Judge Helen Zukin, Case SC128603 2022-08-16 Tentative Ruling

Judge: Helen Zukin, Case: SC128603, Date: 2022-08-16 Tentative Ruling

Case Number: SC128603 Hearing Date: August 16, 2022 Dept: 207

Background

This case concerns a dispute between a landlord and tenant concerning a commercial lease for property located at 152 S. Beverly Drive, Beverly Hills, California 90212. Plaintiff Elite Financial Realty, LLC (“EFR”) owns the subject property and leased it to defendant Pelle Cure LLC (“Pelle Cure”). On December 27, 2017, Plaintiff filed a Complaint against Pelle Cure and individual defendants Anna Margaryan, Dennis Colonello, and Steven Yoon Shin (collectively with Pelle Cure, “Defendants”), alleging causes of action for declaratory relief, unpaid rent and rental damages, and damage to the subject property. On February 1, 2018, Pelle Cure filed a Cross-Complaint against EFR and Ron Mavaddat (“Mavaddat”) alleging causes of action for breach of lease, breach of the covenant of good faith and fair dealing, fraud, and negligent misrepresentation.

Following a lengthy discovery dispute dating back to October 2018, involving multiple Court orders, informal discovery conferences, amended responses, referrals to a discovery referee, and renewed motions to compel, the Court issued an order on April 22, 2022, imposing monetary and issue sanctions against EFR and Mavaddat. EFR and Mavaddat have appealed this order and brought an ex parte application to stay the case and the hearing on this motion pending the outcome of the appeal. The Court denied that application on July 22, 2022. Defendants now move for summary judgment on EFR’s claims against them. Additionally, Pelle Cure moves for summary adjudication of its cause of action for breach of lease against EFR and Mavaddat. The motion is unopposed.

In its moving papers, Pelle Cure indicates it has changed its name to Pellequr LLC and anticipates amending the pleadings to reflect this new name. As no such amendment has been filed, for purposes of ruling on these motions, the Court will continue to refer to the entity as “Pelle Cure” in the interest of clarity and consistency with the prior orders of the Court.

Request for Judicial Notice

Defendants request the Court take judicial notice of two prior orders of the Court and Pelle Cure’s original and restated Articles of Organization filed with the California Secretary of State. Defendants’ request is unopposed and is GRANTED.

Summary Judgment Standard

Motions for summary judgment are governed by Code Civ. Proc. § 437c, which allows a party to “move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (C.C.P. § 437c(a)(1).) 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 Richfield 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. Manor 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, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.) 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.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (C.C.P. § 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 that 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. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (C.C.P. § 437c(p)(2); Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Summary Adjudication Standard

A party may move for summary adjudication as to one or more causes of action, affirmative defenses, claims for damages, or issues of duty if the party contends there is no merit to the cause of action, defense, or claim for damages, or if the party contends there is no duty owed. (See CCP §437c(f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Ibid.) A party moving for summary adjudication bears the burden of persuasion that there are no triable issues of material facts. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.

In analyzing motions for summary adjudication, the court must “view the evidence in the light most favorable to the opposing party and accept all inferences reasonably drawn therefrom.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294; Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389 (Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party”).) A motion for summary adjudication must be denied where the moving party's evidence does not prove all material facts, even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).

As to each claim as framed by the complaint, a plaintiff moving for summary adjudication must satisfy the initial burden of proof by establishing “each element of the cause of action entitling the party to judgment on the cause of action.” (C.C.P. § 437c(p)(1).) Once the plaintiff has met this burden, the burden shifts to the defendant to show a triable issue of one or more material facts exists as to the cause of action or a defense thereto. (C.C.P. § 437c(p)(1).)

Analysis

Defendants’ motion relies heavily on the issue sanctions imposed against EFR and Mavaddat. In its April 22, 2022, the Court imposed issue sanctions deeming it established in this action that EFR and Mavaddat breached the subject lease by failing to timely deliver possession, failing to resolve issues regarding handicapped parking regulations, failing to remediate mold on the premises, failing to remediate a code violation concerning a hole in a load-bearing wall at the premises, failing to fix a defective air conditioning system, and failing to repair leaks. The Court also deemed it established that Defendants are not liable for payment of any common area operating expenses (referred to as “CAM” charges by the parties) under the lease.

