Case Name: Yo, LLC v. Ruth Elly Krucker, et al.
Case No.: 2017-CV-306261

Motion for Summary Adjudication to the Second Amended Complaint by Defendant PA Hotel Holdings, LLC

Factual and Procedural Background

This action initiated by Yo, LLC (“Plaintiff”) against defendants Ruth Elly Krucker (“Krucker”), PA Venture Holdings, LLC, PA Restaurant Holdings, LLC (“Restaurant”), PA Hotel Holdings, LLC (“Hotel”), and Lawrence Investments, LLC (“Lawrence Investments”) (collectively, “Defendants”) arises out of a real estate transaction.

According to the allegations of the Second Amended Complaint (“SAC”), Krucker owned real estate located on 620 Emerson Street in Palo Alto, California (“Subject Property”). (SAC, ¶ 14.) On February 26, 2013, Plaintiff and Krucker executed a contract, pursuant to which Plaintiff would purchase the Subject Property (the “Contract”). (Id. at ¶ 15.) According to the terms of the Contract, Plaintiff deposited $50,000 with First American Title Company, which included a $100 nonrefundable deposit for the escrow to remain open pending sale. (Id. at ¶ 16.)

While escrow was pending, questions arose regarding whether Krucker had sole legal title to the Subject Property. (SAC, ¶ 22.) This is because Krucker’s husband, Adolph Konigsreiter (“Konigsreiter”), made claims of ownership and a deed recorded out of the chain of title created a cloud on the Subject Property. (Ibid.) To resolve those questions, the parties entered into the fifth addendum to the Contract in November 2013 (“Addendum 5”), requiring Krucker at her own cost to clear her title of any competing claims. (Id. at ¶¶ 25, 27.) Escrow was rescheduled to close no later than thirty days after Plaintiff’s receipt of written notification from First American Title Company that Krucker had complied with all of the requirements of Paragraph B of Addendum 5, including Krucker’s receipt of a final court order quieting title. (Id. at ¶ 27.)

On June 19, 2014, Krucker filed a quiet tile action against Konigsreiter in Santa Clara County Superior Court (“Quiet Title Action”). (SAC, ¶ 28.) In addition, Krucker filed and recorded a Notice of Pendency of Action in Santa Clara County on January 12, 2015 as Document No. 22825495 (“2015 Lis Pendens”), in connection with the Quiet Title Action. (Ibid.)

A court trial occurred in the Quiet Title Action in June 2016. (SAC, ¶ 29.) Following trial, the court entered judgment confirming the Krucker Trust as the sole owner of the Subject Property. (Ibid.) The judgment became final as to all parties except Konigsreiter who filed an appeal which remains pending before the Court of the Appeal for the Sixth District. (Ibid.)

During the months of July, August, and September 2015, the Hotel negotiated and purchased the ground lease for the Epiphany Hotel from Casa Olga, located immediately adjacent to the Subject Property. (SAC, ¶ 30.) At the same time, Lawrence Investments, through its representative, Paul Marinelli, began attempting to secure a lease for the Subject Property in conjunction with its anticipated operation of the Epiphany Hotel and so it could open a restaurant. (Ibid.)

On November 20, 2016, Krucker and Restaurant entered into a purchase agreement for the purchase and sale of the Subject Property for a price of $4.25 million. (SAC, ¶ 37.) The sale under the purchase agreement between Krucker and Restaurant closed on January 26, 2017, by deed recorded in Santa Clara County as Document No. 23568560. (Id. at ¶ 38.) The next day, counsel on behalf of the Restaurant wrote to Plaintiff and informed Plaintiff’s manager that it was his belief that the Contract between Plaintiff and Krucker was not enforceable. (Id. at ¶ 39.) Up until that day, Plaintiff was not aware that Krucker was in negotiations to sell the Subject Property to any person or entity or that Krucker had executed a purchase agreement in favor of the Restaurant. (Id. at ¶ 41.)

However, at the time the Restaurant received title, there existed of record against the Subject Property the 2015 Lis Pendens, which made specific reference of the existence of the Contract between Krucker and Plaintiff. (SAC, ¶ 42.) The 2015 Lis Pendens has not been withdrawn and still constitutes a lien against the Subject Property, and references the Krucker Quiet Title Complaint in which Krucker acknowledges her Contract with Plaintiff. (Ibid.)

On November 17, 2017, Plaintiff filed the operative SAC setting forth the following causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) fraudulent concealment; (4) intentional misrepresentation; (5) negligent misrepresentation; (6) inducing breach of contract; (7) intentional interference with contractual relations; and (8) declaratory relief.

On April 9, 2018, Defendants filed their Answer to the SAC alleging various affirmative defenses.

Motion for Summary Adjudication

Currently before the Court is defendant Hotel’s motion for summary adjudication on the issue of duty in the eighth cause of action. (Code Civ. Proc., § 437c, subd. (f).) Plaintiff filed written opposition. Both sides filed requests for judicial notice in conjunction with the motion. Hotel filed reply papers. No trial date has been set.

