Judge: Mel Red Recana, Case: 20STCV26950, Date: 2024-10-22 Tentative Ruling
Case Number: 20STCV26950 Hearing Date: October 22, 2024 Dept: 45
Hearing date: October 22, 2024
Moving Party: Defendants/Cross-Complainants
Michelle Kim, Konstantinos Raptakis, Scala Investments, LLC, and Moloko
Holdings, LLC
Responding Party:
Plaintiffs
Grace Cai and Mitchel Gao
Motion
to Stay Entire Action and for Protective Order Before Depositions
The court has considered the moving,
opposition, and reply papers.
The court DENIES
Defendants/Cross-Complainants Michelle Kim, Konstantinos Raptakis, Scala
Investments, LLC, and Moloko Holdings, LLC’s motion to stay entire action and
for protective order before depositions.
Background
Plaintiffs Grace Cai and Mitchell
Gao filed this action on July 17, 2020, against defendants Michelle Kim,
Konstantinos Raptakis, Scala Investments, LLC, Moloko Holdings, LLC, Forward
Beverly Hills, Inc. dba Keller Williams, and Does 1 through 100, alleging
causes of action for (1) Fraud; (2) Fraudulent Transfer; (3) Negligent
Misrepresentation; (4) Conversion; (5) Breach of Oral or Implied Contract; (6) Breach
of Promissory Note; (7) Fraudulent Business Practices, Cal. Bus. & Prof.
Code §§ 17200, et seq.; (8) Breach of Fiduciary Duty; (9) Money Had
& Received; (10) Constructive Trust; (11) Unjust Enrichment/Recission; (12)
Recovery of Compensation Paid to Unlicensed Contract Cal. Bus. & Prof. Code
§§7031(b), et seq.; (13) Violation of Cal. Penal Code § 496; and (14)
Injunctive Relief. Forward Beverly Hills, Inc. dba Keller Williams was
dismissed on January 8, 2021.
On October 22, 2021, Michelle Kim
and Konstantinos Raptakis filed a Cross-Complaint against cross-defendant
Sheena Gao, and Roes 1 through 50, alleging causes of action for: (1)
Defamation Per Se; (2) Defamation Per Se (second count); (3) Intentional
Infliction of Emotional Distress; (4) Fraud/Intentional Misrepresentation; and
(5) Promissory Fraud/False Promise. On February 8, 2022, Kim and Raptakis filed
the operative First Amended Cross-Complaint, alleging the same causes of action
against Sheena and Roes 1 through 50.
The Complaint
alleges the following: In early 2012, defendant Michelle Kim befriended
Plaintiffs’ daughter, Sheena Gao, and became very close to Plaintiffs. (Compl.,
¶¶ 13, 27.) Sheena Gao loaned Kim $300,000 and assigned the note and deed of
trust to plaintiff Cai. (Id. at ¶¶ 15-16.) The money for the loan came
from Cai’s bank account, as evidenced by the check that was written. (Id.
at ¶ 15.) The subject note provides that Kim make interest-only payments from
March 1, 2018 to February 1, 2020, and that the entire principal balance
together with interest due thereon would become due and payable on February 1,
2020. (Ibid.) Kim gave an interest in 930 N. Doheny St., #215, West
Hollywood, CA 90069 to Sheena Gao. (Id. at ¶ 17.) Kim told Sheena Gao
that the deed of trust would be recorded against the property, but Kim never
did so. (Ibid.) Kim and her husband, defendant Konstantinos Raptakis,
encumbered the subject property and transferred it to their formed entity,
defendant Moloko Holdings, LLC, to avoid collection on the note and foreclose
of the deed of trust. (Id. at ¶¶ 17, 20-21.) Plaintiffs repeatedly
demanded payment on the subject note from February 2020 to May 2020, but Kim
refused to pay. (Id. at ¶ 19.)
On April 3, 2017,
defendant Raptakis formed 1111 Creative Holdings LLC (Creative Holdings) so
that Kim and Raptakis would find and invest in real estate monies, with
Raptakis receiving one percent in Creative Holdings. (Compl., ¶ 34.) In August
2018, plaintiff Gao made three separate wire transfers totaling $321,068.98
from Hong Kong to Raptakis’ company, SCALA Investments, LLC, which was to be
used to find and invest in real estate for Gao. (Id. at ¶ 35.) None of
the Defendants has returned or provided an accounting of the monies to
Plaintiffs. (Ibid.)
