Conway
Filed 4/26/13 Conway v. Caffery CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE
STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
TOM CONWAY,
Plaintiff
and Appellant,
v.
JOE CAFFERY et al.,
Defendants
and Respondents.
E055656
(Super.Ct.No.
CIVMS1100211)
APPEAL from the Superior
Court of
Bernardino County.
Frank Gafkowski, Jr., Judge.
(Retired judge of the former L.A. Mun. Ct.
assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal.
Const.) Reversed.
Tom Conway, in pro. per., for
Plaintiff and Appellant.
No appearance for Defendants and
Respondents.
On July 28, 2011, plaintiff Tom Conway filed his first
amended complaint, alleging six causes of action based on his dealings with
defendants in a series of real estate loan transactions.
On August 11, 2011, defendants filed a demurrer to the first
amended complaint. On August 31, 2011, the trial court
sustained the demurrer without leave to amend.
After Conway’s motion for
reconsideration was denied, Conway
filed this appeal from the ensuing judgment.
I
STANDARD OF REVIEW
A demurrer is usually used to test
the sufficiency of the factual allegations of the complaint to state a cause of
action. (Code Civ. Proc., § 430.10,
subd. (e).)
title="">[1] In this case, defendants alleged a special
demurrer for lack of capacity to sue under section 430.10, subdivision
(b). But, in any case, our
of review.
In reviewing a general demurrer, the facts pled are assumed to be true
and the only issue is whether they are legally sufficient to state a cause of
action. “In
reviewing the sufficiency of a complaint against a general demurrer, we are
guided by long-settled rules.
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. [Citation.]
When a demurrer is sustained, we determine whether the complaint states
facts sufficient to constitute a cause of action. [Citation.]
And when it is sustained without leave to amend, we decide whether there
is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse; if not, there has been no abuse of discretion and we
affirm. [Citations.] The burden of proving such reasonable
possibility is squarely on the plaintiff.
[Citation.]†(
318.)
Our standard of review is de novo: “Treating as true all material facts properly
pleaded, we determine de novo whether the factual allegations of the complaint
are adequate to state a cause of action under any legal theory, regardless of
the title under which the factual basis for relief is stated. [Citation.]â€
(Burns v. Neiman Marcus Group,
Inc. (2009) 173 Cal.App.4th 479, 486.)
II
PROCEDURAL BACKGROUND
A. The
First Amended Complaint
The first amended complaint alleges that Conway is the “lawful owner†of seven itemized real properties
in San Bernardino and Riverside Counties. He specifically
alleges that he held “an interest in the Properties as the 100% beneficial
owner of a trust or a Limited Liability Company and signed personally for the
Defendants loans.â€
Defendant Joe Caffery is alleged to be “a
licensed mortgage broker who has arranged loans for CONWAY with private
investors for over 10 years . . . .†Caffery and Conway had a business
relationship for 11 years and completed about 100 transactions over that period
of time. After the real estate crash in
2008, they agreed that they would continue to work together. Conway then describes a number of
transactions involving Caffery which were funded by various private lenders.
As described below, the sufficiency of the
specific allegations of the various causes of action are not challenged. Six causes of action are alleged: (1) fraud; (2) negligent misrepresentation;
(3) breach of fiduciary duty; (4) breach of contract; (5) breach of implied
covenant of good faith and fair dealing; and (6) violation of Business and
Professions Code section 17200.
B.
On August 11, 2011, defendants
to the first amended complaint. The
demurrer is based on section 430.10, subdivision (b), which provides that a
defendant may file a demurrer on grounds that “[t]he person who filed the
pleading does not have the legal capacity to sue.†Defendants also cite section 367, which
provides that “[e]very action must be prosecuted in the name of the real party
in interest, except as otherwise provided by statute.â€
Defendants then attack the
allegation in the first amended complaint that Conway is the lawful owner of
each of the seven subject properties.
They do so by presenting evidence, consisting of recorded deeds and
deeds of trust, attached as exhibits to the demurrer.
The first property is referred to as Sunny Sands in the City of Joshua
Tree. A 2009 grant deed shows title in a
trust. Conway was trustee of the
trust. Defendants also submitted a
trustee’s deed upon sale which shows that, after foreclosure in 2011, the
property was transferred to defendant Darren D. Elkins.
The second property is 2945 Mesquite Springs Road in Twentynine
Palms. The demurrer relies on a 2007
grant deed which conveys the property to “Tom Conway, Trustee of the Mesquite
Springs #2 Trust.†Conway was therefore a
trustee for the trust which owned the property at that time.
The third property is 2960 Mesquite Springs Road in Twentynine
Palms. Exhibit D to the demurrer is a
2007 deed of the property to “The Mesquite Springs Trust, California Recovery
Inc., Trustee.â€
The fourth property is 74993 Serrano in Twentynine Palms. Exhibit E to the demurrer is a 2008 deed to
“Tom The Home Buyer, LLC, a California Limited Liability Company.â€
The fifth property is 57528 Onaga Trail in Yucca Valley. Exhibit F to the demurrer is a 2009 deed to
“Tom The Home Buyer, LLC, a California Limited Liability Company.â€
The sixth property is 241 Santa Rita in Banning. Exhibit G to the demurrer is a grant deed
showing a transfer to Home Team Eight LLC.
