Judge: Salvatore Sirna, Case: 21PSCV00654, Date: 2022-12-15 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling.

Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 620-3071 prior to 8:30 a.m. the morning of the hearing.

Case Number: 21PSCV00654    Hearing Date: December 15, 2022    Dept: G

Cross-Defendants Weiss Industrial Holdings, LLC, Art Weiss, Inc., Matthew A. Sawyer, and Wendy A. Sawyer’s Demurrer to Defendants/Cross-Complainants’ Second Amended Cross-Complaint

Respondent: Defendants/Cross-Complainants Mudita Health and Wellness, Inc. and Orlander Earl Robinson

Cross-Defendants Weiss Industrial Holdings, LLC, Art Weiss, Inc., Matthew A. Sawyer, and Wendy A. Sawyer’s Motion to Strike Defendants/Cross-Complainants’ Second Amended Cross-Complaint

Respondent: Defendants/Cross-Complainants Mudita Health and Wellness, Inc. and Orlander Earl Robinson

TENTATIVE RULING

Cross-Defendants Weiss Industrial Holdings, LLC, Art Weiss, Inc., Matthew A. Sawyer, and Wendy A. Sawyer’s Demurrer to Defendants/Cross-Complainants’ Second Amended Cross-Complaint is OVERRULED IN PART, SUSTAINED IN PART with 30 days leave to amend.

Cross-Defendants Weiss Industrial Holdings, LLC, Art Weiss, Inc., Matthew A. Sawyer, and Wendy A. Sawyer’s Motion to Strike Defendants/Cross-Complainants’ Second Amended Cross-Complaint is deemed MOOT.

BACKGROUND

This is an action arising from the alleged breach of a lease agreement. On March 6, 2017, Weiss Industrial Holdings, LLC (Weiss) entered into a two-year written lease agreement with Mudita Health and Wellness, Inc. (Mudita) in which Mudita agreed to lease Unit B in a Baldwin Park property from Weiss for $11,050 per month. Mudita’s principal, Orlander Earl Robinson (Robinson) agreed to be a guarantor for the lease agreement. In December 2017, Mudita and Robinson executed a lease for Unit A in the same property from Weiss with Mudita agreeing to move in on February 1, 2018.

Commencing on December 1, 2018, Weiss claims Mudita failed to make rental payments, failed to pay their share of the common area operating expenses, and abandoned the property before expiration of the lease. Weiss alleges total damages of $171,677.86, including $55,250 in unpaid rent, $58,510.81 in repairs, $672.95 in security deposits, $79,344.10 in common area operating expenses, and minus the $22,100 security deposit. Mudita claims Weiss never let Mudita take possession of Unit A despite Mudita making payments of $142,249.25 plus a deposit of $32,826.75 from February to December 2018. After an electrical fire in Unit A that destroyed the electrical systems for the property, Mudita alleges Weiss refused to provide temporary generators resulting in a loss of Mudita’s cannabis crops and total business losses of $1,636,425. Mudita then argues it had to abandon the property as the purposes of the lease had been frustrated.

On August 11, 2021, Weiss filed a complaint against Mudita, Robinson, and Does 1-10, alleging (1) common counts, (2) breach of contract, (3) breach of written guaranty, and (4) unjust enrichment. On September 24, default was entered against Mudita and Robinson. On January 5, 2022, the court vacated the entries of default.

On February 9, 2022, Mudita and Robinson (collectively, Cross-Complainants) filed a cross-complaint against Weiss, Art Weiss, Inc. (Art Weiss), Matthew A. Sawyer (Matthew), Wendy A. Sawyer (Wendy Sawyer), and Roes 1-50 (collectively, Cross-Defendants), alleging the following causes of action: (1) fraud, (2) negligence, (3) unfair business practices, (4) breach of contract, (5) breach of contract, (6) breach of the covenant of good faith and fair dealing, and (7) breach of the covenant of good faith and fair dealing. On June 8, the court sustained Cross-Defendants’ demurrer to the cross-complaint.

