Rene Chavez et al vs James Nuttal

Case Number

23CV02097

Case Type

Hearing Date / Time

Mon, 12/18/2023 - 10:00

Nature of Proceedings

Demurrer

Tentative Ruling

Rene Chavez, et al. vs. James D. Nuttal

Case No. 23CV02097

           

Hearing Date: December 18, 2023                                         

HEARING:              Demurrer To Complaint

                                                           

ATTORNEYS:        For Plaintiffs Rene Chavez and Mellany Jane Chavez: James L. Hudgens, James L. Hudgens, APC, John A. Reyes

                             For Defendant James D. Nuttal: Robert B. Forouzandeh, Cory T. Baker, Reicker, Pfau, Pyle & McRoy LLP

TENTATIVE RULING:

The demurrer of defendant to plaintiffs’ complaint is overruled. Defendant shall file and serve his answer to the complaint on or before December 29, 2023.

Background:

This action was initiated on May 12, 2023, by the filing of a complaint by plaintiffs Rene Chavez (Rene) and Mellany Jane Chavez (Mellany) (collectively, plaintiffs) against defendant James D. Nuttal (Nuttal). (Note: The court notes that in the complaint and in subsequent documents filed with this court by plaintiffs, there exist inconsistent spellings of plaintiffs’ first names and defendant’s last name. In the absence of clarification, the court will refer to Rene, Mellany, and Nuttal using the same spelling that appears in the caption of the original complaint. Further, due to common surnames, the court will refer to plaintiffs by their first names to avoid confusion. No disrespect is intended.)

Rene and Mellany were a married couple who reside in Goleta, California. (Compl., ¶ 1.) Nuttal, who is Mellany’s brother and who was Rene’s brother-in-law during relevant times, resides in Solvang, California. (Compl., ¶ 2.)

Soon after the death of Mellany and Nuttal’s father, Steven Nuttal, Sr. (Steven), Nuttal told Mellany that Steven had disinherited Mellany. (Compl., ¶¶ 6, 9, 10.) Nuttal reassured Mellany that Nuttal “had her back” and that Nuttal knew that Steven would have wanted her to have something because Mellany had taken care of Steven during the last years of Steven’s life. (Compl., ¶ 10.)

A few days later, Nuttal told Mellany that he wanted to buy her and her family a home. (Compl., ¶ 11.) A week later, while having dinner at Rene and Mellany’s home, Nuttal told plaintiffs that friends of a family who lived across the street from Steven’s home wanted to sell their home located at 7047 Del Norte Drive in Goleta, California (the property). (Compl., ¶¶ 12, 14.) Nuttal stated that he would make an offer to buy the property for plaintiffs. (Compl., ¶ 13.)

Nuttal also stated that he wanted plaintiffs to pay the monthly installment payments to the bank. (Compl., ¶ 13.) Nuttal said that he would structure the transaction by leasing the property to plaintiffs at the rate of $2,500 per month which would be applied to the monthly mortgage installment payments for the property. (Compl., ¶ 14.) Nuttal stated that at the end of a period of ten years (in approximately November 2023), Nuttal would transfer record title from himself to plaintiffs. (Ibid.) If plaintiffs continued to make monthly mortgage payments for the duration of the 30-year term of the mortgage, the property would be theirs “free and clear”. (Ibid.)

In addition to requiring monthly installment payments, Nuttal also required that Rene make improvements to the property “consistent with the improvements that only an owner, not a lessor, would make to a home” which included exterior renovations and interior improvements. (Compl., ¶ 15.)

Plaintiffs accepted Nuttal’s terms and conditions during the dinner. (Compl., ¶ 17.) No formal written agreement was executed at that time because the parties were all family members and plaintiffs trusted that Nuttal would carry out the terms of the parties’ agreement. (Compl., ¶ 18.) “As a result of relying on [Nuttal’s] offer and representations, and in reliance upon the [p]laintiff’s verbal acceptance of [Nuttal’s] offer and representations, [p]laintiffs entered into a verbal contract for the purchase of the … property[]” (the oral contract). (Compl., ¶ 19.)