The seventh property is 4909 Encelia in Twentynine Palms. The demurrer alleges that, according to the
county recorder’s office, the property does not exist.
Based on the foregoing, defendants argue that Conway is not the owner
of the properties and therefore has no standing to sue.
C.
In his response to the demurrer, Conway acknowledges that he is not
the current owner of the properties:
“This is the whole thrust of the case in that he was induced out of them
by deceit.†But he contends he was the
100 percent beneficial owner of a trust or limited liability company that owned
each property.
D.
The trial court issued an eight-page tentative decision that was
adopted after the demurrer hearing.
After reviewing the facts stated above, the court states: “Plaintiff concedes that he no longer owns
the subject property. He does, however,
contend that he was the owner and has the right to proceed against the
Defendants as to the manner in which they obtained the subject property from
him. [¶]
The problem for Plaintiff, however, is that none of the documents
reviewed specifically identify Plaintiff by name as the owner. Plaintiff has submitted to the Court no
judicially noticeable documentation to support his action.†The court concludes by finding that Conway
“has failed to set forth sufficient facts upon which to support his standing to
pursue this action. Furthermore,
Plaintiff has failed to allege any damages (how he can be damaged) which is
fatal to his pleading.†(Boldface
omitted.) The court then sustains the
demurrer without leave to amend. The
court did not state any reasons for denying leave to amend.
E. Motion
for Reconsideration
On September 13, 2011, Conway filed a motion for reconsideration. He presented a proposed second amended
complaint which alleges that he “held a[n] interest of each of the properties
itemized below by virtue of his beneficial interest in the title holding
entity.†A number of documentary
exhibits were attached to the proposed second amended complaint.
As a new fact, Conway attached an assignment from “Tom The Homebuyer
LLC & Tom Conway, Trustee†to “Tom Conway, Individually†of “all causes of
action resulting or arising from the ownership of the properties listed below
. . . .†He then signed
for each property as trustee or managing member of the LLC, and he signed for
himself as assignee.
The trial court denied the motion
for reconsideration, stating “you do need to have an attorney represent you
in these matters if you’re a titled person and so forth.â€
III
DISCUSSION
Section 430.10 allows a special demurrer
on grounds that the person who filed the pleading does not have the legal
capacity to sue.
The term “capacity to sue†refers to the
legal ability of plaintiff to come into court.
For example, minors lack capacity to sue. “[(1)]
There is a difference between the capacity to sue, which is the
right to come into court, and the standing to sue, which is the right to
relief in court. [Citations.] Thus, although a plaintiff may have
‘capacity’ to sue, if the complaint shows that he is not a real party in
interest and therefore lacks ‘standing’ to sue, a ‘general’ demurrer will be
sustained. [Citations.] [¶]
[(2)] One of the grounds of demurrer was
that the complaint failed to state a cause of action because plaintiff did not
allege it owned or possessed the real property allegedly damaged by the acts of
defendants. Accordingly, if the
complaint was insufficient upon this ground the judgment must be affirmed even
though the trial court, in sustaining the demurrer, erroneously referred to
plaintiff’s ‘capacity’ to sue.
[Citations.] [¶] An element of a cause of action for injury to real
property is the plaintiff’s ownership, lawful possession, or right to
possession, of the property.
[Citation.] The complaint failed
to allege that plaintiff owned the real property comprising the condominium,
nor was there any allegation of plaintiff’s possession, or right to possession,
of such property. It was alleged merely
that, under the declaration of covenants, conditions and restrictions,
plaintiff was required to repair such common areas of the condominium as were
injured by defendants’ wrongful acts.
Hence, the complaint stated no cause of action in plaintiff.†(Friendly
Village Community Assn., Inc. v. Silva & Hill Constr. Co. (1973) 31
Cal.App.3d 220, 224-225, fn. omitted.)
In the present case, however, there are no allegations of damage to real
property.
“‘A litigant’s standing to sue is a
threshold issue to be resolved before the matter can be reached on the
merits. [Citation.]’ [Citation.]
Because elements for standing ‘are not mere pleading requirements but
rather an indispensable part of the plaintiff’s case, each element must be
supported in the same way as any other matter on which the plaintiff bears the
burden of proof, i.e., with the manner and degree of evidence required
at the successive stages of the litigation.
[Citations.]’ [Citation.
[¶] ‘Because
standing goes to the existence of a cause of action, lack of standing may be
raised by demurrer or at any time in the proceeding
. . . .’
[Citation.]†(
Cal.App.4th 1305, 1345.)
The question here is whether Conway is a
real party in interest within the meaning of section 367. A real party in interest is “‘one who has “an
actual and substantial interest in the subject matter of the action and who
would be benefited or injured by the judgment in the action.†[Citation.]’
