2018-00225669-CU-BC

Kamar Singh vs. Josh Bottfeld Trust

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Corrick, W. David

Defendants Josh Bottfeld as Trustee of the Josh Bottfeld Trust (erroneously sued as Josh Bottfeld Trust), Polycomp Trust Company as Custodian FBO Joanne K. Fratis IRA, Clairelee Leiser Bulkley as Successor Trustee of the Marya Welch Trust (erroneously sued as Marya Welch Trust), Yolanda Rose Ortega, Sharon F. Marks, Richard A. Ortiz as Trustee of the Ortiz Family Living Trust (erroneously sued as Ortiz Family Living Trust), Frank A. Wolfe as Trustee of the 2000 Wolfe Family Trust (erroneously sued as 2000 Wolfe Family Trust), Beverly A. Smallfield, and Stan Kurz’ (collectively, “Defendants”) motion for summary judgment or, in the alternative, summary adjudication is ruled upon as follows.

Defendants’ request for judicial notice is granted. In taking judicial notice of these documents, the Court accepts the fact of their existence, not the truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal.4th 543, 590 [judicial notice of findings of fact does not mean that those findings of fact are true]; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121 [“[W]hile the existence of any document in a court file may be judicially noticed, the truth of the matters asserted in those documents, including the factual findings of the judge who was sitting as the trier of fact, is not entitled to notice.”]; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1562-1570.)

The Court does not rule on Defendants’ evidentiary objections filed in support of their reply since they concern evidence deemed immaterial to decision on the motion. (Code Civ. Proc., § 437c, subd. (q).)

Factual and Procedural Background

Plaintiffs Kamar Singh and Kent Hoggan (collectively, “Plaintiffs”) filed their First Amended Complaint (“FAC”) on July 12, 2018, alleging declaratory judgment, promissory estoppel, specific performance, breach of contract, and breach of the implied covenant of good faith and fair dealing.

Plaintiffs allege they are the assignees of an agreement to purchase real property (the “Agreement”) that was entered into between SAVS Energy, LLC (“SAVS”) and Defendants on or about January 9, 2017. (FAC ¶¶ 1, 15.) Plaintiffs allege Defendants are fractional owners of the property. (FAC ¶¶ 2-12.)

Plaintiffs allege SAVS assigned the Agreement to them, that SAVS made $30,000 in deposits, and that the transaction was originally scheduled to close on April 27, 2017. (FAC ¶ 16.) Plaintiffs allege that before closing they learned that an adjoining land owner (Lennar) required substantial infrastructure changes to the subject property and that governmental approvals would be required. Plaintiffs allege Defendants did not disclose these facts. (FAC ¶ 17.) Plaintiffs allege they have expended over $100,000 in engineering and development costs based on Defendants’ representations that they would extend the closing date until completion of the lot line adjustment and reconfigurations, including the necessary governmental approvals. (FAC ¶ 18.) They allege Defendants abruptly attempted to cancel the Agreement in January 2018. (FAC

¶ 19.) Plaintiffs allege they are entitled to close on the purchase of the property and that they have performed under the contract. (FAC ¶ 21.)

Defendants now move for summary judgment or, in the alternative, summary adjudication as to each cause of action.

The Court notes Plaintiffs have a pending motion for leave to file a Second Amended Complaint, which is set to be heard on October 15, 2018. The proposed Second Amended Complaint removes the second and third causes of action for promissory estoppel and specific performance.

Legal Standard

In evaluating a motion for summary judgment or summary adjudication the Court engages in a three step process. First, the Court identifies the issues framed by the pleadings. The pleadings define the scope of the issues on a motion for summary judgment or summary adjudication. (FPI Dev. Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381-382.) Because a motion for summary judgment or summary adjudication is limited to the issues raised by the pleadings (Lewis v. Chevron (2004) 119 Cal. App. 4th 690, 694), all evidence submitted in support of or in opposition to the motion must be addressed to the claims and defenses raised in the pleadings. The Court cannot consider an unpleaded issue in ruling on a motion for summary judgment or summary adjudication. (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 541.) The papers filed in response to a defendant’s motion for summary judgment or summary adjudication may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings. (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342.)

