Judge: Anne Richardson, Case: 24STCV00971, Date: 2024-07-08 Tentative Ruling

Case Number: 24STCV00971    Hearing Date: July 8, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings and Consolidation

1. Lead Case

In LASC No. 22STCV09953, Plaintiff SL Retail Owner LLC (SL Retail) sues Christopher Au and Does 1 through 20 pursuant to a May 26, 2022, First Amended Complaint (FAC) alleging two breach of guaranty claims.

The FAC’s claims arise from allegations that Keisuke SC LLC (Keisuke SC) leased commercial mall space from SL Retail and that Keisuke SC defaulted on its two lease agreements—the Keisuke Lease and the Ushi Ushi Lease—with Defendant Au, Keisuke SC’s guarantor, subsequently failing to compensate SL Retail following Keisuke SC’s default.

On May 26, 2022—the same day on which the FAC was filed by SL Retail—SL Retail filed a request for dismissal without prejudice in relation to Keisuke SC, which the Clerk entered on May 31, 2022.

2. Later Filed Case

In LASC No. 24STCV00971, Keisuke SC and Ushi Ushi LLC (Ushi Ushi) sue SL Retail and Does 1-10 pursuant to a January 12, 2024, Complaint alleging claims of (1) Breach of Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, and (3) Declaratory Relief.

The claims arise from the following allegations. After SL Retail found more desirable tenants to occupy the restaurant spaces rented by Keisuke SC and Ushi Ushi, SL Retail deliberately acted to prevent Keisuke SC and Ushi Ushi from fulfilling their contractual obligations and from operating their businesses. For example, SL Retail failed to provide the requisite paperwork for Keisuke SC and Ushi Ushi to secure the necessary permits to establish their businesses, and as a result, hindered Keisuke SC’s and Ushi Ushi’s ability to launch or open their businesses. SL Retail also prematurely charge rent from Keisuke SC and Ushi Ushi at a time when Keisuke SC and Ushi Ushi had not yet opened for business.

3. Relation and Consolidation

On March 1, 2024, the Court related the two actions.

On May 15, 2024, the Court consolidated the two actions.

B. Motion Before the Court

On March 20, 2024, prior to consolidation, SL Retail filed a demurrer in the Later Filed Case, which challenges the 24STCV00971 Complaint’s first to third causes of action.

On June 24, 2024, after consolidation, Keisuke SC and Ushi Ushi filed an opposition in the Lead Case.

On June 28, 2024, SL Retail filed a reply in the Later Filed Case.

SL Retail’s demurrer is now before the Court.

II. Demurrer

A. Request for Judicial Notice

Per SL Retail’s request, the Court takes judicial notice of various judgments and/or orders (including a nunc pro tunc) made in cases before the Los Angeles Superior Court. (Demurrer, Amended RJN, p. 2, Exs. A-C; Evid. Code, §§ 452, subd. (d), 453, subds. (a)-(b).)

B. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

C. Demurrer, Complaint, First to Third Cause of Action [Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, and Declaratory Relief]: SUSTAINED without leave to amend.

a. Relevant Law

The doctrine of res judicata has two aspects: claim preclusion and issue preclusion. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824; Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties [or those in privity with them] (3) after a final judgment on the merits in the first suit. [Citations.] If claim preclusion is established, it operates to bar relitigation of the claim altogether.” (DNK Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.) “Upon satisfaction of these conditions, claim preclusion bars ‘not only issues that were actually litigated but also issues that could have been litigated.’” (Planning and Conservation League v. Castaic Lake Water Agency (2009) 180 Cal.App.4th 210, 226, quoting Federation of Hillside & Canyon Associations v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202; Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 576.)

A general demurrer lies where preclusion applies. (See Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 792 [plaintiff’s wrongful death action barred by her prior voluntary dismissal of loss of consortium action against same defendant]; Shine v. Williams-Sonoma, Inc. (2018) 23 Cal.App.5th 1070, 1076-77 [court properly took judicial notice of “pleading, settlement agreement, and stipulated judgment of dismissal” in earlier class action to sustain demurrer on res judicata grounds in new class action].)

b. Court’s Determination

The Court finds in favor of SL Retail.

