Ayala v. Dawson

• Decision Date: 04 August 2017
• Docket Number: A142830
• Citation: 13 Cal.App.5th 1319,220 Cal.Rptr.3d 917
• Court: California Court of Appeals Court of Appeals
• Parties: Alfonso AYALA, Plaintiff and Appellant, v. Randy DAWSON, Defendant and Respondent.

13 Cal.App.5th 1319

220 Cal.Rptr.3d 917

Alfonso AYALA, Plaintiff and Appellant,

v.Randy DAWSON, Defendant and Respondent.

A142830

Court of Appeal, First District, Division 4, California.

Filed August 4, 2017

Arthur Samuel Humphrey, Attorney at Law and Arthur Samuel Humphrey for Plaintiff and Appellant.

Terry A. Duree, Fairfield, for Defendant and Respondent.

Streeter, J.

After living for more than a dozen years in a residential unit he claimed he owned, Alfonso Ayala was evicted by the property owner, Randy Dawson, in an unlawful detainer action. Ayala defended by attempting to quash service of summons on the ground he was not a tenant, but instead held equitable title under an oral installment sale contract for the purchase of property. Dawson countered that, in fact, Ayala was a tenant under a written lease, and had breached the lease in various ways, thus justifying his eviction. After an evidentiary hearing on Ayala's motion to quash service, Dawson prevailed and ultimately took a default judgment. Ayala then vacated the premises.

In this case, a separate, concurrent action by Ayala against Dawson for fraud and various other claims, Ayala once again pursues the theory that he holds equitable title under an installment sale contract. He seeks to argue, as he did in the unlawful detainer action, that Dawson, a real estate broker, deceived him into signing the lease, while misrepresenting that the document was simply the memorialization of a preexisting oral contract of sale. The court granted summary judgment for Dawson, ruling that, under the doctrine of collateral estoppel, Ayala is barred from relitigating his fraud-in-the-inducement theory. This appeal is from the ensuing judgment and from an award of attorney fees in Dawson's favor under the prevailing party fee clause in the lease. We affirm.

I. BACKGROUND

In late 1999, Ayala found a five-unit residential property in Vacaville that he wished to buy, but he could not qualify for a mortgage loan, so he sought the assistance of his friend Dawson, a real estate broker. According to Ayala, the two men struck an oral agreement under which Dawson agreed to obtain the required purchase money mortgage loan and buy the property in Dawson's name for a price of $330,000; Ayala agreed to pay the entire down payment of 20 percent and thereafter pay Dawson a $200 per month fee, plus the monthly principal and interest on the mortgage loan; Ayala agreed to maintain the property and not to commit waste; Ayala agreed to contract with a property management company to manage the rental units; and, upon Ayala's payoff of the entire principal and interest due on the mortgage, Dawson agreed to deed the property to Ayala in fee.

The parties executed a written contract provided by Dawson on December 9, 1999, which Ayala—in reliance on Dawson's superior knowledge of real estate transactions—claims he understood merely to confirm an installment contract for the purchase of property on terms the two men had previously discussed. After signing and initialing the papers, Ayala moved into one of the units and contends he spent hundreds of thousands of dollars improving the property over the more than 12 years he lived there. Ayala used a "shop" on the property in his business and may have stored equipment in a "barn" on the property. From January 2000 to 2008, he also paid Dawson $2,700 per month, and from 2008 to July 2012, he paid Dawson $2,900 per month. Payments to Dawson apparently were made by the property management company, which used rental income from the property, supplemented by funds provided by Ayala. Unbeknownst to Ayala—who testified he did not read the "pile of documents" presented to him in December 1999 —the contract he executed was a "RESIDENTIAL LEASE WITH OPTION TO PURCHASE (CALIFORNIA SHORT FORM)," not an installment sale contract. According to Dawson, Ayala allowed the purchase option granted under this lease to expire on December 31, 2004, and thereafter Ayala's interest in the property amounted to nothing more than a month-to-month tenancy. As evidence that both parties understood their relationship that way, Dawson points out he raised what he explicitly denominated as the monthly "rent" from $2,700 per month to $2,900 per month in 2008, without protest of any kind by Ayala.

