Judge: Mitchell L. Beckloff, Case: 21STCV44977, Date: 2022-12-14 Tentative Ruling

Case Number: 21STCV44977    Hearing Date: December 14, 2022    Dept: 86

AZUSA ROWLAND, LLC v. FITNESS & SPORTS CLUBS, LLC

Case Number: 21STCV44977

Hearing Date: December 14, 2022

[Tentative]       ORDER GRANTING APPLICATIONS FOR WRITS OF ATTACHMENT

This action arises out of a breach of commercial lease.

Plaintiff, Azusa Rowland, LLC, filed this action against Defendants, Fitness Sports Clubs, LLC (FSC) and Fitness International, LLC (FI) on December 9, 2021. Plaintiff asserts two causes of action, one against each Defendant—breach of the lease agreement as to FSC and breach of the guaranty as to FI.

Plaintiff generally alleges it entered into a commercial lease, as landlord, with FSC, as tenant, for 441 North Azusa Avenue in West Covina (Premises). FI guaranteed FSC’s performance under the lease. According to Plaintiff, FSC has now defaulted under the lease, and FI has not otherwise cured the default.

On January 24, 2022, Defendants filed their cross-complaint (1AXC) against Plaintiff. The 1AXC alleges two causes of action—breach of contract and declaratory relief.

Plaintiff now applies for writs of attachment[1] against each Defendant in the amount of $916,704.77.

Defendants oppose the applications. The applications are granted.

Defendants’ request for judicial notice (RJN) of various governmental orders/acts and judicial filings is granted.

Plaintiff’s objections to the Declaration of Diann D. Alexander: The following objections are overruled – 1, 4, 5, 8, 9, 10, 15, 16, 17 and 18. The following objections are sustained – 2, 3, 6, 7, 11, 14 and 22. The following objections are sustained in part – 12 (as to “Fitness was . . . the closure periods”), 13 (as to the final sentence), 19 (as to the final sentence as improper argument), 20 (as to the last two sentences as improper argument) and 21 (as to all except the first sentence as improper argument).

LEGAL STANDARD

The court shall issue a right to attach order if the court finds all of the following:

1. The claim upon which the attachment is based is one upon which an attachment may be issued.

2. The plaintiff has established the probable validity of the claim upon which the attachment is based.

3. The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

4. The amount to be secured by the attachment is greater than zero.

    

   (Code Civ. Proc., § 484.090.)

    

   “The application [for a writ of attachment] shall be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (Code Civ. Proc., § 484.030.) Statutory attachment procedures are purely creations of the legislature and as such “are subject to ‘strict construction.’ ” (Hobbs v. Weiss (1999) 73 Cal.App.4th 76; see also Nakasone v. Randall (1982) 129 Cal.App.3d 757, 761.) A court does not have authority to order any attachment that is not provided for by the attachment statutes. (Jordan-Lyon Productions, Ltd. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1466.) “The declarations in the moving papers must contain evidentiary facts, stated ‘with particularity,’ and based on actual personal knowledge with all documentary evidence properly identified and authenticated.” (Hobbs v. Weiss, supra, 73 Cal.App.4th at 79-80.) “In contested applications, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (Id., at 80 [cleaned up].)

    

   ANALYSIS

    

   Probable Validity of Plaintiff’s Claims

    

   “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (Code Civ. Proc., § 481.190.)

    

   The applications are based on an alleged breach of the lease agreement and guaranty. To establish a claim for breach of contract, a plaintiff must prove: (1) existence of a contract;

   (2) plaintiff’s performance under the contract or excuse for nonperformance; (3) defendant’s breach of the contract; and (4) damages incurred by plaintiff as a result of the breach. (Durell v. Sharp Healthcare, (2010) 183 Cal.App.4th 1350, 1367.) To establish a claim for breach of a guaranty, a plaintiff must prove: (1) defendant’s guaranty of another’s performance under a contract; (2) that other party’s failure to perform, and (3) resulting damage. (Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 819-820.)

