Judge: Daniel M. Crowley, Case: 21STCV23459, Date: 2023-03-27 Tentative Ruling

Case Number: 21STCV23459    Hearing Date: March 27, 2023    Dept: 207

Background

This case arises from the sale of real property located at 2478 Glyndon Avenue, Los Angeles, CA 90291. Defendant Allstar Financial Services, Inc. (“Allstar”) acquired the property at a non-judicial foreclosure sale and subsequently sought to sell it to Plaintiff Gregory Scott Demos (“Demos”) pursuant to a March 12, 2021, purchase agreement executed by the parties. After Allstar and Demos contracted for the sale of the property, third parties Sunrise Projects, LLC (“Sunrise”) and Alvin Cox (“Cox”) asserted rights to purchase the property pursuant to Civil Code § 2924m, a recently-enacted statute which changes the procedures for certain non-judicial foreclosure sales.

The property and Defendant Allstar’s attempted sale have given rise to multiple lawsuits which have been consolidated in whole or in part with lead action Case No. 21SMCV00756. This includes the instant action filed by Demos, Case No. 21STCV23459. Demos’ action asserts causes of action against Allstar for breach of contract and declaratory relief. Allstar now moves for summary judgment, or, alternatively, summary adjudication on each of these causes of action, as well as Demos’ claim for attorney’s fees. Demos opposes Allstar’s motion.

Objections to Evidence

Demos’ objections to paragraphs 43 and 44 of the Declaration of Alfred Haberstroh are SUSTAINED as speculation. Demos’ remaining objections are OVERRULED.

Allstar’s evidentiary objections are OVERRULED.

Summary Judgment Standard

Motions for summary judgment are governed by Code Civ. Proc. § 437c, which allows a party to “move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (C.C.P. § 437c(a)(1).) The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code Civ. Proc. § 437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (C.C.P. § 437c(p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (C.C.P. § 437c(p)(2); Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Summary Adjudication Standard

A party may move for summary adjudication as to one or more causes of action, affirmative defenses, claims for damages, or issues of duty if that party contends there is no merit to the cause of action, defense, or claim for damages, or there is no duty owed. (See CCP §437c(f)(1).) “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.” (Ibid.) A party moving for summary adjudication bears the burden of persuasion that there are no triable issues of material facts. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.

In analyzing motions for summary adjudication, the court must “view the evidence in the light most favorable to the opposing party and accept all inferences reasonably drawn therefrom.”  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294; Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389 (Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party”).) A motion for summary adjudication must be denied where the moving party's evidence does not prove all material facts, even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).

Analysis

The majority of the background facts are undisputed by the parties. The subject property was previously owned by LDM-PP, LLC (“LDM”). Allstar provided a loan to LDM secured by a deed of trust for the property. Allstar then assigned its interest in the deed of trust to a group of individuals collectively referred to by the parties as the “Beneficiaries.” The loan included $600,000 in funds to redevelop and expand the existing residence on the property. When the loan became delinquent, Allstar foreclosed and decided to sell the property at a trustee’s sale. At Allstar’s direction, the opening bid on the property was $364,770. The sale was held on March 4, 2021, and the only bid received was from the Beneficiaries in the amount of $364,770. Allstar then executed a Trustee’s Deed Upon Sale, which was recorded on March 9, 2021.

On March 12, 2021, Allstar entered into a purchase agreement to sell the property to Demos for $1,650,000. (UMF No. 16.)

On March 17, 2021, and April 13, 2021, Allstar received Notices of Intent to Bid from Cox and Sunrise, respectively, for purchase of the property pursuant to Civil Code § 2924m, a recently-enacted statute which changes the procedures for non-judicial foreclosures. (UMF Nos. 24-25.) Prior to the new statute, the delivery of the trustee’s deed to a bona fide purchaser was conclusive and the buyer took free and clear of any other claims. Section 2924m changes that. With regard to sales of properties having one to four residential units, the sale is not immediately final. Rather, the sale only becomes final after 15 days unless an eligible bidder, as defined by the statute, submits a notice of intent to bid an amount exceeding the highest bid at the sale. An eligible bidder then has an additional 30 days to submit a formal bid with a tender of payment by cash or cashier’s check.

