Judge: Theresa M. Traber, Case: 24STCV09339, Date: 2025-02-11 Tentative Ruling
Case Number: 24STCV09339 Hearing Date: February 11, 2025 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: February 11, 2025 TRIAL DATE:
NOT SET
CASE: Pacific Capital Quebec I, LLC v. 6380
Quebec LLC, et al.
CASE NO.: 24STCV09339 
MOTION
TO EXPUNGE LIS PENDENS
MOVING PARTY: Defendant Easy Financial, LLC
RESPONDING PARTY(S): Plaintiff Pacific
Capital Quebec I, LLC
CASE
HISTORY:
·
04/12/24: Complaint filed.
·
10/28/24: Case deemed related to 6380 Quebec,
LLC v. Easy Financial, LLC et al. Case No. 23STCV13312 [lead case].
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
This is a real property action. Plaintiff alleges that Defendants
conspired to usurp control of a parcel of real property by inducing Plaintiff
to mortgage the property, altering the payment scheme on the loan to induce
default, executing a forged quitclaim deed on the property, and foreclosing on
the property.
Defendant Easy Financial, LLC moves
to expunge a notice of lis pendens recorded against the property that is the
subject of this action.
TENTATIVE RULING:
Defendant’s Motion to Expunge Lis
Pendens is GRANTED.
DISCUSSION:
Defendant Easy Financial, LLC moves
to expunge a notice of lis pendens recorded against the property that is the
subject of this action.
//
Legal Standard
A lis pendens is a recorded
document that gives constructive notice that an action affecting title or right
to possession of real property has been filed; it may be filed by any party
that asserts a real property claim to that real property. (Kirkeby v.
Sup. Ct. (2004) 33 Cal.4th 642, 647.) A person with an interest in the
affected real property can petition the court to expunge the lis pendens. (Code
Civ. Proc. § 405.30.) The court must order the lis pendens expunged if it finds
that (a) there is no real property claim, (b) the claimant did not establish by
a preponderance of the evidence the probable validity of the real property
claim, or (c) adequate relief can be secured by giving an undertaking. (Code
Civ. Proc. §§ 405.31- 405.33.) A real property claim is a cause of action that,
if successful, would affect title to or the right of possession of specific
real property or the use of an easement identified in a
pleading. (Code Civ. Proc. § 405.4.)
Defendant’s Requests for Judicial Notice
Defendant
requests that the Court take judicial notice of (1) a January 3, 2024 order in
the related case granting a Motion to Expunge Lis Pendens and (2) the February
15, 2024 Court of Appeal Order denying 6380 Quebec LLC’s petition for writ of
mandate on that ruling. These materials are not relevant to this motion, as
they concern a lis pendens recorded by a separate party in a separate action.
Defendant’s requests for judicial notice are DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [“[J]udicial notice .
. . is always confined to those matters which are relevant to the issue at
hand.”].)
Plaintiff’s Requests for Judicial Notice
Plaintiff requests
that the Court take judicial notice of (1) a Grant Deed recorded September 17,
2020 transferring title to property at 6380 Quebec Dr. Los Angeles CA 90068 to
Plaintiff; (2) a Deed of Trust recorded on September 17, 2020 against the
property; (3) a Quitclaim Deed purporting to transfer the property from
Plaintiff to 6380 Quebec, LLC recorded February 28, 2022; (4) the January 12,
2022 Articles of Organization for 6380 Quebec LLC filed with the California
Secretary of State; and (5) the Statement of Information filed by the same
entity on the same date with the Secretary of State. Plaintiffs’ Requests are
GRANTED pursuant to Evidence Code section 452(c) (official acts).
Defendant’s Improper Legal Citations
As
Plaintiff notes in its opposition to this motion, Defendant’s moving papers are
riddled with improper and invalid legal citations. At several points, Defendant
purports to offer quotations from cited authority where the quoted language,
although in accord with the citation, is not actually present in
the cited text. (E.g., Mot. p.8:24-25 [nonexistent quotation from Mix v.
Sodd (1981) 126 Cal. App.3d 386, 390]; p.10:12-14 [citation from WestLaw
headnote offered as quotation from Code of Civil Procedure section 1060].) In
at least one instance, Defendant simply offers a facially incorrect citation to
Code of Civil Procedure section 405.20. (Mot. p.7:6-7.) That said, the authorities
themselves mostly support the positions for which they are offered, and the
contention improperly citing to section 405.20 is merely a restatement of the
general sentiment that a lis pendens is a cloud on title to real property.
