Saint Andrews Equities v. Ausweger CA2/2

Filed 3/24/23 Saint Andrews Equities v. Ausweger CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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has not been certified for publication or ordered published for purposes of rule 8.1115.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
SECOND APPELLATE DISTRICT
DIVISION TWO
SAINT ANDREWS EQUITIES LLC, B317724
Plaintiff and Appellant,
(Los Angeles County
v. Super. Ct. No.
20TRCV00565)
CAROLYN AUSWEGER, as
Trustee, etc., et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County. Deirdre H. Hill, Judge. Affirmed.
Law Office of Richard Jacobs and Richard B. Jacobs for
Plaintiff and Appellant.
Rutan & Tucker, Richard Montevideo and Samantha
Lamm for Defendants and Respondents.
_____________________________________
Saint Andrews Equities LLC (Saint Andrews) appeals from
a judgment of dismissal entered after the trial court sustained a
general demurrer as to all causes of action asserted against
Carolyn and Kurt Ausweger, the alleged trustees of the Carolyn
C. Ausweger Trust dated October 8, 2008, allegedly also known
as the Ausweger Family Trust dated October 8, 2008 (collectively
Auswegers1 ). We find Saint Andrews has failed to state a cause
of action against the Auswegers and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. Facts
In June 2019, Saint Andrews entered into a Purchase and
Sales Agreement to acquire real property from the Auswegers.2
Saint Andrews financed the purchase by a loan from the Carolyn
C. Ausweger Trust (Trust), evidenced by a note and secured by a
deed of trust. As part of the purchase price, the lease of the
property was assigned to Saint Andrews, who renegotiated the
rent with the existing tenant. Thereafter, Saint Andrews
defaulted on its loan payments to the Trust because of a problem
with the automatic payment system (autopay). The Auswegers
exercised their assignment of rents under the deed of trust and
began collecting rent payments on the property from the tenant.
1 Although we refer to all named defendants collectively as
the Auswegers, according to their counsel, the Carolyn C.
Ausweger Trust and the Ausweger Family Trust are two distinct
legal entities. Kurt Ausweger was improperly named in this case
because neither he nor the Ausweger Family Trust have an
interest in the property that is the subject of this lawsuit. The
only trust involved here is the Carolyn C. Ausweger Trust.
2 The Purchase and Sales Agreement is not part of the
record.
2
The Auswegers recorded a notice of default on the loan in
March 2020 and, because the default was not cured, they
recorded a notice of sale in June 2020. However, the Auswegers
delayed the trustee’s sale to negotiate an agreement with Saint
Andrews over payment issues. When their efforts proved
unsuccessful, the Auswegers transferred their beneficial interest
in the note and deed of trust to Curry Parkway LLP (Curry
Parkway) by a recorded Assignment of Deed of Trust in July
2020.
Following the assignment, Curry Parkway and Saint
Andrews engaged in an extended discussion to resolve payment
issues. Eventually, Saint Andrews offered to pay off the entire
loan in cash. Curry Parkway, however, would only accept a wire
transfer of funds from Saint Andrews. At some point, Curry
Parkway decided to resume the foreclosure proceedings against
Saint Andrews, which ultimately led to foreclosure.
B. Procedural History
Saint Andrews filed a lawsuit but named only the
Auswegers as defendants in the first amended complaint (FAC),
alleging seven claims against them. The Auswegers filed a
demurrer challenging all claims and a motion to strike the
request for punitive damages. The trial court sustained the
demurrer in its entirety. As to the claims for breach of contract,
violation of Business and Professions Code section 17200, fraud,
and tort of another, the court granted leave to amend. As to the
remaining three claims, it denied leave to amend. The court
denied the motion to strike punitive damages as moot.
Saint Andrews filed a second amended complaint (SAC)
realleging claims against the Auswegers for breach of contract,
3
violation of Business and Professions Code section 17200, and
fraud. Saint Andrews did not reallege a claim for tort of another.
The Auswegers again demurred and moved to strike the
request for punitive damages. The trial court sustained the
Auswegers’ demurrer without leave to amend. The court denied
their motion to strike the request for punitive damages as moot.
