Judge: Ashfaq G. Chowdhury, Case: 23GDCV01531, Date: 2024-09-13 Tentative Ruling
Case Number: 23GDCV01531 Hearing Date: September 13, 2024 Dept: E
Hearing Date: 09/13/2024 – 8:30am
Case No:
23GDCV01531
Trial Date: UNSET
Case Name: LA CANADA RETAIL LLC, a Delaware limited
liability company, v. ASRALPHS ENTERPRISES, also known as ASRALPHS ENTERPRISES
CORP, a California corporation, individually and doing business as SPORT CLIPS,
also doing business as SPORT CLIPS HAIRCUTS, also doing business SPORTCLIPS,
also doing business as LA CANADA SPORTCLIPS; STACEY RALPHS, an individual; ADAM
RALPHS, an individual; and DOES 1-40, inclusive
[PLAINTIFF’S
MSA]
RELIEF REQUESTED
“Plaintiff LA CANADA RETAIL LLC, a Delaware limited liability
company (“LCR”), will move the Court as follows:
1. For an order
granting summary adjudication in favor of Plaintiff and against Defendants as
to the Twenty-Eighth Affirmative Defense set forth in Defendants Answer to
Plaintiff’s Complaint entitled “Protection from Personal Guarantee,” pursuant
to Code of Civil Procedure § 437c, on the grounds that the Twenty-Eighth
Affirmative Defense has no merit as to the Third and Fourth Causes of Action.
2. This Motion
will be based on this Notice of Motion and Motion, the Memorandum of Points and
Authorities in support thereof, the accompanying Declarations of Sarah Cha and
Jennifer I. Freedman, Esq., the Request for Judicial Notice, the Notice of
Lodgment of Evidence filed and served concurrently herewith, the List of
Exhibits, the complete files and records of this action, and such other oral
and documentary evidence as may be presented at or before the hearing on said
Motion.”
(Pl. Notice, p.
2.)
PROCEDURAL
Moving Party: Plaintiff,
La Canada Retail LLC
Responding Party: Defendants - ASRALPHS ENTERPRISES; STACEY
RALPHS; ADAM RALPHS
Moving Papers: Notice; Memorandum; Separate Statement;
List of Exhibits; Notice of Lodgment; Proposed Order; Declaration Sarah Cha; Declaration
Jennifer I. Freedman; Request for Judicial Notice; Proof of Service;
Opposition Papers: Opposition; Separate Statement
Reply Papers: Reply; Proof of Service
Proof of service timely filed (CRC 3.1300(c)): Ok
Correct Address (CCP §§ 1013, 1013a, 1013b): Ok
75/80 Days
Under 437c(2), notice of the motion and supporting
papers shall be served on all other parties to the action at least 75 days
before the time appointed for hearing. If the notice is served by mail, the
required 75-day period of notice shall be increased by 5 days if the place of
address is within the State of California. If the notice is served by facsimile
transmission, express mail, or another method of delivery providing for
overnight delivery, the required 75-day period of notice shall be increased by
two court days. (CCP §437c(a)(2).)
Here, Plaintiff’s motion is timely.
LEGAL STANDARD
The function of a motion
for summary judgment or adjudication is to allow a determination as to whether
an opposing party cannot show evidentiary support for a pleading or claim and
to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 843.) “The function of the pleadings in a motion for summary
judgment is to delimit the scope of the issues; the function of the affidavits
or declarations is to disclose whether there is any triable issue of fact
within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima
(1991) 231 Cal. App. 3d 367, 381-382.)
Code of Civil Procedure section
437c, subdivision (a) provides that “a party may move for summary judgment in
an action or proceeding if it is contended that the action has no merit or that
there is no defense to the action or proceeding.” The motion 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 judgment as a matter
of law. (Code Civ. Proc., § 437c(c).) In determining if the papers show
that there is no triable issue as to any material fact, the court shall
consider all of the evidence set forth in the papers, except the evidence to
which objections have been made and sustained by the court, and all inferences
reasonably deducible from the evidence, except summary judgment shall not be
granted by the court based on inferences reasonably deducible from the evidence
if contradicted by other inferences or evidence that raise a triable issue as
to any material fact. (Id.)
