Duncan v. McCaffrey Grp., Inc.
| Decision Date | 28 October 2011 |
| Docket Number | No. F060922.,F060922. |
| Citation | 11 Cal. Daily Op. Serv. 13414,200 Cal.App.4th 346,133 Cal.Rptr.3d 280 |
| Court | California Court of Appeals Court of Appeals |
| Parties | David DUNCAN et al., Plaintiffs and Appellants, v. The McCAFFREY GROUP, INC. et al., Defendants and Respondents. |
OPINION TEXT STARTS HERE
Law Offices of Keith C. Rickelman, Keith C. Rickelman; Law Offices of Sara Hedgpeth–Harris and Sara Hedgpeth–Harris for Plaintiffs and Appellants.
Cooley, Patrick P. Gunn and Charles M. Schaible, San Francisco, for Defendants and Respondents.
Plaintiffs David Duncan, Lynne Y. Duncan, Michael V. Fillebrown, Gerald Lung, Jeannie Lung, the Lung Family Revocable Trust, Richard Marino, Angela Marino, Weldon K. Schapansky, individually and as the sole beneficiary of the Grabe, Schapansky, Moss, Levy & Julian DDS PC 401 Retirement Plan, Noah Sever, Linda Washington, Carl D. West, and Chung C. Faulkner (hereafter collectively, plaintiffs) appeal from the judgment entered after the trial court sustained the demurrers filed by defendants The McCaffrey Group, Inc., McCaffrey Home Realty, Robert A. McCaffrey, McCaffrey Development LP, Bullard Grantland No. 1, Inc., and Ron Pottorff (hereafter collectively, defendants) 1 to plaintiffs' sixth amended complaint.
Defendants are the developers of a tract of land marketed as the Treviso Custom Home Development (hereafter the Development). Plaintiffs are individuals who purchased lots from defendants with the intent to build custom homes on each lot, with some having completed construction on their homes.
The complaint alleged, in essence, that plaintiffs paid a premium price for their lots because the Development was marketed as one that would be limited to custom homes with at least 2,700 square feet of living space. Plaintiffs alleged that, unbeknownst to them, defendants at all times intended to build tract homes on some of the lots that would be much smaller than 2,700 square feet of living space. As a result of the construction of smaller tract homes, plaintiffs alleged the value of their lots plummeted.
In the various versions of their complaint, plaintiffs have alleged numerous causes of action attributable to the purchase of the lots. As we understand plaintiffs' argument, they contend only that the trial court erred in sustaining the demurrer to their causes of action for alleged unfair competition, in violation of Business and Professions Code section 17200, false advertising, in violation of Business and Professions Code section 17500, and fraud. In addition, plaintiffs challenge the trial court's order granting defendants' motion for summary adjudication on their causes of action for breach of fiduciary duty and constructive fraud.
The primary basis for the trial court's order sustaining defendants' demurrers was that the parole evidence rule precluded any testimony about facts inconsistent with the contract between the parties and the purchase and sale agreement (hereafter the Agreement) and therefore there was no factual basis for any of plaintiffs' claims. As we shall explain, the trial court was correct that the fraud cause of action lacked any factual support because the parol evidence rule precluded the evidence on which plaintiffs relied. The trial court erred, however, in sustaining the demurrer to the causes of action for false advertising and unfair competition because the allegations on which plaintiffs relied were not offered to vary, alter, or add to the terms of the Agreement, and thus the parol evidence rule was inapplicable.
We also conclude the trial court erred in granting the motion for summary adjudication. Plaintiffs alleged that defendant McCaffrey Home Realty acted as their real estate agent in the purchase transaction and therefore owed them a fiduciary duty, which was breached by various acts of defendants. The trial court concluded that the Agreement established that defendant McCaffrey Home Realty acted as a broker only for defendants and therefore there was no fiduciary relationship between plaintiffs and defendants. As we shall explain, we conclude the Agreement was ambiguous and therefore a triable issue of fact exists as to the meaning of the contract, which may require extrinsic evidence to resolve. Therefore, the order granting summary adjudication also must be reversed.
We begin with the sixth amended complaint (SAC) because that was the operative pleading at the time judgment was entered. As relevant to the issues we must decide, the SAC alleged plaintiffs were the owners of lots in the Development. The lots were purchased between July 28, 2006, and August 8, 2007. Defendants were corporate entities or partnerships doing business in the state of California, primarily the development, construction, and sale of new residential homes, except for Ron Pottorff, who was an employee of defendants.
