Judge Theresa M. Traber, Case BC717200 2023-05-05 Tentative Ruling

Judge: Theresa M. Traber, Case: BC717200, Date: 2023-05-05 Tentative Ruling

Case Number: BC717200 Hearing Date: May 5, 2023 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: May 5, 2023 JURY VERDICT: March 10, 2023

CASE: Yoav Botach et al. v Newmark of Southern California, Inc., et al.

CASE NO.: BC717200

(1) MOTION FOR ORDER AWARDING PREJUDGMENT INTEREST

(2) MOTION FOR ORDER ADJUDICATING AFFIRMATIVE DEFENSE OF OFFSET

MOVING PARTY: (1) Plaintiffs Yoav Botach and YB Real Estate Properties I, LLC; (2) Defendants Newmark of Southern California, Inc.; Newmark & Company Real Estate, Inc.; Newmark Knight Frank Valuation & Advisory, LLC; Gibran Begum

RESPONDING PARTY(S): (1) Defendants Newmark of Southern California, Inc.; Newmark & Company Real Estate, Inc.; Newmark Knight Frank Valuation & Advisory, LLC; Gibran Begum; (2) Plaintiffs Yoav Botach and YB Real Estate Properties I, LLC

CASE HISTORY:

08/09/18: Complaint filed.
01/10/22: First Amended Complaint filed.
03/10/23: Jury verdict.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiffs allege that Defendants conspired to induce Plaintiff Yoav Botach to sell the Garfield Building at 403 W. 8th Street, Los Angeles, CA (hereafter “the subject property”) to sell the subject property to Kyriakos Kerry Bonnis for well below its listed price. Plaintiffs allege causes of action for breach of fiduciary duty, fraud, declaratory relief, financial elder abuse, and negligence.

Plaintiffs move for an award of prejudgment interest. Defendants move for an order adjudicating their setoff affirmative defense.

TENTATIVE RULING:

Plaintiffs’ Motion for Award of Prejudgment Interest is DENIED.

Defendants’ Motion for Order Adjudicating Setoff Affirmative Defense is DENIED.

DISCUSSION:

Motion for Award of Prejudgment Interest

Plaintiffs move for an award of prejudgment interest under Civil Code section 3287(a).

Civil Code section 3287(a) provides:

(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.

(Civ. Code § 3287(a), bold emphasis added.)

The case law interpreting Civil Code section 3287 provides some guidance to its application . . . . As discussed above, "[t]he policy underlying authorization of an award of prejudgment interest is to compensate the injured party--to make that party whole for the accrual of wealth which could have been produced during the period of loss. [Citations.]" (Citation omitted.)

The court in Cassinos also said: "The test for recovery of prejudgment interest under [Civil Code] section 3287, subdivision (a) is whether defendant actually know[s] the amount owed or from reasonably available information could the defendant have computed that amount. [Citation.]" (Citations omitted.) "The statute [Civil Code section 3287] does not authorize prejudgment interest where the amount of damage, as opposed to the determination¿of liability, 'depends upon a judicial determination based upon conflicting evidence and is not ascertainable from truthful data supplied by the claimant to his debtor.' [Citations.]" ( Citation omitted.) Thus, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate. (Citation omitted.)

(Wisper Corp. v. Cal. Commerce Bank (1996) 49 Cal.App.4th 948, 960, bold emphasis and underlining added.)

Here, the jury in this case determined that Plaintiff YBREP I was entitled to prejudgment interest on their economic damages in the amount of $204,335.00. (March 10, 2023 Minute Order p. 8.) Plaintiffs contend that this award was made under Civil Code 3288, which places prejudgment interest in the discretion of the jury, but that Plaintiffs are nonetheless entitled to additional interest under Civil Code section 3287(a), relying on appellate and California Supreme Court authority stating that awards of prejudgment interest were justified under both sections. (Cassinos v. Union Oil Co. of California, (1993) 14 Cal.App.4th 1770, 1790; Bullis v. Security Pacific National Bank (1978) 221 Cal.3d 801, 808.) Plaintiffs’ reliance on these authorities is misplaced, as these citations only stand for the proposition that both statutes provide an independent basis for an award of prejudgment interest, not that a party may receive prejudgment interest twice. The Court of Appeal expressed this rule in Curtis v. State of California, which Plaintiffs quote in their reply brief:

Interest is recoverable under Civil Code section 3287, subdivision (a), in tort actions for damages for loss of real and personal property, where the damages are readily ascertainable. Interest is also recoverable to compensate a party for the loss of his or her property pursuant to Civil Code section 3288. . .

