Judge Teresa A. Beaudet, Case Number: BC598021, Date: 2024-02-15 Tentative Ruling

THAKOR I. PATEL AND KUSUM T. PATEL AS TRUSTEES OF THE PATEL FAMILY TRUST, DATED MAY 15, 1992, Plaintiff, vs. 8300 SOUTH VERMONT AVENUE, L.P., et al. Defendants.	Case No.:	BC598021
	Hearing Date:	April 15, 2024
	Hearing Time:	3:00 p.m.
	[TENTATIVE] ORDER RE: CROSS-DEFENDANTS CBRE, INC. AND DENNIS ZHANG’S AMENDED MOTION FOR SUMMARY JUDGMENT, OR ALTERNATIVELY, SUMMARY ADJUDICATION
AND RELATED CROSS-ACTION

On July 1, 2015, Plaintiff Thakor I. Patel and Kusum T. Patel as Trustees of the Patel Family Trust, dated May 15, 1992 (“Patel Family Trust”) filed this action against Defendants 8300 South Vermont Avenue, L.P., Factory Outlet Store, Inc., Factory Outlet Store, LLC, Western Holdings Limited Liability Company, and Eli Sasson.

Patel Family Trust filed a First Amended Complaint on August 22, 2017. On September 16, 2019, Patel Family Trust filed a request for dismissal of the complaint. The case was ordered dismissed by the Court on August 9, 2019. (See Request for Dismissal filed September 16, 2019.)

On November 17, 2017, Cross-Complainants 8300 South Vermont Avenue, L.P., Factory Outlet Store, Inc., Factory Outlet Store, LLC, Western Holdings Limited Liability Company, and Eli Sasson (collectively, “Cross-Complainants”) filed a Cross-Complaint against CBRE, Inc. On July 14, 2020, Cross-Complainants filed the operative First Amended Cross-Complaint (“FACC”) against CBRE, Inc. (“CBRE”) and Dennis Zhang (“Zhang”) (jointly, “Cross-Defendants”). The FACC alleges causes of action for (1) equitable indemnity, (2) breach of contract, (3) breach of fiduciary duty, (4) negligence, (5) violations of Business and Professions Code section 17200, (6) unjust enrichment, and (7) declaratory relief. All of the causes of action of the FACC are alleged against both Cross-Defendants.

On February 19, 2021, Department 57 of this Court issued a minute order in this action concerning, inter alia, Zhang’s demurrer to the FACC. The February 19, 2021 minute order provides, inter alia, that “Cross-Defendant Zhang’s demurrer is sustained without leave to amend as to the second, fourth, and seventh causes of action. The demurrer is overruled as to the third and sixth causes of action.”

Cross-Defendants now move for summary judgement of each cause of action in FACC. In the alternative, Cross-Defendants move for summary adjudication of the individual causes of action of the FACC. Cross-Complainants oppose.

The Court rules on the parties’ Amended Joint Statement Regarding Objections to Evidence Submitted in Support of and in Opposition to Cross-Defendants’ Amended Motion for Summary Judgment, or Alternatively, Summary Adjudication as follows:

Objection to Paragraph 7: overruled as to the first sentence, sustained as to the second sentence

Objection to Paragraph 5: sustained as to “without knowledge of concealed information as discussed below,” overruled as to the remainder

Objection to Paragraph 17: sustained as to “Mr. Zhang was required to seek authorization from Eli Sasson before making such a representation, as he was aware Mr. Sasson owned both 8300 and Factory Outlet Store,” overruled as to the remainder.

Objection to Paragraph 11: overruled as to the first sentence, sustained as to the

Gross Declaration regarding the statement as to what was provided to “8300, Eli

“[A] 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.” (Code Civ. Proc., § 437c, subd. (c).) “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.” (Code Civ. Proc., § 437c, subd. (f)(1).) “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.” (Ibid.)

The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. (Ibid.) 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.) When a defendant seeks summary judgment or summary adjudication, he/she must show either (1) that one or more elements of the cause of action cannot be established; or (2) that there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).)

In the FACC, Cross-Complainants allege that “Mr. Sasson’s company, 8300 South Vermont, purchased 6401 Haven Avenue, Rancho Cucamonga (the ‘Subject Property’) in 1996, and owned the Subject Property until its sale to Plaintiffs on July 3, 2012.” (FACC, ¶ 9.)

“Trader Joe’s entered into a lease with 8300 South Vermont on July 6, 2007 to occupy one of two retail spaces at the Subject Property...” (FACC, ¶ 11.) “On May 27, 2009, Mr. Sasson formed [Factory Outlet Store, Inc. (‘FOS, Inc.’)]. On September 1, 2009, 8300 South Vermont entered into a 7-year lease with FOS, Inc. to occupy the other retail space at the Subject Property with the Factory Outlet Store retail store (the ‘FOS Lease’).” (FACC, ¶ 13.) On February 1, 2011, FOS, Inc. assigned its interest in the FOS Lease to FOS, LLC. (FACC, ¶ 15.)