Of greater concern, however, is
Defendant’s citation to Kirkeby v. Superior Court (2003) 109 Cal.App.4th
1275, for the proposition that a complaint for money damages seeking to set
aside a fraudulent conveyance is not a real property claim. (See Motion
p.7:24-8:2.) This is not merely another example of a nonexistent quotation, as
a cursory investigation reveals that this authority was expressly overturned by
our Supreme Court in Kirkeby v. Sup. Ct. (2004) 33 Cal.4th 642, at 649,
which held that “a fraudulent conveyance action seeking avoidance of a transfer
[…] clearly ‘affects title to or the right to possession of’ […] real property
and is therefore a real property claim for the purposes of the lis pendens
statutes.” No explanation is offered in Defendant’s reply papers for the
omission of this authority, or, indeed, for any of the other improper citations
offered by Defendant.
As an officer of the Court, counsel
for Defendant was obligated to disclose this superseding contrary authority and
to properly represent the legal authorities cited in support of Defendant’s
position. (Cal. Rules of Prof. Conduct 3.3.) Defendant’s counsel has violated
that obligation.
Failure to Assert Real Property Claim
Defendant
brings this motion on the basis that Plaintiff’s complaint does not properly
allege a real property claim on which a lis pendens can be grounded.
Code of Civil Procedure section
405.31 requires expungement of a lis pendens “if the court finds that
the pleading on which the notice is based does not contain a real property
claim.” (Code Civ. Proc. § 405.31.) As our Supreme Court has stated:
In making this determination, the court
must engage in a demurrer-like analysis. Rather than analyzing whether the
pleading states any claim at all, as on a general demurrer, the court must
undertake the more limited analysis of whether the pleading states a real
property claim. Review involves only a review of the adequacy of the pleading
and normally should not involve evidence from either side, other than possibly
that which may be judicially noticed as on a demurrer.
(Kirkeby v. Sup. Ct. (2004) 33 Cal.4th 642, 647-48
[internal citations and quotations omitted].) Unlike most other motions, the
burden of proof in a motion to expunge lis pendens is on the party opposing
the motion, who must show the existence of the real property claim. (Id.
at 647.)
Plaintiff’s
Complaint alleges six causes of action: two causes of action for quiet title
grounded in an allegedly fraudulent February 2022 quitclaim deed (Complaint ¶¶
25-28 [first cause of action]) and the October 2022 foreclosure sale (¶¶ 39-41
[fourth cause of action]); two causes of action for declaratory relief
concerning the same deed (¶¶ 29-32 [second cause of action]) and sale (¶¶ 42-45
[fifth]); one cause of action for breach of fiduciary duty (¶¶ 33-38 [third])
and one cause of action for breach of contract (¶¶ 46-51 [sixth].)
The first
cause of action alleges that the 2022 foreclosure is invalid to the extent that
it is premised on the February 2022 quitclaim deed transferring the subject
property to 6380 Quebec, LLC, asserting that the quitclaim deed was a forgery.
(Complaint ¶¶ 25-28.) The second cause of action seeks a judicial determination
that the quitclaim deed is forged. (Id. ¶¶ 29-32.) Defendant’s invalid
citation notwithstanding, these causes of action assert real property claims on
their face. (Kirkeby v. Sup. Ct. (2004) 33 Cal.4th 642, 649.) The fourth
and fifth causes of action, which attack the foreclosure sale of the property
and seek the return of the property, are likewise real property claims on their
face. (Complaint ¶¶ 39-45.) On these four causes of action alone, Defendant
would not be entitled to expungement for failure to plead a real property
claim.
As to the
third cause of action for breach of fiduciary duty and sixth cause of action
for breach of contract, Defendant asserts that these causes of action are not
real property claims because they seek monetary damages, rather than affecting
title to real property. The Court concurs. Contrary to Plaintiff’s argument in
opposition, the Complaint plainly specifies in the prayer for relief that
monetary damages are being sought in connection with the fiduciary duty and
contract claims, while also seeking restoration of title to the property.
(Complaint Prayer Nos. 1-5.) Moreover, the Complaint specifically demands
restoration of title in the substantive allegations of the first and fourth
causes of action for quiet title, but not in the third and sixth causes of
action. (See Complaint ¶¶ 28, 41.) The Court therefore finds that the third and
sixth causes of action are not “real property claims.” Thus, the Court will
confine its analysis concerning the probable validity of claims to the first,
second, fourth, and fifth causes of action.
Probable Validity of Real Property Claims
Defendant’s
alternative basis for this motion is that Plaintiff cannot demonstrate the
probable validity of the real property claims asserted in this action.
On a motion to expunge for lack of
probable validity under section 405.32, the burden is on the claimant to
demonstrate, by a preponderance of the evidence, the probable validity of the
claim. (Code Civ. Proc. § 405.30.) In ruling on the motion, “evidence or
declarations may be filed with the motion,” and the Court “may permit evidence
to be received in the form of oral testimony, and may make any orders it deems
just to provide for discovery by any
party affected by a motion to expunge the notice.” (Id.) “‘Probable
validity,’ with respect to a real property claim, means that it is more likely
than not that the claimant will obtain a judgment against the defendant on the
claim.” (Code Civ. Proc. § 405.3.)
