Judge Christopher K. Lui, Case 22STCV22914 2022-12-08 Tentative Ruling

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the demurrer addressed herein. As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue. Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776. If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff leased production studio space from Defendant, with an option to purchase the property. Defendant allegedly interfered with Plaintiff’s business from prospective clients who wished to rent studio space from Plaintiff. Moreover, Defendant was allegedly responsible for a flood to the building, which Plaintiff paid to have the resulting damages repaired.

Defendant Castaic Studios, LLC filed a Cross-Complaint alleging that Plaintiff ceased making payments as required under the License Agreement, yet continued to occupy the premises and improperly maintained possession and control despite Cross-Complainant’s objections.

Defendants Castaic Studios, LLC and Fred Faramarzi demur to the First Amended Complaint.

Defendants Castaic Studios, LLC and Fred Faramarzi’s demurrer to the First Amended Complaint is SUSTAINED with leave to amend as to the first, second causes of action and OVERRULED as to the third, fourth, fifth and sixth causes of action

The Declaration of Lane M. Nussbaum reflects hat Defendant’s counsel satisfied the meet and confer requirement set forth in CCP § 430.41.

1. First Cause of Action (Intentional Interference With Prospective Economic Advantage).

In order to prove a claim for intentional interference with prospective economic advantage, a plaintiff has the burden of proving five elements: (1) an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) an intentional act by the defendant, designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's wrongful act, including an intentional act by the defendant that is designed to disrupt the relationship between the plaintiff and a third party. (Citation omitted.) The plaintiff must also prove that the interference was wrongful, independent of its interfering character. (Citation omitted.) “[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Citation omitted.)

(Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 944 [bold emphasis added].)

Defendant argues that Plaintiff fails to allege the existence of an economic relationship with a third party, but only the hope that a relationship might be entered into. Defendant argues that there are insufficient allegations of the terms of a potential contract, or the likelihood that such a contract would ultimately have been consummated.

However, the 1AC actually alleges that Plaintiff entered into an agreement with Ova whereby the parties agreed that Ova would rent portions of the Studio from Plaintiff starting on June 1, 2022, continuing on a month-to-month basis for a period of up to two years at the following rates: $41,037 per day, $287,262 per week, $1,149,050 per month. (1AC, ¶ 24.) This is a sufficient economic relationship—indeed, a contract[1]—to support this cause of action. The essential terms of the contract are sufficiently pled. This argument is not persuasive.

Defendant also argues that the 1AC alleges a sublease, but Plaintiff ‘s rights under the master lease was limited to a one month terms, subject to 35 successive renewal options if certain conditions were met, so Plaintiff did not have the ability to enter into a valid multi-year sublease for the premises.

However, as noted above, the agreement with Ova was for a month-to-month basis as well. This argument is not persuasive.

Moreover, the Lease explicitly prohibits subletting, absent the Licensor’s prior written consent. (Lease, ¶¶ 12.1, 14.4.) The Lease states that unapproved subletting may be treated by the Licensor as a non-curable default. (Lease, ¶ 12.1(d).)

Plaintiff argues that when a lease allows assignment or subletting only with the lessor’s prior consent, the lessor may refuse consent only where they have a good faith reasonable objection to the assignment or sublease, even if no provision prohibits the unreasonable or arbitrary withholding of consent. (Airport Plaza v. Blanchard (1987) 188 Cal.App.3d 1594, 1600.)

However, in 1989, the Legislature enacted Civil Code § 1995.230, which expressly permitted absolute restrictions on subleases:

A restriction on transfer of a tenant’s interest in a lease may absolutely prohibit transfer.