“On February 14, 2012, Mr. Sasson on behalf of 8300 South Vermont entered into an Exclusive Sales Listing Agreement (the ‘Listing Agreement’) with Cross-Defendant CBRE, to act as the licensed real estate broker…Dennis Zhang, a Senior Managing Director at CBRE, executed the Listing Agreement on behalf of Cross-Defendant CBRE.” (FACC, ¶ 16.) “Under the terms of the Listing Agreement, Cross-Defendants agreed to use its ‘reasonable efforts to effect a sale’ of the Subject Property for a period commencing on February 8, 2012 and ending June 6, 2012 (the ‘Listing Term’), at a list price of $7,500,000.00. If successful, Cross-Defendants would earn a commission of 4% of the gross sales price.” (FACC, ¶ 17.)

“In or around early-April 2012, Total Woman Gym + Spa (‘Total Woman’), a national credit tenant, expressed interest in leasing the space occupied by FOS, LLC at the Subject Property.” (FACC, ¶ 24.) “Despite the fact that Cross-Defendants knew that replacing FOS, LLC with a national credit tenant would increase the value of the Subject Property, Cross-Defendants never informed Cross-Complainants of the Total Woman opportunity and did not seek a Letter of Intent from Total Woman. Had Cross-Defendants informed Cross-Complainants of Total Woman’s interest, it would have increased the listing price and market value of the Subject Property.” (FACC, ¶ 25.) Cross-Complainants allege that “the reason why Mr. Zhang never informed them of the Total Woman opportunity was because (1) Mr. Zhang could not earn a commission through Cross-Complainants for procuring Total Woman and (2) because Mr. Zhang sought to keep that deal for Plaintiffs, to be completed after close of escrow.” (FACC, ¶ 27.)

“On May 29, 2012, Plaintiffs and Cross-Complainants executed a Standard Offer, Agreement and Escrow Instructions For Purchase of Real Estate (the ‘Purchase Agreement’)…This document discloses that Mr. Zhang of Cross-Defendant CBRE was the real estate broker representing both Plaintiffs (Buyer) and Cross-Complainant 8300 South Vermont (Seller). The final purchase price for the Subject Property was $6,870,000.00…” (FACC, ¶ 30.) Cross-Complainants allege that “Cross-Defendants helped renegotiate the purchase price for Plaintiffs and ultimately brokered the sale of the Subject Property to Plaintiffs for $6,870,000—more than $500,000 less than the listing price Cross-Defendants agreed to use reasonable efforts to secure for Cross-Complainants under the Listing Agreement. At closing, Plaintiffs’ representative, Ray Patel, emailed Mr. Zhang, writing: ‘Dennis, you conducted the sale of [the Subject Property] with creativity and excellence today.’ Mr. Zhang replied: ‘Ray, I did this only for you, I am looking to doing more transactions with you in the future.’” (FACC, ¶ 34.)

In the first cause of action of the FACC for equitable indemnity, Cross-Complainants allege that “[o]n August 22, 2017, Plaintiffs filed a First Amended Complaint for Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, Fraudulent Concealment, Fraud in the Inducement and Constructive Fraud, against Cross-Complainants, asserting (among other things) that Cross-Complainants are liable to Plaintiffs for concealing certain facts from Plaintiffs in connection with the sale of the Subject Property, including Eli Sasson’s affiliation with FOS, Inc. and FOS, LLC, and for early-termination of a lease agreement, as is more fully alleged in the First Amended Complaint in this action.” (FACC, ¶ 40.) Cross-Complainants further allege that “[i]n October 2018, Cross-Complainants entered into a settlement with the Plaintiffs, upon which Cross-Complainants agreed to pay settlement monies in exchange for dismissal of Plaintiffs’ lawsuit…Cross-Complainants are entitled to equitable indemnity, apportionment of liability, and contribution from Cross-Defendants for the injuries and damages allegedly suffered by Plaintiffs, and for reasonable attorneys’ fees and costs incurred in defending Plaintiffs’ action against Cross-Complainants.” (FACC, ¶ 42.)

In the motion, Cross-Defendants assert that the first cause of action fails. Cross-Defendants cite to BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852, where the Court of Appeal noted that “[a]lthough the body of law defining and applying principles of equitable indemnity has not fully gelled but is still evolving, one thing is clear: The doctrine applies only among defendants who are jointly and severally liable to the plaintiff…With limited exception, there must be some basis for tort liability against the proposed indemnitor.”

