Judge: Gregory Keosian, Case: BC720385, Date: 2023-08-08 Tentative Ruling

Case Number: BC720385    Hearing Date: August 8, 2023    Dept: 61

Plaintiff Hushman Sohaili’s Motion for Summary Adjudication is DENIED.

I.                   OBJECTIONS

Defendants Michael Palmer and Steve Shpilsky (Defendants) offer objections to various portions of the materials submitted by Plaintiff Hushman Sohaili (Plaintiff) in support of his motion for summary adjudication.The first objections are directed to the exhibits contained in Plaintiff’s motion, and target their lack of authentication. Any such lack of authentication, however, has been remedied in reply by Plaintiff’s filing of a declaration authenticating the relevant exhibits. Defendants also object to the declaration of Plaintiff included with the exhibits, as it includes assertions of his understanding of the parties’ conduct with respect to contract formation. These objections are OVERRULED, as Plaintiff may testify to his understanding of the contract.

Plaintiff’s objections to the declarations of Michael Palmer, Steve Shpilsky, and Alexandra Brand are OVERRULED, as they concern objections to the witnesses’ statements of their actual intent with respect to contractual formation and subsequent conduct at issue in this motion, which Plaintiff contends is irrelevant. Plaintiff is correct that in contract interpretation, “mutual consent is gathered from the reasonable meaning of the words and acts of the parties, and not from their unexpressed intentions or understanding. (Rodriguez v. Oto (2013) 212 Cal.App.4th 1020, 1027.) However, this rule applies most strongly where “the terms [of the contract] are unambiguous,” as in such circumstances “there is ordinarily no occasion for additional evidence of the parties' subjective intent.” (Ibid.) But where, as here, Plaintiff seeks to establish his claim in significant part by reference to extrinsic evidence beyond the four corners of the contract, evidence of the parties’ actual intent is admissible:  “[I]n the absence of grounds for estoppel, the contracting parties should be allowed to testify as to their actual intention.” (Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 351.) As will be discussed below, Plaintiff has not shown the absence of triable issues with respect to his claims for estoppel.

II.                MOTION FOR SUMMARY JUDGEMENT

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.”  (Code Civ. Proc. § 437c, subd. (a).) “[I]f 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,” the moving party will be entitled to summary judgment.  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment.  (Code Civ. Proc. § 437c, subd. (f)(2).)  

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact.  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).) Plaintiffs moving for summary judgment may meet their initial burden by “prov[ing] each element of the cause of action entitling the party to judgment on the cause of action.” (Code Civ. Proc. § 437c(p)(1).)

Once the plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  (Code Civ. Proc. § 437c(p)(1).)  The defendant may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.  (Code Civ. Proc. § 437c(p)(1).)  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.)

Plaintiff Hushman Sohaili (Plaintiff) moves for summary adjudication of his first cause of action for declaratory relief, which seeks a declaration that he is a 33% member of the company and nominal defendant California Real Estate Regional Center, LLC (CARE).

Plaintiff presents what he contends to be an email agreement between himself and CARE’s then-manager, Defendant Michale Palmer (Palmer). (Motion Exh. 12.) The initial email in the chain is Plaintiff sending Palmer a seven-point list of “terms and conditions on which I am putting funds into the Company,” which would roughly grant him a one-third interest in “the capital, profits and losses of the Company” in exchange for a $75,000 contribution. (Ibid.) The email, dated January 28, 2012, also stated:

Assuming this is all ok please confirm and I will get you a check on monday as you requested. If possible I would like to get half on Monday so you have enough funds and get you the other half when we draft up a forma l operating agreement that could be as simple as this memo incorporated into an agreement format and sign it. Hopefully we can do this in a week or so. This will let us get started and me committed on Monday but give us a week or so to get a formal operating agreement done.