CCP § 437c(f)(1) states:
A party may move for summary
adjudication as to one or more causes of action within an action, one or more
affirmative defenses, one or more claims for damages, or one or more issues of
duty, if the party contends that the cause of action has no merit, that there
is no affirmative defense to the cause of action, that there is no merit to an
affirmative defense as to any cause of action, that there is no merit to a
claim for damages, as specified in Section 3294 of the Civil Code, or that one
or more defendants either owed or did not owe a duty to the plaintiff or
plaintiffs. A motion for summary adjudication shall be granted only if it
completely disposes of a cause of action, an affirmative defense, a claim for
damages, or an issue of duty.
(CCP § 437c(f)(1).)
Further, CCP § 437c(f)(2) provides:
A motion for summary adjudication
may be made by itself or as an alternative to a motion for summary judgment and
shall proceed in all procedural respects as a motion for summary judgment. A
party shall not move for summary judgment based on issues asserted in a prior
motion for summary adjudication and denied by the court unless that party
establishes, to the satisfaction of the court, newly discovered facts or
circumstances or a change of law supporting the issues reasserted in the
summary judgment motion.
(CCP § 437c(f)(2).)
Further, for purposes of motions for summary judgment and
summary adjudication:
A plaintiff or cross-complainant has
met his or her burden of showing that there is no defense to a cause of action
if that party has proved each element of the cause of action entitling the
party to judgment on the cause of action. Once the plaintiff or
cross-complainant has met that burden, the burden shifts to the defendant or
cross-defendant to show that a triable issue of one or more material facts
exists as to the cause of action or a defense thereto. The defendant or
cross-defendant shall not rely upon the allegations or denials of its pleadings
to show that a triable issue of material fact exists but, instead, shall set
forth the specific facts showing that a triable issue of material fact exists
as to the cause of action or a defense thereto.
(CCP § 437c(p)(1).)
ANALYSIS
Plaintiff, La Canada Retail LLC (LCR),
filed a Complaint on 7/19/2023 alleging four causes of actions: (1) Breach of
Lease – Option Exercised; (2) Breach of Lease – Holdover Tenancy; (3) Breach of
Guarantors – Option Exercised; and (4) Breach of Guaranty – Holdover Tenancy.
Plaintiff, LCR, summarizes its allegations
in the Complaint as follows:
LCR (as Landlord) and Asralphs Enterprises
Corp, a California corporation (“Asralphs”) (as Tenant), entered into a written
lease agreement for commercial real property located in the City of La Canada
Flintridge. LCR claims that the principals of Asralphs - Stacey and Adam Ralphs
(collectively, the “Ralphs”) - personally guaranteed Asralphs’ payment
obligations under the lease. After Asralphs defaulted in its rental payments
and vacated the leased premises, LCR filed the present Action. LCR seeks damages
against Asralphs (for a breach of the lease) and the Ralphs (for a breach of
the guaranty). The twenty-eighth (28th) affirmative defense in Defendants’
answer claims that a COVID resolution passed by the Los Angeles County Board of
Supervisors in 2023 prohibits enforcement of the guaranty. LCR contends the
resolution only provided for a temporary – not permanent - stay of enforcement.
(Pl. Memo, p. 2.)
On 9/5/2023, Defendants – Asralphs
Enterprises, Stacey Ralphs, and Adam Ralphs – filed an Answer.
The twenty-eight
affirmative defense in Defendants’ Answer stated as follows:
As its twenty-eighth, separate, and
affirmative defense, Defendants allege that Plaintiff is barred from recovering
any damages or other relief or penalties from the personal guarantors pursuant
to the order passed by the Los Angeles County Board of Supervisors on June 22,
2021.
(Def. Answer, p. 8.)
[The Court notes as follows:
Plaintiff indicates in its separate statement,
“While the 28th Affirmative Defense refers to an order passed on
June 22, 2021, such order was subsequently amended and presumably refers to the
resolution passed on January 24, 2023 (the “Resolution”).” (Pl. Sep. Stmt.
#20.)
In Defendants’ opposition separate
statement, Defendants do not dispute this fact. (Def. Sep. Stmt. # 20.)]
At issue in the instant MSA is the
Defendants’ 28th affirmative defense in the Answer. Plaintiff argues
that the 28th affirmative defense has no merit as to the third cause
of action for Breach of Guarantors – Option Exercised, nor does it have merit
as to the fourth cause of action for Breach of Guaranty – Holdover Tenancy.
