Judge: Joel L. Lofton, Case: 22AHCV00214, Date: 2023-04-10 Tentative Ruling
Case Number: 22AHCV00214 Hearing Date: April 10, 2023 Dept: X
Tentative Ruling
Judge Joel L. Lofton,
Department X
HEARING DATE: April
10, 2023 TRIAL DATE: May 9, 2023
CASE: 1510 GLEN OAKS
LLC, a California limited liability company, v. JONATHON B. SURAK, an
individual; DAVID M. MARCH, an individual; and DOES 1 through 20,
inclusive.
CASE NO.: 22AHCV00214
MOTION
FOR SUMMARY JUDGMENT
MOVING PARTY: Plaintiff 1510 Glen Oaks, LLC
RESPONDING PARTY: Defendant
Jonathan B. Surak
SERVICE: Filed January 12, 2023
OPPOSITION: Filed March 28, 2023
REPLY: Filed April 5, 2023
RELIEF
REQUESTED
Plaintiff moves for
summary judgment.
BACKGROUND
This case arises out of Plaintiff 1510 Glen
Oaks LLC’s (“Plaintiff”) claim that Defendants Jonathan B. Surak and David M.
March (“Defendant”) failed to pay the Guaranties they executed for the
underlying loan. Plaintiff alleges that the original loan was between Loan
Funder, LLC Series 6237 and Troubadours Enterprises, Inc. Plaintiff alleges the
loan was secured by a Deed of Trust encumbering real property located at 1510
Glen Oaks Boulevard, Pasadena (“Property”). Plaintiff alleges that Surak and
March executed a Guaranty for the loan. Plaintiff alleges that Lender assigned
its interest in the loan to Investor Funding Capital, LLC, which assigned its
interest to Plaintiff.
Plaintiff alleges $278,612.34 is
still due under the loan, it incurred $18,079.56 in attorney’s fees, and it
incurred $56,227.29 in other costs and fees. Plaintiff filed this complaint on
April 13, 2022, alleging one cause of action for breach of written guaranty.
TENTATIVE RULING
Plaintiff’s
motion for summary judgment is DENIED.
OBJECTION TO EVIDENCE
Plaintiff’s
objection number one is sustained. Plaintiff’s objections numbers two and three
are overruled.
Defendant’s
objection to the declaration of Jefferey McCunn paragraph seven is sustained.
Defendant’s other objections are overruled.
REQUEST FOR JUDICIAL NOTICE
Plaintiff’s
request for judicial notice for exhibits three through nine is granted pursuant
to Evidence Code section 452, subdivision (d).
LEGAL STANDARD
“The purpose of the law of summary
judgment 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.) “A party may move for summary judgment in an
action or proceeding if it is contended that the action has no merit or that
there is no defense to the action or proceeding.” (Code of Civil Procedure
section 473c subd. (a)(1).) “The motion for summary judgment shall be granted
if all the papers submitted show that there is no triable issue as to any
material fact and that the moving party is entitled to a judgment as a matter
of law.” (Code of Civil Procedures section 473c subd. (c).)
“[W]here the plaintiff has
also moved for summary judgment—or, as in this case, summary adjudication—that
party has the burden of showing there is no defense to a cause of
action. (Code Civ. Proc., § 437c, subd. (a).) That burden can be met
if the plaintiff “has proved each element of the cause of action entitling the
party to judgment on that cause of action.” (Code Civ. Proc., § 437c, subd.
(p)(1).) If the plaintiff meets this burden, it is up 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.” (S.B.C.C., Inc. v. St. Paul Fire
& Marine Ins. Co. (2010) 186 Cal.App.4th 383, 388.)
DISCUSSION
Background Facts
On March 22, 2019, Loan Funder LLC,
Series 6237 (“Lender”) lent Troubadours Enterprises, Inc. (“Borrower”) $1,281,554.00. (SSUF No. 1,
Exhibit 2.) The loan was secured by a Deed of Trust, which encumbered the
Property. (SSUF No. 2, Exhibit 3.) On or about March 22, 2019, Defendant
executed a guaranty for the payment of the amount due under the loan. (SSUF No.
