A. Stuart Rubin, et al., v. Preferred Bank

Case Number

21CV03982

Case Type

Hearing Date / Time

Wed, 01/24/2024 - 10:00

Nature of Proceedings

(1) Plaintiffs A. Stuart Rubin and Annette Rubin’s Motion for New Trial Re: Summary Judgment Order; and, (2) Plaintiffs A. Stuart Rubin and Annette Rubin’s Motion for New Trial Re: Terminating Sanctions

Tentative Ruling

For Plaintiffs and Cross-Defendants A. Stuart Rubin and Annette Rubin: Douglas M. Reid and Franklin L. Ferguson, Jr.                     

For Plaintiff and Cross-Defendant 1604 Sunset Plaza LLC: Unrepresented               

For Plaintiff and Cross-Defendant Elliot Lander: Self-Represented

For Defendant and Cross-Complainant Preferred Bank: Michael E. Bubman, Mirman, Bubman & Nahmias, LLP

                       

RULING

For the reasons set forth below:

1. Plaintiffs A. Stuart Rubin and Annette Rubin’s motion for new trial re: summary judgment order is denied.
2. Plaintiffs A. Stuart Rubin and Annette Rubin’s Motion for new trial re: terminating sanctions is denied.
3. Preferred Bank shall submit Orders consistent with this ruling and shall give notice.

Background

This action was commenced on October 6, 2021, by the filing of the complaint by plaintiffs against defendant Preferred Bank (Preferred).

As alleged in plaintiffs’ complaint:

Plaintiff Stuart Rubin (Rubin) is a real estate investor and developer. (Complaint, ¶ 24.) For approximately 30 years, Rubin and his various entities have had long term banking relationships with several banks, including defendant Preferred. (Complaint, ¶¶ 24-26.) Rubin and his wife, plaintiff Annette Rubin (A. Rubin), (collectively, the Rubins) formed a close and confidential relationship with Preferred and its President and Chief Executive Officer, Wellington Chen. (Complaint, ¶ 27.) Business was not done by formal applications, but were discussed in a meeting or on the phone or by text and Preferred would send documents for the loan as discussed. (Ibid.) Preferred’s standard practice was to provide Rubin and his related entities with credit lines on an unsecured, interest-only basis, and to regularly renew those lines. (Complaint, ¶ 28.)

On August 21, 2017, Preferred insisted that Rubin and his entities convert the unsecured credit lines to a jumbo loan of $12,750,000 (the Loan or Loan No. 209465) to be supported by collateral. (Complaint, ¶ 29 & exhibits 1, 2.) The collateral for the Loan included (1) a second deed of trust on the residence at 715 N. Alpine Drive, Beverly Hills (the Beverly Hills Property), (2) a third deed of trust on the Rubins’ home at 4347 Marina Drive, Santa Barbara (the Santa Barbara Property), and (3) a second trust deed of trust on property located at 1604 Sunset Plaza Drive, Los Angeles (the Sunset Property) owned by plaintiff 1604 Sunset Plaza, LLC (Sunset). (Complaint, ¶¶ 17, 30 & exhibits 3-5.) Rubin is the manager of Sunset. (Complaint, ¶ 17.)

In April 2019, Preferred increased the principal of the Loan by approximately $4,125,870 to $16,875,868.57, paying off four other loans. (Complaint, ¶ 31 & exhibit 6.) The Loan was guaranteed by Sunset, the Stuart and Annette Rubin Family Trust dated 11/4/2003 (Family Trust), and the Stuart Rubin Children’s Trust dated 12/21/2001 (Children’s Trust). (Complaint, ¶¶ 16, 18, 32 & exhibits 7-9.)

In December 2009, Rubin had lunch with Chen and discussed restructuring the Loan’s debt service. (Complaint, ¶ 33.) Chen reiterated that Preferred’s relationship with the Rubins was important to Preferred. (Ibid.) They also agreed that Preferred only needed a principal paydown from the proceeds of the sale of the Beverly Hills Property, that following the sale of the Beverly Hills Property Preferred would then restructure the Loan, and that interest owed on the Loan could be paid by means of a separate loan. (Complaint, ¶ 34.)

