Judge Ralph C. Hofer, Case Number: 20GDCV00728, Date: 2024-03-08 Tentative Ruling

The complaint which is the subject of these motions for summary judgment/adjudication was consolidated with this case, the lead case, in which plaintiff King Cobra Construction, P.C. (King Cobra) alleges that it is a licensed general contractor, and in 2019 entered into a written agreement with defendants Corazon S. Nieves, Trustee of the Corazon Revocable Trust Dated October 10, 2013, to act as the general contractor for a project located on 3080 Hollywell Place in Glendale, which property was owned by defendant. There were also approved change orders and extra work performed that improved the property.

Plaintiff alleges that it performed all of the conditions of the agreement, but defendant materially breached the terms of the agreement by failing to pay for the work performed and owes plaintiff no less than the sum of $288,000 plus interest and prompt payment penalties. The complaint alleges causes of action for breach of written contract, breach of implied covenant of good faith and fair dealing, indebitatus assumpsit, account stated, foreclosure of mechanic’s lien and declaratory relief.

Defendant Nieves, individually, and as trustee, has filed a cross-complaint in the lead case against King Cobra and its principal, Haroutyan Keshishyan, as cross-defendants, alleging that the construction contract between the parties did not contain any provision for payment of construction supervision fees to cross-defendants, or payment of profits, and that there were no executed change orders. The cross-complaint alleges that to finance the construction, Corazon obtained a loan from U.S. Bank (US Bank) (the Construction Loan), disbursements from which were handled by Dixieline Builders Fund Control, Inc. (Dixieline). The cross-complaint alleges that as of the time of the filing of this action, US Bank and Dixieline have paid to King Cobra the total sum of $613,501.00 out of the original contact price, and there remains $39,499.00 in escrow on hold until the instant litigation is resolved.

Cross-complainant alleges that during the construction, Keshishyan alerted Nieves that disbursements were being held up by Dixieline because Dixieline required additional or specific forms to be completed, which Keshishyan offered to complete to spare cross-complainant the trouble of reviewing and completing the forms. Cross-complainant alleges that cross-complainant would sign the forms completed by cross-defendants, and was not permitted to review the documents, and was assured that cross-complainant would have the opportunity to review the documents and make adjustments or corrections later in the process. The cross-complaint alleges that unbeknownst to cross-complainant, the Dixieline Standard Cost Breakdown included a provision for “supervision” fees of $35,000 and “profit” of $60,000, which were not discussed or agreed upon by the parties.

The cross-complaint alleges that over the course of the construction, Keshishyan began requesting that Nieves pay King Cobra directly for monies to fund the construction, separate and apart from the Construction Loan, representing that such would expedite completion, and that defendants would agree to an accounting for cross-defendants to reimburse any overpayment from reimbursement received from Dixieline. The cross-complaint alleges that cross-complainant ultimately paid cross-defendants direct payments of $332,579.22, and that cross-defendants have been paid a total sum of $946,080.22 from the Construction Loan and direct payments. The cross-complaint alleges that in April of 2020, after cross-complainant refused an offer to sell the property as is to a buyer located by cross-defendants to resolve cross-complainant’s growing liquidity problems, cross-complainant refused to make any further direct payments and demanded that cross-defendants complete construction and perform an accounting. The cross-complaint alleges that cross-defendants then abandoned construction and took with them personal property belonging to cross-complainant, including appliances and fixtures, with the approximate value of $25,000. Cross-defendant King Cobra then recorded a mechanic’s lien and sued cross-complainant in this lawsuit. The cross-complaint in the lead case alleges causes of action for breach of written contract, breach of covenant of good faith and fair dealing, conversion, fraud, elder financial abuse, unfair competition, unjust enrichment, and declaratory relief.

This case, originally Case Number 22 GDCV00004, was consolidated with the lead case on July 29, 2022, with all further matters to be handled in Case Number 20 GDCV000728. Because of the timing of the consolidation, some of the pertinent papers were filed in Case Number 22 GDCV00004, including the operative First Amended Complaint, and can be located there. The First Amended Complaint in the case is brought by Nieves as plaintiff, on behalf of herself and as attorney in fact for her brother, who allegedly co-owns the subject property. Plaintiff alleges that defendants U.S. Bank National Association (US Bank), and its servicers and agents, defendant Dixieline Builders Fund Control (Dixieline), and defendant Pro Build Company, LLC (ProBuild) were negligent in issuing payments to the construction company King Cobra in connection with the construction project at 3600 Hollywell Place in Glendale because work was not performed in a workmanlike fashion, and defendants failed to properly inspect and verify that the construction work was properly done.

