Judge: Gail Killefer, Case: 23STCV23672, Date: 2024-05-17 Tentative Ruling
Case Number: 23STCV23672 Hearing Date: May 17, 2024 Dept: 37
HEARING DATE: Friday, May 17, 2024
CASE NUMBER: 23STCV23672
CASE NAME: Valence Surface
Technologies, LLC v. Justin Gavin, LLC, et al.
MOVING PARTY: Cross-Defendant TCFI CP LLC
OPPOSING PARTY: Defendants Justine Gavin, LLC; Triple Net Portfolio I Carson
CA, LLC; Triple Net Portfolio I Gardena CA, LLC; Patterson Drive Garden Grove
Ca, LLC
TRIAL DATE: Not Set
PROOF OF SERVICE: OK
PROCEEDING: Demurrer to First Amended
Cross-Complaint
OPPOSITION: 01 May 2024
REPLY: 07
May 2024
TENTATIVE: Cross-Defendant TCFI’s demurrer to the First
Amended Cross-Complaint is overruled as to the first cause of action and
sustained with leave to amend as to the third and fourth causes of action.
Cross-Complainant is granted 60 days leave to amend. The court sets the OSC RE:
Amended Complaint for June 24, 2024, at 8:30 a.m. Moving party to give notice.
Background
On September 29,
2023, Valence Surface Technologies, LLC (“Plaintiff” or “Tenant”)) filed a
Complaint against Justine Gavin, LLC; Triple Net Portfolio I Carson CA, LLC;
Triple Net Portfolio I Gardena CA, LLC; Patterson Drive Garden Grove Ca, LLC
(collectively “Defendants” or “Landlord”); and Does 1 to 10.
The Complaint
alleges three causes of action: (1) Breach of Contract; (2) Money Paid; and (3)
Declaratory Relief.
On February 13, 2024,
Defendants filed the First Amended Cross-Complaint (FACC) against Plaintiff and
TCFI CP LLC (“TCFI”); Coast Plating Holdings, Inc.; Coast Plating, Inc.;
Coastline Metal Finishing Co.; and Does 1 to 10. The FACC alleges five causes
of action: (1) Breach of Contract; (2) Breach of Implied Covenant of Good Faith
and Fair Dealing; (3) Waste; (4) Negligence/Gross Negligence; and (5) Unjust
Enrichment.
On March 15, 2024,
Cross-Defendant TCFI filed a demurrer to the FACC. Cross-Complainant
Landlord/Defendants oppose the Motion. The matter is now before the court.
request
for JUDICIAL notice
The court may
take judicial notice of “official acts of the legislative, executive, and
judicial departments of the United States and of any state of the United
States,” “[r]ecords of (1) any court of this state or (2) any court of record
of the United States or of any state of the United States,” and “[f]acts and
propositions that are not reasonably subject to dispute and are capable of
immediate and accurate determination by resort to sources of reasonably
indisputable accuracy.” (Evid. Code § 452(c), (d), and (h).) “Taking
judicial notice of a document is not the same as accepting the truth of its
contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)
Cross-Defendant TCFI
requests judicial notice of the following:
1)
Original 2013 Master Lease, effective as of October 17,
2013, between TCFI and Justine Gavin, LLC, which is attached to the Declaration
of Scott D. Bertzyk and labeled as Exhibit A, in support of its Demurrer to
Cross-Complainants’ First Amended Cross-Complaint.
Cross-Defendant TCFI’s request
for judicial notice is denied as the Original 2013 Master Lease is not part of
the FACC and the truth of what the Original 2013 Master Lease represents is
disputed. (See Cross-Complainants’ objections to TCFI’s request for judicial
notice.) TCFI does not seek to prove the
Existence of the Original 2013 Master Lease but instead requests that the court
interpret the Original 2013 Master Lease and the Replacement Lease as a matter
of law and find that TCFI owes no contractual duties to Landlord. The court may
only interpret a contract when there is no conflict in the extrinsic evidence
and there is no question as to the intent of the contracting parties. (See Coyne v. De Leo (2018)
26 Cal.App.5th 801, 822.)
Here, the Landlord disputes
TCFI’s interpretation of the Lease such that the court cannot accept TCFI’s
proposed interpretation that under the Leases TCFI was released from
contractual liability. “Although the existence of a document may be judicially noticeable, the truth of statements contained in the
document and its proper interpretation are not subject to judicial notice if
those matters are reasonably disputable.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113.) “The hearing on demurrer may not
be turned into a contested evidentiary
hearing through the guise of having the court take judicial notice
of documents whose truthfulness or proper interpretation
are disputable.” (Id. at p. 114.)
