Judge: Martha K. Gooding, Case: 2021-01188964, Date: 2022-09-19 Tentative Ruling

Motion for Summary Judgement and/or Adjudication

The Court grants the motion by Plaintiff Packing District, LLC (“Plaintiff”) for summary judgment on its Complaint for breach of contract against Defendant RTR Bakery Inc. (“Defendant”).

A.   Requests for Judicial Notice (RJN)

The Court grants Plaintiff’s request to judicially notice Exhibits H through K, which are the state and local declarations of emergency because of Covid. (RJN, Exs. H-K.)

On March 16, 2020, the City of Anaheim declared a local public health and safety emergency, prompting a lockdown. (Id., Ex. H.) On March 24, 2020, the City of Anaheim passed Ordinance 6482, which temporarily placed a moratorium on commercial evictions during COVID, but expressly stated that “[n]othing in this ordinance relieves the tenant of liability for the unpaid rent after expiration of this ordinance.” (Id., Ex. I.)

On May 15, 2020, the Anaheim City Manager issued Order No. 5, which stated that any tenant unable to pay rent was required to notify their landlords in writing and that any back rent owed “shall be repaid in four (4) equal installments to be paid in monthly intervals beginning . . . on July 31, 2020.” (Id., Ex. J.)

The deadline was extended to September 30, 2020 per Anaheim Order No. 8. (Id., Ex. K.)

In opposition, Defendant asks the Court to judicially notice the California Department of Public Health Oder dated March 17, 2020. (RJN in opp. Ex. 1.) This, too, is granted. 

B.   Facts

Plaintiff owns commercial real property at 440 South Anaheim Blvd., #214, Anaheim California 92805 (the “Premises”), which Plaintiff leased to Defendant pursuant to a written lease agreement dated November 3, 2014 (the “Lease”). (Fichter Decl., ¶ 2, Ex. A; SSUF 1)

Plaintiff performed its obligations under the Lease by leasing the Premises to Defendant. (SSUF 2).  Defendant operated a coffee and French pastry retail café.

Defendant breached the Lease by failing to pay $140,077.73 owed in GMMR, Percentage Rent, CAM charges, Promo charges, late fees, and interest. (SSUF 3)

When asked at deposition, Defendant acknowledged owing rent and did not dispute the amount owed, except Defendant was unsure whether Defendant’s payments had been accounted for. (Usaha Decl., Ex. D [T. Sepetjian Depo., p. 19:9-22:25], Ex. E [R. Sepetjian Depo., p. 14:19-21, 23:25-25:6].) Plaintiff confirmed that all payments made by Defendant and received by Plaintiff had indeed been accounted for in this total amount still owing. (Fichter Decl., ¶ 5.)

Thus, Plaintiff filed this Complaint for breach of contract.

Paragraph 27 of the Lease, entitled "Force Majeure", reads as follows:

"Whenever performance is required of a party hereunder, that party shall use all due diligence and take all necessary measures in good faith to perform, but if either party hereto shall he delayed or prevented from the performance of any act required hereunder by reason of acts of God (including inordinately long rain delays), strikes, lockouts, labor troubles, inability to procure or delay in procuring materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of the party obligated (financial inability excepted), then performance of such act shall be extended by the amount of the delay actually so caused, provided that the party requesting such extension provides to the other party written notice of the event giving rise to the Force Majeure delay together with a reasonably detained explanation of the basis for the same, within 15 days of the event giving rise to such Force Majeure delay, and thereafter supports with reasonable evidence the basis for the duration of such Force Majeure delay; provided, however, nothing in this Article 27 contained shall excuse Tenant from the prompt payment of any rental or other charge required of Tenant hereunder except as may be expressly provided elsewhere in this Lease. ..."

[Decl. of Fichter, ¶2 Exh. "A,” Art. 27 at 31; November 2014 Lease.]

Defendant asserts that “Plaintiff failed to advise Defendant RTR of the 15-day notice requirement set forth in the Lease for Force majeure to apply.” (Defendant’s Disputed Fact 10; Decl. of Sepetjian ¶6.)

Defendant argues that minimally, it does not owe Plaintiff for the months of March 2020 to July 2020 because of the Force Majeure Clause. (Defendant’s Disputed Fact 11; Decl. of Sepetjian ¶¶2-7.)

This is the Eleventh affirmative defense in the Answer. (ROA 12.)

Defendant also alleges as the Fourteenth and Fifteenth affirmative defenses Impossibility of Performance and Frustration of Purpose, respectively. (ROA 14.)

Specifically, Defendant argues it does not owe Plaintiff for the months of March 2020 to July 2020, which is minimally almost $23k, because of several affirmative defenses. (See Additional Disputed Fact No. 11)

C.   Merits

Where plaintiff seeks summary judgment, the burden is to produce admissible evidence on each element of a “cause of action” entitling him or her to judgment. (CCP § 437c(p)(1); see Hunter v. Pacific Mechanical Corp. (1995) 37 CA4th 1282, 1287 (citing text) (disapproved on other grounds by Aguilar v. Atlantic Richfield Co. (2001) 25 C4th 826); S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 CA4th 383, 388.)

It is not plaintiff's initial burden to disprove affirmative defenses and cross-complaints asserted by defendant. (See CCP § 437c(p)(1); Consumer Cause, Inc. v. SmileCare (2001) 91 CA4th 454, 468 (citing text); Oldcastle Precast, Inc. v. Lumbermens Mut. Cas. Co. (2009) 170 CA4th 554, 565 (citing text).)

Here, the Complaint asserts a single claim for breach of contract.

 “The elements of a cause of action for breach of contract are: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Coles v. Glaser (2016) 2 Cal. App. 5th 384, 391.)

