Nguyen v. Scott

• Decision Date: 16 December 1988
• Docket Number: No. A039292,A039292
• Citation: 206 Cal.App.3d 725,253 Cal.Rptr. 800
• Court: California Court of Appeals Court of Appeals
• Parties: Ngan Tang NGUYEN et al., Plaintiffs and Appellants, v. John L. SCOTT et al., Defendants and Respondents.

Page 800

253 Cal.Rptr. 800

206 Cal.App.3d 725

Ngan Tang NGUYEN et al., Plaintiffs and Appellants, v. John L. SCOTT et al., Defendants and Respondents.

No. A039292.

Court of Appeal, First District, Division 1, California.

Dec. 16, 1988.

Review Denied March 1, 1989.

John D. Nelson, Jue & Nelson, San Mateo, for plaintiffs and appellants.

Harry I. Price, Reynolds, Roux & Price, Los Altos, for defendants and respondents.

NEWSOM, Acting Presiding Justice.

Ngan Tang Nguyen and Ngoc Tho Thi Vu Nguyen (hereafter appellants) appeal from a judgment of dismissal entered on an order sustaining a demurrer to their second amended complaint. The grievance stated in this amended complaint arose in the course of the litigation. The appellants originally filed on August 19, 1986, a complaint against Barclays Bank of California as trustee for California Dental Guild (hereafter Barclays) praying for partition of certain real property. Barclays filed a cross-complaint that similarly prayed for partition and sale of the property and moved for a judgment on the pleading. Shortly thereafter, John L. Scott, an individual, filed a notice on October 1, 1986, that he had acquired Barclays' interest in the property with authority to pursue the cross-complaint in its name. In response, appellants filed an answer to the cross-complaint containing "supplemental allegations modifying and partially rescinding complaint herein" and opposed the motion for judgment on the pleading. The court first denied the motion for judgment on the pleading as untimely since a cross-defendant had not yet filed an answer. Barclays and John L. Scott renewed the motion alleging that the cross-defendant had actually consented to entry of default against it. The court then granted the motion for judgment on the pleading subject to appellants' right to amend the complaint within 30 days.

On January 20, 1987, appellants filed a first amended complaint stating the causes of action involved in this appeal. The complaint named as additional defendants John L. Scott, J. & P. Scott, Inc., Terry John O'Brien (an officer of J. & P. Scott, Inc.), Joseph Monck, and Raymond Love (both employees of Barclays). The first cause of action claimed $127,000 in damages from John L. Scott. The second cause of action sought to require John L. Scott and J. & P. Scott, Inc., as constructive trustees to convey a one-half interest in the property to appellants for a purchase price of $325,000. The third cause of action alleged a conspiracy among all the defendants and prayed for general damages of $127,000 and punitive damages of $10,000,000. Defendants again demurred to the complaint, and appellants moved for leave to file further amendments. Granting appellants' motion to amend the complaint, the court took the demurrer off calendar.

On April 1, 1987, appellants filed the second amended complaint at issue here. Later, they dismissed the complaint without prejudice against Barclays, Joseph Monck, and Raymond Love. The remaining defendants, John L. Scott, J. & P. Scott, Inc., and Terry John O'Brien once again demurred. On May 21, 1987, the court sustained the demurrer without leave to amend.

In reviewing the sufficiency of the complaint against the general demurrer, "[a]ll allegations are taken as true even though their proof appears unlikely...." (Stanson v. Brown (1975) 49 Cal.App.3d 812, 814, 122 Cal.Rptr. 862; Buckaloo v. Johnson (1975) 14 Cal.3d 815, 828, 122 Cal.Rptr. 745, 537 P.2d 865.) " '[T]he complaint must be liberally construed with a view to attaining substantial justice among the parties.' " (Glaire v. La Lanne-Paris Health Spa, Inc. (1974) 12 Cal.3d 915, 918, 117 Cal.Rptr. 541, 528 P.2d 357.) The court is "not limited to plaintiffs' theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory." (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103, 101 Cal.Rptr. 745, 496 P.2d 817.) "Mistaken labels and confusion of legal theory are not fatal; if appellant's complaint states a cause of action on any theory, he is entitled to introduce evidence thereon." (Porten v. University of San Francisco (1976) 64 Cal.App.3d 825, 833, 134 Cal.Rptr. 839.)