    

   In support of its contract claims against Defendants, Plaintiff submits evidence that on August 2, 1982, Plaintiff and FSC entered into a written lease for the Premises which the parties subsequently amended on May 15, 1983, October 8, 1990, February 1, 1993, March 26, 2007, and February 2, 2015 (collectively, the Lease). (Alhassen Decl. ¶¶ 1-9, Ex. 1-6.) FI guaranteed FSC’s obligations under the Lease pursuant to a written Guaranty of Lease dated February 2, 2015. (Id. ¶ 10 and Ex. 7.) The Lease requires FSC to pay minimum monthly rent of $77,281.79 as well as real property taxes as additional rent. (Id. ¶¶ 11-12, Ex. 1 at §§ 2.1-2.2, 2.5, Ex. 6 at § 3.)

    

   Relevant to this application, Plaintiff proffers evidence Defendants did not pay monthly rent from April to June 2020 and August 2020 to February 2021 and paid only partial rent for April 2021 to June 2021. Defendants’ failure to pay rent as required under the Lease resulted in a principal amount of monthly rent due to Plaintiff for those time periods totaling $805,037.16. (Id. ¶¶ 16-19, Ex. 9.) Additionally, Plaintiff proffers evidence FSC did not pay its real property taxes required under the Lease for tax year 2019/2020 and for the first installment of tax year 2020/2021, resulting in a total amount owed (as limited for the purposes of this application) to $111,667.61 for the time period of July 1, 2019 to June 30, 2020 and July 1, 2020 to December 31, 2020. (Id. ¶¶ 15-16, Ex. 8-9.)

    

   On October 28, 2021, Plaintiff served FSC with a notice of default requesting payment. Defendants did not cure the default. (Id. ¶¶ 20, 22.)

    

   FSC surrendered possession of the Premises on November 30, 2021. (Id. ¶¶ 21-22.)

    

   The total amount due and owing from Defendants to Plaintiff (for purposes of these applications) is $916,704.77. (Id. ¶¶ 11-19, Ex. 9.)

    

   This evidence, if not rebutted, is sufficient to show the probable validity of Plaintiff’s breach of lease and breach of guaranty claims.

    

   Defendants oppose Plaintiff’s applications.

    

   Defendants generally argue FSC did not pay rent in full because the COVID-19 pandemic resulted in government orders requiring closure of its facility. Defendants contend the government shut-down orders frustrated the purpose of the Lease and made FSC’s performance impracticable. Defendants also report FSC notified Plaintiff in writing on March 17, 2020 that the purpose of the Lease had been frustrated “since the consideration was destroyed due to [an] unforeseeable governmental order . . . .” (Opposition 1:13-14.)

    

   Defendants contend:

    

   “this is not a case about mere non-payment of rent by a tenant who was provided with full uses and enjoyment of the premises. Rather, there is a serious dispute between the parties regarding whether there was a total failure of consideration for the times it was illegal for [FSC] to use the premises to operate its business during the unprecedented, unforeseen, catastrophic global COVID-19 pandemic . . . .” (Opposition 1:22-26.)

    

   Defendants assert the equities dictate Plaintiff bear the risk that the agreed upon use of the Premises was rendered illegal by governmental decree. Defendants also argue they are entitled to an offset against any damages owed.

    

   In support of their defense, Defendants proffer the following material evidence:

    

   The Lease expressly restricted the use of the Premises for the operation of an indoor health club and facility. (Alhassen Decl. Ex. 1[2] at § 4.5, Ex. 6 at § (B)(4).) The COVID-19 pandemic negatively affected the operation of the Premises as a fitness facility because FSC could no longer operate the Premises for that purpose for much of the relevant time period, with some exceptions, after the government issued various orders. (See generally Alexander Decl. ¶¶ 14-16, Defendants’ RJN Ex. A-M.) As a result of governmental mandates, FSC could not legally use the Premises in its entirety and without capacity limitations from March 17, 2020 to June 15, 2021. FSC did not collect membership dues during the period the governmental orders were in place. (Alexander Decl. ¶¶ 6, 18.) FSC paid full rent for the months of March 2020 and July 2020, partial rent for March 2021 through June 2021, and then paid full rent commencing in July 2021 through the termination of the Lease in November 2021. (Alexander Decl. ¶¶ 20-29.)

