TENTATIVE RULING

 

Calendar:    1

Date:          8/26/22 

Case No: 21 GDCV00645 Trial Date: December 12, 2022 

Case Name: S & N Properties, LP v. World Financial Group, Inc., et al.

MOTION FOR SUMMARY JUDGMENT

(Or, in the Alternative, Summary Adjudication)

Moving Party:            Plaintiff S & N Properties, LP       

Responding Party: Defendants Artak Daldumyan and Goar Nersesyan

RELIEF REQUESTED:

Order granting summary judgment in the compliant in favor of plaintiff and against defendants Artak Daldumyan, an individual, Goar Nersesyan, an individual, and World Financial Group, Inc., a California corporation  

In the alternative, summary adjudication of each cause of action.    

CAUSES OF ACTION: from Complaint   

1) Breach of Contract 

2) Breach of the Covenant of Good Faith and Fair Dealing 

SUMMARY OF FACTS:

Plaintiff S & N Properties alleges that it is a real estate limited partnership, and that in October 2018 it entered into a Lease Agreement, as owner, with defendant World Financial Group, Inc. as tenant for commercial property in Glendale.  The complaint alleges that defendants Artak Daldumyan and Goar Nersesyan are principals of World Financial Group, who also executed the Lease Agreement in their individual capacities.  

Plaintiff alleges that beginning in late 2019 and continuing thereafter, World Financial Group failed to pay utilities and common area operating expenses deemed rent by the terms of the Lease Agreement, as well as rent, and holdover rent, and that defendants now owe the outstanding balance in the amount of $65,594.60 to plaintiff.   

The complaint alleges that in October of 2020, plaintiff made demand for payment to defendants, but did not receive a response, and that in August of 2020, World Financial Group unilaterally vacated the premises. 

Defendant World Financial Group filed a cross-complaint against the individual defendants as cross-defendants for breach of contractual indemnity and declaratory relief, alleging that cross-defendants were at certain relevant times independent contractors of cross-complainant, but at no time had authority to enter the subject Lease Agreement on behalf of World Financial Group. 

On April 4, 2022, after the filing of this motion, plaintiff filed a Request for Dismissal of the action without prejudice as to defendant World Financial Group, Inc., a California corporation, and World Financial Group, Inc., a Delaware corporation, which was entered as requested the same date. 

On April 11, 2022, defendant World Financial Group, Inc. filed a Request for Dismissal without prejudice of its cross-complaint, which was entered as requested the same date.  

ANALYSIS:

Procedural

Motion as to Defendant World Financial Group Inc.  

This motion is brought as to the individual defendants, Artak Daldumyan and Goar Nersesyan, and World Financial Group, Inc., a California corporation.  As noted above, the file shows that since the filing of this motion by plaintiff, defendant World Financial Group, Inc., a California corporation, has been dismissed from this action without prejudice pursuant to a Request for Dismissal filed by plaintiff on April 4, 2022. Since defendant World Financial Group, Inc. has been dismissed from the action and is no longer a party, the motion as to World Financial Group, Inc. will not be considered by the court.  It is held that once a dismissal is entered, the court loses subject matter jurisdiction over the matter, and has no jurisdiction to consider any matter other than a motion for costs or attorney’s fees, or to set aside the dismissal pursuant to CCP §473.   See Shapelle Industries, Inc. v. Superior Court (2005, 2nd Dist.) 132 Cal.App.4th 1101, 1108.   

The motion will be considered to the extent plaintiff seeks summary judgment or summary adjudication as against the individual defendants, who have not been dismissed. 

Substantive 

Under CCP § 437c(p)(1) a plaintiff “has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action.  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(f)(1) provides that “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.”

Plaintiff S & N Properties seeks summary judgment or summary adjudication against the individual defendants, Artak Daldumyan and Goar Nersesyan, arguing that plaintiff can meet its burden of proving each element of its causes of action entitling plaintiff to judgment on the causes of action.  

ISSUE 1: THE FACTS DEMONSTRATE THE EXISTENCE OF THE LEASE AGREEMENT, S & N’S PERFORMANCE UNDER THE LEASE AGREEMENT, DEFENDANT’S BREACH, AND RESULTING DAMAGES. THEREFORE, S & N IS ENTITLED TO SUMMARY 

ADJUDICATION OF ITS CAUSE OF ACTION FOR BREACH OF 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.” 

Richman v. Hartley (2014, 2nd Dist.) 224 Cal.App.4th 1182, 1186.  

