Judge: Stephanie M. Bowick, Case: BC703209, Date: 2024-11-14 Tentative Ruling
Case Number: BC703209 Hearing Date: November 14, 2024 Dept: 19
After full consideration of the papers and evidence filed, and inferences reasonably drawn therefrom, as well as oral argument at the hearing, Plaintiffs 101 Vermont Auto Group, Inc. and Andrew Hong’s Motion for Summary Judgment/Adjudication is DENIED.
Counsel for Plaintiffs to give notice.
This case arises out of breach of
contract and fraud claims. Plaintiffs 101 Vermont Auto Group, Inc. (“101
Vermont”) and Andrew Hong (“Hong”) (collectively, “Plaintiffs”) bring suit
against Defendants Joseph Schrage (“Joseph”), Michael Schrage (“Michael”),
Assets Of State Court Receivership Estate, Byron Moldo, State Court Receiver,
Sage Management Co., Inc., Sage Holding Company, Sage Downtown, Inc., West
Covina Auto Group, LLC, Sage MJL Properties, LLC, UCNP II, LLC, UCNP 4, LLC
UCNP 8, LLC, and UCN Partners, LLC alleging the following causes of action:
1.
Breach of Contract [All Plaintiffs against
Joseph, Michael, and Entity Defendants as alter egos of Sage Vermont];
2.
Conversion [All Plaintiffs against all
Defendants)];
3.
Violation of Penal Code section 496a [All
Plaintiffs against all Defendants];
4.
Breach of Fiduciary Duty [Plaintiff 101 Vermont
Auto Group against all Defendants];
5.
Fraud [All Plaintiffs against all Defendants];
and
6. Express Indemnification [All Plaintiffs against Joseph, Michael, and Entity Defendants as alter egos of Sage Vermont].
The Complaint refers to Defendants Sage Management Co., Inc., Sage Holding Company, Inc., Sage Downtown, Inc., West Covina Auto Group, LLC, Sage MJL Properties, LLC, UCNP II, LLC, UCNP 4, LLC, UCNP 8, LLP, and UNC Partners, LP collectively as the “Entity Defendants,” and alleges that Defendants Joseph and Michael (referred to collectively as the “Individual Defendants”), own a majority interest in each of the Entity Defendants ase alter egos of Defendants Joseph and Michael and each other. (Compl., ¶¶ 17-18, 23.)
The Complaint alleges that, Defendants Joseph and Michael along with their brother, Leonard Schrage (collectively, the “Schrage Brothers”), collectively operated under the name “Sage,” and each inherited equal shares in automobile dealerships founded by their father when he passed away in 2011. (Id. at ¶ 25.)
The Complaint alleges that Plaintiff 101 Vermont owned a Hyundai dealership commonly known as 101 Hyundai located at 200 North Vermont Avenue, Los Angeles, CA 90004 (the “Dealership”), and that Plaintiff Hong owns Plaintiff 101 Vermont. (Id., ¶ 24.)
Plaintiffs allege that, in or around December 2015, Plaintiffs began negotiating with Defendant Joseph for the sale of the Dealership to “Sage,” but were unaware that Defendants Joseph and Michael were defendants in a lawsuit filed by Leonard, Case No. BC579623 (the “Schrage Brothers Lawsuit”) until Plaintiffs' counsel was informed by counsel for “Sage Vermont, LLC” (“Sage Vermont”) that a receiver had recently been appointed over Sage Vermont, among other entities. (Id. at ¶¶ 25-26.) The Complaint alleges that Sage Vermont “¿purports to be a wholly owned subsidiary of defendant Sage Holding Company, Inc., and — up until a receiver was recently appointed in September 2017 — controlled by defendants Joseph and Michael.” (Id. at ¶ 7.)
Plaintiffs allege that, in reviewing documents filed in the Schrage Brothers Lawsuit, they “for the first time discovered they had been massively defrauded by Joseph, Michael, Sage Vermont, and their alter egos….” (Id. at ¶ 27.)