Unlawful detainer is a summary proceeding in which only limited issues may be presented to the court in a limited time period. As a result, the judgment in an unlawful detainer action is accorded only limited res judicata effect. (Vargas v. Municipal Court (1978) 22 Cal.3d 902, 916 [“adjudications in unlawful detainer actions should in general be afforded rather limited res judicata effect because of the special nature of such proceedings”], following Vella v. Hudgins (1977) 20 Cal.3d 251, 255 (Vella).)

If an issue is actually litigated in the unlawful detainer action, then the judgment will be res judicata as to that issue. (Vella, supra, 20 Cal.3d at pp. 256-257.) In such a case, the policy underlying res judicata is fully satisfied because the parties have had a full and fair opportunity to litigate the issue once and should not be permitted to relitigate it in a subsequent proceeding. (Wood v. Herson (1974) 39 Cal.App.3d 737, 743-746.) The parties to an unlawful detainer action may agree to a settlement that will have res judicata or collateral estoppel effect, but the settlement documents must be comprehensive. (Landeros v. Pankey (1995) 39 Cal.App.4th 1167, 1172-1174 (Landeros).)

Here, SL Retail argues that “the issues raised by the [Keisuke SC and Ushi Ushi] Complaint are the same as the issues in the Eviction Actions [by SL Retail against Keisuke SC and Ushi Ushi] – i.e., whether Former Tenants and Landlord complied with the contractual duties, and the respective rights that follow.” In support, SL Retail cites to its amended request for judicial notice, which contains copies of the judgments in the unlawful detainer actions against Keisuke SC and Ushi Ushi, as well as a minute order for a denied ex parte application by Ushi Ushi to set aside the judgment in the unlawful detainer proceeding against it. (Mot., p. 7; Mot., Amended RJN, p. 2, Exs. A-C.)

The Court agrees with SL Retail.

The underlying unlawful detainer judgments were secured in the form of default judgments in favor of SL Retail as against Keisuke SC and Ushi Ushi. (Mot., Amended RJN, Exs. A [Ushi Ushi judgment], B [Keisuke SC judgment].) Thus, the record clearly shows that the second and third requirements of claim preclusion—same parties, judgment in underlying action—are applicable here. Though the opposition argues that the judgments attached to the moving papers are of limited effect and do not elaborate on the grounds for judgment (Opp’n, pp. 5-6, 10), the evidence is clearly relevant to showing judgments have been entered by the Superior Court against Keisuke SC and Ushi Ushi in unlawful detainer proceedings for the subject premises. Moreover, the Court determines that primary rights that should have been raised in the unlawful detainer proceedings involve the same causes of action raised in the 24STCV00971 Complaint, as follows.

The remaining question is whether the 24STCV00971 Keisuke SC and Ushi Ushi Complaint involves primary rights that could have been raised as affirmative defenses to SL Retail’s right of possession to the subject premises in the unlawful detainer proceedings, i.e., the same cause of action.

In the unlawful detainer context, California decisions have permitted the introduction of ‘equitable’ and ‘legal’ defenses whenever such defenses, if proven, would have preserved possession in the tenant. (Green v. Superior Court (1974) 10 Cal.3d 616, 634, fn. 19 (Green) [collecting and summarizing cases].) Such defenses include discrimination in housing and retaliatory eviction. (See, e.g., Abstract Investment Co. v. Hutchinson (1962) 204 Cal.App.2d 242, 255 (Abstract Investment) [court permitted tenant to raise landlord’s alleged racially discriminatory motive as defense in unlawful detainer action where, if such discrimination were established, constitutional principles would bar the state from giving affirmative aid to the landlord’s eviction efforts]; Schweiger v. Superior Court (1970) 3 Cal.3d 507, 513-517 (Schweiger) [upholding tenant’s defense to an unlawful detainer action on the ground that landlord’s attempt to evict tenant was in retaliation for exercise of right to ‘repair and deduct’ granted by Civil Code sections 1941 et seq.].)