4, Exhibit 4.) On November 15, 2019, Lender assigned its interest in the loan
to Investor Funding Capital, LLC. (SSUF No. 12, Exhibit 5.) On February 26,
2021, Investor Funding Assigned its interest in the loan to Plaintiff. (SSUF
No. 13, Exhibit 6.)
On December 15, Borrow defaulted and
a notice of default was recorded against the Property. (SSUF No. 14.) A notice
of sale was recorded against the Property on February 4, 2021, with the date of
the sale set for March 3, 2021. (SSUF No. 15.) The property was sold at the trustee’s
sale on March 3, 2021, and title reverted to Plaintiff. (SSUF No. 16.) Plaintiff
asserts that after the Property was sold at a trustee’s sale, $278,612.34 was still
due on the loan and Plaintiff incurred additional costs totaling $68,288.60.
(Motion at p. 6:1-7.) Defendant contests both amounts.
“A lender is entitled to judgment on
a breach of guaranty claim based upon undisputed evidence that (1) there is a
valid guaranty, (2) the borrower has defaulted, and (3) the guarantor failed to
perform under the guaranty.” (Gray1 CPB, LLC v. Kolokotronis (2011) 202
Cal.App.4th 480, 486.)
Plaintiff
has met its initial burden of establishing a guaranty, default by Borrow, and that
Defendant has failed to perform under the guaranty.
Choice of Law
Defendant first argues that Plaintiff’s motion for summary judgment
should fail because the loan and the guaranty both contain choice-of-law
provisions that provide that New York law should govern. Defendant contends
that if New York Law applies, Plaintiff’s claims fail as a matter of law
pursuant to the New York Real Properties Actions and Proceedings Law (“RPAPL § 1371”).
“Choice of law provisions in agreements are enforceable,
unless grounds exist for not enforcing them.” (Gramercy Investment Trust v.
Lakemont Homes Nevada, Inc. (2011) 198 Cal.App.4th 903, 908. (“Gramercy”).)
“In
assessing the validity of a choice-of-law clause, ‘the proper approach ... is
for the court first to determine either: (1) whether the chosen state has a
substantial relationship to the parties or their transaction, or (2) whether
there is any other reasonable basis for the parties' choice of law. If neither
of these tests is met, that is the end of the inquiry, and the court need not
enforce the parties' choice of law. If neither of these tests is met, that is
the end of the inquiry, and the court need not enforce the parties' choice of
law. If, however, either test is met, the court must next determine whether the
chosen state's law is contrary to a fundamental policy
of California.’ ” (Peleg v. Neiman Marcus Group, Inc. (2012) 204
Cal.App.4th 1425, 1446.)
Here, the
promissory note contains a provision that it “shall be governed by, and
construed in accordance with, the laws of the State of New York”. (Exhibit 2 at
p. 4, section 13.) The guaranty provides it “shall be governed and construed in
accordance with the laws of the State of NEW YORK (sic).” (Exhibit 4 at p. 4,
section 16.)
In Gramercy,
supra, the appellate court upheld the trial court’s decision that New York
antideficiency statutes were “inapplicable when the property is located outside
the State of New York.” (198 Cal.App.4th at p. 909.) In Gramercy, both
the promissory note and the guaranty included choice of law provisions stating
that the documents would be governed by New York laws. (Id. at p.
906-7.) However, the Court in Gramercy held that under New York laws, “the
law of the jurisdiction having the greatest interest in the litigation will be
applied. [Citation.] Where New York has sufficient contacts, a contractual
choice of law provision adopting New York law may be applied to foreclosures
involving out-of-state property.” (Id. at p. 910.)
