Judge: Barbara M. Scheper, Case: 22STCV40595, Date: 2024-02-29 Tentative Ruling
Case Number: 22STCV40595 Hearing Date: February 29, 2024 Dept: 30
Dept. 30
Calendar No.
Sterling Venue Ventures, LLC v.
Unibal-Rodamco-Westfiels SE, et al.
Case No. 22STCV40595
Tentative Ruling
re: Defendants’ Demurrer to First
Amended Complaint; Motion to Strike
Defendants Valencia Town Center,
L.P. and Valencia Town Center GP, LLC (“Defendants”) demurs to Plaintiff’s
First Amended Complaint. The demurrer is
sustained with ten (10) days leave to amend as to the first and fifth causes of
action and otherwise overruled. The
motion to strike is granted in part and denied in part.
A demurrer
for sufficiency tests whether the complaint states a cause of action. (Hahn
v. Mirada (2007) 147 Cal.App.4th 740, 747.) A demurrer tests the pleadings
alone and not the evidence or other extrinsic matters. Therefore, the defects
must be apparent on the face of the pleading or via proper judicial notice.
(Code Civ. Proc., §§ 430.30, 430.70; Donabedian v. Mercury Ins. Co. (2004)
116 Cal.App.4th 968, 994.) At the pleading stage, a plaintiff need only allege
ultimate facts sufficient to apprise the defendant of the factual basis for the
claim against him. (Semole v.
Sansoucie (1972) 28 Cal. App. 3d 714, 721.)
The court assumes the truth of the complaint’s properly pleaded or
implied factual allegations. (E-Fab, Inc. v. Accountants, Inc. Servs. (2007)
153 Cal.App.4th 1308, 1315.) A “demurrer
does not, however, admit contentions, deductions or conclusions of fact or law
alleged in the pleading, or the construction of instruments pleaded, or facts
impossible in law.” (S. Shore Land
Co. v. Petersen (1964) 226 Cal.App.2d 725, 732.)
VTC GP, LLC is a proper party to the causes of action
VTC GP, LLC
is allegedly the general partner of VTC LP.
(FAC, ¶3.) This allegation must
be accepted as true on demurrer and is not denied by Defendants in their
demurrer.
Pursuant to
Corporations Code §15904.04(a), “all general partners are liable jointly and
severally for all obligations of the limited partnership unless otherwise
agreed by the claimant or provided by law.”
“To the extent not inconsistent with Section 15904.04, a general partner
may be joined in an action against the limited partnership or named in a
separate action.” (Corp. C. §15904.05(a).)
Defendants
argue that Plaintiff agreed that only Defendant VTC LP, the Landlord identified
in the lease agreement, and no other entities or persons would be liable under
the Lease Agreement. Defendants rely on
Section 27.14 of the Lease Agreement, entitled “Liability of Landlord,” as a
complete affirmative defense to the claims asserted against VTC GP, LLC (FAC, Ex. 1, §27.14, “Liability of Landlord,”
p. 39.)
Section
27.14 of the Lease Agreement provides:
“If Landlord shall
fail to perform any covenant, term or condition of this Lease upon Landlord's
part to be performed, and if as a consequence of such default Tenant shall
recover a money judgment against Landlord, such judgment shall be satisfied
only out of the proceeds of sale received upon execution of such judgment and
levied thereon against the right, title and interest of Landlord in the
Development and out of rents or other income from such property receivable by
Landlord, or out of the consideration received by Landlord from the sale or
other disposition of all or any part of Landlord's right, title and interest in
the Development subject, nevertheless to the rights of Landlord's mortgagee,
and neither Landlord nor any of the partners comprising the partnership which
may be the Landlord herein shall be liable for any deficiency.” (FAC, Ex. 1,
§27.14.)
A “demurrer
based on an affirmative defense cannot properly be sustained where the action
might be barred by the defense, but is not necessarily barred.” (CrossTalk Productions, Inc. v. Jacobson
(1998) 65 Cal.App.4th 631, 635.) Section
27.14 does not clearly and unambiguously release VTC GP, LLC from liability for
the obligations of VTC LP, nor does it state that no judgment may be obtained
against Landlord’s general partner. Section
27.14 does not reference Corporations Code §15904.05, though parties could
easily have inserted such a reference. Section
27.14 merely limits the assets from which a judgment obtained against the
Landlord, VTC, LP, may be satisfied. At
best, it exonerates VTC GP, LLC from liability for any deficiency that remains
after the tenant exhausts the named assets from which judgment may be
satisfied.