On March 30, 2021, Allstar recorded a Notice of Recission of the March 4, 2021, foreclosure sale. (UMF No. 27.) On April 2, 2021, Geraci Law Firm was substituted in as the new trustee for the foreclosure and recorded a Notice of Trustee’s Sale, setting a new sale date for April 28, 2021. (UMF Nos. 29-30.) On April 28, 2021, the Court in the 21SMCV00756 action granted an ex parte application for a temporary restraining order prohibiting the new foreclosure sale from proceeding. On May 26, 2021, the Court entered a preliminary injunction prohibiting the sale. The preliminary injunction remains in effect today.

Sunrise and Cox have separately filed lawsuits claiming an interest in the property pursuant to Civil Code § 2924m. Demos filed his own action alleging Allstar breached the purchase agreement. Demos’ claims are the subject of Allstar’s instant motion.

            1.         Performance Excused by Demos’ Breach

Allstar argues Demos breached the March 12, 2021, purchase agreement by failing to make an initial deposit of $50,000 into escrow by March 15, 2021, as required by the agreement. The purchase agreement identifies the escrow holder as “seller’s choice.” (Ex. 17 to Haberstroh Decl. at ¶7.C.(1)(b).) Allstar argues it identified Vanguard Title Insurance Agency as the escrow agent for the agreement. Allstar claims Demos refused to accept Allstar’s chosen escrow agent and instead wanted to find a different agent who would offer more favorable terms. Ultimately, escrow was never opened and Demos never deposited the $50,000.

Allstar’s argument is based on the declaration of Allstar’s Senior Underwriter, Alfred Haberstroh, which states “Allstar identified Vanguard Title Insurance Agency, an agent of First American Title Insurance Company, as the escrow agent for the Purchase Agreement.” (Haberstroh Decl. at ¶28.) As support for this statement, Allstar points to two emails. The first is a March 23, 2021, email sent by Demos stating ”The seller wants to use his escrow company.” (Ex. 18 to Haberstroh Decl.) The second is a March 9, 2021, sent to Allstar by Allstar’s broker at Power Brokers International, stating “I spoke with Loren Goldman, the VP of First American Title, he confirmed they will require notary to be ‘first american [sic] approved.’ Loren says that Joann is a great seasoned escrow officer and is connecting us now but that free escrow services is no such thing, and while escrow fees may be discounted it will still be based on a rate sheet. I will bring you into that email thread so that you can address your concern directly with Joann.” (Ex. 19 to Haberstroh Decl.)

In response, Demos points to Allstar’s prior discovery responses as contradicting the assertion made in Mr. Haberstroh’s declaration. In response to Demos’ requests for admission, Allstar initially admitted it did not select an escrow holder. (Ex. 2 to Spach Decl. at 8-9.) Allstar later amended these responses to deny that it did not select an escrow holder. (Ex. 3 to Spach Decl. at 7-8.) Demos also points to Allstar’s supplemental responses to form interrogatories in which Allstar asserted “The Purchase Agreement states that Responding Party was to select the escrow company. Prior to the foreclosure sale, borrower’s principal, Lisa DuAmarell, had opened an escrow with Pickford Escrow Company, Inc. using the services of Jackie Theis. Responding Party intended to continue with that escrow, or alternatively, to use their customary escrow company, Chicago Title, which Propounding Party was informed of.” (Ex. 6 to Spach Decl. at 17.)

In addition, Demos has submitted his own declaration stating “Allstar did not at any time from the date the PSA was signed through the present notify me that Allstar had selected an Escrow Holder and opened escrow for the transaction pursuant to the PSA. Allstar’s agent Jaclyn Theis did not at any time from the date the PSA was signed through the present notify me that Allstar had selected an Escrow Holder and opened escrow for the transaction pursuant to the PSA.” (Demos Decl. at ¶5.)