In reliance on the oral contract, plaintiffs entered into a Residential Rental Agreement (the rental agreement) with Nuttal on November 1, 2013, pursuant to which plaintiffs would lease the property from Nuttal. (Compl., ¶ 20.) By leasing the property for a period of 10 years, plaintiffs would in effect pay the monthly mortgage payments for Nuttal, and Nuttal would apply the payments to the mortgage as required by the mortgage lender. (Compl., ¶ 20.) “Leasing the [property] then became a condition precedent to transfer of title to the [p]laintiffs after the 10-year period.” (Compl., ¶ 20.) Nuttal knew that, by making the monthly payments and relying on Nuttal’s promises, plaintiffs were purchasing the property. (Compl., ¶ 21.)

In November 2013, Nuttal purchased the property placing title in his name. (Compl., ¶ 23.) Nuttal allowed plaintiffs to occupy the property with their family, accepted monthly payments in the amount of $2,500, and required Rene to make the improvements to the property. (Compl., ¶ 24.)

Soon after plaintiffs occupied the property, Nuttal made unilateral changes to the rental agreement by renting out the garage without plaintiffs’ consent “in case of an emergency”, by not allowing plaintiffs to rent any rooms out themselves and instead renting out two rooms at the property after plaintiffs separated and divorced in 2018, and by failing to give rental income from the property to plaintiffs. (Compl., ¶ 25.)

“Plaintiffs substantially performed their duties and obligations to [Nuttal] under [the rental] agreement.” (Compl., ¶ 27.) Despite this fact, Nuttal filed a complaint for unlawful detainer against Rene on April 5, 2022 (the UD action). In the UD action, Nuttal did not reference the oral contract or that plaintiffs were in fact in the process of purchasing the property, and mischaracterized the parties’ relationship as landlord/tenant in order to gain possession and control of the property before the expiration of the 10-year period discussed above. (Compl., ¶ 28.) Nuttal has obtained an order recovering possession of the property. (Ibid.)

The complaint alleges four causes of action: (1) breach of contract; (2) good faith improver of real property (Code of Civil Procedure section 871.3); (3) fraud and deceit; and (4) quiet title.

Nuttal has filed a demurrer to the complaint on the grounds that each cause of action is barred by applicable statutes of limitations and fails to state facts sufficient to constitute a cause of action. Plaintiffs oppose the demurrer.

Analysis:

In ruling on a demurrer, the court determines whether the complaint states a cause of action. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) “ ‘“The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]’ [Citation.]” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (Quelimane); accord, Zhang v. Superior Court (2013) 57 Cal.4th 364, 370.) “If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane, supra, 19 Cal.4th at p. 38.)

Nuttal’s request for judicial notice:

On a demurrer, the court considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Nuttal requests judicial notice of a grant deed recorded on August 27, 2013, in the official records of the County of Santa Barbara as document no. 2013-0057351 (the Grant Deed). (RFJN, ¶ 1 & Exh. 1.) The court will grant Nuttal’s request for judicial notice of the Grant Deed. (Evid. Code, § 452, subd. (c).)

Nuttal also requests that the court take judicial notice of the following fact: “[t]hat on July 23, 2013, Michael P. LeFeuvre, Successor Trustee of the Beaulah LeFeuvre Living Trust Dated July 7, 2003, conveyed the entire interest in the real property described therein to James D. Nuttal.” (RFJN, ¶ 1.)

“While courts may take judicial notice of public records, they do not take notice of the truth of matters stated therein. [Citation.] ‘When judicial notice is taken of a document, ... the truthfulness and proper interpretation of the document are disputable.’ [Citation.]” (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375 (Herrera).)

Though the asserted fact that Michael P. LeFeuvre (LeFeuvre) conveyed the entire interest in the property to Nuttal on July 23, 2013, is a matter purportedly stated in the Grant Deed, a court cannot take judicial notice of any factual matters stated in a recorded document because such matters are “hearsay and disputed[.]” (Herrera, supra, 196 Cal.App.4th at p. 1375.) Furthermore, taking judicial notice of the Grant Deed does not establish that LeFeuvre in fact conveyed the entire interest in the property. The truthfulness of that fact remains subject to dispute. (Ibid.)

In addition, while a demurrer may raise an issue of law (see Code Civ. Proc., § 589, subd. (a)), a demurrer tests only the pleadings and not the evidence or extrinsic matters outside the pleading. (See Executive Landscape Corp. v. San Vicente Country Villas IV Assn. (1983) 145 Cal.App.3d 496, 499-500 [also noting that the court is precluded from weighing disputed facts on demurrer].) Whether the entire interest in the property was conveyed is an extrinsic matter outside the complaint and may not be considered for present purposes.