On August 12, 2022, the court heard a demurrer and motion to strike in connection with the FAC brought by defendants US Bank and US Bancorp. The demurrer was overruled to the first cause of action for negligence, second cause of action for breach of contract, and fourth cause of action for breach of contract. The demurrer was sustained with leave to amend to the sixth cause of action for unfair business practices. The motion to strike allegations of pain and suffering and emotional distress and claims for attorney’s fees was granted without leave to amend at the concession of plaintiff in the opposition papers. Plaintiff was permitted ten days leave to amend the sixth cause of action only. No further amended complaint has been filed.

The motion for summary judgment was denied. The motion for summary adjudication was denied as to the first cause of action for negligence, and the second cause of action for breach of contract under the inspection agreement. The motion for summary adjudication was granted as to the fourth cause of action for breach of contract under the USB-DX Agreement.

Under CCP § 437c(p)(2) a defendant “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, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. 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.”

Issue No. 1: As to the First Cause of Action for Negligence: Neives claim for negligence against Dixieline fails because (a) Dixieline’s liability was contractually limited with respect to the construction, inspections, and the actions of the fund control, (b) Dixieline did not breach its duty to Plaintiff in performing its contractual duties.

To establish a cause of action for negligence, plaintiff must plead and prove the following elements: Defendant owed a legal duty of care to plaintiff; defendant breached the duty (negligent act or omission); plaintiff was injured as a result (proximate or legal cause); and damages. Palmer v. Crafts (1936) 16 Cal.App.2d 370, 375.

“An escrow involves the deposit of documents and/or money with a third party to be delivered on the occurrence of some condition. An escrow holder is an agent and fiduciary of the parties to the escrow. The agency created by the escrow is limited— limited to the obligation of the escrow holder to carry out the instructions of each of the parties to the escrow. If the escrow holder fails to carry out an instruction it has contracted to perform, the injured party has a cause of action for breach of contract. In delimiting the scope of an escrow holder’s fiduciary duties, then, we start from the principle that an escrow holder must comply strictly with the instructions of the parties. On the other hand, an escrow holder has no general duty to police the affairs of its depositors; rather, an escrow holder’s obligations are limited to faithful compliance with the depositors’ instructions. Absent clear evidence of fraud, an escrow holder’s obligations are limited to compliance with the parties’ instructions.”

It is held that the “instructions” involved need not necessarily be contained in the written instructions but can be oral or implied. In Kirk Corp. v. First American Title Co. (1990) 220 Cal.App.3d 785, the trial court and the court of appeal considered in evaluating what instructions had been given, materials such as letters to and from the escrow, as well as the conduct of the parties:

“An escrow holder has an implied obligation to do all of the things normally done by an escrow agent which were not expressly excluded by the escrow instructions. Upon the escrow holder’s breach of an instruction that it has contracted to perform or of an implied promise arising out of the agreement with either party, the injured party acquires a cause of action for breach of contract. As noted in Claussen, ‘escrow instructions may be oral, even when some are in writing and some escrow instructions may be implicit in the express instructions given.’”

Defendant argues that the parties here agreed that plaintiff and King Cobra were to instruct Dixieland to disburse funds upon the written order of either plaintiff or Haroutyun Keshishyan, who each agreed to order disbursements only in payment of expenses relating to the job which were due and payable, and that Dixieline would conclusively presume that any written order executed by an authorized person was given in accordance with the terms of the agreement, and the funds were for the purposes stated in the order.

“[S]hall not be responsible for and does not guarantee (1) that the job shall proceed, (2) that any job cost shall be paid, (3) that the job will be performed in accordance with contract requirements, or (4) that liens, stop notices or bond claims will not be filed. Control has no duty to determine that any labor and materials used in the job are in accordance with the plans and specifications, or to verify that any funds disbursed are for the purposes stated in any written order directing disbursement.”

“CONTROL’S LIABILITY SHALL BE LIMITED TO THE AMOUNT OF ANY DISBURSEMENT (1) MADE WITHOUT AUTHORIZATION OR (2) AS A RESULT OF CONTROL'S WILLFUL MISCONDUCT OR SOLE NEGLIGENCE. CONTROL SHALL NOT BE LIABLE FOR ANY ACTS, OMISSIONS OR DAMAGES, FORESEEABLE OR UNFORESEEABLE, OTHER THAN AS EXPRESSLY SET FORTH IN THIS PARAGRAPH.”

Defendant argues that given the Fund Control Agreement, plaintiff cannot hold Dixieline liable for the actions of King Cobra or the inspector, the inspections, the quality of workmanship or materials or the adequacy of funds to complete the project. The motion argues that the parties agreed that Dixieline’s inspections were for the lender’s benefit only, and to assure that the state of construction substantially justified payment. However, no evidence is cited for the argument that the inspections were for the lender’s benefit only.

