Complaint,Petition: BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

• 
• 
• 
• 
• 
• 
• 
• 

						
                                
Preview
                                Steven H. Schwartz, Esq., SBN 94637
Noel E. Macaulay, Esq., SBN 121695
SCHWARTZ & JANZEN, LLP

12100 Wilshire Boulevard, Suite 1125
Los Angeles, CA 90025 7117
Telephone: 310/979 4090
Facsimile: 310/207 3344

Attorneys for Cross Defendant, HKS, INC, individually and dba HKS ARCHITECTS, INC.

SUPERIOR COURT OF CALIFORNIA

BEACON RESIDENTIAL COMMUNITY
ASSOCIATION,

Plaintiff,
VS.

CATELLUS THIRD AND KING LLC; CATELLUS
DEVELOPMENT CORPORATION; CATELLUS
COMMERCIAL DEVELOPMENT CORP.; CATELLUS
OPERATING LIMITED PARTNERSHIP; CATELLUS
URBAN DEVELOPMENT CORPORATION: THIRD
AND KING INVESTORS LLC; PROLOGIS; MISSION
PLACE LLC; MISSION PLACE MEZZANINE LLC;
MISSION PLACE MEZZ HOLDINGS LLC; MISSION
PLACE PARTNERS LLC; CENTURION REAL
ESTATE INVESTORS IV, LLC; CENTURION REAL
ESTTE PARTNERS, LLC; CENTURION PARTNERS
LLC; WEBCOR CONSTRUCTION, INC.; WEBCOR
BUILDERS, INC.; WEBCOR CONSTRUCTION, INC.,
individually and doing business as WEBCOR
BUILDERS; WEBCOR CONSTRUCTION LP
individually and doing business as WEBCOR
BUILDERS; SKIDMORE OWINGS & MERRILL LLP;
HKS, INC.; HKS ARCHITECTS, INC.; HKS, INC.,
individually and doing business as HKS
ARCHITECTS, INC. and DOES 1 through 200,

Defendants.

ELECTRONICA
FILE

Superior Court of Calif
County of San Franc

SEP 03 201

Clerk of the Cou
BY: EDNALEEN JAVI
Deput)

COUNTY OF SAN FRANCISCO

CASE NO. CGC 08 478453

[Complaint Filed: August 8, 2008]

EXHIBIT 2 TO REQUEST TO TAKE
JUDICIAL NOTICE IN SUPPORT OF
HKS’ NOTICE OF MOTION AND
MOTION TO STRIKE PORTIONS OF
THE THIRD AMENDED COMPLAINT

[NOTICE OF MOTION TO STRIKE
PORTIONS OF THE THIRD AMENDED
COMPLAINT, MEMORANDUM OF
POINTS AND AUTHORITIES IN
SUPPORT THEREOF AND REQUEST
TO TAKE JUDICIAL NOTICE
CONCURRENTLY FILED HEREWITH]

DATE: September 30, 2014

TIME: 9:00 a.m.

DEPT: 304

JUDGE: Honorable Curtis E.A. Karnow

EXHIBIT 2 TO REQUEST TO TAKE JUDICIAL NOTICE IN SUPPORT OF HKS’ NOTICE OF MOTION AND MOTION TO
STRIKE PORTIONS OF THE THIRD AMENDED COMPLAINT

LY

nia,
co

rt
R
ClerkEXHIBIT 2

TO REQUEST TO TAKE JUDICIAL NOTICE IN SUPPORT
OF HKS’ NOTICE OF MOTION AND MOTION TO STRIKE
PORTIONS OF THE THIRD AMENDED COMPLAINT

[NOTICE OF MOTION TO STRIKE PORTIONS OF THE THIRD AMENDED
COMPLAINT, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
THEREOF AND REQUEST TO TAKE JUDICIAL NOTICE CONCURRENTLY
FILED HEREWITH]KATZOFE & RIGGS LLP
1808 PARK AVE. SUITE 299

22

23

ANN RANKIN (SBN 83690)
TERRY WILKENS (SBN 118469)
Law Offices of Ann Rankin

3911 Harrison Street

Oakland, CA. 94611

Tel.: (510) 653-8886

Fax: (510) 653-8889

KENNETH S. KATZOFF (SBN 103490)
ROBERT R. RIGGS (SBN 107684)
SUNG E. SHIM (SBN 184247}
Katzoff & Riggs LLP

1500 Park Ave #300

Emeryville, CA 94608

Tel: (510) 597-1990

Fax: (510) 597-0295

Attorneys for Plaintiff BEACON
RESIDENTIAL COMMUNITY
ASSOCIATION

ELECTRONICALLY
FILED

Superior Court of California,
County of San Francisco

DEC 05 2012

Clerk of the Court
BY: ANNIE PASCUAL
Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN FRANCISCO

BEACON RESIDENTIAL
COMMUNITY ASSOCIATION,

Plaintiff,
vs.

