L.I.T. Consulting, Inc. vs. DCE Construction, Inc.

Plaintiff L.I.T. Consulting, Inc. (“Plaintiff”) moves for summary judgment of the remaining cause of action for breach of contract against Defendants DCE Construction, Inc. dba Mesa Garage Doors (“DCE”) and Mesa Home Resources, Inc. (“Mesa Home Resources”). Plaintiff’s request for judicial notice is denied.

“A party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) “A prima facie showing is one that is sufficient to support the position of the party in question.” (Id. at 851.) Simply put, “[i]f a party moving for summary judgment in any action . . . would prevail at trial without submission of any issue of material fact to a trier of fact for determination, then he should prevail on summary judgment.” (Id. at 855.) “The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Cal. Civ. Proc. Code § 437c(c).

Where a plaintiff seeks summary judgment, the burden is to produce admissible evidence on each element of a cause of action entitling him or her to judgment. (Code Civ. Proc., § 437c(p)(1); S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, 388.) “It is not plaintiff’s initial burden to disprove affirmative defenses and crosscomplaints asserted by defendant.” (Oldcastle Precast, Inc. v. 17 Lumbermens Mut. Cas. Co. (2009) 170 Cal.App.4th 554, 565 [cleaned up].)

If plaintiff meets this initial burden, the burden then shifts to the defendant “to show that a triable issue of one or more material facts exists as to that cause of action.” (Code Civ. Proc. § 437c(p)(1).) “An issue of fact can only be created by a conflict of evidence. It is not created by speculation, conjecture, imagination or guess work.” (Yuzon v. Collins (2004) 116 Cal.App.4th 149, 166 [cleaned up]; see Doe v. Salesian Society (2008) 159 Cal.App.4th 474, 481 [citing Yuzon].) In ruling on the motion, the court must consider all of the evidence and all of the inferences reasonably drawn therefrom, and must view such evidence and such inferences in the light most favorable to the opposing party.” (Aguilar, supa, 25 Cal.4th at 843.)

To establish breach of contract claim, a plaintiff must prove: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom. (Property California SCJLW One Corp. v. Leamy (2018) 25 Cal.App.5th 1115, 1162.)

Plaintiff’s submitted evidence establishes the following material facts: On or about 7/20/22, Plaintiff entered into a Simple Agreement for Future Equity (“SAFE”) Agreement with DCE. (UMF 1-2.) Under the terms of the SAFE Agreement, Plaintiff was to pay DCE and investment amount of $200,000. (UMF 3.) The Summary of the SAFE Agreement provides, in relevant part: “The investment will convert to common shares in the Company at a 30% discount upon a specifically defined event where the common shares begin trading or upon quotation in a public forum, such as NYSE, NASDAQ, or OTC Markets (over the counter). “If no such public trading event occurs within one year, the SAFE investment converts into an interest-bearing promissory note issued by the Company bearing interest at an annual rate of 15% for the period between the initial investment and the payoff of the note. 18 “There are other essential details of the investment outlined in this document. Investors should read and understand the terms thoroughly.” (UMF 4.)

Section 1 of the SAFE Agreement provides the details of the conversion in relevant part: “1. Conversion. Upon the first occurrence of the following, the SAFE will convert into either Common Stock of the Company or into a simple promissory note to be issued by the Company: “1.1 Post Trading Commencement Conversion Event. Upon the occurrence of the Post Trading Commencement Conversion Event, the SAFE will convert into a number of shares of Common Stock in the Company equal to the dollar amount invested in each SAFE divided by the Conversion Price. Such shares are referenced herein as the Conversion Shares, or, “1.2 Twelve Month Anniversary of the SAFE Investment if There is No Post Trading Commencement Conversion Event. If there is no Post Trading Commencement Conversion Event within the first twelve months after investment in the SAFE, the Company shall issue the Holder [Plaintiff] a simple promissory note in the amount of the initial investment (the "SAFE Note(s)"). On, or before, the 90th day after issuance of the SAFE Notes, the Company shall pay to the holder of the SAFE Note the initial SAFE investment amount and annualized 15% interest for the time period between the initial investment and the payoff in full of the Note(s) and all interested due.” (UMF 4 [underlines in original].)

On 7/20/22, Plaintiff paid, via wire transfer, the $200,000 investment amount to DCE. (UMF 3.)

The parties dispute the descriptive term for the event causing a conversion to occur. Plaintiff refers to it as a “public trading event” while Defendants refer to it as a “Post Trading Commencement Conversion Event.” However, the parties define the event the same: “an event where the Company’s “common shares begin trading or upon quotation in a public forum such as NYSE, NADDAQ, or OTC Markets (over the counter). (See Motion, p. 5:22- 19 25; Opposition, p. 2:15-17.) Thus, Defendants’ attempt to manufacture a dispute on this basis is unavailing.

Plaintiff contends no “public trading event” occurred prior to 7/20/23, as required under the SAFE Agreement. Plaintiff therefore contends its $200,000.00 investment converted into a promissory note and DCE breached the SAFE Agreement by failing to pay it by 10/19/23 (90 days from the one-year date of the original investment).

In support of its contention that no public trading event occurred, Plaintiff asks the court to take judicial notice of the facts and propositions contained in the "Quarterly Report Q3 2024, Disclosure & Financials" filed by defendant Mesa Home Resources w ith the OTC Markets and posted on the OTC Markets’ website. (RJN, Ex. A.) More specifically, Plaintiff cites Note 3 of the report that states, in part, that Mesa Home Resources and DCE completed a reverse acquisition on 11/3/23 that resulted in Mesa Home Resources acquiring all issued shares of common stock of DCE. (See UMF 5.)

While the court may take judicial notice of the report under section 452, subdivision (h) as to the posting of the report on OTC Markets’ website, the court may not take judicial notice of the facts and propositions stated therein. Especially in this instance where the date upon which Plaintiff appears to rely (11/3/23) is controverted by Defendant’s evidence which contends the merger resulting in a “public trading event” occurred on 2/9/23. (See Defendants’ response to UMF 5; Esnard Decl., ¶¶ 1-3, Exs. 1-2.)

Plaintiff’s request for judicial notice does not cite any authority supporting the proposition that such a report and the facts stated therein are the proper subject of judicial notice. As Plaintiff has not presented any other evidence supporting its contention that no public trading event occurred prior to 7/20/23, Plaintiff has failed to meet its initial burden.