In its reply, Allstar attaches the deposition testimony of its broker, Jaclyn Theis, who testified that Allstar did select Pickford Escrow as its escrow company, but Demos raised a dispute regarding the use of Pickford Escrow and wanted to find an alternative company, which Allstar allowed him to do. (Reply Ex. A at 20:11; 21:4-14; 25:4-7.)

The Court finds there is a conflict in the evidence before it as to whether Allstar identified an escrow company such as to allow Demos to make the initial deposit as required by the purchase agreement. The evidence alternatively indicates Allstar identified Vanguard Title Insurance Agency as the escrow company, identified Pickford Escrow as the escrow company, or never identified an escrow company to Demos. The declaration of Demos and deposition testimony of Theis conflict as to whether Allstar ever notified Demos that it had selected an escrow company, and the email documentation submitted by Allstar fails to show Demos was notified that Allstar had selected a specific escrow company to use for the transaction. The Court cannot weigh conflicting evidence in ruling on a motion for summary judgment or adjudication, and thus the Court finds Demos has carried the burden shifted to him to demonstrate the triable issue of material fact as to whether he breached the purchase agreement by failing to make the $50,000 deposit by March 15 as required by the contract.

            2.         Third-Party Superseding Cause

Allstar argues it cannot be held liable for breach of contract because the Notices of Intent to Bid it received from Cox and Sunrise were third-party superseding causes which absolve Allstar from liability on the purchase agreement. However, as Demos correctly points out, this defense applies only in tort cases and will not absolve a defendant from liability on a contract. (Ash v. N. Am. Title Co. (2014) 223 Cal.App.4th 1258, 1274 [“The defense of intervening and superseding cause applies in tort cases. In contract cases, the defense does not absolve the defendant of liability”].) Accordingly, Allstar cannot reply on this theory to defeat Demos’ cause of action for breach of contract.

            3.         Impossibility or Impracticability of Performance

Allstar next contends its performance under the purchase agreement is excused under the doctrines of impossibility or impracticability. Allstar argues Cox and Sunrise’s Notices of Intent to Bid clouded title to the property. Allstar claims if it had performed under the purchase agreement after receiving the Cox and Sunrise notices, Demos and Allstar would have both been subjected to unreasonable difficulty, expense, injury, or loss because Demos would have been subject to a lawsuit to quiet title from Cox and/or Sunrise.

Demos responds that a party cannot assert the defenses of impossibility or impracticability where the alleged impossibility or impracticability arose as a result of that party’s own acts, decisions, or omissions. (Johnson v. Hapke (1960) 183 Cal.App.2d 255, 259 [“A person cannot avoid liability for the nonperformance of an obligation by placing such performance beyond his control by his own voluntary act”].) Demos also argues Allstar’s inability to secure Cox or Sunrise’s cooperation in transferring the property to Demos does not render Allstar’s performance impossible or impracticable. (Hensler v. City of Los Angeles (1954) 124 Cal.App.2d 71, 83 [“One who binds himself to a contract which cannot be performed without the consent or cooperation of a third person is not relieved of liability because of his inability to secure the required consent or cooperation”].)

The Court finds any impossibility or impracticability stemming from the Cox or Sunrise Notices of Intent to Bid arose from Allstar’s own decision to enter into the purchase agreement with Demos before the expiration of the mandatory waiting period under Civil Code § 2924m. It was Allstar’s own acts which thus gave rise to the alleged impossibility or impracticability. Allstar cannot avoid liability on the purchase agreement for its own actions which rendered its performance impossible or impractical. Even if the Court were to find Allstar was not ultimately the cause of the alleged impracticability or impossibility, at most Allstar has demonstrated is that it could not have performed under the agreement without the consent of Cox or Sunrise. However, as set forth above, Allstar’s inability to secure the consent or cooperation of third parties will not absolve it for liability for breaching the purchase agreement.

