Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC365125, Michael L. Stern, Judge.
Rafii & Associates and Daniel J. Rafii for Plaintiffs and Appellants.
Law Offices of Alyce S. Minsky, Alyce S. Minsky, and George P. Pacheco for Defendant and Respondent.
SUZUKAWA, J.
Plaintiffs and appellants Maria Guadalupe Garcia, Josefine Lopez, Alva Dabila, and Alfonso Garcia appeal from the dismissal entered following the trial court’s order sustaining defendant and respondent Jose Chavez’s demurrer without leave to amend. Appellants contend their complaint alleges sufficient facts showing they are entitled to relief on either a theory of constructive trust or part performance of an oral agreement. We agree and reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
We take the following from appellants’ operative pleading, the first amended complaint (FAC). By virtue of the marriage between Jose Chavez (Jose) and Maria Garcia (Maria), now deceased, appellants have the following familial relationship with Jose: Maria Guadalupe Garcia (Guadalupe) is Jose’s mother-in-law; Josefine Lopez (Josefine) is Jose’s aunt-in-law; Alfonso Garcia (Alfonso) is Jose’s brother-in-law; and Alva Dabila (Alva) is Jose’s sister-in-law.
We address the parties using their first names for sake of clarity and intend no disrespect.
A. The Belgrave Property
Alfonso and Guadalupe held legal title to property at 1915 Pennsylvania Avenue in Los Angeles. They held title on behalf of Josefine and managed the property for her. In September 2002, Alfonso and Guadalupe sold the property in order to purchase a larger home for Josefine and Guadalupe. Appellants had the ability to make a down payment on a new home, however, they did not have a sufficient credit history to obtain a mortgage. Jose informed appellants that he had excellent credit. Appellants and Jose agreed that appellants would make the down payment on a residence at 2711 Belgrave Avenue in Huntington Park (the Belgrave property), Jose would procure a mortgage, and that legal title would be placed in Jose’s name “for the sole purpose of holding the property in such title on behalf of and for the benefit of [appellants].” Appellants alleged Jose promised to obtain a mortgage and hold the Belgrave property in trust for appellants until the latter “were ready and able” to hold the title themselves, “which would likely coincide with the death of [Maria].” In reliance on that promise, appellants made the down payment on the property and paid all mortgage payments, property taxes, and insurance expenses from Alva’s bank account.
B. The Pennsylvania Property
Josefine and Guadalupe owned a five-unit residential building at 1916 Pennsylvania Avenue in Los Angeles (the Pennsylvania property). Family member Jesus Gomez lived rent-free in one unit and the other units were rented. Appellants jointly managed the property. In 1990, Alfonso was added to the legal title. On or about September 9, 1994, appellants transferred legal title to Maria pursuant to an oral agreement. Appellants and Jose “orally agreed that the Pennsylvania Property would be placed under [Jose’s] wife’s name for the purpose of holding the Pennsylvania Property in such title on behalf of and for the benefit of [appellants].” Jose agreed that he would “hold the Pennsylvania Property in trust for [appellants], until [they] were ready and able to have the title held under their respective names, such reversion which would coincide with the death of [Maria].” The parties further agreed that Jose would manage the property for appellants’ benefit, pay all property expenses from the rent, and give any residual monies to Josefine. Appellants alleged that “[i]n return for [Jose’s] said promise, [they] promised to and did, pay all mortgage payments, including property taxes and insurance, and allowed [Jose] to deduct as an expense certain fees for his management of the property.”
We recognize appellants could not have meant to include Alva in this allegation, as she did not hold title to the property.
From September 1994 to February 2006, the Pennsylvania property was managed in accordance with the agreement. In February 2006, Maria died without a will. In March 2006, appellants demanded that Jose convey title to the Belgrave and Pennsylvania properties to them but he refused. For a year after Maria’s death, Jose continued to perform his responsibilities with regard to the Pennsylvania property, collecting rent from tenants and paying about $400 per month in residual income to Josefine. In January 2007, Jose refinanced the mortgage on the Belgrave property. In February 2007, Jose arranged to have the rent checks from the Pennsylvania property sent directly to him and halted the monthly residual payments to Josefine. In April 2007, as to the Belgrave property, Jose served appellants with a 60-day notice to quit.
Appellants claim they can amend the FAC by alleging that Jose took out $145,000 in cash when he refinanced the property, an amount that represents most of the equity in the property.
Appellants sued Jose. Their FAC alleged Jose breached a fiduciary duty and sought imposition of a constructive trust, an order to quiet title, and injunctive and declaratory relief. Jose demurred to the FAC. The trial court sustained the demurrer without leave to amend on the grounds that enforcement of the oral agreement was barred by the statute of frauds and the complaint failed to allege a fiduciary relationship between the parties. Judgment in favor of Jose was entered and this appeal followed.
