Preview
1 Brian Zimmerman (admitted pro hac vice)
Nicholas Reisch (admitted pro hac vice)
2 Jessica E. Chong (SBN 317869)
SPENCER FANE LLP
3 3040 Post Oak Blvd., Suite 1400
Houston, TX 77056
4 (713) 552-1234 telephone
5 Ernesto F. Aldover (SBN 157625)
RETZ & ALDOVER, LLP
6 2550 Via Tejon, Suite 3A
Palos Verdes Estates, California 90274
7 (310) 540-9800 telephone
8 Attorneys for Defendants
SVRV 385 Moore, LLC; SVRV 387 Moore, LLC;
9 Gregory J. Davis; Kevin Wolfe; Jason Justesen;
Paramont Woodside, LLC; Paramont Capital,
10 LLC; Monks Family Trust; TEH Capital, LLC;
Caproc III, LLC; WZ Partners LLC; McLan
11 Trust; Wild Rose Irrevocable Trust; Black
Horse Holdings, LLC; Phil Stoker; Diane
12 Stoker; Scott O’Neil; and Dale Huish
13
SUPERIOR COURT OF THE STATE OF CALIFORNIA
14
COUNTY OF SAN MATEO
15
16 Robert Arntsen; Mary Lee; Arntsen Case No. 22-CIV-01148 consolidated
Family Partnership, LP; and Brian with Case No. 22-CIV-01099
17 Christopher Dunn Custodianship;
MOTION FOR PARTIAL DIRECTED
18 Plaintiffs, VERDICT
19 -vs-
Dept. 24
20 David M. Bragg; Kurtis Stuart Kludt; Honorable Jeffrey Finigan
Silicon Valley Real Ventures, LLC;
21 SVRV 385 Moore, LLC; SVRV 387
Moore, LLC; Gregory J. Davis; Kevin
22 Wolfe; Jason Justesen; Paramont
Woodside, LLC; and Paramont Capital,
23 LLC;
24 Defendants.
25
26
27
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John Ho and Quanyu Huang;
1
Plaintiffs,
2
-vs-
3
David M. Bragg; Silicon Valley Real
4 Ventures, LLC; SVRV 385 Moore, LLC;
SVRV 387 Moore, LLC; Gregory J.
5 Davis; Kevin Wolfe; Jason Justesen;
Paramont Woodside, LLC; Paramont
6 Capital, LLC; Monks Family Trust; TEH
Capital, LLC; Caproc III, LLC; WZ
7 Partners LLC; McLan Trust; Wild Rose
Irrevocable Trust; Black Horse Holdings,
8 LLC; Phil Stoker; Diane Stoker; Scott
O’Neil; and Dale Huish;
9
Defendants.
10
11 Defendants SVRV 385 Moore, LLC, SVRV 387 Moore, LLC, Gregory J. Davis,
12 Paramont Woodside, LLC, Paramont Capital, LLC along with Monks Family Trust;
13 TEH Capital, LLC; Caproc III, LLC; WZ Partners LLC; McLan Trust; Wild Rose
14 Irrevocable Trust; Black Horse Holdings, LLC; Phil Stoker; Diane Stoker; Scott
15 O’Neil; and Dale Huish (everyone after Paramont Capital, LLC designated
16 “Paramont Investors”) move for directed verdict under Civil Procedure Code § 630
17 as follows.
18
A. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict
19 on Count 4 of Plaintiffs Second Amended Complaint based on a lack of
reasonable reliance.
20
21 Reasonable reliance is a required element of a fraud claim. (Hasso v. Hapke,
22 (2014) 227 Cal. App. 4th 107, 132.) The reasonableness of the reliance is ordinarily a
23 question of fact. (Id.) However, whether a party's reliance was justified may be decided
24 as a matter of law if reasonable minds can come to only one conclusion based on the
25 facts.” (Id.) “In determining whether one can reasonably or justifiably rely on an
26 alleged misrepresentation, the knowledge, education and experience of the person
27 claiming reliance must be considered.” (Id.)
28
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1 Mr. Ho claims that he was promised a return on his investment after Genesis
2 was paid from the proceeds from the sale of the properties. However, the documents
3 that Mr. Ho relies upon belie any argument that he reasonably relied on any alleged
4 misrepresentations. Mr. Ho’s “Investment-Subscription Agreement” dated October
5 2018 describes Mr. Ho as a “Class B Member.” (Ex. 348.) The bottom of the first page
6 contains specific language notifying Mr. Ho that there is a “preferred class” in second
7 position who would get paid before him; not “pro rata” along with Mr. Ho as he
8 contends. The second page provides more details of the “Pay Back and Distributions”
9 and explains how net proceeds will be distributed with Mr. Ho’s treatment as “Class
10 B Equity” in third position.
11 Moreover, there is no verbiage in the draft operating agreement that was
12 provided to Mr. ]Ho (and, as he testified, reviewed by him) that contains any such
13 language, as Mr. Ho suggests, elevating Mr. Ho above the second position over
14 Paramont Woodside in the capital stack. Indeed, the draft operating agreements that
15 were provided to Mr. Ho gave SVRV as the only Active Member the right to add new
16 members, create new classes of members, or take any other action the members could
17 take. (Ex. 7 & 8.) The record evidence further reveals that before Mr. Ho invested, he
18 was provided a Powerpoint presentation that makes it clear that Mr. Ho would be in
19 the third position under Genesis and a “preferred equity.” There is another
20 Investment-Subscription Agreement signed by Mr. Ho in June of 2019. (Ex. 502.) That
21 exhibit also makes it clear that Mr. Ho was listed in the “capital stack” below the
22 “Third Party Preferred Equity Partner” who is referenced as “Paramont Capital.” This
23 evidence demonstrates that Mr. Ho could not have reasonably relied on any alleged
24 misrepresentations, and therefore, directed verdict is warranted.
25 Hasso v. Hapke (2014) 227 Cal. App. 4th 107, 132 is instructive in this context.
26 In Hasso, the Court of Appeal held that a trustee's reliance on the alleged failure by a
27 hedge fund manager to disclose and explain to the beneficiary the fact that the fund
28
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1 would employ risky and highly-leveraged arbitrage strategies for investment was
2 unreasonable, as a matter of law, because the private placement memorandum
3 contained two full paragraphs devoted to leverage. (Id.)
4 In Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal. App. 4th 620, an
5 at-will employee of a law firm sued the law firm for misrepresentation after she was
6 terminated. Plaintiff alleged that the law firm falsely told her that it would find her
7 another position within the firm and she relied on such false statement to her
8 detriment by not seeking employment with a different employer. The Court of Appeal
9 affirmed the dismissal of plaintiff's misrepresentation claim against the law firm,
10 reasoning that:
11 To prevail on a claim for misrepresentation, Mrs. Camp must establish that
12 she justifiably relied on the alleged statements. Of course, Mrs. Camp was an
at-will employee who thus had no reasonable expectation that she would be
13 employed by Jeffer Mangels for any particular length of time. In essence, her
misrepresentation claim asserts nothing more than that she interpreted the
14 alleged misrepresentations as a promise of continued employment. However, a
15 promise to find an employee another position does not create a justifiable
expectation that the employee will be continuously employed.
16
17 Id. at 639-40.
18 Thus, based on relevant California law and the record evidence, directed verdict
19 on this claim is warranted.