On June 23, 2022, Cross-Complainants filed a First Amended Cross-Complaint (FACC) against the same defendants alleging the same causes of action. On September 15, the court sustained Cross-Defendants’ demurrer to the FACC in part and overruled in part.

On October 6, 2022, Cross-Complainants filed a Second Amended Cross-Complaint (SACC) against the same defendants, minus Wendy Sawyer, alleging the same causes of action. On November 7, Cross-Defendants filed the present demurrer and motion to strike. After the SACC was filed on October 26, Cross-Defendants’ counsel emailed Cross-Complainants counsel with grounds for a demurrer. On October 28, counsel meet telephonically and could not come to an agreement on the SACC.

A hearing is set for December 15 and a case management conference is set for January 27, 2023.

REQUEST FOR JUDICIAL NOTICE

The court grants Cross-Defendants’ request for judicial notice of previous filings and records in this case. (Evid. Code, § 452, subd. (d).) The court also grants the request for judicial notice of the California Secretary of State’s records, including a certificate of status for Mudita and a statement of information for Weiss. (Evid. Code, § 452, subd. (c); Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483-1484 [judicial notice of certificates of status and statements of information proper when reviewing demurrer as “documents reflecting official acts of the executive department of the State of California”].)  

LEGAL STANDARD

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.) 

ANALYSIS

Wendy Sawyer specially demurs to the entire SACC. The remaining Cross-Defendants generally demur to the SACC as to Mudita and demur to the second cause of action (negligence), fourth and fifth causes of action (breach of contract), and seventh cause of action (breach of covenant of good faith and fair dealing). For the following reasons, the court OVERRULES Wendy Sawyer’s special demurrer, Cross-Defendants’ demurrer to Mudita, and Cross-Defendants’ demurrer to the fifth and seventh causes of action, but SUSTAINS Cross-Defendants’ demurrer to the second and fourth causes of action.

Special Demurrer

Wendy Sawyer argues the SACC is uncertain, ambiguous, and unintelligible because it does not allege any facts against Wendy Sawyer. The court disagrees. After the court previously sustained Wendy Sawyer’s demurrer to the FACC, Wendy Sawyer was omitted as a named cross-defendant in the SACC. Thus, Wendy Sawyer is no longer a party to the SACC. (Tracy Press, Inc. v. Superior Court (2008) 164 Cal.App.4th 1290, 1297 [“Failing to name an individual as a real party in interest in the pleading . . . merely defines the parties, leaving out the individual not named.”]; see also Ingram v. Superior Court (1979) 98 Cal.App.3d 483, 490.)

Accordingly, the court OVERRULES Wendy Sawyer’s special demurrer.

Mudita’s Capacity to Sue

Cross-Defendants generally demur to the SACC as to Mudita, contending Mudita lacks standing to bring suit for business losses. The court disagrees.

As an initial matter, Cross-Complainants maintain the court should not consider Cross-Defendants arguments as they were not raised in past demurrers. The court finds no merit to this argument as “a party is within its rights to successively demur to a cause of action in an amended pleading notwithstanding a prior unsuccessful demurrer to that same cause of action. [Citation.]” (Carlton v. Dr. Pepper Snapple Group, Inc. (2014) 228 Cal.App.4th 1200, 1211, quoting Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1036.)  