Cross-Defendants assert that “[t]o obtain indemnification here, Cross-Complainants must show that the CBRE Defendants breached a duty owed to the purchaser, Plaintiff, and thus would be joint and severally liable with Cross-Complainants. Cross-Complainants cannot do so. The sole basis for such tort liability is CBRE’s alleged concealment of Cross-Complainant Sasson’s involvement with the FOS entities. But the undisputed evidence shows that on May 25, 2012, CBRE sent Plaintiff an email, disclosing Mr. Sasson’s involvement with FOS, including an attachment summarizing FOS’s Company Profile stating that the FOS team is ‘headed by Mr. Eli Sasson.’” (Mot. at p. 9:12-18.)[1] In his supporting declaration, Zhang states that “[o]n May 25, 2012, I sent an email to Mr. Patel confirming my familiarity with Trader Joes and disclosing Mr. Sasson’s involvement with FOS. A true and correct copy of that email is attached as Exhibit E.” (Zhang Decl., ¶ 16, Ex. E.)

In the opposition, Cross-Complainants assert that “[b]ased upon the substantial evidence of misrepresentations and non-disclosures, and breaches of duties by Cross-Defendants during the pendency, at the close, and after the close of escrow, which infected the relationship between Cross-Complainants and Plaintiff in the main action, the claims for equitable indemnity are supported by evidence and Summary Adjudication should be denied as to this cause of action...” (Opp’n at p. 15:3-8.) But Cross-Complainants do not cite any legal authority supporting their apparent argument that Cross-Defendants “infected the relationship between Cross-Complainants and Plaintiff,” such that an equitable indemnity cause of action exists here. (See Opp’n at pp. 14:18-15:8.) As discussed, the doctrine of equitable indemnity applies only among defendants who are jointly and severally liable to the plaintiff. (BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc., supra, 119 Cal.App.4th at p. 852.) “With limited exception, there must be some basis for tort liability against the proposed indemnitor.” (Ibid.) Cross-Complainants do not demonstrate how Cross-Defendants are purportedly jointly and severally liable to Patel Family Trust, or how there is purportedly a basis for tort liability against Cross-Defendants, the alleged indemnitors.

In addition, Cross-Complainants do not dispute that “[o]n May 25, 2012, Mr. Zhang sent an email to Plaintiff disclosing Mr. Sasson’s involvement with FOS.” (See Cross-Complainants’ Response to Cross-Defendants’ Undisputed Material Fact (“UMF”) No. 29.)

Based on the foregoing, the Court finds that Cross-Defendants have met their burden of demonstrating that the first cause of action is without merit, and that Cross-Complainants have failed to raise a triable issue of material fact as to this cause of action. Thus, the Court grants Cross-Defendants’ motion for summary adjudication as to the first cause of action.

In the second cause of action for breach of contract, Cross-Complainants allege, inter alia, that “Cross-Defendants materially breached the Listing and Purchase Agreements by failing to use reasonable efforts to effect a sale of the property for $7,500,000.00. Among other things, Cross-Defendants withheld information from Cross-Complainants that would have increased the purchase price and/or market value of the property, including but not limited to, information concerning national credit tenants—such as Total Woman Spa—interested in leasing the space occupied by FOS, LLC. Cross-Defendants presented these opportunities to Plaintiffs instead, while the Subject Property was still in escrow.” (FACC, ¶ 48.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) Cross-Defendants assert that here, Cross-Complainants cannot prove that Cross-Defendants breached the Listing Agreement or Purchase Agreement.

First, Cross-Defendants assert that “CBRE did not breach the Listing Agreement’s offering brochure requirements.” (Mot. at p. 10:4-5.) As an initial matter, the Court is unable to locate any allegation in the FACC that Cross-Defendants purportedly breached the Listing Agreement’s offering brochure requirements. Cross-Complainants only appear to allege that “[u]nder the Listing Agreement, Cross-Defendants also agreed to produce marketing materials, of a type that is customary for selling similar properties, to help market and sell the Subject Property. The brochure was to contain property facts, photographs, and other relevant information regarding the Subject Property.” (FACC, ¶ 46.) The Court notes that “[t]he pleadings play a key role in a summary judgment motion and set the boundaries of the issues to be resolved at summary judgment. [T]he scope of the issues to be properly addressed in [a] summary judgment motion is generally limited to the claims framed by the pleadings.” (Jacobs v. Coldwell Banker Residential Brokerage Co. (2017) 14 Cal.App.5th 438, 444 [internal quotations and citation omitted].)

In addition, even if Cross-Complainants alleged that Cross-Defendants breached the Listing Agreement by failing to produce an adequate brochure, Cross-Complainants provide evidence that Zhang prepared an offering brochure which he sent to 8300 South Vermont Avenue. L.P. (“Vermont”) for review and approval. (Zhang Decl., ¶ 10.) Zhang states that Vermont approved the brochure. (Ibid.)

