Judge Edward B. Moreton, Jr, Case Number: 24SMCV05526, Date: 2025-03-13 Tentative Ruling

Judge: Edward B. Moreton, Jr, Case: 24SMCV05526, Date: 2025-03-13 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

ALL GOOD REAL ESTATE, LLC,

Plaintiff,

THE 10786 MISSOURI AVE, LLC, et al.,

Defendants.

Case No.: 24SMCV05526

Hearing Date: March 13, 2025

[TENTATIVE] order RE:

DEFENDANT’s MOTION TO EXPUNGE

lis pendens

This case arises out of a real estate transaction. Defendant The 10786 Missouri Ave, LLC (“Seller”) owns the real property located at 10786 Missouri Ave, Los Angeles, CA 90025 (the “Property”). In December 2023, Seller listed the Property for sale. (Zacky Dec., ¶3.) Plaintiff So Good Real Estate, LLC (“Buyer”)1 submitted an offer to buy the Property for $4.2 million. (Id. at ¶4.) Buyer planned to redevelop the Property and nearby properties as affordable housing. Seller accepted Buyer’s offer and returned a counter-signed copy of the Purchase Agreement to Buyer’s agent. (Id. at ¶5; Ex. 1 to Zacky Decl.)

On March 8, 2024, the parties entered into Addendum No. 1 to the Purchase Agreement (“Addendum 1”). (Ex. 2 to Zacky Decl.) Addendum 1 clarified that escrow would close in 60 days, but provided for additional time as follows: “Additional time/deposit: Buyers escrow is 60 days, however, buyer may extend escrow 30 days up to 5 times for a total of 150 days. Buyer must place an additional deposit equal to 1.5% of purchase price ($63,000) into escrow and release said deposit to seller non refundable out of escrow in increments of $12,600 for each 30 day extension. Additional deposit funds will apply towards purchase but will be forfeited if buyer does not close the escrow. For every day escrow is delayed past the approved extension period (150 Days past the original 60 days), buyer to pay an $800 per day extension fee for a maximum of 30 days that does not apply towards purchase price.” (Id.)

The parties dispute when escrow was to close. Seller claims that per Addendum 1, escrow was to close on or before May 7, 2024. (Zacky Decl. ¶¶ 7-8, Ex. 2 to Zacky Decl.) Provided that the $63,000 additional deposit was made, escrow could be extended to October 4, 2024 with increments of $12,600 released to Seller on May 7, 2024, June 6, 2024, July 6, 2024, August 5, 2024, and September 4, 2024 respectively. (Id.)

Meanwhile, Buyer claims that the parties agreed escrow was to close on July 8, 2024, per amended escrow instructions. (Nissani Decl. at ¶ 12, Ex. 7.) Thus, contrary to Seller’s assertions, escrow could be extended to December 8, 2024, with increments of $12,600 released to seller on July 8, 2024, August 8, 2024, September 8, 2024, October 8, 2024 and November 8, 2024.

Seller next claims, Buyer did not waive contingencies by April 4, 2024 as required, and thus on May 1, 2024, Seller sent to Buyer “Notice To Buyer To Perform No. 1”, demanding that all contingencies be waived. (Zacky Decl. at ¶9, Ex. 3 to Zacky Decl.) Buyer claims the deadline to waive was actually April 28, 2024. (Nissani Decl. at ¶ 7, Ex. 3.) Regardless, Buyer submitted a “Request for Repair No. 1” (“ROR 1”) and corresponding “Buyer Contingency Removal No. 1” (“CR 1”) on May 6, 2024. Via ROR 1, Buyer offered to remove all contingencies in exchange for a reduction in the purchase price to $4,060,000.00. (Zacky Decl. at ¶10.) On May 8, 2024, Seller executed ROR 1, and all contingencies were removed as of that date per CR 1. (Id. at ¶11, Ex. 4.)

