J.R. & A.R. Services v. City of Los Angeles
Filed 1/31/14 J.R. &
A.R. Services v. City of Los Angeles CA2/5
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opinion has not been certified for publication or ordered published for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 FIVE
J.R. &
A.R. SERVICES, INC.,
Plaintiff and Appellant,
v.
CITY OF LOS
ANGELES et al.,
Defendants and Respondents.
B245081
(Los
Angeles County
Super. Ct. No.
BC446460)
APPEAL
from a judgment of the Superior Court of
the County of Los Angeles, Deirdre Hill, Judge. Reversed and remanded.
C.
Timothy Lashlee for Plaintiff and Appellant.
Michael
C. Feuer, City Attorney, Brian I.
Cheng, Deputy City Attorney for Defendant and Respondent City of Los Angeles.
Tabatabai
& Blonstein, Farzad Tabatabai and Robert S. Blonstein for Defendant and
Respondent KOP Holdings, Inc.
J.R.
& A.R. Services, Inc. (J.R.) appeals from a judgment entered against it following
the trial court’s sustaining of the demurrer of KOP Holdings, Inc. (KOP) to the
first amended complaint (FAC) and granting of the motion for judgment on the
pleadings of the City of Los Angeles (the City) regarding the FAC. J.R. contends that the trial court erred
because J.R. stated facts sufficient to constitute the causes of action pleaded
in the FAC: the taking of property without due
process of law, negligence and declaratory relief asserted against the
City; “Restitution, Quasi-Contract Recovery,†conversion and
We
hold that the trial court did not err in granting the City’s motion for
judgment on the pleadings as to all of the causes of action asserted against it,
and in sustaining KOP’s demurrer as to the cause of action for declaratory
relief; and the trial court erred in sustaining KOP’s demurrer as to the causes
of action “Restitution, Quasi-Contract Recovery†and conversion. We reverse the judgment, and remand the
matter to the trial court to provide J.R. with an opportunity to amend the FAC.
FACTUAL BACKGROUND
J.R. alleged in
its FAC that in June 1998, it purchased “a residential duplex consisting of two
rental units†(property) in Los Angeles
and in or about January 2000, under the Utility Maintenance Program (UMP),
the City began accepting “rent payments from the tenant occupants of the real
property under UMP case #UP0624.†“While
UMP case number UP0624 was open, the City . . . received monthly rent
from the tenants of the Property and deposited said rents in an escrow account
and administered said account.
Thereafter, the City. . . charged and deducted a maintenance fee
from each payment received from the tenants and paid utility bills to the
[City’s Department of Water and Power (DWP)].â€
“The total rent paid by the tenants, collected and retained by the City . . . in
escrow, greatly exceeded the payments, charges, distributions, transfers and
other uses of funds made by the City . . . during the time the escrow
was open.†“All rent payments received
into the said escrow
accounts accrued and were paid while [J.R.] was the owner of the Property. At all times, from the date the first payment
was paid into the escrow account to the present, all such payments belonged to
and continue to belong to [J.R.] and to no other. At no time did [J.R.] assign, transfer,
forfeit or otherwise give up or lose its right to or ownership of such paymentsâ€
J.R. alleged
that in October 2007, Andrew Kwiat “acquired title†to the property, and J.R.
owned the property prior to Kwiat’s acquiring it.
property from Kwiat pursuant to a quitclaim deed.
J.R. alleged
that in June 2009, it sent a letter to the Los Angeles Housing Department (LAHD)
requesting an accounting of all rents received from the tenants of the property
and all expenses paid in connection therewith during the pendency of UMP case
number UP0624 concerning the subject property, and requested a check for the
balance. “No reply was received to the
request, the accounting [was] never produced and no funds were paid to
[J.R.]†J.R. made numerous telephone
calls to the LASD, and “left several messages†in an attempt to obtain a
response to the letter, but the telephone “calls were never returned.†On February 12, 2010, J.R. was informed by an LAHD employee that LAHD closed the UMP case
concerning the property, and that “he could not give [J.R.] any specific
information regarding the release of the funds except that they had been mailed
out.†J.R. alleged on information and
belief that KOP submitted “paperwork†to the City required by the City before
it would pay the remaining escrow funds to KOP; after September 29, 2009, the
City “paid the remaining escrow funds to KOP;†and prior to February 12, 2010,
[J.R.] did not receive notice or information that “the funds had been
paid.†On February 26, 2010, J.R. filed with the City a claim for damages for the failure to
pay to J.R. the escrow funds held at the close of the UMP case concerning the
property, and the City provided notice to J.R. that the claim had been
“rejected.â€
PROCEDURAL BACKGROUND
J.R. filed a
complaint against the City, LAHD and KOP.
The first through third causes of action were asserted against the City
and LAHD. The first cause of action was
for taking of property without due process of law; the second cause of action
was for negligence; and the third cause
of action was for declaratory relief.
The complaint’s
fourth and fifth causes of action were asserted against KOP. The fourth cause of action was for unjust
enrichment; and the fifth cause of action was for declaratory relief.
The complaint
attached J.R.’s Government Code section 915 et seq. claim (government claim)
submitted against the City on February 26, 2010. In describing how the damage or injury
occurred, J.R. stated in its government claim that its “tenant[s] paid rent
into UMP program from approx. 1-00 to approx. 10-07. After [the] property [was] removed from UMP
program, [J.R.] filed [a] demand for payment of [the] remaining funds. [The] City paid [the] funds to another
instead and refuses to pay [J.R.]†In
describing the particular act or omission J.R. claims caused the injury or
damage, J.R. stated in its government claim, “[The] [f]ailure to pay UMP funds
to the rightful owner, i.e., [J.R.].†Characterizing
J.R.’s government claim as one “concerning the alleged failure ‘to pay UMP
funds to the rightful owner,’†the City denied the claim.