Next, the Court must determine whether the moving party has met its burden. A defendant moving for summary judgment or summary adjudication bears the burden of persuasion that one or more elements of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850, quoting C.C.P § 437c(p)(2).) A defendant is not required to conclusively negate one or more elements of the plaintiff’s cause of action. (Saelzer v Advance, Group 400 (2001) 25 Cal.4th 763, 780-781). Rather, to meet its burden, the defendant is only required to show that the plaintiff cannot prove an element of its cause of action, i.e., that the plaintiff does not possess

and cannot reasonably obtain evidence necessary to show this element. (Aguilar, supra, at 853-855.)

At the same time, a defendant cannot shift the burden to the plaintiff simply by suggesting the possibility that the plaintiff cannot prove its case; a moving defendant must still make “an affirmative showing” in support of its motion. (See Aguilar, supra, at 854-855 n.23; Addy v Bliss & Glennon (1996) 44 Cal.App.4th 205, 214.)

Once the moving party has met its burden, the burden shifts to the opposing party to show that a material factual issue exists as to the cause of action alleged or a defense to it. (C.C.P. § 437c(p); see, generally Bush v. Parents Without Partners (1993) 17 Cal. App. 4th 322, 326-327.) In ruling on the motion, the Court must consider the evidence and inferences reasonably drawn from the evidence in the light most favorable to the party opposing the motion. (Aguilar, supra, at 843.)

Summary adjudication requires disposition of an entire cause of action or claim for damages. (Code Civ. Proc. § 437c(f)(1); Hindin v. Rust (2004) 118 Cal. App. 4th 1247, 1256; see also Catalano v. Superior Court (2000) 82 Cal.App.4th 91, 97 (“summary adjudication is meant to dispose of an entire substantive area”).)

First Cause of Action for Declaratory Relief

Plaintiffs allege an actual controversy has arisen between the parties because Plaintiffs claim they have performed under the Agreement and are entitled to close on the purchase of the property, while Defendants claim they are not required to close. Plaintiffs also claim Defendants’ retention of $30,000 in deposits is excessive liquidated damages since Defendants have suffered no actual damages and Plaintiffs are, therefore, entitled to a return of those monies. (FAC ¶ 21.)

Defendants contend summary adjudication is warranted because there is no actual, justiciable controversy. In support, Defendants present the following 10 UMFs, which are also the basis for summary adjudication of the other causes of action as well. On or about January 9, 2017, SAVS entered into the Agreement to acquire the property from the proportional owners (Defendants). (UMF 1.) The Agreement was fully integrated, required escrow to close no later than April 27, 2017, provided escrow could only be extended by the mutual written agreement of the parties, and provided the property was being sold “as-is, where-is.” (UMF 2.) On or about September 25, 2017, the parties executed the final written escrow extension, which set January 26, 2018, as the last day to close escrow. (UMF 3.) As consideration, SAVS agreed to make three $10,000 non-applicable deposit payments on October 26, November 26, and December 26, 2017. (UMF 4.) SAVS did not make its $10,000 payment on December 26, 2017. (UMF 5.) On January 5, 2018, Plaintiffs were advised in writing that Defendants would cancel escrow on January 8, 2018, if SAVS did not make the $10,000 payment by 5:00 p.m. on January 5, 2018. (UMF 6.) SAVS did not make the payment by 5:00 on January 5, 2018, and Mr. Singh, in an email dated January 5, rejected Defendants’ offer for an escrow extension. (UMFs 7, 8.) On January 11, 2018, SAVS made a counter-offer, which was rejected by Defendants. (UMF 9.) On January 16, 2018, Defendants canceled escrow and terminated the Agreement because SAVS refused to make the $10,000 deposit payment that was originally due on December 26, 2017. (UMF 10.)