[Citation.] With regard to an
action for transfer of real property, only the person claiming title to the
property has the actual and substantial interest to be a real party in
interest. A cause of action seeking the
transfer of an interest in real property cannot be assigned absent assigning
the interest in the property.
[Citation.]†(
Cal.App.4th 48, 57) In our case, Conway
is not seeking a transfer of title to real property.
“‘“A real party in interest ordinarily is
defined as the person possessing the right sued upon by reason of the
substantive law.†[Citation.]
. . . . The purpose of
this section is to protect a defendant from harassment by other claimants on
the same demand. [Citation.]’ [Citation.]â€
(Doe v. Lincoln Unified School
Dist. (2010) 188 Cal.App.4th 758, 765.)
Thus, standing is usually defined in terms
of whether plaintiff is a real party in interest with respect to the claim
involved in the litigation. (Weil &
Brown, Cal. Practice Guide: Civil
Procedure Before Trial (The Rutter Group 2012) ¶ 2:80, p. 2-28.1.)
We agree with the trial court that Conway
cannot assert causes of action for damage to the real property in which he
allegedly held a beneficial interest, but not an ownership interest. (Estate
of Bowles (2008) 169 Cal.App.4th 684, 691.)
Nor can he, as a nonattorney, represent others. (Ziegler
v. Nickel (1998) 64 Cal.App.4th 545, 547-548.) But he can
appear in propria persona to assert claims on his own behalf. As to those claims, he is a real party in
interest.
Accordingly, the question is whether the
causes of action asserted in the first amended complaint are actions for damage
to the real estate or claims arising from dealings between Conway and
defendants.
Even a superficial review of the first
amended complaint reveals that the alleged causes of action arise from Conway’s
dealings with defendants.
In the first cause of action, for example,
Conway alleges that Caffery, Elkins, and Lamb made false representations that
led Conway to take certain actions, to his detriment. Similarly, the second cause of action, for
negligent misrepresentation, alleges that Caffery, Elkins, and Lamb made
representations to Conway to induce him to “carry upside down properties and
make improvements to them with no reasonable expectation of profit†to
Conway. The third alleged cause of
action, for breach of fiduciary duty, alleges that Caffery and Caffery
Financial owed Conway a fiduciary duty, and they breached that duty. The fourth cause of action, for breach of
contract, alleges that certain defendants breached the terms of certain loan
agreements. The fifth cause of action
alleges that defendants breached the implied covenant of good faith and fair
dealing. The sixth cause of action
alleges that defendants violated the unfair competition law, Business and
Professions Code section 17200 et seq.
Damages sought are well over a million dollars.
In short, none of these causes of action
depend on the ownership of any property because Conway is not relying on any
such ownership to assert his claims. Nor
is he asserting claims on behalf of past property owners, including himself, or
on behalf of his own limited liability company.
Conway is only alleging that he
personally had business dealings with defendants and they defrauded him.
We therefore conclude that Conway is a
real party in interest and has standing to sue on the alleged causes of
action. “The real party in interest has
‘“an actual and substantial interest in the subject matter of the action,†and
stands to be “benefited or injured†by a judgment in the action.’ [Citation.]
‘Plaintiffs have standing to sue if they or someone they represent have
either suffered or are threatened with an injury of sufficient magnitude to
reasonably assure the relevant facts and issues will be adequately
presented.’ [Citation.]†(Fladeboe
v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 54-55.) Such injury is alleged here.
Even if there was a persuasive argument
that Conway lacked standing to sue under section 430.10, subdivision (b), the
defect would probably be only a technical defect, and the trial court should
have granted leave to amend. (
726, 729.) “The trial court exercises
its discretion in declining to grant leave to amend. [Citation.]
If it is reasonably possible the pleading can be cured by amendment, the
trial court abuses its discretion by not granting leave to amend. [Citation.]
The plaintiff has the burden of proving the possibility of cure by
amendment. [Citation.]†(Grinzi
v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78.) In this case, we find it reasonably possible
that any defect in the pleading could be cured by
amendment.
IV
DISPOSITION
The judgment is reversed and the case is
remanded for further proceedings in accordance with the views expressed in this
opinion. Conway shall recover his costs
on appeal.
NOT TO BE PUBLISHED IN OFFICIAL
REPORTS
RICHLI
J.
We concur:
HOLLENHORST
Acting
P. J.
KING
J.
name="_ftn1" title=""> [1]
Unless otherwise indicated, all further statutory references are to the
Code of Civil Procedure.
Defendants are Joe Caffery and his firm, Caffery Financial, and
individual lenders: Darren D. Elkins,
Linda Elkins, Patricia J. Lamb individually, Patricia J. Lamb, Trustee of the
Patricia J. Lamb living trust, Pensco Trust Company custodian for the benefit
of Patricia J. Lamb Roth IRA and The Amy Moran Roth IRA. Also named as a defendant is Golden State
Foreclosure Services.