Plaintiff argues that it has sufficient evidence to establish that a contract was formed between the parties, the Lease agreement, that defendants breached the contract by vacating the premises and failing to pay rent as due under the Lease, and that plaintiff has suffered damages from that breach in the sum of $48,954.60.  [UMF Nos. 1-3, and evidence cited, Maniscalchi Decl., paras. 5-8, 11-20, Ex. 1, Lease Agreement, Ex. 2, Tenant Statement of Account].  As an initial matter, the separate statement does not include as an undisputed fact that plaintiff performed under the agreement, and there is no testimony or other evidence submitted by plaintiff indicating that plaintiff fully performed under the agreement or was excused from any non-performance, an essential element of a breach of contract claim. Plaintiff has accordingly failed to meet its initial burden on this motion.   

In addition, plaintiff has failed to fully meet its burden on this motion to establish the essential element of damages, as the moving papers concede that plaintiff has failed to apply the security deposit to offset the damages claimed, evidently leaving this issue for resolution at a later time.  Plaintiff states in the memorandum that “defendants’ security deposit was in the amount of $6,500,” and that “said security deposit, which has not yet been applied, will be reduced against the judgment and attorney’s fees and costs entered by this Court.”  [Memorandum, p.12:1-2, 5-6].   

In Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, the Second District held, “As damages are an element of a breach of contract cause of action, a plaintiff cannot obtain judgment on a breach of contract cause of action in an amount of damages to be determined later.”  Paramount Petroleum, at 241, internal citation omitted.   Accordingly, summary judgment or adjudication are improper where “the issue of calculation of damages apparently remain to be determined.”  Paramount Petroleum, at 243, citing Weil & Brown, Cal. Practice Guide:  Civil Procedure Before Trial (The Rutter Group 1996) 10:40.1.

Plaintiff has accordingly failed to meet its initial burden on this motion of establishing each element of its cause of action for breach of contract, and the motion must be denied. 

Even if the burden had shifted to defendants to raise triable issues of material fact, defendants in opposition have raised triable issues of material fact. 

Specifically, defendants submit evidence that they have not had their security deposit accounted for by plaintiffs, so that the sum sought in the moving papers is incomplete.  Defendants submit their declarations in which they state that they have never been provided with an accounting of their security deposit.  [Daldumyan Decl., para. 17; Nersesyan Decl., para. 17]

Defendants also submit the deposition testimony of Anthony Maniscalchi, the property manager for plaintiff, who was deposed as the Person Most Qualified for plaintiff in this case.   Maniscalchi testified at deposition in connection with the statement prepared by his staff on which plaintiff relies here in connection with the total sum due of $48,954.60, that such a total may not be correct in light of the failure to account for the security deposit:

“Q. Okay. And the amount stated there at the bottom right, the total amount due, $48,954.60?

A. Uh-huh.

Q. Is that correct?

A. Yes, sir.

Q. And you believe that figure to be accurate; correct?

  A. Yes, sir.

  Q. Did you apply the security deposit to that figure?

 A. Clearly, no, sir.

  Q. Okay. So it's not accurate?

A. May not be.”

[Euredjian Decl., para. 4, Ex. 3, Maniscalchi Depo., p. 102: 2-14; Additional Fact No. 15, and evidence cited].

This showing is sufficient to raise triable issues of fact.   Plaintiff in reply submits a Reply declaration of Maniscalchi indicating that since the deposition he has reviewed the Tenant ledger and that it indicates that the security deposit was applied toward the total balance due. [Reply Maniscalchi Decl., paras. 22, 23].  The moving papers themselves, however, expressly indicated that the security deposit had not been applied or credited, as set forth above, and under the circumstances of this change of position in the reply, defendants have not had the opportunity to address this new argument.   

Defendants also submit evidence in support of an argument that the damages sought by plaintiff in the motion are overstated because they include charges for utilities which are not contemplated by the Lease, and had not been required to be paid in the past by plaintiff until a charge received on September of 2019, to which plaintiffs objected, and did not pay.  [Additional Facts Nos. 6-10, and evidence cited; Daldumyan Decl., paras. 9-12; Nersesyan Decl., para. 9-12].

Defendant Daldumyan states in this declararation:

“9. In approximately September 2019, we received a notice from Mr. Maniscalchi’s office requesting that we pay $3,154.58 for utilities.