Cross-Defendants also assert that “CBRE did not have, nor did it breach, any duty to disclose Total Woman’s Interest in the FOS space.” (Mot. at p. 11:4-5.) Cross-Defendants indicate that the Listing Agreement did not require CBRE to be responsible for leasing the Property. (Zhang Decl., ¶ 12.) Cross-Defendants also assert that “even if CBRE had a duty (which it did not), the record evidence shows that CBRE disclosed Total Woman’s interest to Vermont’s representative, Mr. Gross, who confirmed that Vermont was not interested in replacing FOS with Total Woman.” (Mot. at p. 11:14-16, emphasis omitted.)

Cross-Defendants cite to the following testimony from Zhang’s deposition: “Q[.] Okay. When that other broker called you about Total Woman, what exactly did that broker tell you? A[.] They said that they are looking at this location. Q[.] I’m sorry. I did not understand. A[.] They are looking at this location. Q[.] So Total Woman is looking at the FOS location? A[.] Yes.

(Kennedy Decl., ¶ 14, Ex. 12 (Zhang Depo.) at pp. 153:25-154:9.) Cross-Defendants also cite to the following testimony: “Q[.] Okay. During your initial call with this broker when this broker told you about Total Woman’s interest, what else did you discuss? A[.] I do not recall. Q[.] Okay. A[.] But I pass this information to Barry Gross. Barry Gross told me he is not interested. Q[.] Okay. Let me ask you about that. So you passed that information along to Barry Gross when? A[.] After Total Woman called me. Q[.] So right after Total Woman called you? A[.] Yes. Q[.] Okay. Okay. Okay. And what did Barry Gross tell you? A[.] He said Factory Outlet Store will never leave, he doing good business there, there is no space for lease. Q[.] Okay. So in other words, Mr. Gross told you that Factory Outlet Store was not interested in leaving that space; correct? A[.] Yes. Because there is no space for lease.” (Id. at p. 155:1-22.)[2]

In the opposition, Cross-Complainants assert that “[t]he evidence comprising the testimony of Jennifer Duenas, Barry Gross, and Katia Demiao, is that Cross-Defendants knew material facts, including the interest of the Total Woman Gym/Spa, a national credit tenant, which would have supported the sales price of $7,500,000 or above. However, instead of using this information to secure a sale at $7,500,000, Cross-Defendants breached the contract, by failing and refusing to both disclose this material fact to Cross-Complainants, and failed to use this information to obtain a sales price of $7,500,000.” (Opp’n at p. 10:21-28.) However, Cross-Complainants do not appear to dispute Cross-Defendants’ assertion that Cross-Defendants did not have any duty to disclose Total Woman’s interest in the “FOS space.” (Mot. at p. 11:4-5.)

Cross-Complainants argue that “Cross-Defendants violated their contractual duties by not using this favorable information, and thereby breached their contractual obligations by securing a final sales price of more than $600,000 less than the Listing Agreement sales price.” (Opp’n at p. 11:3-6.) But Cross-Complainants do not appear to identify such purported “contractual duties.” Cross-Complainants do not appear to point to any provisions of the Listing Agreement or Purchase Agreement purportedly requiring Cross-Defendants to disclose to Cross-Complainants Total Woman Spa’s interest in leasing the space occupied by FOS, LLC. Thus, it is unclear how Cross-Defendants allegedly breached such agreements. Cross-Defendants note that “a real estate broker’s duty is derived from the agreement between the broker and client.” (Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 750-751.)

Based on the foregoing, the Court finds that Cross-Defendants have met their burden of demonstrating that the second cause of action of the FACC is without merit, and that Cross-Complainants have failed to raise a triable issue of material fact as to this cause of action. Thus, the Court grants Cross-Defendants’ motion for summary adjudication as to the second cause of action.

In the third cause of action for breach of fiduciary duty, Cross-Complainants allege that “Cross-Defendants breached their fiduciary duty to Cross-Complainants by failing to disclose to Cross-Complainants information that would materially affect the sales price and/or market value of the Subject Property. Instead, Cross-Defendants disclosed that information to Plaintiffs and assisted Plaintiffs in negotiating a purchase price more than $600,000.00 below the price for which Cross-Defendants had agreed with Cross-Complainants to use reasonable efforts to sell the Subject Property. Moreover, if what Plaintiffs have alleged in the underlying complaint is true, Cross-Defendants further breached their fiduciary duty to Cross-Complainants by failing to disclose to Plaintiffs facts concerning Mr. Sasson’s involvement with FOS, LLC.” (FACC, ¶ 56.)