CATELLUS THIRD AND KING LLC,
etal.,

Defendants.

Ne ee Ne Ne Ne ee ee et ee ee

Case No. CGC 08-478453

OPPOSITION OF BEACON
RESIDENTIAL COMMUNITY
ASSOCIATION TO MOTION FOR
SUMMARY ADJUDICATION OF
CATELLUS ON EIGHTH CAUSE
OF ACTION

Date: Dec. 14, 2012

Time: 10:00 a.m.

Dept.: 304

Judge: Hon. Richard A. Kramer

Trial Date: Feb. 4, 2013

«-i-

OPPOSITION GF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1500 PARK AVE. SUITE. 300

EDIERYVILLE, CA 94608

(819) 597-2990

TABLE OF CONTENTS
TABLE OF CONTENTS..
TABLE OF AUTHORITIES ..cccscccccsssssssssssnssessesesecerennsnesseneeneesaneneavanerenseenssonaanessseanes iii
INTRODUCTION o.o..ccccseeceesscssessesceesseeaceretisesnssssesnensceresuaeeactueeanenisnneninencnuenascaseneaesueneaneas 1
STATEMENT OF FACTS Wccccccccssesscssserssssnessesnecssesnesssesaseacenensneenennsertenseneeeeemeacaneesenssenss 2
ARGUMENT

A.  Catellus is Not Entitled to Summary Judgment Unless There Are
No Triable Issues as to Any Material Fact .........ceccrssssecessesreetesrerinenensrnesens 8

B. — Catellus Is Not Entitled to Summary Judgment, Because a Triable
Issue of Fact Exists as to Catellus’ Liability for Fraudulent
Concealment Under the Doctrine of Indirect Deception... cece 8

Cc. Catellus Also Is Liable Because It Accepted the Fruits of a Fraud
that It Participated in Jointly With Mission Place

D. —Catellus Is Subject to Punitive Damages Based on Its Participation
in an Egregious Scheme to Conceal the Overheating Defect from
Buyers of the Units at the Beacon Project.

CONCLUSION ...necececseec res eesseesereseesascesesccneesuecssqneenseesnenuesaauenunssaravseesaaseeanteasneesareneesnenses 16

eid -
OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1800 PARK AVE. SUITE 309

EMERYVILLE, CA 94608

4514) §97-1990,

TABLE OF AUTHORITIES

Cases

Allmerica Financial Life Ins. Co. v. Dalessio (N.D. Cal. 2006) 2006 U.S. Dist. Lexis

8994 10
Ally Bank v. Castle (N.D. Cal. 2012) 2012 U.S. Dist. Lexis 118452 10
Barnhouse v. City of Pinole (1982) 133 Cal App.3d 171 il
Geernaert v. Mitchell (1995) 31 Cal.App.4th 601 10
Lingsch v. Savage (1963) 213 Cal App.2d 729 12
Madden v. Cowen & Co. (9" Cir, 2009) 576 F.2d 957 9
Mann vy. Cracchiolo (1985) 38 Cal.3d 18 8
McClung v. Watt (1922) 190 Cal. 15S 13

OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 137
Cal.App.4" 835 10

Sanfran Co. v. Rees Blow Pipe Mfg. Co. (1959) 168 Cal.App.2d 191 13
Shapiro v. Sutherland (1998) 64 Cal.App.4" 1534 8,9
Varwig v. Anderson-Behel Porsche/Audi, Inc, (1977) 74 Cal.App.3d 578 12
Statutes

Civil Code, § 2332 13
Code of Civil Procedure § 437c 7
Other Authorities

4 Witkin, Summary of Cal. Law, Torts, § 467 W
Restatement 2d Torts § 533 10
Varwig v. Anderson-Behel Porsche/Audi, Inc. (1977) 74 Cal.App.3d 578 i

-iii-
OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP
1500 PARK AVE, SUITE 300
EMERYVILLE, CA 94658
{810 597-1990.

