Judge: Lee W. Tsao, Case: 21NWCV00133, Date: 2023-04-04 Tentative Ruling
Case Number: 21NWCV00133 Hearing Date: April 4, 2023 Dept: C
SAADIA SQUARE LLC v. ALL-WAYS PACIFIC, LLC,
et al.
CASE NO.: 21NWCV00133
HEARING: 4/4/23 @ 1:30 PM
TENTATIVE RULING
Plaintiff Saadia Square
LLC’s motion for summary adjudication is DENIED.
Opposing Party All-Ways to
give NOTICE.
Plaintiff Saadia Square LLC (“Saadia”) moves
for summary adjudication pursuant to CCP § 437c.
Objections
All-Ways’ Objection Nos. 1-24 are overruled.
SM’s Objection to ¶¶ 6, 9, 17, and 18 of
Saadia Declaration are overruled.
SM’s Objection to ¶¶ 3-7 of Nordling
Declaration are overruled.
Saadia’s Objection No. 1 to Reisz Declaration
is overruled.
Saadia’s Objection Nos. 1-4 to Goines
Declaration are overruled.
Saadia’s Objection Nos. 1-3 to Butler
Declaration are overruled.
Saadia’s Objection Nos. 1-2 to De Wit
Declaration are overruled.
Saadia’s Objection No. 1 to Becerra
Declaration is overruled.
Complaint
The operative Second Amended
Complaint (“SAC”) alleges the following relevant facts: “This action was initiated on March 5, 2021
and arises out of the scheme to violate Saadia’s Right of First Offer (‘ROFO’)
and deprive Saadia of the right to purchase the industrial property in Rialto,
CA (the ‘Property’). (SAC ¶1.) “Saadia and SM Member are the sole members of SM
Holdco. SM Holdco, in turn, is the sole member of SM Logistics Owner LLC (‘SM
Owner’) which, in turn, is the sole member of SM Rialto, the single-asset
entity that owned the Property. The Property is a unique industrial real estate
asset located in Rialto, CA…. [¶] In order to protect its investment in SM
Holdco, Saadia negotiated for a ROFO…. The ROFO allows Saadia to purchase the
Property and protect its multi-million dollar financial stake in SM Holdco.
Without this ROFO, Saadia’s interest in the Property was at risk of being wiped
out by SM Member’s virtually unfettered control The ROFO right was Saadia’s
primary protection.” (SAC ¶¶26-27.) “Rather than honor the ROFO, and without
Saadia’s knowledge or consent, SM entered into an Option Agreement dated March
11, 2020 (the ‘Option Agreement’) with Rialto Holdings, LLC (‘RH’)
…
The Option Agreement defines the ‘Effective Date’ as March 11, 2020, the date
of the Option Agreement, and sets the deadline by which RMH must exercise the
option as March 10, 2020, ‘the last day of the twelfth (12th) full calendar
month following the Effective Date (the ‘Option Exercise Period’), time being
of the essence.’… Although the deadline to exercise the option set forth in the
Option Agreement was March 10, 2020, in a related action, RMH… alleges that RH
assigned the Option Agreement to RMH and that RMH purportedly exercised the
option on March 11, 2021, not March 10, 2021.” (SAC ¶28.) “[I]n violation (and
with knowledge) of Saadia’s ROFO, on information and belief, the Property was
sold to RMH on August 3, 2021.” (SAC ¶31.) “Although SM Rialto entered into the
Lease with RD and entered into the Option Agreement with non-party Rialto
Holdings, LLC (‘RH’) on March 11, 2020, SM did not disclose either agreement to
Saadia. RMH alleges in a separate action that RH later assigned the Option
Agreement to RMH, against without Saadia’s knowledge. SM concealed the identity
of RD, RH, and RMH from Saadia and referred to them merely and interchangeable
as ‘All-Ways’.” (SAC ¶ 46.)
Based thereon, the SAC asserts
causes of action for:
1.
Breach
of Contract
2.
Breach
of Covenant of Good Faith and Fair Dealing
3.
Intentional
Interference
4.
