Judge Ronald F. Frank, Case 20TRCV00671 2023-04-24 Tentative Ruling

Judge: Ronald F. Frank, Case: 20TRCV00671, Date: 2023-04-24 Tentative Ruling

Case Number: 20TRCV00671 Hearing Date: April 24, 2023 Dept: 8

Tentative Ruling¿

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HEARING DATE: April 24, 2023¿

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CASE NUMBER: 20TRCV00671

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CASE NAME: Vatche Cabayan v. Petri Entertainment, LLC, et al

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MOVING PARTY: Defendants, Petri Entertainment, LLC and Warner Davis

RESPONDING PARTY: Plaintiff, Vatche Cabayan

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TRIAL DATE: July 6, 2023

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MOTION:¿ (1) Motion for Summary Judgment, or in the alternative, Summary Adjudication

¿ Tentative Rulings: (1) ARGUE

I. BACKGROUND¿¿

This civil action is one of two civils suits in addition to a criminal prosecution and a probate case all arising out of a complicated financing arrangement for a motion picture. Complicating the circumstances is that fact that a now-deceased attorney, Mr. Hassan, was involved with communications between the parties and that Mr. Hassan and his law firms have been sued for malpractice arising out of financing arrangement. The malpractice action is apparently in the MSJ phase in arbitration, the arbitration has been delayed because of the probate of Hassan’s estate. Further it appears that there are certain depositions yet to be completed so some of the evidence is in the form of a “rough” transcript. Many of the Opposition’s 330+ pages of exhibits are authenticated only by counsel’s declaration, not by an RFA or witness declaration. All of these complications make it difficult for the Court to rule definitively on a dispositive motion. The Court will elicit ARGUMENT from both sides as to whether it is premature for an MSJ hearing, whether this suit can or should proceed independently of the malpractice case and the probate case, and why much of the evidence submitted in opposition appears to bear more on the malpractice suit than on this separate civil action. Specific issues for oral argument are discussed in the sections of this Tentative Ruling below, as are the Court’s tentative views on the contract/bailment causes of action. But the Court is prepared to rule now on individual defendant Davis’ MSJ as there appears no triable issue of fact as to his individual liability nor as to the alter ego allegations of the FAC.

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A. Factual¿¿

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On September 25, 2020, Vatche Cabayan (“Plaintiff”) filed a complaint against Petri Entertainment, LLC and Warner Davis (collectively “Defendants” for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, and (3) declaratory relief. On December 22, 2020, plaintiff filed a FAC for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) money had and received, (4) failure to return deposit, and (5) declaratory relief.

In the FAC, plaintiff alleges that in November 2017, plaintiff and defendant Petri entered into an agreement in which plaintiff agreed to deposit plaintiff’s own funds in the sum of $1.6 million into Petri’s account at Chase Bank and, in exchange, Petri agreed, among other things, (1) to return the full deposit to plaintiff within 122 days, and (2) not to withdraw the deposit at any time, whether in whole or in part, except to return the deposit in full to plaintiff. (FAC, ¶14.) The terms of the agreement between plaintiff and Petri are in a writing entitled Depositor Funding Agreement, attached as Exhibit A to the FAC. (Id., ¶15.) While the version of the agreement attached contains only plaintiff’s signature, Petri countersigned the agreement at or about the same time as plaintiff signed it. (Id., ¶16.) The purpose of plaintiff’s deposit with Petri was to facilitate, in some manner, Petri’s acquisition of financing from entities known as WeatherVane Productions, Inc. and Forrest Capital Partners, Inc., for the production of an independent film. (Id., ¶17.)