(Curtis v. State of California (1982) 128 Cal.App.3d 668, 686 n.2.) Thus, even under Plaintiffs’ own authority, Plaintiffs have only established that there are two separate legal theories under which prejudgment interest could lawfully be awarded—an award which, as stated above, was granted by the jury. Plaintiffs cite no authority whatsoever permitting the Court to set aside the determination of the jury with respect to the proper amount of prejudgment interest.

Conclusion

Accordingly, Plaintiffs’ Motion for Award of Prejudgment Interest is DENIED

Motion for Order Adjudicating Setoff Affirmative Defense

Defendants move for an order adjudicating the affirmative defense of setoff following the jury verdict.

Plaintiffs’ Requests for Judicial Notice

Plaintiffs request that the Court take judicial notice of (1) the Complaint in Bonnis Properties Cal. LP v. YB Real Estate Properties I, LLC LASC Case No. BC642548; (2) the Complaint in Bonnis Properties Cal. LP v. YB Real Estate Properties I, LLC LASC Case No. BC666288; (3) the Complaint-in-Interpleader in Chicago Title Co. v. Bonnis Properties Cal. LP, et al. LASC Case No. BC648975; (4) Newmark of Southern California’s Answer to the Complaint-in-Interpleader; (5) the July 3, 2018 Ex Parte Application for Order Releasing Escrow Deposit in the interpleader action; (6) the Declaration of Alisha C. Burgin accompanying the ex parte application; (7) the July 3, 2018 order granting the ex parte application; (8) the July 3, 2018 Notice of Ruling regarding the ex parte application and; (9) the August 24, 2018 request for dismissal in the interpleader action.

Plaintiffs’ requests are GRANTED pursuant to Evidence Code section 452(d) (court records.)

Defendants’ Requests for Judicial Notice

Defendants request that the Court take judicial notice of (1) the March 10, 2023 Special Verdict Form in this action; and (2) Defendants’ Answer to the First Amended Complaint in this action. Defendants’ requests are GRANTED pursuant to Evidence Code section 452(d) (court records.)

Legal Standard

Code of Civil Procedure section 431.70 provides:

Where cross-demands for money have existed between persons at any point in time when neither demand was barred by the statute of limitations, and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated so far as they equal each other, notwithstanding that an independent action asserting the person's claim would at the time of filing the answer be barred by the statute of limitations. If the cross-demand would otherwise be barred by the statute of limitations, the relief accorded under this section shall not exceed the value of the relief granted to the other party. The defense provided by this section is not available if the cross-demand is barred for failure to assert it in a prior action under Section 426.30.

(Code Civ. Proc. § 431.70.) The mutuality requirement of the doctrine of setoff requires that the debts be due to and from the same persons in the same capacity. (Petersen v. Lyders (1934) 139 Cal.App. 303, 306.) This requirement also applies to offset claims under section 431.70. (Carnation Co. v. Olivet Egg Ranch (1986) 189 Cal.App.3d 809, 821.)

Analysis

Defendants contend that they are entitled to a setoff of $575,000 plus 6% interest per annum from the underlying commission agreement for the sale of the subject property. Defendants provided a copy of that agreement, which states that YBREP agreed to pay Newmark of Southern California (“NSC”) (doing business as Newmark Grubb Knight Frank) a commission of $575,000 on the sale of the Garfield Building. (Declaration of Thomas J. Kearney Exh. A.) The agreement states that the commission is to be paid “(a) through escrow on recordation of the deed or other evidence of title, or (b) if completion of sale is prevented by default of Seller, upon Seller’s default.” (Id.) YBREP refused to honor the sale. (Kearney Decl. Exh. E.) Defendants never received any commission. (Thomas Decl. ¶ 9.) Thus, Defendants argue, they are entitled to assert the value of that commission to offset the award against them.