At the very
least, Section 27.14’s scope and application is ambiguous. Plaintiff offers a reasonable interpretation
of Section 27.14 that would not exonerate VTC GP, LLC from liability under
Corp. C. §15904.05. Plaintiff’s
reasonable interpretation must be accepted on demurrer. (Aragon-Haas v. Family Security Ins.
Services, Inc. (1991) 231 Cal.App.3d 232, 239 (general demurrer to the
complaint admits not only the contents of the instrument but also any pleaded
meaning to which the instrument is reasonably susceptible).)
VTC GP,
LLC’s demurrer based on its status as the general partner of the landlord and a
non-party to the Lease Agreement is overruled.
1st cause of action for fraudulent inducement
The
elements of fraud are: (1) misrepresentation (false representation,
concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent
to defraud or induce reliance; (4) justifiable reliance; and (5) damages.
(Civil Code §1709.) Fraud actions are subject to strict requirements of
particularity in pleading. (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d
197, 216.) A plaintiff must allege what
was said, by whom, in what manner (i.e. oral or in writing), when, and, in the
case of a corporate defendant, under what authority to bind the corporation.
(Goldrich v. Natural Y Surgical Specialties, Inc.) (1994) 25 Cal.App.4th 772,
782.)
Plaintiff
fails to allege fraud with specificity. Plaintiff fails to allege the nature of
the misrepresentations, when they were made, who made them and the authority by
which that person made those representations on behalf of the entity
Defendants. Plaintiff may be attempting
to allege promissory fraud based on the promises made in the Lease
Agreement. If so, Plaintiff must
identify the specific promises in the Lease Agreement that were made without
the intent to perform.
Accordingly,
the demurrer to the first cause of action is sustained with ten (10) days leave
to amend.
2nd cause of action for breach of contract
Plaintiff
alleges that Defendants breached the lease agreement by failing to maintain the
shopping center in good order, condition, and repair. Plaintiff attaches the Lease Agreement as
Exhibit 1, pleading the material terms of the contract by attachment.
Defendants
argue Plaintiff fails to identify a specific contract clause that required it
to do so. Plaintiff was not required to
do so. Defendants fail to establish,
based on the face of the complaint, that it was not obligated to maintain the
shopping center in reasonable condition, including performing maintenance and
repairs to prevent water intrusion and vermin infestation. In fact, Defendants cite two sections of the
Lease Agreement that could reasonably be interpreted as imposing an obligation
to maintain the roof and common areas to ensure there would be no water
intrusion, flooding, or vermin infestation—Sections 8.01 and 10.
Section
8.01 of the Lease Agreement required the Landlord to operate and maintain the
common areas of the shopping mall “at a level comparable to other regional
shopping malls in the region.” Section 8.01 indicated that the manner in which
the common areas would be operated and maintained “shall be at the sole
discretion of the Landlord…” (FAC, Ex.
1, §8.01, p. 17.) Section 8.01 therefore
imposes on the Landlord the obligation to maintain the common areas at a level
comparable to other regional shopping malls, which could reasonably be
interpreted to mean that Landlord would maintain common areas in a reasonable
manner that would not result in water intrusion or vermin infestation. The mere
fact that the specifics of maintenance would be at the “sole discretion” of the
Landlord does not negate the existence of its obligation to maintain the common
areas in a manner that prevented water intrusion and vermin infestation.
Section
10.01 also requires the Landlord to “keep and maintain the roof, foundation and
the exterior surface of the exterior walls of the building in which the
Premises is located…in good repair.”
(FAC, Ex. 1, §10.01, p. 19.)
Plaintiff has alleged water intrusion and vermin infestation. Nothing in the FAC establishes that these
issues were unrelated to the roof, foundation, or exterior wall
maintenance.
