Judge Peter A. Hernandez, Case Number: 23STCV20231, Date: 2024-09-17 Tentative Ruling

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Defendants Carlos Sotelo and VIP Enterprises, Inc. dba KW VIP Properties’ Motion for Summary Judgment, or in the Alternative, for Summary Adjudication is DENIED.

On August 23, 2023, Plaintiff Sebastian Solano (“Plaintiff”) filed his Complaint against Defendants Carlos Sotelo and Keller Williams, Inc. on causes of action of professional negligence, breach of fiduciary duty, and fraudulent concealment.

On September 26, 2023, Plaintiff filed his operative First Amended Complaint (“FAC”) against Defendants Carlos Sotelo and VIP Enterprises, Inc. (collectively “Defendants”) on causes of action of (1) Professional negligence, (2) Breach of Fiduciary Duty, and (3) Negligence, arising from Plaintiff’s retainer of Defendants to represent Plaintiff in the purchase of real property.

Plaintiff retained Defendants to represent him in his potential purchase of residential real property. (FAC, ¶ 7.) Plaintiff entered into a purchase agreement for real property (the “Purchase Agreement”), which had a loan contingency such that Plaintiff could cancel the Purchase Agreement if he was unable to obtain a loan and receive a full refund of his $292,000 deposit. (FAC, ¶¶ 10-13.) Plaintiff is in the cannabis business, however funds from Plaintiff’s cannabis business were not accepted by lenders. (FAC, ¶¶ 17, 19-21.) As such lenders would not provide Plaintiff the necessary $4 million loan identified in the Purchase Agreement. (FAC, ¶¶ 10, 20-21.) Because Plaintiff was unable to obtain adequate financing because his funds were derived from cannabis companies, he decided to cancel the Purchase Agreement. (FAC, ¶ 7.)

Paragraph 14D(3) of the Purchase Agreement provides Plaintiff with the express right to cancel and terminate the Purchase Agreement if he is unable to satisfy the loan contingency. On or about February 11, 2022, Defendant Sotelo, on behalf of Plaintiff delivered to the seller written notice of cancellation of the Purchase Agreement prepared by Defendant Sotelo in accordance with Paragraph 14D(3). (FAC, ¶ 25.) Under Paragraph 14F of the Purchase Agreement, entitled, “Effect of Cancellation on Deposits,” it states, “If states, or Seller gives written notice of cancellation pursuant to rights duly exercised under the terms of this Agreement, the Parties agree to Sign and Deliver mutual instructions to cancel the sale and escrow and release deposits, if any, to the Party entitled to the funds.” (FAC, ¶ 26.) The seller refused to execute the escrow instruction so that the deposit could be released to Plaintiff. Instead, the seller argued that Plaintiff obtained a final loan, but cancelled because he could not make the down payment and was no longer interested in the subject property. Plaintiff and the seller then asserted cross-claims in a contractual arbitration, each seeking to recover the deposit. (FAC, ¶ 28.) Defendants confirmed in writing to Plaintiff that the only reason Plaintiff could not move forward with the transaction was because he could not obtain a loan with cannabis funds. (FAC, ¶¶ 29-31.)

It was later discovered that Defendants secretly sent an email to the seller’s brokers stating that Plaintiff cancelled the Purchase Agreement for reasons including that Plaintiff lacked the funds for the down payment given substantial losses in crypto investments and Plaintiff was going through “family trauma” that interfered with the transaction. (FAC, ¶¶ 33-39.) These statements were false and misrepresented to the seller that Plaintiff breached the Purchase Agreement because Plaintiff had a loan, but could not, or did not want to make the required down payment. (FAC, ¶¶ 38-40.) As a result of the misrepresentations to the seller’s brokers, Plaintiff ultimately lost $225,000 and incurred legal fees attempting to recover the $292,000 deposit.[1] (FAC, ¶¶ 44-45.)

As such, Plaintiff’s assert causes of action for professional negligence, negligence and breach of fiduciary duty.

On December 14, 2023, the Court denied Defendants’ Motion to Strike (not anti-SLAAP) – without Demurrer.

On June 14, 2024, Defendants filed their Motion for Summary Judgment, or in the Alternative, Summary Adjudication, which Plaintiff opposed on September 3, 2024, and to which Defendants replied on September 10, 2024.

The Court grants Defendants’ request for judicial notice of Exhibits 1 through 4 pursuant to Evidence Code section 452 subdivisions (d) and (h).

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review. (Code Civ. Proc., § 437c, subd. (q).) Evidentiary objections not made either in writing or orally shall be deemed waived. (Code Civ. Proc., § 437c, subd. (b).)

Defendants’ evidentiary objections are not material to the court’s ruling, and the court therefore declines to rule on them. (Code Civ. Proc., § 437c, subd. (q).

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (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 judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy its initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520 (Scalf).)

More specifically, “[o]n 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, supra,128 Cal.App.4th at p. 1519.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown 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.” (Code Civ. Proc., § 437c, subd. (p)(2).)

“Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . 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)(2).) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi¿v. Centro Medico¿Urgente¿Medical Center¿(2008) 159 Cal.App.4th 463, 467.)

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”¿(Id. at p. 467; Code Civ. Proc., § 437c, subd. (c).)¿

Defendants move for summary judgment, or in the alternative, for summary adjudication on the FAC’s three causes of action for (1) professional negligence; (2) breach of fiduciary duty; and (3) negligence. Defendants argue the gravamen of the FAC is indemnity. Defendants also argue the gravamen of the declaratory relief claim in the sellers’ Amended Counterclaim against Plaintiff is breach of contract. Consequently, Defendants contend there are three separate basis for summary judgment.

First, Defendants are entitled to judgment on the FAC since per California law Plaintiff and Defendants must be joint tortfeasors for Plaintiff to recover based on equitable indemnity.

Second, Defendants are entitled to judgment on the FAC because 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 non-performance; (3) the defendant's breach; and (4) the resulting damage to the plaintiff. The seller, Sunset Plaza, could not, as a matter of law, prevail on its breach of written contract claim against Plaintiff because it could not prove that it had performed under the contract, as to recover the deposit the seller must provide to the Buyer a Notice to Perform with at least 2 days’ notice. The notices in this case were invalid.

Third, Defendants are entitled to judgment on the FAC because the seller’s Amended Counterclaim was only based on Plaintiff’s misconduct not upon Defendants’ misconduct.

California Rules of Court, Rule 3.1350(b) provides that: “If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, 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.”

Plaintiff argues that Defendants failed to comply with the notice requirements of Rule 3.1350(b) because Defendants’ notice of motion and separate statement do not contain the same issues verbatim. However, the Court exercises its discretion to overlook the procedural defect in order to address the merits of the instant motion just as Plaintiff did. This also applies to Plaintiff’s other procedural arguments.[2] Notwithstanding, the motion is denied as discussed below.

In order to state a claim for negligence, the plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.)

“The elements of a cause of action for professional negligence are (1) the existence of the duty of the professional to use such skill, prudence, and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Id. at 820.)

As the moving party, Defendants have the initial burden to make a prima facie showing that there are no triable issues of material fact. Defendants can satisfy their initial burden of proof by presenting facts to negate an essential element, or to establish a defense. However, as to each claim in the FAC, Defendants have not done so.

Instead, Defendants argue that (1) the gravamen of the FAC is indemnity; and (2) the gravamen of declaratory relief claim in the seller’s Amended Counterclaim is breach of contract. Based on these arguments, Defendants then argue they are entitled to summary judgment for three separate reasons. First, Plaintiff cannot obtain equitable indemnity because it is only available among joint tortfeasors but Plaintiff is not a joint tortfeasor with Defendants as the seller’s Amended Counterclaim has two causes of action for breach of contract (written) and declaratory relief. Second, an essential element of the seller’s breach of contract claim is that the seller performed under the Purchase Agreement, which cannot be proved because the seller did not provide Plaintiff a notice to perform with at least 2 days’ notice. Lastly, the seller’s Counterclaim does reference any misconduct by Defendants (i.e., the smoking gun email referenced in paragraph 12 of the FAC).

The court does not agree with Defendants’ arguments. Notably, with respect to the first and third arguments, this action is about Defendants’ negligence and breach of fiduciary duty, not the sellers’ Counterclaim including what the seller alleged against Plaintiff despite that being discussed at length in Defendants’ motion. While the court agrees with Defendants that the label attached to a cause of action is not necessarily determinative, that is not the case here. For example, the FAC does not allege equitable indemnity; it does not allege that Plaintiff seeks contribution for damages to the seller; nor does it allege that Defendants harmed the seller.

Rather, the FAC alleges that Plaintiff seeks damages caused by Defendants’ negligence and breach of fiduciary duty by making material misrepresentations to the sellers’ brokers about Plaintiff’s reasons for cancelling the Purchase Agreement. Further, Defendants’ argument that Defendants must be joint tortfeasors in the seller’s Counterclaim for Defendants to be liable to Plaintiff does not appear to be supported by the cases that Defendants rely on—Baird v. Jones (1993) 21 Cal.App.4th 684, 688; American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 597. These cases, and the relevant parts that Defendants cite, appear to state that a party that is liable for equitable indemnity may be brought into a pending litigation. Lastly, with respect to the second argument that the seller did not provide proper notice to perform and therefore was not entitled to retain any part of the deposit, the court does not find that this satisfies Defendants’ initial burden of proof on summary judgement; however, even if it did, there exists a factual dispute whether Plaintiff was the one who canceled the Purchase Agreement, not the seller, making the notice not relevant to Plaintiff’s cancellation.

Accordingly, the court denies Defendants’ Motion for Summary Judgment, or in the alternative, for Summary Adjudication.

[1] Plaintiff only received $67,000 from escrow and the Seller was given $225,000. (FAC ¶ 44.)

[2] Plaintiff argues Defendants have not complied with California Rules of Court, Rule 3.1350(g) and Code of Civil Procedure sections 437c (f)(1) and (t).