Judge Randolph M. Hammock, Case 22STCV19824 2023-04-28 Tentative Ruling

Plaintiffs Gloria Shulman Hughes and John E. Hughes, both individuals and co-Trustees of the Hughes Shulman Family Trust (the “Trust”), bring this unlawful detainer action against Defendants Living the Dream. The Trust is the sole owner of real property located at 1646 Blue Jay Way, Los Angeles, CA 90069, which includes a single-family residence. Plaintiffs allege that Defendant Living the Dream remains in possession of the property despite expiration of the lease term. Plaintiff also alleges that the Defendant subleased the property in violation of the lease agreement.

Plaintiffs’ Alternative Motion for Summary Adjudication is GRANTED as to the Tenth Affirmative Defense (Landlord/Tenant) and Twelfth Affirmative Defense (LARSO) only. It is DENIED as to any other issues, unless expressly stated otherwise.

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843. In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294. Thus, summary judgment is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist and the moving party is entitled to judgment as a matter of law. Code Civ. Proc. § 437c(c); Villa v. McFarren (1995) 35 Cal.App.4th 733, 741.

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. Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520. 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. A defendant has met its burden of showing that a cause of action has no merit if it demonstrates the absence of any single essential element of plaintiff’s case or a complete defense to plaintiff’s action. Code Civ. Proc. § 437c(o)(2); Bacon v. Southern Cal. Edison Co. (1997) 53 Cal.App.4th 854, 858. Once the defendant moving party has met the burden, the burden shifts to the plaintiff to show via specific facts that a triable issue of material facts exists as to a cause of action or a defense thereto. § 437c(o)(2).

In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)

This is an unlawful detainer action. Plaintiffs Gloria Shulman Hughes and John E. Hughes, Jr., as trustees of the Hughes Shulman Family Trust, seek recovery of the leased property and incidental unlawful detainer damages against Defendant Living the Dream. Defendant is alleged to be “a commercial property manager and short term, and long-term rental company.” (FAC ¶ 14.)

The Trust is the sole owner of the real property located at 1646 Blue Jay Way, Los Angeles, California 90069 (“the Property”). (Id. ¶ 3.) The Property is improved with a six-bedroom, six-bathroom, 6,339 square foot single family residence. (Id. ¶ 13.) On May 15, 2019, the Trust as landlord and Defendant as tenant entered into a residential lease for the entire residence. (Id. ¶ 21.) The Lease’s initial term was 2 years, with an Addendum No. 1 allowing for an option to extend the lease “upon landlord’s approval.” (Id. ¶ 25.) Defendant then sublet the property to Applied Plant Sciences and its officer and managing agent, Michael Straumietis, but “without the knowledge or written consent of Landlord,” and in violation of the Lease. (Id. ¶¶ 6, 7, 22.)

The parties subsequently modified the lease through an “Addendum” dated July 24, 2020, that included several lease amendments, such as extending the Lease for a third year and reducing rent during the second year. (Id. ¶¶ 16, 27.) As the end of the three-year lease term approached, Defendant sought to exercise the lease extension option. (Id. ¶ 29.) Plaintiffs contend they decided to decline the lease option due to “concern[s] about Tenant’s failure to keep the Property in good maintenance and repair,” among other things. (Id. ¶¶ 30, 31.) Despite this, Defendant purported to exercise the lease option and has remained in possession of the property. (Id. ¶¶ 32, 42.) Plaintiffs now “demand possession of the Premises from each Defendant because of the expiration of the fixed term of the Lease.” (Id. ¶ 43.)

As an initial matter, Defendant contends the property here is subject to the Los Angeles Rent Stabilization Ordinance (“LARSO”). Among other things, LARSO “limits the substantive grounds upon which a landlord may bring an action to repossess a rent-controlled unit in Los Angeles.” (Yanez v. Vasquez (2021) 65 Cal. App. 5th Supp. 1, 11.) The Ordinance “applies to any rental unit in a building for which a certificate of occupancy was issued before October 1978, unless it falls within an enumerated exemption.” (§§ 151.02, 151.04(A), 151.09(A) & (E).) Thus, if a property is governed by LARSO, “[a] landlord may bring an action to recover possession of a rental unit only upon” one of the LARSO's enumerated grounds. (LAMC § 151.09(A).) Violations of the Ordinance may be raised as an affirmative defense in an unlawful detainer action. (See § 151.09(E), (F), & (H).)

