Judge Lynette Gridiron Winston, Case Number: 21PSCV00636, Date: 2024-03-25 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 21PSCV00636, Date: 2024-03-25 Tentative Ruling

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.

This is a breach of lease agreement and guaranty dispute. On August 9, 2021, plaintiff Art Weiss, Inc. (Plaintiff) filed this action against defendants Cloud Control, Inc. (Cloud Control), Jefferson Liou (Liou) (collectively, Defendants) and Does 1 through 10. Plaintiff filed the operative First Amended Complaint (FAC) on the same day against Defendants and Does 1 through 10, alleging causes of action for common counts, breach of contract, breach of written guaranty, and unjust enrichment.

On January 5, 2024, Plaintiff moved for summary judgment. The motion is unopposed.

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) “Code of Civil Procedure section 437c, subdivision (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, italics in original and quoting Code Civ. Proc., § 437c, subd. (c).) “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.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A plaintiff moving for summary judgment or summary adjudication “has met his or her 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. 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. 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 as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) “[A] plaintiff bears the burden of persuasion that ‘each element of’ the ‘cause of action’ in question has been ‘proved,’ and hence that ‘there is no defense’ thereto.” (Aguilar, supra, 25 Cal.4th at p. 850, citing Code Civ. Proc., § 437c, subd. (o)(1).)”

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.)

The Court GRANTS the requests for judicial notice. (Evid. Code, § 452, subd. (d).) But, the Court takes judicial notice only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal.App.5th 389, 400.)

On November 29, 2017, Plaintiff entered into a written lease agreement (the Lease) with Defendant Cloud Control for certain real property located at 13450 Brooks, Unit A, Baldwin Park, CA 91706 (the Premises) for a three-year period commencing on December 1, 2017, at a monthly rate of $19,875.00. (UMF 1.) Defendant Liou signed the Lease on behalf of Cloud Control. (UMF 2.) Liou executed a guaranty (the Guaranty) for the Lease, wherein Liou agreed to guarantee Cloud Control’s payments and performance under the Lease. (UMF 3-6.) The Guaranty gave Plaintiff the right to proceed against Liou if Cloud Control breached the Lease. (UMF 7.) The parties entered into an addendum agreement (the Addendum) on January 5, 2018, to include Unit C at the Premises for the remainder of the 3-year term in the Lease, commencing on February 1, 2018. (UMF 8.) The terms of the Addendum were otherwise identical to the Lease. (UMF 9.) The Addendum incorporated the Guaranty, and thereby extended its obligations to Liou. (UMF 10.) Cloud Control was obligated to maintain the Premises, return the Premises in good condition upon surrender, and pay for 25% of common area expenses. (UMF 11-13.) The Lease, Addendum, and Guaranty provide for recovery of attorney’s fees to the prevailing party for any actions based thereon. (UMF 14.)

Beginning on December 1, 2018, Cloud Control stopped paying rent and common area expenses, and abandoned both Unit A and Unit C before the expiration of the Lease and the Addendum. (UMF 15.) Due to Cloud Control’s breaches, Plaintiff sustained damages in the amount of $418,442.62. (UMF 16.) Plaintiff mitigated its damages by reletting Units A and C to a new tenant around April 1, 2019. (UMF 17.) Liou failed to pay Cloud Control’s obligations under the Lease and Addendum per the Guaranty. (UMF 18.) Plaintiff filed the operative FAC on August 9, 2021, alleging causes of action for common counts, breach of contract, breach of written guaranty, and unjust enrichment . (UMF 19-20.) Liou answered the FAC on October 27, 2021. (UMF 21.) The Court entered default judgment against Cloud Control on September 19, 2022, in the amount of $548,627.45, comprised of $418,442.62 in damages, $126,220.63 in prejudgment interest, $3,440.00 in attorney’s fees, and $524.20 in costs. (UMF 22.)

“The essential allegations of a common count ‘are (1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.’ [Citation.]” (Allen v. Powell (1967) 248 Cal.App.2d 502, 510.)

Plaintiff contends there is no triable issue of fact that Liou is indebted to Plaintiff in the amount of $418,442.62, plus the sums that are included in the default judgment entered against Cloud Control. Plaintiff then contends there is no dispute the possession of the Premises constituted the consideration, and that there is no dispute Liou guaranteed Cloud Control’s payments and performance under the Lease and Addendum but failed to do so.