In opposition, Plaintiffs raise several arguments. First, Plaintiffs argue that NSC is the only party that can assert the offset defense under the Agreement. Second, Plaintiffs contend that NSC either waived or retracted its claim on the commission. Third, Plaintiffs argue that Defendants’ claims are incompatible with the jury verdict. Fourth, Plaintiffs contend that YBREP never became obligated to pay the commission because it never defaulted on the agreement. Finally, Plaintiffs contend that it would not be equitable to permit a setoff in this case.

1. Mutuality

As Plaintiffs correctly state in their opposition, the only parties to the Commission Agreement are YBREP I and NSC. Thus, NSC is the only Defendant that may assert a setoff defense under the mutuality requirement of the doctrine of setoff. (Petersen v. Lyders (1934) 139 Cal.App. 303, 306.) Defendants’ argument in reply that Plaintiffs cannot make this argument after having sought damages against all Defendants on the theory of vicarious liability is irrelevant, as vicarious tortious liability is a separate consideration from mutuality in a setoff context. Defendants’ contention that Begum and Newmark & Co. cannot or should not be liable for a different (i.e. greater) amount than NSC is unsupported by any citation to authority, and, in any event, is insufficient to overcome the mutuality requirement of the doctrine of setoff. Thus, the Court will only consider the remaining issues as they pertain to NSC.

2. Retraxit and Waiver

Plaintiffs argue that NSC previously asserted its claim under the Commission Agreement in a separate interpleader action, and either withdrew or waived its claim in that action and cannot assert it again here.

The doctrine of retraxit is a “particular application of claim preclusion” requiring that all claims based on the same cause of action be decided in a single suit. (Kim v. Reins International California Inc. (2020) 9 Cal.5th 73, 91-92.) Under this doctrine, a party’s voluntary dismissal of a claim is equivalent to a judgment on the merits, and thus bars any further litigation of that claim. (See, e.g., Federal Home Loan Bank of San Francisco v. Countrywide Financial Corp. (2013) 214 Cal.App.4th 1520, 1527.)

Waiver is “the intentional relinquishment of a known right after knowledge of the facts.” (Roesch v. DeMota, (1944) 24 Cal.2d 563, 572.) Waiver may be implied by a party’s course of conduct, such as when a “party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.” (Wind Dancer Production Group v. Walt Disney Pictures (2017) 10 Cal.App.5th 56, 78.) The statutory right of setoff is among the rights that can be waived. (Jess v. Herrmann (1979) 26 Cal.3d 131, 143.) The burden of proving waiver is on the party claiming waiver, and must be proved by clear and convincing evidence. (Waller v. Truck Ins. Exc., Inc. (1995) 11 Cal.4th 1, 31.)

Plaintiffs offer the Complaint in the Interpleader Action filed by Chicago Title Co. concerning the sale of the property. (RJN Exh. 3.) The Interpleader Complaint specifically alleges that NSC was YBREP’s agent and broker and was claiming a right to some of the disputed funds. (Id. ¶ 5.) NSC’s Answer subsequently alleged that it was entitled to the $575,000 commission from the interpleaded funds and sought an order directing payment of those funds. (RJN Exh. 4 ¶¶ 2-7.) More than a year later, Bonnis Properties, the buyer of the property and one of the defendants in the Interpleader Action, moved ex parte to have the disputed funds returned to Bonnis Properties. (RJN Exh. 5.) NSC did not oppose that application. (Id.) The application was granted and the funds ordered to be returned to Bonnis Properties. (RJN Exh. 7.) The interpleader action was subsequently dismissed by Chicago Title Co. with prejudice. (RJN Exh. 9.)