DISCUSSION
“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.]” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)
I. Statute of Frauds
The trial court sustained the demurrer pursuant to Civil Code section 1624, subdivision (a), noting that contracts concerning property must be in writing. “‘The primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made.’” (Sterling v. Taylor (2007) 40 Cal.4th 757, 766, quoting Rest.2d Contracts, § 131, com. c, p. 335.) However, the statute is not intended to justify the repudiation of promises that were in fact made. (Lockwood v. Smigel (1971) 18 Cal.App.3d 800, 803.) Appellants correctly point to two situations where enforcement of an oral agreement involving real property is not barred by the statute of frauds. One is where a constructive trust is imposed, and the other is where a party to an oral agreement for the transfer of an interest in property partially performs pursuant to, and in reliance on, the agreement.
One such contract is described in Civil Code section 1624, subdivision (a)(3) as follows: “An agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged.”
A constructive trust “is a creature of equity and need not be evidenced by writing or even by an express declaration.” (Calistoga Civic Club v. City of Calistoga (1983) 143 Cal.App.3d 111, 117-118; accord Lombardo v. Santa Monica Young Men’s Christian Assn. (1985) 169 Cal.App.3d 529, 537 [“The statute of frauds does not apply where the plaintiff is entitled to the imposition of a constructive trust, for such a trust arises by operation of law”].) Equitable principles justify the remedy of constructive trust to compel performance of an otherwise unenforceable promise in cases of fraud, breach of a confidential relationship, or unjust enrichment. (See 13 Witkin, Summary of Cal. Law (10th ed. 2005) Trusts, § 324, p. 899.)
Enforcement of an oral agreement concerning the transfer of property is also allowed when a party partially performs in reliance on that oral agreement. Part performance typically consists of acts such as taking possession of the property and either making substantial improvements to the property or making payments toward the purchase price. (See Sutton v. Warner (1993) 12 Cal.App.4th 415, 422; Miller & Starr, Cal. Real Estate (3d ed. 2000) § 1:71, pp. 227-230.) “Such conduct satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached.” (In re Marriage of Benson (2005) 36 Cal.4th 1096, 1109.) The part performance must clearly relate to, and be pursuant to, the terms of the oral agreement.
We next examine appellants’ FAC to determine whether either theory has been sufficiently pled.
II. Constructive Trust
Appellants contend that the facts alleged in the FAC establish they are entitled to the imposition of a constructive trust. We agree.
“A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner. [Citations.] The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing. [Citations.]
“The principal circumstances where constructive trusts are imposed are set forth in Civil Code sections 2223 and 2224. Section 2223 provides that ‘[o]ne who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner.’ Section 2224 states that ‘[o]ne who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he or she has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it.’ Under these statutes and the case law applying them, a constructive trust may only be imposed where the following three conditions are satisfied: (1) the existence of a res (property or some interest in property); (2) the right of a complaining party to that res; and (3) some wrongful acquisition or detention of the res by another party who is not entitled to it. [Citations.]” (Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990.)
Courts have imposed a constructive trust in circumstances, similar to the present case, where a defendant holds title to property purchased with the plaintiff’s money. (See Martin v. Kehl (1983) 145 Cal.App.3d 228, 236-237 (Martin).) In such situations, a court possesses “broad equitable powers to fashion a remedy which would prevent defendant from being unjustly enriched at plaintiff’s expense.” (Ibid.)
In Martin, the plaintiff, the defendant, and the defendant’s boyfriend agreed to purchase property together and record title in the defendant’s name. The agreement provided that so long as the defendant occupied the property, in lieu of rent, she would pay the mortgage and take care of minor maintenance. The parties agreed further that if the defendant vacated the property, it would be sold and the plaintiff would receive one-half of the net proceeds. The defendant moved into the house on the property. Five years later, she moved out of the house and rented it. The tenants paid the bank payments as well as the water and power bills. (145 Cal.App.3d at pp. 234-235.) When the defendant refused to abide by the agreement to either sell the house or pay the plaintiff his equity share, the plaintiff sued. Following a bench trial, the court imposed a constructive trust in plaintiff’s favor of a one-half undivided interest in the property. On appeal, the defendant argued that in the absence of a finding of a fiduciary relationship or fraud, her failure to perform the oral agreement to convey the property could not give rise to a constructive trust and the oral agreement was unenforceable under the statute of frauds. (Id. at p. 237.) The appellate court disagreed. Pointing out that “‘a constructive trust may be imposed in practically any case where there is a wrongful acquisition or detention of property to which another is entitled[]’ [citations],” the court ruled the defendant’s act of retaining the property after she had moved out justified the trial court’s use of the equitable remedy. (Id. at p. 238.)
In Hall v. Hall (1950) 98 Cal.App.2d 209 (Hall), the plaintiff was precluded by the terms of his parole from entering into any civil contract. He and the defendant, his girlfriend, agreed that she would take title to property on his behalf, he would make all the payments on the property, and she would transfer title back to him when he was eligible to hold title to the property. The plaintiff made the payments, and when the defendant threatened to sell the property, he brought a quiet title action. (Id. at pp. 210-212.) After trial, the court found that “defendant was merely holding title to the property in trust for plaintiff” and the appellate court affirmed. (Id. at p. 214.)
