Wednesday, December 30, 2009
C.A. Grants New Trial on Brea Restaurateurs’ Claims Against Buyer
By SHERRI M. OKAMOTO, Staff Writer
The Fourth District Court of Appeal has revived an Orange County couple’s claims against the would-be buyer of their Brea eatery who never completed the purchase before taking possession and selling the business to a third party.
Div. Three concluded that Leonor and Jose Hernandez’s complaint, which asserted claims for breach of contract, “intentional tort” and fraud, adequately pleaded causes of action for unjust enrichment, conversion and trespass and ordered a new trial for resolution of these quasi-contract and tort theories in a Nov. 30 decision ordered published yesterday.
The Hernandezes owned the Wet Burrito restaurant in the Brea Shopping Mall and agreed to sell the restaurant for $140,000 to Jose Lopez in 2006.
The parties entered into a contract which provided that Lopez would assume the existing lease for the retail location and that the Hernandezes would apply to transfer their liquor license to Lopez.
Lopez also agreed to pay a $50,000 deposit and to pay $10,000 from it to the Hernandezes if the sale fell through.
In January 2007, while escrow was still open and before the sale was completed, Lopez took control of the restaurant. But rather than assume the Hernandezes’ lease as called for in the agreement, he signed a new five-year lease with the landlord.
On June 14, Lopez cancelled escrow because of difficulties in transferring the Hernandezes’ liquor license to him. Pursuant to escrow instructions in the sales agreement, the escrow officer returned $40,000 of Lopez’s deposit to him and issued $10,000 to the Hernandezes.
But no one apparently informed the California Department of Alcoholic Beverage Control of the changed circumstances and about two weeks later, the agency approved the transfer of the Hernandezes’ liquor license to Lopez.
Lopez testified that he intended to complete the sale and pay the full purchase price or “give back the restaurant,” but he called the Hernandezes “twice” and “couldn’t find them.” He claimed that he remained in the restaurant because he “had no way of paying the hefty rent other than to work the restaurant and make money to pay the rent.”
The Hernandezes averred that they had asked Lopez to complete the sale but he refused.
In the fall of 2007, Lopez negotiated to sell the restaurant to a third party for $93,000 and the Hernandezes filed suit against Lopez and his wife.
Orange Superior Court Judge Mary Fingal Schulte found that that the Lopezes “may be liable for what they did (selling a business they didn’t own), but not under the theories plead in the complaint.”
But on appeal, Justice Richard M. Aaronson said Schulte “focused unduly on labels,” explaining that a party is entitled to any relief which may be appropriate under the scope of the pleadings and within the facts alleged and proved, regardless of the theory upon which the facts were pleaded. He declined to accord Schulte’s judgment a presumption of correctness since the record indicated she did not weigh the evidence supporting any claim other than breach of contract.
Aaronson said that the case involved “a textbook example for application of the equitable doctrine of unjust enrichment,” since the Hernandezes had conferred a benefit upon Lopez, which Lopez knowingly accepted under circumstances making it inequitable for him to retain the benefit received without paying for its value.
Pursuant to Dunkin v. Boskey (2000) 82 Cal.App.4th 171, Aaronson explained, a plaintiff can seek compensation under an unjust enrichment theory based on a pleaded cause of action for breach of contract. Unjust enrichment “does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so,” he wrote.
The justice reasoned that Dunkin was dispositive since the Hernandezes’ cause of action for breach of contract “fully raised all the facts and circumstances in which equity could contemplate a quasi-contractual remedy to prevent Lopez and his wife from being unjustly enriched at the expense of the Hernandezes.”
He added that the Hernandezes’ “intentional tort” claim, based on the allegation that Lopez “took full control of the Business from Plaintiffs without paying the agreed purchase price, or any price at all,” was sufficient to support a cause of action for conversion and trespass as well.
Joined by Presiding Justice David G .Sills and Justice Raymond J. Ikola, Aronson concluded that an unqualified reversal was appropriate, allowing retrial on all legal issues properly raised by the complaint, including the cause of action for breach of contract.
“The legal theories in this case are so intertwined and inseparable as to call for a retrial on all issues rather than a limited new trial on certain issues,” he said.
The case is Hernandez v. Lopez, 09 S.O.S. 7382.
Copyright 2009, Metropolitan News Company