Filed 8/16/16 Roberts v. Haro CA2/8

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

MARIA D. ROBERTS,

Plaintiff and Appellant, 

v.

ROBERT HARO,

Defendant and Respondent.

 B266157

 (Los Angeles County

 Super. Ct. No. LC100835)

APPEAL from an order of the Superior Court of Los Angeles County. Russell S. 

Kussman, Judge. Affirmed in part, reversed in part, and remanded with directions.

Steinhart Law Offices and Terran T. Steinhart for Plaintiff and Appellant.

Gabrielsalomons, Jonathan G. Gabriel and David S. Mayes for Defendant and 

Respondent.

__________________________
2

Plaintiff Maria D. Roberts appeals from the judgment of dismissal entered after 

the trial court sustained without leave to amend the demurrers of defendant Robert Haro 

to Roberts’s action to enforce an oral employment agreement that was made in 

conjunction with a written agreement to sell her house to Haro. We conclude Roberts has 

raised new factual allegations that warrant an opportunity to amend her pleading and 

remand for that purpose.

FACTS AND PROCEDURAL HISTORY1

Maria D. Roberts owned a home in Tarzana that she leased to Robert Haro. 

Roberts was having financial difficulties and arranged for a lender-approved short sale at 

the price of $480,400. Two potential buyers—Haro and another man—submitted offers 

to buy Roberts’s home. Both potential buyers offered to buy the property for $480,400. 

Roberts advised Haro and the alternative potential buyer that she had received offers 

from both of them, “which created competition between them to become the buyer of the 

Wilbur property.”

The price of the property did not increase. Instead, “in addition to offering to 

purchase [the Wilbur] property at the aforesaid price [of $480,400] the alternative buyer 

orally offered to provide [Roberts] with an additional $100,000 in some manner that 

would be legal [while Haro] orally offered to procure [Roberts] an engagement as a 

marketing program/project manager with a third party . . . with payment for her services 

in one or more projects to be provided by [Haro] in the sum of $90,000[, with] the 

engagement to be for at least six months at no less than $1,300 per week.”

On May 8, 2013, Roberts accepted Haro’s offer. A few days later, Haro orally 

agreed that Roberts would perform project management and marketing services for a 

company called Encon for a period of six to 11 months. In exchange, Roberts would be 

 

1 Our statement of facts comes from the allegations of Roberts’s operative second 

amended complaint which, as set forth in our standard of review, we must accept as true.
3

paid $90,000 funded by Haro through Encon, although she would be responsible for 

mileage and other business expenses.2 The sale of the house was completed two months 

later through the usual process of a written agreement handled through escrow.

In July 2013, Haro gave Encon $5,000 as a start on Roberts’s compensation. One 

month later, however, Haro would not commit to paying the remainder of Roberts’s 

salary. Encon did pay Roberts the $5,000 Haro had provided. Haro assured Roberts that 

he would fund the rest of her salary, but in September 2013 repudiated the deal. Encon 

ended the employment relationship with Roberts. Roberts then sued Haro, alleging that 

he breached their oral agreement for her employment. Her complaint included a cause of

action for fraud, alleging that Haro never intended to honor their oral employment 

agreement, the agreement was intended to dupe her into selling the house to him and not 

the other prospective buyer, she justifiably relied on Haro’s assurances, and, as a result, 

she lost out on the employment opportunity that the other potential buyer had promised.

Haro demurred to the second amended complaint, contending that the oral 

agreement to employ Roberts was an integral part of their written agreement for the sale 

of Roberts’s house and, as such, was barred by the statute of frauds. (Civ. Code, § 1624, 

subd. (a)(3) [agreements for sale of land must be in writing].)3 Anticipating that Roberts 

might try to avoid the statute of frauds based on her part performance of the agreement, 

Haro argued that Roberts failed to plead facts showing the requisite unconscionable 

injury under that doctrine. Instead, he contended, she had unclean hands by going behind 

her lender’s back to obtain additional compensation outside the lender-approved short 

sale. Haro contended that the fraud cause of action was barred because Roberts was 

trying to enforce a contract that violated the statute of frauds, and because she failed to 

plead fraud with specificity.

 

2 Haro’s relationship to Encon is not alleged in the complaint or otherwise explained 

in the appellate record.

3 Neither the record nor Roberts’s appellate briefs explain the disposition of her 

original and first amended complaints.
4

In opposition to the demurrer, Roberts argued that the statute of frauds did not 

apply because: (1) the oral employment agreement was separate and divisible from the 

real estate purchase agreement: (2) Haro was equitably estopped to raise the statute of 

frauds because Roberts had changed her position by passing on the other prospective 

buyer’s purchase and employment offers; and (3) the agreement was partly performed 

when the sale closed and Haro paid the purchase price. Roberts also contended the fraud 

cause of action was viable in part because the statute of frauds does not operate to 

preclude fraud claims, and in part because she adequately alleged the elements of that 

tort.

