Case Number: BC680152 Hearing Date: May 15, 2019 Dept: 48

MOTION FOR SUMMARY JUDGMENT (FIRST AMENDED COMPLAINT)

MOVING PARTY: Defendant Djamshid Younessi

RESPONDING PARTY(S): Plaintiff John Banafsheha

PROOF OF SERVICE:

Correct Address: Yes.
75/80 (CCP § 437c(a): Time shortened per May 6, 2019 minute order. No objection to shortened time in opposition, thereby waiving any objection.

· DENY motion for summary judgment.

ANALYSIS

Motion for Summary Judgment

Request for Judicial Notice

Defendant requests that the Court take judicial notice of the following: (1) Grant Deed recorded July 12, 2013; (2) First Deed of Trust recorded July 12, 103; (3) Second Deed of Trust recorded July 1, 2013; (4) Subordination agreement recorded July 1, 2013; (5) First Deed of Trust recorded March 5, 2004; (6) Notice of Default recorded September 19, 2013; (7) Second Deed of Trust recorded December 7, 2012; (8) Notice of Default recorded November 5, 2013; (9) Certificate of Dissolution of Zakaryah Inc. filed February 23, 2015 in the Office of the California Secretary of State; (10) First Amended Complaint filed in this action.

Requests Nos. 1 – 8 are GRANTED. The Court may take judicial notice of recorded documents (Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 263, 274). Plaintiff’s objections to Nos. 5 – 8 are OVERRULED. Request No. 9 is GRANTED. The Court may take judicial notice of a business’ entity’s corporate status as reflected in the Secretary of State’s records. Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1286; Pedus Bldg. Servs. v. Allen (2002) 96 Cal.App.4th 152, 156 n.2. Plaintiff’s objection to No. 9 is OVERRULED. The Court may deny a request for judicial notice of material unnecessary to its decision. Rivera v. First DataBank, Inc. (2010) 187 Cal.App.4th 709, 713. Request No. 10 is GRANTED per Evid. Code § 452(d)(court records).

Plaintiff’s Evidentiary Objections

Pursuant to CCP § 437c(q), the Court declines to rule upon objections to Defendant’s evidence, as they are asserted against evidence which the Court deems to be material to the disposition of this matter:

Defendant’s Evidentiary Objections

Pursuant to CCP § 437c(q), the Court only rules upon objections to evidence which it deems to be material to the disposition of this matter:

Declaration of John Banafsheha

No. 1: OVERRULED. Goes to weight.

No. 4: OVERRULED. Goes to weight; sufficient foundation; personal knowledge.\

No. 5: OVERRULED. Goes to weight (circumstantial evidence).

No. 6: OVERRULED. Goes to weight.

No. 8: OVERRULED. Lack of foundation; lack of personal knowledge.

Discussion

1. Second Cause of Action (Fraud)[1].

Parole evidence is permissible to demonstrate fraud in the inducement of a contract.

A party may claim fraud in the inducement of a contract containing a provision disclaiming any fraudulent misrepresentations and introduce parol evidence to show such fraud. (Citations omitted.) Fraud in the inducement renders the entire contract voidable, including any provision in the contract providing the written contract is, for example, the sole agreement of the parties, that it contains their entire agreement and that there are no oral representations (integration/no oral representations clause). (Citation omitted.)

Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 301 (bold emphasis added).

“ ‘In the usual case of fraud, where the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.’ ” Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 921.

Here, a triable issue of material fact exists as to whether: Defendant fraudulently induced Plaintiff to accept $272,500 from Defendant as a loan; that, if the loan, including interest, was paid off from the Note proceeds, Plaintiff would receive the excess; and that the Agreement was crafted as a purchase agreement only to provide Defendant “more security” for the Loan.

In ¶ 7 of Plaintiff Banafsheha’s declaration, he indicates that in either a 3-minute telephone conversation or in face-to-face meetings (before the August 26, 2013[2] date the LLC Membership Agreement was signed), the parties agreed that Defendant would loan Plaintiff $72,500 at 18% interest, and that Plaintiff would pledge his membership interest in the Wildwood Note. Moreover, Defendant’s attorney, Kevin McShane[3], told Plaintiff that the purchase agreement would be structured to make the loan seem like a purchase agreement so that it would look like Plaintiff did not own any membership interest in the LLC, which would give Defendant added security protection from other possible creditors or claimants against Plaintiff’s membership interest. Id.

Plaintiff indicates that when he saw the first draft of the Agreement prepared by McShane, Plaintiff expressed concern about the way the Agreement was drafted, but McShane sent Plaintiff and his attorney Rodney T. Lewin an email stating: “Jimmy is only willing to buy/loan based on 40% of the value.” Banafsheha Decl., ¶ 8, Exh. B.

