Judge: Gary Y. Tanaka, Case: 21TRCV00016, Date: 2022-09-26 Tentative Ruling

Case Number: 21TRCV00016    Hearing Date: September 26, 2022    Dept: B

PROCEEDINGS

1301 Capital Partners, LLC v. Libiano Construction, Inc., et al.  

21TRCV00016

1. Mark Libiano and Kayo Libiano’s Motion for Summary Adjudication     

        

   TENTATIVE RULING

           

               Mark Libiano and Kayo Libiano’s Motion for Summary Adjudication is denied.

    

               Background

    

               Plaintiff filed the Complaint on January 7, 2022.  Plaintiff alleges the following facts.  Plaintiff, as lender, and Defendant Libiano Construction, as borrower, entered into a Liquidity Support Agreement and Promissory Note in the principal amount of $500,000. Defendants Mark Libiano and Kayo Libiano executed a Personal Guaranty guaranteeing the obligations of Libiano Construction.  Defendants attempted to defraud Plaintiff out of the benefits of the loan.  As compensation for the loan, Defendants agreed to pay Plaintiff two elements of interest: (1) ten percent premium on the principal amount, and (2) one half of the profits that the Defendant contractor would earn from a construction project related to the loan.  Defendants earned profit from the construction project in the amount of $1,889,228.03 but represented that they only earned $254,648.72.  Plaintiff alleges the following causes of action: 1. Breach of Written Contract; 2. Accounting and Inspection of Books and Records; 3. Specific Performance for Assignment of Rents in Deed of Trust; 4. Judicial Foreclosure; 5. Conversion; 6. Fraud.

    

               Request for Judicial Notice

    

               Defendants’ request for judicial notice is granted pursuant to Evidence Code sections 452(d) and (h).

    

               Objections

    

               Declaration of Rick Siebert:

               Objections to paragraphs 4-6, 12, 13, and 15 to 21 are sustained.  The Court notes that much of the objectionable portions of the declaration simply dealt with the amounts allegedly owed to Plaintiff under the profit-sharing provision of the promissory note.  This is not actually relevant for purposes of this motion, although it may be relevant for the trier of fact.

    

               Objections to paragraphs 7, 8, 10, and 14 are overruled.

    

               Motion for Summary Adjudication

    

               The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (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.)

    

               “On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal. App. 4th 1510, 1519.)  A defendant moving for summary judgment or summary adjudication “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 . . . cannot be established, or that there is a complete defense to the cause of action.”  CCP § 437c(p)(2).  “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 the cause of action or a defense thereto.” CCP § 437c(p)(2).  “If the plaintiff cannot do so, summary judgment should be granted.”  Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal. App. 4th 463, 467.

    

               “A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff or cross-complainant has met that burden, the burden shifts to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” Code Civ. Proc., § 437c(p)(1).

    

               “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Avivi, 159 Cal.App.4th at 467; CCP § 437c(c).)

    

               “If made in the alternative, a motion for summary adjudication may make reference to and depend on the same evidence submitted in support of the summary judgment motion. If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” Cal. Rules of Court, Rule 3.1350(b).

    

               Defendants move for summary adjudication of the third and fourth causes of action. The motion is based on the grounds that Plaintiff is not entitled to the relief sought by the third and fourth causes of action because the underlying deed of trust at issue must be released and reconveyed to Defendants.  Defendants argue that the deed of trust must be discharged because the sum secured therein has been satisfied by the Defendants timely repayment of the full amount of the $500,000 loan principal with 10% interest thereon, and/or if the Court determines that there is a principle amount outstanding, Defendants shall tender same with 10% interest to release said deed of trust.

    

               Defendants’ motion for summary adjudication is denied. First, the motion is procedurally defective because Defendants failed to comply with mandatory Rule 3.1350(b).  The specific cause of action, affirmative defense, claims for damages, or issues of duty sought to be adjudicated in the notice of motion were not repeated verbatim in the separate statement of facts.  The notice of motion states that Defendants specifically seek to adjudicate the following: “(i) the Third Cause of Action for Specific Performance For Assignment of Rents in Deed of Trust; and (ii) the Fourth Cause of Action for Judicial Foreclosure alleged in Plaintiff 1301 CAPITAL PARTNERS, LLC’s (“Plaintiff”) Complaint.”  (Notice of Motion, page i, line 28, page ii, lines 1-2.)  However, the issues sought to be adjudicated were not repeated verbatim in the separate statement of facts.

