Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from the Superior Court of Riverside County. Super. Ct. No. RIC447539, Stephen D. Cunnison, Judge.
Law Offices of Michael D. McCaffrey and Michael D. McCaffrey for Plaintiffs and Appellants.
Finestone & Richter and Jay Stein for Defendant and Respondent.
OPINION
King J.
I. INTRODUCTION
Pecuniary Capital, LLC (Pecuniary Capital) and Jalisco Land Corporation (Jalisco) sued Orchard Heights Development, LLC (Orchard Heights) for claims arising from the sale of certain vacant land. According to Pecuniary Capital and Jalisco, they agreed to sell the land to Orchard Heights and Orchard Heights promised to develop the property; Orchard Heights then failed to develop the property. Orchard Heights filed a demurrer, contending that the alleged promise to develop the property was an oral promise barred by the statute of frauds and an integration clause in the written agreement. Orchard Heights further argued that Pecuniary Capital lacked standing to sue because it had conveyed its interest in the property to Jalisco.
The trial court sustained the demurrer against Pecuniary Capital as to all causes of action without leave to amend, sustained the demurrer against Jalisco as to the breach of contract cause of action without leave to amend, and sustained the demurrer against Jalisco as to the misrepresentation cause of action with leave to amend. Jalisco did not file a further amended pleading.
Reviewing the matter de novo, we find that the plaintiffs’ breach of contract claim is based upon an interpretation of the written contract that is not clearly erroneous, and that the action is not therefore barred by the statute of frauds or the contract’s integration clause. We further find that Pecuniary Capital, as a real party in interest with respect to the performance of Orchard Heights’s alleged promise to develop the land, has standing to pursue that cause of action and a cause of action for misrepresentation. Jalisco, however, has forfeited its right to assert a misrepresentation cause of action because it did not file an amended cause of action for misrepresentation when it was given the opportunity to do so. Accordingly, we will reverse in part and affirm in part with directions set out below.
II. SUMMARY OF FACTUAL ALLEGATIONS
Our statement of facts is based upon plaintiffs’ second amended complaint, the properly pleaded allegations of which we accept as true. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318; First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662.)
In May 2004, Pecuniary Capital and QBH Development, LLC (QBH) entered into a written contract concerning certain vacant land in Riverside County (the Orchard Heights Property). The contract is comprised of a California Association of Realtors (CAR) form “Vacant Land Purchase Agreement and Joint Escrow Instructions (and Receipt for Deposit),” a CAR form “Counter Offer No. 1,” which incorporates a CAR form “Addendum,” and a CAR form “Counter Offer No. 2.” The last counteroffer includes signatures assenting to the terms of that counteroffer and to the terms in the forms that preceded it. We refer to these documents collectively as the VLPA. A copy of the VLPA is attached as an exhibit to the second amended complaint.
“CAR is an association of licensed realtors and realtor-associates that ‘develops and publishes standard forms and publications for specific use and reference by the real estate industry.’” (Manderville v. PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486, 1492, quoting 2 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 4:62, pp. 201-202.)
Under the VLPA, Pecuniary Capital agreed to sell, and QBH (or its assignee) agreed to buy, the Orchard Heights Property for $1.65 million. The VLPA includes the following “financing terms”: “Seller to carry 2nd TD for $400,000.00 for 18 months @ 8% interest. Escrow to close 60 days after review and approval on tentative map approval. Buyer[] to obtain financing for 1st TD with 1st Centennial Bank in Redlands, CA.”
The CAR form Addendum, which was offered by Pecuniary Capital, states: “Our engineer has completed a preliminary review of the referenced site. Currently the parcel is vacant. The closest sewer is in Cherry Ave. The zoning and General Plan allow lots of 6000 square feet.
“We propose to provide a tentative map on the referenced property in accordance with the following scope of work:
“1. Prepare base map utilizing Riverside County Flood Control topography map provided title report.
“2. Prepare preliminary plan for review by City staff.
“3. Prepare tentative map for Single Family Residential (minimum lots of 6000 SF) in accordance with City of Beaumont standards.
“4. Prepare concept grading plan.
