Opinion
B293615
10-20-2020
LA OPEN DOOR PRESBYTERIAN CHURCH, Plaintiff and Appellant, v. EVANGELICAL CHRISTIAN CREDIT UNION, Defendant and Respondent.
Law Offices of Mary Lee and Mary Lee; Esner, Chang & Boyer and Andrew N. Chang for Plaintiff and Appellant. Sheppard, Mullin, Richter & Hampton and Isaiah Z. Weedn for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC497940) APPEAL from a judgment of the Superior Court of Los Angeles County, Randolph M. Hammock, Judge. Affirmed. Law Offices of Mary Lee and Mary Lee; Esner, Chang & Boyer and Andrew N. Chang for Plaintiff and Appellant. Sheppard, Mullin, Richter & Hampton and Isaiah Z. Weedn for Defendant and Respondent.
Plaintiff and appellant LA Open Door Presbyterian Church (the Church) appeals from summary judgment entered in favor of its construction lender, defendant and respondent Evangelical Christian Credit Union (the Credit Union). The trial court granted summary judgment for the Credit Union on the Church's fraud and breach of contract causes of action, which allege damages in connection with construction loans the Credit Union extended (and did not extend) to the Church, because it was undisputed the Church willingly quitclaimed the subject property to a third party before the Credit Union foreclosed for defaulting on the construction loans. We are asked to decide whether summary judgment was proper, which reduces to the question of whether the summary judgment record demonstrates the Church could prove it sustained its alleged damages if the case were allowed to go to trial.
I. BACKGROUND
A. The Parties' Dealings
In 2001, the Church purchased real property on Wilshire Boulevard in the Westlake District of Los Angeles (the Property) that it planned to develop as a sanctuary for its congregants (the project). To finance the project, the Church obtained a $20 million construction loan from the Credit Union in 2005.
The plan was to complete the project by 2007, and J.D. Diffenbaugh was selected as the general contractor. However, by 2009, with construction still not finished, the parties entered into a loan modification agreement in which the Credit Union agreed to lend the Church an additional $8.75 million.
In February 2011, construction still was not complete. The Church by that point owed the Credit Union nearly $29 million, and the parties entered into a forbearance agreement (the forbearance agreement). In that agreement, the Church acknowledged it was in default under the terms of the parties' loan agreements. The Credit Union agreed to forbear "for a limited period of time" from exercising its rights and remedies arising from the Church's default, to move the loan's maturity date from December 2010 to December 2011, and to allow the Church to borrow an additional $1,725 million, which could be used to pay for the completion of the project. Performance by the Credit Union, however, was conditioned on the Church's strict compliance with the forbearance agreement and the underlying loan documents. The agreement also stated the Credit Union had "the right to immediately exercise any and all rights and remedies available upon default . . . , including, without limitation, the right to foreclose on the Property . . . ."
Six months after the parties signed the forbearance agreement, the Church stopped making payments to the Credit Union. Six months after that, when the Credit Union had already recorded a notice of default, the Church quitclaimed the Property to a third party—in an effort to forestall an impending foreclosure or in the hope of facilitating an effort to repurchase the Property after a foreclosure sale. One week after the Church quitclaimed the Property, the Credit Union foreclosed.
B. The Lawsuit, Judgment for the Credit Union, and Partial Reversal on Appeal
After the foreclosure, the Church sued the Credit Union for fraud and wrongful foreclosure, among other causes of action. The trial court summarily adjudicated the fraud and the wrongful foreclosure claims in the Credit Union's favor. The trial court found, as to the fraud claim, that a release of claims provision in the forbearance agreement barred the Church from prosecuting that claim. In an appeal challenging that summary adjudication ruling (taken from a final judgment after trial on separate conversion claim), we held summary adjudication of the wrongful foreclosure claim was proper because the Church lacked standing to challenge the foreclosure sale, having quitclaimed the Property to a third party before the foreclosure. (LA Open Door Presbyterian Church v. Evangelical Christian Credit Union (Sept. 19, 2016, B263647) [nonpub. opn.] (LA Open Door I).) We reversed the court's ruling on the fraud claim, however, rejecting the only two arguments the Credit Union advanced on appeal to defend summary adjudication, namely, the argument that the release provisions in the loan modification and forbearance agreements were enforceable and barred a fraud claim, and the argument that the Church's senior pastor and president Hun Sung Park's (Park's) failure to read the forbearance agreement meant there could be no justifiable reliance. (LA Open Door I, supra, B263647.) We were not asked to decide in LA Open Door I whether the Church could prove it suffered any damages from the alleged fraud notwithstanding its decision to quitclaim the Property to a third party.
