Judge Michael P. Linfield, Case 19STCV02403 2023-01-25 Tentative Ruling

Judge: Michael P. Linfield, Case: 19STCV02403, Date: 2023-01-25 Tentative Ruling

The Court often posts its tentative several days in advance of the hearing. Please re-check the tentative rulings the day before the hearing to be sure that the Court has not revised the ruling since the time it was posted.

Please call the clerk at (213) 633-0154 by 4:00 pm. the court day before the hearing if you wish to submit on the tentative.

Moving Party: Defendants Rediger Investment Corporation and Olive Street Investors II, LP

On January 8, 2020, Defendants Rediger Investment Corporation and Olive Street Investors II, LP filed: (1) Verified Answer to Third Amended Complaint; and (2) Cross-Complaint against Cross-Defendants Gunilla Gupta, Raj Christopher Gupta, Julio Garcia, Vision Capital, and Abby A. Escobar.

On March 2, 2020, Cross-Defendants Gunilla Gupta and Raj Christopher Gupta filed their Answer to the Cross-Complaint.

On April 21, 2020, by request of Cross-Complainants, the Clerk’s Office entered default on Cross-Defendants Abby A. Escobar and Vision Capital regarding the Cross-Complaint.

On February 24, 2021, Plaintiff amended her Third Amended Complaint to substitute Doe 1 with Jose Garcia, Doe 2 with Vision Capital Inc., Doe 3 with Vision Capital LLC, Doe 4 with Margarita Garcia, and Doe 5 with UBS of California.

On June 4, 2021, by request of Plaintiff, the Clerk’s Office dismissed without prejudice Defendant Vision Capital, LLC from the Third Amended Complaint.

On October 12 and 14, 2022, the Court issued Orders for Publication regarding Julio Garcia, Margarita Garcia, and Jose Garcia.

On October 17, 2022, Defendants Rediger Investment Corporation and Oliver Street Investors II, LP (“Defendants”) filed their Motion for Summary Adjudication. Defendants concurrently filed: (1) Separate Statement; (2) Appendix of Evidence; (3) Request for Judicial Notice; and (4) Proof of Service.

On January 21, 2023, Plaintiff filed her Opposition. Plaintiff concurrently filed: (1) Declaration of Gunilla Gupta; (2) Declaration of Raj Christopher Gupta; (3) Separate Statement; and (4) Appendix of Evidence.

On January 20, 2023, Defendants filed their Reply. Defendants concurrently filed: (1) Objections to Plaintiff’s Evidence; (2) Proposed Order; and (3) Proof of Service.

(1) Quitclaim Deed recorded December 23, 2014, in the Office of the Recorder, County of Los Angeles as Instrument No. 20141393839;

(2) Quitclaim Deed recorded September 15, 2015, in the Office of the Recorder, County of Los Angeles as Instrument No. 20151142781;

(3) Deed of Trust in the amount of $275,000 recorded February 29, 2016, in the Office of the Recorder, County of Los Angeles as Instrument No. 20160216788;

(4) Quitclaim Deed recorded August 30, 2016, in the Office of the Recorder, County of Los Angeles as Instrument No. 20161038722;

(5) Quitclaim Deed recorded February 22, 2017, in the Office of the Recorder, County of Los Angeles as Instrument No. 20170208980;

(6) Note Secured by Deed of Trust dated April 3, 2017, in the amount of $375,000 executed by Raj Gupta;

(7) Deed of Trust recorded April 11, 2017, in the Office of the Recorder, County of Los Angeles as Instrument No. 20170394511;

(8) Quitclaim Deed recorded April 11, 2017, in the Office of the Recorder, County of Los Angeles as Instrument No. 20170394510;

(9) Reconveyance of the $275,000 Deed of Trust recorded on May 18, 2017, in the Office of the Recorder, County of Los Angeles as Instrument Number 20170554755;

The Court GRANTS in part the Request for Judicial Notice. The Court GRANTS judicial notice for the first nine items, which are public documents filed with the Los Angeles County Recorder’s Office. The Court DENIES as superfluous judicial notice for items 10 through 12. Any party that wishes to draw the Court’s attention to a filing in this action may simply cite directly to the document by execution and filing date. (See Cal. Rules of Court, rule 3.1110(d).)¿

Defendants filed the following Objections to Plaintiff’s Evidence The following are the Court’s rulings on these objections.

