Judge Peter A. Hernandez, Case Number: 19PSCV00419, Date: 2024-03-01 Tentative Ruling

1. Defendant/Cross-Complainant Yalong Investment Group, LLC’s Motion for Summary Judgment or, in the Alternative, Summary Adjudication on Yalong’s Cross-Complaint is DENIED.

Plaintiff Southern California School of Theology dba Claremont School of Theology (“CST”) alleges as follows:

On June 5, 1957, Defendant Claremont Graduate University fka Claremont College and Claremont University Center (“CGU”) conveyed approximately 16.4 acres of land contiguous to The Claremont Colleges (“Parcels 1 and 2”) to CST in exchange for $107,500.00 via a grant deed (the “1957 Deed”). The 1957 Deed contained two restrictions: (1) a First Option Clause (“FOC”) and (2) an educational use restriction, both of which were enforced by a power of termination. On June 5, 1957, CGU and CST entered into an “Agreement between Claremont College and Southern California School of Theology” (“1957 Agreement”), containing the procedure for establishing a purchase price in the event the FOC is triggered. Per Code of Civil Procedure § 885.030 of the Marketable Record Title Act (“MRTA”), the power of termination in the 1957 Deed expired in 1987, as no Notice of Preservation was recorded on Parcels 1 and 2; accordingly, the restrictions became unenforceable.

In or around August 2015, CST told CGU and Defendant Claremont University Consortium (“Consortium”) that it was considering selling a portion of Parcels 1 and 2. CGU and Consortium, in response, asserted that they still had a right under the 1957 Deed and related 1957 Agreement to purchase Parcels 1 and 2 at a price substantially below current market value based upon the pricing formula in the 1957 Agreement. Additionally, in 1972 CGU conveyed a 60-foot parcel of property (“60 Foot Parcel”) to CST (“1972 Deed”) which afforded CST additional access to the property covered by the 1957 Deed. The 1972 Deed contains an option by which CGU and Consortium have a right of first refusal to purchase the 60 Foot Parcel. When CST informed CGU and Consortium that it was considering a sale of Parcels 1 and 2, it also informed CGU and Consortium that the sale would have to include the 60 Foot Parcel. CGU and Consortium demand that the 60 Foot Parcel be valued separately and sold to them even if a third party would ultimately purchase Parcels 1 and 2.

In 2001, Consortium and CST entered into an “Agreement between Claremont University Consortium and Southern California School of Theology” (“2001 Agreement”), stating therein that Consortium and CST “are currently parties” to the 1957 Agreement and that they desired to “amend and reaffirm” the 1957 Agreement. The 2001 Agreement was made based on the mistaken assumption that the powers of termination had not expired and that Consortium was a party to the 1957 Agreement. The 2001 Agreement also lacked consideration.

On November 30, 2016, CST filed a First Amended Complaint, asserting causes of action against CGU, Consortium and Does 1-50 for:

On April 20, 2018, CGU and Consortium filed a Second Amended Cross-Complaint, asserting causes of action against CST for:

This case proceeded to court trial on September 24, 2018. On December 18, 2018, the “Statement of Decision” was filed. On January 23, 2019, the “Amended Final Judgment and Permanent Injunction” was filed.

On November 15, 2019, CGU and Consortium filed another Notice of Appeal (i.e., of the court’s November 5, 2019 order on attorney’s fees).

On July 6, 2021, a second remittitur was issued (reversed) as to the attorney fee award.

On September 9, 2021, the court related this case with Case No. 21PSCV00241. On October 29, 2021, the court related this case with Case No. 21PSCV00726.

Plaintiff The Claremont Colleges, Inc. dba The Claremont Colleges Services fka Claremont University Consortium (“Consortium”) alleges that CST, after the trial of Claremont I, secretly entered into a sale agreement with Yalong Investment Group, LLC (“Yalong”) which represents a violation of Consortium’s right to purchase the property under the FOC if the judgment is reversed, or the First Right of Refusal (“FROR”) if the judgment in Claremont I is affirmed. Consortium alleges that the sales agreement also constitutes a violation of the Educational Use Restriction.

On October 23, 2019, the “Order Denying Plaintiff The Claremont Colleges, Inc.’s Motion for Preliminary Injunction” was filed. On December 5, 2019, the court sustained CST’s demurrer to Consortium’s First Amended Complaint, without leave to amend; the court took the matter under submission “[a]s to the Educational Use Restriction.” On December 17, 2019, the court sustained the demurrer as to the Educational Use Restriction, without leave to amend.

