Court Opinion

ID: 7801096
Source: CourtListenerOpinion
Date Created: 2022-08-16 21:02:35.281325+00
Date Added: 2024-06-11T16:29:14.268630
License: Public Domain

Filed 8/16/22 Zhou v. SJO Investments CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

YONG ZHOU,                                                             B313152

         Plaintiff and Appellant,                                      (Los Angeles County
                                                                       Super. Ct. No. BC687779)
         v.

SJO INVESTMENTS, LLC,

         Defendant and Respondent.

     APPEAL from a judgment of the Superior Court of
Los Angeles County. Robert B. Broadbelt, Judge. Affirmed.

     Grebow & Rubin and Arthur Grebow for Plaintiff and
Appellant.

     The Enochs Law Group, Jon Alan Enochs and Jeffrey D.
Poindexter for Defendant and Respondent.
               ______________________________
      Plaintiff and appellant Yong Zhou (Zhou) appeals from a
judgment entered in favor of defendant and respondent SJO
Investments, LLC (SJO) following the trial court’s order
sustaining a demurrer without leave to amend.
      We affirm.
                  1
      FACTUAL AND PROCEDURAL BACKGROUND
Original and first amended complaint
      On December 20, 2017, Zhou initiated this action against
                                     2
Stewart Title Guaranty Company and SJO. As is relevant to the
instant appeal, the complaint and first amended complaint
alleged, inter alia, that “[o]n or about June 30, 2017, . . . SJO
. . . entered into a written agreement pursuant to which SJO
. . . agreed to purchase [certain real property (the property)] from
Jose Daniel Santana” (Santana). Thereafter, “[o]n or about
July 26, 2017, SJO . . . entered into an agreement pursuant to
which SJO . . . agreed to assign its right to purchase and sell the
Property to” Zhou.
        The two pleadings further alleged that SJO “falsely
represented” to Zhou that the property “was capable of being
conveyed and was conveyed with marketable title.”

1
       “Because this matter comes to us on demurrer, we take the
facts from plaintiff’s complaint, the allegations of which are
deemed true for the limited purpose of determining whether [the]
plaintiff has stated a viable cause of action. [Citation.]”
(Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885.)
2
      Zhou dismissed Stewart Title Guaranty Company with
prejudice on April 9, 2019.

                                 2
Discovery
       The parties then apparently participated in some discovery.
Again, as is relevant to the issues raised in this appeal, SJO
asked Zhou in a special interrogatory to “[i]dentify, with
specificity, the content of each and every verbal statement any
representative of SJO . . . made to [you] that [you] contend was
false.” Zhou responded: “Mr. Chris Sumners [an SJO
representative] informed me that this is a normal sale with
distressed property. He never informed me that this property
could not be sold or inhabited.” Similarly, in response to a form
interrogatory, Zhou stated that SJO “represented to [him] that
the property being sold was capable of being conveyed and was
conveyed with marketable title.” Furthermore, Zhou stated that
“[t]he property was not capable of being conveyed and was not
conveyed with a marketable title.” When asked if “any
agreement alleged in the pleadings [is] ambiguous,” Zhou
responded, “No.”
Second amended complaint (SAC)
       The operative pleading is the SAC, which was filed after
Zhou submitted responses to SJO’s form and special
interrogatories.
       According to the SAC, on June 30, 2017, SJO acquired the
                       3
property from Santana. Less than a month later, Zhou and SJO
entered into a written contract pursuant to which SJO agreed to
sell, and Zhou agreed to purchase, the property. Escrow closed in
a sales transaction on August 18, 2017.
       At some point prior to the execution of the sales contract
and continuing through the escrow period, SJO either became

