Judge Daniel M. Crowley, Case Number: 23STCV31254, Date: 2024-04-04 Tentative Ruling

Defendant 821 Traction FM LLC’s demurrer to Plaintiff Juicerie VII, LLC’s complaint is sustained as to the 2nd and 3rd causes of action with 20 days leave to amend and overruled as to the 1st cause of action.

Defendant 821 Traction FM LLC (“821 Traction”) (“Defendant”) demurs to the complaint (“Complaint”) of Plaintiff Juicerie VII, LLC (“Juicerie”) (“Plaintiff”) on the grounds that the 2nd and 3rd causes of action fail to state facts sufficient to constitute viable causes of action against it, and the 1st cause of action is uncertain. (Notice of Demurrer, pg. 2; C.C.P. §§430.10(e), (f).)

Defendant’s counsel declares she met and conferred telephonically with Plaintiff’s counsel on February 28, 2024, however the parties were unable to reach an agreement as to the deficiencies raised by the demurrer. (Decl. of Pérez ¶3.). Defendant’s counsel’s declaration is proper; therefore, the Court will consider Defendant’s demurrer.

On December 21, 2023, Plaintiff filed its operative Complaint against Defendant alleging three causes of action: (1) declaratory relief, (2) recission, and (3) anticipatory breach of lease, arising from Plaintiff’s tenancy at real property located at 821 Traction Avenue, Los Angeles, California 90021 (“Premises”), leased by Defendant. (See Complaint ¶¶1-2, 9.)

Defendant filed the instant demurrer on March 6, 2024. Plaintiff filed its opposition on March 21, 2024. Defendant filed its reply on March 27, 2024.

Plaintiff alleges it entered into a lease agreement (“Lease”) with Defendant on January 31, 2022, for Plaintiff to open and operate a Butcher’s Daughter restaurant. (Complaint ¶9, Exh. 1.) Plaintiff alleges as reflected on the Lease’s Exhibit B, Defendant was require to substantially complete the landlord work (including receipt of a certificate of occupancy for the Building, or its legal equivalent allowing Plaintiff to commence construction of the Tenant Improvements, and allowing Plaintiff to legally occupy the Premises for the Permitted Use following Plaintiff’s completion of the Tenant Improvements and receipt of any required governmental approvals relating to the Tenant Improvements), and only upon those occurrences did the “Delivery Date” occur. (Complaint ¶10.) Plaintiff alleges the Lease Commencement Date is defined in the Lease as 120 days after the “Delivery Date.” (Complaint ¶10.)

Plaintiff alleges upon such delivery, the Premises was required to be in good working order and condition, and in compliance with applicable laws, including the ADA, to the extent required to allow the legal use of the Premises for the Permitted use upon Plaintiff’s receipt of permits for and completion of the Tenant Improvements in the Premises, and free of Hazardous Materials in violation of applicable laws. (Complaint ¶11.) Plaintiff alleges as of the date this complaint is filed, the Delivery Date has not occurred due to various incomplete items for which Defendant is responsible. (Complaint ¶12.) Plaintiff alleges for example, the Premises is not ADA compliant. (Complaint ¶13.) Plaintiff alleges parts of landlord’s “delivery conditions” have also not been fulfilled. (Complaint ¶13.) Plaintiff alleges that as required before the “Delivery Date,” Plaintiff has not completed its Tenant Improvements due, in part, to Defendant’s refusal to provide the Tenant Improvement funds. (Complaint ¶14.)

Plaintiff alleges it began its Tenant Improvement work, has already expended over $200,000 in various expenses related to the Tenant Improvement work, and submitted a reimbursement package on or about July 14th and followed-up with all information and documents on July 25th. (Complaint ¶15.) Plaintiff alleges Defendant, on or about August 8, 2023, informed Plaintiff that “TI should be approved and transferred by the end of next week.” (Complaint ¶16.) Plaintiff alleges Defendant’s representation was false. (Complaint ¶16.)

Plaintiff alleges Defendant, on the other hand, contends the “Delivery Date” occurred in December 2022 solely based on Landlord obtaining a certificate of occupancy. (Complaint ¶17.) Plaintiff alleges Defendant, however, was mistaken in that this is but just one of the items required of Defendant as alleged above in ¶10. (Complaint ¶17.) Plaintiff alleges in response to Defendant’s multiple demands for rent payments or else face the consequences, although not yet due, Plaintiff remitted rent payments in June, July, August, and September 2023 as an accommodation and under protest. (Complaint ¶18.) Plaintiff alleges, however, it stopped making rent payments after understanding that Defendant had failed to satisfy the “Delivery Conditions” and didn't have the right in the first instance to demand rent payments. (Complaint ¶18.)

