Case Name: Yo LLC v. Krucker, et al.

Case No.: 17CV306261

According to the allegations of the second amended complaint (“SAC”), on February 26, 2013, defendant Ruth Elly Krucker (“Krucker”) entered into a purchase agreement with plaintiff Yo LLC (“Plaintiff”) for the sale of certain real property located at 620 Emerson Street in Palo Alto for $3,350,000. (See SAC, ¶¶ 14-15.) As a condition to closing escrow, Krucker was required to, among other things, obtain title insurance concerning the property. (See SAC, ¶ 17.) In October 2013, First American Title Company issued a purported title commitment letter, but it was subject to the condition that Seller clear title, and upon subsequent approval of the title company’s underwriting department. (See SAC, ¶ 18.) Krucker is still not able to provide a grant deed conveying insurable clear fee title of the property to Plaintiff. (See SAC, ¶ 18.) Title questions arose as to whether Krucker had sole legal title to the property because Krucker’s husband, Adolph Konigsreiter (“Konigsreiter”), also made claims of ownership, and a deed recorded out of the chain of the title created a cloud on the property. (See SAC, ¶ 22.) Krucker retained the services of Jessica Poyner to clear title to the property and Poyner determined that a probate proceeding would result in clear title. (See SAC, ¶ 23.) In order to remove Konigsreiter as a tenant from the property, Krucker filed an unlawful detainer against him on November 21, 2013, and on January 8, 2014, a trial was held and judgment was entered in favor of Krucker. (See SAC, ¶ 26.) Konigsreiter timely appealed the judgment on January 17, 2014 before the Appellate Division of the Santa Clara County Superior Court and on December 17, 2014, the appellate division overturned the judgment. (See SAC, ¶ 26.) Konigsreiter remained in possession of the property until January 2017 when he was evicted. (See SAC, ¶ 26.) On June 19, 2014, Krucker filed a quiet title action with her sister, Ursula Flickiger-Kruger (“Ursula”), against Konigsreiter. (See SAC, ¶ 28.)

On January 12, 2015, Krucker filed and recorded a lis pendens in connection with the quiet title action. (See SAC, ¶ 28.) Paul Marinelli, a representative of Lawrence Investments, LLC, (“LI”), learned of the quiet title action and then offered to lease the property for 20 years or purchase the building for $4.75 million, noting that he felt that Konigsreiter had a very weak case but offered to pay $25,000 for him to find an attorney to represent him in the dispute. (See SAC, ¶ 31.) The Court issued a decision in favor of Krucker in the quiet title action, and on June 21, 2016, Marinelli sent a proposed letter of intent to Krucker’s counsel advising him of LI’s interest in purchasing the property from Krucker for $4.2 million: $4 million immediately upon close of escrow and $200,000 after all property claims were resolved. (See SAC, ¶ 35.)

In July 2016, the Court entered judgment in favor of Krucker in the quiet title action, but also finding that Ursula had no interest in the property, and Konigsreiter appealed the judgment. (See SAC, ¶ 29.) On November 20, 2016, Krucker and PA Restaurant Holdings, LLC (“PA Restaurant”) entered into a purchase agreement for the purchase and sale of the property for $4.25 million, with the following paragraphs:

28.3 Seller has disclosed to Buyer that in 2013 Seller signed a document titled Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated February 26, 2013 relating to the Property and naming Yo LLC as buyer (the “Prior Contract”). Seller warrants and represents that the Property Documents provided to Buyer include all known material documents relating to the Prior Contract, but Seller does not make any representations concerning the validity or invalidity of the Prior Contract. It is agreed once escrow closes, Buyer shall be responsible for any and all fees, costs, and damages associated with the Prior Contract.

30.1 Indemnity Obligation. To induce Seller to sell the Property to Buyer, and in consideration of the foregoing… Buyer (or “indemnitor”) hereby covenants and agrees for the benefit of Seller… as follows: (a) Indemnitor hereby assumes liability for, and agrees to pay to protect, defend, indemnify, and save all indemnitees harmless from any and all attorneys’ fees, costs, and damages… arising out of the Prior Contract.

(SAC, ¶ 37.)

