Judge Ronald F. Frank, Case Number: 20TRCV00847, Date: 2023-10-27 Tentative Ruling

Judge: Ronald F. Frank, Case: 20TRCV00847, Date: 2023-10-27 Tentative Ruling

Case Number: 20TRCV00847 Hearing Date: March 27, 2024 Dept: 8

Tentative Ruling¿

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HEARING DATE: March 27, 2024

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CASE NUMBER: 20TRCV00847

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CASE NAME: Drakk Holdings, LLC v. PSIP SN Vermont LLC, et al.

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MOVING PARTY: Defendant, PSIP SN Vermont, LLC

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RESPONDING PARTY: Plaintiff, Drakk Holdings, LLC

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TRIAL DATE: May 28, 2024

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MOTION:¿ (1) Motion for Summary Judgment

Tentative Rulings: (1) ARGUE but likely CONTINUE hearing to address missing Exhibits HH, II, and JJ.

I. BACKGROUND¿¿

A. Factual¿¿

On November 17, 2020, Plaintiff DRAKK Holdings, LLC (“DRAKK”) filed this action against Defendant, PSIP SN Vermont, LLC (“PSIP”). On September 29, 2021, Plaintiff filed a Second Amended Complaint. On November 30, 2022, Plaintiff filed a Third Amended Complaint (“TAC”) alleging cases of action for: (1) Specific Performance/Express Written Contract; (2) Specific Performance/Promissory Estoppel; (3) Specific Performance/Breach of Implied Covenant of Good Faith and Fair Dealing; (4) Promissory Estoppel and Money Damages; (5) Fraud & Deceit; and (6) Negligent Misrepresentation.¿

This case involves a dispute between Plaintiff DRAKK (buyer) and Defendant PSIP (seller), regarding a purchase and sale agreement (“PSA”) in a heavily litigated dispute that has been pending for over four years concerning an improved parcel of real property in Gardena, California. Plaintiff claims in its complaint that Defendant failed to complete the sale of its subdivided parcel under its PSA. On the other hand, Defendant asserts DRAKK failed to complete the purchase of the subdivided property because it did not have the funds in hand to pay the purchase price on time, and that DRAKK’s claims to “financial ability” to borrow or sell assets to get the funds at some future time is not legal sufficient to prove DRAKK was “ready and able” to purchase on time.

Defendant files a Motion for Summary Adjudication as to all six of the causes of action asserting that Plaintiff’s causes of action have no merit, that the necessary elements of each cannot be established, and there is a complete defense to each. Further, Defendant contends that because this Court can grant a Motion for Summary Adjudication to each of the causes of action that Summary Judgment can be granted on the grounds that the entire TAC has no merit, there are no triable issues of material fact, and PSIP is entitled to judgment against Drakk as a matter of law.

B. Procedural¿¿

On August 15, 2023, Defendant filed a Motion for Summary Adjudication and Summary Judgment. On March 13, 2024, Plaintiff filed an opposition. On March 22, 2024, Defendant filed a reply brief. In all, there are 24 separate digital documents filed for this motion, including briefs, declarations, exhibit compendiums, separate statements, and evidentiary objections. But there are no documents or transcripts or declarations filed by Plaintiff for its opposition Exhibits HH, II, or JJ.

II. 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

Specific Performance – First, Second, and Third Causes of Action

First, Defendant argues that Plaintiff is not entitled to specific performance because the undisputed facts establish that Defendant did not breach and that Plaintiff did not have the funds to purchase by the extended escrow closing date of October 30, 2020, or for months thereafter. Defendant argues that Plaintiff is barred from seeking specific performance by not being ready and able to pay the purchase price on time, and also by failing to tender the purchase price under the PSA. Defendant asserts that Plaintiff did not have its own funds to purchase the property and had not secured financing by the original or extended deadline, and thus Plaintiff was not ready and able to purchase the property under the terms of the PSA as agreed upon by the partis, or thereafter when Plaintiff filed its lawsuit for specific performance. Defendant contends that Plaintiff admitted that it did not have the funds to close on time under the PSA and that Plaintiff will be unable to prove it had a loan commitment to close on time under the PSA, which is why it requested more time for testing and then more time to close. Defendant cites to Am-Cal Inv. Co. v. Sharlyn Estates, Inc. (1967) 255 Cal. App. 2d 526, 539-540, and notes that “[a] purchaser without funds of his own may show that he was ready and able to pay the purchase price because he had made arrangements to borrow the required funds from a lending institution or from a third party, but if he relies upon the negotiation of a loan from a third party, the buyer must prove: (1) That the third party was legally bound by contract to advance the funds . . . .”