The Loan’s stated maturity date was March 5, 2020. (Complaint, ¶ 35.) Preferred agreed to defer the maturity date to March 31, 2020, if the Rubins paid $37,000. (Ibid.) The Rubins made that payment, effectively deferring the maturity date on the Loan. (Ibid.)

By mid-March 2020, the COVID-19 pandemic occurred, and most banks were readily able to accommodate their affected borrowers. (Complaint, ¶ 36.) Preferred reiterated and explicitly agreed in mid-April 2020 that the Rubins could sell the Beverly Hills Property, apply $8 million or more of the sales proceeds to pay down the outstanding principal owed on the Loan, and that Preferred would restructure the remaining outstanding loan amount. (Complaint, ¶ 37.) (Note: The complaint identifies exhibit 10 as an email exchange. Instead, exhibit 10 attached to the complaint is a document entitled, “Business Loan Agreement.”) The April 2020 email exchange is identified by plaintiffs as a “forbearance agreement.” (Ibid.)

The Rubins listed the Beverly Hills Property for sale and kept Preferred informed of offers and the ongoing process. (Complaint, ¶ 38.) Preferred did not keep the Rubins informed of their plans to record a notice of default and, as such, the Rubins rejected certain offers made on the Beverly Hills Property. (Complaint, ¶ 39.) Had the Rubins accepted the offers, Preferred would have received its $8 million in principal paydown, the Loan would have been restructured, and the foreclosure halted before it began. (Ibid.)

Preferred recorded notices of default (NOD) on each property on June 3, 2020, but did not tell the Rubins at that time. (Complaint, ¶ 40.) The Rubins learned of the NODs two weeks later when they arrived by mail. (Ibid.)

As a result of Preferred’s actions, the Rubins filed suit against Preferred on October 2, 2020, as case No. 20CV03206 (the Prior Action). (Complaint, ¶ 42.) The Rubins successfully obtained a temporary restraining order in the Prior Action preventing Preferred from proceeding with the trustee sales of the three properties. (Complaint, ¶ 43.)

On January 6, 2021, the parties entered into a written Forbearance Agreement which served to act as a settlement agreement of the Prior Action. (Complaint, ¶ 44 & exhibit 11.) Among its express terms, the Forbearance Agreement required plaintiffs to file a request for dismissal of the Prior Action. (Complaint, ¶ 45.) The Forbearance Agreement also required plaintiffs to pay Preferred $8 million by June 6, 2021, in exchange for a Change of Terms Agreement with Preferred for the balance of the loan, modifying the repayment terms for the outstanding balance. (Ibid.) Plaintiffs complied with the terms of the Forbearance Agreement and timely made monthly payments owing under the Forbearance Agreement. (Complaint, ¶ 46.)

Between March 2021 and May 2021, plaintiffs received several offers to purchase the Beverly Hills Property. (Complaint, ¶ 47.) Plaintiffs kept Preferred informed of the offers and of the opening of escrow within the timelines provided in the Forbearance Agreement. (Ibid.) Upon receiving notice from plaintiffs of the opening of escrow, Preferred was obligated to extend the Forbearance Termination Date by at least 30 days until at least July 6, 2021. (Complaint, ¶ 48.)

Preferred in bad faith violated the Forbearance Agreement by recording a NOD on June 15, 2021, during the period by which the plaintiffs contractually were entitled to continued forbearance. (Complaint, ¶ 49 & exhibit 12.) Preferred had predesigns to obstruct plaintiffs from receiving the benefit of the bargain of the Forbearance Agreement and to take steps to ensure that it would not have to enter into the Change in Terms Agreement as agreed. (Complaint, ¶ 50.)

Plaintiffs accepted an all-cash offer to purchase the Beverly Hills Property and the buyer has waived contingencies. (Complaint, ¶ 52.) The escrow is open and was set to close on October 6, 2021. (Ibid.) Plaintiffs are actively taking steps to close the escrow, but the primary factor preventing the sale from closing is the NOD and notice of sale recorded by Preferred which Preferred refuses to rescind. (Ibid.)