    

   There is no dispute Defendants did not pay the rent owed under the Lease or the required property taxes during certain time periods. Defendants do not concede liability, however, and argue their performance was excused because government regulation frustrated the purpose of the Lease. In fact, the single issue in dispute by the parties is whether and to what extent, if at all, is Defendants’ performance under the Lease and guaranty excused based on commercial frustration of purpose?

    

   First, Plaintiff argues the Lease does not contain a “general force majeure provision.” (Reply 1:22.) Plaintiff notes the clause in issue, Section 15.15 of the Lease, “applies only to the parties’ obligations related to the construction contemplated in Article XV of the Lease.” (Reply 5:4-5.) Article XV of the Lease relates to construction of the Premises. The court accepts Plaintiff’s interpretation of the Lease at Section XV.

    

   Second, extending Plaintiff’s logic concerning Section 15.15 and its application to construction related issues only—that is, it is not a general force majeure clause—based on its location in the Lease, the court finds Section 6.8 of the Lease and its provision for no abatement of rent applies only in the context of Section VI of the Lease. Accordingly, the Lease provision concerning abatement of rent (at Section 6.8) applies only where the premises has been damaged or destroyed.

    

   Thus, the court finds there is applicable force majeure clause in the Lease. The court also finds there is no applicable provision in the Lease related to rent abatement. There is no issue before the court concerning damage, destruction or construction of the Premises.

    

   Section 288 of the Restatement of the Law of Contracts, cited with approval by Johnson v. Atkins (1942) 53 Cal.App.2d 430, 433-434[3] states:

    

   “Where the assumed possibility of a desired object or effect to be attained by either party to a contract forms the basis on which both parties enter into it, and this object or effect if or surely will be frustrated, a promisor who is without fault in causing the frustration, and who is harmed thereby, is discharged from the duty of performing his promise unless a contrary intention appears.”

    

   Additionally:

    

   “ ‘Where from the nature of the contract it is evident that the parties contracted on the basis of the continued existence of the person or thing, condition or state of things, to which it relates, the subsequent perishing of the person or thing, or cessation of existence of the condition, will excuse the performance, a condition to such effect being implied, in spite of the fact that the promise may have been unqualified.’ ” (Id. at 434 [citation omitted].)

    

   Frustration of purpose occurs where some supervening and unforeseen event occurs destroying the value of the contract to at least one of the parties. As explained in Dorn v. Goetz (1948) 85 Cal.App.2d 407, 410:

    

   “The doctrine of commercial frustration is defined in Williston on Contracts . . . as follows: ‘Performance remains entirely possible, but the whole value of the performance to one of the parties at least, and the basic reason recognized as such by both parties, for entering into the contract has been destroyed by a supervening and unforeseen event. This does not operate primarily as an excuse for the promisor, the performance of whose promise has lost its value, but as a failure of consideration for the promise of the other party, not in a literal sense it is true, since the performance bargained for can be given, but in substance, because the performance has lost its value. The name “frustration” has been given to this situation.’ (Emphasis Williston's.)”

    

   The object of the contract is set forth in the Lease. Defendants let the Premises to use as a “health club and fitness facility.” As amended in 2015, the Lease specifies the use of the Premises:

    

