Judge: Elaine W. Mandel, Case: 22SMCV00870, Date: 2024-02-07 Tentative Ruling

Case Number: 22SMCV00870    Hearing Date: March 12, 2024    Dept: P

Tentative Ruling

Wolf v. Kohen et al., Case No. 22SMCV00870

Hearing Date March 12, 2024

Defendants Jerry Kohen, Orit Kohen & Adir Haroni’s Motion for Summary Adjudication/Summary Judgment

Plaintiffs Daniella and Yaakov Wolf operated apparel business Why U. Third-party Eisenberg, a business associate, introduced the Wolfs to defendant Jerry Kohen, whose company American Waste was engaged to provide funds to pay for orders of products and materials. In 2005 the Wolfs signed a promissory note for $500,000 in favor of Jerry and Orit Kohen, secured by a deed of trust on the Wolfs’ home. Between 2005 and 2015, Yaakov Wolf made payments toward satisfaction of the purported debt. In 2016, the Kohens assigned the note and deed of trust to defendant Haroni.

The Kohens argue the Wolfs repeatedly drew on a line of credit created by the promissory note; the Wolfs argue Eisenberg drew on the line of credit without the Wolfs’ knowledge or permission.

Plaintiff Daniella Wolf sues for declaratory relief and quiet title, arguing the note and deed of trust are invalid, neither she nor Yaakov Wolf owes the Cohens or Haroni any money, and no defendant has a security interest in her property. Defendants move for summary judgment and/or summary adjudication, arguing laches and equitable estoppel.

Laches

Under the doctrine of laches, relief is barred for plaintiffs who unreasonably delay in bringing a claim and cause substantial prejudice to the opposing party through their delay. Huang v. Wells Fargo Bank (2020) 48 Cal.App.5th 431, 440. The expense of hiring a lawyer to pursue a claim can be considered in determining whether a delay was reasonable. E.g., Hahn v. Board of Ed. (1988) 205 Cal.App.3d 744, 753.

Defendants argue undisputed evidence shows the promissory note and deed of trust were signed in 2005, and plaintiff delayed nearly two decades in bringing this action, so it is barred by laches. They present evidence of prejudice as a result of this delay, as documents and accounting records associated with the 2005 loan have been lost over time. Abrams decl. ¶4. Defendants argue important witnesses are no longer available; Kohen’s accountant died, and the identity of the Wolfs’ bookkeeper has been forgotten.

Plaintiff cites Connolly v. Trabue (2012) 204 Cal.App.4th 1154, wherein the court held “clearly a quite [SIC] title action is now considered to be one in law, not equity, and hence the doctrine of laches cannot apply.” Id. 1167. Defendants argue plaintiff’s Connolly argument is barred by judicial estoppel, given the arguments in her own MSJ.

Defendants are correct Wolf is estopped from making contradictory arguments in her own MSJ and opposition to defendants’ motion herein. That is not the situation, however. In her MSJ, Wolf argued defendants were barred from enforcing the note and deed of trust because they waited almost twenty years to try to enforce it. In this motion, she argues estoppel cannot be a defense in a quiet title action, since quiet title is a legal, not equitable, cause of action. The arguments are different; Wolf is not estopped from raising them.

There is ambiguity in the case law about whether a laches defense can apply to a quiet title action. Connolly holds it cannot, reasoning that quiet title is an action at law, not equity. More recent cases hold otherwise. Huang v. Wells Fargo Bank (2020) 48 Cal.App.5th 31 cited Muktarian v. Barmby (1965) 63 Cal.2d 558 for the principle that “[i]n a quiet title action, ‘the party in possession runs the risk that the doctrine of laches will bar his action to quiet title if his delay in bringing action has prejudiced the claimant.” Huang, supra, 48 Cal.App.5th at 441. This is arguably dicta but reflects an understanding that quiet title is an equitable cause of action, subject to a laches defense.

Ultimately, Connolly is distinguishable. There, the court determined laches was unavailable as a defense because plaintiffs’ action was at law, not equity. The court reasoned that plaintiffs sought to “determine the existence of an easement by prescription,” which is “an action at law and not at equity.” Connolly, supra, 204 Cal. App.4th at 1164. No easement is sought here, so Connolly is not applicable.

The court relies on the more recent Huang case, holding laches is available as a defense in an equitable action for quiet title. Defendants provided uncontroverted evidence of prejudice as a result of plaintiff’s delay in the form of lost evidence and witnesses. Abrams decl. ¶3-4, exh. 1-2.

Unless plaintiff presents evidence the delay was reasonable, summary judgment on the laches defense is appropriate. Plaintiff argues her delay was reasonable due to an inability to pay for a lawyer, citing Hahn v. Bd. of Education (1988) 205 Cal.App.3d 744, 753 for the proposition that the “expense involved” in a lawsuit can be considered when determining whether a delay was reasonable. In Hahn the delay was five months. Here, the delay was eleven years, if the delay is dated from the date of defendants’ demand letter, and as long as sixteen years. Abrams decl. ¶15.

Hahn found a five-month delay was not unreasonable “[g]iven the concerns which a plaintiff must weigh before undertaking legal action,” which included the cost of litigation. Hahn’s reasoning is not applicable to a delay of at least eleven years. Between 2005, when the loan was made, and 2022, when this action was filed, the Wolfs never repudiated the loan, the deed of trust or the note. They did not repudiate it after defendants sent a demand letter in 2011.

The Wolfs never told the Kohens they did not believe they owed them money until this lawsuit was initiated. To the contrary, on multiple occasions Yaakov Wolf told Jerry Kohen he intended to pay off the loan. In the interim, evidence and witnesses were lost. The Wolfs’ delay was unexplained and unreasonable, and it resulted in actual prejudice. Summary adjudication is proper as to the laches affirmative defense. GRANTED.

Estoppel

The elements of an estoppel defense are “(1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended, (3) the other party must be ignorant of the true state of facts, and (4) he must rely upon the conduct to his injury.” Kleinecke v. Montecito Water Dist. (1983) 147 Cal.App.3d 240, 246.  

Defendants argue the quiet title claim is barred by estoppel because of Jacob Eisenberg’s repeated acknowledgment of the debt. Defendants state they relied on these acknowledgments to their injury by forbearing collection or foreclosure on the DOT. Defendants failed, however, to present evidence that this reliance was reasonable, given that the Wolfs did not pay for several years leading up to this action. DENIED.

Wolf’s Motion for Summary Judgment (under submission)

At the hearing, the Wolfs reiterated arguments that Eisenberg lacked authority to act on Why U’s behalf or incur debts on behalf of Why U. Counsel argued Eisenberg acted only as a vendor. Counsel also argued there was no signed writing, in violation of the statute of frauds.

For ten years, there was no repudiation of the debt, and payments were made. On summary judgement, ambiguous evidence is interpreted in favor of the non-moving party. The motion is DENIED, and the tentative becomes the order of the court.