The court further notes that in the complaint, plaintiffs allege that Nuttal placed title to the property in his name. (See Compl., ¶ 23.) The conveyance of the interest in the property to Nuttal and the date of any such conveyance does not appear to be relevant to the issues presented on demurrer regarding whether the complaint is time-barred or states facts sufficient to constitute a cause of action. (See Evid. Code, § 350; Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.) For all reasons discussed above, the court will deny Nuttal’s request for judicial notice of the fact that LeFeuvre conveyed the entire interest in the property to Nuttal on July 23, 2013.

Nuttal also requests that the court take judicial notice of the rental agreement alleged in but not attached to plaintiffs’ complaint. (RFJN, ¶ 2 & Exh. 2.) The court will grant judicial notice of the existence of the rental agreement. (Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285, fn.3, disapproved on another ground in Leon v. County of Riverside (2023) 14 Cal.5th 910, 1106 [judicial notice of documents summarized in complaint is properly granted].)

Nuttal further requests that the court take judicial notice of the following facts: “[t]hat on November 1, 2013, [Nuttal] and [p]laintiffs entered into the [rental agreement] which [p]laintiffs reference in the [c]omplaint” and “[t]he [rental agreement] contains an express integration clause stating: ‘[t]his Agreement and any addenda contain the complete terms and conditions. No oral agreements have been entered into and all modifications or notices shall be in writing to be valid.’” (RFJN, ¶ 2.)

Judicial notice may be taken of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452, subd. (h).) “[W]e keep in mind the general rule that ‘[w]hen judicial notice is taken of a document ... the truthfulness and proper interpretation of the document are disputable.’ [Citation.]” (Trinity Park, L.P. v. City of Sunnyvale (2011) 193 Cal.App.4th 1014, 1027, disapproved on another ground in Sterling Park, L.P. v. City of Palo Alto (2013) 57 Cal.4th 1193, 1210.)

In addition, “[o]n a demurrer a court’s function is limited to testing the legal sufficiency of the complaint. [Citation.] ‘A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.’ [Citation.] The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable. [Citation.]” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

Plaintiffs allege that the parties entered into the rental agreement on November 1, 2023. (Compl., ¶ 20.) Therefore, as there appears to be no reasonable dispute regarding the date the parties entered into the rental agreement referenced in the complaint, the court will grant Nuttal’s request for judicial notice of the fact that the parties entered into the rental agreement on November 1, 2013. (Evid. Code, § 452, subd. (h).)

The allegations of the complaint and the contentions and arguments raised in by the demurrer and papers opposing the demurrer demonstrate a dispute between the parties as to the effect or interpretation of the rental agreement’s integration clause. As the interpretation of the rental agreement’s integration clause is subject to dispute, Nuttal’s demurrer is not an appropriate procedure for determining the proper interpretation that clause. Therefore, the court will deny Nuttal’s request for judicial notice of the express integration clause of the rental agreement.

Demurrer to the fourth cause of action to quiet title:

In their opposition to the demurrer, plaintiffs assert that they withdraw the fourth cause of action to quiet title alleged in the complaint. (Opp. at p. 6, ll. 26-27.) The court will construe plaintiff’s assertion as a concession that Nuttal’s demurrer to the fourth cause of action has merit. (See Code Civ. Proc., § 128, subds. (a)(3) & (a)(8); Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1377-1378 [discussing court’s inherent powers to fashion procedures to ensure the orderly and efficient conduct of the court’s business].) The court will accordingly sustain the demurrer to the fourth cause of action alleged in the complaint, without leave to amend. The court’s ruling is without prejudice to any later appropriate noticed motion for leave to amend the complaint to assert a claim to quiet title that may be filed by plaintiffs.

Demurrer to the first and third causes of action on statute of limitations grounds:

Nuttal contends that, because the first and third causes of action alleged in the complaint arise from alleged fraudulent conduct by Nuttal in connection with the oral contract, each is governed by the three-year statute of limitations under Code of Civil Procedure section 338, subdivision (d). Because plaintiffs did not bring this action within three years from November 2013, when the allegedly fraudulent conduct occurred, or three years from 2018, when plaintiffs were on notice of purported fraud based on allegations that changes were made to the rental agreement, Nuttal asserts that the complaint is time-barred. Nuttal further argues that plaintiffs have failed to allege any facts establishing a basis for tolling the three-year statute of limitations under Code of Civil Procedure section 338.

