Judge: Mark A. Young, Case: 19SMCV00603, Date: 2023-02-07 Tentative Ruling

Case Number: 19SMCV00603    Hearing Date: February 7, 2023    Dept: M

CASE NAME:           Snukal, et al., v. 926 Broadway LLC, et al.

CASE NO.:                19SMCV00603

MOTION:                  Motion for Summary Judgment/Adjudication

HEARING DATE:   2/7/2023

Legal Standard

            A party may move for summary judgment in any action or proceeding if it is contended the action has no merit or that there is no defense to the action or proceeding. (CCP, § 437c(a).) “The purpose of the law of summary judgment 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.)

“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, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” (CCP, § 437c(f)(1).) If a party seeks summary adjudication as an alternative to a request for summary judgment, the request must be clearly made in the notice of the motion. (Gonzales v. Superior Court (1987) 189 Cal.App.3d 1542, 1544.)  “[A] party may move for summary adjudication of a legal issue or a claim for damages other than punitive damages that does not completely dispose of a cause of action, affirmative defense, or issue of duty pursuant to” subdivision (t). (CCP, § 437c(t).) 

            To prevail, the evidence submitted must show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (CCP, § 437c(c).) The motion cannot succeed unless the evidence leaves no room for conflicting inferences as to material facts; the court has no power to weigh one inference against another or against other evidence. (Murillo v. Rite Stuff Food Inc. (1998) 65 Cal.App.4th 833, 841.) In determining whether the facts give rise to a triable issue of material fact, “[a]ll doubts as to whether any material, triable, issues of fact exist are to be resolved in favor of the party opposing summary judgment…” (Gold v. Weissman (2004) 114 Cal.App.4th 1195, 1198-99.) “In other words, the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences there from must be accepted as true.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 179.) However, if adjudication is otherwise proper the motion “may not be denied on grounds of credibility,” except when a material fact is the witness’s state of mind and “that fact is sought to be established solely by the [witness’s] affirmation thereof.” (CCP, § 437c(e).) 

            Once the moving party has met their burden, the burden shifts to the opposing party “to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (CCP § 437c(p)(1).) “[T]here is no obligation on the opposing party... to establish anything by affidavit unless and until the moving party has by affidavit stated facts establishing every element... necessary to sustain a judgment in his favor.” (Consumer Cause, Inc. v. SmileCare (2001) 91 Cal.App.4th 454, 468.) 

“The pleadings play a key role in a summary judgment motion. The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues and to frame the outer measure of materiality in a summary judgment proceeding.” (Hutton v. Fidelity National Title Co. (2013) 213 Cal.App.4th 486, 493, quotations and citations omitted.) “Accordingly, the burden of a defendant moving for summary judgment only requires that he or she negate plaintiff's theories of liability as alleged in the complaint; that is, a moving party need not refute liability on some theoretical possibility not included in the pleadings.” (Ibid.) 

EVIDENTIARY ISSUES

Plaintiffs’ objections to the Vivoli declaration are SUSTAINED as to objections no. 1 and 3, OVERRULED as to no. 2.

Plaintiffs’ objections to the Abolfathi declaration are SUSTAINED as to objection nos. 6, 7, and 9.  As to objection no. 5, it is granted as to the sentence starting with “Instead, it has become apparent . . . for their delays in opening.  Otherwise, they are OVERRULED.

Defendants’ objections are immaterial considering that Defendants did not meet their initial burden.

Analysis

Defendants 926 Broadway LLC and Fortuna Asset Management move for summary judgment/adjudication of each cause of action of the complaint by Plaintiff Daniel J. Snukal, Robert M. Snukal, Mark D. Mittleman, and T.C.P. II LLC (dba Tacos Punta Cabras).

Breach of Contract and Breach of Implied Covenant

The elements for the breach of contract cause of action are: (1) existence of contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach (or anticipatory breach); and (4) resulting damage.  (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.)  All contracts impose upon each party an implied duty of good faith and fair dealing as part of its performance and its enforcement. (Foley v. Interactive Data Corporation (1988) 47 Cal.3d 654, 683.) Under the implied covenant, each contracting party must “refrain from doing anything to injure the right of the other to receive the agreement’s benefits.” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072.)  In sum, the implied covenant “fills in” gaps in contracts in order to effectuate the intentions of parties or protect their reasonable expectations. (Id.) Consequently, a breach of the covenant of good faith and fair dealing is treated as a breach of the underlying contract. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal. App. 3d 1371, 1393.)

