Judge: Richard Y. Lee, Case: 2020-01131235, Date: 2022-08-22 Tentative Ruling

Motion for Summary Judgment or, in the Alternative, Summary Adjudication

The Motion for Summary Judgment, or in the Alternative, Summary Adjudication is DENIED in its entirety.

Cross-Defendants Pioneer Realty & Investments, Parimal Shah, and Raj Shah (“Brokers”) move for summary judgment or, in the alternative, summary adjudication in favor of Brokers and against Defendants/Cross-Complainants Pinky Rajesh Mehta and Rajesh Pravinchandra Mehta (“Sellers”) in connection with Sellers’ First Amended Cross-Complaint (“FACC”).

A defendant moving for summary judgment bears the initial burden to show the plaintiff’s action has no merit. The defendant may do this by demonstrating the action has no merit, that plaintiff cannot prove an element of their claim, or that the defendant has a complete defense entitling the defendant to judgment as a matter of law. (Civil Proc. Code, § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851.) If a plaintiff has pleaded several theories, the defendant has the burden of demonstrating there are no material facts requiring trial on any of them. (Carlsen v. Koivumaki (2014) 227 Cal.App.4th 879, 889.) 

If a defendant fails to meet this initial burden, the plaintiff need not oppose the motion and the motion must be denied. (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 840.) If the defendant meets this initial burden, however, the burden shifts to the plaintiff to establish, by means of competent and admissible evidence, that a triable issue of material fact still remains. (Civil Proc. Code, § 437c, subd. (p)(2); Binder v. Aetna Life Ins. Co., supra, 75 Cal.App.4th at pp. 850–851.)  The moving party’s papers are to be strictly construed, while the opposing party’s papers are to be liberally construed. (Committee to Save Beverly Highland Homes Ass’n v. Beverly Highland (2001) 92 Cal.App.4th 1247, 1260.)  

A court may not make credibility determinations or weigh the evidence on a motion for summary judgment or adjudication, and all evidentiary conflicts are to be resolved against the moving party. (McCabe v. American Honda Motor Corp. (2002) 100 Cal.App.4th 1111, 1119.) 

Plaintiffs/Cross-Defendants Yagnesh Patel, Jignesh Patel, and Mehul Ahir (“Buyers”) submitted an offer to purchase a vacant lot in Placentia (“Property”). The Property was owned by Defendant/Cross-Complainant Pinky Mehta. Defendant/Cross-Complainant Rajesh Mehta negotiated the sale on Pinky’s behalf.

Buyers and Sellers entered into a joint sales agreement with a 90-day escrow. The transaction was to be an all-cash purchase for $620,000.00. Buyers planned to build a hotel on the Property and wanted the ability to obtain a conditional use permit (“CUP”) from the City of Placentia to be a condition of the sale. Subsequently, Buyers requested to extend escrow and stated that the reason for the extension was to obtain a CUP.

At the close of escrow, Buyers had not obtained a CUP and did not transfer the balance of funds into escrow. Buyers then sued Sellers when Sellers refused to transfer the Property. Sellers then filed a Cross-Complaint against Buyers and Brokers.

First Cause of Action for Intentional Misrepresentation and Second Cause of Action for Negligent Misrepresentation

The elements of fraud by misrepresentation are: (1) a misrepresentation; (2) knowledge of its falsity; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance on the misrepresentation; and (5) resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) The elements of a negligent misrepresentation cause of action are the same as those for fraud except for the requirement of scienter. (Bains v. Moores (2009) 172 Cal.App.4th 445, 454.)

The first cause of action for intentional misrepresentation and the second cause of action for negligent misrepresentation allege that Brokers represented to Sellers that: (1) Buyers’ offer to purchase the Property was legitimate and (2) Buyers had the ability to consummate the transaction. (FACC ¶¶ 13, 20.) Sellers allege that these representations were false. (FACC ¶ 15.)