Notably, the expiration of the lease term is not one of the enumerated grounds. Thus, if a property is subject to LARSO, and if the attempted eviction was based solely on expiration of the lease term, the unlawful detainer action must fail as a matter of law. Defendant contends that such is the case here.

As relevant here, however, LARSO exempts single-family dwellings. (§ 151.02.) Thus, as an initial matter, this court must determine whether the Property at issue fits within LARSO’s single-family dwelling exemption. For ease, this court incorporates another court’s discussion of the relevant “interlocking definitions” in LARSO here:

“Rental unit” is broadly defined to include “[a]ll dwelling units, ... guest rooms, and suites, as defined in Section 12.03 of [the Los Angeles Municipal Code] (section 12.03), and all housing accommodations as defined in Government Code Section 12927 [section 12927] ... rented or offered for rent for living or dwelling purposes, the land and buildings appurtenant thereto, and all ... privileges, ... and facilities supplied in connection with the use or occupancy thereof.” (§ 151.02.) A “housing accommodation” is “any building, structure, or portion thereof that is occupied as, or intended for occupancy as, a residence by one or more families.” (Gov. Code, § 12927, subd. (d).)

The Ordinance creates the so–called single–family dwelling exemption by excepting from the definition of rental unit: “Dwellings, one family, except where two or more dwelling units are located on the same parcel.” (§ 151.02.) The definitions of relevant terms for application of the exemption are found in section 12.03: (1) a “Dwelling” is “[a]ny residential building, other than an Apartment House, Hotel or Apartment Hotel[;]” (2) a “Dwelling Unit” is a “group of two or more rooms, one of which is a kitchen, designed for occupancy by one family for living and sleeping purposes[;]” (3) a “Dwelling, one–family” (or single–family dwelling) is a “detached dwelling containing only one dwelling unit[;]” and (4) a “Family” is defined as “[o]ne or more persons living together in a dwelling unit, with common access to, and common use of all living, kitchen, and eating areas within the dwelling unit.”

Combining these interlocking definitions, the scope of the exemption for single–family dwellings applies only if the structure: (1) is a “Dwelling[ ], one family, except where two or more dwelling units are located on the same parcel” (§ 151.02),” and (2) is “detached” and contains “only one dwelling unit.” (§ 12.03). For purposes of the exemption, a “dwelling unit” means “[a] group of two or more rooms, one of which is a kitchen, designed for occupancy by one family for living and sleeping purposes,” and “family” means “[o]ne or more persons living together in a dwelling unit, with common access to, and common use of all living, kitchen, and eating areas within the dwelling unit.” (§ 12.03.)

The property at issue consists of a main residence and what Defendant calls two “guest houses.” The guest houses are physically attached to the main unit but cannot be accessed from the interior of the main unit and vice versa. (SSUMF 6.) Guest house 1 contains, among other things, a bedroom, bathroom, dining area, living area, and a full chef’s kitchen (SSUMF 7). Guest House 2 is a “studio apartment”, and contains a bathroom, kitchen, dining area, and combination living area/bedroom. (SSUMF 8). More recently, Defendant sublet the property to five different individuals: three lived in the main residence, one in Guest House 1, and one in Guest House 2. (SSUMF 9.) Thus, Defendant contends the property contains three separate “dwelling units,” and thus cannot meet the single-family dwelling exemption.

Plaintiff counters that the “guest houses” are “Accessory Living Quarters.” (Shulman Decl. ¶ 8.) And although they are not accessible from the main unit, that was the result of the topography of the land, and “not because [Plaintiffs’] wanted these areas for separate use.” (Id.) Plaintiffs contend these “additions to the house were designed and intended to serve the main living quarters.” (Id.) When Plaintiffs resided at the property, they treated the property as a single residence. (Shulman Decl. ¶ 8.) While the Plaintiffs lived there, they “regularly used and had complete and unfettered access to the entire living spaces of the Property as the design intended.” (Id.) Plaintiffs leased the entire property, including all additional “units,” to Defendant. For much of the lease period, Defendant sublet the property to a single tenant. Plaintiffs note the lease addendum further stated that Defendant “is aware that the zoning property is R-1 for residential area.” (Id. ¶ 3.)