After the court dismissed the Auswegers from the suit, Saint
Andrews timely appealed.
DISCUSSION
Saint Andrews argues the trial court erred in sustaining
the demurrer and dismissing the Auswegers from the lawsuit.
A. Standard of Review
“The rules by which the sufficiency of a complaint is tested
against a general demurrer are well settled. ‘ “ ‘We treat the
demurrer as admitting all material facts properly pleaded, but
not contentions, deductions or conclusions of fact or law.
[Citation.] We also consider matters which may be judicially
noticed.’ [Citation.] Further, we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their
context.” ’ ” (Centinela Freeman Emergency Medical Associates v.
Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010; see Roy
Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2
Cal.5th 505, 512.) After reviewing the allegations of the
complaint and its exhibits as well as the matters properly subject
to judicial notice, we exercise our independent judgment as to
whether the complaint states a cause of action as a matter of law.
(See Centinela, at p. 1010; Moore v. Regents of University of
California (1990) 51 Cal.3d 120, 125.) If the allegations of a
complaint contradict facts appearing in judicially noticed
documents or exhibits attached to the complaint, we accept the
4
facts in the documents as true. (Tucker v. Pacific Bell Mobile
Services (2012) 208 Cal.App.4th 201, 210.)
B. Breach of Contract Claim
To state a claim for breach of contract, the plaintiff must
plead and prove (1) the existence of the contract, (2) the plaintiff’s
performance or excuse for nonperformance, (3) the defendant’s
breach, and (4) resulting damages to the plaintiff. (Oasis West
Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
Saint Andrews’s breach of contract claim is premised on the
Auswegers’ alleged breach of the note and deed of trust. For
purposes of this claim, we accept that the deed of trust is a
contract. (See Kerivan v. Title Ins. & Trust Co. (1983) 147
Cal.App.3d 225, 230 [a deed of trust is a contract involving
mutual obligations on a trustor, trustee, and beneficiary; the
promissory note is a separate contract and the two agreements
form parts of one transaction].)
1. Saint Andrews Fails to State a Claim for the
Alleged First Breach
In the SAC, Saint Andrews asserts the Auswegers
committed two breaches of contract: The first breach concerns
provisions in the deed of trust that permitted the Auswegers to
collect rent payments from the tenant in possession if Saint
Andrews defaulted on the loan and to deduct from those
payments “reasonable attorney’s fees” incurred in pursuing
foreclosure.
In support of the first breach, the SAC sets forth general
allegations that the monthly rent payment was more than double
the monthly loan payment, the Auswegers began collecting rent
payments when Saint Andrews defaulted, the Auswegers “ran
up” unreasonable attorney fees to keep Saint Andrews in default,
5
and without the unearned and unnecessary attorney fees, Saint
Andrews would have become current on its loan payments within
one or two months.
These allegations are not sufficient to establish the first
breach. While Saint Andrews asserts the attorney fees were not
reasonable, this allegation is not supported by any particularized
facts. Saint Andrews provides no details as to the what the
attorneys did or did not do to generate unreasonable fees. Nor
does Saint Andrews offer any dollar amounts for the fees charged
or by what percentage the fees exceeded the monthly rent
payment, or any other means by which the reasonableness of the
fees was objectively determined. On demurrer, such conclusory
general allegations may be disregarded. (Schep v. Capital One,
N.A. (2017) 12 Cal.App.5th 1331, 1337.)
Although Saint Andrews argues its breach of contract claim
hinges on the reasonableness of the Auswegers’ attorney fees, its
allegations center on the Auswegers’ purported motive for
charging those fees—to ensure Saint Andrews remained in
default. A party’s alleged motive to breach a contract is not
relevant to the issue of whether there has been a breach. (JRS
Products, Inc. v Matsushita Electric Corp. of America (2004) 115
Cal.App.4th 168, 182 [“motive, regardless of how malevolent,
remains irrelevant to a breach of contract claim”].)