Defendants
fail to identify any deficiency in Plaintiff’s breach of contract claim. Defendants’ Demurrer to the 2nd
cause of action for breach of contract is overruled.
3rd cause of action for breach of the implied
covenant of good faith and fair dealing
Defendants
argue that the breach of implied covenant claim is duplicative of the breach of
contract claim. However, Plaintiff is
entitled to plead alternative theories of recovery. “Pleading of alternative theories of relief
on the same set of facts is, of course, quite proper and is often done where
there is a legally recognized basis for recovery in both contract and
tort.” (Gebert v. Yank (1985) 172
Cal.App.3d 544, 554 (plaintiff properly pled alternative theories of recovery
for breach of bailment contract and negligence, two causes of action with
differing burdens of proof).)
In
addition, Defendants argue their alleged conduct did not violate any express
provision of the Lease Agreement, because they had sole discretion to determine
how the common areas would be maintained under Section 10.10 of the Lease
Agreement. The implied covenant of good
faith and fair dealing is generally imposed to ensure that a discretionary
power is exercised in good faith, which is precisely the situation presented
here based on Defendants’ position that they had sole discretion in determining
appropriate maintenance of the shopping center common areas. (Third Story Music, Inc. v. Waits
(1995) 41 Cal.App.4th 798, 804) (defendant’s refusal to exploit plaintiff’s
music was expressly allowed under parties’ contract, which provided that
defendant could refrain from doing so “at its election” and therefore could not
violate the covenant of good faith and fair dealing); Locke v. Warner Bros.,
Inc. (1997) 57 Cal.App.4th 354, 366 (where contract gave defendant
discretion to develop plaintiff’s proposed projects, discretion was subject to
implied covenant and defendant could not reject plaintiff’s projects in bad
faith).) Plaintiff’s breach of implied
covenant claim is therefore not duplicative of the express breach of contract
claim.
The demurrer
to the 3rd cause of action for breach of the implied covenant is
overruled.
4th cause of action for breach of the covenant
of quiet enjoyment
“In the
absence of language to the contrary, every lease contains an implied covenant
of quiet enjoyment, whereby the landlord impliedly covenants that the tenant
shall have quiet enjoyment and possession of the premises. The covenant of quiet enjoyment insulates the
tenant against any act or omission on the part of the landlord, or anyone
claiming under him, which interferes with a tenants right to use and enjoy the
premises for the purposes contemplated by the tenancy.” (Andrews v. Mobile Aire Estates (2005)
125 Cal.App.4th 578, 588.) “Minor
inconveniences and annoyances are not actionable breaches of the implied
covenant of quiet enjoyment. To be actionable, the landlords act or omission
must substantially interfere with a tenants right to use and enjoy the premises
for the purposes contemplated by the tenancy.”
(Id. at 589.)
Plaintiff
alleges substantial interference with its right to use and enjoy the premises
for the purposes contemplated by the tenancy—operation of a bar, restaurant,
and concert venue. Plaintiff alleges the
water intrusion and vermin infestation, which were the result of Defendants’
failure to maintain the common areas and other vacant spaces in the shopping
center, substantially interfered with Plaintiff’s ability to operate its
business and ultimately forced Plaintiff to shut down the business and vacate the
premises. (FAC, ¶¶7-17.) In addition, prior to vacating the premises,
Plaintiff was cited by the health department for rodent droppings at or near
the wall the leased premises shared with the vacant and unattended Sears
space. (FAC, ¶15.) As a result, Plaintiff was forced to close
its business. (Id.) These allegations are not “minor
inconveniences or annoyances.”
The demurrer
to the 4th cause of action for breach of the covenant of quiet
enjoyment is overruled.
5th cause of action for breach of B&PC
§17200
Plaintiff’s
17200 claim is based on the alleged misrepresentations made in connection with
the Lease Agreement. Plaintiff alleges
in the first cause of action for fraudulent inducement that (1) Defendants
misrepresented that they would be responsible for repairs and losses, including
those resulting from water intrusion and vermin and (2) Defendants
misrepresented that the shopping mall was a thriving and viable location and
that they would make all reasonable and good faith efforts to fill any
vacancies in the shopping mall. (FAC,
¶19 and 20.) Plaintiff alleges
Defendants knew these representations were false when made and made them to
induce Plaintiff into entering into the lease.