   4. Use. Tenant shall be entitled to use the Premises for the operation of a health club and fitness facility which may include any of the following: weight and aerobic training, group exercise classes, exercise dancing such as Zumba, yoga, Pilates, racquetball/squash, personal training, aerobics, health and fitness related programs, free weights, spinning/cycling, circuit training, boxing, basketball, swimming pool, instruction in sports or other physical activities (e.g., swim lessons, racquetball/squash/tennis lessons, martial arts and dance) and sauna and whirlpool facilities (collectively, the “Primary Uses”). As part of the health club and fitness facility operated within the Premises, Tenant may use portions of the Premises for the following uses ancillary to a health club and fitness facility in Tenant's discretion (hereinafter, the "Ancillary Uses"): a health club and fitness facility related pro shop selling apparel and other fitness related items; physical, occupational, therapeutic or aquatic therapy; nutrition counseling; weight loss services and treatments; spa services (e.g., massages, facials, hair care and nail care); tanning services; dry cleaning drop-off and pickup; phone charging stations; juice bar; vitamin and nutritional supplement sales and nutritional advice; ATM machines located inside the Premises; vending machines located inside the Premises; child care facility for members; food and beverage service (including the sale of healthy and/or natural foods); the sale of exercise and/or health related videos and/or DVDs; and chiropractic services, teeth whitening services, and services designed to provide or facilitate medical treatments or consultation so long as they are not offered to the senior population exclusively. In addition, Tenant shall be permitted to use portions of the Premises for storage and office uses incidental to the Primary Uses and for photography/filming for advertisements or other visual media. Tenant shall have the right throughout the Term to operate the Premises, or any portion thereof, for uses permitted under the Lease, as amended by this Amendment, For the avoidance of doubt, the foregoing replaces the "permitted use" contained in Section 6 of the Fourth Amendment.

    

   (Alhassen Decl., Ex. 6 at § 4.)

    

   While Defendants were entitled to certain other related uses of the Premises, such uses were uses “ancillary to a health club and fitness facility . . . .”[4] Defendant leased the Premises to conduct its business—a health club and fitness facility. The government regulation requiring such facilities to close “constituted a ‘cessation of existence of the condition’ which was the ‘desired object or effect’ and was the essential, primary and principal basis for which” Defendant’s leased the Premises. (20th Century Lites, Inc. v. Goodman (1944) 64 Cal.App.Supp. 938, 943.)

    

   Defendants need not show they were “entirely prevented for any purpose permitted under the contract of letting” from using the Premises. (Ibid.) In fact:

    

   “[t]he weight of the authority in the United States is to the contrary, and is to the effect that such doctrine may be invoked whenever official governmental action prevents the hirer from using the property for the primary and principal purpose for which it was hired.” (Ibid.)

    

   Of course, the governmental regulation at issue was temporary. Defendants remained in possession of the Premises until the Lease terminated in November 2021. Defendants acknowledge the governmental regulation ended on June 5, 2021, and their use of the Premises after that time was unrestricted.

    

   Defendants do not assert the governmental regulation completely eliminated the object of the parties’ contract. Instead, Defendants contend the frustration of purpose was temporary. Defendants assert “California law recognizes temporary frustration of purpose as a basis to relieve parties of their obligations of performance.” (Opposition 12:27-28.) Defendants suggest a temporary frustration of purpose extinguished Defendants’ obligation to pay rent during the period of governmental regulation.

    

   Temporary frustration of purpose, however, does not excuse or discharge Defendants’ obligation under the Lease and guaranty. Instead, Defendants’ obligation is suspended. Defendants’ obligation to pay rent to Plaintiff would not be excused “unless the delayed performance becomes materially more burdensome or the temporary impossibility because permanent.” (Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001, 1017.)

    

   While a temporary frustration of purpose may have permitted Defendants to delay paying Plaintiff monthly rent until the intervening cause (the governmental regulation) ended on June 5, 2021, it did not excuse or discharge the obligation.[5] The Restatement Second of Contracts at section 269 makes that clear. (Ibid.)

    

   At best, Defendants obligation to pay rent was suspended from March 17, 2020 to June 5, 2021. After that period of suspension, Defendants were required to pay the rent that had accrued during that period at some point—that is, the obligation existed. Defendants’ obligation “to perform [was] not excused or discharged by a temporary” frustration of purpose. (Ibid.)

    

   Defendants could excuse their duty to perform (i.e., pay rent) for the period of March 17, 2020 to June 5, 2021 by demonstrating “performance after the cessation of the . . . frustration would be materially more burdensome than had there been no impracticability or frustration.” (Ibid.) Defendants, however, provide no argument or evidence on the issue of how paying the suspended rent obligation would be more burdensome than had there been no frustration of purpose. While the admissible evidence suggests FSC’s members were not paying dues during the closure periods, Defendants have provided no analysis of the practical effect of members not paying dues. This is especially true in the context of a 44-year lease (terminable at 39 years). Defendants have offered no evidence of the actual financial impact on FSC of the closure based on the governmental regulations.[6] Thus, the court cannot find Defendants demonstrated performance of the suspended obligation would be “more burdensome than had there been no impracticability or frustration.” (Ibid.)