Declaratory relief is an equitable remedy enabling a court to declare and adjudicate the rights and duties of parties when there is an “actual controversy” relating to those legal rights. (E. Bay Mun. Util. Dist. v. Cal. Dep’t of Forestry & Fire Protection (1996) 43 Cal.App.4th 1113, 1121; see also, Civil Code §1060.) “Whether a claim presents an ‘actual controversy’ within the meaning of [CCP] section 1060 is a question of law….”

(Environ’l Defense Proj. of Sierra County v. County of Sierra (2008) 159 Cal.App.4th 877, 885.)

The purpose of a judicial declaration of rights in advance of an actual tortious incident is to enable the parties to shape their conduct so as to avoid a breach.” (Babb v. Superior Court (1971) 3 Cal.3d 841, 848.) Therefore, “[declaratory relief] operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in interests of preventive justice, to declare rights rather than execute them.” (Ibid.) Courts have long recognized that declaratory relief should be denied when a cause of action has purportedly accrued, such as in the case where the facts have matured to a claim for damages. (See, e.g., C.J.L. Constr., Inc. v. Universal Plumbing (1993) 18 Cal.App.4th 376, 390, citing Standard Brands of Cal. v. Bryce (1934) 1 Cal.2d 718, 721.) Indeed, a court may properly refuse to grant declaratory relief if such relief “is not necessary or proper at the time under all the circumstances.” (§ 1061). While it is no objection that past wrongs are also to be redressed, there is no basis for declaratory relief where only past wrongs are involved. Baldwin v. Marina City Properties, Inc. (1078) 79 Cal. App. 3d 393, 407.

The foregoing undisputed material facts demonstrate a cause of action for damages has already accrued. Plaintiffs have refused to pay the $10,000 December payment as agreed, and Defendants have terminated the Agreement as a result. There are no prospective rights to declare in an attempt to avoid a breach. A purported breach of the Agreement has already occurred. Further, Plaintiffs’ argument that they withheld the $10,000 payment because they believed Defendants repudiated and breached the Agreement does not create a dispute as to any of the foregoing facts. It also lends further support to the fact that this cause of action is no longer proper as it does not seek a declaration of rights in advance in order to avoid a breach. Accordingly, Defendants’ motion for summary adjudication of Plaintiffs’ claim for declaratory relief is granted.

Second Cause of Action for Promissory Estoppel

Plaintiffs allege Defendants’ represented that they would proceed with the sale if Plaintiffs continued to invest and expend sums for further engineering and development, and Plaintiffs relied on this representation and did expend substantial sums on further engineering and development. As a result, Plaintiffs allege Defendants are estopped from denying the enforceability of the Agreement. (FAC ¶ 24.)

Promissory estoppel applies when an injustice arising from reliance and action upon a promise can be avoided only by enforcing the promise.(Rest.2d Contracts, § 90, subd.

(1), p. 242; Kajima/Ray Wilson v. Los Angeles Metropolitan Transportation Authority
(2000) 23 Cal.4th 305, 310.)

“The elements of promissory estoppel are: (1) a clear promise, (2) reliance, (3) substantial detriment, and (4) damages measured by the extent of the obligation

assumed and not performed.” (Poway Royal Mobilehome Owners Assn. v. City of Poway (2007) 149 Cal.App.4th 1460, 1471.)

Defendants argue Plaintiffs cannot establish the alleged clear and unambiguous promise made by Defendants. In support, Defendants rely on the same 10 UMFs discussed above. UMF 2 is of particular import as it establishes the Agreement regarding the purchase and sale of the subject property was a fully integrated contract that could only be amended or modified by a signed written agreement of the parties. Section 10.15 of the Agreement specifically states “This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior or concurrent agreements, understandings, or arrangements, whether written or oral, express or implied. No amendment to or modification of this Agreement shall be valid and enforceable unless in writing and signed by Buyer and Seller … .” (UMF 2, TOE, Exh. A ¶ 10.15.) Further, the Agreement specifically provided escrow could only be extended by the mutual written agreement of the parties. (UMF 2, TOE , Exh. A, ¶¶ 5.2, 8.1.) While Plaintiffs contend the Agreement could be orally modified, they have not proffered any evidence in support that would contradict the express written terms of the Agreement that provide otherwise. The Agreement specifically precludes oral modifications. The remaining UMFs evidence that the only written modifications the parties agreed to regarding the escrow closing date, that Plaintiffs failed to make the $10,000 December payment required thereunder, and that Defendants terminated the Agreement as a result. (UMFs 3-10.) Plaintiffs have not provided any evidence that creates a dispute as to these material facts.