Plaintiff has met its burden entitling it to judgment. 

The burden shifts to Defendant “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).)

In Opposition, Defendant argues that it was forced to close its café from March 17, 2020 through June, 2020 at Plaintiff's instruction and argues that the Force Majeure clause applies minimally from March to July 2020. (Defendant's Disputed Facts 6, 7, 10, 11.) Defendant argues that Plaintiff’s forced closure resulted in insolvency and it had to shut down operations, as it was losing $10k per month. (Disputed Facts 6-9.)

The Court finds that Defendant has not met its burden to show a defense to Plaintiff’s breach of contact claim.

Force Majeure

The Force Majeure clause is contained in Article 27 of the Lease Agreement:

Whenever performance is required of a party hereunder, that party shall use all due diligence and take all necessary measures in good faith to perform, but if either party hereto shall be delayed or prevented from the performance of any act required hereunder by reason of acts of God (including inordinately long rain delays), strikes, lockouts, labor troubles, inability to procure or delay in procuring materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of the party obligated (financial inability excepted), then performance of such act shall be extended by the amount of the delay actually so caused, provided that the party requesting such extension provides to the other party written notice of the event giving rise to the Force Majeure delay together with a reasonably detailed explanation of the basis for same, within 15 days of the event giving rise to such Force Ma1eure delay, and thereafter supports with reasonable evidence the basis for the duration of such Force Majeure delay; provided, however, nothing in this Article 27 contained shall excuse Tenant from the prompt payment of any rental or other charge required of Tenant hereunder except as may be expressly provided elsewhere in this Lease. Interference by reason of rain the intensity or duration of which does not materially exceed customary historical periods or amounts shall not be grounds for a Force Majeure delay.

(Fichter Decl., Ex. A. (italics in original).)

Here, the Lease Agreement requires specific notice to be provided, which Defendant does not contend it made.

In an apparent effort to get around the notice provision, Defendant asserts that “Plaintiff failed to advise Defendant RTR of the 15-day notice requirement set forth in the Lease for Force Majeure to apply.” (Disputed Fact No. 10) But Defendant has not shown that Plaintiff had a duty, contractually or otherwise, to notify Defendant of a provision in the contract in order for the provision to be enforceable. 

Moreover, according to the terms of the contract, the payment of rent is temporarily delayed, not excused. (Fichter Decl., Ex. A, Art. 27 [expressly stating that “financial inability excepted” from the force majeure provision and that “nothing in this Article 27 contained shall excuse Tenant from the prompt payment of any rental or other charge required of Tenant hereunder.”].)

Thus, even if the Covid-19 and Safer at Home orders constitute force majeure events, they do not eliminate Defendant’s obligation to pay rent under the Lease Agreement.

Impossibility

In the absence of a force majeure provision, California Civil Code Section 1511, common law defenses (such as commercial impracticability and frustration of purpose), or Uniform Commercial Code Section 2-615 may relieve a party from its obligation to perform.

Section 1511 provides that performance of an obligation is excused “[w]hen it is prevented or delayed by an irresistible, superhuman cause ... unless the parties have expressly agreed to the contrary.”

Under the doctrine of commercial impracticability, a party may be excused from performance if an unexpected event renders performance impracticable (i.e., the performance would involve “extreme and unreasonable difficulty, expense, injury, or loss”). (Oosten v. Hay Haulers Dairy Emp. & Helpers Union (1955) 45 Cal. 2d 784, 788.)

According to Civil Code Section 1511, the impossibility defense only applies to excuse performance “[w]hen it is prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary.”

Here, there was no “irresistible, superhuman cause” or “act of public enemies” that prevented Defendant’s performance of its rent obligations. Further, the parties had an express agreement regarding when force majeure-type events could excuse performance, and they expressly agreed that such events could not excuse rent obligations.

Further, the Lease Agreement was not rendered completely impossible by a temporary closure.

Frustration of Purpose

Frustration of purpose is a defense that arises when performance of the contract is actually possible, but the anticipated value of the performance to the party asserting the defense has been destroyed by an unexpected event causing an actual—although not literal—failure of consideration. (Lloyd v. Murphy (1944) 25 Cal.2d 48, 53).

As is true with prevention of performance, mere difficulty or unusual or unexpected expense of performance does not give rise to the defense. (Mineral Park Land Co. v. Howard (1916) 172 Cal. 289, 293; Glens Falls Indemnity Co. v. Perscallo (1950) 96 Cal.App.2d 799, 802.)

“[L]aws or other governmental acts that make performance unprofitable or more difficult or expensive do not excuse the duty to perform a contractual obligation.” (Lloyd v. Murphy (1944) 25 Cal. 2d 48, 55 [making this holding in the context of a frustration of purpose defense, which the court noted is “akin to the doctrine of impossibility”]; see also Glens Falls Indem. Co. v. Perscallo (1950) 96 Cal. App. 2d 799, 802 [“Mere difficulty, or unusual or unexpected expense does not establish frustration or impossibility of performance of a contract.”]; Waegemann v. Montgomery Ward & Co. (9th Cir. 1983) 713 F.2d 452, 455 [“The excuse of frustration serves to mitigate the costs of disaster, not to provide a means of escape from a contract less profitable than anticipated”].)

Here, the closure was temporary. Further, Defendant confirmed it had two other locations that were still operating throughout COVID and that Defendant received two government assistance loans totaling about $300,000. (Usaha Decl., Ex. E [R. Sepetjian Depo., p. 18:12-24, 30:10-21].)

Thus, this Motion is granted. Plaintiff is ordered to file and serve a proposed judgment consistent with the foregoing.

Plaintiff is ordered to give notice.