Judge: Michael E. Whitaker, Case: 23SMCV01097, Date: 2024-12-10 Tentative Ruling

Case Number: 23SMCV01097    Hearing Date: December 10, 2024    Dept: 207

TENTATIVE RULING

MOVING PAPERS:

1. Notice of Motion and Motion for Summary Adjudication; Memorandum of Points and Authorities
2. Separate Statement of Undisputed Material Facts and Supporting Evidence
3. Declaration of Stephanie R. Perez
4. Declaration of Dalton Barnes

OPPOSITION PAPERS:

1.     Opposition to Motion for Summary Adjudication

2.     Response to Separate Statement of Undisputed Material Facts

3.     Evidentiary Objections to the Declaration of Dalton Barnes

REPLY PAPERS:

1.     Reply in support of Motion for Summary Adjudication

BACKGROUND

On October 5, 2023, Plaintiff Sixth Street Realty, L.P. (“Plaintiff”) filed the operative Second Amended Complaint alleging two causes of action for (1) breach of lease (unpaid rents) against Defendant Alpha Real Estate Advisors, LLC (“Alpha”) and (2) breach of written guarantee against Defendants Braden Crocket (“Crocket”) and Dalton Barnes (“Barnes”). 

On August 27, 2024, the Court granted Plaintiff’s motion for summary judgment with respect to the operative Complaint, finding no triable issue of material fact that Alpha had breached the lease and Crocket and Barnes had breached the guaranty by failing to pay the agreed upon rent.

On June 21, 2024, Barnes filed the operative Cross-Complaint against Alpha and Crocket, alleging five causes of action for (1) breach of contract; (2) declaratory judgment; (3) indemnity; (4) express indemnity; and (5) implied indemnity.

Barnes now moves for summary adjudication on his claims of breach of contract, express indemnification, and declaratory relief.  Alpha and Crocket (“Cross-Defendants”) oppose, and Barnes replies.

EVIDENCE

            The Court rules as follows with respect to Cross-Defendants’ Evidentiary Objections to the Declaration of Dalton Barnes:

1.     Overruled

2.     Overruled

3.     Overruled

4.     Overruled

LEGAL STANDARDS – MOTION FOR ADJUDICATION

“[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law[.] There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” ¿(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (hereafter Aguilar).) ¿“[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” ¿(Ibid.; Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1474 [summary judgment standards held by Aguilar apply to summary adjudication motions].) 

Further, “the trial court may not weigh the evidence in the manner of a factfinder to determine whose version is more likely true.  Nor may the trial court grant summary judgment based on the court's evaluation of credibility.”  (Aguilar, supra, 25 Cal.4th. at p. 840 [cleaned up]; see also Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840, 864 [“Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party”].) 

A party may move for summary adjudication as to one or more causes of action, affirmative defenses, claims for damages, or issues of duty if that party contends that there is no merit to the cause of action, defense, or claim for damages, or if the party contends that there is no duty owed.  (See Code Civ. Proc., § 437c, subd. (f)(1).)  “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.”  (Ibid.)  A cause of action has no merit if: (1) one or more elements of the cause of action cannot be separately established, even if that element is separately pleaded, or (2) a defendant establishes an affirmative defense to that cause of action.  (See Code Civ. Proc., § 437c, subd. (n); Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 583.)  Once the defendant has shown that a cause of action has no merit, the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action.  (See Code Civ. Proc., § 437c, subd. (o)(2); Union Bank v. Superior Court, supra, 31 Cal.App.4th at p. 583.)  Additionally, in line with Aguilar, “[o]n a motion for summary adjudication, the trial court has no discretion to exercise.  If a triable issue of material fact exists as to the challenged causes of action, the motion must be denied. If there is no triable issue of fact, the motion must be granted.”  (Fisherman's Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 320.) 

DISCUSSION

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff.”  (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) 

The Cross-Complaint alleges Barnes and Cross-Defendants are parties to an Operating Agreement that requires the Alpha to indemnify its members, which Cross-Defendants breached by failing to indemnify Barnes for the damages alleged in Plaintiff’s complaint.

Barnes’ Evidence

In support of the motion, Barnes has provided a copy of the Operating Agreement for Alpha Real Estate Investors, LLC.  (Ex. 1 to Perez Decl.)  The members are listed as Crockett and Barnes.  (Ibid.)  Section 4.6 of that Agreement provides:

4.6 Indemnity. No Member is liable or accountable in damages or otherwise to the Company or the other Members for any act or omission done or omitted in good faith, unless such act or omission constitutes gross negligence, willful misconduct, breach of fiduciary duties, or a breach of this Agreement. The Company must indemnify each Member against any loss, damage, judgment, or claim incurred by or asserted against the Member (including reasonable attorneys’ fees incurred in the defense thereof) arising out of any act or omission of the Member in connection with the Company, unless such act or omission constitutes gross negligence, willful misconduct, breach of fiduciary duties, or a breach of this Agreement on the part of the Member.

            Further, Barnes has provided the Declaration of Dalton Barnes, which provides:

7. On March 26, 2022, I executed the Lease Agreement with Plaintiff as a Member of Defendant Alpha Real Estate Advisors LLC, for the benefit of Defendant Alpha Real Estate Advisors LLC. Attached herein is a true and correct copy of the signature line of the lease agreement, where I am identified as a member.

8. Defendant Crockett was responsible for making the rent payments, and Alpha’s financial responsibilities. On occasion, I administratively make the rent payments with Defendant Crockett’s permission.

