Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

This case arises out of a dispute over a residential lease.  Plaintiffs Carter Russ and Emily Nicole Eberhard entered into a residential lease agreement with Defendant Theodore Khalili (the “Lease”) for property located at 200 South Westgate Avenue, Los Angeles, California (the “Premises”).  Defendant Ben Hagooli is the property manager for the Premises. 

The Lease was for one year at the rate of $17,500 per month.  (Undisputed Material Facts (“UMF”) No. 1.)  The Lease contained a “LEASE/RENTAL MOLD AND VENTILATION ADDENDUM” by which Plaintiffs agreed that “[e]xcept as may be noted at the time of Tenant’s move in inspection, Tenant agrees that the Premises is being delivered free of known damp or wet building materials (‘mold’) or mildew contamination.”  (UMF No. 2.) 

Cross-Defendant Ronald Russ (“R. Russ”), Carter Russ’ father, signed a guaranty of the Lease (the “Guaranty”) by which he agreed to guarantee the prompt payment of rent and other sums due under the Lease and waived any rights to require Defendants to proceed against Plaintiffs for any default occurring under the Lease before seeking to enforce the Guaranty.  (UMF No. 4.)  R. Russ paid $35,000 to cover the first month’s rent and security deposit.  (UMF No. 5.) 

Prior to their move-in date, Plaintiffs performed a visual inspection of the Premises (the “MIMO Inspection.”)  (UMF No. 7.)  During the MIMO Inspection, Plaintiffs had unobstructed views of all the floors, walls and ceilings in the Premises.  (UMF No. 8.)  Plaintiffs also had no time limit on their MIMO Inspection.  (UMF No. 9.)  Plaintiffs filled out and signed a Move-In/Move-Out Inspection Form (the “MIMO Form”), which contained no notes regarding water intrusion, water damage or mold.  (UMF No. 10, 11.)   

Nonetheless, Plaintiffs verbally noted a “moldy odor” and “stain” in a second bedroom to Hagooli during the MIMO inspection.  (UMF No. 12.)  Plaintiffs also sent an email to Hagooli, asking him to have a mold inspector “check out” the second bedroom.  (UMF No. 13.) 

Defendants hired VM3 Environmental Inc. to perform an inspection of the second bedroom, including collecting an air sample and swab of the floor (“First VM3 Inspection”).  (UMF No. 15.)  Hagooli forwarded the complete First VM3 Report to Plaintiffs and also provided the direct contact information for VM3.  (UMF No. 17, 18.)  According to Defendants’ environmental engineering and consulting expert, the First VM3 Report does not indicate the presence of any condition in the Premises that poses a risk to human health.  (UMF No. 21.)  

In contrast, Plaintiffs’ mold expert attests the laboratory testing performed by VM3 was faulty and no mold inspector would be able to draw an accurate conclusion regarding the presence of mold from the laboratory results in the First VM3 Report.  (Bancroft Decl. ¶¶ 6-8.)  In any event, the First VM3 Report noted a “visible mold-like growth and “evidence of poor drainage and ponding against foundation.”  (Bancroft Decl. ¶ 9.) 

Plaintiffs then retained Mold Test Company (“MTC”) to conduct an inspection of the Premises, including air sampling in the second bedroom, the living room and the home’s exterior (the “MTC Inspection”).  (UMF No. 22.)  MTC produced a report.  While the MTC Report noted the “presents [sic] of early indicators for fungal contamination,” according to Defendants’ expert, nowhere in the MTC Report does it indicate the Premises contain any condition that poses a risk to human health.  (UMF Nos. 27, 30.)   

In contrast, Plaintiffs’ mold expert who authored the MTC report, attests that there were “several strains of fungus and/or mold at the property, which without intervention would continue to grow because of continued water intrusion and elevated levels of humidity.”  (Bancroft Decl. ¶ 11.)   The laboratory tests reveal that the interior of the home contained “hyphal fragments” which facilitate the growth and spread of mold.  (Id. ¶ 13.)   

At Defendants’ behest, VM3 returned to the Premises to conduct a second inspection (“Second VM3 Inspection”) and produce a second report (“Second VM3 Report”).  (UMF No. 31.)  C. Russ testified he is satisfied with the air sampling methodology employed in the Second VM3 Inspection.  (UMF No. 33.)   

According to Defendants’ expert, neither the Second VM3 Report nor the laboratory analysis of the air samples collected during the Second VM3 Inspection indicate the presence of any condition in the Premises that poses a risk to human health.  (UMF No. 37.)  Plaintiffs’ expert, however, notes the laboratory results from the Second VM3 Report show indicated levels of mold, fungus and spores.  (Bancroft Decl. ¶ 15.) 