3
      Santana was never named as a defendant in this lawsuit.

                                3
aware of or failed to use reasonable care to observe that certain
repairs or alterations were completed by Santana without the
requisite permits. SJO also failed to use reasonable care to
observe that the property was land-locked and uninhabitable.
And, prior to the close of escrow, SJO failed to provide Zhou with
a transfer disclosure statement as required by Civil Code section
            4
1102 et seq.
       Based upon these allegations, Zhou asserts claims for
violation of section 1102 et seq., failure to disclose material facts,
fraud, and negligent misrepresentation.
       Attached to the SAC is a copy of the agreement to sell real
estate between Zhou and SJO, although it is unsigned by SJO.
Page one provides that SJO “makes no guarantee or promise as
to status or validity of permits, additions, or repairs. SJO . . . did
not perform or obtain any inspections on the property.” (Italics
omitted.) The agreement further provides, in relevant part: “If
Seller has the Property in escrow but has not yet closed on it, the
parties agree that they will do an assignment of Seller’s contract
with the current owner, at Seller’s request, so that the Buyer’s
total purchase price remains the same after the assignment fee is
considered.” Moreover, “Seller agrees to deliver the premises at
the time of closing in an as-is condition.” And, “Seller agrees to
deliver a good and marketable or insurable owner’s title to the
property . . . and clear of all encumbrances except as herein set
forth. Purchaser agrees to notify Seller in writing of any defects
in title as soon as reasonably possible.” Finally, the agreement
provides that Zhou acknowledges that ‘THE PREMISES WERE

4
      All further statutory references are to the Civil Code unless
otherwise indicated.

                                  4
ACCEPTED WITHOUT [ANY] REPRESENTATION [AS TO]
WARRANTY OF ANY KIND OR NATURE AND IN ITS
PRESENT ‘AS IS’ CONDITION BASED SOLELY ON BUYER’S
OWN INSPECTION.”
SJO’s demurrer
       SJO demurred. It asserted that it had entered into a
contract to purchase the property from Santana. Before escrow
closed, SJO assigned its right to purchase the property to Zhou.
The transaction went forward and Zhou obtained title to the
property from Santana.
       SJO then pointed out that Zhou “has now abandoned his
marketability of title argument” and replaced it with allegations
of violation of section 1102 et seq. and fraud. But, according to
SJO, these allegations fail as a matter of law.
       Regarding the first cause of action for violation of section
1102, SJO argued that that statute only “applies to any transfer
by sale . . . [or] real property sales contract as defined in Section
2985 . . . of any single-family residential property.” (§ 1102, subd.
(a).) “A real property sales contract is an agreement in which one
party agrees to convey title to real property to another party upon
the satisfaction of specified conditions set forth in the contract
and that does not require conveyance of title within one year
from the date of formation of the contract.” (§ 2985, subd. (a).)
Because SJO did not convey title to Zhou, the contract at issue
does not qualify as a “real property sales contract.”
       Regarding the second cause of action for failure to disclose
material facts, SJO asserted that because it assigned its right to
purchase the property from Santana and it did not sell the
property itself, SJO could not be held liable for failure to disclose
material facts.

                                  5
       Finally, SJO asserted that the third and fourth causes of
action failed because they directly contradicted the contract
attached to the SAC as well as Zhou’s verified discovery
responses.
       In support of its demurrer, SJO requested judicial notice of
(1) the grant deed dated August 7, 2017, showing Santana’s
conveyance of the property to Zhou; (2) excerpts of Zhou’s
responses to SJO’s special interrogatories; and (3) excerpts of
Zhou’s responses to SJO’s form interrogatories.
Belated opposition
       Zhou belatedly filed an opposition to the demurrer,
addressing only the first cause of action. He argued that SJO
was required to issue a real estate disclosure statement because
it transferred real property to him.
Trial court order
       At the outset of its order, the trial granted SJO’s request
for judicial notice. It then proceeded to address the viability of
each cause of action pled in the SAC.
       Regarding the first and second causes of action, based upon
the grant deed, it found that SJO did not sell nor transfer title to
the property to Zhou, Santana did. Because SJO was not the
seller, it did not owe Zhou a duty of disclosure.
       Regarding the third and fourth causes of action, the trial
court found that the SAC contradicted Zhou’s verified responses
to SJO’s interrogatories. Thus, it could disregard the
inconsistent allegations of the SAC.
       Finally, because Zhou failed to show how he could amend
the SAC to state claims against SJO, the trial court sustained the
demurrer without leave to amend.

