Judge: Lynette Gridiron Winston, Case: 22PSCV01107, Date: 2024-04-23 Tentative Ruling

Case Number: 22PSCV01107    Hearing Date: April 23, 2024    Dept: 6

CASE NAME:  Zhou’s Investment & Management, Inc. dba The Noodle v. U.N.T. Atia Co. II, et al. 

Defendant Great New World Equity LLC’s Motion for Summary Judgment, or in the Alternative, Summary Adjudication 

TENTATIVE RULING 

The Court DENIES Defendant Great New World Equity LLC’s Motion for Summary Judgment. The Court DENIES the motion for summary adjudication as to the First Cause of Action for breach of written agreement. The Court GRANTS the motion for summary adjudication as to the Second Cause of Action for declaratory relief. 

             Defendant Great New World Equity LLC is ordered to give notice of the Court’s ruling within five calendar days of this order. 

BACKGROUND 

This is a breach of contract action. On September 26, 2022, plaintiff Zhou’s Investment & Management, Inc. dba The Noodle (Plaintiff) filed this action. On October 5, 2022, Plaintiff filed the operative First Amended Complaint (FAC) against U.N.T. Atia Co. II, Great New World Equity LLC (Defendant), and Does 1 to 10, alleging causes of action for breach of written agreement and declaratory relief. Plaintiff dismissed U.N.T. Atia Co. II from this action on October 28, 2022. 

On February 26, 2024, Defendant moved for summary judgment, or in the alternative, summary adjudication.[1] On April 9, 2024, Plaintiff opposed the motion.[2] On April 16, 2024, Defendant replied. 

LEGAL STANDARD 

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 defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2); see also Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) 

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.” (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion “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.” (Id.; see also Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) 

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.) 

OBJECTIONS 

            The Court SUSTAINS Plaintiff’s evidentiary objections, but notes that the Court does not rely on the evidence to which Plaintiff objects in reaching its decision herein.    

DISCUSSION 

Summary of Material Facts 

On December 13, 2011, Defendant entered into a 20-year lease agreement (the Lease) with Plaintiff for the premises located at 19755 E. Colima Road, Suite C, Rowland Heights, CA (the Premises). (SSF 1.) Defendant is the successor in interest to the landlord, i.e., U.N.T. Atia Co. II, LLP, of that Lease. (SSF 2.) The Lease states that Plaintiff’s taking possession of the Premises constitutes Plaintiff’s acceptance that the Premises were in satisfactory condition at that time. (SSF 3.) The Lease States that Defendant is responsible for repairing the common areas, but that Defendant is not liable to Plaintiff for failure to perform such common area repairs unless Defendant first gives Defendant written notice of the need to make such repairs, and that Plaintiff waives the right to make any such repairs at Defendant’s expense. (SSF 4.) The Lease states that Plaintiff is responsible for repairing and maintaining the Premises. (SSF 5.) After executing the Lease, Plaintiff performed extensive construction work on the Premises, including installing its own cooling fan on the roof. (SSF 6.) 

In January and March 2021, Defendant’s property management company had repairs done to the roof totaling $3,800. (SSF 7.) On March 8, 2021, Defendant’s property management company sent an email to Plaintiff regarding a repair of a leak it had performed. (SSF 8.) On June 8, 2021, Plaintiff sent Defendant two letters, one of which notified Defendant that Plaintiff was exercising its right to abate rate because of a failure to repair the roof. (SSF 10.) In December 2023, Defendant’s property manager refurbished the Premises’ roof at Defendant’s expense. (SSF 11.) 

The Lease does not provide for any tenant’s improvement allowance, and there are no written amendments to the Lease signed by Defendant authorizing an offset of the rent for Plaintiff’s construction costs on the Premises. (SSF 12-13.) The Lease provides that all amendments to the Lease must be in writing. (SSF 14.) The June 6, 2018 Tenant Estoppel Certificate states that the Lease has not been modified orally or in writing since its execution, that Defendant has furnished Plaintiff with the improvements and space required under the Lease, that Plaintiff does not know of any uncured defaults by Defendant, and that there are no disputes between Plaintiff and Defendant concerning the Lease, the Premises, or the improvements therein. (SSF 16.) 

In the second June 8, 2021 letter, Plaintiff wrote that Defendant failed to repay Plaintiff for certain improvements and repair expenditures in the amount of $70,000, plus applicable accrued interest, incurred in 2012. (SSF 17.) Plaintiff assessed a 3% compound interest to bring the total to $90,190.97, and applied that amount to offset rent payments to Defendant. (SSF 18.) Defendant disputed Plaintiff’s offset letter. (SSF 19.) 

First Cause of Action – Breach of Written Contract 

“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. [Citation].” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) 

Defendant contends there is no triable issue of fact regarding the First Cause of Action for breach of written contract. Defendant contends the undisputed facts show that Plaintiff installed a cooling fan for the Premises exclusively, which caused the leaks and damage to the roof. Defendants cite paragraph 11.4 of the Lease, which provides that Plaintiff is responsible for repairing and maintaining its own improvements and air conditioning systems exclusively serving the Premises, so any water damage Plaintiff sustained was caused by Plaintiff’s own equipment. Defendants then cite paragraph 11.3 of the Lease, which provides that Plaintiff is prohibited from performing repairs itself and then passing the cost on to Defendant. 