In fact, the contractual provisions included in the applicable contracts include language in the Inspection Agreement, and the Fund Control Agreement, that with respect to Dixieland, designated as “Control” in that agreement, and plaintiff, designated as “Owner,” that there are reports required and that each “report is for the sole purpose of assisting Lender and/or Owner in making a determination of the percentage of completion of the job by costs category.” [Osberg Decl., para. 7, Ex. 3, Inspection Agreement, para. 2, emphasis added]. Moreover, as set forth above, it is also agreed in the Fund Control Agreement that Dixieline’s liability “shall be limited to the amount of any disbursement…as a result of Control’s willful misconduct or sole negligence.” [Osberg Decl., Ex. 2, Fund Control Agreement, para. 10]. This language suggests there was an agreement concerning liability for negligence. The Fund Control Agreement also states that the “Agreement is not made for nor intended to be for the benefit of anyone not a party herein.” However, plaintiff is a party to that agreement which suggests that the duties running to plaintiff include those to provide an appropriate report to assist the plaintiff in determining the percentage of the completion of the job. [Osberg Decl., para. 6, Ex. 2, Fund Control Agreement, para. 12].

Here, the argument is basically that the court can find as a matter of law that there is no duty owed due to contractual restrictions. It is generally held that, “[t]he existence of a duty owed by a defendant to a plaintiff is a question of law for the court, reviewed de novo on appeal.” Garcia v. Paramount Citrus Association, Inc. (2008) 164 Cal.App.4th 1448, 1452. It is questionable in this instance whether the court can at this juncture determine as a matter of law that no duty was owed or undertaken due to the limited development of the relevant facts in the context of a motion for summary judgment.

CCP § 437c(c) provides that “summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” See also Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 718.

Unlike the issue of the existence of duty, the issue of due care and whether a duty was breached in a negligence case ordinarily presents questions of fact for the jury. Wahlgren v. Market Street Ry Co. (1901) 132 Cal. 656, 663. Accordingly, defendant is entitled to a finding on summary judgment as a matter of law only if “the facts of the case permit only one reasonable conclusion.” Capolungo v. Bondi (1986) 179 Cal.App.3d 346, 354.

Dixieline argues that the evidence shows that 31 inspections were conducted, and reports generated, and that US Bank considered the draw request packets, including the inspection reports, draw requests and photographs provided by Dixieline, and disbursed only the amounts that reflected the amount of construction completed, as it sometimes did not disburse the full amounts requested. [UMF Nos. 35, 37, 43, 63, 67, 71, 88, 93, and evidence cited; Fronjian Decl., Ex. 7].

Plaintiff in opposition has submitted the declaration of an expert in construction lending, Sherwood Kelley. He has offered the opinion that Dixieline breached the applicable standard of care by performing inadequate inspections, by using untrained or inexperienced inspectors and by permitting draws without competent oversight of verification of completion. The result of such alleged negligence was that, by the time the contractor abandoned the project, the minimal remaining balance in the loan account was not sufficient to complete the project. [Kelley Decl., paras. 10-11].

“A. 31 inspections performed: if performed properly, the obvious problems which precipitated this lawsuit may have been avoided. If these inspections had been a valid analysis, they would have indicated to USB that there was a problem with the true state of the construction and the fact that disbursement and percentage completion were tragically out of balance. Based on documents reviewed to date, it appears that virtually no site inspections were made to verify field conditions prior to release or funds. Further, I believe fund requests were not reviewed closely to validate draws. It appears that if there were any inspections, they were inadequate at best, may have been done by untrained or inexperienced inspectors, and USB as the lender should have been aware of this situation and suspended the project.

Dixieline argues that in conformity with its obligations under the Inspection Agreement, it engaged an independent consultant, Barry Simonetti dba RES/COM Inspection Services, Inc., who conducted 31 inspections from 2016 to 2019, which included photographs and estimates of percentage of completion, so that plaintiff cannot demonstrate that Dixieline breached the Inspection Agreement in any alleged failure to conduct the pre-paid inspections. [UMF Nos. 10, 11, 35-99, and evidence cited].

As discussed above, the Inspection Agreement provides that the reports were designated as to assist the owner in “making a determination of the percentage of completion of the job,” which creates ambiguity with respect to whether a deficient report would not constitute a breach of the agreement. [Osberg Decl., Ex. 3, Inspection Agreement, para. 2].

