Preview
.
1 BRADLEY A. BENING – SBN: 104221
BRUCE D. MacLEOD – SBN: 130860
2 DAVIS, BENGTSON & YOUNG, APLC
1960 The Alameda, Suite 210
3 San Jose, CA 95126
Phone: 669.245.4200
4 Fax: 408.985.1814
Email: bbening@dby-law.com
5 Email: bmacleod@dby-law.com
6 Attorneys for Defendants/Cross-Complainants
SCOTT LISSOY, an individual; IRA
7 GLASKY, an individual; ALBERT LISSOY,
an individual; ALBERT LISSOY, as trustee of
8 the Lissoy Family Trust U/D/T June 17, 1996;
THE LISSOY FAMILY TRUST U/D/T/ June
9 17, 1996; and LFT QSBC-2011 B, INC.
10
SUPERIOR COURT OF CALIFORNIA, COUNTY OF MONTEREY
11
12 NADER T. AGHA, an individual, MOSS Case No. 21CV001478
LANDING COMMERCIAL PARK, LLC, a
13 California Limited Liability Company, CROSS-COMPLAINANTS’ OPPOSITION
ANDALUCIA LTD., a California Limited TO CROSS-DEFENDANTS’ MOTION
14 Partnership, HOLMAN BUILDING FOR JUDGMENT ON THE PLEADINGS
ASSOCIATES, L.P., A California Limited ON CROSS-COMPLAINT
15 Partnership, GABILAN APARTMENTS, LLC,
a California limited liability company, Date: March 15, 2024
16 Time: 9:00 A.M.
Plaintiffs, Department: 14
17
vs.
18 Trial Date: June 10, 2024
ALBERT LISSOY, an individual, et al.,
19
Defendants.
20
_____________________________________
21
AND RELATED CROSS-ACTION
22
23
24
25
26
27
28
-1-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 TABLE OF CONTENTS
I. INTRODUCTION ........................................................................................................................... 5
2
II. SCOPE OF FACTS RELEVANT TO THE MOTION. ................................................................. 6
3
III. ANALYSIS ................................................................................................................................... 6
4
A. The Motion Fails to Satisfy the Basic Prerequisites for a Motion for Judgment on the
5 Pleadings, Including the Requirement That The Motion Can Only Be Brought Against
The “Entire Complaint” or “Entire Cause of Action”. ....................................................... 6
6
B. The Statute of Limitations Does Not Bar Any of the Causes of Action. ........................... 7
7
C. The Motion Fails to Show That Judgment on the Pleadings Should Apply to Any of the
8 Three Causes of Action. ..................................................................................................... 9
9 1. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to
the Entire “Breach of Contract” Cause of Action. ................................................. 9
10
a. The MPA incorrectly defines which contractual agreements are at issue in the
11 Breach of Contract Cause of Action. ..................................................................... 9
12 b. There is no basis for the claim that judgment should be entered in favor of
HMBY or Molasses Trust. ................................................................................... 10
13
c. Res judicata, even assuming it applies, does not provide the basis for judgment on
14 the pleadings because it would not “entirely defeat” the Breach of Contract cause
of action which includes claims arising out of the Binding Term Sheets which
15 created new uties unrelated to the 2010 note in the underlying case. ......................
.............................................................................................................................. 11
16
d. Physical Possession of the Note Is Not Necessary for Standing .......................... 12
17
e. The argument that the 2005 MCB DOT “Was Fully Reconveyed” does not
18 provide a sufficient basis for granting a Motion for Judgment on the Pleadings. ....
.............................................................................................................................. 13
19
f. Cross-Defendants’ remaining “standing” arguments (MPA §V(E)-(F)) are
20 nothing more than series of statements of the law but fail to make any attempt to
apply the statements of law to the current action. ................................................ 13
21
2. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to
22 the Entire Second Cause of Action for “Appointment of Receiver” .................... 13
23 3. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to
the Entire Third Cause of Action for “Accounting”............................................. 13
24
D. Cross-Defendants Fail to Show That Foreclosure Is Barred, Or That They Would Be
25 Entitled to Have the Motion Be Granted Even If They Showed That Foreclosure Is
Barred. .............................................................................................................................. 15
26
1. Foreclosure is contractually barred. ..................................................................... 15
27
28
-2-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 2. Foreclosure is Not Barred by Cross-Complainants Status as “Partners” or “Joint
Venturers” Because the Assets That Are Subject to Foreclosure Were Obtained
2 Prior to Or as Part of the Formation of the Partnership. ...................................... 16
3 E. The Special Case of the “FL.Corp” Described in the MPA. ............................................ 17
4 IV. IF THE COURT IS INCLINED TO GRANT THE MOTION AS TO ANY OF THE CROSS-
COMPLAINANTS ON ANY OF THE CAUSES OF ACTION, LEAVE TO AMEND THE
5 CROSS-COMPLAINT SHOULD BE GRANTED. ................................................. 17
6 V. CONCLUSION ........................................................................................................... 18
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-3-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 TABLE OF AUTHORITIES
2 CASES
3 B.L.M. v. Sabo & Deitsch (1997) 55 Cal. App. 4th 823 …… 18
4 BT-1 v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 1406 … 16, 17
5 Carlton Browne & Co v. Superior Court (1989) 210 Cal.App.3d 3 5 …… 8
6 Chambers v. Kay (2002) 29 Cal.4th 142, 151 …… 17
7 Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal. App. 4th 433, 440 12, 13
8 Easton v. Ash (1941) 18 Cal.2d 530. …… 8
Geren v. Deutsche Bank National (E.D.Cal., Aug. 12, 2011, No. CV F 11-0938 LJO GSA 12
9
Gramercy Investment Trust v. Lakemont Homes Nevada, Inc. (2011) 198 9
10
Hague v. Wells Fargo Bank, N.A. (N.D.Cal., Aug. 2, 2011, No. C11-02366 TEH, p. *3 12
11
Higgins v. Del Faro (1981) 123 Cal. App. 3d 558 7, 10, 17
12
Impink v. Bank of America (S.D.Cal., Sept. 6, 2011 ……. 13
13
Kolbe v. JP Morgan Chase Bank N.A. N.D.Cal., Oct. 13, 2011 12
14
Lewis v. United States Bank Nat'l Ass'n, 2017 U.S. Dist. LEXIS 186577 12
15
Martindell v. Bodrero (1967) 256 Cal.App.2d 56, 59; C.C.P. §360 8
16
Shuster v. BAC Home Loans Servicing, LP (2012) 211 12
17
STATUE
18 California Code of Civil Procedure. §438 …………………………….….. 7
19 California Code of Civil Procedure §580 …………… 9
20 California Code of Civil Procedure §726 …………… 9, 16
21 California Code of Civil Procedure 2856 …………… 9
22 California Code of Civil Procedure 2924 6, 12
23 California Code Section V(E) …………… 2, 13, 15
24 RULES
25 California Rule of Court 3.1113 6
26
27
28
-4-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 I. INTRODUCTION
2 Cross-Defendants’1 Motion for Judgment on the Pleadings is an exemplar of a “quantity over
3 quality”, “throw everything at the wall” style of motion, with all of the expected shortcomings, most
4 particularly a lack of cogent analysis. This lawsuit involves a complex series of transactions
5 involving the Cross-Defendants and two banks2, the Cross-Complainants and the same banks, and
6 among the parties to this lawsuit. The complexity continued to the agreements among the parties
7 which were set out in an initial “Binding Term Sheet”, an “Amendment to the Binding Term Sheet”,
8 a “Second Amendment to Binding Term Sheet” and “Third Amendment to Binding Term Sheet”
9 (collectively “Term Sheets”). In turn, the Term Sheets incorporated other documents that had been
10 executed by the other participants in the transactions.
11 The motion attempts to attack specific points of the overall transaction, without tying their
12 arguments to the overall plan of the parties, and hope that the court will look at the points and
13 decide that the points somehow add up to eliminating an “entire” cause of action. In fact, the
14 Plaintiff’s [sic] Memorandum of Points and Authorities in Support of Motion for Judgment on the
15 Pleadings (“MPA”) largely ignores the Term Sheets, and in so doing prevents their ability to fulfill
16 the foundational requirement for a Motion for Judgment on the Pleadings of “eliminating” an entire
17 Cause of Action given that each cause of action relies, in part, upon the Term Sheets.
18 It will be quickly apparent that the Cross-Defendants’ motion is premised upon efforts to
19 “pick-off” specific allegations against specific Cross-Defendants, and hope that the court will
20 conclude that when they are added up, they constitute the “entirety” of the cause of action.
21 Unfortunately for the Cross-Defendants, their efforts fail to eliminate each of the breaches specified
22 in the motion, meaning that the effort cannot be successful.
23 The motion also contains defects, both procedural and substantive, including the following:
24 1. To prevail on a motion for Judgment on the Pleadings, the motion must be made as
25 to, at minimum, an “entire” cause of action, and the motion fails to show that any of
26
1
27 Although the Notice of Motion is titled “Plaintiffs’ Notice of Motion . .. for Judgment on the Pleadings, the content of
the motion makes clear that the moving parties are the Cross-Defendants, and the motion is directed at the Cross-
28 Complaint.
2
Monterey County Bank (“MCB”) and Bank of the Sierra (“BOTS”).
