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LAW & MOTION TENTATIVE RULINGS
TUESDAY, MAY 14, 2013 - 8:30 a.m.
COURTROOM 19 – Covered by Judge Diane Elan Wick
3055 Cleveland Avenue, Santa Rosa, CA 95403
Court Call is available for all Law and Motion appearances, EXCEPT parties in small claims cases and motions for claims of exemption which are mandatory appearances. To set up Court Call, please call CourtCall directly at (888) 882-6878.
The following Tentative rulings will become the ruling of the Court unless a party desires to be heard. If you desire to appear and present oral argument as to any motion, it will be necessary for you to contact Judge Wick’s Judicial Assistant by telephone at (707) 521-6730 by 4:00 p.m. today, MONDAY, MAY 13, 2013. Any party requesting an appearance must notify all other parties of their intent to appear.
1. MCV-217680; Capital One Bank (USA) v. Flint:
Plaintiff Capital One has moved for terminating sanctions against the Defendant for failing to comply with the court’s earlier discovery order. No opposition has been received.
Generally, only monetary sanctions may be imposed without a prior court order compelling discovery. However, once an order compelling discovery has been made by the court, a broader range of sanctions is available for failure to make discovery. Steven M. Garber & Assocs. v. Eskandarian (2007) 150 Cal.App.4th 813, 820. The following types of sanctions are authorized for discovery violations: monetary sanctions; issue sanctions (designating facts as established); evidence sanctions (barring introduction of evidence); —terminating sanctions (striking pleadings, dismissal or default); and contempt. CCP § 2023.030.
Here, on October 20, 2012 the court ordered the Defendant to comply with the discovery demands of the Plaintiff. The Plaintiff served notice of the court’s order. The Defendant has failed to comply with the court order. Accordingly, the Plaintiff’s motion is granted. The Plaintiff is to draft an order consistent with this ruling.
2. MCV-218091- Captial One Bank v. Gutierrez:
This is a collections action arising from the Defendant’s alleged default on a credit card.
On October 20, 2012, the Plaintiff served Requests for Admission, Special Interrogatories and Requests for the Production of Documents on the Defendant. The Defendant failed to respond. On February 11, 2013, Plaintiff filed the instant motion.
Plaintiff's Motion to Compel, Deem Request for Admissions Admitted is granted. Defendant is to serve verified responses to Defendant's requests for the Special Interrogatories, and Requests for Production in ten days from the date of this order.
3. SCV-244007; Matthews v. Gaspardone:
Motions are continued to July 16, 2013 at 8:30 a.m. in Department #19.
4. SCV-249927; WestAmerica Bank v. Carneros Business Condominium:
I. Relevant Facts and Procedural Background
On October 19, 2007, Carneros Business Condos., LLC (CBC), obtained a construction loan (the Loan) from Sonoma Valley Bank (See footnote at the bottom of the last page) (together with West America Bank, the Bank) to fund the construction of an office and warehouse complex (the Project). Pursuant to the terms of the loan, the managing members of the LLC, McDevitt, Saks and Brush were required to guarantee the Loan (the Guarantees).
McDevitt & McDevitt Construction (MMC) was retained by CBC to act as the general contractor for the Project. The Bank required that MMC execute a Guaranty of Completion and Performance, (See footnote at the bottom of the last page) which provides, in pertinent part:
[MMC] hereby unconditionally and absolutely warrants and guarantees to [Bank] that (a) construction of the Project shall be commenced and shall be substantially completed within the time limits set forth in the Construction Loan Agreement; (b) the Project shall be constructed and completed in accordance with the loan documents and the Plans and Specifications, with [sic] substantial deviation therefrom unless approved by the [Bank] in writing….
Further, MMC's guarantee provided that is would continue until: "the Project has been completed, free and clear of all liens and encumbrances … and … all obligations of [MMC] under this Guaranty have been performed in full."
On February 24, 2010, CBC entered into a Change of Terms on the Loan with Bank; whereby the credit limits were lowered and CBC pledged more collateral to secure the Loan. Pursuant to this amendment, the Loan was to mature on January 19, 2011.