Hotel’s Request for Judicial Notice

In support of the motion, defendant Hotel requests judicial notice of various recorded documents (Exhibits E, F, and G) and a stipulation to add doe defendants filed in this court (Exhibit H). With respect to Exhibits E, F, and G, the Court may take judicial notice of these recorded documents under Evidence Code section 452, subdivision (h). (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [disapproved on other grounds in Yvanova v. New Century Morg. Corp. (2016) 62 Cal.4th 919].) The Court may also take judicial notice of Exhibit H under Evidence Code section 452, subdivision (d) as the stipulation constitutes a record of the superior court. (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) Furthermore, the request appears relevant to issues raised in the motion for summary adjudication. (See Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [judicial notice is confined to those matters which are relevant to the issue at hand].)

Accordingly, the request for judicial notice is GRANTED.

Plaintiff’s Request for Judicial Notice

In opposition, Plaintiff seeks judicial notice of various recorded documents in this case. (See Exhibits 1, 2, and 3.) As stated above, judicial notice of such recorded instruments is proper under Evidence Code section 452, subdivision (h). Plaintiff also requests judicial notice of declarations by Nathan Haratani (“Haratani”) that were filed in connection with prior motions in this action. (See Exhibits 4 and 5.) According to Plaintiff, Haratani is an attorney and officer of the Hotel and Restaurant in this case. While the Court is free to take judicial notice of the existence of a document in a court file, the Court may not take judicial notice of the truth of hearsay statements in decisions and court files. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.) More specifically, courts may not take judicial notice of affidavits and declarations in court records as such matters are reasonably subject to dispute and therefore require formal proof. (Ibid.) Here, Plaintiff relies upon the substantive contents of Haratani’s declarations which is not a proper subject of judicial notice.

Therefore, the request for judicial notice is GRANTED with respect to Exhibits 1, 2, and 3 and DENIED as to Exhibits 4 and 5.

Legal Standard

“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 moving party “bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if [the moving party] carries [its] burden of production, [it] causes a shift, and the opposing party is then subjected to a burden of production of [its] own to make a prima facie showing of the existence of a triable issue of material fact…. A prima facie showing is one that is sufficient to support the position of the party in question.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851, fn. omitted.)

Eighth Cause of Action: Declaratory Relief (Issue of Duty)
The eighth cause of action is a claim for declaratory relief. Code of Civil Procedure section 1060, which governs actions for declaratory relief, provides: “Any person interested under a written instrument …, or under a contract, or who desires a declaration of his or her rights or duties with respect to another … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action … for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”

“Declaratory relief operates prospectively, serving to set controversies at rest before obligations are repudiated, rights are invaded or wrongs are committed. Thus the remedy is to be used to advance preventive justice, to declare rather than execute rights. [Citation.] Declaratory relief serves a practical purpose in stabilizing an uncertain or disputed legal relation, thereby defusing doubts which might otherwise lead to subsequent litigation. [Citation.]” (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 59.)
In determining the issues that a motion for summary judgment (or summary adjudication) must address, courts look to the pleadings. The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues and to frame the outer measure of materiality in a summary judgment proceeding. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.) Plaintiff here alleges a dispute has arisen and a controversy exists between Plaintiff and Defendants and thus seeks a judicial determination with respect to various issues. (SAC, ¶ 101.) Defendant Hotel’s motion for summary adjudication is directed solely to the following issue:

“That Plaintiff is entitled to receive an order from this Court requiring PA Restaurant and PA Hotel, and/or any of the Ellison Companies to release any interest they may have in and to the Emerson Property to Plaintiff in connection with Plaintiff’s acquisition of title to the Emerson Property.”
(Id. at ¶ 101, subd. (E).)

According to the Notice of Motion, the motion for summary adjudication is brought under Code of Civil Procedure section 437c, subdivision (f). In doing so, defendant Hotel does not seek to summarily adjudicate the eighth cause of action, an affirmative defense or a claim for damages. Instead, Hotel requests an order to summarily adjudicate that it has no duty to release to Plaintiff its interest in the Subject Property as alleged in paragraph 101, subdivision (E) in the eighth cause of action. This argument is problematic as this paragraph does not specifically allege any issue of duty to be disposed under section 437c, subdivision (f). The statute is clear that “[a] party may move for summary adjudication as to … one or more issues of duty, if that party contends … that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” (Code Civ. Proc., § 437, subd. (f)(1); Paramount Petroleum Corp. v. Super. Ct. (2014) 227 Cal.App.4th 226, 244.) For example, this may apply in the insurance context where there is a duty to defend or duty to indemnify or negligence claims where a duty of care is at issue. In addition, at least one appellate court has held that “an issue of duty” as used in the summary adjudication rule is not limited to negligence claims but also includes duties under contracts. (See Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508.) Here, the eighth cause of action alleges various issues addressed to Defendants to support declaratory relief. However, paragraph 101, subdivision (E), at issue here, does not allege any issue of duty (contractual or otherwise) to be disposed of by motion for summary adjudication. The Court thus concludes the motion fails as a matter of law.

Disposition

The motion for summary adjudication is DENIED.

The Court will prepare the Order.