2018-00225669-CU-BC

Kamar Singh vs. Josh Bottfeld Trust

Nature of Proceeding: Motion to Expunge Lis Pendens

Filed By: Banks, James J.

Defendants Josh Bottfeld as Trustee of the Josh Bottfeld Trust, et al.’s motion to expunge notice of pending action (lis pendens) is granted.

Defendants’ unopposed request for judicial notice is granted.

Plaintiffs Kamar Singh and Kent Hoggan filed the complaint in this action on January 22, 2018 alleging causes of action for declaratory judgment, promissory estoppel, specific performance, breach of contract and breach of the implied covenant of good faith and fair dealing. Plaintiffs allege that they are the assignees of an agreement to purchase real property (“Agreement”) that was entered into between SAVS Energy, LLC (“SAVS”) and Defendants on or about January 12, 2017. They allege that SAVS assigned the Agreement to them. They allege that SAVS made $30,000 in deposits and that the transaction was originally scheduled to close on April 27, 2017. They 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 that Defendants did not disclose these facts. They allege that 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. They allege that Defendants abruptly attempted to cancel the Agreement in January 2018. Plaintiffs recorded a lis pendens on January 23, 2018 which Defendants now move to expunge.

Defendants argue that the lis pendens recorded on January 23, 2018 is procedurally defective and void and that in any event, Plaintiffs cannot demonstrate that their claims are probably valid.

Procedural Deficiencies

Before recording a lis pendens, a copy of the notice must be mailed to all “known addresses of the parties to whom the real property claim is adverse and to all owners of record of the real property affected by the real property claim as shown by the latest county assessment roll.” (CCP § 405.22.) Further, a proof of service showing compliance with CCP § 405.22 must be recorded with the lis pendens. (CCP §

405.23.) The failure to make proper service or to record the proof of service with the lis pendens renders the lis pendens “void and invalid” as to any adverse party or owner of record. (Id.) Here, no proof of service was recorded with the lis pendens rendering it “void and invalid.” (RJN Exh. B.) In opposition, Plaintiffs attempt to avoid this result by arguing that they withdrew the lis pendens recorded on January 23, 2018 on March 23, 2018. They argue that they recorded a proper lis pendens with the proof of service on March 26, 2018 showing service on Defendants via their counsel. In reply, Defendants argue that CCP § 405.22 expressly requires service to be made to adverse parties and all owners of record by mail to their known addresses and does not provide for service upon counsel. They also argue that Plaintiffs failed to serve additional owners who were not named in this action. They also claim that Plaintiffs have named four trusts as defendants yet because the trustee holds title, they were required to serve the trustees with the lis pendens. The Court need not resolve the procedural issues because even if the lis pendens was procedurally proper, as discussed below, the Court concludes that Plaintiffs failed to demonstrate the probable validity of their real property claims

Probable Validity

Code Civ Proc § 405.3 defines “probable validity” as “more likely than not” that the real property claimant will prevail against the defendant in the action. The claimant must make a showing that he is likely to prevail on the merits, in much the same fashion as one seeking an attachment must show the probable merit of the underlying lawsuit. (See §§ 481.190, 484.090, subd. (a)(2).) (Amalgamated Bank v. Superior Court (2007) 149 Cal. App. 4th 1003, 1012.) Pursuant to CCP § 405.32, “the court shall order that the notice be expunged if the court finds that the claimant has not established by a preponderance of the evidence the probable validity of the real property claim.” As the party opposing the motion, Plaintiffs have the burden to establish the probable validity of their claims by a preponderance of the evidence. ( Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314,

319.) It bears repeating: “Probable validity” requires Plaintiffs to show that “it is more likely than not that [they] will obtain a judgment against [Defendants] on the

claim.” (CCP § 405.3.) The phrase “‘probable validity’ as used in section 405.32 was obviously written from the perspective of a trial court judge trying to forecast, at some point before trial, the ‘probable’ outcome in the trial court.” (Mix v. Superior Court (2004) 124 Cal.App.4th 987, 995 [emphasis in original].)