Section 1995.230 settles the question raised in Kendall v Ernest Pestana, Inc. (1985) 40 Cal 3d 488, 220 Cal Rptr 818, 709 P 2d 837, 1985 Cal LEXIS 419, of the validity of a clause absolutely prohibiting assignment or sublease. 40 Cal. 3d at 499 n. 14. A lease term absolutely prohibiting transfer of the tenant’s interest is not invalid as a restraint on alienation. Such a term is valid subject to general principles governing freedom of contract, including the adhesion contract doctrine, where applicable. See Section 1995.210 and Comment thereto (right to transfer absent a restriction). It should be noted that an absolute prohibition on transfer precludes the landlord’s use of the remedy provided in Section 1951.4 (continuation of lease after breach and abandonment). See Section 1951.4 and Comment thereto.

Thus, Defendant as landlord was not required to have a commercially reasonable reason for withholding consent. The only consequence of the absolute prohibition on subleasing absent the landlord’s prior written consent is that the landlord would not have available to it the remedy set forth in Civil code § 1951.4[2], which is the continuation of the lease after breach and abandonment.

Defendant argues that the 1AC does not allege that consent to a sublease was ever requested, or that the terms of the sublease were ever provided to Defendant for review prior to their execution or that written consent was ever given.

(a) Licensee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Licensee’s interest in this Agreement or in the Premises without Licensor’s prior written consent, except daily stage rentals, and no commitment for the period of unpaid fees periods.

(d) An assignment or subletting of over 50% without consent of Licensor shall, at Licensor's option, be Default curable after notice per Paragraph 13.l(c), or a non-curable Breach without the necessity of any notice and grace period. If Licensor elects to treat such unapproved assignment or subletting as a non-curable Breach Licensor may either: (i) terminate this Agreement, or (ii) upon 30 days written notice, increase the monthly monetary obligation to 110% of the amount then in effect. Further, in the event of such Breach and rental adjustment, ·(i) the Agreement price of any option to Agreement the Premises held by Licensee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Agreement term shall be increased to 110% of the scheduled adjusted amount.

(f) Licensor may reasonably withhold consent to a proposed assignment or subletting if Licensee is in Default at the time consent is requested.

12.4 Licensee has no right to sub-license more than 25 % of the space without the written consent of Licensor. Licensee has to provide a copy of the proposed sub-license contracts to Licensor for approval at Licensor's sole discretion.

Here, the 1AC does not allege the percentage of the “portions of the Studio” which Plaintiff agreed to rent to Ova. As such, it is unclear whether Plaintiff was violated ¶ 12.1, Page 18 and ¶ 12.4, Page 4 of the Lease. The Licensor’s written consent was not required for a sublease of 25% or lease of the space. Thus, it is a question of fact outside the scope of this demurrer as to whether Plaintiff had no right to sublease to Ova. This argument is not persuasive on demurrer.

Defendant also argues that the 1AC fails to allege that Defendant had knowledge of the terms of the alleged agreement. However, ¶ 25 alleges that Defendant Faramarzi approached Casandra Cooper, the CEO of Ova Media Group and her staff while they were visiting the Studio, asked about their relationship with Atoori[3], and was told that Ova had an agreement with Plaintiff to lease the Studio. (1AC, ¶¶ 14, 25.) This is sufficient to allege that Defendant had knowledge of the existence of the economic relationship/agreement between Plaintiff and Ova. Defendant does not cite any case law that the defendant must know every term of the economic relationship/agreement. This argument is not persuasive.

Defendant argues that Plaintiff fails to allege facts that Defendant intentionally disrupted the relationship, or that Defendant engaged in independently wrongful acts. In this regard, the 1AC alleges that Defendant interfered with prospective or actual clients of Plaintiff by stating that Atoori was not doing well and that Faramarzi could sell the studio to the client for roughly $16,000,000, which caused clients to pull out of business dealings and/or agreements with Plaintiff due to the uncertainty surrounding the Studio’s ownership. (1AC, 19.) Moreover, Faramarzi would not allow Plaintiff’s clients to enter or rent the Stage 4 area on the studio lot where Faramarzi stored his personal belongings despite Plaintiff’s exclusive license to use the Studio. (1AC, ¶¶ 19, 20.) Thus, the 1AC adequately alleges intentional disruption of the relationship.

However, the 1AC does not allege an independently wrongful act apart from the fact of interference itself.