Defendants argue that there is an exculpatory provision in the Lease which they contend absolves them of responsibility over the pled breaches.  The Complaint alleges that in November 2018, Plaintiffs began to experience numerous leaks and odors in its commercial unit. (Compl., ¶ 30.) Defendants “breached its warranty relating to the roof by failing to maintain the roof and repair the leaks occurring within Plaintiffs unit. Defendants have further breached their warranty by failing to fix numerous building issues relating to odors, mold and rodents.” (Compl., ¶ 31.) Defendants breached the Lease further by “(b) failing to repair the roof and maintain the roof’s warranty; and (c) failing to repair plumbing, mold and rodent issues despite having knowledge of such issues.” (Id.)  

Defendants cite terms in the Lease which provide that Plaintiffs bore responsibility for improving the Premises to render them usable by Plaintiffs and for keeping them in good condition, order and repair, including all "plumbing and sewage facilities (including all sinks, toilets, faucets and drains located in the Premises), and all ducts, pipes, vents, or other parts of the HVAC or plumbing system," along with Plaintiffs' trade fixtures and other equipment servicing the premises, and even "any necessary pest extermination services . . .." (Compl., ¶ 15.) The Lessee is further “responsible, at its sole cost, for the procurement and maintenance of a service contract with a pest extermination contractor to service the Premises on a quarterly basis or at such intervals as Lessor may require.” (Lease ¶ 7.2(b).)

Here, the evidence submitted by Defendants does not meet their initial burden to demonstrate that the exculpatory clause cited applies to the allegations in the complaint.  Notably, the contract defines premises as including the “certain portion of the Shopping Center (as defined below), including all improvements therein . . . commonly known by the street address of 930B/930C Broadway Ave., located in the City of Santa Monica . . . and generally described as . . . approximately 3,456 rentable square feet of space. In addition . . . Lessee shall have non-exclusive rights to the Common Areas . . ..” (¶ 1.2)   “Common areas” is defined as “all areas and facilities outside the Premises and within the exterior boundary line of the Shopping Center and utility raceways and installations within the Premises . . ..” (¶ 2.7.)

Critically, paragraph 7.2 of the contract provides for the “Lessor’s Obligations” which include that the Lessor “shall keep in good order, condition and repair, the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs, utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Experience pursuant to Paragraph 4.2 . . ...  Lessor shall have no maintenance, repair or replacement obligations related to the Premises. Lessor shall not be liable to Lessee for injury or damage that may result in any defect in the construction or condition of the Premises, nor for any damage that may result from interruption of lessee’s use of the premises during any repairs by Lessor. Lessee waives any right to repair the Premises at the expense of Lessor under any applicable laws including with limitations Sections 1941 and 9142 of the California Civil Code.” (Emphasis Added.)

Defendants do not meet their initial burden of production to demonstrate that the pled breaches fall under the cited exculpatory clause. As noted, the Complaint alleged that Defendants failed to repair the roof and maintain the roof’s warranty, and failed to repair plumbing as they were obligated under the Lease. Defendants present no material fact or evidence that suggests the leaks/plumbing issues were limited to the Premises, as opposed to the Common Areas. It is undisputed that the Lessor would have the obligation to repair such issues with the Common Area, including the utility systems servicing such areas.[1] Therefore, the Court cannot conclude that these causes of action fails as a matter of law.

Therefore, the motion for summary judgment is DENIED. The motion for summary adjudication is DENIED as to issues 1 and 2.

Fraud

Defendants move to adjudicate the fraud cause of action on the grounds that the Lease contains disclaimers which would render any reliance on misrepresentations by Defendants as unreasonable. (See Hinesley v. Oakshade Town Center (2005) 135 27 Cal.App.4th 289, 301, 303.)  “The existence of actual fraud is always a question of fact. Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact. However, whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.” (Guido v. Koopman (1991) 1 Cal.App.4th 837.) Only “[i]n such instances where the absence of justifiable reliance is one of law, summary judgment or summary adjudication is an appropriate vehicle.” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178 internal citations omitted.)

Generally, a party may claim fraud in the inducement of a contract, even where the contract contains a provision disclaiming any fraudulent misrepresentations. (Hinesley, supra, 135 Cal.App.4th at 300-301, citing Ron Greenspan Volkswagen, Inc. v. Ford Motor Land Development Corp. (1995) 32 Cal.App.4th 985, 994; Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 42 [parol evidence admissible on issue of fraud in the inducement].) Fraud in the inducement renders the entire contract voidable, including an integration clause or a no-oral-representations clause. (Vai v. Bank of America Nat'l Trust & Sav. Assoc. (1961) 56 Cal.2d 329, 344.) Thus, there is no per se rule that an integration/no oral representations clause establishes that a party claiming fraud could not reasonably rely on representations not contained in the contract. (Greenspan, supra, at 987, 996.)