As stated above, TCFI’s request for judicial notice is denied.
I. Legal Standard
Where pleadings are defective, a party may
raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36
Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the
grounds for a demurrer must appear on the face of the pleading or from
judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985)
39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s
properly pled facts as true and ignores contentions, deductions, and conclusory
statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano
v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider
whether a plaintiff will be able to prove the allegations or the possible
difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital
(1989) 214 Cal.App.3d 590, 604.)
Leave to amend must be allowed
where there is a reasonable possibility of successful amendment. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to
show the Court that a pleading can be amended successfully. (Ibid.)
II. Demurrer[1]
Cross-Defendant TCFI demurs to
Cross-Complainants/Landlord’s first cause of action for breach of contract,
third cause of action for waste, and fourth cause of action for negligence on
the grounds that the claims in the FACC fail to state sufficient facts to
constitute a cause of action and are barred by the applicable state of
limitations.
TCFI and the Landlord entered into
a Master Lease Agreement (the “Master Lease”) as of October 2013, relating to
the three properties at issue in this case: Gardena, Garden Grove, and
Carson. In July 2019, TCFI sold its
interest in Valence. Effective June 7,
2021, Landlord and Valence executed a replacement lease (the “Replacement Lease”)
for the three properties. (FACC, ¶
50.) The Replacement Lease memorialized
TCFI’s purported transfer of the Master Lease to Valence. (Id. at 51.)
A. First Cause of Action – Breach of
Contract
The
elements of a claim for breach of contract are: “(1) the existence of the
contract, (2) plaintiff’s performance or excuse for nonperformance, (3)
defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal. 4th 811, 821.) In addition, the
complaint must demonstrate damages proximately caused by the breach. (St.
Paul Ins. v. American Dynasty (2002) 101 Cal.App.4th 1038, 1060.)
Furthermore, “the complaint must [also] indicate on its face whether the
contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac.
Transportation Co. (1985) 166 Cal.App.3d 452, 458-59 citing CCP, §
430.10(g).)
“If the
action is based on alleged breach of written contract, the terms must be set
out verbatim in the body of the complaint or a copy of the written agreement
must be attached and incorporated by reference.” (Harris v. Rudin, Richman
& Appel (1999) 74 Cal.App.4th 299, 308.) Alternatively, “a plaintiff
may plead the legal effect of the contract rather than its precise language.”¿
(Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002)
29 Cal.4th 189, 198-199.)¿¿“[A]ll essential elements of a breach of contract
cause of action [] must be pleaded with specificity.”¿(Levy v. State Farm
Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 5.)
Cross-Defendant
TCFI asserts that it is not liable because the Replacement Lease, effective
June 7, 2021, worked as a novation that discharged TCFI of its duties and
obligations under the Master Lease. (FACC ¶ 50, Ex. 1.) “Novation is a question of fact, and the
burden of proving it is upon the party asserting it.” (Williams v. Reed (1952) 113 Cal.App.2d 195, 200; see
also Eluschuk v. Chemical Engineers Termite Control, Inc.
(1966) 246 Cal.App.2d 463, 468 [whether the parties intended novation of a
written employment agreement was a question of fact].)
In opposition, Landlord points out that
pursuant to section 4.2(d) of the Replacement Lease, TCFI’s environmental
indemnification obligation expressly survived any termination of the Master
Lease:
(c) THE PROVISIONS OF THIS SECTION 4.2 SHALL SURVIVE ANY
TERMINATION OF THIS LEASE AND IS INTENDED TO ALLOCATE LIABILITY FOR BOTH
STATUTORY AND COMMON LAW STRICT LIABILITY AS WELL AS LIABILITY (INCLUDING
STRICT LIABILITY) UNDER ENVIRONMENTAL LAWS, INCLUDING WITHOUT LIMITATION CERCLA.
