Judge: H. Jay Ford, III, Case: 22SMCV00124, Date: 2023-11-02 Tentative Ruling

Case Number: 22SMCV00124    Hearing Date: November 2, 2023    Dept: O

  Case Name:  2400 Willow Lane Associates Limited Partnership, et al. v. Kozak, et al.

SUBJECT:                 MOTION FOR SUMMARY ADJUDICATION  

MOVING PARTY:   Plaintiffs 2400 Willow Lane Associates Limited Partnership and West Hollywood Property Limited Partnership 

RESP. PARTY:         Defendant Gregory Jon Kozak

TENTATIVE RULING

            Plaintiffs’ Motion for Summary Adjudication as to Plaintiffs’ Firth, Third and Fifth Causes of Action is DENIED.   There is a triable issue  regarding the amount of Plaintiff’s damages.  (Defendant’s Separate Statement ¶¶ 23-24, 26, 49, 52, 75, 78 and evidence referenced from the declaration of Robert Barnes and Defendant.)

            Defendant Gregory Jon Kozak’s Objections to the declaration of Robert M. Resch nos. 1-2, 4, and 9 (exhibit B) are OVERRULED. The remaining objections nos. 3,5-8 are OVERRULED as to the statements (admissions) made by Kozak.   The objection to the declaration of Ronald Resch no. 15 is OVERRULED.

            Plaintiff’s objections to the declaration of Gregory Jon Kozak nos. 2-22 are OVERRULED.  The remaining objections are not material to the Court’s decision. (C.C.P. §437c,(q).

“A plaintiff ...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.” (CCP §437c(p)(1).)  

            “[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.’ [Citation.]” (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1463; see also Nalwa v. Cedar Fair, L.P. (2012) 55 Cal.4th 1148, 1153–1154.) “A plaintiff moving for summary judgment establishes the absence of a defense to a cause of action by proving ‘each element of the cause of action entitling the party to judgment on that cause of action.’ [Citation.] The plaintiff need not, however, disprove any affirmative defenses alleged by the defendant. [Citation.] Once the plaintiff's burden is met, the burden of proof 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.’ [Citation.] In meeting this burden, the defendant must present ‘specific facts showing’ the existence of the triable issue of material fact.” (City of Monterey v. Carrnshimba (2013) 215 Cal.App.4th 1068, 1081.)  “The court's assessment of whether the moving party has carried its burden—and therefore caused a shift—occurs before the court's evaluation of the opposing party's papers.  Therefore, the burden on the motion does not initially shift as a result of what is, or is not, contained in the opposing papers.” (Mosley v. Pacific Specialty Insurance Company (2020) 49 Cal.App.5th 417, 434–435 [landlord’s failure to address issue of whether they were aware of their tenant’s marijuana growing operation was not grounds to grant summary judgment where moving party failed to satisfy its initial burden as to the issue]; Thatcher v. Lucky Stores, Inc. (2000) 79 Cal.App.4th 1081, 1086-1087 [court cannot grant summary judgment based merely on lack of opposition; court must first determine if the moving party has satisfied its burden].)  

            “In general, the opposing party may not rely on the opposing party's own pleadings (even if verified) to oppose the motion. (CCP § 437c(p); Roman v BRE Props., Inc. (2015) 237 CA4th 1040, 1054, 188 CR3d 537 [plaintiff must show “specific facts” to defeat defendant's summary judgment motion and may not rely on allegations of complaint].) A plaintiff may rely on the plaintiff's pleadings to resist a summary judgment motion if the defendant's motion is based on the legal insufficiency of the plaintiff's claims as alleged. (Hand v Farmers Ins. Exch. (1994) 23 CA 4th 1847, 1853, 29 CR2d 258.” Cal. Judges Benchbook Civ. Proc. Before Trial § 13.24 (2023).

I.                Affirmative Defenses

As a preliminary matter, Defendant raises the issue of their affirmative defenses, including the claims are time-barred and comparative fault, as triable issues of material facts existing to negate the Motion for Summary Adjudication for all three causes of action. However, the 3-29-21 Waiver and Tolling agreement, deemed enforceable by order of this Court on 7-17-23, expressly waives the right of Defendant to assert any defenses “in response to any action or proceeding arising out of the Debt or the Claims, which defenses are based, in law or in equity, or the passage of time, including without limitation any and all applicable statute of limitation and the defenses of laches, waiver, and estoppel.” (Resch Decl., ¶ 14; Ex. C ¶ 2.1.)

Thus, pursuant to the signed Waiver and Tolling Agreement, the Defendant is unable to raise any defenses in this matter, and therefore the Court finds the Defendant’s affirmative defense arguments without merit.

II.             5^th Cause of Action for Breach of Fiduciary Duty

"The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach." (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)

“A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent....” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, as modified on denial of reh'g (Mar. 20, 2003).) Traditional examples of fiduciary relationships in the commercial context include trustee/beneficiary, directors and majority shareholders of a corporation, business partners, joint adventurers, and agent/principal. (Id.)