20 B. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict
on Count 5 of Plaintiffs Second Amended Complaint based on a lack of
21 reasonable reliance.
22
Similar to Mr. Ho, Mr. Huang’s fraud claim fails for lack of justifiable reliance.
23
Mr. Huang testified that before he signed two Investment-Subscription Agreements,
24
he reviewed the Operating Agreement for each of the Moore Road Entities. Mr. Huang
25
admitted that he did not review the draft operating agreement(s) provided to the
26
Arntsen Plaintiffs or Mr. Ho, which would mean the operating agreements he
27
reviewed were necessarily the November 2018 operating agreements signed by
28
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1 Paramont Woodside. (Ex. 360.) Mr. Bragg confirmed in his trial testimony that he
2 specifically provided Mr. Huang with the Operating Agreements for the Moore Road
3 Entities. (Ex. 360.) Both Operating Agreements which Mr. Huang testified he
4 reviewed make clear that Mr. Bragg has no authority to enter into any such agreement
5 with Mr. Huang to give him a preferred return. Specifically, at section 5.4(d), it proves
6 that without “written approval of Paramont,” Mr. Bragg cannot enter any agreement
7 requiring payment of the Company of an amount more than $10,000. Based on Mr.
8 Huang’s testimony in conjunction with the express language, Mr. Huang could not
9 have justifiably relied on any alleged representations promising a preferred return
10 over Paramont Woodside because Mr. Huang knew or reasonably should have known
11 that Mr. Bragg lacked any authority to bind the Moore Road Entities to that preferred
12 return. Thus, a directed verdict on this count is warranted.
13 C. Greg Davis, Paramont Capital, and Paramont Woodside are entitled to
14 directed verdict on Count 9 of Plaintiffs Second Amended Complaint
based on lack of duty to disclose, lack of reasonable reliance, or lack
15 of causation.
16
The elements of fraudulent concealment are (1) defendant concealed or
17
suppressed a material fact, (2) defendant was under a duty to disclose the fact to the
18
plaintiff, (3) defendant intentionally concealed or suppressed the fact with the intent
19
to defraud plaintiff, (4) plaintiff was unaware of the fact and would not have acted as
20
he/she did if he//she had known of the concealed or suppressed fact, and (5) resulting
21
damage to plaintiff. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230,
22
248.)
23
1. Plaintiffs have failed to present evidence of a duty to disclose under
24 element 2 by Davis or Paramont Capital.
25
The duty for fraudulent concealment requires that there be some transactional
26
relationship between the parties and the absence of such a relationship will doom the
27
claim. (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187-89.) Four
28
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1 circumstances exist where a defendant has an affirmative duty to disclose: (1) when a
2 defendant is in a fiduciary relationship with plaintiff; (2) when a defendant had
3 exclusive knowledge of material facts not known to plaintiff; (3) when a defendant
4 actively conceals a material fact from plaintiff; or (4) when a defendant makes partial
5 representations but also suppresses some material facts. (Rubenstein v. The Gap, Inc.
6 (2017) 14 Cal.App.5th 870, 877.) There is not sufficient evidence to establish any of
7 these.
8 Neither Davis nor Paramont Capital’s alleged duty to disclose can be based on
9 a fiduciary duty to SVRV 385 Moore and SVRV 387 Moore or their (alleged) members
10 because the only fiduciary duties owed for limited liability companies are owed by
11 managers and members. (Corp. Code, § 17704.09.) Plaintiffs do not have any evidence
12 that either Davis or Paramont Capital was a member of those two entities. To the
13 contrary, the record evidence demonstrates conclusively that the manager was Bragg/
14 SVRV and eventually Paramont Woodside in May 2020 upon the notices of removal.
15 (Exs. 426 and 427).
16 Also, there is no evidence that Davis or Paramont Capital had exclusive
17 knowledge of any facts that Plaintiffs allege were not disclosed to them. The evidence
18 demonstrates that multiple people other than Davis and Paramont Capital had access
19 to the facts Plaintiffs allege were not disclosed in their operative complaint (the
20 existence of the “unapproved operating agreements”, Paramont Woodside’s eventual
21 replacement as manager, etc.) And the evidence establishes that the Plaintiffs
22 actually learned of these facts before the properties sold.
23 In addition, there is no evidence that Davis or Paramont Capital “actively
24 concealed” anything from Plaintiffs. Active concealment occurs when a defendant
25 prevents the discovery of material facts. (Rubenstein, 14 Cal.App.5th at 878.) The
26 Plaintiffs have not presented any evidence that Davis or Paramont Capital took any
27 act to prevent the Plaintiffs from discovery any facts.
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1 Finally, there is no evidence of any partial representations by Davis or
2 Paramont Capital. The Plaintiffs themselves conceded that neither Davis nor
3 Paramont Capital ever had any contact with them, so no representations could have
4 been made.
5 2. Plaintiffs have failed to present evidence that they reasonably
6 relied on any alleged concealment by Davis, Paramont Capital, or
Paramont Woodside.
7
8 Lack of reasonable reliance is fatal to a fraudulent concealment claim.
9 (Hoffman, 228 Cal.App.4th at 1193-95.) A plaintiff establishes reliance “when the
10 misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct
11 which altered his or her legal relations, and when without such misrepresentation or
12 nondisclosure he or she would not, in all reasonable probability, have entered into the
13 contract or other transaction.” (Id.) (citations omitted). And such reliance must be
14 reasonable. (Id.)
15 In this case, Plaintiffs have not established evidence of what actions they would
16 have taken differently had any of the information, pleaded as not disclosed, been
17 shared with Plaintiffs. The evidence demonstrates that all Plaintiffs, other than
18 Huang, were provided the November 2018 operating agreements signed by Paramont
19 Woodside no later than June 2019. And Huang received those operating agreements
20 before he signed his investment agreement in January 2020 and yet paid his money
21 anyway. Also, the Plaintiffs contributed further funds for the Genesis interest
22 payment in April 2020 (i.e. they did not change their behavior after learning the
23 information) even after knowing about the November 2018 operating agreements.
24 Fatal to their claim, there is no evidence offered by Plaintiffs explaining what they
25 would have done instead based on receiving the information earlier than they did.
26 Further demonstrating a lack of reliance is that none of the Plaintiffs ever took
27 action after learning all of the facts except file a lawsuit years later. And filing a
28 lawsuit sooner cannot be a valid basis for reasonable reliance because otherwise the
PAGE 7
1 existence of the separate element would never make sense. By definition, any plaintiff
2 alleging fraudulent concealment could have filed a suit sooner if the information was
3 disclosed. If that were enough to establish reliance, the element would necessarily be
4 met in every case.
5 3. Plaintiffs have failed to present evidence that any alleged
6 concealment by Davis, Paramont Capital, or Paramont Woodside
resulted in their damage.
7
8 To prove damages resulting from fraud, Plaintiffs must show that a loss
9 proximately resulted from the alleged tortious conduct. (Auerbach v. Great Western
10 Bank (1999) 74 Cal.App.4th 1172, 1184–1186.) Here Plaintiffs have not presented
11 evidence on this point for their damages. Most of the damages the Arnsten Plaintiffs
12 and John Ho are claiming were for investments made prior to the November 2018
13 operating agreements being signed or the purchase of the properties closing; i.e. before
14 Davis, Paramont Capital, or Paramont Woodside were even involved. Even assuming
15 that those Defendants had disclosed all the information they had (assuming they
16 knew who the Plaintiffs were), such as the existence of the November 2018 operating
17 agreements, to those Plaintiffs immediately after those transactions were
18 completed (i.e. the first time Paramont Woodside could have had a duty as a member),
19 there are no facts indicating that the Plaintiffs could have gotten their money back.