9. Initially, Defendant ALPHA provided a joint defense for Defendants Alpha, myself and Defendant Crockett, whom were jointly represented by Casper Yen, Esq.

10. I learned through our joint attorney Casper Yen, Esq. ALPHA disclosed its refusal to honor the indemnification provision.

11. I immediately retained separate counsel and substituted out Casper Yen, Esq. on May 15, 2024. Defendant ALPHA refused to pay for my reasonable attorneys (sic) fees incurred after the conflict interest arose.

(Barnes Decl. ¶¶ 7-11.)

Thus, as to Alpha, Barnes has provided prima facie evidence of the contract (Operating Agreement), Barnes’ performance under the contract (executing the lease agreement and making administrative rent payments as a Member of Alpha), Alpha’s breach (refusal to honor the indemnification provision or pay Barnes’ reasonable attorneys’ fees), and damages (the attorneys’ fees he incurred.)  Similarly, Barnes has provided prima facie evidence of Alpha’s breach of the express indemnity provision.

As to Crockett, however, pursuant to the indemnity provision, Crockett is not liable to Barnes, as a fellow Member, unless Crockett’s act or omission constitutes gross negligence, willful misconduct, breach of fiduciary duties, or a breach of the Operating Agreement.  But Barnes has not presented any evidence of Crockett’s gross negligence, willful misconduct, or breach of fiduciary duties.  Furthermore, the only alleged breach of the Operating Agreement is the failure to indemnify Barnes.  But in the absence of gross negligence, willful misconduct, breach of fiduciary duties, or some other breach of the Operating Agreement, only Alpha had an obligation to indemnify Barnes as a Member. 

Further, as for declaratory relief, a plaintiff must show their action presents two essential elements: “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party.”  (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546.) 

Here, Barnes “seeks a judicial declaration that Cross-Defendants shall defend and indemnify DALTON BARNES for all damages alleged by Plaintiff and all attorneys’ fees and costs relating to the defense and now prosecution of this cross-complaint.”  (Cross-Complaint ¶ 19.)  The Court finds the facts presented do not support the requested declaratory relief for several reasons.

First, pursuant to the indemnification provision, Alpha would be responsible to indemnify Barnes for damages actually incurred, not “all damages alleged” by Plaintiff. 

Second, to the extent Barnes has already retained separate counsel and litigated the original complaint to judgment, declaratory relief requiring Alpha to defend Barnes appears moot. 

Third, Barnes’ request for attorneys’ fees incurred in prosecuting the cross-complaint go beyond the indemnity provision, which only requires indemnity of claims “incurred by or asserted against the Member (including reasonable attorneys’ fees incurred in the defense thereof)[.]”  As cross-complainant, the claims in the cross-complaint were neither incurred by/asserted against Barnes, nor do Barnes’ legal fees pertain to “the defense thereof.” 

Moreover, the requested Declaratory Relief is also wholly inappropriate as to Crockett because, as discussed above, there is no evidence that Crockett engaged in gross negligence, willful misconduct, breach of fiduciary duties, or breach of the Operating Agreement such that Crockett is personally liable to Barnes, as fellow Members. 

Therefore, Barnes has met his initial burdens of production and persuasion that Alpha breached the express indemnity provision of the Operating Agreement, for purposes of the breach of contract and express indemnity claims against Alpha, but Barnes has not met his initial burdens of production and persuasion that Crockett has breached the Operating Agreement or express indemnity provision therein, or that the requested declaratory relief is warranted as to either Alpha or Crockett.

Cross-Defendants’ Evidence

Cross-Defendants do not proffer any evidence in opposition.  Instead, they argue (1) Barnes has not produced any evidence that Crockett’s act or omission constituted gross negligence, willful misconduct, breach of fiduciary duty or breach of agreement; and (2) Barnes has not established which came first – his decision to get a different lawyer or his decision to move to Texas.

As for the first argument, the Court agrees, and as discussed above, denies summary adjudication on all claims as to Defendant Crockett.

As for Cross-Defendants’ second argument, it does not matter whether Barnes first moved to Texas or retained a separate attorney, because either way, Barnes has presented evidence that Alpha refused to indemnify him in violation of the agreement.

Therefore, Cross-Defendants have not met their burden of production to create a triable issue of material fact as to whether Alpha breached the agreement by failing to indemnify Barnes.

CONCLUSION AND ORDER

Therefore, the Court grants in part and denies in part Barnes’ motion for summary adjudication.  Having found Barnes met his initial burdens of production and persuasion that Alpha breached the Operating Agreement by failing to indemnify Barnes, the Court grants summary adjudication as to Barnes’ first cause of action for breach of contract and fourth cause of action for express indemnity against Alpha. 

However, having found Barnes failed to meet his initial burdens of production and persuasion that Crockett committed an act or omission that constituted gross negligence, willful misconduct, breach of fiduciary duties, or breach of the Operating Agreement, the Court denies summary adjudication as to Crockett. 

Further, having found Barnes failed to meet his initial burdens of production and persuasion that the requested declaratory relief is warranted, the Court similarly denies summary adjudication as to the second cause of action for declaratory relief against all Cross-Defendants.

Barnes shall file and serve a proposed Order in conformance with the Court’s ruling on or before December 27, 2024.  Further, Barnes shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith.   

DATED:  December 10, 2024                                                ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court