Judge: Maurice A. Leiter, Case: 21STCV43687, Date: 2023-08-08 Tentative Ruling

Case Number: 21STCV43687    Hearing Date: August 8, 2023    Dept: 54

Hearing Date: August 8, 2023

Department 54, Judge Maurice A. Leiter

Motion for Leave to Amend

Moving Party: Fuel Enterprise, Inc. and Asaph Guirguis

Responding Party: Anabi Oil Corporation

T/R:      THE MOTION FOR LEAVE TO AMEND IS GRANTED.

DEFENDANTS TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing. 

The Court considers the moving papers, opposition, and reply.

BACKGROUND

This action (comprised of two consolidated actions) arises from the operation of a gas station. Fuel Enterprise, Inc. purchased the Covina, California station on November 17, 2020 from Georges Investments, Inc. Anabi Oil supplied Shell-branded gasoline to Fuel enterprise per a Supply Contract. Fuel Enterprise terminated the agreement in November 2021 by “debranding” the station. The parties dispute the amount owed by Defendants for termination of the contract.

ANALYSIS

The Court may allow, in furtherance of justice, and “upon any terms as may be just, an amendment to any pleading or proceeding in other particulars….”  (CCP § 473(a)(1).)  A motion to amend a pleading before trial must be accompanied by a separate declaration that specifies (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) the reasons why the request for amendment was not made earlier.  (CRC Rule 3.1324(b).)

It is not an abuse of discretion of the court to grant the motion unless there is a “showing that actual unfairness or obvious prejudice has resulted from the allowance of such an amendment”.  (Posz v. Burchell (1962) 209 Cal.App.2d 324, 334.)  “Counsel on the firing line in an actual trial must be prepared for surprises, including requests for amendments of pleading.”  (Ibid.)  Absent a showing of prejudice, delay alone is insufficient grounds for denial.  (See Higgins v. Del Faro (1981) 123 Cal. App. 3d 558, 564–65.)

Defendants FEI and Guirguis move for leave to file a second amended complaint to add a cause of action for fraud against Plaintiff Anabi. Defendants assert that Plaintiff wrongfully concealed the agreement between Shell and Anabi from Defendants. In opposition, Plaintiff asserts Defendants have delayed seeking leave, with the September 18, 2023 trial rapidly approaching. Plaintiff also argues that the amendment lacks merit and will require a demurrer.

The Court will allow leave to amend. The amendment does not add facts, theories, or damages requiring additional discovery. Defendants’ delay alone is insufficient to deny leave.

The motion is GRANTED.

Hearing Date: August 8, 2023

Department 54, Judge Maurice A. Leiter

(2) Motions for Summary Judgment, or in the alternative, Motions for Summary Adjudication

T/R:      PLAINTIFF’S MOTION FOR SUMMARY ADJUDICATION IS DENIED.

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, MOTION FOR SUMMARY ADJUDICATION IS DENIED.

PLAINTIFF TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing. 

The Court considers the moving papers, oppositions and replies..

BACKGROUND

This action (comprised of two consolidated actions) arises from the operation of a gas station. Fuel Enterprise, Inc. purchased the Covina, California station on November 17, 2020 from Georges Investments, Inc. Anabi Oil supplied Shell-branded gasoline to Fuel enterprise per a Supply Contract. Fuel Enterprise terminated the agreement in November 2021 by “debranding” the station. The parties dispute the amount owed by Defendants for termination of the contract.

ANALYSIS

A. Plaintiff’s Motion for Summary Adjudication

“In moving for summary judgment, a ‘plaintiff . . . has met’ his ‘burden of showing that there is no defense to a cause of action if’ he ‘has proved each element of the cause of action entitling’ him ‘to judgment on that cause of action.’”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849 (as modified (July 11, 2001).)  The plaintiff “must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.”  (Id., at 851, original italics.)

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.  (CCP § 437c(p)(1).)  “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.”  (Aguilar, supra, 25 Cal.4th at 850.)  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.”  (CCP § 437c(p)(1).)

A. Plaintiff’s Statement of Facts

On October 6, 2017, Plaintiff and Defendant Georges Investments, Inc. (“GEI”) executed the Retailer Products Sales Agreement (“RPSA”) and Retailer Facility Development Incentive Program Agreement ("RFDIP").

Under the RPSA, Plaintiff agreed to sell and deliver, and the GEI agreed to purchase and accept, the minimum quantity of 65,000 gallons of Shell-branded gasoline per month, or 780,000 gallons per year, for resale at Retailer's Station. (UMF 3.)

In the event of termination of the RPSA, Plaintiff “will be entitled to all remedies for such termination, however arising, including, without limitation, all remedies available at law, in equity, or under contract including, without limitation, this Agreement, and in addition to any remedies provided for in any applicable [RFD IP] ... repayment obligations under its RFD IP and any other incentive or concession agreement executed between Retailer and Seller." (UMF 5.) Additionally, early termination of the RPSA by the Retailer entitles AOC to liquidated damages amounting to three cents ($0.03) per gallon multiplied by the difference between the total minimum volume the Retailer promised to purchase and the total volume the Retailer actually purchased. (UMF 6.)

Under the RFDIP, GEI agreed to keep the station Shell-branded through Plaintiff for 120 months, until June 30, 2028. If the 48 months or more of the Brand Commitment remaining at the time of termination, GEI must pay Plaintiff “THE GREATER OF: (i) 100% of the funds allocated in Article 1 or (ii) the amount Seller is required to pay Shell Oil Products US ("SOPUS") as a result of the Default Event."

