Case Name: Robert McCrory v. Jose Luis Magana, et al.
Case No.: 2015-1-CV-285140

Currently before the Court is the motion by plaintiff Robert McCrory (“Plaintiff”) for summary judgment or, alternatively, summary adjudication.

Factual and Procedural Background

This action arises out of two loan agreements between the parties. On March 1, 2006, Plaintiff and defendants Jose Luis Magana (“Magana”) and Maria G. Espinoza (“Espinoza”) (collectively, “Defendants”) entered into a loan agreement. (Complaint, ¶ BC-1 and Ex. A.) Under the terms of the agreement, Defendants agreed to pay Plaintiff $100,000 “with interest from March [ ]1, 2006, until paid at the rate of 12.0 percent per annum, payable monthly or more, commencing April 1, 2006 and continuing on the same day of each and every moth thereafter until March [ ]1, 2008 at which time the entire remaining unpaid balance of principal and accrued interest … shall become immediately due and payable.” (Ibid.) With respect to interest, the contract states, “[p]rovided that there are no principal reductions or additions made during the term of the within note, the interest payments referred to herein shall remain at $1,000.00 per Month.” (Ibid.) In addition, the contract provides for the payment of “a late charge of 10% of the monthly payment with each payment not paid within 10 days of the due date.” (Ibid.) Finally, the contract refers to a deed of trust that purportedly secures the note. (Ibid.)

Subsequently, on June 9, 2006, Plaintiff and Defendants entered into a second loan agreement. (Complaint, ¶ BC-1 and Ex. B.) Under the terms of the agreement, Defendants agreed to pay Plaintiff $100,000 “with interest from June [ ] 9, 2006, until paid at the rate of 12.0 percent per annum, payable monthly or more, commencing July [ ] 9, 2006 and continuing on the same day of each and every moth thereafter until June [ ] 9, 2008 at which time the entire remaining unpaid balance of principal and accrued interest … shall become immediately due and payable.” (Ibid.) The contract also provides for “a late charge of 6% of the monthly payment with each payment not paid within 10 days of the due date.” (Ibid.) Lastly, the contract refers to a deed of trust that purportedly secures the note. (Ibid.)

At some unspecified time, Defendants made a “partial payment of $50,000” to Plaintiff. (Complaint, ¶ 13.)

On or about March 27, 2014, Defendants breached their loan agreements by “default[ing] on the senior mortgage, which conducted and concluded a foreclosure sale, thereby nullifying and wiping-out Plaintiff’s Deed of Trust.” (Complaint, ¶ BC-2.) Plaintiff allegedly lost “his collateral and secured creditor status” and became “an unsecured creditor.” (Ibid.) Plaintiff alleges that the total amount due and owing, “including principal and interest, is $267,000.00 as of [July 31, 2015.]” (Id., at ¶ BC-4.) Plaintiff further alleges that he is entitled to “interest thereon at the rate of 12%APR from and after [August 1, 2015].” (Ibid.)

Based on the foregoing allegations, Plaintiff filed a complaint against Defendants on September 2, 2015, alleging causes of action for: (1) breach of contract; (2) common counts; and (3) dishonor of promissory notes.

Magana filed an answer to the complaint on November 2, 2015.

On April 18, 2016, Plaintiff requested and obtained entry of default against Espinoza.

On November 14, 2017, Plaintiff filed the instant motion for summary judgment or, alternatively, summary adjudication.

Discussion

Pursuant to Code of Civil Procedure section 437c, Plaintiff moves for summary judgment of the complaint or, alternatively, summary adjudication of eight issues against Defendants. (P’s Ntc. of Mtn., pp. 1:19-24 and 2:23-3:25.)

I. Request for Judicial Notice

Plaintiff asks the Court to take judicial notice of: (1) a deed of trust recorded on May 27, 2005; (2) a deed of trust and assignment of rents recorded on March 3, 2006; and (3) a trustee’s deed upon sale recorded on March 27, 2014.

The recorded property documents are generally proper subjects of judicial notice. Evidence Code section 452, subdivision (h) allows a court to take judicial notice of facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. Courts have taken judicial notice of recorded property instruments, including deeds of trust, under this provision. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 (Fontenot), disapproved of on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.) A court may take judicial notice of certain facts in a recorded document, including “the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity.” (Fontenot, supra, 198 Cal.App.4th at p. 265.) The Court will take judicial notice of these facts as Defendants do not dispute the documents’ authenticity.

