Judge: Craig Griffin, Case: "Fortis Capital Lending, Inc. vs. Titan Mutual Lending, Inc.", Date: 2023-07-31 Tentative Ruling

Defendants Titan Mutual Lending, Inc. (“Titan” individually) and Victor Loo’s (“Loo” individually; “Defendants” together with Titan) Motion for Summary Adjudication (“Motion”) is DENIED.

“(1) A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. 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.

(2) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. . .” 

(Civ. Proc. Code § 437c(f).)

“(p) For purposes of motions for summary judgment and summary adjudication:

. . .

“(2) A defendant . . . has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” 

(Civ. Proc. Code § 437c(p)(2).)

“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. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” 

(Civ. Proc. Code § 437c(c).)

”[T]he function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.“ [Citation omitted.]  In this regard, the court construes the moving party's affidavits strictly, construes the opposing affidavits liberally, and resolves any doubt about the propriety of granting the motion in favor of the party opposing it.” 

(Marshak v. Ballesteros (1999) 72 Cal. App. 4th 1514, 1517.)

Defendants request summary adjudication as to SAC cause of action No. 1 – Breach of Contract.

“To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant's breach and resulting damage. [Citation.] If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” 

(Harris v. Rudin, Richman & Appel (1999) 74 Cal. App. 4th 299, 307.)

The cause of action alleges Loo 1) was obligated to perform certain obligations (SAC ¶ 48); 2) obligated to dedicate his expertise, experience, and production to Fortis (SAC ¶ 49); 3) breached the Fortis Agreement when he incorporated Titan (SAC ¶ 50); and 4) breached the Fortis Agreement by failing to contribute the $5,000 under the Fortis Agreement (SAC ¶¶ 51-52).  Loo’s performance and obligations under the Fortis Agreement were not excused or discharged by Plaintiffs.  (SAC ¶ 53.)

Defendants argue Loo was excused from performing under the contracts pursuant to a subsequent “Addendum to the Fortis Agreement” (“Addendum”).  (Loo Decl., Ex. 12.)  The Addendum states in relevant part:

“Additionally, all parties transferring his/her rights and interest to JJ ZHANG shall be released from any future liabilities, obligations and duties under the Corporation, and all prior agreements, whether oral or written, between the parties shall be deemed terminated effective immediately.” 

[Emphasis added.] (Loo Decl., Ex. 12.)

While Defendants argue that Loo was excused from all of his contractual obligations as the result of the Addendum, this does not appear to be the case.  First and foremost, the Addendum (even if taken as valid) per its language only released Loo from future liabilities under the Fortis Agreement.  It does not appear to release Loo from past or all liabilities or obligations under the Fortis Agreement.  (Loo Decl., Ex. 12.) 

Thus, per the terms of both the Fortis Agreement and the Addendum (again, even if taken as valid), Loo would still have been required to have provided the $5,000 capital.  Loo provided no evidence that $5,000 obligation was ever made. Loo has not negated any of the elements for this cause of action on that issue. 

The Fortis Agreement was signed by Loo, plaintiff JJ Zhang (“Zhang”), and Huy John Vu (“Vu”).  Loo stated that in addition to the Fortis Agreement, these individuals also ratified and signed corporate bylaws (“Bylaws”).  (Loo Decl. ¶ 10, Ex. 5.)  Under the relevant terms of the Bylaw:

“All shareholders who are terminated, sells his shares, leaves the company, forfeits his shares may not create another mortgage company that is in the same line of business of originating loans for a period of 3 years from the date of departure UNLESS Fortis Capital Lending unwinds itself or becomes insoluble.” 

[Emphasis added.]  (Loo Decl. ¶ 10, Ex. 5.)

Loo formed Titan, another mortgage company, on 02/08/17, while he was still employed by Fortis.  (Westmoreland Decl., Ex. 5 at 152:10-23; 162:17-163:10; Zhang Decl. ¶ 7, Ex. 1.)  In order for Loo’s formation of Titan to not be a breach of the bylaws and Fortis Agreement, Loo would have to have produced evidence that 1) Fortis had been unwound; and/or 2) Fortis was insoluble.  While Loo claims Fortis became insoluble in December 2016, no evidence was provided to support that claim.  Loo also alleges he told Zhang about Titan in early 2017 and offered Zhang interest, but the two could not come to an agreement.  No evidence was provided to support this claim. Loo states Titan did not begin mortgage lending until July 2017, but provided no evidence to support that claim either.  Further, under the terms of the Bylaws, Loo was not permitted to “create another mortgage company,” which Loo did in February 2017.  The Bylaws do not state that a partner “will not start lending” by a certain period of time. 

As there is no evidence that Loo was permitted to found Titan while being employed by Fortis, Loo did not negate any of the elements of the breach of contract cause of action on this issue. 

As Loo has not met his initial burden under Civ. Proc. Code § 437c(p)(2), the Motion is DENIED.

The objections made by the parties are not material to the disposition of the Motion.  (Civ. Proc. Code § 437c(q).)

Defendants to give notice.