The Court finds Defendant has failed to establish the absence of a triable issue of material fact as to the First Cause of Action. The Lease provides that Defendant is not liable to Plaintiff for the failure to repair common area expenses or other structural portions of the building, such as the roof, unless Plaintiff first gives Defendant written notice of the needed repair and Defendant failed to perform that repair within a reasonable time. (Compendium of Evidence, Ex. 1, ¶ 11.3, italics added.) Paragraph 11.3 of the Lease provides that roof repairs fall under Defendant’s responsibility unless Plaintiff caused those damages. (Id.) Plaintiff gave written notice to Defendant on June 8, 2021 of issues pertaining to roof leaks, which contained a copy of a denial of an insurance claim that stated the leak was caused by normal age and wear and tear, not the cooling fan as Defendant contends. (See Id., Ex. 6.) 

Moreover, while Defendant performed some roof repairs in January and March 2021, (SSF 7), Defendant did not do any repairs to the roof following receipt of the June 8, 2021 letter, at least until December 2023. (SSF 11.) Thus, the Court finds there to be triable issues of material fact as to what caused the leak, who was obligated to repair the roof, and whether Defendant acted within a reasonable time to repair the roof. 

Based on the foregoing, the Court DENIES Defendant’s motion for summary judgment. The Court will proceed to address Defendant’s alternative motion for summary adjudication as to the Second Cause of Action for declaratory relief. 

Second Cause of Action – Declaratory Relief 

“To qualify for declaratory relief, [a party] would have to demonstrate its action presented two essential elements: ‘(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [the party's] rights or obligations.’ [Citation.]” (Jolley v. Chase Home Fin., LLC (2013) 213 Cal.App.4th 872, 909.) “[D]eclaratory relief is an equitable remedy and need not be awarded if the circumstances do not warrant.” (Artus v. Gramercy Towers Condo. Assn. (2018) 19 Cal.App.5th 923, 930.) 

Defendant contends no triable issue of material fact exists as to Plaintiff’s Second Cause of Action for declaratory relief. Defendant contends it did not verbally agree with Plaintiff to offset the construction costs against the rent at the time the parties entered into the Lease, and that there is no written amendment to the Lease allowing for an offset. Defendant cites the 2018 Tenant Estoppel Certificate, wherein Plaintiff confirmed the Lease had not been modified and that there were no disputes between the parties concerning the Lease, the Premises, or improvements thereon. 

Defendant then contends any oral agreement would be unenforceable because the alleged oral agreement occurred in 2012 or 2013 and would be barred by the two-year statute of limitations of such claims, or even the four-year statute of limitations for written agreements would also bar such claims. Defendant contends the alleged oral agreement does not recite the material terms of the agreement, such as when Defendant would reimburse Plaintiff or when Plaintiff would be able to offset its rent, as well as the 3% interest rate. Defendant also contends any modifications had to be in writing and that the statute of frauds would bar this claim because the Lease had a term of twenty years, which exceeds the one-year requirement of Civil Code section 1624, subdivision (a)(3). Defendant finally contends that case law prohibits setoff for commercial leases. 

The Court finds Defendant has established the absence of a triable issue of material fact. First, the Court reads the Second Cause of Action for declaratory relief as being one for breach of contract in connection with construction work done back in 2012 and 2013, since the FAC alleges there was an agreement between the parties for Defendant to reimburse Plaintiff $70,000.00 in connection with such work. (See FAC, ¶¶ 10, 12; Alfaro v. Cmty. Hous. Improvement Sys. & Plan. Assn., Inc. (2009) 171 Cal.App.4th 1356, 1371 [“What is necessary to state a cause of action are the facts warranting legal relief, and not whether a plaintiff has provided apt, inapt, or no labels or titles for causes of action.”]) Additionally, setoff is an affirmative defense, not a cause of action. (See Code Civ. Proc., § 431.70; Morris Cerullo World Evangelism v. Newport Harbor Offs. & Marina, LLC (2021) 67 Cal.App.5th 1149, 1159; see also Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 197-198 [setoff under Code of Civil Procedure section 431.70 is only a defense for a defendant, it does not provide affirmative relief; if defendant seeks affirmative relief, defendant must file a cross-complaint].) 

