Judge Lee W. Tsao, Case Number: 22NWCV01091, Date: 2024-11-13 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV01091, Date: 2024-11-13 Tentative Ruling

Case Number: 22NWCV01091 Hearing Date: November 13, 2024 Dept: C

ELAINE M. SIMMONS, ET AL. v. COLIMA PROFESSIONAL BUILDING, LLC, ET AL.

CASE NO.: 22NWCV01091

HEARING: 11/13/24

TENTATIVE ORDER

Plaintiffs Elaine M. Simmons and Janet K. Cunningham’s Motion for Summary Adjudication is DENIED.

Opposing party to give notice.

This action arises from the alleged breach of a lease agreement pertaining to property located at 9209 Colima Road in Whittier, California. On October 24, 2022, Plaintiffs Elaine M. Simmons (“Simmons”) and Janet K. Cunningham (“Cunningham”) (collectively, “Plaintiffs”) filed a complaint against Defendants Colima Professional Building (“CPB”), Victor Fahmy Khalil (“Khalil”), and DOES 1 through 20, inclusive (collectively, “Defendants”), alleging causes of action for: (1) specific performance; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; and (4) declaratory relief.

On May 16, 2023, Plaintiffs filed a First Amended Complaint (“FAC”) alleging causes of action for: (1) specific performance; (2) breach of contract; and (3) declaratory relief.

On November 9, 2023, after hearing oral argument, the Court sustained Defendants’ demurrer to the FAC with leave to amend. (11/09/23 Minute Order.)

On November 27, 2023, the operative Second Amended Complaint (“SAC”) was filed, which alleges causes of action for: (1) breach of contract; and (2) declaratory relief.

On December 28, 2023, Defendants filed a joint answer to the SAC which alleges, among other affirmative defenses, an affirmative defense of waiver/release.

On August 8, 2024, Plaintiffs filed and served the instant motion for summary adjudication of the claim for declaratory relief. Plaintiffs move for summary adjudication on the grounds “that the undisputed facts establish that Defendants are obligated to participate in good faith in the appraisal process and establishment of a new rental amount pursuant to the terms of the lease regarding the property located at 9209 Colima Road, Whittier, California, and shall be ordered to do so.” (Not. of Mot. at p. 1:6-9.)

On October 30, 2024, Defendants filed and served an opposition to the motion.

As of November 6, 2024, no reply brief has been filed. Any reply brief was required to have been filed and served at least five court days prior to the hearing. (Code Civ. Proc., § 1005, subd. (b).)

DISCUSSION

Evidentiary Objections

The Court SUSTAINS Defendants’ evidentiary objection number 1 to the declaration of Janet K. Cunningham in support of the motion on the grounds of hearsay.

The Court SUSTAINS Defendants’ evidentiary objections numbers 2, 3 ,4, and 5 to the declaration of Michael S. Magnuson in support of the motion on the grounds of hearsay.

The Court OVERRULES Defendants’ evidentiary objection number 6 to the declaration of Michael S. Magnuson.

Legal Standard

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.) CCP Section 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.)

“[A] plaintiff [moving for summary adjudication] bears the burden of persuasion that each element of the cause of action in question has been proved, and hence there is no defense thereto.” (Beebe v. Wonderful Pistachios & Almonds LLC (2023) 92 Cal.App.5th 351, 370, internal quotations omitted.)

A plaintiff may “move for summary adjudication of a cause of action, if the plaintiff asserts there is no defense to that cause of action.” (Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 241.) “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages . . . if the party contends that . . . there is no affirmative defense to the cause of action, [or] that there is no merit to an affirmative defense as to any cause of action . . . .” (Code Civ. Proc., § 437c, subd. (f)(1).)