-5-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 the cross-defendants are entitled to judgment on any of the causes of action.
2 2. “Except in a summary judgment or summary adjudication motion, no opening or
3 responding memorandum may exceed 15 pages.” (Rule of Court 3.1113.) Despite
4 glossing over numerous issues, the MPA is 20 pages, and the final 5 pages should be
5 ignored.
6 3. The motion relies upon the court taking Judicial Notice of a large number of
7 documents, many of which cannot be the subject of judicial notice or contain
8 information which cannot be judicially noticed.
9 II. SCOPE OF FACTS RELEVANT TO THE MOTION.
10 The Cross-Complaint at issue in this motion contains just three causes of action: “Breach of
11 Contract”, “Appointment of Receiver”3 and “Accounting.” While these causes are not complicated
12 in themselves, they are based on numerous documents that interact with the others in some cases
13 and stand alone in others. The MPA initially attempts to portray this universe of documents as
14 including just three documents which the Cross-Complaint defined as “DOCUMENTS”: 2005
15 Promissory Note, a 2010 Promissory Note and Deed and a Commercial Term Sheet and a Term
16 Sheet. Cross-Complaint 12:5-9. However, the list of specific actions that were breached include a
17 collection of additional documents that are also identified in the Cross-Complaint, including, most
18 prominently the Term Sheets.
19 III. ANALYSIS
20 A. The Motion Fails to Satisfy the Basic Prerequisites for a Motion for Judgment
on the Pleadings, Including the Requirement That The Motion Can Only Be
21 Brought Against The “Entire Complaint” or “Entire Cause of Action”.
22 “Plaintiff’s [sic] Notice of Motion and Motion for Judgment on the Pleadings (“Notice of
23 Motion”) states that they are moving “pursuant to Code of Civil Procedure Section 438 for entry of
24 judgment on the pleadings in favor of each of them and against Cross-Defendants[.]” Notice of
25 Motion, 2:5-8. If the “Table of Authorities” in Plaintiff’s [sic] Memorandum of Points and
26 Authorities in Support of Motion for Judgment on the Pleadings (“MPA”), is to be believed, this
27
3
28 It does not appear that the moving parties have addressed the Cause of Action seeking appointment of a receiver in
any way in the motion.
-6-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 single sentence in the Notice of Motion is the only mention of §438 in the moving papers. The
2 omission is telling.
3 A motion for judgment on the pleadings is authorized if the moving party is a defendant, and
4 “the complaint does not state a cause of action against the defendant.” C.C.P. §438(c)(1)(B)(i).
5 “The motion provided for in this section may be made as to … (A) The entire complaint or cross-
6 complaint or one or as to any of the causes of action stated therein.” §438(c)(2(A). This
7 requirement is not satisfied as to any of the arguments advanced in the Motion. The Notice of
8 Motion lists a series of nine conclusory statements of grounds, which even facially apply to only
9 certain parties and certain causes of action without specificity as to the causes of action, and no
10 obvious conclusion that they would add up to “any cause of action” let alone “the entire cross-
11 complaint. More specifically, there is no evidence that any of the Cross-Defendants could defeat the
12 Breach of Contract cause of action in its entirety (nor either of the other remaining causes of action
13 – “appointment of receiver” and “accounting”.)
14 In ruling on a motion for judgment on the pleadings, the same rules governing ruling on a
15 demurrer apply. “[T]he facts alleged in the complaint must be assumed to be true and liberally
16 construed in favor of the party against whom the motion is made. [Citations.]” Higgins v. Del Faro
17 (1981) 123 Cal. App. 3d 558, 565. The grounds for motion provided for in this section shall appear
18 on the face of the challenged pleading or from any matter in which the court is required to take
19 judicial notice.”
20 Many of the arguments in the MPA rely on taking one cross-defendant, and focusing on one
21 alleged breach, and saying that that cross-defendant cannot be found to have breached the contract.
22 Even if the argument was accurate, it would not lead to the Motion being granted because it does not
23 address an entire cause of action as to any of the Cross-Defendants.
24 B. The Statute of Limitations Does Not Bar Any of the Causes of Action.
25 As will be shown to occur regularly in the MPA, it lays out the law on the statute of
26 limitations in extensive – if frequently only tangentially relevant detail --but perhaps due to space
27 limitations, leaves it mostly to the reader to apply his or her own conclusions. (MPA pp.20-22:16)
28 As with other arguments, the statute of limitations arguments also fail to address each of the
-7-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 agreements in question – most obviously, the Term Sheets – and in this omission, prevent their
2 ability to address the “entirety” of a cause of action, necessitating rejection of the argument by the
3 court.
4 Cross-Complainant focuses most directly on the 2010 note, arguing that it became due and
5 payable in full on January 30, 2013 (MPA, 22:8-9), and so the 4-year statute of limitations would
6 have expired by 2017. Using this argument as a template for addressing the statute’s claims, the
7 following defects in the argument are evident:
8 • The Second Amended to the Binding Term Sheet provided that the Note would be
9 modified, including, “[§4]d. The maturity date of the Modified Note will be extended ten (10) years
10 from the original expiration date[.]”
11 • An agreement in which the parties agree to renew the mortgage with the same terms
12 and an extension is sufficient to renew the reset the statute of limitations. Easton v. Ash (1941) 18
13 Cal.2d 530. Carlton Browne & Co v. Superior Court (1989) 210 Cal.App.3d 35 concluded that a
14 writing signed by an agent of the parties was sufficient Id. at 44. Similarly, “part payment of a debt
15 or obligation is sufficient to extend the bar of the statute. The theory on which this is based is that
16 the payment is an acknowledgment of the existence of the indebtedness which raises an implied
17 promise to continue the obligation and to pay the balance. [Citation.].” Martindell v. Bodrero
18 (1967) 256 Cal.App.2d 56, 59; C.C.P. §360. The primary intent behind the parties entering into
19 their agreements was for the Lissoys to assume responsibility for the obligations contained in the
20 2010 Note.
21 • The Binding Term Sheet contained provisions for payment of “net revenues” toward
22 the balance on the note. Cross-Complaint, Exh. N, p. 1-2. Cross-Defendants continued to make
23 payments under these provisions through 2021. (However, without an accounting, Cross-
24 Complainants cannot say whether the payments made were the full amount that had been agreed
25 upon by the parties.)
26 • Guarantees signed by HMBY, L.P. and Molasses Trust, attached to the Cross-
27 Complaint as Exhs. L & M contained waivers of the statute of limitations, which is permissible.
28 C.C.P 2856 permits guarantors or other sureties to waive certain rights and defenses, including the
-8-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 protections afforded by Code of Civil Procedure §580a and 726. Gramercy Investment Trust v.
2 Lakemont Homes Nevada, Inc. (2011) 198 Cal.App.4th 903, 907 fn 3.
3 All of these factors demonstrate an intent by the parties, including each of the Cross-
4 Defendants to “reset” the statute of limitations. This is consistent with the allegations contained in
5 the Cross-Complaint that the parties partially performed under the Term Sheet (as amended) for the
6 five-year period between December 2015 and January 2021.” (Cross-Complaint, 11:19-21.) This
7 demonstrates that the statute of limitations was triggered no earlier than January 4, 2021, and has
8 not expired.
9 C. The Motion Fails to Show That Judgment on the Pleadings Should Apply to Any
of the Three Causes of Action.
10
1. The Motion Fails to Show That Any of the Cross-Defendants Have a
11 Defense to the Entire “Breach of Contract” Cause of Action.
12 It will be quickly apparent that the Cross-Defendants’ motion is premised upon efforts to
13 “pick-off” specific allegations against specific Cross-Defendants, and hope that the court will
14 conclude that when they are added up, they constitute the “entirety” of the cause of action.
15 Unfortunately for the Cross-Defendants, their efforts fail to eliminate in their entirety any of the
16 breaches specified in the motion, meaning that the effort cannot be successful.4
17 a. The MPA incorrectly defines which contractual agreements are at
issue in the Breach of Contract Cause of Action.
18
The MPA deals at length with four of the agreements identified in the Cross-Complaint. The
19
MPA refers to these four agreements as “Loan Documents” (MPA 10:9-18) -- a term which is
20
problematic given the plethora of other documents discussed in the Cross-Complaint which could be
21
included in that definition; the Cross-Complaint specifically defines these 4 agreements as “THE
22
CONTRACTS” (Cross-Complaint, 12:5-9). The MPA then incorrectly proceeds with its analysis in
23
which it selectively ignores certain of the Loan Documents in service of various arguments.
24
25
26
4
An example of their shortcomings can be seen with the allegations related to their interference with the “Assignment
27 of Rents” executed as part of the financing agreements. As stated in the Cross-Complaint, MLCP or its agents refused
to comply with the Assignment of Rents by complying MLCP tenants not to make their payments to Cross-Defendants
28 in violation of this agreement. Cross-Complaint, ¶48. There is no mention of this paragraph in the motion. Nor do the
Cross-Defendants address their breaches in providing financial reports as alleged in reports as alleged in ¶47.
