Plaintiffs David Duncan, Lynne Y. Duncan, Michael V. Fillebrown, Gerald Lung, Jeannie Lung, the Lung Family Revocable Trust, Richard Marino, Angela Marino, Weldon K. Schapansky, individually and as the sole beneficiary of the Grabe, Schapansky, Moss, Levy & Julian DDS PC 401 Retirement Plan, Noah Sever, Linda Washington, Carl D. West, and Chung C. Faulkner (hereafter collectively, plaintiffs) appeal from the judgment entered after the trial court sustained the demurrers filed by defendants The McCaffrey Group, Inc., McCaffrey Home Realty, Robert A. McCaffrey, McCaffrey Development LP, Bullard Grantland No. 1, Inc., and Ron Pottorff (hereafter collectively, defendants)
Defendants are the developers of a tract of land marketed as the Treviso Custom Home Development (hereafter the Development). Plaintiffs are individuals who purchased lots from defendants with the intent to build custom homes on each lot, with some having completed construction on their homes.
The complaint alleged, in essence, that plaintiffs paid a premium price for their lots because the Development was marketed as one that would be limited to custom homes with at least 2,700 square feet of living space. Plaintiffs alleged that, unbeknownst to them, defendants at all times intended to build tract homes on some of the lots that would be much smaller than 2,700 square feet of living space. As a result of the construction of smaller tract homes, plaintiffs alleged the value of their lots plummeted.
In the various versions of their complaint, plaintiffs have alleged numerous causes of action attributable to the purchase of the lots. As we understand plaintiffs' argument, they contend only that the trial court erred in sustaining the demurrer to their causes of action for alleged unfair competition, in violation of Business and Professions Code section 17200, false advertising, in violation of Business and Professions Code section 17500, and fraud. In
The primary basis for the trial court's order sustaining defendants' demurrers was that the parol evidence rule precluded any testimony about facts inconsistent with the contract between the parties and the purchase and sale agreement (hereafter the Agreement) and therefore there was no factual basis for any of plaintiffs' claims. As we shall explain, the trial court was correct that the fraud cause of action lacked any factual support because the parol evidence rule precluded the evidence on which plaintiffs relied. The trial court erred, however, in sustaining the demurrer to the causes of action for false advertising and unfair competition because the allegations on which plaintiffs relied were not offered to vary, alter, or add to the terms of the Agreement, and thus the parol evidence rule was inapplicable.
We also conclude the trial court erred in granting the motion for summary adjudication. Plaintiffs alleged that defendant McCaffrey Home Realty acted as their real estate agent in the purchase transaction and therefore owed them a fiduciary duty, which was breached by various acts of defendants. The trial court concluded that the Agreement established that defendant McCaffrey Home Realty acted as a broker only for defendants and therefore there was no fiduciary relationship between plaintiffs and defendants. As we shall explain, we conclude the Agreement was ambiguous and therefore a triable issue of fact exists as to the meaning of the contract, which may require extrinsic evidence to resolve. Therefore, the order granting summary adjudication also must be reversed.
We begin with the sixth amended complaint (SAC) because that was the operative pleading at the time judgment was entered. As relevant to the issues we must decide, the SAC alleged plaintiffs were the owners of lots in the Development. The lots were purchased between July 28, 2006, and August 8, 2007. Defendants were corporate entities or partnerships doing business in the state of California, primarily the development, construction, and sale of new residential homes, except for Ron Pottorff, who was an employee of defendants.
Plaintiffs' first cause of action alleged defendants committed acts of unfair competition, in violation of Business and Professions Code section 17200. According to plaintiffs, defendants authored and caused to be recorded a
In addition, Pottorff told plaintiffs Richard Marino and Angela Marino that the Development contained the only custom home lots in that area. The sales office for the Development exhibited numerous pictures and architectural plans for custom homes built at defendants' other developments and that were similar to the Development's.
After each plaintiff had purchased his or her lot, defendants, without notice, caused the CC&R's to be amended to reduce the minimum size of each residence built in the Development to 1,700 square feet. Approximately one month later, defendants caused the CC&R's to be amended a second time without notice, this time reducing the minimum size of a residence built in the Development to 1,400 square feet.
After each plaintiff had purchased his or her lot, defendants began selling tract homes on lots within the Development. The price for some of these tract homes was essentially the same as the price paid by plaintiffs for their undeveloped lots. As a result of defendants' construction of tract homes, the Development no longer was a custom home development. Defendant Robert A. McCaffrey admitted to plaintiffs that the Development never was intended to be limited to custom homes.