A breach of fiduciary duty occurs when a property manager diverts the principal’s funds for the manager’s own use. (Apollo Estates, Inc. v. Department of Real Estate (1985) 174 Cal.App.3d 625, 640 (holding that a property manager’s use of funds that were “diverted to [manager’s] own payment rather than paying the mortgage … was clearly a breach of his fiduciary obligation.”].)

Plaintiffs argue they have established all the elements of their 5^th cause of action for Breach of Fiduciary Duty:

1.     A fiduciary relationship existed between Defendant and Plaintiffs because Defendant was Plaintiffs’ property manager, an officer and or director of Plaintiffs’ general partners, and a person entrusted with Plaintiffs’ money (Separate Statement (“SS”), ¶ 5; Lederer Decl., ¶¶ 6, 13, Exh. B; Resch Decl., ¶¶ 7, 14, Exh. C; Gregory Kozak’s Cross-Complaint, dated March 14, 2022 (“Cross-Complaint”), Exh. 1 (Tolling Agreement), ¶¶ 1.1.)

2.     There was a breach of the fiduciary relationship because Defendant admitted to the diversion of Plaintiff’s funds for purposes unrelated to Plaintiffs’ business. (SS, ¶ 34; Lederer Decl., ¶¶ 10, 13, Exh. B; Resch Decl., ¶¶ 11, 14, Exh. C; Cross-Complaint, Exh. 1, ¶ 1.2.)

3.     The Plaintiffs were damaged as a result of the Defendant’s breach of fiduciary duty. The Plaintiffs allege the amount of damages is $2,251,792 after a deduction of $52,500 in payments made by Defendant. (SS, ¶¶ 23–26; Barnes Decl., ¶¶ 2, 4, 5, Ex. A-4, B; Resch Decl., ¶ 14, Exh. C; Lederer Decl., ¶¶ 13, 14, 15, Ex. B, C; Cross-Complaint, Ex. 1.)

Plaintiffs point to evidence of a ledger attached to an email sent by Defendant on March 11, 2021 as undisputed proof of the exact amount of damages. (SS, ¶ 23; Barnes Decl., ¶ 5, Ex. B.) However, within the email the Defendant never states the exact amount taken from Plaintiffs. Defendant just mentions how he came about calculating the figures, apologizing, and ends the email by stating “if something doesn’t look right to you or I said the wrong thing please assume that I didn’t mean anything by it,” adding a cloud of uncertainty to the calculations attached. (See Barnes Decl., Ex. B.) Furthermore, the attached ledger includes numerous figures and calculations, including the $2,251,792 figure, but it is not certain that this is the figure owed to Plaintiffs, amount stolen, or something else entirely. (See id.)

Thus, Plaintiffs have not met their burden of proving the damages element for Breach of Fiduciary Duty against Defendant.

Even if Plaintiff was able to reach their burden, Defendant points to evidence that damages are disputed including the same email and ledger Plaintiff point to in Exhibit B of the Barnes Declaration, but also further evidence of possible reductions in the total amount owed. (See SS, ¶ 23; Kozak Decl. ¶¶ 3-14 at 2:4-28; 3:1-28; 4:1-28; 5:1-3.) These amounts include $300,000 and $400,000 the Defendant allegedly borrowed from his father in 2012 to cover negative cash flow, and which Defendant was unable to find documentation to include in his March 11, 2021 ledger. (See SS, ¶ 23l Kozak Decl., ¶¶ 12–14.)

Thus, Defendant has provided evidence to create a triable issue of material fact as to damages. Plaintiffs’ Motion for Summary Adjudication for the 5^th cause of action of Breach of Fiduciary Duty is DENIED.

III.           1^st Cause of Action for Fraud and 3^rd Cause of Action for Embezzlement (Conversion)

“The elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)

“The elements for the cause of action for constructive fraud are: (1) fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury (causation).” (Stokes v. Henson (1990) 217 Cal.App.3d 187, 197.)

“Conversion is the wrongful exercise of dominion over the property of another.  The elements of a conversion are: (1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.  It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.”  (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 441, 451-452.)

“A cause of action for conversion requires allegations of plaintiff's ownership or right to possession of property; defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession; and damage to plaintiff. Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.)

Plaintiff again proves all but one element of both Fraud and Embezzlement (or conversion) but cannot meet their burden of proving the amount of damages is $2,251,792 (See supra, Section II; SS, ¶ 23; Barnes Decl., ¶ 5, Ex. B; Kozak Decl. ¶¶ 3-14 at 2:4-28; 3:1-28; 4:1-28; 5:1-3)

Thus, Plaintiffs cannot meet their burden of proving there is no triable issue of material fact and that they are entitled to judgment as a matter of law for the 1^st Cause of Action for Fraud and 3^rd Cause of Action for Embezzlement. Plaintiffs’ Motion for Summary Adjudication for the 1^st and 3^rd cause of action is DENIED.