It is also important to consider the character of the property in the context of the lease between the parties. The lease here is not the typical landlord-tenant arrangement as likely contemplated by LARSO. That is because Defendant, as lessee, was not using the property as its dwelling or residence. Instead, Defendant is a property management company that entered into the lease with Plaintiffs for the purpose of later subletting the property to its “Clienteles.” (Shulman Decl., Exh. 6 [Addendum].)

Pursuant to that arrangement, only a single subtenant, APS, resided at the property for most of the lease term, at a rent of around $62,500.00 per month. (SSUMF 31.) That rent covered the entire property. It must also be considered that it is Defendant—an intermediary who merely sublets the property to third party tenant—and not that third party who is attempting to invoke the LARSO protections.

Thus, considering the lease pertained to the property as a whole, and that one tenant resided at the property, the undisputed evidence establishes the property fits within the single-family dwelling exemption to LARSO. (§ 151.02.) The accessory units were not “designed for occupancy by one family for living and sleeping purposes,” but rather, to be a part of the main living unit. (Chun, supra, 34 Cal. App. 5th at 816–17.) The property therefore is—and was leased to Defendant to be used as—a single family dwelling.

This conclusion is also consistent with the legislative intent of LARSO. LARSO was “born out of the shortage of affordable housing, especially for low-income individuals, in Los Angeles.” (Bos. LLC v. Juarez (2016) 245 Cal. App. 4th 75, 84 [citing L.A. Mun. Code, § 151.01].) “It seeks to ‘safeguard tenants from excessive rent increases’ by imposing certain statutory limitations and obligations on landlords which landlords would otherwise not be subject to under normal freedom to contract principles.” (Id.)

A court’s “fundamental task in construing a statute is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute.” (Day v. City of Fontana (2001) 25 Cal.4th 268, 272.) “ ‘Rules of statutory construction require courts to construe a statute to promote its purpose, render it reasonable, and avoid absurd consequences.’ [Citation.]” (Ford v. Gouin (1992) 3 Cal.4th 339, 348.) This court agrees with Plaintiffs that interpreting the Ordinance in the manner advanced by Defendant might lead to an absurd result. [FN 1] Moreover, affording protections to a luxury leasing company does nothing to effectuate the shortage of affordable housing for low-income individuals.

Defendant further contends that Plaintiffs are barred from claiming an exemption from the statute because they did not register the property or file an annual declaration to claim an exclusion from LARSO. Section 151.05(G) of LARSO provides:

“The landlord of a rental unit which is not registered with the Department shall provide the Department, on the form approved by the Department and accompanied by supporting documentation, a written declaration stating the facts upon which the landlord bases a claim of exclusion from the provisions of this Chapter. If a landlord fails to submit a written declaration and supporting documents by the last day of the month of January of each year, the unit shall be deemed to be subject to the provisions of this Chapter and any fees collected shall be non-refundable…” (LAMC 151.05(G).)

However, as Plaintiffs correctly counter, this section only applies to landlords of a “rental unit.” And as already discussed, the definition of “rental unit” exempts “Dwellings, one family.” (§ 151.02.) Thus, because the property is a single-family dwelling, it need not comply with the registration requirements.

The language used in the Ordinance is also notable and supports this interpretation. The Ordinance states that the definition of “rental unit” “shall not include” 13 different enumerated categories, and it refers to these categories as “exemptions.” (LAMC 151.02, “Rental Units,” 1-13.) But section 151.05(G) requires a written declaration when the landlord is making a “claim of exclusion” from the Ordinance—not an exemption. (Roy v. Superior Court (2011) 198 Cal.App.4th 1337, 1352 [“‘[w]hen the Legislature uses different words as part of the same statutory scheme, those words are presumed to have different meanings’ ”].)

Thus, because the property falls within the single-family dwelling exemption, it is not a “rental unit,” and therefore Plaintiffs need not register or file a declaration basing a claim of exclusion from the statute.

Accordingly, this court finds the property is not subject to LARSO. Thus, Plaintiffs are not limited to recover possession on only those grounds specifically enumerated in LARSO. (LAMC § 151.09(A).) Plaintiffs can therefore recover possession based on expiration of the lease term alone, assuming valid grounds exist to decline the extension option. That discussion follows.