Plaintiff in opposition has submitted expert testimony concerning banking practices, as well as expert testimony concerning the condition of the construction project. This expert opinion supports a reasonable inference that the conditions showed a failure to either conduct the inspections at all, or to submit the agreed upon information concerning percentage of completion, both of which are in breach of the agreement and violate the purpose of the inspections as set forth in that agreement. [Additional Facts Nos. 40, 42, and evidence cited, Kelley Decl., paras. 10-11; Michael Panish Decl., paras. 8, 10-12].

Issue No. 3: As to the Third Cause of Action for Breach of Contract under the Fund Control Agreement (“USB/DX-FCA”) between U.S. Bank and Dixieline: Nieves’ claim for breach of the USB/DX-FCA contract against Dixieline fails because (a) Plaintiff cannot enforce the terms as a third-party beneficiary; and (b) Dixieline did not breach the terms of the contract.

Defendant argues that the claim for breach of contract related to the Fund Control Agreement fails because Simonetti conducted 31 inspections on the property and generated 31 inspection reports. As discussed above, plaintiff has submitted expert testimony supporting a reasonable inference that the inspections were not appropriately conducted, and disbursements were not appropriately made in accordance with the obligations under the Fund Control Agreement, including the express obligation to not engage in negligence. [Additional Facts Nos. 40, 42, and evidence cited, Kelley Decl., paras. 10-11; Michael Panish Decl., paras. 8, 10-12].

Plaintiff has also submitted evidence concerning the purpose of the agreement to relieve plaintiff, an elderly woman, who was a novice in construction matters, from responsibility concerning matters outside of her education, training, experience and knowledge. [Additional Fact No. 40, and evidence cited, Nieves Decl., para. 17, Kelley Decl., paras. 10-11].

Plaintiff also points out that defendant has failed to offer evidence from an expert or from the inspector himself to establish that the reports relied upon are proper, complete, accurate, and not defective. [Additional Fact No. 41, and evidence cited]. This issue does appear to be a topic which would be sufficiently beyond the knowledge of laypeople to require the guidance of expert testimony on this issue. The Kelley and Panish Declarations point to specific facts which would support a reasonable inference that the reports do not support that the progress of the construction was in balance with the remaining funds to complete the project. [Kelley Decl., paras. 10-11, Panish Decl., paras. 6-12].

Issue No. 4: As to the Fourth Cause of Action for Breach of Contract under the Master Services Agreement (“USB/DX-MSA”) between U.S. Bank and Dixieline: Nieves’ claim for breach of the USB/DX-FCA contract against Dixieline fails because (a) Dixieline did not owe a duty of care to Nieves because Dixieline’s liability was contractually limited with respect to the construction, inspections, and the actions as the fund control: (b) Plaintiff cannot enforce the terms as a third-party beneficiary; and (c) Dixieline did not breach the terms of the contract.

Plaintiff in the Opposition indicates that the causes of action which “remain” in this case from the First Amended Complaint are the first, second, third, and fifth causes of action. [Opposition, p. 5:1-10]. This conclusion is expressly confirmed in the declaration of plaintiff’s counsel submitted with the opposition. [Espina Decl., para. 12].

The opposition refers to the minute order in connection with the motion for summary judgment/adjudication brought by the US Bank, in which the motion for summary adjudication of the fourth cause of action for breach of the Master Service Agreement between US Bank and Dixieline was granted, quoting from the minute order:

As pointed out in the reply, plaintiff in the opposition papers does not even attempt to establish a breach of the Master Service Agreement, does not point to any provision of the Master Service Agreement which has been breached, and has failed to refer to or submit evidence which would support a reasonable inference that Dixieline breached any identified term of that Agreement. This posture appears to be because plaintiff has conceded that the cause of action is no longer viable in light of the previous summary adjudication ruling and is no longer being pursued by plaintiff. The motion accordingly is granted as to the fourth cause of action to the extent it is brought against defendant Dixieline.

Issue No. 5: As to the Fifth Cause of Action for Breach of Contract under the DX-PB Agreement: Nieves' claim for breach of contract fails because a valid contract does not exist between Dixieline and ProBuild. Accordingly, Plaintiff cannot enforce the terms as a third-party beneficiary. Further, Dixieline contracted with a third-party inspector, Barry Simonetti dba RES/COM Inspections, Inc., not ProBuild, to conduct the inspections on the subject property. It was Simonetti, not ProBuild, who conducted all the inspections on the property and the terms of this DX-PB Agreement between Dixieline and Simonetti were not breached

Defendant argues that it engaged third-party consultant Barry Simonetti dba RES/COM Inspection Services, Inc., not defendant ProBuild Company, LLC, to conduct the inspections on the Project, and that Simonetti conducted 31 inspections from 2016 to 2019. [UMF No. 27, and evidence cited]. Defendant indicates that it engaged Simonetti’s services under a Real Estate Services Consulting Agreement they had previously entered on May 2, 2018, which Consulting Agreement states that Simonetti is an independent contractor and not an employee of Dixieline. [UMF Nos. 28, 31, and evidence cited.]. Defendant argues that ProBuild is not a party to the Consulting Agreement. Defendant does not cite to any legal authority in support of its argument but argues that since an agreement between Dixieline and ProBuild for ProBuild to conduct inspections on the property does not exist, plaintiff cannot prove the first element of a breach of contract claim.