The Supreme Court in Della Penna expressly declined to provide more detail as to the exact definition and scope of the wrongfulness component of a business interference claim. (Della Penna, supra, 11 Cal.4th at p. 393.) But in Korea Supply, supra, 29 Cal.4th at page 1159, the court explained that wrongful conduct is sufficient to support a business interference claim if it is proscribed by “some constitutional, statutory, regulatory, common law, or other determinable legal standard” where it amounts to “independently actionable conduct.” The court explained that this requirement serves to “distinguish[] lawful competitive behavior from tortious interference.” (Ibid.) It also clarified the intent element of the tort, concluding that a plaintiff is not required to plead and prove a defendant's specific intent to disrupt the plaintiff's prospective economic advantage. Rather, the plaintiff may either plead specific intent, or, alternatively, “plead that the defendant [*64] knew that the interference was certain or substantially certain to occur as a result of its action.” (Id. at p. 1154.)

(Popescu v. Apple Inc. (2016) 1 Cal.App.5th 39, 63-64, overruled in part on other grounds by Ixhcel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5^th 1130, 1148 [bold emphasis and underlining added].)

It appears that the independently wrongful conduct must be tortious, not a contractual breach:

We conclude, therefore, that an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. n11 (See Marin Tug & Barge, Inc., supra, at p. 835; see also Della Penna, supra, 11 Cal.4th at 408 (conc. opn. of Mosk, J.) ["It follows that the tort may be satisfied by intentional interference with prospective economic advantage by independently tortious means"].)

(Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159 (italics in original, bold emphasis added).)

Here, the 1AC does not specify an independently wrongful act by Defendants. In the Opposition, Plaintiff argues that Defendant Faramarzi defamed Plaintiff. However, Faramarzi allegedly told Ova that Castaic would likely be selling the Studio to someone other than Plaintiff because Atoori “had not been able to do anything with the Studio in months.” (1AC, ¶ 26.) Plaintiff alleges that the statement was false as Atoori was currently caught up on all his payments and had been actively negotiating agreements to rent space in the Studio to third parties, including Ova. (Id.) However, Faramarzi did not allegedly say that Plaintiff was behind on rent. Also, the fact that Plaintiff was negotiating agreements does not mean that that space was being actively rented. Thus, absent an allegation that space was in fact being rented, the falsity element of a defamation claim is lacking.

“The elements of a defamation claim are (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage. [Citation.] Civil Code section 45 provides, ‘Libel is a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye, which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.’” (Wong v. Jing (2010) 189 Cal.App.4th 1354, 1369 [117 Cal. Rptr. 3d 747].)

“ ‘The sine qua non of recovery for defamation … is the existence of falsehood.’ [Citation.] Because the statement must contain a provable falsehood, courts distinguish between statements of fact and statements of opinion for purposes of defamation liability. Although statements of fact may be actionable as libel, statements of opinion are constitutionally protected.” (McGarry v. University of San Diego (2007) 154 Cal.App.4th 97, 112 [64 Cal. Rptr. 3d 467] (McGarry).)

Plaintiff also alleges that Castaic did not have the right to sell the Studio for more than $16,000 without giving notice to Plaintiff of a qualifying offer, and Faramarzi falsely represented to Ova that no one could use the Stage 4 because it was his personal studio, in direct violation of the exclusive licensing agreement. However, this would be a contractual breach, not independently wrongful tortious conduct which would support this cause of action.

As such, this argument is persuasive, and the demurrer will be sustained on this basis.

Defendant argues that Plaintiff fails to allege facts to establish that Plaintiff’s actions caused a breach of the sublease or a disruption of the relationship. Defendant argues that the sublease could not have been performed because it was entered into without prior written approval and exceeded Plaintiff’s authority under the contract, and there is no likelihood that it would have been approved. Defendant argues that the 1AC does not allege any money was ever paid under the sublease, how much would have been due, what the obligations of the parties would have been, or that the subtenant ever had an intent or willingness to perform. Nor does the 1AC provide a rational reason for the subtenant backing out of the agreement.