“5. Prepare hydrology study as required.
“Additionally, our engineering firm will coordinate with the City staff: attend Planning Commission and City Council meetings on your [QBH’s] behalf.
“We anticipate that the preliminary plan will be submitted by June 11, 2004 and the tentative map will be submitted with any changes by July 1, 2004 for hearing before the Planning Commission on August 10, 2004.”
In the second amended complaint, Pecuniary Capital alleged that it performed the obligations set forth in the Addendum.
The VLPA includes the following integration clause: “All understandings between the parties are incorporated in this Agreement. Its terms are intended by the parties as a final, complete and exclusive expression of their Agreement with respect to its subject matter and may not be contradicted by evidence of any prior agreement or contemporaneous oral agreement. . . . Neither this Agreement nor any provision in it may be extended, amended, modified, altered or changed, except in writing signed by Buyer and Seller.”
The promissory note given as part of the purchase price is attached as an exhibit to the second amended complaint (the Note). The Note, dated January 26, 2005, is made by Orchard Heights and payable to Jalisco. Jalisco is described in the second amended complaint as being “affiliated” with Pecuniary Capital. The principal amount of the Note is $400,000, and the interest rate is eight percent. The Note does not include a specific due date for any payment. Instead, it states: “Payments shall be due as follows: The sum of $70,000.00 payable for each home sold, beginning with the first home sold, along with interest due from close of escrow to date each payment is made to Beneficiary herein, until all unpaid principal and accrued interest is paid in full.” The Note recites that it “is given and accepted as a portion of the purchase price.” The Note is secured by a deed of trust against the Orchard Heights Property, a copy of which is attached to the second amended complaint.
Pecuniary Capital owns another parcel of vacant land, referred to as the Adjacent Property, which is approved for development of 19 residential lots. However, the development of the Adjacent Property is subject to a condition imposed by the City of Beaumont that the Orchard Heights Property be developed first. This condition was imposed so that the infrastructure necessary to support the Adjacent Property would be in place prior to the development of the Adjacent Property. QBH and Orchard Heights were aware of this condition at the time of the purchase of the Orchard Heights Property.
Pecuniary Capital alleged: “QBH . . . and Orchard Heights agreed with Plaintiffs that Orchard Heights would promptly start construction on the improvements and sell residences on the [Orchard Heights Property] and that Orchard Heights would complete construction of the residences by the middle of May 2006, and this agreement is reflected by memoranda and writings, including, without limitation, the [VLPA], Note and Second Trust Deed . . . . [¶] . . . As reflected by the memoranda and writings, Orchard Heights understood that the development of the [Orchard Heights Property] was a material part of the sale of the [Orchard Heights Property] and an essential part of the reason Plaintiffs agreed to sell [the Orchard Heights Property] to it for the actual price.”
Regarding the payment provision in the Note, Pecuniary Capital interprets the language in the following allegation: “The Note provisions for payment also reflected the agreement of the parties that Orchard Heights had to develop the [Orchard Heights Property]. Although the Note did not state an express maturity date, Orchard Heights understood and agreed that the residences on the [Orchard Heights Property] would be completed by May 2006, and that the [Orchard Heights Property] would be sufficiently developed to allow for the development of the [Adjacent Property] owned by Plaintiffs, as further evidenced by the [VLPA] providing for payment in 18 months.”
Prior to close of escrow, QBH assigned its rights under the VLPA to Orchard Heights, and Orchard Heights assumed QBH’s obligations.
Pecuniary Capital conveyed the Orchard Heights Property to Jalisco on February 2, 2005; the next day, Jalisco conveyed the parcel to Orchard Heights.
Plaintiffs allege that “Orchard Heights has failed to construct infrastructure and residences on the [Orchard Heights Property]. . . . Orchard Heights, instead of developing the [Orchard Heights Property] and building houses, an access road, a sewer lift, and other infrastructures, is attempting to sell the [Orchard Heights Property], and that Orchard Heights has no intention of timely developing the [Orchard Heights Property] in line with its agreements or promises to do so.”
