Memorandum Points and Authorities

Cal. Super. - 6th Dist.March 20, 2019

Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 William B. Clayton, Jr. (S.B.N. 60811) CLAYTON & McEVOY, P.C. 333 W. Santa Clara Street, Suite 950 San Jose, California 95113-1721 Telephone: (408) 293-9100 Facsimile: (408) 293-4172 Attorney for Defendant DMJ HOME SOLUTIONS, LLC IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA ARVIND K. AGARWAL AND NEELO AGARWAL AS TRUSTEES OF THE AGARWAL FAMILY TRUST DATED AUGUST 2, 2001, Plaintiff, v. DMJ HOME SOLUTIONS, LLC, A NEVADA LLC; DAVID HERRERA, APEX DEVELOPMENT GROUP, LLC, A NEVADA LLC, ERIC FOGELSONG, DAN NOBLE, MICHAELA ROUSSEAU AND DOES 1 through 150, inclusive, Defendants. Case No. 19CV344918 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT DMJ HOME SOLUTIONS, LLC, NOTICE OF MOTION AND MOTION TO EXPUNGE NOTICE OF PENDENCY OF ACTION [LIS PENDENS] Date: July 11, 2019 Time: 8:15 a.m. Dept.: 19 Judge: Hon. Peter H. Kirwan Unlimited Civil Matter Complaint Filed: March 20, 2019 Electronically Filed by Superior Court of CA, County of Santa Clara, on 6/5/2019 4:40 PM Reviewed By: L. Quach-Marcellana Case #19CV344918 Envelope: 2973293 19CV344918 Santa Clara - Civil -i- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS I. INTRODUCTION ...............................................................................................………...1 II. STATEMENT OF FACTS...................................................................................……….. 3 A. Plaintiffs’ Complaint .....................................................................................................3 B. Defendant’s Efforts to Meet and Confer .......................................................................5 III LEGAL ARGUMENT ..............................................................................................................7 A. Legal Standards Applicable to a Motion to Expunge a Lis Pendens ............................7 B. Pursuant to BGJ Associates, LLC v. Superior Court, and the cases that follow, Plaintiffs Allegations Do Not Support the Recording of a Lis Pendens……………...8 C. Defendant DMJ is Entitled to an Award of Attorney’s Fees………………………...11 IV. CONCLUSION……………………………………………………………………………...12 TABLE OF AUTHORITIES CASE BGJ Associates, LLC v. Superior Court, 75 Cal.4th 952 (1999)………………………………….7 Campbell v. Superior Court, 132 Cal.App.4th 904 (2005)………………………………………10 Castro v. Superior Court, 116 Cal.App.4th 1010 (2004)………………………………………...11 Kirkeby v. Superior Court of Orange County, 33 Cal.4th 642 (2004) .............................................7 Urez Corp. v. Superior Court, 190 Cal.App.3d 1141, 1149 (1987)…………………………..9, 12 STATUTE C. C. P. §405.4………………………………………………………………………………4, 6, 7 C. C. P. §405.20…………………………………………………………………………………..7 C. C. P. §405.22 ………………………………………………………………………...2, 5, 6, 11 C. C. P. §405.30………………………………………………………………………………….7 C. C. P. §405.31……………………………………………………………………...1, 2, 7, 8, 12 C. C. P. §405.32……………………………………………………………………….................7 C. C. P. §405.38………………………………………………………………………….2, 11, 12 -1- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendant DMJ HOME SOLUTIONS, LLC, hereby submits the following Memorandum of Points and Authorities in support of its motion to expunge a notice of pendency of action as follows: I. INTRODUCTION Defendant DMJ HOME SOLUTIONS, LLC, motion seeks to expunge multiple lis pendens recordings on six (6) different pieces of real property improperly recorded by Plaintiffs Arvind K. Agarwal and Neelo Agarwal as Trustees of the Agarwal family Trust dated August 2, 2001 (“Agarwal” or “Plaintiffs”), in connection with the underlying action. Plaintiffs’ verified complaint contains claims for breach of contract, fraud/negligent representation breach of good faith and fair dealing and an accounting. In short, this is a money damage case arising out of alleged breaches on two separate and distinct written commercial agreements between Plaintiffs and Defendant DMJ. The object of one commercial agreement has been completed and in the accounting stage. The second commercial agreement is continuing and in the performance stage with an estimated completion time of September 2019. The complaint contains no claims for specific performance or to quiet title, or any allegation typically expected where there is a valid real property interest affecting the “right, title and interest to real property”. Plaintiffs’ allegations and prayers