Judge Nathan Vu, Case 20-01148474 2022-08-29 Tentative Ruling

Judge: Nathan Vu, Case: 20-01148474, Date: 2022-08-29 Tentative Ruling

Motion to Compel

The Motion for Leave to Depose for More than Seven Hours of Plaintiffs and Cross-Defendants Robert Chavez and Advanced Floor Coatings, Inc., dba Allied International is GRANTED.

The Motion to Compel Further Responses at Deposition of Plaintiffs and Cross-Defendants Robert Chavez and Advanced Floor Coatings, Inc., dba Allied International is GRANTED.

Plaintiffs and Cross-Defendants Robert Chavez and Advanced Floor Coatings, Inc., dba Allied International moved to be allowed to depose Defendant and Cross-Complainant Miguel Chavez in his individual capacity for an additional 4 hours beyond the statutorily mandated 7 hours.

Plaintiffs also moved to compel Defendant Chavez to answer questions that he refused to answer at his deposition on 02/21/2022 and 02/22/2022.

Additional Time for Deposition

Civil Procedure Code section 2025.290 (a) provides that, “Except as provided in subdivision (b), or by any court order, including a case management order, a deposition examination of the witness by all counsel, other than the witness' counsel of record, shall be limited to seven hours of total testimony. The court shall allow additional time, beyond any limits imposed by this section, if needed to fairly examine the deponent or if the deponent, another person, or any other circumstance impedes or delays the examination.”

“[S]ection 2025.290 not only authorizes the court to allow additional time to depose a witness in these circumstances, but requires it to do so unless the court, in its discretion, determines that the deposition should be limited for another reason.”(Certainteed Corp. v. Superior Court (2014) 222 Cal.App.4th 1053, 1062.)

Plaintiffs have demonstrated good cause for an additional 4 hours to depose Defendant Chavez in his individual capacity. Although Plaintiffs have deposed Defendant Chavez for the statutorily mandated 7 hours, the deposition was delayed by Defendant Chavez repeatedly giving evasive answers and his counsel instructing Defendant Chavez not to answer without giving a proper legal basis.

Defendant Chavez first argues that Plaintiffs failed to meet and confer prior to bringing this motion. However, the record shows that Plaintiff’s counsel did bring up the issue of Defendant’s Chavez’s evasive answers and the amount of time being spent on them. Defendant’s counsel also admitted that both counsel had a discussion regarding Defendant’s counsel’s instruction not to answer and the legal basis for it.

Plaintiffs made adequate meet and confer efforts, and given the positions taken by Defendant Chavez both in the deposition and on this motion, it is apparent that further meet and confer efforts would have been futile.

Defendant Chavez also claims that, in addition to the seven hours of this particular deposition, he has already been deposed for 22+ hours and is subject to being deposed for more hours yet. However, Defendant Chavez participated or will participate in these other depositions as the person-most-knowledgeable of several limited liability companies and corporations. The questioning in such depositions was or will be limited to his role as the person-most-knowledgeable. Further, there is no guarantee that Defendant Chavez will be designated as the person-most-knowledgeable in future depositions of the entities.

Plaintiff Robert Chavez has established good cause for the deposition to be conducted for an additional four hours and Defendant Miguel Chavez has not presented a sufficient reason to limit the deposition.

Further Responses at Deposition

As noted above, Defendant Chavez gave evasive answers and/or refused to answer some questions at the deposition. Defense counsel also instructed Defendant Chavez not to answer certain questions on the basis that the questions related to documents that allegedly had been stolen from Defendant Chavez.

A deponent may “not be prevented by counsel from answering a question unless it pertains to privileged matters or deposing counsel's conduct has reached a stage where suspension is warranted.” (Stewart v. Colonial Western Agency, Inc. (2001) 87 Cal.App.4th 1006, 1015). Instructing a witness not to answer questions without a proper legal basis is a misuse of the discovery process and may result in a court order requiring the deponent to answer the questions. (See Civil Proc. Code, § 2025.480(a); Tucker v. Pacific Bell Mobile Services (2010) 186 Cal.App.4th 1548, 1563-64).

In this case, Defendant’s counsel’s assertion that the questions related to documents that had been stolen from Defendant Chavez did not state an applicable privilege, nor is there any showing that Plaintiffs’ counsel’s conduct warranted a suspension of the deposition. In fact, it appeared to be Plaintiffs’ counsel who requested to suspend the deposition because no progress was being made.