-9-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 While the MPA is correct that only four documents are included in the defined
2 “CONTRACTS”, the four specifically enumerated documents represent a broad variety of
3 agreements among the parties. While the first three documents – “2005 MCB Note”, “2010 Note
4 and Deed” and “Commercial Security Agreement” – were parts of pre-existing Bank agreements
5 between Cross-Defendants and two separate banks, the “Term Sheet” was a document executed in
6 July of 2015 that created and defined the relationship between the parties. (The initial “Binding
7 Term Sheet” was followed by three amendments, which were also mentioned in the list of contract
8 breaches committed by Defendants; e.g., MLCP’s failure to provide financial statements and tax
9 returns “as required by Term Sheet 3.” (Cross-Complaint, 13:2-4.) There were also other
10 agreements explicitly identified in the Cross-Complaint which form the basis for further contract
11 breaches identified in the Cross-Complaint, for example: “[¶46](k): MLCP failed to inform Cross-
12 Complainants of existing and threatened litigation, a violation of the Commercial Security
13 Agreement” (Id., 13:8-9); and “[¶46(l): MLCP failed to maintain books and records in accordance
14 with GAAP standards and permit Cross-Complainant to examine the books and records, a violation
15 of the Business Loan Agreement.” Id., 13:10-12. In a separate paragraph from the remaining
16 breaches, the Cross-Complaint identified additional instances in which the Cross-Defendants
17 violated “duties”, including provisions of an “Assignment of Rents” executed by MLCP
18 representatives. Id., 13:13-20.
19 As stated previously, in ruling on a Motion for Judgment on the Pleadings, “the facts alleged
20 in the complaint must be assumed to be true and liberally construed in favor of the party against
21 whom the motion is made. [Citations.]” Higgins, supra, 123 Cal. App. 3d at 565. Apart from the
22 existing problems with the Cross-Defendants’ arguments identified below, once the additional
23 agreements that are not identified as “CONTRACTS” or “Loan Documents” are acknowledged to
24 be part of the cause of action, the failings of the Motion become even more apparent.
25 b. There is no basis for the claim that judgment should be entered in
favor of HMBY or Molasses Trust.
26
The Motion argues that Cross-Defendants HMBY and Molasses Trust are entitled to
27
judgment on the grounds that “a person whose name does not appear on an instrument is not a party
28
-10-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 to it[.]” MPA, 11:18-25. The MPA, however, acknowledges that the Cross-Complaint alleges that
2 HMBY and Molasses Trust executed Personal and Commercial Guarantees of the MCB Bank Loan.
3 Cross-Complaint, 6:15-17.
4 Cross-Defendants’ argument appears to be that because the Guarantees state that they were
5 “separate and independent agreements” they were not encompassed within the rights and benefits
6 that were assigned from the banks to the Lissoys. Cross-Complainants contend that the Guarantees
7 were among the benefits assigned to the Cross-Complainants when they purchased the loans. The
8 determination of whether they were “separate” documents is a matter that cannot be determined in a
9 Motion for Judgment on the Pleadings.
10 c. Res judicata, even assuming it applies, does not provide the basis for
judgment on the pleadings because it would not “entirely defeat” the
11 Breach of Contract cause of action which includes claims arising out
of the Term Sheets which created new duties unrelated to the 2010
12 note in the underlying case.
13 Demonstrating anew the slapdash nature of this motion, the Cross-Defendants, again using
14 random bold type with no indication of whether the emphasis was in the original text, set out the
15 basics of “res judicata” laws (MPA 12:24-15:11), then state without citation, in limited fashion, and
16 without explaining how the rules apply to the Cross-Complainants that were not parties to the prior
17 action. MPA, 15:12-16:13.
18 The heart of the Cross-Defendants’ “Res Judicata” case is summed up in two sentences from
19 the MPA: “Here the Cross-Complaint is brought against the same four parties, MLCP, HMBY,
20 AGHA and MOLASSES. The Cross-Complaint seeks to enforce the same loan documents and
21 agreements; i.e., the 2010 MCB NOTE, the 2010 DOT, the 2010 CSA and the 2010 guarantee
22 agreements.” MPA, 15:21-24. I
23 The MPA can also reach its desired conclusion only by ignoring crucial facts. While the
24 MPA argues that the lawsuit, which was filed dealt only with the 2010 Note, entitles Cross-
25 Defendants to judgment as to the “entirety of the Cross-Complaint” (Id., 15:27-16:3), it achieves
26 this by relying on its self-created “Loan Documents” definition. However, the Breach of Contract
27 Cause of Action is not limited to claims under those four documents. Because there are allegations
28 in the Breach of Contract Cause of Action arising from documents other than those claimed by the
-11-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 Cross-Complainant to have been at issue in the prior lawsuit, the existence of violations of
2 additional documents means that application of Res Judicata principles would not result in the
3 striking of an entire cause of action, necessitating the denial of the motion.
4 d. Physical Possession of the Note Is Not Necessary for Standing
5 The foundation of the Cross-Defendants’ arguments that the Cross-Complainants do not
6 have standing to pursue their claims – MPA §V(A)-(C) and (G) -- is a purported claim that the
7 Defendants do not have physical possession of the promissory note, and only those with physical
8 possession are entitled to “enforce and collect on the note.” MPA, 16:15-16; 17:23-26, 18:16-18,
9 20:10-12. California law, however, as set forth in multiple cases, is clear that physical possession of
10 the note is not required. “California's statutory nonjudicial foreclosure scheme ([Civil Code] §§
11 2924–2924k) does not require that the foreclosing party have beneficial interest in or physical
12 possession of the note. [Citation.]” Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.
13 App. 4th 505, 511. “California courts have not required the foreclosing party to physically possess
14 the note. [Citations.]” Lewis v. United States Bank Nat'l Ass'n, 2017 U.S. Dist. LEXIS 186577, *13-
15 14. “We likewise see nothing in the applicable statutes that precludes foreclosure when the
16 foreclosing party does not possess the original promissory note. Debrunner v. Deutsche Bank
17 National Trust Co. (2012) 204 Cal. App. 4th 433, 440. “[Many federal courts] applying California
18 law . . . have noted that the procedures to be followed in a nonjudicial foreclosure are governed by
19 sections 2924 through 2924k, which do not require that the note be in the possession of the party
20 initiating the foreclosure. (See, e.g., Geren v. Deutsche Bank National (E.D.Cal., Aug. 12, 2011, No.
21 CV F 11-0938 LJO GSA) 2011 WL 3568913; Kolbe v. JP Morgan Chase Bank N.A. (N.D.Cal., Oct.
22 13, 2011, No. C 11-01532 SI) 2011 WL 4965065; Hague v. Wells Fargo Bank, N.A. (N.D.Cal.,
23 Aug. 2, 2011, No. C11-02366 TEH) 2011 WL 3360026, p. *3; Impink v. Bank of America (S.D.Cal.,
24 Sept. 6, 2011, No. 11cv0104 BTM(WMc)) 2011 WL 3903197.)” Debrunner, supra at 440. 5
25 The overwhelming weight of authority cited above demonstrates that the Cross-Defendants
26
27
5
The one case cited by the Cross-Defendant, In re Kang Jin Hwang, was reversed, as noted in the citation provided by
28 the Cross-Complainants. Further, even that action does not provide support for the claim that physical possession of the
note is required.
-12-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 claims that the Cross-Complainants do not have standing to pursue the argument are wrong, and
2 cannot support the motion.
3 e. The argument that the 2005 MCB DOT “Was Fully Reconveyed”
does not provide a sufficient basis for granting a Motion for Judgment
4 on the Pleadings.
5 The Cross-Complainants seek to have this court take judicial notice of a series of documents,
6 some of which may be subject to judicial notice if they were properly authenticated, and others
7 which would not be subject to judicial notice that relate to claims associated with the 2005
8 Monterey County Bank Deed of Trust which is one of the “CONTRACTS” identified in the Cross-
9 Complaint (as well as one of the “Loan Documents”) described in the MPA. Even if the court could
10 take notice of the documents, it would only remove one of at least five separate documents
11 addressed in the “Breach of Contract” cause of action, as well as additional related documents
12 mentioned in the Cross-Complaint, not the “entirety” of the cause of action as required in a Motion
13 for Judgment on the Pleadings.
14 f. Cross-Defendants’ remaining “standing” arguments (MPA §V(E)-(F))
are nothing more than series of statements of the law but fail to make
15 any attempt to apply the statements of law to the current action.
16 Section V(E) of the MPA (MPA 19:1-10) asserts that “the assignment of the 2010 MCB
17 DOT was invalid [and] transferred no rights.” (Id., 19:1) However, this section merely contains a
18 series of citations, combined with “bold” text, but no apparent analysis which ties these statements
19 to the current lawsuit, let alone the instant motion.
20 2. The Motion Fails to Show That Any of the Cross-Defendants Have a
Defense to the Entire Second Cause of Action for “Appointment of
21 Receiver”
22 The MPA essentially ignores this cause of action meaning that the Motion for Judgment on
23 the Pleadings cannot be granted as to the entire Cross-Complaint.