                                 6
Judgment; Appeal
       A judgment of dismissal was entered, and Zhou’s timely
appeal ensued.
                            DISCUSSION
I. Standards of review
       “We review de novo a trial court’s sustaining of a demurrer
without leave to amend, exercising our independent judgment as
to whether a cause of action has been stated as a matter of law.
[Citations.] We assume the truth of properly pleaded allegations
in the complaint and give the complaint a reasonable
interpretation, reading it as a whole and with all its parts in
their context. [Citations.]” (Market Lofts Community Assn. v. 9th
Street Market Lofts, LLC (2014) 222 Cal.App.4th 924, 930.)
       That said, we cannot ignore “[t]he [c]oncept of [t]ruthful
[p]leading.” (Del E. Webb Corp. v. Structural Materials Co. (1981)
123 Cal.App.3d 593, 604.) Courts “will not close their eyes to
situations where a complaint contains allegations of fact
inconsistent with attached documents, or allegations contrary to
facts which are judicially noticed. . . . In this regard the court
passing upon the question of the demurrer may look to . . . the
plaintiff’s answers to interrogatories.” (Ibid.) “The court will
take judicial notice of records such as . . . answers to
interrogatories . . . when considering a demurrer, only where they
contain statements of the plaintiff . . . which are inconsistent
with the allegations of the pleading before the court.” (Id. at
pp. 604–605.)
       “[F]acts appearing in exhibits attached to the complaint
will also be accepted as true and, if contrary to the allegations in
the pleading, will be given precedence.” (Dodd v. Citizens Bank
of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)

                                 7
      “Although our review of [an order sustaining a demurrer] is
de novo, it is limited to issues which have been adequately raised
and supported in [the appellant’s] brief.” (Reyes v. Kosha (1998)
65 Cal.App.4th 451, 466, fn. 6.)
      “‘[I]t is an abuse of discretion to sustain a demurrer
without leave to amend if the plaintiff shows there is a
reasonable possibility any defect identified by the defendant can
be cured by amendment. [Citation.]’” (Payne v. National
Collection Systems, Inc. (2001) 91 Cal.App.4th 1037, 1043–1044.)
“The burden is on the plaintiff . . . to demonstrate the manner in
which the complaint might be amended. [Citation.]” (Hendy v.
Losse (1991) 54 Cal.3d 723, 742.)
II. Analysis
      Applying these legal principles, we conclude that the trial
court properly sustained SJO’s demurrer to the SAC without
                5
leave to amend.
       A. Section 1102
       As set forth above, section 1102, subdivision (a), provides
that “this article applies to any transfer by sale, exchange, real
property sales contract as defined in Section 2985, lease with an

5
        In his reply brief, Zhou argues that he has stated a claim
against SJO because SJO did not transfer “good and marketable
title” to the property to him. There are a host of problems with
this argument. Although this theory was pled in the original and
first amended complaints, it was omitted from the SAC. This
argument was not raised below. (Algeri v. Tonini (1958) 159
Cal.App.2d 828, 832.) And, it is well-settled that we do not
consider arguments first raised in a reply brief. (Reichardt v.
Hoffman (1997) 52 Cal.App.4th 754, 764.) Although page 17 of
the opening brief refers to that portion of the parties’ agreement
concerning marketable title, no argument is presented.

                                 8
option to purchase, any other option to purchase, or ground lease
coupled with improvements of any single-family residential
property.”
       We agree with the trial court that section 1102 does not
apply to SJO because SJO did not sell or transfer title to the
property to Zhou. (§ 1039 [“Transfer is an act of the parties, or of
the law, by which the title to property is conveyed from one living
person to another”].) The grant deed, of which the trial court
took judicial notice, shows that Santana, not SJO, transferred
title to the property Zhou on August 18, 2017. Although Zhou
alleges that SJO acquired the property from Santana on June 30,
2017, that SJO agreed to sell the property to Zhou, and that
escrow closed on August 18, 2017, the grant deed: (1) contradicts
Zhou’s contention that SJO transferred the property to Zhou, and
(2) establishes that Santana, not SJO, was the seller of the
property and the person who transferred the property to Zhou.
Because SJO did not transfer the property to Zhou, Zhou’s claim
pursuant to section 1102 et seq. fails.
       Urging us to conclude otherwise, Zhou directs us to the title
of the agreement attached to the SAC: “AGREEMENT TO SELL
REAL ESTATE.” He also points out that the agreement
obligated SJO to deliver a good and marketable title to the
property. According to Zhou, this title and clause establish that
SJO was the seller of the property. The problem for SJO is that
the agreement itself does not unambiguously provide that SJO is
selling the property to Zhou. In fact, it expressly anticipates a
situation in which SJO does not have title to property that Zhou
intends to purchase: “If [SJO] has the Property in escrow but has
not yet closed on it, the parties agree that they will do an
assignment of [the] Seller’s contract with the current owner.” In