Here, Defendants argue that Plaintiffs cannot prevail on their claims because they cannot show that Defendants breached the Agreement. The elements of a breach of contract cause of action are “(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” ( Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1005.) According to Defendants, Plaintiffs’ alleged assignor, SAVS, did not perform under the terms of the Agreement and the September 25, 2017 written escrow extension. First, some discussion of assignment is warranted. The assignee of a non-negotiable chose in action, such as a contract, steps into the shoes of his assignor and takes his assignor’s rights subject to all defenses which may be asserted against the assignor in an action to enforce the right. (See, e.g. 6 Am. Jur. 2d Assignments § 144 (1999) [stating that an assignee can acquire no right superior to those held by the assignor, and “simply stands in the shoes of the assignor”]; see also, 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 948, p. 844.)

Returning to the instant case, the Agreement was a fully integrated agreement for the purchase of the subject real property between SAVS and the sellers . (Ortiz Decl. Exh. A at ¶ 10.15.) The sellers were represented by Richard Ortiz who signed the Agreement on their behalf. Plaintiff Singh signed the Agreement on SAVS’ behalf. Skip Andreae represented SAVS and the sellers as the broker for the transaction. The purchase price was for $900,000. SAVS was required to make an initial $5,000 deposit and an additional $25,000 deposit upon expiration of a 60-day contingency period. (Id. Exh. A at ¶¶ 4.2(A)-(B), 7.1.) Close of escrow was to occur no later than April 27, 2017. (Id. Exh, A at ¶ 5.2.) The Agreement provided that the parties could extend the close of escrow by mutual written agreement of the parties. (Id. Exh. A at ¶ 8.1.) SAVS requested and received numerous escrow closing extensions. The final extension was executed on September 25, 2017 and set January 26, 2018 as the closing date. (Id. 2:11-12, Exh. D.) As consideration for the final extension, SAVS agreed to make a $10,000 non-applicable deposit payments on October 26, November 26, and December 26, 2017. (Id. 2:12-14, Ehx. D.) In mid-December, SAVS agent, Plaintiff Singh, began efforts to obtain an additional extension. SAVS did not make the $10,000 payment due on December 26, 2017 despite receiving a one day extension to do so. (Id. 2:19-21.) On December 28, 2017, Mr. Ortiz instructed Mr. Andreae to advise Plaintiff Singh that SAVS was out of contract due to its failure to make the December $10,000 payment. (Id. 2:22-23.) While the parties continued negotiating an additional extension, the sellers made clear that no agreement was possible so long as SAVS failed to make the December $10,000 payment. (Id. 2:24-26.) SAVS was given until January 4, 2018 to make the payment but did not do so. Mr. Ortiz instructed Mr. Andreae to advise SAVS that escrow would be cancelled on January 8, 2018 if the $10,000 payment was not made by 5 p.m. on January 5, 2018. (Id. 2:28-3:2.) SAVS did not make the payment. Sellers delayed cancelling escrow and terminating the contract until January 16, 2018 in order to give SAVS an additional chance to make the payment. (Id. 3:2-4.)

Defendants’ evidence shows that SAVS failed to perform under the Agreement and the September 25, 2017 written escrow extension when it failed to make the December 2017, $10,000 payment despite being given multiple opportunities to do so. A plaintiff bringing an action for breach of contract must show that he or she has performed all conditions, or was excused from doing so. (Consolidated World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 Cal.App.4th 373, 380.) In addition, where a defendant’s duty to perform in conditioned on the happening of an event, the plaintiff must show

that the event occurred. (Id.) Defendants’ evidence shows that Plaintiffs failed to perform all conditions because SAVS never made the December 2017 $10,000 payment, and that their duty to close escrow never arose.

In opposition, Plaintiffs make no argument that it did not breach the Agreement and instead argue that there was a “fully executed oral modification” of the Agreement to extend escrow beyond January 2018. (Oppo. 1:23-24.) According to Plaintiffs, they approached the parties’ dual agent Mr. Andreae and Mr. Ortiz to discuss the issues regarding the time required for Lennar’s lot line adjustment and other reconfigurations in “mid-2017.” Plaintiffs claim that the parties all agreed that the closing date would need to be extended again and that the parties agreed that Plaintiffs should proceed with acquiring the necessary approvals and entitlements. Plaintiffs contend that the closing date would be extended until final government approvals were obtained. (Singh Decl.) They contend that in reliance on this oral agreement, they expended over $100,000 in additional costs. (Id.) They contend that when they requested Defendants to sign an addendum in late December 2017 to actually extend the closing date, Defendants refused. (Id.)

