Judge: Mark A. Young, Case: 19SMCV02159, Date: 2023-01-26 Tentative Ruling
Case Number: 19SMCV02159 Hearing Date: January 26, 2023 Dept: M
CASE NAME: HDevelopment
LLC, et al., v. Schimmel, et al.
CASE NO.: 19SMCV02159
MOTION: Motion
for Summary Judgment/Adjudication
HEARING DATE: 1/26/2023
Legal
Standard
A party may move for summary
judgment in any action or proceeding if it is contended the action has no merit
or that there is no defense to the action or proceeding. (CCP, § 437c(a).) “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 adjudication as
to one or more causes of action within an action, one or more affirmative
defenses, one or more claims for damages, or one or more issues of duty, if the
party contends that the cause of action has no merit, that there is no
affirmative defense to the cause of action, that there is no merit to an
affirmative defense as to any cause of action, that there is no merit to a
claim for damages, as specified in Section 3294 of the Civil Code, or that
one or more defendants either owed or did not owe a duty to the plaintiff or
plaintiffs.” (CCP, § 437c(f)(1).) If a party seeks summary
adjudication as an alternative to a request for summary judgment, the request
must be clearly made in the notice of the motion. (Gonzales v. Superior
Court (1987) 189 Cal.App.3d 1542, 1544.) “[A] party may move for
summary adjudication of a legal issue or a claim for damages other than
punitive damages that does not completely dispose of a cause of action,
affirmative defense, or issue of duty pursuant to” subdivision (t).
(CCP, § 437c(t).)
To
prevail, the evidence submitted must show there is no triable issue as to any
material fact and that the moving party is entitled to judgment as a matter of
law. (CCP, § 437c(c).) The motion cannot succeed unless the
evidence leaves no room for conflicting inferences as to material facts; the
court has no power to weigh one inference against another or against other
evidence. (Murillo v. Rite Stuff Food Inc. (1998) 65 Cal.App.4th
833, 841.) In determining whether the facts give rise to a triable issue of
material fact, “[a]ll doubts as to whether any material, triable, issues of
fact exist are to be resolved in favor of the party opposing summary judgment…”
(Gold v. Weissman (2004) 114 Cal.App.4th 1195, 1198-99.) “In other
words, the facts alleged in the evidence of the party opposing summary judgment
and the reasonable inferences there from must be accepted as true.” (Jackson
v. County of Los Angeles (1997) 60 Cal.App.4th 171, 179.) However, if
adjudication is otherwise proper the motion “may not be denied on grounds of
credibility,” except when a material fact is the witness’s state of
mind and “that fact is sought to be established solely by the [witness’s]
affirmation thereof.” (CCP, § 437c(e).)
Once
the moving party has met their burden, the burden shifts to the opposing party
“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).) “[T]here is no obligation on the opposing party... to establish
anything by affidavit unless and until the moving party has by affidavit stated
facts establishing every element... necessary to sustain a judgment in his
favor.” (Consumer Cause, Inc. v. SmileCare (2001) 91
Cal.App.4th 454, 468.)
“The pleadings play a key role in a summary
judgment motion. The function of the pleadings in a motion for summary judgment
is to delimit the scope of the issues and to frame the outer measure
of materiality in a summary judgment proceeding.” (Hutton v. Fidelity
National Title Co. (2013) 213 Cal.App.4th 486, 493, quotations
and citations omitted.) “Accordingly, the burden of a defendant moving for
summary judgment only requires that he or she negate plaintiff's theories of
liability as alleged in the complaint; that is, a moving party need
not refute liability on some theoretical possibility not included in the
pleadings.” (Ibid.)
EVIDENTIARY ISSUES
Defendants’ objections to the Marino and Gordon declarations
are OVERRULED.
Plaintiffs’ objections to the Schimmel and Biafora Declarations
are OVERRULED.
Analysis
Defendants Schimmel and S&B
move for summary judgment or adjudication of each cause of action alleged by
Plaintiffs HDevelopment and RLM. The operative third amened complaint (TAC)
alleges three causes of action for breach of a joint venture agreement,
promissory fraud, and quantum meruit. Defendants move on the premise that the
undisputed evidence shows that there was never an agreement to form a
partnership or joint venture with Plaintiffs.