2. The Alleged Second Breach Is Barred by the
Statute of Frauds
The second breach relates to an oral agreement that
occurred after Saint Andrews defaulted on the loan. The SAC
makes general allegations that before selling the loan, the
Auswegers advised that payment by Saint Andrews of “a specific
amount” would bring its loan payments current and stop
6
foreclosure proceedings, and that Saint Andrews paid the amount
requested, but the Auswegers breached the oral agreement by
selling the loan to Curry Parkway after accepting payment,
thereby leaving Saint Andrews in default and “mov[ing]” the
foreclosure proceedings to Curry Parkway.
The second breach is barred by the statute of frauds, which
requires any agreement for the sale of real property or of an
interest in real property to be memorialized in a writing
subscribed by the party to be charged or by the party’s agent.
(Civ. Code, § 1624, subd. (a)(3).) This includes a promissory note
and a deed of trust securing performance under the note. (Secrest
v. Security National Mortgage Loan Trust 2002-2 (2008) 167
Cal.App.4th 544, 552.) An alleged oral agreement subject to the
statute of frauds is not enforceable because modification of the
agreement must also be in writing. (See Secrest, at pp. 552–553.)
Thus, Saint Andrews’s breach of contract claim, predicated on a
breach of the oral agreement modifying the terms of the loan, is
barred by the statute of frauds and fails as a matter of law.
3. Saint Andrews Cannot Rely on Promissory
Estoppel
Saint Andrews takes the position that the oral agreement
is not barred by the statute of frauds because of “promissory
estoppel.” While promissory estoppel and estoppel to assert the
statute of frauds rest on similar equitable principles and are
closely related, they are nevertheless distinct: Promissory
estoppel is a cause of action based upon a promise that might
otherwise constitute a contract but for the lack of consideration,
which is enforceable notwithstanding the absence of a writing
(see Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031,
1040, fn. 10); estoppel is a doctrine allowing an exception to the
7
statute of frauds’ writing requirement for a contract supported by
true consideration.
No promissory estoppel cause of action was alleged in
either the FAC or the SAC.3 We therefore assume that Saint
Andrews is relying instead on estoppel.
The Auswegers are not estopped from asserting the statute
of frauds in connection with the breach of contract claim. As
discussed in Secrest v. Security National Mortgage Loan Trust
2002-2, supra, 167 Cal.App.4th at page 555, partial performance
of an oral contract coming within the purview of the statute of
frauds may warrant enforcement of the contract if failure to do so
would cause unconscionable injury. “In addition to having
partially performed, the party seeking to enforce the contract
must have changed position in reliance on the oral contract to
such an extent that application of the statute of frauds would
result in an unjust or unconscionable loss, amount in effect to a
fraud.” (Ibid.; Garcia v. World Savings, FSB, supra, 183
Cal.App.4th at p. 1040, fn. 10 [“[a] party is estopped to assert the
3 Without an express statement of leave by the trial court
to add entirely new causes of action, when a demurrer is
sustained with leave to amend, that leave is properly interpreted
as permission to amend the causes of action as to which the
demurrer was sustained (People ex rel. Dept. Pub. Wks. v.
Clausen (1967) 248 Cal.App.2d 770, 775), to add new causes of
action in direct response to the trial court’s reasons for sustaining
the earlier demurrer (Patrick v. Alacer Corp. (2008) 167
Cal.App.4th 995, 1015), or to plead new legal theories premised
on the same operative facts asserted in the previous complaint.
(See McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415
[issue on demurrer is whether facts alleged state a cause of action
under any possible legal theory].)
8
statute of frauds as a defense ‘where [the] party, by words or
conduct, represents that he will stand by his oral agreement, and
the other party, in reliance upon that representation, changes his
position, to his detriment’ ”].)
Saint Andrews’s mere payment of money due under an oral
agreement subject to the statute of frauds is insufficient to
establish both partial performance and a change of position
justifying application of the estoppel doctrine. (See Secrest v.
Security National Mortgage Loan Trust 2002-2, supra, 167
Cal.App.4th at p. 555.) Saint Andrews does not allege it changed
its position in reliance on the oral agreement in any way other
than making the payment.
Despite the differences between promissory estoppel and
estoppel, because Saint Andrews is unable to show it
detrimentally relied on the oral agreement to modify the loan
agreement, a promissory estoppel cause of action would be
precluded as well.