Based upon these essential facts, plaintiffs asserted four causes of action for: (1) “Rescission Based on Mistake”; (2) “Declaratory Relief”; (3) “Negligent Misrepresentation”; and (4) “Breach of Written Contract.” In their opening brief on appeal, plaintiffs state that they “have decided not to pursue [the first two] causes of action for Rescission and Declaratory Relief and, consequently, those causes of action are not at issue on appeal.”
Relative to the third cause of action (for negligent misrepresentation), plaintiffs allege: Prior to the execution of the VLPA, agents of QBH and Orchard Heights represented to plaintiffs that QBH or its assignee would develop the Orchard Heights Property by building residences, an access road, a sewer lift, and other infrastructures after purchasing the property; QBH and Orchard Heights knew or should have known that they would not develop the property as they had represented, or lack a reasonable basis for believing they would develop the property; these representations were made with the intent to induce plaintiffs to act in reliance thereon, and Pecuniary Capital and Jalisco did rely on them when entering into the VLPA and conveying the Orchard Heights Property to Orchard Heights; plaintiffs would not have entered into the VLPA or conveyed the Orchard Heights Property if they had known the true facts; and Pecuniary Capital has been damaged by the failure to develop the Orchard Heights Property because it prevented the development of the Adjacent Property, and Jalisco was harmed because the Note, which was to be paid through the sale of homes, will not be paid.
Relative to the cause of action for breach of written contract, plaintiffs allege: “Pursuant to the Documents [i.e., the VLPA, the Note, and the deed of trust], Orchard Heights was obligated, among other things, to:
This allegation refers to the term, “Documents (as defined in paragraph 45, above) . . . .” Paragraph 45, however, does not include a definition of that term. Instead, the term is defined in paragraph 38, which defines the term as the “Vacant Land Purchase Agreement, including the Addendum, the Note, and the Deed of Trust.”
“a. Develop the [Orchard Heights Property] pursuant to the conditions of approval of the City [of Beaumont];
“b. Build infrastructure and grade the [Orchard Heights Property];
“c. Build and sell homes; and
“d. Pay Jalisco from the proceeds of the sale of homes built on the [Orchard Heights Property].”
Finally, plaintiffs allege that Orchard Heights breached these obligations, causing damages.
Orchard Heights demurred to the second amended complaint, contending that the alleged promise to develop the property was an oral promise barred by the statute of frauds and by the integration clause. Orchard Heights further argued that Pecuniary Capital lacked standing to sue for the claims asserted. Orchard Heights also moved to strike the second amended complaint on similar grounds and to strike portions of the second amended complaint that were made irrelevant by the statute of frauds and the integration clause.
During a hearing on the demurrer and motion to strike, the court gave the following tentative ruling: “[T]o sustain the demurrer as to Pecuniary [Capital], as a plaintiff, as to all causes of action without leave to amend. . . . [T]o sustain the demurrer to the first, second, and fourth causes of action, also without leave to amend, based upon the statute of frauds and parol evidence rules. . . . [T]o sustain the demurrer to the third cause of action, the negligent promissory fraud, with leave to amend and to grant the motion to strike all references to the extrinsic agreement related to the development except as they relate to the promissory fraud claims.” Following argument, the court stated that this tentative ruling will “stand.”
Following the hearing, neither party availed itself of the procedure for obtaining a written order pursuant to rule 3.1312 of the California Rules of Court. Instead, Orchard Heights prepared and filed a “Notice of Ruling,” which describes five pages of purported rulings and findings, some of which are arguably unsupported by or inconsistent with the court’s oral pronouncement of its ruling. We review the court’s actual ruling, not one party’s characterization and embellishment of the court’s ruling. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2008) ¶ 9:320.4a, p. 9(I)-116.)
Jalisco did not file a third amended complaint and judgment was thereafter entered against both plaintiffs. Orchard Heights was awarded its costs, including attorney fees. Plaintiffs appealed.