Nonetheless, Plaintiff argues that it was ready, willing, and able to purchase the Property because at all times, Plaintiff’s purchase of the property was secured by a loan commitment or its financial ability to obtain its own funds.” (TAC, ¶ 56.) There is no dispute that Plaintiff did not tender payment, but that pursuant to Henry v. Sharma (1984) 154 Cal.App.3d 665, tendered payment is not required to prove a party’s readiness, willingness, and ability. While this is true, the facts of Henry are inherently distinguishable. In Henry, the court rejected the argument that without proof of an existing legally enforceable loan contract, a buyer cannot prove he or she is ready, willing, and able to perform under a real estate purchase agreement. The Court, instead, noted that proof of ability to perform may be made by showing the buyer “’commanded resources upon which he could obtain the requisite credit.’” (Id. at 671.) Put simply, the “proof needed to show ability [to perform] depends [not on the existence of a legally enforceable loan agreement, but] on all the surrounding circumstances.” (Id. at 672.) In Henry, the Second District noted that the seller had committed an anticipatory breach, and thus, they saw no purpose in requiring the buyers to bind themselves to a loan for which they have no immediate need. (Ibid.) Rather, the Henry Court questioned whether a lender would make a firm commitment to loan money for the purchase of property the present owner refuses to sell. (Ibid.) Further, the circumstances in Henry were that “[b]oth buyers were employed. They owned a home which they had on the market at the time they contracted to buy the property at issue [there]. They proceeded to sell the home and realized $26,500 from the sale. In addition, buyers owned a six-unit apartment house and a duplex in Los Angeles. When the deal at issue [in Henry] fell through, buyers purchased another home on almost identical terms to those in the [transaction in Henry].” (Ibid.) As such, the Henry Court found that this evidence led the court to reasonably conclude the buyers had the ability to perform their end of the bargain. (Ibid.) Lastly, this Court further notes that the Court in Henry only applied a “reasonable [amount of] time” when a real estate sales contract does not specify the dates for performance. (Id. at 669.)

Here, Plaintiff asserts that, assuming October 12, 2020 was the closing date (which Plaintiff contends it is not), then the balance of the Purchase Price, deducting the earnest deposit, dropped to about $5,941,720. Plaintiff argues that the evidence shows that Plaintiff could have purchased the property because: (1) Plaintiff was already pre-qualified for a loan from its Bankers to purchase the Property even prior to executing the Second Amendment/Lease credit, noting on December 1, 2019, Bank of America had committed to loan Plaintiff $8,260.000; (2) because of the rent credits and Tenant Improvement allowances the Property had an equity cushion by September 2020, noting by September and October 2020, Plaintiff’s lender informed Plaintiff it would fund the entire Purchase Price without down payment because of the TIs plaintiff had constructed; (3) On May 26, 2021, Zions Bank committed to loaning Plaintiff $8,725,000 for this deal; and (4) Plaintiff continues to be contacted by lenders asking about the status of the prospective purchase price.

However, while Plaintiff’s opposition references these four instances as “evidence,” it provides no actual evidence such as deposition testimony or declarations or exhibits as to these four claimed propositions. Plaintiff’s opposition as to this part of the motion does not cite to any attached or concurrently filed evidence. The Separate Statement does not cite to anything except paragraph 33 of the Kenneally Declaration which then notes three unattached exhbits. Further, this is clearly distinguishable from Henry. The circumstances analyzed in Henry involved the selling of a former property, the owning of an apartment complex, and the purchasing of a similar property. These circumstances are not present in the case at bar, nor are they even alleged. Instead, Plaintiff attempts to draw an analogy to Henry despite the conclusory statement that the evidence will show that they had a other loan opportunities. In fact, this Court notes that this analysis is in line with the case relied on by Defendant, Sharlyn Estates, where, as noted above, that “[a] purchaser without funds of his own may show that he was ready and able to pay the purchase price because he had made arrangements to borrow the required funds from a lending institution or from a third party, but if he relies upon the negotiation of a loan from a third party, the buyer must prove: (1) that the third party was legal bound by contract to advance the funds.” (Sharlyn Estates, supra, 225 Cal.App.2d at 539-40.) Here, because Plaintiff has no proof, that on their own, they had the funds, Plaintiff is required to PROVE that the third-party banks were legally bound, by contract, to advance the funds. There is no evidence presented by Plaintiff, besides the Declaration of Keith A. Kenneally (“Kenneally Decl.”). Paragraph 33 of the Kenneally Declaration asserts to attach Exhibits HH, II, and JJ to support these allegations, however, the Court cannot find any documents in the nine (9) exhibit lists submitted on behalf of Plaintiff entitled Exhibits HH, II, or JJ.

Moreover, Defendant has provided evidence that pursuant to the PSA, there was a definitive deadline for close of escrow – 15 days after map recordation – and to accommodate Plaintiff, Defendant gave Plaintiff extra time, first to October 12 and then to October 30, 2020. This fact is another distinction from the Henry, where the property sale contract did not have a specified date. Additionally, Plaintiff again tries to draw an analogy to Ninety-Nine Investments, LTD. V. Overseas Courier Service (Singapore) Private, LTD. (2003) 113 Cal.App.4th 1118, despite this Court indicating in its January 31, 2023 ruling on demurrer that the two cases are inherently factually distinguishable as there is no allegation that PSIP itself caused the delay in recording the Tract Map or that PSIP breached any of its express seller’s obligations in the attached PSA.

Now, Plaintiff is citing to Ninety Nine, noting the reviewing court in Ninety Nine found that even though the buyer’s ability to fund with a loan was not a contingency (similar to the facts of this case), the buyer had the right to fund with a loan as the deal was not an “all cash” deal (also similar to the facts of this case). (Id. at 1130– 31, see also fn. 7.) However, the Court cannot locate and review the evidence identified in Kenneally Declaration but not attached to the exhibit compendium (Exhibits HH, II, and JJ) bearing on the claimed triable issues of fact exist as to whether Plaintiff was ready, willing, and able to purchase the property. As such, the Court will likely continue the hearing once the Plaintiff can point this Court to the claimed evidence the Court cannot find in the filed exhibits nor in Plaintiff’s separate statement.

Without access to the alleged potential evidence Plaintiff may have, the Court cannot decide whether Plaintiff is able to carry its shifted burden by proving that the evidence demonstrates that triable issues of material fact exist.