“[T]he elements of a cause of action for breach of contract are (1) the
existence of the contract, (2) plaintiff's performance or excuse for
nonperformance, (3) defendant's breach, and (4) the resulting damages to the
plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811,
821.)
“The elements of promissory fraud .
. . are: (1) a promise made regarding a material fact without any intention of
performing it; (2) the existence of the intent not to perform at the time the
promise was made; (3) intent to deceive or induce the promise to enter into a
transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the
party making the promise; and (6) resulting damage to the promisee.” (Rossberg
v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)
The
elements for a claim for quantum meruit are: 1) performance of services, work
or labor; 2) at defendant’s request; and 3) circumstances inferring defendant’s
promise to pay a reasonable value. (Maglica v. Maglica (1998) 66
Cal.App.4th 442, 449-450.) “ ‘The measure of recovery in quantum meruit
is the reasonable value of the services rendered provided they were of
direct benefit to the defendant.’ ” (Chodos v. Borman (2014) 227
Cal.App.4th 76, 96.) “The idea that one must be benefited by the goods
and services bestowed is thus integral to recovery in quantum meruit.” (Maglica,
supra, 66 Cal.App.4th at 450.) Therefore, a plaintiff must establish both that he was acting pursuant to
either an express or implied request for such services from the defendant and
that the services rendered were intended to and did benefit the defendant;
further, the defendant must have retained the benefit with full appreciation of
the facts. (Pacific Bay Recovery, Inc. v.
California Physicians' Services, Inc.¿(2017) 12 Cal.App.5th 200.)
The TAC alleges that on January 3,
2017, defendants, through Biafora, acting on his own behalf and as the
authorized agent of each defendant, and specially authorized to agree on each
defendant’s behalf, orally agreed with both plaintiffs, Jeffrey Gordon for HD
and Ronald Marino for RLM, to combine their skills, property, knowledge, and
labor for investment purposes, as follows, regarding a single-family home
commonly known as 2218 Glencoe Ave, Venice, California (the “property”), which
plaintiffs had located. (TAC ¶10.) The joint venture’s business was to acquire,
renovate, and resell the property, and divide profit from the sale as
“partners.” (Id.; see ¶¶ 21-26.) The claims are dependent on the existence of
this joint venture agreement, and Plaintiff’s reasonable reliance on
representations of a joint venture agreement. (¶¶ 21-36.)
Existence of Joint
Venture
“A joint venture . . . [is] an association of two or more persons who
combine their property, skill or knowledge to carry out a single business
enterprise for profit. It has generally been recognized that in order to create
a joint venture there must be an agreement between the parties under which they
have a community of interest, that is, a joint interest, in a common business
undertaking, an understanding as to the sharing of profits and losses, and a
right of joint control. Such an agreement, however, need not be formal or
definite in every detail relating to the respective rights and duties of the
parties but may be implied as a reasonable deduction from their acts and
declarations.” (Holtz v. United Plumbing & Heating Co. (1957) 49
Cal.2d 501, 506–507.)
Defendants present the following
evidence to negate the allegations of a joint venture between themselves and
Plaintiffs. Defendant Schimmel is a managing member of S&B (UMF No. 1.)
Steve Biafora, another member of S&B, told Schimmel that he found a house
located at 2281 Glencoe Ave. in Venice (“the Venice Property”) that he wanted
S&B to invest in to remodel and sell. (UMF No. 2.) Biafora approached
Schimmel with the investment and to approve S&B purchasing and remodeling
the Venice Property. (UMF No. 3.) S&B and Schimmel had no partners or joint
venturers in the Venice Property. (UMF No. 4.)
Plaintiff HD was never a partner or
engage in a joint venture with Schimmel (UMF No. 5.) HD was never a partner or
joint venturer of S&B. (UMF No. 6.) Plaintiff RLM was never a partner or
joint venturer of Schimmel. (UMF No. 7.) RLM was never a partner or joint
venturer of S&B. (UMF No. 8.) S&B made no promises to HD or RLM to
share ownership of the Venice Property or to share any profits or losses as a
joint venture with S&B in the Venice Property. (UMF No. 13.) Schimmel made
no promises to HD or RLM to share ownership of the Venice Property or to share
any profits or losses as a joint venture with S&B in the Venice Property.