Plaintiffs allege that, in the Schrage Brothers Lawsuit, Leonard accused Defendants Joseph and Michael of mismanaging the “Sage” family of dealerships to Leonard’s detriment, which resulted in the issuance of an order that appointed an independent examiner (the “Examiner”) and imposed a preliminary injunction against Defendants Joseph and Michael “preventing them from, among other things, making certain loans from any ‘Sage’ entity without the approval of the court-appointed Examiner. (Id. at ¶¶ 28-29.) Pursuant to the order, the Examiner needed to approve any loan proposed to be made by Defendants Joseph and Michael and/or any entity “if the Examiner deems the proposed loan transaction to have been undertaken for a business purpose of the Entity Defendants.” (Id.) Plaintiffs allege that they were unaware of the injunction and the existence of an Examiner “until discovering it on October 4, 2017, via Plaintiffs counsel's review of the documents on file in the Schrage Brothers Lawsuit.” (Id. at ¶ 30.)
The Complaint alleges that, despite not having the authority to enter into a contract with Plaintiffs to purchase the Dealership, Defendant Schrage executed on behalf of Sage Vermont a contract for the purchase and sale of the Dealership (the “Dealership Asset Purchase Agreement” or “APA”). (Id. at ¶¶ 31-32.)
Plaintiffs allege that, in the APA, Sage Vermont, as the “Buyer,” made representations and warranties “¿as to Sage Vermont's power, ability and authority to execute and perform under the APA,” but that “¿each of these representations and warranties were false when made, false as of the effective date of the APA and false as of the date of the ‘Closing’ occurring on March 15, 2016.” (Id. at ¶¶ 33-34; see id. at ¶¶ 35-38.)
Plaintiffs allege that neither Sage Vermont nor Sage Holding Company, Inc. had sufficient assets or cash available to consummate the purchase of the Dealership under the terms of the APA, and that Defendants Michael and Joseph are liable for the breach the APA. (See, e.g., id. at ¶¶ 37, 68-74.)
The Complaint alleges that, as a result of Sage Vermont’s breach of the APA, Plaintiffs suffered $672,705.00 in damages, consisting of (1) $300,000.00 of the purchase price that was held by Sage Vermont (the “Held Back Cash”) pursuant to Section 5(b)(i) of the APA; and (2) $372,705.00 (the “Escrow Cash”) to be held by the Escrow Agent pursuant to Section 5(b)(ii) of the APA pending satisfaction of the judgment in ¿Dye v. 101 Vermont Auto Group, Inc., et al., Adversary Case No. 2:14-ap-01335-RN (Bankr. C.D. Cal.). (See, e.g., id. at ¶¶ 72-137, 156, 170-195, 203-224.)
On June 2, 2022, the Entity Defendants were dismissed without prejudice.
Plaintiffs filed the instant “Motion for Summary Judgment/Adjudication” (the “Motion”).
Pursuant to Code of Civil Procedure section 437c, Plaintiffs move for summary adjudication of the Second Cause of Action and for entry of judgment in favor of Plaintiffs and against Defendants Joseph and Michael for $300,000.00 (representing the alleged “Held Back Cash”) plus prejudgment interest from April 29, 2016 through the date of entry of judgment on the ground that it is undisputed that Sage Vermont wrongfully and substantially interfered with Plaintiffs’ present right to possess the Held Back Cash of $300,000.00.
REQUEST FOR JUDICIAL NOTICE
Pursuant to Evidence Code, section 452, subdivisions (d)
and/or (h), the Court GRANTS Plaintiffs’ unopposed request to take judicial
notice of the following:
·
Exhibits
1 through 6;
·
Plaintiff’s
Exhibit O;
· The fact that the judgment in the
action Dye v. 101 Vermont Auto. Group, Inc., et
·
al.,
Adversary Case No.
2:14-ap-01335-RN (Bankr. C.D. Cal.), referenced in Exhibit O
·
to
Plaintiffs’ Appendix of Evidence, has been satisfied in full; and
· The fact that August 10, 2016, is three business days after August 5, 2016
I.
