Judge Jill Feeney, Case Number: 22STCV37271, Date: 2023-11-29 Tentative Ruling

This is an action for breach of contract. Plaintiff alleges that in May 2017, it entered into an ATM Machine placement agreement to place an ATM at Defendant’s business and pay Defendant $1.00 per transaction. (Compl., ¶¶7-9.) The contract term was five years, which would automatically renew for an additional term unless written notice was given at least one month prior to expiration of the previous term. (Id.) Plaintiff alleges it never received termination of the agreement. (Compl., ¶9.) In September 2022, Defendant breached the agreement by turning off the ATM. (Compl., ¶10.)

Defendant moves for summary judgment on the grounds that (1) the parties’ contract is unenforceable, (2) Defendant did not breach the contract, and (3) Plaintiff cannot prove that the breach caused Plaintiff to sustain measurable damages.

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., section 437c, subd. (a).) “[I]f 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,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. (Code Civ. Proc. § 437c, subd. (f)(2).)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).) “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 the cause of action or a defense thereto.” (Ibid.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Med. Ctr. (2008) 159 Cal.App.4th 463, 467.)

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi, supra, 159 Cal.App.4th at p. 467; see also Code Civ. Proc., section 437c(c).)

“[T]he elements of a cause of action 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.” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.)

“When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is ‘reasonably susceptible’ to the interpretation urged by the party. If it is not, the case is over. If the court decides the language is reasonably susceptible to the interpretation urged, the court moves to the second question: what did the parties intend the language to mean. Whether the contract is reasonably susceptible to a party's interpretation can be determined from the language of the contract itself or from extrinsic evidence of the parties' intent.” (Southern Cal. Edison Co. v. Superior Court¿(1995) 37 Cal.App.4th 839, 847–848.)

“‘Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.’” (Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 777 (quoting Ladas v. California State Automobile Association (1993) 19 Cal.App.4th 761, 770).)

“The defense of uncertainty has validity only when the uncertainty or incompleteness of the contract prevents the court from knowing what to enforce.” (Okun v. Morton (1988) 203 Cal.App.3d 805, 817 (citing Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500).) If parties “concluded a transaction in which it appears that they intend to make a contract, the court should not frustrate their intention if it is possible to reach a fair and just result, even though this requires a choice among conflicting meanings and the filling of some gaps that the parties have left.” (Id.)

Here, Defendant also cites Yamanishi v. Bleily & Collinshaw, Inc. (1972) 29 Cal.App.3d 457, 463, Hellman v. Great American Insurance Co. (1977) 66 Cal.App.3d 298, 303, and other cases which state that in cases of uncertainty, the language of a contract should be interpreted most strongly against the party that caused the uncertainty to exist.

Defendant first argues that the contract is unenforceable because the title of agreement is illegible, the font is small and blurry, and the price of each transaction is illegible. However, the title does not affect the material terms of the contract. Additionally, though the font is small, the contract is legible.

The price of each transaction is handwritten and is illegible. However, the parties are not disputing the price of each transaction, but whether Defendant terminated or breached the contract. The legible terms of the contract state that Plaintiff agreed to install an ATM on Defendant’s premises, Plaintiff would pay Defendant for every transaction, that the contract term is five years, and that the term would automatically renew. (Compl., Exh. A.) The legible terms sufficiently provide the Court with information about what it should enforce.

Defendant also argues that the contract is uncertain because it fails to define “eligible transaction.” However, the contract does define “transaction” as “any cash withdrawal made at the Site ATM from a cardholder’s account when a surcharge fee is collected.” (Compl., Exh. A.) The Court finds that the contract sufficiently defines the word “transaction” even if it does not define what constitutes an eligible transaction. In any case, such an ambiguity would not render the contract unenforceable because it appears from the rest of the contract that the parties intended to make a contract to install an ATM at Defendant’s business.

Defendant also argues that the contract is uncertain because it states that Plaintiff may unilaterally increase or decrease the amount of the transaction fee payable to Plaintiff “upon demonstration of a change in direct transaction costs payable to third party processing providers or a change in transaction fee revenue due to a change in network rule or other law or regulation that affects fees payable to Location ATM owners.” (Compl., Exh. A.) However, this term is not uncertain because the contract defines specific conditions under which Plaintiff may modify its fees. The Court would have sufficient information to enforce this term. Additionally, the parties do not dispute this term.

Defendant next argues that the automatic renewal provision is invalid because it does not appear under the “Term” or “Renewal” headings, but under the “Exclusivity” heading in small, blurry font. Defendant cites Domestic Linen Supply Co., Inc. v. L J T Flowers, Inc. (2020) 58 Cal.App.5th 180, 185 in support of this argument. Domestic Linnen involved an arbitration clause which the court there ruled was invalid because its placement showed the clause was intentionally deceptive and did not indicate any agreement to arbitrate.

Defendant also cites case law related to other legal theories including unconscionability. However, unconscionability is a different legal theory with different requirements, including a sliding scale of both procedural and substantive unconscionability. Defendant does not raise the legal theory of unconscionability anywhere else in this motion or the notice of motion.