Accordingly, Plaintiff’s request for judicial notice is GRANTED.

II. Legal Standard

A motion for summary judgment shall be granted when all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) Where a plaintiff moves for summary judgment, the plaintiff bears the initial burden of showing that there is no defense to a cause of action by proving each element of the cause of action entitling the plaintiff to judgment. (Code Civ. Proc., § 437, subd. (p)(1); Paramount Petroleum Corporation v. Super. Ct. (2014) 227 Cal.App.4th 226, 241 (Paramount).) If the plaintiff makes such a showing, the burden then shifts to the defendant to show that a triable issue of one or more material facts exists as to a cause of action or a defense thereto. (Ibid.)

“Summary adjudication works the same way, except it acts on specific causes of action or affirmative defenses, rather than on the entire complaint. A summary adjudication is properly granted only if a motion therefor completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. Motions for summary adjudication proceed in all procedural respects as a motion for summary judgment.” (Hartline v. Kaiser Foundation Hospitals (2005) 132 Cal.App.4th 458, 464, internal citations omitted.)

For purposes of establishing their respective burdens, the parties involved in a motion for summary judgment or adjudication must present admissible evidence, which is to say the motion is evidentiary in nature and cannot be based solely upon the allegations in a complaint. (Saporta v. Barbagelata (1963) 220 Cal.App.2d 463.) In ruling on the motion, however, a court cannot weigh the evidence presented or deny summary judgment or adjudication on the ground any particular evidence lacks credibility. (Melorich Builders v. Super. Ct. (1984) 160 Cal.App.3d 931, 935; Lerner v. Super. Ct. (1977) 70 Cal.App.3d 656, 660.) As summary judgment “is a drastic remedy eliminating trial,” the court must liberally construe evidence in support of the party opposing summary judgment and resolve all doubts concerning the evidence in favor of that party. (See Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389; see also Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 717-718.)

III. Procedural Issue

As a preliminary matter, the Court notes that Plaintiff moves for summary judgment or, in the alternative, summary adjudication against Espinoza even though Plaintiff already obtained a default against her.

Plaintiff’s proper recourse with respect to Espinoza is through the prove-up procedure under Code of Civil Procedure section 585, subdivision (b), not by way of a motion for summary judgment and/or adjudication under Code of Civil Procedure section 437c. (See Code Civ. Proc., § 585, subd. (b) [after entry of default against a defendant, “[t]he plaintiff thereafter may apply to the court for the relief demanded in the complaint; and the court shall hear the evidence offered by the plaintiff, and shall render judgment in the plaintiff’s favor for that relief, not exceeding the amount stated in the complaint …”]; see also Ford v. Super. Ct. (1973) 34 Cal.App.3d 338, 342 [“Where, as here, an action on a promissory note discloses that the note is secured by a deed of trust on real property and the allegation is made that the security has become valueless by virtue of foreclosure of a senior security, it is necessary to take evidence on the latter allegation to establish the amount due on the promissory note, and any default judgment should be had only after hearing by the court under subdivision 2 of section 585 of the Code of Civil Procedure ….”]; Electronic Funds Solutions v. Murphy (2005) 134 Cal.App.4th 1161, 1176 [the court’s jurisdiction to render default judgments can be exercised only in the way authorized by statute].)

Accordingly, the Court construes the instant motion as being directed at Magana alone.

IV. Alternative Motion for Summary Adjudication

Plaintiff moves for summary adjudication of eight issues in his favor and against Magana. In his notice of motion, Plaintiff seeks summary adjudication of the following issues:

