Elvira v. Superior Court

Filed 10/29/07 Elvira v. Superior Court CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ORIGINAL PROCEEDING in mandate. Melvin D. Sandvig, Judge. Petition granted.

Law Offices of Kenneth W. Ralidis, Kenneth W. Ralidis; The Ehrlich Law Firm and Jeffrey Isaac Ehrlich for Petitioner.

No appearance for Respondent.

Nelson E. Brestoff for Real Parties in Interest.

* * * * * * * * * *

In this action which centers on competing claims to a condominium unit, Gloria Elvira seeks writ relief after the trial court sustained without leave to amend demurrers to numerous causes of action in her complaint against her daughter, Wendolyn Elvira, and several other defendants.^[1]In sustaining the demurrers, the trial court concluded the claims were barred by (1) the applicable statutes of limitations, and (2) the doctrine of judicial estoppel. We conclude Gloria is entitled to relief. Accordingly, we grant her petition.

FACTUAL AND PROCEDURAL BACKGROUND

As a demurrer tests the sufficiency of the complaint, the following factual description is based on the allegations of Glorias complaint, liberally construed.

In approximately the summer of 2003, Gloria sought to purchase a certain condominium unit in Santa Clarita (the condo). However, she did not qualify for the loan, due to negative credit item(s) relating to a recent divorce.^[2] Therefore, Gloria and Wendolyn entered into an oral agreement under which (1) Wendolyn would apply for a loan to purchase the condo in her own name solely for the purposes of qualifying for the loan, (2) Gloria would make the downpayment and pay all closing costs from the proceeds of the sale of her home, (3) Wendolyn would quitclaim the condo to Gloria during escrow on the Condo purchase and sale, or within a reasonable time, such as some number of months thereafter, which could be extended at Glorias sole discretion for financial hardship or as a courtesy to her daughter, (4) Gloria was to be the primary resident of the condo, (5) Wendolyn would be permitted to live in the condo rent-free for an unspecified amount of time at Glorias sole discretion, (6) Glorias son, Robert Lima, would also be permitted to live in the condo rent-free at Glorias sole discretion, (7) Wendolyn and Lima would contribute to household expenses and perform various chores, and (8) Gloria would make all mortgage, homeowners association, and property tax payments.

Escrow closed in late August 2003, and title was vested solely in Wendolyns name. A quitclaim deed was not recorded when escrow closed. However, Wendolyn repeatedly reaffirmed (on a monthly and even weekly basis) her intention to sign such a deed, and she and Gloria agreed to put off the date when this would occur. Wendolyn provided these reassurances to Gloria on a regular basis until Glorias ouster from the condo in June 2006. At one point, Gloria believed a quitclaim deed would be executed during an August 2005 meeting involving the real estate agent who was involved in the purchase of the condo, but the agent advised Gloria to delay the matter until after her divorce became final.

Wendolyn and Lima (Glorias son), and their respective partners (Bryce Looney, Wendolyns husband, and Jazmin Villanueva, Limas girlfriend), ousted Gloria from the condo in June 2006.

Between the close of escrow and Glorias ouster, Gloria made all mortgage, homeowners association, and utility payments.

In January 2007, Gloria filed this lawsuit against, among others, Wendolyn, Looney, Lima and Villanueva (collectively, the defendants). The complaint contained approximately 15 causes of action, most of which centered on Glorias claim to the condo.

The following month, the defendants demurred to the causes of action relating to the condo based on (1) the applicable statutes of limitations, and (2) the doctrine of judicial estoppel.^[3]

The statute of limitations argument was based on the contention that (1) Gloria alleged there was an oral agreement that title to the condo would be conveyed to her when escrow closed (in August 2003) or immediately thereafter, (2) Gloria knew in late August 2003 that title to the condo was not conveyed to her, and (3) she did not file her action until more than three years later.

The judicial estoppel argument was based on the fact that Gloria did not include the condo when she listed her assets in both (1) a bankruptcy proceeding she filed in 2004, which was discharged in January 2005, and (2) a marital dissolution proceeding she filed in June 2006, which concluded with entry of a judgment in November 2006. In support of this contention, the defendants asked the court to take judicial notice of asset schedules and other documents which Gloria filed in the bankruptcy and marital dissolution proceedings. In the bankruptcy proceeding, Gloria did not list anything in the schedule section where a debtor is required to list all real property in which the debtor has any legal, equitable, or future interest . . . . In the marital dissolution proceeding, Gloria indicated None in the schedule section where parties are required to list their real estate assets even if they are in the possession of another person. In a financial statement Gloria filed in the same proceeding, Gloria selected the rent and not the mortgage box when asked about her monthly housing costs.

Gloria represented herself in both the bankruptcy and marital dissolution proceedings.^[4]There is no evidence concerning any hearings that may have taken place in either proceeding.