On January 19, 2011, Defendants defaulted on the Loan by not remitting the full principal balance and accrued interest on the Loan. On March 31, 2011, Bank notified all Defendants of the default and demanded payment thereof. On June 29, 2011, the Bank filed suit alleging two causes of action: (1) Judicial Foreclosure; and (2) Breach of Contract Against Guarantors. The Property was foreclosed.
On April 3, 2012, the court ruled on the Defendants’ first motion for judgment on the pleadings. The court granted the motion as to the first cause of action, as it was moot. The court denied the motion as to the second, ruling:
The Defendants argument, with respect to the Second COA fails on two accords. First, the Second COA is a simple breach of contract COA—nothing more, nothing less. The sale/non-sale of the security does not affect the viability of the claim, only the amount of set-off the Defendants ultimately may have against the principal amount. See Gray1 CPB, LLC v. Kolokotronis (2011) 202 Cal.App.4th 480, 486 citing Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 819. The Complaint adequately pleads the necessary elements to establish a breach of contract. See Complaint ¶¶ 30-35. This is all the Plaintiff need do at this stage of the suit. Moreover, the sale of the security is not a necessary element to the Second COA, and in fact, the Defendants waived any right/defense they may have had regarding “security first” in the guaranty itself. See Complaint Exhbt. E.
Defendants are again moving for a judgment on the pleadings as to the Second Cause of Action. Defendants contend that they are entitled to judgment on the pleadings with respect to Second Cause of Action for breach of contract on primarily two grounds: (1) that the Guarantees are “shams”; and (2) any judgment on the Guarantees would violate the anti-deficiency statutes.
The gist of the Defendants’ sham argument is that the guarantors are guarantying their own performance. The Defendants argue that the loan documents in question make them “primary obligors” and “jointly and severally” obligated with the borrower. The Defendants further argue that the guarantees in question are not enforceable because the obligations of the guarantors are not dependent on the borrower defaulting. Further, the guarantors argue that their obligations were secured by a deed of trust on the property, and therefore they are protected by the anti-deficiency statutes.
Plaintiff opposes arguing that the issues presented by the Defendants were addressed by the court in their first motion for judgment on the pleadings. The Plaintiff further opposes, contending that the pleadings do not allege that the Defendants are liable on the underlying note and/or construction loan agreement. The Plaintiff also argues that the case law cited by the Defendants does not support their position.
The Defendants’ motion is not well taken. With respect to the anti-deficiency argument, the court already ruled that the guarantees in question included a waiver of anti-deficiency protection. Further, as discussed in more detail below, at this stage the court does not find that the Defendants were the primary obligor on the note—therefore the anti-deficiency statutes do not come into play, and the guarantees are not ineffective as a matter of law.
The Defendants hone in on language contained in the promissory note, titled “Events Affecting Guarantor” which provides: “Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness….”
The “proceeding events” catalogue ten different default scenarios. The language contained in the “Events Affecting Guarantor” does not create a primary obligation under the note. Rather, it explains that the note can be defaulted by the independent acts of the Guarantor—or by their death or incompetence.
The Defendants argument that if you substitute the term “Trustor” with “Guarantor” within certain default provisions in the note, it follows that the guarantors are then primarily obligated on the note—therefore rendering their guarantees unenforceable. The Defendants’ arguments are not supported by any controlling legal authority; nor by the language that they cite from the note. The Defendants cite to a Federal District Court Opinion from the Southern District of New York, Agrippa LLC v. Bank of America 2011 U.S. Dist. LEXIS 2503. The Defendants do not explain how this case applies to the instant facts, nor how it supports the rather extreme argument that the court may substitute defined terms within commercial notes and guarantees to create new obligations of the parties.
The allegations and documents attached to the pleadings do not support the Defendants’ argument that the guarantees are unenforceable, nor do they support the Defendants’ theory that the guarantees are subject to the anti-deficiency statutes.
The parties’ respective requests for judicial notice are granted. Accordingly, the Defendants’ motion is DENIED. The Plaintiff is to draft an order consistent with this ruling.