20 And Huang made his investment despite having information he claims was not
21 disclosed.
22 Indeed, most of the damages claimed by Plaintiffs cannot be recovered based on
23 concealment of facts simply based on timing. Plaintiffs assert that there was a a
24 failure to disclose the removal of the manager in May 2020, but do not explain or
25 provide any evidence as to how disclosure of that information “resulted in” any of their
26 damages. Likewise, Plaintiffs complain of a failure to disclose Bragg/SVRV’s alleged
27 mismanagement based on the November 2019 notices of breach sent by Paramont
28 Woodside, but do not explain or provide any evidence as to how that lack of disclosure
PAGE 8
1 “resulted in” any of the damages they suffered based on earlier investments. Plaintiffs
2 simply have not presented any evidence factually connecting any particular alleged
3 concealment with any particular item of alleged damages.
4 D. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict
5 on Count 10 of Plaintiffs Second Amended Complaint based on lack of
breach.
6
7 “Unjust enrichment” is not a cause of action or remedy but a general principle
8 underlying various doctrines and remedies. (McBride v. Boughton (2004) 123
9 Cal.App.4th 379, 387.) It is often asserted as a basis for seeking restitution. (Id. 387-
10 88.) In such cases, it is treated as seeking recovery under a “common count” such as
11 quasi contract or assumpsit. (Id.)
12 E. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict
on Count 16 of Plaintiffs Second Amended Complaint based on lack of
13 duty, lack of breach of duty, or lack of causation.
14
The elements of a claim for breach of fiduciary duty are (1) the existence of a
15
fiduciary relationship, (2) its breach, and (3) damage proximately caused by that
16
breach. (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)
17
18 1. Plaintiffs have failed to present evidence of a fiduciary duty under
element 1 by Davis or Paramont Capital.
19
20 Davis or Paramont Capital’s duty to disclose cannot be based on a fiduciary
21 duty to SVRV 385 Moore and SVRV 387 Moore or their (alleged) members because the
22 only fiduciary duties owed for limited liability companies are owed by managers and
23 members. (Corp. Code, § 17704.09.) Plaintiffs did not provide any evidence that either
24 Davis or Paramont Capital was a member of those two entities. To the contrary, the
25 record evidence demonstrates conclusively that the manager was Bragg/ SVRV and
26 eventually Paramont Woodside in May 2020.
27
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2. Plaintiffs have failed to present evidence that the conduct by Davis,
1
Paramont Capital, or Paramont Woodside breached any fiduciary
2 duty.
3
In a manager-managed limited liability company like SVRV 385 Moore and
4
SVRV 387 Moore, only members and managers owe fiduciary duties. (Corp. Code, §
5
17704.09.) The member only owes the duty of good faith and fair dealing. (Id. subd.
6
(d), (f).) But importantly, the requirement of good faith and fair dealing cannot impose
7
obligations beyond the contract that creates it. (Guz v. Bechtel Nat. Inc. (2000) 24
8
Cal.4th 317, 349–350.) The duty of good faith and fair dealing “cannot be extended to
9
create obligations not contemplated in the contract.” (Racine & Laramie, Ltd. v.
10
Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032.)
11
In this case, Paramont Woodside (and Paramont Capital and Davis, assuming
12
arguendo that they were members) could only have become members, and thus
13
incurred the duty of good faith and fair dealing, as a result of the November 2018
14
operating agreements. But Plaintiffs are nonetheless seeking to impose a duty on a
15
co-member that is inconsistent with the contract making it a member. The law does
16
not allow a claim based on such an alleged duty. In this case, the evidence
17
demonstrates that all of Paramont Woodside (and Paramont Capital and Davis’s)
18
actions were consistent with the November 2018 operating agreements. Thus, there
19
could not be a breach of the only fiduciary duty owed as a member as a matter of law.
20
A manager in LLCs such as SVRV 385 Moore and SVRV 387 Moore owes the
21
same duty of good faith and fair dealing as a member, but also owes limited duties of
22
loyalty and care. (Corp. Code, § 17704.09 subd. (b), (c), (d), and (f).) But a “member
23
does not violate a duty or obligation under this article or under the operating
24
agreement merely because the member's conduct furthers the member's own interest.”
25
(Id. subd. (e).) Importantly, Bragg/SVRV was not replaced as the manager until May
26
2020. But the evidence conclusively demonstrates that all but one of the alleged
27
breaches of fiduciary duty alleged by Plaintiffs took place prior to that date. So, those
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1 breaches could not have been by Paramont Woodside (or Paramont Capital or Davis)
2 as a manager. As for the only alleged breach occurring after that date—distributing
3 funds from the property sales to Paramont Woodside—those distributions were
4 consistent with Paramont Woodside’s rights under the agreement making it a
5 member. The law does not impose a duty on a manager to forgo rights contractual
6 rights because it would benefit an entity. If that were the case, nobody would ever be
7 the manager of an LLC because it would require them to give up all rights (direct or
8 indirect) to compensation for the good of the entity.
9 F. The Paramont Investors are entitled to a directed verdict on Count 17
10 of Plaintiffs Second Amended Complaint based on receiving
distributions in good faith and for reasonably equivalent value.
11
12 A transfer or obligation is not voidable under fraudulent/voidable transfer law
13 against a person that took in good faith and for a reasonably equivalent value given
14 the debtor or against any subsequent transferee or obligee. (Civ. Code, § 3439.08 subd.
15 (a) and (b)(1)(B).)
16 Even before the statute existed, a transferee receiving property in good faith
17 and for value could not be liable. (Aufdemkamp v. Pierce (1935) 4 Cal.App.2d 276, 282–
18 283.) In Pierce, a spouse that received property after marriage pursuant to a
19 prenuptial agreement was entitled to a nonsuit because the evidence demonstrated
20 she did not receive the property with fraudulent intent and gave value for the
21 property. (Id.) Similar holdings exist under the statute. Summary judgment was
22 granted in favor of defendants on a fraudulent transfer claim because they did not
23 know of dealings between the transferor and the plaintiff and did not believe any to
24 the plaintiff existed. (Kojababian v. Genuine Home Loans, Inc. (2009) 174 Cal.App.4th
25 408, 417.)
26 The holding in Annod v. Hamilton & Samuels is most directly on point. (Annod
27 Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1295–1300.) In that case,
28 summary judgment was granted on a fraudulent/voidable transfer claim under the
PAGE 11
1 statute based on the defendants taking for good faith and for value. (Id.) The
2 defendants were partners at a law firm that received distributions from the firm based
3 on a fraction of their billings based on hours worked for the firm. (Id.) The work that
4 the partners provided gave value to the firm in return for the distributions and
5 actually helped the firm generate more revenue to pay creditors. (Id.) Notably, Annod
6 held that the partners knowledge of the debt to the plaintiff landlord and the
7 insolvency of the firm (i.e. badges of fraud) did not create a fact issue because the
8 partners offered testimony that they knew the lease exempted them from personal
9 liability for that debt. (Id.) Annod rejected the plaintiff’s argument that fraudulent
10 intent could be inferred through speculation that the plaintiffs’ intent was fraudulent
11 based on the “badges of fraud.” (Id.)
