Judge Christian R. Gullon, Case Number: 22PSCV00888, Date: 2023-09-05 Tentative Ruling

Judge: Christian R. Gullon, Case: 22PSCV00888, Date: 2023-09-05 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, attorneys are advised to check this website to determine if any changes or updates have been made to the tentative ruling.

Counsel may submit on the tentative rulings by calling the clerk in Dept. O at 909-802-1126 before 8:30 the morning of the hearing. Submission on the tentative does not bind the court to adopt the tentative ruling at the hearing should the opposing party appear and convince the court of further modification during oral argument.

The Tentative Ruling is not an invitation, nor an opportunity, to file any further documents relative to the hearing in question. No such filing will be considered by the Court in the absence of permission first obtained following ex-parte application therefore.

(1) Defendant Avalon Management Group, Inc. Motion for Summary Judgment or, in the alternative, Motion for Summary Adjudication on Plaintiffs’ First Amended Complaint is GRANTED IN ITS ENTIRETY, notably because (as to negligence), Plaintiffs rely upon immaterial allegations and deduce their theories of liability based upon speculation.

(2) Motion For Summary Adjudication By Defendant Avalon Management Group, Inc. As Against Diamond Bar Village Association On Avalon’s Cross-Complaint is TBD.

This case pertains to the evacuation of over 150 residents at the condominium units located at Diamond Bar Village (“DBV”). Plaintiffs, the owners of condominium units, allege the following against Defendants THE AVALON MANAGEMENT GROUP, INC. (“Avalon”), a California corporation; DIAMOND BAR VILLAGE ASSOCIATION (“HOA” or “DBV”), a California nonprofit corporation; LARRY CARMACK, an individual; JAMES HOPKINS, an individual; KHATRI INTERNATIONAL, INC., a Nevada corporation and DIPLIP MULCHAND KHATRI, an individual (collectively, “Khatri Defendants” or “Khatri”); RKA CONSULTING GROUP, a California corporation (“RKA”); CITY OF DIAMOND BAR, a governmental entity (occasionally referred to as the “City”): On September 27, 2021, Defendants Avalon and the HOA sent an e-mail to all the residents and owners of DBV, including Plaintiffs, advising them for the first time that all the residents may need to evacuate the Subject Property due to “impending risk to the health and safety of residents from the roof rafter conditions.” (First Amended Complaint (FAC) ¶75.) The City’s Notice and Order to Vacate DBV (“Vacate Order”) referenced a 2017 report that found similar problems with Termite, Dry Rot, and structural damage. However, Plaintiffs were not informed about the 2017 report; therefore, the first time Plaintiffs learned of any possible massive evacuation was in 2021. That said, the Vacate Order was rescinded because on October 25, 2021, Plaintiffs’ own structural engineer determined that there was no imminent threat of collapse to the buildings at DBV. Although the Vacate Order had been rescinded by the City, Plaintiffs still suffered damages because they “had to pay their tenants relocation fees and lost rent for months . . . and had to live through the chaos, discomfort, trash being dumped everywhere, the swimming pool being green and full of mosquitos, the lack of maintenance to the Subject Property, the news reporters being at the Subject Property, and the threat of fines and penalties being levied by the City and being arrested by the police for failure to vacate by October 18, 2021.” (FAC ¶100.)

On October 27, 2023, Avalon filed the instant MSA against DBVA on Avalon’s Cross-Complaint.

On November 7, 2023, the court, after taking Khatri’s GFS motion under submission, issued its final ruling, reversing the tentative ruling to deny and granting Khatri’s GFS motion.

On January 17, 2024, Plaintiffs filed their opposition to Avalon’s MSJ/MSA as to Plaintiffs’ complaint.

On January 22, 2024, the court denied RKA’s motion for reconsideration and denied Plaintiffs’ motion for sanctions. (At this point, two good faith settlement (“GFS”) motions have been granted the City of Diamond Bar and Khatri Defendants.)

On January 25, 2024, Plaintiffs filed their Opposition To Defendant Avalon Management Group, Inc.’s Motion For Summary Adjudication As Against Diamond Bar Village Association On Avalon’s Cross-complaint. That same day, Avalon filed its reply as to its MSJ/MSA. That same day, DBVA filed its Oppositions to Avalon’s MSA as to Avalon’s Cross-Complaint.