In the present case, appellants allege that Jose fraudulently promised to take title to the Belgrave property and hold it in trust for them. Appellants, in reliance on Jose’s promise, made the down payment on the property and paid the mortgage, property taxes, and insurance. When Maria died, appellants requested title to the property. Respondent refused to convey title, refinanced the property, and served appellants with a notice to quit.
Appellants allege that title to the Pennsylvania property was transferred to Maria pursuant to an oral agreement between appellants, Maria, and Jose that Maria would hold title in trust for appellants until Maria’s death. Appellants allege that Jose had a secret intention not to perform according to the agreement so as to keep the property for himself. In reliance on the promise, appellants continued to pay the mortgage, taxes, and other property-related expenses.
The holdings of Martin and Hall support appellants’ allegations that they are entitled to the imposition of a constructive trust in their favor to prevent Jose from benefitting from his wrongful refusal to return title. He purports to hold legal title in property despite the fact he has not paid a cent toward any of the property-related expenses. Thus, the trial court erred when it sustained Jose’s demurrer.
Jose contends that as holder of legal title, his claim necessarily trumps any equitable claim appellants may have. He argues because appellants admit they transferred legal title to Maria, the FAC fails to identify any duties he has to any of them. Jose misunderstands the nature of the constructive trust. The imposition of a constructive trust is appropriate whenever a party is guilty of wrongfully retaining property, regardless of whether he or she has a legal duty to the rightful owner. (Martin, supra, 145 Cal.App.3d at p. 238.) As we have discussed, appellants sufficiently allege that is the case here.
III. Part Performance
Appellants also argue that they are entitled to the enforcement of the oral agreement because they partially performed pursuant to that agreement. Although the part performance exception to the statute of frauds is typically applied in cases where the plaintiff is seeking enforcement of an oral agreement for the sale of land based on his or her performance pursuant to that agreement (see Miller & Starr, Cal. Real Estate, supra, § 1:71, pp. 227-228), we note that courts have applied the part performance doctrine in circumstances similar to ours.
In Maddox v. Rainoldi (1958) 163 Cal.App.2d 384, the plaintiffs took possession of the defendant’s property and agreed to pay for substantial improvements in reliance on the defendant’s promise that she would cause legal title to pass to the plaintiffs upon her death and that she would not sell the property unless she became destitute and the plaintiffs were unable to care for her. Five years later, after the plaintiffs had expended considerable money, the defendant told them she was going to sell the property unless they purchased it for a specific sum. The plaintiffs sought a decree that the defendant held the property in trust for them. A nonsuit was granted on the ground that the action was barred by the statute of frauds. (Id. at pp. 384-388.) The appellate court reversed, finding that an enforceable oral trust in land was formed when the plaintiffs, with the defendant’s approval, took possession of the land and made valuable improvements upon it in reliance on the agreement. (Id. at p. 388; accord Jose v. Pacific Tile & Porcelain Co. (1967) 251 Cal.App.2d 141, 144-145 [“An express trust in land based on entirely oral transactions can be enforced if, with the consent of the trustee, the beneficiary enters into possession or irrevocably changes his position in reliance on the trust”]; Mulli v. Mulli (1951) 105 Cal.App.2d 68, 73 [an oral trust is enforceable notwithstanding the statute of frauds “‘if, with the consent of the trustee, the beneficiary as such enters into possession of the land or makes valuable improvements thereon or irrevocably changes his position in reliance upon the trust.’ [Citations.].”)
Here, the FAC alleges that appellants took possession of the Belgrave property and paid all expenses on the Belgrave and Pennsylvania properties with Jose’s consent and in reliance on his agreement to hold title to the properties for their benefit. Appellants have pled sufficient facts showing they possess an enforceable oral trust in land based on their part performance of the agreement.
IV. Indispensible Party
Jose contends that Maria is an indispensible party under Code of Civil Procedure section 389. He notes that she is the “lynchpin” to this case, as she was a party to the agreements appellants seek to enforce. Jose contends dismissal of the complaint with prejudice was appropriate because a proper judgment cannot be rendered unless Maria is joined as a defendant. We disagree.
Code of Civil Procedure section 389, subdivision (a) provides: “A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.”
A person “‘is an indispensible party [only] when the judgment to be rendered necessarily must affect [her] rights.’ [Citation.]” (Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 808-809.) According to Jose, he possesses legal title to both properties. He fails to explain how Maria’s interests, or more appropriately her estate’s interests, will be affected or injured by any judgment that is rendered in this case. As Jose holds the interests appellants now seek, complete relief can be granted without affecting Maria’s estate.
DISPOSITION
The judgment is reversed. Appellants shall recover their costs on appeal.
We concur: EPSTEIN, P. J., MANELLA, J.