Defendant Chavez did not provide, at the deposition or in his opposition to this motion, any legal justification for his refusal to answer or the instruction not to answer. Defendant Chavez only asserts that he is willing to answer the questions if Plaintiffs’ Counsel represents that the documents were not stolen. However, Defendant Chavez fails to point to any legal authority that Plaintiffs or Plaintiffs’ counsel are required to make such a representation in order for Defendant Chavez to be required to answer.

Therefore, Defendant Chavez shall, at his continued deposition, answer questions without making objections or giving instructions not to answer on the basis that the questions relate to documents that are stolen.

Motion for Summary Judgment or Summary Adjudication

The Motion for Summary Judgment, or Summary Adjudication, of Plaintiffs and Cross-Defendants Robert Chavez and Advanced Floor Coatings, Inc., dba Allied International is GRANTED in its entirety.

Defendant and Cross-Complainant RAJT Enterprises, Inc.’s Objections Nos. 1-10 to the Declaration of Plaintiff and Cross-Defendant Robert Chavez are OVERRULED.

Plaintiffs and Cross-Defendants Robert Chavez’s and Advanced Floor Coatings, Inc., dba Allied International’s Objections Nos. 1-9 to the Declaration of Defendant and Cross-Complainant Miguel Chavez are OVERRULED.

Defendant and Cross-Complainant RAJT Enterprises, Inc.’s Request for Judicial Notice is GRANTED.

Plaintiffs and Cross-Defendants Robert Chavez’s and Advanced Floor Coatings, Inc., dba Allied International’s Supplemental Request for Judicial Notice is GRANTED.

Plaintiffs and Cross-Defendants Robert Chavez and Advanced Floor Coatings, Inc., dba Allied International (Cross-Defendants) move for summary judgment, or in the alternative, summary adjudication on the Cross-Complaint of Defendant and Cross-Complainant RAJT Enterprises, Inc. (RAJT).

The Cross-Complaint alleges that in or about 2013, RAJT acquired all the assets of GO2 International, Inc. (GO2). (Cross-Compl., ¶ 11.) The Cross-Complaint also pleads that in that same year, RAJT and Cross-Defendants entered into an oral agreement whereby RAJT would license to the Cross-Defendants the right to use, manufacture, promote, advertise, and sell products using the GO2 assets. (Cross-Compl., ¶ 12.) In exchange, all or a portion of the gross income generated from the GO2 assets would be paid to RAJT. (Ibid.)

Cross-Defendants argue that summary judgment should be granted because 1) all of the causes of action on the cross-complaint rely upon the existence of the oral agreement between RAJT and Cross-Defendants and the undisputed evidence shows that an oral contract was never formed 2) RAJT lacks standing to bring all of the claims because the undisputed evidence shows that it was never the owner of the GO2 assets, and 3) all of the claims are barred by the doctrine of unclean hands because the undisputed evidence reveals that RAJT deliberately concealed its alleged ownership of the GO2 assets from Cross-Defendants.

A “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 . . . .” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) “A prima facie showing is one that is sufficient to support the position of the party in question.” (Id. at 851.)

A defendant moving for summary judgment satisfies his or her initial burden by showing that one or more elements of the cause of action cannot be established or that there is a complete defense to the cause of action. (Civil Proc. Code, § 437c(p)(2).) A cause of action “cannot be established” if the undisputed facts presented by the defendant prove the contrary of the plaintiff’s allegations as a matter of law. (Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1597.)

Once the moving party meets that burden, the burden shifts to the party opposing summary judgment to show, by reference to specific facts, the existence of a triable issue as to an affirmative defense or cause of action. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 855; Villacres v. ABM Industries, Inc. (2010) 189 Cal.App. 4th 562, 575.)

In ruling on a motion for summary judgment or summary adjudication, the court must “consider all of the evidence” and all of the “inferences” reasonably drawn therefrom [citing Civil Procedure Code section 437c(c)] and must view the evidence and inferences “in the light most favorable to the opposing party.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.)

A court may not make credibility determinations or weigh the evidence on a motion for summary judgment or adjudication, and all evidentiary conflicts are to be resolved against the moving party. (McCabe v. American Honda Motor Corp. (2002) 100 Cal.App.4th 1111, 1119.) The moving party’s papers are to be strictly construed, while the opposing party’s papers are to be liberally construed. (Committee to Save Beverly Highland Homes Ass’n v. Beverly Highland (2001) 92 Cal.App.4th 1247, 1260.)