On February 8, 2024, during the hearing on the instant MSJs, the court allowed for supplemental briefing on the issues raised in the tentative ruling.

The law of summary judgment provides courts “a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) In reviewing a motion for summary judgment, courts employ a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) “The motion for summary judgment shall be granted if 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).) For emphasis, only material facts govern summary judgment.[3] To be material, a fact must be essential to the action and, if proven, change the outcome of the case. (Los Angeles Nat’l Bank v. Bank of Canton (1991) 229 Cal.App.3d 1267, 1274.)[4] As

A moving defendant bears the initial burden of production to show that one or more elements of the cause of action cannot be established or that there is a complete defense to the cause of action, at which point the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue. (Code Civ. Proc., § 437c, subd. (p)(2).) “The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken. The supporting papers shall include a separate statement setting forth plainly and concisely all material facts that the moving party contends are undisputed. Each of the material facts stated shall be followed by a reference to the supporting evidence. The failure to comply with this requirement of a separate statement may in the court’s discretion constitute a sufficient ground for denying the motion.” (Code Civ. Proc., § 437c, subd. (b)(1).)

The opposing party may not rely on the mere allegations or denials of the pleadings, but instead must set forth the specific facts showing that a triable issue exists as to that cause of action or a defense thereto. (Aguilar, supra, at p. 849.) Specifically, “[t]he opposition, where appropriate, shall consist of affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken.” (Code Civ. Proc., § 437c, subd. (2).)

As a preliminary matter, the court revisits its rulings on the GFS motions as the court’s concerns there lay the foundation for this ruling.

As to the City’s GFS motion, the court’s tentative was to deny the motion because $35,000 (.14% of the total projected settlement of 25.2 million in damages) was disproportionate to the City’s share of liability. Specifically, focusing on the Khatri Reports, this court proposed the following question: “Based on the foregoing facts, which appear to favor Avalon, this leads to a query: what did Avalon do in comparison to the City (and RKA) and Khatri Defendants that Avalon should presumably bear thousands or millions more in liability? Absent evidence from either party, the court is unable to answer this fundamental question about liability, indicating that the instant GFS is premature.” (See 9/6/23 Final Ruling, emphasis added.)[5] The court reversed its tentative to grant the motion based upon (i) new/accurate approximate of damages of about 2 million dollars and (ii) reconsideration of the City’s defenses/immunities. That said, the court’s conclusion in its final ruling the court noted that “presumably the Khatri Defendants [] bear significant liability for making inaccurate reports.” (9/6/23 Final Ruling, emphasis added.)

As to Khatri’s GFS motion, the court’s tentative was to deny the motion because Khatri’s settlement offer of $250,000 (14% of the $1.945 million total damages) did not adequately represent Khatri’s proportionate liability when RKA/Tao/the City relied upon Khatri’s report. The court ultimately reversed its tentative because of Khatri’s Counsel’s emphasis on Horton v. Superior Court (1987) 194 Cal.App.3d 727, which provides that a trial court need solely look at the plaintiff’s claimed damages but on the rough approximation of what a plaintiff would actually recover if the case should go to trial. (Id. at p. 735.) And Khatri set forth a compelling application as to what Plaintiffs would actually recover, which was no longer the initially claimed $25.2 million, was no longer the $1.945 million amount, but at most about $500,000. Therefore, bearing 50% of liability for at most (likely far less during trial due to speculative damages) was made in good faith.

Effectively, as demonstrated above, the court has wavered in its decisions because the ultimately underscored the fact that the Khatri Reports and Tao’s assessment that created Plaintiffs’ economic damages due to the improperly tagged apartments.

Now, for purposes of this motion, the court returns to that point because when (1) focusing on the material facts as found within the four corners of the FAC, when (2) considering all reasonable inferences that a reasonable trier of fact could deduce from the evidence (CCP section 437c(c),[6] and, importantly, when (3) observing that said inferences cannot be derived mere possibility or speculation that something else might have happened but-for the alleged conduct at issue,[7] Plaintiffs have not alleged that Avalon, the party who did not create the Khatri Reports nor decide to issue the Vacate Order, caused Plaintiffs’ damages as to the negligence COA.

The gravamen of the FAC’s 189 allegations is that “there was no basis for the City to issue the Vacate Order.” (Supp. Brief p. 7:21-22.) This is not just Avalon’s argument, but Plaintiff’s own position as evidenced by the following allegations:

- “[T]he City had no grounds whatsoever to red or yellow tag all 150 units of DBV.” (FAC ¶155, emphasis added and underline added.)