24 3. The Motion Fails to Show That Any of the Cross-Defendants Have a
Defense to the Entire Third Cause of Action for “Accounting”
25
It appears that the sole basis for the Motion as to the Accounting Cause of Action is that
26
Cross-Complainants efforts to determine the amount due under the Complaint and demand a
27
specific amount rendered the amount due “certain”, regardless of the complications involved in the
28
-13-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 method of calculation for payments contemplated by the Term Sheets.
2 The original Term Sheet (Cross-Complaint, Exhibit N) identified the payments that MLCP
3 was to pay to the Cross-Complainants: “Until the entirety of the [Bank of the Sierra] Balance is paid
4 off, all LLC revenue will be specifically allocated to LLC for tax purposes, and all net cash flow
5 from the leasing operations shall be directed to the financing institution for monthly payments to, or
6 effectively made available to retire the entirety of, the BOTS Balance.” Id., 6. The subsequent
7 Term Sheets modified the loan repayment to certain degrees, but they retained the concept that the
8 initial payments on the notes would be determined by the net rents from the MLCP properties. It is
9 readily apparent that the amount of the net rents would vary regularly based on the rent rolls, capital
10 expenditures, etc., which itself would necessitate an accounting. This inherent uncertainty
11 ballooned when the Cross-Defendants unilaterally decided that they would not only stop making the
12 payments they had agreed to make, but also to cease providing the “financial reports” they had
13 agreed to provide under the “Third Amendment to Binding Term Sheet for Moss Landing Park.”
14 Cross-Complaint, Exh Q, p. 2.)6 While the Cross-Complainants provided a specific demand, the
15 Cross-Defendants have alleged that the amounts they owe are radically different, demonstrating a
16 disagreement that would necessitate an accounting.
17 The MPA relies heavily on the existence of Exhibit R to the Cross-Complaint which is a
18 demand letter to the Plaintiff for the amount due as of January 10, 2023. However, this demand
19 does not reflect the potential variability in the amounts that would be due after that date under the
20 contractual agreement. Further, the Cross-Defendants have taken the position in their moving
21 papers that the Defendants are prohibited from foreclosing on the Note(s) in question. While Cross-
22 Complainants disagree with this position, should the Cross-Defendants prevail, the need for an
23 Accounting would be manifest. In addition, the financial reports that have been produced by the
24 Cross-Defendants in response to the Court’s orders requiring production reflect that one or more of
25 the Cross-Defendants may have taken monies from MLCP that in violation of the terms of the
26 Agreement, and an accounting would be necessary to determine the final amounts.
27
28
6
Each of the Term Sheets contained provisions by which the Cross-Defendants agreed to an accounting.
-14-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 Given the legal standard that “facts alleged in the complaint must be assumed to be true and
2 liberally construed in favor of the party against whom the motion is made” (Higgins, supra, 123 Cal.
3 App. 3d at 565), the demand letter sent by Cross-Complainants after the Cross-Defendants stopped
4 making payments is a thin reed for them to rely upon given the complexity of the factors that would
5 go into determining the payments that would be due.
6 D. Cross-Defendants Fail to Show That Foreclosure Is Barred, Or That They
Would Be Entitled to Have the Motion Be Granted Even If They Showed That
7 Foreclosure Is Barred.
8 The MPA finally offers several arguments to the effect that “foreclosure” is barred. None of
9 the arguments offered by Cross-Defendants satisfies the basic standard repeatedly stated that it must
10 demonstrate that the Cross-Complainants cannot prevail on either an “entire” cause of action or
11 “entire complaint. There is no separate cause of action in the Cross-Complaint, so the elimination
12 of a potential remedy does not support the motion.
13 One of the Cross-Defendants arguments in this regard is curious. They argue that C.C.P. §
14 California Code Section V(E) gives the debtor the option to either force the creditor to first foreclose
15 on the collateral or allow the creditor to proceed directly against them without foreclosure, “the
16 effect of which is to release and terminate the security interest held by the creditor in the collateral.”
17 MPA , 24:7-12. Again, assuming all of this to be true, it does not support their motion as it would
18 merely limit the potential remedies available
19 1. Foreclosure is not contractually barred.
20 The Cross-Defendants point to a provision in the Second Amended Binding Term Sheet in
21 which Albert Lissoy agreed not to foreclose on the PROPERTY in the Second Amended Binding
22 Term Sheet. After citing this section, the Cross-Defendants cite §726, but the purpose of the
23 citation is unclear. In this instance, it merely eliminates foreclosure as an option, and would force
24 the Cross-Defendants to pursue other options to enfoce their judgment.
25
26
27
28
-15-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 2. Foreclosure is not barred by Cross-Complainants status as “Partners” or
“Joint Venturers” because the assets that are subject to foreclosure were
2 obtained prior to or as part of the formation of the partnership.
3 The MPA next asserts the closely related arguments that the Cross-Defendants status as
4 “alleged” Partners or Joint Venturers7 prevents the Cross-Defendants from being able to foreclose
5 on the property. (MPA, 24:13-26:12. One case relied upon by the MPA is useful. BT-1 v. Equitable
6 Life Assurance Society (1999) 75 Cal.App.4th 1406 is cited by the Cross-Complaints for the theory
7 that that California law “unconditionally prohibits Partners/Joint Venturers from acquiring
8 Partnership debt and then foreclosing on Partnership property”, but in fact the analogous facts of
9 BT-1 demonstrate the opposite.
10 In BT-1, one of the partners, Equitable, learned that a bank that had loaned the partnership
11 money was interested in selling the loans at a discount. Equitable then reached an agreement that it
12 would match the high bid, and the Bank agreed it would not deal directly with BT-1. BT-1 alleged
13 Equitable’s proffer of the opportunity to the partnership was a charade, since neither the partnership
14 nor BT-1 had the necessary funds. BT-I, supra at 1409. Equitable bought the loans on August 21,
15 1995, for $ 38.5 million, and 10 days later, the day after the loans were due, Equitable demanded
16 full payment of approximately $ 65 million within 10 days. On the 11th day, no payment having
17 been received, Equitable recorded notices of default. BT-1 made a $ 39 million cash offer for the
18 project but Equitable turned it down, both as lender and on behalf of the partnership, and acquired
19 the building at the foreclosure sale. BT-1, supra at 1410. The Court determined that while the
20 partners could determine many aspects of their relationship, they could not relieve defendant of its
21 fiduciary duties, and it was a breach of Equitable’s fiduciary duties to purchase the loans that had
22 been made to the partnership. “[A partner has] the duty to account to the partnership for any benefit,
23 and hold as trustee for it any profits, derived without the consent of the other partners from any
24 transaction connected with the conduct of the partnership.” Id. at 1408. The court then observed,
25 “Equitable's conduct in buying and foreclosing the loans went far beyond whatever safe harbor
26 might be found in the partnership agreement. It is one thing simply to do nothing and suffer the
27
7
28 In the past, the cross-Defendants have repeatedly and consistently denied that the parties were Joint Venturers It
must be seen whether this pleading heralds a shift in their position.
-16-
CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS-
COMPLAINT
.
1 consequences equally with all other partners. It is another to step out of the role of partner and into
2 that of an aggressive (and apparently greedy) lender in the marketplace.” BT-I , supra at 1414.
3 Unlike BT-1, the parties to the current transaction bargained for exactly the deal that took
4 place, with the Lissoys agreeing with the Cross-Defendants that the Lissoys would acquire the debt
5 owed by the Cross-Defendants in order to save the Cross-Defendants from foreclosure by the Banks
6 that would have left the Cross-Defendants with nothing. This was not a violation of fiduciary duty,
7 nor would it be a violation of fiduciary duty to seek to recover when the Cross-Defendants decided
8 unilaterally that they no longer needed to comply with the duties they assumed.8
9 E. The Special Case of the “FL.Corp” Described in the MPA.
10 The Lissoys were granted ownership of a fee interest in the MLCP properties as part of the
11 Binding Term Sheets. Lissoy took ownership of the fee interest in an existing special purpose,
12 Cross-Complainant LFT QSBC-2011 B. Inc. (“LFT”). While there are no direct contractual
13 relations between LFT and the Cross-Defendants, LFT was included as its interests may be effected
14 by the relief sought in the Cross-Complaint.
15 IV. IF THE COURT IS INCLINED TO GRANT THE MOTION AS TO ANY OF THE
CROSS-COMPLAINANTS ON ANY OF THE CAUSES OF ACTION, LEAVE TO AMEND
16 THE CROSS-COMPLAINT SHOULD BE GRANTED.
17 “[T]he established rule is that upon granting [a motion for judgment on the pleadings], "
18 'great liberality' " should be used in allowing amendments.” Higgins v. Del Faro (1981) 123 Cal.
19 App. 3d 558, 565. "The rule is well established that great liberality will be used in allowing
20 amendments and where an amendment provides merely the addition of matters essential to make the
21 original cause of action complete the amendment should certainly be allowed by the court.