Plaintiffs contend that the failure to oppose Bonnis’s ex parte application constituted a voluntary dismissal of NSC’s claims or, alternatively, a waiver of those claims. As NSC did not dismiss its own claim for the funds, the Court does not agree with Plaintiffs that the doctrine of retraxit bars NSC’s claim. (See Kim v. Reins International California Inc. (2020) 9 Cal.5th 73, 91-92.) However, the Court agrees that NSC’s conduct constituted a waiver of its claim on the commission. Bonnis’s ex parte application, in the process of demonstrating that Bonnis alone was entitled to the interpleaded funds, expressly asserted that NSC was not entitled to a commission on the funds because the sale of the subject property was never completed. (RJN Exh. 5 p. 4.) Although NSC did not sign the stipulation with the other interpleader defendants agreeing that Bonnis was entitled to the funds (see RJN Exh. 5. p.5), NSC also did not appear to oppose the ex parte application. (RJN Exh. 8.) The Court is unmoved by NSC’s argument in reply that it did not waive the right to a setoff because it “had no idea [it] would be embroiled in this litigation many years later where a potential setoff claim could be made.” In the Court’s view, NSC is drawing a false distinction between an affirmative claim for the commission and an offset based on that commission. NSC asserted a right to $575,000 on the basis of a commission agreement for the sale of the subject property in the interpleader action, and subsequently declined to contest another entity’s claim that the right to that money did not exist. NSC’s conduct is totally inconsistent with an intention to preserve the right to that money. Thus, under the doctrine of waiver, NSC cannot now claim that the judgment against it should be reduced because it is entitled to $575,000 under the Commission Agreement.

3. Failure of Consideration

Plaintiffs contend that Defendants cannot pursue their setoff defense because it is antithetical to the jury finding that they committed professional negligence in representing YBREP in the sale of the subject property. (Jury Verdict, Questions 2, 33 and 34.) The Court agrees. At the heart of the setoff defense here is a claim against YBREP for breach of contract. The elements of a breach of contract claim are “(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.) A recognized defense to such a claim is that there was a failure of consideration in that the party accusing the other of a breach has failed “to execute on a promise, the performance of which has been exchanged for performance by the other party.” (Taliaferro v. Davis (1963) 216 Cal. App. 2d 398, 410 [Citation omitted].) “[W]here the consideration fails in whole or in part through the fault of a party whose duty it is to render it, the other party may invoke such failure as a basis for rescinding or terminating the contract, provided the failure or refusal to perform constitutes a breach in such an essential particular as to justify rescission or termination.” (Id., at p. 412.)

In this case, Defendants’ setoff defense is based on the California Sale Commission Agreement between YPREP and NSC. (Kearney Decl., Exh. A.) The contract sets out the specific performance due from NSC in exchange for the $575,000 commission payment. It provides that YPREP agreed to pay the commission “[f]or and in consideration of the efforts and services rendered by Newmark of Southern California, Inc., . . . in connection with the sale of that certain property . . . known as ‘The Garfield Building.’” (Id.) This was the only consideration provided by NSC, and the jury’s determination that NSC acted negligently means that NSC failed to provide the kind of professional services contracted for. Because there was a failure of consideration based on the jury’s finding, NSC cannot collect the commission that might otherwise be due under the Commission Agreement.

As the Court finds that Defendants’ setoff defense is barred under the doctrine of waiver and because of NSC’s failure of consideration under the Commission Agreement, the Court does not consider the remainder of Plaintiffs’ arguments in opposition.

Conclusion

Accordingly, Defendants’ Motion for Order Adjudicating Setoff Affirmative Defense is DENIED.

CONCLUSION:

Accordingly, Plaintiffs’ Motion for Award of Prejudgment Interest is DENIED.

Defendants’ Motion for Order Adjudicating Setoff Affirmative Defense is DENIED.

Moving parties to give notice.

IT IS SO ORDERED.

Dated: May 5, 2023 ___________________________________

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.