“A general demurrer based on the statute of limitations is only permissible where the dates alleged in the complaint show that the action is barred by the statute of limitations. [Citation.] The running of the statute must appear ‘clearly and affirmatively’ from the dates alleged. It is not sufficient that the complaint might be barred. [Citation.] If the dates establishing the running of the statute of limitations do not clearly appear in the complaint, there is no ground for general demurrer. The proper remedy ‘is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment ….’ [Citation.]” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324-325, italics omitted.)

Under Code of Civil Procedure section 338, subdivision (d), an “action for relief on the ground of fraud or mistake” is subject to a three-year statute of limitations. An action for relief based on fraud “is not deemed accrued ‘until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.’ [Citation.] The courts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry.” (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373–1374; Code Civ. Proc., § 338, subd. (d).)

Giving the complaint a reasonable interpretation, the first cause of action for breach of contract alleged by plaintiffs relates to Nuttal’s purported promise that title to the property would be transferred to plaintiffs sometime in November 2023, provided that plaintiffs made monthly payments and improvements to the property. In the third cause of action, plaintiffs allege that Nuttal is liable for fraud because Nuttal misrepresented to the court in the UD action that plaintiffs were tenants at the property and suppressed the fact that plaintiffs were in the process of purchasing the property by making payments in the form of rent, thereby misleading the court and causing injury to plaintiffs. (See Compl., ¶¶ 45-49.)

Assuming without deciding for present purposes that Code of Civil Procedure section 338, subdivision (d), applies to the claims alleged in the first cause of action (and the court presently makes no findings in this regard), there are no facts alleged on the face of the complaint demonstrating that plaintiffs had any reason to suspect that wrongdoing by Nuttal caused any injury to plaintiffs or that plaintiff had any reason to discover a cause of action based on fraud in 2013, when plaintiffs and Nuttal entered into the oral contract or rental agreement. (See Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807; see also Gutierrez v. Mofid (1985) 39 Cal.3d 892, 897 [“the uniform California rule is that a limitations period dependent on discovery of the cause of action begins to run no later than the time the plaintiff learns, or should have learned, the facts essential to his claim”].)

For example, plaintiffs allege that, as of the date the parties purportedly entered into the oral contract in 2013, plaintiffs trusted that Nuttal would carry out its terms without a written agreement, and that in reliance on the oral contract, plaintiffs entered into the rental agreement. These allegations demonstrate that as of the date the parties purportedly entered into the oral contract in November 2013, plaintiffs had no reason to discover any fraud by Nuttal.

In addition, though plaintiffs allege that Nuttal made unilateral changes to the rental agreement in 2018, it can be inferred from facts expressly alleged in the complaint that as of that date, plaintiffs did not suspect had reason to suspect wrongdoing as of that time. For example, plaintiffs expressly allege that Nuttal told them that “after [plaintiffs’] separation [the] original agreement … would remain in the same force and effect despite their separation and divorce.” (Compl., ¶ 25.) These allegations demonstrate that as of 2018, plaintiffs believed that Nuttal would transfer title to the property sometime in November 2023 pursuant to the oral contract and under the conditions described in the complaint and discussed above. Plaintiffs further alleged that, based on their belief that Nuttal would transfer the title, plaintiffs continued to make the monthly installment payments. (See, e.g., Compl., ¶ 21.)

Furthermore, plaintiff’s allegations that Nuttal fraudulently represented to the court the nature of the legal relationship between the parties demonstrate that, with regard to the third cause of action, plaintiffs could not have discovered any information to put them on inquiry of any fraudulent conduct in connection with the UD action until, at the earliest, April 5, 2022, the date Nuttal filed the UD action.

Based on the allegations of the complaint and facts that may be inferred from those expressly alleged, the earliest date that plaintiffs could have suspected or learned that Nuttal did not intend to transfer title to the property pursuant to the oral contract or rental agreement is when Nuttal filed the UD complaint. (Compl., ¶ 28.) As of that date, plaintiffs suspected or should have suspected that an injury was caused by wrongdoing by Nuttal, and had actual or presumptive knowledge of facts sufficient to put plaintiffs on inquiry notice of fraud. There are no allegations that demonstrate that plaintiffs were on sufficient inquiry notice prior to the filing of the UD complaint. As plaintiffs allege the UD complaint was filed on April 5, 2022, the present complaint filed on May 12, 2023, would be timely.