These actions allegedly violated Civil Code sections 1567
The second cause of action sought rescission and restitution because defendants failed to notify the Real Estate Commissioner of the amendments to the CC&R's as required by Business and Professions Code sections 11012, 11018.7, and 11019. In addition, defendants allegedly violated Business and Professions Code sections 11012, 11018.7, 11019, and 11022 by building and marketing a limited number of models of tract homes. Plaintiffs also alleged the tract homes were not reviewed by the architectural control committee, as required by the CC&R's. These facts allegedly constituted a material change in the Development without notice to the Department of Real Estate, resulting in violation of the identified code sections entitling plaintiffs to rescission and restitution.
The third cause of action (false advertising) alleged that defendants falsely advertised the Development as limited to custom homes with the intent to induce plaintiffs to purchase lots, in violation of Business and Professions Code section 11022, subdivision (a). As a result of defendants' conduct, plaintiffs each suffered substantial damages.
The fourth cause of action (trespass) alleged that defendants trespassed on the lots owned by plaintiffs Lung, Marino, Schapansky, and Washington, causing damage to the lots and decreasing their value.
In response to the SAC, defendants, as they had to each preceding complaint, filed a demurrer and motion to strike certain portions of the
Defendants argued that plaintiffs could not recover on the second cause of action because any material change to the setup and offering that may have occurred at the Development occurred after plaintiffs had purchased their lots. According to defendants, since they were in compliance with the Subdivided Lands Act (Bus. & Prof. Code, § 11000 et seq.) at the time of the sale, there were no grounds for rescission or restitution.
Finally, defendants argued that plaintiffs could not recover on the third cause of action because the alleged misrepresentations were directly contradicted by paragraph 9(a) of the Agreement, which gave defendants the right to alter the Development. Therefore, any alleged misrepresentations were barred by the parol evidence rule. In addition, defendants argued that even if the alleged misrepresentations were considered, plaintiffs could not recover because the statements were true at the time they were made.
The trial court sustained the demurrer to the first cause of action on several grounds. To the extent plaintiffs were alleging that defendants acted fraudulently, the trial court concluded that plaintiffs did not plead actual reliance on
The trial court sustained the demurrer to the second cause of action as it concluded there was nothing to indicate that the public report was invalid or illegal. Instead, the trial court concluded the report prepared by defendants was valid.
The trial court sustained the demurrer to the third cause of action because plaintiffs improperly sought monetary damages, a remedy not available under the statute. In addition, the trial court concluded that any allegation of false advertising on which plaintiffs might rely would be inadmissible under the parol evidence rule as the claimed false statements directly contradicted the written agreement, specifically paragraph 9(a) of the Agreement.
The trial court also granted defendants' motion to strike specific items in the SAC. The trial court ordered stricken allegations that (1) defendants engaged in unfair competition by including in the CC&R's a paragraph requiring each residence to be at least 2,700 square feet, (2) plaintiffs actually and reasonably relied on defendants' allegedly deceptive practices and false advertising, and (3) plaintiffs were entitled to recover monetary damages for alleged violations of the Subdivided Lands Act. The trial court ruled that the first item was precluded by the parol evidence rule, the second item was irrelevant, and the third item was improper because violations of the Subdivided Lands Act did not permit monetary recovery.
The SAC was preceded by six pleadings that attempted to state various causes of actions against defendants. Each complaint was attacked by defendants through a demurrer and/or a motion to strike. The trial court's rulings on these motions were similar to the above ruling.
The ruling on the motions directed at the original complaint sustained demurrers to several causes of actions based on allegations that defendants advertised and promoted the Development as requiring each residence constructed to be a custom home of at least 2,700 square feet. The trial court
The trial court granted plaintiffs leave to amend the complaint. When plaintiffs failed to do so, defendants moved for judgment in their favor. Judgment was entered accordingly and plaintiffs appealed.
"For purposes of a demurrer, we accept as true both facts alleged in the text of the complaint and facts appearing in exhibits attached to it. If the facts appearing in the attached exhibit contradict those expressly pleaded, those in the exhibit are given precedence. [Citation.]" (Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 567-568 [71 Cal.Rptr.2d 625].) We review a ruling sustaining a demurrer de novo, independently determining whether the complaint states a cause of action as a matter of law. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115 [55 Cal.Rptr.2d 276].)