Defendants’ Twenty-Eighth
Affirmative Defense
Plaintiff
attaches as Exhibit I the Resolution of the Board of Supervisors of the County
of Los Angeles Further Amending and Restating the County of Los Angeles
COVID-19 Tenant Protections Resolution, dated January 24, 2023 (the Resolution).
Plaintiff argues that the
Resolution does not permanently, nor in perpetuity, bar Plaintiff from
enforcing the personal guaranty. Or to phrase it differently, Plaintiff argues
that Defendants’ 28th affirmative defense – that the Resolution permanently
bars Plaintiff from recovering from the guarantors – fails as a matter of law.
Defendants argue that the
Resolution survives any termination or expiration, as to collecting from
personal guarantors, and that landlords are prohibited from enforcing personal
guarantees not only during any applicable repayment period, but landlords are
prohibited permanently from enforcing personal guarantees from individuals for
commercial tenants employing nine or fewer employees.
The Resolution
In
relevant part of the Resolution in section VI titled “Eviction Protections”:
2. Repayment by Commercial Tenants.
a. Commercial Tenants with nine (9)
employees or fewer shall have until January 31, 2023 to repay unpaid rent
incurred during the Protected Time Period.
…
c. During the applicable repayment period,
a Landlord is prohibited from enforcing a Personal Guarantee for rent incurred
by a commercial Tenant with nine (9) employees or fewer, arising from unpaid
rent incurred during the Protected Time Period.
(Pl. Ex. I, Resolution, VI.C.2.(a)-(c).)
Further, in relevant part:
Protections for Commercial Tenants with
Nine Employees or Fewer.
Effective June 22, 2021, a Landlord of
such a commercial Tenant is:
2. Prohibited from enforcing a Personal
Guarantee for rent incurred by the commercial Tenant during the Protected Time
Period.
(Pl. Ex. I, Resolution, VI.D.2.)
In the “Definitions” section of the Resolution, the
Court notes the following definitions that are helpful for this motion:
I. "Personal Guarantee" means,
with respect to a commercial lease for a commercial Tenant who has nine (9)
employees or fewer, a term that provides for an individual who is not the
Tenant to become wholly or partially personally liable for the rent, charges,
or other sums required to be paid by the commercial Tenant, upon the occurrence
of a default in payment. The term "Personal Guarantee" includes the
execution of a separate instrument that would otherwise qualify as a Personal
Guarantee if it were included within the terms of the underlying commercial
lease. This definition only applies to a Personal Guarantee by a third party
that is a natural person rather than a business entity.
J. "Protected Time Period" means
either of the following time periods: 1. March 4, 2020, through September 30,
2020, during which a Residential Tenant was unable to pay rent due to Financial
Impacts Related to COVID-19; or 2. March 4, 2020 through January 31, 2022,
during which a commercial Tenant was unable to pay rent due to Financial
Impacts Related to COVID-19.
K. "Protections" (formerly known
as the "Moratorium") means the set of tenant protections applicable
to a Tenant pursuant to the terms of this Resolution.
L. "Protections Period"
(formerly known as the "Moratorium Period") means the time period
commencing March 4, 2020, through March 31, 2023, unless further extended or
repealed by the Board.
(Pl. Ex. I, Resolution, IV.I., IV.J., IV.K., & IV.L.)
Defendants argue that landlords are prohibited
permanently from enforcing personal guarantees not only during any applicable
repayment period, but effectively prohibited permanently from enforcing
personal guarantees from individuals for commercial tenants employing nine or
fewer employees based on Section XI, titled “Remedies,” which states:
C. Affirmative Defense. Effective
March 4, 2020, any Protections, including the Protection pertaining to Personal
Guarantees for commercial rental debt, provided under this Resolution shall
constitute an affirmative defense for a Tenant in any unlawful detainer action
brought pursuant to California Code of Civil Procedure section 1161, as
amended, and any other civil action seeking repossession and repayment of
rental debt. The Tenant shall have the burden to prove the basis of their
affirmative defense, including the merit of any self-certification of a Financial
Impact Related to COVID-19 made pursuant to this Resolution. Said affirmative
defenses shall survive the termination or expiration of these Protections.