The City
answered the complaint, and KOP filed a demurrer to it. The trial court sustained KOP’s demurrer with
leave to amend.
J.R. filed a FAC against the City, LAHD
and KOP. The FAC is at issue in this appeal.
of the causes of action contained in the FAC incorporates by reference the
prior paragraphs of the FAC. The FAC
prays for $32,921.79 in damages plus deductions from the escrow account “not
provided for by law or not properly documented,†interest, imposition of a
constructive trust against KOP in a sum to be determined at trial, costs of
suit, and such other relief as the trial court deems necessary and proper.
Under the FAC’s
introduction heading,
name="_ftnref4" title="">[4]
was “under a mandatory, non-discretionary duty to not deprive [it] of [its]
property without due process of law.†J.R.
alleged that article I, section 7, subdivision (a) of the California
Constitution states that a person may not be deprived of property without due
process of law, and Government Code section 815.6 states that a public entity
is liable for an injury proximately caused by the public entity’s failure to
discharge a mandatory duty imposed by an enactment designed to protect against
the injury, unless the public entity establishes that it exercised reasonable
diligence in discharging the duty.
The first
through third causes of action of the FAC were asserted against the City.
first cause of action was for taking of property without due process of law, alleging
that, “[LAMC] Section 155.07B[
name="_ftnref6" title="">[6]]
[providing in part that “the release of accumulated REAP [i.e., Rent
Escrow Account Program] funds to the landlord(s) subject to the provision of
the landlord(s)’s Social Security Number or Tax Identification Numberâ€], and
such other statutes, codes and regulations as [the City] may have relied upon
[to provide the funds to KOP instead of J.R.], are . . . either
unconstitutionally ambiguous and vague as to who the landlord is or provide for
a taking of property without due process of law and instead delivering such
property, in this case the remainder of the escrow funds, to a person or entity
that did not own the Property when such funds were paid into the escrow account
and at no time acquired ownership or any other interest of or in such funds by
assignment, purchase transfer or otherwise.â€
J.R. has been damaged “[a]s a result of the unconstitutional taking and
violation of [the City’s] mandatory and non-discretionary
duty . . . .â€
The second cause
of action was for negligence, alleging that the City was the custodian of funds
belonging to J.R. and “[as] such, [the City] owed a duty to [J.R.] to manage
such funds without injury to [J.R.]
Prior to the distribution of the funds to KOP, [the City] had knowledge
that there was a dispute as to the ownership of the funds or an objection to
the payment of the funds. As such, [the
City] owed a duty to [J.R.] to resolve such dispute or interplead such funds
and/or seek a judicial determination of the owner or such funds prior to paying
out such funds. When [the City] paid out
said funds to another, . . . [the City] breached [its] duty to
[J.R.]â€
The third cause
of action was for declaratory relief, seeking a judicial declaration of the
owner of the remaining escrow funds, whether the withdrawals of the funds were
proper, whether the City wrongfully paid such funds to a person or entity other
that J.R., and whether J.R. was damaged.
The fourth through
sixth causes of action were asserted against KOP. The fourth cause of action was for “Restitution,
Quasi-Contract Recovery†alleging on information and belief that the City “paid
the escrow funds remaining in the UMP account in the sum of $32,921.79, to KOP . .
. .†J.R. alleged that the rents
paid by the tenants to the said escrow account were its personal property, and
“[b]y receiving and retaining the $32,921.79, [KOP] obtained an identifiable sum
of money . . . to which [KOP was] not entitled, for which [it] gave
no consideration and for which [KOP] are indebted†to J.R. “[I]t is unjust for [KOP] to continue to
retain such funds,†and J.R. has been damaged.
The fifth cause
of action for conversion alleged that “the retention of the funds by [KOP] is
wrongful and constitutes conversion.†The
sixth cause of action was for declaratory relief in which J.R. sought a
judicial declaration of the owner of the remaining escrow funds, and whether
J.R. was damaged.
The
City answered the FAC, and KOP filed a demurrer to it on the grounds that each
of the causes of action asserted against KOP failed to state facts sufficient
to constitute causes of action against KOP.
KOP filed a request for judicial notice in support of its demurrer,
requesting that the trial court take judicial notice of the City’s notice of
acceptance of the property into UMP/REAP, dated February 18, 2000, stating that
“[LAHD] has accepted [the] property into the [UMP] because of unpaid delinquent
utility bills owed to the [DWP] by the landlord;†tax deed to purchaser of
tax-defaulted property, filed with the Los Angeles County official records
recorder’s office on October 19, 2007, stating there was a tax lien on the
property and a default of payment of the levied taxes on the property, and the
property was sold by the Los Angeles County treasurer and tax collector to
Kwiat; the City’s notice of general manager’s hearing and notice of acceptance
into [REAP], dated October 9, 2007, stating that the property was placed into
REAP “because the property [was] the subject of one or more Orders issued by [
. . [had] expired without compliance;†the LAHD’s notice of removal
of property from REAP, dated October 31, 2008; and sections 155.00 through
155.09, and 162.01 through 162.08.
J.R.
opposed the demurrer, stating, inter alia, that “[J.R.] is prepared to amend
its [FAC], if necessary, to state the following: ‘When [J.R.] became the owner of the Property,
the [DWP] refused to accept [J.R.’s] utility payments due to DWP’s
misunderstanding as to the owner of the property. As a result, [J.R.] voluntarily allowed the
property to be accepted into the UMP.’â€
At
the hearing on the demurrer, following argument by counsel, the trial court
stated, “The tentative [ruling] will be the ruling.†The record before us does not contain the
trial court’s tentative ruling. Following
the hearing on the demurrer, the trial court issued a minute order stating that
KOP’s request for judicial notice was granted and the demurrer was sustained
without leave to amend.