Specific
Performance and Injunctive Relief
5.
Declaratory
Relief
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 met, the
burden then 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. (CCP § 437c(p)(1).)
Plaintiff
Saadia seeks summary adjudication against Defendant Rialto Merrill Holdings,
LLC (“RMH”) of the following issues.
ISSUE 1
3rd
Cause of Action for Intentional Interference: “The elements which a plaintiff must plead to
state the cause of action for intentional interference with contractual
relations are (1) a valid contract between plaintiff and a third party; (2)
defendant's knowledge of this contract; (3) defendant's intentional acts
designed to induce a breach or disruption of the contractual relationship; (4)
actual breach or disruption of the contractual relationship; and (5) resulting
damage.” (Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal. 4th
26, 55; Pac. Gas & Elec. Co. v. Bear Stearns & Co. (1990) 50
Cal. 3d 1118, 1126 - “It has long been held that a stranger to a contract may
be liable in tort for intentionally interfering with the performance of the
contract”).
Saadia contends that RMH intentionally interfered with Saadia’s Right of
First Offer (“ROFO”) to purchase the property located at 1110
Merrill Avenue, Rialto, California.
(SAC, Ex. A; Plaintiff’s Separate Statement (PSS) 1-6.) According to Saadia,
RMH knew of Saadia’s ROFO by at least February 19, 2021 (PSS 7), but proceeded
to purchase the Property on August 3, 2021,
with full knowledge of Saadia’s ROFO. (PSS 26-29.) SM sold the Property to RMH without complying
with Saadia’s ROFO. (PSS 31.) As a result of RMH’s actions, Saadia was deprived of its
right to purchase the Property. (PSS 63.)
“When the optionee exercises the
option, the optionee’s priority rights relate back in time to the date the
option was given. As a result, the optionee’s priority rights take
precedence over any party having actual or constructive knowledge of the
option and whose claim of right arose after the option agreement came into
existence.” (3 California Real Estate
Law & Practice, § 70.35 (2021).)
According to Saadia, RMH did not properly
exercise its Option, and therefore, the relation-back doctrine does not apply
to give RMH priority rights as of March 11, 2020, the date the Option was
given. If the relation-back doctrine
does not apply, then RMH’s subsequent purchase of the property on August 3,
2021, constitutes an interference with Saadia’s ROFO.
Saadia submits the following evidence: RMH did not send SM Rialto a “hard (i.e.,
non-refundable) deposit” of $6,167,650.00 at or before 5 p.m. eastern time by
March 10, 2021 (or by March 11, 2021 or even by March 31, 2021). (PSS
16-22.) RMH wired $6,167,650.00 to a
unilateral Escrow Account with Old Republic under RMH’s exclusive control on
March 11, 2021. (PSS 17-22.) RMH wired $6,167,650.00 to Fidelity, the closing
escrow agent for the Property, on August 2, 2021. (PSS 19-21.) RMH’s $6,167,650.00 did not become a hard
non-refundable deposit to SM Rialto until August 3, 2021, when Fidelity wired
the funds to SM Rialto. (PSS 30-31.) RMH
did not purchase the Property pursuant to the Option PSA and SM Rialto never
returned two executed copies of the Option PSA to RMH. (PSS 26.)
The court is in receipt of two
Oppositions filed by: 1) Defendants RMH,
All-Ways Pacific LLC, All-Ways Far East, LLC, and All-Ways Forwarding
International Inc. (collectively, “All-Ways”); and 2) SM
Logistics Holdco LLC, SMLogistics Rialto LLC, SM Logistics Member LLC, Square
Mile Capital Management LLC, Square Mile Partners V LP, Square Mile Partners
V-A LP, Square Mile Partners V (AIV) LP, Square Mile Partners V (AIV 2) LP,
Square Mile Partners V (AIV 3) LP, and MSD Private Credit Opportunity Master
(ECI) Fund II, LP (collectively “SM Defendants”).
According to Defendants, if the relation-back
doctrine applies, then RMH has superior priority rights as of March 11, 2020,
and RMH cannot have interfered with
Saadia’s ROFO. (Civ. Code. §§ 1213, 1214.)