22

23

INTRODUCTION

The Court should deny the motion for summary adjudication of Catellus.’ Under
the doctrine of indirect deception, liability for concealment is not limited to the actual
seller of real estate. Liability also extends to a developer such as Catellus who intended
that the property be sold, who profited by the sale transaction, and who knew of the
material defects in the property, without taking reasonable actions to make sure that the
facts were fully and fairly disclosed to the buyers. If anything, Catellus’s liability is
even more egregious than that of Mission Place, in that Catellus as the developer had
superior knowledge with respect to the deletion of low-E glass, which is a contributing
factor to the overheating problem. Plaintiffs claim for punitive damages against
Catellus is based on fraud, is proper, and must not be stricken.

Catellus used its December 2004 “sale” of the Beacon Project to Mission Place
as a device to avoid becoming a direct “seller” to the public as to the residential units.
However, Catellus was the indirect seller, in that the evidence reflects that it fully
intended that the residential units of the Beacon Project be sold, and that it fully
intended to realize a profit as a result. As detailed below, Catellus created the concept
of a “Mission Place” development; Catellus shared office space with Mission Place, the

entity formed to sell the units, for more than four months when the project first opened;

1 By “Catellus” plaintiff includes all of the CATELLUS moving parties, including
Catellus Development Corp., Catellus Commercial Development Corp., Catellus
Operating Limited Partnership, Catellus Urban Development Corp., Catellus Urban
Development Group, LLC, Third and King Investors, LLC, and Prologis. Catellus does
not contend that there is any meaningful distinction between these entities for purposes
of the issues presented by this motion. Moreover, Catellus does not dispute that all of
these entities are agents of each other.

-1-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1500 PARK AVE, SULTE 300

EMERYVILLE.CA 94608

(810) 597-1990

Catellus learned about the overheating problem through numerous tenant complaints
that rapidly occurred once some of the units were occupied, Catellus signed under oath
as a declarant on a recorded declaration which makes it clear that the project is being
marketed to the public for sale as condominiums. Catellus realized a financial benefit
of approximately $20 million, specifically due to the sales by Mission Place as
condominiums. Catellus fully intended for sales to the public to occur, although it did
pot wish to be the direct seller. Under these circumstances, evidence exists to support
liability of Catellus based on the doctrine of indirect deception. Catellus cannot avoid
liability for concealment simply because it was not the direct seller of the units. Privity
is not a prerequisite for a claim of fraudulent concealment.
STATEMENT OF FACTS
Plaintiff brings its Eighth Cause of Action for fraudulent concealment as a class
representative on behalf of the owners of residential units at the Beacon Project in San
Francisco.? The Beacon Project consists of 595 units that are situated within eight
different buildings. (Declaration of Michael Alfaro in Support of Motion for Class
Certification, filed herein on Aug. 24, 2012 attached as (“Alfaro Class Cert. Decl.”), 3
attached as Exhibit 6 to Plaintiffs Request for Judicial Notice in Opposition to Motions
for Summary Adjudication of Mission Place, LLC and Catellus (“Request for Judicial
Notice”).) The project has two sets of four buildings, known as 250 King Street and 260

King Street, respectively. Each set of residential buildings consists of a high rise

? Plaintiffs Motion for Class Certification was filed Aug. 24, 2012 and is pending
hearing on December 21, 2012.
~2-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1500 FARK AVE. SUITE 208

EMERYVILLE, CA 94608,

4516) 597-1990

structure, commonly called the “tower,” of 16 stories, while the other three buildings
making up each set are called “mid rise” and have between six and nine stories. There
are also commercial portions of the project, and residential amenities such as a
community exercise room and a swimming pool, (Alfaro Class Cert. Decl., { 3.)