On December 26, 2019, Consortium filed a Second Amended Complaint (“SAC”), asserting causes of action against Defendants CST, Yalong and Does 1-50 for:

On December 31, 2019, an “Order Regarding Defendant Southern California School of Theology, dba Claremont School of Theology’s (1) Demurrer; (2) Motion to Strike and (3) Motion for Sanctions” was filed. On January 24, 2020, judgment was filed; on January 31, 2020, a “Notice of Entry of Judgment” was filed. On February 4, 2020, Plaintiff filed a “Notice of Appeal.”

On October 8, 2020, the court sustained Yalong’s demurrer to the fourth, fifth, and eighth through tenth causes of action in the SAC; the court stayed Consortium’s request for leave as to the fourth, eighth and ninth causes of action pending resolution of issues and denied leave as to the fifth and tenth causes of action.

On August 5, 2021, remittitur was issued (reversed in part, affirmed in part). The Court of Appeal reversed the trial court’s order denying Consortium’s motion for preliminary injunction and reversed the trial court’s order sustaining CST’s demurrer as to the FAC’s first through third, sixth and ninth causes of action and affirmed the trial court’s order sustaining CST’s demurrer as to the FAC’s seventh and tenth causes of action.

On October 15, 2021, Consortium filed a Third Amended Complaint (“TAC”), asserting causes of action against Defendants CST, Yalong, Education Tomorrow, Inc. (“Education Tomorrow”), Henry Appenzeller University (“HPU”), Mpire, Inc dba California Academy (“Mpire”), Western University of Health Sciences and Does 1-50 for:

On January 7, 2022, an “Order Granting Plaintiff’s Motion for Preliminary Injunction Against Defendants Southern California School of Theology and Yalong Investment Group, LLC” was entered.

On January 20, 2022, HPU’s default was entered. On January 24, 2022, Education Tomorrow’s default was entered.

On April 20, 2022, Yalong filed a cross-complaint, asserting causes of action against CST and Roes 1-20 for:

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

On January 18, 2024, CST dismissed its second, seventh and eighth causes of action against Yalong, without prejudice.

The Final Status Conference is set for July 30, 2024. Trial is set for August 13, 2024.

CST seeks a judicial determination and declaration that the FROR and educational use equitable servitudes created by the trial court in Claremont I are not enforceable because of a change of conditions. CST also alleges that Defendant The Claremont Colleges, Inc. (“Claremont Colleges”) breached the 1957 and 2001 Agreements by terminating CST’s affiliation and its use of certain facilities and equipment. CST seeks an injunction preventing Claremont Colleges from “land banking” in violation of the educational use equitable servitude.

On June 9, 2021, CST filed a First Amended Complaint (“FAC”), asserting causes of action against Claremont Colleges and Does 1-50 for:

On January 10, 2022, the court sustained Claremont Colleges’ demurrer to CST’s FAC, without leave to amend.

On January 21, 2022, “Judgment Following Demurrer” was entered. On March 3, 2022 and March 7, 2022, CST filed a “Notice of Appeal.”; on July 20, 2022 and August 23, 2022, remittiturs were issued (appeals dismissed).

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

Plaintiff Western University of Health Sciences (“Plaintiff”) alleges as follows:

On or about June 3, 2021, Plaintiff and CST entered into a “Revocable License Agreement for Certain Premises that Comprise a Portion of the Claremont School of Theology Campus” (“License”), which was for access, use and occupation of a portion of the premises located at 1325 North College Avenue, Claremont, California (the “Premises”). Per the License, the Base License Fee for the initial term of the License (i.e., 11 months) was a total of $1 million, which consisted of $100,000.00 payable on or before the Possession Date set forth therein, $600,000.00 payable on or before August 1, 2021 and $300,000.00 payable on or before December 31, 2021. Plaintiff made the $100,000.00 payment and was thereafter permitted to occupy the Premises. Before the $600,000.00 payment came due, Claremont Colleges informed CST that CST was not in rightful possession of the Premises and that it would seek a preliminary injunction, including against Plaintiff, relating to CST’s entitlement to license the Premises or otherwise allow Plaintiff to occupy the Premises. CST and Claremont Colleges have made conflicting demands upon Plaintiff for payment.