Defendanat also argues that, as the landlord, it was a party to the sublease, as Defendant had the right to review and approve or disapproved of any such agreements, and was directly interested in and reliant on the performance of the subtenants. As such, Defendant argues, it cannot be liable for interference with the sublease.

The sublessee is not in privity of contract with the head landlord, since there are no contractual relations between them, and he is not in privity of estate with him, since there is no relation of tenancy between them and he merely holds possession for the lessee." (1 Tiffany, Real Property [3d ed.], § 124.)

When the transfer is a sublease, the transferor becomes the landlord, the transferee the subtenant, and the latter is not in privity with the head lessor. (Op. cit., § 3.57, at p. 297.)

In contrast to an assignment, a sublease is a transfer of only a portion of the tenant's estate, with the latter retaining a reversionary interest. (Citation omitted.) Presumably, BACC would like to be characterized as a subtenant to come within the rule that a subtenant is not directly liable to the landlord, there being neither privity of estate nor contract (the sublease creates a new estate, and is a contract between the tenant and subtenant). (Citations omitted)

(Vallely Invs. v. Bancamerica Commercial Corp (2001) 88 Cal.App.4th 816, 823.)

2. Second Cause of Action (Negligent Interference With Prospective Economic Advantage).

Defendant argues that the elements of negligent interference with prospective economic advantage are the same as with intentional interference with prospective economic advantage, and this cause of action fails for the same reasons.

“[A] plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant's interference was wrongful "by some measure beyond the fact of the interference itself." (Citation omitted.).” (Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal.4th 376, 392-93.) “[T]he element of independent wrongfulness [applies] in analyzing claims for negligent as well as intentional interference with prospective economic advantage. (Citations omitted.)” (Nat'l Medical Transp. Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440.) “An act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Citation omitted.)” (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 944 [italics added].)

For the reasons discussed above, Plaintiff has not pled that Defendants engaged in an independently wrongful act.

The Court makes the following observation regarding Defendants’ argument that Plaintiff fails to allege that Defendants breached a duty of care owed to Plaintiff.

The elements of negligent interference with . . . prospective economic advantage are (1) the existence of . . . [an] economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge (actual or construed) of the relationship; (3) the defendant's knowledge (actual or construed) that the relationship would be disrupted if the defendant failed to act with reasonable care; (4) the defendant's failure to act with reasonable care; (5) actual disruption of the relationship; and (6) resulting economic harm. (Citations omitted.)

"The tort of negligent interference with economic relationship arises only when the defendant owes the plaintiff a duty of care." (Stolz v. Wong Communications Limited Partnership (1994) 25 Cal. App. 4th 1811, 1825 [31 Cal. Rptr. 2d 229].) . . .

Whether a duty of care is owed with respect to a plaintiff's interests in a prospective economic advantage may be determined by reference to the following criteria: (1) the extent that the transaction is intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the certainty that plaintiff actually suffered injury; (4) the closeness of the connection between the defendant's conduct and the injury suffered; (5) the moral blame attached to the defendant's conduct; and (6) the policy of preventing future harm. (Citation omitted.)

Because Defendant did not address these factors in the demurrer, the Court need not address this argument at this time.

Defendant argues that the 1AC does not allege that Defendants were ever served with a 60-day notice to cure in accordance with ¶ 13.6 of the License Agreement. However, ¶ 13.6 requires notice as to breaches of the Agreement. As to this cause of action, the alleged breaches are not of contractual provisions, but rather acts designed to frustrate the purpose of the contract. (1AC, ¶ 40.) As such, ¶ 13.6 would not require Plaintiff to give notice of the alleged BICGFFD. This argument is not persuasive.

