Villas
Filed 11/20/12 California Business Bank v. Kenmore Villas CA2/1
NOT TO BE PUBLISHED IN THE
OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
ONE
CALIFORNIA BUSINESS BANK,
Plaintiff, Cross-defendant and Respondent,
v.
KENMORE
VILLAS, LLC, et al.,
Defendants, Cross-complainants, and Appellants.
B233593
(Los Angeles County
Super. Ct. No. BC412112)
APPEAL
from a judgment and orders of the Superior Court of
directions.
Western
Law Connection, Corp., and Christopher G. Weston for Defendants,
Cross-complainants and Appellants.
Prenovost,
Normandin, Bergh & Dawe, Tom R. Normandin and Kristin F. Godeke for
Plaintiff, Cross-defendant and Respondent.
__________________________
Kenmore
Villas, LLC (Kenmore), and its guarantors Amco Company, Inc., Suk Myong Kim, and Kyong Hwa
Pak (collectively Guarantors) appeal from a judgment and orders entered in
favor of California Business Bank (Bank).
Kenmore and Guarantors contend that the trial court erred in sustaining
Bank’s demurrer to Kenmore and Guarantors’ second amended cross-complaint
without leave to amend for, among other things, breach of the covenant of good
faith and fair dealing; granting Bank’s motion for summary judgment on Kenmore
and Guarantors’ third amended cross-complaint for breach of contract; and
granting Bank’s motion for summary adjudication as to Bank’s complaint for
breach of guaranty and a common count.
We
conclude the trial court did not err in sustaining Bank’s demurrer to the
second amended cross-complaint without leave to amend as to the causes of
action for intentional and negligent interference with contract/economic
advantage, negligent loan administration, and intentional infliction of
emotional distress. But we determine
that the court erred in sustaining Bank’s demurrer to the second amended
cross-complaint as to the causes of action for breach of the covenant of good
faith and fair dealing and rescission without leave to amend. We also conclude the court erred in granting
Bank’s motion for summary judgment as to the third amended cross-complaint
because Kenmore and Guarantors have shown that triable issues of material fact exist as
to whether Bank breached a contract. And
for the same reason we determine that the court erred in granting Bank’s motion
for summary adjudication as to Bank’s complaint for breach of guaranty and a
common count. (The trial court granted
Bank’s request to dismiss the remaining causes of action in its
complaint.) Accordingly, we affirm in
part and reverse in part.
BACKGROUND
Kim
and Pak, who are married to each other, are the limited liability partners of Kenmore, which in August 2006
acquired title to real property located on South Kenmore Avenue in Los Angeles (the Property). Kenmore intended to construct 28 condominium units on the
Property for sale (the Project). On August 28, 2006, Kenmore executed and delivered a promissory note to Bank in
the amount of $9.5 million, secured by a first deed of trust on the
Property, due and payable on February 28, 2008 (Promissory Note). Under the terms of the Promissory Note, Kenmore authorized Bank to “place
$1,300,000 of the Principal Amount as an interest reserve, which is an estimate
of the interest due†on the Promissory Note.
On August 28, 2006, Kim and Pak also executed
guaranties of the “Indebtedness†of Kenmore.
On March 17, 2008, Kenmore and Bank entered into a
extended the due date of the Promissory Note to May 31,
2008,
and increased the loan amount to $10 million (Construction Loan
Agreement). The Construction Loan
Agreement recited that Kenmore “has applied to [Bank] for one or more loans for
purposes of constructing the Improvements on the Real Property†and that Bank
is willing to lend the loan amount to Kenmore under the terms and conditions of the Construction
Loan Agreement. The Construction Loan
Agreement required Kenmore to fulfill conditions precedent to each advance and
required Pak and Kim to execute guaranties of the loan in favor of Bank. The Construction Loan Agreement provided that
on the occurrence of any default, Bank could, among other things, “[b]ring an
action on the Note and/or Indebtedness.â€
On October 31, 2008, Kenmore executed a “Change in Terms
Agreement†dated October 30, 2008, which extended the maturity
date of the Promissory Note to January 2, 2009.