On September 1, 2021, Plaintiff filed a Complaint in Interpleader against CST, Claremont Colleges and Does 1-100.

On September 9, 2021, the court related this case with Case No. KC068691. On October 29, 2021, the court related this case with Case Nos. KC068691, 19PSCV00419 and 21PSCV00241.

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

On January 4, 2024, Claremont Colleges filed a “Petition to Confirm Contractual Arbitration Award.”

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119 [emphasis theirs].)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) “A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) “Once the plaintiff or cross-complainant has met that burden, the burden shift to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)

Yalong moves the court for an order granting summary judgment in its favor and against CST on its cross-complaint; alternatively, Yalong seeks summary adjudication with respect to the following causes of action within the cross-complaint and issue of duty as follows:

• Yalong’s Cross-Complaint, Fifth Cause of Action for Declaratory Relief: A judicial declaration that: (1) the Lease is rescinded, and (2) Yalong is entitled to repayment of the $10 Million Deposit plus prejudgment interest less any valid offset that CST is able to prove. Yalong’s Motion is brought under Code of Civil Procedure section 437c(f)(1) on the basis that the undisputed material facts show that Yalong is entitled to judgment as a matter of law because there was a mutual mistake of fact at the time the parties executed the Lease and a material failure of consideration. See Cal. Civ. Code § 1689.

• CST’s duty and obligation to return the $10 Million Deposit plus prejudgment interest to Yalong: Yalong’s Motion is brought under Code of Civil Procedure section 437c(f)(1) on the basis that the undisputed material facts show that Yalong is entitled to these funds because there was a mutual mistake of fact at the time the parties executed the Lease and a material failure of consideration. See Cal. Civ. Code § 1689.

The court determines that Yalong’s alternate request for summary adjudication is deficient.

California Rules of Court (“CRC”) Rule 3.1350, subdivision (b) provides that “[i]f summary adjudication is sought . . . the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” (Emphasis added). Subdivision (d) provides that “[t]he separate Statement of Undisputed Material Facts in support of a motion must separately identify: (A) Each cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion; and (B) Each supporting material fact claimed to be without dispute with respect to the cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion.” (Emphasis added). Yalong purports to seek summary adjudication of the fifth cause of action for declaratory relief and of CST’s purported duty to return the deposit, with interest to Yalong; however, its separate statement fails to address the fifth cause of action and issue of duty separately.

The court rules on Yalong’s Request for Judicial Notice (“RJN”) as follows: Granted as to Exhibits 1 and 12-27.

· As to the Declaration of Dr. Kah-Jin Jeffrey Kuan: Overruled as to Nos. 1, 4, 5 (i.e., as to first sentence only), 6 and 8-10 and Sustained as to Nos. 2, 3, 5 (i.e., as to second sentence only) and 7.

· As to the Declaration of Charles M. Clark: Overruled as to Nos. 11 and 14 and Sustained as to Nos. 12, 13 and 15.

Yalong claims that it is entitled to rescission of the February 5, 2019 ground lease (the “Lease”) between Yalong and CST on the basis of (1) mutual mistake and/or (2) material failure of consideration.[2]

On October 15, 2021, Plaintiff The Claremont Colleges, Inc. dba The Claremont Colleges Services fka Claremont University Consortium (“Consortium”) filed a Third Amended Complaint (“TAC”) in this action against CST, Yalong, Education Tomorrow, HPU, Mpire, and Western University of Health Sciences for Specific Performance of Right of First Offer, Quiet Title Based on Right of First Offer, Breach and Enforcement of 1957 Deed, Breach and Enforcement of 1957 Agreement, Breach and Enforcement of 2001 Agreement, Breach of the Implied Covenant of Good Faith and Fair Dealing, Intentional Interference with Right of First Offer, Declaratory Relief and Restitution and Unjust Enrichment. (RJN, Exh. 23).