5. SCV-249938; Petras v. JP Morgan Chase Bank:
This is the Plaintiff’s fifth attempt to state causes of action against the Defendants. The gravamen of the Plaintiff’s lawsuit is that the Defendant JP Morgan did not assume the servicing rights to his mortgage, and therefore cannot foreclose on the property. The Defendant has demurred again, and has asked that this court take judicial notice of several documents. The Defendant’s request for judicial notice is granted.
As this court has stated on more than one occasion, the Plaintiff’s position with respect to the Purchase & Assumption Agreement is wrong. JPM has succeeded WaMu in its interests in the subject loan. RJN Ex. 2; Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743; see also GECCMC 2005-C1 Plummer Street Office Ltd. Partnership v. JPMorgan Chase Bank, Nat. (2012) 671 F.3d 1027.
It is not subject to reasonable dispute that the Defendant succeeded in interest to the loans in question here through the Purchase & Assumption Agreement. Given that the Plaintiff’s Second and Third Causes of action are premised on the Purchase & Assumption Agreement not having transferred interest in the loans to Defendant JP Morgan, both of those causes of action fail to allege facts sufficient to state a claim. CCP § 430.10(e).
The Defendant’s demurrer is sustainedas to the Second and Third causes of action
without leave to amend. The Defendant is to draft an order consistent with this ruling.
6. SCV-250483; Anderson v. Yepiz:
This is a fraud and malpractice case where the Plaintiffs allege that the Defendant recommended an investment, which ultimately failed, causing them to allegedly lose $500,000. The Plaintiffs allege that they used the Defendant’s services to set up a 401k plan for their employees, and personal retirement accounts. In or around 2004, the Plaintiffs then sought advice from the Defendant regarding the “purchase” of commercial property. The Plaintiffs allege that the Defendant recommended purchasing Tenant in Common interests. The Plaintiffs allege that they invested over $800,000 in these TIC interests. Plaintiffs allege that in 2011, when discussing the underperforming investments, the Defendant admitted that he was not familiar with TIC investments and that now that he was familiar with the risks, he would no longer recommend them to clients.
On September 30, 2011 the Plaintiffs filed suit alleging: (1) Constructive Fraud; (2) Breach of Fiduciary Duty; and (3) Professional Negligence. On March 26, 2012, the Defendant answered the complaint. An April 5, 2013 trial date was set.
On February 13, 2013, the Defendant filed a motion to compel arbitration based on a contractual arbitration clause he discovered when preparing for trial. The Plaintiffs oppose, arguing that the delay in seeking to compel arbitration waived any obligation that the Plaintiffs may have had to arbitrate the matter. Further Plaintiffs argue that the Defendant’s eleventh hour demand to arbitrate has prejudiced them.
A party who does not demand arbitration within a reasonable time is deemed to have waived the right to arbitration. Spear v. California State Auto. Ass'n (1992) 2 Cal.4th 1035, 1043; Sawday v. Vista Irrig. Dist. (1966) 64 Cal.2d 833, 836–837; Johnson v. Siegel (2000) 84 Cal.App.4th 1087, 1099.
Here, there is no doubt that the Defendant waited nearly a year to demand to arbitrate the Plaintiffs claims. The demand came within 3 months of the scheduled trial (now continued), and after two CMCs, discussions with counsel, preparation and review of discovery. Further, the Plaintiffs have been deprived of many of the benefits of arbitration. The litigation activity of the Defendant “belies an intent to arbitrate.” See Burton v. Cruise (2010) 190 Cal.App.4th 939, 942–943, 946–949. The Defendant did not demand arbitration within a reasonable time. As such the Defendant is estopped from now demanding arbitration.
The Defendant’s motion to Compel Arbitration is denied. The Plaintiffs are to draft an order consistent with this ruling.
7. SCV-250770; Simons v. Neptune Society:
The Motion for Summary Judgment scheduled for May 14, 2013, is continued to July 23, 2013.