Defendants assert that many of plaintiffs' allegations may not be considered because they contradict the terms of the Agreement and the CC&R's.
Defendants first point to paragraph 9(a) of the Agreement, which states in relevant part: "Buyer acknowledges that Seller may, in its sole discretion,
The next paragraph of the Agreement deemed relevant by defendants is paragraph 18(d), which states: "
Finally, defendants point out paragraph 6.1 of the CC&R's, which states: "
In addition, plaintiffs agreed in the Agreement that (1) no representative for defendants had made any representation different from the above; (2) no representative of defendants had made any representation about possible future appreciation of the lots within the Development; and (3) the Agreement was the only agreement between the parties pursuant to the merger clause.
In addition to the portions of the documents on which defendants rely, we also find relevant paragraph 5.10 of the CC&R's. Paragraph 5.10 states: "
Article 5 of the CC&R's provides for establishment of an architectural committee and requirements for committee approval before constructing on the lot. An "improvement" is defined in paragraph 1.5 of the CC&R's as including the residence built on any lot. Therefore, defendants are specifically exempt from compliance with the provisions of article 5 when constructing any residence, thus rendering any claim by plaintiffs that defendants failed to do so irrelevant.
Defendants' motions to the trial court, and their arguments in this court, largely relied on the assertion that the parol evidence rule, when applied to the above paragraphs, precluded admission of many of the allegations made by plaintiffs.
Plaintiffs cite these statutes and then make a blanket claim that the complaint contained sufficient allegations to overcome defendants' demurrer. We understand plaintiffs to be contending that their allegations that defendants' representation to the public that the Development was to consist exclusively of custom homes of at least 2,700 square feet and three-car garages was indeed an advertisement and was knowingly false when made.
Defendants rely on the parol evidence rule to assert that each of plaintiffs' factual allegations is contradicted by the terms of the written agreement and thus not admissible. We reject defendants' argument because it is an attempt to misuse the parol evidence rule. As explained ante, parol evidence is not admissible to vary, alter, or add to the terms of a written agreement. This cause of action does not attempt to vary, alter, or add to the terms of the written agreement between the parties. Instead, plaintiffs argue defendants engaged in a campaign of false advertising when marketing the lots in the Development.
The case on which defendants and the trial court relied demonstrates our point. In Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258 [48 P.2d 659] (Pendergrass), the plaintiff sued the defendants to recover money lent to the defendants and evidenced by a note. The terms contained in the note stated that the sum lent was payable on demand. The plaintiff introduced the note into evidence and presented testimony that the note had not been paid. The defendants attempted to introduce evidence that the
In Pendergrass the parol evidence rule precluded evidence that the terms of the agreement were other than those terms contained in the writing (was the note payable on demand or did the parties agree that no payments would be due for one year?).
Here, plaintiffs are not arguing that the terms of the Agreement and the CC&R's prohibited defendants from building tract homes in the Development. Indeed, this cause of action is not an action on the contract. Instead, plaintiffs are alleging that defendants advertised the Development as one where only custom homes would be built, thus justifying selling the lots at a premium price. According to plaintiffs' theory, had defendants advertised the Development as a mixed custom/tract home development, the lots purchased by plaintiffs would have been worth considerably less than the price they paid. Thus, Pendergrass is distinguishable (allegations do not seek to vary or change the terms of the written agreement) and does not support defendants' argument.
Instead, the issue in this cause of action is whether plaintiffs reasonably relied on this allegedly false advertising. This issue recently was addressed in In re Tobacco II Cases (2009) 46 Cal.4th 298 [93 Cal.Rptr.3d 559, 207 P.3d 20] (Tobacco II). The case was presented to the trial court as a class action lawsuit against various tobacco companies alleging the companies engaged in
"This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. Reliance is `an essential element of ... fraud .... [¶] ... [R]eliance is proved by showing that the defendant's misrepresentation or nondisclosure was "an immediate cause" of the plaintiff's injury-producing conduct. [Citation.] A plaintiff may establish that the defendant's misrepresentation is an "immediate cause" of the plaintiff's conduct by showing that in its absence the plaintiff "in all reasonable probability" would not have engaged in the injury-producing conduct.' [Citation.]