For all reasons discussed above, the complaint does not disclose on its face that the claims asserted in the first and third causes of action alleged in the complaint are barred by the three-year statute of limitations under Code of Civil Procedure section 338, subdivision (d). Therefore, the court will overrule the demurrer to the first and third causes of action on statute of limitations grounds.

Demurrer to the second cause of action:

Nuttal contends that because the complaint does not allege that plaintiffs made improvements to the property in good faith based on an erroneous belief that plaintiffs owned the property, and because Nuttal is the owner of the property, the second cause of action for good faith improver fails to state facts sufficient to constitute a cause of action. Nuttal further asserts that the second cause of action is barred by the one-year statute of limitations under Code of Civil Procedure section 340, subdivision (e), because the final act of fraud as alleged in the complaint took place no later than 2018, and because plaintiffs allege that they knew that Nuttal was the owner of the property in 2013.

Under Code of Civil Procedure section 871.1 et seq. (the good faith improver statute), a “good faith improver” includes “[a] person who makes an improvement to land in good faith and under the erroneous belief, because of a mistake of law or fact, that he is the owner of the land.” (Code Civ. Proc., § 871.1, subd. (a).) “In every case, the burden is on the good faith improver to establish that the good faith improver is entitled to relief under this chapter, and the degree of negligence of the good faith improver should be taken into account by the court in determining whether the improver acted in good faith and in determining the relief, if any, that is consistent with substantial justice to the parties under the circumstances of the particular case.” (Code Civ. Proc., § 871.3, subd. (b).)

In determining what relief a person is entitled to under the good faith improver statute, and subject to the setoff provisions of Code of Civil Procedure section 871.4, a court may “effect such an adjustment of the rights, equities, and interests of the good faith improver, the owner of the land, and other interested parties (including, but not limited to, lessees, lienholders, and encumbrancers) as is consistent with substantial justice to the parties under the circumstances of the particular case. The relief granted shall protect the owner of the land upon which the improvement was constructed against any pecuniary loss but shall avoid, insofar as possible, enriching him unjustly at the expense of the good faith improver.” (Code Civ. Proc., § 871.5.)

Okuda v. Superior Court (1983) 144 Cal.App.3d 135 (Okuda) is instructive. In Okuda, plaintiffs contracted to purchase a house from defendants, made monthly payments to defendants under a deed of trust for a year and a half, added substantial improvements to the property under a mistaken assumption that they held title to the property, and then discovered that defendants had not transferred title to the property as promised. (Okuda, supra, 144 Cal.App.3d at pp. 138-139.) Plaintiffs surrendered possession of the property and filed an action which included a claim for relief under section 871.1 et seq. (Id. at pp. 137, 138.) Plaintiffs also recorded a lis pendens against the property, which defendants moved to expunge. (Id. at p. 137.)

In determining whether the good faith improver statute permitted plaintiffs to record the lis pendens, the court in Okuda analyzed the provisions of the statute noting that it was enacted “to supplement Civil Code section 1013.5. The latter provision affords the good faith improver only one remedy, removal of the improvements upon payment of the value to the owner of the land. The new provision, as noted, vests the court with broad equitable powers to fashion a remedy ‘consistent with substantial justice to the parties.’ However, unlike section 1013.5, relief under the new statute is available only to those improvers who acted under the good faith belief that they owned the land in question.” (Okuda, supra, 144 Cal.App.3d at p. 139, original italics.)

The allegations of the complaint indicate that when Rene made the improvements to the property, plaintiffs did not believe, at that time, that they owned the property. (See, e.g., Compl., ¶¶ 22-24 [effectively alleging that the improvements were made while plaintiffs occupied but did not yet own the property], 38 [alleging that “as a condition of” the transfer of title, plaintiffs were required to make and pay for improvements and repairs to the property].) Based on these express allegations, it would appear that plaintiffs did not believe, erroneously or otherwise, that they owned the property when the improvements were made.

Notwithstanding whether plaintiffs have alleged facts sufficient to state a cause of action under the good faith improver statute, “[i]If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane, supra, 19 Cal.4th at p. 38.)