In the motion, Cross-Defendants argue that “there is no evidence CBRE breached its fiduciary duties by tilting the scaled in Plaintiff’s favor during the sales transaction.” (Mot. at p. 14:6-7.) In support of this assertion, Cross-Defendants cite to the following testimony from Mr. Gross’s deposition: “Q[.] And you didn’t think that he was preferring the buyer over the seller, and he’s acting in this dual relationship. You never felt like he was tilting the scales one way or the other, correct?...THE WITNESS: Not that I can recall.” (Kennedy Decl., ¶ 22, Ex. 20 (Gross Depo.) at p. 68:23-69:5.)

In the opposition, Cross-Complainants note that “[u]nder California law, a real estate broker may act as a ‘dual agent’ for both the seller and the buyer in a real property transaction, provided both parties consent to the arrangement after full disclosure. To that end, the law requires brokers to disclose whether they are acting as dual agents and to inform the parties that a broker acting as a dual agent owes fiduciary duties to both buyer and seller.” (Horiike v. Coldwell Banker Residential Brokerage Co. (2016) 1 Cal.5th 1024, 1028 [internal citation omitted].) The Horiike Court found that “[b]ecause Cortazzo, as an agent of Coldwell Banker in the transaction, owed Horiike a duty to learn and disclose all facts materially affecting the value or desirability of the property, the trial court erred in granting nonsuit on Horiike’s breach of fiduciary duty claim against Cortazzo and in instructing the jury that it could not find Coldwell Banker liable for breach of fiduciary duty based on Cortazzo’s conduct.” (Id. at p. 1042.)

Cross-Defendants acknowledge that “[o]n May 29, 2012, Plaintiff and Vermont (including its general partner, Western Holdings) executed a Standard Offer Agreement and Escrow Instructions for the Purchase of Real Estate…which disclosed CBRE’s role as the dual agent for the buyer and seller.” (Cross-Defendants’ UMF No. 30.) In the opposition, Cross-Complainants assert that “the Declarations of Barry Gross…and Katia Damaio…include testimony…that emails discovered years after the transaction closed in July, 2012, establish that Cross-Defendants CBRE and Dennis Zhang, knew material facts about the interest of at least one national credit tenant, Total Women Gym, and other potential tenants, in the space occupied by Factory Outlet Stores, in April and May, 2012, which would have significantly affected the ‘value and desirability’ of the Subject Property. Per the Declarations of Barry Gross and Katia Damaio, neither Cross-Defendant disclosed that material information.” (Opp’n at p. 4:6-16.)

Exhibit “A” to Mr. Gross’s declaration includes a May 31, 2012 email from “Ray” to Zhang stating, “Ok. Dennis, I wanted to get the contact information for total women. Do you have it?” (Amended Gross Decl., ¶ 6, Ex. A.) This Exhibit also includes a May 31, 2012 email from Zhang stating, “[w]ill pass over to you as soon as you take title, another broker called today too, he has a tenant wants this location…” (Ibid.) Exhibit “B” to Mr. Gross’s declaration includes an April 3, 2012 email from Zhang to “Dean Copans” stating, “Total Women wants to take Factory Outlet Store location, Total Women has financials and 15 locations owned a well known person [sic], I am still trying to do this deal with you even I have back up offers [sic]…” (Amended Gross Decl., ¶ 7, Ex. B.) Mr. Gross states in his supporting declaration that “I do not recall the information contained in the April 3, 2012 email or the May 31, 2012 email, being provided…while the escrow was pending with Patel in 2012.” (Amended Gross Decl., ¶ 8.)

In the reply, Cross-Defendants counter that Cross-Complainants “submit a declaration from Mr. Gross, indicating that he ‘do[es] not recall’ seeing two specific emails discussing Total Woman’s interest in leasing the FOS space…This could very well be true, but it is irrelevant, because Mr. Zhang never forwarded those emails to Mr. Gross. Instead, Mr. Zhang and Mr. Gross had a verbal conversation about Total Woman during which Mr. Gross informed Mr. Zhang that FOS would not leave the leased space…Mr. Gross does not dispute this.” (Reply at p. 5:14-20.) Such conversation is discussed above in connection with Cross-Defendants’ arguments pertaining to the breach of contract cause of action. Indeed, Cross-Complainants do not appear to dispute that Mr. Gross had a conversation with Zhang concerning Total Woman’s interest in the FOS, LLC space.

