Judge Thomas D. Long, Case Number: 22STCV18474, Date: 2023-10-12 Tentative Ruling

On June 6, 2022, Plaintiff QBN Capital LLC filed this action against Defendants Eugenio A. Gonzalez, Monica Gonzalez, and Theresa Gonzalez. “The parties and relevant individuals share a last name. For clarity, convenience, and in order to avoid confusion, we refer to them by their first names and intend no disrespect.” (Cruz v. Superior Court (2004) 120 Cal.App.4th 175, 188, fn. 13.)

On June 6, 2023, Plaintiff filed a motion for summary judgment, or in the alternative, summary adjudication.

Plaintiff’s objections are not numbered consecutively as required. (California Rules of Court, rule 3.1354(b).) The Court rules as follows:

Paragraph 4: Overruled. To the extent that Plaintiff objects due to lack of personal knowledge because Eugenio’s declaration contradicts other evidence, the Court will consider the declaration in accordance with D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1 (D’Amico). (See Harris v. Thomas Dee Engineering Co., Inc. (2021) 68 Cal.App.5th 594, 604 [“Properly understood, D’Amico does not state a rule regarding the admissibility of evidence; instead, the case provides guidance in determining whether a declaration that contradicts prior discovery responses is sufficient to create a triable issue of fact.”].)

Paragraph 12: Overruled as to “During the LA Kush litigation, I also met with Mr. Bequer at his home where he produced a sheet listing his investments. Nowhere on that document does it show the amounts Mr. Bequer is alleging that I owe him. In fact, he never once loaned me any money. The money he claims to be owed are his own investments in the company.” Sustained as to Exhibit A for lack of foundation and authentication.

Paragraph 13: Overruled as to “Shortly after sitting for my deposition in this matter, I went into my email account and discovered that certain emails I distinctly remember receiving were no longer there. I hired a forensic investigator.” Sustained as to “who has since determined that emails in my inbox were indeed being deleted against my knowledge. Attached hereto as Exhibit B is a true and correct copy of a letter delivered by the forensic investigator that explains the discrepancies discovered in my email inbox” and Exhibit B as hearsay and for lack of foundation and authentication.

Plaintiff is a licensed California Finance Lender. (Undisputed Material Facts “UMF” 1.) Pursuant to written agreement dated January 24, 2020, FEM Ventures LLC (“FEM”) irrevocably assigned, transferred and conveyed all of FEM’s right, title, interest and remedies in, to, under and with respect to money lent to Eugenio to Plaintiff. (UMF 2.)

Eugenio entered and executed a written promissory note (“2020 Recapitalization Note”) dated January 24, 2020 in the principal amount of $1,000,000 in favor of Plaintiff. (UMF 3.) The 2020 Recapitalization Note provides that the principal amount of $1,000,000 would bear interest at the rate of 7.5% per annum from the date of issuance. (UMF 4.) It also provides that accrued interest shall be paid on the first day of each month commencing on March 1, 2020 and that all other charges, including all due and unpaid principal and interest, shall be paid on the maturity date of January 23, 2021. (UMF 5.) Eugenio was required to pay Plaintiff $250,000 on or before April 23, 2020. (UMF 7.) Upon a default by Eugenio, the interest rate may be increased by the lesser of 7.5% or the maximum rate permitted by law from the date of such election until all amounts were paid. (UMF 6.)

Eugenio also entered and executed another written promissory note (“2020 Gonzalez Note”) dated January 24, 2020 in the principal amount of $1,463,800.26 in favor of Plaintiff. (UMF 23.) The 2020 Gonzalez Note amended a previous promissory note entered and executed by Eugenio in 2018. (UMF 24.) The 2020 Gonzalez Note provides that, as of March 1, 2020, the outstanding balance of principal and accrued interest under the Gonzalez Note shall be $1,713,800.00, and the principal owed under the note would bear interest at the rate of 10% per annum from the date of issuance. (UMF 25-26.) Upon a default, the interest rate may be increased by the lesser of 5% or the maximum rate permitted by law from the date of such election until all amounts were paid. (UMF 28.)

Theresa and Monica, as personal guarantors, each entered and executed written personal guarantees dated January 24, 2020 in favor of Plaintiff through and in which they each personally guaranteed all payment obligations of Eugenio under both the 2020 Recapitalization Note and the 2020 Gonzalez Note. (UMF 47, 84.)