(FAC, ¶¶21 and 22.) While these
allegations are insufficiently specific to plead fraud, they are sufficient to
support a consumer unfair business practice claim.
However,
these allegations are incorporated by reference into the 5th cause
of action from the 1st cause of action for fraudulent
inducement. Because the demurrer is
sustained with leave to amend to the 1st cause of action for
fraudulent inducement, leave to amend is also granted as to the 5th
cause of action for violation of Bus. & Prof. Code §17200.
The demurrer
to the 5th cause of action for violation of B&PC §17200 is sustained
with ten (10) days leave to amend.
6th cause of action for conversion
Conversion
is the wrongful exercise of dominion over the property of another. (Farmers Ins. Exchange v. Zerin (1997)
53 Cal.App.4th 445, 451.) The elements
of a claim for conversion are (1) the plaintiff's ownership or right to
possession of the property at the time of the conversion, (2) the defendant's
conversion by a wrongful act or disposition of property rights, and (3)
damages. (Id.) It is not necessary that there be a manual
taking of the property, only an assumption of control or ownership over the
property, or that the alleged converter has applied the property to his or her
own use. (Id. at pp. 451–452.)
Defendants
demur to the conversion claim based on Sections 6.01 and 6.02 of the Lease
Agreement. Defendants argue the personal
property allegedly converted belonged to Defendants pursuant to Sections 6.01
and 6.02.
Section
6.01 of the Lease Agreement provides, “All alternations, decorations, additions
and improvements made by Tenant shall be deemed to have attached to the
Premises and to have become the property of Landlord upon such
attachment.” (FAC, Ex. 1, §6.01, p.
10.) Section 6.02 of the Lease Agreement
provides, “Tenant shall not remove any of such alterations, decorations,
additions and improvements, except that trade fixtures, equipment and other
personal property installed by the Tenant…and not affixed to the Premises…may
be removed if all Rental and other charges due hereunder are paid in full and
Tenant is not otherwise in default hereunder…If Tenant shall fail to remove any
of its Property, Landlord may, at Landlord’s option, retain either any or all
of the property, and title thereto shall thereupon vest in Landlord without
compensation to Tenant…” (Id. at
§6.02, pp. 10-11.)
Neither of
these sections clearly and affirmatively bar Plaintiff’s conversion claim. Plaintiff alleges it was forced to vacate the
premises due to water intrusion and vermin infestation. (FAC, ¶¶15-17.) Plaintiff also does not specifically identify
the “Personal Property” that was converted, only describing the property as
“certain property, including, but not limited to, the floor constructed for the
Premises and other equipment.” (FAC,
¶53.) As such, it is not clear from the
face of the complaint that the items converted would fall into the categories
of improvements identified in Section 6.01, or that Tenant failed to remove the
“personal property,” such that Defendants’ discretion to deem the property
theirs was exercised in good faith.
Likewise,
Section 19.01 is not a clear and affirmative defense to the conversion
claim. Section 19.01 is entitled “Rights
Upon Default” and provides, “In the event Tenant shall not remove its property
from the Premises within ten (10) days after Tenant has vacated the Premises,
then such property shall be deemed abandoned by the Tenant and Landlord may
dispose of the same without the Landlord having any liability to Tenant.” (FAC, Ex. 1, §19.01, p. 32.)
Plaintiff
is alleging a material breach by Defendants of the Lease Agreement, such that
it was constructively evicted from the leased premises. Based on this allegation it is unclear if
Section 19.01 applies and whether Plaintiff was in “default.” Moreover, there are no facts alleged that
would indicate Plaintiff failed to remove its property from the Premises within
10 days of abandonment.
The demurrer
to the 6th cause of action for conversion is overruled.
7th cause of action for unjust enrichment
Unjust
enrichment is synonymous with a claim for restitution. (McBride v. Boughton (2004) 123
Cal.App.4th 379, 387.) Moreover, a
general demurrer must be overruled if the allegations state any claim, even one
not intended by the plaintiff. (Sheehan
v. San Francisco 49ers, Ltd. (2009) 45 Cal.4th 992, 998 (general demurrer
may be upheld “only if the complaint fails to state a cause of action under any
possible legal theory”).)