III. ANALYSIS
“We review a trial court’s ruling on a demurrer independently. [Citation.]” (Liska v. The Arns Law Firm (2004) 117 Cal.App.4th 275, 281.) “Our task in reviewing a judgment of dismissal following the sustaining of . . . a demurrer [without leave to amend] is to determine whether the complaint states, or can be amended to state, a cause of action. For that purpose we accept as true the properly pleaded material factual allegations of the complaint, together with facts that may properly be judicially noticed. [Citations.]” (Crowley v. Katleman (1994) 8 Cal.4th 666, 672.) “‘[W]hen a plaintiff is given the opportunity to amend his complaint and elects not to do so, strict construction of the complaint is required and it must be presumed that the plaintiff has stated as strong a case as he can.’” (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.)
A. Breach of Contract
Orchard Heights generally demurred to the fourth cause of action for breach of contract on the grounds that it was barred by the statute of frauds and the integration clause in the VLPA. We agree with plaintiffs that these arguments are based upon a mischaracterization of their claim.
The statute of frauds, as codified in California, provides, in relevant part: “The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent: [¶] (1) An agreement that by its terms is not to be performed within a year from the making thereof. [¶] . . . [¶] (3) An agreement . . . for the sale of real property, or of an interest therein . . . .” (Civ. Code, § 1624, subd. (a).) Orchard Heights argues that plaintiffs’ claims are based upon an oral agreement to develop the Orchard Heights Property, and that this agreement is made invalid by the statute of frauds because: (1) the oral agreement constitutes an agreement for the sale of real property, and (2) the agreement cannot be performed within one year.
In their opening brief on appeal, plaintiffs present alternative arguments: (1) that the statute of frauds does not apply because they are suing for breach of promises reflected in the written VLPA and Note, and (2) even if the promise to develop the Orchard Heights Property is an oral promise, the statute of frauds does not apply because of Orchard Heights’s partial performance of the promise and the doctrine of estoppel. Orchard Heights focused its respondent’s brief on the second argument, asserting that the alleged promises are oral promises barred by the statute of frauds and the integration clause. In its reply brief, plaintiffs criticize this response, stating that Orchard Heights has mischaracterized their claim as a claim based upon an oral contract. Plaintiffs emphasized that they are suing upon the written contract, stating that they “will try once again to make this point as clearly as it can: [Plaintiffs] contend in their Second Amended Complaint that the promise to complete construction is memorialized in the series of writings between the parties, including, without limitation, the Purchase Agreement, Addendum, Note and Second Trust Deed, and that these writings, taken together, are reasonably susceptible to this interpretation. Because the promise is in writing, there is no Statute of Frauds issue.” (Italics added.)
Plaintiffs’ assertion that they are suing upon promises expressed in the written documents is supported by the language of the second amended complaint. The breach of contract cause of action is styled, “Breach of Written Contract” (italics added) and alleges the entry into the VLPA, the performance by plaintiffs of their obligations under the VLPA, Orchard Heights’s breaches of obligations under the VLPA and the Note, and damages resulting from such breaches. Thus, as pleaded, plaintiffs’ breach of contract claim is based upon the written documents. The statute of frauds invalidates certain oral contracts, and has no application to written contracts. (Civ. Code, § 1624.) Therefore, we agree with plaintiffs that the statute of frauds is not implicated by their breach of contract cause of action and the demurrer on that basis is without merit.
Orchard Heights’s argument that the integration clause in the VLPA bars the current action fails for the same reason as its statute of frauds argument. The integration clause provides that the terms of the written VLPA “may not be contradicted by evidence of any prior agreement or contemporaneous oral agreement.” (Italics added.) Plaintiffs, according to their second amended complaint (and the representations made in their briefs on appeal), are not asserting the breach of any prior or oral agreement; the contracts that were allegedly breached are the written VLPA (which includes the integration clause) and the related Note. The integration clause, therefore, does not bar plaintiffs’ action for breach of contract.