22 [Citation.] Such an amendment effects no change in the nature of the case, and can therefore cause
23 no surprise or prejudice to th
Preview
. 1 BRADLEY A. BENING – SBN: 104221 BRUCE D. MacLEOD – SBN: 130860 2 DAVIS, BENGTSON & YOUNG, APLC 1960 The Alameda, Suite 210 3 San Jose, CA 95126 Phone: 669.245.4200 4 Fax: 408.985.1814 Email: bbening@dby-law.com 5 Email: bmacleod@dby-law.com 6 Attorneys for Defendants/Cross-Complainants SCOTT LISSOY, an individual; IRA 7 GLASKY, an individual; ALBERT LISSOY, an individual; ALBERT LISSOY, as trustee of 8 the Lissoy Family Trust U/D/T June 17, 1996; THE LISSOY FAMILY TRUST U/D/T/ June 9 17, 1996; and LFT QSBC-2011 B, INC. 10 SUPERIOR COURT OF CALIFORNIA, COUNTY OF MONTEREY 11 12 NADER T. AGHA, an individual, MOSS Case No. 21CV001478 LANDING COMMERCIAL PARK, LLC, a 13 California Limited Liability Company, CROSS-COMPLAINANTS’ OPPOSITION ANDALUCIA LTD., a California Limited TO CROSS-DEFENDANTS’ MOTION 14 Partnership, HOLMAN BUILDING FOR JUDGMENT ON THE PLEADINGS ASSOCIATES, L.P., A California Limited ON CROSS-COMPLAINT 15 Partnership, GABILAN APARTMENTS, LLC, a California limited liability company, Date: March 15, 2024 16 Time: 9:00 A.M. Plaintiffs, Department: 14 17 vs. 18 Trial Date: June 10, 2024 ALBERT LISSOY, an individual, et al., 19 Defendants. 20 _____________________________________ 21 AND RELATED CROSS-ACTION 22 23 24 25 26 27 28 -1- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 TABLE OF CONTENTS I. INTRODUCTION ........................................................................................................................... 5 2 II. SCOPE OF FACTS RELEVANT TO THE MOTION. ................................................................. 6 3 III. ANALYSIS ................................................................................................................................... 6 4 A. The Motion Fails to Satisfy the Basic Prerequisites for a Motion for Judgment on the 5 Pleadings, Including the Requirement That The Motion Can Only Be Brought Against The “Entire Complaint” or “Entire Cause of Action”. ....................................................... 6 6 B. The Statute of Limitations Does Not Bar Any of the Causes of Action. ........................... 7 7 C. The Motion Fails to Show That Judgment on the Pleadings Should Apply to Any of the 8 Three Causes of Action. ..................................................................................................... 9 9 1. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to the Entire “Breach of Contract” Cause of Action. ................................................. 9 10 a. The MPA incorrectly defines which contractual agreements are at issue in the 11 Breach of Contract Cause of Action. ..................................................................... 9 12 b. There is no basis for the claim that judgment should be entered in favor of HMBY or Molasses Trust. ................................................................................... 10 13 c. Res judicata, even assuming it applies, does not provide the basis for judgment on 14 the pleadings because it would not “entirely defeat” the Breach of Contract cause of action which includes claims arising out of the Binding Term Sheets which 15 created new uties unrelated to the 2010 note in the underlying case. ...................... .............................................................................................................................. 11 16 d. Physical Possession of the Note Is Not Necessary for Standing .......................... 12 17 e. The argument that the 2005 MCB DOT “Was Fully Reconveyed” does not 18 provide a sufficient basis for granting a Motion for Judgment on the Pleadings. .... .............................................................................................................................. 13 19 f. Cross-Defendants’ remaining “standing” arguments (MPA §V(E)-(F)) are 20 nothing more than series of statements of the law but fail to make any attempt to apply the statements of law to the current action. ................................................ 13 21 2. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to 22 the Entire Second Cause of Action for “Appointment of Receiver” .................... 13 23 3. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to the Entire Third Cause of Action for “Accounting”............................................. 13 24 D. Cross-Defendants Fail to Show That Foreclosure Is Barred, Or That They Would Be 25 Entitled to Have the Motion Be Granted Even If They Showed That Foreclosure Is Barred. .............................................................................................................................. 15 26 1. Foreclosure is contractually barred. ..................................................................... 15 27 28 -2- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 2. Foreclosure is Not Barred by Cross-Complainants Status as “Partners” or “Joint Venturers” Because the Assets That Are Subject to Foreclosure Were Obtained 2 Prior to Or as Part of the Formation of the Partnership. ...................................... 16 3 E. The Special Case of the “FL.Corp” Described in the MPA. ............................................ 17 4 IV. IF THE COURT IS INCLINED TO GRANT THE MOTION AS TO ANY OF THE CROSS- COMPLAINANTS ON ANY OF THE CAUSES OF ACTION, LEAVE TO AMEND THE 5 CROSS-COMPLAINT SHOULD BE GRANTED. ................................................. 17 6 V. CONCLUSION ........................................................................................................... 18 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 TABLE OF AUTHORITIES 2 CASES 3 B.L.M. v. Sabo & Deitsch (1997) 55 Cal. App. 4th 823 …… 18 4 BT-1 v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 1406 … 16, 17 5 Carlton Browne & Co v. Superior Court (1989) 210 Cal.App.3d 3 5 …… 8 6 Chambers v. Kay (2002) 29 Cal.4th 142, 151 …… 17 7 Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal. App. 4th 433, 440 12, 13 8 Easton v. Ash (1941) 18 Cal.2d 530. …… 8 Geren v. Deutsche Bank National (E.D.Cal., Aug. 12, 2011, No. CV F 11-0938 LJO GSA 12 9 Gramercy Investment Trust v. Lakemont Homes Nevada, Inc. (2011) 198 9 10 Hague v. Wells Fargo Bank, N.A. (N.D.Cal., Aug. 2, 2011, No. C11-02366 TEH, p. *3 12 11 Higgins v. Del Faro (1981) 123 Cal. App. 3d 558 7, 10, 17 12 Impink v. Bank of America (S.D.Cal., Sept. 6, 2011 ……. 13 13 Kolbe v. JP Morgan Chase Bank N.A. N.D.Cal., Oct. 13, 2011 12 14 Lewis v. United States Bank Nat'l Ass'n, 2017 U.S. Dist. LEXIS 186577 12 15 Martindell v. Bodrero (1967) 256 Cal.App.2d 56, 59; C.C.P. §360 8 16 Shuster v. BAC Home Loans Servicing, LP (2012) 211 12 17 STATUE 18 California Code of Civil Procedure. §438 …………………………….….. 7 19 California Code of Civil Procedure §580 …………… 9 20 California Code of Civil Procedure §726 …………… 9, 16 21 California Code of Civil Procedure 2856 …………… 9 22 California Code of Civil Procedure 2924 6, 12 23 California Code Section V(E) …………… 2, 13, 15 24 RULES 25 California Rule of Court 3.1113 6 26 27 28 -4- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 I. INTRODUCTION 2 Cross-Defendants’1 Motion for Judgment on the Pleadings is an exemplar of a “quantity over 3 quality”, “throw everything at the wall” style of motion, with all of the expected shortcomings, most 4 particularly a lack of cogent analysis. This lawsuit involves a complex series of transactions 5 involving the Cross-Defendants and two banks2, the Cross-Complainants and the same banks, and 6 among the parties to this lawsuit. The complexity continued to the agreements among the parties 7 which were set out in an initial “Binding Term Sheet”, an “Amendment to the Binding Term Sheet”, 8 a “Second Amendment to Binding Term Sheet” and “Third Amendment to Binding Term Sheet” 9 (collectively “Term Sheets”). In turn, the Term Sheets incorporated other documents that had been 10 executed by the other participants in the transactions. 11 The motion attempts to attack specific points of the overall transaction, without tying their 12 arguments to the overall plan of the parties, and hope that the court will look at the points and 13 decide that the points somehow add up to eliminating an “entire” cause of action. In fact, the 14 Plaintiff’s [sic] Memorandum of Points and Authorities in Support of Motion for Judgment on the 15 Pleadings (“MPA”) largely ignores the Term Sheets, and in so doing prevents their ability to fulfill 16 the foundational requirement for a Motion for Judgment on the Pleadings of “eliminating” an entire 17 Cause of Action given that each cause of action relies, in part, upon the Term Sheets. 18 It will be quickly apparent that the Cross-Defendants’ motion is premised upon efforts to 19 “pick-off” specific allegations against specific Cross-Defendants, and hope that the court will 20 conclude that when they are added up, they constitute the “entirety” of the cause of action. 21 Unfortunately for the Cross-Defendants, their efforts fail to eliminate each of the breaches specified 22 in the motion, meaning that the effort cannot be successful. 23 The motion also contains defects, both procedural and substantive, including the following: 24 1. To prevail on a motion for Judgment on the Pleadings, the motion must be made as 25 to, at minimum, an “entire” cause of action, and the motion fails to show that any of 26 1 27 Although the Notice of Motion is titled “Plaintiffs’ Notice of Motion . .. for Judgment on the Pleadings, the content of the motion makes clear that the moving parties are the Cross-Defendants, and the motion is directed at the Cross- 28 Complaint. 2 Monterey County Bank (“MCB”) and Bank of the Sierra (“BOTS”). -5- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 the cross-defendants are entitled to judgment on any of the causes of action. 