Brokers submitted evidence that Buyers and Sellers executed Vacant Land Purchase Agreement and Joint Escrow Instructions dated May 18, 2019, (Cross-Defs. Separate Statement No. 3 [P. Shah Decl. ¶ 3, Exh. A]) and that Buyers issue a check on May 18, 2022, for $25,000 (Cross-Defs. Separate Statement No. 4 [P. Shah Decl. ¶ 4, Exh. B]). Hollywood Escrow issued a Receipt for Funds (“Receipt”) on May 31, 2019. (Id.) The Receipt indicates that the Earnest Money Deposit was from MSTALWART, LLC on behalf of Buyer. (Id.) The Receipt identifies the Buyer as Yagnesh Patel and the Property as 450 South Placentia Avenue, Placentia, CA 92870. (Id.) Buyers issued a Notice to Perform to Cross-Complaints/Sellers on August 26, 2019. (Cross-Defs. Separate Statement No. 11 [P. Shah Decl. ¶ 8, Exh. F].) Brokers have thus met their initial burden to show that their representations to Sellers were not false.

In response, Sellers have provided evidence that Buyers conditioned the length that escrow was to remain open upon Buyers obtaining a CUP from the City of Placentia (“City”), that Buyers never filed a CUP application with the City, and that Buyers never obtained a CUP from the City. (Y. Patel Tr. 22:5-10, 28:19-29:25, 50:8-11, 69:14-16.) Sellers submitted evidence that Buyers wanted to extend escrow on August 7, 2019, and did not give Sellers a reason for the extension. (R. Mehta Decl. ¶ 12.) This evidence is sufficient to support an inference that Buyers’ offer to purchase the Property was not legitimate and that Broker’s representations to Sellers were false.

Brokers submitted evidence that Buyers were willing to buy the Property without obtaining the CUP from the City and asked Cross-Defendant Parimal to prepare an amendment to the purchase agreement. (Y. Patel Depo. Tr. 111:25-112:8). However, this is evidence that goes to the disputed issue of fact regarding the falsity of the representations made by Brokers.

Brokers also contend that the Notice to Seller to Perform indicates that the CUP contingency had been removed.  However, nothing in the Notice supports the contention that Buyers were willing to buy the Property without the CUP contingency. (See P. Shah Decl. ¶ 8, Exh. F.) Evidentiary doubts are resolved against the moving party. (Herberg v. California Institute of the Arts (2002) 101 Cal.App.4th 142, 148.)

Sellers have met their burden to show a triable issue of material fact regarding whether Buyers’ offer to purchase the Property was legitimate and whether Broker’s representations were false.

“Regarding the element of scienter, evidence of the falsity of a representation is sufficient to raise a triable issue of fact as to the element[ ] of knowledge of the falsity.” (Hart v. Browne (1980) 103 Cal.App.3d 947, 957–958.) Sellers’ evidence demonstrating a triable issue of material fact as to the falsity of Brokers’ alleged misrepresentation is sufficient to raise a triable issue of fact as to Brokers’ knowledge of the falsity.

Brokers cite to Sellers’ Responses to Brokers’ Special Interrogatories in support of their contention that Sellers lack sufficient evidence to establish the elements of intent to induce reliance, justifiable reliance, and damages. None of Brokers’ Special Interrogatories address these elements, however.

Accordingly, Brokers did not meet their initial burden to show that Sellers cannot prove these elements of their intentional misrepresentation and negligent misrepresentation claims.

Third Cause of Action for Civil Conspiracy

Civil conspiracy is not an independent cause of action. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510; Kenne v. Stennis (2014) 230 Cal.App.4th 953, 968.) Instead, it is a theory of co-equal legal liability under which certain defendants may be held liable for “an independent civil wrong” committed by others. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1062; see also Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 511; Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 44.) A participant in the conspiracy “effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy.” (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 511.)

“The elements of an action for civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design. . . . In such an action the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity.” (Id. at 511.) “’The essence of the claim is that it is merely a mechanism for imposing vicarious liability. . . . Each member of the conspiracy becomes liable for all acts done by others pursuant to the conspiracy, and for all damages caused thereby.’” (Stueve Bros. Farms, LLC v. Berger Kahn, 222 Cal.App.4th at 324.)