(Pl. Ex. I, Resolution, XI.C.)
Defendants argue that since “affirmative defenses
survive the termination or expiration of these Protections” under XI.C.,
landlords are prohibited from enforcing personal guarantees. Defendants argue
that had the County intended for these protections against personal guaranties
to expire, the County would have stated as such.
The Court does not find Defendants’ argument availing.
The Court finds Plaintiff’s argument convincing that a
temporary ban on the enforcement of personal guarantees is supported by the
rules of statutory construction.
Plaintiff pointed to V.A.1. which stated, “This
Resolution shall expire on March 31, 2023.” (Pl. Ex. I, Resolution V.A.1.)
“[C]ourts must strive to give meaning to every word in
a statute and to avoid constructions that render words, phrases, or clauses
superfluous.” (Klein v. United States of America (2010) 50 Cal.4th 68,
80 citing People v. Trevino (2001) 26 Cal.4th 237, 245-46.)
“The rules of statutory construction direct us to
avoid, if possible, interpretations that render a part of a statute
surplusage.” (People v. Cole (2006) 38 Cal.4th 964, 980-981.)
Here, although XI.C. provides that affirmative
defenses survive the termination or expiration of these protections, several
sections of the Resolution would be entirely pointless if Plaintiff was barred
permanently from enforcing its personal guarantees.
For example, VI.D.2. states that landlords are “Prohibited
from enforcing a Personal Guarantee for rent incurred by the commercial Tenant
during the Protected Time Period.” (VI.D.2.) The “Protected Time Period” is a
defined term in the Resolution. For commercial tenants, “Protected Time Period”
was defined as “March 4, 2020 through January 31, 2022, during which a
commercial Tenant was unable to pay rent due to Financial Impacts Related to
COVID-19.” (IV.J.2.)
If Defendants were permanently protected in
perpetuity, as they allege, this entire section would be superfluous and
pointless to the entire Resolution.
Further, VI.C.2.(c) states, “During the applicable
repayment period, a Landlord is prohibited from enforcing a Personal Guarantee
for rent incurred by a commercial Tenant with nine (9) employees or fewer,
arising from unpaid rent incurred during the Protected Time Period.” (VI.C.2.(c).)
The language of “during the applicable repayment period,” limits when the
Landlord is prohibited from enforcing a Personal Guarantee. This limiting
language would also be superfluous if a Landlord was permanently prohibited
from enforcing a Personal Guarantee.
Therefore, even though affirmative defenses survive
termination, rules of statutory construction support Plaintiff’s argument that
Defendants’ 28th affirmative
defense has no merit.
Additionally, the Court notes that XVI,
“Severability,” states:
If any provision of this Resolution or the
application thereof to any person, property, or circumstance, is held invalid,
such invalidity shall not affect other provisions or applications of this
Resolution that can be given effect without the invalid provision(s) or
application, and to this end, the provisions of this Resolution are declared to
be severable.
(Pl. Ex. I., Resolution, XVI.)
Additionally, the Court notes that XI.C. states, “The
Tenant shall have the burden to prove the basis of their affirmative defense
[.]” (XI.C.) Here, Defendants did not prove the basis of their affirmative
defense.
Although affirmative defenses appear to survive
termination of the Resolution, rules of statutory construction support the view
that, when reading the Resolution as a whole, Plaintiff is not permanently
barred from enforcing a Personal Guarantee. The Resolution mentions limited
periods in which Landlords cannot enforce a Personal Guarantee; therefore,
Defendants’ argument that The Resolution permanently bars Landlords from
enforcing a Personal Guarantee is unavailing.
TENTATIVE RULING
Plaintiff’s motion for summary adjudication is
GRANTED.
Although Defendants argue that there is a triable
issue of fact as to whether the twenty-eighth affirmative defense has merit,
this argument is unavailing. The issue before the Court today does not deal
with a dispute as to a triable issue of fact but instead deals with a dispute
as to an issue of law. “It is also well established that where no triable
issues are presented, and the sole remaining question is one of law, that
question may appropriately be determined on a motion for summary judgment.” (Goldstein
v. Hoffman (1963) 213 Cal.App.2d 803, 811.) The parties did not present any
disputes as to issues of fact, only disputed issues of law.