Based on the foregoing, Defendants’ motion for summary adjudication is granted.

Third Cause of Action for Specific Performance

Generally, to obtain specific performance following a breach of contract, Plaintiff must show “(1) the inadequacy of his legal remedy; (2) an underlying contract that is both reasonable and supported by adequate consideration; (3) the existence of a mutuality of remedies; (4) contractual terms which are sufficiently definite to enable the court to know what it is to enforce; and (5) a substantial similarity of the requested performance to that promised in the contract.” (Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463, 472.)

Plaintiffs seek specific performance of the Agreement on the grounds they fully performed by depositing and releasing $30,000 into escrow. (FAC ¶ 26.) Plaintiffs allege the Agreement was never properly cancelled and Defendants wrongfully interfered with Plaintiffs’ performance and failed to disclose known material facts about problems and costs associated with the property. (FAC ¶ 26.)

Defendants contend the undisputed evidence establishes Plaintiffs did not fully perform under the Agreement because they did not make the agreed-upon $10,000 December payment. As a result, Defendants reason Plaintiffs cannot maintain their cause of action for specific performance.

“Specific performance cannot be enforced in favor of a party who has not fully and fairly performed all the conditions precedent on his part to the obligation of the other party, except where his failure to perform is only partial, and either entirely immaterial, or capable of being fully compensated, in which case specific performance may be

compelled, upon full compensation being made for the default.” (Civ. Code § 3392.)

Defendants’ undisputed evidence establishes SAVS breached the Agreement by refusing to make the $10,000 December payment. However, this failure to perform was only partial, yet Defendants have failed to set forth any evidence that the breach was material or not capable of being fully compensated. Further, Defendants failed to address the allegation that Defendants “wrongfully interfered with Plaintiffs’ performance under the [Agreement],” which could be a defense to Plaintiffs’ failure to perform. Under the terms of Civ. Code § 1511 (excuses for nonperformance of contract), plaintiff’s performance or tender is excused if it was prevented by defendant’s conduct. (see Towne Dev. Co. v. Lee (1965) 63 Cal. 2d 147, 152 (plaintiff excused from performing when it attempted to tender money but could not do so because escrow company had gone out of business and defendant suggested that parties go to different escrow company but agreed to wait until rezoning report was received before opening another escrow).) It was Defendant’s burden, as the moving party, to show that Plaintiff “could not prevail on any theory raised by the pleadings.” ( Hawkins v. Wilton (2006) 144 Cal. App. 4th 936, 939-940.)

As the moving party, the Court finds Defendants have failed to meet their initial burden and the motion for summary adjudication is denied.

Fourth Cause of Action for Breach of Contract

To establish a claim for breach of contract, Plaintiff must establish: (1) the existence of the contract, (2) Plaintiffs’ performance or excuse for nonperformance, (3) defendants’ breach, and (4) the resulting damage to Plaintiff.”(Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Plaintiffs contend they fully performed under the Agreement or were excused from doing so. (FAC ¶ 30.) Plaintiffs allege Defendants materially breached the Agreement when they failed to disclose material changes regarding the requirements to develop the property and encouraged Plaintiffs to expend additional sums for engineering and entitlement. (FAC ¶ 31.)

Defendants contend it is undisputed SAVS failed to perform by failing to make the

$10,000 December payment, the performance was not excused, and Defendants did not breach. In support, Defendants rely on the same 10 UMFs discussed above, plus one additional UMF that Plaintiffs executed a written contingency removal dated May 3, 2017. (UMF 11.)