There is a
split amongst California courts regarding whether unjust enrichment is an
independent cause of action. Although
some California courts have suggested the existence of a separate cause of
action for unjust enrichment, other courts have held that there is no cause of
action in California for unjust enrichment.
(Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593
(listing elements of unjust enrichment claim); Levine v. Blue Shield of Cal.
(2010) 189 Cal.App.4th 1117, 1138, quoting Durell v. Sharp Healthcare
(2010) 183 Cal.App.4th 1350, 1370 (no independent cause of action for unjust
enrichment; unjust enrichment equivalent of restitution cause of action).)
Plaintiff
sufficiently alleges grounds for restitution, even if unjust enrichment is not
recognized as a cause of action. Plaintiff
alleges that it was constructively evicted and unable to use the leased
premises throughout the tenancy due to Defendants’ material breaches of its
lease obligations and negligence. (FAC,
¶¶7-17.) Plaintiff seeks restitution for
the rental payments it made despite being unable to use the leased premises as
promised. (FAC, ¶60.)
The demurrer
to the 7th cause of action for unjust enrichment is overruled.
8th cause of action for premises liability and
9th cause of action for negligence
Defendants
argue the premises liability and negligence claims are duplicative of the
breach of contract claim. Plaintiff’s
premises liability and negligence claims sound in tort with distinct elements
from breach of contract. Plaintiff is
entitled to plead alternative theories of liability. (Gebert v. Yank (1985) 172 Cal.App.3d
544, 554 (plaintiff properly pled alternative theories of recovery for breach
of bailment contract and negligence, two causes of action with differing
burdens of proof).)
Accordingly,
the demurrer to the eighth and ninth causes of action if overruled.
Motion to Strike
Consequential
Damages and Lost Profits. Defendants’
Motion to Strike Plaintiff’s request for consequential damages and lost profits
pursuant to Section 10.01 of the Lease Agreement is denied. Section 10.01 of the Lease Agreement
provides, “[i]n no event shall Landlord be liable for consequential damages or
Tenant’s lost profits claimed to be caused by any failure of maintenance or
repair by Landlord.” (FAC, Ex. 1,
§10.01.)
As argued
by Plaintiff, the FAC alleges consequential damages and lost profits from
conduct beyond failure to maintenance or repair. Plaintiff also alleges these damages resulted
from fraud, constructive eviction, destruction and conversion of personal
property, as well as Defendants “improper installation…of piping in the
restrooms located above the Premises.”
(FAC, ¶11.) Section 10.01 also
arguably does not apply to Defendants’ tortious conduct. Finally, Plaintiff is alleging material
breach of the Lease Agreement that excuses it from certain obligations under
the Lease Agreement. (FAC, ¶¶31-32.)
Attorney’s
Fees. Defendants’ Motion to Strike
Plaintiff’s claim for attorney’s fees is denied. Defendants argue the attorney’s fees
provision does not cover tort claims.
However, the language of the attorney’s fee provision is at the very
least ambiguous and reasonably interpreted in the manner advanced by Plaintiff
to cover the tort and contract claims: “If
at any time after the date that this Lease has been executed by Landlord and
Tenant, either Landlord or Tenant institutes any action or proceeding against
the other relating to the provisions of this Lease or any default hereunder,
the non-prevailing party in such action or proceeding shall reimburse the
prevailing party for the reasonable expenses of attorneys’ fees and costs…incurred
therein by the prevailing party.” (FAC,
Ex. 1, §27.22, p. 40.)
Punitive
Damages. Defendants’ Motion to
Strike the punitive damages allegations from the fraud, conversion and
negligence claims is granted with leave to amend. Plaintiff’s fraud claim fails to state a
claim for fraud. Plaintiff’s conversion
claim fails to allege that the conversion was malicious, fraudulent or
oppressive. Plaintiff’s negligence claim
likewise does not allege malice, fraud or oppression. Plaintiff fails to allege that Defendants’
conduct was despicable conduct undertaken with conscious disregard of the
rights and safety of others. At best,
Plaintiff has alleged that Defendants were negligent in failing to maintain the
premises.