The
City filed a motion for judgment on the pleadings. J.R. opposed the motion, requesting leave to
file an amended complaint against the City if the trial court deemed the FAC to
be insufficient. J.R. did not state in what
respects it proposed to amend the FAC.
The City and J.R. filed requests for judicial notice.
At
the hearing on the motion for judgment on the pleadings, the trial court took
the matter under submission, and thereafter issued a written ruling granting
the motion without leave to amend. The record
does not disclose whether the trial court ruled on the requests for judicial
notice made by the City and J.R.
As
to the first cause of action for taking property without due process, the trial
court stated in its written ruling that “As a matter of law, [J.R.] did not
have an interest in the escrow contents at the time the City turned over the
money to KOP. [LAMC section] 162.08
regulates the return of rents collected in escrow at the termination of
REAP. This code section states at sec.
162.08 D1: If the City Council
terminates the escrow account, any funds shall be paid [in an order specified
in the section
and] [¶] . . . [¶] [a]ny remaining
funds shall be returned to the current landlord. [¶] The
code explicitly states that remaining funds are to be returned to the ‘current
landlord.’. . . [J.R.] did not fall under the definition of
‘current landlord.’ [¶] Moreover, [J.R.] lacks any cognizable
injury and Article III standing. The
allegations show that [J.R.] did not own the property when the escrow account
was closed. [¶] [J.R.] argues that the City’s ordinance was
either unacceptably vague because the UMP ordinance does not define ‘landlord’
and the word ‘landlord’ as defined in section 151.02 of the REAP ordinance can
only relate to [J.R.] [J.R.] also
contends that the ordinance is constitutionally void because there is no claim
procedure or a provision for a hearing.
‘It is by now well established that legislative Acts adjusting the
burdens and benefits of economic life come to the Court with a presumption of
constitutionality, and that the burden is on one complaining of a due process
violation to establish that the legislature has acted in an arbitrary and
irrational way. We therefore consider
the sufficiency of the evidence of a substantive due process violation arising
from arbitrary or irrational actions.’ Stubblefield
Construction Co. v. City of San Bernardino
(1995) 32 Cal.App.[4th 687, 709]. Here
there are no allegations that the City acted arbitrar[ily] or irrationally.â€
As
to the second cause of action for negligence, the trial court stated in its
written ruling, that “Negligence is not a
cognizable theory of liability against the City. There is no common law theory of negligence
liability. Plaintiff fails to allege any
statutory liability. [¶] Defendant also argues that the
City has immunity when performing official acts. The City Council removed the property from
REAP and closed the escrow account on 10/29/08. A date after plaintiff lost the property.â€
As
to the third cause of action for declaratory relief, the trial court stated
that, “Here, plaintiff is attempting to address a “past wrong,†which is improper
under a cause of action for declaratory relief.
The allegations are insufficient because there is no actual
controversy. [¶] Further, a cause of action for
declaratory relief cannot be used as an attack upon an order of an
administrative agency. Escrow Owners
Assoc., Inc. v. Taft Allen (1967) 252 Cal.App.2d 506, 510.†The trial court granted the motion without
leave to amend.
Judgment
was entered against J.R.
name="_ftnref7" title="">[7]
DISCUSSION
A. Standard
of Review
In
reviewing a judgment on the pleadings, we apply the same rules governing the
review of a demurrer dismissed. (
33 Cal.4th 1, 32.) “On appeal from a
judgment dismissing an action after sustaining a demurrer without leave to
amend, the standard of review is well settled. The reviewing court gives the complaint a
reasonable interpretation, and treats the demurrer as admitting all material
facts properly pleaded. [Citations.] The court does not, however, assume the truth
of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of
the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to
sustain a demurrer when the plaintiff has stated a cause of action under any
possible legal theory. [Citation.] And it is an abuse of discretion to sustain a
demurrer without leave to amend if the plaintiff shows there is a reasonable
possibility any defect identified by the defendant can be cured by amendment. [Citation.]â€
(Aubry v. Tri-City Hospital Dist.
(1992) 2 Cal.4th 962, 966-967.) The
legal sufficiency of the complaint is reviewed de novo. (Montclair Parkowners Assn. v. City of Montclair (1999) 76
Cal.App.4th 784, 790.)
B. Applicable
Law
1. UMP
Plaintiff
alleges that sometime between September 29, 2009, and when
plaintiff learned of it on February 12, 2010, the City paid
the balance of the escrow funds—$32,921.79—to KOP. During that time, the LAMC set forth the UMP
in sections 155.00 et seq. Section 155.00 provided that, “Many Los Angeles City tenants
reside in master-metered apartment buildings and pay for essential utility
service through their rent payment to the landlord. The landlord has the financial obligation to
pay the Department of Water and Power for utility
services. [¶] A crisis now exists in the City. There are approximately 11,000 master-metered
apartment buildings whose owners have failed to pay for utility services. Tenants who pay rent which include the cost
of utilities face utility service termination due to the diversion of funds by
the owners. The termination of utility
service to a master-metered apartment building would make the building
uninhabitable pursuant to California Civil Code Section 1941.1
purpose of this ordinance is to offer tenants an alternative to service
terminations in master-metered apartment buildings. Tenants who participate in the [UMP] have the
option of paying their rent into an escrow account to maintain utility services. The UMP is built on the existing [REAP].â€
The
DWP “may refer to†the LAHD “any building subject to†the City of Los Angeles’s
Rent Stabilization Ordinance [RSO] if the DWP has failed to collect a utility
bill that is due and provided a “notice of utility shut-off.†(§ 155.02, subd.
