Rutherford Holdings, LLC v. Plaza Del Rey
223 Cal. App. 4th 221
| Cal. Ct. App. | 2014Background
- Rutherford contracted to buy a Sunnyvale mobile home park from Plaza Del Rey (PDR) for $110M and paid a $3M deposit that the agreement stated was nonrefundable except for PDR’s "material breach" or "failure or refusal to close."
- The parties extended the closing date multiple times while discussing seller financing; PDR never tendered a deed and Rutherford never tendered the full purchase price.
- Caswell (PDR VP) allegedly told Rutherford PDR could get tax benefits if not shown to be in contract and promised PDR would sell after filing tax returns; Rutherford relied on those statements and did not tender the purchase price.
- PDR later asserted the agreement was terminated and kept the $3M deposit; Rutherford sued for breach of contract, promissory fraud, money had and received, and unjust enrichment (plus conversion and alter ego theories).
- Trial court sustained demurrers to Rutherford’s second amended complaint without leave to amend and entered judgment of dismissal; the Court of Appeal reversed in part, allowing amendment for breach of contract and reinstating the money-had-and-received and unjust-enrichment claims, but affirmed dismissal of promissory fraud and conversion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — does §1.2 require PDR to return deposit when it "fail[s] or refus[es] to close" even if buyer didn't tender price | Section 1.2’s phrases "material breach" and "failure or refusal to close" have independent meaning; PDR could be required to return deposit even if Rutherford did not tender price because PDR induced nonperformance | The phrases are coextensive; Rutherford’s nonperformance excused PDR and entitles PDR to keep deposit under liquidated-damages clause | Contract ambiguous and reasonably susceptible to Rutherford’s reading; demurrer should have been sustained with leave to amend so Rutherford can plead that PDR "failed or refused to close" other than by deed non-delivery |
| Money had and received — can Rutherford recover deposit based on total failure of consideration? | Deposit paid as part of purchase price; PDR’s failure to convey deed is total failure of consideration entitling Rutherford to restitution | Rutherford’s failure to tender price bars relief; deposit might be an option payment | Rutherford alleged total failure of consideration and neither party performed, so claim for money had and received survives demurrer |
| Unjust enrichment / restitution — is restitution barred by an express contract? | If §1.2 allows forfeiture when buyer did not breach, it is an unenforceable penalty; restitution is available where contract is unenforceable or procured by fraud | Express contract governs the subject matter; restitution not available; deposit may be option payment | Court treats unjust enrichment as restitution; Rutherford pleaded a viable theory that the deposit clause could be void as an unlawful forfeiture, so claim survives demurrer |
| Promissory fraud — did Rutherford plead reliance and causation with particularity? | Caswell made false promises that induced Rutherford to delay payment; Rutherford alleges it could have obtained financing and would have paid but for PDR’s promises | Reliance allegations are conclusory; Rutherford fails to plead facts showing it actually could obtain financing or that its damages were caused by reliance | Demurrer properly sustained without leave to amend: fraud pleadings lack particularized facts on ability to perform and causation |
Key Cases Cited
- Moore v. Regents of Univ. of Cal., 51 Cal.3d 120 (standards for de novo review of demurrer)
- Ninety Nine Invs., Ltd. v. Overseas Courier Serv. (Singapore) Private, Ltd., 113 Cal.App.4th 1118 (concurrent conditions; neither party in default when both fail to perform)
- Richter v. Union Land etc. Co., 129 Cal. 367 (total failure of consideration permits restitution without formal rescission)
- Lance Camper Mfg. Corp. v. Republic Indem. Co., 44 Cal.App.4th 194 (unjust enrichment / restitution barred where valid express contract governs unless contract is void/unenforceable)
- Aragon-Haas v. Family Security Ins. Servs., Inc., 231 Cal.App.3d 232 (on pleading an interpretation of an ambiguous written contract)
- Lazar v. Superior Court, 12 Cal.4th 631 (elements and pleading particularity required for fraud)