Judge: Stephen P. Pfahler, Case: 21CHCV00339, Date: 2023-11-28 Tentative Ruling


Case Number: 21CHCV00339    Hearing Date: November 28, 2023    Dept: F49

Dept. F-49

Date: 11-28-23

Case #: 21CHCV00339

Trial Date: 2-20-24 c/f 8-7-23 c/f 2-6-23

 

SUMMARY ADJUDICATION

 

MOVING PARTY: Defendants, Macias, et al.

RESPONDING PARTY: Plaintiff, Laysion, LLC

 

RELIEF REQUESTED

Motion for Summary Adjudication

·         1st Cause of Action: Fraud – Civil Code 1719

·         4th Cause of Action: Breach of Written Contract

·         5th Cause of Action: Breach of Oral Contract

·         8th Cause of Action: Declaratory Relief – Constructive Trust

·         Claim of Exemplary or Punitive Damages

·         16th Affirmative Defense: Statute of Frauds

 

SUMMARY OF ACTION

Between March 2019 and April 2021, Plaintiff Laysion, LLC alleges Defendants Guillermo Macias and Colt International Clothing, Inc. ordered one million dollars ($1,000,000) in certain lighting equipment. Defendants paid $210,000, and presented another $800,000 in checks, which were rejected for insufficient funds. Plaintiff alleges an outstanding balance of $790,000.

 

On April 30, 2021, Plaintiff filed its complaint for Breach of Contract, Common Counts, and Fraud. On August 19, 2021, Plaintiff filed a first amended complaint for Fraud – Civil Code section 1719, Fraud Civil Code section 1572(3), Conversion – Civil Code section 3336, Breach of Written Contract, Breach of Oral Contract, Account Stated –Sale and Delivery, Quantum Meruit, and Declaratory Relief – Constructive Trust.

 

On December 1, 2021, the court sustained the demurrer to the second and third causes of action for Fraud Civil Code section 1572(3), Conversion, and overruled the demurrer to the seventh cause of action for Quantum Meruit. The court found the motion to strike moot in part, and denied the remainder. Defendants answered the first amended complaint on January 18, 2022.

 

On February 4, 2022, the court denied Defendants’ motion to disqualify Plaintiff’s counsel. Defendants filed a notice of appeal on March 16, 2022. On July 21, 2022, the court granted Defendants leave to file an amended answer to the complaint. On October 18 and November 4, 2022, the court denied Plaintiff’s motions for writ of attachment, and summary adjudication on the first cause of action for fraud. On March 1, 2023, the court sustained the demurrer of Colt LED without leave to amend. On July 28, 2023, the court of appeal affirmed the court, and issued a remittitur on October 11, 2023.

 

RULING: Denied in Part/Granted in Part.

Evidentiary Objection to Declaration of Guillermo Macias: Overruled.

Evidentiary Objections to the Declaration of Yajun Zhang: Overruled.

 

Evidentiary Objections to the Declaration of Michael Atkin: Overruled (Not Relied Upon Code Civ. Proc., 437c, subd. (q).)

 

Evidentiary Objections to the Declaration of Lloyd Mann: Overruled (Not Relied Upon Code Civ. Proc., 437c, subd. (q).)

 

Evidentiary Objections to the Declaration of Xiang Zhang: Sustained (Hearsay)

 

Request for Judicial Notice (Reply): Granted in Part/Denied in Part.

·         The court takes judicial notice of its prior minute order.

·         The court declines to take judicial notice of a declaration submitted with a prior pleading. The declaration is not subject to judicial notice, and the court cannot consider the material for the truth of the matter asserted, even if the court takes judicial notice of the existence of the declaration.

 

Defendants Guillermo Macias, and Colt International Clothing, Inc. dba Colt LED move for summary adjudication on the first cause of action for Fraud – Civil Code 1719, fourth cause of action for Breach of Written Contract, fifth cause of action for Breach of Oral Contract, eighth cause of action for Declaratory Relief – Constructive Trust, Claim of Exemplary or Punitive Damages, and sixteenth affirmative defense for Statute of Frauds. Defendants present the motion on grounds that Plaintiff lacks evidence in support of the challenged causes of action. Plaintiff in opposition maintains triable issues of material fact exist on all causes of action and the punitive damages claims, and no basis for summary adjudication exists on the affirmative defense. Defendants in reply reiterates the lack of evidence and legal support for the challenged causes of action.

 

“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 the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, 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. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

 

The court also considers the basis for the merits of the motion. The law of summary judgment provides courts “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 (Aguilar).)  In reviewing a motion for summary judgment, courts employ 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.)

 

The pleadings frame the issues for motions, “since it is those allegations to which the motion must respond. (Citation.)”  (Scolinos v. Kolts (1995) 37 Cal. App. 4th 635, 640-641; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD., v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1472.) 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.” (Code Civ. Proc., § 437c, subd. (p)(1).) Plaintiff need not disprove all defenses, if the elements of a cause of action are made. (Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co. (2009) 170 Cal.App.4th 554, 564; WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525, 532.) A defendant moving for summary judgment “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established.”  (Code Civ. Proc., § 437c, subd. (p)(2).) “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 the cause of action or a defense thereto.” (Ibid.) 

