Judge Kristin S. Escalante , Case Number: 22STCV36588, Date: 2023-06-30 Tentative Ruling

Judge: Kristin S. Escalante , Case: 22STCV36588, Date: 2023-06-30 Tentative Ruling

DEPARTMENT 24 - LAW AND MOTION RULINGS

Submission Instructions.

1. Please notify the courtroom staff by email not later than 4:00 p.m. the day before the hearing if you wish to submit on the tentative ruling rather than argue the motion. The email address is SMCDEPT24@lacourt.org. Please do not use any other email address. You must cc all other parties on the email.

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NATURE OF PROCEEDINGS: Hearing on Demurrer - with Motion to Strike (CCP 430.10) to Plaintiff's First Amended Complaint

TENTATIVE RULING:

The Court has read the moving papers in the above-captioned motions and announces its tentative rulings in open Court.

The Demurrer to Plaintiff's First Amended Complaint ID: 025249343247 filed by Defendant Leonis Property LLC on 06/07/2023 is SUSTAINED in Part and OVERRULED in part.

The demurrer to the first (breach of contract), second (breach of the implied covenant of good faith and fair dealing), and fourth (declaratory relief) causes of action is overruled. The demurrer to the third (promissory estoppel) cause of action is sustained with 30 days’ leave to amend.

The Motion to Strike Certain Portions of Plaintiff's First Amended Complaint ID: 025249343247 filed by Defendant Leonis Property LLC on 06/07/2023 is GRANTED.

Defendant Leonis Property LLC (“Defendant”) demurrers to the first (breach of contract), second (breach of the implied covenant of good faith and fair dealing), third (promissory estoppel), and fourth (declaratory relief) causes of action in the first amended complaint (“FAC”) of Plaintiff A&G Global Imports, LLC (“Plaintiff”). (Notice of Dem., at p. 3.) Defendant also moves to strike Plaintiff’s claim for relief for “attorneys fees as allowed by law and according to proof.” (Notice of Mtn., at p. 2.)

By way of background, Plaintiff filed its FAC from issues arising from lease between the parties regarding the real property located at 3359, 3379, 3389 E. 50th Street, Vernon, California 90058 (“subject property”). (FAC, ¶8.) Plaintiff alleges the parties entered into three agreements over the course of six years: the September 1, 2016 Lease (“September Lease”), the April 7, 2020 amendment (“April Amendment”), the February 9, 2022 agreement (“February Lease”). (FAC, ¶¶ 9-12.) The February Lease extended the lease through August 31, 2022. (FAC, ¶12.)

In the interim, it included a provision that Plaintiff would make its best efforts to procure a High Pile Storage Permit (the “Permit”) for the Premises. (FAC, ¶14.) To obtain the Permit, the parties were aware that Plaintiff would need to conduct a complete overhaul of the sprinkler system which would take more than four months. (FAC, ¶15.) The February Lease also stated that no amendment would be delivered unless the permit was obtained. (FAC, ¶16.)

Plaintiff engaged in its best effort to obtain the Permit and advanced $50,000 in furtherance of the sprinkler work. (FAC, ¶18.) In October 2022, Plaintiff communicated to Defendant that the sprinkler work would take $623,687.000 and seven and a half months to complete. (FAC, ¶22) Defendant refused to extend the lease unless the sprinkler work was completed by December 2022. (FAC, ¶23.) Defendant refused to negotiate despite the significant improvements Plaintiff had undertaken and in October 2022 delivered a 90 day notice of termination of tenancy (“Termination Notice”). (FAC, ¶25.)

Defendant’s 6/7/2023 request for judicial notice is denied as unnecessary to the motion.

Discussion

“To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff.” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98 [internal citation omitted].) For a written contract, the plaintiff may “plead the legal effect of the contract rather than the price language.” (Ibid.) To “plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

Plaintiff has alleged a breach of contract claim. It alleges the parties entered into the February Lease, Plaintiff undertook its best efforts to obtain the Permit, Defendant set an artificial and unreasonable deadline, and Plaintiff was damaged from this unreasonableness. (FAC, ¶¶ 12, 15, 18, 23, 25, 30, 31.) The court “take[s] as true all properly pleaded material facts, but not conclusions of fact or law asserted in the complaint.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 916.) The allegations are that the parties’ intent was for Plaintiff to engage in its best efforts.

Defendant argues the February Lease was not premised on Plaintiff’s best efforts, but on actual procurement of the Permit. (Dem., at p. 7:20-8:02.) This argument turns on questions of contract interpretation and facts surrounding the parties’ intent when they entered into the February Lease. This is beyond the scope of a demurrer. Additionally, Defendant’s argument that the February Lease is unequivocal is belied by the alleged language that Plaintiff need only take its best efforts to obtain the permit. Moreover, the language that “no amendment shall be delivered” does not establish unmistakably that Defendant had no obligation to negotiate an amendment to the February Lease.

2. Second Cause of Action – Breach of the Implied Covenant of Good Faith and Fair Dealing

The covenant of good faith and fair dealing is “implied by law in every contract.” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.) It “requires each party to do everything the contract presupposes the party will do to accomplish the agreement’s purposes.” (Ibid.) “[T]he covenant of good faith and fair dealing applies to employment contracts and that breach of the covenant may give rise to contract but not tort damages.” (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 663.)

To state a claim for the breach of the covenant of good faith and fair dealing, the plaintiff must allege “that the conduct of the defendant. . . demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) To decide if this has occurred, the court looks at the “contractual purposes and reasonably justified expectations of the parties.” (Ibid.)