Objection	SUSTAINED	OVERRULED
1		OVERRULED
2		OVERRULED
3	SUSTAINED
4		OVERRULED
5		OVERRULED
6		OVERRULED
7		OVERRULED
8		OVERRULED
9		OVERRULED
10		OVERRULED
11		OVERRULED
12		OVERRULED
13		OVERRULED
14		OVERRULED
15		OVERRULED
16		OVERRULED
17		OVERRULED
18		OVERRULED
19		OVERRULED
20		OVERRULED
21		OVERRULED
22		OVERRULED
23		OVERRULED
24		OVERRULED
25		OVERRULED
26		OVERRULED
27		OVERRULED
28		OVERRULED
29		OVERRULED
30		OVERRULED
31		OVERRULED
32		OVERRULED
33		OVERRULED
34		OVERRULED
35		OVERRULED
36		OVERRULED
37		OVERRULED
38		OVERRULED
39		OVERRULED
40		OVERRULED
41	SUSTAINED
42		OVERRULED
43		OVERRULED
44		OVERRULED
45		OVERRULED
46		OVERRULED
47		OVERRULED
48		OVERRULED
49		OVERRULED
50		OVERRULED
51	SUSTAINED
52	SUSTAINED
53	SUSTAINED

“[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.)

“[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.” (Id.; 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, in line with Aguilar v. Atlantic Richfield Co., “[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. Super. Ct. (2003) 114 Cal.App.4th 309, 320.)

“On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. Only when the inferences are indisputable may the court decide the issues as a matter of law. If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839 [cleaned up].)

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.” (Id. at p. 840 [cleaned up]; see also Weiss v. People ex rel. Dep’t of Transp. (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”].)

Defendants move for summary adjudication on the following issues: (1) Defendants’ eighteenth affirmative defense of equitable subrogation; and (2) Defendants’ sixth cause of action for equitable subrogation. (Motion, pp. 2:8–9, 2:23–24, 7:24–25.)

Plaintiff opposes the Motion, arguing: (1) that Defendants are not entitled to equitable subrogation; and (2) that Defendants are barred from relief due to unclean hands. (Opposition, pp. 6:15–16, 8:17–18.)

Defendants argue in their Reply: (1) that Defendants are entitled to summary adjudication on the equitable subrogation issues; (2) that moving Defendants were not “volunteers” in paying off the prior lien; and (3) that the “unclean hands” argument is inappropriate and irrelevant to this Motion. (Reply, pp. 5:2–3, 5:16, 6:15.)

“The doctrine of equitable subrogation implies a right to recover from the principal debtor when the subrogee pays the debtor's obligation to a creditor in order to protect the subrogee's own interest. The doctrine most typically applies in insurance cases but is not limited to that context.” (Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 947–48, citations omitted.)

“One who claims to be equitably subrogated to the rights of a secured creditor must satisfy certain prerequisites. These are: ‘(1) Payment must have been made by the subrogee to protect his own interest. (2) The subrogee must not have acted as a volunteer. (3) The debt paid must be one for which the subrogee was not primarily liable. (4) The entire debt must have been paid. (5) Subrogation must not work any injustice to the rights of others.’” (Caito v. United Cal. Bank (1978) 20 Cal.3d 694, 704, quoting Grant v. de Otte (1954) 122 Cal.App.2d 724, 728.)

“Under the ‘doctrine of superior equities,’ the right to subrogation may be invoked against a third party only if that party's wrongful conduct makes its equity inferior to the plaintiff's.” (Bank of New York Mellon, supra, at 951 [cleaned up].)

“It is an undisputed equitable principle that those who seek the aid of equity must sue in good faith. Any unconscionable conduct which relates to the transaction may give rise to the defense of unclean hands and bar relief.” (Samuelson v. Ingraham (1969) 272 Cal.App.2d 804, 806 [citations omitted].)