Tenant shall have 1 option to extend the lease upon landlord’s approval. The option shall be for (2) two year [sic]. The notice to exercise the option must be made at least 60 days before the expiration of the lease. The option is only permitted if tenant has been in compliance with all applicable rules/laws/ordinances. If landlord decides to extend, the leasing price will increase by 3% each year.

Defendant contends that this provision did not and could not give Plaintiffs unfettered discretion to decline the option. Defendant contends that interpretation would render the option “nugatory.” (MSJ 21: 25.)

To an extent, this court agrees. It is necessary to give the option effect. “Lease options give tenants legal rights to exercise contractual rights to remain on the premises beyond the original lease term. These rights may be important factors in inducing tenants to enter into a lease.” (Robert T. Miner, M.D., Inc. v. Tustin Ave. Investors (2004) 116 Cal. App. 4th 264, 273.) The option would lose all effect if Plaintiffs could simply decline the option for any reason.

It also important to consider that the parties had an implied duty to act in good faith. “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Carma Devs. (Cal.), Inc. v. Marathon Dev. California, Inc. (1992) 2 Cal. 4th 342, 371; Schweiso v. Williams (1984) 150 Cal. App. 3d 883, 886 [noting there is “no significant difference between a residential lease and a commercial lease as to the obligations of good faith and commercial reasonableness”].) And as relevant here, “[t]he covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith.” (Id.)

It is with this backdrop that the court interprets the terms of the lease option. Here, if the tenant was not “in compliance with all applicable rules/laws/ordinances,” then Plaintiff could have declined an extension on those grounds. (Plaintiffs’ Exh. 2, ¶ 4.) Of course, even absent that provision expressly allowing it, those grounds would have been good faith reasons not to extent the lease.

Thus, there is no reason to include that provision at all, unless the parties intended that those would be the only grounds for declining the extension option. Put differently, reading each sentence of the lease option together indicates that Plaintiff had discretion to decline the extension only if Defendant failed to comply with all applicable rules, laws, and ordinances. On the other hand, if the parties intended that Plaintiffs could decline the extension for any reason at all—even those unrelated to violation of rules, laws, or ordinances—then there would be no reason to expressly state that Defendant had to be “in compliance with all applicable rules/laws/ordinances.” That provision would lose any force or meaning. (See Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1507 [courts should strive to “give effect to all of a contract's terms, and to avoid interpretations that render any portion superfluous, void or inexplicable.”].)

To illustrate, consider the option without that language. In that case, the option (and ground for declining the option) potentially becomes broader. It would allow the Plaintiffs to decline the lease option for any reason, so long as they do so in good faith. Perhaps Plaintiffs could decline the extension option in order to retake the property as their personal residence. But by adding the requirement that the “option is only permitted if tenant has been in compliance with all applicable rules/laws/ordinances,” that option must necessarily narrow the reasons that Plaintiffs can decline the option. Therefore, this court interprets the lease option as granting Plaintiffs discretion to decline the option if, and only if, Defendant was not in compliance with all applicable rules, laws, and ordinances.

Thus, the issues become two-fold: First, did Defendant properly exercise the lease option? And second, assuming it did, was Defendant in compliance with all applicable rules, laws, and ordinances? That discussion follows.

Defendant contends it “properly, timely and effectively exercised its Option” to extend the term of the Lease through May 31, 2024. (MSJ 20: 18-19.) To exercise the option, Defendant had to give notice “at least 60 days before the expiration of the lease.” (Plaintiffs’ Exh. 2, ¶ 4.) Under the 2020 Addendum to the lease, the lease term ran until June 1, 2022. (SSUMF 28.) Thus, Defendant had to give notice to Plaintiffs that it was exercising the option at least 60-days before that date.

Defendant presents evidence that its representative, Shalom “Shay” Gozlan, informed Gloria Hughes on February 15, 2022, by phone call “that LTD was exercising its Option under the terms of the Lease, and that we were staying for another two years.” (SSUMF 30; Gozlan Decl. 8.) “Gloria responded that it was fine that LTD was exercising its Option, and that she had no problem with LTD staying for two more years. She then told LTD, however, that she was aware that LTD’s subtenant, APS, was paying $62,500 per month, which she called “outrageous”. She said that since LTD is getting $62,500 per month, LTD was going to need to pay $45,000 per month during the Option period.” (SSUMF 31.)