12 In this case, the evidence demonstrates that Paramont Investors received their
13 right to preferred distributions from Paramont Woodside in return for their capital
14 contributions totaling almost $2 million (omitting the contribution by Paramont
15 Capital). And they put in additional contributions of approximately $200,000 to save
16 the investment even though it was not required under Paramont Woodside’s operating
17 agreements with SVRV. Further, the distributions the Paramont Investors received
18 approximately two years later returned their money with a slight percentage of profit
19 that was far less than the 12% return promised to Paramont Woodside under the
20 operating agreements. Like the defendants in Annod, the Paramont Investor’s
21 contributions, on two separate occasions, likely prevented a total loss on the project
22 (i.e. it benefited SVRV 385 Moore and SVRV 387 Moore enormously).
23 Moreover, unlike in Annod, there is no evidence that the Paramont Investors
24 even knew about the Plaintiffs or their claims to the proceeds of the property sales.
25 Bragg’s testimony (if believed) might provide sufficient evidence that Davis and
26 Paramont Capital knew about the Plaintiffs, but the only evidence about the
27 Paramont Investors’ knowledge is that they did not know anything about the
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1 Plaintiffs or their claims. As is Annod, Plaintiffs are basing any contrary assertion on
2 nothing more than speculation.
3 G. Davis and the Paramont Investors are entitled to a directed verdict on
4 Count 21 of Plaintiffs Second Amended Complaint.
5 “Unjust enrichment” is not a cause of action or remedy but a general principle
6 underlying various doctrines and remedies. (McBride v. Boughton (2004) 123
7 Cal.App.4th 379, 387.) It is often asserted as a basis for seeking restitution. (Id. 387-
8 88.) In such cases, it is treated as seeking recovery under a “common count” such as
9 quasi contract. (Id.)
10 One required element of the claim is that the defendant received a benefit.
11 (Welborne v. Ryman-Carroll Foundation (2018) 22 Cal.App.5th 719, 725.) But there is
12 no evidence that Davis received any benefit from this project. He was not an investor
13 and did not receive any management fee or other compensation. Without evidence of
14 a benefit, the Plaintiffs’ claim fails.
15 More importantly for the Paramont Investors, is that knowledge of the facts
16 allegedly entitling a plaintiff to money is key to such a claim. (Welborne, 22
17 Cal.App.5th at 725-26.) When money is the subject of an unjust enrichment/quasi-
18 contract claim, someone who innocently accepts money even from a thief or embezzler
19 is not liable. (Id.) A defendant’s knowledge at the tie of receipt is critical to the validity
20 of the claim so that it must be alleged to even properly survive a demurrer. (First
21 Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1669.) In this case, there is
22 no evidence that the Paramont Investors had knowledge of the Plaintiffs’ claims to
23 any of the money they received at the time they received. Without such evidence, the
24 claim fails as to the Paramont Investors.
25
H. Davis and the Paramont Investors are entitled to a directed verdict on
26 Count 22 of Plaintiffs Second Amended Complaint because they did
not receive money intended for the benefit of Plaintiffs.
27
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1 A money had and received claim fails if a defendant never received or used any
2 money paid by a plaintiff. (Ramirez v. Thomas Productions (1935) 10 Cal.App.2d 338,
3 340–341.) Further, even where a defendant receives a plaintiff’s money, the defendant
4 must have received the money “for the use of the plaintiff.” (Avidor v. Sutter's Place,
5 Inc., 212 Cal. App. 4th 1439, 1454.) Thus, if a defendant did not receive money with
6 the understanding it would be used for a plaintiff’s benefit, the claims fails. (Id.)
7 Relying upon this law, a federal court dismissed a claim because the money was not
8 received for the benefit of the plaintiff, but as compensation for services rendered.
9 Soma Surgery Center, Inc. v. Aetna Life Insurance Co. (C.D. Cal., Sept. 5, 2017, No.
10 CV 16-5802 DSF (ASX)) 2017 WL 9511778, at *1.
11 Initially, there is no evidence that Davis received any money from this project.
12 He was not an investor and did not receive any management fee or other
13 compensation. Without evidence of him receiving money, the Plaintiffs’ claim against
14 him fails.
15 In addition, there is no evidence that the Paramont Investors ever received any
16 of the Plaintiffs’ money. It was all spent by SVRV, SVRV 385 Moore, and SVRV 387
17 Moore before it could have made its way to the Paramont Investors. Further, the
18 money that the Paramont Investors received from the proceeds of the property sale
19 was not received by them “for the benefit” of any Plaintiffs, but as distributions to
20 which they were contractually entitled based on their investments.
21 CONCLUSION
22 Based on the foregoing, Paramont Defendants respectfully request that this
23 Court grant a directed verdict as to the counts requested above.
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1 Dated: March 29, 2024 SPENCER FANE LLP
2 By: /s/ Jessica E. Chong
Brian Zimmerman
3 (admitted pro hac vice)
Nicholas Reisch
4 (admitted pro hac vice)
Jessica E. Chong (SBN 317869)
5 SPENCER FANE LLP
3040 Post Oak Blvd., Suite 1400
6 Houston, TX 77056
7 and
8 Ernesto F. Aldover, Esq.
RETZ & ALDOVER, LLP
9 2550 Via Tejon, Suite 3A
Palos Verdes Estates, CA 90274
10 Attorneys for Defendants
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1 PROOF OF SERVICE
2
STATE OF NEVADA, COUNTY OF CLARK
3
I am employed in the county of Las Vegas State of Nevada. I am over the age of 18
4 and not a party to the action; my business address is 300 S. Fourth Street, Suite 950
Las Vegas, NV 89101.
5
6 On March 29, 2024, I served the foregoing document(s) described as MOTION FOR
PARTIAL DIRECTED VERDICT as follows:
7
Collin J. Vierra (State Bar No. 322720) Ryan van Steenis (S.B. #254542)
8 EIMER STAHL LLP 1601 S Shepherd Dr., #276
99 Almaden Blvd., Suite 641 Houston, Texas 77019
9 rjvansteenis@gmail.com
San Jose, CA 95113-1605 ATTORNEY FOR DEFENDANTS
10 Telephone: (408) 889-1668 DAVID M. BRAGG AND SILICON
Email: cvierra@eimerstahl.com VALLEY REAL VENTURES, LLC
11 ATTORNEY FOR PLAINTIFFS
12
__ (BY US MAIL) As follows: I am “readily familiar” with the firm’s practice of
13 collection and processing correspondence for mailing. Under that practice it would be
deposited with the U.S. Postal Service on that same day with postage thereon fully
14 prepaid at Palos Verdes Estate, CA in the ordinary cause of business. I am aware
that on motion of the party served, service is presumed invalid of postal cancellation
15
date or postage meter is more than one day after date of deposit for mailing an
16 affidavit.
17 _X_ (BY ELECTRONIC SERVICE) I electronically served the foregoing document(s)
on opposing counsel via electronic mail.
18
19 X (STATE) I declare under penalty of perjury under the laws of the State of
Nevada that the foregoing is true and correct.
20
Executed on March 29, 2024 at Las Vegas, Nevada.