2 2. “Except in a summary judgment or summary adjudication motion, no opening or 3 responding memorandum may exceed 15 pages.” (Rule of Court 3.1113.) Despite 4 glossing over numerous issues, the MPA is 20 pages, and the final 5 pages should be 5 ignored. 6 3. The motion relies upon the court taking Judicial Notice of a large number of 7 documents, many of which cannot be the subject of judicial notice or contain 8 information which cannot be judicially noticed. 9 II. SCOPE OF FACTS RELEVANT TO THE MOTION. 10 The Cross-Complaint at issue in this motion contains just three causes of action: “Breach of 11 Contract”, “Appointment of Receiver”3 and “Accounting.” While these causes are not complicated 12 in themselves, they are based on numerous documents that interact with the others in some cases 13 and stand alone in others. The MPA initially attempts to portray this universe of documents as 14 including just three documents which the Cross-Complaint defined as “DOCUMENTS”: 2005 15 Promissory Note, a 2010 Promissory Note and Deed and a Commercial Term Sheet and a Term 16 Sheet. Cross-Complaint 12:5-9. However, the list of specific actions that were breached include a 17 collection of additional documents that are also identified in the Cross-Complaint, including, most 18 prominently the Term Sheets. 19 III. ANALYSIS 20 A. The Motion Fails to Satisfy the Basic Prerequisites for a Motion for Judgment on the Pleadings, Including the Requirement That The Motion Can Only Be 21 Brought Against The “Entire Complaint” or “Entire Cause of Action”. 22 “Plaintiff’s [sic] Notice of Motion and Motion for Judgment on the Pleadings (“Notice of 23 Motion”) states that they are moving “pursuant to Code of Civil Procedure Section 438 for entry of 24 judgment on the pleadings in favor of each of them and against Cross-Defendants[.]” Notice of 25 Motion, 2:5-8. If the “Table of Authorities” in Plaintiff’s [sic] Memorandum of Points and 26 Authorities in Support of Motion for Judgment on the Pleadings (“MPA”), is to be believed, this 27 3 28 It does not appear that the moving parties have addressed the Cause of Action seeking appointment of a receiver in any way in the motion. -6- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 single sentence in the Notice of Motion is the only mention of §438 in the moving papers. The 2 omission is telling. 3 A motion for judgment on the pleadings is authorized if the moving party is a defendant, and 4 “the complaint does not state a cause of action against the defendant.” C.C.P. §438(c)(1)(B)(i). 5 “The motion provided for in this section may be made as to … (A) The entire complaint or cross- 6 complaint or one or as to any of the causes of action stated therein.” §438(c)(2(A). This 7 requirement is not satisfied as to any of the arguments advanced in the Motion. The Notice of 8 Motion lists a series of nine conclusory statements of grounds, which even facially apply to only 9 certain parties and certain causes of action without specificity as to the causes of action, and no 10 obvious conclusion that they would add up to “any cause of action” let alone “the entire cross- 11 complaint. More specifically, there is no evidence that any of the Cross-Defendants could defeat the 12 Breach of Contract cause of action in its entirety (nor either of the other remaining causes of action 13 – “appointment of receiver” and “accounting”.) 14 In ruling on a motion for judgment on the pleadings, the same rules governing ruling on a 15 demurrer apply. “[T]he facts alleged in the complaint must be assumed to be true and liberally 16 construed in favor of the party against whom the motion is made. [Citations.]” Higgins v. Del Faro 17 (1981) 123 Cal. App. 3d 558, 565. The grounds for motion provided for in this section shall appear 18 on the face of the challenged pleading or from any matter in which the court is required to take 19 judicial notice.” 20 Many of the arguments in the MPA rely on taking one cross-defendant, and focusing on one 21 alleged breach, and saying that that cross-defendant cannot be found to have breached the contract. 22 Even if the argument was accurate, it would not lead to the Motion being granted because it does not 23 address an entire cause of action as to any of the Cross-Defendants. 24 B. The Statute of Limitations Does Not Bar Any of the Causes of Action. 25 As will be shown to occur regularly in the MPA, it lays out the law on the statute of 26 limitations in extensive – if frequently only tangentially relevant detail --but perhaps due to space 27 limitations, leaves it mostly to the reader to apply his or her own conclusions. (MPA pp.20-22:16) 28 As with other arguments, the statute of limitations arguments also fail to address each of the -7- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 agreements in question – most obviously, the Term Sheets – and in this omission, prevent their 2 ability to address the “entirety” of a cause of action, necessitating rejection of the argument by the 3 court. 4 Cross-Complainant focuses most directly on the 2010 note, arguing that it became due and 5 payable in full on January 30, 2013 (MPA, 22:8-9), and so the 4-year statute of limitations would 6 have expired by 2017. Using this argument as a template for addressing the statute’s claims, the 7 following defects in the argument are evident: 8 • The Second Amended to the Binding Term Sheet provided that the Note would be 9 modified, including, “[§4]d. The maturity date of the Modified Note will be extended ten (10) years 10 from the original expiration date[.]” 11 • An agreement in which the parties agree to renew the mortgage with the same terms 12 and an extension is sufficient to renew the reset the statute of limitations. Easton v. Ash (1941) 18 13 Cal.2d 530. Carlton Browne & Co v. Superior Court (1989) 210 Cal.App.3d 35 concluded that a 14 writing signed by an agent of the parties was sufficient Id. at 44. Similarly, “part payment of a debt 15 or obligation is sufficient to extend the bar of the statute. The theory on which this is based is that 16 the payment is an acknowledgment of the existence of the indebtedness which raises an implied 17 promise to continue the obligation and to pay the balance. [Citation.].” Martindell v. Bodrero 18 (1967) 256 Cal.App.2d 56, 59; C.C.P. §360. The primary intent behind the parties entering into 19 their agreements was for the Lissoys to assume responsibility for the obligations contained in the 20 2010 Note. 21 • The Binding Term Sheet contained provisions for payment of “net revenues” toward 22 the balance on the note. Cross-Complaint, Exh. N, p. 1-2. Cross-Defendants continued to make 23 payments under these provisions through 2021. (However, without an accounting, Cross- 24 Complainants cannot say whether the payments made were the full amount that had been agreed 25 upon by the parties.) 26 • Guarantees signed by HMBY, L.P. and Molasses Trust, attached to the Cross- 27 Complaint as Exhs. L & M contained waivers of the statute of limitations, which is permissible. 28 C.C.P 2856 permits guarantors or other sureties to waive certain rights and defenses, including the -8- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 protections afforded by Code of Civil Procedure §580a and 726. Gramercy Investment Trust v. 2 Lakemont Homes Nevada, Inc. (2011) 198 Cal.App.4th 903, 907 fn 3. 3 All of these factors demonstrate an intent by the parties, including each of the Cross- 4 Defendants to “reset” the statute of limitations. This is consistent with the allegations contained in 5 the Cross-Complaint that the parties partially performed under the Term Sheet (as amended) for the 6 five-year period between December 2015 and January 2021.” (Cross-Complaint, 11:19-21.) This 7 demonstrates that the statute of limitations was triggered no earlier than January 4, 2021, and has 8 not expired. 9 C. The Motion Fails to Show That Judgment on the Pleadings Should Apply to Any of the Three Causes of Action. 10 1. The Motion Fails to Show That Any of the Cross-Defendants Have a 11 Defense to the Entire “Breach of Contract” Cause of Action. 12 It will be quickly apparent that the Cross-Defendants’ motion is premised upon efforts to 13 “pick-off” specific allegations against specific Cross-Defendants, and hope that the court will 14 conclude that when they are added up, they constitute the “entirety” of the cause of action. 15 Unfortunately for the Cross-Defendants, their efforts fail to eliminate in their entirety any of the 16 breaches specified in the motion, meaning that the effort cannot be successful.4 17 a. The MPA incorrectly defines which contractual agreements are at issue in the Breach of Contract Cause of Action. 18 The MPA deals at length with four of the agreements identified in the Cross-Complaint. The 19 MPA refers to these four agreements as “Loan Documents” (MPA 10:9-18) -- a term which is 20 problematic given the plethora of other documents discussed in the Cross-Complaint which could be 21 included in that definition; the Cross-Complaint specifically defines these 4 agreements as “THE 22 CONTRACTS” (Cross-Complaint, 12:5-9). The MPA then incorrectly proceeds with its analysis in 23 which it selectively ignores certain of the Loan Documents in service of various arguments. 