On balance, the Court concludes that Plaintiffs have failed to demonstrate the probable validity of their claims. Plaintiffs rely upon Civil Code § 1698 which governs modifications of written contracts. Relevant to the instant case, a contract in writing may “be modified by an oral agreement to the extent that the oral agreement is executed by the parties.” (Civ. Code § 1698(b).) “Unless the contract expressly provides, a contract in writing may be modified by an oral agreement supported by new consideration. The statute of frauds (Section 1624) is required to be satisfied if the contract as modified is within its provisions.” (Id. § 1698(c).) As seen from the reply, it is not even clear when the claimed oral agreement was made. In the opposition brief, Plaintiffs states in was in “mid-December 2017” while Plaintiff Singh states in his declaration that it was in “late-December 2017.” (Singh Decl. 3:9-10.) Plaintiffs’ evidence regarding the supposed oral modification is not particularly strong and consists of Plaintiff Singh’s statement in his declaration that the parties “orally agreed to a new closing date of July 26, 2018” after he informed Mr. Andreae and Mr. Ortiz of the timing issues regarding lot line adjustment, government approvals, etc. (Singh Decl. ¶¶ 8-13.)

However, Defendants’ responsive evidence offered in reply to counter Plaintiffs’ attempt to meet their burden is far more persuasive. Indeed, Mr. Andreae declares that Plaintiff Singh sought the sellers’ agreement to extend the closing date for an additional six months beyond January 26, 2018. (Andreae Reply Decl. 2:3-5, Exh. A.) Mr. Andreae’s office advised Plaintiff Singh that the sellers were not amenable to a six-month extension but might consider a three month extension if SAVS made three additional $12,500 monthly deposits and provided SAVS made the December $10,000 payment that was due on December 26, 2017. (Id. 2:6-8, Exh. B.) On December 20, 2017, Plaintiff Singh proposed a five month extension to May 26, 2018 with monthly $7,000 deposits. The sellers rejected this offer. (Id. 2:10-13, Exh. C.) Plaintiff Singh was advised on December 22, 2017, that SAVS was expected to “stay on track” under the terms of the September 25, 2017 extension, including making the December 26, 2017 payment. (Id. 2:12-15, Exh. D.) On December 25, 2017, Plaintiff Singh sent a letter claiming that the parties orally agreed to extend escrow to July 26, 2018. Mr. Andreae responded to that letter on December 26, 2017 stating that the sellers never agreed to an extension to July 26, 2018. (Id. 2:17-19, Exh. E.) While the parties continued negotiations over the next several weeks regarding a potential extension,

Mr. Ortiz made clear that no further extension would be permitted unless SAVS made the $10,000 December payment. (Ortiz Decl. 2:24-26.) On January 5, 2018, Mr. Andreae’s office sent Plaintiff Singh a contractual amendment signed by Mr. Ortiz which would have extended close of escrow four months beyond January 26, 2018 contingent on SAVS making the December payment by 5 p.m. on January 5, 2018 and monthly $11,000 non-applicable deposit payments. (Andreae Reply Decl. 2:20-24, Exh. F.) Plaintiff Singh expressly rejected the amendment stating that “[t]hese seller terms are not acceptable or reasonable.” (Id. 2:24-26, Exh. G.) Defendants’ evidence is persuasive, at least for purposes of the instant motion, to demonstrate that there was no meeting of the minds with respect to any claimed oral agreement to extend escrow beyond January 26, 2018 and thus the Court concludes that Plaintiffs failed to demonstrate the probable validity of the claim.