A.) “Within five working days after
receiving notification from DWP, LAHD shall give to the landlord(s), any
interested parties, and tenants a Notice of Eligibility to place the building
into REAP. The Notice of Eligibility
shall provide written notification to the landlord(s) of the eligibility of the
building for placement into REAP . . . . The Notice of Eligibility shall provide a
description of UMP and REAP and specify that within seven calendar days from
the date of the notice, the landlord(s) may request a hearing. If no hearing is requested, LAHD shall make a
determination on the eligibility of the building for acceptance in REAP. The Notice of Eligibility shall also state
that if the building is placed into REAP, LAHD shall establish an escrow
account for the deposit of monthly rent payments . . . and that
escrow funds may be paid to DWP to maintain utility services to avoid having
the building become uninhabitable and in violation of Civil Code Section 1941.
et seq.†(§ 155.02, subd. B.) “Within ten working days of the acceptance of
a building into REAP, [the City] shall establish as a part of the REAP Trust
Fund, an account for the building into which tenants may deposit rent
payments.†(§ 155.05, subd. A.)
Section
155.06 provided, in part, that “[t]he
funds paid into the escrow account shall. . . be expended on the
following items: [¶] A.
The non-refundable administrative fee of $50.00 for each rent payment
made into REAP. [¶] B.
Funds paid in accordance with a court order. [¶] C. Funds paid to DWP for the amount required to
maintain utility services for the date of the referral pursuant to Section
155.02 A of this Code. [¶] D.
Funds returned to the landlord(s) when payment arrangements have been
reached to the satisfaction of DWP. [¶] E. Excessive
escrow funds after payment of DWP delinquent utility bills. [¶] a.
Funds returned to the landlord(s) where the landlord(s) has provided LAHD
with proof that the deficiencies have been corrected. [¶] b.
Funds returned to the landlord(s) when the landlord(s) is in compliance
with any order or citation issued by the City Departments of Building and
Safety and Fire, and the County Department of Health Services, the landlord(s)
has complied with the unit registration requirement of the RSO, and the
building is not in REAP.â€
Section
155.07, subdivision A provided that the City “shall administratively remove
buildings from REAP if each of these findings can be made:
[¶] 1. No delinquent DWP bills as reported to [the City] by
DWP; [¶] 2. The building has not also been placed into
REAP pursuant to Section 162.00 et seq.; and [¶] 3. The
landlord(s) has complied with the unit registration requirements of the RSO.†“Within ten days of [the City] removing the
building from REAP, LAHD will make a demand to the Controller of [the City] for
the release of accumulated REAP funds to the
landlord(s)[
subject to the provision of the
landlord(s)’ Social Security Number or Tax Identification Number.†(§ 155.07, subd. B; italics added.)
2. REAP
At
the time plaintiff alleges that the City paid the balance of the escrow funds
to KOP—between September 29, 2009, and February 12, 2010, sections 162.00 et
seq. set for REAP. Section 162.01,
subdivision A, provided that, “It is
the purpose of the provisions of this article to provide a just, equitable and
practical method, to be cumulative to and in addition to any other remedy
available at law, to enforce the purposes of the Housing Code set forth in
Section 161.102 and to encourage compliance by landlords with respect to the
maintenance and repair of residential buildings, structures, premises and
portions of those buildings, structures and premises.â€
“Any
City or County agency or any tenant may refer any building or residential unit
within the scope of this article to the Department for inclusion in REAP if the
following conditions are met:
[¶] 1. The building or unit is subject of one or more Orders
[i.e., orders or notice to comply, correct or abate a condition or violation
issued by the Los Angeles County’s Department of Health Services; the City’s
Departments of Building and Safety, Fire or Housing; the California Department
of Housing and Community Development; their successors; or any other governmental
agency that inspects rental units for the purpose of inspecting for compliance
with health and safety laws]; [¶] ii. The period allowed
by the Order for compliance . . . has expired without
compliance; and [¶] iii. The violation affects the health
or safety of the occupants or, if the until is subject to the RSO, the
violation results in a deprivation of housing
services . . . or a habitability
violation . . . .†(§ 162.03.)
“After completing its review, the Department shall accept the building
or unit into REAP if the conditions set forth in Section 162.03 are met.†(§ 162.04, subd. C.)
“Within
five working days after the decision accepting a building into REAP has become
final, the Department shall establish as part of the REAP Trust Fund an account
for the building into which tenants my deposit rent payments.†(§ 162.07, subd. A.) Withdrawals may be made from the escrow
account, inter alia, “when necessary to prevent a significant diminution of an
essential service to the building, including utilities,†“when necessary for
the correction of deficiencies, including but not limited to those that caused
the acceptance into REAP,†and when ordered by a court. (§ 162.07, subd. B, 1 and 2; italics added.) “If the City Council terminates the escrow .
. .: [¶] . . . [¶] Any remaining
funds [after the payment of certain designated fees] shall be returned to
City
a) Timeliness of Government Claim
The City contends that J.R.’s claims
against it are barred because J.R.’s government claim against the City was
untimely. We disagree.
Government
Code section 911.2, subdivision (a) provides that “A claim relating to
a cause of action for .
. . injury . . . to personal property . . . shall
be presented as provided in Article 2 (commencing with Section 915) not
later than six months after the accrual of the cause of action. A claim relating to any other cause of action
shall be presented as provided in Article 2 (commencing with Section 915) not
later than one year after the accrual of the cause of action.â€
Although section
155.00, a section under the UMP, provided that, “The UMP is built on the
existing [REAP],†section 155.07, subdivision B, also
under UMP, provided that any excess escrow funds shall be released to “the
landlord(s)†upon termination of UMP.
J.R. alleged that the funds should have been release to it instead of to
KOP under section 155.07, subdivision B because J.R. was
the “landlord†at the time the tenants’ rents were paid into the escrow
account. “‘In statutory construction
cases, our fundamental task is to ascertain the intent of the lawmakers so as
to effectuate the purpose of the statute.’
[Citation.] ‘“We begin by
examining the statutory language, giving the words their usual and ordinary
meaning.â€â€™ [Citation.] As a general rule of statutory construction,
‘where possible, significance should be given to every word, phrase, sentence
and part of an act in pursuance of the legislative purpose.’ [Citation.]