Defendant also argues that ¶ 8.8 of the License Agreement excludes liability for the damages sought in the 1AC. ¶ 8.8, Page 16 provides in pertinent part:

Notwithstanding the negligence or breach of this Agreement by Licensor or its agents, neither Licensor nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares merchandise or other property of Licensee, Licensee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, . . . or (iii) injury to Licensee's business or for any loss of income or profit therefrom. Instead, it is intended that Licensee's sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Licensee is required to maintain pursuant to the

Giving ¶ 8.8 a reasonable construction, as the Court must on demurrer, ¶ 8.8’s exemption from injury to License’s business or for any loss or income or profit therefrom apparently refers to situations where the injury or damage occurs from causes beyond the Licensor’s control, not deliberate breaches of contract or intentional torts directed toward the Licensee itself. This argument is not persuasive.

Where a complaint is based on a written contract which it sets out in full, a 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. ( Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 400 [113 Cal.Rptr. 585, 521 P.2d 841].) While plaintiff's interpretation of the contract ultimately may prove invalid, it was improper to resolve the issue against her solely on her own pleading. "In ruling on a demurrer, the likelihood that the pleader will be able to prove his allegations is not the question." ( Shaw v. Metro-Goldwyn-Mayer, Inc. (1974) 37 Cal.App.3d 587, 599 [113 Cal.Rptr. 617].)

(Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239 [bold emphasis and underlining added].)

Defendants also argue that Plaintiff fails to allege facts constituting a breach of the implied covenant of good faith and fair dealing.

The elements of a breach of the implied covenant of good faith and fair dealing sounding in contract are: (1) the existence of a contractual relationship between the parties (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031); (2) defendant was not expressly permitted by the contract to engage in the conduct which constitutes the alleged breach (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1120-1121); (3) defendant subjectively lacked a good faith belief in the validity of the act or the act was intended to frustrate the common purpose of the agreement (Wolf, supra, 162 Cal.App.4^th at 1123) or defendant’s conduct was objectively unreasonable (Carma Developers, Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372-73); (4) the act or conduct was contrary to the contract’s express purposes or the parties' legitimate expectations as expressed in a specific contractual obligation (Carma Developers, supra, 2 Cal.4^th at 373) or otherwise frustrates the other party’s rights to express contractual benefits (Racine & Laramie, Ltd., supra, 11 Cal.App.4^th at 1031-32; Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094); and (5) resulting damages (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 541).

Here, the 1AC sufficiently alleges that Defendants acted to frustrate the common purpose of the agreement, i.e., for Plaintiff to use the Studio “for any legal business related to the Filming and Entertainment Industry . . . .” and Plaintiff could sub-license up to 25% of the Studio without Castaic’s prior written consent. (1AC, ¶ 38, ¶¶ 6.1 and 12.4 of the Agreement.)

Defendants allegedly frustrated the common purpose of the agreement by the following alleged acts:

a. Interfering with Plaintiff’s potential and actual client relations by making false representations to Plaintiff’s clients regarding Plaintiff’s business endeavors at the Studio and Plaintiff’s performance of its contractual obligations to Castaic;

b. Interfering with Plaintiff’s potential and actual client relations by making offers to Plaintiff’s clients to purchase the Studio from Castaic;

c. Interfering with Plaintiff’s potential and actual client relations by preventing Plaintiff’s clients from touring and/or utilizing the Stage 4 area of the Studio, which area was included in Plaintiff’s exclusive license to use the Studio; and

d. On information and belief, causing a flood to occur in a second-floor bathroom of the Studio which resulted in the loss of Plaintiff’s use of that area and ability to rent that space to prospective and actual clients.

This is sufficient to plead a breach of the implied covenant of good faith and fair dealing.

The fourth cause of action is based upon Defendants’ alleged breach of Plaintiff’s exclusive license to use the entire Studio, including but not limited to the “Stage 4 Area” to which Plaintiff was to be given access to use on or before 45 days from the date of the Agreement. (1AC, ¶ 43.) Plaintiff and Castaic entered into a Second Agreement wherein it was agreed that Castaic would vacate the Stage 4 area before the end of April 2022. (Id., ¶ 44.) ¶ 45 alleges that Castaic agreed pursuant to ¶ 8.7 of the Agreement to:

indemnify, protect, defend and hold harmless the Premises, [Plaintiff] and its agents, . . . from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by [Castaic].”