The Beacon Project was developed pursuant to a two stage process. The design
and construction of the Project was essentially complete by October of 2004.
(Certificate of Final Completion and Occupancy for 250 King Street, issued Oct. 6,
2004, attached as Exh. 3 to Plaintiff's Request for Judicial Notice, filed herewith;
Certificate of Final Completion and Occupancy for 260 King Street, issued Oct. 6,
2004, attached as Exh, 4 to Plaintiff's Request for Judicial Notice, filed herewith). The
CC&Rs (as defined herein) make it clear that the entire Project was intended from the
beginning to be “marketed” (i.e., sold) to the public under the name Mission Place
(Amended and Restated Declaration of Covenants, Conditions and Restrictions and
Reservation of Easements for Mission Place (Residential) recorded December 23, 2004,
attached as Exh. 1 to Plaintiff's Request for Judicial Notice (hereinafter referred to as
“CC&Rs”), § 15.12.) Catellus, in fact, devised the name “Mission Place” and marketed
the project, supposedly constructed with “the highest quality Class A” materials and
finishes, for sale under that name. (Deposition of Robert Schlesinger (“Schlesinger
Depo,”), 30:2 ~ 31:25, 34:13 ~ 42:7 attached as Exh. P to the Shim Decl., 19; Shim
Decl., § 28 & Exh. W.)

The CC&Rs were signed both by defendant Catellus Third and King, LLC

.3-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP
180 PARK AVE, SUITE 300

22

23

(“Catellus”) and by defendant Mission Place, LLC (“Mission Place”). (CC&Rs, at p.
73.) The CC&Rs recite that Declarants (i.¢., both Mission Place and Catellus) “intend{]
to create a ‘condominium project’ as defined in Section 1351(f) of the California Civil
Code. (CC&R’s, Recital “E”.) Also, they recite that the entire CC&R’s are “in
furtherance of a plan for subdividing, maintaining, improving and selling” the Project.
(CC&R’s, Recital “F”.) Also, the CC&Rs provide that Declarant (i.e., both Catellus
and Mission Place) will be “marketing” the Project. (CC&Rs § 15.12; see also CC&Rs
§ 1.1.20 (defining “Declarant”).)

Rather than sell the Beacon Project’s units itself, Catellus intended that a new
entity, “Mission Place,” would purchase a long term ground lease to the Project and,
based thereon, market and sell subleasehold interests in the units to the public.
(Deposition of Seth Bland (“Bland Depo.”), 12:9 ~ 18:5, 49:19 — 50:6 attached as Exh.
B to the Shim Decl., ¢ 5.) Mission Place purchased a leasehold interest in the Beacon
Project for approximately $278 million, with Catellus continuing to own the underlying
fee; the jointly agreed plan was for Catellus to then transfer the fee interest in the
“ground” to the unit purchasers for an additional $60 million that would be paid by
Mission Place after the sale of subleasehold interests in most of the units. (Deposition

of Jobn Tashjian (“Tashjian Depo.”), 279:25 ~ 280:7 attached as Exh. S to the Shim

3 “Catellus” as used herein refers to all of the following defendants: Catellus Third and
King, LLC; Catellus Development Corporation; Cateflus Commercial Development
Corporation; Catellus Operating Limited Partnership; Catellus Urban Development
Corporation; Third and King Investors LLC; and Prologis. Plaintiff contends that
Catellus Third and King, LLC acted as the agent of all of these parties throughout the
relevant period of time, and that documents relating to the Beacon Project signed by
Catellus Third and King, LLC were signed as an agent on behalf of each of the Catellus

-4-

OPPOSETION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP
1800 PARK AVE. SUITE 308

22

23

Decl., { 22; Deposition of Robert Schlesinger (“Schlesinger Depo.”), 30:2 — 31:25,
64:13 — 66:9, 140:16 — 141:12, 625:17 attached as Exh. P to the Shim Decl., ¢ 19; Shim
Decl., 4 28, 29, 31 & Exhs. W, X, Z.) The premise of the $338 million transaction was
that Mission Place would then, with Catellus later conveying the actual fee interests, sell
the Beacon Project to the public as condominiums. (Tashjian Depo., [12:1 — 112:17.)
Catellus received additional consideration on the order of $20 million for the Beacon
Project specifically because it was to be marketed as condominiums, rather than as
rental apartments. (Tashjian Depo., 249:15 ~ 250:3; Schlesinger Depo. (v.1) 37:24 —
38:7, 75:22 — 76:7.)

