Judge: Mel Red Recana, Case: 22STCV17451, Date: 2024-09-26 Tentative Ruling
Case Number: 22STCV17451 Hearing Date: September 26, 2024 Dept: 45
Hearing date: September
26, 2024
Moving Party: Defendants
Future Growth, LLC and 621Two, LLC
Responding
Party: Plaintiff Guzman Energy, Inc.
Motion
for Summary Judgment or, in the alternative, Summary Adjudication
The court
considered the moving papers. No opposition was filed in this case.
Defendants’
motion for summary judgment as to Plaintiff’s Complaint is GRANTED.
Defendants’ motion for summary adjudication as to their Cross-Complaint for
causes of action one, three, four five, and eight is GRANTED.
Defendants’ Cross-Complaint for causes of action two, six, and seven are DISMISSED
WITHOUT PREJUDICE.
Background
Factual
Background
Plaintiff Guzman
Energy (“Plaintiff”) brought this action against Defendants Future Growth, 621
Two LLC, unknown persons claiming legal title or equitable right adverse to
Plaintiff’s title, and Does 1 through 50 on May 27, 2022. Plaintiff alleged
four causes of action: (1) quiet title; (2) private nuisance per se; (3)
intentional interference with prospective economic advantage; and (4)
declaratory relief. Plaintiff alleges it is the owner of two oil well leases
(“Leases”) and currently operates wells on those sites. (Complaint, ¶¶ 11, 14,
18, 21.) Plaintiff also alleges ownership of an easement between the two lands
on which the wells are located. (Complaint, ¶ 26.) To support the wells,
facilities were constructed on a portion of the leased lands at 621 West
Rosecrans Avenue, Los Angeles, California (“621 Property”). (Complaint, ¶ 29.)
The surface estate of the 621 Property was then granted to Defendant 621 Two.
(Complaint, ¶ 30.) The above-ground facilities and both wells are located on
the 621 Property, and Plaintiff alleges that the 621 Property is subject to its
easement and one of its leases. (Complaint, ¶ 30.)
On January 29,
2021, Defendant Future Growth’s purported predecessor in interest sent a letter
to Plaintiff alleging that an interest in the Leases was assigned to Defendant
Future Growth. (Complaint, ¶ 31.) The letter contained a copy of a quitclaim
deed, recorded in the Official Records of Los Angeles County on November 20,
2020, and a copy of a Los Angeles County Assessor Change in Ownership Statement.
(Complaint, ¶¶ 32.) Plaintiff interpreted the deed as correctly conveying the
former lessor’s royalty interest consisting only of one-sixth of crude oil
produced minus one-sixth of the property taxes to Defendant Future Growth.
(Complaint, ¶ 33.) However, Plaintiff believed the Change in Ownership
Statement purported that Defendant Future Growth acquired 100 percent of the
revenue interest and 100 percent of the working interest in the leases.
(Complaint, ¶ 34.)
Due to
Plaintiff’s alleged uncertainty about a possible adverse claim to the title,
Plaintiff has held all royalties due on production from the Leases in suspense.
(Complaint, ¶ 38.) Plaintiff also sent a letter to Defendant Future Growth on
February 9, 2021, asking for clarification of Defendant Future Growth’s claim.
(Complaint, ¶ 37.) Plaintiff then sent a letter on November 22, 2021, stating
that Plaintiff required Defendant Future Growth to provide a completed IRS form
W-9 before issuing any royalty payments. (Complaint, ¶ 39.) Plaintiff alleges
Defendant Future Growth did not provide any documents in response to their
request. (Complaint, ¶ 42.)
Defendant Future
Growth then sent a letter to Plaintiff on December 20, 2021, alleging that
Plaintiff failed to pay royalties due on production from the Leases and was
therefore in default. (Complaint, ¶ 42.) Defendant Future Growth sent another
letter the following day, which requested to inspect records to determine the
amount of royalties owed to Defendant Future Growth. (Complaint, ¶ 43.)
Plaintiff did not grant the request for inspection of records, believing it was
only required to accommodate such requests when made by the lessor, and it was
uncertain of Defendant Future Growth’s title to the lessor’s interest.
(Complaint, ¶ 44.) Plaintiff then sent another letter on April 18, 2022,
requesting the IRS W-9 Form, a re-executed copy of the deed clarifying the
interest conveyed, and a correction to the Change in Ownership Statement,
conditioning all royalty payments from November 2020 on receipt of these
documents. (Complaint, ¶ 45.)