24 25 26 4 An example of their shortcomings can be seen with the allegations related to their interference with the “Assignment 27 of Rents” executed as part of the financing agreements. As stated in the Cross-Complaint, MLCP or its agents refused to comply with the Assignment of Rents by complying MLCP tenants not to make their payments to Cross-Defendants 28 in violation of this agreement. Cross-Complaint, ¶48. There is no mention of this paragraph in the motion. Nor do the Cross-Defendants address their breaches in providing financial reports as alleged in reports as alleged in ¶47. -9- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 While the MPA is correct that only four documents are included in the defined 2 “CONTRACTS”, the four specifically enumerated documents represent a broad variety of 3 agreements among the parties. While the first three documents – “2005 MCB Note”, “2010 Note 4 and Deed” and “Commercial Security Agreement” – were parts of pre-existing Bank agreements 5 between Cross-Defendants and two separate banks, the “Term Sheet” was a document executed in 6 July of 2015 that created and defined the relationship between the parties. (The initial “Binding 7 Term Sheet” was followed by three amendments, which were also mentioned in the list of contract 8 breaches committed by Defendants; e.g., MLCP’s failure to provide financial statements and tax 9 returns “as required by Term Sheet 3.” (Cross-Complaint, 13:2-4.) There were also other 10 agreements explicitly identified in the Cross-Complaint which form the basis for further contract 11 breaches identified in the Cross-Complaint, for example: “[¶46](k): MLCP failed to inform Cross- 12 Complainants of existing and threatened litigation, a violation of the Commercial Security 13 Agreement” (Id., 13:8-9); and “[¶46(l): MLCP failed to maintain books and records in accordance 14 with GAAP standards and permit Cross-Complainant to examine the books and records, a violation 15 of the Business Loan Agreement.” Id., 13:10-12. In a separate paragraph from the remaining 16 breaches, the Cross-Complaint identified additional instances in which the Cross-Defendants 17 violated “duties”, including provisions of an “Assignment of Rents” executed by MLCP 18 representatives. Id., 13:13-20. 19 As stated previously, in ruling on a Motion for Judgment on the Pleadings, “the facts alleged 20 in the complaint must be assumed to be true and liberally construed in favor of the party against 21 whom the motion is made. [Citations.]” Higgins, supra, 123 Cal. App. 3d at 565. Apart from the 22 existing problems with the Cross-Defendants’ arguments identified below, once the additional 23 agreements that are not identified as “CONTRACTS” or “Loan Documents” are acknowledged to 24 be part of the cause of action, the failings of the Motion become even more apparent. 25 b. There is no basis for the claim that judgment should be entered in favor of HMBY or Molasses Trust. 26 The Motion argues that Cross-Defendants HMBY and Molasses Trust are entitled to 27 judgment on the grounds that “a person whose name does not appear on an instrument is not a party 28 -10- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 to it[.]” MPA, 11:18-25. The MPA, however, acknowledges that the Cross-Complaint alleges that 2 HMBY and Molasses Trust executed Personal and Commercial Guarantees of the MCB Bank Loan. 3 Cross-Complaint, 6:15-17. 4 Cross-Defendants’ argument appears to be that because the Guarantees state that they were 5 “separate and independent agreements” they were not encompassed within the rights and benefits 6 that were assigned from the banks to the Lissoys. Cross-Complainants contend that the Guarantees 7 were among the benefits assigned to the Cross-Complainants when they purchased the loans. The 8 determination of whether they were “separate” documents is a matter that cannot be determined in a 9 Motion for Judgment on the Pleadings. 10 c. Res judicata, even assuming it applies, does not provide the basis for judgment on the pleadings because it would not “entirely defeat” the 11 Breach of Contract cause of action which includes claims arising out of the Term Sheets which created new duties unrelated to the 2010 12 note in the underlying case. 13 Demonstrating anew the slapdash nature of this motion, the Cross-Defendants, again using 14 random bold type with no indication of whether the emphasis was in the original text, set out the 15 basics of “res judicata” laws (MPA 12:24-15:11), then state without citation, in limited fashion, and 16 without explaining how the rules apply to the Cross-Complainants that were not parties to the prior 17 action. MPA, 15:12-16:13. 18 The heart of the Cross-Defendants’ “Res Judicata” case is summed up in two sentences from 19 the MPA: “Here the Cross-Complaint is brought against the same four parties, MLCP, HMBY, 20 AGHA and MOLASSES. The Cross-Complaint seeks to enforce the same loan documents and 21 agreements; i.e., the 2010 MCB NOTE, the 2010 DOT, the 2010 CSA and the 2010 guarantee 22 agreements.” MPA, 15:21-24. I 23 The MPA can also reach its desired conclusion only by ignoring crucial facts. While the 24 MPA argues that the lawsuit, which was filed dealt only with the 2010 Note, entitles Cross- 25 Defendants to judgment as to the “entirety of the Cross-Complaint” (Id., 15:27-16:3), it achieves 26 this by relying on its self-created “Loan Documents” definition. However, the Breach of Contract 27 Cause of Action is not limited to claims under those four documents. Because there are allegations 28 in the Breach of Contract Cause of Action arising from documents other than those claimed by the -11- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 Cross-Complainant to have been at issue in the prior lawsuit, the existence of violations of 2 additional documents means that application of Res Judicata principles would not result in the 3 striking of an entire cause of action, necessitating the denial of the motion. 4 d. Physical Possession of the Note Is Not Necessary for Standing 5 The foundation of the Cross-Defendants’ arguments that the Cross-Complainants do not 6 have standing to pursue their claims – MPA §V(A)-(C) and (G) -- is a purported claim that the 7 Defendants do not have physical possession of the promissory note, and only those with physical 8 possession are entitled to “enforce and collect on the note.” MPA, 16:15-16; 17:23-26, 18:16-18, 9 20:10-12. California law, however, as set forth in multiple cases, is clear that physical possession of 10 the note is not required. “California's statutory nonjudicial foreclosure scheme ([Civil Code] §§ 11 2924–2924k) does not require that the foreclosing party have beneficial interest in or physical 12 possession of the note. [Citation.]” Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal. 13 App. 4th 505, 511. “California courts have not required the foreclosing party to physically possess 14 the note. [Citations.]” Lewis v. United States Bank Nat'l Ass'n, 2017 U.S. Dist. LEXIS 186577, *13- 15 14. “We likewise see nothing in the applicable statutes that precludes foreclosure when the 16 foreclosing party does not possess the original promissory note. Debrunner v. Deutsche Bank 17 National Trust Co. (2012) 204 Cal. App. 4th 433, 440. “[Many federal courts] applying California 18 law . . . have noted that the procedures to be followed in a nonjudicial foreclosure are governed by 19 sections 2924 through 2924k, which do not require that the note be in the possession of the party 20 initiating the foreclosure. (See, e.g., Geren v. Deutsche Bank National (E.D.Cal., Aug. 12, 2011, No. 21 CV F 11-0938 LJO GSA) 2011 WL 3568913; Kolbe v. JP Morgan Chase Bank N.A. (N.D.Cal., Oct. 22 13, 2011, No. C 11-01532 SI) 2011 WL 4965065; Hague v. Wells Fargo Bank, N.A. (N.D.Cal., 23 Aug. 2, 2011, No. C11-02366 TEH) 2011 WL 3360026, p. *3; Impink v. Bank of America (S.D.Cal., 24 Sept. 6, 2011, No. 11cv0104 BTM(WMc)) 2011 WL 3903197.)” Debrunner, supra at 440. 5 25 The overwhelming weight of authority cited above demonstrates that the Cross-Defendants 26 27 5 The one case cited by the Cross-Defendant, In re Kang Jin Hwang, was reversed, as noted in the citation provided by 28 the Cross-Complainants. Further, even that action does not provide support for the claim that physical possession of the note is required. -12- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 claims that the Cross-Complainants do not have standing to pursue the argument are wrong, and 2 cannot support the motion. 3 e. The argument that the 2005 MCB DOT “Was Fully Reconveyed” does not provide a sufficient basis for granting a Motion for Judgment 4 on the Pleadings. 5 The Cross-Complainants seek to have this court take judicial notice of a series of documents, 6 some of which may be subject to judicial notice if they were properly authenticated, and others 7 which would not be subject to judicial notice that relate to claims associated with the 2005 8 Monterey County Bank Deed of Trust which is one of the “CONTRACTS” identified in the Cross- 9 Complaint (as well as one of the “Loan Documents”) described in the MPA. Even if the court could 10 take notice of the documents, it would only remove one of at least five separate documents 11 addressed in the “Breach of Contract” cause of action, as well as additional related documents 12 mentioned in the Cross-Complaint, not the “entirety” of the cause of action as required in a Motion 13 for Judgment on the Pleadings. 14 f. Cross-Defendants’ remaining “standing” arguments (MPA §V(E)-(F)) are nothing more than series of statements of the law but fail to make 15 any attempt to apply the statements of law to the current action. 16 Section V(E) of the MPA (MPA 19:1-10) asserts that “the assignment of the 2010 MCB 17 DOT was invalid [and] transferred no rights.” (Id., 19:1) However, this section merely contains a 18 series of citations, combined with “bold” text, but no apparent analysis which ties these statements 19 to the current lawsuit, let alone the instant motion. 20 2. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to the Entire Second Cause of Action for “Appointment of 21 Receiver” 22 The MPA essentially ignores this cause of action meaning that the Motion for Judgment on 23 the Pleadings cannot be granted as to the entire Cross-Complaint. 24 3. The Motion Fails to Show That Any of the Cross-Defendants Have a Defense to the Entire Third Cause of Action for “Accounting” 25 It appears that the sole basis for the Motion as to the Accounting Cause of Action is that 26 Cross-Complainants efforts to determine the amount due under the Complaint and demand a 27 specific amount rendered the amount due “certain”, regardless of the complications involved in the 28 -13- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 method of calculation for payments contemplated by the Term Sheets. 