By tying their breach of contract cause of action to promises allegedly reflected in the written documents, plaintiffs appear to have avoided (at least at the pleading stage) defenses based upon the statute of frauds and the contractual integration clause. As they recognize, however, their position raises another issue: whether the language of the written contract is “reasonably susceptible” of the meaning that plaintiffs ascribe to it. (See Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 17.) If, for example, a vendor contracts to deliver apples to a buyer and thereafter tenders the apples called for in the contract, the other party to the contract cannot sue the vendor for breach of the contract by alleging that the contract called for the delivery of oranges; the term “apples” is not “fairly susceptible” of the interpretation, “oranges.” As one court has explained: “‘[W]here an ambiguous contract is the basis of an action, it is proper, if not essential, for a plaintiff to allege its own construction of the agreement. So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff’s allegations as to the meaning of the agreement.’ [Citation.]” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.) “Oranges,” in our example, is a clearly erroneous construction of the term “apples.”
Here, the issues are whether the VLPA and Note are ambiguous and, if so, are they reasonably susceptible to the interpretation proffered by Pecuniary Capital that they include an obligation by Orchard Heights to develop the property. The VLPA itself is arguably unambiguous with respect to Orchard Heights’s alleged development obligations. Pecuniary Capital refers us to the language in the “additional financing terms” provision of the VLPA. This provision states, “Seller to carry 2nd TD for $400,000.00 for 18 months @ 8% interest.” Viewed in isolation, this language appears to have a fairly clear meaning: $400,000 of the purchase price will be paid with a promissory note to seller (Pecuniary Capital) at eight percent interest, due in 18 months, secured by a second deed of trust on the Orchard Heights Property. Nothing in this language appears on its face to suggest an obligation by Orchard Heights to develop the property.
There is language in the VLPA that indicates that the parties contemplated the development of the property by Orchard Heights: the closing of escrow is contingent upon the approval of a tentative subdivision map, and Pecuniary Capital expressly is obligated to assist Orchard Heights with development plans. However, the VLPA does not include an explicit obligation on the part of Orchard Heights to develop the property.
Pecuniary Capital argues that the “additional financing terms” provision in the VLPA must be read in light of the terms of the Note actually given to satisfy that provision. That is, if the Note was tendered by Orchard Heights to perform its obligation to deliver the purchase money note, and plaintiffs accepted the Note in satisfaction of that obligation, we should interpret the contract as calling for such a note. Indeed, “‘[t]he conduct of the parties after execution of the contract and before any controversy has arisen as to its effect affords the most reliable evidence of the parties’ intentions.’ [Citation.] ‘This rule of practical construction is predicated on the common sense concept that “actions speak louder than words.” Words are frequently but an imperfect medium to convey thought and intention. When the parties to a contract perform under it and demonstrate by their conduct that they knew what they were talking about the courts should enforce that intent.’ [Citation.]” (Employers Reinsurance Co. v. Superior Court (2008) 161 Cal.App.4th 906, 921.) The Note was made prior to the close of the transaction, and there is nothing in the second amended complaint that suggests there was any dispute between the parties at that time. Thus, we can properly look to the terms of the Note to aid our construction of the VLPA.
We now turn to the language of the Note given by Orchard Heights. Although it calls for payment to be made in “installments and at the time hereinafter stated,” no specific maturity date is stated. Instead, payments of $70,000 are to be paid “beginning with the first home sold, along with interest due from close of escrow to date each payment is made . . . until all unpaid principal and accrued interest is paid in full.” This raises questions that are not answered by the language of the Note itself: If, for example, no home is sold, does the obligation to make a $70,000 payment ever come due? If repayment must be made even if homes are not sold, when will payments come due? Is the selling of homes—and therefore an obligation to build and sell homes—implied in the Note?
According to plaintiffs, the obligation to pay when homes are sold implies that homes will be sold and built, as well as the construction of infrastructure and grading essential to the building of homes. As the owner of the Orchard Heights Property and the obligor under the Note, the obligation to develop, build, and sell the homes belongs to Orchard Heights. As for the absence of an explicit due date, plaintiffs assert that the missing information is supplied by the requirement in the VLPA that repayment is due within 18 months. Therefore, plaintiffs assert, Orchard Heights has an obligation to build and sell homes within 18 months of the close of the transaction, which occurred in February 2005. Returning to the interpretation of the VLPA, aided by this construction of the Note and the goal of harmonizing the two documents, plaintiffs interpret the VLPA to include the obligation to develop the Orchard Heights Property within 18 months.