Plaintiff has alleged a claim for the breach of the implied covenant of good faith and fair dealing. Plaintiff alleges the parties held a contractual relationship, the February Lease required Plaintiff make its best efforts to install the sprinkler system, Plaintiff performed under the February Lease, and despite Plaintiff’s performance, Defendant refused preform its obligations and, instead, set a knowingly unreasonable timeframe given its knowledge of the impossibilities of obtaining a sprinkler system in under seven and a half months. (FAC, ¶¶19, 33-39.)

Defendant argues the February Lease contained no obligation for Defendant to extend the February Lease during the duration of the sprinkler replacement system and that such an allegation is reading into the contract an obligation which was not present. First, this is an expanded reading of the allegation—e.g., that the February Lease required Defendant to extend the lease terms no matter what. Second, Defendant may be correct; however, at the pleading stage, Plaintiff’s allegations are taken as true. “The allegations of the pleading demurred to must be regarded as true.” (South Shore Land Co. v. Peterson (1964) 266 Cal.App.2d 725, 732.) It is true that a “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (Ibid. [internal citations omitted].) Plaintiff’s pleadings—that there was an implied term to negotiate in good faith and not to unreasonably refuse to extend the lease—does not amount to facts impossible under existing law.

“Promissory estoppel is a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.” (US Ecology, Inc. v. State of California (2004) 129 Cal.App.4th 887, 901–02 [internal quotations omitted].) “The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Id. at p. 901 [internal quotations and brackets omitted].)

Plaintiff has not alleged a claim for promissory estoppel. While Plaintiff has alleged the elements of promissory estoppel in its specific cause of action, the specific allegations contradict the general allegations. In the promissory estoppel cause of action Plaintiff alleges the parties were in negotiations to extend the terms of the February Lease, and that Defendant “made a clear and unambiguous promise that [Plaintiff] would be allowed to continue its tenancy at the Premise if [Plaintiff] made its best efforts to obtain the required permits and complete the sprinkler work.” (FAC, ¶¶42-44.) Plaintiff also alleges it reasonably and foreseeably relied on the promise that the tenancy would continue and was damaged when Defendant reneged on its promise. (FAC, ¶¶46-48.)

However, to the extent the alleged promise is within the February Lease, then Plaintiff’s claim is a breach of contract claim. (See Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 243 [“Based on these significant differences between contract and promissory estoppel claims, our Supreme Court repeatedly has recognized the claims not only as distinct or alternative theories of recovery but also as mutually exclusive.”].) If the promise was in the February Lease, then equitable estoppel does not apply because there was consideration for the promise. (Ibid. [“The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange”].) In opposition, Plaintiff appears to concede that the promise made was the promise within the February Lease. Nevertheless, the allegations do not specify when or in what context Defendant made the promise to Plaintiff.

To the extent the alleged promise was made outside the terms of the February Lease, the Lease itself prohibits any modification unless they were made in writing and signed by the parties; it also states it contains all agreements between the Parties to any matter mentioned therein. (FAC, ¶47, Ex. 1 at pp. 13, 15.) Plaintiff has not alleged any other written agreement which would come within the purview of this cause of action. By the terms of the allegations and attached contract, any oral agreement would be an invalid modification. (FAC, ¶48.) Thus, the claim for promissory estoppel appears contradictory to Plaintiff’s general allegations.

“The existence of an ‘actual controversy relating to the legal rights and duties of the respective parties,’ suffices to maintain an action for declaratory relief.”¿ (Ludgate Ins. Co. v. Lockheed Martin Corp.¿(2000) 82 Cal.App.4th 592, 605 (Ludgate).) “Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another. . . may, in case of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-compliant. . .” (Code Civ. Proc., § 1060.) A plaintiff may bring request for declaratory relief alone or with other relief. (Code Civ. Proc., § 1060.) “The existence of an ‘actual controversy relating to the legal rights and duties of the respective parties,’ suffices to maintain an action for declaratory relief.”¿ (Ludgate Ins. Co. v. Lockheed Martin Corp.¿(2000) 82 Cal.App.4th 592, 605; see also Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.)

Plaintiff has alleged a cause of action for declaratory relief. Plaintiff alleges there is a controversy between the parties regarding their rights and obligations under the February Lease. Particularly, Plaintiff contends that “it is excused from performing the sprinkler work and is entitled to continue its tenancy at the Premises, for a reasonable amount of time, until suitable alternatives are found.” (FAC, ¶51.) This is sufficient to state a claim.

Defendant argues there is “no dispute as to the contents of the documents,” or that Plaintiff had not obtained the Permit prior to the expiration of the February Lease on August 31, 2022. (Dem., at p. 15:14-24.) Nevertheless, the parties do dispute what the terms of the February Lease required the parties to do in the event the Permit was not obtained by August 2022.

Defendant also moves to strike page 12, line 11, in which Plaintiff’s requests relief in the form of “attorneys fees as allowed by law and according to proof.” (Notice of Mtn., at p. 2.) The court may strike out any “irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., §437) Motions may also target pleadings or parts of pleadings that are not filed or drawn in conformity with applicable laws, rules, or orders. (Code Civ. Proc., §437 subd., (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., §437.)

Plaintiff filed a notice of non-opposition to the motion along with counsel’s declaration. Counsel states that he conferred with Defendant and offered to stipulate to amend the complaint and omit the request, but Defendant declined. (Turner Decl., ¶3.)