Brown v. Boren

Decision Date17 September 1999
Docket NumberNo. B128000,B128000
Citation74 Cal.App.4th 1303,88 Cal.Rptr.2d 758
Parties, 99 Cal. Daily Op. Serv. 7785, 1999 Daily Journal D.A.R. 9827 Mary Lou BROWN, Plaintiff and Appellant, v. Ira J. BOREN et al., Defendants and Respondents.
CourtCalifornia Court of Appeals Court of Appeals

John S. Chang for Plaintiff and Appellant.

Gary A. Dordick, Beverly Hills, for Defendants and Respondents.

MASTERSON, J.

INTRODUCTION

Plaintiff Mary Lou Brown appeals from the adverse judgment entered after the trial court granted a motion for judgment (Code Civ. Proc., § 631.8) 1 made by defendants Ira J. Boren and Elizabeth S. Boren at the conclusion of plaintiff's case. We affirm.

STATEMENT OF FACTS 2

In November 1992, plaintiff sold two pieces of real property to Ruffino M. Anderson (Anderson). These properties were located at 1009 East 56th Street and 1019-1021 1/2 East 56th Street in Los Angeles, California. Anderson was a real estate agent with Century 21 A & W II and the person with whom plaintiff had listed her properties for sale. Plaintiff agreed to carry notes on each property for a portion of the purchase price.

The escrow instructions for the 1009 East 56th Street property listed the total consideration for the property as $80,000. Of this amount, $250 was to be deposited into escrow by Anderson, $31,500 represented an existing encumbrance of record (the approximate unpaid balance of a first trust deed), $23,250 represented the amount Anderson was to pay plaintiff from the proceeds of a loan to be obtained, and $25,000 was to be the amount of plaintiff's new purchase money third trust deed. The escrow instructions stated that "[a] new purchase money Third Trust Deed and Assignment of Rents [was] to record, ... securing a Note in the amount of $25,000.00, executed by [Anderson] in favor of [plaintiff]...." The instructions also provided that plaintiff's trust deed was to contain the following language: " 'This Trust Deed is Third and subject to a First Trust Deed of record and a Second Trust deed to record.' " In addition, the instructions stated that "[b]uyer herein agrees to obtain a new 2nd Trust Deed in a sufficient amount to procure $23,250.00 to be paid to seller at the close of escrow." Escrow was contingent upon Anderson obtaining financing "from an institutional lender, at the best prevailing rate." Plaintiff also agreed "to credit buyer the sum of $6,500.00 for repairs needed to subject property." (Emphasis deleted.) In an amendment to the escrow instructions, plaintiff gave Anderson credit for an additional $1,000 for termite work.

With regard to the 1019-1021 1/2 East 56th Street property, the escrow instructions listed the total consideration as $130,000. Of this sum, $250 was to be provided by Anderson, $54,750 was the amount of the loan to be applied toward the purchase price, and $75,000 was to be the amount of plaintiff's new purchase money second trust deed. The escrow instructions provided that a "Deed of Trust (1st Trust Deed) [was] to record in favor of any institutional lender, securing a note in the amount of $54,750.00 payable according to its terms, with interest at the best prevailing rate available, proceeds of which you are to collect and apply to purchase price." The instructions also stated that "Buyer ... agrees to obtain a new lst Trust Deed in a sufficient amount to procure $54,750.00 to be paid to seller at the close of escrow." In addition, "[a] new purchase money 2nd Trust Deed and Assignment of Rents [was] to record, ... securing a Note in the amount of $75,000.00, executed by [Anderson] in favor of [plaintiff]...." The instructions also specified that the trust deed to be prepared was to contain the following clause: " 'This Trust Deed is Second and subject to a First Trust Deed to record.' " This escrow, too, was contingent upon Anderson securing financing from an institutional lender. Plaintiff further agreed to credit Anderson $3,500 for repairs needed on the property. Via amendments to the escrow instructions, plaintiff gave Anderson an additional $2,000 in credit to correct a safety condition caused by a tree, as well as $2,500 in credit for termite work.

Anderson obtained financing from defendant Ira J. Boren, a real estate broker, 3 and his wife, rather than an institutional lender as specified in the escrow instructions. Anderson borrowed $35,000 for the 1009 East 56th Street property and $70,000 for the 1019-1021 1/2 East 56th Street property. The amounts actually funded, however, totaled only $28,275.83 and $57,946.67, respectively. The notes for both properties, which were secured by deeds of trust, listed the yearly interest rate at 15 percent. The truth-in-lending disclosure statement for each property, however, reflects that the dollar value of the points was included in the finance charge resulting in a functional annual percentage rate of "38.734%" on the $35,000 loan for the 1009 East 56th Street property and a functional annual percentage rate of "26.209%" on the $70,000 loan for the 1019-1021 1/2 East 56th Street property. Correspondence from defendant Ira J. Boren to the escrow officer reveals that defendants charged Anderson "[p]oints" in the amount of $5,200 on the $35,000 loan and $10,500 on the $70,000 loan.