seek damages and an accounting arising out of the two contracts entitled “Joint Venture Agreement”. The allegations vaguely hint as a pseudo real property claim. Yet, one contract (“Weeth”) cannot affect any right title and interest to real property as the project property being “flipped” was sold by DMJ to a third party bona fide purchaser for value. The second project property (“Claremont”) is in the process of renovation and reconstruction with an expected completion date of September 2019. The obvious intent of each recording is an effort is to freeze the marketability of all six (6) of Defendant DMJ HOME SOLUTIONS, LLC, pending real property rehabilitation projects, including pending refinancing and construction loans. The intended effect is to block any ability for DMJ to conduct business, meet the monetary and financial agreements with third parties. The coercive effect of this casting of a net over all of DMJ projects is damage existing contractual arrangements on these -2- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 projects in order to obtain a monetary settlement or concession not otherwise available to Plaintiff if Plaintiff pursued supportable claims for money damages. Pursuant to California Code of Civil Procedure (“C.C.P.”) §405.31, and the controlling case law on this issue, Plaintiffs’ complaint has not set forth a real property claim because it improperly combines theories of liability seeking monetary damages and equitable relief in the form of an accounting. The extraordinary effort to record six (6) sweeping lis pendens notices has no legal basis and each and every one should be expunged. Defendant Herrera also requests an award of attorney’s fees and costs pursuant to C.C.P. § 405.38. Defense counsel, upon learning of the existence of the recorded “Notice of Pending Action” initiated at his client’s request an investigation of the circumstances of the filing of the underlying action. The action was filed on March 20, 2019. Of the 6 original recordings of Lis Pendens one occurred on April 26, 2019 and five occurred on May 1, 2019. Defense counsel wrote Plaintiffs’ counsel several emails and two letters requesting removal of all of the Notices of Pending Action. Three of the six had an immediate sense of urgency for DMJ as they involved pending refinance transactions and performance under construction loans. Defense counsel had two telephone conversations of May 7, 2019 and May 24, 2019 with Plaintiff’s counsel regarding his recordings. To date the Complaint has not been served on any of the six named Defendants. DMJ is making a voluntary appearance to bring this motion. In the first letter of May 17, 2019 it was noted that the recordings of each Lis Pendens were in violation of CCP§ 405.22. There was no statutorily required proof of service attached to the recording rendering them void (Request For Judicial Notice “RJN” Exhibits B1-B6). Subsequent to the letter Plaintiff’s counsel simultaneously withdrew and re-recorded each of the six (6) notices on May 20, 2019 (RJN Exhibits B7-B12). The letter sent to Plaintiffs’ counsel also pointed out the impropriety of using the Lis Pendens statute to make his claimants secured creditors or to provide additional leverage for negotiation purposes. In addition, Plaintiff was already aware that Defendant DMJ sold the Weeth property project on January 29, 2019 as his counsel was provided with the sale transactional and closing documents shortly after the closing. -3- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff’s counsel was advised the Joint Venture Agreement was proceeding into the accounting phase of the agreement between the parties. Plaintiff in filing has chosen not to allow the accounting process to complete itself. They have elected to file the complaint and record the lis pendens against all other projects of DMJ. Plaintiff has acted without substantial justification by drafting and filing a verified complaint which does not seek a real property interest and using that complaint as a basis for a blanket recording the Lis Pendens against all of DMJ Projects. The consequence of this action puts each and every one of DMJ Projects in a position of failure. The obvious goal is to block Defendant DMJ from performing any other business to achieve negotiation leverage. The prevailing cases prohibit mixed money damages and equitable causes of action from serving as a basis for recording of a lis pendens against real