Back in the trial court after the partial reversal, the Church ultimately filed a third amended complaint (the operative complaint), which asserted causes of action against the Credit Union for (1) fraud and (2) breach of contract. The operative complaint made clear the "litigation concerns real property located in the County of Los Angeles" with a legal description corresponding to the Property. According to the operative complaint's general allegations, the Church spent "more than $19,750,970.00 between 2001 and 2011 to purchase the [Property], make improvements, and try to complete" the construction project, a sum that was allegedly "over and above the amount of [the Credit Union's] construction loan."
The operative complaint's fraud cause of action alleged the Credit Union (1) failed to disclose five categories of information before "demand[ing]" the Church sign the forbearance agreement, and (2) made promises to fund further construction without any intent of performing. The fraud cause of action further alleged that "[a]s a proximate result of [the Credit Union's] actions/inactions and false promises . . . , [the Church] has suffered special general damages in an amount exceeding $20,000,000.00." The operative complaint's breach of contract claim alleged the Church suffered the same $20 million-plus damages when the Credit Union breached the forbearance agreement by failing to advance $1,725 million to complete the project (along with an additional $2 million that was allegedly available).
The five categories of allegedly concealed information were J.D. Diffenbaugh's status as a "close business partner" of the Credit Union, the receipt by Credit Union directors of "illegal financial benefits" from J.D. Diffenbaugh, the "true purpose" of the forbearance agreement to "cover up and insulate from liability" J.D. Diffenbaugh's breach of the construction contract (and the Credit Union's vicarious liability for the breach), the Credit Union's asserted intent to prevent the Church from completing the construction project, and the Credit Union's "true intention" to "manufacture [the Church's] 'default.'"
The Church also alleged in its operative complaint that its damages included payments to the Credit Union between 2007 and 2011 and the loss of personal property when the Credit Union executed its writ of possession. These additional damage claims were stricken from the operative complaint prior to the Credit Union filing its motion for summary judgment. The Church does not challenge the trial court's motion to strike ruling in this appeal.
C. The Credit Union's Summary Judgment Motion That Is the Subject of This Appeal
In March 2018, the Credit Union moved for summary judgment (or, in the alternative, summary adjudication). The Credit Union contended, among other things, that all the alleged damages in the operative complaint were predicated on money the Church expended in connection with the Property and these damages were not properly traceable to any asserted fraud or breach of contract by the Credit Union because it was undisputed the Church "quitclaimed the Real Property to a third party a week before the foreclosure sale" as part of a post-foreclosure buy-back scheme. As evidence in support of its position, the Credit Union relied on a copy of the quitclaim deed as recorded by the county registrar and trial testimony by Pastor Park that the Church quitclaimed the Property to a third party hoping to buy the Property back from the Credit Union after the foreclosure sale (which would extinguish the outstanding loan defaults) for a significant discount. Solely as to the fraud cause of action, the Credit Union additionally argued (1) the Church's factually devoid discovery responses demonstrated there was no admissible evidence that the Credit Union concealed or failed to disclose any material facts, (2) the Church suffered no damages from the foreclosure because it had no equity in the Property—the liens on the Property were greater than its value, and (3) insofar as the Church's fraud claim was based on the allegation that it was fraudulently induced to sign the forbearance agreement, there were still no damages because the Credit Union would have simply foreclosed on the Property sooner if the Church had opted not to sign the forbearance agreement.
In its opposition to summary judgment, the Church disagreed the quitclaim transfer of the Property meant it could not prove damages caused by the Credit Union's alleged fraud and breach of the loan documents. The Church's arguments on this point took what is charitably viewed as a scattershot approach, variously contending: the Credit Union had gone beyond the role of a typical lender and become a fiduciary to the Church, which in the Church's view meant it could prove fraud even if Church representatives did not read the loan documents; the Church would be entitled to the benefit of its bargain (the additional funds contemplated by the forbearance agreement) if it proved its breach of contract claim; and the Church suffered "out of pocket" damages unrelated to the foreclosure on the Property. Elaborating on this final point, the Church's opposition stated: "[The Church] used its own monies to also fund the [project] that was not covered under [the Credit Union's] law, such as monies paid to its architect, Greun Associates[,] and for other expenses necessary to the Construction Project but not paid through the Construction Loan. (See Woo Declaration.) The Construction Loan was specific to J. D. Diffenbaugh's associated costs. Where, as here, [the Church] paid in other monies to the construction of its new church, both before the Loan Agreement and during, [the Church] is certainly entitled to recover these out of pocket costs at a minimum, should [the Credit Union] be found liable. Especially where, as here, [the Church] was desperate to figure out a way to save its church from [the Credit Union's] fraudulent foreclosure of the property—when it was 95% complete."