This would seem to fix a maturity date sometime in August 2006. It is not clear from the second amended complaint or from plaintiffs’ arguments on appeal why they contend that the development of the Orchard Heights Property was to be completed by May 2006.
We find that the documents are supportive of the plaintiffs’ proffered construction. We do not hold that the plaintiffs’ construction of the written documents is the only plausible construction, or that it is the correct one. Indeed, a review of evidence pertaining to the intent of the parties may well show that plaintiffs’ construction is unsupportable. We hold merely that the interpretation proffered by plaintiffs in the second amended complaint is not a “clearly erroneous construction” of the written documents. Therefore, at this stage of the proceedings, the court must treat the allegations in the pleading, including the development obligations, as true. As such, plaintiffs have stated a cause of action for breach of contract.
Finally, regardless of whether the language of the agreement is fairly susceptible of the plaintiffs’ interpretation with respect to the development obligations, the allegation that Orchard Heights has breached its promise to make the payments called for under the Note supports a cause of action by Jalisco for the breach of such promise.
B. Pecuniary Capital’s Standing to Sue
Orchard Heights argued below, and again on appeal, that Pecuniary Capital does not have standing to assert a claim for breach of contract because it is not a real party in interest. We disagree. Pecuniary Capital is suing Orchard Heights for damages caused by Orchard Heights’s breach of its obligations under the VLPA. (Although the agreement is between Pecuniary Capital and QBH, Orchard Heights is alleged to have undertaken QBH’s obligations under the VLPA.) According to the second amended complaint, these obligations are: (1) develop the Orchard Heights Property, (2) build infrastructure and grade the Orchard Heights Property, (3) build and sell homes, and (4) pay Jalisco amounts owed under the Note. For purposes of our analysis, we will distinguish the first three obligations (the development obligations) from the fourth obligation (to make payments under the Note).
Assuming that the VLPA is construed to include the development obligations, the right to QBH’s performance of such obligations belongs to Pecuniary Capital. As such, it appears from the pleading that Pecuniary Capital is the party with the right to sue for the breach of these obligations. (See Gantman v. United Pacific Ins. Co. (1991) 232 Cal.App.3d 1560, 1566 [person possessing the right sued upon is generally the real party in interest].) There is no allegation that Pecuniary Capital ever assigned or otherwise relinquished these rights.
Relative to the obligation to pay Jalisco under the Note, the VLPA creates the obligation on the part of Orchard Heights to deliver to Pecuniary Capital a purchase money note in the amount of $400,000. The Note actually delivered by Orchard Heights, however, is made payable to Jalisco, not Pecuniary Capital. Pecuniary Capital does not assert that the making of the Note to Jalisco instead of to it constituted a breach of the agreement. Thus, although the performance of the obligation (to deliver the promissory note and deed of trust) is owed to Pecuniary Capital under the VLPA, Pecuniary Capital appears to have accepted Orchard Heights’s delivery of the Note and deed of trust to Jalisco as satisfaction of this obligation. As for the obligation to make payments under the Note itself, it is clear from the Note that this duty is owed to Jalisco, not Pecuniary Capital.
Thus, it appears from our reading of the second amended complaint that Pecuniary Capital holds the right to the performance of the development obligations (if such obligations exist) and Jalisco holds the right to receive the payments called for under the Note. Therefore, Pecuniary Capital has standing to sue Orchard Heights for breach of the development obligations, and Jalisco has standing to sue for nonpayment on the Note.
Orchard Heights contends that by conveying the Orchard Heights Property to Jalisco prior to Jalisco’s conveyance of the property to Orchard Heights, and by Pecuniary Capital’s willingness to accept the making of the Note to Jalisco, Pecuniary Capital lost any interest it had in the contract. In essence, Orchard Heights is arguing that these actions evidence an assignment to Jalisco of all of Pecuniary Capital’s rights under the VLPA. We disagree.