Despite the fact that the option to purchase had expired, in 2011 Dawson offered to sell the property to Ayala for the original price of $330,000, with a credit for the down payment he had paid. Ayala refused the offer, taking the position he should not have to buy property he already owned. By then, according to Dawson, Ayala had fallen into a pattern of late payment of his monthly rent and had allowed the property to fall into a state of disrepair. As a result, Dawson claimed, he was unable to obtain refinancing, which put him in a financial bind because he was in a "negative cash flow" position.¹ According to Dawson, the whole idea for the transaction had been to provide, in effect, temporary financing so that Ayala could purchase the property no later than December 31, 2004, but that never happened, and after a decade, the continued carrying costs were damaging Dawson's credit. Dawson testified that when he tried to raise these concerns with Ayala in August 2011, Ayala for the first time began trying to claim that he was not a tenant, that he held equitable title to the property under an oral installment sale contract, and that the written lease was fraudulent.

In June 2012, Ayala filed this action, a lawsuit alleging claims against Dawson for fraud, breach of an oral contract, specific performance, preliminary and permanent injunctive relief, and declaratory relief. He later amended the complaint to add claims seeking a quiet title declaration, restitution for unjust enrichment, and the imposition of a constructive trust and a resulting trust. In July 2012, Dawson filed an action of his own for unlawful detainer.² Rather than answer, Ayala filed a motion to quash service of summons on the ground that the court in which the unlawful detainer action was filed lacked jurisdiction because "[t]here was never a landlord-tenant relationship between the parties." In support of that jurisdictional argument, Ayala contended the written lease was fraudulent and Ayala occupied the property not as a tenant, but as a vendee-in-possession pursuant to an oral installment sale contract.

After holding a one and a half day evidentiary hearing in the unlawful detainer action, Judge D. Scott Daniels denied the motion to quash, ruling that "[b]ased on Plaintiff's ... Residential Lease with Option to Purchase and the conduct of the parties, [Dawson had] met his burden of proof to establish the existence of a landlord-tenant relationship...." In denying the motion, Judge Daniels found that Ayala had read and signed the lease, declined to find any basis to relieve Ayala of his contractual obligations, and specifically rejected the theory that Dawson served as Ayala's real estate broker or was Ayala's trusted real estate advisor.

Ayala sought a writ of mandate in the superior court appellate division, requesting review of Judge Daniels's ruling. The appellate division panel denied the writ, specifically affirming Judge Daniels's finding of a landlord-tenant relationship as supported by substantial evidence. The panel also found no merit to a contention from Ayala that he had been deprived of due process because of the expedited handling of the hearing on his motion to quash. In addressing the due process issue, the writ panel stated "[t]he sole issue in the unlawful detainer action is possession and the arguments that [Ayala] wished to raise concerning ‘fraud, constructive trust, estoppel, breach of fiduciary duties and many integrally related factual matters' will be exhaustively decided in the separate unlimited civil action [he has] filed," referring to this action.

After affirmance of the denial of the motion to quash in Dawson's unlawful detainer action and entry of judgment in that action by default,³ Ayala continued to pursue this action against Dawson. Discovery remained open in the case for nearly two years. In February 2014, Dawson filed a motion for summary judgment, arguing, among other things, that Judge Daniels's rejection of Ayala's fraud theory in the unlawful detainer action collaterally estops Ayala from pursuing the same theory in this action. Judge Daniels's ruling, once it became final after Ayala exhausted his efforts to seek review, Dawson argued, is dispositive on every one of the claims asserted in this case. In opposition, Ayala argued once again that he had not been given enough time to prepare for the hearing on the motion to quash or for meaningful discovery, but his opposition papers identified no witnesses who had not testified before Judge Daniels in the unlawful detainer action and presented no documents that had not been considered by Judge Daniels.

Judge Scott Kays granted Dawson's motion for summary judgment in May 2014. He found that "[Dawson] has shown that [Ayala] is unable to establish an essential element of any of [his] causes of action because [he] is precluded from relitigating the validity and enforceability of the parties' written lease agreement"; that "[a]ll of [Ayala's] causes of action are based on [his] allegations that [Dawson] improperly memorialized the parties' oral agreement for an installment sales contract as a lease agreement with an option to purchase ... [which Dawson] fraudulently induced [Ayala] to execute ... by misrepresenting the contents of the agreement ..."; and that "the same parties have already fully litigated the validity and enforceability of the lease agreement in a prior unlawful detainer action."

Judgment pursuant to the order granting summary judgment was entered June 11, 2014. An attorney fees award for $27,000 in favor of Dawson under a prevailing party fee clause in the lease issued later, on July 31, 2014. Ayala timely appealed both from...