Catellus and Mission Place worked very closely with each other to jointly
complete the development and sale of the Project as condominiums. Thus, both
Catellus and Mission Place jointly received protections, such as indemnities, that were
designed to protect the developers of a for-sale type housing project. (Tashjian Depo.,
141:5 ~ 144:15.) Catellus and Mission Place both jointly used the same attorey for
purposes of securing Department of Real Estate (“DRE”) approval of the sales of the
Beacon Project as condominiums. (Schlesinger Depo., 55:16 — 55:23.) This attorney,
as counsel for Catellus, represented to DRE that it was Catellus’s intent to sell the units
as condominiums. (/bid.; Tashjian Depo., 277:12 — 277:16 & Exh. 254.) Catellus
provided Mission Place with a unit in the 250 King Street side of the project, in which
Mission Place’s principals resided part-time beginning in August, 2004. (Schlesinger

Depo., 86:9 ~ 89:20.)

parties.
5

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFE & RIGGS LLP
1508 PARK AVE,, SUITE 300
EMERYVILLE, CA 14604
810) 97-1999

Before any of the units of the Beacon Project were in fact sold to the public,
Catellus rented a portion of the 291 units on the 250 King Street side of the project, for
a time, to the public. (Schlesinger Depo., 39:24 ~ 40:11.) The 304 units on the 260
King Street side were never rented, (Schlesinger Depo., 48:22 - 49:4.) Immediately
upon the renting of the 250 King side units, serious complaints about overheating in the
units ensued. The existence of the overheating problem, as well as the use of a
“disclosure” blurb to try to deal with it, was discussed by Mission Place with Catcllus
prior to closing of Mission Place’s “purchase” of the Beacon Project. (Tashjian Depo.,
73:23 — 76:4.) The joint Catellus - Mission Place attorney was consulted with respect
to the wording of this blurb. (Schlesinger Depo., 229:2 — 229:18.)

By December of 2004, Catellus and its management agent Prometheus Real
Estate Group, Inc. (“Prometheus”) had already received numerous complaints from its
tenants about excessive temperatures. (Deposition of Keith Anderson (“Anderson
Depo.), 79:7 — 79:19, 91:4 ~ 91:11 attached as Exh. A to the Shim Decl, 4.) For
example, Catellus Vice President for Asset Management Anni Chapman, whose duties
included supervising Prometheus, informed her supervisor that tenants were circulating
a petition about the heat. (Anderson Depo., 99:4 ~ 99:12; Schlesinger Depo., 167:16 —

169:20; Shim Decl, 4] 33 & Exh. BB.) She was aware of complaints from the residents

4 For more specifics as to the severity of the overheating problem as known to Catellus
and Mission Place from complaints before the units were sold, reference is made to the
Opposition to the companion Motion for Summary Adjudication of Mission Place, filed
herewith. For specifics as to the reasons why paragraph 40(d) buried in the
“Disclosure” form was not a “full and fair” disclosure of the overheating problem,
reference is made to the Mission Place Opposition, filed herewith. It is noted that
Catellus does not separately argue these points in its Motion.
-6-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFE & RIGGS LLP

1560 PARK AVE,, SUITE 300

EMERYVILLE CA 94608

(510) 597-1990,

22

23

of at least five different units. (Tashjian Depo., 343:19 ~ 344:1; Chapman Depo., 142:5
~ 142:17; Schlesinger Depo., 162:6 - 162:12; Shim Decl., 4 30, 32 & Exhs. Y, AA.)
Mission Place, Catellus’ co-developer, was also informed about the complaints.
(Anderson Depo., 79:7 — 80:22.)

Catellus discussed with Mission Place some measures to address the overheating,
primarily, putting film on windows. (Anderson Depo., 80:23 — 80:25, 81:1 - 81:11,
100:9 — 100:25.) Catellus was also aware of the discussions about the number of
degrees of temperature reduction that supposedly would be achieved by installing a
window film. (Anderson Depo., 99:25 - 100:16.) However, this testing showed that
temperatures in the units would still be more than 20 degrees above ambient outside
temperatures, even with the darkest possible film. (Schlesinger 516:16 ~ 519:25;
Deposition of Mark Haddix (“Haddix Depo”), 47:11 — 47:12, 100:12, 151:23 — 152:1-7
attached as Exh. G to the Shim Decl., § 10; Deposition of Jeff Worthe (“Worth Depo.”),
96:2 ~ 16 attached as Exh. S to the Shim Decl., € 22; Shim Decl., ¢ 39 & Exh. HH;;
Declaration of Robert R. Riggs in Opposition to Motions for Summary Adjudication of
Mission Place, LLC and Catellus (“Riggs Decl.”), 43 & Exh. A.)