Here, the 24STCV00971 Keisuke SC and Ushi Ushi Complaint alleges that SL Retail deliberately acted to prevent Keisuke SC and Ushi Ushi from fulfilling their contractual obligations and from operating their businesses, such as by failing to provide the requisite paperwork for Keisuke SC and Ushi Ushi to secure the necessary permits to establish their businesses, thus hindering Keisuke SC’s and Ushi Ushi’s ability to launch or open their businesses. The Complaint also alleges the premature charging of rent at a time when Keisuke SC and Ushi Ushi had not yet opened for business. (24STCV00971 Complaint, ¶¶ 4, 31 [paperwork], 49-50, 66-67 [premature rent in violation of contracts].)

These allegations fall squarely into defenses that could have been raised in the underlying unlawful detainer proceedings as defenses favoring Keisuke SC or Ushi Ushi. If Keisuke SC or Ushi Ushi had shown to the unlawful detainer courts that it was SL Retail, not them, who had breached the parties’ lease agreements, then Keisuke SC or Ushi Ushi would have been able to argue their right to remain in possession of the premises. Consequently, the doctrine of res judicata applies based on the same causes of action/primary right being at issue in the unlawful detainer actions (defenses) and in the 24STCV00971 action (affirmative claims).

The Court rejects the opposition arguments on pages 7 to 8 and 9 to the effect that the only primary right at issue was right to possession over the subject premises. These arguments do not sufficiently address the circumstances discussed in cases such as Green, Abstract Investment, and Schweiger. Moreover, Duncan v. Kihagi (2023) 96 Cal.App.5th 703 does not demand a contrary result as it rests on very different facts. In that case, the tenants first filed their complaint for nuisance, breach of contract and harassment in violation of a rent stabilization ordinance. The following month, unlawful detainer actions were filed by the landlords. The tenants thereafter filed an answer in the unlawful detainer actions asserting affirmative defenses and a subsequent notice of surrender of possession, stating that the matter therefore became an “ordinary civil action.” (Id. at pp. 706-707.) Therefore, the case there turned on the fact that the tenants had surrendered the premises before the unlawful detainer proceeding, and thus both landlord and tenant may seek affirmative relief that would not otherwise have been available in an unlawful detainer action, under Civil Code § 1952.3. The court of appeal there held that a tenant need not seek such affirmative relief in the unlawful detainer, but could obtain such relief subsequently in another action. (Id. at pp. 708-709.) Indeed, the court in Duncan specifically distinguished its facts from those existing in the most common application of the primary right theory: “[where] the first suit has terminated in a judgment on the merits adverse to the plaintiff, the defendant in the second suit may set up that judgment as a bar under the principles of res judicata. . . . numerous cases hold that when there is only one primary right an adverse judgment in the first suit is a bar even though the second suit is based on a different theory or seeks a different remedy. [Citations omitted.] Neither scenario occurred here.” (Id. at p. 709, italics added.) By contrast, that is precisely the scenario occurring here.

The other cases cited by Keisuke are also inapposite. (Struiksma v. Ocwen Loan Servicing, LLC (2021) 66 Cal.App.5th 546, 557 [plaintiffs not obligated to have raise in the UD action their complex Truth in Lending Act (TILA) claims of the defendants’ failure to apply payments to their account, resulting in foreclosure]; Vella, supra, 20 Cal.3d at p. 255 [unlawful detainer will not prevent one who is dispossessed from bringing a subsequent action to resolve issues of title].)

The Court also rejects the opposition argument that “Tenants’ Complaint presents retaliatory claims strictly related to the underlying breaches of the lease agreements, which have not been conclusively litigated and decided.” (Opp’n, p. 10.) The Court relies on Schweiger, supra, to note that Keisuke LLC and Ushi Ushi could have raised retaliation defenses in the unlawful detainer proceedings.

