Judge: Armen Tamzarian, Case: 22STCV09201, Date: 2022-07-28 Tentative Ruling

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Case Number: 22STCV09201    Hearing Date: July 28, 2022    Dept: 52

Tentative Ruling:

Defendant Megna T Shirt Manufacturing Company, Inc.’s Motion to Strike First Amended Complaint

Defendant Megna T Shirt Manufacturing Company, Inc. moves to strike one portion of the first amended complaint: the request for “[l]ate charges and interest on all past due amounts, per Lease terms.”  (FAC, ¶ 19.i.)  Courts may strike a “demand for judgment requesting relief not supported by the allegations of the complaint.”  (Code Civ. Proc., § 431.10, subd. (b)(3).)  

Los Angeles Municipal Code § 49.99.3

            Defendant contends plaintiff T-A Fashion (USA), LLC cannot recover interest or late fees under Municipal Code § 49.99.3, which provides, “[N]o Owner shall endeavor to evict or evict a tenant of Commercial Real Property for non-payment of rent during the Local Emergency Period if the tenant is unable to pay rent due to circumstances related to the COVID-19 pandemic.  These circumstances include loss of business income due to a COVID-19 related workplace closure, child care expenditures due to school closures, health care expenses related to being ill with COVID-19 or caring for a member of the tenant's household or family who is ill with COVID-19, or reasonable expenditures that stem from government-ordered emergency measures. …  No Owner shall charge interest or a late fee on rent not paid under the provisions of this article.”

            This section only prohibits interest or late fees on unpaid rent “under the provisions of this article.”  It only applies “if the tenant is unable to pay rent due to circumstances related to the COVID-19 pandemic.”  Why defendant was unable to pay rent cannot be ascertained from the face of the first amended complaint.  It merely alleges defendant did not pay its rent. 

Interest

            Plaintiff may recover interest in this action.  Generally, “[a] person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day.”  (Civ. Code, § 3287(a).)  Defendant cites no authority that the general provision does not apply to unlawful detainer actions.  The general rule applies to unlawful detainer actions.  (See, e.g., Chambers v. Security Commercial & Sav. Bank (1920) 46 Cal.App. 32, 34 [trial court erred by not including interest in unlawful detainer judgment].)

Defendant’s reliance on McFarland v. Carpenter (1936) 18 Cal.App.2d 205, 214 is misplaced.  There, the court held interest was not recoverable because “the amount of damages… was unliquidated.”  (Ibid.)  “The amount of damages was not based on a fixed or agreed monthly rental for the property” and the amount “could not be computed except from testimony which was adduced showing the reasonable rental value thereof.”  (Ibid.)  The court thus applied the general rule under Civil Code § 3287.    

Here, the damages are based on a fixed amount: monthly rent due under the parties’ lease agreement.  The amount can be made certain by calculating rent according to the lease. 

Late Fees

The allegations of the complaint suffice to recover late fees as damages.  Defendant contends the late fee provision is void.  “[A] provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.”  (Civ. Code, § 1671(b).)

The lease provides, “Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender.”  (FAC, Ex. 1, Lease, ¶ 13.4.)  If the lessee does not pay rent within 5 days after it is due, “Lessee shall immediately pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater.  The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment.”  (Ibid.)

The lease defines “rent” to include these late fees.  “All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent.”  (Lease, ¶ 4.1, p. 3.)

The court cannot decide at this stage that the late fee was unreasonable under the circumstances when the parties entered the contract.  “The California Supreme Court has recognized that it is essentially a factual question whether the parties reasonably estimated foreseeable damages under the prevailing circumstances [citations] that becomes a question of law when the facts are undisputed and susceptible of only one reasonable interpretation.”  (Krechuniak v. Noorzoy (2017) 11 Cal.App.5th 713, 723 (Krechuniak).)  Under Civil Code § 1671(b), defendant bears the burden of showing the late fee was unreasonable under the circumstances. 

Defendant argues whether the late fee is valid is a legal question that can be resolved on the pleadings.  It relies on Jade Fashion & Co., Inc. v. Harkham Industries, Inc. (2014) 229 Cal.App.4th 635, 646: “ ‘Whether an amount to be paid upon breach is to be treated as liquidated damages or as an unenforceable penalty is a question of law.’ ”  (Citing Harbor Island Holdings v. Kim (2003) 107 Cal.App.4th 790, 794.)  But both Jade Fashion & Co., Inc. and Harbor Island Holdings were appeals after summary judgment or adjudication.  They were not decided on the pleadings.  The facts appearing on the face of the first amended complaint are not “susceptible of only one reasonable interpretation.”  (Krechuniak, supra, 11 Cal.App.5th at p. 723.)  The court therefore cannot decide this issue on a motion to strike.

Disposition

The motion to strike is denied.      

Defendant Megna T Shirt Manufacturing Company, Inc. is ordered to answer within 5 calendar days.