After hearing argument, the court sustained demurrers to all condo-related claims based on both the statute of limitations and judicial estoppel arguments.^[5]

Gloria filed a writ petition challenging the trial courts ruling. We notified the parties of our intention to issue a peremptory writ of mandate in the first instance (Palmav. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 180), directing the trial court to vacate its order sustaining the demurrers and to thereafter enter a new and different order overruling the demurrers. We also invited and received plenary opposition to the petition from the defendants. In their opposition, defendants elected not to invoke the statute of limitations as a basis for upholding the demurrer ruling. They argued only that Glorias claims were barred by the doctrine of judicial estoppel.

DISCUSSION

1. Standard of Review

It is not the ordinary function of a demurrer to test the truth of the plaintiffs allegations . . . . A demurrer tests only the legal sufficiency of the pleading. [Citation.] It admits the truth of all material factual allegations in the complaint . . .; the question of plaintiffs ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court. (Committee on Childrens Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.)

We review an order sustaining a demurrer de novo. We independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967; Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 998.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., 452; Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1120.)

2. The Trial Court Erred in Sustaining the Demurrers

a. Judicial estoppel

Judicial estoppel is an equitable doctrine aimed at preventing fraud on the courts. [Citation.] . . . [It] is invoked to prevent a party from changing its position over the course of judicial proceedings when such positional changes have an adverse impact on the judicial process . . . . The policies underlying preclusion of inconsistent positions are general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings. . . . Judicial estoppel is intended to protect against a litigant playing fast and loose with the courts. [Citation.] It seems patently wrong to allow a person to abuse the judicial process by first [advocating] one position, and later, if it becomes beneficial, to assert the opposite. (M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 463, first ellipses added.)

Because of its harsh consequences, the doctrine should be applied with caution and limited to egregious circumstances. (Gottlieb. v. Kest (2006) 141 Cal.App.4th 110, 132; see also Daar & Newman v. VRL International (2005) 129 Cal.App.4th 482, 491 [judicial estoppel is an extraordinary remed[y] to be invoked when a partys inconsistent behavior will otherwise result in a miscarriage of justice[,] original brackets].)

The doctrine applies when (1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake. (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986-987, italics added.)

Some of the above requirements--especially the fifth--will ordinarily involve factual questions that cannot be resolved by demurrer. Certainly in this case, the fifth requirement cannot be established at the pleading stage.

Based on our review of the bankruptcy and marital dissolution documents in the record, it appears that Gloria was required to list her alleged interest in the condo in both proceedings. However, at this stage of the litigation, there is no information from which one can determine whether Glorias failure to do so was the result of ignorance, fraud or mistake. Glorias alleged interest in the condo was equitable and contingent. There is no indication Gloria--who stated in a dissolution proceeding form that she worked as a cashier at Wal-Mart--has any legal training. (Indeed, there is no information regarding any aspect of her educational background.) It is not known if Gloria understood the nature of her alleged interest in the condo and that she may have been required to list such an interest in her bankruptcy and marital dissolution schedules. Moreover, there is no evidence concerning what advice, if any, she may have received before submitting the documents in the bankruptcy and marital dissolution proceedings. Thus, there is simply no basis to rule out the possibility that Glorias failure to list her alleged interest in the condo was the result of mistake, fraud or ignorance.

Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995 (Cloud), is on point. In that case, the trial court entered judgment on the pleadings in favor of the defendants in an action for wrongful termination and sexual harassment. Invoking the doctrine of judicial estoppel, the trial court determined the defendants were entitled to judgment on the pleadings because the plaintiff had failed to disclose any claim or potential claim in a schedule of assets she filed in bankruptcy court after her termination.

The Court of Appeal reversed.^[6] Among other things, the court stated: [N]ondisclosure in bankruptcy filings, standing alone, is insufficient to support the finding of bad faith intent necessary for the application of judicial estoppel. Yet nondisclosure, and nothing more, is all that could be established in this case by a review limited to plaintiffs complaint plus her bankruptcy filings. (Cloud, supra, 67 Cal.App.4th at p. 1019.) The court noted that consideration of whether a debtor has engaged in a deliberate scheme to mislead and gain unfair advantage, as opposed to having made a mistake born of misunderstanding, ignorance of legal procedures, lack of adequate legal advice, or some other innocent cause, requires consideration of the evidence.  . . . Hence the trial court should not have attempted to decide this issue on a motion for judgment on the pleadings.^[7] (Id. at p. 1020.)

The defendants rely heavily on Furia v. Helm (2003) 111 Cal.App.4th 945, where the Court of Appeal affirmed a judgment after the sustaining of a demurrer based in part on the doctrine of judicial estoppel. However, the fifth requirement for applying the judicial estoppel doctrine was not at issue. As the Court of Appeal stated, The only reason [plaintiff] contends that this doctrine does not apply here is that the allegations of his complaint are not truly inconsistent with the position he took in the earlier proceedings.^[8] (Id. at p. 958, italics added.)