Cross-Complainants also cite to the deposition transcript of Jennifer Duenas, who was produced as Cross-Complainants’ PMQ/PMK in this action. (Amended Evans Decl., ¶ 3.) Cross-Complainants cite to the following testimony from Ms. Duenas’s deposition: “Q[.] On behalf of 8300, did 8300 know about the interest of Total Woman and/or any other tenant as of the time of this deal in April through May of 2012?...A[.] we were unaware of any tenants that approached Dennis Zhang during the listing period or the escrow period that they expressed interest. We were not made aware of any of that.” (Amended Evans Decl., ¶ 9, Ex. 7 (Duenas Depo.) at p. 318:4-17.) Ms. Duenas further testified that “[w]hen we found out later through discovery that Ray Patel was interested in Total Woman Spa and that there was interest from tenants at that time, we would have had more of a leverage to negotiate and stand our ground when we were at the seven million when he asked for a discount at his appraisal -- due to his appraisal.” (Amended Evans Decl., ¶ 15, Ex. 13 (Duenas Depo.) at p. 282:17-23.) In the reply, Cross-Defendants do not appear to address Ms. Duenas’s testimony.

In addition, the parties acknowledge that “Ray [Patel] e-mailed Dennis Zhang on June 19 and told him, ‘Dennis, you conducted the sale of 6401 with creativity and excellence today.’…Dennis Zhang replies back and tells him on the next day, ‘Ray, I did this only for you. I’m looking to do more transactions with you in the future…” (Amended Evans Decl., ¶ 14, Ex. 12 (Duenas Depo.) at p. 341:15-25; Mot. at p. 14:18-21.) Cross-Defendants assert that “[t]his evidence is nowhere near sufficient to prove a breach of fiduciary duty.” (Mot. at p. 14:22.) However, Cross-Defendants do not appear to cite to any legal authority to support such assertion.

Cross-Complainants assert that Zhang’s email further “substantiate[s] the loyalty expressed by Mr. Zhang to Ray Patel, the Buyer, in conflict with the duties owed to the Seller…” (Opp’n at p. 6:23-24.) In Horiike v. Coldwell Banker Residential Brokerage Co., supra, 1 Cal.5th at page 1030, the California Supreme Court noted that “[j]udicial decisions had long made clear that real estate agents owed sellers the same obligation of undivided service and loyalty that [the law] imposes on a trustee in favor of his beneficiary.” (Internal quotations omitted.) The Horiike Court further noted that “[t]he statute also requires real estate agents to provide their clients with a form entitled ‘Disclosure Regarding Real Estate Agency Relationship.’…The form, the contents of which are prescribed by the statute, states that ‘[a] real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer,’ and that, ‘[i]n a dual agency situation,’ the agent owes ‘[a] fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the Seller or the Buyer.’ (Id., § 2079.16.).” (Id. at p. 1031.)

Based on the foregoing, the Court finds that Cross-Complainants have raised a triable issue of material fact regarding their third cause of action for breach of fiduciary duty. Thus,

the Court denies Cross-Defendants’ motion for summary adjudication as to the third cause of action.

Cross-Defendants assert that Cross-Complainants’ negligence cause of action is barred by the economic loss rule. The economic loss rule “functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties…[q]uite simply, the economic loss rule prevent[s] the law of contract and the law of tort from dissolving one into the other…” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922 [internal quotation and citations omitted].) “In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Ibid.)

Cross-Defendants assert that the negligence cause of action seeks purely economic losses that do not go above and beyond alleged broken contractual promises. In the fourth cause of action for negligence, Cross-Complainants allege, inter alia, that “Cross-Defendants breached their duty of care to Cross-Complainants by, among other things, failing to disclose to Cross-Complainants information that would materially affect the sales price and/or market value of the Subject Property and failing to use reasonable efforts to sell the Subject Property for $7,500,000.00 as agreed under the Listing Agreement.” (FACC, ¶ 60.)

In the opposition, Cross-Complainants argue that “[t]he Fourth Cause of Action in the First Amended Cross-Complaint states a negligence claim based upon a breach of duty of due care for the conduct of Cross-Defendants in this Real Estate Transaction.” (Opp’n at p. 9:15-17.)

Cross-Complainants cite to Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 558-559, where “[t]he trial court found that while representing plaintiffs in a real estate purchase, appellant’s employee David Seigal breached his fiduciary duty of care and committed constructive fraud by making false representations to plaintiffs that the property they purchased was more than one acre in size and that it could be subdivided where, in fact, the property was less than one acre and could not be subdivided.” The Court of Appeal affirmed the judgment. (Id. at p. 559.) The Salahutdin Court noted that “the disclosure duty is a general duty imposed on the agent, and whether a breach of that duty constitutes negligence or fraud depends on the particular circumstances of each case. Consequently, there is no clear line establishing when a fiduciary’s breach of the duty of care will be merely negligent and when it may be characterized as constructive fraud.” (Id. at p. 563 [internal citation omitted].) However, the Salahutdin case does not concern the application of the economic loss rule. Thus, the Court does not see how it is relevant to Cross-Defendants’ argument that the negligence cause of action is barred by the economic loss rule.