2 The original Term Sheet (Cross-Complaint, Exhibit N) identified the payments that MLCP 3 was to pay to the Cross-Complainants: “Until the entirety of the [Bank of the Sierra] Balance is paid 4 off, all LLC revenue will be specifically allocated to LLC for tax purposes, and all net cash flow 5 from the leasing operations shall be directed to the financing institution for monthly payments to, or 6 effectively made available to retire the entirety of, the BOTS Balance.” Id., 6. The subsequent 7 Term Sheets modified the loan repayment to certain degrees, but they retained the concept that the 8 initial payments on the notes would be determined by the net rents from the MLCP properties. It is 9 readily apparent that the amount of the net rents would vary regularly based on the rent rolls, capital 10 expenditures, etc., which itself would necessitate an accounting. This inherent uncertainty 11 ballooned when the Cross-Defendants unilaterally decided that they would not only stop making the 12 payments they had agreed to make, but also to cease providing the “financial reports” they had 13 agreed to provide under the “Third Amendment to Binding Term Sheet for Moss Landing Park.” 14 Cross-Complaint, Exh Q, p. 2.)6 While the Cross-Complainants provided a specific demand, the 15 Cross-Defendants have alleged that the amounts they owe are radically different, demonstrating a 16 disagreement that would necessitate an accounting. 17 The MPA relies heavily on the existence of Exhibit R to the Cross-Complaint which is a 18 demand letter to the Plaintiff for the amount due as of January 10, 2023. However, this demand 19 does not reflect the potential variability in the amounts that would be due after that date under the 20 contractual agreement. Further, the Cross-Defendants have taken the position in their moving 21 papers that the Defendants are prohibited from foreclosing on the Note(s) in question. While Cross- 22 Complainants disagree with this position, should the Cross-Defendants prevail, the need for an 23 Accounting would be manifest. In addition, the financial reports that have been produced by the 24 Cross-Defendants in response to the Court’s orders requiring production reflect that one or more of 25 the Cross-Defendants may have taken monies from MLCP that in violation of the terms of the 26 Agreement, and an accounting would be necessary to determine the final amounts. 27 28 6 Each of the Term Sheets contained provisions by which the Cross-Defendants agreed to an accounting. -14- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 Given the legal standard that “facts alleged in the complaint must be assumed to be true and 2 liberally construed in favor of the party against whom the motion is made” (Higgins, supra, 123 Cal. 3 App. 3d at 565), the demand letter sent by Cross-Complainants after the Cross-Defendants stopped 4 making payments is a thin reed for them to rely upon given the complexity of the factors that would 5 go into determining the payments that would be due. 6 D. Cross-Defendants Fail to Show That Foreclosure Is Barred, Or That They Would Be Entitled to Have the Motion Be Granted Even If They Showed That 7 Foreclosure Is Barred. 8 The MPA finally offers several arguments to the effect that “foreclosure” is barred. None of 9 the arguments offered by Cross-Defendants satisfies the basic standard repeatedly stated that it must 10 demonstrate that the Cross-Complainants cannot prevail on either an “entire” cause of action or 11 “entire complaint. There is no separate cause of action in the Cross-Complaint, so the elimination 12 of a potential remedy does not support the motion. 13 One of the Cross-Defendants arguments in this regard is curious. They argue that C.C.P. § 14 California Code Section V(E) gives the debtor the option to either force the creditor to first foreclose 15 on the collateral or allow the creditor to proceed directly against them without foreclosure, “the 16 effect of which is to release and terminate the security interest held by the creditor in the collateral.” 17 MPA , 24:7-12. Again, assuming all of this to be true, it does not support their motion as it would 18 merely limit the potential remedies available 19 1. Foreclosure is not contractually barred. 20 The Cross-Defendants point to a provision in the Second Amended Binding Term Sheet in 21 which Albert Lissoy agreed not to foreclose on the PROPERTY in the Second Amended Binding 22 Term Sheet. After citing this section, the Cross-Defendants cite §726, but the purpose of the 23 citation is unclear. In this instance, it merely eliminates foreclosure as an option, and would force 24 the Cross-Defendants to pursue other options to enfoce their judgment. 25 26 27 28 -15- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 2. Foreclosure is not barred by Cross-Complainants status as “Partners” or “Joint Venturers” because the assets that are subject to foreclosure were 2 obtained prior to or as part of the formation of the partnership. 3 The MPA next asserts the closely related arguments that the Cross-Defendants status as 4 “alleged” Partners or Joint Venturers7 prevents the Cross-Defendants from being able to foreclose 5 on the property. (MPA, 24:13-26:12. One case relied upon by the MPA is useful. BT-1 v. Equitable 6 Life Assurance Society (1999) 75 Cal.App.4th 1406 is cited by the Cross-Complaints for the theory 7 that that California law “unconditionally prohibits Partners/Joint Venturers from acquiring 8 Partnership debt and then foreclosing on Partnership property”, but in fact the analogous facts of 9 BT-1 demonstrate the opposite. 10 In BT-1, one of the partners, Equitable, learned that a bank that had loaned the partnership 11 money was interested in selling the loans at a discount. Equitable then reached an agreement that it 12 would match the high bid, and the Bank agreed it would not deal directly with BT-1. BT-1 alleged 13 Equitable’s proffer of the opportunity to the partnership was a charade, since neither the partnership 14 nor BT-1 had the necessary funds. BT-I, supra at 1409. Equitable bought the loans on August 21, 15 1995, for $ 38.5 million, and 10 days later, the day after the loans were due, Equitable demanded 16 full payment of approximately $ 65 million within 10 days. On the 11th day, no payment having 17 been received, Equitable recorded notices of default. BT-1 made a $ 39 million cash offer for the 18 project but Equitable turned it down, both as lender and on behalf of the partnership, and acquired 19 the building at the foreclosure sale. BT-1, supra at 1410. The Court determined that while the 20 partners could determine many aspects of their relationship, they could not relieve defendant of its 21 fiduciary duties, and it was a breach of Equitable’s fiduciary duties to purchase the loans that had 22 been made to the partnership. “[A partner has] the duty to account to the partnership for any benefit, 23 and hold as trustee for it any profits, derived without the consent of the other partners from any 24 transaction connected with the conduct of the partnership.” Id. at 1408. The court then observed, 25 “Equitable's conduct in buying and foreclosing the loans went far beyond whatever safe harbor 26 might be found in the partnership agreement. It is one thing simply to do nothing and suffer the 27 7 28 In the past, the cross-Defendants have repeatedly and consistently denied that the parties were Joint Venturers It must be seen whether this pleading heralds a shift in their position. -16- CROSS-COMPLAINANTS’ OPPOSITION TO CROSS-DEFENDNATS’ MOTION FOR JUDGMENT ON THE PLEADINGS ON CROSS- COMPLAINT . 1 consequences equally with all other partners. It is another to step out of the role of partner and into 2 that of an aggressive (and apparently greedy) lender in the marketplace.” BT-I , supra at 1414. 3 Unlike BT-1, the parties to the current transaction bargained for exactly the deal that took 4 place, with the Lissoys agreeing with the Cross-Defendants that the Lissoys would acquire the debt 5 owed by the Cross-Defendants in order to save the Cross-Defendants from foreclosure by the Banks 6 that would have left the Cross-Defendants with nothing. This was not a violation of fiduciary duty, 7 nor would it be a violation of fiduciary duty to seek to recover when the Cross-Defendants decided 8 unilaterally that they no longer needed to comply with the duties they assumed.8 9 E. The Special Case of the “FL.Corp” Described in the MPA. 10 The Lissoys were granted ownership of a fee interest in the MLCP properties as part of the 11 Binding Term Sheets. Lissoy took ownership of the fee interest in an existing special purpose, 12 Cross-Complainant LFT QSBC-2011 B. Inc. (“LFT”). While there are no direct contractual 13 relations between LFT and the Cross-Defendants, LFT was included as its interests may be effected 14 by the relief sought in the Cross-Complaint. 15 IV. IF THE COURT IS INCLINED TO GRANT THE MOTION AS TO ANY OF THE CROSS-COMPLAINANTS ON ANY OF THE CAUSES OF ACTION, LEAVE TO AMEND 16 THE CROSS-COMPLAINT SHOULD BE GRANTED. 17 “[T]he established rule is that upon granting [a motion for judgment on the pleadings], " 18 'great liberality' " should be used in allowing amendments.” Higgins v. Del Faro (1981) 123 Cal. 19 App. 3d 558, 565. "The rule is well established that great liberality will be used in allowing 20 amendments and where an amendment provides merely the addition of matters essential to make the 21 original cause of action complete the amendment should certainly be allowed by the court. 22 [Citation.] Such an amendment effects no change in the nature of the case, and can therefore cause 23 no surprise or prejudice to th