The evidence submitted in support of the motion includes a declaration of Cathy Osberg, the President of Dixieline, who testifies that Dixieline handled the progress inspections and creation of inspection reports, pursuant to the Inspection Agreement, and that it engaged Simonetti dba RES/COM to conduct the inspections on the project. [Osberg Decl., paras. 7, 8]. The declaration indicates that Simonetti “was an independent contractor who was unaffiliated with ProBuild at the time of the engagement.” [Osberg Decl., para. 8]. However, Osberg also testifies that Dixieline and Simonetti had previously entered into a consulting agreement, suggesting that Dixieline had agreements concerning the work to be performed by inspectors with those third party inspectors. [Osberg Decl., para. 9, Ex. 4]. The declaration also states, “Notwithstanding the forms including a reference to ProBuild as the inspector, Simonetti, not ProBuild, completed” all inspections on the property. [Osberg Decl., para. 10].

Dixieline also submits with the moving papers copies of the inspection reports in support of its argument in other parts of the motion that all inspections were conducted. [Compendium of Exhibits, Ex. 2, Response to Request for Admissions, Exs. 3-33.] Each of these inspection reports is on a form which includes a logo which reads, “PROBuild.” On the Inspection Report, the report states, “Inspector: PROBUILD.” [Id.] There is no mention of any other inspector, including Simonetti dba RES/COM Inspections, Inc. These reports are executed by Dixieline, by Cathy Osberg.

The evidence submitted with the moving papers does not explain why the forms include such a reference, very clearly designating the inspector as ProBuild. The evidence submitted accordingly supports a competing inference that the inspector was in fact ProBuild, and that it was the business practice of Dixieline to have written consulting contracts with those it retained to provide inspection services. The evidence accordingly supports a reasonable competing inference that ProBuild, acting on behalf of Dixieline, was responsible for the quality of the inspections.

“(c) The motion for summary judgment shall be granted if all the papers submitted 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. In determining whether the papers show that there is no triable issue as to any material fact the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.”

The evidence submitted by Dixieline includes evidence which supports an inference contradicting the representation by Dixieline in the motion that ProBuild was not involved in the inspection process, and that Dixieline had no contract with ProBuild concerning the inspections conducted. Defendant has accordingly failed to meet its initial burden on the motion for summary adjudication of the fifth cause of action, and the motion is denied.

Even if the burden had shifted to plaintiff, plaintiff in opposition points out the existence of the ProBuild designations on the inspection reports, and also argues that the terse declaration of Osberg with respect to the situation fails to offer any explanation concerning why the inspections are on the ProBuild form, or how the report was prepared for Dixieline’s signature. The declaration accordingly appears to be of questionable weight with respect to an argument that ProBuilt was not the inspector. Plaintiff also argues that neither Dixieline nor ProBuilt in their Answers in this matter have alleged that they have no duty to plaintiff because ProBuilt did not perform the inspections, but Simonetti or RES/COM did. [RFJN, Exs. 3, 4].

“Whether DX and PB are different business entities or the same is also uncertain. They share the same address and loan related documents reflect they are the same entity, and their discovery responses. Exhibit 7 DX Responses to Form Interrogatories and Exhibit 8 PB responses to Form Interrogatories, reveal these entities use similar names and identities in their various business entanglements.”

Finally, to the extent Dixieline argues that, since it did not contract with ProBuild, there can be no breach of an agreement between them which plaintiff could enforce. However, the opposition also points out that the Consultant Agreement which is submitted with the motion requires that an inspector “review and analyze construction budgets and specifications.” Moreover, there is no evidence that the inspector, whoever that inspector was, performed those requirements in this case. [Osberg Decl., Ex. 4]. The expert declarations referenced above suggest that the appropriate analysis by ProBuild or Dixieland was not conducted.

Issue No. 2: As to the Fifth Cause of Action for Breach of Contract: Neives breach of contract claim against ProBuild fails because the “DX-PB Agreement” does not exist. Co-Defendant Dixlieline Builders Fund Control, Inc. contracted with third-party inspector Barry Simonetti dba RES/Com Inspections, Inc., not ProBuild, to conduct the inspections on the subject property.