Haro’s reply asserted that Roberts could not rely on any equitable exception to the 

statute of frauds because no unconscionable injury would result from denying 

enforcement of the contract as she was attempting to defraud the bank by getting 

additional compensation for the sale of her home outside of escrow. Haro fleshed out his

unclean hands argument by quoting a portion of the Federal National Mortgage 

Association’s (FNMA) website concerning short sales and the prohibition against 

undisclosed side agreements: “For a real estate transaction to be completed, all lien 

holders must sign off. In this fraud, one party (real estate agents involved, first mortgage 

lenders, second lien holders) might make certain demands outside of the escrow 

transaction before signing off, such as asking that real estate agents reduce their 

commissions or other parties (short sale negotiators, attorneys, etc.) get reduced pay or no 

pay. [¶] While these arrangements sound innocent enough, they are actually ‘off the 

books’ transactions, meaning they are not being recorded in the HUD-1 Settlement 

Statement. Someone will profit from that hidden cash.” Haro did not request the court to 

take judicial notice of the FNMA website or any FNMA regulations.

In its minute order, the trial court said it was sustaining the demurrers without 

leave to amend for the reasons stated in the moving papers. Judgment for Haro was then 

entered.
5

STANDARD OF REVIEW

When reviewing a judgment of dismissal after a demurrer is sustained without 

leave to amend, we assume the truth of all properly pleaded facts, and examine the 

complaint’s factual allegations to determine whether they state a cause of action on any 

available legal theory regardless of the label attached to a cause of action. (Fischer v. 

Time Warner Cable, Inc. (2015) 234 Cal.App.4th 784, 790.) We do not assume the truth 

of contentions, deductions, or conclusions of fact or law, and may disregard allegations 

that are contrary to the law or to a fact that may be judicially noticed. (Ibid.) We also 

accept as true all facts that may reasonably be inferred from those expressly alleged, and 

read the complaint in context to give it a reasonable interpretation. (Richtek USA, Inc. v. 

uPI Semiconductor Corp. (2015) 242 Cal.App.4th 651, 658.) Whether leave to amend 

should have been granted is reviewed under the abuse of discretion standard. (Fischer, at 

p. 790.)

If there is a reasonable possibility that a defective pleading can be cured by 

amendment, then the trial court abused its discretion by sustaining a demurrer without 

leave to amend. The burden of showing such a reasonable possibility lies with the 

appellant. (Murphy v. BDO Seidman (2003) 113 Cal.App.4th 687, 691-692.)

DISCUSSION

Roberts Has Alleged New Facts, Which Warrant Leave to Amend

The statute of frauds requires that certain contracts, including those for the sale of 

realty, be in writing. (Civ. Code, § 1624, subd. (a).) The statute requires either a written 

contract or a note or memorandum signed by the party against whom the contract will be 

enforced. (Ibid.; In re Marriage of Benson (2005) 36 Cal.4th 1096, 1108.) Because the

statute of frauds is designed to prove that a contract exists, the writing need mention only 

certain essential or meaningful terms. Ambiguities can be resolved by extrinsic evidence. 

(Benson, supra, at p. 1104.)
6

We agree with Haro that the alleged oral agreement cannot be separated from the 

real estate purchase agreement and therefore falls within the statute of frauds. However, 

we conclude that at this stage of the proceedings, Roberts has alleged new facts with 

which she should be allowed to amend her contract cause of action.

Under the doctrine of partial performance, enforcement of an oral contract that 

falls within the statute of frauds is permitted when the party seeking to enforce it has 

partially performed, so long as the performance unequivocally refers to the contract or 

clearly relates to its terms. (Secrest v. Security National Mortgage Loan Trust 2002-2

(2008) 167 Cal.App.4th 544, 555 (Secrest).) Such conduct satisfies the statute of fraud’s 

evidentiary function by confirming that an agreement was reached. (Ibid.)

In addition to partial performance, the party seeking to enforce the contract must 

have changed position in reliance on the oral agreement so that application of the statute 

of frauds would result in an unjust or unconscionable injury that effectively amounts to

fraud. (Secrest, supra, 167 Cal.App.4th at p. 555.)