8. SCV-250892- Cropsey v. Ensign Group:
This is an employment disability discrimination case. The Plaintiff alleges, among other things, that her former employer, the Defendant, failed to reasonably accommodate her disability and unlawfully terminated her.
On November 28, 2012, the Plaintiff propounded discovery on the Defendant, in particular Special Interrogatories, Set Two. The Defendant responded on January 3, 2013. The Plaintiff was unhappy with the responses, and on February 5, 2013 counsel sent a meet and confer letter to the Defendant advising it of the deficiencies. The Plaintiff now has moved to compel further responses as to Special Interrogatories 5,6,8,19,22,30,32,33,34. The Plaintiff’s request for judicial notice is granted.
The Defendant opposes. The Defendant contends that the Plaintiff has failed to properly meet and confer—there was no substantive opposition. The Defendant then, on May 7, 2013 (five court days prior to the hearing), filed a “Supplemental Opposition.” The court will not consider this, as it is not authorized by the CCP, and unfairly prejudices the Plaintiff, as she would be unable to (and in fact was) respond in reply.
The court notes that this matter was assigned to the Discovery Facilitator Program, where Mr. Robert Jackson was appointed to facilitate this dispute. Mr. Jackson’s report advised, after a telephonic conference, that in his opinion, the Plaintiff was entitled to additional responses to Special Interrogatories 5,6,8,22,30,32,33, and 34. The court thanks Mr. Jackson for his time and service.
The court has reviewed the moving parties and the submitted declarations. The court agrees with Mr. Jackson’s appraisal of the merits of the Plaintiff’s motion. Accordingly, the Defendant is ordered to provide further responses to Special Interrogatories, Set Two, Nos. 5,6,8,22,30,32,33, and 34 within 10 days of notice of this order. Additionally, the Defendant is ordered to pay $1,500 in discovery sanctions to the Plaintiff.
The Plaintiff is to prepare an order consistent with this ruling.
9. SCV-252044- Mukherji v. Patel:
This is a case dealing with a series of business and real property transactions dealing with a Travelodge Hotel (Travelodge) situated at 635 Healdsburg Ave., Santa Rosa (the Real Property). In the end the Plaintiffs allege that the broker they engaged to sell their business and the buyers of that business have breached several agreements and duties owed them.
In July 2012, Plaintiffs filed suit alleging: (1) Breach of Contract; (2) Negligence; (3) Resulting Trust (4) Quiet Title; (5) Money Had and Received; (6) Breach of Contract; (7) Equitable Lien; (8) Fraud; (9) Breach of Fiduciary Duty; (10) Breach of Implied Covenant; (11) Conversion; (12) Unjust Enrichment; (13) Money Had and Received; (14) Conversion; and (15) Unjust Enrichment.
On February 15, 2013, the Plaintiffs filed a First Amended Complaint alleging: (1) Breach of Contract; (2) Money Had and Received; (3) Conversion; (4) Unjust Enrichment; (5) Rescission; and (6) Negligence.
Defendants Nitin and Sharmila Patel, the buyers, have demurred to the First, Second, Third, Fourth, Fifth, and Sixth causes of action on the basis that they fail to state claims, in that they are barred by the applicable statutes of limitations. The demurrer is unopposed. The Defendants’ request for judicial notice is granted.
The basis for the Defendants’ argument regarding the contract is that the Complaint alleges that the full-sum on the Promissory Note was due and payable if the DOT “becomes inoperable.” FAC ¶ 20.
The statute does not begin to run on installments not yet due unless the promissory note contains an acceleration clause and the creditor, by some affirmative act, has manifested his or her election to declare the entire sum due. See Garver v. Brace (1996) 47 Cal.App.4th 995, 1000. There are no allegations that the Plaintiffs took any affirmative acts to declare the entire sum due and payable. There is no indication that the 1031 Exchange holder made a demand for payment either. Further, when a note is payable in installments, the statute of limitations begins to run on the date each installment is due. White v. Moriarty (1993) 15 Cal.App.4th 1290, 1299 quoting Conway v. Bughouse Inc. (1980) 105 Cal.App.3d 194, 200.