Buyer claims that because the Seller signed the ROR 1 on May 8, 2024, escrow was to close by 60 days after the due diligence period, or by July 8, 2024. Buyer claims under Addendum No. 1, the 60 day escrow can be reasonably construed to mean a close of escrow 60 days after the expiration of a 30 day due diligence period and waiver of contingencies by Buyer. According to Buyer, it did not waive contingencies until May 8, 2024, so escrow was to close by July 8, 2024.

Seller next claims Buyer did not deposit the additional $63,000 as required by Addendum 1 by May 7, 2024, the date Seller claims escrow was to close. (Id. at ¶12.) In light of Buyer’s failure to make the required additional $63,000 deposit on May 29, 2024, Seller submitted to Buyer “Notice to Perform No. 2”, demanding that Buyer deliver the increased deposit of $63,000 per Addendum 1. (Id. at ¶13, Ex. 5.) Buyer failed to make the further deposit or to close escrow, and on July 17, 2024, Seller submitted to Buyer a “Demand to Close Escrow”. (Id. at ¶14, Ex. 6 to Zacky Decl.) Buyer did not close escrow as demanded. (Id. at ¶14.)

On August 8, 2024, Seller submitted to Buyer a “Cancellation of Contract” due to Buyer’s alleged failure to close escrow and corresponding failure to deposit the increased deposit — which was a condition precedent to extending escrow. (Id. at ¶15, Ex. 7 to Zacky Decl.) In response, on August 12, 2024, Buyer submitted Addendum No. 2 to Seller proposing to amend Addendum 1 in relevant part as follows: “Addendum #1 is amended as follows: buyer may exercise its extensions by depositing and releasing $12,600 for each extension (instead of one lump sum of $63,000 for all five extensions). Each $12,600 shall be deposited in escrow at least 2 days prior to the due date and released to Seller without any further instructions from either party. Upon signing of this addendum, Buyer has to deposit $25,200 for the two extension options that has already been exercised. Escrow Holder is authorized and instructed to immediately release the entirety of the $12,600.00 additional deposit to the Seller without any further written or verbal Instruction needed from either party.” (Id. at ¶¶15-16, Ex. 7 to Zacky Decl.) On August 13, 2024, Seller executed and returned Addendum 2 still hoping to close the transaction. (Id. at ¶¶15-16, Ex. 8 to Zacky Decl.)

On August 24, 2024, Buyer deposited an additional deposit of $25,200. Seller claims these amounts were for the May 6, 2024 and June 6, 2024 escrow extensions. (Id. at ¶18.) And Buyer failed to deposit the escrow extension money for July and August, and an additional $12,600 on September 2, 2024 per Addendum 2. (Id. at ¶19.) In opposition, Buyer claims that the $25,200.00 was due for the July 8, 2024 and August 8, 2024 escrow extensions, and therefore, it had until September 8, 2024 to make the next escrow extension payment. (Nissani Decl. at ¶¶ 15-16, Ex. 10.)

On August 28, 2024, before the expiration of the September 8 deadline, Buyer provided to Seller a proposed Letter of Authorization (“LOA”) for Seller’s signature. (Id. at ¶ 17, Ex. 11.) Buyer claims that pursuant to Addendum No. 1, Seller was required to promptly sign and return the LOA, which was critical to Buyer’s application for required approvals by the City of Los Angeles for the Property and to Buyer’s business plan for the Property. (Id. at ¶ 17.) After receiving the LOA, Seller refused to sign or agree to it, which Buyer claims breached Addendum No. 1, which required Seller to “cooperate with buyer in its efforts to achieve its business plans by signing required documents that a city, county, state or other governmental agency may require to be signed by seller.” As of August 28, 2024 and shortly thereafter when Seller refused to sign the LOA, Buyer claims Seller materially breached a critical provision that went to the core of the Parties’ Agreement, thereby excusing any remaining performance due from Buyer.