The court finds that triable issues exist
regarding whether RMH properly exercised its Option.
Par. 2 of the Option Agreement states, “The
Optionee may exercise its Option during the period commencing on the Effective
Date set forth above [March 11, 2020] and automatically expiring at 5 p.m.
eastern time on the date that is the last day of the twelfth (12th) full
calendar month following the Effective Date (the “Option Exercise Period”),
time being of the essence, unless sooner terminated as proved below in this
Agreement.” (CEx 4(1), Option § 2, p.
214.)
Par. 3 of the Option Agreement states, “At any time during the Option Exercise
Period, if this Agreement has not been terminated, Optionee may exercise the
Option by timely sending Owner a written notice of Optionee’s intention to
exercise the Option (“Exercise Notice”) accompanied by an executed copy of the
Purchase and Sale Agreement in the form attached hereto as Exhibit B [the
“PSA”] and a hard (i.e. nonrefundable) deposit equivalent to five percent (5%)
of the Purchase Price...in the sum of Six Million One Hundred Sixty-Seven Thousand
Six Hundred Fifty and 00/100 Dollars ($6,167.650.00) (the “Option Payment”).
Owner shall promptly execute the Purchase Agreement and return two executed
copies to Optionee. If Optionee does not timely exercise the Option in the
manner described herein before the expiration of the Option Exercise Period,
this Agreement shall terminate automatically. Thereafter, neither party shall
have any further obligations hereunder except for those that expressly survive
termination of this Agreement.” (Undisputed
PSS 15.)
It is undisputed that the Effective Date is
March 11, 2020. (Undisputed PSS
14.) Therefore, the last day to exercise
the Option is March 31, 2021 because it is the “last day of the twelfth (12th)
full calendar month following the Effective Date” (i.e. March 11, 2020).
Defendants submit the following evidence:
·
On
March 11, 2021, RMH exercised the Option by making a “hard” non-refundable
deposit of $6,167,650.00. (All Ways Separate Statement (“AWSS” 47-57, 59;
Disputed PSS 15.)
·
On
March 11, 2021, RMH notified SM by letter that it had placed the Option Payment
in escrow with instructions for it to be transferred upon receipt of wire
instructions from SM. (Disputed PSS 15.)
·
Because
SM did not provide wire instructions, RMH deposited the Option Payment with Old
Republic until SM Rialto provided RMH with wire instructions. (AWSS 56-57.)
·
SM Rialto acknowledged that RMH validly
exercised its Option. (AWSS 59.)
·
RMH notified SM Rialto that it had exercised
the Option, SM Rialto was in default of the Option by failing to maintain clean
title to the Property as required by the Option, and that RMH was ready,
willing, and able to close on the transaction upon SM Rialto’s compliance with
its contractual obligations. (AWSS 56, 58.)
·
Because SM Rialto was unable to deliver title
in accordance with the permitted exceptions in Schedule 1 of the Option, SM
Rialto was in default of the Option. (AWSS 45.)
·
Saadia’s assertion of the ROFO delayed the
closing of the transaction for several months.
(AWSS 60.)
·
From March 11, 2021 through August 2, 2021,
RMH and SM worked cooperatively to resolve the title issues created by Jack
Saadia’s invocation of the ROFO, in order to give effect to RMH’s exercise of
its Option. (AWSS 61.)
·
SM
Rialto waived any purported defects in RMH’s exercise of the Option by
accepting the exercise of the option without objection. (SSADF 59, 62, 66.)
·
On
August 3, 2021, SM accepted the Option Payment as a credit against the
Property’s Purchase Price. (Disputed PSS
15.)
·
RMH
purchased the Property for $123,353,000.00 (the price set forth in the Option)
and took title to the Property in accordance with the Option. (AWSS 61-66.)