Eugenio, Monica, Theresa, Plaintiff and FEM entered a written Amendment and Waiver Agreement effective May 22, 2020, and it was notarized by a licensed notary public. (UMF 9-10.) Eugenio acknowledged in the Amendment and Waiver Agreement that he had defaulted on the 2020 Recapitalization Note and 2020 Gonzalez Note by failing to make any payments, and he ratified and affirmed his payment obligations under the 2020 Recapitalization Note and 2020 Gonzalez Note. (UMF 11-12, 32-33.) Theresa and Monica ratified and affirmed all of their payment obligations under their guarantees. (UMF 54, 91.)

The Amendment and Waiver Agreement amended the 2020 Recapitalization Note to require Eugenio to pay Plaintiff $250,000, waived the requirement of monthly interest payments, and made all interest and principal due on the maturity date of January 23, 2021. (UMF 13-14.) After the amendment, the outstanding principal balance on the 2020 Recapitalization Note (after giving effect to the $250,000 payment required to be made) was $750,000. (UMF 15.) It also amended the 2020 Gonzalez Note to waive the requirement of monthly interest payments and made all interest and principal due on the maturity date of February 1, 2021. (UMF 34.) Eugenio was represented by attorney Charles Lew in connection with negotiating and signing (with notarization) the Amendment and Waiver Agreement. (UMF 16.)

No payments have been made on or towards the 2020 Recapitalization Note with the exceptions of a payment of $250,000 and an interest payment of $20,532. (UMF 17-18.) No less than the amount of $1,227,055 remains unpaid and due on the 2020 Recapitalization Note. (UMF 19.)

No payments have been made on or towards the 2020 Gonzalez Note with the exception of an interest payment of $14,164. (UMF 36-37.) No less than the amount of $2,759,350 remains unpaid and due on the 2020 Gonzalez Note. (UMF 38.)

Plaintiff has performed all of its obligations under the 2020 Recapitalization Note and the 2020 Gonzalez Note. (UMF 8, 29.)

A plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(1).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

The Complaint alleges (1) breach of the 2020 Recapitalization Note by Eugenio; (2) breach of the 2020 Gonzalez Note by Eugenio; (3) breach of Theresa’s personal guarantees for the 2020 Recapitalization Note and the 2020 Gonzalez Note; and (4) breach of Monica’s guarantees for the 2020 Recapitalization Note and the 2020 Gonzalez Note.

As set forth in the Factual Background, the facts supporting Plaintiff’s claims are undisputed. Indeed, “Defendants do not argue that the contracts in question claimed by Plaintiff were not executed by each of them.” (Opposition at p. 4.) Plaintiff has also provided evidence of its damages under the 2020 Recapitalization Note and 2020 Gonzalez Note. (UMF 19, 38.) Plaintiff has therefore met its moving burden.

Defendant’s sole evidence in opposition is Eugenio’s declaration, which alleges contractual defenses. Defendants contend that the contracts in question were procured through fraud and undue influence. (Opposition at p. 4.) Defendants’ answer, with thirty-four affirmative defenses, did not raise fraud or undue influence. The failure to plead an affirmative defense in the answer does not necessarily preclude a defendant from raising it in a motion for summary judgment, as long as there is no showing of prejudice and the opposing party has adequate notice and opportunity to respond. (Atkins v. St. Cecilia Catholic School (2023) 90 Cal.App.5th 1328, 1341.)