Anderson also executed promissory notes to plaintiff in the amounts of $25,000 and $75,000. In accordance with the escrow instructions, the deed of trust securing plaintiff's $25,000 note specified that " 'THIS DEED OF TRUST IS THIRD (3rd) AND SUBJECT TO A FIRST (1st) TRUST DEED AND [A] SECOND (2nd) TRUST DEED OF RECORD.' " The deed of trust securing plaintiff's $75,000 note stated that " 'THIS TRUST DEED IS SECOND (2nd) AND SUBJECT TO A FIRST TRUST DEED TO RECORD.' "

At the close of escrow, plaintiff received $10,512.08 from the sale of the 1009 East 56th Street property and $38,007.20 from the sale of the 1019-1021 1/2 East 56th Street property, for a total of $48,519.28. Anderson, having deposited a total of only $500 into escrow, received a refund of $11,340.15 from the escrow on the 1009 East 56th Street property and $10,526.77 from the escrow on the 1019-1021 1/2 East 56th Street property, for a total refund of $21,866.92. Anderson subsequently defaulted on his obligations to plaintiff.

PROCEDURAL BACKGROUND 4

On March 12, 1997, plaintiff filed a complaint against the Boren defendants, as well as Anderson, Century 21 A & W II 5 and others who are not parties to this appeal. Plaintiff alleged five causes of action for fraud, breach of fiduciary duty, quiet title, declaratory relief and injunctive relief, respectively.

The thrust of plaintiff's first cause of action for fraud was that Anderson defrauded her out of her property. Plaintiff alleged that Anderson falsely represented the sums of money he was going to borrow, that he would pay plaintiff all loan proceeds and that he needed to spend thousands of dollars to make repairs and improvements to the property. Plaintiff alleged that in reliance on these misrepresentations, she sold Anderson her properties, gave Anderson credit for the sums he had incurred or would later incur for repairs and improvements, and agreed to subordinate her purchase money trust deeds to two trust deeds in favor of an institutional lender. Plaintiff further alleged that Anderson's statements were false, in that he borrowed more money than he said he would, pocketed the excess over the amount of loan proceeds paid to plaintiff, caused trust deeds to be recorded in favor of the Borens in amounts greater than had been agreed, and failed to incur or pay the amounts he stated he had incurred, or would incur, for repairs and improvements. As to the Borens, plaintiff alleged that they conspired with Anderson to defraud her. Specifically, plaintiff alleged that they "acted with and shared a common plan with Anderson to defraud plaintiff, and each of them conspired in, planned, participated or joined in, assisted, aided and abetted and reaped the profits from such activities, causing plaintiff damages." These fraud and civil conspiracy allegations where incorporated by reference into plaintiff's breach of fiduciary duty cause of action, as well as each of her equitable causes of action.

In her cause of action for quiet title, plaintiff alleged that she would not have subordinated her trust deeds "[w]ere it not for the fraud perpetrated on her by defendants." Plaintiff also alleged that "the principal amounts of the Boren Trust Deeds were bogus and fraudulent" and that "since [she] was fraudulently induced to execute the documents which resulted in [her] Trust Deeds being junior to the Boren Trust Deeds, the Boren Trust Deeds are void and/or voidable at plaintiff's option." Plaintiff stated that by filing this action she elected to void the Borens' trust deeds. In the 33rd paragraph of her complaint, she claimed an entitlement "to hav[ing] the Boren Trust Deeds ordered reconveyed, expunged and/or subordinated to each of the Plaintiff Trust Deeds, as of approximately November 2, 1992, so as to clear plaintiff's title to the properties of the cloud created by the recordation of the Boren Trust Deeds." Plaintiff incorporated these additional fraud allegations into her declaratory and injunctive relief causes of action, in which she respectively asked for a declaration of the matters alleged in paragraph 33 of the complaint and an order enjoining foreclosure on the Boren trust deeds.

Plaintiff prayed for compensatory and punitive damages on her fraud and breach of fiduciary duty causes of action. She further requested equitable relief, including a readjustment of priorities, on her remaining equitable causes of action. Plaintiff did not include a breach of contract cause of action in her complaint. Thus, apart from the fraud allegations, plaintiff did not assert a contractual theory of recovery as an independent basis for readjustment of priorities.

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