Plaintiffs allege that when they decided to purchase their lots, they relied on the various advertisements as well as the statements of Pottorff that the Development would remain a custom home development. Defendants assert that plaintiffs' reliance was unreasonable because the written contracts specifically gave defendants the ability to change the nature of the Development.
This case comes before us after the trial court sustained defendants' demurrer to this cause of action. In sustaining defendants' demurrer, the trial court must have concluded as a matter of law that it was reasonably probable plaintiffs would have bought the lots even if defendants had not advertised the Development as a custom home development. Moreover, to overcome the presumption or inference of reliance, the trial court must have concluded that the advertisements and Pottorff's statements were not material, i.e., they were "`"so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by [them]."'" (Tobacco II, supra, 46 Cal.4th at p. 327.)
Accordingly, the trial court erred in granting defendants' demurrer to the UCL cause of action based on false or misleading advertising. Because
Kasky also supports our conclusion that the trial court erred in granting defendants' demurrers to the UCL and false advertising causes of action. In Kasky, the Supreme Court emphasized that both causes of action need only plead advertising that is false or misleading. The Supreme Court noted that both laws prohibit "not only advertising which is false, but also advertising which[,] although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public." (Leoni v. State Bar (1985) 39 Cal.3d 609, 626 [217 Cal.Rptr. 423, 704 P.2d 183], cited with approval in Kasky, supra, 27 Cal.4th at p. 951.) "Thus, to state a claim under either the UCL or the false advertising law, based on false advertising or promotional practices, `it is necessary only to show that "members of the public are likely to be deceived."' [Citations.]" (Kasky, at p. 951.) Thus, the terms of the contract are irrelevant to the cause of action. Instead, the focus is on whether the advertising was misleading or had a tendency to deceive or confuse the public.
Plaintiffs argue they also have pled sufficient facts to overcome defendants' demurrer to their cause of action for fraud based on a willful misrepresentation. They contend that defendants' advertising campaign intentionally was misleading and induced plaintiffs to buy lots in the Development. They further allege that defendants misrepresented what was meant by paragraph 9 of the Agreement.
Once again, defendants assert that the parol evidence rule precludes consideration of any statements that are inconsistent with the contract terms. They also argue that plaintiffs' reliance on the oral statements was not
The scope of the fraud exception to the parol evidence rule is the crux of this issue. Our analysis must begin with Pendergrass, discussed ante. In summary, the Supreme Court held that the parol evidence rule precluded evidence that the bank promised it would not enforce a note for one year when the note stated it was payable on demand, i.e., at any time.
Pendergrass, therefore, reflects a choice by the Supreme Court when faced with a conflict between contract principles and tort principles. The Supreme Court concluded that in this situation contract principles should be paramount to avoid injecting tort principles into commercial contexts, where such principles do not readily fit. By doing so, the Supreme Court limited litigation over the terms of contracts under the "guise of a promise made without intention to perform" (Price, supra, 213 Cal.App.3d at p. 485) based on proof that the contract does not contain terms consistent with the alleged oral promises. "While the decision was by no means logically inevitable, it represents a rational policy choice that should be reconsidered only by the Supreme Court itself." (Id. at p. 486.)
The Pendergrass rule has been the subject of numerous opinions, some of which attempt to avoid its effects. In Bank of America v. Lamb Finance Co. (1960) 179 Cal.App.2d 498 [3 Cal.Rptr. 877] (Lamb Finance), Bank of America filed an action to recover on a note executed by Lamb Finance and guaranteed by the president of Lamb Finance, Leah Lamb Poyet. The guaranty stated that Poyet promised to pay the note signed by Lamb Finance and agreed that Bank of America could proceed against her in the event of default. Poyet attempted to testify that a bank employee told her when she
In Price, the issue was presented in the context of a loan for a mobilehome. Price claimed he had arranged for a loan from another institution at a specific interest rate. Wells Fargo then told Price it would loan him the money to buy the mobilehome at a lower interest rate. By the time the application process was completed, the interest rate charged by Wells Fargo exceeded the original interest rate offered by the other institution. The other institution, however, no longer offered the lower interest rate, so Price entered into an integrated contract to borrow the money from Wells Fargo at the higher interest rate. Price argued in his complaint that Wells Fargo committed fraud by promising him a lower interest rate than the other institution, with no intent of doing so. The appellate court concluded that Price's allegation was barred by the parol evidence rule because it reflected a contemporaneous oral agreement that contradicted the terms of the contact. (Price, supra, 213 Cal.App.3d at p. 486.)
In Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388 [264 Cal.Rptr. 779] (Continental), Continental purchased several commercial passenger aircraft from McDonnell. Prior to entering into the contract for the purchase, McDonnell presented Continental with numerous sales brochures and participated in numerous meetings regarding the proposed purchase. The brochures represented that the fuel tanks in the wings of the aircraft "`will not rupture under crash load conditions.'" (Id. at p. 400.) Similar representations were made during meetings held before the contract was executed. The contract, however, which was an integrated document, stated that the fuel tanks were "`not likely' to rupture" in a specific type of crash. (Ibid.) Continental sued when one of the wing fuel tanks ruptured during an aborted takeoff.
McDonnell moved in limine to preclude Continental from introducing the statement in the sales brochure that represented that the fuel tanks would not rupture. Continental argued the statement was admissible under the fraud exception to the parol evidence rule. The appellate court, citing Pendergrass, held the statements were not admissible because they contradicted a term of the integrated sales contract. (Continental, supra, 216 Cal.App.3d at p. 419.)
The appellate court, however, concluded other similar statements were admissible. The sales brochures also stated that the wing and landing gear
Banco Do Brasil, S.A. v. Latian, Inc. (1991) 234 Cal.App.3d 973 [285 Cal.Rptr. 870] (Banco Do Brasil) involves a complicated fact pattern. In a very simplified form, Latian was formed to acquire the assets of another business. These assets were security for loans made by Banco Do Brasil to the original owners of the assets. To accomplish the acquisition, Latian agreed to assume liability for a portion of the amount due to Banco Do Brasil. When Latian had difficulty making the payments required by the loan agreements, the guaranty that formed the basis of the lawsuit was executed by Latian. When required payments were not made, Banco Do Brasil sued on the guaranty. Latian filed a cross-complaint alleging that Banco Do Brasil had promised to provide them with a new $2 million line of credit, but failed to do so. This promise was alleged to be an integral part of the agreement to guarantee the original loan. Latian alleged causes of actions for fraud and breach of contract.
The appellate court observed that Latian's defense to Banco Do Brasil's complaint, and the basis of the cross-complaint, was the assertion that Banco Do Brasil orally had promised to extend to Latian a $2 million line of credit. (Banco Do Brasil, supra, 234 Cal.App.3d at p. 999.) Indeed, Latian repeatedly testified at trial and argued to the appellate court that the line of credit was critical to Latian's decision to purchase the assets. Latian asserted that without the oral promise to extend the line of credit, Latian would not have purchased the assets. Banco Do Brasil argued the oral promise should have been excluded under the parol evidence rule. The trial court concluded it was an independent agreement, thus avoiding the parol evidence rule.
The appellate court concluded that because Latian took the position that the line of credit was an essential part of the guaranty agreement, and the contract stated that the obligation to repay the debt was unconditional, the alleged oral agreement contradicted the contract and was inadmissible under the parol evidence rule. (Banco Do Brasil, supra, 234 Cal.App.3d at pp. 1004-1005.)
The appellate court also rejected Latian's argument that the parol evidence rule was inapplicable because the evidence fell under the fraud exception to the rule. (Banco Do Brasil, supra, 234 Cal.App.3d at pp. 1009-1010.)
Alling, supra, 5 Cal.App.4th 1412 is another case with complicated facts. Alling
Initially, Universal's attempts to produce the ballast based on the design advanced by Alling were unsuccessful. Nonetheless, after five years Universal finally solved the design and production issues and began producing and marketing the ballasts. Alling quit before the issues were resolved, asserting that all the production problems were directly related to inadequate investment by Universal.
Alling then sued Universal on various grounds. Prior to trial, Universal moved to prohibit any testimony suggesting that Alling's business plan was part of the purchase contract. Alling argued that Universal had promised to implement the business plan, and its failure to do so was the basis of the action. The trial court eventually allowed the business plan into evidence and judgment was entered in favor of Alling.