A plaintiff moving for summary adjudication has met its burden if it shows “that there is no defense to a cause of action” by showing “each element of the cause of action entitling the party to judgment on the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(1).) “Once the plaintiff . . . has met that burden, the burden shifts to the defendant . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) “The defendant . . . shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists s to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)

Pertinent Allegations of the SAC

The SAC alleges the following relevant facts: “Plaintiffs . . . are individuals each owning and [sic] undivided 50% interest in certain real property located at 9209 Colima Road, Whittier, California.” (SAC, ¶ 1.) “On or about August 31, 1962, William L. Simmons, as owner, entered into a written long-term lease with William G. Greschner Co. with respect to the real property . . . .” (SAC, ¶ 6.) “The property and the Lease were subsequently transferred to the Simmons Family Trust . . . plaintiffs herein, Elaine M. Simmons and Janet K. Cunningham, each acquired a one-half interest in the property and the Lease.” (SAC, ¶ 7.) “Defendant Khalil acquired lessee’s interest in the Lease in or about November 1996. Mr. Khalil conveyed the leasehold to his company, defendant Colima Professional Building, LLC, on or about June 24, 2019.” (SAC, ¶ 8.) “The Lease is, and has since 1962, been in full force and effect. The Lease establishes a procedure for adjusting the annual rent every ten years based on six percent (6%) of the current appraised value of the property.” (SAC, ¶ 9.) “Defendants are currently paying monthly rent of $4,679.16. However, plaintiffs have informed and believe that the actual value of the property (excluding improvements) is approximately $6,000,000.00, and monthly rental, commencing January 1, 2023, should be about $30,000.00.” (SAC, ¶ 10.) “By letters dated August 23, 2022, and September 14, 2022, plaintiff lessors gave notice to defendant lessees initiating the process of setting a new rental amount which will go into effect as of January 1, 2023 . . . .” (SAC, ¶ 11.) “Plaintiff lessors received no response from defendants.” (SAC, ¶ 11.)

Concerning the second cause of action for declaratory relief, Plaintiffs allege that “[a]s a result of defendants’ failure to comply with the terms of the Lease an actual controversy exists between the parties as to their right and obligations under the Lease in that plaintiffs contend that they are entitled to a rent increase and defendants are required to comply with provisions of the lease setting a new lease amount. Defendants deny that they have any obligation to participate in setting a new rent amount or to pay an increased monthly rent.” (SAC, ¶ 20.) Plaintiffs seek a judicial determination that: (1) the Lease between the parties is valid and enforceable as against Defendants Khalil and Colima; (2) Defendants are in breach of the Lease as a result of their failure to comply with provisions of the Lease establishing the rental value of the property; and (3) Defendants be ordered to participate in good faith in the appraisal process and establishment of a new rental amount commencing as of January 1, 2023 and, alternatively, that Plaintiffs may unilaterally obtain appraisal and establish a new rental amount. (SAC, ¶ 21(a)-(c).)

Analysis

A. Second Cause of Action for Declaratory Relief

To state a cause of action for declaratory relief, a plaintiff must show “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party.” (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546.) “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code § 1638.) “When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to other provisions of this Title.” (Civ. Code § 1639.) “A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code § 1643.)

Plaintiffs’ Evidence

Plaintiffs present the following undisputed material facts: On or about August 31, 1962, William L. Simmons, an owner, entered into a written long-term lease with William G. Greschner Co. with respect to the real property located at 9209 Colima Road, Whittier, California. (Plaintiffs’ Separate Statement of Undisputed Material Facts (PSUF) 1.) The property and the Lease were subsequently transferred to the Simmons Family Trust. (PSUF 2.) On or about April 10, 2006, by distribution from the trust, plaintiffs herein, Elaine M. Simmons and Janet K. Cunningham, each acquired a one-half interest in the property and the Lease. (PSUF 2.) The lease attached as Exhibit 1 to the Cunningham declaration is the lease that is applicable and operative. (PSUF 4.) Defendant Khalil acquired lessee’s interest in the Lease by assignment in or about June 1997. (PSUF 5.) The Lease establishes a procedure for adjusting the annual rent every ten years based on six percent of the current appraised value of the property. (PSUF 9.) The Lease further provides that lessor and lessee are to try and agree to a new rental amount during the period 30 days prior to each succeeding 10-year period and if they are unable to agree, the new lease amount is set by an appraisal process. (PSUF 10.) Defendants are currently paying monthly rent of $4,679.16. (PSUF 11.) Defendant Khalil has not made any rent adjustment at any time since he acquired the leasehold interest in 1997. (PSUF 12.) Although he transferred ownership of the leasehold interest to his LLC, Defendant Khalil acknowledges that he is still personally obligated as lessee under the lease. (PSUF 27.)

