Judge Kenneth J. Medel, Case 37-2020-00046532-CL-BC-CTL 2023-12-01 Tentative Ruling

Judge: Kenneth J. Medel, Case: 37-2020-00046532-CL-BC-CTL, Date: 2023-12-01 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - November 30, 2023

12/01/2023 09:30:00 AM C-66 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Kenneth J Medel

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Civil - Limited Breach of Contract/Warranty Summary Judgment / Summary Adjudication (Civil) 37-2020-00046532-CL-BC-CTL DODGE VS NJND LLC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 10/04/2023

Evidentiary Objections filed by Defendant are OVERRULED.

Defendant NJND, LLC's Motion for Summary Judgment is DENIED.

This case stems from a dispute over commissions received by Plaintiff in relation to a real estate lease transaction. Plaintiff is the successor-in-interest to the broker for the lessee. She alleges she did not receive her 50% share of the leasing commission in two instances: (1) when Base Rent under the Lease increased in 2018 and 2019, and (2) when her client (the tenant) exercised its option to extend the lease.

She filed the action alleging breach of contract and common counts against two different parties: (1) Harmon Realtors (who was the broker who represented the lessor) and (2) NJND, LLC , the successor-in-interest to the original lessor. (Subsequent to the execution of the Lease, on December 20, 2019, the original lessor, THE COSS FAMILY TRUST, sold the Property by way of purchase agreement to GEORGE SALAMEH 'and/or Assignee,' who then assigned all of his interest in the Property (including the Lessor's rights in the Lease) to NJND, LLC. [NJND NOL, Exh. 2, p. 31; Plaintiff's NOL, Exh. 4, p. 1].

On 3/11/22, Judge Mangione granted summary judgment in favor of Harmon. Plaintiff had alleged that HARMON had received the commission Plaintiff has complained about, but failed to distribute half to her. [Compl., p. 5, ¶ 27]. HARMON showed that she did not receive any commissions, the Court granted summary judgment as to HARMON alone. [ROA No. , Min. Order, 3/11/22). The Court made no rulings as to whether NJND, as successor in interest to COSS, owed a commission to Plaintiff (and/or HARMON).

Now NJND, LLC moves for summary judgment of the claims against NJND. According to NJND, NJND was not a party to the Lease and has not expressly assumed any obligations to Dodge.

Dodge alleges that The Coss Family Trust 'transferred all of its interest as Lessor in the Lease to NJND, LLC, who assumed all rights and responsibilities from THE COSS FAMILY TRUST under the Lease.' (SSUMF No.37.) In making this claim, Dodge relies on Section 15.2 of the Lease, which says 'any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder.' (SSUMF No.38.) NJND argues that it did not 'expressly assume' the obligations of the Lease. NJND relies on authority that 'absent an express assumption of the obligations of the lease there is no privity of contract between the original landlord[]... and the [tenant's] assignee....' (Kelly v. Tri-Cities Broad. (1983) 147 Cal.App.3d 666, 676 ('Kelly') 'An express assumption of a real property lease requires specific affirmation by the assignee to bind itself to the lease obligations.' (BRE DDR BR Whittwood CA LLC v. Farmers and Merchants Bank of Long Beach (2017) 14 Cal.App.5th 992, 1001 ('BRE') Merely taking possession of the property is insufficient. 'An assignee who takes possession under an assignment without an express assumption of the obligation of the lease is not bound by the contractual obligations of the lease.' (Kelly, Calendar No.: Event ID: TENTATIVE RULINGS

3031641 52 CASE NUMBER: CASE TITLE: DODGE VS NJND LLC [IMAGED] 37-2020-00046532-CL-BC-CTL supra, 147 Cal.App.3d at p. 676.) Kelly is factually distinguishable in that the assigning party therein was assuming the tenant's position, not the landlord position in the lease. [Kelly, p. 666]. The Kelly court goes onto explain that the rule regarding expressed assumptions is applied to a subsequent tenant that assumes the lease obligations from a previous tenant. [Id. at p. 675]. NJND did not assume naked possession as an assignment of tenancy interests in the Lease. To the contrary, NJND purchased the land, including the reversionary interest, which also conveyed privity of estate and the lessor's obligations under the Lease.

When a property is transferred while rented to a tenant, the buyer's interest is nonpossessory during the tenant's occupancy. [Avalon Pacific-Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183, 1217–1218]. Additionally, in the absence of a prohibition in the lease or a merger, a transfer of the lease and the reversion does not abrogate the lease. The transfer creates a privity of estate between the transferee and the tenant. This means that the transferee becomes the landlord and is bound by the terms and conditions of the lease.' [Scholey v. Steele (1943) 59 Cal.App.2d 402, 404-405; see also Chapman v. Great Western Gypsum Co. (1932) 216 Cal. 420, 428].

Page 16 of Exhibit 1 of NJND's own lodgment of exhibits, specifically Section 15.2 of the Lease states: 'Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligations hereunder.' [NJND NOL, Exh. 1, p. 16, § 15.2]. There is an affirmative obligation upon any successors in interest to the original lessor.

It is undisputed that the original lease had certain commissions payable to the broker under different scenarios (the details are set forth in the papers). That lease was amended in May, 2018. NJND contend the lease contained an addendum that altered the terms of the Lease to eliminate the commissions upon the exercise of an Option as set forth in the Addendum. [NJND NOL, Exh. 4, p. 46]. Plaintiff disputes that the addendum was part of the original Lease, and was later and improperly added by HARMAN and the BROKERAGE to gain favor with NJND as the new landowners for the property management business.

[Decl. Dodge, pp. 4, ¶ 21] The factual issue is whether this addendum was part of the lease or not.

NJND also relies heavily on the case of C.H.E.G., Inc. v. Millenium Bank, 99 Cal. App. 4th 505 (2002). In that case, the original landlord leased to IMP. Like our case, the lease contained explicit provisions for commission to the landlord's broker, including provisions for commissions upon sale. Subsequently, landlord lost the property to foreclosure and landlord filed for bankruptcy. After the conclusion of the bankruptcy, the foreclosing bank sold at least a portion of the property to new owner (the original tenant). Like our case, the broker for original landlord sought commission from the bank based upon provisions of the lease for commissions after sale. The Court of Appeal first ruled that the bankruptcy order precluded the commission. The Court also ruled that there was no 'attornment' (or an assumption on the part of the bank to the tenancy because it used the broker as manager of the property after foreclosure and paid rent).

In holding that the bank did not assume the role of landlord for commissions, the Court reasoned: 'The implication would be that the bank agreed to assume the responsibilities of the prior landlord owed to IMP under the original lease, but this would not include duties owed to third parties. The successor landlord's implied commitment is to ensure that the tenant, who is held to its continuing obligations under the lease, receives the full consideration for which it bargained. To accomplish this objective, it is not necessary for the new landlord to agree to assume obligations to any other party. Thus, while the concept of attornment may bear on the rights and obligations of the bank and IMP after the bank's purchase of the building, an attornment would not bind a succeeding landlord to Rivendell's promise to pay CHEG a commission for services that had been fully performed before the bank acquired its interest in the property.' C.H.E.G., Inc. v. Millenium Bank, 99 Cal. App. 4th 505, 515 (2002) The difference here is that we have a sale of the property, not a foreclosure by a bank. The bank's obligations in the period of time it collected rents and managed the property included an implied commitment to the tenant. The case at bar involves a purchase of the property, where the lease was to be assumed by the new owner.

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