1. Defendants’ Motion for Summary Judgment

EFR’s operative pleading is the Complaint filed on December 27, 2017, asserting causes of action against Defendants for (1) declaratory relief, (2) unpaid rent and rental damages, and (3) damage to the leased premises. EFR alleges “After Defendant Pelle Cure took possession of the Premises and commenced demolition work of the Premises a dispute arose between Plaintiff and Defendants as to whether Defendant Pelle Cure in addition to the payment of the Base Rent as specified in the Lease was also obligated for the payment of CAM Charges as specified in the Lease based on the percentage of the area that the Premises bears to the other rentable space of the Property; and whether Plaintiff Elite was responsible for delays that Defendant Pelle Cure allegedly experienced in obtaining the necessary permits for commencing its demolition and tenant improvement work and whether Plaintiff Elite was responsible for certain alleged defects encountered with the Premises and the Property during the course of the demolition work, which allegedly caused Defendants unnecessary delays and expenses.” (Complaint at ¶10.) These allegations form the basis of each of EFR’s claims against Defendants.

A. First Cause of Action for Declaratory Relief

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909 [quotation marks and brackets omitted].) EFR’s cause of action for declaratory relief seeks an adjudication from the Court “as to whether Defendant Pelle Cure had the obligation for the payment of CAM Charges under the terms of the Lease and whether Defendant Pelle Cure had justifiable grounds to terminate the Lease and vacate and abandon the Premises.” (Complaint at ¶13.)

As set forth above, in its April 22 order the Court imposed an issue sanction deeming it established for purposes of this action that Defendants are not liable to EFR for payment of “CAM” expenses under the subject lease. (Order at 9.) Accordingly, this element of EFR’s declaratory relief claim has been resolved in Defendants’ favor.

As to whether Pelle Cure had justifiable grounds to terminate the lease and abandon the premises, Defendants also rely on the April 22 issue sanctions imposed by the Court. In the April 22 order, the Court held it deemed established that EFR breached the lease in several ways. Defendants argue these breaches were material and justified Pelle Cure’s termination of the lease and abandonment of the property. The Court agrees.

The subject lease contemplated Pelle Cure would use the premises to operate a skin care spa. (UMF Nos. 2-3.) At the time the lease was signed, the premises was in a “shell condition” which required demolition and construction work before it could be used as a spa. (UMF No. 4; Complaint at ¶9.) The Court has deemed it established that EFR breached the lease by failing to resolve issues regarding handicapped parking regulations, failing to remediate mold on the premises, failing to remediate a code violation concerning a hole in a load-bearing wall at the premises, failing to fix a defective air conditioning system, and failing to repair leaks. Defendants have submitted evidence showing these breaches occurred during the process of this demolition and construction work and ultimately prevented Defendants from constructing the improvements necessary to use the property for its intended use. (UMF Nos. 6-10.)

“[A]lthough every instance of noncompliance with a contract's terms constitutes a breach, not every breach justifies treating the contract as terminated.” (Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051.) However, “when one party to a contract breaches a material term of the contract, the other party has the option to terminate the contract for cause.” (Multani v. Knight (2018) 23 Cal.App.5th 837, 851.) A breach is material " 'if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract.' . . ." (Superior Motels, supra, 195 Cal.App.3d at 1051.) “For this reason a failure is less likely to be regarded as material if it occurs late, after substantial preparation or performance, and more likely to be regarded as material if it occurs early, before such reliance.” (Rest.2d Contracts, § 241, com. d, pp. 239-240; 12 Corbin, Contracts (2002 Interim ed.) § 1176, p. 359 [“[a]fter a large part performance has been rendered by the plaintiff, a nonperformance thereafter is less likely to . . . deprive the plaintiff of a right to specific performance . . . [c]ourts are astute to prevent unjust forfeiture and unjust enrichment”].)

“Normally the question of whether a breach of an obligation is a material breach, so as to excuse performance by the other party, is a question of fact.” (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277.) Only where reasonable minds could not differ on the question of materiality may the issue be resolved as a matter of law. (Insurance Underwriters Clearing House, Inc. v. Natomas Co. (1986) 184 Cal.App.3d 1520, 1526-1527.) Whether a breach is material “depends on ‘the importance or seriousness thereof and the probability of the injured party getting substantial performance.’ [Citations.]” (Brown, supra, 192 Cal.App.4th at 278.)