    

   Accordingly, for purposes of these applications, Plaintiff has demonstrated a probable validity of its claims against Defendants.

    

   Finally, Defendants argue they are entitled to an offset of $180,062.84 because FSC overpaid Plaintiff. (Alexander Decl. ¶¶ 22-30.) More specifically, Defendants argue FSC overpaid rent because it had no obligation to pay rent during time periods affected by governmental regulations restricting the use of the Premises. The argument fails, however, for the reasons set forth above, i.e., Defendants were obligated to eventually make the rental payments that had been suspended from March 17, 2020 to June 5, 2021

    

   Basis of Attachment

    

   The court shall issue a right to attach order if the claim upon which the attachment is based is one upon which an attachment may be issued. (Code Civ. Proc., § 484.090.) “[A]n attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney’s fees.” (Code Civ. Proc., § 483.010, subd. (a).) “If the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession.” (Code Civ. Proc., § 483.010, subd. (c).)

    

   Plaintiff’s claim is based on a written contract—the lease and guaranty—and is in excess of five hundred dollars. Accordingly, the court finds Plaintiff’s claims are proper for attachment.

    

   Purpose and Amount of Attachment

    

   As noted earlier, statutory attachment procedures are purely creations of the legislature and as such “are subject to ‘strict construction.’ ” (Hobbs v. Weiss, supra, 73 Cal.App.4th at 79.) “The declarations in the moving papers must contain evidentiary facts, stated ‘with particularity,’ and based on actual personal knowledge with all documentary evidence properly identified and authenticated.” (Id. at 79-80.) 

    

   Code of Civil Procedure section 484.090 provides the court shall issue a right to attach order if “the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based . . . [and] the amount to be secured by the attachment is greater than zero.” A plaintiff seeking attachment must make this showing.

    

   Here, Plaintiff attests the application for attachment is not sought for a purpose other than the recovery on a claim upon which the attachment is based. (Application ¶ 4; Alhassen Decl. ¶ 23.) The amount of attachment is indisputably greater than zero.

    

   Accordingly, the court finds that Plaintiff has complied with this statutory requirement and finds attachment is sought for a proper purpose.

    

   The court rejects Defendants’ argument the purpose of the applications is to seek a litigation advantage. (Opposition 2:8-21.) Defendants identify no evidence to support such a claim. (Id. 2:18-21.) That Defendants ultimately may have the ability to satisfy any judgment against it is not determinative. Under the applicable statutes, the critical question is whether the attachment is sought to recover the claim upon which the attachment is based.

    

   Subject Property

    

   Code Civil Procedure section 487.010, subdivision (a) provides that “[w]here the defendant is a corporation, all corporate property for which a method of levy is provided” is subject to attachment.

    

   Plaintiff identifies the property subject to attachment as any property of Defendants. Such property is properly subject to attachment.

    

   ///

    

   Undertaking

    

   Code of Civil Procedure section 489.210 requires the plaintiff to file an undertaking before issuance of a writ of attachment. Code of Civil Procedure section 489.220 provides, with exceptions, for an undertaking in the amount of $10,000. Plaintiff does not argue for a different amount of undertaking.

    

   The court sets a $10,000 undertaking for each application.

    

   CONCLUSION

    

   Based on the foregoing, Plaintiff’s applications for writs of attachment are GRANTED in the amount of $916,704.77. Plaintiff shall post a $10,000 undertaking prior to the writ issuing for each application, i.e., two $10,000 undertakings.

    

   IT IS SO ORDERED.

    

   December 14, 2022                                                              ________________________________

                                                                                                                      Hon. Mitchell Beckloff

                                                                                                                      Judge of the Superior Court