Defendants reliance on Thomas v. Gordon (2000) 85 Cal.App.4th 113, is also misplaced. First, as a procedural matter, the court in that case affirmed a summary judgment, not a demurrer ruling. Second, as a factual mater, the case is distinguishable. In that case, the plaintiff was a highly sophisticated professional (a physician) with extensive business dealings. She sued her accountant for wrongdoing in connection with the latters work involving two corporations. Although she had no shares in the corporations, she claimed an equitable interest in them by virtue of having transferred assets to the corporations through her paramour. As the Court of Appeal explained, the plaintiff brazenly admit[ted] that she transferred her assets to keep them out of the hands of her creditors. (Id. at p. 119.) Accordingly, she did not list her alleged equitable interests in the corporations in documents she filed in a bankruptcy proceeding. However, she was careful to list various unliquidated claims in her bankruptcy documents. Under these facts, the court noted that [a]ssuming that the doctrine of judicial estoppel should be applied to an unsuccessful litigant only in the rare situation where the litigant has made an egregious attempt to manipulate the legal system, we agree with the trial court that this is as egregious as it gets . . . . (Id. at p. 119; see also id. at p. 121 [intent to deceive could be inferred from appellants admission that she formed the corporations to hide assets from her creditors and the failure to list the corporations in a bankruptcy petition filed two years later].) In short, under the facts of that case, there was no evidence that could support a finding the plaintiffs failure to list her alleged corporate interests in her bankruptcy proceeding was the result of ignorance, fraud or mistake. In this case, we are still at the pleading stage and have no evidence reflecting on Glorias state of mind when she failed to include her alleged interest in the condo in the bankruptcy and marital dissolution proceedings.

Accordingly, we conclude the trial court erred in sustaining the demurrer based on the doctrine of judicial estoppel.

b. The statute of limitations

Although defendants elected not to raise the statute of limitations argument in their opposition to the writ petition, they argued to the trial court that the claims relating to the condo were barred by various statutes that contain limitation periods of either two or three years. The trial court agreed with defendants argument. This was error for two reasons.

First, defendants argument before the trial court was premised on the assumption that Gloria claimed she and Wendolyn agreed that Wendolyn would quitclaim the deed to Gloria immediately upon the close of escrow. However, Gloria asserted in the complaint that the agreement was for the quitclaim deed to be signed and recorded at the close of escrow or within a reasonable time thereafter. What constitutes a reasonable time in this case is a factual question that cannot be resolved at the pleading stage. (See Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 30 [[W]hat constitutes a reasonable time is a question of fact, depending upon the situation of the parties, the nature of the transaction, and the facts of the particular case[,] original brackets].)

Second, the complaint alleges that Gloria and her daughter repeatedly agreed--up to the time of Glorias alleged ouster from the condo--to postpone the date on which Wendolyn would quitclaim the condo to Gloria. Therefore, there was no basis to conclude at the pleading stage that Gloria had reason to know at least two years before she filed her action that her daughter would not abide by the alleged agreement.

In light of the above, it was error to sustain the demurrers based on the statute of limitations.

DISPOSITION

The petition for writ of mandate is granted. The respondent court is directed to vacate its May 3, 2007 order sustaining the demurrers of real parties in interest, and to thereafter enter a new and different order overruling the demurrers.

Petitioner is entitled to recover her costs in this writ proceeding. (Cal. Rules of Court, rule 8.490(m).)

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

FLIER, J.

We concur:

COOPER, P. J.

RUBIN, J.

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^[1] Because they share the same last name, we refer to petitioner and her daughter by their first names.

^[2] As a technical matter, the reference to a recent divorce appears to be erroneous as the marital dissolution petition was not filed until 2006.

^[3] In a somewhat obscured argument, the defendants also claimed that a breach of contract cause of action was barred by the statute of frauds. In contrast to the statutes of limitations and judicial estoppel arguments, the statute of frauds contention was not presented in a separate section. In fact, the two-sentence argument was presented as part of the statute of limitations argument.

^[4] Gloria utilized a nonattorney to assist her in preparing the bankruptcy petition.

^[5] It is unclear from the record whether the respondent court sustained a demurrer to the breach of contract cause of action based on the statute of frauds. The petition does not raise a statute of frauds argument. We have had no occasion to consider that issue, and we express no opinion on it.

^[6] The motion for judgment on the pleadings performs the function of a general demurrer.  . . . The standard of appellate review of a judgment on the pleadings is, therefore, identical to that on a judgment following the sustaining of a demurrer. (Barker v. Hull (1987) 191 Cal.App.3d 221, 224.)

^[7] Defendants note that Cloud did not hold judicial estoppel determinations may never be made at the pleading stage. Defendants are correct. Where there is evidence in the complaint or in matters of which judicial notice may be taken that clearly and unequivocally refute any suggestion that the plaintiff took a totally inconsistent position in another proceeding out of ignorance, fraud or mistake, the doctrine may be invoked. However, defendants do not identify any such evidence in this case.

^[8] Moreover, the case is factually distinguishable. The case involved a contractor who claimed in the action that he had abandoned a particular project based on the wrongful advice of an attorney. Previously, however, the contractor had successfully argued before the Contractors State Licensing Board that he had not abandoned the project. It is hard to reconcile these conflicting positions or to attribute them to mistake or ignorance.