Defendant Future
Growth sent Plaintiff a letter on May 5, 2022, alleging that it sent a letter
on March 17, 2022, notifying Plaintiff that it was terminating the Leases for
Plaintiff’s failure to comply with the demands for royalty payment and request
for document inspection and demanding that Plaintiff quitclaim its interests in
the Leases to Defendant Future Growth. (Complaint, ¶ 47.)
Plaintiff
asserts that its leases are still in full force and effect, and its withholding
of royalty payments until it receives documents and information to resolve
uncertainty regarding royalty interest does not constitute a failure to pay
royalties amounting to a default and justifying a lease termination.
(Complaint, ¶¶ 50, 52.) Plaintiff alleges that it is common industry practice
to withhold royalty payments so long as there is uncertainty as to a payee’s
title to the interest, and that this suspense of payments is not considered a
breach or default under an oil and gas lease. (Complaint, ¶ 54.)
Procedural
Background
Plaintiff filed its
Complaint on May 27, 2022, alleging four causes of action for: (1) quiet title;
(2) private nuisance per se; (3) intentional interference with prospective
economic advantage; and (4) declaratory relief. Defendants filed their Answer
on August 11, 2022. Defendants also filed a Cross-Complaint on the same day,
alleging eight causes of action: (1) declaratory relief; (2) slander of title;
(3) termination of lease; (4) conversion; (5) accounting; (6) trespass; (7)
nuisance; and (8) ejectment. Plaintiff filed their Answer to the Cross-Complaint
on September 27, 2022. The trial date was set for April 29, 2024.
Defendants then
filed their motion for summary judgment on August 3, 2023. They requested a
hearing date of September 26, 2023, but it was erroneously entered for the
following year, several months after the trial date. Defendants then sought an ex parte application
for an order to advance the hearing date on their motion for summary judgment.
Plaintiff did not oppose the application, so long as the new hearing dates was
on or after December 22, 2023. The court did not advance the hearing due to
unavailability of dates, and Defendants again sought an ex parte application
for an order to advance the hearing date on their motion for summary judgement.
Plaintiffs filed an opposition, arguing that the court should instead continue
the trial to a date after October 7, 2024, which would allow Defendants’ motion
for summary judgment to be heard as calendared. The court continued the trial
date to October 28, 2024. Plaintiff has not filed an opposition to the motion
for summary judgment.
Legal
Standard
California Code
of Civil Procedure section 437c, subdivision (a), provides: “Any party may move
for summary judgment in any action or proceeding if it is contended that the
action has no merit.” A defendant moving for summary judgment must satisfy the
initial burden of proof by presenting facts to negate an essential element of
the plaintiff’s claim, or to establish a complete defense to the cause of action.
(Code Civ. Proc., §437c, subd. (p)(2).) “Summary judgment law in this state,
however, continues to require a defendant moving for summary judgment to
present evidence, and not simply point out through argument, that the plaintiff
does not possess, and cannot reasonably obtain, needed evidence.” (Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) Once a defendant has
met this burden, the burden shifts to the plaintiff “to prove that a triable
issue of one or more material facts exists as to the cause of action . . . .”
(Code Civ. Proc., §437c, subd. (p)(2).) The plaintiff cannot simply rely on allegations
they made in the pleadings, but must produce substantial responsive evidence. (Snyder
v. U.S. Fidelity & Guar. Co. (1997) 60 Cal.App.4th 561, 565.)
In analyzing
summary judgment motions, courts must apply a three-step analysis: “(1)
identify the issues framed by the pleadings; (2) determine whether the moving
party has negated the opponent's claims; and (3) determine whether the
opposition has demonstrated the existence of a triable, material factual
issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289,
294.) Summary judgment is granted when, after the court’s consideration of the
evidence set forth in the papers and all reasonable inferences accordingly, no
triable issues of fact exist and the moving party is entitled to judgment as a
matter of law. (Code Civ. Proc., §437c, subd. (c); Villa v. McFarren
(1995) 35 Cal.App.4th 733, 741.)
Request
for Judicial Notice
Defendants
filed a request for judicial notice of eight exhibits: (1) Plaintiff’s verified
Complaint, with recorded copies of the Leitch and Sutherland leases and the
recorded easement; (2) Plaintiff’s amended motion for preliminary injunction;
(3) Declaration of Peter Starflinger in Support of Opposition by Defendants for
Preliminary Injunction; (4) Declaration of Barry R. Gore in Support of
Opposition by Defendants to Motion for Preliminary Injunction; (5) Internal
Revenue Service publication regarding payments of royalties in the event a
party declines to provide a W-9 statement; (6) Defendants’ Cross-Complaint; (7)
Defendants’ Opposition to Plaintiff’s Motion for Preliminary Injunction; and
(8) Final Ruling of Los Angeles Superior Court Judge James Chalfant on
Plaintiff’s Motion for Preliminary Injunction.