Plaintiff further alleges that while the agreement sets forth terms of the arrangement agreed to by plaintiff and Petri, the agreement misleadingly and inaccurately refers to plaintiff’s deposit as a “bridge loan” and/or as “loan funds.” (Id., ¶ 18.) The terms “bridge loan” and “loan funds” in the agreement are claimed by Plaintiff to be misnomers. The FAC contends that neither plaintiff nor Petri intended, expected, or agreed that plaintiff’s deposit would be a loan to Petri, which is confirmed by the terms of the agreement itself, i.e., the agreement’s terms prohibited Petri from withdrawing the deposit at any time, whether in whole or in part, except to return the deposit in full to plaintiff. (Id., ¶ 19.) Instead, the FAC alleges that Plaintiff’s deposit with Petri was not a loan but rather a bailment or “parking arrangement” in which plaintiff was the bailor and defendants were alleged to be the bailees. (Id., ¶ 20.) The FAC claims that on November 6, 2017, plaintiff deposited plaintiff’s own funds in the amount of $1.6 million by wire transfer into an account ending in number 665 at Chase Bank. (Id., ¶ 21.) It alleges that Plaintiff was subsequently asked on several occasions to consent to extensions of time for the deposit to be returned to plaintiff and was often promised “forbearance fees” and interest as consideration for the extension of time. (Id., ¶ 22.) Plaintiff alleges he consented in writing to the extensions requested, agreed to the additional consideration, and fully performed the terms of each extension, which extended defendants’ time to return the deposit to plaintiff into 2019. (Id., ¶ 23.) In late 2019, plaintiff demanded the return of plaintiff’s deposit. (Id., ¶ 24.) Despite plaintiff’s demand, defendants have not returned any of the $1.6M. (Id., ¶ 25.)

Defendants previously demurred to Plaintiff’s FAC. The Honorable Judge Deirdre Hill held that the above allegations were sufficient to constitute a cause of action. Judge Hill noted that Plaintiff alleges that defendant signed the agreement. Plaintiff also alleges that although the deposit of funds is referred to as a “loan,” the parties intended for the funds to be a “bailment.” As noted by Judge Hill, the agreement is ambiguous, as the title refers to a “depositor” agreement and yet refers to the funds as a “loan” but there is no interest rate and prohibits defendant from withdrawing the funds. As such, Judge Hill overruled Defendants’ demurrer to the FAC.

Defendants now file a Motion for Summary Judgment

B. Procedural¿¿

On March 30, 2023, Defendants filed their Code-compliant Motion for Summary Judgment after being advised by the Court at the previous hearing that the Court would not consider the oversized briefs originally filed in support of the MSJ. On January 13, 2023, Plaintiff filed an opposition. On March 23, 2023, Defendants filed a reply brief. Multiple related documents including 3 rounds of Separate Statements, plus exhibits, declarations, and evidentiary objections have also been filed.

II. EVIDENTIARY OBJECTIONS: Tentative Rulings

Defendants’ objections to Plaintiff’s Evidence:

Overruled: 1-2, 5, 7 -9, 10, 12, 14-15, 21, 24-25, 26, 28-36, 40-42, 46, 49-52, 58-60, 65-68, 40-71, 74, 76, 78-80, 83-85, 88-93, 95-96, 103, 107, 111, 113-114, 116, 119-120, 125, 127, 137, 139, 143, 145, 148, 151-152, 159, 162-163, 165, 167-170, 171 (as to Davis not to Hassen), 172 (as to Cabayan, not Hassen), 173(as to Davis, not Hassen), 174-178, 182 (as to Davis, not Hassen’s messages), 183-198, 231-232

Sustained: 3, 4, 11, 13, 16, 17-20, 22-23, 27, 37-39, 43-45, 47-48, 53-57, 61-64, 69, 72-73, 75, 77, 81-82, 87, 94, 97-102, 104-106, 108-110, 112, 115, 117-118, 121-124, 126, 128-136, 138, 140-142, 144, 146-147, 149-150, 153-158, 160-161, 164, 166, 171, 179-181, 199-227, 228-230

III. ANALYSIS¿

A. Legal Standard

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.) CCP Section 437(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.)¿ “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.”¿ (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.)¿

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (CCP § 437c(p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520. ) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”¿ (Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389.)¿

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 that cause of action or a defense thereto.¿¿¿