- “Plaintiffs …seek …to prevent the defendants improperly issuing red tags in the future…” (FAC ¶104, emphasis added.)

- “Neither MR. KHATRI nor the reports he had generated (2017 KHATRI REPORT and 2021 KHATRI REPORT) were credible.” (FAC ¶95, emphasis added.)

- “The Village at Diamond Bar, citing to reports that clearly did not justify an evacuation….” (FAC, Ex. 10, 12 [Plaintiff’s Administrative Claim for Damages against the City, ¶9, p. 213 of 264 of PDF.)[8]

Even as to the allegations specifically directed to Avalon (¶113, subds. (a)-(f)), the majority reference Mr. Khatri and the Khatri Reports:

[D]efendants . . . negligently managed, controlled, and/or failed to performed services relating to DBV, including, but not limited to, the following actions:

(a) Total failure to perform any deferred maintenance repairs to the Subject Property as addressed in the 2017 KHATRI REPORT for over 4 years;

(b) Total failure to seal the walls that were left open by MARCUS ALLEN or other contractors, causing these walls to mold over time;

(c) Total failure to disclose the 2017 KHATRI REPORT to the owners, sellers, and buyers of condominium units at DBV, including Plaintiffs;

(d) Total and gross negligence by advising the HOA to not disclose the 2017 KHATRI REPORT and 2021 KHATRI REPORT to the owners or sellers of DBV;

(e) Total failure to conduct a background check on MR. KHATRI to determine any and all previous licensing issues with his civil and structural engineering licenses; and

(f) Total failure to obtain a second opinion from another licensed structural engineer after receiving the 2021 KHATRI REPORT before handing the report over to the CITY OF DIAMOND BAR, which resulted in DBV being improperly red and yellow tagged forcing a massive evacuation of the Subject Property by most of the residents at DBV. The actions taken by the defendants were unreasonable in that they caused the CITY OF DIAMOND BAR to improperly red and yellow tag all the condominium units at DBV, which resulted in a massive evacuation of most of the residents of DBV, depriving Plaintiffs of the normal use and quiet enjoyment of their units, loss of rental income, out of pocket expenses, relocation fees paid to the tenants, and severe emotional distress. (FAC pp. 26-27, emphasis added.)

According to the FAC, it is Mr. Khatri’s assessment(s) and the Khatri Reports that caused the improperly tagging the units. (See ¶126 [3^rd COA for negligence directed against Mr. Khatri and Khatri Defendants] [“The actions taken by the [Khatri defendants] were unreasonable in that they caused the CITY OF DIAMOND BAR to improperly red and yellow tag all the condominium units at DBV…”], emphasis and underline added.) Put another way, the FAC suggests that but-for Khatri’s alleged negligence, the buildings would not have been tagged. Plaintiffs drive home this point—that Mr. Khatri performed an inept job—by heavily referencing disciplinary action taken against him. (See e.g., FAC ¶134). The copy of the ‘Decision, Stipulated Settlement and Disciplinary Order’ (attached to the complaint) provides, in summary, the following reason why disciplinary action was taken: “[Mr. Khatri is subject to disciplinary action under section 6775 (c) of the Code because he demonstrated a lack of knowledge of the applicable state and local statutes, regulations, and building codes and failed to use the care ordinarily exercised by licensed professional engineers.”]) (FAC, Ex. 4, p. 106 of 264 of PDF.) In short, Mr. Khatri was deemed as incompetent in the field of his work. (FAC, Ex. 4 [‘First Amended Accusation], ¶6, p. 240 of 264 [“Title 16, Section 404, subdivision (u) of the California Code of Regulations defines “incompetence” as used in Code Section 6775 as “the lack of knowledge or ability in discharging professional obligations as a professional engineer or land surveyor.”].)

Effectively, as Plaintiffs are alleging that Mr. Khatri was so unqualified that he would have created a false report regardless of the conditions, then ¶113(a), (b), (e) are immaterial.[9]

To the extent that Plaintiffs aver that a “second opinion” from another licensed structural engineer after receiving the 2021 Khatri Report would have not caused the City to issue its Vacate Order, that is both immaterial and based on speculation.