1. “[Plaintiff] loaned money to [Magana] and [Magana’s] then-wife, and on or about March 1, 2006, and June 9, 2006, they executed and delivered to [Plaintiff] two promissory notes whereby they promised to repay him $100,000.00[ ] on the first note[ ] and $100,000.00 on the second note[ ] with interest thereon at the rate of 12%APR.”
2. “On [March 3, 2006, Plaintiff] recorded a deed of trust with the Santa Clara County Recorder to secure the first note, and the deed of trust included a clause that covered the subsequent loan on June 9, 2006.”
3. “On or about [March 27, 2014, Magana] defaulted on payment of said Notes, except for partial payment of $50,000.00 paid by [Magana] to [Plaintiff], by allowing their first deed of trust to foreclose out [Plaintiff’s] junior (second) deed of trust on the … real property which secured payment of [the] notes, and thereby nullifying [Plaintiff’s] deed of trust, and cancelling it in non-judicial foreclosure by the senior lienholder on the property.”
4. “After credit duly given to [Defendants] for their partial payment paid to [Plaintiff] and received by him on the notes, there was at the date of filing of the Complaint the amount of $267,000.00, unpaid principal and accrued interest on both notes.”
5. “The notes include the following term: ‘Should default by [sic] made in any payment when due, the whole sum of principal and interest shall become immediately due at the option of the holder of this note. If action be instituted on this note, I promise to pay such sum as the Court may fix as attorney’s fees.’ ”
6. “[Plaintiff’s] loans to [Magana] were not for the purchase of the underlying property, but rather, were ‘hard money’ loans.”
7. “[Plaintiff] did not purchase [Defendants’] property at the foreclosure sale conducted by the first (senior) deed of trust.”
8. “[Plaintiff] took no action to foreclose on his junior (second) deed of trust.”

(P’s Ntc. Mtn., pp. 2:24-3:25.)

Plaintiff’s alternative motion for summary adjudication is procedurally improper. Generally, a party may only move for summary adjudication as to the following:

[O]ne or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.

(Code Civ. Proc., § 437c, subd. (f)(1).)

The “issues” set forth in Plaintiff’s notice of motion for which he seeks adjudication do not fall within the scope of the foregoing code section. (See Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120, 1136 [summary adjudication of general “issues” is prohibited].) Thus, the “issues” identified by Plaintiff are not proper subjects for summary adjudication in the absence of compliance with the procedures set forth in subdivision (t) of Code of Civil Procedure section 437c. Under subdivision (t), a party may move for summary adjudication of a legal issue or a claim for damages (other than punitive damages) even though such adjudication would not completely dispose of a cause of action, an affirmative defense, or an issue of duty, if the following requirements are met before its filing:

• the parties stipulate that such a motion may be brought;
• the parties each file a declaration justifying the filing of the motion on the ground “that the motion will further the interest of judicial economy by decreasing trial time or significantly increasing the likelihood of settlement”; and
• the court determines that the motion may be filed.

(Code Civ. Proc., § 437c, subd. (t)(1)- (2).)

None of the foregoing actions occurred here and, therefore, Plaintiff is not entitled to summary adjudication of any of the eight “issues” set forth in his notice of motion. Consequently, Plaintiff’s alternative motion for summary adjudication is DENIED.

V. Motion for Summary Judgment

Plaintiff moves for summary judgment of the complaint, arguing that there is no triable issue of material fact as to any cause of action in the complaint. If he fails to meet his initial burden with respect to any cause of action, Plaintiff is not entitled to summary judgment of the complaint. (See All Towing Services LLC v. City of Orange (2013) 220 Cal.App.4th 946, 954 [“[s]ummary judgment is proper only if it disposes of the entire lawsuit”].)

The first cause of action of the complaint is for breach of contract. “To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

As explained below, Plaintiff fails to meet his initial burden with respect to the first cause of action because he does not demonstrate that there is no triable issue of material fact with respect to the amount of damages to which he is allegedly entitled. (See Dept. of Indus. Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097 [summary judgment and/or adjudication is inappropriate where issues of the calculation of damages remain to be determined]; see also Paramount, supra, 227 Cal.App.4th at p. 241 [the plaintiff must prove each element of the cause of action entitling the party to judgment on that cause of action and, as damages are an element of a breach of contract cause of action, a plaintiff cannot obtain judgment on a breach of contract cause of action in an amount of damages to be determined later].)