To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

B. Discussion

Breach of Contract

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

Here, Plaintiff’s FAC alleges that in or about November 2017, Plaintiff and Defendants entered into the Agreement whereby Plaintiff agreed to deposit Plaintiff’s own funds in the sum of $1.6M into Defendant Petr’s account at Chase Bank and in exchange, Defendants agreed, among other things, (1) to return the full deposit to Plaintiff within 122 days, and (2) not to withdraw the deposit at any time, whether in whole or in part, except to return the deposit in full to Plaintiff. (FAC, ¶ 27.) Plaintiff asserts that it performed all conditions, covenants, and promises required on his part to be performed by, among other things, depositing the sum of $1.6M by wire transfer into the Chase Bank account in accordance with the terms of the Agreement. (FAC, ¶ 28.) Plaintiff contends that Defendants breached the Agreement by failing and refusing to return the deposit of $1.6M. (FAC, ¶ 29.)

Plaintiff contends that although the deposit of funds is referred to as a “loan,” the parties intended for the funds to be a “bailment.” As addressed by Honorable Judge Deirdre Hill, the agreement is ambiguous, as the title refers to a “depositor” agreement and yet refers to the funds as a “loan” but there is no interest rate and prohibits Defendant from withdrawing the funds. Regardless of how it is characterized, there is no factual dispute that the DFA was not signed by Defendants, the parties against whom the contract is being sought to be enforced. While Plaintiff provides several arguments in his Separate Statement bearing on the no-signature UMF, he does not provide any evidence that the agreement was in fact signed by Defendants. Nor is there any evidence that Defendants received the $1.6 M and thereby be estopped to contest the enforceability of the written contract. Defendants note that the Statute of Frauds in Civil Code § 1624 states that a contract to loan money in any amount greater than $100,000 must be in writing and subscribed by the party to be charged. Defendants argue that the DFA by the very terms thereof, falls squarely within this definition, and under the plain language, is invalid unless it is in writing and subscribed by the party to be charged (e.g., Defendants.) Defendants note that in Plaintiff’s deposition, he admitted that he is unaware of any signed copy of the DFA. (Exhibit 41, 36:5-8.)

But Plaintiff argues that there are inferences that could preclude summary judgment arising from his wire transfers of the $1.6M, his inquiries about the status of the project and his money. The Court invites ARGUMENT as to whether there are inferences sufficient to create a triable issue bearing on any exception to the Statute of Frauds, ARGUMENT as to whether there is a triable issue as to whether Mr. Hassan was the agent for both Plaintiff and for Defendants (whose knowledge or notice would be imputed to both sides), and ARGUMENT as to any other triable issue as to a non-signatory’s alleged breach of a written contract. In the absence of convincing argument by Plaintiff, the Court’s tentative would be to GRANT summary judgment / adjudication as to the contract and implied covenant claims.

Bailment

“In a broad sense a bailment is the delivery of a thing to another for some special object or purpose, on a contract, express or implied, to conform to the objects or purposes of the delivery which may be as various as the transactions of men [citation].” (Gebert v. Yank (1985) 172 Cal.App.3d 544, 550.) “Breach of the bailment contract may be asserted by the bailor when there is a failure to return that which was bailed.” (Id. at p. 551.)

Defendants assert that Plaintiff’s argument that the DFA was a bailment fails because the funds were never delivered to Defendants. Defendants note that even Plaintiff’s own banking documents show that his $1.6M wire transfer went to a Chase Bank account number 916931665. Defendants submit that the account in question is owned by FCP Master Holding Account, Inc, and the incorporator, sole officer, director, and authorized signer for that account is Gustavo Gullo. Defendants further submit that the account is not owned or authorized by Davis nor Petri, and Plaintiff has zero evidence to the contrary. Defendants assert that based on his own testimony in deposition, all Plaintiff could identify as evidence to support his allegation that the Chase account ending in 665 was somehow owned by Davis was (1) the 1-page DFA drafted by Hassen; and (2) Various unidentified statements by Hassen that Plaintiff’s funds were going into a blocked account that Davis controlled. However, Defendants argue that the DFA, at best, may speak to what Plaintiff intended the account to be, but has nothing to do with what the 665 account actually was. Defendant further notes that Davis’s declaration makes clear that neither he nor Petri had any relationship to or interest in FCP Master Holding Account, Inc.