First, arguably, a second opinion was provided by Raymond Tao, who even if was unqualified, spoke as to the structural integrity of DBV and whether DBV was subject to imminent threat of collapse. (FAC ¶151.) In fact, the Vacate Order, which, as a reminder, was issued by the City and the City hired Raymond Tao/RKA, was based on the Khatri Reports. (See FAC ¶81; see also ¶84 [“RAYMOND TAO responded that support for the Vacate Order was based upon his visual inspection and the 2017 KHATRI REPORT and the 2021 KHATRI REPORT.”], emphasis added.) Accordingly, even if Tao’s/RKA’s opinion was not the opinion that Plaintiffs wanted, a second opinion was given, and it reached the same conclusion as Khatri.

Second, assuming a second opinion by someone other than RKA would have or might have prevented the issuance of the Vacate Order, that is based upon speculation which is insufficient to create a triable issue of material fact.

Third, Plaintiffs argue that this is a material fact because “[c]ommon sense dictates that Avalon should have reviewed [the reports] to determine if a second opinion was needed.” (Supp. Opp. p. 7:23-24, emphasis and underline added.) But whether something is of common sense or not does not create a triable issue of material fact.

Therefore, allegation ¶113(f) is insufficient to create a triable issue of material fact as to causation.

To the extent that Plaintiffs argue total and gross negligence by advising the HOA to not disclose the 2017 KHATRI REPORT and 2021 KHATRI REPORT to the owners or sellers of DBV, that is immaterial. The allegation indicates that the HOA decides whether to disclose the information to the residents. And, in fact, per the S&L agreement assigned to Avalon on 9/1/2020, Avalon, as the managing agent, was to merely “implement the decisions and they policy established by the Board of Directors of the Association.” (Supp. Brief p. 8:25-28.) (This is undisputed or otherwise uncontested by Plaintiffs in opposition.) Thus, any decision that was ultimately made rested in the discretion of the HOA.

Therefore, as a “moving party need not refute liability on some theoretical possibility not included in the pleadings” (Supp. Brief p. 9, quoting Hutton v. Fidelity Nat’l Title Co. (2013) 213 Cal.App.4th 486, 593, emphasis added) and there is no allegation that Avalon, irrespective of the HOA, could have disclosed the reports, those allegations are insufficient to defy summary judgment.

In sum, the known and undisputed fact is that Khatri created two reports that were wrong, that RKA/Tao made its assessment partly based on said reports, and based thereon, the City issued its Vacate Order. To infer that Avalon caused the issuance/need for the Vacate Order is simply not supported by the allegations or any evidence. Plaintiffs can’t have their cake and eat it too.

[Avalon] ha[s] failed and neglected to keep proper books and records and has failed and refused to account to Plaintiffs in any manner whatsoever with regard to the conduct of the business with regard to the management of DBV, despite demand for such an accounting. For example, missing accounting records, include, but are not limited to, missing contracts with vendors, missing contracts with construction companies for work allegedly performed, missing receipts showing how much money was spent and paid to vendors, missing accounting for the monies received from the laundry machines, and missing accounting for payments to Marcus Allen. (FAC ¶187.)

A COA for accounting has two elements: (1) a showing that a relationship exists between the plaintiff and the defendant that requires an accounting and (2) that some balance is due to the plaintiff that can only be ascertained by an accounting. (Sass v. Cohen (2020) Cal.5th 861.)

The crux of Avalon’s argument, though grounded in derivative action, is that the HOA is the right party to sue for accounting.

Indeed, according to Civil Code section 5300, subdivision (a), an association shall distribute an annual budget report 30 to 90 days before the end of its fiscal year. The statute sets forth a host of mandatory disclosures (e.g., operating budget; summary of reserves; “statement as to whether the board has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years or less, including a justification for the deferral or decision not to undertake the repairs or replacement.”) Accordingly, the language of the statutory provision is not ambiguous in that the HOA is under a duty to provide the fiscal and other records Plaintiffs seek. In fact, taking Plaintiffs’ citation to Kovich v. Paseo Del Mar Homeowners’ Assn. (1996) 41 Cal.App.4th 621 (Supp. Opp. p. 8), which is the only HOA-related case cited by either party, it is the HOA that has a fiduciary relationship with its members; thus, the HOA is to provide the accounting.

Therefore, as the HOA is in indispensable party as to this COA, the motion is GRANTED as to the 5^th COA for accounting.

[1] Due to the numerous filings in this case, the procedural background only provides the pertinent filings.