Procedural Requirements
The Code of Civil Procedure requires that the notice of motion and supporting paper be served on all other parties at least 75 days prior to the hearing date, and that the motion be heard no later than 30 days prior to trial. (Code Civ. Proc., §§ 437c(a)(2), 437c(a)(3).)
Further, the Code of Civil Procedure prescribes that:
The supporting papers shall include a
separate statement setting forth plainly and concisely all material facts which
the moving party contends are undisputed. Each of the material facts stated
shall be followed by a reference to the supporting evidence. The failure to
comply with this requirement of a separate statement may in the court's
discretion constitute a sufficient ground for denial of the motion.
(Code Civil Proc., § 437c(b)(1); see also Cal. R. Ct., 3.1350(c)(2) & (d).)
Here, Plaintiffs provided the required separate statement.
The Motion was filed and served more than 75 days before the hearing date and
will be heard more than 30 days prior to trial. Accordingly, the Court finds
the Motion timely and properly filed.
Code of Civil Procedure section 437c, subdivision (c) provides that:
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 if 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.
(Code Civ. Proc., § 437c(c).)
Further, pursuant to Code of Civil Procedure section 437c, subdivision (f)(1):
“A party may move for summary
adjudication as to one or more causes of action within an action, one or more
affirmative defenses, one or more claims for damages, or one or more issues of
duty, if that party contends that the cause of action has no merit or that
there is no affirmative defense thereto, or that there is no merit to an
affirmative defense as to any cause of action, or both, or that there is no
merit to a claim for damages, as specified in Section 3294 of the Civil Code,
or that one or more defendants either owed or did not owe a duty to the
plaintiff or plaintiffs.”
(Code Civil Proc., § 437c(f)(1).)
“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) In analyzing motions for summary adjudication, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) Pursuant to Code of Civil Procedure section 437c, subdivision (p)(1):
A plaintiff or cross-complainant has
met his or her burden of showing that there is no defense to a cause of action
if that party has proved each element of the cause of action entitling the
party to judgment on the cause of action. Once the plaintiff or
cross-complainant has met that burden, the burden shifts to the defendant or
cross-defendant to show that a triable issue of one or more material facts
exists as to the cause of action or a defense thereto. The defendant or
cross-defendant shall not rely upon the allegations or denials of its pleadings
to show that a triable issue of material fact exists but, instead, shall set
forth the specific facts showing that a triable issue of material fact exists
as to the cause of action or a defense thereto.
(Code Civil Proc. § 437c(p)(1).)
The California Supreme Court in Aguilar laid down the requisite burden for the party moving for summary judgment:
From commencement to conclusion, the
moving party bears the burden of persuasion that there is no genuine issue of
material fact and that he is entitled to judgment as a matter of law. There is
a genuine issue of material fact if, and only if, the evidence would allow a
reasonable trier of fact to find the underlying fact in favor of the party
opposing the motion in accordance with the applicable standard of proof.
Initially, the moving party bears a burden of production to make a prima facie
showing of the nonexistence of any genuine issue of material fact. If he
carries his burden of production, he causes a shift: the opposing party is then
subjected to a burden of production of his own to make a prima facie showing of
the existence of a genuine issue of material fact. How each party may carry his
burden of persuasion and/or production depends on which would bear what burden
of proof at trial. Thus, if a plaintiff who would bear the burden of proof by a
preponderance of evidence at trial moves for summary judgment, he must present
evidence that would require a reasonable trier of fact to find any underlying
material fact more likely than not.
(Aguilar, supra, 25 Cal.4th at 857.)
It is not the plaintiff’s initial burden to disprove affirmative defenses asserted by a defendant. (Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co. (2009) 170 Cal.App.4th 554, 564; see Code Civ. Proc., § 437c(p)(1).)
The court must “view the evidence in the light most favorable to the opposing party and accept all inferences reasonably drawn therefrom.” (Hinesley, supra, 135 Cal.App.4th at 294; Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389 [courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”].) A motion for summary adjudication must be denied where the moving party's evidence does not prove all material facts, even in the absence of any opposition, (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475), or where the opposition is weak. (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387.)