In
November 2008, Bank on the one hand and Kenmore and Guarantors on the other
hand entered into a forbearance agreement that recited, among other things,
that the due date of the Promissory Note had been extended; the loan amount had
been increased to $10 million; Kenmore had been unable to pay obligations
under the Promissory Note as they became due; and Kenmore and Guarantors were
in default under the loan agreement (Forbearance Agreement). Under the terms of the Forbearance Agreement,
upon meeting certain conditions, Kenmore was given additional time to repay the loan up to March 10, 2009 and Kenmore and Guarantors agreed to release Bank from all
claims against Bank subject to the provisions of Civil Code section 1542.
On April 17, 2009, Bank filed a complaint against Kenmore and Guarantors for, among
other things, breach of the Promissory Note; breach of the Construction Loan
Agreement; breach of guaranty; breach of the Forbearance Agreement; and a
common count. As to the causes of action
for breach of guaranty and a common count, Bank alleged that Amco, a joint
venture of Kim and Pak, executed a “Guaranty of Completion and Performanceâ€
dated March 17, 2008, which it breached on March 10, 2009; that on
August 28, 2006, Kim and Pak executed guaranties, which they breached on
March 10, 2009, by failing to make the payments then due and owing; and
that Kenmore and Guarantors have become indebted to Bank in the sum of
$6,785,839.59.
Kenmore
and Guarantors filed an answer to Bank’s complaint and a cross-complaint
alleging causes of action for breach of the covenant of good faith and fair
dealing; rescission; “intentional interference with contract and/or economic
advantageâ€; “negligent interference with contract and/or economic advantageâ€;
negligence; and intentional infliction of emotional distress. On July 27, 2009, Bank filed a demurrer
and motion to strike portions of the cross-complaint. Before the hearing on the demurrer, on
September 3, 2009, Kenmore and Guarantors filed a first amended
cross-complaint.
On
August 10, 2009, the Property was sold to Bank pursuant to a nonjudicial
foreclosure sale. The amount of the
unpaid debt was $7,016,908.97 and the bid amount was $6,793,794.93.
On
October 8, 2009, Bank filed a demurrer to the first amended
cross-complaint. The trial court
sustained Bank’s demurrer to the first amended cross-complaint “in its
entirety,†with 20 days’ leave to amend.
On November 24, 2009, Kenmore and Guarantors filed a second amended
cross-complaint for breach of contract; breach of the covenant of good faith
and fair dealing; rescission; “intentional interference with contract and/or
economic advantageâ€; “negligent interference with contract and/or economic
advantageâ€; negligent loan administration; and intentional infliction of
emotional distress.
Kenmore
and Guarantors’ second amended cross-complaint generally alleged that on
August 28, 2006, Kenmore obtained a loan for $9.5 million for the
purpose of building 28 condominium units.
The loan called for an interest reserve of $1.3 million.
As to
breach of contract, the second amended cross-complaint alleged that after
Kenmore obtained the loan, Bank breached the loan agreement in the “following
ways: [¶] (a) Cross-Defendants increased the
credit reserve on the construction loan amount more than one million three
hundred thousand dollars ($1,300,000.00) and as direct and proximate result the
Cross-complainants were unable to and were delayed in pay contractors which
resulted in the stopping and delaying completion of the condominium
project. [¶] (b) The Cross-Defendants failed to
provide prompt approval, provide the necessary documentation and/or sign the
necessary documents which was the direct and proximate result of cancellation
of the escrow and failure of four other potential sales when the bank provide
the financing for unit 503 decided not finance and fund the sales of four other
condominium units.†(
It also alleged that Kenmore and Guarantors performed all conditions,
covenants, and promises on the Promissory Note, but were prevented from making
payment on the Promissory Note by Bank’s actions.
As to
breach of the covenant of good faith and fair dealing, the second amended
cross-complaint alleged that Bank “destroy[ed] or injur[ed] the right of the
other party to receive the fruits of the . . . loan contract†by
increasing the interest reserve and failing to provide prompt approvals and causing
the failure of four other sales as alleged previously. Bank caused Kenmore and Guarantors to enter
into the Forbearance Agreement through fraud, duress, and undue influence.