21
22 /s/ Adam Miller
Adam Miller
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1 Brian Zimmerman (admitted pro hac vice) Nicholas Reisch (admitted pro hac vice) 2 Jessica E. Chong (SBN 317869) SPENCER FANE LLP 3 3040 Post Oak Blvd., Suite 1400 Houston, TX 77056 4 (713) 552-1234 telephone 5 Ernesto F. Aldover (SBN 157625) RETZ & ALDOVER, LLP 6 2550 Via Tejon, Suite 3A Palos Verdes Estates, California 90274 7 (310) 540-9800 telephone 8 Attorneys for Defendants SVRV 385 Moore, LLC; SVRV 387 Moore, LLC; 9 Gregory J. Davis; Kevin Wolfe; Jason Justesen; Paramont Woodside, LLC; Paramont Capital, 10 LLC; Monks Family Trust; TEH Capital, LLC; Caproc III, LLC; WZ Partners LLC; McLan 11 Trust; Wild Rose Irrevocable Trust; Black Horse Holdings, LLC; Phil Stoker; Diane 12 Stoker; Scott O’Neil; and Dale Huish 13 SUPERIOR COURT OF THE STATE OF CALIFORNIA 14 COUNTY OF SAN MATEO 15 16 Robert Arntsen; Mary Lee; Arntsen Case No. 22-CIV-01148 consolidated Family Partnership, LP; and Brian with Case No. 22-CIV-01099 17 Christopher Dunn Custodianship; MOTION FOR PARTIAL DIRECTED 18 Plaintiffs, VERDICT 19 -vs- Dept. 24 20 David M. Bragg; Kurtis Stuart Kludt; Honorable Jeffrey Finigan Silicon Valley Real Ventures, LLC; 21 SVRV 385 Moore, LLC; SVRV 387 Moore, LLC; Gregory J. Davis; Kevin 22 Wolfe; Jason Justesen; Paramont Woodside, LLC; and Paramont Capital, 23 LLC; 24 Defendants. 25 26 27 28 PAGE 1 John Ho and Quanyu Huang; 1 Plaintiffs, 2 -vs- 3 David M. Bragg; Silicon Valley Real 4 Ventures, LLC; SVRV 385 Moore, LLC; SVRV 387 Moore, LLC; Gregory J. 5 Davis; Kevin Wolfe; Jason Justesen; Paramont Woodside, LLC; Paramont 6 Capital, LLC; Monks Family Trust; TEH Capital, LLC; Caproc III, LLC; WZ 7 Partners LLC; McLan Trust; Wild Rose Irrevocable Trust; Black Horse Holdings, 8 LLC; Phil Stoker; Diane Stoker; Scott O’Neil; and Dale Huish; 9 Defendants. 10 11 Defendants SVRV 385 Moore, LLC, SVRV 387 Moore, LLC, Gregory J. Davis, 12 Paramont Woodside, LLC, Paramont Capital, LLC along with Monks Family Trust; 13 TEH Capital, LLC; Caproc III, LLC; WZ Partners LLC; McLan Trust; Wild Rose 14 Irrevocable Trust; Black Horse Holdings, LLC; Phil Stoker; Diane Stoker; Scott 15 O’Neil; and Dale Huish (everyone after Paramont Capital, LLC designated 16 “Paramont Investors”) move for directed verdict under Civil Procedure Code § 630 17 as follows. 18 A. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict 19 on Count 4 of Plaintiffs Second Amended Complaint based on a lack of reasonable reliance. 20 21 Reasonable reliance is a required element of a fraud claim. (Hasso v. Hapke, 22 (2014) 227 Cal. App. 4th 107, 132.) The reasonableness of the reliance is ordinarily a 23 question of fact. (Id.) However, whether a party's reliance was justified may be decided 24 as a matter of law if reasonable minds can come to only one conclusion based on the 25 facts.” (Id.) “In determining whether one can reasonably or justifiably rely on an 26 alleged misrepresentation, the knowledge, education and experience of the person 27 claiming reliance must be considered.” (Id.) 28 PAGE 2 1 Mr. Ho claims that he was promised a return on his investment after Genesis 2 was paid from the proceeds from the sale of the properties. However, the documents 3 that Mr. Ho relies upon belie any argument that he reasonably relied on any alleged 4 misrepresentations. Mr. Ho’s “Investment-Subscription Agreement” dated October 5 2018 describes Mr. Ho as a “Class B Member.” (Ex. 348.) The bottom of the first page 6 contains specific language notifying Mr. Ho that there is a “preferred class” in second 7 position who would get paid before him; not “pro rata” along with Mr. Ho as he 8 contends. The second page provides more details of the “Pay Back and Distributions” 9 and explains how net proceeds will be distributed with Mr. Ho’s treatment as “Class 10 B Equity” in third position. 11 Moreover, there is no verbiage in the draft operating agreement that was 12 provided to Mr. ]Ho (and, as he testified, reviewed by him) that contains any such 13 language, as Mr. Ho suggests, elevating Mr. Ho above the second position over 14 Paramont Woodside in the capital stack. Indeed, the draft operating agreements that 15 were provided to Mr. Ho gave SVRV as the only Active Member the right to add new 16 members, create new classes of members, or take any other action the members could 17 take. (Ex. 7 & 8.) The record evidence further reveals that before Mr. Ho invested, he 18 was provided a Powerpoint presentation that makes it clear that Mr. Ho would be in 19 the third position under Genesis and a “preferred equity.” There is another 20 Investment-Subscription Agreement signed by Mr. Ho in June of 2019. (Ex. 502.) That 21 exhibit also makes it clear that Mr. Ho was listed in the “capital stack” below the 22 “Third Party Preferred Equity Partner” who is referenced as “Paramont Capital.” This 23 evidence demonstrates that Mr. Ho could not have reasonably relied on any alleged 24 misrepresentations, and therefore, directed verdict is warranted. 25 Hasso v. Hapke (2014) 227 Cal. App. 4th 107, 132 is instructive in this context. 26 In Hasso, the Court of Appeal held that a trustee's reliance on the alleged failure by a 27 hedge fund manager to disclose and explain to the beneficiary the fact that the fund 28 PAGE 3 1 would employ risky and highly-leveraged arbitrage strategies for investment was 2 unreasonable, as a matter of law, because the private placement memorandum 3 contained two full paragraphs devoted to leverage. (Id.) 4 In Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal. App. 4th 620, an 5 at-will employee of a law firm sued the law firm for misrepresentation after she was 6 terminated. Plaintiff alleged that the law firm falsely told her that it would find her 7 another position within the firm and she relied on such false statement to her 8 detriment by not seeking employment with a different employer. The Court of Appeal 9 affirmed the dismissal of plaintiff's misrepresentation claim against the law firm, 10 reasoning that: 11 To prevail on a claim for misrepresentation, Mrs. Camp must establish that 12 she justifiably relied on the alleged statements. Of course, Mrs. Camp was an at-will employee who thus had no reasonable expectation that she would be 13 employed by Jeffer Mangels for any particular length of time. In essence, her misrepresentation claim asserts nothing more than that she interpreted the 14 alleged misrepresentations as a promise of continued employment. However, a 15 promise to find an employee another position does not create a justifiable expectation that the employee will be continuously employed. 16 17 Id. at 639-40. 18 Thus, based on relevant California law and the record evidence, directed verdict 19 on this claim is warranted. 20 B. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict on Count 5 of Plaintiffs Second Amended Complaint based on a lack of 21 reasonable reliance. 22 Similar to Mr. Ho, Mr. Huang’s fraud claim fails for lack of justifiable reliance. 