Defendants here have submitted evidence showing EFR’s breaches came at the inception of the lease agreement at the time Defendants were just beginning to undertake construction activities to use the premises to operate a spa and these breaches prevented Defendants from completing the construction necessary to use the premises for the purpose set forth in the lease. (UMF Nos. 6-10.) The Court finds these breaches were material as they frustrated the central purpose of the lease itself. These breaches were numerous and occurred soon after the inception of the lease agreement indicating a slim possibility Defendants would end up getting substantial performance from EFR. Indeed, Defendants have submitted evidence showing EFR was notified of the breaches in October 2017 and took no action to remedy them before Defendants vacated the property in December 2017. (Ex. 5 to Margaryan Decl.; UMF No. 10.) This is sufficient to satisfy Defendants’ burden under Code Civ. Proc. § 437c(p)(2) to show they were justified in terminating the lease and vacating the premises. The burden has shifted to EFR to show the existence of a triable issue of material fact remains with respect to the cause of action for declaratory relief. EFR has filed no response or opposition to the motion and thus has not carried its burden. Defendants are thus entitled to summary judgment on EFR’s first cause of action for declaratory relief.

B. Second Cause of Action for Unpaid Rent

EFR’s second cause of action seeks to collect unpair rent from Defendants from December 1, 2017, to the end of the lease term on June 30, 2022, as well as unpaid CAM charges. (Complaint at ¶¶14-15.) While not expressly stated in the Complaint, EFR’s claim is one for breach of contract. To state a cause of action for breach of contract, a plaintiff must be able to establish “(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.)

First, as discussed above, the Court has deemed it established that Defendants were not liable for CAM charges under the lease, and thus EFR cannot establish any breach by Defendants in failing to pay such charges. Further, Defendants have submitted evidence showing EFR cannot establish the essential elements of its own performance under the lease agreement or a breach by Defendants. The Court has ordered that EFR is deemed to have breached the lease in multiple ways, and as discussed in connection with EFR’s declaratory relief claim, Defendants have submitted evidence showing these breaches were material and justified Defendants’ termination of the lease. Defendants have also submitted evidence indicating EFR was notified of its breaches as early as October 2017 and did not remedy them before Defendants terminated the lease in December 2017. (Ex. 5 to Margaryan Decl.; UMF No. 10.)

Defendants have thus satisfied their burden of showing EFR cannot establish it performed under the lease. Alternatively, Defendants have also shown EFR cannot establish the element of breach as Defendants were justified in terminating the lease in December 2017 and thus were no longer liable for rent payments as of that date. EFR has filed no opposition or response, and thus has not carried the burden shifted to it to show a triable issue of material fact remains as to its second cause of action for unpaid rent. Defendants are entitled to summary judgment on EFR’s second cause of action.

C. Third Cause of Action for Waste

EFR’s third cause of action alleges Defendants improperly left the premises in a demolished state when they vacated the premises, “which amounts to the commission of waste.” (Complaint at ¶17.) “[W]aste is defined as ‘an unlawful act or omission of duty on the part of a tenant, resulting in permanent injury to the [property].’ [Citations.]” (Avalon Pacific—Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183, 1212 [quoting Old Republic Ins. Co. v. Superior Court (1998) 66 Cal.App.4th 128, 149].) “In order to state a cause of action for waste, a plaintiff must plead and prove that the defendant was under a duty to preserve and protect the property involved.” (Id [internal quotation omitted].)

Defendants argue EFR’s claim for waste must fail because the demolition work performed by Defendants was not an unlawful act or omission. The Court agrees. Defendants have submitted evidence showing EFR and Pelle Cure agreed the premises would require demolition and construction of improvements to be used as a spa and that EFR reviewed and approved the construction plans. (Margaryan Decl. at ¶¶7-8.) EFR offers no response or rebuttal. Accordingly, Defendants were acting with the permission and consent of EFR in undertaking the demolition work which forms the basis of EFR’s waste claim.

To the extent EFR may be alleging Defendants are liable for an unlawful omission in abandoning the premises prior to the completion of construction, this argument is premised on Defendants’ not having been justified in terminating the lease and vacating the subject property. As discussed above, the Court has already determined Defendants were entitled to terminate the lease as a result of EFR’s material breaches. Further, Defendants have presented evidence indicating EFR’s breaches prevented Defendants from completing construction activities. Accordingly, any failure to complete construction stems from EFR’s own unlawful acts, not Defendants’.

The Court thus finds Defendants have carried their burden under Code Civ. Proc. § 437c(p)(2) to show EFR cannot establish a cause of action for waste. EFR has not carried the burden shifted to it to show a triable issue of material fact exists on this claim, and thus summary judgment for Defendants is appropriate.

As Defendants are entitled to summary judgment on each of EFR’s causes of action, Defendants’ motion for summary judgment as to EFR’s Complaint is GRANTED.