    

               Instead, the issues sought to be adjudicated in the separate statement of facts is stated as follows: “The Assignment Of Rents And Judicial Foreclosure Causes Of Action Must Fail Because The Deed Of Trust Only Secures The “Note Amount” With 10% Interest Thereon, And Defendants Timely Repaid Plaintiff Such Amounts” and “The Assignment Of Rents Cause Of Action Also Fails Because Defendants Previously Assigned Rents To Another Creditor Through The First Deed Of Trust.”  These are not issues sought to be adjudicated but the reasons or grounds as to why Defendants may be seeking adjudication of the third and fourth causes of action.

    

               As to the substantive portion of the motion, Plaintiff has provided competent evidence to demonstrate that a triable issue of material fact exists as to the third and fourth causes of action.  (Plaintiff’s Separate Statement of Facts and Supporting Evidence, 2, 6, 10-13, 16.)

    

               Pursuant to the express provisions of the Liquidity Support Agreement and Promissory Note, interest is defined as follows: “Interest. Interest shall accrue on all outstanding and unpaid amounts on the Loan at the rate of ten percent (10%) per annum (the "Loan Rate"), compounded annually, until this Promissory Note is paid in full. Additionally, Lender shall receive fifty percent (50%) of the profits from the Project, after interest payments on note and actual costs of the work and approved overhead costs in accordance with generally accepted accounting principles. Lender is making this Loan in consideration, at least in part, on the promises and obligations contained within the Guaranty and the Deed of Trust.”  (Defendants, Ex. D, para. 2.)  Defendants contend that the second portion of this provision referring to the fifty percent of profits does not constitute as interest.  However, a triable issue of material fact exists as to whether this portion of the promissory note constitutes interest.  The provision was specifically included in the interest provision of the note.

    

               Civ. Code, § 1915 states: “Interest is the compensation allowed by law or fixed by the parties for the use, or forbearance, or detention of money.” Cal. U. Com. Code, § 3112(b) states: “Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.” Pursuant to these statutory provisions, a triable issue of fact exists as to whether the fifth percent profit sharing provision could qualify as interest under the promissory note. Defendants deny that this constitutes interest, but, instead, believes that this was simply a separate provision of the promissory note. However, a triable issue of material fact exists. This provision was included in the “interest” portion of the note, and may qualify as “interest” under the applicable statutory provisions.

    

               As noted by Defendants in the separate statement of facts, number 5: “The Second Deed of Trust states that it’s “For the Purpose of Securing: 1. Performance of each agreement of Trustor incorporated by reference or contained herein. 2. Payment of the principal sum of $500,000 with interest thereon evidenced by one promissory note of even date herewith. ...”  Thus, the Second Deed of Trust is secured not only by the principal sum, but with interest evidenced by the promissory note.  As noted above, a triable issue of material fact exists as to whether that “interest” also includes the profit-sharing mechanism noted above.

    

               Defendants also argue that Defendants’ assignment of rents for the Property to the first deed of trust creditor prevents Plaintiff’s seizure of rents under the subordinate second Deed of Trust.  Defendants cite to Kinnison v. Guaranty Liquidating Corp. (1941) 18 Cal.2d 256, 264.  However, this case was decided prior to the enactment of CC § 2938.  Under the statutory scheme of CC § 2938, multiple assignees may enforce the assignments.

    

               “Delivery to the assignor of a written demand for the rents, issues, or profits, a copy of which shall be mailed to all other assignees of record of the leases, rents, issues, and profits of the real property at the address for notices provided in the assignment or, if none, to the address to which the recorded assignment was to be mailed after recording.” Civ. Code § 2938(c)(4)

    

               “If an assignee elects to take the action provided for under paragraph (3) of subdivision (c), the demand provided for therein shall be signed under penalty of perjury by the assignee or an authorized agent of the assignee and shall be effective as against the tenant when actually received by the tenant at the address for notices provided under the lease or other contractual agreement under which the tenant occupies the property or, if no address for notices is so provided, at the property. Upon receipt of this demand, the tenant shall be obligated to pay to the assignee all rents, issues, and profits that are past due and payable on the date of receipt of the demand, and all rents, issues, and profits coming due under the lease following the date of receipt of the demand, unless either of the following occurs: (1) The tenant has previously received a demand that is valid on its face from another assignee of the leases, issues, rents, and profits sent by the other assignee in accordance with this subdivision and subdivision (c).” Civ. Code, § 2938(d)(1).

    

               These provisions recognize the potential that multiple assignees may attempt to enforce their interest. There is no evidence that a prior demand was received from another assignee. Thus, Defendants have failed to establish that Plaintiff is prohibited from attempting to enforce its rights under the assignment of rents provision set forth in the applicable Deed of Trust.

    

               For the foregoing reasons, Defendants’ motion for summary adjudication of the third and fourth causes of action is denied.

    

               Plaintiff is ordered to give notice of this ruling.