23 Mr. Huang testified that before he signed two Investment-Subscription Agreements, 24 he reviewed the Operating Agreement for each of the Moore Road Entities. Mr. Huang 25 admitted that he did not review the draft operating agreement(s) provided to the 26 Arntsen Plaintiffs or Mr. Ho, which would mean the operating agreements he 27 reviewed were necessarily the November 2018 operating agreements signed by 28 PAGE 4 1 Paramont Woodside. (Ex. 360.) Mr. Bragg confirmed in his trial testimony that he 2 specifically provided Mr. Huang with the Operating Agreements for the Moore Road 3 Entities. (Ex. 360.) Both Operating Agreements which Mr. Huang testified he 4 reviewed make clear that Mr. Bragg has no authority to enter into any such agreement 5 with Mr. Huang to give him a preferred return. Specifically, at section 5.4(d), it proves 6 that without “written approval of Paramont,” Mr. Bragg cannot enter any agreement 7 requiring payment of the Company of an amount more than $10,000. Based on Mr. 8 Huang’s testimony in conjunction with the express language, Mr. Huang could not 9 have justifiably relied on any alleged representations promising a preferred return 10 over Paramont Woodside because Mr. Huang knew or reasonably should have known 11 that Mr. Bragg lacked any authority to bind the Moore Road Entities to that preferred 12 return. Thus, a directed verdict on this count is warranted. 13 C. Greg Davis, Paramont Capital, and Paramont Woodside are entitled to 14 directed verdict on Count 9 of Plaintiffs Second Amended Complaint based on lack of duty to disclose, lack of reasonable reliance, or lack 15 of causation. 16 The elements of fraudulent concealment are (1) defendant concealed or 17 suppressed a material fact, (2) defendant was under a duty to disclose the fact to the 18 plaintiff, (3) defendant intentionally concealed or suppressed the fact with the intent 19 to defraud plaintiff, (4) plaintiff was unaware of the fact and would not have acted as 20 he/she did if he//she had known of the concealed or suppressed fact, and (5) resulting 21 damage to plaintiff. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 22 248.) 23 1. Plaintiffs have failed to present evidence of a duty to disclose under 24 element 2 by Davis or Paramont Capital. 25 The duty for fraudulent concealment requires that there be some transactional 26 relationship between the parties and the absence of such a relationship will doom the 27 claim. (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187-89.) Four 28 PAGE 5 1 circumstances exist where a defendant has an affirmative duty to disclose: (1) when a 2 defendant is in a fiduciary relationship with plaintiff; (2) when a defendant had 3 exclusive knowledge of material facts not known to plaintiff; (3) when a defendant 4 actively conceals a material fact from plaintiff; or (4) when a defendant makes partial 5 representations but also suppresses some material facts. (Rubenstein v. The Gap, Inc. 6 (2017) 14 Cal.App.5th 870, 877.) There is not sufficient evidence to establish any of 7 these. 8 Neither Davis nor Paramont Capital’s alleged duty to disclose can be based on 9 a fiduciary duty to SVRV 385 Moore and SVRV 387 Moore or their (alleged) members 10 because the only fiduciary duties owed for limited liability companies are owed by 11 managers and members. (Corp. Code, § 17704.09.) Plaintiffs do not have any evidence 12 that either Davis or Paramont Capital was a member of those two entities. To the 13 contrary, the record evidence demonstrates conclusively that the manager was Bragg/ 14 SVRV and eventually Paramont Woodside in May 2020 upon the notices of removal. 15 (Exs. 426 and 427). 16 Also, there is no evidence that Davis or Paramont Capital had exclusive 17 knowledge of any facts that Plaintiffs allege were not disclosed to them. The evidence 18 demonstrates that multiple people other than Davis and Paramont Capital had access 19 to the facts Plaintiffs allege were not disclosed in their operative complaint (the 20 existence of the “unapproved operating agreements”, Paramont Woodside’s eventual 21 replacement as manager, etc.) And the evidence establishes that the Plaintiffs 22 actually learned of these facts before the properties sold. 23 In addition, there is no evidence that Davis or Paramont Capital “actively 24 concealed” anything from Plaintiffs. Active concealment occurs when a defendant 25 prevents the discovery of material facts. (Rubenstein, 14 Cal.App.5th at 878.) The 26 Plaintiffs have not presented any evidence that Davis or Paramont Capital took any 27 act to prevent the Plaintiffs from discovery any facts. 28 PAGE 6 1 Finally, there is no evidence of any partial representations by Davis or 2 Paramont Capital. The Plaintiffs themselves conceded that neither Davis nor 3 Paramont Capital ever had any contact with them, so no representations could have 4 been made. 5 2. Plaintiffs have failed to present evidence that they reasonably 6 relied on any alleged concealment by Davis, Paramont Capital, or Paramont Woodside. 7 8 Lack of reasonable reliance is fatal to a fraudulent concealment claim. 9 (Hoffman, 228 Cal.App.4th at 1193-95.) A plaintiff establishes reliance “when the 10 misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct 11 which altered his or her legal relations, and when without such misrepresentation or 12 nondisclosure he or she would not, in all reasonable probability, have entered into the 13 contract or other transaction.” (Id.) (citations omitted). And such reliance must be 14 reasonable. (Id.) 15 In this case, Plaintiffs have not established evidence of what actions they would 16 have taken differently had any of the information, pleaded as not disclosed, been 17 shared with Plaintiffs. The evidence demonstrates that all Plaintiffs, other than 18 Huang, were provided the November 2018 operating agreements signed by Paramont 19 Woodside no later than June 2019. And Huang received those operating agreements 20 before he signed his investment agreement in January 2020 and yet paid his money 21 anyway. Also, the Plaintiffs contributed further funds for the Genesis interest 22 payment in April 2020 (i.e. they did not change their behavior after learning the 23 information) even after knowing about the November 2018 operating agreements. 24 Fatal to their claim, there is no evidence offered by Plaintiffs explaining what they 25 would have done instead based on receiving the information earlier than they did. 26 Further demonstrating a lack of reliance is that none of the Plaintiffs ever took 27 action after learning all of the facts except file a lawsuit years later. And filing a 28 lawsuit sooner cannot be a valid basis for reasonable reliance because otherwise the PAGE 7 1 existence of the separate element would never make sense. By definition, any plaintiff 2 alleging fraudulent concealment could have filed a suit sooner if the information was 3 disclosed. If that were enough to establish reliance, the element would necessarily be 4 met in every case. 5 3. Plaintiffs have failed to present evidence that any alleged 6 concealment by Davis, Paramont Capital, or Paramont Woodside resulted in their damage. 7 8 To prove damages resulting from fraud, Plaintiffs must show that a loss 9 proximately resulted from the alleged tortious conduct. (Auerbach v. Great Western 10 Bank (1999) 74 Cal.App.4th 1172, 1184–1186.) Here Plaintiffs have not presented 11 evidence on this point for their damages. Most of the damages the Arnsten Plaintiffs 12 and John Ho are claiming were for investments made prior to the November 2018 13 operating agreements being signed or the purchase of the properties closing; i.e. before 14 Davis, Paramont Capital, or Paramont Woodside were even involved. Even assuming 15 that those Defendants had disclosed all the information they had (assuming they 16 knew who the Plaintiffs were), such as the existence of the November 2018 operating 17 agreements, to those Plaintiffs immediately after those transactions were 18 completed (i.e. the first time Paramont Woodside could have had a duty as a member), 19 there are no facts indicating that the Plaintiffs could have gotten their money back. 20 And Huang made his investment despite having information he claims was not 21 disclosed. 