(UMF No. 14.)
As a managing member, Schimmel would
require a signed, written agreement with all terms agreed to and signed off on
by S&B and himself as a managing member and would never agree to form any
joint venture to share title, ownership or profits for the Venice Property (or
any real estate) without a signed, written agreement. (UMF No. 15.) S&B never made any promise to share,
divide or split any profits from its purchase, ownership, investment and sale
of the Venice Property with either HD or Red Letter. (UMF No. 16.) Schimmel
never made any promise to share or split profits from S&B’s purchase,
ownership, investment and sale of the Venice Property with either HD or Red
Letter. (UMF No. 17.)
This
evidence meets Defendants’ initial burden to demonstrate that there was no joint
venture contract between the parties. Thus, Plaintiffs must demonstrate a
dispute of fact as to the existence of a joint venture agreement.
Plaintiffs submit sufficient
evidence to put into dispute whether a joint venture formed between
S&B/Schimmel and Plaintiffs regarding the development of the Venice
Property. (See Marino Decl., ¶¶ 4-15, Exs. 1, 3, 5; ¶¶ 20-21(a) – (g), Exs.
7-15.) Plaintiffs proffer the declaration of Ronald Marino, who explains:
4. Mr. Biafora told me that I do
not need to do this deal with anyone else, that he wanted to enter into a deal
with Mr. Gordon and me wherein he would provide the money for acquisition and
construction, Mr. Gordon and I would handle the design and construction, and
that Mr. Gordon and I, as his partners, would make money and receive a
reasonable share of the profits. I relied on those statements.
5. My participation in the project,
on behalf of RLM, was helping to find candidate sites, analyzing their feasibility,
and consulting during renovation and resale.
6. On December 14, 2016, I, along
with Mr. Gordon, drove Mr. Biafora around Los Angeles, and presented Mr.
Biafora with several candidate properties that I was targeting. At that time,
Mr. Biafora told me that he wished to make a joint venture agreement with me
and Mr. Gordon regarding acquisition, renovation, resale, and division of
profit.
[¶]
8. In early January 2017, Mr.
Biafora and I orally agreed to form a joint venture for the acquisition, renovation,
and resale of the Venice Property
9. During that discussion, Mr.
Biafora agreed that he would provide the funds to acquire and renovate the
property and that HDevelopment and Red Letter Management would perform or cause
to be performed the design and renovation, at our cost, which Mr. Biafora would
pay currently. Mr. Biafora said at that time that we did not need a written
agreement because we were friends, he would add us to an LLC to formalize the
deal, and we would be paid a reasonable share of the profits.
(Marino Decl., ¶¶ 4-9.)
Marino goes on to explain that
Schimmel, as an individual, would be part of the deal. (Marino Decl., ¶¶ 10-14.)
Plaintiffs present evidence that Schimmel personally was aware that there would
be a “split” of the profits before Venice Property was purchased. (Marino
Decl., ¶ Ex. 1.) Moreover, Biafora made some discovery admissions which suggest
that the parties intended to split profits regarding the sale. (Callo Decl.,
¶¶4-9, Exs. 3-8.)
Therefore, Plaintiffs’ meet their burden
to show a dispute of fact regarding the creation of a joint venture.
Statute of Frauds
Defendants evidence, strictly
construed, does not support the application of the statute of frauds as a
complete defense. The statute of
frauds declares several types of agreements “invalid” unless “they, or some
note or memorandum thereof, are in writing and subscribed by the party to be
charged or by the party's agent.” (Civ. Code § 1624(a).) The statute applies to agreements “for the
sale of real property, or of an interest therein; such an agreement, if made by
an agent of the party sought to be charged, is invalid, unless the authority of
the agent is in writing, subscribed by the party sought to be charged.”
(§1624(a)(3); see Westside Estate Agency, Inc. v.
Randall (2016) 6 Cal.App.5th 317, 323 [the court is presented with two
questions: (1) does the statute apply to the contract at issue?; and if so, (2)
are the statute's requirements of a properly subscribed writing met?].)