 

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inference that may be drawn form that evidence, in the light most favorable to the party opposing summary judgment.”  (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467; see also Code Civ. Proc., § 437c, subd. (c).)  “An issue of fact can only be created by a conflict in the evidence.  It is not created by speculation, conjecture, imagination or guesswork.”  (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1041 (citation omitted).)

 

1st Cause of Action, Fraud – Civil Code 1719: Denied.

Defendant challenges the subject cause of action on grounds that Plaintiff never actually deposited any check, thereby supporting the underlying fraud claim for delivering a check drawn with insufficient funds. Plaintiff in opposition maintains the motion lacks any basis of support on grounds of a required deposit. The only requirement is the refusal of the bank to honor the check. Plaintiff relies on the three objected to declarations for triable issues of material fact over the “pass” the check element. Defendant in reply maintains the lack of evidence in support of the claim, and additionally cites to the previously denied motion for summary adjudication on the exact same cause of action brought by Plaintiff in November 2022 [Req. Jud. Not.].

 

As addressed above, the court can take judicial notice of its prior order. Nevertheless, a prior order denying a motion for summary adjudication brought by a plaintiff in no way establishes an automatic right to summary judgment against the plaintiff. The moving defendant must still meet the standard for summary adjudication.

 

The court considers the operative statute:

 

“(a)(1) Notwithstanding any penal sanctions that may apply, any person who passes a check on insufficient funds shall be liable to the payee for the amount of the check and a service charge payable to the payee for an amount not to exceed twenty-five dollars ($25) for the first check passed on insufficient funds and an amount not to exceed thirty-five dollars ($35) for each subsequent check to that payee passed on insufficient funds. ... (6) As used in this subdivision, to ‘pass a check on insufficient funds’ means to make, utter, draw, or deliver any check, draft, or order for the payment of money upon any bank, depository, person, firm, or corporation that refuses to honor the check, draft, or order for any of the following reasons: (A) Lack of funds or credit in the account to pay the check. (B) The person who wrote the check does not have an account with the drawee. (C) The person who wrote the check instructed the drawee to stop payment on the check.” (Civ. Code, § 1719.)

 

The parties dispute the standard regarding the definition of passing the check with Defendant contending no deposit ever occurred and plaintiff countering the indicated insufficiency of funds meets the standard. The deposition of Austin Feng presents testimony whereby Feng sought to deposit the checks at the behest of Zhang in the summer of 2019. [Declaration of David Fisher, Ex. D: Deposition of Austin Feng, 17:17-18:15.] Feng went to the bank of August 3, whereby he “tried to deposit” the check at a Bank of America branch in Wesley Massachusetts and was told by the teller that the check would not be accepted because the check was “no good.” [21:2-23-17.]

 

The plain language of the statute allows for a finding of liability against a presenting a check subsequently refused by a bank due to insufficient funds. Nothing in the motion or plain language of the statute requires an attempted deposit of the check and some form of subsequent notice of rejection. For purposes of the subject motion, the court finds Defendant fails to establish an inability to present the claim before a trier of fact. Nothing in the denial of the motion in any way establishes proof of liability, only the existence of triable issues of material fact regarding the presentation of a check with insufficient funds as presented in the declaration of Austin Feng. The court finds the deposition seeking to establish knowledge of the intent to pass a bad check beyond the scope of the sought after relief in the motion. [See Feng Depo., 55:21-56:11.]

 

4th Cause of Action, Breach of Written Contract: Denied.

Defendant moves for summary adjudication on grounds that no written, enforceable contract was ever formed. Plaintiff in opposition maintains the invoices demonstrate the existence of a contract under California Commercial Code section 2204. Defendant in reply reiterates the formation argument and challenges the legal argument under the California Commercial Code.

 

The argument of defendant first challenges the reliance on the first amended complaint and a lack of any other admissible evidence in support of proof of the claim, in particular the Zhang declaration. A defendant may satisfy its burden on summary adjudication by pointing to an absence of evidence supporting plaintiff’s claims. (Union Bank (1995) 31 Cal.App.4th 573, 590; see Ganoe v. Metalclad Insulation Corp. (2014) 227 Cal.App.4th 1577, 1584; Scheiding v. Dinwiddie Const. Co. (1999) 69 Cal.App.4th 64, 81-83.) A defendant must do this by providing evidence that a plaintiff does not possess and cannot reasonably obtain needed evidence, rather than simply by arguing that a plaintiff has no evidence. (Aguilar, supra, 25 Cal.4th at pp. 854-855.) Plaintiff counters that the depositions of Macias and Zhang in fact establish the existence of the orders reflecting the parties’ transactions regardless of the dates of any invoices.

 

“(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.” (Cal. U. Com. Code, § 2204.)

