have a writing.
That is what the statute of frauds requires. Under Code of Civil Procedure section 1971, " No estate or interest in real property, other than for leases for a term not exceeding one year, nor any power over or concerning it, or in any manner relating thereto, can be created, granted, assigned, surrendered, or declared, otherwise than by operation of law, or a conveyance or other instrument in writing, . . ."
There is no question but that the statute applies here. However, there is an exception to the statute of frauds. Under Code of Civil Procedure section 1972, " Section 1971 shall not be construed to abridge the power of any court to compel the specific performance of an agreement, in case of part performance thereof."
" The doctrine of part performance by the purchaser is a well-recognized exception to the statute of frauds as applied to contracts for the sale or lease of real property. (1 Miller & Starr,
" [T]he acts of part performance must clearly appear to be related to and in pursuance of the agreement sought to be enforced." (10 Witkin, Summary of
Sutton is instructive. The case, which came to the Court of Appeal after trial, concerned an unwritten lease-purchase agreement for a home. The Court of Appeal, like the trial court, found that part performance by the tenants, the Suttons, sufficed to remove the bar of the statute. (Sutton v. Warner, supra, 12 Cal.App.4th at p. 421.) The facts were these: the Warners owned a house which they rented to the Suttons. After a period of time, landlord and tenant entered into a lease-option agreement for the house. The Suttons made a down payment of $15,000 on the purchase price of $185,000, and agreed to make all mortgage payments and real estate tax payments. They did so. Indeed, their payments were the precise amount the Warners owed on their variable rate loan. The Suttons testified that under the oral agreement, they had five years to purchase the property. The Warners testified that they had only six months. Four years after the agreement, the Warners offered to sell the Suttons the property for $250,000. In response, the Suttons sought specific enforcement of an oral agreement allowing them to purchase for $185,000.
The Warners made an argument under the " possession" requirement of the part performance exception, arguing that the Suttons could not demonstrate part performance because they did not take possession under the oral agreement, but instead took possession as tenants and continued in possession after agreement.
The Court acknowledged that in general possession must be " actual, visible, notorious and exclusive, so that it manifests clearly that the buyer is claiming and asserting a distinctive ownership of the property inconsistent with the right of possession or ownership in any other person. (Wood v. Anderson (1926) 199 Cal. 440, 445; see 1 Witkin, Summary of Cal. Law, supra, at p. 321; 1 Miller & Starr, Cal. Real Estate 2d supra, p. 170.)" (Sutton v. Warner, supra, 12 Cal.App.4th at pp. 422-423.)
However, the Court held that " To apply a transfer of possession requirement to preclude former tenants from ever establishing an oral contract to purchase would be unjust under the circumstances of this case," and that where a purchaser is already in possession, " continuance in possession . . . may . . . be sufficiently referable to the parol contract of sale to constitute a part performance thereof." (Sutton v. Warner, supra, 12 Cal.App.4th at p. 423.)
The Court found that the Suttons' continued possession and their other actions sufficiently related to the parol option contract to constitute part performance, noting the down payment, the mortgage payments, and the improvements made by the Suttons. The Court concluded that " [t]he actions taken by the Suttons in reliance upon the oral agreement, when considered together with the Warners' admission that there was an oral agreement of some duration, satisfy both elements of the part performance doctrine -- evidence of the existence of the oral contract on the terms found by the court and reliance by the Suttons upon that contract warranting specific performance relief." (Sutton v. Warner, supra, 12 Cal.App.4th at p. 424.)