22 Indeed, most of the damages claimed by Plaintiffs cannot be recovered based on 23 concealment of facts simply based on timing. Plaintiffs assert that there was a a 24 failure to disclose the removal of the manager in May 2020, but do not explain or 25 provide any evidence as to how disclosure of that information “resulted in” any of their 26 damages. Likewise, Plaintiffs complain of a failure to disclose Bragg/SVRV’s alleged 27 mismanagement based on the November 2019 notices of breach sent by Paramont 28 Woodside, but do not explain or provide any evidence as to how that lack of disclosure PAGE 8 1 “resulted in” any of the damages they suffered based on earlier investments. Plaintiffs 2 simply have not presented any evidence factually connecting any particular alleged 3 concealment with any particular item of alleged damages. 4 D. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict 5 on Count 10 of Plaintiffs Second Amended Complaint based on lack of breach. 6 7 “Unjust enrichment” is not a cause of action or remedy but a general principle 8 underlying various doctrines and remedies. (McBride v. Boughton (2004) 123 9 Cal.App.4th 379, 387.) It is often asserted as a basis for seeking restitution. (Id. 387- 10 88.) In such cases, it is treated as seeking recovery under a “common count” such as 11 quasi contract or assumpsit. (Id.) 12 E. SVRV 385 Moore and SVRV 387 Moore are entitled to directed verdict on Count 16 of Plaintiffs Second Amended Complaint based on lack of 13 duty, lack of breach of duty, or lack of causation. 14 The elements of a claim for breach of fiduciary duty are (1) the existence of a 15 fiduciary relationship, (2) its breach, and (3) damage proximately caused by that 16 breach. (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.) 17 18 1. Plaintiffs have failed to present evidence of a fiduciary duty under element 1 by Davis or Paramont Capital. 19 20 Davis or Paramont Capital’s duty to disclose cannot be based on a fiduciary 21 duty to SVRV 385 Moore and SVRV 387 Moore or their (alleged) members because the 22 only fiduciary duties owed for limited liability companies are owed by managers and 23 members. (Corp. Code, § 17704.09.) Plaintiffs did not provide any evidence that either 24 Davis or Paramont Capital was a member of those two entities. To the contrary, the 25 record evidence demonstrates conclusively that the manager was Bragg/ SVRV and 26 eventually Paramont Woodside in May 2020. 27 28 PAGE 9 2. Plaintiffs have failed to present evidence that the conduct by Davis, 1 Paramont Capital, or Paramont Woodside breached any fiduciary 2 duty. 3 In a manager-managed limited liability company like SVRV 385 Moore and 4 SVRV 387 Moore, only members and managers owe fiduciary duties. (Corp. Code, § 5 17704.09.) The member only owes the duty of good faith and fair dealing. (Id. subd. 6 (d), (f).) But importantly, the requirement of good faith and fair dealing cannot impose 7 obligations beyond the contract that creates it. (Guz v. Bechtel Nat. Inc. (2000) 24 8 Cal.4th 317, 349–350.) The duty of good faith and fair dealing “cannot be extended to 9 create obligations not contemplated in the contract.” (Racine & Laramie, Ltd. v. 10 Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032.) 11 In this case, Paramont Woodside (and Paramont Capital and Davis, assuming 12 arguendo that they were members) could only have become members, and thus 13 incurred the duty of good faith and fair dealing, as a result of the November 2018 14 operating agreements. But Plaintiffs are nonetheless seeking to impose a duty on a 15 co-member that is inconsistent with the contract making it a member. The law does 16 not allow a claim based on such an alleged duty. In this case, the evidence 17 demonstrates that all of Paramont Woodside (and Paramont Capital and Davis’s) 18 actions were consistent with the November 2018 operating agreements. Thus, there 19 could not be a breach of the only fiduciary duty owed as a member as a matter of law. 20 A manager in LLCs such as SVRV 385 Moore and SVRV 387 Moore owes the 21 same duty of good faith and fair dealing as a member, but also owes limited duties of 22 loyalty and care. (Corp. Code, § 17704.09 subd. (b), (c), (d), and (f).) But a “member 23 does not violate a duty or obligation under this article or under the operating 24 agreement merely because the member's conduct furthers the member's own interest.” 25 (Id. subd. (e).) Importantly, Bragg/SVRV was not replaced as the manager until May 26 2020. But the evidence conclusively demonstrates that all but one of the alleged 27 breaches of fiduciary duty alleged by Plaintiffs took place prior to that date. So, those 28 PAGE 10 1 breaches could not have been by Paramont Woodside (or Paramont Capital or Davis) 2 as a manager. As for the only alleged breach occurring after that date—distributing 3 funds from the property sales to Paramont Woodside—those distributions were 4 consistent with Paramont Woodside’s rights under the agreement making it a 5 member. The law does not impose a duty on a manager to forgo rights contractual 6 rights because it would benefit an entity. If that were the case, nobody would ever be 7 the manager of an LLC because it would require them to give up all rights (direct or 8 indirect) to compensation for the good of the entity. 9 F. The Paramont Investors are entitled to a directed verdict on Count 17 10 of Plaintiffs Second Amended Complaint based on receiving distributions in good faith and for reasonably equivalent value. 11 12 A transfer or obligation is not voidable under fraudulent/voidable transfer law 13 against a person that took in good faith and for a reasonably equivalent value given 14 the debtor or against any subsequent transferee or obligee. (Civ. Code, § 3439.08 subd. 15 (a) and (b)(1)(B).) 16 Even before the statute existed, a transferee receiving property in good faith 17 and for value could not be liable. (Aufdemkamp v. Pierce (1935) 4 Cal.App.2d 276, 282– 18 283.) In Pierce, a spouse that received property after marriage pursuant to a 19 prenuptial agreement was entitled to a nonsuit because the evidence demonstrated 20 she did not receive the property with fraudulent intent and gave value for the 21 property. (Id.) Similar holdings exist under the statute. Summary judgment was 22 granted in favor of defendants on a fraudulent transfer claim because they did not 23 know of dealings between the transferor and the plaintiff and did not believe any to 24 the plaintiff existed. (Kojababian v. Genuine Home Loans, Inc. (2009) 174 Cal.App.4th 25 408, 417.) 