In its reply, Allstar argues its performance is currently rendered completely impossible by the preliminary injunction entered in the 21SMCV00756 action. The Court rejects this argument. The purchase agreement contemplated a close of escrow on March 31, 2021. (Ex. 17 to Haberstroh Decl.) Thus, the sale to Demos was to be consummated two months before the preliminary injunction was entered by the Court. While the preliminary injunction may render Allstar currently unable to perform under the contract, it did not prevent Allstar from closing escrow with Demos on March 31, 2021.

The Court finds Allstar has not established its performance under the contract is excused by the doctrines of impossibility or impracticability.

            4.         Rescission

Allstar claims it was entitled to rescind the March 4, 2021, foreclosure sale due to (1) an inequitable sale price and irregularity in the proceedings, or (2) mistake of law as to the applicability of Civil Code § 2924m. Demos argues Allstar has waived these affirmative defenses by not pleading them in its Answer and that even if the Court were to consider Allstar’s claims on their merits, Allstar has not shown how recission of the March 2021 foreclosure sale would relieve it of liability on the purchase agreement.

Ultimately, the Court need not address Demos’ waiver argument because it finds Allstar has failed to show how the recission, if valid, would relieve it of liability on the purchase agreement. Allstar’s argument appears to be that if the March 30 Notice of Recission is given effect, then the title to the property reverted to LDM and thus cannot be transferred by Allstar to Demos pursuant to the agreement. However, as Demos points out, “A party may lawfully agree to transfer property that he does not own and be compelled to secure and deliver it” or pay damages. (Pacific Hospital of Long Beach v. Lackner (1979) 90 Cal.App.3d 294, 297.) Moreover, Allstar is the one who recorded the Notice of Recission. As set forth above, Allstar cannot avoid liability on the contract by rendering its own performance impossible.

As the Court has rejected all of Allstar’s bases for summary adjudication on Demos’ cause of action for breach of contract, Allstar’s motion for summary adjudication of that cause of action is DENIED. As the Court cannot enter summary judgment on less than all of Demos’ claims, Allstar’s motion for summary judgment on Demos’ claims is DENIED as well.

            6.         Declaratory Relief

Allstar argues Demos’ claim for declaratory relief is derivative of his claim for breach of contract, and thus Allstar is entitled to summary adjudication on this claim for the same reasons it is entitled to summary adjudication on Demos’ claim for breach of contract. As the Court has found Allstar is not entitled to summary adjudication on that breach of contract claim, its motions for summary adjudication on the declaratory relief cause of action is DENIED as well.

            7.         Attorney’s Fees

Allstar also moves for summary adjudication of Demos’ claim for attorney’s fees, arguing Demos cannot claim attorney’s fees under the attorney fee provision contained in the purchase agreement because he refused to submit his claims to mediation with Allstar before filing this lawsuit. Code Civ. Proc. § 437c(f)(1) permits a party to move for summary adjudication of causes of action, affirmative defenses, issues of duties, or claims for damages “as specified in Section 3294 of the Civil Code.” (C.C.P. § 437c(f)(1).) Civil Code section 3294 concerns claims for punitive damages. Thus, a motion for summary adjudication under section 437c(f)(1) may only challenge a claim for punitive damages, not any claim for damages, such as Demos’ claim for attorney’s fees.

Under Code Civ. Proc. § 437c(t) “a party may move for summary adjudication of a legal issue or a claim for damages other than punitive damages” only if certain prerequisites are met. (C.C.P. § 437c(t).) These requirements include the filing of a joint stipulation by the parties whose claims are put at issue by the motion. (C.C.P. § 437c(t)(1).) This stipulation must be filed before the motion for summary adjudication is filed and must include a “A declaration from each stipulating party that the motion will further the interest of judicial economy by decreasing trial time or significantly increasing the likelihood of settlement.” (C.C.P. § 437c(t)(1)(A)(ii).) The Court must then determine whether to permit the filing or not. (C.C.P. § 437c(t)(2).)

Allstar has not demonstrated it has complied with the requirements of section 437c(t) in seeking summary adjudication of Demos’ claim for attorney’s fees. Allstar’s motion for summary adjudication of this claim is DENIED.

Conclusion

Allstar’s motion for summary judgment, or, alternatively, summary adjudication is DENIED.