The remediation recommendations in the Second VM3 Report include (1) “containment set up in the aforementioned areas with Negative Air Machine vented to the outside, if physically possible”, (2) “remove and dispose of all contaminated materials”, (3) “demo and remove the visibly affected drywall and/or building materials as specifically mentioned above”, (4) “HEPA vacuum all surfaces within containment”, (5) “resurface (grinders and sanders) all affected wood materials to remove all mold growth (dry ice blasting may be used and or substituted); (6) surface clean all affected wood areas within the containment”, (7) “dry out all affected wood areas within the containment”, (8) “run air scrubber(s) in containment areas for a minimum of 24 hours after final critical cleaning”, and (9) “perform post-remediation clearance inspection and testing by a certified microbial inspector”.  (Defendants’ Exhibit 3.)   

Pursuant to the remediation recommendations in the Second VM3 Report, Defendants commissioned the inspection of the Premises by licensed plumbing contractor, JMS Express Plumbing (“JMS”).  (UMF No. 43.)  JMS produced a report stating its findings, and Defendants had JMS perform all repairs recommended in the JMS Report.  (UMF Nos. 44, 45.)  Defendants also had a roofing contractor, Brandi Lynn Powell Roofing (“Powell”) inspect the Premises.  (UMF No. 46.)  Powell found a leak over the living room and bathroom.  (UMF No. 47.)  Defendants had Powell perform all repairs that Powell recommended.  (UMF No. 48.) 

Before the Second VM3 Inspection, Plaintiffs had already requested both the return of the $35,000 paid by R. Russ and termination of the Lease.  (UMF No. 38.)  None of the Russ Parties ever made any payment to Khalili after the initial $35,000 payment.  (UMF No. 40.)  Though Khalili made diligent efforts to re-lease the Premises after Plaintiffs’ demand to terminate the Lease, new tenants did not take possession of the Premises until April 15, 2022 at a rate lower than that in the Lease.  (UMF No. 41.)  In addition to lost rent, Khalili also incurred damages in additional costs to re-stage the Premises, additional broker fees and the attorney’s fees necessary to defend against Plaintiff’s Complaint and prosecute his own cross-claims.  (UMF No. 42.) 

The operative complaint alleges claims for (1) breach of contract, (2) fraudulent misrepresentation, (3) negligent misrepresentation, (4) fraudulent concealment, and (5) violation of Civ. Code §1941.  Khalili cross-claimed against Plaintiffs and Ronald Russ (collectively the “Russ Parties”) for (1) breach of the Lease, and (2) breach of the Guaranty. 

This hearing is on Defendants’ motion for summary judgment or in the alternative for summary adjudication.  Defendants seek summary judgment on Plaintiffs’ claims as well as Khalili’s cross-claims.  As to Plaintiff’s claims, Defendants argue (1) Plaintiffs cannot establish essential elements of their breach of contract claim including that Defendants breached the Lease because the mold inspection reports did not identify any condition that poses a risk to human health and that Plaintiffs suffered any damages because any money paid to Defendants came from Ronald Russ, who is not a plaintiff in this matter, (2) Plaintiffs cannot establish essential elements of their misrepresentation claims because Plaintiffs cannot prove any misrepresentation or concealment or that Plaintiffs actually relied on the purported misrepresentations, and (3) Plaintiffs cannot establish any alleged violation of Civ. Code § 1941 because they terminated the Lease without allowing Defendants the statutorily prescribed time to make necessary repairs.  As to his cross-claims, Khalili argues he has established all essential elements of his breach of contract claims because it is undisputed the Russ Parties breached the Lease and Guaranty by failing to remit rent which caused Khalili damages in the form of rent owed, broker fees, costs associated with re-staging and re-listing the Premises for rent and attorneys’ fees.   

LEGAL STANDARD 

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial.  (Aguilar v. Atlantic Ritchfield Co. (2001) 25 Cal.4th 826, 843.)  Code Civ. Proc. §437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Minor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)  “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.”  (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67).   

As to each claim as framed by the complaint, a defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element of the claim(s) or by establishing an affirmative defense.  (Code Civ. Proc. §437c(p)(2); Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.)  Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”  (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)  

Once the defendant has met its burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  (Id.)  To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) 

EVIDENTIARY OBJECTIONS 

The Court overrules Defendants’ evidentiary objections to the Declaration of Daniel Oberle, as no such declaration was filed with the Court.  The Court overrules Objection Nos. 11-22 to the Declaration of Jeremiah Bancroft.  The Court sustains Objection Nos. 23, 27, 29, 30, 34 and overrules Objection Nos. 24, 25, 26, 28, 31, 32, 33 to the Declaration of Carter Russ.  The Court sustains Objection Nos. 35, 37, 38, and overrules Objection Nos. 36, 39, 40 to the Declaration of Emily Russ. 

DISCUSSION 

Plaintiffs’ Breach of Contract Claim  

To prevail on their breach of contract claim, Plaintiffs must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for non-performance, (3) the defendant’s breach and (4) the resulting damage to plaintiff.  (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)    

Here, the Lease requires Plaintiffs to pay Khalili the sum of $17,500 per month for one year.  Plaintiffs have failed to remit any payment as required under the Lease except for the security deposit and first month’s rent.  (UMF No. 40.)  Plaintiffs argue, however, that their performance is excused (and Defendants breached the lease) because of the alleged uninhabitability of the Premises.     