Plaintiffs also present evidence that: Defendant Khalil transferred ownership of the building located on the Colima real property to Defendant Colima, which is an entity owned by Defendant Khalil. (Magnuson Decl., ¶ 2; Ex. 4.) Defendant Khalil failed to give notice to lessors of the intended assignment as required by the Lease. (Magnuson Decl., ¶ 7; Ex. 9 at p. 33:2.) Defendant Khalil has not communicated with Plaintiffs at any time from January 1, 2019, to the present. (Magnuson Decl., ¶ 7; Ex. 9 at p. 15:1-4.) By letters from counsel dated August 23, 2022, and September 14, 2022, plaintiff lessors gave notice to defendant lessees initiating the process of setting a new rental amount which would go into effect as of January 1, 2023. (Magnuson Decl., ¶¶ 3-4; Exs. 5, 6.) Plaintiff lessors received no response from Defendants to the August 23 and September 14 letters. (Magnuson Decl., ¶ 4.) There are currently close to about 15 tenants in the Colima Professional Building which is fully occupied. (Magnuson Decl., ¶ 7; Ex. 9 at p. 19:4-9.) Defendant Khalil testified that he receives approximately $50,000 to $60,000 per month in rent. (Magnuson Decl., ¶ 7; Ex. 9 at p. 36:13-17.)

Defendant Khalil believes that he has no obligation at this point to engage in any rent adjustment and believes that he has no obligation to do anything unless someone contacts him. (Magnuson Decl., ¶ 7; Ex. 9 at p. 24:12-25.) Moreover, Defendant Khalil states that he is under no obligation to initiate the process of adjusting rent. (Magnuson Decl., ¶ 7; Ex. 9 at p. 25:23-25.) Defendant Khalil testified that if he is not contacted by the lessors then he has no obligation to make a rent adjustment. (Magnuson Decl., ¶ 7; Ex. 9 at p. 28:21.) Defendant Khalil has not engaged in any process of negotiating with the lessors to determine the value of the land. (Magnuson Decl., ¶ 7; Ex. 9 at p. 31:6-10.) Defendant Khalil has been sending payment to both Plaintiffs. (Magnuson Decl., ¶ 7; Ex. 9 at p. 43:14-21.) Defendant Khalil has never contacted Plaintiffs to attempt to agree on the value of the land comprising the leased premises and has never contacted Plaintiffs regarding an appraisal of the property. (Cunningham Decl., ¶ 4.)

Defendants’ Evidence

Defendant Khalil presents a declaration in opposition to the motion. Defendant Khalil declares the following: Plaintiffs have not individually contacted him at any time to discuss a recalculation of the rent. (Khalil Decl., ¶ 4.) He has made sure that payments for rent went out to Plaintiffs every month and he continues to do so pursuant to the information that has been provided to him. (Khalil Decl., ¶ 5.) He has looked for an appraiser to determine a fair price to purchase the land which is the subject of this case. (Khalil Decl., ¶ 7.) He did not receive the letters marked as Exhibit 5 or Exhibit 6 before August 31, 2022. (Khalil Decl., ¶ 9.) Defendant Khalil indicates that he may not have fully understood the questions asked during his deposition, but he did his best to answer the questions as he understood the. (Khalil Decl., ¶ 11.) Defendant Khalil has not been contacted at any time prior to 2022 to engage in an adjustment of the rent. (Khalil Decl., ¶ 12.) The owners did not contact him in 2012 or in 2022 about a rental calculation. (Khalil Decl., ¶ 13.)