As to
rescission, the second amended cross-complaint alleged that Kenmore and
Guarantors entered into the Forbearance Agreement through the fraud, duress,
undue influence, and intentional acts of Bank in delaying the presentation of
the Forbearance Agreement until a few days before the foreclosure of the
Property.
As to
intentional interference with contract and economic advantage, the second
amended cross-complaint alleged that Bank knew of the contractual relationship
between Kenmore and third-party contractors and “intentionally increased the
interest rate reserve account reducing the amount available for the
construction project to interfere with or disrupt this relationship with the
third party contractors and sub-contractors.â€
(Sic.) Bank also knew of and interfered with the
contractual relationship between Kenmore and Guarantors on the one hand and
five parties attempting to purchase condominium units on the other hand by
“failing to provide prompt approval, provide the necessary documentation and/or
sign the necessary documents to allow the closure on the escrow of unit 503.â€
As to
negligent interference with contract and economic advantage, the second amended
cross-complaint alleged that Bank should have known of the relationship between
Kenmore and Guarantors on the one hand and third party contractors on the
other, but acted “wrongfully and negligently and without due care increased the
reserve account interfering and disrupting with the contractual and business
relationship of the Cross-Complainants and the third party contractors and
subcontractors.†(Sic.) Bank should have known
of the contractual relationship between Kenmore and Guarantors on the one hand
and five parties attempting to purchase condominium units on the other, but
acted wrongfully and negligently by failing to provide prompt approval,
necessary documentation, and signatures on documents to allow escrow to close
on unit 503.
As to
negligent loan administration, the second amended cross-complaint alleged that
Bank owed a duty to Kenmore and Guarantors arising from the contract between
them. It alleged Bank was negligent in
administering the loan contract by increasing the interest reserve and failing
to provide prompt approvals and causing the failure of four other sales as
alleged previously.
As to
intentional infliction of emotional distress, the second amended
cross-complaint alleged that Bank’s increase of the interest reserve; failure
to provide prompt approval, necessary documentation, and signing of necessary
documents; use of duress to force Kenmore and Guarantors to enter into the
Forbearance Agreement; and use of racist and disparaging remarks against Kim
and Pak resulted in severe and extreme emotional distress to Kim and Pak.
The
trial court sustained Bank’s demurrer to the second amended cross-complaint
without leave to amend as to all but the breach of contract cause of action,
with 20 days’ leave to amend.
On
March 22, 2010, Kenmore and Guarantors filed a third amended
cross-complaint which repeated the same allegations of the breach of contract
cause of action in the second amended cross-complaint and added the allegation
that “[s]aid agreement for [Bank] to Advance funds pursuant to certain
conditions as alleged as stated in Page 3 of the construction Loan
agreement. The Conditions precedent were
met but [Bank] failed and repeatedly failed to make proper payments.â€
On
May 7, 2010, Bank filed a motion for summary judgment to the third amended
cross-complaint on the basis that Bank did not breach the Construction Loan
Agreement and, if there were any breach, Kenmore had released all claims against
Bank in the Forbearance Agreement. In
support of Bank’s motion for summary judgment, Charles Wood, CEO of Bank,
declared on April 27, 2010, as follows.
On March 17, 2008, Kenmore and Bank entered into a Construction
Loan Agreement. The Construction Loan
Agreement does not specify the amount of interest required to be set aside in
reserve, and at all times Kenmore was “actually aware of or had access to
determine the exact amount in the interest reserve.†When Kenmore fulfilled conditions precedent to
each advance, Bank made timely advances to Kenmore. Kenmore entered into the Forbearance
Agreement, which contains a release of all claims against Bank.
The
Forbearance Agreement set forth the following recitals. On August 28, 2006, Kenmore delivered to
Bank the Promissory Note in the principal amount of $9.5 million due on
February 28, 2008. After Kenmore
“was unable to fully pay the Promissory Note, Kenmore . . . for
valuable consideration, made, executed and delivered to the Bank a Modification
of Deed of Trust recorded March 27, 2008 . . . and a series of
Change in Terms Agreements, essentially (a) extending the due date of the
Promissory Note from time to time and finally to January 2, 2009, and (b)
increasing the amount of the Promissory Note to $10 [million].†On March 17, 2008, Kenmore executed the
Construction Loan Agreement. On
March 17, 2008, Amco executed the “Guaranty of Completion and Performance.†“Kenmore . . . previously
renewed/extended its obligations to the Bank because it was unable to pay the
obligations as they became due.â€
Kenmore, Guarantors, and Amco are in default and there is currently due
$7,129,941.13 plus interest from September 26, 2008. Bank is willing to forbear enforcement of the
loan documents subject to the terms of the Forbearance Agreement.
