Prof'l Tax Appeal v. Kennedy-Wilson Holdings, Inc.
29 Cal. App. 5th 230
Cal. Ct. App. 5th2018Background
- Professional Tax Appeal (PTA) contracted on contingency (30%) with Victory Glen to pursue 2009–2010 property tax appeals for vacant land; settlements produced refunds totaling $139,624.29 and PTA’s fee of $41,887.28 was payable when the owner received a refund or when the county applied the refund to delinquent taxes.
- Before refunds were paid, KW Victory Land and affiliate Kennedy-Wilson foreclosed nonjudicially and acquired title; upon acquisition they paid delinquent taxes after the county applied the full 2009–2010 refunds to the tax delinquencies.
- PTA sued defendants for unjust enrichment and conversion, alleging defendants received the benefit of PTA’s work (reduced tax liability) and retained it without paying PTA’s contingent fee; PTA alleged it had no adequate remedy against the former owner after foreclosure.
- Defendants demurred to both causes of action; the trial court sustained the demurrer without leave to amend and dismissed the complaint.
- On appeal, the Court of Appeal affirmed dismissal of the conversion claim but reversed as to unjust enrichment, concluding PTA alleged sufficient facts that defendants were enriched, retained the benefit unjustly, and had notice or reason to know of PTA’s fee claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unjust enrichment claim states a cause of action | PTA: defendants received and retained the economic benefit of PTA’s performance (reduced taxes) and should pay PTA’s 30% fee; PTA has no remedy against prior owner | Defs: retention was not unjust because defendants were not contractually obligated and were bona fide purchasers without notice; Restatement §25 should not impose liability | Reversed dismissal as to unjust enrichment; PTA pleaded benefit, unjust retention, lack of remedy against former owner, and facts showing defendants knew or had reason to know of PTA’s claim (Restatement §25 and CA precedent support restitution) |
| Whether conversion claim states a cause of action | PTA: defendants’ payment and retention of refund value amounted to wrongful exercise of dominion over PTA’s property interest | Defs: no act of dominion because county applied refunds to tax delinquencies; defendants never had control of any refund check | Affirmed dismissal of conversion claim; complaint alleges no dominion or control over a specific identifiable personal property item that could support conversion |
| Whether defendants qualify as bona fide purchasers without notice | PTA: defendants were sophisticated investors who had or should have had actual/constructive notice via due diligence, public records, trustee-sale materials, and receiver communications | Defs: argued lack of California authority for imposing restitution via Restatement §25 and asserted they lacked notice | Court: PTA alleged sufficient facts to show defendants had knowledge or reason to know of PTA’s contingent-fee claim; issue survives demurrer and is for proof at trial |
Key Cases Cited
- Aubry v. Tri-City Hospital Dist., 2 Cal.4th 962 (de novo review on appeal from demurrer)
- Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (standard for demurrer review)
- Schifando v. City of Los Angeles, 31 Cal.4th 1074 (pleading standards and inferences)
- First Nationwide Savings v. Perry, 11 Cal.App.4th 1657 (judicial notice and restitution principles)
- Lectrodryer v. Seoulbank, 77 Cal.App.4th 723 (elements of unjust enrichment)
- Ghirardo v. Antonioli, 14 Cal.4th 39 (definition of benefit in restitution context)
- Kossian v. American Nat. Ins. Co., 254 Cal.App.2d 647 (equitable unjust enrichment recovery where defendant benefits despite lack of privity)
- County of Solano v. Vallejo Redevelopment Agency, 75 Cal.App.4th 1262 (transferee with knowledge may be required to make restitution)