Analysis

Defendants contend that Plaintiffs improperly attempt to seek a judicial determination that there has been a breach of the lease. The Court finds that Defendants’ contention is persuasive. Here, Plaintiffs seek a judicial determination that: (1) the lease is valid and enforceable; and (2) Defendants are in breach of the lease as a result of their failure to comply with provisions of the lease establishing the rental value of the property. (SAC, ¶ 21(a)-(b).)

The lease provision at issue pertaining to establishing the rental value states the following:

“Thirty (30) days prior to the expiration of the first twenty (20) years of the term hereof, and thirty (30) days prior to the expiration of each successive 10-year period of the term of this lease and thereafter, Lessee and Lessor shall attempt to agree on the value of the land composing the leased premises (excluding any improvements made by Lessee) as of the date of expiration of said 20-year period and as of the date of each successive 10-year period thereafter, so that said value will conform to changed economic and other conditions. In the event the parties hereto are unable to reach an agreement concerning said value within the first fifteen (15) days of said 30-day period, then the value of said leased premises shall be determined by appraisal in accordance with the terms, covenants and conditions hereof. One reputable appraiser shall forthwith be appointed by Lessor, one reputable appraiser shall forthwith be appointed by Lessee, and the third reputable appraiser shall be forthwith appointed by the two appraisers so selected. The appraisal of the three appraisers shall be in writing and the average of the three appraisals shall constitute for the purposes hereof the value of said premises for the next succeeding 10 years of the term of this lease. The rental [sic] payable for the first 10-year period of the term of this lease following the expiration of the first 20 years of the term hereof shall be $1,600.00 per month plus an additional amount per month equal to 1/12 of 6% of any appraised value of the leased premises in excess of $320,000.00.” (Cunningham Decl., Ex. 1, Article V, section 2.)

Further, as to notice, the lease provides that notices must be delivered in person or by mail, return receipt requested. (Cunningham Decl., Ex. 1 at p. 7.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

The Court notes that the lease does require the parties to attempt to agree on the value of the land for purposes of adjusting the rent amount. The crux of the motion is that Defendant Khalil did not participate in the process of agreeing on the value of the land and the subsequent necessary appraisal process.

However, based on the evidence presented by the parties, the Court finds that Plaintiffs have not presented any evidence as to any damages they sustained from Defendant Khalil’s purported non-participation in the land valuation process, or that they performed or were excused from performance. The Court fails to see how Plaintiffs can seek a judicial determination that Defendants breached the lease when Plaintiffs have not met their burden to establish a breach of contract. The Court recognizes that the breach of contract cause of action is not at issue in the instant motion; however, the second cause of action for declaratory relief seeks a judicial determination, in part, that Defendants breached the lease. It follows that there must be a finding that the lease was breached before there can be a judicial determination concerning a breach.

Further, the Court finds that even if Plaintiffs had met their burden to show that a breach of the lease occurred, there would be a triable issue of fact on whether the land valuation process ever commenced between Plaintiffs and Defendants, and therefore summary adjudication would be inappropriate.

Additionally, summary adjudication is inappropriate because of Defendants’ waiver defense. “Acceptance of benefits under a lease is conduct that supports a finding of waiver.” (Gould v. Corinthian Colleges, Inc. (2011) 192 Cal.App.4th 1176, 1179.) Here, in support of the opposition, Defendants have presented evidence that Defendant Khalil has continued to pay rent. (Khalil Decl., ¶ 5.) Thus, the Court finds that there is a triable issue of fact concerning Defendants’ waiver defense articulated in their answer.

Based on the foregoing, the Court DENIES the motion for summary adjudication.