Plaintiff
purchased the Curson Property in March 2018, with defendant Kim acting as her
real estate agent. (Compl. ¶ 36.) The parties agreed that defendant Raptakis
would perform certain remolding of the Curson Property after the seller vacated
it on July 1, 2018. (Id. at ¶ 36.) Cai sent over $454,000 to Raptakis
and SCALA Investments, LLC to perform the remodeling. (Ibid.) Raptakis
performed the construction from July 2018 to April 2019, without a license or
obtaining the necessary permits from the Los Angeles Building and Safety
Division. (Ibid.) Cai believed Raptakis had a license and would not have
sent the funds had she known Raptakis was unlicensed. (Ibid.) To date,
Raptakis has failed to provide an accounting or return the over $454,000 that
Cai sent for remodeling. (Ibid.) Raptakis and SCALA Investments, LLC
have been paid over $775,000, but they have failed to provide an accounting or
proof of where and how these monies were spent on Plaintiffs’ behalf. (Id.
at ¶ 37.)
Legal Standard
A notice of stay caused by a filing in a
federal bankruptcy court must be immediately filed with the court and served on
all parties in the case. (Cal. Rules of Court, rule 3.650, subds. (a), (b)(4).)
While the bankruptcy of one defendant automatically stays the action as to that
defendant, it does not automatically stay the action against all defendants.
(See Lane v. Newport Bldg. Corp. (1986) 176 Cal.App.3d 870,
874; Higgins v. Superior Ct. (2017) 15 Cal.App.5th 973, 981.)
“It is fundamental under federal bankruptcy law that the automatic stay
operates for the benefit of the debtor and trustee only, and gives other
parties interested in property affected by the automatic stay no substantive or
procedural rights. [Citations.]”) (Campbell v. Lauigan
(1988) 202 Cal.App.3d 651, 656.)
A party can ask the court to stay an
action or proceeding based on the court's inherent power to stay in the
interest of justice and to promote judicial efficiency. (See Cal. Const., art.
VI, § 1; Code Civ. Proc., § 128; Adams v. Paul (1995) 11 Cal.4th 583,
593; Smith v. Jones (1900) 128 Cal. 14, 15; Koch-Ash v. Superior Ct.
(1986) 180 Cal.App.3d 689, 696; see also Walker v. Superior Ct. (1991)
53 Cal.3d 257, 266-267.)
Preliminary
Issue
The
court notes that Moving Parties attached exhibits to their reply papers and
appear to have raised arguments not presented in their moving papers. Generally, new evidence and arguments are not permitted on
reply unless they fill in gaps in the evidence created by the opposing party’s
opposition and are not raising new substantive issues for the first time;
otherwise, a further hearing would be required to permit the opposing party to
respond. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-1538.) Therefore,
the court declines to consider the new arguments and exhibits attached to
Moving Parties’ reply papers.
Discussion
Stay of Entire Action
Defendants Michelle Kim, Konstantinos
Raptakis, Scala Investments, LLC, and Moloko Holdings, LLC (collectively,
Moving Parties), seek for the Court to stay this action under 11 U.S.C. § 362,
subdivision (a)(1), based on the bankruptcy of Cross-Defendant Sheena Gao
(Sheena). Moving Parties contend they have an identity of interests with
Sheena, and that the claims and defenses cannot be separated from Sheen’s
involvement. Moving Parties contend Kim’s and Raptakis’ counterclaims are also
intertwined with the factual allegations of the underlying Complaint. Moving
Parties then contend Sheena is an indispensable party, and that continuing this
action without Sheena’s participation would be highly prejudicial to Moving
Parties. Moving Parties further contend the Court should stay this entire
action to preserve property of the bankruptcy estate and to avoid duplicative
litigation.
In opposition, Plaintiffs contend there is
no prejudice or irreparable harm if the Court allows this action to continue,
and note that they are not parties to the Cross-Complaint. Plaintiffs contend
there is no identity of interest and that the facts show Moving Parties’ direct
involvement in this matter. Plaintiffs contend Sheena is not an indispensable
party to this lawsuit. Plaintiffs further contend there is no evidence to support
Moving Parties’ claims regarding the $300,000 assignment as a potential asset
from the estate, and that the entire matter should not be stayed just because
Moving Parties want to blame Sheena for their conduct.