An assignment is “‘a manifestation to another person by the owner of the right indicating his intention to transfer, without further action or manifestation of intention, the right to such other person, or to a third person.’” (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 709, p. 795, quoting Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 291.) As with contracts generally, the nature of an assignment is determined by ascertaining the intent of the parties. (Cambridge Co. v. City of Elsinore (1922) 57 Cal.App. 245, 249.) The conveyance of the Orchard Heights Property by Pecuniary Capital to Jalisco and Orchard Heights’s delivery of the Note to Jalisco suggest that Pecuniary Capital assigned to Jalisco its right to receive the promissory note called for in the VLPA. Even if these facts evidence such an assignment, they do not, without more, establish that Pecuniary Capital also assigned to Jalisco its right to the performance of other, distinct obligations owed by Orchard Heights, such as the development obligations. (See id. at pp. 249-250.) Although there may be more to the Pecuniary Capital-Jalisco transaction than what appears from the pleading, the mere conveyance of the property and the apparent assignment of the right to receive the promissory note do not necessarily constitute an assignment of other contractual rights held by Pecuniary Capital.
Although an assignment of a right generally carries with it an assignment of other rights incident thereto (see generally 1 Witkin, Summary of Cal. Law, supra, Contracts, § 734, pp. 817-818; Civ. Code, § 1084), we cannot say, as a matter of law, that the right to the performance of the alleged development obligations is incidental to the transfer of the Orchard Heights Property to Jalisco or an assignment of the right to receive the Note (see, e.g., Millner v. Lankershim Packing Co. (1936) 13 Cal.App.2d 315, 319-320 [assignment of mortgage did not include assignment of right to recover for injury to the mortgaged property]; Jolly v. Thornton (1940) 40 Cal.App.2d Supp. 819, 824 [after foreclosure of mortgaged property, mortgagor still held right to recover for damage to the property that occurred prior to foreclosure]). Indeed, it appears from the second amended complaint that the purpose of the development obligations is to ensure the building of infrastructure necessary to the development of the Adjacent Property. Thus, the right to the performance of the alleged development obligations was held by Pecuniary Capital because of its status as the owner of the Adjacent Property, not because of its status as the owner of the Orchard Heights Property. If Pecuniary Capital conveyed to Jalisco the Adjacent Property along with the Orchard Heights Property, it might be reasonable to conclude that the conveyance included an assignment of the right to the performance of the development obligations. However, according to the second amended complaint, Pecuniary Capital continues to own the Adjacent Property. Thus, the principle that an assignment also transfers incidental rights does not apply to the alleged development obligations.
Because we cannot conclude that Pecuniary Capital had assigned its rights to the performance of the development obligations, it has standing to pursue an alleged breach of these obligations.
C. Negligent Misrepresentation Cause of Action
The court sustained the general demurrer to the third cause of action for negligent misrepresentation. Pecuniary Capital was not given leave to amend, apparently on the basis that it did not have standing to pursue any claim against Orchard Heights. Relative to Jalisco, the court “sustain[ed] the demurrer to the third cause of action, the negligent promissory fraud, with leave to amend and . . . grant[ed] the motion to strike all references to the extrinsic agreement related to the development except as they relate to the promissory fraud claims.”
On appeal, plaintiffs concede that their cause of action for negligent misrepresentation was flawed. According to them, the cause of action as pleaded “does not allege a ‘misrepresentation,’ but instead alleges a ‘false promise’ to complete construction by May 2006.” They acknowledge that “there can be no cause of action for a ‘negligent false promise.’” We agree. (See, e.g., Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481-482.) Therefore, the sustaining of the demurrer for failure to state a cause of action was not error.
Although the court gave Jalisco leave to amend, Jalisco did not do so. Ordinarily, when a plaintiff elects not to amend the complaint after a demurrer has been sustained with leave to amend, we presume that the plaintiff has stated as strong a case as it can. (Reynolds v. Bement, supra, 36 Cal.4th at p. 1091.) If the claim is objectionable on any ground raised by the demurrer, we must affirm the judgment of dismissal. (Soliz v. Williams (1999) 74 Cal.App.4th 577, 585; Schick v. Lerner (1987) 193 Cal.App.3d 1321, 1327.) Jalisco contends that these rules do not apply here because the court’s concurrent ruling on the motion to strike effectively precluded them from stating as strong a case as they could. According to Jalisco, the ruling on the motion precludes them from alleging “independent” promises to develop the property as a basis for intentional (rather than negligent) promissory fraud. Because such promises are essential to its proposed claim for promissory fraud, Jalisco argues that any attempt to amend would have been “pointless.”