Pursuant to the Forbearance Agreement, Preferred has made a demand to the escrow to be paid $8 million from the sales proceeds of the Beverly Hills Property. (Complaint, ¶ 53.) By doing so, Preferred is ratifying and seeking to enforce the Forbearance Agreement and is waiving any defects it contends existed in the plaintiffs’ performance. (Ibid.)

At about the same time, plaintiffs were negotiating with a third party to lease the Santa Barbara Property. (Complaint, ¶ 55.) The rent to be paid under the terms of the lease would have been more than sufficient to service the Loan. (Ibid.) However, Preferred, without notice to plaintiffs, recorded a NOD on the Santa Barbara Property. (Complaint, ¶ 56 & exhibit 13.) The tenant, upon learning of the NOD, refused to execute any lease agreement, resulting in a loss of significant rental payments and plaintiffs’ ability to promptly repay Preferred. (Complaint, ¶ 56.) Preferred also recorded a NOD on the Sunset Property. (Complaint, ¶ 56 & exhibit 14.)

Preferred has recorded notices of trustee’s sale (NOS) on each of the properties: a NOS for the Beverly Hills Property, noticing a sale for October 12, 2021; a NOTS for the Sunset Property, noticing a sale for October 12, 2021; a NOS for the Santa Barbara Property, noticing a sale for October 13, 2021. (Complaint, ¶¶ 58-59 & exhibits 15-17.)

On October 6, 2021, plaintiffs filed their complaint in this action asserting 11 causes of action: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) estoppel; (4) slander of title; (5) interference with contractual relationships; (6) interference with prospective economic advantage; (7) unfair business practices; (8) unjust enrichment; (9) declaratory relief; (10) breach of fiduciary duty; and (11) constructive fraud.

Preferred filed a demurrer and motion to strike portions of the complaint and, on February 15, 2022, the court sustained the demurrer as to the third cause of action for estoppel, the sixth cause of action for interference with prospective economic advantage, the eighth cause of action for unjust enrichment, the tenth cause of action for breach of fiduciary duty, and the eleventh cause of action for constructive fraud. Although they were given leave to amend, plaintiffs did not do so. The remaining causes of action are the first, second, fourth, fifth, seventh, and ninth.

Preferred filed an answer to the complaint on April 5, 2022, asserting a general denial and 18 affirmative defenses. Concurrently with filing the answer, Preferred filed a cross-complaint against plaintiffs, asserting causes of action for: (1) breach of contract; (2) breach of guarantees; (3) money lent; (4) trespass; and (5) loss of use of real property.

On August 14, 2023, Preferred moved for summary judgment of each of the remaining causes of action on the grounds that this action has no merit, there are no triable issues of material fact and Preferred is entitled to judgment as a matter of law. In the alternative, Preferred sought summary adjudication of each of the remaining causes of action.

The Rubin plaintiffs filed six declarations from various individuals that they claimed to be in support of their opposition. However, no opposition, separate statement, objections to Preferred’s evidence, or any other document was filed by plaintiffs, besides the declarations, until the day prior to, and the day of, the hearing on the motion.

Preferred also moved for an order dismissing with prejudice plaintiffs’ complaint and striking the answer filed by cross-defendants on the grounds that: (1) Plaintiffs and Cross-Defendants have deliberately and repeatedly violated their statutory discovery obligations despite being afforded numerous opportunities by both Preferred and this Court to comply; (2) Plaintiffs and Cross-Defendants have violated and refused to obey numerous orders of this Court designed specifically to remedy the impact of their ongoing failure to comply with their statutory discovery obligations; (3) Preferred has been prejudiced in its ability to defend itself against the complaint or prosecute its cross-complaint as a direct result of Plaintiffs and Cross-Defendants’ deliberate, repeated and wrongful failures to comply with their statutory discovery obligations and this Court’s orders; and (4) Plaintiffs and Cross-Defendants’ continuing misconduct, which this Court described in its June 7, 2023 order as ‘egregious,’ ‘deliberate’ and occurring with ‘rhythmic regularity,’ makes clear that any sanction less than terminating sanctions will be ineffective.