Defendant ProBuild argues that plaintiff will be unable to establish plaintiff’s second cause of action for negligence because plaintiff cannot establish that ProBuild owed plaintiff a duty of care because ProBuild did not contract for, or conduct, the inspections on the subject property. In connection with the fifth cause of action for breach of contract, the same basic argument is made: that plaintiff will be unable to establish the essential element of a breach of contract cause of action that a contract exists, because a third party was in fact retained to, and actually conducted, the inspections.

Defendant relies on an almost identical declaration by Dixieline President Cathy Osberg as was submitted in support of Dixieline’s motion. That declaration indicates that Dixieline handled the progress inspections and creation of inspection reports, pursuant to the Inspection Agreement, and that it engaged Barry Simonetti dba RES/COM Inspection Services, Inc. to conduct the inspections on the project. [Osberg Decl., paras. 7, 8]. The declaration indicates that Simonetti “was an independent contractor who was unaffiliated with ProBuild at the time of the engagement.” [Osberg Decl., para. 8]. However, Osberg also testifies that Dixieline and Simonetti previously had entered into a consulting agreement, suggesting that Dixieline had agreements concerning the work to be performed by inspectors with those inspectors. [Osberg Decl., para. 9, Ex. 4]. The declaration also states, “Notwithstanding the forms including a reference to ProBuild as the inspector, Simonetti, not ProBuild, completed” all inspections on the property. [Osberg Decl., para. 10].

The motion also relies on evidence that ProBuild in verified responses to plaintiff’s special interrogatories and request for production, confirmed that it did not perform the inspections, and identified the name of the entity which did. [UMF No. 9, and evidence cited, Hatem Decl., para. 7, Ex. 4]. A review of those discovery responses show that the responses are made by defendant ProBuild as responding party, indicate that ProBuild did not perform the inspections at the subject property, that ProBuild was not the designed inspector, and that no DX-PB Agreement exists because “an independent contractor, Res/Com Inspections, Inc., performed all the inspections.” [Ex. 4, Responses to Special Interrogatory No. 5, Responses to Request for Production Nos. 4, 5, 8, 12-19].

The evidence is a bit confusing, as the responses are verified by Cathy Osberg, who indicates at the signature line in the verification of the responses to document demands that the verification is executed as “President of DBFC.” [Ex. 4, Verification]. The verification of the responses to special interrogatories is executed by Osberg, designated as “President.” [Ex. 4]. This signature designation is confusing, as the responses are supposed to be by responding party ProBuild, not by Dixieline, and it is not clear how Osberg is qualified to verify such responses on behalf of ProBuild by virtue of her position at Dixieline. The verification of the special interrogatory responses could also be construed to represent that Osberg is also the President of ProBuild in addition to being the President of Dixieline. This conclusion suggests some connection between the two entities or calls into question the validity of the discovery responses as admissible evidence here, given that the person who verified the responses is not shown to be affiliated with the party responding to the discovery. This outcome arguably leaves the only evidence offered by defendant ProBuild in support of its argument is the Osberg Declaration. It is not clear why ProBuild has not offered the declaration of a witness affiliated with ProBuild to testify that ProBuild did not perform inspection services, when it was clearly within ProBuild’s ability to do so if such evidence could be presented.

“all Property Inspection Reports produced identify PB as the Inspector and they were all on PB Form. During the period of 2016 until the last disbursement, I had been aware of only PB as the inspection company. Even the materials provided to me by USB at the time my construction loan was being processed, PB was identified as the Property Inspection Company.”

The opposition also relies in response to ProBuild’s Separate Statement the Dixieline Compendium of Exhibits, which include the inspection reports submitted in response to Requests for Admissions, which, as discussed above, reflect that each of the 31 inspection reports is on a form which includes a logo and letterhead reading, “ProBuild.” [Response to UMF Nos. 6, 7, and evidence cited, Dixieline Compendium of Exhibits, Ex. 2, Response to Request for Admissions, Exs. 3-33.] On each Inspection Report, the report states, “Inspector: PROBUILD.” [Id.] There is no mention of any other inspector, including Simonetti dba RES/COM Inspections, Inc., and the reports are all executed by Dixieline, by Cathy Osberg.

As was the case in connection with the Dixieland motion, the evidence submitted with the moving papers does not explain why the forms include such a reference, very clearly designating the inspector as ProBuild. Again, this evidence supports a reasonable inference that the inspector was in fact ProBuild, and that it was the business practice of Dixieline to have written consulting contracts with those it retained to provide inspection services, which would presumably include ProBuild. Triable issues of fact accordingly remain concerning whether ProBuild, acting on behalf of Dixieline, was responsible for the quality of the inspections.