                                 9
other words, at best, we could deem the agreement to be
ambiguous. But, as Zhou admitted in his verified response to
SJO’s form interrogatory No. 50.6, the agreement is not
ambiguous. He offers us no reason to contradict him. In light of
the grant deed, we cannot conclude that the agreement
unambiguously shows that SJO was the seller of the property to
Zhou.
       Zhou further argues that SJO, as Santana’s assignee,
assumed Santana’s obligation to comply with section 1102. This
argument was not raised below and is therefore forfeited on
appeal. (In re C.M. (2017) 15 Cal.App.5th 376, 385 [“A party may
not assert theories on appeal which were not raised in the trial
court”].)
       Setting that procedural obstacle aside, as the parties agree,
generally speaking, an assignee does not assume the obligations
of a contract when accepting an assignment. (Melchior v. New
Lines Production, Inc. (2003) 106 Cal.App.4th 779, 790
(Melchior).) As the parties also agree, section 1589 provides an
exception to that general rule: “A voluntary acceptance of the
benefit of a transaction is equivalent to a consent to all the
obligations arising from it, so far as the facts are known, or ought
to be known, to the person accepting.” (§ 1589.)
       Assuming without deciding that SJO voluntarily accepted
the benefits of a transaction when it assigned its right to
purchase the property from Santana to Zhou, Zhou has not
demonstrated how SJO owes him a duty under section 1102.
When SJO assigned its right to purchase the property from
Santana, it never agreed to act as the seller of the property. In
fact, as set forth above, SJO did not sell or otherwise transfer the
property to Zhou—Santana did. Thus, SJO did not assume

                                 10
Santana’s obligation to make any statutory disclosures.
(Melchior, supra, 106 Cal.App.4th at p. 788 [a party who accepts
the benefits of an assigned agreement is bound by all of the
“obligations arising under” that agreement].)
       B. Failure to Disclose Material Facts
       “‘“[T]he elements of an action for fraud and deceit based on
concealment are: (1) the defendant must have concealed or
suppressed a material fact, (2) the defendant must have been
under a duty to disclose the fact to the plaintiff, (3) the defendant
must have intentionally concealed or suppressed the fact with the
intent to defraud the plaintiff, (4) the plaintiff must have been
unaware of the fact and would not have acted as he did if he had
known of the concealed or suppressed fact, and (5) as a result of
the concealment or suppression of the fact, the plaintiff must
have sustained damage.”’” (Boschma v. Home Loan Center, Inc.
(2011) 198 Cal.App.4th 230, 248.) “A real estate seller has both a
common law and statutory duty of disclosure.” (Calemine v.
Samuelson (2009) 171 Cal.App.4th 153, 161.)
       On appeal, Zhou argues that he properly pled a cause of
action for failure to disclose. But, he failed to raise this argument
below. On this ground alone, we could affirm the trial court’s
order. (In re C.M., supra, 15 Cal.App.5th at p. 385.)
       Regardless, Zhou has not demonstrated how this cause of
action can proceed against SJO. Zhou alleges that SJO failed to
disclose material facts to him. But, as set forth above, SJO was
not the seller of the property, Santana was. Because SJO was
not the seller of the property, it did not have a duty of disclosure
to Zhou. It follows that this cause of action fails.
       In his opening brief, Zhou discusses the law concerning
fiduciaries and their obligations. But he neglects to argue or