The
Forbearance Agreement also provided for an extension of the period Bank would
forbear from enforcing the terms of the loan to February 10, 2009, then to
March 10, 2009, on the conditions that Kenmore, Guarantors, and Amco were
not in default of the terms of the loan and the Forbearance Agreement and
Kenmore had closed on the sale of a certain number of condominium units.
The
Forbearance Agreement required Kenmore, Guarantors, and Amco to release Bank as
follows. “Kenmore . . . ,
Guarantors, and Amco each hereby releases, discharges, and relieves the Bank
. . . from and against any and all causes of actions, claims,
judgments, liabilities and demands of any kind, nature, or character, known or
unknown, suspected or unsuspected. It is
the intention of the parties hereto that Kenmore . . . ,
Guarantors, and Amco each execute a complete release in favor of the Bank of
any and all claims they may possess against the Bank. In making and executing this release, it is
the express understanding of Kenmore . . . , Guarantors, and
Amco, and they so warrant and represent to the Bank, that they do not rely and
have not relied upon any representation or statement, oral or written, that is
not contained herein, made by any party or any party’s agent or representative,
attorneys or employees with respect to the matters contained herein, or with
respect to the advisability of entering into and executing this release. Kenmore . . . , Guarantors,
and Amco each expressly assumes the risk of any mistake of law or fact and the
risk that the true facts now known may turn out to be other than, or different
from, the facts now known or believed to exist.
Kenmore . . . , Guarantors, and Amco each expressly agree
and understand that this release extends to all claims of every kind and
nature, whether known or unknown, suspected or unsuspected, past or present,
concerning the Bank. Kenmore
. . . , Guarantors, and Amco each acknowledge that they are
aware of the rights given to them by California’s Civil Code Section 1542, and
expressly waive all of said rights. This
release is intended to be a general release.
California Civil Code Section 1542 states: [¶] A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.â€
In
opposition to Bank’s motion for summary judgment, Kim declared as follows. On
August 28, 2006, Kenmore entered into an agreement to borrow
$9.5 million from Bank. The terms
of the agreement provided that $7,887,000 was available for construction and
for an interest reserve of $1.3 million.
The first disbursement statement from California Fund Control stated
that $7.3 million was available for construction of the condominiums. There was a “discrepancy of [$577,000].†In November 2007, Bank assured Kim that Bank
would fund the Project to completion, but later told Kim that she should seek
additional funding to complete the Project prior to the loan due date of
February 2008. Kim was unable to secure
funding from other banks. In late
November 2007, Bank informed Kim that there was over $1 million in the
“fund control budget†and that Bank would provide funding to finish the
Project. In February 2008, Bank released
$95,000. On March 13, 2008, the
balance remaining in the “fund control†was $670,377.82. On March 17, 2008, Kim signed the
Construction Loan Agreement that increased the total loan amount to
$10 million. But the balance
available in the “fund control†remained at $670,377.82, and Kim did not
receive “an additional [$500,000]†to finish the Project. Bank subsequently delayed approving fund
requests, which resulted in Kim’s failure to pay contractors on time, which
caused completion of the Project to be delayed.
Kim and Pak borrowed money and finished the Project on July 30,
2008. “Many†contractors placed
mechanics’ liens on the Property. Kim
and Bank agreed that the contractors would be paid out of the proceeds from the
escrows. Seven escrows closed by
October 3, 2008, and contractors were paid out of the escrows. “On the eighth and ninth escrows, Jane
Auerswald started working on approving the escrow but did not pay the
mechanic’s liens and it close after the bank bought a bond.†(Sic.) On October 31, 2008, Kim “signed an
extension to the loan to January 2, 2009 . . . but was later to
sign the forbearance agreement as part of this extension.†“However, after this agreement I had
approximately 14 properties in escrow, but Ms. Auerswald was delaying the close
of escrow, and refused to sign documents, refused to pay out balance of the
loan to pay of the mechanical liens and telling anyone involved that she was
just going let the property go into foreclosure.†(Sic.) Auerswald’s actions caused Kenmore “to be
unable to pay off the existing excusing the breach of the forbearance
agreement.†(Sic.)
