Judge: Theresa M. Traber, Case: 21STCV24538, Date: 2023-12-01 Tentative Ruling
Case Number: 21STCV24538 Hearing Date: December 5, 2023 Dept: 47
MITTAL
V. STARBIANO, LLC, Case No. 21STCV24538
Plaintiff/Cross-Defendant’s
Motion in Limine
No. 1, seeking exclusion of all evidence,
argument, etc., in support of Defendant’s claim or request to rescind the April
5, 2021 Purchase Agreement.
TENTATIVE
RULING: Denied.
Plaintiff’s
argument that Defendant embraced a judicial admission that the Purchase and
Sales Agreement (PSA), described in the Complaint is a valid, enforceable
contract is not well-taken. Defendant made
clear in its Answer and Cross-Complaint that it disputes Plaintiff’s
construction of the PSA, in that Plaintiff contends that it is a contract to
sell both the Ambassador Hotel and the adjacent parking lot, while Defendant
argues the PSA was intended to effectuate the sale of the Hotel alone. Thus, the Verified Answer alleges, in response
to Plaintiff’s cause of action for breach of contract, that “the Subject
Property of the contract, the ‘Purchase Agreement’ (‘PSA’), was always intended
to only be one lot which consisted of a 65-unit apartment complex (the ‘Hotel’)
and not the Hotel and the adjoining parking lot,” and that the Hotel located at
817 N. Fries Avenue in Wilmington is “only associated with APN: 7416-031-017
and is not legally described as stated in the Complaint.” (Verified Answer, ¶¶ 6-7.) The Answer also asserts that Defendant
performed all acts require under the PSA to sell the Hotel and, thus, did not
breach the PSA. (Id., ¶ 20.) Read in conjunction with the Answer, the
breach of contract claim against Plaintiff in the Cross-Complaint appears to
assert that Plaintiff and Cross-Defendant breached the PSA to sell the Hotel
alone, not the PSA as construed by Plaintiff to sell the Hotel and parking lot
together. This interpretation of the
Cross-Complaint is also consistent with its allegation that “David O’Keefe,
during the course and scope of this employment with Marcus & Millichap
drafted the contract/”Purchase Agreement” attached as Exhibit A, misstating the
APN for the Subject Property 817 N. Fries Avenue, Wilmington, Ca as APN:
7416-031-016 when the correct APN for the Subject Property was APN:
7416-031-017.” (Cross-Complaint,
p. 4.) Under these circumstances,
the Court cannot find that Plaintiff has asserted a judicial admission in its Answer
or Cross-Complaint that it is suing on the PSA as interpreted by Plaintiff. To the contrary, Defendant’s pleadings
reflect a view that the PSA should be viewed as a contract to sell the Hotel
alone and, thus, is not inconsistent with a request to rescind the PSA in the
event it is interpreted as Plaintiff suggests.
Plaintiff’s
second argument is that Defendant has waived any right to rescission because it
was not asserted as an affirmative defense in the Answer. It is true that there is no affirmative
defense of rescission explicitly as such in Defendant’s Answer. Nor is there any cause of action for
rescission asserted in the Cross-Complaint.
On the other hand, Civil Code § 1693 provides, in relevant part: “When
relief based upon rescission is claimed in an action or proceeding, such relief
shall not be denied because of delay in giving notice of rescission unless such
delay has been substantially prejudicial to the other party.” (Civil Code § 1693.) Thus, if Defendant were to request such
relief, the question would be whether Plaintiff would suffer any prejudice if
the Court were to permit Defendant to seek the equitable remedy of rescission
in the event it is not able to convince the Court of the defense interpretation
of the PSA. The Court finds there is no
evidence of prejudice to Plaintiff that would bar a rescission as an
alternative prayer for relief.
Although
no coherent claim or defense for rescission has been asserted, Defendant has offered
factual allegations that could support such equitable relief. Thus, for example, rescission may be sought
where the rescinding party’s consent was “given by mistake, or obtained through
. . . fraud . . . or with the connivance of the party as to whom he rescinds.” (Civil
Code § 1689(b).) Defendant’s
Cross-Complaint includes an allegation that numerical identification of the
property listed in the PSA was a mistake by the parties’ joint broker. (Cross-Complaint, p. 4.) If true, such an allegation could support a
prayer for rescission. Similarly, Defendant
asserts “unclean hands” in the nature of “conniving” under Civil Code 1689(b) by
contending in the Answer that the PSA was “always intended to only be one lot
which consists of the 65-unit apartment complex,” so Plaintiff comes to the
Court with unclean hands seeking two properties because “Plaintiff in fact
contracted for the purchase of the Hotel only at the time the Purchase
Agreement was executed.” (Answer, pp. 2,
5.) While denominated an Equitable
Estoppel defense, Defendant also avers that Plaintiff’s claims are “barred by
reason of acts, omissions, representations, and courses of conduct by Plaintiff,
upon which Defendant was reasonably led to rely to his detriment” – which
invokes the language of a misrepresentation by Plaintiff. (Id., p. 5.) Defendant also alleges that Plaintiff
breached the terms of the parties’ agreement “by changing it’s [sic] terms from
the purchase of the Hotel to the purchase of the Hotel and Parking Lot,” which
again charges Plaintiff with an improper scheme akin to fraud. In addition to these allegations, the Answer
asserts affirmative defenses for failure of consideration and lack of
consideration based on allegations that “Plaintiff failed to tender sufficient
consideration to purchase both the Hotel and Parking Lot,” and that under
Plaintiff’s construction of the PSA, Defendant was required to sell both
properties, even though “Plaintiff was not required to pay for both the Hotel
and Parking Lot.” (Id., pp. 5-6.)
