Judge: Gary Y. Tanaka, Case: 22TRCV00208, Date: 2022-08-03 Tentative Ruling
Case Number: 22TRCV00208 Hearing Date: August 3, 2022 Dept: B
LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT
Honorable Gary Y. Tanaka Wednesday, August 3, 2022
Department B Calendar No. 2
PROCEEDINGS
Omninet Pacific Pointe, LP v. Posh Management, et al.
22TRCV00208
Posh Management, Inc.’s Motion for Relief from Forfeiture
TENTATIVE RULING
Posh Management, Inc.’s Motion for Relief from Forfeiture is denied.
Background
Plaintiff filed its Complaint on March 18, 2022. Plaintiff alleges a single cause of action for unlawful detainer pursuant to a commercial lease agreement. Plaintiff alleges that Defendant breached the lease by failing to pay the amounts due under the agreement. On June 17, 2022, after a court trial, the Court entered a verdict in favor of Plaintiff. On June 23, 2022, judgment was entered in favor of Plaintiff. On July 7, 2022, Defendant filed the instant motion. On July 15, 2022, Plaintiff filed a writ of possession.
Requests for Judicial Notice
Plaintiff’s requests for judicial notice are granted pursuant to Evidence Code Sections 452(c)(d) and (h).
Objections
Plaintiff’s objections
Plaintiff’s objections 1 to 10 are overruled. Objection 11 is sustained.
Defendant’s objections
Defendant’s objections to paragraphs 2-4, 6, 8, and 11 to 22 to the declaration of Sergeant Steven Muirhead are overruled.
Objection to paragraph 3 to the declaration of Richard Kastin is overruled.
Objections to paragraphs 2, 9-11, and 13 to the declaration of Mary Magiatis are overruled.
Motion for Relief from Forfeiture
Under CCP § 1179, the court may grant relief to a tenant against a forfeiture of a lease based on hardship. “Under section 1179, the court in balancing the equities should take into consideration the circumstances of the case, the hardship, if any, to the lessee from the forfeiture, the hardship, if any, to the lessor from relieving the lessee from the forfeiture, the wilful or other character of the breach, and then use its best discretion in determining whether relief will be granted. Its action will not be upset unless there is a clear showing of abuse of discretion.” Thrifty Oil Co. v. Batarse (1985) 174 Cal.App.3d 770, 777. “Nothing in section 1179 precludes the trial court from exercising discretion to relieve a party against forfeiture due to the existence of a default judgment.” SRO Housing v. Dyce (2014) 223 Cal.App.4th Supp. 1, 4.
Defendant moves for an order granting relief from the forfeiture of possession of its place of business pursuant to the judgment issued in favor of Plaintiff entered on June 23, 2022. The motion is made on the ground that Defendant will suffer great hardship if not relieved from this pending forfeiture. Defendant contends that its owner, Tiara McKenzie, is young, female, and relatively unsophisticated compared to Plaintiff. Defendant argues that, if relief is not granted, Defendant and its owner will have lost over $500,000, including over $200,000 in tenant improvements, and will also be obligated to pay future rent of over $200,000 per year until 2029. Defendant states that it will pay the back rent owed if relief is afforded. Otherwise, Defendant believes that not granting relief would result in tremendous hardship.
First, the Court finds that Defendant has waived its right to seek relief from forfeiture. Paragraph 17.15 of the lease specifically states: “Tenant hereby waives any right of redemption or relief from forfeiture under C.C.P. Sections 473, 1174 and 1179, and C.C.C. Section 3275, and under any present or future statutes or case decisions to the same effect, in the event a Court or Arbitrator enters a finding or judgment of lease forfeiture or Landlord takes possession of the Premises by reason of any default by Tenant hereunder.” (Decl., Mary Magiatis, Ex. A). Thus, the term of the lease specifically waives the statutory relief from forfeiture sought here. Defendant expressly assumed and accepted all the lease provisions pursuant to paragraph 2 of the Assignment, Assumption and Consent Agreement. “Assignee [Posh] hereby expressly assumes the Lease and agrees to be bound by and to perform and comply with, for the benefit of Landlord, each and every obligation of the ‘Tenant’ under the Lease, after the Effective Date.” (Id., at Ex. D.)
The Court finds that In re Art and Architecture Books of the 21st Century (Bankr. C.D. 2014) 518 B.R. 43 is instructive. While it is not specific binding authority, the bankruptcy court applied California law and underwent a thorough and exhaustive analysis of the issue of whether a commercial tenant may waive the right to seek relief from forfeiture in the lease. The instant Court concurs with this analysis and adopts its reasoning in also so holding that the Defendant here, Posh, has waived its right to seek forfeiture. A long line of cases and authorities have made explicitly clear that parties to a contract may freely enter into contracts with terms properly negotiated by the parties. A specific example of codification of this authority is found in Civil Code § 1995.270 which states, in relevant part: “(a) The Legislature finds and declares: (1) It is the public policy of the state and fundamental to the commerce and economic development of the state to enable and facilitate freedom of contract by the parties to commercial real property leases.”
“Freedom of contract in commercial real property leases is well established in California law. The California legislature enacted Civil Code § 1995.270(a)(1) to declare it the public policy of the State of California to ‘enable and facilitate freedom of contract by the parties to commercial real property leases.’ Consistent with this public policy, California courts have generally held that commercial tenants may waive their rights under the California Civil Code.” In re Art and Architecture Books of the 21st Century (Bankr. C.D. Cal. 2014) 518 B.R. 43, 49–50. The Bankruptcy Court, in In re Art, found that no public policy was contravened by upholding the waiver. In re Art stated that no specific statute prohibited the waiver of the right to relief from forfeiture and upheld the parties’ well-established right to freely contract in entering into a commercial property lease agreement. Here, similarly in the instant action, the right to relief from forfeiture of a commercial lease serves a private purpose and no public policy purpose precludes the waiver of the right to seek forfeiture.