On
September 13, 2010, the trial court granted Bank’s motion for summary
judgment.
On
November 10, 2010, Bank filed a motion for summary adjudication as to
Bank’s cause of action for breach of guaranty and a common count. Jane Auerswald, executive vice-president and
chief credit officer of Bank, declared in support of Bank’s motion for summary
adjudication as follows. On
August 28, 2006, Kenmore executed the Promissory Note in the original
principal amount of $9.5 million, due and payable on February 28,
2008. On August 28, 2006, Kenmore
also executed and delivered to Bank a construction deed of trust encumbering
the Property. Concurrently with the
execution of the Promissory Note, Guarantors executed guaranties in which they
agreed to pay Bank the indebtedness “owed by Kenmore.†Bank performed all conditions precedent under
the Promissory Note and the guaranties.
On March 10, 2009, Kenmore failed to pay amounts due under the
Promissory Note and Guarantors failed to pay amounts due under the
guaranties. Bank made demand on Kenmore
and Guarantors to pay. On
August 10, 2009, the Property was sold to Bank pursuant to a nonjudicial
foreclosure sale, at which time the amount of the unpaid debt was $7,016,908.97
and the bid amount was $6,793,794.93.
Guarantors are responsible for the deficiency amount of $223,114.04 plus
interest at the legal rate of 10 percent per annum.
Kim
filed a declaration in support of the opposition to Bank’s motion for summary
adjudication that was identical to the declaration filed in support of the
opposition to Bank’s motion for summary judgment.
The
trial court granted Bank’s motion for summary adjudication on March 16,
2011. The court granted Bank’s request
for dismissal of the remaining causes of action in Bank’s complaint and entered
judgment in favor of Bank and against Guarantors in the amount of $258,808.13
plus interest. Kenmore and Guarantors
appealed.
DISCUSSION
second amended cross-complaint
1. Standard
of review
“For
purposes of this appeal we accept as true the properly pled factual allegations
of the complaint. (Thompson v. County
of Alameda (1980) 27 Cal.3d 741, 746.) Furthermore, the allegations of the
complaint must be read in the light most favorable to the plaintiff and
liberally construed with a view to attaining substantial justice among the
parties. (Code Civ. Proc., § 452; King
v. Central Bank (1977) 18 Cal.3d 840, 843.)
With these considerations in mind, we review the complaint de novo to
determine whether it alleges facts sufficient to state a cause of action under any
legal theory. If it does not, we next
determine whether the complaint reasonably could be amended to state a cause of
action. (Blank v. Kirwan (1985)
39 Cal.3d 311, 318.)†(
Holtzinger (1995) 39 Cal.App.4th 1194, 1199.)
2. Breach of
the covenant of good faith and fair dealing
Kenmore
and Guarantors urge that the second amended cross-complaint stated facts
sufficient to constitute a cause of action for breach of the covenant of good
faith and fair dealing. We agree.
“It
has long been recognized, of course, that every contract imposes upon each
party a duty of good faith and fair dealing in the performance of the contract
such that neither party shall do anything which will have the effect of
destroying or injuring the right of the other party to receive the fruits of
the contract. (Waller v. Truck Ins.
Exchange, Inc. (1995) 11 Cal.4th 1, 36.)
The Supreme Court has clarified, however, that an implied covenant of
good faith and fair dealing cannot contradict the express terms of a
contract.†(Storek & Storek, Inc. v. Citicorp Real Estate, Inc. (2002) 100
Cal.App.4th 44, 55.) “The covenant of
good faith and fair dealing, implied by law in every contract, exists merely to
prevent one contracting party from unfairly frustrating the other party’s right
to receive the benefits of the agreement actually made. [Citation.]