On September 12, 2024, Buyer proposed Addendum 3. Addendum 3 required Defendant to sign the LOA. In exchange, Buyer agreed to “defend and hold harmless the seller for any all damages that may arise from the processing of buyers business plan.” Buyer also agreed to “reimburse the seller for the attorney fees of $400 per hour to review the Letter of Authorization and application up to $2000.” Addendum 3 further provided “[i]t is the Buyer’s complete responsibility to hold the Seller harmless as it relates to the Buyer’s Application to the City of Los Angeles, for the ED-1, and of any ensuing requests or complications that the City of Los Angeles or any of its agencies may require.” (Nissani Decl. at ¶ 19.) Buyer claims Seller at first agreed to Addendum 3 but later refused to sign it. (Nissani Decl. at ¶ 19.)

Meanwhile, Seller argues that the LOA was not required by Addendum 1. Addendum 1 required only that Seller sign application forms required by the city, county, state or other governmental agency in the furtherance of Buyer’s business plan – provided that doing so “would not adversely affect seller or property should buyer not perform.” But Seller claims Buyer instead demanded that Seller sign a blanket authorization allowing Buyer to sign any application form itself on Seller’s behalf. Seller argues that its refusal to sign the LOA or Addendum 3 was not a breach. And in any event, Seller argues that at the time Addendum 3 was proposed, Buyer was already in default under the Purchase Agreement due to its failure to deposit funds into escrow to secure additional extensions of the escrow close date. (Zacky Decl. at ¶26.)

On September 20, 2024, when escrow still did not close, Seller submitted to Buyer a second Demand to Close Escrow. (Id. at ¶20, Ex. 9 to Zacky Decl.) Buyer did not close escrow as demanded. (Id. at ¶20.) On September 30, 2024, Buyer attempted to make a further deposit of $12,600.00. However, this deposit was rejected and returned as delinquent. (Id. at ¶21.) On October 15, 2024, 161 days past the original close date of May 7, 2024, and 101 days beyond the two 30-day extensions, Seller submitted to Buyer a second Cancellation of Contract due to Buyer’s failure to close escrow. (Id. at ¶22, Ex. 10 to Zacky Decl.) On October 17, 2024, Buyer attempted to make another further deposit of $12,600.00. However, this deposit was rejected and returned because escrow had been canceled on October 15, 2024, two days earlier. (Id. at ¶ 23.)

This action ensued. Plaintiff alleged Defendant represented it would sign Addendum 3 but failed to do so, in breach of the Seller’s cooperation clause in the Purchase Agreement. The operative complaint alleges claims for breach of contract and specific performance. Plaintiff also recorded a lis pendens on the Property.

This hearing is on Seller’s motion to expunge lis pendens. Seller argues that Buyer’s claims lack probable validity because it was Buyer (not Seller) who defaulted on the Purchase Agreement, resulting in the cancellation of the contract, and in any event, Plaintiff lacks standing because it is not a party to the Purchase Agreement and there is no evidence of an assignment.

EVIDENTIARY OBJECTIONS

The Court overrules Seller’s objections to the Declaration of Hooman Nissani. The crux of Seller’s objections is that it doubts Nissani has personal knowledge even though Nissani attests he “acted on behalf of the Buyer in connection with the purchase of the real property located at 10786 Missouri Ave., Los Angeles, CA 90025 (the “Property”).” According to Seller, Buyer was required to provide an “explanation of the scope [Nissani’s] agency or any foundation to support this purported agent’s role in the transaction.” The Court disagrees. The declaration sufficiently states the foundation for Nissani’s personal knowledge in that he attests he acted on behalf of Buyer in connection with the transaction at issue in this case.

“A party to an action who asserts a real property claim may record a notice of pendency of action in which that real property claim is alleged.”¿(Code Civ. Proc., § 405.20.) The purpose of lis pendens is to “give notice that a lawsuit has been filed which may, if that person prevails, affect title to or possession of the real property described in the notice.”¿(Fed. Deposit Ins. Corp. v. Charlton (1993) 17 Cal.App.4th 1066, 1069.)

“The lis pendens procedure¿[is] susceptible to serious abuse, providing unscrupulous Plaintiffs with a powerful lever to force the settlement of groundless or malicious suits.”¿(Malcolm v. Superior Court (1981) 29 Cal.3d 518, 524.) “In order to alleviate potential abuses in the filing of lis pendens claims, the Legislature created prejudgment procedures for their expungement.”¿(Id.¿at 524-25.) Therefore, “[a]t any time after notice of pendency of action has been recorded, any party, or any nonparty with an interest in the real property affected thereby, may apply to the court in which the action is pending to expunge the notice.”¿(Code Civ. Proc., § 405.30.)