Roberts has alleged for the first time on appeal that she can amend her complaint 

to demonstrate facts that satisfy the partial performance doctrine. Roberts has adequately

alleged that she partially performed the oral agreement by working for Encon for about 

one month before Haro backed out of the deal, an act that clearly relates to the terms of 

the alleged oral agreement. She also alleged that Haro partly funded the employment by 

paying Encon $5,000 to cover some of her work. Roberts changed position in reliance on 

the oral agreement by passing on the other prospective buyer’s offer to purchase her 

house and provide her with work at his company for $10,000 more than the $90,000 

Roberts had agreed to cover.

However, Haro challenges application of the part performance doctrine on the 

contention that no unconscionable injury has been alleged sufficient to deny application 

of the statute of frauds because Roberts was seeking to defraud her lender by personally 

garnering close to $100,000 in additional compensation above the approve short sale 

price of her home. 
7

Roberts contends, for the first time on appeal, that she can amend her pleadings to 

allege that she and Haro were concerned about the legality of the agreement, and split the 

cost of legal fees when seeking out a lawyer who advised them the agreement was in fact 

lawful. That proposed allegation raises a possibility that the side agreement was legal. 

Taken as a whole, we believe the potential illegality of the side agreement requires an 

affirmance of the order sustaining the demurrer, but a reversal as to the order sustaining 

the demurrer without leave to amend. In short, at this stage of the proceedings, we are 

unable to determine whether the side agreement was either illegal or fraudulent, and 

conclude that Roberts should be given leave to amend to allege its legality if she can. We 

therefore remand for Roberts to file a new pleading that adequately alleges the lawfulness 

of the side agreement. 

We reach the same result as to the fraud cause of action. Haro contended below 

that Roberts’s fraud cause of action was barred because it was based on an agreement that 

violated the statute of frauds. First, Haro is legally wrong. (Riverisland Cold Storage, 

Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1183 [fraud 

action not barred when allegedly fraudulent promise is unenforceable under the statute of 

frauds].) Second, the contention fails because we hold that Roberts has indicated she can 

amend the complaint in a manner that might allow her to invoke the partial performance 

exception to the statute of frauds, as outlined above.

We disagree insofar as Haro contended below that Roberts failed to adequately 

allege the required elements of a fraud cause of action. Fraud requires: an intentional 

misrepresentation of material fact with knowledge of its falsity and intent to induce 

reliance, actual and justifiable reliance, and damages proximately caused by the reliance. 

(Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)

Roberts alleged that Haro’s promise to pay for her services at Encon was made 

without the intention to perform in order to induce her to sell her house to him, that she 

agreed to sell her house to Haro in justifiable reliance on that promise, that the other 

prospective buyer was ready, willing, and able to perform his promise to secure her 
8

employment, and that as a proximate result she lost out on that other opportunity. These 

allegations are sufficient. (See Beckwith v. Dahl (2012) 205 Cal.App.4th 1039.)

The dissent opens with the view that the agreement between the parties is “plainly 

dishonest,” and continues with its assertion that by providing that Roberts would receive 

a salary for work to be performed by Encon, the contract was as a matter of law unlawful 

and Roberts, therefore, may not enforce it. Specifically, the dissent has determined that 

the contract defrauded Roberts’s lender. This accusation is found on three occasions in 

the dissent. (“It seems plain to me that plaintiff made an agreement with defendant to 

defraud the lender; and the three-way arrangement among plaintiff, defendant and Encon 

was a ploy to hide the money trail.” (Dis. opn. post, at p. 2.) “[T]he entire arrangement 

was for the purpose of defrauding plaintiff’s lender.” (Id. at p. 3.) “To the contrary, the 

purpose of the oral contract was to enable plaintiff to receive $90,000 outside of escrow 

and by so doing to defraud her lender which had agreed to grant her the benefits of a 

short sale.” (Id. at p. 5.)

What is missing from this conclusion is any authority that this is so. The dissent 

clearly does not approve of the transaction and we agree that it is unusual, but is it 

unlawful or a fraud? At oral argument, Haro’s counsel was specifically asked if his 

position was that the contract was unlawful. He declined to take that position. In his 

respondent’s brief, Haro refers us to a website of the Federal National Mortgage 

Association (Fannie Mae) but does not ask us to take judicial notice of any Fannie Mae 

rules or regulations. In addition, the examples from the website do not deal with the 

current situation.

It may very well be that this type of transaction is unlawful and should not be 

enforced. But the parties in the current appeal assiduously stayed away from the issue, 

and Haro in particular disavowed any intent to go down that road. In any event, we are 

not prepared to pursue on our own a theory that neither party has asserted. Perhaps, the 

fact that Roberts started work for which she was paid defeats such a claim. It thus seems 

appropriate to permit Roberts to amend her complaint to raise expressly the lawfulness of 
9

the transaction and what impact that might have on issues such as part performance and 

estoppel.

