Tindell v. Shaw CA3 ( 2013 )

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NOT TO BE PUBLISHED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 This opinion has not been certified for publication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)
----
RANDY TINDELL et al., C068453
Plaintiffs and Appellants, (Super. Ct. No. 50512)
v.
JOHN SHAW et al.,
Defendants and Respondents.
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 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.
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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.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.
1 Neither Bradley nor Keith is a party to this appeal.
2
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
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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,
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defendants failed to disclose during the 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.”
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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.
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The trial court entered judgment in favor of defendants and awarded costs. The
Tindells filed a timely 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
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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
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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.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
2 The handwritten note actually says “1979.”
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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.
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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
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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.
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DISPOSITION
The judgment is affirmed. Defendants are awarded their costs on appeal.
RAYE , P. J.
We concur:
BLEASE , J.
MAURO , J.
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