Each of
Plaintiff’s four real property claims are substantially premised on the same
set of facts. Plaintiff was formed by its majority owner and manager, Pacific
Capital Partners, LLC, to acquire, improve, and sell the property located at
6380 Quebec Drive, Los Angeles CA 90068. (Complaint ¶ 14.) Plaintiff contracted
with the individual Defendants Sasha Mager and Dave Mallel to obtain financing
for this venture. (¶¶ 15-17.) The Complaint alleges that the individual
Defendants have a kickback arrangement with Defendant Easy Financial, LLC
whereby they would receive compensation for steering Plaintiff to seek out a
loan with the LLC Defendant. (Complaint ¶ 18.) Plaintiff ultimately took out a
loan from Easy Financial secured by the property. (See Id. ¶¶ 17-18.) In
the interim, Defendant Charles McLaurin, who was previously a managing agent of
Pacific Capital Partners, resigned from his position in or about October 2021
to form Defendant 6380 Quebec. (Complaint ¶ 20.) According to Plaintiff,
Defendant McLaurin, conspiring with the other Defendants, locked Plaintiff out
of the property, took unauthorized draws on the loan alongside the other
individual Defendants, and executed a forged quitclaim deed transferring the
property to Defendant 6380 Quebec. (Complaint ¶¶ 21-22.) In the meantime, it is
alleged, Defendant Easy Financial manipulated the loan payment plan by redirecting
payments allocated to the interest reserve to construction line items,
resulting in progress payments accelerating ahead of the actual state of
construction. (Complaint ¶ 23.) In doing so, Plaintiff alleges Defendant Easy
Financial artificially created a default which it then used as grounds to
foreclose on the property. (Id. ¶¶ 23-24.)
1.
Claims Arising from Fraudulent Conveyance
With
respect to the first cause of action for quiet title and second cause of action
for declaratory relief, Defendant argues that Plaintiff cannot establish the
probable validity of these claims because the 2022 foreclosure was not based on
the Quitclaim Deed, forged or not.
In support of its position, Defendant
offers the testimony of its managing member, Benjamin Donel, who was personally
involved in the transaction. (Declaration of Benjamin Donel ISO Mot. ¶¶ 1-2;
4.) Mr. Donel states that Defendant made to Plaintiff a business-purpose loan
of up to $1,645,150 to remodel the subject property, the Agreement for which
was signed by himself and Plaintiff’s Managing Member, John Yarbrough. (Id.
¶ 5; Exh. A.) The initial disbursement was $1,267,500, with scheduled
interest-only monthly payments at 9.99% per annum. (Id. ¶ 6.) The Loan’s
maturity date was September 30, 2021. (Id.) Mr. Donel further states
that Defendant made additional advances between November 1, 2020 and April 23,
2021, bringing the principal balance to $1,453,550.22. (Id. ¶ 7.)
According to Defendant, Plaintiff made only two regular interest payments and agreed
to allow Defendant to advance three interest payments from undisbursed funds,
but was six months in arrears by November 22, 2021. (Id. ¶ 8.) Plaintiff
paid $40,000 on November 22, 2021, which was credited against interest but left
a balance of $32,604.86. (Id. ¶ 9.) Mr. Donel states that he agreed to forbear
from pursuing remedies until March 2022 to permit Plaintiff to obtain
refinancing, but that Defendant would assess an additional 15% default interest
from the maturity date of the loan. (Donel Decl. ¶¶ 10-11.) Between November
2021 and May 2022, no payments were made, resulting in an additional balance of
$211,891.26 at the new 24.99% interest rate, for a total outstanding interest balance
of $244,496.12 plus principal. (Id. ¶ 12.) In May 2022, Plaintiff paid an
additional $214,000 toward the interest. (Id. ¶ 13.) Mr. Donel declares
that he agreed to forbear on foreclosure if Plaintiff immediately paid two
months of regular interest payments and then continued to make monthly
payments. (Id.) Plaintiff did not do so, and Mr. Donel, as Defendant’s
managing member, recorded a Notice of Default on June 13, 2022, and commenced
nonjudicial foreclosure proceedings on the basis of Plaintiff’s failure to make
the loan payments. (Id. ¶ 14.) Mr. Donel firmly states that the
foreclosure was based solely on the failure to make payments, and not on the
Quitclaim Deed, which was executed without Defendant’s consent. (Donel Decl. ¶¶
17, 24.)
In opposition to this showing and
Defendant’s categorical denials, Plaintiff contends that the usurpation of control
over the subject property and the fraudulent Quitclaim Deed effectively
immobilized Plaintiff with respect to the Loan Agreement and the subject property.