Plaintiff indicates that, as a follow up, Plaintiff spoke to McShane, who told Plaintiff that the only way Defendant would loan Plaintiff the money was if the written agreement was framed to look like a purchase of Plaintiff’s membership interest in the LLC with an option to buy it back at a later date, and that Defendant wanted a return of 18% and that if the deal was structured as a loan, on paper, it could create problems for Defendant later on due to the possibility of claims brought by other claimants, and that a purchase agreement would give Defendant added security. Banafsheha Decl., ¶ 9. Plaintiff indicates that he signed the LLC Membership Purchase Agreement because Defendant had led Plaintiff to believe it was actually a loan. Id. Plaintiff indicates that had he known Defendant actually intended to keep Plaintiff’s membership interest and deprive him of his percentage interest in the proceeds of the Wildwood Note once it was paid, and not allow Plaintiff to repay him with the proceeds of the Wildwood note, Plaintiff never would have signed the Agreement. Banafsheha Decl., ¶ 13.

The foregoing evidence is sufficient to raise a triable issue of material fact as to all elements of fraud in the inducement. Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 299-300.

Moreover, Plaintiff indicates that in approximately September 2015, Plaintiff had a conversation with Defendant in which Plaintiff asked Defendant what would happen if Plaintiff was not able to pay by the February 25, 2016 due date set forth in the Agreement, and Defendant told Plaintiff not to worry and that he would extend it to when Wildwood pays its Note to the LLC. Banafsheha Decl., ¶ 16. Defendant also told Plaintiff that once the loan was repaid, Defendant would pay Plaintiff the balance of his share of the proceeds after deducting the $272,500 principal amount of the loan plus 18% interest thereon. Id. It was not until a July 31, 2017 meeting that Defendant told Plaintiff for the first time that Plaintiff was going to get nothing after Wildwood paid off the note. Id. at ¶ 17. This evidence goes toward explaining why Plaintiff’s failure to repay Defendant out of his own pocket was consistent with the terms of a loan.

Moreover, Plaintiff submits emails whereby Defendant references the transaction as a “loan” in August 2017. Banafsheha Decl., ¶ 18; Exh. D. This is evidence that Defendant understood that he represented to Plaintiff that the transaction would be a loan.

Younessi’s statements which contradict Plaintiff’s version of negotiations presents triable issues of material fact for a jury to determine. For example, Younessi disputing the manner in which he communicated with Plaintiff (Declaration of Djamshid Younessi, ¶¶ 13 – 16) goes to credibility. Younessi’s statement that during an August 11, 2013, three-minute phone call, in response to Plaintiff asking Defendant if he would be wiling to loan Defendant several hundred thousand dollars, Defendant did not represent, agree or promise any substantive terms of a loan or contract, goes to weight/credibility. Younessi Decl., ¶ 17. Younessi’s statement that other than the emails attached as Exh. 5 and Exhs. 2 – 5 and 7 – 11 of the McShane Declaration, there were no other emails or written communications between Plaintiff and Defendant concerning the transaction (Younessi Decl., ¶ 20) goes to weight/credibility. Younessi’s statement that other than the Agreement itself, on or before August 26, 2013, Defendant made no oral representations or promises to Plaintiff concerning the transaction different than the emails or the Agreement (Younessi Decl., ¶¶ 21, 22, 36) also goes to weight/credibility. Likewise, as to Younessi’s representation as to the nature and truth of statements he made to Banafsheha. Younessi Decl., ¶¶ 23 – 28. Defendant’s statements as to his lack of any intent to defraud, deceive or mislead Plaintiff in any way goes to weight and credibility. Younessi Decl., ¶ 33.

Similarly, Kevin McShane’s statements which contradict the substance of his discussions with Plaintiff (McShane Decl., ¶¶ 4, 11, 12, 13) goes to weight and credibility.

The Court cannot weigh the evidence or determine credibility in ruling on a summary judgment motion. Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 840.

If Plaintiff succeeds in proving his fraud-in-the inducement claim at trial, it appears an appropriate remedy would be rescission of the Membership Purchase Agreement, with Plaintiff receiving all of his membership interest back, plus all of the Note proceeds attributable to that membership interest, with interest at the legal rate, offset by the $272,500 Plaintiff received from Defendant, with interest at the legal rate.

Accordingly, the motion for summary judgment is DENIED.

[1] After the Court’s ruling on Defendant’s demurrer, this is the only remaining cause of action.

[2] ¶ 6 of the Banafsheha Decl. erroneously refers to an August 26, 2019 (which date has not yet occurred).

[3] See Younessi Decl., ¶ 19 (admitting that McShane acted exclusively as Defendant’s counsel in the transaction and Plaintiff had his own attorney, Rodney Lewin). Accordingly, McShane’s statements are properly attributed to Defendant as authorized admission of a party opponent.