Plaintiffs' first cause of action alleged defendants committed acts of unfair competition, in violation of Business and Professions Code section 17200. According to plaintiffs, defendants authored and caused to be recorded a declaration of covenants, conditions, and restrictions (CC & R's) applicable to the Development. As initially recorded, and at the time plaintiffs bought their lots, the CC & R's required each home built within the Development to be at least 2,700 square feet and “ ‘architecturally compatible with each other.’ ”
In addition, Pottorff told plaintiffs Richard Marino and Angela Marino that the Development contained the only custom home lots in that area. The sales office for the Development exhibited numerous pictures and architectural plans for custom homes built at defendants' other developments and that were similar to the Development's.
After each plaintiff had purchased his or her lot, defendants, without notice, caused the CC & R's to be amended to reduce the minimum size of each residence built in the Development to 1,700 square feet. Approximately one month later, defendants caused the CC & R's to be amended a second time without notice, this time reducing the minimum size of a residence built in the Development to 1,400 square feet.
After each plaintiff had purchased his or her lot, defendants began selling tract homes on lots within the Development. The price for some of these tract homes was essentially the same as the price paid by plaintiffs for their undeveloped lots. As a result of defendants' construction of tract homes, the Development no longer was a custom home development. Defendant Robert A. McCaffrey admitted to plaintiffs that the Development never was intended to be limited to custom homes.
These actions allegedly violated Civil Code sections 15672 (freedom of consent), [133 Cal.Rptr.3d 285]1572 3 (fraud), 1573 4 (constructive fraud), 1575 5 (undue influence), 1667 6 and 1668 7 (contracts contrary to law), 1670.5 8 (unconscionable contracts), 1709 9 and 1710 10 (deceit), and Business and Profession Code sections 11012 11 (unlawful material change in setup), 11018.7 12 (unlawful amendment of the CC & R's), 11019 13 (order prohibiting violations), 11022 14 (false or misleading advertising), and 17530 15 (misleading publications). The SAC alleged that these statutory violations constituted unlawful business acts within the meaning of Business and Professions Code section 17200 et seq., the Unfair Competition Law (UCL). Because plaintiffs actually and reasonably relied on defendants' representations, defendants' acts also constituted fraudulent business practices within the meaning of the UCL and false advertising within the meaning of Business and Professions Code sections 11022, 17200, and 17500. Finally, the SAC alleged that each plaintiff was damaged as a result of defendants' unlawful conduct.
The second cause of action sought rescission and restitution because defendants failed to notify the Real Estate Commissioner of the amendments to the CC & R's as required by Business and Professions Code sections 11012, 11018.7, and 11019. In addition, defendants allegedly violated Business and Professions Code section 11012, 11018.7, 11019, and 11022 by building and marketing a limited number of models of tract homes. Plaintiffs also alleged the tract homes were not reviewed by the architectural control committee, as required by the CC & R's. These facts allegedly constituted a material change in the Development without notice to the Department of Real Estate, resulting in violation of the identified code sections entitling plaintiffs to rescission and restitution.
The third cause of action (false advertising) alleged that defendants falsely advertised the Development as limited to custom homes with the intent to induce plaintiffs to purchase lots, in violation of Business and Professions Code section 11022, subdivision (a). As a result of defendants' conduct, plaintiffs each suffered substantial damages.
The fourth cause of action (trespass) alleged that defendants trespassed on the lots owned by plaintiffs Lung, Marino, Schapansky, and Washington, causing damage to the lots and decreasing their value.
In response to the SAC, defendants, as they had to each preceding complaint, filed a demurrer and motion to strike certain portions of the pleadings. Defendants argued that plaintiffs could not recover for any alleged unfair competition because any reliance on the alleged misrepresentations was unreasonable as a matter of law. Defendants pointed out that paragraph 9(a) of the Agreement specifically permitted defendants to change the “product, development plan ... and marketing methods” 16 for the Development.
Defendants argued that plaintiffs could not recover on the second cause of action because any material change to the setup and offering that may have occurred at the Development occurred after plaintiffs had purchased their lots. According to defendants, since they were in compliance with the Subdivided Lands Act (Bus. & Prof.Code, §...
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Neely v. Zimmer, CIVIL ACTION NO. 2:11-cv-00444
...guided by the principle that when a contract is ambiguous, it should be construed against its drafter. Duncan v. McCaffrey Grp., Inc., 133 Cal. Rptr. 3d 280, 306 (Cal. Ct. App. 2011); Nisbet v. Watson, 162 W. Va. 522, 530 (1979). This principle applies with even greater force here, where th......