26 The holding in Annod v. Hamilton & Samuels is most directly on point. (Annod 27 Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1295–1300.) In that case, 28 summary judgment was granted on a fraudulent/voidable transfer claim under the PAGE 11 1 statute based on the defendants taking for good faith and for value. (Id.) The 2 defendants were partners at a law firm that received distributions from the firm based 3 on a fraction of their billings based on hours worked for the firm. (Id.) The work that 4 the partners provided gave value to the firm in return for the distributions and 5 actually helped the firm generate more revenue to pay creditors. (Id.) Notably, Annod 6 held that the partners knowledge of the debt to the plaintiff landlord and the 7 insolvency of the firm (i.e. badges of fraud) did not create a fact issue because the 8 partners offered testimony that they knew the lease exempted them from personal 9 liability for that debt. (Id.) Annod rejected the plaintiff’s argument that fraudulent 10 intent could be inferred through speculation that the plaintiffs’ intent was fraudulent 11 based on the “badges of fraud.” (Id.) 12 In this case, the evidence demonstrates that Paramont Investors received their 13 right to preferred distributions from Paramont Woodside in return for their capital 14 contributions totaling almost $2 million (omitting the contribution by Paramont 15 Capital). And they put in additional contributions of approximately $200,000 to save 16 the investment even though it was not required under Paramont Woodside’s operating 17 agreements with SVRV. Further, the distributions the Paramont Investors received 18 approximately two years later returned their money with a slight percentage of profit 19 that was far less than the 12% return promised to Paramont Woodside under the 20 operating agreements. Like the defendants in Annod, the Paramont Investor’s 21 contributions, on two separate occasions, likely prevented a total loss on the project 22 (i.e. it benefited SVRV 385 Moore and SVRV 387 Moore enormously). 23 Moreover, unlike in Annod, there is no evidence that the Paramont Investors 24 even knew about the Plaintiffs or their claims to the proceeds of the property sales. 25 Bragg’s testimony (if believed) might provide sufficient evidence that Davis and 26 Paramont Capital knew about the Plaintiffs, but the only evidence about the 27 Paramont Investors’ knowledge is that they did not know anything about the 28 PAGE 12 1 Plaintiffs or their claims. As is Annod, Plaintiffs are basing any contrary assertion on 2 nothing more than speculation. 3 G. Davis and the Paramont Investors are entitled to a directed verdict on 4 Count 21 of Plaintiffs Second Amended Complaint. 5 “Unjust enrichment” is not a cause of action or remedy but a general principle 6 underlying various doctrines and remedies. (McBride v. Boughton (2004) 123 7 Cal.App.4th 379, 387.) It is often asserted as a basis for seeking restitution. (Id. 387- 8 88.) In such cases, it is treated as seeking recovery under a “common count” such as 9 quasi contract. (Id.) 10 One required element of the claim is that the defendant received a benefit. 11 (Welborne v. Ryman-Carroll Foundation (2018) 22 Cal.App.5th 719, 725.) But there is 12 no evidence that Davis received any benefit from this project. He was not an investor 13 and did not receive any management fee or other compensation. Without evidence of 14 a benefit, the Plaintiffs’ claim fails. 15 More importantly for the Paramont Investors, is that knowledge of the facts 16 allegedly entitling a plaintiff to money is key to such a claim. (Welborne, 22 17 Cal.App.5th at 725-26.) When money is the subject of an unjust enrichment/quasi- 18 contract claim, someone who innocently accepts money even from a thief or embezzler 19 is not liable. (Id.) A defendant’s knowledge at the tie of receipt is critical to the validity 20 of the claim so that it must be alleged to even properly survive a demurrer. (First 21 Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1669.) In this case, there is 22 no evidence that the Paramont Investors had knowledge of the Plaintiffs’ claims to 23 any of the money they received at the time they received. Without such evidence, the 24 claim fails as to the Paramont Investors. 25 H. Davis and the Paramont Investors are entitled to a directed verdict on 26 Count 22 of Plaintiffs Second Amended Complaint because they did not receive money intended for the benefit of Plaintiffs. 27 28 PAGE 13 1 A money had and received claim fails if a defendant never received or used any 2 money paid by a plaintiff. (Ramirez v. Thomas Productions (1935) 10 Cal.App.2d 338, 3 340–341.) Further, even where a defendant receives a plaintiff’s money, the defendant 4 must have received the money “for the use of the plaintiff.” (Avidor v. Sutter's Place, 5 Inc., 212 Cal. App. 4th 1439, 1454.) Thus, if a defendant did not receive money with 6 the understanding it would be used for a plaintiff’s benefit, the claims fails. (Id.) 7 Relying upon this law, a federal court dismissed a claim because the money was not 8 received for the benefit of the plaintiff, but as compensation for services rendered. 9 Soma Surgery Center, Inc. v. Aetna Life Insurance Co. (C.D. Cal., Sept. 5, 2017, No. 10 CV 16-5802 DSF (ASX)) 2017 WL 9511778, at *1. 11 Initially, there is no evidence that Davis received any money from this project. 12 He was not an investor and did not receive any management fee or other 13 compensation. Without evidence of him receiving money, the Plaintiffs’ claim against 14 him fails. 15 In addition, there is no evidence that the Paramont Investors ever received any 16 of the Plaintiffs’ money. It was all spent by SVRV, SVRV 385 Moore, and SVRV 387 17 Moore before it could have made its way to the Paramont Investors. Further, the 18 money that the Paramont Investors received from the proceeds of the property sale 19 was not received by them “for the benefit” of any Plaintiffs, but as distributions to 20 which they were contractually entitled based on their investments. 21 CONCLUSION 22 Based on the foregoing, Paramont Defendants respectfully request that this 23 Court grant a directed verdict as to the counts requested above. 24 25 26 27 28 PAGE 14 1 Dated: March 29, 2024 SPENCER FANE LLP 2 By: /s/ Jessica E. Chong Brian Zimmerman 3 (admitted pro hac vice) Nicholas Reisch 4 (admitted pro hac vice) Jessica E. Chong (SBN 317869) 5 SPENCER FANE LLP 3040 Post Oak Blvd., Suite 1400 6 Houston, TX 77056 7 and 8 Ernesto F. Aldover, Esq. RETZ & ALDOVER, LLP 9 2550 Via Tejon, Suite 3A Palos Verdes Estates, CA 90274 10 Attorneys for Defendants 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PAGE 15 1 PROOF OF SERVICE 2 STATE OF NEVADA, COUNTY OF CLARK 3 I am employed in the county of Las Vegas State of Nevada. I am over the age of 18 4 and not a party to the action; my business address is 300 S. Fourth Street, Suite 950 Las Vegas, NV 89101. 5 6 On March 29, 2024, I served the foregoing document(s) described as MOTION FOR PARTIAL DIRECTED VERDICT as follows: 7 Collin J. Vierra (State Bar No. 322720) Ryan van Steenis (S.B. #254542) 8 EIMER STAHL LLP 1601 S Shepherd Dr., #276 99 Almaden Blvd., Suite 641 Houston, Texas 77019 9 rjvansteenis@gmail.com San Jose, CA 95113-1605 ATTORNEY FOR DEFENDANTS 10 Telephone: (408) 889-1668 DAVID M. BRAGG AND SILICON Email: cvierra@eimerstahl.com VALLEY REAL VENTURES, LLC 11 ATTORNEY FOR PLAINTIFFS 12 __ (BY US MAIL) As follows: I am “readily familiar” with the firm’s practice of 13 collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully 14 prepaid at Palos Verdes Estate, CA in the ordinary cause of business. I am aware that on motion of the party served, service is presumed invalid of postal cancellation 15 date or postage meter is more than one day after date of deposit for mailing an 16 affidavit. 17 _X_ (BY ELECTRONIC SERVICE) I electronically served the foregoing document(s) on opposing counsel via electronic mail. 18 19 X (STATE) I declare under penalty of perjury under the laws of the State of Nevada that the foregoing is true and correct. 20 Executed on March 29, 2024 at Las Vegas, Nevada. 21 22 /s/ Adam Miller Adam Miller 23 24 25 26 27 28 PAGE 16