Because Faramazi did not remove his personal belongings, Plaintiff was unable to show the Stage 4 area to potential clients. (1AC, ¶¶ 47-50.)

“The elements of a breach of contract claim are that a contract was formed; that the plaintiff did everything required by the contract; that the defendant did not do something required by the contract; and that the plaintiff was harmed as a result. (Citation omitted.)” (CSAA Ins. Exch. v. Hodroj (2021) 72 Cal.App.4th 272, 276.)

Generally, a party's failure to perform a condition precedent will preclude an action for breach of contract. (Id., at p. 205.) Because Richman did not perform that condition precedent, Hartley was not required to perform as a matter of law and summary judgment was properly granted.

Defendant argues that the 1AC does not allege that Defendants were ever served with a 60-day notice to cure in accordance with ¶ 13.6, Page 21 of the License Agreement. However, ¶ 47 alleges that, at the end of April 2022, Plaintiff provided oral and written notice to Faramarzi and Castaic to vacate the Stage 4 area, but they failed to do so.

Defendant also argues that ¶ 8.8 of the License Agreement excludes liability for the damages sought in the 1AC. As discussed above re: the third cause of action, the ¶ 8.8

exemption from injury to License’s business or for any loss or income or profit therefrom apparently refers to situations where the injury or damage occurs from causes beyond the Licensor’s control, not deliberate breaches of contract or intentional torts directed toward the Licensee itself. This argument is not persuasive.

The fifth cause of action is based upon the parties’ agreement wherein Plaintiff had an exclusive license to use the entire Studio. (1AC, ¶ 52.)

Defendant argues that the 1AC does not allege that Defendants were ever served with a 60-day notice to cure in accordance with ¶ 13.6, Page 21 of the License Agreement. However, ¶ 57 alleges that Plaintiff provided notice to Castaic of the flood and repair costs and requested that Castaic pay for or reimburse Plaintiff for such repair costs. This argument is not persuasive.

Defendant also argues that ¶ 8.8 of the License Agreement excludes liability for the damages sought in the 1AC. Here, the breach of contract cause of action is based upon the flooding occurring in a second-floor bathroom located next to the room where Faramarzi stored his personal belongings. (1AC, ¶ 55.) The 1AC also alleges that the flooding was deliberately caused by Faramarzi or resulted from his use of the bathroom and the area where the flooding occurred. (Id.)

While ¶ 8.8 would exempt Defendants from liability for accidental or negligent flooding, ¶ 8.8. would apparently not exempt Defendant from intentional flooding. Obviously culpability for the flood is a question of fact outside the scope of the demurrer. As such, Defendant’s argument in this regard is not persuasive on demurrer.

Defendants argue that declaratory relief is inapplicable here because the Plaintiff’s rights are not impacted by the controversy. Defendants argue that, because the sale of the property to a third party does not impact Plaintiff’s rights and obligations under the license agreement, Plaintiff has no interest in a declaration constricting the purchase price of a sale by Defendant to a third party.

A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court . . . . In order to obtain declaratory relief, "'[T]he controversy must be of a character which admits of specific and conclusive relief by judgment within the field of judicial determination, as distinguished from an advisory opinion upon a particular or hypothetical state of facts. The judgment must decree, and not suggest, what the parties may or may not do."' (Citations omitted.)

61. An actual controversy has arisen and now exists between Plaintiff and Castaic concerning the meaning of the Agreement in that Plaintiff contends that Castaic could not sell the Studio for more than $16,000,000 pursuant to paragraphs 39 and 57 of the Agreement. In contrast, Castaic contends that it could sell the Studio for any amount, including an amount over $16,000,000, pursuant to paragraph 57 of the Agreement.