Regarding the issue of damages, Plaintiff argues that he is entitled to damages in the total amount of $315.911.32. (P’s Mem. Ps. & As., p. 8:27; P’s Dec., ¶ 17; P’s UMF Nos. 1, 3, and 4.) Plaintiffs argument is based on the following contentions: on March 1, 2006, Magana agreed pay him $100,000; “[a]fter a few months of making payments, [Magana] paid $50,000.00 toward the original principal amount”; in June 2006, Magana “requested to borrow another $100,000.00 and promised to pay on a new total principal of $150,000.00”; and “at this time [Magana] continued making monthly interest payments until 2009 when he failed to make monthly payments.” (P’s Mem. Ps. & As., p. 8:16-21.) Plaintiff then asserts that the “[d]aily rate of interest is $43.91; annual interest 365 x $43.91/day = $16,027.15.” (Id., at p. 8:21.) Based on the foregoing, Plaintiff provides the following summary:

Unpaid principal after receipt of the last payment on 3/1/2009 $150,000.00
Interest accrued on unpaid principal at rate of 12%APR to 11/3/17:
3,172 days x $49.31/day = $156,411.32
Late payment penalties (10% of monthly payment $1000) =
105 months x $100/mo. = $10,500.00

TOTAL PRINCIPAL, INTEREST AND LATE CHARGES $316,911.32

(Id., at p. 8:22-27.)

As an initial matter, Plaintiff’s argument regarding the total amount of damages that he is allegedly owed is not adequately supported by his undisputed material facts (“UMF”). Only UMF Nos. 1, 3, and 4 pertain to the issue of damages. UMF Nos. 1, 3, and 4 state that: Plaintiff loaned money to Defendants on March 1 and June 9, 2006, and Defendants executed and delivered two promissory notes to Plaintiff; on March 27, 2014, Defendant “defaulted on payment of said Notes, except for partial payment of $50,000.00 paid by [Magana] to [Plaintiff], by allowing their first deed of trust to foreclose out [Plaintiff’s] junior (second) deed of trust …”; and “[a]fter credit duly given to [Defendants] for their partial payment paid to [Plaintiff] and received by him on the notes, there was at the date of filing of the Complaint the amount of $267,000.00, unpaid principal and accrued interest on both notes.” These UMF do not establish many of the crucial facts that underlie Plaintiff’s argument. For example, the UMF do not demonstrate that: the unpaid principal is $150,000; Defendants made their last payment on March 1, 2009; the accrued interest is $156.411.32 as of November 3, 2017; or the late charges amount to $10,500. Because the UMF do not adequately support Plaintiff’s argument, he fails to show that there is no triable issue of material fact with respect to the amount of damages.

Additionally, Plaintiff fails to sufficiently explain why he is entitled to $156,411.32 in interest. Plaintiff’s calculation of interest is based a daily interest rate of $49.31 that accrues for 3,172 days. However, Plaintiff fails to explain how he arrived at a daily interest rate of $49.31. He also fails to explain why he is entitled to interest for 3,172 days. Notably, Plaintiff indicates that Defendants made their last payment on March 1, 2009, and accrued interest is sought through November 3, 2017. However, there are only 3,170 days between March 1, 2009 and November 3, 2017.

Finally, Plaintiff fails to sufficiently explain why he is entitled to $10,500 in late fees. Plaintiff’s calculation of late fees assumes that a late fee is 10 percent of a monthly interest payment of $1000, and that late fees are owed for 105 months. As an initial matter, only the March 1, 2006 promissory note provides that a late fee is 10 percent of a monthly payment. (Complaint, Ex. A.) The June 9, 2006 promissory note provides that a late fee is 6 percent of a monthly payment. (Id., at Ex. B.) Because Plaintiff appears to seek late fees in connection with the June 9, 2006 promissory note, as well as the March 1, 2006 promissory note, he fails to demonstrate that all of the late fees should be 10 percent of a monthly fee. Furthermore, Plaintiff fails to present any UMF or evidence establishing that Defendants’ monthly interest payments for the relevant time period were $1,000. The March 1, 2006 promissory note states that a late fee is 10 percent of a monthly payment. (Id., at Ex. A.) The promissory note further states with respect to interest that “[p]rovided that there are no principal reductions or additions made during the term of the within note, the interest payments referred to herein shall remain at $1,000.00 per Month.” (Ibid.) Here, Plaintiff admits that Defendants reduced the principal by making a payment of $50,000. Therefore, under the terms of the promissory note, it is unclear whether Defendants’ interest payment remained $1,000 per month. Finally, Plaintiff fails to explain why late fees accrued for 105 months.

For these reasons, Plaintiff fails to demonstrate that there is no triable issue of material fact with respect to the amount of damages to which he is allegedly entitled. Because Plaintiff does not meet his initial burden with respect to the first cause of action, he is not entitled to summary judgment of the complaint.

Accordingly, Plaintiff’s motion for summary judgment is DENIED.