There is no disputed issue as to whether the Premises were uninhabitable.  Defendants’ expert attests that the First and Second VM3 Reports and the MTC Report do not indicate the presence of any condition that poses a risk to human health.  (UMF Nos. 21, 30, 37.)  In opposition, Plaintiffs contend the Second VM3 Report and the MTC Report both show the presence of mold, but their expert does not go further to conclude the levels of mold rendered the Premises uninhabitable.  (Bancroft Decl. ¶¶ 10-15.)   

Setting aside the issue of inhabitability, Defendants argue Plaintiffs cannot prove damages because the only payments made – a security deposit of $35,000 – came from Ronald Russ, who is not a plaintiff in this action.  In response, Plaintiffs claim they have suffered harm and are seeking declaratory relief to terminate the lease.  But this relief is rendered moot by the Lease’s self-termination at the end of September 2022.  (UMF No. 1.)   

Because Plaintiffs cannot prove breach or damages, the Court grants the motion for summary adjudication of their breach of contract claim.               

Khalili’s Breach of Contract Claims 

Conversely, Khalili argues there is no triable issue on his breach of contract claims.  There is a contract requiring Plaintiffs to pay rent, and a guaranty of Plaintiffs’ obligations to pay rent.  The Russ Parties have failed to pay rent.  Accordingly, they have breached the Lease and Guaranty.  However, while Khalili claims he suffered damages in the form of rent owed, broker fees, costs associated with re-staging and re-listing the Premises for rent, and attorneys’ fees.  (UMF No. 42), he has not specified the amount of damages he is seeking.  Accordingly, his motion for summary judgment must be denied.   

In moving for summary judgment, Khalili must prove every component of his claims against Cross-Defendants.¿One component of each of his claims is the amount of damages.  Code Civ. Proc. § 437c¿makes no provision for partial summary judgment as to liability.  Where issues regarding calculation of damages remain, it is not appropriate to grant summary judgment.  (Dept. of Industrial Relations v. UI Video Stores Inc. (1997) 55 Cal.App.4th 1084, 1097; accord Pajaro Valley Water Management Agency v. McGrath (2005) 128 Cal.App.4th 1093, 1106¿(a party can “not establish a prima facie entitlement to summary judgment without showing both the fact and the amount of damages”).)  Accordingly, the Court denies the motion for summary judgment as to Khalili’s cross-claims.   ¿  

Misrepresentation Claims 

To establish a claim for fraud, Plaintiffs must prove (1) a misrepresentation (false representation, concealment or nondisclosure), (2) scienter or knowledge of its falsity, (3) intent to induce reliance, (4) justifiable reliance, and (6) resulting damage.”  (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)  The tort of negligent misrepresentation is similar to fraud, except that it does not require scienter or an intent to defraud.  (Tenet Health System Desert Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 845.) 

Plaintiffs alleges two misrepresentations: (1) Hagooli’s representation that the First and Second VM3 Reports indicated that Defendants “did not need to remediate the mold problem prior to Plaintiffs moving into the Property” and (2) Mr. Khalili’s execution of an “addendum representing to Plaintiffs that there was no mold at the Property.”  (UMF No. 52.)  Plaintiffs also allege Defendants concealed VM3’s supposed finding that the Premises had a mold problem requiring remediation.  (UMF No. 53.)    

Without considering whether such representations were made or evidence concealed, the Court concludes Plaintiffs did not actually rely on the misrepresentations.  Rather than accept the representations, Plaintiffs commissioned the subsequent MTC Inspection, and then refused to move into the Premises based on the results and analysis of the MTC Report.  (UMF Nos. 22, 38, 39, 68.)  Accordingly, the Court grants summary adjudication as to Plaintiffs’ fraudulent misrepresentation, fraudulent concealment and negligent misrepresentation claims.  

Breach of Civ. Code §1941 

The only alleged violation of Civ. Code §1941 in Plaintiffs’ complaint is the presence of “water intrusion issues, which have led to the presence of hazardous mold.”  (UMF No. 54.) Defendants argue the various reports show there is no condition in the Premises that poses a risk to human health.  (UMF Nos. 21, 30, 37.)  Plaintiffs’ expert does not contest this conclusion.   

Defendants also argue that Civ. Code §1942(b) gives them at least 30 days from written or oral notice of the alleged defect to render the premises tenantable.  Here, Plaintiffs provided notice on September 30, 2021 (UMF No. 12), and less than 30 days later, on October 26, 2021, Plaintiffs requested termination of the Lease and the return of $35,000.  (UMF No. 38.)  It does not matter that Defendants did not actually repair the defects for 41 days, because at that point, Plaintiffs had already requested termination of the Lease.   

Accordingly, the Court grants the motion for summary adjudication of Plaintiffs’ §1942(b) claim.   

CONCLUSION 

Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART Defendants’ motion for summary judgment of Plaintiffs’ claims and Khalili’s cross-claims.   

 

IT IS SO ORDERED. 

 

DATED: December 7, 2023 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court