We think that this case so resembles Sutton that the result should be the same. Here, as in Sutton, the defendants admit that there was an oral agreement of some duration. (Or so the attachments to the complaint indicate.) Here, as in Sutton, Pladott performed pursuant to the agreement by paying the initial $15,000, and by making mortgage and tax payments thereafter. The facts alleged are perhaps not as strong as that in Sutton, where the payments precisely matched the mortgage payments, which changed over time. It is also that true that, as the Blanksteins argue, Miller & Starr warns that " The courts have been cautious in the application of this exception to the statute of frauds to preclude its practical elimination of the statute. The performance by the buyer must clearly and unequivocally relate to, and must be pursuant to, the terms of the oral agreement." (1Miller & Starr,
We also find that the allegations of the complaint are sufficient to satisfy the final element. " 'Before a party can be estopped to assert the statute [of frauds] due to the other's part performance, it must appear that a sufficient change of position has occurred so that the application of the statutory bar would result in an unjust and unconscionable loss, amounting in effect to a fraud. . . . The payment of money is not 'sufficient part performance to take an oral agreement out of the statute of frauds' . . . , for the party paying money 'under an invalid contract . . . has an adequate remedy at law.' (Anderson v. Stansbury (1952) 38 Cal.2d 707; Contreras v. Loya (1961) 192 Cal.App.2d 176; Gaglione v. Coolidge (1955) 134 Cal.App.2d 518; Estes v. Hardesty (1944) 66 Cal.App.2d 747.)" (Oren Realty & Development Co. v. Superior Court (1979) 91 Cal.App.3d 229, 235.) (This requirement is not discussed in Sutton, but it is touched on. The Court's determination that the Suttons' possession and other acts related to the contract relies in part on the allegations that in reliance on the oral agreement, the Suttons made substantial improvements to the property. (Sutton v. Warner, supra, 12 Cal.App.4th at pp. 423-424.).)
The complaint alleges that in reliance on the Blanksteins' promises, Pladott sold the property to them and gave up other options, including refinancing the property. Further, in the lis pendens, Pladott declared that he performed or paid for regular maintenance of the property from 1996 to the date he vacated the property, that in reliance on the oral repurchase agreement he paid more than $20,000 for major, valuable, improvements on the property.
The Blanksteins argue that the agreement could not be partially performed because its terms were not certain, contending that there was no agreement on price or on the time period in which the repurchase could take place.
We see no fatal uncertainty. The complaint alleges that the parties agreed that the repurchase price was to be the Blanksteins' price. This is not contradicted by any attachment.
We do agree with the Blanksteins that the complaint and its attachments establish (for purposes of demurrer) that there was no meeting of the minds on the time period in which the repurchase would take place. That difference was not fatal in Sutton, and we see no reason why it should be fatal here. That is particularly so because the allegation of the complaint was that Pladott made his offer to repurchase barely more than a year and half after the agreement.
The Blanksteins' other arguments are based on the variances they find between the original and first amended complaints. They contend that the inconsistencies mean that Pladott's part performance does not relate to the contract, and cite the rule that allegations inconsistent with prior pleadings may be treated as shams and disregarded (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379) and even that they indicate perjury. (See Manti v. Gunari (1970) 5 Cal.App.3d 442, 449.)
The Blanksteins first point out that the original complaint alleged that Pladott " could" repurchase within three years, and the first amended complaint alleges that he " could and would." They argue that this amendment was an attempt to avoid the rule that options to purchase real estate fall under the statute of frauds (Pacific Southwest Development Corp. v. Western Pacific Railroad Co. (1956) 47 Cal.2d 62, 68), and also argue that the change is an attempt to bring these facts closer to the facts of Sutton, where, the Blanksteins contend there was an option, not an obligation, to repurchase.
We do not see that the allegation that Pladott " could" repurchase differs greatly from the allegation that he " could and would" repurchase, especially in light of the attachments, which indicate that repurchase was what everyone intended. Nor can we see a fraudulent attempt to avoid the statute of frauds, because the statute is implicated either way.
Next, the Blanksteins contend that the first amended complaint omits a permissive use allegation found in the original complaint. That is, the original complaint alleged that Pladott would be permitted to live in house provided that he pay regular maintenance, and the first amended complaint alleges that, based on mutual trust and family relationship, the parties agreed that he would live in the property and would pay regular maintenance. The Blanksteins argue that the original allegation described a landlord-tenant relationship which implicates the statute of frauds and that the allegation admits that the unlawful detainer statutes apply. Again, we can see no improper attempt to avoid the statute of frauds, nor, at this point, to avoid unlawful detainer laws.
The Blanksteins also argue that the omission of the permissive use facts is an attempt to bring the case under Sutton, which in their view requires notorious and exclusive possession inconsistent with the right of ownership. As we have seen, it does not.