C. Violation of Business and Professions Code section
17200
Business and Professions Code section 17200 (unfair
competition law) proscribes “unfair competition,” which is defined
as “any unlawful, unfair or fraudulent business act or practice.”
(Bus. & Prof. Code, § 17200.) Among other things, the statute
covers injuries to consumers. It “ ‘ “borrows” violations of other
laws and treats them as unlawful practices’ that the unfair
competition law makes independently actionable.” (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co.
(1999) 20 Cal.4th 163, 180.) However, the unfair competition law
also “makes clear that a practice may be deemed unfair even if
not specifically proscribed by some other law.” (Ibid.) Business
9
and Professions Code section 17200 “ ‘establishes three varieties
of unfair competition—acts or practices which are unlawful, or
unfair, or fraudulent.’ ” (Ibid.)
In support of its claim under Business and Professions
Code section 17200, Saint Andrews maintains the SAC
sufficiently alleges the Auswegers engaged in (1) unlawful
conduct by violating “non-judicial foreclosure laws” and by
“initiating and moving forward with foreclosure proceedings”
after receiving Saint Andrews agreed-upon payment; (2) unfair
conduct by running up attorney fees to keep Saint Andrews in
default; and (3) fraudulent conduct by accepting the agreed-upon
payment and while “informing [Curry Parkway] that the loan
was still in default.”
As set forth above, there are no viable allegations that the
Auswegers engaged in unfair competition. Saint Andrews failed
to specify which nonjudicial foreclosure laws the Auswegers
supposedly violated and how the Auswegers violated those laws.
Contrary to Saint Andrews’ assertion, Curry Parkway, not the
Auswegers, foreclosed on the property. Saint Andrews failed to
allege any facts suggesting that Curry Parkway lacked the
authority to proceed independently with the nonjudicial
foreclosure. The recorded assignment, which was attached to the
pleadings, shows that Curry Parkway had such authority.
Saint Andrews’s claim that the Auswegers engaged in
unfair conduct by running up attorney fees to keep the property
in default fails for the reasons previously discussed. Finally, the
attached deed of trust shows that Saint Andrews defaulted on the
loan, and, in the absence of a valid modified agreement, remained
10
in default after the sale of the loan to Curry Parkway. The
default was not cured by the agreed-upon payment.4
D. Saint Andrews Cannot Salvage Its Unfair
Competition Claim
On appeal following demurrer, a plaintiff may propose new
facts and new theories for the first time on appeal to show that a
complaint can be amended to state a cause of action. (Code Civ.
Proc., § 472c; King v. CompPartners, Inc. (2018) 5 Cal.5th 1039,
1049, fn. 2.)
Saint Andrews argues for the first time that the Auswegers’
alleged violation of Civil Code section 2938 also constitutes a
violation of Business and Professions Code section 17200 as
unlawful conduct. Civil Code section 2938 governs the
enforcement of assignment of rents. Subdivision (g)(1) of the
statute provides that if the assignee (lender) enforces the
assignment, the assignor (borrower) may make a written demand
that the assignee “pay the reasonable costs of protecting and
preserving the property, including payment of taxes and
insurance and compliance with building and housing codes, if
any.” (Civ. Code, § 2938, subd. (g)(1).)
Saint Andrews contends that because the roof collapsed
after the Auswegers exercised their assignment of rents, they
were obligated to pay for protecting and preserving the property,
including the roof, and that rather than repair or replace the roof,
4 Paragraph 9 of the deed of trust reads: “The entering
upon and taking possession of said property, the collection of such
rents, issues and profits and the application thereof as aforesaid,
shall not cure or waive any default or notice of default hereunder
or invalidate any act done pursuant to such notice.”
11
the Auswegers “allowed the roof to remain collapsed and allowed
the insurance proceeds for fixing the roof to go elsewhere.”
Once again, Saint Andrews’s conclusory allegations are
inadequate to state a claim. There are no allegations that Saint
Andrews demanded in writing that the Auswegers repair or
replace the roof, that the Auswegers agreed to use their
insurance for that purpose, and how they “allowed the insurance
proceeds for fixing the roof to go elsewhere.” Nor are there
allegations as to the precise date the roof collapsed, how it
collapsed, the cost to repair or replace it, and whether Saint
Andrews received funds from its own insurer or other sources for
that purpose.5 Thus, a claim of unfair competition will not lie
here based on a purported violation of Civil Code section 2938,
subdivision (g)(1).