Both parties favorably cite to Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, as to this issue. In Hinesley, a representative of a shopping center, as a part of courting the plaintiff as a prospective tenant, pointed out specific units and major retailers associated with those units. (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 295.) The court found that these representations contained an implied and false assertion of fact that the mall had already signed leases with those particular businesses. (Id.) However, the court went on to conclude that the plaintiff could not have reasonably relied on such material misrepresentations due to the specificity of the disclaiming language. The Court held that the provision “was not merely a generic integration/no oral representations clause.”  The lease paragraph at issue in Hinesly, 25.33, provided that:

“Lessor reserves the right to effect such other tenancies in the Shopping Center as Lessor in the exercise of its judgment shall determine to bet [sic] promote the interest of the Shopping Center. Lessee does not rely on the fact nor does Lessor represent that any specific Lessee of [sic] type or number of Lessees shall during the term of this Lease occupy any space in the Shopping Center.” (Italics added.)

(Id. at 300.) The court noted that while there is no per se rule regarding exculpatory clauses and fraud, this would “not mean the contract provision is in every case irrelevant.” (Id. at 301.) In consideration of the above language, in addition to the undisputed facts that Hinesley reviewed the paragraph and had assistance of counsel, the Court concluded that Hinesley could not have reasonably relied on the oral representations.

[S]uch express language should have conveyed the implication [citation] that the lease did not come with a guarantee that any particular businesses would be or stay cotenants with Hinesley. The clause should have put Hinesley on notice to ask further questions. The clause is certainly a factor [citation] to consider in determining whether Hinesley justifiably relied on Petrovich's representations regarding the particular tenants locating close to the suite Hinesley was considering leasing… [¶] If the represented tenancies of Dos Coyotes, Starbucks, and Baskin–Robbins were in fact at all significant to his decision to enter into a lease at Oakshade, paragraph 25.33 should have waved a red flag, or at least a yellow flag, in front of him.

[¶¶]

We do not suggest Hinesley had an independent obligation to question Petrovich or to tell him that the status of the other tenants' leases was important to his decision and the timing of his own lease. [Citation.] However, in this business transaction, Hinesley's failure to make such inquiries, discuss such factors or express his intentions when those issues would have been natural and reasonable in the situation is persuasive evidence of Hinesley's state of mind. It is evidence he was not in fact relying on the presence of these tenants in deciding to execute this commercial lease. In the complete absence of any actions taken to question, clarify, or confirm the contractual status of the three cotenants, to notify his attorney of the representations or to modify paragraph 25.33, Hinesley could not justifiably rely on his understanding of the representations and gestures made by Petrovich.

(Id. at 301-303.)

With this in mind, the Court turns to the misrepresentations pled, and the disclaimer presented by Defendants. In early 2017, prior to executing the Lease Agreement with Defendants, Defendants represented that: “ Defendants’ building was maintained in good shape and could be renovated to operate a Mexican restaurant; Defendants had the knowledge, experience, and understanding to maintain 930 Broadway as needed to fulfill its obligations pursuant to the Lease Agreement; Defendants would disclose material defects in Broadway 930; and Defendants would maintain Broadway 930’s warrantability pursuant to the Lease Agreement.” (Compl., ¶ 42.)

Defendants cite ¶ 51 of the addendum to the Lease, which provides: “Condition of Premises. The Premises shall be delivered to Lessee in "AS IS/WHERE IS'' condition with all faults. Lessor shall have no obligation to improve, remodel, alter or otherwise modify to prepare the Premises or the Shopping Center in connection with Lessee's occupancy… Lessee hereby represents each of the following: (a) Lessee or its authorized representative has inspected the Premises and has made all inquiries, tests and studies that it deems necessary in connection with its leasing of the Premises and business operations within the Premises (b) Lessee is relying solely on Lesse's own inspection, inquires, tests and studies conducted in connection with, and Lessee's own judgment with respect to the condition of the Premises and Lessee’s leasing thereof, and (c) Lessee is leasing the Premises without any representations or warranties, express, implied or statutory by Lessor, or Lessor’s agents . . ..”