Plaintiff alleges on October 20, 2023, it informed Defendant that because Defendant was not allowing the Tenant Improvement Allowance, Plaintiff would exercise its right to offset rent against the Tenant Improvement Allowance under paragraph 2.3 of the Lease’s Exhibit B. (Complaint ¶19.) Plaintiff alleges it stated: “Want to call to your attention section 2.3 Exhibit B - let this email serve as second notice. To the extent Landlord fails to pay from the Tenant Improvement Allowance amounts due to Tenant in accordance with the terms thereof, and such amounts remain unpaid for thirty days after notice from Tenant, then without limiting Tenant’s other remedies under the Lease, Tenant may, after Landlord’s failure to pay such amounts within five business days after Tenant’s delivery of a second notice from Tenant delivered after the expiration of such 30-day period, pay the same and deduct the amount thereof from the Rent.” (Complaint ¶19.)

Plaintiff alleges in response Defendant indicated through counsel that an unlawful detainer action would be filed immediately, or as of December 20, 2023. (Complaint ¶20.) Plaintiff alleges Defendant, through counsel, issued a “Three-Day Notice to Pay Rent or Quit” and a second “Three-Day Notice to Cure or Quit” with respect to an estoppel certificate that was not delivered according to the “notice” provisions in the Lease. (Complaint ¶20.)

In support of its demurrer to Plaintiff’s Complaint, Defendant argues the 2nd and 3rd claims fails to allege facts sufficient to constitute viable causes of action against it, and the 1st cause of action is uncertain. (Demurrer, pg. 3; C.C.P. §§430.10(e), (f).)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

The grounds for rescission and the procedure by which parties may rescind their contract are governed by Civil Code §§1688, et seq. (Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1384.) “[A] party to a contract cannot rescind at his pleasure, but only for some one or more of the [seven] causes enumerated in section 1689 of the Civil Code.” (Nmsbpcsldhb v. County of Fresno (2007) 152 Cal.App.4th 954, 959.)

Pursuant to Civil Code §1689(b)(1), a party to a contract may rescind the contract “[i]f the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.” (Civ. Code §1689(b)(1).)

Plaintiff alleges it believed that the Tenant Work Letter, Exhibit B to the Lease, controlled the “Delivery Date” and when the Lease Commencement Date would be triggered. (Complaint ¶24.) Plaintiff alleges Defendant, on the other hand, contends the Delivery Date occurred in December 2022 notwithstanding that the delivery conditions had not been satisfied. (Complaint ¶25.)

Plaintiff alleges it expended significant funds with respect to its tenant improvement work, all without receipt of the Tenant Improvement Allowance of $330,995. (Complaint ¶26.) Plaintiff alleges Defendant represented on or about August 8, 2023, that the Tenant Improvement Allowance would be paid in mid-August 2023, but Defendant’s representation was false, made with the intent that Plaintiff rely on it, which Plaintiff reasonably did, because Plaintiff did not have any grounds to contest Defendant’s false representations about when the Tenant Improvement Allowance would be paid. (Complaint ¶27.) Plaintiff alleges its reliance was reasonable and justified. (Complaint ¶28.) Plaintiff alleges based on that reliance, Plaintiff continued to fund the Tenant Improvement work without receiving any of the promised $330,995 in Tenant Improvement Allowance. (Complaint ¶28.)

Plaintiff alleges Plaintiff and Defendant are required to restore each other to the same position they were in prior to January 31, 2022. (Complaint ¶29.)

With regard to mutual mistake, Plaintiff fails to allege that both parties were mistaken as to any material matter. (Civ. Code §1577 [“Mistake of fact is a mistake . . . consisting in: [¶] 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract; or, [¶] 2. Belief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed.”]; Wood v. Kalbaugh (1974) 39 Cal.App.3d 926, 932 [“It is settled that to warrant a unilateral rescission of a contract because of mutual mistake, the mistake must relate to basic or material fact . . . .”].) Plaintiff alleges what it believed regarding the Tenant Work Letter and the Delivery Date, and what Defendant now contends, not what Defendant believed at the time the parties entered into the Lease regarding the Delivery Date. (See Complaint ¶24.)

“A ‘mutual’ mistake is one made by both parties as to the same proposition.” (See 1 Miller and Starr Cal. Real Est. §1:135 [4th ed.].) “Because one or the other may have been mistaken does not constitute mutuality of mistake; and does not constitute ground for rescission for mutual mistake.” (Wood v. Metzenbaum (1951) 107 Cal.App.2d 727, 730-731; see also Harding v. Robinson (1917) 175 Cal. 534, 541-542; Miller v. Lantz (1937) 9 Cal.2d 544, 548.) Parties having differing interpretations of a contract does not constitute a “mistake” for rescission purposes. (See, e.g., Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1421.)