Again, plaintiff in opposition points out the existence of the ProBuild designations on the inspection reports, and also argues that the terse declaration of Osberg with respect to the inspectionsituation fails to offer any explanation concerning why the inspections are on the ProBuild form, or how the report was prepared for Dixieline’s signature. The declaration accordingly is of questionable weight with respect to an argument that ProBuild was not the inspector. Plaintiff also argues that neither Dixieline nor ProBuild in their Answers in this matter have alleged that they have no duty to plaintiff because ProBuild did not perform the inspections, but Simonetti or RES/COM did. [RFJN, Exs. 3, 4].

Also, this connection between Dixieline and ProBuild is further raised by the verification of discovery responses where ProBuild is the sole responding party, by Osberg, either as representative of Dixieline, or as “President” of either Dixieline or ProBuild, or both. This circumstance, along with the other evidence, supports a reasonable inference that ProBuild was involved.

With respect to the argument of moving defendant Dixieline that the causes of action are contrary to the terms of the contracts, the documents submitted with the moving papers include language that can be reasonably construed to expressly acknowledge an agreement for liability for negligence and impose obligations on moving defendant concerning the conduct of its funding decisions with respect to the percentage completion of the project. [Osberg Decl., Ex. 3, Inspection Agreement, para. 2; Ex. 2, Fund Control Agreement, paras. 10, 12].

To the extent defendant argues that plaintiff cannot establish that the negligence duty was breached, plaintiff in opposition raises triable issues of material fact which would support a reasonable inference that defendant breached its duties concerning the disbursement of construction loan funds in this matter. [Additional Facts Nos. 40-42, and evidence cited, Kelley Decl., paras. 10-11; Panish Decl., paras. 6-12; Nieves Decl., para. 17].

Plaintiff has raised triable issues of material fact, including the submission of expert testimony concerning banking practices, as well as expert testimony concerning the condition of the construction project, which evidence supports a reasonable inference that the conditions showed a failure to thoroughly conduct the contracted for inspections, or to submit the agreed upon information concerning percentage of completion to plaintiff, in breach of the agreement and the purpose of the inspections as set forth in that agreement. [Additional Facts Nos. 40, 42, and evidence cited, Kelley Decl., paras. 10-11; Michael Panish Decl., paras. 8, 10-12; Osberg Decl., Ex. 3, Inspection Agreement, para. 2; Nieves Decl., paras. 7-13, 17].

Plaintiff has raised triable issues of material fact by submitting evidence, including expert testimony supporting a reasonable inference that the inspections were not appropriately conducted, and disbursements were not appropriately made in accordance with the obligations under the Fund Control Agreement, including the express obligation to not engage in negligence, and the understood purposes of the Agreement. [Additional Facts Nos. 40-42, and evidence cited, Kelley Decl., paras. 10-11; Michael Panish Decl., paras. 8, 10-12; Nieves Decl., para. 17].

Plaintiff in the Opposition indicates that the causes of action which “remain” in this case from the First Amended Complaint are the first, second, third, and fifth causes of action. [Opposition, p. 5:1-10; Espina Decl., para. 12]. The fourth cause of action is evidently not being further pursued against the moving defendant. The Opposition instead refers to the minute order in connection with the motion for summary judgment/adjudication brought by the US Bank, in which the motion for summary adjudication of the fourth cause of action for breach of the Master Service Agreement between US Bank and Dixieline was granted, quoting from the minute order: "Plaintiff has failed to refer to or submit evidence which would support a reasonable inference that moving defendant breached any identified term of the MSA, and the motion for summary adjudication is granted on this ground as well". [Opposition, p. 4:15-20; RFJN, Minute Order 07/28/2023, p. 30].

Defendant Dixieline has failed to meet its initial burden of demonstrating that plaintiff will be unable to establish each element of its breach of contract action, as the evidence relied upon in the moving papers supports a reasonable inference that it was not a third-party consultant which conducted the inspections, but that the inspections were conducted, as clearly represented on each inspection report submitted by defendant, by ProBuild as “Inspector,” with the form completed on a ProBuild logo document, with no designation of any other inspector or inspection company. [Osberg Decl., para. 10; Compendium of Exhibits, Ex. 2, Response to Request for Admissions, Exs. 3-33.] The evidence submitted with the moving papers does not explain why the forms include such a reference, and defendant’s showing includes evidence that the inspector was in fact ProBuild, and that it was the business practice of Dixieline to have written consulting contracts with those it retained to provide inspection services, such as ProBuild. [Osberg Decl., para. 9, Ex. 4]. The initial showing does not demonstrate that plaintiff will be unable to establish the existence of a contract or breach of such a contract between Dixieline and ProBuild, so that the burden does not shift to plaintiff to raise triable issues of material fact.

