Judge: Edward B. Moreton, Jr., Case: 20SMCV01659, Date: 2022-12-15 Tentative Ruling

Case Number: 20SMCV01659    Hearing Date: December 15, 2022    Dept: 205

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

MOVING PARTY:                    Plaintiff/Cross-Defendant One Westside, LLC

RESPONDING PARTY:         Defendant/Cross-Complainant Silver Cinemas Acquisition Co.

BACKGROUND

This action arises from a landlord-tenant dispute.  Plaintiff and Cross-Defendant One Westside LLC (“Landlord”) is the owner of 10850 W. Pico Boulevard, Los Angeles, California (the “Premises”).  Defendant and Cross-Complainant Silver Cinemas Acquisition Co. (“Tenant”) leased the Premises and operated a movie theater.  Landlord alleges Tenant failed to pay rent and provide a required letter of credit (“Rental LC”).  The Complaint alleges claims for (1) breach of contract, and (2) specific performance. 

Tenant has cross-claimed alleging the Landlord interfered with its use of the Premises by redirecting all parking traffic onto a ramp directly over the theater, causing excessive noise and vibration and making the auditoriums unsuitable for use.  Tenant further alleges that due to the COVID 19 pandemic, state and local authorities issued an ordinance that prevented the use of theaters, resulting in a temporary taking which warranted rent abatement under the Lease.  The Cross-Complaint alleges claims for (1) breach of lease agreement, (2) nuisance, (3) interference with prospective business advantage, (4) declaratory relief and (5) unfair practices. 

This hearing is on Landlord’s demurrer of the Cross-Complaint on grounds that (1) the breach of contract claim alleges breaches that are not actionable under the Lease or California law, and the damages sought are also barred by the Lease, (2) the nuisance claim fails because it seeks consequential damages barred by the Lease, (3) the intentional interference claim fails because there is no independent actionable wrong; there is no existing economic relationship that was interfered with, and damages for any such interference are barred by the Lease, (4) the declaratory relief action is mooted by the expiration of the lease on August 31, 2022, and (5) the unfair practices act claim fails because there is no fraudulent or wrongful act and the remedies available under the act cannot be awarded here as a matter of law.  Landlord also moves to strike allegations relating to (1) a taking, (2) consequential damages, (3) Landlord’s prosecution of its unlawful detainer action, and (4) punitive damages.                

LEGAL STANDARD

“[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 Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in 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 Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Further, the court may, upon motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).)  The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).)  The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Code Civ. Proc., § 436.)  The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”); Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 (“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”).)  The burden is on the complainant to show the Court that a pleading can be amended successfully.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

DISCUSSION

Breach of Contract Claim

            Tenant contends that Landlord breached the Lease by (1) reinstating use of a ramp directly above Tenant’s movie theater that interfered with Tenant’s use of the Premises (Third Amended Cross-Complaint (“TAXC”) ¶¶15-20), (2) failing to repair an elevator which prevented Tenant’s elderly and disabled patrons from gaining access to the theaters (TAXC ¶17), and (3) refusing to abate rent and instituting a lawsuit to collect rent, despite an ordinance that prevented use of the theater and Lease provision that “rent shall be equitably reduced” if there is a taking (TAXC ¶¶22, 24-26).   

            The Court finds Tenant has stated sufficient facts to allege a breach.  Tenant contends Landlord breached Section 17.6 of the Lease Agreement which states that “in the event that Tenant’s business in the Premises shall be materially interfered with as a result of any work which is performed or other action taken by Landlord or any of the Landlord Parties pursuant to any provision of this Lease including, but not limited, this Article 17, then in addition to other rights and remedies available to the Tenant, the rent payable hereunder shall be equitably abated during the period of any such impairment based on the damage sustained to tenant’s business[.]”  (TAXC ¶11(a).)  Tenant has alleged sufficient facts to support that Section 17.6 was breached including that Landlord allowed use of a parking ramp that interfered with the use of the Premises as a movie theater.  (TAXC ¶18.)

            Tenant also contends Landlord breached Section 12.1.1 of the Lease Agreement which states in relevant part that “Landlord shall at all times during the Term and at its sole cost and expense maintain, keep in good order and condition and repair and replace [] the Common Area” which include access and perimeter roads.  Tenant has alleged sufficient facts to support a breach of Section 12.1.1 including that Landlord failed to repair the faulty parking ramp and elevators.  Landlord argues there can be no breach under Section 12.1.1 because Section 16.2.1 of the Lease provides that “the Common Area shall be subject to the exclusive control and management of the Landlord, reasonably exercised.”  But the question whether there has been a “reasonable exercise” is a fact question inappropriate for resolution on a demurrer. 