Second, Defendant has presented evidence showing that the terms of this alleged agreement to reimburse are too indefinite to enforce. (See Moncada v. West Coast Corp. (2013) 221 Cal.App.4th 768, 777.) For example, the FAC vaguely alleges that Defendant would reimburse Plaintiff “later”, which is an indefinite time; it also does not allege when the construction work was supposed to be completed. (See FAC, ¶¶ 10, 12; but see Civ. Code, § 1657 [“If no time is specified for the performance of an act required to be performed, a reasonable time is allowed. If the act is in its nature capable of being done instantly--as, for example, if it consists in the payment of money only--it must be performed immediately upon the thing to be done being exactly ascertained.”]) The FAC also does not allege what the purported interest rate was, which is significant since it added approximately $20,000.00 to the amount Defendant allegedly owed Plaintiff. (See FAC, ¶ 10; Compendium of Evidence, Ex. 7.) The FAC also does not clearly allege the scope of work to be performed other than “common space walkways and an oil tank.” (FAC, ¶ 10.) 

            Third, Defendant has presented evidence that Plaintiff’s claim is time-barred. Plaintiff indicates in the second June 8, 2021 letter that it incurred the $70,000.00 in 2012. (Compendium of Evidence, Ex. 7.) While the FAC does not allege whether the agreement to reimburse was oral or in writing, it would be time-barred either way. Two years from 2012 is 2014, while four years from 2012 is 2016. (See Code Civ. Proc., §§ 337 [four years for written contracts], 339 [two years for oral contracts].) A claim for declaratory relief is governed by the statute of limitations, and the period of limitations is determined by the nature of the underlying dispute. (See Maguire v. Hibernia S&L (1944) 23 Cal.2d 719, 734; Snyder v. Cal. Ins. Guarantee Assn. (2014) 229 Cal.App.4th 1196, 1208.) Plaintiff also signed the 2018 Tenant Estoppel Certificate, which indicates that the Lease has not been modified, there are no issues with the improvements, there are no issues with any defaults under the Lease, and there are no disputes between the parties concerning the Lease, the Premises, or the improvements thereon. (Compendium of Evidence, Ex. 9.) 

            For all of these reasons, the Court finds Defendant has established the absence of a triable issue of material fact as to the declaratory relief claim. Accordingly, the burden now shifts to Plaintiff to establish the existence of a triable issue of material fact. 

            Plaintiff contends the Lease defines the Premises as the interior of the building and that Defendant is responsible for the common area.[3] Plaintiff contends most of the construction work needed was for the interior of the building and that Mr. Zhang, on behalf of the original landlord, repeatedly promised Plaintiff would be reimbursed. Plaintiff argues there is a triable issue of fact regarding Defendant’s contention it did not agree to reimburse Plaintiff. Plaintiff further argues that Defendant was still promising it would reimburse Plaintiff for the work performed on the common area when Plaintiff signed the 2018 Tenant Estoppel Certificate. 

            Plaintiff contends the statute of limitations does not apply because a claim for setoff is not barred by the statute of limitations. Plaintiff then contends the terms of the agreement are sufficiently definite, namely that Defendant agreed to reimburse Plaintiff $70,000.00. Plaintiff then argues the agreement to reimburse was not a modification of the Lease per se, and that either way, there is a triable issue of fact as to whether Plaintiff is estopped from asserting that any modification must be in writing. Plaintiff finally argues that the debts are clearly related for purposes of setoff since both debts arise out of the Lease. 

            The Court finds Plaintiff has failed to establish the existence of a triable issue of material fact. The Court finds Plaintiff’s arguments regarding interior work versus common area work to be irrelevant to the issue of whether Defendant agreed to reimburse Plaintiff as alleged. Regarding the argument that Defendant was still promising to reimburse when the 2018 Tenant Estoppel Certificate was signed, this does not create a triable issue of material fact because the claim would still be barred by the statute of limitations. 

            Moreover, Plaintiff’s argument regarding a claim for setoff not being barred by the statute of limitations is incorrect. Setoff is not barred by the statute of limitations so long as it is being asserted as a defense. (Construction Protective Services, Inc., supra, 29 Cal.4th at pp. 197-198.) Plaintiff here is seeking affirmative relief, which is subject to the statute of limitations. (See Id.) 

            Furthermore, Plaintiff’s arguments regarding the alleged agreement to reimburse being sufficiently definite are conclusory and unpersuasive, and fail to address the issues Defendant raised in its moving papers. As for unrelated debts, the Court finds the authority Defendant cited, namely Nork v. Pacific Coast Medical Enterprises, Inc. (1977) 73 Cal.App.3d 410 to be distinguishable since that case involved an unlawful detainer action, whereas this case is a breach of contract claim. (See Id. at p. 415.) 

For the foregoing reasons, the Court finds there is no triable issues of material fact as to the Second Cause of Action and Defendant is entitled to judgment as a matter of law. The Court therefore GRANTS Defendant’s motion for summary adjudication as to the Second Cause of Action. 

CONCLUSION 

The Court DENIES Defendant Great New World Equity LLC’s Motion for Summary Judgment. The Court DENIES the motion for summary adjudication as to the First Cause of Action for breach of written agreement. The Court GRANTS the motion for summary adjudication as to the Second Cause of Action for declaratory relief. 

             Defendant Great New World Equity LLC is ordered to give notice of the Court’s ruling within five calendar days of this order.