Universal argued on appeal that admission of the business plan violated the parol evidence rule. The appellate court found the purchase agreement was an integrated contract and that the business plan was inconsistent with the contract. Accordingly, the appellate court concluded the trial court erred in permitting the business plan to be introduced into evidence. (Alling, supra, 5
"Here, plaintiffs offered the business plan for the express purpose of showing a fraudulent oral promise which was directly at variance with the terms of the Purchase Agreement. The alleged unequivocal oral promise to fund the business plan, elicited in testimony and referred to repeatedly by plaintiffs' trial attorney both in opening and in closing argument, varied and contradicted the specific language in paragraph 5 of the Purchase Agreement giving Universal `the sole right to determine any amounts of capital resources which it may invest in [Alling's company] ....' The evidence of that alleged promissory fraud was therefore improperly admitted. [Citation.]" (Alling, supra, 5 Cal.App.4th at pp. 1436-1437.)
Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15 [61 Cal.Rptr.2d 518] (Edwards) addressed the application of the parol evidence rule to a release and settlement agreement. The plaintiffs had purchased homes from the defendants that had been built on salt marshes. When the defendants first received complaints from homeowners (not the plaintiffs) about cracks in the foundations of their homes, the defendants hired an engineering firm and made extensive modifications to the foundation pursuant to the firm's recommendations.
Approximately one year later, the plaintiffs discovered cracks in the foundations of their homes and they contacted the defendants. The defendants again retained an engineering firm to investigate, but the investigation was neither as thorough nor as extensive as in the previous repair. The engineer recommended a different, less extensive and cheaper repair to the plaintiffs' homes. The plaintiffs received the engineer's report, reached an agreement with the defendants, and permitted the defendants to complete repairs consistent with the report. The plaintiffs also signed a settlement agreement releasing the defendants from any and all liability "`in any way connected with the design and construction of the concrete slab foundation, adjoining soil areas ... and the investigation of defects or damages claimed to such improvements.'" (Edwards, supra, 53 Cal.App.4th at p. 24, fn. 4.)
Wang, supra, 97 Cal.App.4th 856 involved Wang's acquisition of a vehicle from Massey Chevrolet. Wang asserted that he repeatedly told Massey's representatives that he wanted to make a large downpayment, finance the remaining balance for a few months, and then pay the balance of the purchase price. Massey convinced Wang to sign a lease that Massey asserted would allow Wang to accomplish his goal of paying off the vehicle in two or three months. A few days later Massey called Wang and informed him that Massey had found a new loan company to fund the lease with a lower monthly payment. Massey represented to Wang that he could pay off the vehicle at any time with no penalty. When Wang attempted to pay off the vehicle a few months later, he learned that the lease contained a substantial penalty for early payment. Wang sued Massey for fraud, violation of the Consumers Legal Remedies Act, and violation of the UCL. The trial court granted Massey's motion for summary judgment based primarily on its conclusion that the oral statements made by Massey's representatives were barred by the parol evidence rule.
The appellate court concluded that the parol evidence rule was inapplicable to statutory claims under the Consumers Legal Remedies Act because the
Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375 [1 Cal.Rptr.3d 739] (Greene) created an exception to the rule stated in Pendergrass. Greene's husband entered into several loan agreements with Pacific State Bank using various items as collateral. One item of collateral was a trailer that Greene agreed to purchase from her husband. Greene agreed to assume the loan secured by the trailer as the purchase price. Pacific State Bank agreed to this arrangement and prepared two guaranty agreements for Greene to sign (one for Greene personally and one for her business). Each agreement listed the amount of the loan on the trailer as the maximum liability to which Greene was exposed. Each guaranty, however, defined the indebtedness to which the guaranty applied as all of the husband's loans.
Greene made all payments on the trailer loan, but her husband defaulted on the other loans. Pacific State Bank sued Greene and her husband for the amounts due under the loans. Greene opposed Pacific State Bank's motion for summary judgment by executing a declaration that claimed Pacific State Bank's employees had told her that the guaranty she signed related only to the loan secured by the trailer. Greene asserted she told Pacific State Bank that she would not guaranty any of her husband's other loans with the bank,
The appellate court agreed that Greene's statements contradicted the terms of the guaranty agreement and thus were not admissible to interpret the language of the guaranties. (Greene, supra, 110 Cal.App.4th at pp. 385-387.) The appellate court, however, held Greene's statements were admissible under the fraud exception to the parol evidence rule. It interpreted Greene's argument as asserting that she was induced to enter the guaranty agreements due to the fraud perpetrated by Pacific State Bank's employees. (Id. at p. 389.) It recognized Pendergrass's limitation on the admission of parol evidence of promises that contradict the terms of an integrated contract (promissory fraud), but concluded this limitation was inapplicable because Greene was alleging that there was a misrepresentation of the terms of the document, i.e., a misrepresentation of fact over the contents of the document at the time of its execution. (Greene, at p. 391.) The appellate court found significant that in many respects the guaranty agreements appeared to be consistent with Greene's contention that she guaranteed only the trailer loan, and the expansion of liability was found in the "fine print of a definition." (Id. at p. 393.)