The covenant thus cannot ‘“be endowed with an existence independent of
its contractual underpinnings.â€â€™
[Citations.]†(
Cal.4th 317, 349.)
For
the implied covenant “[t]o be imposed ‘“(1) the implication must arise
from the language used or it must be indispensable to effectuate the intention
of the parties; (2) it must appear from the language used that it was so
clearly within the contemplation of the parties that they deemed it unnecessary
to express it; (3) implied covenants can only be justified on the grounds
of legal necessity; (4) a promise can be implied only where it can be
rightfully assumed that it would have been made if attention had been called to
it; (5) there can be no implied covenant where the subject is completely
covered by the contract.â€â€™
[Citations.]†(
41 Cal.App.4th 798, 804.)
Liberally
construing the second amended cross-complaint, as we must, we conclude that
Kenmore and Guarantors alleged facts sufficient to state a breach of the
covenant of good faith and fair dealing before and after the parties signed the
Forbearance Agreement. The second
amended cross-complaint alleged that Kenmore entered into an agreement to
borrow $9.5 million from Bank; the agreement called for an interest
reserve of $1.3 million; and Bank breached the implied covenant of good
faith and fair dealing by increasing the interest reserve more than
$1.3 million, which caused Kenmore and Guarantors to delay paying
contractors and delay completion of the Project. Bank contends that these alleged actions
occurred prior to the date of the Forbearance Agreement and are therefore
barred. But, as we explain later, the
trial court erred in granting Bank’s demurrer without leave to amend the cause
of action for rescission of the Forbearance Agreement. Thus, if Kenmore and Guarantors prevail on
the cause of action for rescission, the Forbearance Agreement cannot bar a
claim for relief based on actions that occurred before the parties executed the
Forbearance Agreement.
And
the second amended complaint also alleged that Bank “failed to provide prompt
approval, provide the necessary documentation and/or sign the necessary
documents which was the direct and proximate result of cancellation of the
escrow and failure of four other potential sales when the bank provide the
financing for unit 503 decided not finance and fund the sales of four other
condominium units.†(
These alleged actions occurred after the parties entered into the
Forbearance Agreement and are not barred by it.
By
alleging that Bank unfairly frustrated Kenmore’s and Guarantors’ right to
receive the benefits of the agreement
actually made by increasing the interest reserve over $1.3 million and failing
to provide prompt approvals, documents and signatures—leading to the inability
of Kenmore and Guarantors to pay back the loan—the second amended
cross-complaint stated a cause of action for breach of the covenant of good
faith and fair dealing.
We conclude
that the trial court erred in sustaining the demurrer as to the cause of action
for breach of the covenant of good faith and fair dealing.
Rescission
Kenmore
and Guarantors contend that the trial court erred in sustaining the demurrer
without leave to amend as to the cause of action for rescission of the
Forbearance Agreement because the second amended cross-complaint “contains
sufficient facts for rescission with specific allegations of economic duressâ€
and the second amended cross-complaint could be amended to include allegations
that the Forbearance Agreement should be rescinded as void against public
policy. We conclude that based on Kim’s
declaration and counsel’s statements at oral argument, the second amended
cross-complaint can be amended to allege Bank breached the terms of the
Promissory Note by increasing the interest reserve over $1.3 million, forcing
Kenmore and Guarantors into signing the Forbearance Agreement.
“‘Typically,
those claiming [economic duress] are attempting to avoid the consequences of a
modification of an original contract or of a settlement and release
agreement.’†(Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157
Cal.App.3d 1154, 1158.) The doctrine of
economic duress “may come into play upon the doing of a wrongful act which is
sufficiently coercive to cause a reasonably prudent person faced with no
reasonable alternative to succumb to the perpetrator’s pressure. [Citations.]â€
(Ibid.) “The assertion of a claim known to be false
or a bad faith threat to breach a contract or to withhold a payment may
constitute a wrongful act for purposes of the economic duress doctrine. [Citations.]
Further, a reasonably prudent person subject to such an act may have no
reasonable alternative but to succumb when the only other alternative is
bankruptcy or financial ruin.