The sale under the purchase agreement between Krucker and PA Restaurant closed on January 26, 2017. (See SAC, ¶ 38.) On January 27, 2017, counsel for PA Restaurant wrote to Plaintiff that it was his belief that the agreement between Krucker and Plaintiff was not enforceable. (See SAC, ¶ 39.) On February 9, 2017, Plaintiff filed the instant action. On November 17, 2017, Plaintiff filed the SAC against Krucker, individually and as trustee of the Ruth Elly Krucker Revocable Living Trust Dated September 20, 2002, LI, PA Venture Holdings, LLC (“PA Venture”), PA Hotel Holdings, LLC (“PA Hotel”), and PA Restaurant, asserting causes of action for:

1) breach of contract (against Krucker);
2)
3) breach of the implied covenant of good faith and fair dealing (against Krucker);
4)
5) fraudulent concealment (against Krucker);
6)
7) intentional misrepresentation (against Krucker);
8)
9) negligent misrepresentation (against Krucker);
10)
11) breach of contract (against LI, PA Venture, PA Hotel, and PA Restaurant);
12)
13) intentional interference with contractual relations (against LI, PA Venture, PA Hotel, and PA Restaurant); and,
14)
15) declaratory relief (against all defendants).
16)

On February 28, 2018, Krucker died. Krucker’s heirs did not appoint a personal representative in California because Krucker did not reside in California at the time of her death. In October 2018, PA Restaurant filed a motion to dismiss the lawsuit because no one had yet been appointed as a representative of Krucker. Because of that motion, Plaintiff filed a petition to probate the estate of Krucker. On November 1, 2018, Plaintiff filed an ex parte application with the Probate Department of this Court seeking to appoint Gary E. Loebner as the special administrator of the estate. At the November 5, 2018 hearing, counsel for PA Restaurant argued that the petition could not be approved because an executor for Krucker’s estate was appointed in Switzerland and Plaintiff failed to provide him notice of the hearing. The Court [Hon. Pichon] continued the hearing to December 10, 2018 to allow notice. Additionally, the Swiss executor declined appointment so that Kruckers’ heirs could administer the estate without court involvement. Prior to the December 10, 2018 hearing, PA Restaurant continued the hearing on the motion to dismiss until February 2019, and after the December 10, 2018 hearing, the Court stated that the appointment of a special administrator required a noticed motion since there was no urgency to use the ex parte process. Plaintiff then filed a petition for the appointment of a special administrator; it was calendared for June 26, 2019—the earliest available date. On June 26, 2019, the Court [Hon. Lie] continued the hearing on the petition to August 21, 2019. On August 21, 2019, the Court [Hon. Emede] continued the hearing to September 27, 2019. On September 27, 2019, argument was presented and the Court took the matter under submission. On December 23, 2019, the Court granted the petition to appoint Mr. Loebner and issued Letters of Administration. On January 3, 2020, Letters Testamentary were filed. On January 13, 2020, Plaintiff filed a creditor’s claim with the Court and served the parties to the instant action, Loebner and Loebner’s attorney. On February 5, 2020, Loebner filed a document entitled Allowance or Rejection of Creditor’s Claim with the Probate Court.

On February 20, 2020, Plaintiff filed a motion pursuant to Code of Civil Procedure section 377.41 to have Loebner appointed as the personal representative on behalf of Krucker. That same day, PA Restaurant moved for judgment on the pleadings as to the SAC on behalf of Krucker as Krucker’s indemnitor, arguing that Plaintiff cannot satisfy the essential requirements of section 377.41.

Motion for judgment on the pleadings

In support of its motion, PA Restaurant requests judicial notice of: the SAC; the Petition for Letters of Special Administration filed by plaintiff in the probate division on March 8, 2019; the order for probate filed in the probate division of the Court on December 23, 2019; the creditor claim filed in the probate division of the Court on January 13, 2020; and, the allowance of the creditor claim filed by the Special Administrator in the probate division. PA Restaurant’s request for judicial notice is GRANTED. (Evid. Code § 452, subds. (c), (d), (h).)

In support of its opposition to the motion, Plaintiff requests judicial notice of a number of documents. Plaintiff’s request for judicial notice is GRANTED as to: the SAC; the notice of death of Krucker; PA Restaurant’s objection to petition for Letters of Special Administration; the order regarding the ex parte application for order appointing special administrator filed on January 11, 2019; order for probate appointing Loebner as personal representative for estate of Krucker filed on December 23, 2019; the copy of Letters Testamentary for the estate of Krucker; the Creditor’s claim filed January 13, 2020 by Plaintiff; the Sixth District’s docket in the Krucker v. Konigsreiter case; the Allowance or Rejection of Creditor’s Claim filed by Loebner on February 5, 2020; the memorandum in support of the motion to appoint Loebner as personal representative for Krucker, filed on February 20, 2020; and the April 16, 2018 interim case management statement and points and authorities. (Evid. Code § 452, subds. (c), (d), (h).)

