Case Name: Azure Vista Real Estate Services, Inc. v. Patriot Resources, LLC
Case No.: 1-14-CV-267525

Motion for Summary Adjudication by Plaintiff Azure Vista Real Estate Services, Inc.

Evidence

The request for judicial notice by defendant Patriot Resources, LLC (“Patriot”) is GRANTED. (See Evid. Code § 452, subd. (d); see also Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files].)

Patriot’s Evidentiary Objections are SUSTAINED IN PART and OVERRULED IN PART. The court sustains objection nos. 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 14, 15, and 16. The court overrules objection nos. 8 and 13.

The court declines to consider the Evidentiary Objections submitted by plaintiff Azure Vista Real Estate Services, Inc. (“Azure Vista”) because it failed to meet its initial burden on the motion for the reasons stated below.

Motion for Summary Adjudication

On July 3, 2014, plaintiff Azure Vista Real Estate Services, Inc. (“Azure Vista”), as servicing agent for all owners of Sargent Ranch (“Ownership Group”), filed its complaint against Patriot, asserting four causes of action for (1) breach of contract, (2) accounting, (3) constructive trust, and (4) declaratory relief.

On November 5, 2014, Patriot filed its answer alleging various affirmative defenses to the complaint.

On December 12, 2014, Azure Vista timely filed the motion presently before the court, a motion for summary adjudication to the first cause of action in the complaint. (Code Civ. Proc. § 437c, subd. (f).) Patriot has filed written opposition to the motion. No trial date has been set.

Legal Standard

“The purpose of a summary judgment proceeding is to permit a party to show that material factual claims arising from the pleadings need not be tried because they are not in dispute. A party may seek summary adjudication on whether a cause of action, affirmative defense, or punitive damages claim has merit or whether a defendant owed a duty to a plaintiff. A motion for summary adjudication…shall proceed in all procedural respects as a motion for summary judgment.” (California Bank & Trust v. Lawlor (2013) 222 Cal.App.4th 625, 630 [internal citations and quotation marks omitted].)
“The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact. To meet that burden, a plaintiff seeking summary adjudication on a cause of action must present evidence sufficient to establish every element of that cause of action. A plaintiff’s initial burden, however, does not include disproving any affirmative defenses the defendant asserts. Once the plaintiff…has met [its] burden, the burden shifts to the defendant…to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (California Bank & Trust v. Lawlor, supra, 222 Cal.App.4th at pp. 630-631 [internal citations and quotation marks omitted].)

“A triable issue of material fact exists if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. Thus, a party cannot avoid summary [adjudication] by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact.” (California Bank & Trust v. Lawlor, supra, 222 Cal.App.4th at p. 631 [internal citations and quotation marks omitted].)

Analysis

Azure Vista moves for summary adjudication only with respect to the first cause of action for breach of contract.

“The essential elements of a breach of contract claim are: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)

With respect to the first cause of action, Azure Vista alleges that both the Ownership Group and Patriot are parties the lawful, valid and binding contract of the 1974 lease. (See Complaint at ¶ 23.) Azure Vista claims that both the Ownership Group and SR Real Estate Holdings, LLC (“SRREH”) have satisfied all of the requirements as Lessors under the 1974 lease while SRREH had that status. (Id. at ¶ 24.) Azure Vista alleges that Patriot breached the contract by failing to pay certain royalties due and owing under the 1974 lease since at least March 23, 2012. (Id. at ¶ 25.) As a result, the Ownership Group has been damaged in the amount of at least $1 million and such damages continue to accrue at a rate of $40,000 per month indefinitely. (Id. at ¶ 26.)

On summary adjudication, Azure Vista must present sufficient evidence to establish every element of its breach of contract cause of action. As a threshold matter, Azure Vista acknowledges that it must demonstrate proper standing to bring claims on behalf of the Ownership Group. (See Memo of P’s & A’s at p. 12: 8-14.) Azure Vista claims it has such standing pursuant to Civil Code section 2941.9 which provides in part that:

“All holders of notes secured by the same real property or a series of undivided interests in notes secured by real property equivalent to a series transaction may agree in writing to be governed by the desires of the holders of more than 50 percent of the record beneficial interest of those notes or interests, exclusive of any notes or interests of a licensed real estate broker that it the issuer or servicer of the notes or interests of any affiliate of the licensed real estate broker, with respect to actions to be taken on behalf of all holders in the event of default or foreclosure for matters that require direction or approval of the holders, including designation of the broker, servicing agent, or other person acting on their behalf, and the sale, encumbrance, or lease of real property owned by the holders resulting from foreclosure or receipt of a deed in lieu of foreclosure.”

(Civ. Code § 2941.9, subd. (b).)

In support, Azure Vista argues that its standing under section 2941.9 arises out the servicing contracts and majority action affidavits submitted with the motion. As an initial matter, Azure Vista does not identify such documents by name in discussing standing in its memorandum of points and authorities. However, according to the separate statement, Azure Vista asserts that it has standing under section 2941.9 pursuant to the Lender Servicing and Equity Interest Agreement and a Majority Action Affidavit. (See Azure Vista’s Separate Statement of Undisputed Facts at Nos. 33 and 37.)