Strictly construed, the cited provision does not bar the fraud claim. Lessee may have relied on its own inspection and judgment with respect to the condition of the Premises. As noted above, the phrase “Premises” has a specific, limited meaning. Such a disclaimer does not affect any warranties regarding the Common Areas. As noted above, it is undisputed that Defendants represented that they would maintain the Common Areas and the utility raceways and installations within the Premises. That Defendants would not “improve, remodel, alter or otherwise modify to prepare the Premises or Shopping Center” would not disclaim their explicit agreement to maintain common areas and utility systems servicing the common areas. Therefore, Defendants fail to meet their burden to show that Plaintiffs could not have relied on those express representations.

Accordingly, Defendants’ motion is DENIED as to the fraud cause of action.

Reformation

A reformation action lies when a written instrument does not accurately reflect the oral understanding that gave rise to it. (Civ. Code § 3399; Getty v. Getty (1986) 187 Cal. App. 3d 1159, 1178) The sole purpose of the reformation doctrine is to correct a written instrument in order to effectuate a common intention of the parties which was incorrectly reduced to writing. (Ibid.) Thus, when, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised by the court on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value. (Ibid.) The court cannot, under a theory of reformation, create a new agreement for the parties which conforms to circumstances other than those that they had mistakenly assumed were true. (Ibid.) If the written instrument accurately reflects the agreement of the parties, albeit an agreement based upon a mistaken assumption of fact, an action for reformation does not lie. (Ibid.)

The complaint alleges that in “early February 2017, prior to executing the Lease Agreement, Plaintiffs, through verbal and written communications, indicated that the tenant and lessee to the Lease Agreement was supposed to be Plaintiffs’ entity limited liability company [TCP II].” (Compl., ¶ 52.) “An error occurred in reducing the Lease Agreement of the parties to writing, in that the Lease Agreement provides that the individual Plaintiffs are listed as the lessee instead of the entity of T.C.P. II, LLC.” (Compl., ¶ 53.)  “As a result of a mutual mistake in reducing the parties’ original understanding to writing, the Lease Agreement does not correctly express the prior understanding of the parties with regard to the Lease Agreement’s terms, in that the Plaintiffs are individually listed as the lessee.” (Compl., ¶ 54.)

Plaintiffs request that the Lease be reformed “so that it comports with the understanding reached by Plaintiffs and Defendants prior to the execution of the written contract. Specifically, Plaintiffs request that the court reform the contract in the following manner: that T.C.P. II, LLC be listed as the Lessee under the Lease Agreement.” (Compl., ¶ 59.)

First, Defendants argue that Plaintiffs “cannot possibly meet their burden” to show “clear and convincing” evidence that both parties agreed to something different from what the Lease expressed in writing. With this argument, Defendants merely cite to the allegation that February 2017 was prior to executing the Lease Agreement, when the Lease was executed on January 30, 2017. (See Lease.) Defendants thus conclude that Plaintiffs cannot possibly have evidence, since the pled date is contradicted. This argument would not sustain Defendants’ burden of production. (See Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 59 [in order to meet a moving burden on summary judgment based on an absence of evidence, the moving party must present evidence in the form of discovery admissions and/or factually devoid “all facts” discovery responses].) Defendants do not show that Plaintiffs lack evidence of mistake, and cannot reasonably obtain such evidence, based on a minor defect in the pleadings.

Second, Defendants cite the undisputed material fact that the Letter of Intent from the individual Plaintiffs reflected that each of the Plaintiffs would be “Guarantors” under the Lease. (UMF 10.) This also does not contradict the pled mistake that the Lease inaccurately provides that the individual Plaintiffs are listed as the “lessee” instead of the LLC entity. Indeed, the Letter of Intent states that the Lessee was to be a “(Newly Formed LLC).” Defendants’ bald contentions that there is ultimately no practical difference between a guarantor and a lessee are of no moment.

Defendants also argue that subjective, uncommunicated intent of one of the parties to a contract cannot contradict the express provisions of a contract. However, Defendants do not present any evidence which contradicts the pled allegations that there was an explicit understanding between the parties that the entity would be the Lessee under the Lease instead of the individual Plaintiffs. For instance, Defendants could have presented evidence that there were no written/verbal communications indicating that the tenant was only supposed to be the LLC. They did not. Moreover, the only evidence cited (the Letter of Intent) suggests otherwise.

Accordingly, Defendants’ motion is DENIED as to this cause of action.

Constructive Eviction and Unfair Business Practices

Defendants argue that these two causes of action mirror the defective breach of contract claims. However, as discussed, Defendants do not shift the burden on those issues. For the same reasons, Defendants do not shift their burden as to these issues.

Accordingly, Defendants’ motion is DENIED as to all issues.