Judge: Daniel S. Murphy, Case: 18STCV01201, Date: 2024-04-24 Tentative Ruling

Case Number: 18STCV01201    Hearing Date: April 24, 2024    Dept: 32

BACKGROUND

In October 2018, AMAG, Inc. (“Plaintiff”) commenced this action against Marc Anthony Cubas, et al. (“Defendants”), asserting causes of action for creditor’s suit, fraudulent conversion, and declaratory relief. The lawsuit stems from an underlying judgment wherein Vlaze was found liable to AMAG for unpaid loans. Marc Cubas was Vlaze’s CEO, and he allegedly made several fraudulent transfers of real and personal property to other Defendants to avoid debt collection. By this action, AMAG seeks to unwind these transfers and to apply these assets to the unpaid balance of the money judgment. The operative complaint is the First Amended Complaint (“FAC”) filed August 4, 2020, alleging fraudulent conversion and declaratory relief.

On October 28, 2021, the Court granted Defendants’ motion for summary judgment as to all Defendants except Omar Zambrano and the Zambrano Law Corporation. On February 2, 2022, default was entered against Vlaze pursuant to a November 11, 2021 court order striking its answer. Plaintiff appealed the grant of summary judgment.

In a decision dated November 6, 2023, the Court of Appeal affirmed in part and reversed in part. The Court of Appeal affirmed the Court’s decision as to most of the defendants, finding that Plaintiff had failed to present evidence demonstrating any transfer from the judgment debtor (Vlaze) to those defendants. However, the Court of Appeal reversed as to Marc Cubas and Injected Arts, finding a triable issue based on the possibility that Cubas and Injected Arts “did not provide rental income due to Vlaze under a 99-year lease of real property to Vlaze.” The Court of Appeal found that “AMAG demonstrated a triable question as to whether Vlaze’s long-term lease qualifies as an asset and whether Injected Arts and Cubas diverted the value of that asset.” The case was remanded to this Court for further proceedings.

On January 16, 2024, Marc Cubas and Injected Arts filed the instant motion for summary judgment. Plaintiff filed its opposition on April 10, 2024. Defendants filed their reply on April 19, 2024.     

LEGAL STANDARD

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 of Civil Procedure section 437c, subdivision (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.)

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. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) 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. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) 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.)

EVIDENTIARY OBJECTIONS

Plaintiff’s Objections to Defendants’ Evidence

• Declaration of Kevin Kulbacki
• The following objections are sustained: Paragraphs 12-14.
• The following objections are overruled: Paragraphs 15-16.

• Report of Kevin Kulbacki (Exhibit A)
• The following objections are sustained: Paragraphs 1-3.
• The following objections are overruled: Paragraphs 4-5.

• Declaration of Sydney Cubas
• All objections are sustained.

• Declaration of Marc Cubas
• All objections are sustained.

• Declaration of Nadia Nino
• All objections are sustained.

• Declaration of Omar Zambrano
• All objections are sustained.

• Requests for Judicial Notice
• The objections to Exhibits G, H, and I are sustained.

• Compendium of Exhibits
• The objections to Exhibits C and E are sustained.

Defendants’ Objections to Plaintiff’s Evidence

·       Defendants’ objections are overruled.

DISCUSSION

            Based on the appellate opinion, the sole issue on remand is a potential fraudulent transfer based on the purported 99-year lease. Defendants move for summary judgment on the grounds that the lease is invalid and therefore there was no “transfer” of an “asset” for purposes of fraudulent transfer.

Defendants offer four independent reasons why the lease is invalid. First, the pertinent signatures were forged. Second, Marc Cubas had no authority to enter into a lease because he did not own the property and was not otherwise authorized. Third, Vlaze’s failure to pay the security deposit voided the lease ab initio. And fourth, the property listed on the lease as 2124, 2126, 2128 and 2130 Bellevue is a residential quadruplex even though the location is zoned for commercial use, meaning the lease was formed for an illegal purpose. Defendants also argue that Plaintiff did not mention the purported lease in its FAC or discovery responses.

                        1. Signatures

            The signatures on the lease are of Marc Cubas and Susana Cubas, but both deny signing the lease or even being aware of it. (UF 1-4.) Defendants’ expert concludes it is “highly probable” that the signatures were cut and pasted from other documents. (UF 5-6.) However, Defendants’ expert report also acknowledges that it is based on “examination of poor-quality reproductions of the documents” and that “certain types of evidence cannot be examined from non-original documents.” (Def.’s Ex. A, p. 3.) The expert “request[ed] the submission of the original, written ink on paper or higher-quality reproductions of Items 1 through 6 for further examination” and “reserve[d] the right to issue a supplemental report based on the submission of additional evidence that may address this limitation.” (Ibid.) There is no indication that the originals were ever submitted to or examined by the expert. A reasonable trier of fact may find that the expert report is inconclusive and does not prove forgery occurred. Additionally, Plaintiff’s opposing expert report concludes that the signatures were not cut and paste. (Wakshull Decl.) This conflicting evidence raises a factual dispute for the trier of fact to resolve. The defense expert’s supplemental declaration only adds to the factual dispute. The credibility of Plaintiff’s expert is itself a matter for the trier of fact.  