While the Court must look to the evidence rather than the pleadings, “the pleadings set the boundaries of the issues to be resolved at summary judgment.” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648.)

Existence of the Oral Agreement

Contract formation requires three elements: (1) offer, (2) acceptance, and (3) consideration. (See Hecimovich v. Encinal School Parent Teacher Organization (2012) 203 Cal.App.4th 450, 475.)

Cross-Defendants argue that in deposition, RAJT’s sole owner and officer Ricardo Chavez and RAJT’s person-most-knowledgeable Defendant and Cross-Complainant Miguel Chavez testified that 1) neither of them had ever told Cross-Defendants that RAJT owned the GO2 assets and 2) that neither of them had ever told Cross-Defendants why the proceeds from GO2’s assets should be sent to RAJT. (Cross-Def.s’ Separate Statement of Material Undisputed Facts in Supp. of Mot., ¶¶ 29 - 35.) Cross-Defendants point out that there were two critical terms of the alleged oral agreement; if they were never conveyed to Cross-Defendants, then there was never an offer or an acceptance, and certainly no meeting of the minds.

In response, RAJT argues that the Court may rely on subsequent declarations that contradict admissions made in discovery to find that there is a material dispute of fact.

In D’Amico vs. Board of Medical Examiners (1974) 11 Cal.3d 1, the Supreme Court stated that “when discovery has produced an admission or concession on the part of the party opposing summary judgment which demonstrates that there is no factual issue to be tried, certain of those stern requirements applicable in a normal case are relaxed or altered in their operation.” (Id. at p. 21.)

The D’Amico Court pointed to another case in which a plaintiff had previously testified n deposition that no force was used and then in a counter-affidavit that unnecessary force was used. (Ibid., citing King v. Anderson (1966) 242 Cal.App.2d 606, 610). In that case, the court correctly determined that, notwithstanding the counter-affidavit, “the clear and unequivocal admission of the plaintiff, himself, in his deposition . . . [required the court] to conclude there is no substantial evidence of the existence of a triable issue of fact.” (King v. Anderson, supra, 242 Cal.App.2d at p. 610.)

The Court is mindful that although “admissions of a party obtained through discovery receive an unusual deference in summary judgment proceedings, and, absent a credible explanation, prevail over that party's later inconsistent declarations[,] . . . later cases have cautioned that D'Amico should not be read ‘as saying that admissions should be shielded from careful examination in light of the entire record.’” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1415, quoting Price v. Wells Fargo Bank (1989) 213 Cal.App.2d 465, 482, overruled on other grounds, Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Ass’n (2013) 55 Cal.4th 1169.) “In D'Amico, the California Supreme Court did not hold that declarations contradicting discovery responses must be ‘excluded.’” (Harris v. Thomas Dee Engineering Co., Inc. (2021) 68 Cal.App.5th 594, 604, emphasis original.)

Instead, D’Amico “provides guidance in determining whether a declaration that contradicts prior discovery responses is sufficient to create a triable issue of fact. (Id. at p. 604.) The Court should be mindful that “[t]he stated rationale for the D'Amico rule is that ‘admissions against interest have a very high credibility value.’ . . . And this is particularly true where a deponent testifies regarding a factual matter within his or her personal knowledge and arguably contradicts the testimony in a declaration.” (Id. at p. 605.)

Miguel Chavez did assert in his declaration that there had been an oral agreement: “In 2012, RAJT, and Robert Chavez, on behalf of Advanced, agree that RAJT would license to Advanced the right to use, manufacture, promote, and sell products using GO2’s assets, most particularly its name, formulas, and customers. I personally witnessed and heard this agreement between RAJT and Advanced.” (Decl. of Miguel Chavez in Supp. of Opp’n to Mot., ¶ 18.)