The unjust enrichment and promissory estoppel causes of action
In the cause of action for unjust enrichment, Pladott alleged that he sold the property to the Blanksteins in reliance on their promises, that by failing to perform those promises, the Blanksteins " received a substantial benefit based upon the increase in value and equity of the Property," that he had suffered an economic detriment because the Blanksteins had not fulfilled their promises, and that " it is unjust for Defendants to have received the benefit of the payments made by Plaintiff and the appreciation in value and equity of the Property, based upon Defendants' breach of the Agreement." Pladott sought a constructive trust over the property until the Blanksteins conveyed it to him.
" The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched." (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 460.) It is not, strictly speaking, a theory of recovery, " 'but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.' [Citation.] . . . It is synonymous with restitution." (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) For an unjust enrichment claim, there must be receipt of a benefit and unjust retention of the benefit at the expense of another. (Hirsch v. Bank of
We agree with the Blanksteins that the factual allegations are insufficient. The complaint includes an allegation that Pladott has been deprived of the appreciated value and equity in the property, and requests compensatory damages in an amount in excess of $1 million. Yet, Pladott seeks conveyance at the 1996 price. Pladott's unjust enrichment theory is that he, not the Blanksteins, should have the benefit of the increase in value. The fatal flaw is that he does not allege that he paid the Blanksteins anything since 1998, and the procedural facts before us, in the unlawful detainer, make it clear that he has been living in the house continually. Without, at a minimum, an allegation that Pladott paid for the use of the house during that time, we cannot see that the Blanksteins could be unjustly enriched by virtue of the increase in value.
The factual allegations of the promissory estoppel claim are the allegations of the complaint, and the remedy is that sought in the unjust enrichment cause of action, constructive trust until the property is conveyed. The Blanksteins read the cause of action as one claiming an equitable estoppel to assert the statute of frauds, and in his reply brief, Pladott does not contradict this view of his pleading. He cites the rule that " The doctrine of estoppel to assert the statute of frauds applies where unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract or where there would be unjust enrichment of a party who has received the benefit of the other's performance. (Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624.)" (Isaac v. A & B Loan Co (1988) 201 Cal.App.3d 307, 313 (emphasis in the original).)
Pladott's argument on this cause of action is that he pled all the necessary elements by pleading that in reliance on the Blanksteins' promise that he could repurchase he gave up the opportunity to refinance the house, that he paid the $15,000 good faith deposit and made the other payments specified in the complaint and its attachments. The cause of action depends on unjust enrichment, and as we have seen, the complaint cannot be read to include that allegation.
Disposition
The judgment is reversed insofar as it sustains the demurrer to the causes of action for breach of oral contract and specific performance and affirmed insofar as the order sustains the demurrer to the cause of action for promissory estoppel and the cause of action for unjust enrichment. The parties are to bear their own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ARMSTRONG, J.
We concur:
TURNER, P. J.
KRIEGLER, J.
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[1] Carmella is hereinafter referred to by her first name, in order to avoid confusion. No disrespect is intended.
[2] The unlawful detainer case was consolidated with this case. Summary judgment was granted in the Blanksteins' favor in January 2006. Pladott vacated the house at that time.
[3] He also alleged that the Blanksteins were estopped from asserting the statute of limitations because they had not been in
[4] There were also causes of action for breach of fiduciary duty and breach of the covenant of good faith and fair dealing, but Pladott makes no arguments about those causes of action, we thus do not consider them.
[5] In support of his argument that he should have been given leave to amend, Pladott cites his declaration in opposition to the Blanksteins' motion to expunge a lis pendens and portions of Carmella's deposition, which was taken while the fraud cause of action was still extant, lodged with the court in connection with the lis pendens proceedings. We find the complaint sufficient without amendment, and do not consider those facts herein.
[6] The letter is in response to a letter from Pladott. A copy of that letter is attached to Pladott's reply brief, but it was not attached to the complaint and was not part of the evidence in the lis pendens proceedings. We cannot see that it is a proper subject of judicial notice (Evid. Code § 450) or is otherwise properly before us.