On March 13, 2018, Plaintiff and Shell aka SOPUS, entered into a Wholesale Marketer Facility Development Incentive Program Agreement ("WMA-FDIP"), whereby Plaintiff is liable to SOPUS for any event of "Default" by GEI or its successors in interest. If more than 50 percent of the number of months in the "Brand Commitment" remain on the date of default, then AOC must reimburse SOPUS for 100 percent of the "Incentives" SOPUS paid AOC for the Station and damages of $75,000. Plaintiff represents SOPUS paid Plaintiff $288,344.04 in incentives.

In November 2020, Georges sold the property and business to Guirguis and Fuel Enterprises, Inc. The parties, including Plaintiff, entered into a “Consent Agreement” in which FEI agreed to assume all of GEI's "rights, debts and obligations" owed to AOC under the "Retailer Documents in the same condition and under the same circumstances existing at the time of the making of the assignment," including the RPSA and RFDIP. Under the Consent Agreement, GEI was not released from the obligations in its previous agreements with Plaintiff.

Also in November 2020, Plaintiff, FEI and Morgan Capital Group, LLC entered into a Memorandum of Right of First Refusal and Supply Covenant (“Supply Covenant”). Under this agreement, Plaintiff was to remain the Station's exclusive supplier of gasoline and motor fuel for a period of eight (8) years from the "Effective Date" of November 17, 2020, providing the "burdens of the Right of First Refusal and Supply Covenant shall apply to the entire [] Premise ... [and] shall apply to all of FEI's successors, assigns, transferees."

In November 2021, FEI debranded the station and ceased to purchase Shell fuel from Plaintiff. For the period of November 2020 to November 2021, FEI's Shortfall is 154,344 gallons and for the period December 2021 to June 2028, FEI's Shortfall is 5,135,000 gallons. (UF 46-47).  Plaintiff asserts the liquidated damages resulting from FEI's shortfall amount to $4,630.32 for the period November 2020 to October 2021, and $154,050 for the period November 2021 to June 27 2028. (UF 48). Plaintiff represents that it owes SOPUS $363,344.04, for total damages against Defendants in the amount of $522,024.36.

B. First, Second and Third Causes of Action for Breach of RPSA, RFDIP and Supply Covenant

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Plaintiff asserts Defendants breached the RPSA, RFDIP and Supply Covenant by terminating the contracts in November 2021, resulting in $522,024.36 in damages for Plaintiff.

In opposition, Defendants dispute whether they owe Plaintiff any damages. Defendants assert Plaintiff does not have damages because Defendants tendered $278,304.91 to Plaintiff after debranding the station.

Defendants also argue that they cannot be required to pay Plaintiff’s obligations to Shell because the Shell/Anabi agreement (the WMA-FDIP) was not disclosed or incorporated into Defendants’ and Plaintiff’s agreements and because Plaintiff miscalculates the amount owed under the agreement. Specifically, Defendants interpret the WMA-FDIP to require Shell to pay incentives only on monthly sales volume exceeding 125,000 gallons per month, citing the “Reimbursement Period. Incentive Monthly Gasoline Volume and Advanced Funds” table attached as Exh. A to the WMA-FDIP. Defendants represent that monthly gasoline sales never exceeded 125,000 gallons at the station.

Defendants similarly dispute the validity and calculations of the RPSA liquidated damages provision. The RPSA requires Defendants to purchase a minimum of 65,000 gallons of gasoline per month. However, Defendants rarely sold over 65,000 gallons of gasoline per month, making the $0.03 per gallon liquidated damages provision based on monthly sales of 65,000 gallons unenforceable.

Defendants have established triable issues of fact as to whether Plaintiff is entitled to damages. Plaintiff’s motion for summary adjudication of the first, second and third causes of action is DENIED.

C. Breach of Personal Guaranties

Plaintiff asserts Defendants Guirguis and Georges have breached their personal guaranties by failing to pay Plaintiff for Defendants’ breaches of the RPSA, RFDIP and Supply Covenant. As discussed, Defendants have established a triable issue of fact as to damages for breaches of the RPSA, RFDIP and Supply Covenant. Plaintiff’s motion for summary adjudication of the fifth cause of action is DENIED.

D. Judicial Foreclosure

Plaintiff argues it is entitled to foreclose on the station’s real property. As Defendants have established a triable issue of fact as to damages, triable issues of fact exist as to Plaintiff’s entitlement to foreclose and collect the proceeds. Plaintiff’s motion for summary adjudication of the sixth cause of action is DENIED.

B. Defendants’ Motion for Summary Judgment, or in the alternative, Motion for Summary Adjudication

“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.) Trial judges are required “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.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (CCP § 437c(p)(2).) 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 that cause of action or a defense thereto.” (Id.)  To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (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.)

Defendants move for summary judgment, or in the alternative, summary adjudication of Plaintiff’s causes of action. Defendants assert that Plaintiff’s claims fail because Plaintiff cannot establish damages. Defendants represent that they tendered $278,305.51 to Plaintiff for debranding the station and terminating their contract. Defendants state that this amount exceeds Plaintiff’s actual damages (the amount due under the contracts for termination) and therefore Plaintiff does not have damages.

In opposition, Plaintiff maintains that Defendants must pay Plaintiff $522,024.36 for termination. These damages are made up of money owed to Shell from Plaintiff and liquidated damages.

As discussed above relating to Plaintiff’s motion, there are triable issues of fact as to whether damages are owed to Plaintiff for Defendants’ debranding of the station. Defendants’ motion is DENIED.