Judge: Colin Leis, Case: 23STCV27870, Date: 2024-07-01 Tentative Ruling

Case Number: 23STCV27870    Hearing Date: July 1, 2024    Dept: 74

D&M Investments Holdings Inc. et al. v. U.S. Capital Global Partners LLC et al.

Defendants US Capital Global Partners LLC, US Capital Global Holding Corporation, Charles Towle, Devon Zubka, and Iksvaku Spencer’s Motion to Quash Service of Summons

BACKGROUND 

This action arises from an alleged breach of contract and associated fraud.

Plaintiffs D&M Investments Holdings Inc. (“D&M”) and Nasir Eftekhari (“Eftekhari”) commenced this action on November 14, 2023 by filing their Complaint against defendants US Capital Global Partners LLC (“USC Partners”), US Capital Global Holding Corporation (“USC Holding”), Charles V. Towele, Davon Zubka, Ish Spencer, and Does 1 through 50 for (1) Fraud and Deceit, (2) Breach of Contract, (3) Breach of the Implied Covenant of Good Faith and Fair Dealing, and (4) Violation of Business and Professions Code section 17200 et seq.

According to the Complaint, USC Partners agreed to provide D&M with a $110 million construction loan in 2022. (Compl., ¶ 11.) D&M intended to use the loan to fund construction on a property located on Canyon Road, Bradbury Estates, California (“the Property”). (Id., ¶ 16.) D&M pledged the Property to secure the loan. (Ibid.) D&M “made it clear that no deal can be made, unless the value of the Subject Property is acceptable by re-certifying an existing appraisal [of the Property] done on March 23, [2022] ... .” (Id., ¶ 12 [corrected to 2022 based on ¶ 17].)

A dispute subsequently arose about the terms of the re-appraisal. (Id., ¶¶ 18-28.) Defendants elected not to proceed with the loan agreement. (Ibid.) Plaintiffs allege they refused to do so in bad faith and in breach of the parties’ contract.

On April 18, 2024, Defendants collectively moved to quash service of the summons on Plaintiffs’ complaint, and concurrently petitioned to compel arbitration of the parties’ dispute and stay or dismiss proceedings.

On June 13, 2024, Plaintiffs opposed.

On June 20, 2024, Defendants replied.

LEGAL STANDARD

¿¿ A court lacks jurisdiction over a party if there has not been proper service of process. (Ruttenberg v. Ruttenberg (1997) 53 Cal.App.4th 801, 808.) Compliance with the statutory procedures for service of process is essential to establish personal jurisdiction. (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444.) The filing of a proof of service creates a rebuttable presumption that the service was proper, but only if the proof of service satisfies relevant statutory requirements. (Id., at 1441-1442.)

DISCUSSION 

            Petition to Compel Arbitration

            Defendants’ petition to compel arbitration may not be considered. Code of Civil Procedure section 418.10 only permits demurrer, answer, or motion to strike concurrent with a motion to quash. (Code Civ. Proc., § 418.10(e).) However, Defendants’ petition also does nto conceded jurisdiction. Whether or not a demurrer, etc. is concurrently made, “no act by a party who makes a motion under [section 418.20] ... constitutes an appearance, unless the court denies the motion ... .” (Id., subd. (e)(1), emphasis added.)

A party ordinarily makes a general appearance by “participat[ing] in [an] action in a manner which recognizes the court's jurisdiction.” (Factor Health Management, LLC v. Superior Court (2005) 132 Cal.App.4th 246, 250.) The Court would ordinarily regard the filing of a petition to compel arbitration as a general appearance, and Defendants do not argue it shouldn’t. But where a motion to quash is filed, the motion “delays the effect of such actions until the motion to quash is denied ... .” (State Farm General Ins. Co. v. JT's Frames, Inc. (2010) 181 Cal.App.4th 429, 441.)

The service and filing of Defendants’ petition has no effect unless and until their motion to quash is denied. In that event, service and filing would be effective, and the notice period on Defendants’ petition would begin to run. But the matter is moot; for reasons discussed below, Plaintiffs’ motion is granted.

            Defects in Service

            Defendants assert, on a number of grounds, that they were not properly served.

            Defendants’ first two grounds are unpersuasive. They identify two superficial defects in the Complaint: that USC Holding’s address is not specified and the individual Plaintiffs’ names are misspelled. But Defendants do not explain how those errors thwart service.

Third, Defendants argue Plaintiffs cannot have conducted due diligence before serving Defendants by substituted service, because Plaintiffs did not attempt methods readily available on the California Secretary of State’s website. The point is well-taken, but insufficiently supported and unnecessary for disposition of the motion.

Defendants’ fourth argument is dispositive.

Plaintiffs contend they substitute-served all five defendants at the same address, 1 Ferry Building, Suite 201, San Francisco, CA 94111. But for effective substituted service, Code of Civil Procedure section 415.20 requires a plaintiff’s process server to deliver papers to a person “apparently in charge” at an office or usual mailing address. Plaintiffs’ process server here did not do so.

The server indicates he served a “Security Guard” at Defendants’ office at the San Francisco Ferry Building who refused to give her name. But the uncontradicted declaration of Charles Towle indicates that USC Partners’ office in the Ferry Building is part of a “co-working” space that serves many businesses. (D.Exh. D, ¶ 4.) The suite has a concierge, but “does not have separate building security.” (Ibid.) In other words, Plaintiffs’ server attests he gave documents to an individual who refused to give her name and had no individual association with any of the Defendants.

Plaintiffs’ opposition does nothing to advance their case. It merely reiterates their Complaint. “When a defendant challenges the court’s personal jurisdiction on the ground of improper service of process the burden is on the plaintiff to prove . . . the facts requisite to an effective service.”¿ (Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413 [internal quotations omitted].) Plaintiffs neither object to nor contradict any of Defendants’ evidence. In the face of Defendants’ evidence that they were not effectively served, Plaintiffs did not carry their burden.

Defendants have shown Plaintiffs did not effect proper service. The motion is granted, and the petition to compel arbitration is moot.

CONCLUSION 

Based on the foregoing, the court GRANTS Defendants’ motion and quashes service of the summons on the initial Complaint.

Defendants’ petition to compel arbitration is moot.