‘If the terms of the statute are unambiguous, we presume the lawmakers
meant what they said, and the plain meaning of the language governs.’ [Citations.]â€
(Hoffman v. Smithwoods RV Park,
LLC (2009) 179 Cal.App.4th 390, 398-399.)
J.R. alleged
that from the date the first payment was paid into the escrow account to the
present, all rental payments paid into the escrow account belonged to and
continue to belong to J.R., and J.R. did not assign, transfer, forfeit or
otherwise lose its right to the funds.
“Under general principles of property and contract law, a sale or
assignment does not transfer the seller/assignor-landlord’s claims for back-due
rent (preexisting rent defaults) unless expressly so provided in the instrument
of transfer. Rents due and owing become personal property (mere choses in
action) which are not part of the land and do not pass as incidents of a
transfer of real property subject to a lease . . . .†(Friedman et al.,
Cal. Practice Guide: Landlord-Tenant (The Rutter Group 2013) ¶ 2:522.5, p.
2B-158.1 (rev. # 1, 2009); see Lucky Auto
Supply v. Turner (1966) 244 Cal.App.2d 872, 885-886; Ginsberg v. Austin (Fed. Cir. 1992) 968 F.2d 1198, 1201.)
J.R. submitted
its government claim against the City on February 26, 2010. A government claim accrues
on the date of actual or constructive discovery of the allegedly wrongful
act. (Martinez v. County of Los Angeles (1978) 78 Cal App 3d 242, 245.) “The reasonableness of a delayed discovery is
usually a question of fact but may be a question of law when the allegations of
the complaint bearing on whether the plaintiffs had constructive notice of
allegedly undiscovered facts are susceptible to only one legitimate inference
[citation].†(Christ v. Lipsitz (1979) 99
Cal.App.3d 894, 898.)
The
City argues that J.R.’s government claim was untimely because J.R.’s claims
against the City asserted in the FAC accrued when the property was transferred
from J.R. in 2007, pursuant to the tax sale. According to the City, at the time of the tax
sale J.R., knew or should have known that “any excess funds in the REAP escrow
account would not be paid to†J.R. J.R.’s FAC alleges that it was damaged when the City distributed the
excess escrow funds to KOP, and J.R. learned of it after the distribution
occurred. There is no evidence in the
record consisting of the allegations in the FAC and matters judicially noticed that
J.R. knew or should have known at the time of the tax sale that
any
excess funds in the REAP escrow account would not be paid to it and instead would
be paid to KOP.
The
City proposes, without argument or authority, that “other reasonable accrual
dates could be†when the tenants ceased paying rent into the UMP escrow—at
about the time the property was sold pursuant to the tax sale; in October 2008,
when the City heard KOP’s motion to remove the property from REAP; or on June
2, 2009, when J.R. requested an accounting of all rents from the City. The tenants ceasing to
pay rent into the UMP escrow does not support the proposition that J.R. knew or
should have known that the excess escrow funds would not be paid to it and
instead was paid to KOP. In addition,
there is no evidence in the record that J.R. knew or should have known that in October 2008, the City knew of KOP’s motion to remove the property
from REAP. Moreover, J.R.’s request for
an accounting of all rents from the City does not support the
proposition that J.R. knew or should have known that the excess escrow funds
would not be paid to it but instead was paid to KOP, particularly because J.R.
alleged that it never received a reply to its request for an accounting, and
its subsequent telephone messages to the City were never returned.
b) Immunity for Discretionary Acts
The
City contends that “[t]o the extent . . . that the City’s payment of
the funds . . . is considered [a] discretionary [act], the City is immune from
liability†to J.R. Government Code
section 820.2 states, “Except as otherwise provided by statute, a public
employee is not liable for an injury resulting from his act or omission where
the act or omission was the result of the exercise of the discretion vested in
him, whether or not such discretion be abused.â€
The
City’s payment of the excess escrow funds upon the removal of the building from
REAP is mandatory, not discretionary. “Within
ten days of [the City] removing the building from REAP, LAHD
[the City] for the release of accumulated
REAP . . . .†(§ 155.07,
subd. B; italics added.) Government Code
section 820.2, therefore, does not render the City immune from liability to
J.R.
c) Due Process
J.R. contends that the UMP ordinances
California Constitution which provides that a person may not be deprived of life,
liberty, or property without due process of law.
alleged violation of due process may not be if an alternative remedy is
available.
There is no
damages claim for an alleged violation of due process if a meaningful
alternative remedy is available to the plaintiff. (Katzberg
v. Regents of University of California (2002) 29 Cal.4th 300, 328 [“The
availability of meaningful alternative remedies leads us to decline to
recognize a constitutional tort to remedy the asserted violation of article I,
section 7(a)â€].) J.R. did not allege
that there is and was no alternative remedy to a damages claim for
an alleged violation of due process available to it. The trial court therefore did not err in
granting the City’s motion concerning the cause of action for taking of
property without due process of law.
d) Negligence
J.R.’s cause of
action for negligence, alleged that the City was the custodian of escrow funds
belonging to J.R. and owed a duty to J.R. to manage those funds without injury
to J.R. J.R. alleged that when the City
paid the funds to KOP, the City breached its duty owed to J.R. The City contends that J.R. abandoned its
cause of action for negligence by failing to argue it adequately in its briefs
that it did not argue the cause of action for negligence was “viable,’ and that
the cause of action “is pretty well gone.â€
J.R. abandoned
that cause of action by failing to argue it adequately in its briefs before
this court. Courts have said, “‘[w]hen
an issue is unsupported by pertinent or cognizable legal argument it may be
deemed abandoned and discussion by the reviewing court is unnecessary. [Citations.]’ [Citation.]†(R.A.