However, the statements made in the declaration are conclusory and self-serving. Further, Miguel Chavez’s deposition testimony related to facts within his personal knowledge. The declaration, created after the fact, does not create a material dispute of fact under the standards of D’Amico. (See Price v. Wells Fargo Bank, supra, 213 Cal.App.2d at p. 482 [“[T]his court has recently applied the [D’Amico] decision where credible admissions on deposition were contracted only by self-serving declarations of a party.”].) (fn.1)

RAJT also argues that Miguel Chavez testified that he (Miguel Chavez) owned all of the GO2 assets. (See Cross-Compl.’s Separate Statement of Material Undisputed Facts in Opp’n to Mot., ¶ 35.) However, Miguel Chavez representing that he owned the assets of GO2 is consistent with the admission that neither Miguel Chavez nor Ricardo Chavez ever told the Cross-Defendants that RAJT owned the assets of GO2. Quite simply, Cross-Defendants could not have entered into an oral agreement with RAJT to license the GO2 assets if Cross-Defendants knew that Miguel Chavez owned those assets.

RAJT further asserts that Miguel Chavez told Plaintiff and Cross-Defendant Robert Chavez to send the GO2 revenue to RAJT. (Cross-Compl.’s Separate Statement of Material Undisputed Facts in Opp’n to Mot., ¶ 35.) RAJT also points to numerous payments made by Cross-Defendants to RAJT over several years until 2020 and that Robert Chavez and Miguel Chavez had negotiated the amount and payee of those payments. (See id., ¶¶ 35-37.)

However, the fact that Cross-Defendants sent the GO2 revenue to RAJT and that Robert Chavez and Miguel Chavez negotiated the payments is not inconsistent with the admission that Cross-Defendants were never told the money was being sent to RAJT to license GO2’s assets. Even if Cross-Defendants knew that payments were being made and that they were being made to RAJT, does not mean that Cross-Defendants knew that they were being paid to license the GO2 assets. (See Price v. Wells Fargo Bank, supra, 213 Cal.App.2d at p. 482 [“We are persuaded that the trial court properly relied on the admissions in the case at bar only because we find nothing in the record that is material inconsistent with the admissions.”].)

Summary judgment shall be granted on the basis that there is no material disputed fact regarding the non-existence of the oral agreement.

No Standing

Cross-Defendants claim that RAJT lacks standing to sue because it did not own the assets of GO2. First, Cross-Defendants assert that they acquired GO2’s assets from Miguel Chavez and his companies. Cross-Defendants argument in this regard relies on the declaration of Robert Chavez and some document provided by him. (See Cross-Def.s’ Separate Statement of Material Undisputed Facts in Supp. of Mot., ¶¶ 8-17; Declaration of Robert Chavez in Supp. of Mot., ¶¶ 7-16 & Exhs. 1-7.)

In response, RAJT relies upon the declaration of Miguel Chavez denying that he ever transferred GO2 or the GO2 assets to Cross-Defendants. (See Declaration of Miguel Chavez in Opp’n to Mot., ¶¶ 7 & 12-15.) This creates a material dispute of fact.

The court declines to grant summary judgment on this basis.

Cross-Defendants also assert that RAJT could not have acquired title to the GO2 assets because Miguel Chavez filed for chapter 7 bankruptcy on 08/12/2012 and did not list GO2 or the GO2 assets as an asset in his bankruptcy filings.

Cross-Defendants argue that after Miguel Chavez filed for bankruptcy protection, any assets he previously possessed became the property of the bankrupt estate. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1001; see also 11 U.S.C. §§ 323 & 541(a)(1).) Property that is neither administered nor abandoned by the bankruptcy trustee remains property of the bankruptcy estate. (11 U.S.C. § 554(d).)

Cross-Defendants reason that because Miguel Chavez did not list the GO2 assets in his 2012 bankruptcy schedules, they were neither administered nor abandoned by the bankruptcy trustee and they remained in the bankruptcy estate. Thus, Miguel Chavez was without authority to transfer them to RAJT in 2013, as claimed in the Cross-Complaint.

In response, Miguel Chavez filed a declaration alleging that the sale of the GO2 assets to RAJT occurred in early 2012 and before Miguel Chavez filed for bankruptcy: “My son, Ricardo and I entered into an oral agreement in early 2012 whereby I would transfer the assets of GO2 to RAJT. Ricardo then agreed to hire me as a consultant for RAJT in exchange for a monthly fee for such consulting work. We did not formalize said agreement until it was reduced to writing in or about December 31, 2013.” (Declaration of Miguel Chavez in Opp’n to Mot., ¶ 14.)

However, RAJT asserted in the Cross-Complaint that RAJT acquired the GO2 assets in 2013. (Cross-Compl., ¶¶ 10-11). “The admission of fact in a pleading is a ‘judicial admission.’” (Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271). “A judicial admission in a pleading…is not merely evidence of a fact; it is a conclusive concession of the truth of a matter which has the effect of removing it from the issues.” (Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 218.)