property. The cases recognize that due to the damaging and serious effects a lis pendens has on title to real property that it may only be recorded in connection with a true “real property” claim; not a commercial damage claim cobbled together to masquerade as a real property claim in an effort to extract a monetary settlement. DMJ seeks expungement of all Notices by this motion. II. STATEMENT OF FACTS A. Plaintiffs’ Complaint. Plaintiff filed its verified complaint on March 20, 2019. As stated in the introduction, the complaint alleged four causes of action for breach of contract, fraud/negligent representation breach of good faith and fair dealing and an accounting. The essence of Plaintiffs’ complaint seeks to describe two separate commercial contractual relationships between Plaintiff and Defendant DMJ. Each of those contracts were described as a “Joint Venture Agreement”. The first agreement Plaintiff mentions between Plaintiff and DMJ is dated May 18, 2017. Plaintiff coins this agreement as JVAG1 (RJN, Exhibit A, Complaint; Exhibit A). The agreement provided that DMJ was to acquire title in its name to specified property (in this case Leigh/Weeth, San Jose CA) to renovate and sell for a projected “but not guaranteed profit”. Plaintiff would contribute $422,000 to the venture. DMJ was to obtain -4- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the loans to purchase, and construction funds to renovate, market and resell the property. DMJ was to obtain and oversee construction funding for the project. Plaintiff designated DMJ “the agent of the Venture with sole discretionary authority to enter into all contracts of construction and of supply in connection with the renovation of the Project”. (JVAG 1: paragraph 1.5) The Agreement also provided that in the event of a shortage of construction funds the “Venturers” upon mutual consent “shall contribute the funds necessary” in accordance with their interests to provide “make up funds” based upon their interests. (JVAG paragraph 2.3) On the Weeth project, when the need for make-up funds arose Plaintiff declined to contribute. DMJ obtained alternate funding, completed the project and marketed it for sale. Weeth was sold on January 29, 2019. As stated previously the project is in the accounting stage with the expectation that the venture will suffer a loss. The remaining accounting issue is one of money. It is not a real property claim per CCP §405.4. The second Joint Venture Agreement between Plaintiff and DMJ is dated March 6, 2017. This was coined by Plaintiff as JVAG2. (RJN Exhibit A, Complaint; Exhibit B) The specified property “to acquire, renovate and sell for a projected but not guaranteed profit” on JVAG2 was located on Claremont Avenue in Oakland CA. The same terms are contained in this agreement as in JVAG1. In JVAG2 Plaintiff contributed $531,000 to the project. DMJ was to purchase the property and hold title in its name. DMJ was to obtain the loans to enable the purchase, construction funds to renovate, and then market and resell the property. DMJ was to obtain and oversee construction funding for the project. DMJ was the designated agent of the venture (JVAG2 paragraph 1.5) This project was recently refinanced to enable it to be completed and readied for sale. Plaintiff and their counsel were advised of this refinancing and provided copies of the closing statement. The project when completed will consist of 5 residential units. The projected value upon completion as determined by an independent appraiser is $6,554,000. Plaintiff’s counsel was provided a copy of this appraisal with Defense counsel’s letter of May 17, 2019. Plaintiff recorded a Lis Pendens against this property, along with the five (5) others. The Properties affected by the initial recordings (4/26/19 and 5/1/19) of Plaintiff’s counsel -5- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and the subsequent recordings (5/20/19) are: Original Recording 1. 5401 Claremont Avenue, Oakland., California (Original recording #2019076979) 2. 118 Telles Lane, Fremont, California (Original recording #2019079598) 3. 10410 N. Stelling Road, Cupertino, California (Original recording #24168989) 4. 26 Alpine Avenue, Los Gatos, California (Original recording #24168990) 5. 7825 Lilac Court, Cupertino, California (Original recording #24168991) 6. 10191 Santa Clara Av., Cupertino, California (Original recording #24168992) Second Recording 7. 5401 Claremont Avenue, Oakland., California (#2019093484) 8. 