The Church alleged and argued it sustained out-of-pocket damages only in connection with its fraud cause of action, not its breach of contract claim.
The Woo declaration referenced in the Church's opposition was a declaration submitted six years earlier in the litigation by Young Sook Woo (Woo), one of the Church's senior administrators. Attached to Woo's declaration were copies of cancelled checks reflecting payments the Church made to the Credit Union during 2005 to 2011 and a copy of the Church's construction account ledger, which recorded payments made by the Church between 2001 and 2011 to various parties. Woo's declaration stated "[t]he ledger indicates how much money was spent by [the Church] for what purpose" in connection with the project. Neither the Woo declaration nor its supporting ledger, however, identifies the payees in a meaningful way. In addition, Woo's declaration and its accompanying ledger do not describe or otherwise categorize the reasons for the various payments, listing them instead only in lump-sum amounts as correlated to the various payees on particular dates.
In 2011, for instance, the ledger indicated payments were made to the Credit Union and to the following: "Insurance," "The Capital," "LA County &," "Schreier," "Koury Eng.," "kingstar," and "Judson."
D. The Trial Court's Ruling
The trial court granted the Credit Union's summary judgment motion based on its finding there was no evidence supporting the Church's claim to have suffered $20 million in damages. The provenance of that amount was not clear from the operative complaint, but the court surmised it "appear[ed] to derive" from the general allegation that the Church spent more than $19,750,970 between 2001 and 2011 to purchase the real property, make improvements, and fund the construction project. The Court reasoned, however, that the Church's quitclaim transfer of its property was a relinquishment of its interest in the contemplated completion of the construction project that defeated any prospect of prevailing on its causes of action for fraud and breach of contract. As an independent, alternative ground for summarily adjudicating just the fraud cause of action (and the Church's "out of pocket" losses theory), the trial court explained the fraud allegations concerned only the forbearance agreement and the earlier loan documents or any alleged representations that caused the Church not to discharge J.D. Diffenbaugh as contractor. Because, the court reasoned, it had previously stricken allegations of out-of-pocket damages arising from alleged reliance on the forbearance agreement, there was no remaining evidence supporting a fraud damages claim.
With no triable issue of material fact relating to the Church's alleged damages, the trial court declined to address the Credit Union's other arguments and granted judgment as a matter of law to the Credit Union on both the fraud and breach of contract claims.
II. DISCUSSION
Summary judgment for the Credit Union was properly granted. Damages are an essential element of fraud and breach of contract claims and the Church's quitclaim transfer of the Property to a third party destroyed any prospect of proving its alleged damages—money it invested in the Property and lost—are fairly traceable to misconduct by the Credit Union. Furthermore, even putting aside the effect of the quitclaim transfer on the Church's fraud cause of action, which is the primary focus of its arguments for reversal on appeal, there is still no evidence of so-called out-of-pocket damages warranting a trial on the fraud claim.
A. Standard of Review
"'"'A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); [citation].) The moving party bears the burden of showing the court that the plaintiff "has not established, and cannot reasonably expect to establish,"' the elements of his or her cause of action. [Citation.]" [Citation.] We review the trial court's decision de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party.' [Citation.]" (Ennabe v. Manosa (2014) 58 Cal.4th 697, 705.)
B. The Quitclaim Transfer Defeats Any Possibility of Proving Damages
For a fraud cause of action, as well as one for breach of contract, an essential element is proof of damage caused by the defendant's misconduct. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173; Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1415 ["'[f]raud without damage is not actionable'"]; see also Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821; Bramalea California, Inc. v. Reliable Interiors, Inc. (2004) 119 Cal.App.4th 468, 473 ["A breach of contract is not actionable without damage"]; Goehring v. Chapman University (2004) 121 Cal.App.4th 353, 365 [affirming summary adjudication on intentional misrepresentation claim because plaintiff's damages were caused by his academic dismissal from law school, not by misrepresentations inducing him to enroll].)
Issues to be decided at summary judgment are framed by the pleadings (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250) and "[a] party may not oppose a summary judgment motion based on a claim, theory, or defense that is not alleged in the pleadings" (California Bank & Trust v. Lawlor (2013) 222 Cal.App.4th 625, 637, fn. 3). All the damages the operative complaint alleges the Church suffered, sparse as those allegations are, concern funds the Church allegedly paid to purchase the Property or develop it. Yet there is no material dispute on the summary judgment record that the Church deliberately and voluntarily quitclaimed the Property to a third party before the foreclosure sale in the hope of repurchasing the Property later at a reduced price. Because "'[a] quitclaim deed transfers whatever present right or interest the grantor has in the property'" (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 239; accord, Estate of Dayan (2016) 5 Cal.App.5th 29, 37), the Church has no prospect of showing it suffered damages as a result of the Credit Union's alleged misconduct.