(FACC ¶ 57, Ex. 1.) The FACC alleges that “TCFI
breached, or anticipatorily breached, Section 4.2 of the Master Lease by
failing to indemnify Landlord for all costs, liabilities, and expenses
associated with the environmental contamination associated with the hazardous
materials released on the Properties by TCFI or its affiliates or their agents,
employees, or representatives during such entities’ occupation of the
Properties.” (FACC ¶ 232.) Even if TCFI was released
from certain obligations under the 2019 Master Lease, the FACC sufficiently
alleges that TCFI remains liable for breaches under section 4.2(d) of the 2019
Master Lease. Therefore, Landlord has stated a viable breach of contract claim.
“A
demurrer does not lie to a portion of a cause of action.” (PH II, Inc. v.
Superior Court (1995) 33 Cal.App.4th 1680, 1682.) The demurrer to the first
cause of action is overruled.
B. Third and
Fourth Causes of Action for Waste and Negligence/Gross-Negligence
“The gist of a waste claim is acts by the
tenant causing injury to the lessor's reversion interest or the inheritance. ‘To
constitute waste, there must be an injury to the inheritance (C[iv].C[ode, § ]
818), substantially depreciating the market value of the property.’
[Citations.]” (Avalon Pacific-Santa Ana, L.P. v. HD Supply
Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183, 1214.) “ ‘[Waste]
has also been defined as an unlawful act or omission of duty on the part of a
tenant which results in permanent injury to the inheritance.’ ” (Id. at
p. 1214.)
The elements of a cause of action for negligence are well established.
They are (a) a legal duty to use due care; (b) a breach of such legal duty;
[and] (c) the breach as the proximate or legal cause of the resulting injury.”
(Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917 [internal
quotation marks omitted].) The existence and scope of a property owner’s duty
are legal questions for the court. (Annocki v. Peterson Enterprises, LLC
(2014) 232 Cal.App.4th 32, 36.)
Cross-Defendant TCFI demurs to the third and fourth causes of action on
the basis that under CCP § 338(b)—for injury to real property—a claim must be
brought within three years. TCFI asserts that the three-year statute of
limitations bars the Landlord’s tort-based claims because four years ago TCFI
transferred the Master Lease to Valence Surface Technologies, LLC (“Valence”). The
Landlord asserts that TCFI is liable as Valence’s alter ego and the claims are
not barred because the tortious acts continued to occur under Valence’s
ownership. (FACC ¶¶ 95, 111, 112, 122, 139, 178, 224, 262.)
The court finds that the alter ego claims in the FACC are conclusory and
devoid of any facts to support the allegation that TCFI was Valence’s alter
ego. (FACC ¶¶ 4, 15.) “It is settled law that a pleading must allege facts and
not conclusions, and that material facts must be alleged directly and not by
way of recital.” (Ankeny v. Lockheed Missiles and Space Co. (1979) 88
Cal.App.3d 531, 537.)
For example, in Davidson
v. Seterus, Inc. (2018) 21 Cal.App.5th 283, the parent company was
found liable not because it was the parent company of the subsidiary but
because the parent company itself engaged in wrongful conduct. “Davidson's complaint does not rest on
alter-ego allegations against IBM; the complaint does not allege liability on
IBM's part based solely on its status as Seterus's
parent corporation. Rather, the complaint asserts that IBM, itself, was
actively involved in the alleged illegal conduct.” (Id. at p. 306
[italics original].)
Here, the FACC fails to allege what specific
conduct renders TCFI the alter ego of Valence or how and by what conduct is
TCFI is tortiously liable to Landlord. “Although the relationship of parent and subsidiary does not by itself
give rise to any duty on the part of the parent
to the subsidiary's employees, the parent
may owe a duty arising out of obligations independent of the parent-subsidiary relationship.” (Waste Management, Inc. v. Superior Court (2004) 119
Cal.App.4th 105, 110.)
Based on the above, the
demurrer to the third and fourth causes of action is sustained with leave to
amend.
Conclusion
Cross-Defendant TCFI’s demurrer to
the First Amended Cross-Complaint is overruled as to the first cause of action
and sustained with leave to amend as to the third and fourth causes of action.
Cross-Complainant is granted 60 days leave to amend. The court sets the OSC RE:
Amended Complaint for June 26, 2024, at 8:30 a.m. Moving party to give notice.