[Citations.]†(
release was rescinded where defendant company acted in bad faith by refusing to
pay contractor’s final billing and offering to pay compromise amount, knowing
that contractor was a new company faced with imminent bankruptcy if not paid
its final billing].)
The
second amended cross-complaint alleged that Kenmore’s and Guarantors’ consent
to enter into the Forbearance Agreement was coerced by Bank’s “purposefulâ€
delay in presenting the Forbearance Agreement until a few days before the
foreclosure of the Property. Although we
reject Kenmore’s and Guarantors’ argument that the second amended
cross-complaint can be amended to allege facts sufficient to state a claim for
rescission by simply urging that they could allege the Forbearance Agreement is
void against public policy and that it had not been explained to them, based on
Kim’s declaration and counsel’s statements at oral argument, the second amended
cross-complaint can be amended to allege Bank breached the terms of the
Promissory Note by increasing the interest reserve over $1.3 million, forcing
Kenmore and Guarantors into signing the Forbearance Agreement.
Accordingly,
we conclude that the trial court erred in sustaining the demurrer without leave
to amend as to the cause of action for rescission.
4. Intentional
and negligent interference with contract and economic advantage
On
appeal, the appellant must present an intelligible legal argument as to why the
trial court’s ruling was reversible error. (Niko
v. Foreman (2006) 144 Cal.App.4th 344, 368.) With respect to challenges to an order
sustaining a demurrer, the burden is on the appellant to demonstrate how a
complaint might be cured by amendment. (
Cal.4th 1112, 1126.) Kenmore and
Guarantors have failed to present a cogent argument as to why the trial court
erred in sustaining the demurrer to the second amended cross-complaint as to
the causes of action for intentional and negligent interference with contract
and economic advantage and have not shown how the second amended
cross-complaint can be cured by amendment.
Accordingly,
we conclude the trial court did not err in sustaining the demurrer without
leave to amend as to the causes of action for intentional and negligent
interference with contract and economic advantage.
5. Negligent
loan administration
As
previously stated, on appeal, the appellant must present an intelligible legal
argument as to why the trial court’s ruling was reversible error. (Niko
v. Foreman, supra, 144
Cal.App.4th at p. 368.) With respect to
challenges to an order sustaining a demurrer, the burden is on the appellant to
demonstrate how a complaint might be cured by amendment. (Zelig
v. County of Los Angeles, supra,
27 Cal.4th at p. 1126.) Kenmore and
Guarantors have failed to present a cogent argument as to why the trial court
erred in sustaining the demurrer to the second amended cross-complaint as to
the cause of action for negligent loan administration and have not shown how
the second amended cross-complaint can be cured by amendment.
Accordingly,
we conclude the trial court did not err in sustaining the demurrer without
leave to amend as to the cause of action for negligent loan administration.
6. Intentional
infliction of emotional distress
On
appeal, the appellant must present an intelligible legal argument as to why the
trial court’s ruling was reversible error.
(Niko v. Foreman,
With respect to challenges to an order sustaining a demurrer, the burden
is on the appellant to demonstrate how a complaint might be cured by amendment. (Zelig
v. County of Los Angeles, supra,
27 Cal.4th at 1112, 1126.) Kenmore and
Guarantors have failed to present a cogent argument as to why the trial court
erred in sustaining the demurrer to the second amended cross-complaint as to
the cause of action for intentional infliction of emotional distress and have
not shown how the second amended cross-complaint can be cured by amendment.
Accordingly,
we conclude the trial court did not err in sustaining the demurrer without
leave to amend as to the cause of action for intentional infliction of
emotional distress.
on third amended cross-complaint
Standard of review
A
“motion for summary judgment shall be granted if all the papers submitted show
that there is no triable issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.â€
(Code Civ.
Proc., § 437c, subdivision (c).)
A defendant in moving for summary judgment has met his burden of
showing that a cause of action has no merit if that party has shown that one or
more elements of the cause of action cannot be established or that there is a
complete defense to that cause of action. (Id., § 437c, subdivision (p)(2).) “Once the defendant . . . has met
that burden, the burden shifts to the plaintiff . . . to show that a
triable issue of one or more material facts exists as to that cause of action
or a defense thereto.†(
Where the plaintiff appeals from an order granting the defendant’s
summary judgment motion, we must independently examine the record to determine
whether the defendant has conclusively negated a necessary element of the
plaintiff’s case or demonstrated that no triable issues of material fact
exist. (Saelzer v. Advanced Group 400 (2001) 25 Cal.4th 763, 767.)