10. We did not understand why we were being asked to pay utilities, particularly since (i) the utilities at the Premises shared a meter with another tenant; (ii) we had never paid for utilities in more than 20 years; and (iii) the notice requesting payment for utilities came nearly a year after we executed the Lease.

11. Section 4.2(a)(ii) specifically indicates that “any utilities not separately metered” are considered Common Area Operating Expenses. And, Section 4.2(g) of the Lease specifically indicates that the Common Area Operating Expenses would be capped at $600 per month for the first 12 months and $750 per month for the last six months of the Lease.

12. We expressed our displeasure with these charges to Mr. Maniscalchi and we informed him that it did not comport to our understanding of the Lease.”

[Daldumyan Decl., paras. 9-12]. 

Defendant Neresesyan recounts the same events.  [Nersesyan Decl., paras. 9-12]. 

This testimony is supported by the language of the Lease, as submitted with the opposition, and authenticated by defendants.  [Daldumyan Decl., para. 5, Ex. 1].  Defendants also submit deposition testimony of Maniscalchi in which he admits that defendants shared a meter with another tenant, such that certain charges sought were not separately metered. [Maniscalchi Depo, p.53:12-19]. 

The reply concedes that the utility charges at issue equal $8,351.84.  There remain triable issues of material fact concerning the appropriateness of the damages claimed which include this sum.  The reply seems to argue that there is at the very least no argument that the remaining $40,602.76 in damages are due.  This claim is not what was argued by plaintiff in the motion, however, raising issues of notice and depriving defendants of the opportunity to address this new argument.  In addition, there are in fact other arguments with respect to the damages claimed.   

Defendants also argue that damages are overstated because in calculating damages, plaintiff has applied an incorrect date upon which plaintiff vacated the premises. Specifically, defendants indicate in their declarations that they informed Maniscalchi that they would not be renewing the Lease, which expired on April 30, 2020, and vacated the premises shortly after COVID-19 stay at home orders were issued in March of 2020, and informed plaintiff of that. [Additional Facts Nos. 11-13, and evidence cited; Daldumyan Decl., paras. 13-15; Nersesyan Decl., paras. 13-15].   This assertion is sufficient to raise further triable issues on the accuracy of the damages claimed, as plaintiff calculated those damages based on a alleged holdover tenancy which plaintiff indicates continued until August 31, 2020. [See UMF No. 2, and evidence cited].   

Triable issues of fact remain, and the motion is denied. 

ISSUE 2: THE FACTS DEMONSTRATE THE EXISTENCE OF A LEASE AGREEMENT AND S & N’S PERFORMANCE UNDER THE LEASE AGREEMENT, DEFENDANT’S BREACH, AND RESULTING DAMAGES. THEREFORE, S & N IS ENTITLED TO SUMMARY ADJUDICATION OF ITS CAUSE OF ACTION FOR BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING.

It is recognized that “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”  Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371, quoting Restatement 2nd Contracts, §205. 

The elements of a claim for breach of the implied covenant of good faith and fair dealing are:

1) That plaintiff and defendant entered into a contract;

2) That plaintiff did all, or substantially all of the significant things that the contract required plaintiff to do or that plaintiff was excused from having to do those things;

3) That all conditions required for defendant’s performance had occurred;

4) That defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract; and 

5) That plaintiff was harmed by defendant’s conduct. 

See CACI 325. 

It is recognized that the covenant is implied “as a supplement to the express terms of the contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.”  Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032. 

The motion as to this cause of action relies on the same Lease, alleged breach, and calculation of resulting damages set forth in support of the first cause of action for breach of contract.  As discussed above, plaintiff has failed to meet its initial burden of establishing plaintiff’s performance, or of establishing the sum of damages due, and, even if that burden had been met, triable issues of material fact have been raised with respect to the correctness of the damages claimed.  The motion as to the second cause of action also is denied. 

In addition, the cause of action is based on the same alleged breach of express provisions of the Lease upon which the breach of contract cause of action is based, not a breach of any covenant implied in the contract distinct from an express term.  As noted above, an implied covenant would be one which does not technically transgress the express covenants between the parties, which is not what is being argued here, as the motion seeks to establish breach of the actual terms of the Lease.  Plaintiff has accordingly failed to sufficiently establish the essential element of breach of an implied covenant, apart from an express covenant, and the motion is denied on this ground as well. 

RULING:

Plaintiff S & N Properties, LP Motion for Summary Judgment, or in the Alternative, Summary Adjudication:

Motion is NOT CONSIDERED BY THE COURT to the extent relief is sought against defendant World Financial Group, Inc., a California Corporation, in light of the entry of dismissal of this party from this action on April 4, 2022. 