“Under a conspiracy theory of recovery, liability depends on the actual commission of a tort.” Navarrete v. Meyer (2015) 237 Cal.App.4th 1276, 1291–1292, citations omitted.) Liability “presupposes that the coconspirator is legally capable of committing the tort, i.e., that he or she owes a duty to plaintiff recognized by law and is potentially subject to liability for breach of that duty.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 511.) And for conspiracy liability, the conspiring defendants must have actual knowledge that a tort is planned and concur in the scheme with knowledge of its unlawful purpose. (Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1582.) Knowledge of the planned tort must be combined with intent to aid in its commission. (Id.) “An agreement may be tacit as well as express. [Citation.] A conspirator's concurrence in the scheme ‘may be inferred from the nature of the acts done, the relation of the parties, the interests of the alleged conspirators, and other circumstances.’” (Arei II Cases (2013) 216 Cal.App.4th 1004, 1024.)

The FACC alleges that Buyers and Brokers entered into a plan, agreement, and course of action to approach Sellers with an offer to purchase the Property, to submit the offer, to propose that Sellers had the finances to purchase the Property, to then not provide evidence to Sellers of Buyer’ financial ability, to represent repeatedly that Buyers had the money to buy the Property, and to ask for extensions of escrow, yet all the while not intending to purchase the property, so as to force Sellers to reduce the price of the Property and/or to keep the Property off the market . (FACC ¶27.)

Brokers move for summary adjudication of the third cause of action on the ground that Sellers cannot prove Brokers conspired with Buyers to commit any unlawful act. Brokers cannot meet their initial burden simply by arguing that Sellers are incapable of producing evidence that Brokers reached an express agreement with Buyers to prevent the sale of the Property.  (See Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 854 [“Summary judgment law in this state, however, continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.”].)

Thus, Brokers must produce direct or circumstantial evidence that Sellers did not possess and could not reasonably obtain any competent evidence of such an agreement. Brokers have not offered such evidence which could have come, for example, in the form of declarations or testimony that Cross-Defendant Parimal Shah had no actual knowledge of any planned wrongful conduct, nor any association with an agreement to further any wrongful act.

Fourth Cause of Action for Breach of Fiduciary Duties and Breach of the Implied Covenant of Good Faith and Fair Dealing and Fifth Cause of Action for Breach of Contract

The FACC alleges that Brokers were fiduciaries of Sellers as a result of Brokers “entering into a principal-agent relationship” with Sellers and by Brokers “entering into a written agreement with [Sellers] to act as their agents and brokers.” (FACC ¶¶ 33.) The FACC further alleges that the Sellers entered into a separate agreement (different from the Vacant Land Purchase Agreement and Joint Escrow Instructions) with the Cross-Defendants that “set forth the nature of the relationship, the terms and conditions of each party to perform, the amount of compensation due to the cross-defendants.” (FACC ¶ 37.)

Brokers move for summary adjudication of the fourth and fifth causes of action on the ground that no contract exists between Sellers and Brokers and cite to Sellers’ Responses to Brokers’ Special Interrogatories and Requests for Production as support. Sellers’ discovery responses regarding contracts between Brokers and Sellers are factually devoid. (See Campo Decl. ¶¶ 3, 5, Exhs. 1 & 3.) An absence of evidence may be inferred from Sellers’ factually devoid discovery responses. Thus, Brokers have met their initial burden. (Andrews v. Foster Wheeler LLC (2006) 138 Cal.App.4th 96, 107 [“If plaintiffs respond to comprehensive interrogatories seeking all known facts with boilerplate answers that restate their allegations … the burden of production will almost certainly be shifted to them once defendants move for summary judgment and properly present plaintiffs' factually devoid discovery responses.”].)

However, the Vacant Land Purchase Agreement and Joint Escrow Instructions (“Purchase Agreement”) lists “Pioneer Realty & Investments” as “Seller’s Brokerage Firm” and “Parimal Shah” as “Seller’s Agent.” (P. Shah Decl. ¶ 3, Exh. A.) Although the Purchase Agreement is not a contract between Sellers and Brokers, the provisions identifying Brokers as Sellers’ brokerage firm and agent is evidence that a contract exists between Brokers and Sellers. A triable issue of material fact exists and the Court is without authority to assess the relative strengths and weaknesses of the evidence.

Punitive Damages

To recover punitive damages, a plaintiff must prove by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civil Code, § 3294(a).) As discussed above, Sellers have presented  evidence by which a reasonable factfinder could conclude that Brokers defrauded Sellers. Accordingly, the motion for summary judgment must be denied as to Sellers’ prayer for punitive damages.

Brokers’ objections are overruled.

Cross-Complainants shall give notice of this ruling.