In response, Defendant noted that an increase to $45,000.00 would exceed that provided in the lease option, which stated “the leasing price will increase by 3% each year.” (SSUMF 33.) However, because Defendant “wanted a good relationship” with Gloria and her husband, Defendant agreed to a rent adjustment of $40,000.00 per month. (SSUMF 33.) Gloria countered that Defendant could “afford to pay $45,000 per month” since Defendant was receiving significantly more than that from its subtenant. (SSUMF 34.) The call apparently ended without an agreement. (SSUMF 35.)

The next day, on February 16, 2022, Defendant emailed Plaintiff an offer “whereby LTD would agree to enter into a lease amendment providing for a monthly rent of $40,000 per month and obligating LTD to hire Plaintiffs’ gardener at $600 per month, and to send flowers to Plaintiffs’ offices on a weekly basis.” (SSUMF 36.) Plaintiffs rejected this offer.

On February 24, 2022, Defendant emailed Plaintiffs with the subject heading “Lease Extension – 1646 Blue Jay Way, Los Angeles CA 90069.” (SSUMF 38.) That email stated that Defendant was “exercising [its] two year Option under the terms of the Lease” and “look[ed] forward to another two years of a productive working relationship.” (Id.) The email attached a letter also confirming the extension. (SSUMF 39, 40.) The letter further stated: “Pursuant to said Section 4 of the 2019 Addendum, the monthly rental rate shall be $36,050 for the months June 2022 through May 2023 and $37,131.50 for the months June 2023 through May 2024.” (SSUMF 41.)

Finding the undisputed evidence demonstrates that Defendant attempted to exercise the lease option, the issue becomes whether Plaintiffs could properly decline the extension option because Defendant was not in compliance with “all applicable rules/laws/ordinances.” Defendant contends it was in compliance with all requisite rules, laws, and ordinances both during the lease and at the time it sought to exercise the option. Plaintiffs counter Defendant was not, and thus, that they had good cause to decline the extension. This appears to present a classic question of material fact, as discussed further.

Defendant presents evidence that on March 18, 2022, Plaintiffs informed Defendant by letter from counsel that they would not approve the extension. (SSUMF 43.) The letter stated that the lease would “terminate on June 1, 2022, unless extended by the mutual agreement of the parties upon terms that are mutually acceptable.” (SSUMF 44.) The letter also asserted seventeen purported breaches of the lease, including “[f]ailure to seal the limestone at the front of the Residence…,” “[f]ailure to timely repair pipe blockage…,” and “[f]ailure to timely maintain and repair the waterfall feature…” (SSUMF 45; Jablon Decl. Exh. 8.)

In their Cross-motion for summary judgment, Plaintiffs provide numerous examples of acts or omissions by Defendant that they contend constitute a breach of the lease or option. Plaintiffs assert they leased the property fully furnished. (Shulman Decl. ¶ 15.) The parties agreed that Defendant would prepare an “inventory list” of all furnishings at the property, and that both would “sign off on the inventory list prior to keys being given to the tenant.” (See P’s Exh. 6, Addendum No. 1”, ¶ 2.) Plaintiffs contend Defendant provided them with an incomplete or inaccurate inventory list. (Shulman Decl. ¶¶ 16, 21) Defendant also allegedly took furnishings from the house and used them in its other properties, resulting in unaccounted-for furniture. (Id. ¶ 18.)

Also as a term of the lease, Defendant agreed to “remove the exterior waterproofing memb[rane] that was installed incorrectly, and will apply a new water proofing system” and “run it by the landlord for approval.” (See Exhibit “6”, Addendum 1.) Plaintiffs contend Defendant never sought their approval, and failed to properly seal or otherwise maintain the decking. (Shulman Decl. ¶ 25.) As a result, the Property’s stone and decking needed costly repairs. (Id. ¶¶ 28-29.)

Similarly, Plaintiffs discovered extensive damage to the landscaping at the property. (Id. ¶¶ 26, 30.) Plaintiffs also raised concerns over Defendant’s failures to care for or repair the pool, roof, and waste system, among other things. (Id. ¶¶ 38, 39.) Gloria Shulman remarked that the property had been so poorly neglected by Defendant that it “look[ed] like a slum.” (Id. ¶¶ 15, 26, 34.)