The Court finds Plaintiff has established each element of the cause of action for Common Counts. The Court agrees the evidence shows Liou was obligated under the Guaranty to cover the $418,442.62 at issue (UMF 16-18, 22). The Guaranty provides that Liou would guarantee the prompt payment of all rents and other sums owed under the Lease and Cloud Control’s prompt performance thereunder. (Statement of Evidence, Ex. 2.) The prejudgment interest, attorney’s fees, and costs were imposed only against Cloud Control per the default judgment issued on September 19, 2022, and not necessarily a sum due under the Lease (see UMF 22). However, this is more form over substance because Plaintiff has established the certain sum of $418,442.62 owed under the Lease and Guaranty, and the Lease provides for attorney’s fees to the prevailing party (Lease, ¶ 31), and Plaintiff seeks prejudgment interest in the Complaint, (Compl., Prayer for Relief ¶ 2). It is indisputable that the consideration in this case is the possession of the Premises by Cloud Control, pursuant to the terms of the Lease and Addendum, which were guaranteed by Liou under the Guaranty. (UMF 2-10). It is also indisputable that Liou guaranteed the payment of all rents and all other sums payable by Cloud Control under the Lease and Addendum, but failed to pay the sums owed by Cloud Control. (UMF 2-10, 18, 22.) The burden of proof now shifts to Defendant Liou to establish the existence of a triable issue of material fact.

Liou has not opposed the motion for summary judgment. Accordingly, Liou has not established the existence of a triable issue of material fact as to the First Cause of Action for Common Counts.

“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.) “As damages are an element of a breach of contract cause of action [citation], a plaintiff cannot obtain judgment on a breach of contract cause of action in an amount of damages to be determined later.” (Paramount Petroleum Corp. v. Superior Ct. (2014) 227 Cal.App.4th 226, 241.)

Plaintiff moves for summary judgment on the grounds that Liou has no defense to the First Cause of Action for breach of contract as to the subject lease agreement and guaranty. The following is a brief summary of Plaintiff’s proffered undisputed material facts:

1. On or about November 29, 2017, Plaintiff and Defendant Cloud Control entered into the Lease for Cloud Control to use and occupy the Premises, at Unit A, for a period of three (3) years, with base rent in the amount of $19,875.00 per month, payable on the first day of each month, commencing around December 1, 2017, terminating November 30, 2020. (UMF 1.)

2. Liou signed the Lease on behalf of Cloud Control, and the obligations pursuant to the terms of the Lease were guaranteed by Liou under paragraph 1.11 of the Lease. (UMF 2, 3.) Specifically, paragraph 1.11 of the Lease states, “[t]he obligations of the Lessee under this Lease are to be guaranteed by . . . Liou (‘Guarantor’).” (UMF 3, 4.)

3. Liou concurrently executed the Guaranty giving Plaintiff the right to proceed against Liou for any breach or default of the Lease by Cloud Control. (UMF 5). Under the Guaranty, Liou “unconditionally and irrevocably guarantee[d] the prompt payment by Lessee of all rents and all other sums payable by Lessee under said Lease and the faithful and prompt performance by Lessee of each and every one of its terms, conditions and covenants of said Lease . . ..” (UMF 6.) The Guaranty further gave Plaintiff the right to proceed against Liou, as guarantor, for any breach or default of the Lease by Cloud Control. (UMF 7.)

4. On or about January 5, 2018, Plaintiff, by the Addendum, leased a second unit at the same property, at Unit C (Unit C), to Cloud Control, to use and occupy the Premises as described in particularity in the Lease. (UMF 8.) The Addendum incorporated the terms of the Lease, and all terms of the Addendum mirrored the Lease, except for the start date. (UMF 9.)

5. The Addendum incorporated the Guaranty signed by Liou, therein, extending Liou’s obligations as guarantor to the terms of the Lease for Unit C. (UMF 10.)

6. Under the Lease and Addendum, Cloud Control was required to keep the Premises, utility installations, and alterations in good order, condition, and repair; requiring Defendants to exercise and perform good maintenance practices, such as restorations, replacements, or renewals, when necessary to keep the premises and all improvements thereon in good order, condition, and state of repair. (UMF 11.) Upon surrender of the Premises, Cloud Control was required to return the Premises with all of the improvements, parts, and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, with exception to ordinary wear and tear. (UMF 12.)

7. Under the Lease and Addendum, Cloud Control was responsible for 25% of the common area operating expenses, which included, but were not limited to, property taxes, utilities, and common area improvements. (UMF 13.)

8. Commencing on or about December 1, 2018, and continuing every month thereafter, Cloud Control failed to pay rent, failed to pay their share of the common area operating expenses, and abandoned Units A and C before the expiration dates of the Lease and Addendum. (UMF 15.)

9. Due to Cloud Control’s breaches of the Lease for Unit A and the Addendum for Unit C, Plaintiff sustained damages comprised of delinquent rent, late charges, delinquent common area operating expenses, costs to repair the Premises, costs to relet the Premises, and legal fees; totaling $418,442.62. (UMF 16-18, 22.)

10. Around April 1, 2019, Plaintiff was able to mitigate its damages by reletting Units A and C to a new tenant, at a rate less than fair market rental value, for the remainder of the term of the Lease for Unit A and the Addendum for Unit C. (UMF 16-17, 22.)