Stuchbery & Others Syndicate 1096 v. Redland Ins. Co. (2007) 154
Cal.App.4th 796, 801-802, fn. 3; Plotnik
v. Meihaus (2012) 208 Cal.App.4th 1590, 1615 [“Since [the defendant] does
not address the issue, we treat it as abandoned . . . .â€]; see Cal.
Rules of Court, rule 8.204.)
e) Declaratory Relief
The
trial court granted the City’s motion for judgment on the pleadings as to the
third cause of action declaratory relief contained in its FAC. As with its negligence cause of action
discussed above, J.R. abandoned its declaratory relief cause of action by
failing to argue it adequately in its briefs before this court. (R.A.
Stuchbery & Others Syndicate 1096 v. Redland Ins. Co.,
fn. 3; Plotnik v. Meihaus,
Cal. Rules of Court, rule 8.204.)
The
City contends, and J.R. does not oppose, that even if J.R. did not abandon his
cause of action for declaratory relief, the trial court did not err in granting
the City’s motion as to that cause of action because it merely addresses an
alleged past wrong—the City’s payment of the remainder of the escrow funds to
KOP. We agree with the City.
“‘“The
fundamental basis of declaratory relief is the existence of an
(American Way Cellular, Inc. v.
Travelers Property Casualty Co. of
“‘[A]n actual, present controversy must be pleaded specifically.’ .
. . [Citations.]†(City
of Cotati v. Cashman (2002) 29 Cal.4th 69, 80; Escrow Owners Assn., Inc. v. Taft Allen, Inc., supra, 252 Cal.App.2d at p. 510 [“an action for declaratory
relief is not proper procedure unless an actual controversy exists between the
partiesâ€].) “‘The controversy must be
definite and concrete, touching the legal relations of parties having adverse
legal interests. [Citation.] It must be
a real and substantial controversy admitting of specific relief through a
decree of a conclusive character . . . .’†(Pacific
Legal Foundation v. California Coastal Com (1982) 33 Cal.3d 158, 170-171.) “The
court may sustain a demurrer on the ground that the complaint fails to allege
an actual or present controversy, or that it is not ‘justiciable.’†(DeLaura
v. Beckett (2006) 137 Cal.App.4th 542, 545.)
“‘[W]e
have found no authority for the proposition that declaratory relief is proper
procedure when the rights of the complaining party have crystallized into a
cause of action for past wrongs, all relationship between the parties has
ceased to exist and there is no conduct of the parties subject to regulation by
the court.’ [Citation.] ‘There is unanimity of authority to the
effect that the declaratory procedure operates prospectively, and not merely
for the redress of past wrongs. . . .’ [Citation.]â€
(Osseous Technologies of America,
Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 367.)
“Declaratory
relief generally operates prospectively to declare future rights, rather than
to redress past wrongs. [Citations.]
It serves to set controversies at rest before they lead to repudiation
of obligations, invasion of rights or commission of wrongs. In short, the remedy is to be used in the
interests of preventive justice, to declare rights rather than execute them. [Citation.]â€
(Jolley v.
Accordingly, J.R. has not stated facts sufficient to constitute a cause
of action for declaratory relief.
f) Leave to Amend
J.R.
contends that the trial court abused its discretion in not allowing J.R. to
amend the FAC against the City. We agree.
The
same rules apply to our review of a judgment on the pleadings as we apply to a
review of a dismissal based on the sustaining of a demurrer. (Gerawan
Farming, Inc. v. Kawamura, supra,
33 Cal.4th at p. 32.) The trial court
abuses it discretion by sustaining a demurrer without leave to amend if the
plaintiff shows there is a reasonable possibility any defect identified by the
defendant can be cured by amendment. (
J.R.
was never granted leave to amend its allegations against the City in any of its
two operative complaints. As to the
initial complaint, the City answered it.
KOP demurred to it, and the demurrer was sustained with leave to
amend. J.R. therefore filed a FAC. The allegations against the City in the
original complaint and the FAC, however, are identical.
The
basic facts alleged in the FAC are that J.R. owned the UMP escrow funds, the
City received and held those funds for the benefit of J.R. and J.R.’s tenant’s
pursuant to UMP, the City was limited in the uses it could make of the escrow
funds, and upon closure of the UMP escrow account the City improperly
transferred the excess escrow funds to KOP.
J.R. contends that no new facts are required to amend the FAC, and that even
though other theories are available, those theories need not be pleaded. But to defeat a demurrer or judgment on the
pleadings, a new unpleaded theory cannot be raised. (Government
Employees Ins. Co. v. Superior Court (2000) 79 Cal.App.4th 95, 98-99, fn.
4; Roth v. Rhodes (1994) 25
Cal.App.4th 530, 541; City of Hope Nat.
Medical Center v. Superior Court (1992) 8 Cal.App.4th 633, 639.)
J.R.
identified theories that it can plead, such as conversion and money had and received. This court may permit such an amendment. (KFC
Western, Inc. v. Meghrig (1994) 23 Cal.App.4th 1167, 1181-1182.) It appears that amending the FAC here,
including to allege different legal theories or new causes of action based on
the facts already alleged in the FAC would not subject those new claims to be
barred by the applicable statute of
limitations. “An amended complaint is
considered a new action for purposes of the statute of limitations only if the
claims do not ‘relate back’ to an earlier timely filed complaint. Under the relation-back doctrine, an
amendment relates back to the original complaint if the amendment (1) rests on
the same general set of facts; (2) involves the same injury; and (3) refers to
the same instrumentality. [Citations.] An amended complaint relates back to an
earlier complaint if it is based on the same general set of facts, even if the
plaintiff alleges a different legal theory or new cause of action. [Citations.]†(Pointe
San Diego Residential Community, L.P. v. Procopio, Cory, Hargreaves &
Savitch, LLP (2011) 195 Cal.App.4th 265, 276-277.)