On April 20, 2022, Yalong filed the instant cross-complaint, asserting causes of action against CST for Rescission of the Lease, Restitution, Breach of Contract, Money Had and Received and Declaratory Relief. (RJN, Exh. 26). Yalong alleges therein that Consortium deeded the property located at 1325 North College Avenue, Claremont, California 91711 (“subject property”) to CST on December 18, 1957 (“1957 Deed”) (Cross-Complaint, ¶¶ 4 and 5), that the 1957 Deed contained two restrictions, an Educational Use Restriction and a First Offer Clause (Id., ¶ 6); that CST filed Claremont I on August 31, 2016, disputing Consortium’s position that the subject property was encumbered by the Educational Use Restriction and that the First Offer Clause constituted a right of first refusal in the event CST desired to sell the land (Id., ¶ 7); that the trial court in Claremont I issued a statement of decision on December 18, 2018 (and subsequently entered judgment on January 23, 2019), determining that the Educational Use Restriction had expired but was enforceable based upon principles of equitable estoppel and/or as an equitable servitude and that the Right of First Offer was enforceable as a First Right of Refusal (Id., ¶ 8); that Yalong and CST entered into a written ground lease agreement (“Lease”) for the subject property dated February 5, 2019 (Id., ¶ 9); that the Claremont I judgment was subsequently reversed by the Court of Appeal on January 22, 2021 (Id., p. 3, fn. 1); that Consortium filed Claremont II (the instant action) on May 3, 2019 against CST and Yalong claiming, inter alia, that CST breached the 1957 Deed and related agreements by entering into the Lease and that Yalong intentionally interfered with said agreements (Id., ¶ 19); that on June 4, 2021, the Court of Appeal reversed the trial court’s orders sustaining CST’s demurrers to Consortium’s FAC and denying Consortium’s motion for a preliminary injunction in Claremont II, finding that the Lease triggered the First Offer Clause and directing that Consortium be give leave to file an amended complaint as well as a renewed motion for a preliminary injunction (Id., ¶ 21); that the court herein granted Consortium motion for preliminary injunction, prohibiting Yalong from “using, occupying, or possessing any part of the Property” and “purporting to grant through sublease, assignment or otherwise, any defendant or third party any right to use, occupy, or possess any part of the Property pending the final resolution of this case” (Id., ¶ 24); that Yalong and CST entered into the Lease based on the mutual mistake of fact that CST had the ability to lease and deliver the subject property to Yalong (Id.); that CST did not have the ability to lease or deliver possession of the subject property to Yalong (Id.); that Yalong is also entitled to rescission of the Lease on the basis that CST has failed to provide the required consideration under the Lease (specifically, possession) (Id., ¶ 31) and that Yalong is entitled to repayment of the money it paid to CST under the Lease, including the $10 million deposit (Id., ¶ 32).

Code of Civil Procedure § 1689 first provides, in relevant part, that “[a] party to a contract may rescind the contract . . . (1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party. . .(4) If the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.”

“[R]escission, when available, is an equitable remedy. The purpose of rescission is to restore both parties to their former position as far as possible and to bring about substantial justice by adjusting the equities between the parties even though the status quo cannot be exactly reproduced.” (Eminence Healthcare, Inc. v. Centuri Health Ventures, LLC (2022) 74 Cal.App.5^th 869, 881; see also Civ. Code §§ 1691[3] and 1692[4]).

The procedural history of this matter is undisputed by the parties. With that said, Yalong’s own moving papers reflect that there is a triable issue of material fact relative to offset. (See Motion for Summary Judgment or, in the alternative, Summary Adjudication, at 2, fn. 2 [“[t]o the extent CST contends, and is able to prove in its Opposition, that it is entitled to a[n] offset of some kind, Yalong is willing to consider stipulating to such amount to avoid a disputed issue of fact. . .”], 19:3-6 and 19:18-21.) Kuan attests that Yalong, following commencement of the Initial Term of the Lease on February 5, 2019, was immediately given full access to the CST Property and given specific space on the campus to conduct the process of becoming a bona fide educational institution of collegiate grade. (Kuan Decl., ¶ 5, lines 15-17). The court granted Consortium’s renewed Motion for Preliminary Injunction on January 7, 2022 (nearly three years later), which precluded Yalong, inter alia, from “using, occupying, or possessing any part of the Property pending the final resolution of this case.” (UMF No. 58; RJN, Exh. 25).

As an aside, the court notes as to CST’s laches and estoppel argument that “[s]ince the 1961 amendments of sections 1691 and 1693 of the Civil Code, reasonable diligence or promptness on the part of the party seeking rescission is no longer a prerequisite for the remedy. The new requirement is essentially one of freedom from laches. Its application depends on whether, under the particular facts, the delay has in any way prejudiced the defendant.” (Wilke v. Coinway, Inc. (1967) 257 Cal.App.2d 126, 140).