2. Pelle Cure’s Motion for Summary Adjudication

In addition to moving for summary judgment on EFR’s claims against Defendants, Pelle Cure also moves for summary adjudication of its first cause of action for breach of contract against EFR and Mavaddat. In an April 14, 2019, order, the Court previously imposed an issue sanction finding that Mavaddat is the alter ego of EFR. As Pelle Cure asserts the same claims against EFR and Mavaddat, the Court will address EFR and Mavaddat collectively as “EFR” for purposes of Pelle Cure’s motion for summary adjudication.

As an initial matter, the Court notes Pelle Cure’s motion for summary adjudication does not comply with the requirements of California Rules of Court rule 3.1350(b), which requires the moving party to prepare and file a separate statement which specifically enumerates the specific cause of action, affirmative defense, claims for damages, or issues of duty” which are the subject of the motion. Pelle Cure has not filed such a separate statement and instead Defendants have filed one joint separate statement for both their motion for summary judgment and Pelle Cure’s motion for summary adjudication. This separate statement does not identify the specific causes of action which are the subject of Pelle Cure’s motion for summary adjudication or the undisputed material facts relevant to such cause of action. However, the Court in its discretion will consider the merits of Pelle Cure’s motion. (Code Civ. Proc. § 437c(b)(1).)

Under Code Civ. Proc. § 437c(p)(1), a cross-complainant moving for summary adjudication on one of its cross claims bears the “burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action.” Pelle Cure’s first cause of action against EFR is for breach of contract. As set forth above, the essential 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, supra, 51 Cal.4th at 821.)

The Court finds Pelle Cure has carried its burden as to each of these elements. Pelle Cure has submitted evidence showing it entered into a lease with EFR. As set forth above, Pelle Cure has also shown it was excused from performance under the lease by EFR’s breaches. EFR’s breaches are deemed established by virtue of the Court’s April 22, 2022, order, and Pelle Cure has shown it was damaged in the amount of $149,355.89 in out-of-pocket costs expended to construct a spa on the premises. (UMF No. 11.) Ultimately, EFR’s breaches prevented Pelle Cure from completing the construction project, and thus Pelle Cure incurred those amounts without ever receiving the benefit of the lease. (UMF Nos. 6-10.)

Under Code Civ. Proc. § 437c(p)(1), the burden has been shifted to EFR to show a triable issue of material fact exists as to Pelle Cure’s claim or any affirmative defense EFR may have against it. As with Defendants’ motion for summary judgment, EFR has filed no opposition or response to Pelle Cure’s motion for summary adjudication and thus has not carried the burden shifted to it. Accordingly, Pelle Cure’s motion for summary adjudication is GRANTED.

3. Attorney’s Fees

Defendants also ask the Court to award them $196,100 in attorney’s fees as the prevailing parties pursuant to provisions in the lease agreement. Section 31 of the lease states, in pertinent part “If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees… The term ‘Prevailing Party’ shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense.” (Ex. 2 to Margaryan Decl.) The guaranty executed by Defendants Anna Margaryan, Dennis Colonello, and Steven Yoon Shin similarly provides “In the event any action be brought by said Lessor against Guarantors hereunder to enforce the obligation of Guarantors hereunder, the unsuccessful party in such action shall pay to the prevailing party therein a reasonable attorney’s fee.” (Id.)

The Court notes the language in the lease entitles the prevailing party to “reasonable” attorney’s fees. Defendants have submitted declarations stating they have incurred a total of $196,100 in attorney’s fees in connection with this litigation (Tumpson Decl. at ¶2; Margaryan Decl. at ¶16) but have not put before the Court any evidence from which the Court could determine the reasonableness of these fees. Further, the Court notes this action has not yet concluded as Pelle Cure’s remaining cross-claims against EFR and Mavaddat remain pending before the Court. Defendants do not provide the Court with any basis “to depart from well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.” (Artus v. Gramercy Towers Condominium Assn. (2018) 19 Cal.App.5th 923, 927; see also Code Civ. Proc. § 437c(k) [“a final judgment shall not be entered on a motion for summary judgment before the termination of the action”].) Accordingly, Defendants’ request for an award of attorney’s fees is DENIED. If Defendants believe they are ultimately entitled to such an award at the conclusion of this litigation, they may bring a motion establishing the reasonableness of the fees sought.

Conclusion

Defendants’ motion for summary judgment as to EFR’s claims against them is GRANTED. Pelle Cure’s motion for summary adjudication of its cause of action for breach of the lease is GRANTED. Defendants’ request for an award of attorney’s fees is DENIED without prejudice.