Whether or not that is so, Plaintiff’s argument is not responsive to
Defendant’s challenge to the first two causes of action. While the Quitclaim
Deed may be relevant to the foreclosure or the preceding events,
Defendant has affirmatively denied that the Quitclaim Deed was a ground on
which the foreclosure was premised, and Plaintiff has offered no evidence to
the contrary. Plaintiff has therefore failed to demonstrate the probable
validity of these claims with respect to this Defendant.
2.
Wrongful Foreclosure
As to the fourth and fifth causes
of action, Defendant contends that Plaintiff cannot demonstrate the probable
validity of these claims.
As Defendant argues, it is
undisputed that Plaintiff has not tendered the loan amount. Under well-settled
authority, “as a condition precedent to an action by the borrower to set aside
the trustee’s sale on the ground that the sale is voidable . . .
the borrower must offer to pay the full amount of the debt for which the
property was security.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th
89, 112 [emphasis added].) There are several exceptions to the tender
requirement: (1) if the borrower’s action attacks the validity of the
underlying debt (Id. at 112-113); (2) if the party seeking to set aside
the trustee’s sale has a counter-claim or set-off against the beneficiary (Id.
at 113); (3) if it would be inequitable to impose a requirement of tender
on the party challenging the sale (Id.); or (4) when the trustee’s deed
is void on its face. (Id.)
Plaintiff
contends the tender requirement should be excused because the underlying debt
is invalid since Defendant misappropriated loan funds by allowing the
individual Defendants to take draws on the loan despite knowing that they were
not authorized to do so. (Complaint ¶ 21.) Although the Complaint plainly asserts
these allegations, an attack on the probable validity of the claim requires
Plaintiff to demonstrate a probability of success by a preponderance of the
evidence. (Code Civ. Proc. § 405.30.) Plaintiff’s managing member states that
the individual Defendants took draws on the loan in approximate amounts of
$22,500 and $30,000 in or about November 2021, which were not authorized by
Plaintiff and were never received by Plaintiff. (Declaration of John Yarbrough
ISO Opp. ¶ 9.) These transactions, however, are not referenced in the Borrower
Statement of Account which Plaintiff has also produced. Instead, that document
shows that the last advancement was made in April 2021, not in November 2021.
(Yarbrough Decl. Exh. G.) The documentary evidence thus appears to undercut the
statements by Plaintiff’s principal.
In the alternative, Plaintiff
argues that Defendant caused progress payments to be accelerated ahead of the
state of construction which somehow halted progress on the subject property and
induced the default. Plaintiff’s position is supported solely by Mr.
Yarbrough’s declaration stating that “[t]he terms of the loan provided for
holdbacks to be used for progress payments” and that Defendant “violated this
process by taking interest payments for the loan and charging the payments
against particular construction line items.” (Yarbrough Decl. ¶ 12.) Again,
however, Mr. Yarbrough’s contentions are undercut by the Borrower Statement of Account,
which specifies the changes in interest, principal, late charges, advancements,
and accrual of default interest. (Id. Exh. G.) As above, the payment
scheme described by Plaintiff is not reflected in these records. Similar
problems arise from the December 23, 2020 email exchange between Mr. Yarbrough
and Kevin Kwon, whom Mr. Yarbrough describes as an employee of an affiliated
entity. (Yarbrough Decl. ¶ 13; Exh. F.) Although that exchange describes
certain payments being allocated toward monthly interest, the exact payment
amounts described in that email are not clearly reflected in the Statement of
Account. (Id. Exhs. F-G.) Moreover, the subject line of the email:
“Waiver for 2253 Coldwater Draw” calls into question whether this exchange
pertains to the property at the center of the dispute, or to some other
property. Plaintiff contends the underlying debt is not valid. But the Court
credits the Statement of Account, offered by Plaintiff itself, over the
self-serving statements by Plaintiff’s principal and an email exchange of
uncertain provenance. On this showing, the Court finds that Plaintiff has not
demonstrated the probable validity of these claims by a preponderance of the
evidence.
As
Plaintiff has not demonstrated the probable validity of any of its real
property claims, the Court finds that Defendant is entitled to expungement of
the lis pendens.
CONCLUSION:
Accordingly,
Defendant’s Motion to Expunge Lis Pendens is GRANTED.
Moving
Party to give notice.
IT IS SO ORDERED.
Dated: February 11,
2025 ___________________________________
Theresa
M. Traber
Judge
of the Superior Court
Any party may submit on the
tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day
before the hearing. All interested parties must be copied on the email. It
should be noted that if you submit on a tentative ruling the court will still
conduct a hearing if any party appears. By submitting on the tentative you
have, in essence, waived your right to be present at the hearing, and you
should be aware that the court may not adopt the tentative, and may issue an
order which modifies the tentative ruling in whole or in part.