A. Defendants Have Not Shown Disputed Facts For Their Affirmative Defense of Fraudulent Inducement.

Eugenio declares that in 2018, Mr. Bequer (Manager of Plaintiff) asked him to sign a document that he said was for tax purposes, but Eugenio later learned that it was a note in the amount of approximately 1.6 million dollars. (E. Gonzalez Decl. ¶ 5.) Eugenio would not have signed the document if he knew it was a promissory note. (E. Gonzalez Decl. ¶ 5.) This 2018 Note was the basis for the 2020 Gonzalez Note. (See UMF 24.) The 2018 Note states in bold at the top, “PROMISSORY NOTE” and “$1,463800.26.” (Motion, Ex. B.) It then sets forth the terms of payment, default, and other provisions. It cannot be reasonably deduced from this evidence that Eugenio reasonably believed the 2018 Note to be a tax document. (See Code Civ. Proc., § 437c, subd. (c).) Even if Eugenio did believe that at the time, he is now precluded from claiming fraudulent inducement of the 2018 Note because he reaffirmed those obligations in the 2020 Gonzalez Note. (See UMF 24-26; cf. Oakland Raiders v. Oakland-Alameda County Coliseum, Inc. (2006) 144 Cal.App.4th 1175, 1186 [“[O]ne who, after discovery of an alleged fraud, ratifies the original contract by entering into a new agreement granting him substantial benefits with respect to the same subject matter, is deemed to have waived his right to claim damages for fraudulent inducement.”]; Schied v. Bodinson Mfg. Co. (1947) 79 Cal.App.2d 134, 142 [“[A] party to an executory contract, who, with full knowledge of the facts constituting the fraud complained of, subsequently, with intention to do so, affirms the contract and recognizes it as valid . . . thereby waives his right to damages on account of the fraud.’”].)

For the 2020 Recapitalization Note, 2020 Gonzalez Note, and guarantees (dated January 24, 2020), Eugenio declares that Mr. Bequer advised him that these Notes and guarantees would go away after all the assets held by CPA were sold. (E. Gonzalez Decl. ¶ 10.) But later, in the notarized May 22, 2020 Amendment and Waiver Agreement, all Defendants ratified and affirmed all of their payment obligations for the 2020 Recapitalization Note, 2020 Gonzalez Note, and the guarantees. (UMF 9-12, 32-33, 54, 91.) Eugenio was represented by attorney Charles Lew in connection with negotiating and signing the Amendment and Waiver Agreement. (UMF 16.) Defendants have therefore waived their right to claim fraudulent inducement of the 2020 Recapitalization Note, the 2020 Gonzalez Note, and guarantees.

In sum, Defendants have not presented specific facts showing that a triable issue of material fact exists as to the defense of fraudulent inducement. (Code Civ. Proc., § 437c, subd. (p)(1).)

B. Defendants Have Not Shown Disputed Facts For Their Affirmative Defense of Undue Influence.

Undue influence generally consists of a significant number of characteristic elements that, when simultaneously present, characterize the persuasion as excessive: “‘(1) discussion of the transaction at an unusual or inappropriate time, (2) consummation of the transaction in an unusual place, (3) insistent demand that the business be finished at once, (4) extreme emphasis on untoward consequences of delay, (5) the use of multiple persuaders by the dominant side against a single servient party, (6) absence of third-party advisers to the servient party, (7) statements that there is no time to consult financial advisers or attorneys.’” (Keithley v. Civil Service Bd. (1970) 11 Cal.App.3d 443, 452.)

For the 2020 Recapitalization Note, 2020 Gonzalez Note, and guarantees, Eugenio declares that he was overnighted these documents after a mediation for the parties’ LA Kush litigation. (E. Gonzalez Decl. ¶¶ 7-8.) Mr. Bequer told Eugenio that he would refuse to sign the LA Kush litigation settlement papers and sue him unless Eugenio and his family signed the Notes and guarantees within 48 hours. (E. Gonzalez Decl. ¶ 9.) This “threat” to not sign the settlement is not undue influence. (See Miller v. Walden (1942) 53 Cal.App.2d 353, 361 [“[T]he threat and not the apprehension which makes out the menace and that threat must be an unlawful and invalid one. A threat to exercise a valid legal right cannot be construed to be an act of duress.”] Additionally, “the mediation confidentiality provisions of Evidence Code section 1119 protect the mediation process and preclude any claim of undue influence.” (In re Marriage of Woolsey (2013) 220 Cal.App.4th 881, 903.)

Considering all the admissible evidence and all reasonable inferences that may be drawn from the evidence in the light most favorable to Defendants, the non-moving party (see Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843), there is no triable issue of fact regarding Defendants’ defense of undue influence.

The motion for summary judgment is GRANTED. Plaintiff is ordered to submit a proposed judgment within five days.

A Non-Appearance Case Review Re: Submission of Proposed Judgment is scheduled for October 27, 2023 at 9:00 a.m.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court