Breach of contract
Kenmore
and Guarantors contend that the trial court erred in granting Bank’s motion for
summary judgment on the cause of action for breach of contract alleged in the
third amended cross-complaint because there were triable issues of fact as to
whether the Construction Loan Agreement was funded properly and as to the
enforceability of the Forbearance Agreement.
We conclude that Kenmore and Guarantors raised a triable issue of fact
as to whether Bank breached the Promissory Note and Construction Loan Agreement
before and after the parties entered into the Forbearance Agreement.
The
elements of breach of contract are: “(1)
the contract, (2) plaintiff’s performance or excuse for nonperformance, (3)
defendant’s breach, and (4) the resulting damages to plaintiff. [Citation.]â€
(Careau & Co. v. Security
Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)
Kenmore
and Guarantors alleged in their third amended cross-complaint for breach of
contract that Bank breached the Construction Loan Agreement for
$10 million by increasing the interest reserve on the loan amount more
than $1.3 million and delaying providing approvals, documentation, and
signatures on documents. The third
amended cross-complaint alleged that Bank’s breaches caused delay of the
completion of the Project and sales of condominium units. It also alleged that Kenmore and Guarantors
performed all conditions, covenants, and promises on the Promissory Note, but
were prevented from making payment on the Promissory Note by Bank’s actions.
Kim
declared that there was a discrepancy of
“$577,000†between the amount available for construction under the
Construction Loan Agreement and the amount disbursed to Kenmore and
Guarantors. After signing the
Construction Loan Agreement that increased the total loan amount to $10
million, Kenmore and Guarantors did not receive the additional “$500,000â€
called for under the agreement to finish the Project. Kim declared that Bank delayed approving
funding requests, resulting in Kenmore’s and Guarantors’ failure to pay
contractors, which resulted in the delay of the completion of the Project. Subsequently, unpaid contractors placed
mechanics’ liens on the Property. Bank
on the one hand and Kenmore and Guarantors on the other hand agreed to pay the
contractors out of proceeds from the escrows.
Kim declared that on October 31, 2008, she signed an extension to
the loan to January 2, 2009, and the Forbearance Agreement. She declared that after signing the
Forbearance Agreement, 14 properties were in escrow. But Bank delayed closing of escrow, refused
to sign documents, and refused to pay out the balance of the loan to pay off
mechanics’ liens. She declared that
Bank’s actions caused Kenmore to be unable to pay off the loan.
Thus,
a fact finder could conclude that Bank breached the Promissory Note before and
after it entered into the Forbearance Agreement by increasing the interest
reserve requirement and refusing to pay out the balance of the loan.
Accordingly,
we conclude that triable issues of material fact exist and the trial court
erred in granting Bank’s motion for summary judgment.
3. Breach of
guaranty and a common count
In
light of the foregoing conclusion, we determine the trial court erred in
granting Bank’s motion for summary adjudication on its complaint for breach of
guaranty and a common count.
DISPOSITION
The order sustaining Bank’s demurrer to the second
amended cross-complaint without leave to amend as to the causes of action for
intentional and negligent interference with contract/economic advantage,
negligent loan administration, and intentional infliction of emotional distress
is affirmed. The order sustaining Bank’s
demurrer to the second amended cross-complaint as to the causes of action for
breach of the covenant of good faith and fair dealing and rescission is
reversed, and the trial court is directed to allow Kenmore and Guarantor leave
to amend the second amended cross-complaint to state a cause of action for
rescission. The order granting Bank’s
motion for summary judgment as to the third amended cross-complaint is
reversed. The order and judgment entered
granting Bank’s motion for summary adjudication as to Bank’s complaint for
breach of guaranty and a common count is reversed. Appellants are entitled to costs on appeal.
NOT TO BE PUBLISHED.
MALLANO,
P. J.
We
concur:
ROTHSCHILD, J.
JOHNSON, J.