E. Fraud and Concealment
“The elements of fraud are ‘ “(a) misrepresentation (false
representation, concealment, or nondisclosure); (b) knowledge of
falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance;
(d) justifiable reliance; and (e) resulting damage.” ’ ” (Charnay v.
Cobert (2006) 145 Cal.App.4th 170, 184; Lazar v. Superior Court
(1996) 12 Cal.4th 631, 638.)
5 The SAC alleges the roof collapsed in “late 2020.”
However, codefendant Elad Investments LLC alleged in its
demurrer that the roof collapsed “[o]n or about in late 2019,”
before Saint Andrews defaulted on the loan. Further, Saint
Andrews alleged in the SAC that codefendant Aerodynamics
Plating Co., Inc., the tenant in possession, was responsible to
Saint Andrews for the collapse of the roof, that Aerodynamics
settled the roof damage with its insurer for $50,000, which did
not cover all the roof damage.
12
Concealment is a form of fraud and deceit. (Civ. Code,
§§ 1710, 1572.) To state a claim for concealment, the plaintiff
must allege: “(1) the defendant must have concealed or
suppressed a material fact, (2) the defendant must have been
under a duty to disclose the fact to the plaintiff, (3) the defendant
must have intentionally concealed or suppressed the fact with
intent to defraud the plaintiff, (4) the plaintiff must have been
unaware of the fact and would not have acted as he did if he had
known of the concealed or suppressed fact, and (5) as a result of
the concealment or suppression of the fact, the plaintiff must
have sustained damage.” (Marketing West, Inc. v. Sanyo Fisher
(USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)
In its cause of action for fraud (and concealment), Saint
Andrews alleged: The Auswegers concealed the fact they were
selling the loan to Curry Parkway when Saint Andrews made the
agreed-upon payment. Saint Andrews asserts that “[t]his
constituted both a concealment and a misrepresentation” because
the foreclosure proceedings did not stop but were continued by
Curry Parkway after it purchased the loan. Saint Andrews
further alleges that had it known of the pending sale, it would
have negotiated separately with Curry Parkway or sought
written assurances from the Auswegers that the new purchaser
would abide by the oral agreement.
This claim readily fails as a matter of law. As a
concealment claim, there is no allegation that the Auswegers had
a duty under any statute or common law to disclose the sale to
Saint Andrews. Moreover, the deed of trust provides that it may
be assigned multiple times over the life of the loan. As a fraud
claim, Saint Andrews cannot show justifiable reliance or damages
because it was not prejudiced by the sale of the loan—Saint
13
Andrews had the same liabilities under the note and deed of trust
before and after the sale. As the trial court remarked, “Simply
because [Saint Andrews] could have hedged its bets with the new
holder and saved money by not keeping up with its obligations
does not constitute damages.”
F. Leave To Amend
A demurrer may be sustained without leave to amend if the
plaintiff has unsuccessfully attempted to cure the defects.
(Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.) Further,
“[W]here the nature of the plaintiff’s claim is clear, and under
substantive law no liability exists, a court should deny leave to
amend because no amendment could change the result.” (City of
Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998)
68 Cal.App.4th 445, 459.)
Here, Saint Andrews was twice granted an opportunity to
amend its complaint and cure its deficiencies. Despite these
opportunities, Saint Andrews failed to state any cause of action
against the Auswegers, making few if any changes to some of its
claims. Saint Andrews bears the burden of demonstrating in
what manner it can amend the SAC, and how such an
amendment would change the legal effect of its pleading. (In re
Social Services Payment Cases (2008) 166 Cal.App.4th 1249,
1274.) Yet Saint Andrews asks us to assume that task, “if . . .
[we] determine[] that more detail (or, for example, splitting the
fraud cause of action into separate claims for concealment and
misrepresentation) could lead to a[] sufficiently pled cause of
action.” We decline to do so.
14
DISPOSITION
The judgment of dismissal is affirmed. Respondents are
entitled to their costs on appeal.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.
15