In addition, Miguel Chavez, Ricardo Chavez, and RAJT have admitted in several discovery responses and declarations that the transfer of GO2’s assets occurred in 2013:

1. Miguel Chavez’s Responses to Form Interrogatories, Set One, served on November 16, 2020 (see Supplemental Decl. of Joseph M. Dankert in Supp. of Mot., Exh. 5, Response to Form Interrogatory No. 15.1);

2. RAJT’s Responses to Form Interrogatories, Set One, served on November 16, 2020 (see Supplemental Decl. of Joseph M. Dankert in Supp. of Mot., Exh. 6, Response to Form Interrogatory Nos. 15.1 & 17.1);

3. Miguel Chavez’s Declaration in Support of RAJT’s Motion for Preliminary Injunction filed on November 9, 2020, ¶¶ 8-9;

4. Ricardo Chavez’s Declaration in Support of RAJT’s Motion for Preliminary Injunction filed on November 9, 2020, ¶¶ 4-5;

5. Deposition of Miguel Chavez conducted on January 6, 2021 (see Supplemental Decl. of Joseph M. Dankert in Supp. of Mot., Exh. 1);

6. Deposition of Ricardo Chavez conducted on January 12, 2021 (see Supplemental Decl. of Joseph M. Dankert in Supp. of Mot., Exh. 2).

For the reasons explained above, one self-serving paragraph in Miguel Chavez’s declaration does not create a material dispute of fact where Miguel Chavez, Ricardo Chavez, and RAJT have averred under oath on numerous occasions to a fact within their personal knowledge.

Summary judgment shall be granted on the basis that there is no material disputed fact that Miguel Chavez lacked the authority to transfer the GO2 assets to RAJT.

Unclean Hands

Cross-Defendants argue that all of the claims are barred by the doctrine of unclean hands because the undisputed evidence reveals that RAJT deliberately concealed its alleged ownership of the GO2 assets from Cross-Defendants.

Whether particular misconduct constitutes unclean hands and therefore bars a “claim for relief depends on (1) analogous case law, (2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed injuries.” (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal. App. 4th 970, 979.)

With respect to the second prong, the Kendall-Jackson Winery Court cautioned that “[n]ot every wrongful act constitutes unclean hands. But, the misconduct need not be a crime or an actionable tort. Any conduct that violates conscience, or good faith, or other equitable standards of conduct is sufficient cause to invoke the doctrine.” (Id. at p. 979, citing DeRosa v. Transamerica Title Ins. Co. (1989) 213 Cal.App.3d 1390, 1395-1396 & Precision Co. v. Automotive Co. (1945) 324 U.S. 806, 814-815.)

Here, Cross-Defendants do not allege that the failure to inform them of the identity of the owner of the GO2 assets was a crime or an actionable tort, but only “inequitable conduct”. However, this conduct did not violate conscience, good faith, or other equitable standards. Cross-Defendants do not point to any injury or harm that befell them as a result of not being told who owned the GO2 assets. Cross-Defendants only assert that, had they known, they would not have agreed to manufacture GO2 products for RAJT’s benefit. (Cross-Def.s’ Separate Statement of Material Undisputed Facts in Supp. of Mot., ¶ 30.)

The third prong requires that “[t]he misconduct that brings the unclean hands doctrine into play must relate directly to the transaction concerning which the complaint is made” and “[i]t must infect the cause of action involved and affect the equitable relations between the litigants.” (Kendall-Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal. App. 4th at p. 984.)

In this case, the conduct does relate directly to the transaction that is the focus of the Cross-Complaint. However, conduct did not infect the causes of action of the Cross-Complaint or the equitable relations between the litigants. Hiding the identity of the owner of the GO2 assets is not so related to the causes of action that it would be equitable to bar RAJT from pressing its claims simply because Cross-Defendants did not know to whom a portion of the GO2 assets were being sent.

The court declines to apply the unclean hands doctrine in this case.

Cross-Defendants shall give notice of this ruling.

(fn.1) In addition, Miguel Chavez’s declaration appears to be inconsistent with RAJT’s cross-complaint. (Compare Decl. of Miguel Chavez, ¶ 18 [alleging oral agreement was entered into in 2012] with Cross-Compl., ¶ 12 [alleging oral agreement was entered into in 2013].)