“The motion
shall be supported by affidavits, declarations, admissions, answers to
interrogatories, depositions, and matters of which judicial notice shall or may
be taken.” (Code Civ. Proc., §437c, subd. (b)(1).) “However, while courts are
free to take judicial notice of the existence of each document in a court file,
including the truth of results reached, they may not take judicial notice of
the truth of hearsay statements in decisions and court files. [Citation.]” (Kilroy
v. State of California (2004) 119 Cal.App.4th 140, 145.)
Exhibits 1, 2,
3, 4, 6, 7, and 8 are previous filings in this case and part of this case’s
record. The court takes judicial notice of these documents.
The Court may
take judicial notice of official legislative, executive, and judicial acts.
(Evid. Code § 452(c).) Exhibit 5 is a publication by the IRS. The court takes
judicial notice of this document.
Motion
for Summary Judgment
Moving Argument
Plaintiff’s
Complaint
Defendants argue
that there are no triable issues of material fact because Plaintiff no longer
owns leasehold interest in two oil wells, due to a failure to pay royalties and
allow inspection of documents. (Motion for Summary Judgment, p. 5.) Defendants
argue that Plaintiff’s justification for not paying royalties—that the
quitclaim deed was uncertain—was made after the fact and in bad faith. (Motion
for Summary Judgment, pp. 16–18.) Defendant offers as evidence that Plaintiff
admitted the sale by quitclaim to Future Growth by email in February 2021,
which was identified by Defendants in discovery. (Declaration of Mark J. Sarni,
Exhibit 1.) In the same email,
Plaintiff’s attorney stated that Plaintiff was prepared to pay the one-sixth
interest that it believed to be Defendant Future Growth’s. (Declaration of Mark
J. Sarni, Exhibit 1.) Defendants argue
that these admissions show Plaintiff was aware of Defendants’ ownership of the
land and right to royalties, yet Plaintiff did not pay said royalties. As a result
of Plaintiff’s default, Defendants terminated the leases, eliminating
Plaintiff’s ownership interest in the land and any right to bring causes of
action related to the land. (Motion for Summary Judgment, p. 18.)
Defendants’
Cross-Complaint
Defendants filed
a cross-complaint asserting eight causes of action for: (1) declaratory relief;
(2) slander of title; (3) termination of lease; (4) conversion; (5) accounting;
(6) trespass; (7) nuisance; and (8) ejectment. Defendants seek summary
adjudication on their first, third, fourth, fifth, and eighth causes of action.
They agree to dismissal without prejudice of their second, sixth, and seventh
causes of action if the court grants their motion for summary judgment. (Motion
for Summary Judgment, p. 20.) They argue that because Plaintiff’s lease has
been terminated, Defendants are entitled to court order and judgment confirming
the termination, judgment that Plaintiff converted their property, an
accounting of the oil production and due royalties, and ejectment of the
Plaintiff’s equipment and material from the 621 Property. (Motion for Summary
Judgment, p. 21.)
Plaintiff did
not file an opposition to this motion for summary judgment.
Discussion
A defendant
moving for summary judgment must satisfy the initial burden of proof by
presenting facts to negate an essential element of the plaintiff’s claim, or to
establish a complete defense to the cause of action. (Code Civ. Proc., §437c,
subd. (p)(2).)
Plaintiff’s
Complaint
a.
First Cause of Action: Quiet Title
Plaintiff
alleges it is entitled to a judicial declaration that Plaintiff is the owner of
all right, title, and interest granted to the lessee by the Leases. (Complaint,
¶ 73.) However, Defendant has presented evidence that Defendant Future Growth
acquired the lessor’s interest in the Leases, (Separate Statement of Undisputed
Facts, ¶ 6,) and gave Plaintiff Notices of Default for Failure to Pay Royalties
and failure to honor a Notice of Requests for Inspection of Records. (Separate
Statement of Undisputed Facts, ¶ 10.) Defendant Future Growth presented further
evidence that Plaintiff failed to cure the default within the 30-day period
specified in the leases, and that Defendant Future Growth then properly
exercised its right to terminate the Leases on March 17, 2022. (Declaration of
Peter Starflinger, ¶ 7, Exhibit D.)
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate as to this cause of action.
b.