DISPOSITION

We affirm the order to the extent it sustained the demurrers to Roberts’s second 

amended complaint, but reverse as to that portion of the order sustaining the demurrers 

without leave to amend. The matter is remanded to the trial court to permit Roberts leave 

to amend and for further proceedings. Appellant shall recover her appellate costs.

RUBIN, J.

WE CONCUR:

BIGELOW, P. J.
1

Grimes, J., Dissenting.

Respectfully, I dissent.

In my view, the allegations of the operative complaint cannot be cured to bring 

this case within an exception to the statute of frauds. Plaintiff seeks to enforce an oral 

side agreement she made with the buyer of her home in a short sale by which she was to 

receive $90,000 outside of escrow. To me, the agreement is plainly dishonest, and thus, 

equity will not prevent application of the statute of frauds.

Plaintiff’s home was encumbered by first and second deeds of trust in favor of 

Bank of America, and a third deed of trust in favor of Rushmore Capital Partners, LLC. 

Plaintiff defaulted on her mortgage payments and the three deeds of trust “went into 

default.” Plaintiff made a “payoff agreement” with Rushmore and a short sale agreement 

with Bank of America. In a short sale, a homeowner who is behind in making mortgage 

payments may make an agreement with the lender to sell the home for less than the 

balance remaining on the mortgage, with the lender forgiving any remaining loan 

balance.

Plaintiff engaged the services of a real estate broker who brought plaintiff two 

offers to buy the property at the price approved by Bank of America. But this was not 

enough for plaintiff. Plaintiff advised defendant and the other potential buyer that she 

had received offers from both of them, “which created competition between them to 

become the buyer.” Both rose to the bait. The other potential buyer offered plaintiff 

$100,000 “in some manner that would be legal, such as his possibly directly engaging her 

as a project manager for one of his own business projects.” (Ahem.) The other, 

defendant here, offered plaintiff $90,000 to be paid to an unnamed third party over a 

period of six months, in exchange for plaintiff rendering unspecified marketing services 

to the unknown third party. Defendant would pay the third party, who would remit 

payment to plaintiff at the rate of “no less than $1,300 per week.” 
2

On May 8, 2013, plaintiff orally accepted defendant’s oral offer and signed a 

written purchase agreement and escrow instructions the next day. Within five days after 

that, plaintiff and defendant orally modified their oral agreement for the payment of 

$90,000 outside of escrow, including that the money would be “provided to [third party] 

Encon by defendant . . . payable in advance in weekly, monthly or quarterly installments 

based on invoices to be provided by plaintiff.” Escrow closed on July 2, 2013. 

It was not until late June or early July 2013 that plaintiff and unnamed executives 

at the third party, Encon, began to discuss “the parameters of the Encon marketing 

project/program that plaintiff was to help formulate, and which she was to manage.” In 

other words, plaintiff and the third party did not know one another or communicate at all 

to discuss job responsibilities, compensation and other basic terms until about seven 

weeks after plaintiff agreed to sell her home to defendant.

It seems plain to me that plaintiff made an agreement with defendant to defraud 

the lender; and the three-way arrangement among plaintiff, defendant and Encon was a 

ploy to hide the money trail. Who ever heard of a legitimate employer making such an 

arrangement? How could plaintiff have believed in good faith that the arrangement was 

above board? The general rule of liberal allowance of pleading amendment does not 

require us to turn a blind eye to the reality of the facts plaintiff alleged.

1. The First Cause of Action for Breach of Oral Contract

Plaintiff invokes equity to save her breach of contract claim from the statute of 

frauds. Plaintiff argues “[t]he doctrine of part performance by the buyer is an exception 

to the statute of frauds only as applies to contracts for the sale or lease of real property.” 

The doctrine of part performance permits a real estate purchaser to enforce an oral 

contract to buy real property (i.e., take the contract out of the statute of frauds) when the 

buyer has taken actual, visible and exclusive possession that unequivocally manifests a 

new and distinctive ownership of the property. (Hambey v. Wise (1919) 181 Cal. 286, 

290-291.) The doctrine applies when there is a claim that the buyer cannot enforce a 

contract that was not in writing. The doctrine does not apply when there is no dispute 

that the buyer acquired legal title to the property. Plaintiff does not dispute that 
3

defendant has legal title and possession of her property. Plaintiff’s theory that defendant 

partly performed the agreement to pay her $90,000 outside of escrow, and she partly 

performed by her dealings with Encon, simply has nothing to do with the doctrine of part 

performance as an exception to the statute of frauds.