In March or April of 2022, Plaintiffs learned Defendants had made alterations without their consent, including installation of a compressor unit for a new HVAC, an extensive camera surveillance system, and installation of petrol tanks—the latter which was done without any permit from the City of Los Angeles. (Shulman Decl. ¶ 44.)

This court must “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.) Considering the above, Plaintiff has established a triable issue of material fact as to whether Defendant complied with all applicable rules, laws, or ordinances. Thus, there is a triable issue as to whether Plaintiffs could validly decline the extension option in good-faith, consistent with the language of the extension option.

As the issues involved in Plaintiffs’ motion for summary judgment are largely the same as those in Defendant’s motion, the court incorporates its ruling on Defendant’s motion by reference in full here.

To establish an unlawful detainer based on expiration of the lease term, Plaintiffs must prove (1) that they own the property; (2) that they leased the property to Defendant for certain period; (3) that they did not give Defendant permission to continue occupying the property after the lease term ended; and (4) that Defendant is still occupying the property. (CACI 4301.)

Plaintiffs contend they had the right to decline the lease extension option. However, considering the lease option as a whole, the option gave Plaintiffs discretion to decline the extension option if, and only if, Defendant was not in compliance with “all applicable rules, laws, and ordinances.” Moreover, any exercise of that discretion had to be in good faith. (See Carma Devs. (Cal.), Inc. v. Marathon Dev. California, Inc. (1992) 2 Cal. 4th 342, 371 [“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”].)

Plaintiffs then contend that no jury could conclude that they lacked a good faith basis to decline the extension. As discussed earlier and in the Ruling on Defendant’s motion, the real question is whether a jury can conclude that Defendant was not in compliance with all applicable rules, laws, and ordinances—a fact which, if accepted, would permit Plaintiffs to decline the lease extension.

In opposition, Defendant presents evidence that Plaintiffs were, in fact, open to extending the lease, but wanted more money to do so. Indeed, the fact that Plaintiffs were potentially willing to extend the lease in exchange for a rent-increase cuts against a finding that Defendant had violated the lease—at least in any substantial or material way. (See, Malka Decl. ¶ 21; Gozlan Decl. ¶ 14).

Defendant also presents evidence that Plaintiffs had approached Defendant’s Subtenant, APS, about entering into a separate lease for the property. By doing so, Plaintiff could cut out the middleman (Defendant) and lease the property to APS directly, presumably to the benefit of both parties. Plaintiffs dispute this ever occurred. (Shulman Decl. ¶¶ 57, 58.)

These facts, if credited by a trier of fact, could create a reasonable question as to Plaintiffs’ underlying motivation to deny a lease extension, and moreover, whether these multitudes of grievances were merely pretextual and in bad faith. Hence, there exists triable issues of disputed material fact as to whether Plaintiffs properly declined the lease option.

1. ISSUE NO. 1: As a matter of law, the implied covenant of good faith and fair dealing does not apply to Plaintiffs’ express right to refrain from extending the Lease, and therefore the fixed lease terminated at the end of its term.

As already discussed herein, this court has determined that the lease agreement and accompanying option included an implied covenant of good faith and fair dealing. “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Carma Developers (Cal.), Inc., supra, 2 Cal.4th at 371.)

Code of Civil Procedure Section 437c, subdivision (f)(1) provides that “[a] party may move for summary adjudication as to…one or more issues of duty, if the party contends…that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” [Emphasis added.] Contrary to Defendant’s contention, this court sees no reason why the “duty of good faith and fair dealing” cannot be properly adjudicated as an “issue of duty.” (Carma Developers (Cal.), Inc., supra, 2 Cal.4th at 371; § 437c(f)(1).)

Be that as it may, this “issue” is essentially duplicative of issues already resolved. As noted, there is a triable issue of material fact as to whether Plaintiffs could reject Defendant’s timely attempt to exercise the lease extension option. This necessarily implicates the implied covenant of good faith and fair dealing. Nor can this court treat the implied covenant as an affirmative defense, given that it is already implied in the contract.

Thus, in view of this court’s finding that there is a triable issue of material fact as to whether Plaintiffs properly declined the lease option, Plaintiffs’ motion for summary adjudication of this issue is MOOT.