Under Civil Code section 1013.5, “[w]hen any person, acting in good faith and erroneously believing because of a mistake either of law or fact that he has a right to do so, affixes improvements to the land of another, such person, or his successor in interest, shall have the right to remove such improvements upon payment, as their interests shall appear, to the owner of the land, and any other person having any interest therein who acquired such interest for value after the commencement of the work of improvement and in reliance thereon, of all their damages proximately resulting from the affixing and removal of such improvements.” (Civ. Code, § 1013.5.)

In the complaint, plaintiffs allege that the improvements made to the property by Rene included tree removal, ground leveling, the building of walls and enclosures, the installation of pathways, smoothing of cement, installation of flooring, remodeling of a bathroom, and installing new windows. (Compl., ¶¶ 15, 40.) Nuttal does not address these allegations or whether they, in combination with the allegations further discussed above with respect to the oral contract, are sufficient to state a cause of action under Civil Code section 1013.5.

Moreover, based on the allegations of the complaint, “the situation is very much analogous to that in which one person makes improvements to the property of another under the reasonable, good faith mistaken belief that … he or she is under an obligation to do so. Although early decisions denied any recovery of compensation at all, the better and more equitable rule is embodied in section 42 of the Restatement of Restitution. Subsection (1) of section 42 states that when the circumstances are appropriate for the allowance of restitution, the amount of restitution should be the amount ‘that the land has been increased in value by such improvements, or for the value of the labor and materials employed in making such improvements, whichever is least.’ [] Similarly, subsection (2) of section 42 pertaining to personal property provides that when restitution is authorized the amount should be ‘the added value or the value of the services, whichever is least ....’ [].” (Lesney Development Co. v. Kendall (1985) 164 Cal.App.3d 1010, 1022, original italics.)

Here, plaintiffs have alleged facts that indicate the improvements to the property were made pursuant to the oral contract and under the belief that plaintiffs were required to make the improvements in order to obtain title to the property. Nuttal does not address whether the improvements performed by Rene as alleged in the complaint are sufficient to state a claim for restitution with regard to any resulting increased value in the property or with regard to the labor and materials employed by Rene in making the improvements. (See, e.g., Compl., ¶ 16 [alleging that Rene worked for approximately 4,000 hours to make the improvements at the rate of $75 per hour].)

In addition, under general equitable principles of unjust enrichment, “one person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained, or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly.” (Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1315.) “The elements of a cause of action for unjust enrichment are simply stated as ‘receipt of a benefit and unjust retention of the benefit at the expense of another.’ [Citation.]” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.)

Here, plaintiffs allege that Rene provided “several thousand dollars-worth” of improvements during the nine years plaintiffs occupied the premises which “substantially increased the value” of the property held by Nuttal resulting in “unjust enrichment”. (Compl., ¶¶ 40, 42.) Nuttal does not address whether these allegations are sufficient to state a claim for unjust enrichment.

The court is “not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the [f]actual allegations of the complaint are adequate to state a cause of action under any legal theory. The courts of this state have, of course, long since departed from holding a plaintiff strictly to the ‘form of action’ he has pleaded and instead have adopted the more flexible approach of examining the facts alleged to determine if a demurrer should be sustained.” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103.)

For reasons discussed above, and notwithstanding whether plaintiffs have sufficiently alleged a claim under the good faith improver statute, plaintiffs have alleged facts which support the additional theories of liability discussed above. Nuttal fails to address these theories in the demurrer. In addition, Nuttal does not address whether the statutes of limitation applicable to the theories of liability discussed above bar any claims based on these theories. Therefore, the court will overrule the demurrer to the second cause of action.

Demurrer to the first cause of action based on the statute of frauds and the parol evidence rule:

The first cause of action is based on the alleged breach of the oral contract as further discussed above. Nuttal asserts that the integration clause contained in the rental agreement prevents plaintiffs from relying on the oral contract to sustain the first cause of action for breach of contract. Nuttal further asserts that, under the parol evidence rule, plaintiffs cannot rest their claim for breach of contract on the oral contract because it contradicts the terms of the rental agreement.

As further discussed above, because the interpretation of the rental agreement’s integration clause is subject to dispute, Nuttal’s demurrer is not an appropriate procedure for determining its proper interpretation.