            Additionally, a former executive and custodian of records for Vlaze, Anastasiia Arseneva, avers that she obtained the lease from Vlaze’s business records. (Arseneva Decl. ¶ 5.) Ms. Arseneva also avers that Vlaze paid the $10,000 monthly rent under the lease. (Id., ¶ 6.) Lastly, Ms. Arseneva avers that Susana Cubas had a signature stamp. (Id., ¶ 7.) “Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.” (Evid. Code, § 1400.) “A writing may be authenticated by evidence that . . . [t]he writing has been acted upon as authentic by the party against whom it is offered.” (Evid. Code, § 1414(b).) “The means of authenticating a writing are not limited to those specified in the Evidence Code. For example, a writing can be authenticated by circumstantial evidence and by its contents.” (Hart v. Keenan Properties, Inc. (2020) 9 Cal.5th 442, 450.)

Ms. Arseneva’s declaration, viewed in the light most favorable to Plaintiff, establishes the lease as a document from Vlaze’s business records that was treated as authentic. The evidence also suggests that the identical signatures may have been generated by a stamp rather than forgery. This is sufficient to raise a factual dispute as to the authenticity of the lease. Ms. Arseneva’s credibility is itself a matter for the trier of fact. The Court does not weigh evidence on summary judgment. Even without Ms. Arseneva’s declaration, the testimony of Plaintiff’s expert (which Defendants do not object to) is sufficient to raise a factual dispute, as discussed above.      

                        2. Marc Cubas’ Ownership

            While Marc Cubas did not own the property located at 517 Alvarado and 2116 Bellevue at the time the purported lease was executed (UF 7), he did acquire a joint tenancy interest in the property shortly after (AF 1). Additionally, Cubas does not deny owning the other property subject to the lease (2124, 2126, 2128 and 2130 Bellevue). (See AF 2.) A trier of fact may reasonably infer from this evidence that Marc Cubas had authority to lease the property for purposes of fraudulent transfer.

                        3. Security Deposit

            The lease required a security deposit “concurrently with the Tenant’s execution of this lease.” (Def.’s Ex. B, § 2.02.) It is undisputed that Vlaze did not pay this deposit. (UF 9.) However, the lease also defines default as the “failure to pay any installment of Rent or any other sum due on the date when such payment is due, with such failure continuing for a period of three (3) days after written notice of such delinquency.” (Def.’s Ex. B, § 6.01(b).) Additionally, the lease provides that in the event of default, the Landlord (defined in the agreement as Marc Cubas) “shall have the right to immediately terminate this lease and all rights of Tenant hereunder by giving written notice to Tenant of such election by Landlord.” (Id., ¶ 7.01.) There is no indication that Marc Cubas provided written notice of delinquency or written notice of his election to terminate the lease. A trier of fact may reasonably find that the lease remained valid despite Vlaze’s failure to pay the security deposit. 

                        4. Zoning

            The lease does not identify the specific use for the subject properties. Instead, the lease provides that the property would be used “for any lawful purpose” and that Tenant’s use shall not “in any way conflict with any law, ordinance, rule or regulation.” (Def.’s Ex. B, §§ 3.01, 3.02.) The lease also requires Tenant to “comply with all of the requirements of all municipal, state and federal authorities.” (Id., § 3.04.) Therefore, Defendants have not established as a matter of law that the lease was formed for residential purposes in violation of commercial zoning. Additionally, Defendants’ cited evidence appears to show that the location is zoned for residential. (See Def.’s Ex. F.) Thus, a triable issue remains as to whether the lease contemplated an unlawful purpose. 

                        5. FAC and Discovery Responses

            Defendants argue that Plaintiff cannot rely on the purported 99-year lease to formulate a triable issue because the lease was not alleged in the FAC or mentioned in Plaintiff’s discovery responses. However, the Court of Appeal has expressly held that Plaintiff could demonstrate a triable issue with regards to the lease. Additionally, Plaintiff is entitled to amend the complaint, even during trial, to conform to the evidence. (See Garcia v. Roberts (2009) 173 Cal.App.4th 900, 909.)

CONCLUSION

            Defendants Marc Cubas’ and Injected Arts Inc.’s motion for summary judgment is DENIED.