Case Number: BC537933    Hearing Date: January 05, 2015    Dept: 58

JUDGE ROLF M. TREU
DEPARTMENT 58
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Hearing Date: Monday, January 5, 2015
Calendar No: 7
Case Name: Vertical Strategies Group, LLC v. Housing Coalition Educators, Inc., et al.
Case No.: BC537933
Motion: Motion to Expunge Lis Pendens
Moving Party: Defendants Housing Coalition Educators and Iris Fay Warren
Responding Party: No opposition filed
Notice: OK

Tentative Ruling: Motion to expunge lis pendens is granted. Attorney fees and costs are awarded in the total reduced amount of $2,560.
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I. Background
On 2/27/14, Plaintiff Vertical Strategies Group, LLC filed this action against Defendants Housing Coalition Educators, Inc. (“HCE”), Iris Fay Warren, and Morcos Azer, in addition to various other defendants, arising out of a real estate investment agreement. On 3/4/14, prior to the appearance by any defendant, Plaintiff filed a First Amended Complaint. On 11/18/14, Plaintiff voluntarily dismissed Azer with prejudice. Trial is set for 2/2/25; FSC for 1/22/15.

II. Factual Allegations of the FAC
On 3/17/13, Plaintiff and HCE entered into a verbal joint-venture agreement which was later memorialized in writing on 6/24/13 through the Master Capital Partner Management and Security Agreement, which was signed by Warren on behalf of HCE as its executive director and Lane Ferro on behalf of Plaintiff as its managing partner. ¶¶ 10-11, Ex. A. Plaintiff provided funds to acquire interests in the following real properties (“VSG Properties”) to be held by HCE in trust for Plaintiff, until the properties could be sold with all profits paid to Plaintiff or title transferred to Plaintiff: 5054 Gardenia St., Long Beach, CA 90807 (“Gardenia”); 737 E. 87th Place, Los Angeles, CA 90002 (“87th Place”); 644-646 E. 88th Place Los Angeles, CA 90002 (“88th Place”);and 13170 Tonopah St., Arleta, CA 91331 (“Tonopah”). ¶ 12 As a charitable organization, HCE was able to acquire the VSG Properties post-foreclosure under government programs that would provide reimbursement of renovation expenses which were to be held in trust to reimburse Plaintiff. ¶ 14. HCE was to clear any and all encumbrances on the VSG Properties so Plaintiff would receive clear title and a first-place deed of trust (¶ 17), and was to refrain from further encumbering the VSG Properties (¶ 18).

HCE breached the agreement by making similar agreements with other parties (¶ 20), failing to clear the prior encumbrances and allowing further encumbrances on the VSG Properties (¶ 21 (listing the “Lienholder Defendants” (¶ 4))), misappropriating rehabilitation and insurance funds for other properties in which Plaintiff had no interest (¶¶ 22-25 (listing the “Receptacle Property Lienholder Defendants” (¶ 5))), attempting to sell the VSG Properties (¶ 26), engaging in fraudulent invoicing for work performed on other properties other than the VSG Properties (¶ 27), failing to transfer title to Plaintiff (¶ 28), and failing to provide Plaintiff with an exclusive right of first refusal (¶ 29).

The FAC asserts causes of action for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) breach of fiduciary duty, (4) fraud, (5) conversion, (6) fraudulent conveyance, (7) unjust enrichment and constructive trust, (8) declaratory relief, (9) injunctive relief, and (10) accounting/money had and received. The 8th COA is asserted against all Defendants. All other COAs are asserted against HCE and Warren.

III. Motion to Expunge Lis Pendens
HCE and Warren move to expunge lis pendens on the Receptacle Properties in which Plaintiff asserts an equitable interest based on the alleged misappropriation of rehabilitation and insurance funds (FAC ¶¶ 22-25). HCE and Warren argue that Plaintiff fails to state a real property claim as to these properties. CCP § 405.31.

“In proceedings under this chapter, the court shall order the notice expunged if the court finds that the pleading on which the notice is based does not contain a real property claim” (CCP § 405.31). A “real property claim” is defined as “the cause or causes of action in a pleading which would, if meritorious, affect (a) title to, or the right to possession of, specific real property . . . .” CCP § 405.4. The Court applies a demurrer-like review to ascertain whether a real property claim has been properly alleged. Campbell v. Superior Court (2005) 132 Cal.App.4th 904, 911-12.

As is clear from the allegations of the FAC, Plaintiff’s interest in the Receptacle Properties is based on an equitable lien for the purpose of security a claim for money damages based on the misappropriation of funds. This is not a real property claim that will support a lis pendens. Campbell, 132 Cal.App.4th at 919; see also id. at 920-22 (addressing a constructive trust claim). No opposition was filed. Therefore, the motion to expunge lis pendens is granted.

HCE and Warren request attorney fees and costs pursuant to CCP § 405.38 totaling $3,435. Kennon Decl. ¶ 11 (reflecting 3 hours to draft meet and confer correspondence, 5.5 hours to prepare the motion, 3.5 hours to review opposition and prepare a reply, and 1.5 hours to attend the hearing at the hourly rate of $250 and $60 in filing fees). However, because no opposition was filed necessitating a reply, the Court will award HCE and Warren attorney fees and costs in the total reduced amount of $2,560, to be paid within 30 days.