As alleged in the complaint, in 1976 appellant Ngan Tang Nguyen and Phu Loc Truong (hereafter Truong) each purchased an undivided one-half interest in an 18-unit apartment building located at 1865 Bush Street in San Francisco. Ngan Tang Nguyen acted as the managing owner of the apartment. Before the commencement of this litigation, he placed his interest in the names of himself and his wife, Ngoc Tho Thi Vu Nguyen.

John L. Scott (hereafter Scott) is a licensed real estate broker and the sole shareholder of J. & P. Scott, Inc., a California corporation (hereafter Scott, Inc.). In 1983, Scott, Inc. entered into an agreement, termed a "Service Contract," with California Canadian Bank as trustee for the California Dental Guild. The agreement contemplated that from time to time the bank would request Scott, Inc. to offer investments in promissory notes secured by a deed of trust on real property. Scott, Inc., would guarantee payments on the notes but would earn a potential profit by paying the bank a lower rate of interest than that which was actually payable on the note. In 1985, Barclays Bank of California acquired the California Canadian Bank and assumed the Service Contract.

During 1985, appellants' cotenant, Truong, encumbered his one-half interest in the property as security for a loan and then defaulted on loan payments. To avert foreclosure, on January 6, 1986, he obtained a $285,000 loan from Scott, Inc., secured by a second deed of trust. Scott, Inc. sold the note to Barclays for the loan balance at an interest rate 2.25 percent below that payable by Truong. When Truong immediately defaulted on the new loan, Barclays gave Scott a power of attorney to pursue creditor's remedies against Truong. Acting under the power of attorney, Scott filed a complaint for specific performance of the rents and profits clause of the Truong note and initiated nonjudicial foreclosure proceedings on the deed of trust. At a foreclosure sale on August 19, 1986, Barclays acquired Truong's one-half interest in the property for a bid of $320,530.95.

During the foreclosure proceedings, appellants negotiated with Truong to acquire his one-half interest in the property, but the period of redemption expired before they could conclude a deal. Scott refused to delay foreclosure or otherwise accommodate them.

Following the foreclosure, appellants again tried to purchase the property by negotiating with Scott who represented Barclays under the power of attorney. The complaint recites that Scott "sought to extort a high price" for the property. On September 9, 1986, appellants nevertheless submitted an offer to Scott's counsel to purchase the property for $330,000. On September 16, 1986, Scott's attorney refused the offer in writing. As directed by his power of attorney, Scott made some efforts to sell the property to a third party, and purporting to act on behalf of appellants as well as Barclays, he secured at least one offer to purchase the property. But the complaint alleges on information and belief that Scott did not communicate either their offer or the third party's offer to Barclays. Instead, he pursued a secret plan to purchase the property for himself. "SCOTT's actions in appearing to seek to arrange a sale were done for the purpose of lulling [appellants] into a false sense of security." On September 22, 1986, Scott in fact purchased Barclays' one-half interest in the property for $325,000. Appellants were not notified of the sale "until the end of September, 1986."

Although they originally asked for a partition by sale of the property, appellants now seek relief as prospective purchasers of their cotenant's one-half interest in the property. In this appeal, we need consider only the sufficiency of the first and second causes of action. Upon dismissing the complaint against Barclays, appellants have necessarily abandoned the third cause of action alleging conspiracy. Our consideration of the parties may be similarly narrowed. As we have noted, Barclays entered into the Service Contract with Scott, Inc., and granted the power of attorney to Scott individually. Since Scott is alleged to be the sole shareholder of Scott, Inc., the allegations support the inference that the acts of the one should be imputed to the other. (Wenban Estate, Inc. v. Hewlett (1924) 193 Cal. 675, 695, 227 P. 723.) But the first and second causes of action do not mention the remaining respondent, Terry John O'Brien, who is named only in the third cause of action that appellant has now abandoned. Our analysis thus will refer only to Scott and Scott, Inc.

While the first cause of action seeks damages and the second seeks to impose a constructive trust, both are premised on the alleged breach of a duty owed by a licensed real estate broker to prospective purchasers. We therefore face the threshold question of whether the complaint alleges facts from which it may be inferred that Scott acted in the capacity of a real estate broker.

Scott's role in the transactions eludes easy categorization. The "Service Contract," appended as exhibit 1 to the complaint, contained a clause explicitly describing Scott, Inc., as an independent contractor; other provisions, however, tended to create an agency relationship. For example, Scott, Inc. was bound to comply with all written instructions of the bank relating to the notes and remained responsible for collecting payments due on the notes and providing the bank with relevant financial information. Under these allegations, the existence of an agency was a question of fact to be resolved at trial. But can it be inferred that the agency relationship was that of a...