                                 11
demonstrate how SJO was a fiduciary or otherwise owed him any
duties. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th
836, 852 [the appellant bears the burden of supporting a point
with reasoned argument].) Thus, we reject any suggestion by
Zhou that SJO was his fiduciary who owed him a duty to disclose
all material facts.
       C. Fraud – Intentional Misrepresentation
       “The essential elements of a count for intentional
misrepresentation are (1) a misrepresentation, (2) knowledge of
falsity, (3) intent to induce reliance, (4) actual and justifiable
reliance, and (5) resulting damage.” (Chapman v. Skype Inc.
(2013) 220 Cal.App.4th 217, 230–231.)
       On appeal, Zhou argues that he properly pled a cause of
action for failure to disclose. But again, he failed to raise this
argument below. On this ground alone, we could affirm the trial
court’s order. (In re C.M., supra, 15 Cal.App.5th at p. 385.)
       Regardless, as the trial court properly found, Zhou did not
plead an adequate claim for intentional misrepresentation.
According to the SAC, SJO falsely represented to Zhou that
Santana had acquired all of the necessary permits for the
additions and alterations to the property. That allegation
contradicts Zhou’s verified answer to SJO’s special interrogatory
No. 1.
       As set forth above, SJO asked Zhou to specifically identify
“each and every” false statement made by SJO representatives to
him. The only false statement he identified was that the sale
was a “normal” sale with distressed property. Zhou never
attested that SJO falsely represented that Santana had acquired
all necessary permits. We need not accept as true Zhou’s
allegations in the SAC that conflict with his verified answers to

                                12
interrogatories. (Del E. Webb Corp. v. Structural Materials Co.,
supra, 123 Cal.App.3d at pp. 604–605.)
       Urging us to conclude otherwise, Zhou points out that this
interrogatory related to allegations of prior pleadings, not the
SAC. We are not convinced. Nothing in the interrogatory itself
limited the request for information to the allegations of a specific
pleading. Rather, the interrogatory generally asked for
information in support of Zhou’s fraud claim.
       In any event, Zhou could have amended his interrogatory
response. (Code Civ. Proc., § 2030.310, subd. (a) [“Without leave
of court, a party may serve an amended answer to any
interrogatory that contains information subsequently discovered,
inadvertently omitted, or mistakenly stated in the initial
interrogatory”].) He never did.
       Zhou further argues that his responses to other
interrogatories put SJO on notice that his claim was based upon
the false representation that Santana had all the requisite
permits for the property. But, Zhou offers no citation to the
appellate record for these alleged responses, and we could not
locate them. (Cal. Rules of Court, rule 8.204(a)(1)(C); Guthrey v.
State of California (1998) 63 Cal.App.4th 1108, 1115 [appellate
court is not required to make an independent, unassisted search
of the appellate record].)
       D. Negligent Misrepresentation
       “The essential elements of a count for negligent
misrepresentation are the same [as those for intentional
misrepresentation] except that it does not require knowledge of
falsity but instead requires a misrepresentation of fact by a
person who has no reasonable grounds for believing it to be true.”
(Chapman v. Skype Inc., supra, 220 Cal.App.4th at p. 231.)

                                 13
       For the same reasons discussed in connection with Zhou’s
fraud cause of action, this claim fails as well.
       E. Leave to Amend
       The trial court denied Zhou’s request for leave to amend.
On appeal, Zhou asks for leave to amend. “To satisfy [his burden
on appeal of proving that an amendment would cure any pleading
defects], a plaintiff ‘must show in what manner he [or she] can
amend his [or her] complaint and how that amendment will
change the legal effect of the pleading.’ [Citation.] The assertion
of an abstract right to amend does not satisfy this burden.
[Citation.] The plaintiff must clearly and specifically set forth
the ‘applicable substantive law’ [citation] and the legal basis for
the amendment, i.e., the elements of the cause of action and
authority for it. Further, the plaintiff must set forth factual
allegations that sufficiently state all required elements of that
cause of action. [Citations.] Allegations must be factual and
specific, not vague or conclusory. [Citation.]” (Rakestraw v.
California Physicians’ Service (2000) 81 Cal.App.4th 39, 43–44.)
       Here, Zhou offers nothing more than a generic request for
leave to amend the second, third, and fourth causes of action. He
fails to argue or explain how he can amend the pleading to cure
its defects. Having failed to meet his burden on appeal, his
request for leave to amend is denied.

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                       DISPOSITION
     The judgment is affirmed. SJO is entitled to costs on
appeal.
     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                               _____________________, J.
                               ASHMANN-GERST

We concur:

________________________, P. J.
LUI

________________________, J.
CHAVEZ

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