Motion as to individual defendants Artak Daldumyan and Goar Nersesyan is DENIED. 

Motion for Summary Adjudication:

ISSUE 1: THE FACTS DEMONSTRATE THE EXISTENCE OF THE LEASE AGREEMENT, S & N’S PERFORMANCE UNDER THE LEASE AGREEMENT, DEFENDANT’S BREACH, AND RESULTING DAMAGES. THEREFORE, S & N IS ENTITLED TO SUMMARY ADJUDICATION OF ITS CAUSE OF ACTION FOR BREACH OF CONTRACT.

Motion is DENIED. 

Plaintiff has failed to establish through evidence or reference in the separate statement the essential element of a cause of action for breach of contract that plaintiff performed under the subject Lease agreement or was excused from any non-performance.  Plaintiff has also failed to establish the essential element of damages, as the as the moving papers concede that plaintiff has failed to apply the security deposit to offset the damages claimed, evidently leaving this issue for resolution at a later time. [See Memorandum at, p. 12, stating that “defendants’ security deposit was in the amount of $6,500,” and that “said security deposit, which has not yet been applied, will be reduced against the judgment and attorney’s fees and costs entered by this Court.”].   Plaintiff has accordingly failed to meet its initial burden on this motion. 

   

Even if plaintiff had met the initial burden, shifting the burden to defendants to raise triable issues of material fact, defendants have raised triable issues with respect to the sum of damages alleged to be due.  Specifically, defendants submit evidence raising triable issues with respect to the security deposit, including deposition testimony from Anthony Maniscalchi, the property manager for plaintiff, who was deposed as the Person Most Qualified for plaintiff in this case, and testified in connection with the Tenant statement prepared by his staff on which plaintiff relies here in connection with the claim that the total sum due is $48,954.60, that such a total may not be correct.  [Daldumyan Decl., para. 17; Nersesyan Decl., para. 17; Additional Fact No. 15, and evidence cited; Euredjian Decl., para. 4, Ex. 3, Maniscalchi Depo., p. 102: 2-14].

Defendants also submit evidence which would support a finding that the damages sought by plaintiff in the motion are overstated because they include charges for utilities which are not contemplated by the Lease and had not been required to be paid in the past by plaintiff. [Additional Facts Nos. 6-10, and evidence cited; Daldumyan Decl., paras. 5, 9-12, Ex. 1; Nersesyan Decl., para. 9-12; Maniscalchi Depo, p.53:12-19]. 

There is also evidence submitted that the damages sought are overstated due to plaintiff applying an incorrect date that plaintiff vacated the premises in calculating those damages, calling into question the recoverability of several months of rental charges being claimed.  [UMF No. 2, and evidence cited; Additional Facts Nos. 11-13, and evidence cited; Daldumyan Decl., paras. 13-15; Nersesyan Decl., paras. 13-15].   

ISSUE 2: THE FACTS DEMONSTRATE THE EXISTENCE OF A LEASE AGREEMENT AND S & N’S PERFORMANCE UNDER THE LEASE AGREEMENT, DEFENDANT’S BREACH, AND RESULTING DAMAGES. THEREFORE, S & N IS ENTITLED TO SUMMARY ADJUDICATION OF ITS CAUSE OF ACTION FOR BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING.

Motion is DENIED. 

The motion as to this issue is based on the same Undisputed Facts and the same evidence relied upon in connection with the motion as to the first cause of action. 

The motion accordingly is denied on the same grounds and based on the same evidence cited in connection with ISSUE 1, above.  Plaintiff has failed to meet its initial burden of establishing plaintiff’s performance or of establishing the sum of damages due, and, even if that burden had been met, triable issues of material fact have been raised with respect to the correctness of the damages claimed.  

The Court also notes that the motion seeks adjudication based on the same alleged breach of express provisions of the Lease upon which the breach of contract cause of action is based, not a breach of any covenant implied in the contract distinct from an express term. Plaintiff has accordingly also failed to meet its initial burden of establishing the essential element of the breach of an implied covenant in connection with the Lease agreement. 

Defendants Artak Daldumyan and Goar Nersesyan’s Objections to Evidence are OVERRULED. 

 GIVEN THE CORONAVIRUS CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES

Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance.  Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear.  With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines.  In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask.  The Department D Judge and court staff will continue to wear face masks.  If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.