Even if the court were to consider Nuttal’s contentions, the parol evidence rule “ ‘prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument.’ [Citation.] The rule does not, however, prohibit the introduction of extrinsic evidence ‘to explain the meaning of a written contract ... [if] the meaning urged is one to which the written contract terms are reasonably susceptible.’ [Citation.]” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343.)

As further discussed above, plaintiffs effectively allege that they entered into the rental agreement based on the oral contract which required plaintiffs to make monthly payments to Nuttal. For example, plaintiffs allege that the rental agreement permitted plaintiffs to lease the property for 10 years by “in effect” paying the monthly mortgage payments in the form of rent as a condition precedent to the transfer of title to the property to plaintiffs pursuant to the oral contract. (Compl., ¶¶ 20, 21.)

Nuttal does not sufficiently explain how the alleged terms of the oral contract are directly at odds with or alter the terms of the rental agreement such that the parol evidence rule would apply here. Furthermore, the allegations of the complaint indicate that the terms of the oral contract, which allegedly required monthly payments in the same amount as stated in the rental agreement, do not appear to contradict the terms of the rental agreement. Therefore, the meaning alleged by plaintiffs in the complaint is one to which the rental agreement is reasonably susceptible.

Nuttal also contends that the first cause of action is barred under Civil Code section 1624, which requires “[a]n agreement that by its terms is not to be performed within a year from the making thereof” and “[a]n agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein” to be in writing. (Civ. Code, § 1624, subds. (a)(1) & (3).) A defense based on Civil Code section 1624 (the statute of frauds) may be raised by demurrer. (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1503.) However, the complaint must show “on its face” that the subject contract is within the statute of frauds and fails to comply with its requirements. (Parker v. Solomon (1959) 171 Cal.App.2d 125, 136.)

Because the oral contract here was not to be performed within one year and involves an agreement for the lease and sale of real property, the oral contract is within the statute of frauds.

Possession of a property under an oral contract for the sale of the property, the expenditure of money in improvements, and the making of payments towards the purchase price according to the contract is sufficient to take an oral contract for the purchase of the real property “out of the statute of frauds….” (Day v. Cohn (1884) 65 Cal. 508, 508-509.)

Here, plaintiffs allege that they took possession of the property under the rental agreement, paid for all improvements and repairs to the property over a period of 9 years which allegedly increased the value of the property, and made the monthly payments required by the oral contract. (Compl., ¶¶ 33, 39, 40.) Plaintiffs made the monthly payments and improvements in reliance on the oral contract pursuant to which Nuttal agreed to transfer title in November 2023. (Compl., ¶ 33.)

The allegations of the complaint are sufficient to take the oral contract out of the statute of frauds for pleading purposes. (See Harrison v. Hanson (1958) 165 Cal.App.2d 370, 376 [apart from the payment of money, “additional facts must be alleged which establish a sufficient change in the plaintiffs’ position that the application of the statutory [sic] bar would result in an unjust and unconscionable loss”].) In addition, because the improvements alleged in the complaint are not necessarily insubstantial on their face, the complaint does not show that it fails to comply with the statute of frauds. Moreover, on demurrer, the court does not consider whether or not a plaintiff can prove his allegations. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.)

For all reasons discussed above, the court will overrule the demurrer to the first cause of action based on the integration clause in the rental agreement, the parol evidence rule, and the statute of frauds.

Demurrer to third cause of action for failure to plead fraud with sufficient particularity:

The third cause of action for fraud/deceit is premised on allegations that Nuttal misrepresented to the court in the UD action that plaintiffs were mere tenants, and suppressed or failed to disclose to the court that plaintiffs were in the process of purchasing the property and that Nuttal was required to transfer ownership of the property to plaintiffs in November 2023 under the terms of the oral contract. Plaintiffs further allege that Nuttal’s intent in failing to disclose to the court the nature of the parties’ legal relationship was to induce the court to cause plaintiffs to vacate the property. As a result, plaintiffs allege that they lost possession of and their equitable ownership rights in the property.

The demurrer fails to address these allegations, instead focusing on other allegations of the complaint that do not appear to be relevant to or the basis for the third cause of action for fraud and deceit as alleged in the complaint. Therefore, Nuttal has failed to demonstrate why the allegations described above are not sufficiently specific or fail to allege consequential damages. For these reasons, the court will overrule the demurrer to the third cause of action on the grounds that plaintiffs have failed to plead their fraud claim with the requisite particularity.