The viability of the reasoning of Greene is uncertain. On April 20, 2011, the Supreme Court accepted for review Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2011) 191 Cal.App.4th 611 [119 Cal.Rptr.3d 380], review granted April 20, 2011, S190581, an opinion from this court. Riverisland relied on Greene in holding that the parol evidence rule did not bar evidence that a party misrepresented the contents of a written agreement. The issue to be decided is whether "the fraud exception to the parol evidence rule permit[s] evidence of a contemporaneous factual misrepresentation as to the terms contained in a written agreement . . . ." (Admin. Office of Courts, Supreme Ct. Summary of Cases Accepted During the Week of April 18, 2011.) Thus, Greene may be overruled in the future.
We have reviewed these cases in an attempt to establish some parameters for the parol evidence rule. Appellate courts have consistently excluded evidence that the party seeking to enforce a contract made promises inconsistent with the contract. (Pendergrass, supra, 4 Cal.2d 258 [promise not to demand payment for one year]; Lamb Finance, supra 179 Cal.App.2d 498 [promise that defendant would not have any personal liability on the note]; Continental, supra, 216 Cal.App.3d 388 [promise that fuel tank would not rupture in a crash]; Banco Do Brasil, supra, 234 Cal.App.3d 973 [promise to
Here, we do not agree with plaintiffs that their claims fall within the fraud exception to the parol evidence rule. Plaintiffs' argument is, in essence, that defendants promised them that the Development would contain only custom homes, even though the Agreement specifically reserved to defendants the right to build other types of houses, including tract homes. In other words, plaintiffs allege that defendants promised they would not utilize a right included in the contract. This promise was no different than the promises allegedly made in Pendergrass, Lamb Finance, Continental, Banco Do Brasil, Alling, and Wang and thus is not admissible.
Although it is unclear whether plaintiffs are asserting that defendants misrepresented the terms of the contract, as in Greene, such an argument would not change our conclusion, even assuming the continued viability of Greene. In Greene the defendant allegedly told Greene that her liability would extend only to a specific loan and not other loans made to her husband. The guaranty she signed made her liable on all of the loans made to her husband. Thus, the bank's employee represented that the contract did not contain a term that was included in the document.
We are not certain of the extent of the Greene exception to Pendergrass. We are confident, however, that if the exception has any continued validity, it does not encompass the facts in this case. Unlike Greene, the language about which plaintiffs now complain was not hidden in the fine print, but was highlighted for them specifically as evidenced by their initials being placed next to the paragraph. Instead, plaintiffs assert defendants lied to them about what the paragraph meant.
Accordingly, the trial court did not err in granting defendants' demurrer to this cause of action.
In addition to filing numerous demurrers and motions to strike, defendants also made a motion for summary adjudication directed at the fifth (breach of
A party may move for summary adjudication of a cause of action if that party contends that there is no merit to the cause of action. (Code Civ. Proc., § 437c, subd. (f)(1).) A defendant moving for summary adjudication establishes that there is no merit to a cause of action if he or she has shown that one or more elements of a cause of action cannot be established. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849 [107 Cal.Rptr.2d 841, 24 P.3d 493].)
"We review the trial court's decision de novo, considering `all of the evidence set forth in the [supporting and opposition] papers, except that to which objections have been made and sustained by the court, and all [uncontradicted] inferences reasonably deducible from the evidence.' [Citation.] `"To succeed, [the moving party] must ... demonstrate that under no hypothesis is there a material issue of fact that requires the process of a trial."' [Citations.]" (Artiglio v. Corning Inc. (1998) 18 Cal.4th 604, 612 [76 Cal.Rptr.2d 479, 957 P.2d 1313].)
The fifth cause of action alleged a breach of fiduciary duty against each defendant. The basis for this cause of action was the allegation that defendants, as real estate brokers, agents, and developers, owed a fiduciary duty to plaintiffs, and they breached that duty by concealing that tract homes were to be built in the Development. The sixth cause of action, titled "constructive fraud," alleged defendants committed constructive fraud against plaintiffs based on the same relationship and acts described in the fifth cause of action.