In opposition, Plaintiff argues that there is a question of fact as to whether Davis breached the long form DFA that called for him to open the account in his own name in order to receive Plaintiff’s funds. Plaintiff notes that at or around the same time Plaintiff was entering into the DFA with Davis, Davis and the third-party financiers entered into a multi-page depositor funding agreement (“Multi-age DFA”) related to the same film financing agreement. (Decl. of Christine Tour-Sarkissian (“CTS Decl.”), Exhibit F.) Plaintiff contends that multi-page DFA called for Davis to open an account under Petri’s name to receive and hold the funds deposited to facilitate the receipt a line of credit to finance the film project. (CTS Decl., Exhibit F.) Plaintiff specifies that while he was not a signatory to that multi-page DFA, but it called for the account to be opened in Petri’s name. Plaintiff also submits that the account was supposed to be controlled and blocked so that no funds could be withdrawn from tat account except by Petri for the sole purpose of returning Cabayan’s deposited funds. Plaintiff argues that he, as the person providing the funds to Petri that were to be used as the deposit required to facilitate the receipt of the line of credit, was the third-party beneficiary of this Multi-Page DFA.

In their reply brief, Defendants argue that Plaintiff now, on the eve of trial, with discovery and motion cutoff dates past, and with this Motion for Summary Judgment pending, alleges that he was an intended third-party beneficiary of the Multi-Page DFA. Nowhere in Plaintiff’s original complaint or FAC have plead that he was a third-party beneficiary of a contract. Further, in Defendants’ moving papers, they include a series of emails from more than a year (February 2018-May 2019) where Hassen, as Plaintiff’s lawyers wrote to Van Eman and McConnelley, copying Davis, where he made repeated references to the fact that no money had been transferred to Davis. (UMF 16, Exhibit 13; EMF 19, Exhibit 14; EMF 22, Exhibit 15; UMF 25, Exhibit 16; UMF 28, Exhibit 18; UMF 31, Exhibit 18; UMF 34, Exhibit 19; UMF 37, Exhibit 20; UMF 40, Exhibit 21.) The long form statement (Plaintiff’s Exhibit F) is between Weathervane Productions, Inc., Forrest Capital Partners, Inc., and Petri Entertainment, LLC; Plaintiff is not mentioned as an intended TPB nor is he a signatory to this DFA. Also, Paragraph (C)(1) of the long form contract notes that the account was to be deposited in the name of the depositor, but would be controlled by FCP, WVP, and Depositor in accordance with the relevant account operation mechanics.

The Court will entertain ARGUMENT as to whether the belated third-party beneficiary issue should be considered in the absence of any such allegations in the FAC, and if it should be considered whether discovery should be re-opened and trial vacated while Plaintiff amends his complaint to formally raise this new theory.

Plaintiff further argues, in opposition, that there is a question of fact as to whether the account where Plaintiff’s money went to was owned by Davis or Petri. In response to Defendants’ position that the account ending in 665 belonged to Gustavo Gullo, Plaintiff claims that the Secretary of State Statement of Information regarding the name of company into whose account the Plaintiff’s funds were wired confirms that the business was owned by Benjamin F. McConnelly, and not Gustavo Gullo at the time of the deposit. (CTS Decl., Exhibit N.) Plaintiff notes that discovery is continuing in this case as well in Hassen’s malpractice case. However, Plaintiff asserts that Hassen had represented to Plaintiff that Davis made other movies with the third-party financiers in the past. However, Plaintiff notes that McConnelly is presently in prison, and Davis’s deposition has not been concluded, not has Chase’s deposition been taken yet in this matter. As such, Plaintiff suggests that there are many unanswered questions, and this Court should not take Davis’s statements as true. The Court will entertain ARGUMENT as to whether the hearing should be continued so that the discovery as to these matters can be completed.