Even assuming arguendo that the DOT’s invalidity triggered the acceleration clause, the Complaint alleges that the Plaintiffs were only aware of the DOT’s shortcomings in March 2012. The delayed discovery rule applies to a contract breach where the breach is difficult for plaintiff to detect and the harm flowing from the breach will not be reasonably discoverable by plaintiff until a future time. In such circumstances, the limitations period commences when plaintiff knew or should have known of the breach. See April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832.
Here, construing the allegations of the Complaint broadly, the limitations period on the Promissory Note likely accrued on or about September 29, 2008, the Complaint was filed in July 2012, well within the 4 year statute. As for the Defendants’ arguments regarding common counts, common counts (e.g., “services rendered,” “money had and received,” etc.) are merely pleading devices, and the suit is subject to whatever statute of limitations governs the underlying claim.
CCP § 338(c)'s 3–year limitations period applies to an action for conversion of tangible personal property. See Coy v. County of Los Angeles (1991) 235 Cal.App.3d 1077, 1087. When personal property is taken lawfully, the statute of limitations is tolled until the owner demands and is refused possession of it (e.g., bailee refuses to return auto loaned by owner). See Coy v. County of Los Angeles (1991) 235 Cal.App.3d 1077, 1087–1088. The Complaint, on its face, does not provide a date for when the Plaintiffs’ demand their money back—therefore the defect does not appear in the allegations. Complaint ¶ 32.
Accordingly, the demurrer based on the statute of limitations argument is overruled. The Plaintiffs are to draft an order consistent with this ruling.
10. SCV-252068- Cotton v. Soul Cotton:
The Defendant, and several ex-employees of the auto body business have filed a Cross-Complaint against the Plaintiff and his late father’s estate, alleging labor code violations related to the non-payment of wages against the Plaintiff and the estate of his late father. On January 8, 2013, the Cross-Complainants filed an amended cross complaint which added two additional causes of action: 9th Cause of Action for “Civil Code Section 52.1(b) Intimidation Threats; and 10th Cause of Action for “Conversion Ca. CC § 1965, 1993.03, CCP § 1174(e).”
The gravamen of the 9th COA is that Cross-Complainant Michael Gonzales (Gonzales) was extorted by Plaintiff/Cross-Defendant Marie Cotton (Marie Cotton) into signing a false statement. Gonzales contends that while he was attempting to retrieve his personal property from Marie Cotton’s property, she approached him and threatened to seek attorney fees against him and his parents if he continued to prosecute the cross-complaint against her. Gonzales alleges that Marie Cotton would not allow him to retrieve his property unless he signed a false statement that indicated that he did not wish to pursue the claims in the cross-complaint, and that those claims were false.
The 10th COA is premised on the allegations that Marie Cotton, despite entering into a settlement agreement with Defendant/Cross-Complainant Soul Cotton (Soul Cotton) and Gonzales that instructed Marie Cotton to allow Soul Cotton and Gonzales to retrieve personal property from Marie Cotton’s property; Marie Cotton had Soul Cotton’s and Gonzales’ property run over with a bulldozer. The 10th COA also alleges that Marie Cotton said that if Gonzales wanted access to his property, he would have to change his position relative to the instant lawsuit.
It is alleged that Gonzales, after the threats, did sign a document presented to him by Marie Cotton—and thereafter retrieved his personal property.
Marie Cotton has filed a special motion to strike under CCP § 425.16. Marie Cotton argues that the 9th and 10th COAs are an attempt to chill privileged acts and her assertion of constitutional rights. In particular, Marie Cotton argues that her actions, as alleged, are protected free-speech in connection with pending litigation, and therefore privileged under CCP § 425.16(e),
“In terms of the so-called threshold issue, the moving defendant's burden is to show the challenged cause of action 'arises' from protected activity. [Citations.] Once [but only if] it is demonstrated the cause of action arises from the exercise of the defendant's free expression or petition rights, then the burden shifts to the plaintiff to show a probability of prevailing in the litigation.” Shekhter v. Financial Indemnity Co., supra, 89 Cal.App.4th at 151; see also Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 307.