Next, the Court rejects the argument that because “Tenants relinquished their possession,” they “preserved their right to seek affirmative relief on their separate contract and commercial claims.” (Opp’n, p. 7.) Such arguments should have been raised in the underlying unlawful detainer proceedings because they could have served as defenses against the loss of possession. Even if Keisuke SC and Ushi Ushi considered it better to relinquish the premises and instead sue for damages, obviating the immediate need to defend in the unlawful detainer proceedings, the proper course of action may have instead been to enter a stipulated judgment reserving the rights raised in the 24STCV00971 Complaint. (See, e.g., Landeros, supra, 39 Cal.App.4th at pp. 1172-1174.) Instead, Keisuke SC and Ushi Ushi defaulted, with the Superior Court denying a motion by Ushi Ushi to set aside the unlawful detainer judgment against it. (Mot., Amended RJN, Exs. A-B [judgments], C [minutes denying motion to set aside].)

The Court notes that it is immaterial that judgment in the unlawful detainer proceedings was entered in the form of default judgment. (Martin v. Gen. Fin. Co. (1966) 239 Cal.App.2d 438, 443 [“A judgment by default is as conclusive as to the issues tendered by the complaint as if it had been rendered after answer filed and trial had on allegations denied by the answer”]; Murray v. Alaska Airlines, Inc. (2010) 50 Cal.4th 860, 871 [“[A] judgment of default in a civil proceeding is res judicata as to all issues aptly pleaded in the complaint and defendant is estopped from denying in a subsequent action any allegations contained in the former complaint”].)

Last, the Court considers and rejects the opposition’s remaining arguments.

First, even if a meet and confer failed to precede this demurrer (Opp’n, pp. 3-4), that is not a basis for overruling the demurrer. Cal. Civ. Proc. Code § 430.41(a)(4); see also Dumas v. Los Angeles County Bd. of Supervisors (2020) 45 Cal.App.5th 348, 355-56 [“Nothing in the text of section 430.41, subdivision (a)(4), conditions its operation on compliance with other provisions. To the contrary, it instructs that ‘[a]ny’ determination that the process was insufficient will not be grounds to overrule the demurrer”].)

Next, the trial court has discretion to consider an untimely demurrer if it does not affect substantive rights of the plaintiff. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 749-750). Moreover, the 30-day language is not mandatory (“may”) and only applies to the initial demurrer not to amended complaints. (McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, 280.) The court can also increase the time to file a demurrer “in furtherance of justice.” (See Code Civ. Proc., §473, subd. (a)(1).) Here, as recognized by the opposition, SC Retail’s demurrer is at most five days late, (Opp’n, pp. 4-5,) and opposing parties have had ample time to oppose the motion. And the Court determines that no substantive right of Keisuke SC or Ushi Ushi is implicated by a demurrer challenging claims that should have been resolved during the unlawful detainer proceedings. Finally, even if the demurrer were overruled, the same argument could subsequently be raised by summary judgment or motion for judgment on the pleadings. Consequently, the Court permits the hearing on this demurrer to go forward even if untimely filed.

Last, leave to amend need not be granted here where amendment cannot cure the res judicata bars arising from the underlying unlawful detainer actions. (Opp’n, pp. 10-11.) The Court makes this determination because the claims at issue in the 24STCV00971 Complaint are claims for breach of contract and breach of the implied covenant of good faith and fair dealing, i.e., claims at the heart of the parties’ mutual obligations under the lease agreements for the subject premises. The declaratory relief claim is derivative of the breach of contract claims, leading to the same result. Otherwise stated, leave to amend will not cure the fact that the claims raised in LASC No. 24STCV00971 (since consolidated) are the exact type of claims that would have served as defenses to the unlawful detainer proceedings against Keisuke SC and Ushi Ushi.

Based on the above grounds, the Court SUSTAINS SL Retail’s demurrer to the 24STCV00971 Keisuke SC and Ushi Ushi Complaint, without leave to amend. 

III. Conclusion

SL Retail Owner, LLC’s Demurrer to Complaint [Res ID # 4348] is SUSTAINED without leave to amend.

The Court further orders that all filings in this consolidated matter be filed in the LEAD CASE, 22STCV01760.