(1) On September 10, 2015, Plaintiff/Cross-Defendant Gunilla Gupta quitclaimed the deed of the Subject Property to her son, Cross-Defendant Raj Gupta.

(2) On February 11, 2016, Cross-Defendant Raj Gupta executed a deed of trust on the Subject Property, securing a loan in the amount of $275,000.00.

(3) On August 30, 2016, Cross-Defendant Raj Gupta quitclaimed the deed of the Subject Property to RG Homes, LLC.

(4) At some point in 2016, Cross-Defendant Raj Gupta provided Defendants/Cross-Defendants Julio Garcia and Vision Capital with $275,000.00.

(5) On January 14, 2017, Cross-Defendant quitclaimed the deed of the Subject Property to Plaintiff/Cross-Defendant Gunilla Gupta.

(6) On April 3, 2017, Defendants/Cross-Complainants Rediger Investment Corporation and Olive Street Investors II, LP prepared loan documents and escrow instructions for Cross-Defendant Raj Gupta, who signed additional loan documents for the Subject Property.

(7) On April 4, 2017, a fraudulent quitclaim deed was forged using Plaintiff/Cross-Defendant Gunilla Gupta’s name, which purportedly quitclaimed the Subject Property to Cross-Defendant Raj Gupta.

(8) Plaintiff did not sign the April 2017 deed and was not in the United States at the time the deed was notarized in the United States.

(9) Plaintiff did not approve of any lien payoff on her property, including any loan proceeds to be paid to Nonparty SGFC, LLC.

(1) The February 11, 2016 note was for a loan in the amount of $275,000.00 from SGFC, LLC.

(2) On April 11, 2017, a deed of trust was recorded as Instrument No. 20170394511, which secured a note in the amount of $375,000.00 to Cross-Defendant Raj Gupta for beneficiary Defendant/Cross-Complainant Olive Street Investors II, LP.

(3) Defendant/Cross-Complainant Olive Street Investors II, LP used $276,040.32 of the proceeds from the April 11, 2017 transaction to pay off the prior lien held by SGFC, LLC.

Finally, in support of Plaintiff’s Opposition, Cross-Defendant Raj Gupta makes the following allegations:

(1) Defendants/Cross-Defendants Julio Garcia and Jose Garcia enticed Cross-Defendant Raj Gupta to invest money with them in their businesses.

(2) Cross-Defendant Raj Gupta never saw any monthly return on the $275,000.00 he provided to Defendants/Cross-Defendants Julio Garcia and Vision Capital.

(3) The general partners of Defendants/Cross-Complainants Olive Street Investors II, LP and Rediger Investment Corporation (Duane E. Rediger, Daren R. Rediger, and Denis K. Rediger) and Defendant/Cross-Defendant Julio Garcia conspired together to forge Plaintiff/Cross-Defendant Gunilla Gupta’s signature on the April 4, 2017 quitclaim deed so as to issue a loan in the amount of $375,000.00 to themselves.

When considering equitable subrogation, the Court must consider two issues that clearly involve equity. (In its analysis, the Court considers the doctrines of equitable subrogation and unclean hands. Although these are separate doctrines, they both involve equity and the consideration of any unjust actions any of the Parties may have taken.)

First, the Court must consider whether the initial loan on February 11, 2016 of $275,000.00 was properly made. Second, the Court must consider whether the subsequent loan on April 4, 2017 of $375,000.00 was properly made. The reason these issues must be considered is because equitable subrogation – whether as an affirmative defense or a cause of action – “must not work any injustice to the rights of others. (Grant, supra, at 728.)

While the Court must consider these issues, the Court cannot resolve them at this time. Indeed, whether Defendants acted inequitably (or in a way that is otherwise contrary to law) is based on multiple contested, triable issues of material fact, such as whether the April 2017 quitclaim deed was indeed forged. The existence of these triable issues of material fact is sufficient for the Court to deny Defendants’ Motion.