 

The declaration of Macias concedes to the existence of the orders, notwithstanding the lack of any agreement on price for the acknowledged 500 units received. [Declaration of Guillermo Macias, ¶¶ 7-12.] The declaration of Zhang documents a series of specific transactions as demonstrated by the check payments. The concession to the receipt of at least some inventory and no argument that the equipment constituted a gift or rejection of non-conforming items, the court finds the existence of a contract regardless of the disputed amount(s) due. (See Cal. U. Com. Code, § 2206) The emphatic argument reply that the post dated October 17, 2009 invoice—five months after delivery and one year after the “alleged contract formed”—remains insufficient. The court therefore finds no failure of the contract for lack of formation and triable issue of material fact on the appropriate remedy. (Apex LLC v. Sharing World, Inc. (2012) 206 Cal.App.4th 999, 1011.) The motion for summary adjudication is therefore denied.

 

5th Cause of Action, Breach of Oral Contract: Denied.

Like the written contract, Defendant challenges the existence of any oral agreement for the equipment through denial of the agreement and evidentiary challenge via the Zhang declaration. Plaintiff in opposition cites to Commercial Code section 2201 and the declaration of Zhang. Defendant in reply challenges the application of the Commercial Code.

 

“(1) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in the writing.

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subdivision (1) against the party unless written notice of objection to its contents is given within 10 days after it is received.

(3) A contract which does not satisfy the requirements of subdivision (1) but which is valid in other respects is enforceable:

(a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement;

(b) If the party against whom enforcement is sought admits in his or her pleading, testimony, or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(c) With respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2606).” (Cal. U. Com. Code, § 2201.)

 

As addressed in the breach of written contract claim, the court finds sufficient documentary evidence of the contract for goods valued at over $500, albeit an undefined, yet disputed sum. The court finds no bar to the cause of action. Triable issues of material fact exist on the formation and terms. The motion for summary adjudication is therefore denied.

 

8th Cause of Action, Declaratory Relief – Constructive Trust: Granted.

Defendants challenge the declaratory relief cause of action on grounds of the lack of a present or future dispute requiring adjudication. Defendant characterizes the subject cause of action as only addressing past conduct. Plaintiff in opposition cites to the standard for declaratory relief with minimal address of the actual “controversy” other than to say the contractual relationship requires the court “to fashion an appropriate remedy.” The reply maintains that Plaintiff in facts is not seeking declaratory relief but the imposition of a constructive trust remedy.

 

Declaratory relief arises under Code of Civil Procedure section 1060, which states in part:

 

“Any person interested under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”

 

“‘[S]ection 1060 does not require a breach of contract in order to obtain declaratory relief, only an ‘actual controversy.’ Declaratory relief pursuant to this section has frequently been used as a means of settling controversies between parties to a contract regarding the nature of their contractual rights and obligations.’” (Osseous Technologies of America, Inc. v. Discovery Ortho Partners LLC (2010) 191 Cal.App.4th 357, 365.) Declaratory relief operates prospectively. (Id. at p. 366.)

 

“[U]nder California rules, an actual controversy that is currently active is required for such relief to be issued, and both standing and ripeness are appropriate criteria in that determination. (Citation.) One cannot analyze requested declaratory relief without evaluating the nature of the rights and duties that plaintiff is asserting, which must follow some recognized or cognizable legal theories, that are related to subjects and requests for relief that are properly before the court.” (Otay Land Co.v. Royal Indemn. Co. (2008) 169 Cal.App.4th 556, 563.)

 

“[Declaratory relief] serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” (Travers v. Louden (1967) 254 Cal.App.2d 926, 931.)

 

To the extent Plaintiff seeks relief on the past wrongs associated with the allegedly breached contracts and insufficient checks, nothing in the complaint or opposition establishes any basis for declaratory relief. Constructive trust constitutes a remedy not a separate cause of action as well. (Shoker v. Superior Court of Alameda County (2022) 81 Cal.App.5th 271, 278.) The motion for summary adjudication is granted.

 

Claim of Exemplary or Punitive Damages: Denied.

To the extent the argument against punitive damages depends on the lack of a valid fraud claim, the court denies summary adjudication on the subject claim for damages as well.

 

16th Affirmative Defense, Statute of Frauds: Denied.

To the extent the motion relies on the oral contract cause of action, and therefore the statute of limitations as a complete defense, the court also denies the motion for summary adjudication on the same basis as the written and oral contract claims.

 

In summary, the motion for summary adjudication is granted as to the eighth cause of action for constructive trust, and denied as to the remainder of the motion.

 

Motion to quash set for December 18 and 20, 2023, motion to tax reserved for January 22, 2024, trial date for February 20, 2024, and two more motions to quash on February 21, 2024 and March 8, 2024. The court calendar remains tremendously impacted and the subject case represents an inordinately court resource intensive dispute. The court therefore reserves the right to submit any and all of the impending discovery disputes to an expedited referee, especially if the trial date remains set for February 20, 2024, and/or any party seeks an ex parte settting of the currently scheduled post-trial motions to quash.

 

Moving Defendants to give notice.