2. KOP
a) Timeliness of Government Claim
KOP
contends that J.R.’s causes of action against it are barred because J.R. claims
against it are derivate of J.R.’s s claims against the City but J.R.’s
government claim against the City was untimely. Even if J.R.’s causes of action against KOP
would be barred if J.R.’s government claim against the City was untimely, because
we hold above that J.R.’s government claim against the City was timely, KOP’s contention
fails.
b) Restitution, Quasi-Contract Recovery
The
fourth cause of action asserted against KOP was entitled “Restitution,[
sustaining KOP’s demurrer to that cause of action on the ground J.R. failed to
allege facts sufficient to constitute a cause of action. We agree.
“‘Quasi-contract’ is simply another way of
describing the basis for the equitable remedy of restitution when an unjust
enrichment has occurred. Often called
quantum meruit, it applies ‘[w]here one obtains a benefit which he may not
justly retain . . . . The
quasi-contract, or contract “implied in law,†is an obligation created by the
law without regard to the intention of the parties, and is designed to restore
the aggrieved party to his former position by return of the thing or its
equivalent in money.’ [Citation.] ‘The so-called “contract implied in law†in
reality is not a contract.
[Citations.] “Quasi-contracts,
unlike true contracts, are not based on the apparent intention of the parties
to undertake the performances in question, nor are they promises. They are obligations created by law for
reasons of justice.†[Citation.]’ [Citation.]â€
(McBride v. Boughton,
6.)
“[R]estitution may be awarded where the
defendant obtained a benefit from the plaintiff by fraud, duress, conversion,
or similar conduct. In such cases, the
plaintiff may choose not to sue in tort, but instead to seek restitution on a
quasi-contract theory (an election referred to at common law as ‘waiving the
tort and suing in assumpsit’). [Citations.]
In such cases, where appropriate, the law will imply a contract (or
rather, a quasi-contract), without regard to the parties’ intent, in order to
avoid unjust enrichment.†(
Cal.App.4th 388, footnote omitted.) “
“‘Under the law
of restitution, “[a]n individual is required to make restitution if he or she
is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a
benefit at another’s expense. [Citation.]â€
[Citation.] However,
“[t]he fact that one person benefits another is not, by itself,
sufficient to require restitution. The
person receiving the benefit is required to make restitution only if the
circumstances are such that, as between the two individuals, it is
[Citation.]†(
J.R. pleaded
facts sufficient to constitute a cause of action for quasi-contract against
KOP. J.R. alleged that the money
received by KOP was J.R.’s personal property, and it is “unjust†for KOP to
retain it.
KOP contends
that J.R. had unclean hands and cannot pursue its claim for restitution under a
quasi-contract theory. “He who comes
into equity must come with clean hands. (
[230 P.2d 816] [unclean hands precludes assertion of do equity doctrine and
rights of subrogation and restitution].) Unclean hands is an affirmative defense in
actions seeking equitable relief. [Citation.]â€
(Wilson v. S.L. Rey, Inc.
(1993) 17 Cal.App.4th 234, 245.) “The
doctrine demands that a plaintiff act fairly in the matter for which he seeks a
remedy. He must come into court with
clean hands, and keep them clean, or he will be denied relief, regardless of
the merits of his claim. [Citations.]
The defense is available in legal as well as equitable actions. [Citations.]†(Kendall-Jackson
Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978.)
KOP contends
that J.R. had unclean hands because J.R. owned, operated, and maintained the
property in a “slipshod†manner thereby “forc[ing] the City to step in and collect
the rent and utility proceeds to ensure the Property was receiving at least the
minimum level of health and safety services necessary for the protection of its
tenants.†“Whether the doctrine of
unclean hands applies is a question of fact. [Citation.]â€
(Kendall-Jackson Winery, Ltd. v.
Superior Court, supra, 76
Cal.App.4th at p. 798; Fibreboard Paper
Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675,
727 [“the application of the doctrine raises primarily a question of factâ€].) The record is devoid of any facts from which a
determination that J.R. had unclean hands can be made.
The record provides that while J.R. owned the
property, the property was placed in UMP because J.R. failed to pay its utility
bills owed to DWP, and it ceased to own the property because the property was
sold pursuant to an unsatisfied tax lien.
In opposing KOP’s demurrer, J.R. stated that it was prepared to amend
its FAC, if necessary, to state, “When [J.R.] became the owner of the Property,
the [DWP] refused to accept [J.R.’s] utility payments due to DWP’s
misunderstanding as to the owner of the property. As a result, [J.R.] voluntarily allowed the
property to be accepted into the UMP program.’â€
In ruling on a demurrer,
a trial court may not “make any factual findings at all, including ‘implicit’
ones.†(Mink v. Maccabee (2004) 121 Cal.App.4th 835, 839;
Cal.App.4th 912, 943 [“[t]he court erred in making that factual determination
on demurrerâ€].) Questions of fact are
not amendable to resolution on demurrer.
(Alexander v. Exxon Mobil
(2013) 219 Cal.App.4th 1236, 1240.) The
determination of a question of fact requires consideration and weighing of
evidence from both sides before it can be resolved. (Klein
v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1380-1381;
Cal.App.4th 217, 226-227 [“The question
whether consumers are likely to be deceived is a question of fact that can be
decided on a demurrer only if the facts alleged in the complaint, and facts
judicially noticed, compel the conclusion as a matter of law that consumers are
not likely to be deceivedâ€]; TracFone
Wireless, Inc. v. County of Los Angeles (2008) 163 Cal.App.4th 1359, 1368
[questions of fact may be resolved on demurrer only when there is only one
legitimate inference to be drawn from the allegations of the complaint];
Cal.App.3d 155, 162-163 [in considering
the timeliness of a complaint, the court held that the date of the state’s
mailing of a notice rejecting appellant’s claim was a question of fact not
subject to resolution by demurrer].) The
allegations of the FAC and matters judicially noticed do not compel us to
conclude that J.R. had unclean hands.
c) Conversion
“‘Conversion
is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1)
the plaintiff’s ownership or right to possession of the property; (2) the
defendant’s conversion by a wrongful act or disposition of property rights; and
(3) damages. . . .