As discussed at length in plaintiff's Opposition to the Motion for Summary
Adjudication of Mission Place, LLC (“Mission Place Opposition”), filed concurrently,
Mission Place only “disclosed” the overheating problem by a blurb buried in paragraph
40(d) of a lengthy standardized document provided to purchasers. As discussed in

plaintiff's Mission Place Opposition, paragraph 40(d) was not a fair and complete

-7F-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1508 PARK AVE, SUITE 200

EMERYVILLE, CA #4585

4519) $97-1989

22

23

disclosure of the overheating problem, for a variety of reasons.
ARGUMENT

A.  Catellus is Not Entitled to Summary Judgment Unless There Are No Triable
Issues as to Any Material Fact

Summary judgment may be granted only when no triable issue exists as to any
materia! fact and the moving party is entitled to judgment as a matter of law. (Code of
Civil Procedure § 437; Shapiro v. Sutherland (1998) 64 Cal.App.4" 1534, 1543.) The
moving party bears the burden of establishing, by declarations and evidence, a complete
defense to plaintiff's action or the absence of an essential element in the plaintiff's case.
(Shapiro, supra, 64 Cal.App.4" at p. 1543 (citing cases).) The moving party must
demonstrate that under no hypothesis is there a material factual issue requiring trial.
(Shapiro, supra, 64 Cal.App.4" at p. 1543 (citing cases).)

If the defendant makes such a showing, then the burden shifts to the plaintiff, as
the opposing party, to show, by responsive separate statement and admissible evidence,
that triable issues of fact exist. (Shapiro, supra, 64 Cal.App.4" at p. 1543 (citing
cases).) The moving party's supporting documents are strictly construed, and those of
the opposing party are liberally construed, and doubts as to the propriety of summary
judgment should be resolved against granting the motion. (Mann v. Cracchiolo (1985)
38 Cal.3d 18, 35-36.)

B. Catellus Is Not Entitled to Summary Judgment, Because a Triable Issue of

Fact Exists as to Catellus’ Liability for Fraudulent Concealment Under the
Doctrine of Indirect Deception

Under California law a party such as Catellus, who sells a property knowing that

-B-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION FO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONLE, CA 94608

¢510) 597-1900

KATZOFE & RIGGS LLP
1800 PARK AVE, SUITE 300
EMER’

22

23

it will immediately be resold to one or more home buyers, has a duty to disclose, to
those foreseeable home buyers, material defects that exist in the property. Shapiro v.
Sutherland (1998) 64 Cal.App.4™ 1534, 1548 is directly on point, and rejected an
argument indistinguishable from that of Catellus here, In Shapiro, the party being sued
was the owner of a home who sold that home to a “relocation service,” which then in
turn placed the property on the market, and sold it to a buyer. The buyer, allegedly,
learned that there was a concealed neighborhood noise problem. The buyer brought suit
against Sutherland, the original seller. The trial court granted summary judgment to
Sutherland on the ground that Sutherland was not the party who sold the home to
plaintiff, and thus owed plaintiff no duty to disclose. (Shapiro, supra, 64 Cal. App.4” at
p. 1542.)

The Court of Appeal reversed this grant of summary judgment, and specifically
overruled the holding that the lack of a contractual relationship as between the property
owner who knew of the defect, and the buyer, defeated buyer’s claim for damages
sounding in fraud. (/d., at 1548-50.) The Court pointed out that in order for the
defendant to be held liable, the defendant must intend that a particular concealment be
relied upon by a specific person or class of persons. (éd., at 1548.) Shapiro is an
iteration of a fundamental rule, recognized in the Restatement Second of Torts section
533. The person guilty of the fraudulent concealment need not have a particular person
in mind. It is enough that it is directed to a particular class of persons. (/d.)

The Shapiro doctrine of “indirect deception” has since been restated and

-3-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1800 PARK AYE, SUITE 300
EMERYVILLE, CA 94608

418) 597-1990

22

23

followed. (E.g., Madden v. Cowen & Co. (9" Cir. 2009) 576 F.2d 957, 968-69; Ally
Bank v. Castle (N.D. Cal. 2012) 2012 U.S. Dist. Lexis 118452, at pp. *20-*24;
Allmerica Financial Life Ins. Co. v. Dalessio (N.D. Cal. 2006) 2006 U.S. Dist. Lexis
8994, at pp. *11-*12.) In OCM Principal Opportunities Fund, L.P. v. CIBC Worid
Markets Corp. (2007) 157 Cal_App.4” 835, 859-60, the Court of Appeal upheld a claim
of fraudulent concealment against a party who sold an investment privately, but with
knowledge that the investment would immediately be resold to the public. This is the
same as the situation here.