Moreover, as pointed out by Defendants in reply, Plaintiffs have presented no evidence to show that the claimed oral agreement modifying the close of escrow would have been effective. That is, a written contract may only be modified to the extent it is fully executed by the parties or supported by new consideration and the statute of frauds is satisfied. (Civ. Code § 1698(b), (c).) An executed contract has been fully performed by the parties, all others are executory. (Civ. Code § 1661.) “[I]t is well settled that in order to be ‘executed’ an agreement must be fully performed on both sides.” (Lockheed Missiles & Space Co. v. Gilmore Industries, Inc. (1982) 135 Cal.App.3d 556, 559.) There is no evidence that the parties performed under the claimed oral agreement to extend escrow even assuming such an agreement existed. In addition, the Agreement expressly prohibits oral modifications and states that the closing date could only be extended by the mutual written assent of the parties and that no amendment or modification to any term of the Agreement “shall be valid or enforceable unless in writing and signed by Buyer and Seller.” (Ortiz Decl., Exh. A at ¶ 10.15.) Where, as here, a contract specifically reflects an intent to preclude oral modification, an executory (as opposed to executed) oral modification of the contract is not permitted under Civil Code § 1698(c). (Beggerly v. Gbur (1980) 112 Cal.App.3d 180, 189.) It bears noting that an integration clause “has been held conclusive on the issue of integration, so that parol evidence to show that the parties did not intend the writing to constitute the sole agreement will be excluded.” (Grey v. American Management Services (2012) 204 Cal.App.4th 803, 807 [citing Witkin, Cal. Evidence (4th ed. 2000) Documentary Evidence, § 70, p. 190].) Further, even assuming that the Agreement did not expressly prohibit oral modifications, Plaintiffs failed to present any evidence that the alleged oral agreement extending close of escrow to July 2018 was supported by consideration or that the modification satisfied the statute of frauds as required by Civil Code § 1698(c).

Plaintiffs also appear to argue that Defendants should be estopped from denying the existence of an oral modification based on the alleged representation that closing would be extended. “To estop a defendant from asserting the Statute of Frauds, a plaintiff must show unconscionable injury or unjust enrichment if the promise is not enforced. The doctrine of estoppel has been consistently applied by the courts of this state to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract [citations omitted], or in the unjust enrichment that would result if a party who has received the benefits of the other’s performance were allowed to rely upon the statute.” (Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624.) This argument fails because it is premised on the

assumption that an oral agreement to extend escrow to July 2018 was shown. However, as discussed above, the Court concluded that Plaintiffs had not met their burden to show the probable validity of such a claim. Defendants cannot be said to have induced Plaintiffs into relying upon an oral modification which at least for purposes of the instant motion the Court found Plaintiffs failed to establish. The Court need not reach Defendants’ reply arguments regarding the lack of unjust enrichment.

Plaintiffs also cite to case law discussing part performance by a real property purchaser as an exception to the statute of frauds. (Sutton v. Warner (1993) 12 Cal.App.4th 415.) That case has no application here, given it dealt with an oral contract, not an oral modification to a written contract. Further, the case made clear that the doctrine applies where the buyer has taken actual possession of the real property and either makes full or partial payment of the purchase price, or makes valuable and substantial improvements in reliance on the oral agreement. (Id. at 422.) Again, however, the Court has found that Plaintiffs failed to demonstrate an oral modification. Moreover, there is no evidence Plaintiffs took possession of the property.

In short, the Court concludes that Plaintiffs have failed to establish, for purposes of the instant motion only, that their claims in the complaint, all of which are premised on the claimed existence of an oral agreement extending close of escrow until July 2018 are probably valid. As a result, the motion to expunge must be granted. (CCP § 405.32.)

Given the above, the Court need not reach Defendants’ additional argument that Plaintiffs lack standing because the Agreement was not validly assigned to them from SAVS.

The motion is granted and the lis pendens is ordered expunged.

Defendants’ request for attorneys’ fees is denied. CCP § 405.38 allows for the award of attorneys’ fees to a prevailing party unless the opposing party acted with substantial justification or other circumstances render the imposition of fees unjust. The complaint ostensibly asserts claims that could support a lis pendens. While, Plaintiffs failed to demonstrate the probable validity of those claims in connection with the opposition, the Court finds that Plaintiffs acted with substantial justification and that in any event, the imposition of fees would be unjust under the circumstances.