With regard to fraud, Plaintiff does not allege fraud in the inducement. Rather, Plaintiff alleges a fraudulent misrepresentation made on August 8, 2023, more than 1.5 years after the parties entered into the Lease on January 31, 2022. (See Complaint ¶¶9, 27.) Fraudulent inducement is a type of fraud that occurs when one party misrepresents information or makes false statements to another party to convince them to enter into a contract. The fraud that justifies rescission must induce the making of the contract. (See Crow v. Kenworthy (1939) 30 Cal.App.2d 313, 315; Wong, 237 Cal.App.4th at pg. 1388 [“[A] single misstatement as to a material fact, knowingly made with intent to induce another into entering the contract, will, if believed and relied on by that other, afford a complete ground for rescission. . . .].)

Accordingly, Defendant’s demurrer to Plaintiff’s 2nd cause of action is sustained with 20 days leave to amend.

“If a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such notice before the time at which performance upon his part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon his part in favor of the former party.” (Civ. Code §1440.)

“Repudiation of a contract, also known as “anticipatory breach,” occurs when a party announces an intention not to perform prior to the time due for performance.” (Stephens & Stephens XII, LLC v. Fireman’s Fund Insurance Co. (2014) 231 Cal.App.4th 1131, 1150.) Anticipatory breach can be express or implied: “An express repudiation is a clear, positive, unequivocal refusal to perform; an implied repudiation results from conduct where the promisor puts it out of his power to perform so as to make substantial performance of his promise impossible.” (Taylor v. Johnston (1975) 15 Cal.3d 130, 137.)

Plaintiff alleges the Lease contains a “Landlord Lease Restrictions” clause that prohibits Defendant from leasing to any entity that will have a use identified as a coffee shop, roaster, or café where coffee and tea beverages are anticipated to make up more than 30% of total annual revenues. (Complaint ¶31.) Plaintiff alleges Defendant, in violation of this provision, has leased a larger portion of the Premises to an entity, of which Defendant is the majority or controlling member, called Freemarket, which, in turn, is anticipated to sub-lease a portion of Freemarket’s space to “Concierge Coffee.” (Complaint ¶32.)

Plaintiff alleges when it requested information about Concierge Coffee to ascertain its effect vis-à-vis the “Landlord Lease Restrictions” clause, Defendant and its counsel refused to provide any salient information and only concluded that Concierge Coffee, despite its name, will not exceed to anticipated total annual revenue threshold. (Complaint ¶33.) Plaintiff alleges Defendant’s actions constitute an anticipatory breach of the Lease that will cause Plaintiff damage and completely obliterate the “Landlord Lease Restrictions” clause. (Complaint ¶34.) Plaintiff alleges it is entitled to rescind the Lease based on Defendant’s anticipatory breach of the Lease and/or obtain damages for Defendant’s breach in an amount subject to proof. (Complaint ¶35.)

Plaintiff fails to allege that any repudiation occurred, specifically, that Defendant expressly refused to perform under the Lease, or that it has “put it out of [its] power to perform so as to make substantial performance of [its] promise impossible.” (Taylor, 15 Cal.3d at pg. 137.) Plaintiff fails to allege that Concierge Coffee is anticipated to make up more than 30% of total annual revenues in coffee and tea beverages. (See Complaint ¶¶32-33.) Further, Plaintiff fails to allege that it is operating its business at the Premises, which is necessary to trigger §5.3 of the Lease.

Accordingly, Defendant’s demurrer to Plaintiff’s 3rd cause of action is sustained with 20 days leave to amend.

A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond—i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her.¿ (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿¿

If the complaint contains enough facts to apprise defendant of the issues it is being asked to meet, failure to label each cause of action is not ground for demurrer: “Although inconvenient, annoying and inconsiderate, the lack of labels . . . does not substantially impair [defendant’s] ability to understand the complaint.” (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 n.2.)¿¿

Where a demurrer is made upon this ground, it must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears (by reference to page and line numbers of the complaint).¿ (See Fenton v. Groveland Community Services District (1982) 135 Cal.App.3d 797, 809.)¿¿

Plaintiff’s pleading is not so bad that Defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against them.¿ (Khoury, 14 Cal.App.4th 612, 616.)

Plaintiff’s claim for declaratory relief seeks to determine its rights and obligations under the Lease. (Complaint ¶21.) Specifically, determinations of whether Plaintiff can exercise its right to offset rent against the Tenant Improvement Allowance under Lease Exhibit B ¶2.3, and whether the Delivery Date occurred in December 2022 because Defendant obtained a certificate of occupancy, or whether the Delivery Date has yet to occur. (See Complaint ¶¶12-20.)

Accordingly, Defendant’s demurrer to the 1st cause of action on the basis of uncertainty is overruled.¿

Defendant’s demurrer to Plaintiff’s Complaint is sustained as to the 2nd and 3rd causes of action with 20 days leave to amend and overruled as to the 1st cause of action.

Hon. Daniel M. Crowley

Judge of the Superior Court