(Ibid.) Palmer responded by copying Plaintiff’s email and adding his own line-items next to various terms in parentheses. (Palmer Decl. Exh. A.) Palmer concluded the email with an attachment to CARE’s operating agreement “so you can see what we have to work with so far.” (Ibid.) The parties thereafter went back and forth concerning Palmer’s salary and management role at CARE, and Plaintiff eventually sent an email stating that the parties appeared to be in agreement on Palmer’s salary, asking, “So I think you and I are saying the same thing. Right?” (Motion Exh. 12.) Palmer responded, “Yes I think this makes more sense.” (Ibid.) Plaintiff responded with the final email in the chain, stating, “Ok so with the other points we are done. I will get you a check for half on Monday. I will go through the other documentation you sent me and try to sign some sign it up the following week. However as far as I am concerned our deal is done.” (Ibid.) Palmer denies receiving this email, but the following Monday he picked up the check for the first half of Plaintiff’s investment. (Palmer Decl. ¶ 18.) Plaintiff thus argues that the parties had a deal, if not when Palmer indicated that Plaintiff was making sense, when he picked up the check per Plaintiff’s instructions. (Motion at p. 19.) Acceptance of an offer “may be manifested by conduct as well as by words.” (Russell v. Union Oil Co. (1970) 7 Cal.App.3d 110, 114.) And “the acceptance of the consideration offered with a proposal . . . is an acceptance of the proposal.” (Civ. Code § 1584.) Plaintiff thus argues that per the email agreement and payment of the funds agreed, he is now a member of CARE with a 33% interest.

Plaintiff further argues that, not only has he established the existence of a contract for his membership interest, but that Defendants are estopped from denying the existence of such an interest now by their prior admissions. Specifically, Plaintiff refers to several years of state and federal filings for CARE, in which Plaintiff was listed as a “limited partner or other LLC member” of CARE with a 33% interest. (Defendants’ Response to Plaintiff’s Separate Statement of Undisputed Material Facts (DUMF) No. 78–89.) Palmer was responsible for preparing these documents. (DUMF No. 91.) Plaintiff argues that these tax documents, filed under penalty of perjury, constitute binding admissions which Defendants cannot now contradict. (Motion at pp. 16–17.)

Defendants are not precluded from disputing the contentions set forward in the documents that Plaintiff identifies, as the doctrine precluding a party on summary judgment from contesting prior admissions applies particularly to admissions made in the course of litigation and discovery, not to all admissions in general:

The reasons for this attitude toward the legitimate products of discovery are clear. As the law recognizes in other contexts (see Evid. Code, §§ 1220–1230) admissions against interest have a very high credibility value. This is especially true when, as in this case, the admission is obtained not in the normal course of human activities and affairs but in the context of an established pretrial procedure whose purpose is to elicit facts. Accordingly, when such an admission becomes relevant to the determination, on motion for summary judgment, of whether or not there exist triable issues of Fact (as opposed to legal issues) between the parties, it is entitled to and should receive a kind of deference not normally accorded evidentiary allegations in affidavits.

(D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 22.) Although Plaintiff asserts that other cases have precluded a party from contesting prior non-litigation admissions at summary judgment, a review of the authorities cited for this proposition does not favor application of the principle here. The case FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, involved defendants who were precluded from asserting an oral condition, collateral to a written agreement, which was inconsistent with other positions asserted with relation to that agreement during their depositions. (Id. at p. 379–380, 396.) The case of Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, overruled on other grounds in Riverisland Cold Storage v. Fresno-Madera Production credit Assn (2013) 55 Cal.4^th 1169, addressed admissions that were “in part circumstantial,” which were confirmed in “[p]ortions of the deposition testimony” of the parties, and “[e]ven more damaging[ly]” were included in “the letters of [the parties]’ counsel” setting out his clients’ positions before the onset of litigation. (Id. at pp. 480–481.) These cases do not stand for the proposition that prior admissions of any kind, unrelated to the litigation in which they are to be admitted, are incontestable. Indeed, courts have recognized that “uncritical application of the D'Amico decision can lead to anomalous results, inconsistent with the general principles of summary judgment law,” and should be applied only when “nothing in the record . . . is materially inconsistent with the admissions.” (Price, supra, 213 Cal.App.3d at p. 482.)