Cross-Complainants also assert that “[t]here is no limit to recovery of economic losses for a professional negligence claim against a licensed real estate broker based upon the foregoing non-disclosures and misrepresentations, under the above authorities.” (Opp’n at p. 10:11-14.) In support of this assertion, Cross-Complainants cite to Smith v. Rickard (1988) 205 Cal.App.3d 1354. Cross-Complainants cite to page 1364 of the opinion, in which the Court of Appeal noted that “[a]n agent must exercise reasonable skill and care for the benefit of the principal in the performance of agency duties, and will be liable for any damages suffered by the principal as a result of the agent’s negligence. Those duties may include inspecting the property and disclosing any material defects to the principal.” (Smith v. Rickard, supra, 205 Cal.App.3d at p. 1364 [internal citation omitted].) However, the Smith case also does not discuss the economic loss rule.

Cross-Complainants also cite to Civil Code section 3333, which provides that “[f]or the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” The Court does not see how this statute purportedly demonstrates that the economic loss rule does not bar Cross-Complainants’ negligence cause of action.

Lastly, Cross-Complainants cite to CACI No. 4101, which concerns the elements of a claim for breach of the fiduciary duty to use reasonable care. Cross-Complainants also cite to CACI No. 400, which concerns the elements of a claim for negligence. The Court also does not see how these Judicial Council of California Civil Jury Instructions demonstrate that the economic loss rule does not bar Cross-Complainants’ negligence cause of action.

The Court does not find that Cross-Complainants have shown that their negligence cause of action is not barred by the economic loss rule. Based on the foregoing, the Court finds that Cross-Defendants have met their burden of demonstrating that the fourth cause of action is without merit, and that Cross-Complainants have failed to raise a triable issue of material fact as to this cause of action. Thus, the Court grants Cross-Defendants’ motion for summary adjudication as to the fourth cause of action.

Cross-Defendants assert that the unjust enrichment cause of action fails because no such cause of action exists in California.

Cross-Defendants cite to Castillo v. Toll Bros., Inc. (2011) 197 Cal.App.4th 1172, 1209-1210, where the Court of Appeal noted that “[t]he trial court granted summary adjudication of the claims for unjust enrichment on the ground California does not recognize unjust enrichment as a separate cause of action. (See McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 [20 Cal. Rptr. 3d 115].) Plaintiffs do not dispute this ruling on appeal.” In McBride v. Boughton, supra, 123 Cal.App.4th at page 387, cited in Castillo, the Court of Appeal noted that “[u]njust enrichment is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies…It is synonymous with restitution…Unjust enrichment has also been characterized as describing the result of a failure to make restitution…” (Internal quotations and citations omitted.)

In the opposition, Cross-Complainants assert that “[a] claim for unjust enrichment for restitution is expressly recognized in California.” (Opp’n at p. 13:23-24.) Cross-Complainants cite to Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238, where the Court of Appeal noted that “[g]enerally, one who is unjustly enriched at the expense of another is required to make restitution. The elements of a cause of action for unjust enrichment are simply stated as ‘receipt of a benefit and unjust retention of the benefit at the expense of another.’” (Internal citations omitted, emphasis added.)

Based on the foregoing, the Court does not find that Cross-Defendants have met their burden of demonstrating that “Cross-Complainants’ unjust enrichment claim fails because no such cause of action exists in California.” (Mot. at p. 15:1-2.) Thus, the Court denies Cross-Defendants’ motion for summary adjudication as to the sixth cause of action for unjust enrichment.

Lastly, Cross-Defendants assert that “Cross-Complainants’ claims for violation of the UCL and declaratory relief fail as a matter of law because they are derived from faulty predicate claims.” (Mot. at p. 15:11-13.)

As to the fifth cause of action, Cross-Defendants assert that “[b]ecause Cross-Complainants’ breach of contract, negligence, and breach of fiduciary duty claims fail, so does their UCL claim.” (Mot. at p. 15:18-19.) As set forth above, the Court denies Cross-Defendants’ motion for summary adjudication as to Cross-Complainants’ third cause of action for breach of fiduciary duty. Thus, the Court does not find that Cross-Defendants have met their burden of demonstrating that the fifth cause of action is without merit and denies Cross-Defendants’ motion for summary adjudication as to the fifth cause of action.

In the seventh cause of action for declaratory relief, Cross-Complainants allege that “Cross-Complainants contend they are entitled to indemnity from Cross-Defendants for the injuries and damages allegedly suffered by Plaintiffs, and for reasonable attorneys’ fees and costs incurred in defending Plaintiffs’ action against Cross-Complainants. Cross-Complainants are informed and believe that Cross-Defendants contends to the contrary.” (FACC, ¶ 74.)