Here, the subject agreement is distinguishable from the agreement in Domestic Linen. In Domestic Linen, a clause was deceptively placed after the signature line, on the back of the agreement, in a document filled top to bottom with closely spaced lines of small type, surrounded by indistinguishable paragraphs. Here, the automatic renewal provision reads as follows:

“Upon the expiration of the initial term, this Agreement will automatically renew for subsequent an [sic] additional term of equal length, each on the same terms and conditions as provided herein, unless written notice by certified mail is given at least 1 month prior to the expiration of the first term.” (Compl., Exh. A.)

The provision is written in legible font, in a small paragraph placed before the signature line in a one-page contract with standard spacing and margins. Although not placed under the most descriptive heading, the provision is not hidden, is readily visible, and does not appear to have a deceptive effect.

Defendant also makes a conclusory argument that the provision is vague, ambiguous, ungrammatical, and unintelligible. However, the provision is not vague, ambiguous, ungrammatical, or intelligible.

Defendant also argues that the contract is uncertain because the second sentence in Section 8 “Exclusivity” is vague and ambiguous because the word “agreement” is not capitalized there whereas it is capitalized in section 1. However, this term is not vague because there is only one agreement, and the section could only be referring to the subject agreement. Moreover, vagueness in this section does not prevent the Court from knowing what to enforce.

Defendant also argues that the contract is uncertain because the contract does not include various terms, including which party has a duty to give notice of nonrenewal, the party to whom a notice of nonrenewal should be sent, the mailing address where the notice should be sent, an identifiable deadline for the mailing of the nonrenewal, the length of one month, and whether Plaintiff must receive the nonrenewal. However, Defendant provides no evidence or authority that these were required contract terms. Again, these terms do not render the entire agreement unenforceable because it is apparent that the parties intended to make a contract to install an ATM at Defendant’s business. As Plaintiff points out, citing Addiego v. Hill (1965) 238 Cal.App.2d 842, not every term and condition needs to be set forth in a contract.

Finally, Defendant argues that it could not have breached the contract because it turned off the ATM four months after the end of the contract term. However, this fact does not show the contract was unenforceable. Additionally, Plaintiff alleges that it never received a nonrenewal letter, meaning the automatic renewal was in effect and a new contract term had already begun.

Defendant fails to meet its burden of proving no triable issue of material fact exists over whether the contract is unenforceable due to uncertainty. The burden does not shift to Plaintiff.

Defendant next argues that it did not breach the contract because it notified Plaintiff of its intent not to renew the contract twice before the end of the initial term of the contract.

Here, the contract states “Upon the expiration of the initial term, this Agreement will automatically renew for subsequent an [sic] additional term of equal length, each on the same terms and conditions as provided herein, unless written notice by certified mail is given at least 1 month prior to the expiration of the term.” This term is not ambiguous and expressly requires any notice of nonrenewal to be given at least one month before the end of the initial term.

The contract term began on May 2, 2017. Thus, the contract term ended on May 2, 2022. The deadline to give a notice of nonrenewal was April 2, 2022. Defendant provides two letters which Defendant sent to Plaintiff attempting to terminate the contract. (Motion, Exhs. 2-3.) The first is dated March 12, 2022 and the second is dated April 19, 2022. Defendant’s manager, Mustansir Caderbhoy testifies that he prepared and mailed the first nonrenewal letter on March 12, 2022 via first class mail. (Chaderbhoy Decl., ¶11.) Chaderbhoy mailed one more letter (dated April 8, 2022) on April 19, 2022 by certified mail. (Id., ¶¶13-14.) Because the deadline to submit the nonrenewal passed on April 2, 2022, only the first letter was sent prior to the contractual deadline.

Plaintiff provides a declaration from Siamak Simany, Plaintiff’s chief executive officer, who testifies that he reviewed all of Plaintiff’s records with respect to this action and found that Plaintiff never received a letter dated March 12, 2022. (Simany Decl., ¶24.) Thus, a triable issue of material fact remains over whether the agreement was terminated at the time of Defendant’s alleged breach.

The time of the essence cases cited by Defendant do not move the ball forward here. The absence of a time of the essence clause in a contract means that failure to perform an obligation under that contract in strict accordance with deadlines in the contract does not amount to a material breach and does not allow the other side to exercise remedies for a breach.

Here, Plaintiff is not alleging that Defendant breached its obligations under the contract by failing to timely provide notice of nonrenewal of the contract. Rather, Plaintiff alleges that Defendant breached its obligations by turning off the ATM machine. Defendant, rather, is offering as an affirmative defense the fact that the contract was actually terminated at the time that it allegedly committed the breach. Time of the essence or lack thereof is not relevant to this affirmative defense. Defendant has not provided any authority that deadlines in connection with withdrawing from automatic renewal provisions are not enforceable.

Finally, Defendant moves for summary judgment on the grounds that Plaintiff cannot prove with reasonable certainty that Defendant caused Plaintiff to sustain measurable damages.

Defendant first argues that Plaintiff cannot prove it suffered any damages because it timely sent a nonrenewal letter terminating the contract. However, as discussed above, a triable issue remains over whether Defendant timely sent the nonrenewal letter. Thus, a triable issue remains over whether Plaintiff suffered damages as a result of Defendant’s alleged breach of the ATM machine placement agreement.