11. The damages owed by Cloud Control to Plaintiff have not been satisfied, and Liou has failed to pay Cloud Control’s obligations, pursuant to his obligations under the Lease, Addendum, and the written Guaranty. (UMF 18-20, 22.)

12. On September 19, 2022, this Court entered a Default Judgment against Cloud Control, for a total of $548,627.45, which is comprised of damages in the amount of $418,442.62, prejudgment interest in the amount of $126,220.63, Attorney fees in the amount of $3,440.00, and Costs in the amount of $524.20. (UMF 22.)

The Court finds Plaintiff has established every element of its claim for breach of contract against Liou. The evidence establishes that there was a written Lease and Addendum between Plaintiff and Cloud Control to lease the Premises, and that Liou agreed to guarantee the payment of Cloud Control’s obligations thereunder. (UMF 1-13.) The evidence establishes that Plaintiff gave possession of the Premises to Cloud Control as required under the Lease. (UMF 1, 8.) The evidence establishes that Cloud Control breached the Lease and Addendum by failing to pay the rent and expenses due and abandoned the premises prior to the end of the term. (UMF 15.) The evidence further establishes that Liou failed to pay Cloud Control’s obligations due under the Lease and Addendum as required by the Guaranty. (UMF 18.) As a result of these breaches, Plaintiff sustained damages comprised of delinquent rent, late charges, delinquent common area operating expenses, costs to repair the Premises, costs to relet the Premises, and legal fees, totaling $418,442.62. (UMF 16.) The burden of proof now shifts to Defendant Liou to establish the existence of a triable issue of material fact.

Liou has not opposed the motion for summary judgment. Accordingly, Liou has not established the existence of a triable issue of material fact as to the Second Cause of Action for Breach of Contract.

The necessary elements for breach of written guaranty are: (1) that the defendant guaranteed payment of the indebtedness of the primary obligor to the plaintiff; (2) a default on the indebtedness; (3) that the plaintiff notified the guarantor of the default; and (4) that the guarantor did not remit funds to the plaintiff under the guaranty agreement. (Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 819.)

The Court finds Plaintiff has established every element of its claim for breach of written guaranty against Liou. The evidence establishes that Liou, the owner of Cloud Control agreed to guaranty the payment of Cloud Control’s obligations under the Lease and Addendum. (UMF 1-13.) The evidence establishes that Cloud Control breached the Lease and Addendum by failing to pay the rent and expenses due and abandoned the premises prior to the end of the term. (UMF 15.) The evidence establishes that Plaintiff notified Liou of the unpaid amounts due and owing from Cloud Control under the Lease and Addendum. (UMF 15; Statement of Evidence, Ex. 8 - Decl. of Matthew Sawyer ¶ 16, Ex. 3.) The evidence further establishes that Liou failed to pay Cloud Control’s obligations due under the Lease and Addendum as required by the Guaranty. (UMF 18.) As a result of these breaches, Plaintiff sustained damages comprised of delinquent rent, late charges, delinquent common area operating expenses, costs to repair the Premises, costs to relet the Premises, and legal fees, totaling $418,442.62. (UMF 16.) The burden of proof now shifts to Defendant Liou to establish the existence of a triable issue of material fact.

Liou has not opposed the motion for summary judgment. Accordingly, Liou has not established the existence of a triable issue of material fact as to the Third Cause of Action for Breach of Written Guaranty.

“The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. [Citation.] The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched. [Citation.]” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, internal quotation marks omitted.)

The Court notes that Plaintiff’s motion for summary judgment does not address every cause of action in the FAC, specifically the Fourth Cause of Action for Unjust Enrichment. The FAC alleges each cause of action in the FAC against Liou, including the Unjust Enrichment claim. (FAC, ¶¶ 44-49.) The Court does not see that any dismissal has been filed as to the Unjust Enrichment claim. Accordingly, for the Court to grant summary judgment, Plaintiff needs to address each cause of action. (See Code Civ. Proc., § 437c, subd. (a)(1) [“A party may 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.”]; Id., § 437c, subd. (c).) By failing to address the Fourth Cause of Action for Unjust Enrichment, Plaintiff failed to establish the absence of a triable issue of material fact as to the entire action.

The Court further notes that Plaintiff only moved for summary judgment and did not also move for summary adjudication in the alternative. Therefore, the Court cannot grant the motion as to the separate causes of action discussed above.

Therefore, the Court DENIES Plaintiff’s motion for summary judgment without prejudice.

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.

[1] Plaintiff argues that the only remaining claim against Liou is for breach of the Guaranty based on the Court having entered default judgment against Cloud Control on September 19, 2022. (Memorandum of Points and Authorities, 5:18-21.) But, Plaintiff still addresses the other causes of action for breach of contract and common counts elsewhere in the motion. (Id., 6:1-19, 8:17-9:8.) This argument also conflicts with the FAC, which alleges each cause of action against Liou. (See generally, First Amended Complaint.) Thus, the Court begins its analysis with the First Cause of Action for common counts.