Plaintiff has furnished ample evidence to show that Catellus knew and intended
that immediately after its sale of a leasehold interest in the project to Mission Place, the
units of the Beacon Project would be conveyed to consumers in the public as
subleasehold interests in condominiums, at a time when it had a severe overheating
problem that was not fully and fairly disclosed to these buyers. This is sufficient to
present a triable issue of fact as to liability with respect to Catellus.

Also on point is the decision of the First District in Geernaert v. Mitchell (1995)
31 Cal.App.4th 601 involving a suit by real property purchasers for fraud and
concealment against two entities that had owned the property prior to the seller. The
trial court sustained the demurrer of the original owner, defendant Mitchell, who had
sold the property to an intermediate seller, who then sold the property to the plaintiffs

on the general ground that the plaintiffs “were not a class of persons that the demurring

-10-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFE & RIGGS LLP

1800 PARK AVE, SUITE 300

EMERYVILLE, CA 91605,

(S10) 597-5990,

defendants intended to deceive.” (/d. at 604.) Citing to Restatement 2d Torts § 533°,

«ll -

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1598 PARK AVE, SUITE 300
EMERYVILLE, CA 94608

£518) 597-199

the appellate court reversed the decision and explicitly held that, as a matter of law, the
lack of privity between the demurring defendant and the subsequent purchaser could not
defeat subsequent purchasers’ right to recover. (Id. at 609.)

Here, Catellus’ entire basis for its motion for summary adjudication is that it was
not the direct seller, to the public, of any of the units. As a matter of law, this fact does
not defeat plaintiff's right to recover.

Other California cases further demonstrate the existence of triable issues of fact
as to whether plaintiff can maintain its cause of action for concealment against Catellus.
Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171, 191 held that “an action for
deceit does not require privity of contract.” Barnkouse also involved an action by a
subsequent purchaser against the original developer for fraudulent concealment. The
appellate court reversed the trial court’s granting of the defendant developer’s motion
for non-suit holding that a plaintiff who subsequently purchased his home from an
intermediate owner and not directly from the developer could still maintain a suit
against the developer for fraudulent concealment (of drainage problems at the time of
the original sale) where the jury could have inferred that the developer failed to make
the disclosure with intention subsequent purchasers would also act in ignorance as it
was foreseeable that the land would at some time change hands. (/d., at pp. 191-92.)

The evidence of Catellus’ involvement with the development of the Beacon
Project as condominiums, and its awareness of the heating and ventilation problems at

the Beacon Project, creates a triable issue of fact that Catellus failed to make the

-12-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTION{S10) 597-1999

3800 PARK AYE, SUITE 368
BMERY¥ILLE, CA 94606.

KATZOFF & RIGGS LLP

disclosure with the intention that purchasers of units at the Beacon would also act in
ignorance. Furthermore, it was Catellus’ express intention that the units would be sold
to individual owners other than Mission Place.

Also in accord is Varwig v. Anderson-Behel Porsche/Audi, Inc. (1977) 74
Cal.App.3d 578, 581. In Varwig the court reversed an order granting defendant
automobile dealer’s motion for summary judgment and rejected the “sole argument” in
support thereof that the defendant's representation “was made only to Autocar [an
intermediate buyer] and hence was not actionable by plaintiff” stating that:

an actionable representation “may be made indirectly as well as directly.”

(4 Witkin, Summary of Cal. Law, Torts, § 467, p. 2729.) if a

representation is made with “intent to defraud . . . a particular class of

persons," the one making such a representation is deemed to have

intended "to defraud every individual in that class who is actually misled
by the deceit. (Citations omitted.)

The cases cited by Catellus’ fail to address this apposite authority. Rather, the
cases cited by Catellus support the validity of plaintiff's cause of action for
concealment. For example, Catellus erroneously cites to Lingsch v. Savage (1963) 213
Cal.App.2d 729, 735 to support its contention that, as a matter of law, Catellus had not
duty of disclosure to the purchasers of units at the Beacon because it was not the named
seller of the units. Lingsch held that buyer was not required to demonstrate a
contractual relationship with the seller's agent to maintain an action for concealment

against the agent who profited from the transaction.