            Further, Tenant contends Landlord breached the implied covenant of quiet enjoyment.  (TAXC ¶11(c).)  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. (Guntert v. City of Stockton (1976) 55 Cal. App. 3d 131, 138; Petroleum Collections Inc. v. Swords (1975) 48 Cal. App. 3d 841, 846.)  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 tenant’s right to use and enjoy the premises for the purposes contemplated by the tenancy.”  (Green v. Superior Court (1974) 10 Cal.3d 616, 625, fn. 10; 49 Am.Jur.2d, Landlord and Tenant, § 336, p. 351.)  The implied covenant of quiet enjoyment is partially codified in Civ. Code § 1927.  (Andrews v. Mobile Aire Estates (2005) 125 Cal.App.4^th 578, 588-89.)  Minor inconveniences and annoyances are not actionable breaches of the implied covenant of quiet enjoyment.  (Id. at 590.)  To be actionable, the landlord's act or omission must substantially interfere with a tenant's right to use and enjoy the premises for the purposes contemplated by the tenancy. (Petroleum Collections Inc. v. Swords, supra, 48 Cal.App.3d at 846.)  Here, Tenant has alleged sufficient facts to show Landlord substantially interfered with his right to use and enjoy the Premises as a result of a noisy parking ramp directly above the theater and inoperative elevators that prevented its elderly and disabled patrons from accessing the theater.  (Cf. Sierad v. Lilly (1962) 204 Cal.App.2d 770, 775 (landlord breached covenant of quiet enjoyment by denying retail tenant use of adjoining parking spaces which were essential to tenant’s use and enjoyment of the property).)

            However, to the extent Tenant relies on any oral promises that the ramp would be mothballed, those cannot support a breach.  (TAXC ¶15.)  Section 27.1 of the Lease provides that any amendment to the Lease must be in writing.  The TAXC alleges that Cross Defendants orally agreed to prohibit use of the ramp, but it does not allege these oral promises were memorialized in a written amendment to the Lease.      

            Moreover, Tenant’s taking allegations do not support a breach.  The Lease defines “taking” as “any taking or appropriation for public or quasi-public use by the right of eminent domain or otherwise by a taking in the nature of inverse condemnation, with or without litigation or a transfer by agreement in lieu thereof.”  (Ex. D to Lease, Section 2.83.)  Here, the government did not “tak[e] or appropriate[e]” any of the Premises for public or quasi public use.  Instead, the Covid 19 orders by their terms sought to serve a public health and safety benefit.  State and local government’s police powers have long been recognized as not qualifying as a “taking” under California law.  (Hunter v. Adams (1960) 180 Cal.App.2d 511, 523 (“In the exercise of police power, the use of property may be restricted or it may even be destroyed and no legal liability arises to compensate the owner therefor.”).)  Numerous courts have also concluded that Covid-19 orders do not constitute regulatory takings as a matter of law.  (See, e.g., 640 Tenth LP v. Newsom (2022) 78 Cal.App.5^th 840, 859-65 (collecting cases).)  Further, the Lease provides that Tenant’s compliance with all “Governmental Regulations” affecting “all operations and conduct of the business within the Premises” is “at [Tenant’s] sole cost and expense.”  (Ex. A to TAXC, Section 10.6.)  Accordingly, Tenant is not entitled to rent abatement under the Lease as a result of the Covid 19 orders, and Landlord’s failure to provide rent abatement cannot be a breach. 

            The Court next considers whether Tenant has alleged damages allowable under the Lease.  There are two types of contract damages – direct damages and consequential damages.  (Speirs v. BlueFire Ethanol Fuels, Inc. (2015) 243 Cal.App.4^th 969, 989.)  Direct damages are typically expectation damages, measured by what it would take to put the non-breaching party in the same position that it would be in had the breaching party performed as promised under the contract.  Consequential damages, on the other hand, are “extraordinary in that they do not so directly flow from the breach [and] are recoverable only upon a showing that they were foreseeable and within the contemplation of the parties at the time the contract was made.” (Id. (citations omitted).)  Here, Tenant agreed to limit any damages arising from a breach of contract to direct damages only.  Section 22.3 of the Lease states that “neither Landlord nor Tenant shall be liable to the other for any consequential damages caused by the default of Landlord or Tenant under this Lease.”  Landlord claims Tenant’s breach of contract claim seeks only consequential damages.  But the TAXC states Tenant has been “damaged in an amount to be determined at the time of trial, but not less than $1,000,000.00 and costs and expenses charged by Cross-Defendants during the term of Cross-Defendant’s lease.”  (TAXC ¶28.)  While not a model of clarity, Tenant appears to be seeking direct damages in the form of “costs and expenses” it was charged by Cross-Defendants during the term of the Lease. 

For these reasons, the Court overrules the demurrer as to the first cause of action for breach of contract. 

Nuisance Claim

            As to its second cause of action for nuisance, Tenant alleges that “the continual use of the ramp … caused vibration, noise and extreme disruption to [Tenant’s] business operations” (TAXC ¶36) and that Tenant was “forced to refund purchased tickets” (TAXC ¶36).  These damages are consequential and barred by the Lease.  Accordingly, the Court sustains the demurrer on the second cause of action for nuisance.