Defendant argues that owner McKenzie is young, unsophisticated, and did not fully understand the terms. However, these arguments do not defeat the waiver provision. As the Bankruptcy Court noted, “… the public policy concerns that may apply to the unequal bargaining positions of residential tenants and landlords do not apply to a commercial lease.” In re Art and Architecture Books of the 21st Century (Bankr. C.D. Cal. 2014) 518 B.R. 43, 60–61. “The technical requirements of a waiver as stated by the California Supreme Court in Bickel v. City of Piedmont are: (1) there must be an existing right; (2) knowledge of the right, and (3) an actual intention to relinquish the right. Bickel v. City of Piedmont, 16 Cal.4th at 1053, 68 Cal.Rptr.2d 758, 946 P.2d 427 (citation omitted). ‘The waiver may be ... express, based on the words of the waiving party....’ Id. Here, these requirements are met and shown primarily by the written expression of Debtor in negotiating and signing the Lease, which included the waiver provision in Section 23.1.” Id. at 61. Similarly, in the instant action, the requirements are met by the written expression of the Defendant in negotiating and signing the assignment agreement to the lease. “[I]t is well established that a party who signs a document is presumed to have read it and to understand its contents.” Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1163, fn. 6. Therefore, Defendant’s attempts to seek relief from forfeiture was specifically waived under the terms of the lease.
In addition, even had Defendant not waived the right to forfeiture, in balancing the equities and the harms, the Court would find that Defendant is not entitled to relief. As noted above, Defendant has provided facts that it would suffer a hardship if relief were not granted. However, there will always be a hardship when relief from forfeiture is not granted to a tenant. A simple finding of hardship to a tenant does not automatically grant relief to a tenant. Olympic Auditorium, Inc. v. Superior Court (1927) 81 Cal.App. 283, 285-86. Here, Plaintiff has outlined specific conduct on the part of Defendant which goes beyond merely not making payment pursuant to the lease terms, but also other breaches of the lease. Such conduct includes unlawful, unpermitted construction to the premises without consent, failure to rectify and resolve Orders to Comply issued by the City, ABC violations, and the use of the premises in contravention of the lease terms which has resulted in disturbances, violence, and third-party criminal conduct on the premises. The Court determines that if relief from forfeiture is granted, a strong inference could be made that such activity would continue to take place which would strongly prejudice Plaintiff and potentially subject Plaintiff to liability.
In its Reply, Defendant refutes much of the facts and evidence presented by Plaintiff. Defendant contends that it acted reasonably and diligently to cure and rectify any of the issues that may have resulted from the use of the premises. Defendant denies responsibility for much of the conduct that occurred on the premises. Defendant states that it obtained the property with the unpermitted construction, code-violations, and conditions already in place. Defendant again reiterates the hardship that it will suffer if relief from forfeiture is not granted. Defendant is also concerned that Plaintiff has introduced evidence of alleged breaches and conduct which were not specifically at issue in this action. The Court notes that Plaintiff filed another unlawful detainer action which deals specifically with non-payment related breaches of the lease. The Court also notes that Defendant introduced new evidence in the Reply. The Court may consider new evidence submitted with the Reply so long as the other party has an opportunity to respond. Plaintiff did file a supplemental declaration of Sergeant Steven Muirhead. Therefore, the Court has considered Defendant’s new evidence submitted with the Reply as well as the declaration of Sgt. Muirhead.
“The mere fact that a hardship exists will not, automatically, be a basis upon which to set aside the forfeiture since hardship will exist in almost all cases where relief is not granted. Rather, the test in applying section 1179 relative to forfeitures [is] . . . as follows: Under section 1179, the court in balancing the equities should take into consideration the circumstances of the case, the hardship, if any, to the lessee from the forfeiture, the hardship, if any, to the lessor from relieving the lessee from the forfeiture, the wilful or other character of the breach, and then use its best discretion in determining whether relief will be granted. Its action will not be upset unless there is a clear showing of abuse of discretion.” Thrifty Oil Co. v. Batarse (1985) 174 Cal.App.3d 770, 777 (internal citations and quotations omitted).
As noted in the authorities above, the Court has broad discretion in its attempt to decide whether relief from hardship is appropriate. While the Court has considered and is mindful of the evidence that Defendant presented, including Defendant’s purported reasonable attempts to rectify the issues that have occurred on the property, the Court cannot simply ignore the numerous serious incidents and multiple alleged violations of covenants and terms of the lease, as well as failure to comply with orders from the City. In addition, because the nature of the relief requested and the specific authority which mandates that the Court must consider all facts related to the circumstances of the case, as well as all facts concerning the potential to hardship to both parties, the Court must consider all relevant evidence which touch upon these factors, including facts involving non-payment related breaches of the lease. Defendant argues that these allegations have not been proven and urges that a trial on these issues must be proven in the second unlawful detainer action. However, within the context of the instant motion, the Court must review all the relevant facts and evidence and make a ruling based on equitable considerations. The Court is not required to wait for a trial on these facts. This is the nature of the motion that was presented by Defendant, itself.
Thus, here, in balancing the equities and harms, taking into consideration the circumstances, the hardships to each party, and the willful nature of the breach, the Court finds that the evidence establishes that Defendant is not entitled to relief from the forfeiture. While Defendant has articulated the potential hardship that would result to Defendant if relief is not granted, the Court also determines that Plaintiff will suffer significant hardship if relief is granted to Defendant.
Therefore, Defendant’s Motion for Relief from Forfeiture is denied.
Plaintiff is ordered to give notice of this ruling.