118 Telles Lane, Fremont, California (#2019093485) 9. 10410 N. Stelling Road, Cupertino, California (#24183363) 10. 26 Alpine Avenue, Los Gatos, California (#24183366) 11. 7825 Lilac Court, Cupertino, California (#24183365) 12. 10191 Santa Clara Avenue, Cupertino, California (#24183364) Defying legal reasoning, case law, logic and outright common sense, Plaintiffs claim that all of these properties of DMJ were intended to provide security to them for the performance of DMJ under the terms of JVAG1 and JVAG2. Despite these allegations, it is clear from the Complaint that Plaintiff does not claim title to or a right to possession of any specific property. Plaintiff’s are but passive investors in each of the Joint Venture Agreements. B. Defendant’s Efforts to Meet and Confer. Over a month after Plaintiff filed its complaint, without notice or warning a Notice of Pending Action was recorded on each of the six (6) properties, four (4) in the Santa Clara County Recorder’s Office and two (2) in the Alameda County Recorder’s Office. None were served per CCP§ 405.22. All were void under the statute as recorded. Even so, a “blank” non-conformed document identifying the 118 Telles Lane, Fremont, California property found its way to Fidelity National Title Company where a pending escrow for a refinance of Telles property was about to fund. The presence of this document (even lacking recording information) stopped the closing of the refinance of DMJ to complete the project on the Telles property. DMJ counsel sent an email to attorney Douglas Dal Cielo to discuss the situation on May 6, 2019 requesting by email an immediate withdrawal of the Telles Lis Pendens in the face of the -6- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 refinance. Mr. Affrunti and Mr. Dal Cielo both responded alleging the Article IV of both Joint Venture Agreements provided support for their actions. Follow up email exchanges occurred as well.1 A conversation with Mr. Dal Cielo occurred on May 7, 2019 wherein he forwarded a conformed copy of the recorded Telles document and further sought to negotiate his client’s position. He wanted to be assured there was “no money” coming out of the escrow to DMJ. He also advised they had done a title search and recorded Lis Pendens on each other property and project of DMJ. He forwarded copies by email. While counsel were speaking on the phone the lender advised the title company to return wired funds on deposit for the refinance escrow in view of the presence of the Telles Lis Pendens. Defense counsel advised Mr. Dal Cielo email the existence of the recorded notice had caused the refinance to terminate. A request to remove all of the notices was again made. There was no response to the request. On May 17, 2019 Defense counsel wrote to Mr. Dal Cielo advising that each recorded Lis Pendens was void under CCP§ 405.22 and requesting, among other things that the recordings be withdrawn or expungement would be sought. All of the Lis Pendens notices were withdrawn and re-recorded on May 20, 2019. These were void under CCP§ 405.22 as well. On May 24, 2019 a further conversation between occurred. At that time, Plaintiff’s counsel was advised that in addition to Telles, the recording of a Lis Pendens on the Alpine property DMJ was unable to close escrow on a construction loan jeopardizing that project as well. Plaintiff’s counsel requested verification of the failed Telles refinance escrow of May 7, 2019 and that monies deposited were returned to the lender from escrow. On May 31, 2019, William B. Clayton, Jr., of Clayton & McEvoy, P.C., (“Clayton”) sent another letter on behalf of DMJ to counsel for Plaintiff. The letter once again was a good faith effort to meet and confer regarding the impropriety of the multiple Lis Pendens and request that Plaintiff withdraw all Lis Pendens. The requested confirmation regarding the Telles refinance was provided to illustrate effect of the void recordings. The complaint did not contain a “real property claim” as defined in Code of Civil Procedure Section 405.4. Counsel was again advised that 1 Mr. Dal Cielo “. . . In short, what protections or concessions are your clients offering in order to incentivize my client to remove the appropriate lien” email 5/7/19 excerpt. -7- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs’ complaint and its combined theories of liability for money damages and the request for an accounting did not support the