As Krucker’s indemnitor, PA Restaurant moves for judgment on the pleadings as to the SAC on behalf of Krucker, arguing that Plaintiff cannot satisfy the essential requirements of Code of Civil Procedure section 377.41. Section 377.41 states that:

On motion, the court shall allow a pending action or proceeding against the decedent that does not abate to be continued against the decedent’s personal representative or, to the extent provided by statute, against the decedent’s successor in interest, except that the court may not permit an action or proceeding to be continued against the personal representative unless proof of compliance with Part 4 (commencing with Section 9000) of Division 7 of the Probate Code governing creditor claims is first made.

(Code Civ. Proc. § 377.41.)

PA Restaurant argues that Plaintiff cannot state a cause of action against a personal representative for Krucker because it cannot demonstrate proof of compliance with Probate Code sections 9100 and 9370.

Probate Code 9100 and Code of Civil Procedure section 366.2

Probate Code section 9100 states that:

(a) A creditor shall file a claim before expiration of the later of the following times:

(1) Four months after the date letters are first issued to a general personal representative.

(2) Sixty days after the date notice of administration is mailed or personally delivered to the creditor. Nothing in this paragraph extends the time provided in Section 366.2 of the Code of Civil Procedure.

(b) A reference in another statute to the time for filing a claim means the time provided in paragraph (1) of subdivision (a).

(c) Nothing in this section shall be interpreted to extend or toll any other statute of limitations or to revive a claim that is barred by any statute of limitations. The reference in this subdivision to a “statute of limitations” includes Section 366.2 of the Code of Civil Procedure.

(Prob. Code § 9100.)

Here, judicially noticeable facts indicate that Plaintiff has indeed filed a creditor’s claim was filed before the expiration of four months after the date letters were first issued to a general personal representative—the later of subdivisions (a)(1) or (a)(2). Thus, instead, PA Restaurant relies on subdivision (c)’s language which refers to Code of Civil Procedure section 366.2. Section 366.2, subdivision (a) states that:

If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.

(Code Civ. Proc. § 366.2, subd. (a).)

Here, section 366.2 explicitly states that it applies to an action if “the person… dies before the expiration of the applicable limitations period….” Here, Krucker was named as a defendant, and died after the action was filed. In each of the cases cited by PA Restaurant regarding section 366.2, the decedent predeceased the filing of the petition and are thus inapposite. (See Estate of Yool (2007) 151 Cal.App.4th 867, 870-871; see also Dobler v. Arluk Medical Center Industrial Group, Inc. (2001) 89 Cal.App.4th 530, 532-533; see also Wagner v. Wagner (2008) 162 Cal.App.4th 249, 253; see also Embree v. Embree (2004) 125 Cal.App.4th 487, 491; see also Venturi v. Taylor (1995) 35 Cal.App.4th 16, 18-19; see also Bradley v. Breen (1999) 73 Cal.App.4th 798, 800.) Section 366.2 does not apply to the instant situation.

Probate Code section 9370

PA Restaurant also argues that Plaintiff has failed to allege facts that demonstrate that it has fulfilled the requirements of Probate Code section 9370, which states:

(a) An action or proceeding pending against the decedent at the time of death may not be continued against the decedent’s personal representative unless all of the following conditions are satisfied:

(1) A claim is first filed as provided in this part.

(2) The claim is rejected in whole or in part.

(3) Within three months after the notice of rejection is given, the plaintiff applies to the court in which the action or proceeding is pending for an order to substitute the personal representative in the action or proceeding. This paragraph applies only if the notice of rejection contains a statement that the plaintiff has three months within which to apply for an order for substitution.

(b) No recovery shall be allowed in the action against property in the decedent’s estate unless proof is made of compliance with this section.

(Prob. Code, § 9370.)

In opposition, Plaintiff concedes that it “is in the process of complying with these requirements, and expects to complete that process the same day that this motion for judgment [on the pleadings] is heard.” (Opposition to motion for judgment on the pleadings (“Opposition”), p.9:20-22.) Plaintiff also states that “[b]ecause Gary Loebner will soon be appointed as the personal representative of Ruth Krucker’s estate in this Lawsuit, to the extent that fact must be reflected in the operative pleading, YO should be given leave to amend to do so.” (Id. at p.11:22-24.) As Plaintiff admittedly has not provided facts in the SAC alleging compliance with Probate Code section 9370, the motion for judgment on the pleadings as to the SAC is GRANTED with 10 days leave to amend.

Motion to appoint Gary Loebner as personal representative to Krucker

Plaintiff moves to appoint Loebner as personal representative of Krucker, or, in the alternative, moves to appoint PA Restaurant as successor in interest of Krucker, or substitute PA Restaurant as assignee of Krucker, or continue the action against PA Restaurant as the insurer of Krucker. The arguments are identical to those made in the motion for judgment on the pleadings for both parties.

The motion to appoint Loebner as personal representative of Krucker is GRANTED.

The Court will prepare the Order.