“In any action, the court may on notice modify or dissolve an injunction or temporary restraining order upon a showing that there has been a material change in the facts upon which the injunction or temporary restraining order was granted, that the law upon which the injunction or temporary restraining order was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction or temporary restraining order.” (Code Civ. Proc., § 533).

Yalong moves the court, pursuant to Code of Civil Procedure § 533, for an order modifying Subdivision (g) of the preliminary injunction entered January 7, 2022 (“Preliminary Injunction”) to state (additions in bold; deletions in ~~strikethrough~~):

will receive, from Yalong, all parties ~~the other defendants~~, or any third

The January 7, 2022 Preliminary Injunction was entered following Consortium’s motion for preliminary injunction.

Yalong contends that a material change has occurred since the Preliminary Injunction was entered and that the ends of justice would be served by a modification of the Preliminary Injunction. At the time the Preliminary Injunction was entered, the “principal claims” in Consortium’s TAC were for enforcement of the right to reacquire the property located at 1325 North College Avenue, Claremont, California 91711 (“Property”); since then, CST and Consortium commenced and concluded an arbitration regarding the repurchase price of the Property, which the arbitrator concluded should be $7,706,553.00. (Buchignani Decl., ¶ 4, Exh. 2). Subdivision (g) of the Preliminary Injunction, however, does not address funds received by CST from Consortium. Yalong represents that the purpose of the modification is to require CST to hold any funds it receives from Consortium in connection with the sale of the Property, inasmuch as a sale of the Property from CST to Consortium appears “imminent.” This modification will act to preserve the status quo of any funds transferred between the parties pending resolution of the action, inasmuch as Yalong has claims against CST that exceed $10,000,000.00. (See Yang Decl.).

Yalong, however, has failed to provide the court with any authority which would authorize it to move to amend an order relating to a motion for preliminary injunction filed by Consortium rather than filing its own motion for preliminary injunction for the requested relief.

[1] Motion #1 was filed (and served personally and via email) on November 21, 2023 and originally set for hearing on February 7, 2024. On January 31, 2024, the court filed (and mail-served) a “Notice Re: Continuance of Hearing and Order,” advising therein that the February 7, 2024 scheduled hearing on Motion #1 was reset to March 1, 2024; notice was given to counsel.

On January 12, 2024, Yalong filed an “Ex Parte Application for an Order Modifying Preliminary Injunction, or in the Alternative, Specially Setting and Shortening Time on a Motion to Modify Preliminary Injunction Order” (“Ex Parte Application”); on January 16, 2024, the court granted Yalong’s Ex Parte Application with respect to its alternate request and scheduled a “Hearing on Motion—Other to Modify Preliminary Injunction” for March 1, 2024; Plaintiff’s counsel was directed to give notice.

On January 16, 2024, Consortium filed (and electronically served) a “Notice of Order Relating Cases and Setting Hearing on (1) The Claremont Colleges, Inc.’s Petition to Confirm Arbitration Award and (2) Yalong Investment Group, LLC’s Motion to Modify Preliminary Injunction for March 1, 2024.” On January 31, 2024, a “Notice Re: Continuance of Hearing and Order” was filed, wherein the February 7, 2024 scheduled hearing on Motion #1 was continued to March 1, 2024; notice was given to counsel. On February 20, 2024, Consortium filed (and served via email) a “Notice of Order Continuing the Hearing Date of the Motion for Summary Judgment Filed by Yalong Investment Group, LLC,” advising therein of the new March 1, 2024 hearing date on Motion #1.

[2] Yalong’s motion for summary judgment is focused entirely on the rescission cause of action; it is Yalong’s position that “[t]he court’s entry of judgment as requested will resolve Yalong’s entire Cross-Complaint because the remaining [causes of action] will be moot.” (Motion 2:17-20).

[3] Civil Code § 1691 states, in relevant part, that “[s]ubject to Section 1693, to effect a rescission a party to the contract must, promptly upon discovering the facts which entitle him to rescind if he is free from duress, menace, undue influence or disability and is aware of his right to rescind: (a) Give notice of rescission to the party as to whom he rescinds; and (b) Restore to the other party everything of value which he has received from him under the contract or offer to restore the same upon condition that the other party so likewise, unless the latter is unable or positively refuses to do so. . .”

[4] Civil Code § 1691 states, in relevant part, that “[i]f in an action or proceeding a party seeks relief based upon rescission, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require and may otherwise in its judgment adjust the equities between the parties.”