recording of the Lis Pendens under the C.C.P.405.4. Plaintiffs counsel was advised that if Defendant pursued a motion to expunge attorneys fees would be requested. III. LEGAL ARGUMENT A. Legal Standards Applicable To a Motion to Expunge a Lis Pendens. California Code of Civil Procedure (“C.C.P.”) Section 405.20 states in relevant part, “[a] party to an action who asserts a real property claim may record a notice of pendency of action (aka “lis pendens”) in which that real property claim is alleged”. Real property claim is defined in C.C.P. Section 405.4 to mean “the cause of causes of action in a pleading which would, if meritorious, affect (a) title to, or the right to possession of specific property or the use of an easement identified in the pleading, other than an easement obtained pursuant to statute by any regulated public utility”. C.C.P. Section 405.30 allows a court to expunge a lis pendens upon a party’s motion, “at any time after notice of pendency of action has been recorded, any party…with an interest in real property affected thereby, may apply to the court in which the action is pending to expunge the notice.” In addition, unlike a typical motion where the moving party bears the burden of proof, “The claimant shall have the burden of proof under Sections 405.31 and 405.32.” C.C.P 405.30. (“Unlike most other motions, when a motion to expunge is brought, the burden is on the party opposing the motion to show the existence of a real property claim.”) Kirkeby v. Superior Court of Orange County, 33 Cal. 4th 642, 647 (2004) As such, motions to expunge pursuant to C.C.P. Section 405.31 involve a demurrer-like review of whether the pleading states a “real property claim”. Kirkeby, supra at 648. “In determining whether the claims in the pleadings affect title to or possession of specific real property, the courts have not interpreted “affect” literally; they have looked instead to the substance of the dispute.” BGJ Associates, LLC v. Superior Court, 75 Cal. App. 4th 952, 970 -8- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (1999). B. Pursuant to BGJ Associates, LLC v. Superior Court, and the cases that follow, Plaintiffs’ Allegations Do Not Support the Recording of a Lis Pendens. For years, California courts have attempted to address the circumstances under which a pleading seeking to state a cause of action for money damages and equitable relief (such as a constructive trust) as to real property constitutes a “real property claim”. The BGJ case, decided in 1999, answered that question in determining that a constructive trust or effort to otherwise establish an equitable lien is insufficient to justify a lis pendens where the object is to secure real property for a money damage claim.. In BGJ, the plaintiffs alleged that they, along with the defendants, were partners in a joint venture formed to buy real properties. Id. 958. The plaintiffs alleged that defendants wrongfully acquired certain property (Parcel 1) for themselves, to the exclusion of plaintiffs. Plaintiffs filed a complaint that asserted multiple causes of action including claims for breach of oral contract, breach of fiduciary duty, unjust enrichment, intentional and negligent interference with contractual relations, inducing breach of contract, and imposition of a constructive trust. Id. at 958-959. The Court in its discussion stated: As to most of these causes of action, plaintiffs allege that defendants acquired the properties as constructive and involuntary trustees for plaintiffs and plaintiffs’ prayer for relief requests compensatory and punitive damages and/or orders compelling defendants to convey to BGJ and/or Goldman and/or Janger (principals of plaintiff BGJ) an interest in a described portion of the properties and possession thereof. Supra at 959. Plaintiffs in the BGJ case filed a lis pendens as to Parcel 1. Defendants then moved to expunge the lis pendens pursuant to C.C.P. Section 405.31, on the ground that plaintiffs’ complaint did not allege a “real property claim” because the plaintiffs’ action was essentially for money damages not legal title or possession (e.g., specific performance). Id. at 966. The trial court granted the motion to expunge and the plaintiffs’ sought relief of the initial trial court order by way of a petition for writ of mandate. -9- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The appellate court affirmed the trial court’s order granting the motion to expunge. The appellate