Jalisco’s argument is based on a mischaracterization of the court’s ruling. The court did not preclude allegations regarding extrinsic promises in support of the cause of action for promissory fraud. Indeed, although the court explained that it was sustaining the demurrer as to the cause of action for “negligent promissory fraud,” it expressly stated that the motion to strike was granted as to “all references to the extrinsic agreement related to the development except as they relate to the promissory fraud claims.” (Italics added.) The ruling clearly indicates that Jalisco was permitted to allege a claim for promissory fraud (as distinguished from “negligent promissory fraud”) and that it would be allowed to allege an “extrinsic agreement,” or independent promises, to develop the Orchard Heights Property so long as the allegations relate to the new promissory fraud claim. Jalisco has neither asserted nor shown any error in this ruling; indeed, the court’s ruling allowed Jalisco to plead precisely what it argues for on appeal—a claim for intentional promissory fraud based upon extrinsic promises. Because Jalisco chose to forego that opportunity, and finding no error in either the sustaining of the demurrer or in the order granting leave to amend, we will not disturb this aspect of the court’s ruling. (Cf. Sierra Investment Corp. v. County of Sacramento (1967) 252 Cal.App.2d 339, 347.)
Jalisco’s mischaracterization of the court’s ruling may be attributable to language in Orchard Heights’s “Notice of Ruling.” This document states that the court rejected Jalisco’s request for leave to file a claim for intentional misrepresentation, and that Jalisco was given leave to amend “only as to a negligent misrepresentation cause of action.” It further states that “[a]ll references in the complaint to any oral representations or promises or to understandings not expressly contained in the parties’ written contract are stricken . . .,” without including the court’s expressed exception for allegations of an extrinsic agreement “as they relate to the promissory fraud claims.” As noted above, however, we review the court’s ruling, not statements made in one party’s purported notice of the ruling.
The same cannot be said of Pecuniary Capital because it was not given leave to amend. The denial of leave to amend as to Pecuniary Capital is apparently due to the trial court’s implicit determination that Pecuniary Capital does not have standing to pursue a promissory fraud claim against Orchard Heights. As with the breach of contract claim, we hold that Pecuniary Capital has standing to allege a promissory fraud claim if it can allege that it was induced to enter into the contract to sell the Orchard Heights Property in reliance upon Orchard Heights’s fraudulent promises to develop the property, and that it thereby suffered damages. (See, e.g., Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) We see no reason why the conveyance of the Orchard Heights Property to Jalisco or the assignment of the right to receive Orchard Heights’s Note would defeat Pecuniary Capital’s standing to sue for such fraud. The harm to Pecuniary Capital from Orchard Heights’s alleged fraud is due to the fact that it is unable to develop the Adjacent Property, which it still owns, regardless of the conveyance of the Orchard Heights Property to Jalisco or an assignment of the right to receive payments on the Note. Because Pecuniary Capital has standing to allege a promissory fraud cause of action, it was error to deny it leave to do so.
D. Attorney Fees
Following the entry of judgment, Orchard Heights was awarded its costs, including attorney fees. Because we reverse the judgment, the order awarding costs and fees is also reversed. (See Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1053.)
IV. DISPOSITION
We reverse in part and affirm in part. The court is directed to modify its order sustaining the demurrer to the second amended complaint as follows: (1) the demurrer to the third cause of action (for negligent misrepresentation) is sustained as to Pecuniary Capital with leave to amend a cause of action for promissory fraud, and sustained without leave to amend as to Jalisco; and (2) the demurrer to the fourth cause of action (for breach of written contract) is overruled as to both plaintiffs. Because the plaintiffs have abandoned the first and second causes of action (for rescission and declaratory relief), the order sustaining the demurrer as to these causes of action is affirmed.
Pecuniary Capital and Jalisco shall recover their costs on appeal.
We concur: Ramirez P.J. Richli J.