The court does not find the Moving Parties
have demonstrated a sufficient basis for staying this entire action as to all
parties involved. First, the notice of stay Sheena filed with the court applies
only to Sheena, and confers no rights upon Moving Parties. (Notice of Chapter 7
Bankruptcy Filing (1/29/24); see Lane v. Newport Bldg. Corp.,
supra, 176 Cal.App.3d at p. 874; Higgins v. Superior Ct., supra,
15 Cal.App.5th at p. 981; Campbell v. Lauigan, supra, 202 Cal.App.3d at p. 656.)
Second, Sheena is not a party to the
Complaint, but she is a party to the First Amended Cross-Complaint (FACC). (See
Compl., ¶¶ 2-8; FACC, ¶ 3.) Plaintiffs also correctly note that they are not
parties to the FACC. (See FACC, ¶¶ 1-4.) Additionally, although not mentioned
in the parties’ respective briefs, the Court notes that a cross-complaint is an
independent action. (Metro. Transit Sys. v. Superior Ct. (2007) 153
Cal.App.4th 293, 302; Westamerica Bank v. MBG Indus., Inc. (2007) 158
Cal.App.4th 109, 132.) Thus, the staying of the FACC as to Sheena has no
bearing on the continued litigation of the Complaint against Moving Parties.
Third, the court does not find that Sheena
is an indispensable party to the Complaint for purposes of this motion. As
noted above, Sheena is not a party to the Complaint. (See Compl., ¶¶ 2-8.) It
appears to the court that Sheena is at most a percipient witness as it pertains
to Plaintiffs’ claims. (See Compl., ¶¶ 13-46.) Moving Parties have not adequately
shown that Sheena has an interest in the outcome of the Complaint. (Code Civ.
Proc., § 389, subd. (a).) The court also notes that this case is over four years
old. If Sheena truly was an indispensable party, Moving Parties should have
sought Sheena’s joinder to the Complaint years ago. (See Ibid.)
Fourth, regarding the $300,000 note
assignment and preserving the bankruptcy estate, Moving Parties did not present
any evidence that Sheena has an interest in that note. This argument also does
not make sense because once Sheena allegedly assigned all rights in the note to
Plaintiff Cai, Sheena would no longer have an interest in that note. (Compl., ¶
16; see Domarad v. Fisher & Burke, Inc. (1969) 270
Cal.App.2d 543, 554.)
Finally, the Court does not find that
permitting the litigation of the Complaint to continue would result in
duplicative litigation. As noted above, the Complaint and FACC are separate
actions. (Metro. Transit Sys. v. Superior Ct., supra, 153 Cal.App.4th at
p. 302; Westamerica Bank v. MBG Indus., Inc., supra, 158 Cal.App.4th at
p. 132.) Also, the thrust of the Complaint is Plaintiffs seeking to be made
whole for Defendants’ alleged wrongful taking of Plaintiffs’ monies, whereas
the thrust of the FACC is for disputes between Kim and Raptakis on the one hand
and Sheena on the other.
Based on the foregoing, the Court DENIES
the motion to stay.
Protective Order
Moving Parties also seek for the Court to
issue a protective order so that the Moving Parties do not have to appear for
their respective depositions or produce documents for those depositions pending
completion of Sheena’s bankruptcy proceedings. Moving Parties contend they will
otherwise have to be deposed twice, which would be burdensome to Moving Parties
and unduly advantageous to Sheena. In opposition, Plaintiffs contend this part
of the motion is moot since the depositions occurred after Moving Parties filed
the motion, and Plaintiffs took certificates of nonappearances for each of the
Moving Parties.
The court finds motion for the protective
order to be moot. Plaintiffs indicate that the depositions have already
occurred and that they took certificates of nonappearance for each of the
moving parties. (Leon Decl., ¶ 15.) Moreover, even if the depositions had not
yet occurred, the motion would still be denied because the court does not find
the possibility of Moving Parties being deposed twice to be evidence of an
undue burden warranting a protective order here. As noted above, the Complaint
and FACC are two separate actions. (Metro. Transit Sys. v. Superior Ct.,
supra, 153 Cal.App.4th at p. 302; Westamerica Bank v. MBG Indus., Inc.,
supra, 158 Cal.App.4th at p. 132.) Plaintiffs are therefore entitled to
depose Moving Parties at least once in connection with the Complaint without
leave of court, while Sheena is also entitled to depose Moving Parties at least
once in connection with the FACC without leave of court. (Code Civ. Proc., §
2025.210.)
Accordingly, the Court DENIES the
motion for protective order.
It is so
ordered.
Dated:
October 22, 2024
_______________________
MEL RED RECANA
Judge of the
Superior Court