Following a continuance of the hearing on the motion for summary judgment from November 1, 2023, to November 15, 2023, so that the motions could be heard at the same time, the motions were granted on November 15, 2023.

The Rubins were self-represented at the time the motions were granted. On December 11, 2023, the Rubins hired their current attorney.

The Rubins now move for a new trial on the granting of summary judgment (MSJ Motion). The Rubins argue that the court was “obligated to order a continuance to permit affidavits to be obtained or discovery to be had.” (MSJ Motion, p. 2., ll. 6-9) The Rubins also, incorrectly, seem to imply that the sole reason the motion for summary judgment was granted was based on their failure to provide a separate statement. Finally, the Rubins blame their prior attorney.

The Rubins also now move for a new trial on the granting of terminating sanctions for their deliberate and continued failure to comply with their statutory discovery obligations.

The motions are opposed.

Analysis

1. Motion for New Trial on Summary Judgment

As it relates to summary judgment: “If it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication, or both, that facts essential to justify opposition may exist but cannot, for reasons stated, be presented, the court shall deny the motion, order a continuance to permit affidavits to be obtained or discovery to be had, or make any other order as may be just. The application to continue the motion to obtain necessary discovery may also be made by ex parte motion at any time on or before the date the opposition response to the motion is due.” (Code Civ. Proc., 437c, subd. (h).)

“Although [Code of Civil Procedure section 437c, subdivision (h)] authorizes the trial court to either continue the hearing on the summary judgment motion or deny the motion to permit the opposing party to obtain necessary discovery, it was the [opposing party’s] responsibility to request such an order and to demonstrate, either in their opposition papers or in a separate application filed no later than their opposition papers, that the missing discovery was required. (See Frazee v. Seely (2002) 95 Cal.App.4th 627, 633, 115 Cal.Rptr.2d 780 [party seeking continuance must show facts to be obtained are essential to opposing the motion and those facts could not have been presented with the opposition papers].” (Roman v. BRE Properties, Inc. (2015) 237 Cal.App.4th 1040, 1056.)

The hearing on summary judgment was initially scheduled for November 1, 2023. Pursuant to Code of Civil Procedure section 437c, subdivision (b)(2), any opposition, and therefore any request for a continuance, was due no later than 14 days preceding the hearing date. The final date for the Rubins to request a continuance to gather additional evidence was October 18, 2023. On October 19, 2023, A. Rubin filed a declaration in support of request to continue hearing date. The declaration was not accompanied by an Ex Parte Motion to Continue and did not follow any statutory authority for a proper request for continuance. Stuart Rubin did not request a continuance nor did any other plaintiff besides A. Rubin. A. Rubin filed an Ex Parte application on October 24, 2023. The request was not timely and was denied. However, the court, on its own motion, continued the hearing to November 15, 2023, to be heard with the motion for terminating sanctions. A. Rubin only requested a continuance to November 8, 2023. Thus, in effect, the Rubins received a longer continuance than A. Rubin requested.

A second request for a continuance was filed by the Rubins a mere two days before the November 15, 2023 hearing. This is so even though A. Rubin was informed of the deadlines when her first request was denied as untimely.

Even if the Rubins had made a timely request, which they did not, they failed to demonstrate what missing discovery was required, how any additional information would be essential to opposing those motions, or why the information could not have been presented with opposition papers. The Rubins’ late filed request was conclusory and, based on prior proceedings in this case, not credible.

“ ‘A good faith showing that further discovery is needed to oppose summary judgment requires some justification for why such discovery could not have been completed sooner.’ ” [Citation.] This showing is necessary to comply with section 437c, subdivision (h)’s requirement that the party seeking the continuance “ ‘declare why “ ‘facts essential to justify opposition . . . cannot, for reasons stated, then be presented.’ ”(§ 437c, subd. (h), italics added.)’ ” (Braganza v. Albertson’s LLC (2021) 67 Cal.App.5th 144, 157.)