If the defendant meets the initial burden, the burden then shifts, and the plaintiff must show a probability of prevailing on the claim. “The plaintiff must demonstrate the complaint is both legally sufficient and is supported by a prima facie showing of facts sufficient to sustain a favorable judgment if the evidence submitted by the plaintiff is given credit. ” Turner v. Vista Pointe Ridge Homeowners Assn. (2009) 180 Cal.App.4th 676, 681–682.
For purposes of an anti-SLAPP motion, “[t]he court considers the pleadings and evidence submitted by both sides, but does not weigh credibility or compare the weight of the evidence. Rather, the court's responsibility is to accept as true the evidence favorable to the plaintiff....” HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212, 12 Cal.Rptr.3d 786.) A plaintiff “need only establish that his or her claim has ‘minimal merit’ [citation] to avoid being stricken as a SLAPP.” Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 cited in Kleveland v. Siegel & Wolensky, LLP (April 17, 2013) --- Cal.Rptr.3d ----, 2013 WL 1632656
It is well settled that causes of action based on litigation and litigation activities fall within CCP § 425.16 (e)(1) and (e)(2). See Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056. Indeed, CCP § 425.16 protects “communicative conduct such as the filing, funding, and prosecution of a civil action,” including such acts when “committed by attorneys in representing clients in litigation.” See, e.g., Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.
Here, Marie Cotton argues that her acts, attempts to negotiate a settlement and termination of the pending cross-action, are protected speech. The allegations of the 9th COA are in-fact covered under the plain language of CCP § 425.16. The allegations are an attempt to hold Marie Cotton liable for damages for her speech—e.g. demanding that Gonzales sign a statement disavowing the pending lawsuit.
The 10th COA, however, does not fall under the first prong, as the gravamen of the claim is that Marie Cotton unlawfully asserted control over the Cross-Complainants’ personal property, and ultimately had said property destroyed. FACC ¶¶ 147-148. This is not speech, but an action that does not fit the profile of what CCP § 425.16 protects. The alleged tortious misconduct involving the converting and destroying of the personal property goes beyond the proper scope of the legal process and thus did not constitute activity in furtherance of petitioning rights. See § 425.16. (e)(4); and Paul v. Friedman, 95 Cal.App.4th 853, 866-868.
Cross-Complainants contend that under the fraud and illegality exception, Marie Cotton’s otherwise protected activity is not protected by the anti-SLAPP statute as a matter of law. Flatley v. Mauro (2006) 39 Cal.4th 299, 320
Here, the question becomes whether Marie Cotton’s acts, as alleged, in the FACC ¶¶ 123-130 and described in Gonzales Dec. ¶¶ 8-11, constitute extortion as a matter of law by way of uncontroverted evidence. It seems that the elements of extortive behavior have been properly alleged, and supported by evidence submitted by Gonzales. Marie Cotton obtained property from Gonzales by threatening his property, and induced him to sign a document that could be construed to relinquish more property—i.e. his legal claims. The Flatley exception, however, does not apply, as the illegal conduct was not established as a matter of law, i.e. conviction, or established through uncontroverted evidence, or admitted by the party. Marie Cotton flatly denies having threatened Gonzales. See Marie Cotton Reply Dec. ¶ 2.
As a result, Marie Cotton has met her burden as the 9th COA, as the allegations do rest primarily on acts taken in furtherance of the pending lawsuit, and were not illegal under the Flatley standard. However, she has not carried her burden as to the 10th COA for conversion.
Marie Cotton argues that the 9th COA is fatally flawed in that the acts alleged fall under the litigation privilege, and therefore she cannot be held liable. See CC § 47
Was Marie Cotton’s alleged behavior (extortion) protected by the litigation privilege in CC § 47. Flatley, supra, 39 Cal.4th at 320. The litigation privilege does protect from any tort except malicious prosecution. Here, the question of whether Marie Cotton’s alleged extortion, in furtherance of defending herself from litigation was privileged. The parties should come prepared to the hearing to discuss this.