Helfrich v. Kerley

California Court of Appeal Jun 2, 1961 No. Civ. No. 19575Published

Before: Draper

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Holding. The court held that an allegation of actual fraud, specifically that a defendant made a promise to purchase land for another without any intention to perform, is sufficient to support the imposition of a constructive trust despite the statute of frauds.

Issues

Whether an oral agreement to purchase land for another can be enforced via a constructive trust in the absence of a fiduciary relationship.
Whether an allegation that a defendant made a promise without intent to perform constitutes actual fraud sufficient to state a cause of action.
Whether the trial court erred in sustaining a demurrer without leave to amend when the complaint stated a cause of action but contained defects of form.

Disposition. Judgment reversed; appeal from order dismissed.

Quotations verified verbatim against the opinion

“We conclude that the allegation of actual fraud which induced plaintiff and his associates not to bid, and permitted Kerley to bid without competition, is sufficient to permit imposition of a constructive trust.”

“actual fraud, as well as the constructive fraud which arises from abuse of a fiduciary relationship, constitutes an exception to the general California rule that no constructive trust is imposed upon one who Orally agrees to buy land for another”

DRAPER, J.

Demurrer to plaintiff’s second amended complaint was sustained without leave to amend. Judgment of dismissal followed. Plaintiff appeals from the judgment and also from the order sustaining the demurrer. The order is not appealable

(Lavine

Jessup,

48 Cal.2d 611, 614 [311 P.2d 8]). The appeal from the judgment, however, properly raises the question of the sufficiency of the complaint.

Plaintiff, individually and as assignee of two named associates, seeks to recover an undivided one-third interest in a tract of land purchased, at a probate sale, by defendant Kerley in the name of defendant corporation, which is alleged to be Kerley’s

alter ego.

Disregarding the considerable volume of extraneous matter, the complaint alleges that: Plaintiff and his associates had agreed to bid for the land. Kerley told them that he had bid $152,000 for the same land. He wanted two-thirds of the tract for a cattle ranch. Plaintiff’s group wanted one-third for development as a subdivision and golf course. The parties then agreed that they would jointly seek to purchase the land. Kerley, having already made a written bid, would continue as the bidder, and was authorized to bid up to $200,000. Plaintiff’s group was to pay one-third of the purchase price and of the expenses of the purchase. Kerley, if successful in acquiring the land, agreed to convey an undivided one-third interest to plaintiff’s group. In the 26 days intervening between this agreement and the probate sale, Kerley several times renewed his promise. In reliance thereon, plaintiff did not bid. Kerley, acting through his alleged

alter ego

corporation, was the successful bidder and acquired the land. Over a period of three months, Kerley parried plaintiff’s oral demands for performance by asserting that the costs incidental to acquisition of the land had not yet been determined. On January 9, 1959, plaintiff and associates offered in writing to pay their share of the purchase price and costs, and demanded deed of an undivided one-third interest. Kerley refused to perform. Kerley never intended to perform his promises, and plaintiff and associates, in reliance upon these representations, failed to bid at the probate sale.

[728]

Helfrich v. Kerley

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DRAPER, J.

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