+13 -

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFF & RIGGS LLP

1500 PARK AVE, SUITE 300

EMERYVILLE, CA 94608

(510) 597-1900

22

23

Cc. Catellus Also Is Liable Because It Accepted the Fruits of a Fraud that It
Participated in Jointly With Mission Place

Even more fundamentally, California Jaw has long recognized that a party such
as Catellus, which participates with another in a fraudulent scheme, and accepts the
financial fruits of the fraud, cannot escape liability based on the argument that it did not
directly engage in a transaction with the plaintiff. (McClung v. Watt (1922) 190 Cal.
155, 161.) As stated therein, “the rule generally is that one who accepts the fruits of a
fraud, with knowledge of the misrepresentations or concealments by which the fraud
was petpetrated, thereby inferentially ratifies the fraud complained of and will be liable
therefor even though he did not personally participate in the fraud, and this is so apart
from any consideration. of the theory of agency.” (/bid.)

D. —Catellus Is Subject to Punitive Damages Based on Its Participation in an

Egregious Scheme to Conceal the Overheating Defect from Buyers of the
Units at the Beacon Project

Catellus,® like Mission Place, knew that from very first moment of the Beacon
Project’s habitation by human beings, many of the occupants complained of prolonged,
extreme and severe ovetheating problems. Catellus had “anecdotes” and complaints
about the high temperatures and stifling conditions inside units by tenants that were not
merely verbal, but were also submitted by several residents in writing including a
formal protest petition.’ The petition disclosed that residents were suffering “extreme
general discomfort,” “inability to sleep,” “inability to work,” “headaches,” and “loss of
appetite and fatigue” due to heating and ventilation deficiencies.’ Tenants, when

moving out, had informed Catellus’s property manager, in writing, that they had been

-14-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTION(818) 597-1990

22

23

forced to move out because their unit was “un-inhabitable for 11 months a year.”
Others informed Catellus agents that they had been “constantly sick” when they spent
any time in their unit, from the lack of air circulation.’® Catellus was told that the
internal temperatures in certain apartments had approached 100 degrees Fahrenheit,
creating a “convection oven-like situation” in these units.’ Tenants had presented
doctor’s notes prescribing “ventilation” and “air-conditioning” to remedy migraines that
their patients at the Beacon Project were suffering.? The failure to disclose the true
dimensions of this problem shocks the conscience and warrants punitive damages.

If anything, Catellus’s role in the concealment was even more egregious than that
of Mission Place, Not only did Catellus engage in an elaborate scheme to try to avoid
any direct involvement with unit buyers, Catellus was the original developer of the
Project and thus knew more than Mission Place about the comer-cutting that caused the
overheating problem to exist in the first place. As an example, Catellus was aware that
low-E glazing, which was part of the original project specifications, was deleted from
the project as constructed. (McCone Depo., 56:5 ~ 56:17, 116:1 — 116:4 & Exh. 154.)
This was not disclosed io Mission Place until after Mission Place had already started
selling units. (Deposition of Jeff Worthe, 255:17 ~ 255:22 attached as Exh. S to the
Shim Decl., 4 22; Schlesinger Depo., 117:22 ~ 118:18.) The elimination of low-E glass
is one of the major contributing factors to the overheating problem. (Declaration of
Michael Lefler in Opposition to Motions for Summary Adjudication of Mission Place,

LLC and Catellus, (¥ 19-20.)

-15-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGHTH CAUSE OF ACTIONKATZOFE & RIGGS LLP

1800 PARK AVE, SULPE 308

EMERYVILLE, CA, $4608

£810) 597-1990,

CONCLUSION
The Court should deny the motion for summary adjudication of Catellus in its
entirety.
Dated: November 30, 2012

LAW OFFICES OF ANN RANKIN
KATZOFF & RIGGS

/s/ Robert R. Riggs
By:

Robert R. Riggs

Attorneys for BEACON RESIDENTIAL
COMMUNITY ASSOCIATION

-16-

OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTION FOR SUMMARY
ADJUDICATION OF CATELLUS ON EIGRTH CAUSE OF ACTION