There is evidence in the record that is materially inconsistent with Defendants’ prior admissions in these other documents. In the email agreement at issue, the parties discuss the need for an amended operating agreement to account for Plaintiff’s status as a member, but it is undisputed that no such agreement was ever executed. (Motion Exh. 12; Palmer Decl. Exh. A.) Plaintiff contends that no such amendment needed to be executed because under Section 10.2 of the then-effective operating agreement, he would have been “deemed” bound by the operating agreement whether he signed it or not. (Motion at p. 23; Exh. 8.) But Plaintiff, like Defendants, has taken different positions before, both with respect to the necessity of his signature on an amended operating agreement and as to his being bound to the agreement at all. In an email exchange of August 2012, the parties discussed whether an amended operating agreement was necessary for Plaintiff to be included as a member on an I-924 form to be submitted to the Department of Homeland Security, and Plaintiff indicated his understanding that he was not yet a partner: “I do not understand if you bring in a partner 3 months from now why does his I 924 have to be amended.” (Palmer Decl. Exh. C.) When another participant in the conversation proposed that the parties could sign a pre-drafted amendment and not require a revision of the form (on which Plaintiff was already, evidently, included as a member), Plaintiff responded, “I do not want to do that. Can we have this guy change the form. Tell him I am coming in later and all details have not been finalized.” (Ibid.) These communications are inconsistent with the proposition that Plaintiff was already a member upon completion of the prior email correspondence with Palmer, or upon Palmer’s taking of Plaintiff’s first check. Indeed, although Plaintiff relies on Section 10.2 of the operating agreement for the proposition that he is a member deemed bound by the agreement, in response to requests for admission propounded in this litigation, he has “[d]enied” that he is “bound by the operating agreement.” (Palmer Decl. Exh. G.) This evidence is consistent with Defendants’ understanding of the initial email chain of January 2012: that Plaintiff’s status as a member was conditioned upon the execution of an amended operating agreement, which never occurred. This same evidence is also inconsistent with the argument, advanced by Plaintiff, that Defendants by their subsequent conduct of including him on various government forms as a member thereby waived any right to claim that he was not under either the January 2012 email agreement or the CARE operating agreement. (Motion at pp. 23–24.) After all, the above evidence may be taken to suggest that not even Plaintiff imagined himself to be a member of CARE until the operating agreement could be amended to take account of him.

Plaintiff’s reliance on the doctrine of “quasi-estoppel” is likewise unpersuasive. The doctrine applies to circumstances where the party to be estopped obtains an official act in their favor — usually a marriage or divorce — and thereafter attempts to repudiate either the act itself or a fact essential to its occurrence. (See Estate of Anderson (1997) 60 Cal.App.4th 436, 442; see also Estate of Davis (1940) 38 Cal.App.2d 579, 584 [“[O]ne who has invoked the exercise of a jurisdiction within the general powers of the court cannot seek to reverse its orders upon the ground of lack of jurisdiction.”].) These cases do not stand for the broad, preclusive proposition that Plaintiff advances here. 

A similar resolution is appropriate for Plaintiff’s argument that Defendants are equitably estopped from contesting his status as a member. The doctrine of equitable estoppel provides that “a person may not deny the existence of a state of facts if that person has intentionally led others to believe a particular circumstance to be true and to rely upon such belief to their detriment.”

(McGlynn v. State of California (2018) 21 Cal.App.5th 548, 561.) As above, there are triable issues as to whether Plaintiff believed he was a member during the relevant period. Moreover, Plaintiff’s showing of detriment resulting from any misapprehension of his status is vague, and limited to the assertion of unspecified “tax consequences” from his inclusion in the filings. (Motion at p. 25.) Triable issues prevent this court from concluding that Defendants are equitably estopped from denying his membership status as a matter of law.

Accordingly, the motion for summary adjudication is DENIED.