With respect to the Lender Servicing and Equity Interest Agreement, Patriot objects to the document on grounds that it has not been authenticated, lacks foundation, and hearsay. (See Patriot’s Evidentiary Objections at No. 10.) In support of the motion, Azure Vista attaches the declaration of its sole member and owner, Kim Kundrak (“Kundrak”). In Kundrak’s declaration, signed under penalty of perjury, he states that the Lender Servicing and Equity Interest Agreement attached as Exhibit 39 to the Notice of Lodgment (“NOL”) is a true and correct copy of the document. (See Declaration of Kim Kundrak at ¶ 3a.) However, as stated above, the court sustains Objection No. 10 as the Kundrak declaration fails to authenticate the document or provide any adequate foundation for the agreement. For example, Kundrak fails to indicate whether he has any personal knowledge with respect to the document. (See Evid. Code § 702, subd. (a) [“[T]he testimony of a witness concerning a particular matter is inadmissible unless he has personal knowledge of the matter. Against the objection of a party, such personal knowledge must be shown before the witness may testify concerning the matter.]; People v. Valencia (2006) 146 Cal.App.4th 92, 103-104; see also Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 523 [moving party’s attorneys, who have personal knowledge of the attached exhibits, may attach declarations establishing their authenticity (i.e., how they obtained the documents, who identified them, and their status as “true and correct” copies of the originals)].) Thus, the agreement is inadmissible and does not support a basis for standing under section 2941.9. (See Arciniega v. Bank of San Bernardino (1997) 52 Cal.App.4th 213, 231 [the party bringing a motion for summary judgment must produce admissible evidence to support his or her case; a party cannot rely upon claims or theories unsupported by hard evidence].)

Even if the Lender Servicing and Equity Interest Agreement were valid, as the opposition points out, Azure Vista fails to establish compliance with section 2941.9, subdivision (c) to demonstrate standing on behalf of the Ownership Group. That provision states that “A description of the agreement authorized in subdivision (b) of this section shall be disclosed pursuant to Section 10232.5 of the Business and Professions Code and shall be included in a recorded document such as the deed of trust or the assignment of interests.” (Civ. Code § 2941.9, subd. (c).) In reviewing the moving papers, Azure Vista does not identify which documents contain this required notice. Azure Vista may argue that the First Deed of Trust satisfies this requirement. (See Exhibit 31 to Azure Vista’s NOL.) However, the First Deed of Trust contains a check box at paragraph 21 which indicates whether the deed of trust is subject to the provisions of Civil Code section 2941.9. (Ibid.) Since that box remains unchecked, the document does not provide the required recorded notice pursuant to Civil Code section 2941.9, subdivision (c).

Finally, even if the Lender Servicing and Equity Interest Agreement were admissible, any action taken by Azure Vista would not be effective unless all parties signed, under penalty of perjury, a Majority Action Affidavit stating the following:

(1) The action has been authorized pursuant to this section.

(2) None of the undersigned is a licensed real estate broker or an affiliate of the broker that is the issuer or servicer of the obligation secured by the deed of trust.

(3) The undersigned together hold more than 50 percent of the record beneficial interest of a series of notes secured by the same real property or of undivided interests in a note secured by real property equivalent to a series transaction.

(4) Notice of the action was sent by certified mail, postage prepaid, with return receipt requested, to each holder of an interest in the obligation secured by the deed of trust who has not joined in the execution of the substitution or this document.

This document shall be recorded in the office of the county recorder of each county in which the real property described in the deed of trust is located. Once the document in this subdivision is recorded, it shall constitute conclusive evidence of the compliance with the requirements of this subdivision in favor of trustees acting pursuant to this section, substituted trustees acting pursuant to Section 2934a, subsequent assignees of the obligation secured by the deed of trust, and subsequent bona fide purchasers or encumbrancers for value of the real property described therein.

(Civ. Code § 2941.9, subd. (d).)

Here, Azure Vista attaches Majority Action Affidavit #4 which was not fully executed until July 24, 2014 when Howard Justus signed it on behalf of DACA 2010 L.P. and Sargent Ranch Management Company, LLC. (See Azure Vista’s Separate Statement of Undisputed Facts at No. 37 [Exhibit 44 to Azure Vista’s NOL].) The document was recorded shortly thereafter on July 28, 2014. (Ibid.) However, on June 17, 2014, before the document was fully executed, Azure Vista had already given notice to Patriot of its intent to terminate the 1974 lease for breach based on non-payment of royalties. (See Azure Vista’s Separate Statement of Undisputed Facts at No. 41.) Furthermore, the current action was filed on July 3, 2014, more than 20 days before Azure Vista was authorized to employ counsel to prosecute all claims against Patriot. Therefore, the actions taken by Azure Vista in sending notice of termination to Patriot and filing this lawsuit were not effective as plaintiff did not have authority to act on behalf of the Ownership Group to prosecute this action.

Disposition

Since Azure Vista has failed to meet its initial burden, the motion for summary adjudication to the first cause of action is DENIED.