court first noted the deleterious effects of a lis pendens on title to real property. The history of lis pendens legislation shows a legislative intent to restrict the common law notion of constructive notice. This is because of the ease with which a lis pendens can be recorded and the serious consequences flowing from it. Once the lis pendens is filed, it clouds the title and effectively prevents the property’s transfer until litigation is resolved or the lis pendens is expunged. Supra at 966- 967. As such, the BGJ Court acknowledged that “[l]is pendens is a provisional remedy which should be applied narrowly.” Supra at 967. The Court later noted that the lis pendens procedure “(is) susceptible to serious abuse providing unscrupulous plaintiffs with a powerful lever to force the settlement of groundless or malicious suits [Citations]” Supra at 969. The Court additionally recognized that plaintiffs can record a lis pendens for improper strategic reasons - to coerce, leverage, and exert financial pressure on a property owner to force a settlement, regardless of the lack of merit of plaintiffs’ action. Id. Accordingly, an “[o]verbroad definition of ‘an action…effecting the title or right of possession of real property’ would invite abuse of lis pendens. [Citation]” Supra at 970. For example, a “lis pendens is not available in what ‘is essentially a fraud action seeking money damages with additional allegations urged to support the equitable remedies of a constructive trust or an equitable lien.” Urez Corp. v. Superior Court, 190 Cal. App. 3d 1141, 1149 (1987). Having considered these principles, the Court in BGJ held that the plaintiffs’ complaint did not contain a “real property claim” sufficient to support the recording of a lis pendens. In so deciding, the Court first rejected the plaintiffs’ specific performance analogies because, in those instances, the action was solely for specific performance. The Court took note of the eleven causes of action in the complaint - only two of which focused narrowly on the imposition of a constructive trust, with the remainder seeking compensatory and punitive damages on fraud and tort theories or a combination of compensatory and punitive damages with the imposition of a constructive trust. Supra at 971. The Court also rejected the BGJ plaintiffs’ argument that they were not required to elect -10- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 their remedies early in the case. While plaintiffs may not have been required to elect their remedies until trial, the BGJ Court held they were not entitled to maintain a lis pendens in the meantime. In fact, the Court acknowledged that plaintiffs’ ultimate “entitlement to a constructive trust is not determinate of whether plaintiffs may maintain a lis pendens. [Citation]” Supra at 970. Citing the well-known dangers of potential abuse of the lis pendens procedure, the BGJ Court concluded: “In a case such as this where the pleading combines theories of liability for money damages and for a constructive trust, we hold that the plaintiffs should not be able to maintain a lis pendens. The danger is too great that a lis pendens, which effectively renders the property unmarketable, will have the coercive effects condemned by the cases.” Supra at 972. In this case, the concepts discussed are remarkably similar to those considered by the Court in the BGJ case. The actions of Plaintiffs in recording the notices are intended to have a coercive effect. Plaintiff relies upon a Joint Venture Agreement to support blanket filings of Lis Pendens against six of DMJ properties none of which were ever specifically identified as properties to which Plaintiffs were entitled to title or possession. The sole goal of the recordings is to attempt to secure the payment of a money judgment. Such an effort is not consistent with the history and purpose of the lis pendens statute. See Campbell v. Superior Court, 132 Cal. App. 4th 904, 912 (2005) and Urez, supra at 1145 “ ….an action for money damages alone will not support a lis pendens”. The subject Complaint attempts to obtain those money damages (and even punitive damages) from allegations for breach of contract, fraud/negligent representation, breach of good faith and fair dealing and seeking an accounting. The Complaint does not seek title or possession of any real property. In BGJ many similar claims were made including claims seeking compensatory and punitive damages pursuant to various