Second Cause of Action: Nuisance
Per Se
“[W]here the law
expressly declares something to be a nuisance, then no inquiry beyond its
existence need be made and in this sense its mere existence is said to be a
nuisance per se. But, to rephrase the rule, to be considered a nuisance per se
the object, substance, activity or circumstance at issue must be expressly
declared to be a nuisance by its very existence by some applicable law.” (People
v. ConAgra Grocery Products Co. (2017) 17 Cal.App.5th 51, 114 [internal
citations omitted].)
Plaintiff alleges
Defendants blocked vehicle access to the wells on both leased lands, in
violation of state and local laws. (Complaint, ¶ 76.) However, as discussed
above, Defendant presented evidence that Plaintiff’s Leases were terminated on
March 17, 2022. (Declaration of Peter Starflinger, ¶ 7, Exhibit D.) As a
result, Plaintiff no longer had a right to access its previously leased land,
and does not have a claim for nuisance per se.
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate as to this cause of action.
c.
Third Cause of Action: Intentional
Interference with Economic Advantage
“The elements of
the tort of interference with prospective economic advantage are ‘(1) a
relationship between the plaintiff and some third party with the probability of
future economic benefit to the plaintiff; (2) the defendant's knowledge of the
relationship; (3) a wrongful act, apart from the interference itself, by the
defendant designed to disrupt the relationship; (4) actual disruption of the
relationship; and (5) economic harm to the plaintiff proximately caused by the
acts of the defendant.’” (Salma v. Capon
(2008) 161 Cal.App.4th 1275, 1290 [internal citation omitted].)
Plaintiff
alleges that Defendants have intentionally refused to provide access to the
wells, and Plaintiff has lost revenue from oil it cannot sell from the wells.
(Complaint, ¶¶ 88, 90.) However, as discussed above, Defendant presented
evidence that Plaintiff’s Leases were terminated on March 17, 2022.
(Declaration of Peter Starflinger, ¶ 7, Exhibit D.) As a result, Plaintiff no
longer had a right to access its previously leased land, and does not have a
claim to the future economic benefits of oil being produced on the land.
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate as to this cause of action.
d.
Fourth Cause of Action: Declaratory
Relief
Plaintiff seeks
a judicial determination that Plaintiff is the owner the Leases and an easement
on the 621 Property and has a right to access the land for the purpose of
operating wells. (Complaint, ¶ 95.) As discussed above, both Leases have been
terminated. (Declaration of Peter Starflinger, ¶ 7, Exhibit D.) As a result,
Plaintiff does not hold any rights, title, or interest in the land.
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate as to this cause of action.
Defendants’
Cross-Complaint
Defendants also
seek summary adjudication as to their Cross-Complaint causes of action one,
three, four, five, and eight. (Motion for Summary Judgment, p. 20.) Defendants
further agree to a dismissal without prejudice of their second, sixth, and
seventh causes of action. (Motion for Summary Judgment, p. 20.) As such, causes
of action two, six, and seven are dismissed without prejudice.
a.
First Cause of Action: Declaratory
Relief
Defendants seek a
judicial determination that the Leases were legally terminated on March 17,
2022, and pursuant to the Leases, Plaintiff must abandon its wells within six
months of the court’s judgment. (Motion for Summary Judgment, p. 21.)
Defendants also seek a declaration that Defendant Future Growth is entitled to
an accounting for all revenue generated by the wells and all royalties accruing
therefrom that have not been paid since November 2020. (Motion for Summary
Judgment, p. 21.)
As discussed
above, Defendant has produced evidence that Plaintiff’s leaseholds were
terminated on March 17, 2022. Furthermore, Defendant has produced evidence that
Plaintiff continued to produce oil on the land, including after the time Future
Growth became the lessor of the leases. (Separate Statement of Undisputed
Facts, ¶ 10.) Defendants have produced evidence that Plaintiff alleged to have
placed its royalty payments into a separate account, suspended until Plaintiff
received documents requested from Defendants, but no such account existed.
(Separate Statement of Facts, ¶ 13.)
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate, and the court determines that the leases were
legally terminated and Plaintiff must abandon the wells, provide an accounting
of revenue earned since Defendant Future Growth became lessor of the leases,
and Plaintiff must pay past due royalties.
b.
Third Cause of Action: Termination
of Lease
As discussed
above, Defendant has produced evidence that Plaintiff’s Leases were terminated
on March 17, 2022. The evidence is sufficient to meet Defendant’s moving
burden. Plaintiff has not opposed this motion or presented evidence to suggest
a dispute of material fact. Therefore, summary judgment is appropriate as to
this cause of action. The court determines that the Leases have been
terminated.
c.