[2] These motions present largely issues of law rather than fact. This is evidenced by both parties’ heavy focus on arguments rather than disputing facts. (See also Plaintiffs’ responses to Avalon’s SS noting that most if not all statements even if disputed are “immaterial.”) Accordingly, the court will not engage in the standard burden shifting formula required by summary judgment/adjudication.

[3] A judge is not precluded from granting summary judgment merely because the parties dispute immaterial facts. (Seibert Sec. Servs., Inc. v. Superior Court (1993) 18 Cal.App.4th 394, 404, n. 2.)

[4] Avalon provides various rules as to what constitutes a material fact. (See Supp. Opp. p. 9:24-28.) However, the pincites do not correspond with the proceeding cases; thus, it is unclear where those rules are derived from.

[5] The court acknowledges that it also commented that Avalon should “presumably ….bear…liability for [its] failure in disclosing th[e] [Khatri reports] to Plaintiffs” (9/26/23 Final Ruling, italics added), that was not an affirmative state that Avalon must and will bear liability.

[6] See also Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 856-857 [“[C]ourt must nevertheless determine what any evidence or inference could show or imply to a reasonable trier of fact …But if the court determines that all of the evidence presented by the plaintiff, and all of the inferences drawn therefrom, show and imply [the claim] only as likely as permissible competition or even less likely, it must then grant the defendants' motion for summary judgment, even apart from any evidence presented by the defendants or any inferences drawn therefrom, because a reasonable trier of fact could not find for the plaintiff.”], emphasis added.)

[7] See Joseph E. DiLoreto, Inc. v. O’Neil (1991) 1 Cal.App.4th 149, 161 [“When opposition to a motion for summary judgment is based on inferences, those inferences must be reasonably deducible from the evidence, and not such as are derived from speculation, conjecture, imagination, or guesswork.”]; see Advent, Inc. v. National Union Fire Ins. Co. v. Pittsburgh (2016) 6 Cal.App.5th 443, 459 [speculation is not evidence that can be used in opposing summary judgment]; Collin v. CalPortland Co. (2014) 228 Cal.App.4th 582, 592 [mere possibility that plaintiff was exposed to defendant’s product is insufficient to create a triable issue of material fact]; see also Leslie G. v. Perry & Associates (1996) 43 Cal.App.4th 472, 483, emphasis and underline added [“ Since there is no direct evidence that the rapist entered or departed through the broken gate (or even that the broken gate was the only way he could have entered or departed), Leslie cannot survive summary judgment simply because it is possible that he might have entered through the broken gate.”]; Alex R. Thomas & Co. v. Mutual Service Cas. Ins. Co. (2002) 98 Cal.App.4th 66, 74 [Insurance Co. need not disprove alternative causes in the absence of facts indicating alternative causes might have existed].)

[8] Documents attached to and incorporated within a complaint become part of the complaint. (See Robert E. Weil et al., California Practice Guide: Civil Procedure Before Trial ¶ 6:233 (2023) [“Exhibits: Plaintiff may attach a copy of a document to the complaint and incorporate it by reference. By so doing, the documents become part of the complaint as if set forth verbatim therein. Thus, the contents of the exhibit may supply the ultimate facts required to state the cause of action.”], citing Del March Beach Club Owners Ass’n, Inc. v. Imperial Contracting Co., Inc. (1981) 123 Cal.App.3d 898, 908 [“The Association, by reference to the attached exhibit, clearly and directly incorporated the Declaration of Restrictions in its entirety….”].)

[9] On this note, in its initial opposition, Plaintiffs state that Avalon did not patch the holes ones the walls of DBV left by Marcus Allen and the “holes on the walls were used by Khatri in the 2021 Report.” (Opp. p. 16:19-23.) However, there is no allegation that this was used in the Khatri Reports nor any cited thereof. Arguments raised in opposition may not create issues outside the pleadings. (Hutton v. Fidelity National Title Co., (2013) 213 Cal.App.4th 486, 493.)

[10] See Leslie G., supra, 43 Cal.App.4th at p. 483 [“We will not, however, draw inferences from thin air. Where, as here, the plaintiff seeks to prove an essential element of her case by circumstantial evidence, she cannot recover merely by showing that the inferences she draws from those circumstances are consistent with her theory. Instead, she must show that the inferences favorable to her are more reasonable or probable than those against her.”], italics original.)