The motion for summary judgment was, as noted above, filed on November 14, 2023. The Rubins offer no credible reason why they could not have obtained any necessary additional discovery in the three months between the motion being filed and the hearing on the motion. The late request for a continuance was woefully deficient. To the extent that the Rubins argue that they should not be held to the same standards due to their periods of being self-represented, the parties have been reminded previously:

“[M]ere self-representation is not a ground for exceptionally lenient treatment. Except when a particular rule provides otherwise, the rules of civil procedure must apply equally to parties represented by counsel and those who forgo attorney representation. [Citation.] . . . A doctrine generally requiring or permitting exceptional treatment of parties who represent themselves would lead to a quagmire in the trial courts, and would be unfair to the other parties to litigation.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 984-985.)

The facts as they exist here are that Preferred filed a motion for summary judgment which the Rubins had three months to oppose. The Rubins did not timely file a request for a continuance. They did not give any legitimate reason justifying the granting of a continuance or explain why they were unable to obtain evidence in a timely manner. They failed to file a separate statement to the motion, they failed to submit any admissible evidence in opposition, and they failed to file any points and authorities until approximately one-half hour prior to the hearing. Preferred met its burden on summary judgment, and summary judgment was granted.

The Rubins motion for new trial regarding the granting of summary judgment will be denied.

2. Terminating Sanctions

The Rubins cite Code of Civil Procedure section 657, which provides, in pertinent part:

“The verdict may be vacated and any other decision may be modified or vacated, in whole or in part, and a new or further trial granted on all or part of the issues, on the application of the party aggrieved, for any of the following causes, materially affecting the substantial rights of such party:

            “1. Irregularity in the proceedings of the court, jury or adverse party, or any order of the court or abuse of discretion by which either party was prevented from having a fair trial.”

The Rubins argue that the court abused its discretion when granting terminating sanctions because discovery responses were submitted prior to the November 15, 2023 hearing and because payment of monetary sanctions had been confirmed as paid prior to the hearing.

The above, other than placing blame on their prior attorney, is essentially the Rubins’ entire argument for seeking a new trial regarding the order on the motion for terminating sanctions.

“ ‘An abuse of discretion occurs if, in light of the applicable law and considering all of the relevant circumstances, the court’s decision exceeds the bounds of reason and results in a miscarriage of justice. [Citations.] This standard of review affords considerable deference to the trial court provided that the court acted in accordance with the governing rules of law.’ “ (Collins v. City of Los Angeles (2012) 205 Cal.App.4th 140, 153.)

The Rubins acknowledge that they did not serve the disputed discovery requests until the day of the hearing on Preferred’s motion for terminating sanctions. The Rubins concede that “it is understandable that it may seem that Plaintiffs’ actions are deliberately disrespecting the Court.” (Motion, p. 8, ll. 5-6.)

Sending Preferred discovery on the day of the hearing is not compliance with the court’s orders and it further illustrates the willful disregard that the Rubins have exhibited towards court orders in this case. There would be no possibility that Preferred would be capable of going through the discovery, in the time before a 10:00 a.m. hearing, to determine whether the responses were complete.

The Rubins’ discovery abuses were much more egregious than they portray in their motion. The court laid out the discovery abuses in detail in ruling on Preferred’s motion for terminating sanctions. The abuses included failing to comply with several extensions of time to respond, serving unverified objection only responses without justification, Preferred having to file 16 motions to compel, additional extensions, the court giving the Rubins even more time to respond to discovery on more than one occasion, failure to comply with court orders to provide an accurate address for the trustee of the Children’s Trust, failing to appear at court ordered hearings and case management conferences, failing to file a court ordered status report, and even after being ordered to provide proper discovery responses the Rubins failed to do so.

The court has considered all of the evidence as well as the procedural history of this case. The present motion does not add any additional facts that alter the court’s ruling. The Rubins’ violations of their statutory discovery obligations, and blatant disregard of court orders, is willful, proceeded by a history of discovery abuse, and egregious. Given the wide latitude that the Rubins were given to come into compliance with the court’s previous discovery orders, and their continued refusal to do so, it is apparent that no less severe sanctions would have produced compliance.

To the extent that the Rubins blame their previous attorney, they set forth no persuasive legal authority or argument that supports granting a new trial on that basis.