Plaintiff has raised triable issues of material fact with respect to whether ProBuild was responsible for the inspections of the property and owed a duty of care to conduct those inspections within the applicable standard of care. The declaration of Cathy Osberg submitted with the moving papers concedes that the inspection forms refer to ProBuild as the “Inspector.” [Osberg Decl., para. 10]. The only other evidence besides the brief mention in the Osberg Declaration submitted with the moving papers on this issue consists of responses to discovery served by ProBuild as responding party, which responses are verified by Cathy Osberg, President of Dixieline, who is not represented as having an affiliation with defendant ProBuild, so it is not clear that the discovery responses are properly verified for use as evidence in support of the motion. [UMF No. 9, and evidence cited, Hatem Decl., para. 7, Ex. 4]. There is no declaration from a witness from ProBuild denying that the inspections were conducted by ProBuild, which was expressly designated as the “Inspector” on each report.

Plaintiff in opposition relies on testimony concerning the inspection reports, the identification of ProBuild as the inspector, and its designation in the processing of the construction loan, as well as the inspection reports themselves, which reflect that each of the 31 inspection reports is on a form which includes a logo and letterhead reading, “PROBuild.” [Nieves Decl., para. 12; Response to UMF Nos. 6, 7, and evidence cited, Dixieline Compendium of Exhibits, Ex. 2, Response to Request for Admissions, Exs. 3-33.] On each Inspection Report, the report states, “Inspector: PROBUILD.” [Dixieline Compendium of Exhibits, Ex. 2, Response to Requests for Admissions, Exs. 3-33]. There is no mention of any other inspector, including Simonetti dba RES/COM Inspections, Inc., and the reports are executed by Dixieline, by Cathy Osberg.

The evidence submitted by defendant ProBuild does not explain why the forms include such a reference, very clearly designating the inspector as ProBuild. This evidence supports a reasonable inference that the inspector was in fact ProBuild, and that it was the business practice of Dixieline to have written consulting contracts with those it retained to provide inspection services, which would presumably include Dixieline. [Osberg Decl., para. 9, Ex. 4]. Triable issues of fact accordingly remain concerning whether ProBuild, acting on behalf of Dixieline, was responsible for the conduct of and quality of the inspections.

The opposition also includes evidence which raises triable issues of fact with respect to the separate existence of each of the entities claimed to have been inspectors, and whether Dixieline and ProBuild are related or the same entity, which appears bolstered by the verification of ProBuild’s discovery responses by an officer of Dixieline, not ProBuild. [Espina Decl., paras. 6, 8; Exs. 7, 8].

As discussed above, plaintiff has raised triable issues of material fact with respect to whether a contractual arrangement exists between Dixieline and ProBuild in connection with the inspections of the property. [Osberg Decl., para. 9, 10, Ex. 4; UMF No. 9, and evidence cited, Hatem Decl., para. 7, Ex. 4, Verifications; Nieves Decl., para. 12; Response to UMF Nos. 6, 7, and evidence cited, Dixieline Compendium of Exhibits, Ex. 2, Response to Request for Admissions, Exs. 3-33; Espina Decl., paras. 6, 8; Exs. 7, 8].

UNOPPOSED Request for Judicial Notice in Support of Plaintiff Corazon Nieves’s Opposition to Defendant Dixieline Builders Fund Control and ProBuilds’ Motion for Summary Judgment, or in the Alternative, Summary Adjudication is GRANTED. Judicial Notice is taken of the court records and pleadings submitted to the extent permitted under Day v. Sharp (1975) 50 Cal.App.3d 904, 914 (permitting the Court to take judicial notice of the existence of each document in a court file, but not the truth of facts asserted other than pursuant to certain exceptions enumerated in that decision).

Plaintiff Corazon Nieves’ Evidentiary Objections to the Evidence and Declaration of Cathy Osberg in Support of ProBuild’s Motion for Summary Judgment, or in the Alternative Motion for Summary Adjudication are OVERRULED. The Court has not considered any testimony on the ultimate legal issues in this matter as binding on this Court.

Defendant Dixieline Builders Fund Control, Inc.’s Objections to Evidence Submitted by Plaintiff Corazon Nieves in Opposition to its Motion for Summary Judgment, or in the Alternative, Summary Adjudication are OVERRULED. The Court has also not considered any opinions or testimony by expert witnesses as binding on the Court on the ultimate legal issues in this matter.