Lastly, Plaintiff contends that there is a question of fact as to who the owners of the Chase Bank account ending in 960 or whether it existed. In response to Defendants’ assertion that Davis had not been notified as of February 16, 2018 that any of Plaintiff’s funds had been transferred from the FCP account to what he though would be a joint account, Plaintiff argues that this is a false statement as Plaintiff was provided at his request from Hassan, a Chase bank statement dated December 2017, which was represented to Plaintiff as proof that his money is in a blocked controlled account by Davis (CTS Decl., Exhibits I and Q.) Plaintiff argues that the bank statements that Plaintiff bore the same account number (ending in 960) and predate February 16, 2018, as does the signature of Davis on the account’s signature card. Plaintiff contends that the question of whether that account exists or ever existed is a question of fact and the flow of money from FCP’s account ending in 665 to the account ending in 960 at Chase or to another account or accounts under the name of David or Petri is still unknown. The Court will entertain ARGUMENT as to why discovery as to these matters has not been completed, or whether the COR deposition of Chase and documents produced negate the assertion that a Chase account ending in 960 ever existed.

Based on the evidence presented, it does not appear that the DFA was a bailment, as no evidence has been presented that the $1.6M was delivered to Defendants. In the absence of convincing argument by Plaintiff, the Court’s tentative ruling would be to GRANT summary adjudication as to the breach of any alleged bailment contract.

Alter Ego

In Plaintiff’s FAC, Plaintiff alleges that Petri was, and at all times herein is, a mere shell and sham without sufficient capital, assets, stock, stockholders, or partners to undertake the business engaged in by Petri and/or Davis. (FAC, ¶ 6.) Plaintiff claims that Petri is a mere shall, instrumentality, and conduit through which Davis purported to carry on his business activities. (FAC, ¶ 7.) Plaintiff further claims that Davis exercised, and continues to exercise, such complete control and dominance of Petri that any individuality or separateness of Petri on the one and Davis on the other hand does not exist. (FAC, ¶ 8.) Plaintiff asserts that Petri intended and used by Davis, was a mere device to enable Davis to avoid individual liability and for the purpose of substituting a financially insolvent entity such as Petri in the place of Davis. (FAC, ¶ 9.) Plaintiff argues that Petri was so inadequately capitalized that, compared with the business to be conducted by Davis, and the risks attendant thereto, the capitalization of Petri was trifling. (FAC, ¶ 10.) As such, Plaintiff submitted that Petri was the alter ego of Davis, and that there exists, a unity of interest and ownership between Petri and Davis such that any separateness has ceased to exist. (FAC, ¶ 11.) Based on this, Plaintiff alleges that the assets and properties of Petri is commingled with the separate assets of Davis such that there is, and at all times relevant, no distinction between individual and corporate assets. (FAC, ¶ 12.)

Defendants argue that Plaintiff offers no evidence to support this accusations. Defendants claim that at Davis’ deposition, he was asked about the laundry list of factors that are considered when conducting an alter ego analysis, and had no information about any of it. (Cabayan Decl., 22:15-33:9.) As such, Defendant argues that his claim for alter ego liability fails as a matter of law, and, at the very least, summary adjudication should be granted on this issue in favor of Davis, and he should be dismissed from this case as an individual defendant.

In opposition, Plaintiff argues that he could not know these facts and is subject to discovery within the context of this litigation. Further, Plaintiff contends that the question of whether Davis can hide behind his corporate entity when he has committed essentially a fraud on Cabayan by concealing material facts from Cabayan is a question of fact and law. Plaintiff reiterates that he alleges throughout this transaction, that Davis and Petri not only breached the DFA and the Multi-page DFA, but also misled, along with Hassen, Plaintiff into believing that his $1.6M was safe in a blocked account in the name of Davis or Petri, and from which only Davis could withdraw funds for the sole purpose of returning the deposit funds to Plaintiff.

In the Court’s view, Plaintiff offers no facts, evidence, or law to support the claim of alter ego. The Court’s tentative ruling would be to GRANT summary judgment to Davis, dismissing him as an individual defendant in this action.