These allegations are supportive of grounds for rescission based on a
failure of consideration under section 1689.
(Civil Code § 1689(b)(2)-(4).) While
not a model of clarity, Defendant’s Answer, as supplemented by its
Cross-Complaint, preserves its right to assert a prayer for rescission as an
alternative form of relief.
Rescission may be
ordered as an equitable remedy available pursuant to the Court’s equity
jurisdiction. “’The fundamental
principle underlying that jurisprudence is that in such actions the court
should do complete equity between the parties and to that end may grant any
monetary relief necessary to do so. . . . Rescission is intended to restore the
parties as nearly as possible to their former positions and to bring about
substantial justice by adjusting the equities between the parties despite the
fact that the status quo cannot be exactly reproduced. . . . Rescission extinguishes the contract (... §
1688), terminates further liability, and restores the parties to their former
positions by requiring them to return whatever consideration they have
received. . . . Thus, the [r]elief given in rescission cases—restitution and in
some cases consequential damages—puts the rescinding party in the status quo
ante, returning him to his economic position before he entered the contract.” (Wong v. Stoler (2015) 237 Cal. App.
4th 1375, 1386 [citations and internal quotations omitted].) Whether to grant rescission rests within the
sound discretion of the trial court to be exercised in a manner that is
consistent with the facts and circumstances of the case. (Id., at p. 1387.) Here, the Court will consider all evidence
submitted by the parties to determine the strength of their claims and defenses
and order whatever remedies are appropriate to compensate the wronged parties
and do equity.
Plaintiff’s
Motion in Limine
No. 2, seeking exclusion of all evidence,
argument, etc., in support of Defendant’s claim or request to rescind the April
5, 2021 Purchase Agreement.
TENTATIVE
RULING: Denied.
For
the reasons explained above, the Court rejects Plaintiff’s contention that Defendant
has made a judicial admission by seeking the enforcement of the PSA, as
construed by Plaintiff. Similarly, the
Court concludes that Defendant’s responsive pleadings adequately raise the
allegation that there was a mutual misstate that transformed the parties’ PSA
into a contract that did not manifest their mutual intent.
To reiterate the
relevant allegations discussed above, Defendant’s Cross-Complaint includes an
allegation that numerical identification of the property listed in the PSA was
a mistake by the parties’ joint broker, that imported a reference to the
parking lot although the parties’ deal was intended to be solely for sale of
the Hotel. (Cross-Complaint, p. 4.) The Answer emphasizes that the PSA was
“always intended to only be one lot which consists of the 65-unit apartment
complex,” and that the terms of the PSA were improperly changed to reflect the sale
of both the Hotel and Parking Lot. (Answer,
pp. 2, 5.) These allegations are
sufficient to support a request for the alternate remedy of reformation, should
the evidence support such a result. As
the Supreme Court has held, “[t]o raise mutual mistake as a defense, the
aggrieved party does not have to ask ‘for a reformation of the contract or’
have ‘the same reformed.’ . . . The party need only allege and prove mutual
mistake in order to avoid enforcement of the erroneous terms.” (Hess v. Ford Motor Co. (2002) 27 Cal.
4th 516, 525.) This result is consistent
with the Court’s duty “to reform the writing to conform with the mutual
understanding of the parties at the time they entered into it, if such an
understanding exists,” while rejecting any suggestion that the Court craft a
new contract. (Id., at p. 524.)
Plaintiff’s Motion in Limine No. 3, seeking exclusion
of all parol evidence regarding the terms and interpretation of the April 5,
2021 Purchase Agreement.
TENTATIVE
RULING: Denied.
Plaintiff’s motion is
contrary to the law governing the interpretation of written contracts. The Court of Appeal for the Second District
recently described the “well established” rules for interpreting a contract, as
follows:
“The
interpretation of a contract is a judicial function. [Citation.] In engaging in
this function, the trial court ‘give[s] effect to the mutual intention of the
parties as it existed’ at the time the contract was executed. [Citation.]
Ordinarily, the objective intent of the contracting parties is a legal question
determined solely by reference to the contract's terms. [Citation.]” (Wolf v.
Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1125-1126,
76 Cal.Rptr.3d 585 (Wolf).)
“The
court generally may not consider extrinsic evidence of any prior agreement or
contemporaneous oral agreement to vary or contradict the clear and unambiguous
terms of a written, integrated contract. [Citations.] Extrinsic evidence is
admissible, however, to interpret an agreement when a material term is
ambiguous. [Citations.]” (Wolf, supra, 162 Cal.App.4th at p. 1126, 76
Cal.Rptr.3d 585; see also Pacific Gas & Electric Co. v. G.W. Thomas Drayage
& Rigging (1968) 69 Cal.2d 33, 39-40, 69 Cal.Rptr. 561, 442 P.2d 641 [if
extrinsic evidence reveals that apparently clear language in the contract is,
in fact, “susceptible to more than one reasonable interpretation,” then
extrinsic evidence may be used to determine the contracting parties’ objective
intent].)
“The
interpretation of a contract involves ‘a two-step process: First the court
provisionally receives (without actually admitting) all credible evidence
concerning the parties’ intentions to determine “ambiguity,” i.e., whether the
language is “reasonably susceptible” to the interpretation urged by a party. If in light of the extrinsic evidence the
court decides the language is “reasonably susceptible” to the interpretation
urged, the extrinsic evidence is then admitted to aid in the second step –
interpreting the contract. [Citation.]’ [Citation.]” (Wolf v. Superior
Court (2004) 114 Cal.App.4th 1343, 1351, 8 Cal.Rptr.3d 649 (Wolf II);
[citations].)
“When
there is no material conflict in the extrinsic evidence, the trial court
interprets the contract as a matter of law. [Citations.] This is true even when
conflicting inferences may be drawn from the undisputed extrinsic evidence
[citations] or that extrinsic evidence renders the contract terms susceptible
to more than one reasonable interpretation. [Citations.] If, however, there is
a conflict in the extrinsic evidence, the factual conflict is to be resolved by
the jury. [Citations.]” (Wolf, supra, 162 Cal.App.4th at pp. 1126-1127, 76
Cal.Rptr.3d 585; see id. at p. 1134, 76 Cal.Rptr.3d 585 [“that extrinsic
evidence may reveal an ambiguity subjecting a contract to more than one
reasonable interpretation does not mean resolution of that ambiguity is necessarily
a jury question. Absent a conflict in the evidence, the interpretation of the
contract remains a matter of law”].)
(Brown v.
Goldstein (2019) 34 Cal. App. 5th 418, 432-33 [emphasis added].) Thus, contrary to Plaintiff’s suggestion, the
Court’s consideration of relevant parol is critical to any resolution of the contract
dispute between the parties here.
Plaintiff’s
Motion in Limine
No. 4, seeking exclusion of settlement negotiations
that occurred after Defendant failed to close escrow.
TENTATIVE
RULING: Denied, without prejudice to specific objections raised as
to settlement communications used to prove or contest liability.
Under subdivision (a)
of Evidence Code section 1152, [e]vidence that a person has, in compromise or
from humanitarian motives, furnished or offered or promised to furnish money or
any other thing, act, or service to another who has sustained or will sustain
or claims that he or she has sustained or will sustain loss or damage, as well
as any conduct or statements made in negotiation thereof, is inadmissible to
prove his or her liability for the loss or damage or any part of it.” Similarly, Evidence Code section 1154 provides
that “[e]vidence that a person has accepted or offered or promised to accept a
sum of money or any other thing, act, or service in satisfaction of a claim, as
well as any conduct or statements made in negotiation thereof, is inadmissible
to prove the invalidity of the claim or any part of it.”
“Both provisions are
based on the public policy in favor of the settlement of disputes without
litigation and are intended to promote candor in settlement negotiations: ‘The
rule prevents parties from being deterred from making offers of settlement and
facilitates the type of candid discussion that may lead to settlement.’” (Zhou v. Unisource Worldwide (2007)
157 Cal. App. 4th 1471, 1475.) These
statutes have been interpreted broadly to sweep in conduct and statements may
in the context of settlement discussions.
(Id.)
Depending on the
content of the communication, however, it may be interpreted as a demand for
payment in the nature of a bill rather than an invitation to compromise a claim. (Id., at p. 1477 [discussing
cases].) The question in each case is
whether the communication at issue is “connected” with settlement discussions
or “independent” of them. (Caira v.
Offner (2005) 126 Cal. App. 4th 12, 36.) A related question is whether the
targeted interaction concerns the liability or invalidity of the dispute at
issue in the case or a settlement discussion about a separate dispute. (Zhou v. Unisource Worldwide, supra, at
p. 1478.)
Because neither party
has submitted the evidence Plaintiff seeks to exclude, the Court cannot
determine whether the communications were sent in connection with settlement
discussions related to the dispute in this case or independent of any such
negotiations. Nor can the Court assess
whether they would be offered to support or undermine liability in violation of
the Evidence Code provisions, or are admissible for some other purpose.