2. ISSUE NO. 2: As a matter of law, the Lease between the parties expired after the termination of a fixed term and was not extended as no reasonable jury could conclude that Plaintiffs lacked a legal basis to refrain from extending the Lease.

Plaintiff next moves for summary adjudication of the Fifth Affirmative Defense, which asserts that “Plaintiffs’ claims are barred due to the Tenant Protection Act of 2019.” (Answer to FAC.) Plaintiffs’ only argument is that the fifth affirmative defense of the “Tenant Protection Act of 2019” fails because this court has ruled “as a matter of law” that it “do[es] not apply to the Property.” (MSJ 20: 12.)

When ruling on Defendant’s demurrer to the First Amended Complaint, this court found that Defendant had failed to meet its burden as the moving party to establish that the TPA, and not LARSO, governed the Property. (See Ruling on Demurrer to FAC, 03/02/2023.) The court continued with its analysis by “assuming” that LARSO applied instead. (Id., p. 4.) Plaintiff contends that conclusion is dispositive of the issue. Not so.

“A ruling on a demurrer is an attack on the pleadings, and is not binding on subsequent summary judgment motions.” (Aerojet-Gen. Corp. v. Com. Union Ins. Co. (2007) 155 Cal. App. 4th 132, 139.) “ ‘[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.’ [Citation.]” (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1463.)

Here, the moving party, by failing to offer any analysis, has failed to meet its burden to establish that the affirmative defense lacks merit. “[F]ailure to offer reasoned analysis of [an] issue constitutes a waiver.” (Trinity Risk Management, LLC v. Simplified Labor Staffing Solutions, Inc. (2021) 59 Cal.App.5th 995, 1009; see also In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 [“[t]he absence of cogent legal argument or citation to authority allows this court to treat the contentions as waived.”])

Plaintiffs presents evidence they “have not accepted any payment of rent for the Property from Living the Dream for any period after the end of the fixed term of the Lease, June 1, 2022.” (Shulman Decl. ¶ 53.) When Plaintiffs discovered that Defendants wired funds to the Trust bank account on June 7, 2023, they immediately took action to return the funds by cashier’s check. (Id. ¶¶ 53, 54.) The next month, Defendant again wired funds to the Trust bank account. (Id. ¶ 55.) And once again, Plaintiffs immediately returned the funds by cashier’s check. (Id.)

In opposition, Defendant does not dispute this version of events. It would therefore appear undisputed that Plaintiffs did not accept rent following expiration of the lease term, and therefore did not commit a waiver on that ground.

However, Defendant notes there may exist additional waiver issues, including “Plaintiffs purported reasons for refusing to accept the exercise of the Option,” and “Plaintiffs acceptance of rent after service of the Notices to Cure or Quit in April, 2022, to the extent Plaintiffs sought to evict based on the same.” (Opp. 25: 3-6.) These remain largely undiscussed in the briefs.

Because a waiver defense may still exist in these scenarios, and because a motion for summary adjudication should be granted only if it completely disposes of an affirmative defense (§ 437(f)(2)), Plaintiffs’ motion to summarily adjudicate the waiver affirmative defense fails.

Defendant asserted by its Tenth Affirmative Defense that “a landlord/tenant relationship does not exist between Plaintiff and Defendant, such that Plaintiff lacks standing.” (Answer to FAC, 03/16/2023.)

Plaintiffs present evidence that the Trust owns the Property, and as owner of the Property, the Trust through its trustees have the right to recover possession under the Lease. (Shulman Decl. ¶ 3.) The Lease is between the Trust and Living the Dream. (Shulman Decl. Exh. 5.)

Defendant does not appear to address these points in opposition, and it therefore appears undisputed that a landlord/tenant relationship exists between Plaintiffs and Defendant by operation of the lease agreement.

As discussed more fully in Defendant’s motion for summary judgment, this court finds, as a matter of law, that the Property falls within the single-family dwelling exemption to LARSO. (§ 151.02.) The Property is therefore exempt from LARSO.

Judge of the Superior Court

FN 1 - For example, a tenant could unilaterally decide to turn a single-family home into multiple residences in an attempt to make the property subject to LARSO. The tenant would then try to utilize all of the protections of LARSO, vis-à-vis the landlord. This appears to what has recently happened in this case.