Here, the
only contact with New York is that Lender’s principal place of business was in
New York. The property, Borrower’s principal place of business, and Defendant
have their principal place of business or address in California. (Exhibits 2
and 4.) In Gramercy, supra, the Court held that a similar level of
contact with New York was insufficient and that New York antideficiency law did
not apply. (198 Cal.App.4th at p. 910.) Based on the record, there is
insufficient contact with New York, and therefore, New York antideficiency
statutes are inapplicable.
California
Antideficiency Law
Defendant
argues that Plaintiff’s motion for summary judgment fails because (1) he did
not waive his rights under California antideficiency law, and (2) a triable
issue of material fact exists to the validity of the guaranty. The court does
not discuss whether Defendant waived his rights under California antideficiency
law because that issue is not dispositive for the present motion.
“California's
antideficiency statutes are codified at Code of Civil Procedure
sections 580a through 580d and 726. In relevant
part, the statutes provide: ‘[N]o deficiency judgment shall be rendered for a
deficiency on a note secured by a deed of trust or mortgage on real property
... in any case in which the real property ... has been sold by the mortgagee
or trustee under power of sale contained in the mortgage or deed of trust.’ (§ 580d, subd. (a).)” (CADC/RADC Venture 2011-1 LLC v.
Bradley (2015) 235 Cal.App.4th 775, 783 (“CADC”).) “The
antideficiency statutes do not affect the liability a guarantor might otherwise
have with respect to a deficiency. (§ 580d, subd. (b).)”
(Id. at p. 784.) “Thus, a lender may recover a deficiency judgment from a
guarantor who waives his or her antideficiency protections, even though
the antideficiency statutes would bar the lender from recovering that same
deficiency from the primary borrower.” (Ibid.)
“However, to
collect a deficiency from a guarantor, he must be a true guarantor and not
merely the principal debtor under a different name.” (Cadle Co. II v. Harvey
(2000) 83 Cal.App.4th 927, 932.) “When the principal borrower takes on
additional liability as a guarantor, that guaranty is a sham and adds nothing
to the primary obligation.” (CADC, supra, 235 Cal.App.4th at p. 784.) “A
threshold issue in sham guaranty cases is whether the guarantor of a loan is
also obligated as a borrower.” (Ibid.)
“In
assessing sham guaranty claims, several courts have also considered whether
the lender structured the transaction to circumvent
the protections of the antideficiency laws.” (CADC, supra, 235
Cal.App.4th at p. 785.)
In CADC,
the Court stated the following principles “A guaranty is an unenforceable sham
where the guarantor is the principal obligor on the debt. This is the case
where either (1) the guarantor personally executes underlying loan agreements
or a deed of trust, or (2) the guarantor is, in reality, the principal obligor
under a different name by operation of trust or corporate law or some other
applicable legal principle.” (CADC, supra, 235 Cal.App.4th at pp.
786-87.)
Here,
Defendant provides that prior to the loan, he was the sole shareholder,
officer, and director of Borrow. (DSSUF No. 26.) Further, Defendant provides
that Surak, who had no formal role with Borrow prior to the loan, was added as
an officer at the request of the lender. (DSSUF No. 26-27.) Additionally, both
the loan and the guaranty list the same address for Borrow and Defendant.
(Exhibits 2 and 4.) Defendant lastly provides that, based on his knowledge,
Lender never considered the financial condition of Borrow, and Defendant does
not recall providing such information. (DSSUF No. 30.)
Defendant
has raised a triable issue of fact as to whether the guaranty is a sham
guaranty. Specifically, there is a dispute of fact regarding whether Defendant
is obligated as both the guarantor and the borrower and whether Lender structured
the loan to circumvent antideficiency laws.
CONCLUSION
Plaintiff’s
motion for summary judgment is DENIED.
Moving
Party to provide notice
Dated: April 10, 2023 ___________________________________
Joel
L. Lofton
Judge
of the Superior Court
Parties who intend to submit on this tentative must send an email to the court
indicating their
intention to submit.
Parties intending to appear are strongly encouraged to appear remotely. alhdeptx@lacourt.org