62. The third section under paragraph 57 is ambiguous and requires a judicial interpretation. The third paragraph reads: “Upon receipt of an acceptable offer (such as sale/purchase at a lower price, Licensor will provide courtesy seven (7) business day notice of similar priority opportunity privilege to Licensee to accept and act accordingly with same terms.”

63. Plaintiff desires a judicial determination of its rights and a declaration as to whether Castaic can sell the Studio for more or less than $16,000,000 pursuant to paragraph 57 of the Agreement.

64. A judicial declaration is necessary and appropriate at this time under the circumstances so that Plaintiff may ascertain his rights and a declaration as to whether Castaic can sell the Studio for more or less than $16,000,000 pursuant to paragraph 57 of the Agreement.

The obvious import of ¶ 39, Page 27 of the Agreement is that Plaintiff has the right of first refusal in terms of the “exclusive” option to purchase at $16 million during the first year of the License Period, or $17 million during months 13 through 36 of the License Period.

Indeed, ¶ 57, Page 30 of the Agreement appears to provide Plaintiff such a right of first refusal if the Licensor received an offer to purchase the property for a lower price:

57. Licensor's right to sell the property or assign its rights to any third party, Licensor shall have the right [to] sell the property and provide a notice of advice to the Licensee, Licensor's action in this case, by no means will terminate or cancel this agreement; subject to Licensee has complied with all terms and conditions of this agreement, Licensee's rights to continue its multiple monthly options to renew its monthly occupancy and purchase under this agreement will be / are fully protected and will remain in full force.

Upon receipt of an acceptable offer (such as sale/purchase at a lower price), Licensor will provide a courtesy Seven (7) business day notice of similar priority opportunity privilege to Licensee to accept and act accordingly with same terms.

There is an ambiguity as to whether an “acceptable offer” includes a price higher than the $16 million or $17 million set forth at ¶ 39, Page 27. As such, declaratory relief is proper.

[1] It is essential to the existence of a contract that there should be:

1. Parties capable of contracting;

2. Their consent;

3. A lawful object; and,

4. A sufficient cause or consideration.

(Civ. Code § 1550.)

[2] Civil Code § 1951.4 provides:

(a) The remedy described in this section is available only if the lease provides for this remedy. In addition to any other type of provision used in a lease to provide for the remedy described in this section, a provision in the lease in substantially the following form satisfies this subdivision:

“The lessor has the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations).”

(b) Even though a lessee of real property has breached the lease and abandoned the property, the lease continues in effect for so long as the lessor does not terminate the lessee’s right to possession, and the lessor may enforce all the lessor’s rights and remedies under the lease, including the right to recover the rent as it becomes due under the lease, if any of the following conditions is satisfied:

(1) The lease permits the lessee, or does not prohibit or otherwise restrict the right of the lessee, to sublet the property, assign the lessee’s interest in the lease, or both.

(2) The lease permits the lessee to sublet the property, assign the lessee’s interest in the lease, or both, subject to express standards or conditions, provided the standards and conditions are reasonable at the time the lease is executed and the lessor does not require compliance with any standard or condition that has become unreasonable at the time the lessee seeks to sublet or assign. For purposes of this paragraph, an express standard or condition is presumed to be reasonable; this presumption is a presumption affecting the burden of proof.

(3) The lease permits the lessee to sublet the property, assign the lessee’s interest in the lease, or both, with the consent of the lessor, and the lease provides that the consent shall not be unreasonably withheld or the lease includes a standard implied by law that consent shall not be unreasonably withheld.

(c) For the purposes of subdivision (b), the following do not constitute a termination of the lessee’s right to possession:

(1) Acts of maintenance or preservation or efforts to relet the property.

(2) The appointment of a receiver upon initiative of the lessor to protect the lessor’s interest under the lease.

(3) Withholding consent to a subletting or assignment, or terminating a subletting or assignment, if the withholding or termination does not violate the rights of the lessee specified in subdivision (b).

(Civ. Code § 1951.4 [bold emphasis added].)

[3] The President of Plaintiff Wonderland Studios, LLC. (1AC, ¶ 7.)