A court shall order expungement of a lis pendens if the pleading on which it is based does not state a real property claim, if the claimant fails to establish the probable validity of the real property claim, or if the giving of an undertaking would secure adequate relief to the claimant.¿ (Id.¿§§ 405.31,¿405.32,¿405.33.) ¿“Probable validity ‘means that it is more likely than not that the claimant will obtain a judgment against the defendant on the claim.’” (De Martini, 98 Cal.App.5th at 1279.)

The Court first addresses the threshold question of whether Plaintiff has standing to enforce the Purchase Agreement. Plaintiff is listed as “All Good Real Estate, LLC” while the Buyer on the Purchase Agreement is identified as “So Good Real Estate, LLC.” Plaintiff maintains this was a typographical error by its counsel, and that it is in fact So Good Real Estate, LLC. In the face of this argument, Seller appears to have abandoned its standing challenge as it does not raise it any further in reply. Given Plaintiff’s representation that it is actually “So Good Real Estate, LLC”, the Buyer in the Purchase Agreement, the Court finds Plaintiff has standing.

The Court turns now to the merits of the motion. Seller argues that the lis pendens should be expunged because Buyer cannot establish the probable validity of its claims. The Court agrees.

Seller argues escrow was to close by May 7, 2024, and to the extent Buyer wanted to extend escrow, it was required to make escrow extension payments on May 7, 2024, June 7, 2024, July 7, 2024, August 7, 2024, and September 7, 2024. Seller claims Buyer only made two extension payments, and therefore, escrow closed by July 7, 2024. Because Buyer failed to close escrow by that date, Buyer breached. Meanwhile, Buyer claims that escrow was to close by July 8, 2024, and it made two escrow extension payments, which meant escrow was actually to close by September 8, 2024.

Buyer bases its July 8 date on two arguments: (1) the parties agreed to the July 8 date via amended escrow extensions, and (2) the 60 day escrow run from the expiration of a 30 day due diligence period and waiver of contingencies by Buyer, which was not waived until May 8, 2024, so escrow was to close by July 8, 2024. As to (1), Seller argues that the amended escrow extensions are not part of the Purchase Agreement, which could only be amended by written, signed addenda. As to (2), Seller rejects Buyer’s interpretation that the escrow period does not begin until the due diligence period ends, because “there is nothing in the addendum to suggest that escrow starts at the expiration of the 30-day due diligence period. Due diligence is part of escrow in every real estate transaction, so this is a very strange position to attempt to assert.”

Ultimately, the Court need not resolve whether the escrow period was to end on May 7, 2024 or July 8, 2024, because even accepting Buyer’s theory that escrow was not to close until July 8, 2024 (subject to further extensions), the real issue is whether Seller breached the agreement by refusing to sign the LOA and Addendum 3 before September 8, 2024. As to this issue, the Court concludes Buyer has not met its burden of proof.

Buyer’s theory is that because Seller breached the agreement on August 28, 2024 when it refused to sign the LOA, Buyer was excused from performing on September 8, 2024. Buyer claims that Seller was required to sign the LOA per the cooperation clause in the Purchase Agreement. But the cooperation clause only required the Seller to sign application forms required by the city or other governmental agencies “which did not adversely affect seller or property should buyer not perform.” The LOA was not an “application form” required by a governmental agency. Also, the proposed LOA was a blanket consent for Buyer to act as Seller’s agent in connection with any Residential/Multifamily Development application forms. (Zacky Dec., ¶25.) It did not contain the limitation that Seller need not sign the application form if it adversely affected the Seller or Property should Buyer not perform.

Accordingly, even accepting Buyer’s version of events regarding the expiration of the escrow period, the Court cannot conclude that the preponderance of the evidence supports a finding that Seller breached by not signing the LOA or Addendum 3.