Each plaintiff signed an identical Agreement. Paragraph 9(i) of this agreement addresses the nature of the relationship between the real estate broker, McCaffrey Home Realty, and the plaintiff buyers. This paragraph states in full: "
In addition to this paragraph of the Agreement, plaintiffs were provided with a document titled "DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIPS." This document identified McCaffrey Home Realty as the "AGENT" and the respective plaintiffs as the "BUYER/ SELLER." It also explained the duties of a real estate broker when acting as the seller's agent, the buyer's agent, and when representing both the buyer and seller (dual agency). This document, and the information contained therein, is required by Civil Code section 2079.14 et seq.
Finally, during their depositions, several plaintiffs testified that they thought McCaffrey Home Realty was acting as their agent throughout the purchase process.
Defendants' motion asserted that none of the defendants had a fiduciary relationship to plaintiffs, and thus there was no fiduciary duty between the parties that could be breached. Plaintiffs countered that there was a fiduciary relationship between the parties because defendants acted as their broker in the transaction.
The trial court concluded that paragraph 9(i) of the Agreement established that none of the defendants acted as a real estate agent or broker for plaintiffs, therefore no fiduciary duty existed. The trial court found that the Agreement was clear and unambiguous because an "X" was placed in the portion of the fourth sentence of paragraph 9(i) to indicate that McCaffrey Home Realty was acting as the agent for only the seller.
Defendants contend, and plaintiffs do not argue otherwise, that the causes of action for breach of fiduciary duty and constructive fraud are both based on the assertion that defendants owed a fiduciary duty to plaintiffs. Therefore,
Defendants' argument, and the basis for the trial court's ruling, was that paragraph 9(i) of the Agreement was susceptible of only one interpretation, and that interpretation established that McCaffrey Home Realty was acting as an agent for only the seller.
The ambiguity in paragraph 9(i) is apparent when each sentence is considered in isolation. The first sentence unequivocally states that McCaffrey Home Realty is both the listing and selling agent. The next two sentences define the terms "listing agent" and "selling agent." The fourth sentence is in all capital letters and, as marked with the "X," states that McCaffrey Home Realty is the agent for the seller exclusively. The fifth sentence, also in all capital letters, then states that McCaffrey Home Realty, in its capacity as both the listing and selling agent, is acting as the agent for both the buyer and the seller. Finally, the last sentence informs the buyer that McCaffrey Home Realty is owned by at least some of the same principles as the seller.
It is impossible to reconcile these sentences. The first and fifth sentences state that McCaffrey Home Realty is acting as both the listing and selling agent. The fourth sentence is prepared so that, depending on how it is marked, it could indicate that McCaffrey Home Realty is acting as the seller's agent exclusively, or is acting as the agent for both the buyer and the seller. As marked, it indicates that McCaffrey Home Realty is acting exclusively as the agent for the seller. But this statement cannot be reconciled with the first
The trial court erred in granting summary adjudication for two reasons. First, it refused to consider extrinsic evidence because it found no ambiguity in paragraph 9(i). As explained above, paragraph 9(i) plainly is ambiguous, and therefore relevant extrinsic evidence should be admitted and considered by the trier of fact. Second, the ambiguity in paragraph 9(i) compels the conclusion that there is a triable issue of fact as to whether McCaffrey Home Realty was the exclusive agent for the seller or was the agent for both the buyer and seller, giving rise to a fiduciary relationship with plaintiffs.
We emphasize the limited scope of our decision. We determine only that plaintiffs have pled sufficient facts to proceed on their unfair competition and false advertising causes of action and that a triable issue of fact exists as to the breach of fiduciary duty and constructive fraud causes of action. We express no opinion on the merits of plaintiffs' claims.
The judgment is reversed. The trial court is directed to vacate the order sustaining defendants' demurrer to the causes of action for false advertising and unfair competition and enter a new order overruling the demurrers. The trial court also is directed to vacate the order granting defendants' motion for summary adjudication on the causes of action for breach of fiduciary duty and constructive fraud and to enter a new order denying this motion. Plaintiffs can therefore proceed on their causes of action for unfair competition (Bus. & Prof. Code, § 17200), false advertising (id., § 17500), breach of fiduciary duty, constructive fraud, and trespass (to which the demurrer had been overruled when plaintiffs chose not to file a seventh amended
Wiseman, Acting P. J., and Kane, J., concurred.
