Judge: Nick A. Dourbetas, Case: 2022-01243056, Date: 2023-05-19 Tentative Ruling
1. Motion to Expunge Lis Pendens
Defendant 58 Berkshire Wood, LLC’s (hereinafter, Berkshire LLC) motion to expunge lis pendens is GRANTED as follows. (See Code Civ. Proc., § 405.32.)
The Court ORDERS the lis pendens recorded against the subject Berkshire property commonly known as 58 Berkshire Wood, Irvine, CA 92620 (APN 104-673-18) hereby expunged.
The operative third amended complaint (TAC) states two real property claims with respect to the Berkshire property—the 11th and 12th causes of action for quiet title and constructive trust, which seek to establish plaintiffs Na Wu (Wu) and Guowen Liu’s (Liu) (hereinafter, collectively referred to as plaintiffs) title to the subject property against Berkshire LLC, among others, based on fraud. (See Code Civ. Proc., §§ 761.020, 762.010, 762.020 [quiet title]; Warren v. Merrill (2006) 143 Cal.App.4th 96, 112-113 [a plaintiff may quiet title to property against a defendant that has acquired the title through fraud; further, “ ‘[a] constructive trust may be imposed when a party has acquired property to which he is not justly entitled, if it was obtained by actual fraud, mistake or the like, or by constructive fraud through the violation of some fiduciary or confidential relationship”]; Leeper v. Beltrami (1959) 53 Cal.2d 195, 214 when a “plaintiff seeks to quiet title on the ground defendant’s title was secured from plaintiff by fraud, the plaintiff must plead and prove facts constituting the fraud”]; see also Shoker v. Superior Court of Alameda County (2022) 8 Cal.App.5th 271, 282 [claim for constructive trust seeking to acquire title to real property obtained by the defendants by fraud/breach of their fiduciary duties to the plaintiffs “falls squarely within the plain language of the [lis pendens] statute: it ‘would, if meritorious, affect ... title’ to real property”]; TAC ¶¶ 7-9, 19-23, 30, 32-33, 43-48, 51-64, 98-108, 148, 151-154, 204-226, 240-249, 316-327.)
Plaintiffs, however, have failed to meet their burden to demonstrate the probable validity of these claims by a preponderance of the evidence (see Code Civ. Proc., § 405.32), including by failing to submit evidence establishing certain foundational facts that should be well within their own knowledge, possession, and control. For example, plaintiffs allege they authorized their agent and trusted financial advisor, Joseph Tang (Tang), and investment defendants Kevin Robl (Robl) and Production Capital, LLC (Production Capital), to use plaintiffs’ investment funds to purchase the Berkshire property for the benefit of plaintiffs through Production Capital, a company that Tang and the investment defendants had represented was wholly owned by Liu. Plaintiffs have not, however, produced any evidence that so much as suggests Liu had any reasonable basis to believe he owned Production Capital. There is no declaration from Liu, or any other evidence establishing Tang and/or the investment defendants fraudulently misrepresented that Liu owned Production Capital, and also no competent documentary evidence suggesting he was Production Capital’s sole member/owner at any relevant time.
There is also no evidence showing that defendants Mohamed Shaaban (Shaaban), Doaa Fathallah (Fathallah), and/or their single purpose entity, Berkshire LLC, took title to the subject property knowing that it belonged to Liu and/or Wu as opposed to Production Capital or to Robl through Production Capital; or that they knowingly participated in a scheme to defraud plaintiffs, as opposed to participating in what they may have believed were legitimate investment/business transactions with Robl and/or Production Capital.
Plaintiffs’ evidentiary showing is also problematic because a significant portion of it consists of requests for judicial notice of prior evidence submitted with respect to their previously-heard requests for TRO/preliminary injunction. (See ROA No. 616, 618.) While the court may take judicial notice of the existence and legal effect of the documents contained in its files, it may not take judicial notice of the truth of the statements contained in those documents. As such, plaintiffs cannot meet their evidentiary burden here via judicial notice of previously filed declarations. (See Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1266; Kilroy v. State (2004) 119 Cal.App.4th 140, 147 [courts may not take judicial notice of hearsay allegations simply because they are a part of a court record].)
Given the above, plaintiffs have failed to meet their burden to establish the probable validity of their real property claims with respect to the Berkshire property.
Bond. No bond is required. (See Code Civ. Proc., § 405.32.)
Attorney fees and costs. Berkshire LLC’s request for attorney fees and costs is DENIED. (See Code Civ. Proc., § 405.38.)
Plaintiffs acted with substantial justification in recording the lis pendens and attempting to oppose this motion. Plaintiffs filed a verified third amended complaint alleging a detailed claim for quiet title based on fraud with respect to the Berkshire property. As a result, plaintiffs were affirmatively required by statute to immediately record a lis pendens against the property, and thus acted with substantial justification in doing so. (Code Civ. Proc., § 761.010, subd. (b).)
Plaintiffs also acted with substantial justification in opposing this motion. The evidence does not suggest that this was a typical, one-time arms-length transaction for the sale and purchase of real property. Rather, the evidence shows: Shaaban controlled the purchase of Berkshire property on behalf of himself and his wife, Fathallah, through their single purchase entity, Berkshire LLC, and personally received all returns on that purchase and accompanying lease-back agreement in his personal bank account—which strongly supports the allegation that Berkshire LLC was indeed Shaaban’s alter ego; Shaaban had a significant equity interest/made a significant investment in Production Capital worth approximately $5 million at some point prior to Berkshire LLC’s acquisition of the Berkshire property; Shaaban entered into a total of five similar real estate deals with Robl at Production Capital, with whom he shared a close personal relationship, including the subject acquisition of the Berkshire property; and between Shaaban’s investment in Production Capital and the five real estate deals, Shaaban received a return in the range of $350,000 to $750,000 per quarter, despite the fact that Shaaban (or more specifically, his and his wife’s single-purpose entities) had already purchased the properties, or at least the Berkshire property, at significantly reduced price of only 90% of its fair market value. (See Fiset Decl. at Exs. 1 [Shaaban Depo. as the Crestview LLC PMK, pp. 84:23-85:12, 114:15-18, 128:4-107, 135:5-137:11], 2 [Shaaban Depo. as the Chianti LLC PMK, pp. 37:4-10, 130:1-133:3]; Shaaban Decl. ¶¶ 10, 16, 18.)
In sum, while plaintiffs have at this time ultimately failed to meet their burden to establish all facts necessary to show they are more likely than not to prevail on their 11th and 12th causes of action for quiet title and constructive trust, they acted with substantial justification in opposing this motion and attempting to prove its real property claims have probable validity.
Request for judicial notice. Berkshire LLC’s and plaintiffs’ requests for judicial notice are GRANTED. (See Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 924 & fn. 1 [court may take judicial notice of the existence and contents of recorded documents, though not of disputed or disputable facts stated therein]; Evid. Code, § 452, subd. (d) [court records]; see also Kilroy v. State, supra, 119 Cal.App.4th at p. 146-147 [“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”].)
Moving party shall give notice.