Cross-Complainants further allege that they “seek a declaration that Cross-Defendants, as the dual broker and agent of Plaintiffs and Cross-Complainants under the Purchase Agreement, is in breach of that agreement and of their fiduciary duties owed to Cross-Complainants if, as Plaintiffs have alleged, Cross-Defendants in fact failed to disclose the facts concerning Mr. Sasson’s relationship to FOS, Inc. and FOS, LLC to Plaintiffs, and that Cross-Complainants are entitled to be indemnified by Cross-Defendants for all losses and liabilities resulting from Plaintiffs’ action against Cross-Complainants.” (FACC, ¶ 75.) In the motion, Cross-Defendants assert that “[t]he undisputed facts demonstrate that Cross-Defendants disclosed such information, and thus did not violate any duty nor breached any agreement. The declaratory relief claim, therefore, necessarily fails.” (Mot. at p. 16:1-3.)

As discussed above in connection with the first cause of action for equitable indemnity, Zhang states in his supporting declaration that “[o]n May 25, 2012, I sent an email to Mr. Patel confirming my familiarity with Trader Joes and disclosing Mr. Sasson’s involvement with FOS.” (Zhang Decl., ¶ 16, Ex. E.)

In the opposition, Cross-Complainants only assert that “[t]he Seventh Cause of Action frames the issues based upon the breaches of contract and fiduciary duties which are now supported by the evidence supplied in this Opposition. There were breaches of duties as established by the Opposition, and there is a ripe controversy for purposes of a Declaratory Relief Action under C.C.P. Section 1060. Because Cross-Complainant has otherwise supported claims for breach of contractual and legal duties arising from this relationship, the claim for Declaratory Relief is supported by admissible evidence and this claim should overcome Summary Adjudication as well.” (Opp’n at p. 14:8-15.)

But as discussed, the declaratory relief cause of action alleges that “Cross-Complainants seek a declaration that Cross-Defendants, as the dual broker and agent of Plaintiffs and Cross-Complainants under the Purchase Agreement, is in breach of that agreement and of their fiduciary duties owed to Cross-Complainants if, as Plaintiffs have alleged, Cross-Defendants in fact failed to disclose the facts concerning Mr. Sasson’s relationship to FOS, Inc. and FOS, LLC to Plaintiffs, and that Cross-Complainants are entitled to be indemnified by Cross-Defendants for all losses and liabilities resulting from Plaintiffs’ action against Cross-Complainant.” (FACC, ¶ 75, emphasis added.) In the opposition, Cross-Complainants do not address Cross-Defendants’ point that Zhang disclosed Mr. Sasson’s involvement with FOS. (Opp’n at p. 14:8-15.) In addition, as noted by Cross-Defendants in the reply, it is undisputed that “[o]n May 25, 2012, Mr. Zhang sent an email to Plaintiff disclosing Mr. Sasson’s involvement with FOS.” (See Cross-Complainants’ Response to Cross-Defendants’ UMF No. 29.)

Based on the foregoing, the Court finds that Cross-Defendants have met their burden of demonstrating that the seventh cause of action is without merit, and that Cross-Complainants have failed to raise a triable issue of material fact as to this cause of action. Thus, the Court grants Cross-Defendants’ motion for summary adjudication as to the seventh cause of action.

Based on the foregoing, Cross-Defendants’ motion for summary judgment is denied.

Cross-Defendants’ motion for summary adjudication is granted as to the first, second, fourth, and seventh causes of action. Cross-Defendants’ motion for summary adjudication is denied as to the third, fifth, and sixth causes of action.

[1]In the Patel Family Trust’s FAC in the instant action, they allege, inter alia, that “with the intent to induce Patel Family Trust’s purchase of the Subject Property, Defendants 8300 S. Vermont, Western Holdings, Sasson, and FOS, LLC intentionally and actively concealed Sasson’s interest in the FOS entities.” (FAC, ¶ 70.) Patel Family Trust further alleges that “8300 S. Vermont, Western Holdings, Sasson, and FOS, LLC also intentionally failed to disclose facts materially altering the value and/or desirability of the Subject Property, including but not limited to: a. FOS, LLC was not a good faith tenant, and only entered into the FOS Lease Agreement with 8300 S. Vermont, executed the First Amendment to the FOS Lease Agreement, and executed the Estoppel Certificate, to fictitiously increase the total rental income for the Subject Property to facilitate the marketing of the Subject Property for sale…” (FAC, ¶ 70(a).)

[2]In his supporting declaration, Barry Gross states, inter alia, that “[f]rom approximately 2009 through the first quarter of 2014, which includes the time frame of the real estate transaction that is the subject of this lawsuit, I served as legal counsel, real estate consultant and occasional real estate agent for Eli Sasson and various entities under his ownership, including 8300 S Vermont, L.P….” (Amended Gross Decl., ¶ 5.)

Superior Court of California

County of Los Angeles

Department 50