[Citation.]’†(
(2012) 209 Cal.App.4th 1383, 1387; see CACI 2100; Gruber v. Pacific States Sav. & Loan Co. (1939) 13 Cal.2d 144,
148 [conversion is the wrongful exercise of
dominion “over another’s personal property in denial of or inconsistent
with his rights thereinâ€].) “‘Conversion
is a strict liability tort. The
foundation of the action rests neither in the knowledge nor the intent of the
defendant. Instead, the tort consists in
the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant’s good
faith, lack of knowledge, and motive are ordinarily immaterial. [Citations.]’
[Citation.] The basis of a conversion
action ‘“rests upon the unwarranted interference by defendant with the dominion
over the property of the plaintiff from which injury to the latter results. Therefore, neither good nor bad faith, neither
care nor negligence, neither knowledge nor ignorance, are the gist of the action.†[Citations.]’
[Citation.]†(
supra, 209 Cal.App.4th at p. 1387; see
PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
(2007) 150 Cal.App.4th 384, 395.) Money
may be the subject of conversion if the claim involves a specific, identifiable
sum; it is not necessary that each coin or bill be earmarked. (Haigler
v. Donnelly (1941) 18 Cal.2d 674, 681.)
J.R.
alleged that a specific, identifiable sum of money had been converted by
KOP—$32,921.79. KOP contends, however,
that J.R. did not plead that KOP committed a wrongful act to convert the excess
escrow funds. KOP also contends that it
is not liable to J.R. for conversion because it was an innocent purchaser of
the property for value and without notice, actual or constructive. As stated above, however, a defendant’s bad
faith, negligence, knowledge, or intent is immaterial for a valid conversion
claim. (Los Angeles Federal Credit Union v. Madatyan, supra, 209
Cal.App.4th at p. 1387; see PCO, Inc. v.
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, supra, 150
Cal.App.4th at p. 395.)
In
addition, there is no evidence in the record of the value paid by KOP to
acquire title to the property. KOP
argues in its respondent’s brief, without citation to the record, that “KOP
paid $300,000 for the property when sold at the tax sale.†J.R. alleged that in October 2007, Kwiat acquired
title to the Property, and in November 2007, KOP acquired title to the property
from Kwiat pursuant to a quitclaim deed. J.R. does not allege the value paid by KOP to
acquire title to the property. In
addition, the record belies KOP’s unsupported contention that it acquired the
property when it was sold at the tax sale.
The trial court granted KOP’s request for judicial notice in support of
its demurrer that included a tax deed stating that the property was sold by the
treasurer and tax collector of Los Angeles County for non-payment of taxes to
Kwiat—not KOP.
KOP
also cites Oakdale Village Group v. Fong
(1996) 43 Cal.App.4th 539, at page 546, for the proposition that, “[I]t is a
general rule that an innocent purchaser for value and without notice, actual or
constructive, that his vendor had secured the goods by a fraudulent purchase,
is not liable for conversion.†The goods
that were purchased in that case, however, were the goods allegedly
converted. (Id. at p. 543.) There is no
evidence in the record that KOP was an innocent purchaser of the property that
is the subject of J.R.’s conversion action—the excess funds in the escrow
account.
J.R.
stated facts sufficient to constitute a cause of action for conversion against
KOP. The trial court erred in sustaining
KOP’s demurrer as to that cause of action.
d) Declaratory Relief
The
trial court sustained KOP’s demurrer as to the sixth cause of action
declaratory relief contained in its FAC. That claim sought a judicial declaration of
the owner of the remaining escrow funds, and whether J.R. was damaged.
As
with its cause of action for declaratory relief against the City, J.R.
abandoned its declaratory relief cause of action against KOP by failing to
argue it adequately in its briefs before this court. (R.A.
Stuchbery & Others Syndicate 1096 v. Redland Ins. Co.,
fn. 3; Plotnik v. Meihaus,
Cal. Rules of Court, rule 8.204.) In
addition, J.R. has not stated facts sufficient to constitute a cause of action
for declaratory relief against KOP because, like the cause of action against
the City, it merely addresses an alleged past wrong—the City’s payment of the
remainder of the escrow funds to KOP.
The trial court did not err in
sustaining KOP’s demurrer as to the declaratory relief cause of action asserted
against KOP.
e) Leave to Amend
J.R. should be given leave to
amend. As noted above, the trial court
did not err in sustaining KOP’s demurrer as to the cause of action for
declaratory relief because, inter alia, it did not allege an actual, present
controversy. As J.R. is allowed to amend
the FAC against the City, JR may also amend to add any theories it may have
against KOP.
DISPOSITION
The
judgment is reversed, and the matter is remanded to the trial court to provide
J.R. with an opportunity to amend the FAC against the City and KOP. Plaintiff shall recover its costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MOSK,
J.
We concur:
TURNER, P. J.
KRIEGLER, J.
name="_ftn1" title="">
requests that this court take judicial notice of City of Los Angeles Municipal
Code (LAMC) sections 155.00-155.09. The
City requests that we take judicial notice of J.R.’s complaint, LAMC sections
155.00-155.09, LAMC sections 162.00-162.12, a copy of the City’s public file
reflecting that on October 29, 2008, the City adopted a resolution to remove
the subject property from REAP and ordered payment of the remaining escrow
funds to the current landlord, and LAMC sections 151.00-151.02. We grant the requests.
name="_ftn2" title="">
trial court granted KOP’s request for judicial notice that included a “Tax Deed
to Purchaser of Tax-defaulted Property,†providing that the property was sold
to Kwiat for $300,000 by the treasurer and tax collector of Los Angeles County for non-payment of taxes (tax sale).
