Judge Thomas D. Long, Case 21STCV27507 2022-11-17 Tentative Ruling

On July 27, 2021, Sharon Baneer, by and through her conservator Brandon Paxton, filed this action against Clarence Ellington and M&C Development LLC (“M&C”), alleging (1) statutory elder financial abuse, and (2) conversion. The complaint alleges that the defendants requested loans of $100,000 and $50,000 from Baneer and failed to repay them as promised.

On September 14, 2021, M&C filed an answer and a cross-complaint against Brandon Paxton, alleging (1) equitable indemnity, (2) contribution, (3) declaratory relief, and (4) fraud. The cross-complaint alleges, in part, that Paxton did not tell M&C that the loans came from the Baneer Trust instead of Paxton’s personal funds, and M&C repaid the funds to Paxton.

On September 26, 2022, M&C filed a motion for leave to file a cross-complaint against Ellington.

The motion seeks leave to file a compulsory cross-complaint under Code of Civil Procedure section 426.50. (Motion at p. 2.) Alternatively, it seeks leave to file a cross-complaint in the interests of justice under Code of Civil Procedure section 428.50. (Id. at pp. 2-3.)

The proposed cross-complaint purports to be brought by M&C, but then it identifies Michelle Smith (M&C’s CEO) as the cross-complainant. (Motion, Ex. A, at ¶ 2.) Smith declares that she is a defendant in this action (Smith Decl. ¶ 1), but she is not named in Baneer’s complaint. The motion also refers to “Co-Defendant Smith.” (E.g., Motion at pp. 3-4.) If Smith seeks to bring claims on her own behalf, she must move to intervene in this action. If the cross-complaint’s claims are in fact brought by M&C, then the proposed cross-complaint is unclear.

The proposed cross-complaint alleges that Smith met Ellington on an online dating site, and he persuaded Smith to incorporate M&C to help her begin investing in real estate. (Motion, Ex. A, at ¶¶ 7, 10.) In December 2018, Smith purchased a property. (Id. at ¶ 13.) On December 12, 2018, “Plaintiff” (an undefined term in the cross-complaint) wrote a $4,000 check to Ellington, who was doing business as Triplett Homes. (Id. at ¶ 14.) Ellington represented that Plaintiff would profit from the sale of the property in six months. (Id. at ¶ 15.) In January 2019, Plaintiff and Triplett Construction entered into a home improvement contract for the property, and Plaintiff wrote a $7,000 check to Ellington dba Triplett Homes. (Id. at ¶¶ 16, 20.) Although Smith was the sole owner of the property, Ellington entered into one or more leans in the amount of $80,000 and sued the property as collateral. (Id. at ¶ 23.) Ellington refinanced the property numerous times, falsely indicating to Smith that additional funds were needed to complete renovations and construction. (Id. at ¶ 26.) By June 2020, the work on the property was not complete and Ellington had not paid the workers. (Id. at ¶ 40.) On July 12, 2020, Plaintiff terminated the contract with Triplett. (Id. at ¶ 41.) Smith permitted Ellington to reside at the property to supervise the construction and renovation, but he refused to leave the premises in February 2022 when Smith decided she wished to sell the property. (Id. at ¶¶ 42-43.) Ellington’s refused to vacate resulted in the falling out of a sale between Smith and a buyer for the property. (Id. at ¶ 44.) By December 2022, construction and renovations remained incomplete. (Id. at ¶ 45.) Smith eventually sold the property for a significantly reduced price as a means of preventing further refinancing, mortgages, and loans from being taken out against the property. (Id. at ¶¶ 46.)

These allegations appear completely unrelated to the allegations in Baneer’s original complaint. However, a few causes of action refer to Baneer or Paxton.

The third cause of action for intentional misrepresentation includes an allegation that Ellington misrepresented to Paxton and Baneer that he had the authority to take out a loan on the property, on behalf of M&C. (Motion, Ex. A, ¶¶ 80-81.) Smith was harmed by Ellington’s misrepresentations made to Paxton and Baneer when taking out loans against the property. (Id. at ¶ 83.) But this misrepresentation was not made to Smith and cannot be a basis for her (or M&C’s) cause of action against Ellington.

The fifth cause of action seeks an accounting. “A right to an accounting is derivative; it must be based on other claims.” (Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 833.) “A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant, such a fiduciary relationship, that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law. (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.) Smith alleges that Ellington and Triplett Homes owe money on an account stated from previous financial transactions. (Motion, Ex. A, ¶¶ 98-99.) The cross-complaint also alleges that Ellington obtained a loan against the property from Paxton for at least $80,000 by misrepresenting that he was acting on behalf of M&C. (Id. at ¶¶ 100-102.) This loan is not an account stated between Smith/M&C and Ellington that it gives rise to an accounting.

The sixth cause of action is for money had and received. “A cause of action is stated for money had and received if the defendant is indebted to the plaintiff in a certain sum ‘for money had and received by the defendant for the use of the plaintiff.’ [Citation.]” (Schultz v. Harney¿(1994) 27 Cal.App.4th 1611, 1623.) The cross-complaint alleges that Smith and Ellington entered into a home improvement contract, and Ellington promised to pay her. (Motion, Ex. A, ¶¶ 105-106.) Ellington also took out a loan from Paxton. (Id. at ¶ 107.) Smith “has been perceived as liable for the balance of the LOAN and has been subject to liens stemming from said LOAN.” (Id. at ¶ 110.) Although the cross-complaint alleges that Ellington “received money that was intended to be used for the benefit of” Smith (id. at ¶ 109), it lacks any facts showing that the loan funds were intended to benefit Smith.

The seventh cause of action is for promissory estoppel. “The elements of promissory estoppel are (1) a promise, (2) the promisor should reasonably expect the promise to induce action or forbearance on the part of the promisee or a third person, (3) the promise induces action or forbearance by the promisee or a third person, and (4) injustice can be avoided only by enforcement of the promise.” (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2016) 6 Cal.App.5th 1207, 1225.) The only promise alleged to Smith is that “ELLINGTON made a clear and unambiguous promise to perform work for the PROPERTY under the CONTRACT,” and “CROSS-COMPLAINANT reasonably relied on ELLINGTON’S representations regarding their plans to renovate the WH PROPERTY.” (Motion, Ex. A, ¶¶ 113, 115.) The cross-complaint also alleges that Ellington “exploited their relationship with CROSS-COMPLAINANT to take out loans from PAXTON and others.” (Id. at ¶ 116.) But there is no allegation of a promise in this regard or any facts about reasonable reliance or action by an intended third-party beneficiary of a promise.

Accordingly, to the extent that the proposed cross-complaint appears to relate to the loans Baneer made to Ellington and M&C, it seems to be only minimally related, and the causes of action containing those allegations do not state claims that are based on the loans. It is possible that M&C may have claims against co-defendant Ellington, but based on the facts alleged in the proposed cross-complaint, it is not clear that those are compulsory claims that must be brought in this action.

Due to these uncertainties, including the unclear identity of the proposed cross-complainant, the Court cannot conclude that the proposed cross-complaint asserts compulsory claims or that filing the cross-complaint would be in the interests of justice.

Additionally, this proposed second cross-complaint appears at least partially inconsistent with the cross-complaint that M&C has already filed against Paxton, and the motion does not address any of the differing allegations.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court