Interference with Prospective Economic Advantage

            Like its nuisance claim, Tenant’s third cause of action for intentional interference with prospective business advantage is based on Landlord’s default under the Lease (for reinstating use of a faulty parking ramp) and seeks consequential damages (in the form of lost profits from interference with Tenant’s relationships with licensed vendors and customers).  Accordingly, as Section 22.3 of the Lease bars consequential damages for defaults under the Lease, the Court sustains the demurrer on the third cause of action for intentional interference with prospective economic advantage. 

Declaratory Relief

Declaratory relief is intended to resolve controversies that may result in future litigation. (Mefford v. City of Tulare (1951) 102 Cal.App.2d 919, 922.)  Here, the parties’ controversy has already resulted in litigation; a declaration regarding the controversy would merely overlap what Tenant’s legal claims seek to adjudicate.  Any issues that Tenant might request a declaration about could be determined under its legal claims.  (See, e.g., Jolley v. Chase Home Finance LLC (2013) 213 Cal.App.4^th 872, 909-10 (declaratory relief operates prospectively and is unnecessary when an ordinary legal action for damages would suffice); Allstate Ins. Co. v. Fisher (1973) 31 Cal.App.3d 391, 394 (“The object of the [declaratory relief] statute is to afford a new form of relief where needed and not to furnish a litigant with a second cause of action for the determination of identical issues.”); General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 470-471 (an action in declaratory relief will not lie where the issue to be determined is the same as that in a pending action at law between the same parties).)   Accordingly, the Court sustains the demurrer on Tenant’s fourth cause of action for declaratory relief. 

Unfair Practices Claim

            As to Tenant’s UCL claim, Tenant alleges the following wrongful conduct on the part of Landlord:  “a) without basis, pursuing an action on the Lease when the essential purpose of the Lease was destroyed by COVID-19, the public’s fear of gathering, and the government ordinance prohibiting the continuation of the business of theaters until further notice, b) without basis, refusing a rent abatement called under the Lease Agreement including but not limited to [Sections] 17.6 and 24.4 of the Lease Agreement, and c) deliberately failing to keep the Subject Premises in good repair in an effort to drive Cross-Complainant from the Subject Premises and to favor more preferred tenants.”  (TAXC ¶60.) 

As to the first alleged wrongful act, Landlord’s lawsuit is protected by the litigation privilege under Civ. Code § 47(b) and cannot form the basis of a claim.  As to the second wrongful act directed to Section 24.4 of the Lease, and as discussed above, the Covid 19 closures do not qualify as a “taking” under the Lease, and in any event, the Lease requires Tenant to comply with government orders at its sole cost and expense.  As to Section 17.6 and the third alleged wrongful act, Tenant has properly stated an unlawful business practice.  Further and contrary to Landlord’s claim, Tenant is not seeking damages, but restitution in the form of disgorgement of profits.  (TAXC ¶62.)  As such relief is permissible under the UCL which allows for injunctive relief and restitution.  (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4^th 163, 173).  Accordingly, Landlord’s demurrer is overruled as to Tenant’s UCL claim.              

Motion to Strike

            As the Court has sustained Landlord’s demurrer to all of Tenant’s claims except for breach of contract and UCL, Landlord’s motion to strike allegations contained in the dismissed claims is denied as moot.  The Court focuses solely on Landlord’s motion to strike allegations in the sole remaining causes of action for breach of contract and UCL. 

The Court grants Landlord’s motion to strike any takings allegations as the Covid-19 closures do not constitute a taking, and in any event, the Lease does not allow for rent abatement for such closures.  (TAXC ¶21, lines 16-18; ¶22, lines 19-24; ¶23, lines 25-27; ¶24, lines 28 and 1-3; ¶25, lines 4-9; ¶26, lines 11-14; ¶60(b), lines 16-18)  The Court also grants Landlord’s motion to strike Tenant’s allegations that Landlord’s unlawful detainer action as an unfair business practice act as the suit is protected by the litigation privilege under Civ. Code §47(b).  (TAXC ¶60(a), lines 13-16.)  The Court denies Landlord’s motion to strike allegations in the breach of contract claim (TAXC ¶19, lines 4-5) that it claims relate solely to consequential damages.  Allegations that Tenant’s business was disrupted by the use of the ramp do not go specifically to the issue of consequential damages.          

CONCLUSION

Based on the foregoing, the Court SUSTAINS IN PART and OVERRULES IN PART Landlord’s demurrer.  The demurrer on Tenant’s claim for declaratory relief is sustained without leave to amend.  The demurrer on Tenant’s claims for nuisance and interference with prospective business advantage are sustained with 20 days’ leave to amend.  The Court GRANTS IN PART and DENIES IN PART Landlord’s motion to strike.  The Court orders the following paragraphs and lines stricken from the TAXC: ¶21, lines 16-18; ¶22, lines 19-24; ¶23, lines 25-27; ¶24, lines 28 and 1-3; ¶25, lines 4-9; ¶26, lines 11-14; ¶60, lines 13-18. 

DATED: December 15, 2022                                              ___________________________

Edward B. Moreton, Jr.

Judge of the Superior Court