contract and tort theories (e.g., breach of fiduciary duty, conversion, fraud and breach of contract) In BGJ, the alleged duty to plaintiffs arose from a “joint venture relationship” with defendants as well. However, in BGJ, it was alleged one joint venturer wrongfully obtained property in in his name. In essence the claim was the fraudulent usurpation of a business -11- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 opportunity. Here it was never intended that anyone other than DMJ would acquire and take title to the joint venture property to renovate, rehabilitate and resell it. Upon the conclusion of the effort, Plaintiff would then share in the profits or the losses as the case may be. There was never any intention that Plaintiff take title or possession to any property. Under the rationale of the BGJ, Urez, and Campbell cases and their extensive discussion of the purpose and intent of the lis pendens statutes, Plaintiffs recording of the multiple Lis Pendens documents in this case was improper. Accordingly, Defendant’s motion to expunge the Lis Pendens and each of them should be granted. C. Defendant DMJ is Entitled to an Award of Attorney’s Fees. Under C.C.P. Section 405.38, an award of reasonable attorney’s fees and costs shall be made to the party prevailing on “any motion under this chapter”, unless the Court finds that “the non-prevailing party acted with substantial justification or that other circumstances make the imposition of attorney’s fees and costs unjust.” Castro v. Superior Court, 116 Cal. App. 4th 1010, 1018 (2004)(holding that under Section 405.38, a prevailing party on a motion to expunge a lis pendens is “entitled” to recover attorney’s fees.) Here, Plaintiff has acted without “substantial justification” and the imposition of fees and costs upon it would not be “unjust”. As discussed above, Defendant’s counsel repeatedly contacted Plaintiffs’ counsel and advised of the defect of the recordings requesting removal. Plaintiffs’ counsel was further advised of the actual damage which was occurring by these recordings and that its complaint did not properly describe a “real property interest”. Given the series of events, the delay of over a month to record any Lis Pendens, the calculated search by Plaintiff to affect all of Defendant’s pending projects, the failure to serve the complaint or the failure to “[i]mmediately…file [the notice]…with the court in which the action is pending” (C.C.P. § 405.22) this simply underscores the coercive goal of Plaintiff. As the Declaration of David Herrera clearly points out, DMJ has been damaged and continues to be damaged by Plaintiff’s reckless disregard of the rights of third parties on other unrelated projects by blocking Defendants DMJ’s performance under those agreements. -12- Memorandum of Points and Authorities of Defendant DMJ HOME SOLUTIONS, LLC to Expunge Notice of Pendency of Action [Lis Pendens] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs’ obvious objective in recording the Lis Pendens was simply to gain leverage in the effort to extract a settlement/concession unfavorable to defendant to be paid from refinance, construction funds or sales proceeds of any/all of the Properties upon sale. Plaintiff has rendered the Property unmarketable and subject to foreclosure. Plaintiff has abused the lis pendens statutes in a manner the courts routinely find improper and therefore, unjustified. See Urez Corp. v. Superior Court, 190 Cal. App. 3d at 1149 (1987). In accordance with the legislature’s intent, the Court should issue an award of attorney’s fees and costs to deter future abuse of the lis pendens statues by this Plaintiff and other litigants. To date, Defendant DMJ has incurred attorney’s fees in the amount of $10,482.50 for efforts to expunge Plaintiffs’ Lis Pendens, plus $60.00 in filing fees for the motion. Defendant DMJ will update the amount at or prior to the hearing on this motion. Such an award of fees and costs would not be “unjust” under these circumstances. IV. CONCLUSION For the foregoing reasons Defendant DMJ respectfully requests this Court grant his instant motion to expunge Plaintiffs’ Lis Pendens pursuant to C.C.P. Section 405.31 and award Defendant DMJ $10,542.50 in attorney’s fees and costs pursuant to C.C.P. Section 405.38. Respectfully submitted. Date: June 4, 2019 CLAYTON & McEVOY, PC By: __________/S/__________________________ William B. Clayton, Jr. Attorney for Defendant DMJ HOME SOLUTIONS, LLC