Fourth Cause of Action: Conversion
“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 . . . . ” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP (2007) 150 Cal.App.4th 384, 395 [internal citation omitted].)
Defendants
allege that Plaintiff wrongfully exercised control over Defendant Future
Growth’s royalty share. (Cross-Complaint, ¶ 13.) Defendants have established
their right to royalties from Plaintiff’s Leases, beginning when they received
the quitclaim deed to the 621 Property. (Declaration of John Guzman, ¶ 20,
Exhibit J.) Defendants have provided evidence that Plaintiff has not paid
royalties due to Defendant Future Growth since November 2020. (Declaration of
Peter Starflinger, ¶ 7, Exhibit D.) Defendant has shown that Plaintiff admitted
the sale by quitclaim and acknowledged that Defendant Future Growth was the
lessor of the land. (Declaration of Mark J. Sarni, ¶ 4, Exhibit 1.) In the same email, Plaintiff’s attorney
stated that Plaintiff was prepared to pay the one-sixth interest that it
believed to be Defendant Future Growth’s. (Declaration of Mark J. Sarni, ¶ 4,
Exhibit 1.) Plaintiff was aware that royalties were now due to Defendant Future
Growth and had no justification for withholding royalty payments. Plaintiff’s
decision not to pay the royalties constitutes a wrongful act toward the funds, which
are identifiable sums, causing damage to Defendants.
The evidence is
sufficient to meet Defendant’s moving burden. Plaintiff has not opposed this
motion or presented evidence to suggest a dispute of material fact. Therefore,
summary judgment is appropriate as to this cause of action.
d.
Fifth Cause of Action: Accounting
To support a
cause of action for accounting, a party must show (1) the existence of a
relationship requiring accounting, and (2) some unliquidated and unascertained
balance is owed. (See St. James Church of Christ Holiness v. Superior Court
(1955) 135 Cal.App.2d 352, 359.) In this case, the Leases set forth a certain
percentage of royalties Plaintiff must pay the lessor, which was Defendant
Future Growth as of November 2020. (Declaration of John Guzman, ¶¶ 8, 13,
Exhibit C, Exhibit F.) Plaintiff has not paid any royalties to Defendant Future
Growth. (Declaration of Peter Starflinger, ¶ 10.) Thus, Plaintiff owes
Defendant Future Growth the balance of royalties beginning in November 2020 to
now. The evidence is sufficient to meet Defendant’s moving burden. Plaintiff
has not opposed this motion or presented evidence to suggest a dispute of
material fact. Therefore, summary judgment is appropriate as to this cause of
action.
e.
Eighth Cause of Action: Ejectment
To support a
cause of action for ejectment, a plaintiff must show (1) ownership interest in
real property, (2) defendant’s possession and withholding of that property, and
(3) damage to the plaintiff. (See Paap v.
Von Helmholt (1960) 185 Cal.App.2d 823, 828, 829.) Defendant Future Growth
has provided evidence that it is the owner of the 621 Property. (Separate
Statement of Undisputed Facts, ¶ 6.) As discussed above, Defendant Future
Growth terminated Plaintiff’s leasehold on March 17, 2022, pursuant to the process
set forth in the Leases following a default in royalty payments. (Declaration
of Peter Starflinger, ¶ 7; Exhibit D.) However, Plaintiff continued to access
the land until it filed the underlying Complaint, alleging Defendants
interfered with its access. (Separate Statement of Undisputed Facts, ¶ 13.)
Furthermore, this court denied Plaintiff’s motion for preliminary injunction to
continue oil drilling on the property, finding that Defendant Future Growth had
the right to send the Notice of Default and terminate the Leases. (Separate
Statement of Undisputed Facts, ¶¶ 15, 17.) Plaintiff’s continued possession
without a valid lease caused damage to Defendants, the rightful owner and
possessor of the property. The evidence is sufficient to meet Defendant’s
moving burden. Plaintiff has not opposed this motion or presented evidence to
suggest a dispute of material fact. Therefore, summary judgment is appropriate
as to this cause of action.
Conclusion and Order
Defendants’
motion for summary judgment as to Plaintiff’s Complaint is GRANTED. Defendants’
motion for summary adjudication as to their Cross-Complaint for causes of
action one, three, four five, and eight is GRANTED. Defendants’ Cross-Complaint
for causes of action two, six, and seven are DISMISSED WITHOUT PREJUDICE.
It
is so ordered.
Dated:
_______________________
MEL RED RECANA
Judge
of the Superior Court