The Church was not compelled to give up title to its property to sue the Credit Union for the alleged misconduct—indeed, it should have retained title if it wanted to maintain such a lawsuit. But the Church had other ideas; there is no material dispute of fact that it opted to go forward with the quitclaim transfer as part of a plan (ultimately unsuccessful) to repurchase the Property for a lower price after the foreclosure sale. That broke the chain of causation for damages arising from asserted fraud or breach of contract by the Credit Union and destroys any prospect of proving the essential damages element of the Church's lawsuit.
The result we reach here is not inconsistent with our prior reversal of the trial court's ruling on the fraud cause of action in LA Open Door I. In that case, we addressed only the viability of the contractual releases on the fraud claim and the question of justifiable reliance, not the effect of the quitclaim transfer on the prospect of proving damages. (Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 680 ["'It is axiomatic that language in a judicial opinion is to be understood in accordance with the facts and issues before the court. An opinion is not authority for propositions not considered'"]; see also Di Genova v. State Bd. of Ed. (1962) 57 Cal.2d 167, 178-179.)
The counterarguments the Church advances on appeal are negligible. In its opening brief, the Church simply recites Pastor Park's view of the parties' course of dealing and makes the conclusory, nonspecific assertion that "[t]his evidence and the other evidence set forth in [the Church's] opposition to [the Credit Union's] motion for summary judgment set forth more than sufficient triable issues of fact precluding [the Credit Union] from obtaining summary judgment on the ground that [the Church] has no evidence to defeat summary adjudication of [the Church's] contract and fraud claims." That does nothing to convince us our analysis is incorrect. The Church's reply brief is no better. It takes the same approach, even citing back to the deficient discussion in the opening brief, and adds the assertion that the Credit Union on appeal ignores the operative complaint's general allegation that the Church expended over $19 million to purchase the Property and make improvements. This additional observation suffers from two problems: (1) allegations are not evidence (a point we will return to momentarily) and (2) all of the alleged expenses were investments in a property the Church later opted to give away to a third party. The Church cannot prove it was damaged by losing money on an investment when it gave away the asset in which it invested.
C. There Was No Substantial Evidence of So-Called Out-of-Pocket Damages Even If the Church Could Prove Damages from Fraud Notwithstanding the Quitclaim Transfer
A party opposing a summary judgment motion must produce evidence that is both admissible and "substantial." (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163 ["the plaintiff must produce substantial responsive evidence sufficient to establish a triable issue of material fact on the merits of the defendant's showing"].) The Woo declaration and its supporting ledger are not substantial evidence of out-of-pocket expense damages sufficient to forestall summary adjudication of the fraud claim.
Woo's two-page declaration (exclusive of the attached ledger) was prepared much earlier in the litigation, not for the purpose of opposing summary judgment. Woo purported to authenticate, as a business record, what he calls the Church's "construction account ledger." Woo declares the ledger pertains to "the period of January 2001 through December 2011," "indicates how much money was spent by [the Church] for what purpose," and "contains the information about the payments made by [the Church] to [the Credit Union] between 2005 and 2011." That is it—Woo says nothing more about the contents of the ledger.
As for the ledger itself, it is close to undecipherable, listing amounts to undescribed payees in columns (some of which appear to be truncated in the printed copy) with no description of the reasons for the payments. That is significant, because even if the amounts listed are understood as construction expenses, Woo's declaration nowhere states that the amounts listed on the "construction account ledger" pertain solely to the Property. The absence of any sufficient foundational explanation for the ledger amounts means it cannot be substantial evidence of the Church's claimed expenses alleged in the operative complaint. Without such evidence, the Church's claim that so-called out-of-pocket damages barred summary adjudication of the fraud cause of action is meritless.
In addition, even putting aside the foundational problems with the Woo declaration, there is still no substantial evidence in the record supporting the Church's assertion, in its opening brief, that it "used its own monies to also fund the [project] that was not covered under [the Credit Union's loan], such as monies paid to its architect, Greun Associations and for other expenses necessary to the [project] but not paid through the [Credit Union's loan]."
DISPOSITION
The judgment is affirmed. Evangelical Christian Credit Union is awarded its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, J. I concur:
KIM, J. RUBIN, P. J. - Concurrence:
I concur in the judgment. RUBIN, P. J.