Pursuant
to Collins v. Marvel Land Co. (1970) 13 Cal.App.3d 34, 40, “[t]he acceptance
of the exercise of the option without objection to the form of the exercise
waives any objection to the form of the exercise.” See also Rollins
v. Stokes (1981) 123 Cal.App.3d 701, 713,
rejecting Rollins’ third-party challenge that Correia, the optionee, did
not exercise option in accordance with its terms because Stokes, the optionor,
waived any defects in Correia’s tender. Here, SM Rialto waived any purported defects in RMH’s exercise of
the Option by accepting the exercise of the option without
objection (SSADF 59, 62, 66), and Saadia cannot challenge that waiver.
Further,
“an optionor who has given an irrevocable option to purchase
property may not do any act or omit to perform any duty calculated to cause the
optionee to delay exercising the option within the specified period.” (Murfee v. Porter (1950) 96 Cal.App.2d
9, 18; see also Citron v. Franklin (1943) 23 Cal.2d 47, 57 - optionor’s
“evasion or prevention of exercise of the option may excuse tender of
performance and other conditions precedent to acceptance”; Connolly v. Lake
County Canning Co. (1928) 95 Cal.App. 768, 769 - party cannot deprive an
optionee of its option rights by preventing the optionee’s exercise.)
Here, triable issues exist because SM
Rialto’s inability to deliver title was caused by SM Rialto’s delay in
providing wire instructions (AWSS 50-51) and Saadia’s assertion of an ROFO
(AWSS 60).
Therefore, triable issues exist regarding
whether RMH properly exercised its Option.
Triable issues also exist regarding whether
the PSA is an entirely new transaction because it differed from the Option, or
whether such differences are immaterial. The “form” PSA, attached as Exhibit B to the
Option, expressly allows for written modifications. (SSADF 65; CEx. 4(1), p.
245 at ¶ 14.9.) The Option also required
SM to “sign any other and further instruments and documents and take such other
actions [...] as may be reasonably necessary or proper in order to accomplish
the intent of [the Option].” (AWSS 64; CEx. 4(1), p. 218 at ¶ 23.) According to Defendants, any subsequent
instruments signed by RMH and SM or modification to the PSA reflect nothing
more than the parties’ efforts to resolve the chaos caused by Saadia’s belated
assertion of its abandoned ROFO. (AWSS 67-68.) Indeed, that was precisely the
reason SM and RMH amended the form PSA to include a release for SM, and SM
agreed to indemnify RMH for up to $500,000 in legal fees in costs resulting
from SM’s dispute with its partner, Saadia. (SSADF 67.) RMH did not take title to the Property as part
of a new transaction “wholly unconnected” to its exercise of the Option. (AWSS
48, 49, 53, 54, 56, 57, 58, 61, 65, 66, 69.)
Summary adjudication of Issue 1 is DENIED.
ISSUE 2
4th Cause of Action for Injunctive
Relief and Specific Performance:
In
deciding whether to issue a preliminary injunction, a trial court weighs two
interrelated factors: the likelihood the moving party ultimately will prevail
on the merits, and the relative interim harm to the parties from the issuance
or nonissuance of the injunction. A
trial court may not grant a preliminary injunction, regardless of the balance
of interim harm, unless there is some possibility that the plaintiff would
ultimately prevail on the merits of the claim. (Hunt v. Superior Court (1999) 21 Cal.
4th 984, 999-1000.)
As determined in Issue 1, triable issues exist
regarding whether RMH properly exercised its Option, and if properly exercised,
RMH’s priority rights would be superior to Saadia’s ROFO. Therefore, triable issues exist regarding
Saadia’s likely success on the merits.
Accordingly, summary adjudication of Issue 2 is
DENIED.
ISSUES 3-5
5th Cause of Action for Declaratory
Relief:
Saadia requests that the court make a
declaration that: the Option Agreement
was not exercised in accordance with its terms (Issue 3); the Option Agreement
terminated in accordance with its terms in March 2021 (Issue 4); and any
agreement to vary the terms of the Option Agreement constitutes a
rejection/termination of the Option Agreement (Issue 5).
As determined in Issue 1, triable issues exist
regarding whether the Option was properly exercised or terminated and whether
any variance in the terms constitute an entirely new agreement.
Accordingly, summary adjudication of Issues 3-5
is DENIED.