It is undisputed that SAVS partially failed to perform under the Agreement. As to whether that performance was excused or not, Defendants cite to Plaintiffs’ discovery responses, which clarify that Plaintiffs’ performance was excused because “the sellers had agreed to extend the closing to comport with the completion of Lennar’s lot line adjustment and other entitlements.” (Memorandum at 16:8-10.) First, Defendants do not present this as a UMF in their separate statement. Indeed, the separate statement serves two important functions in a summary judgment proceeding: It notifies the parties which material facts are at issue, and it provides a convenient and expeditious vehicle permitting the trial court to hone in on the truly disputed facts. (Collins v. Hertz Corp. (2006) 144 Cal. App. 4th 64, 74.) Moreover, even if Defendants had, they fail to present any other facts that this is the only alleged basis for excused performance. Therefore, on the record before it, the Court cannot conclude that Plaintiffs’ cannot

establish their failure to perform was unexcused.

Similarly, Defendants argue Plaintiffs identified Defendants’ alleged breach in discovery responses as “Defendants failed to close in accord with the amended closing date and purported to cancel the Purchase agreement.” (Memorandum at 16: 21-23.) Again, Defendants do not present this in their separate statement as a UMF. Defendants also argue they did not materially breach the Agreement by failing to “disclose material changes regarding the requirements to develop” the property based on the following. The Agreement fully advised SAVS that the Sellers had obtained the Real Property through a foreclosure proceeding and were in no position to “make any specific representations of knowledge” regarding the Real Property, including but not limited to any representations or warranties as to whether the Real Property was suitable for any use, including possible development. (TOE, Ex. A, 10.20.) When Mr. Singh executed the Agreement on behalf of SAVS, he understood that it was an “as-is, where-is” contract. (TOE Ex. U, 18:5-8.) He understood that the Sellers were making no representations about its nature or development prospects. (TOE Ex. U, 18:5-8.) When Mr. Singh executed the contingency removal notice, he understood he was communicating to the Sellers that he had conducted all the investigation needed to satisfy himself that the Real Property was suitable for his intended purpose. (TOE Ex. U, 36:6-11.) Moreover, Mr. Singh admitted in deposition that the issues he contends “interfered” with his ability to close were not caused by the Sellers. (TOE Ex. U, 30:3-12, 49:9-18.) None of the foregoing purported UMFs are included in Defendants’ separate statement. The only UMFs Defendants point to in support of the argument that they did not breach the agreement are UMFs 10 and 11, which provide they terminated the Agreement because SAVS refused to pay the $10,000 December payment and Plaintiffs executed a contingency removal dated May 3, 2017. These facts are insufficient to conclude Defendants’ did not breach the Agreement by failing to disclose material changes to the property.

Defendants’ motion for summary adjudication is, therefore, denied.

Fifth Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

Under California law, the implied covenant of good faith and fair dealing requires that neither party to a contract do anything that will frustrate the rights of the other party to receive the benefits of the contract. (Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 36; Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153.) A breach of the implied covenant of good faith and fair dealing involves something beyond the breach of the contractual duty itself. (Careau & Co. v. Security Pacific Business Credit (1990) 222 Cal.App.3d 1371, 1394.)

Plaintiffs incorporate all of the allegations of their complaint into this cause of action and allege the acts constitute a breach of the implied covenant. Plaintiffs contend summary adjudication should be granted because they did not injure SAVS’ rights to the benefit of the Agreement because SAVS breached by failing to make the $10,000 December payment, and Defendants’ then exercised their right to cancel. (UMFs 5-7,10.)

For the same reasons discussed above, the motion for summary adjudication must be denied. Defendants as the moving party have failed to present facts to establish Plaintiffs’ failure to perform was unexcused and that Defendants did not breach the

Agreement. The motion for summary adjudication is denied.

Conclusion

Defendants’ motion for summary adjudication as to Plaintiffs’ first and second causes of action is granted.

Defendants’ motion for summary adjudication as to Plaintiffs’ third, fourth, and fifth causes of action is denied.