The undisputed evidence
demosntrates that there was no agreement concerning the transfer of real
property interests, as opposed to an agreement to split profits from the sale
of real property. Such an agreement does not broach the statute of frauds
because the alleged joint venture agreement is not for the sale of real
property or any interest in real property. Defendants also do not address
Plaintiffs’ pled part performance, which also would take the contract out of
the statute of frauds.
Defendants also note that “where
the parties intend to reduce their agreement to writing there is no binding
agreement between the parties until a written contract is signed”. (C. L.
Smith Co. v. Roger Ducharme, Inc. (1977) 65 Cal. App. 3d 735, 742.) However,
Defendants do not provide evidence that the parties intended that the agreement
be reduced to writing. Strictly construed, the February 2, 2017, email
contemplated a writing, but does not necessarily show that the parties
intended to reduce the agreement to a writing. Even if the Court accepts
Defendants’ interpretation of the February 2, 2017, email, Plaintiffs present a
dispute of fact whether the Term Sheet truly represents the terms of the joint
venture agreement alleged, since Biafora contemporaneously claimed that a
written agreement would not be necessary. (Marino Decl., ¶ 9.)
Agency
Defendants also attacks allegations
of agency between them and Mr. Biafora. This evidence, however, does not shift
the burden on the allegation of agency between Biafora and Schimmel/S&B. They
contend that Biafora was not specifically authorized by S&B to form a joint
venture in the investment and ownership of the Venice Property. (UMF No. 18.)
No outside third party was ever mentioned or discussed between Schimmel and Mr.
Biafora to be S&B’s “partner” in owning the Venice Property or sharing
profits. (UMF No. 19.)
Notably, Biafora is a member of
S&B, which lends credence to the fact that he was an agent of S&B. Additionally,
Schimmel’s declaration only offers a conclusion that Biafora was “not
authorized by S&B to form a joint venture in the investment and ownership
of the Venice Property.” Schimmel does not explain how this lack of
authorization came about. Thus, Schimmel does not proffer specific and
substantial evidence to carry his burden on summary judgment.
In any event, there would be a
dispute of fact as to Biafora’s actual or ostensible agency with S&B and
Schimmel. An agency relationship may arise by oral consent or by implication
from the conduct of the parties. (Flores v. Evergreen at San Diego, LLC
(2007) 148 Cal.App.4th 581, 587-88.) "Agency can be founded on ostensible
authority, that is, some intentional conduct or neglect on the part of the
alleged principal creating a belief in the minds of third persons that an
agency exists, and a reasonable reliance thereon by such third persons.
(Ibid.) “Ostensible agency cannot be established by the representations
or conduct of the purported agent; the statements or acts of the principal must
be such as to cause the third party to believe that the agency exists. (Milrot
v. Stamper Medical Corp. (1996) 44 Cal.App.4th 182, 187.)
Here, Plaintiffs submit evidence of
conduct by Schimmel that could reasonably create a belief in the mind of
Plaintiffs that Biafora was his agent and “partner.” As mentioned, Biafora was
a member of S&B. In the summer of 2017, Biafora introduced Plaintiffs and
Schimmel, in the presence of Schimmel, as his “partners” during a meeting while
the Venice Property was being renovated. Schimmel witnessed this and made no
denial. (Marino Decl. ¶ 2.) In context, Schimmel’s inaction at this meeting
could create a reasonable belief in Plaintiffs’ mind that Biafora had actual
authority as a “partner” of Schimmel.
Accordingly, Defendants motion for
summary judgment is DENIED. Defendants’ presented issues are all dependent on
the above arguments regarding the existence of a joint venture. As a dispute of
material fact exists on that point, the motion for summary adjudication is
DENIED as to each issue.
Punitive Damages
As to punitive damages, Defendants
fail to meet their initial burden to demonstrate that Plaintiffs lack clear and
convincing evidence that S&B acted with malice, oppression, or fraud. Defendants
merely cite the same evidence discussed above, without application to the law
of punitive damages. As discussed, there is a dispute of fact as to the above
evidence. Additionally, Defendants cite no positive evidence that shows a lack
of malice/oppression/fraud, etc., on their part, or any discovery admissions by
Plaintiffs that they lack and cannot reasonably obtain such evidence.
Accordingly, Defendants’ motion for adjudication of this item of damages is
DENIED.