“[I]n ruling on a motion for summary judgment, a trial court must consider all the evidence submitted, except the court may ignore evidence not disclosed in moving party's separate statement of undisputed facts.” (San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 315.) However, the court may in its discretion look to evidence outside the separate statement, subject to due process concerns. (Id. at 315-317.)
III. Analysis
By way of the instant Motion, Plaintiffs seek summary adjudication of the Second Cause of Action for Conversion and for entry of judgment in their favor and against Defendants Michael and Joseph for the $300,000.00 “Held Back Funds.” (See Motion, pp. 6-19.)
However, the Court cannot grant the requested relief because, as asserted by Plaintiffs, “¿the matters herein have already been decided in favor of Plaintiffs by Hon. Holly E. Kendig, CASE NO. BC647670 in a summary judgment motion against the entity Sage Vermont, LLC, which was owned and controlled by Defendants Joseph and Michael Schrage sued in this case.” (Motion, p. 6; see id. at pp. 18-19.)
In Case No. BC647670, Plaintiffs brought suit against Sage Vermont and Wilshire Escrow Company (“Wilshire Escrow”). The Second Cause of Action also alleged conversion of the Held Back Funds.
On March 29, 2018, the Court in Case No. BC647670 granted Plaintiffs’ Motion for Summary Adjudication, determining that Plaintiffs were entitled to summary adjudication of the Second Cause of Action against Sage Vermont. (RJN, Ex. 4 at Ex. A [March 29, 2024 Minute Order], pp. 1-3.)
On April 23, 2018, the Court in Case No. BC647670 signed the “Order Granting Plaintiff’s Motion for Summary Adjudication” (the “Order”). (RJN, Ex. 5.) The Order stated that “Summary Judgment is hereby entered in favor of 101 Vermont and against Sage on Plaintiff’s Second Cause of Action for Conversion of the $300,000 ‘Held Back Cash.’” (Id. at p. 2, ¶ 3.)
The Order also stated that: “This Order shall be incorporated into the final judgment.” (Id. at p. 2, ¶ 6.), then on July 31, 2018, Plaintiffs filed their “Motion to Enforce Settlement Pursuant to Code of Civil Procedure Section 664.6” (the “Motion to Enforce”).
On August 22, 2018, the Court granted the Motion to Enforce, and, on September 5, 2018, the “Judgment” was entered.
Thus, the Court finds that Plaintiffs have already received a determination that they are entitled to a judgment in their favor to the $300,000.00 “Hold Back Funds” and that to grant the instant Motion and enter the judgment requested would result in Plaintiffs receiving a double recovery for the $300,000.00 “Held Back Cash.” (See, e.g., Roby v. Mckesson Corp. (2009) 47 Cal.4th 686, 702 (internal citation omitted) [In Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1158–1159…, we explained: ‘Regardless of the nature or number of legal theories advanced by the plaintiff, he is not entitled to more than a single recovery for each distinct item of compensable damage supported by the evidence. Double or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited.’”]; Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061, 1078, disapproved of on other grounds by Zhang v. Superior Court (2013) 57 Cal.4th 364 (citing 6 Witkin, Sum. of Cal. Law (9th ed. 1988) Torts § 1322, p. 779) [“Generally, a party cannot obtain double recovery for the same wrong where joint or concurrent tortfeasors are jointly and severally liable for the same wrong.”]; see also generally 6 Witkin, Sum. of Cal. Law (10th ed. 2005) Torts §1550 (“The general theory of compensatory damages bars double recovery for the same wrong.”)].)
If Plaintiffs believe that the judgment as entered in Case No. BC647670, is incorrect or incomplete, they must go back to Dept. 42. If Plaintiffs believe they are entitled to enforce the Order/Judgment in Case No. BC647670 against Defendants Michael and Joseph as well as Sage, (see Motion at pp. 18-19), then they can seek to add them as judgment debtors in that case pursuant to CCP section 187.
Plaintiffs do not provide any legal authority or factual basis to conclude that Defendants Michael and Joseph are individually liable for another $300,000.00, and there is none. (See Motion at p. 18.)
For the foregoing reasons, the Motion is DENIED.
Plaintiffs to give notice.