Plaintiff is also mistaken in her assertion that “ ‘unconscionability’ is not an 

element of the part performance exception.” Unconscionability is an element of every 

expression of equitable estoppel. (Anderson v. Stansbury (1952) 38 Cal.2d 707, 715 

[“Nor may plaintiffs successfully invoke the doctrine of part performance to overcome 

the bar of the statute of frauds. Before a party can be estopped to assert the statute due to 

the other’s part performance, it must appear that a sufficient change of position has 

occurred so that the application of the statutory bar would result in an unjust and 

unconscionable loss, amounting in effect to a fraud.”].)

I cannot conceive a scenario by which a court would force defendant to pay 

plaintiff $90,000 for services she did not render to Encon, where there was no agreement 

between plaintiff and Encon as to the terms of her engagement, and the entire 

arrangement was for the purpose of defrauding plaintiff’s lender. Plaintiff proposes to 

add allegations that she and defendant consulted an attorney who advised them that the 

oral agreement to pay plaintiff $90,000 with respect to the short sale was not improper 

because plaintiff was earning it by working for an employer. Accepting as true that the 

parties consulted counsel who gave such poor advice, plaintiff cannot allege she suffered 

unconscionable injury, or serious change of position, or that defendant was unjustly 

enriched. And plaintiff cannot cleanse her hands by wiping them on the cloak of counsel. 

(See generally Bertero v. National General Corp. (1974) 13 Cal.3d 43, 54, quoting 

Walker v. Jensen (1949) 95 Cal.App.2d 269, 274 [advice of counsel must be sought in 

good faith and not as a mere cloak to protect oneself against suit].)

I find this case is analogous to Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048 

(Blain) where the plaintiff, a doctor, filed a legal malpractice action against his attorney 

who had represented him in an earlier medical malpractice lawsuit. Plaintiff claimed that 

because he followed his attorney’s advice to lie during a deposition, he was exposed to 
4

greater liability which injured him and his wife. The Court of Appeal affirmed the trial 

court’s sustaining of the defendant’s demurrer without leave to amend, reasoning that 

plaintiff had no cause of action for injury caused by his own misconduct. (Id. at pp. 

1062-1063.) The plaintiff was precluded from asserting the defense of reliance on advice 

of counsel due to the doctrine of unclean hands. (Id. at pp. 1063-1064 [“Even the most 

naive must know that lying under oath is illegal. A doctor who lies under oath about the 

incident for which he is being sued must know that if the lie is discovered it will 

adversely affect his defense.”].)

Likewise, even the most naive must know that an oral agreement to receive 

significant sums outside of escrow in a short sale under a sketchy three-way employment 

agreement is unlikely to be favorably construed when discovered. Just like the plaintiff 

in Blain, plaintiff’s own allegations demonstrate as a matter of law she did not act in 

good faith so as to fall within any exception to the statute of frauds. 

2. The Second Cause of Action for Promissory Fraud

Plaintiff contends she stated a cause of action for promissory fraud under Tenzer v. 

Superscope, Inc. (1985) 39 Cal.3d 18 (Tenzer). Tenzer disapproved the rule of Kroger v. 

Baur (1941) 46 Cal.App.2d 801 and its progeny that an action for fraud cannot be

maintained where the allegedly fraudulent promise is unenforceable as a contract due to 

the statute of frauds. Tenzer reasoned in part that the rule of Kroger was “inconsistent 

with the general rule ‘ “that the statute of frauds, having been enacted for the purpose of 

preventing fraud, shall not be made the instrument of shielding, protecting or aiding the 

party who relies upon it in the perpetration of a fraud or in the consummation of a 

fraudulent scheme.” ’ ” (Tenzer, at p. 29.) Tenzer was recently cited with approval in 

Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 

55 Cal.4th 1169, 1183 (Riverisland). Thus, Tenzer and Riverisland establish that the 

statute of frauds should not be applied so as to facilitate a fraud. 

Tenzer and Riverisland do not save plaintiff’s cause of action for promissory fraud 

because plaintiff was complicit with defendant in the scheme by which plaintiff would 

receive significant sums outside of escrow that otherwise could have been applied to 
5

reduce the mortgage debt the lender agreed to write off. No fraud will be perpetrated 

upon plaintiff by the court’s refusal to enforce the oral contract alleged here. To the 

contrary, the purpose of the oral contract was to enable plaintiff to receive $90,000 

outside of escrow and by so doing to defraud her lender which had agreed to grant her the 

benefits of a short sale.

I would affirm the judgment.

GRIMES, J.