Judge: Randall J. Sherman, Case: 2021-01186203, Date: 2022-09-30 Tentative Ruling

Defendants SCMG Liquidation, Inc. (f/k/a Sovereign Capital Management Group, Inc.), Infinity Urban Century, LLC, Todd Mikles and Etienne Locoh’s Motion for Summary Adjudication, as to their Thirteenth Affirmative Defense of Settlement and Release as against five of the plaintiffs, is denied.  Plaintiffs’ Request for Judicial Notice is granted.  However, while courts may take judicial notice of court filings and their dates, parties and legally operative language, they do not accept the truth of matters stated in those documents.  Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal. App. 4th 256, 264-65; Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal. App. 4th 1366, 1375.  The court declines to rule on plaintiffs’ evidentiary objections because the court does not deem such evidence material to its disposition of the motion under CCP §437c(q).

There are triable issues of fact as to whether plaintiffs agreed to the release, and as to whether the release applies to the breach of fiduciary duty claim asserted in this action.  The release was initialed only by defendant Mikles when he represented the buyer in the transaction, and not by plaintiffs, who were the sellers.  The released parties include the other party’s agents but do not include each party’s own agents, while in this case plaintiffs are suing their own agents and fiduciaries.  Further, the release concerns claims relating to the real property and its condition, which arguably does not include a breach of fiduciary duty claim based on the fiduciary’s alleged failure to disclose an appraisal prior to the sale of the property.

Defendants reference the wrong section of the Purchase Agreement and Escrow Instructions and misquote the relevant release language.  Section 11.1 of the purchase agreement states: “Buyer and any other entity that signs a signature page of this Agreement … hereby knowingly, unconditionally, voluntarily, fully and irrevocably grant this general release and releases, remises, and forever discharges each of the other party’s present and former agents, successors, heirs, devisees, members, officers, employees, managers, representatives, subsidiaries, affiliates, controlling persons and insurers, and their respective successors and assigns, and all persons acting by, through, under or in concert with any of them … of and from any and all liabilities, damages, claims … or causes of action of every nature, character or description, now accrued or which may hereafter accrued, without limitation of law, equity or otherwise, that related to the Property or its condition, based in whole or in part on any facts, conduct, activities, transactions, events or occurrences known or unknown … which have or allegedly have existed”.  There are two lines below for initials for the seller and the buyer.  However, it appears that Todd Mikles initialed both lines for the seller and the buyer in consenting to the release.  There are no initials by plaintiffs Griffith-Griffin Properties, LLC, Davis Family Enterprise LLC, Patricia Wunderlich, William Hoff Jr. or John Page, even though they are defined as the Sellers in this transaction.  Thus, there is a triable issue of fact as to whether these plaintiffs, or a person authorized to sign on their behalf, initialed this section agreeing to this release.  It is a contract formation requirement that a party’s assent be expressed to the other party.  Juen v. Alain Pinel Realtors, Inc. (2019) 32 Cal. App. 5th 972, 983.

There is also a triable issue as to whether plaintiffs released claims against their own agents, including Mikles, when the release discharges only claims against “each of the other party’s present and former agents”.  Plaintiffs further contend that the scope of the release is limited to claims that relate to “the Property or its condition”, which does not extend to claims for breach of fiduciary duty based on the failure to disclose an appraisal, the claim at issue here.

Finally, plaintiffs contend that the release was not obtained with full and frank disclosure of all material facts, because the $40,000,000 appraisal of the subject property was not disclosed before plaintiffs executed the purchase agreement.  “Assent to a release is not real and free when obtained through fraud, and the release may be avoided if the facts are sufficient to bring the case within the provisions of the Civil Code defining fraud.  Before there can be a waiver there must be full knowledge on the part of the party defrauded.”  Chung v. Johnston (1954) 128 Cal. App. 2d 157, 163.  Here, there are triable issues of fact as to whether defendants committed fraud by failing to disclose the appraisal to plaintiffs.  While defendants argue that the appraisal was immaterial to the purchase negotiations, that itself is a triable issue of fact.

Plaintiffs are ordered to give notice of the ruling unless notice is waived.