Pursuant to Revenue and Taxation Code section 23301, “[t]he ‘corporate powers, rights and privileges’ of any domestic corporate taxpayer may be suspended for failure to pay certain taxes and penalties.” (Center for Self-Improvement & Community Development v. Lennar Corporation (2009) 173 Cal.App.4th 1543, 1552, quoting Rev. & Tax. Code, § 23301.) “[C]ontracts entered into during the time of suspension are voidable by the other party or parties through legal action.” (Ibid; see Rev. & Tax. Code, §§ 23304.1, subd. (a), 23304.5, 23305.1, subd. (a).) “However, a suspension of corporate powers only affects a corporation's capacity to sue, not its standing.” (Rubinstein v. Fakheri (2020) 49 Cal.App.5th 797, 806.) Once a corporation is restored to good standing, “the revival of corporate powers has the effect of validating the earlier acts and permitting the corporation to proceed with the action.” (Peacock Hill Assn. v. Peacock Lagoon Constr. Co. (1972) 8 Cal.3d 369, 373.)

“A defense based on a suspended corporation's lack of capacity to sue ‘is a plea in abatement which is not favored in law, is to be strictly construed and must be supported by facts warranting the abatement at the time of the plea.’” (Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304, 312, quoting Traub Co. v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 370.) “The objection may be raised by demurrer when the ground for objection appears on the face of the complaint or from any matter that is subject to judicial notice; otherwise, the objection may be raised by answer.” (The Rossdale Group, LLC v. Walton (2017) 12 Cal.App.5th 936, 943.)

In this case, Cross-Defendants raised this defense in their first demurrer, as well as their second motion to strike and the present demurrer. In addition, the court has taken judicial notice of a Certificate of Status from the California Secretary of State, dated January 10, 2022, that states Mudita has been suspended since August 28, 2018. (Motion, Ex. 3.) However, the cross-complaint, FACC, and SACC all allege that Mudita is a corporation in good standing and were submitted after Cross-Defendants obtained the Certificate of Status. (Cross-Complaint, ¶ 5; FACC, ¶ 5; SACC, ¶ 5.) Thus, because the court accepts as true the facts alleged in the complaint and because a “defect must clearly and affirmatively appear on the face of the complaint,” the court does not find Mudita lacks the capacity to bring this action. (Cf. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)

Accordingly, the court OVERRULES Cross-Defendants’ general demurrer to Mudita.

Negligence (Second Cause of Action)

Cross-Defendants argue Cross-Complainants fail to state a claim for negligence. The court agrees.

As an initial matter, Cross-Defendants contend Cross-Complainants have engaged in sham pleading because the SACC alters facts alleged in previous cross-complaints. A party engages in sham pleading when “a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings.” (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384 (Owens).) For example, in Owens, the original complaint had alleged the plaintiff was injured in a street near the supermarket and in the first amended complaint, plaintiff changed the location of injury and claimed it occurred on the supermarket’s premises. (Ibid.)

However, that is not the case here. Cross-Defendants claim Cross-Complaints changed the location of the “ill-managed electrical system.” In the SACC, Cross-Complainants allege “[a]s to Unit B, Weiss Industrial, Art Weiss, and Matthew Sawyer represented that the electrical system was in good working order for the entirety of the property . . . Weiss Industrial, Art Weiss, and Matthew Sawyer represented the same as to Unit A[.]” (SACC, ¶ 22.) Cross-Complainants then allege the fire in Unit A was caused by Cross-Defendants’ negligence in “maintaining the electrical systems throughout all of 5020 Heintz, including the common areas, led to the fire.” (SACC, ¶ 34.) Cross-Defendants contrast these allegations to Cross-Complainants prior pleadings, which alleged “As to Unit B, Weiss Industrial and Matthew Sawyer represented that the electrical system was in good working order . . . Matthew Sawyer represented the same as to Unit A[.]” (Cross-Complaint, ¶ 22; FACC, ¶ 22.)

The court finds the allegations pled in the SACC are not inconsistent with the original cross-complaint or FACC. Unlike Owens, this not a case where the injury can be fixed to one location and Cross-Complainants do not change their pleadings to claim the electrical fire did not occur in Unit A. Rather, they add additional facts to argue Cross-Defendants’ failure to maintain electrical systems in the common areas was a cause of the electrical fire in Unit A. In fact, the prior complaints did allege Cross-Defendants “had a duty to maintain electrical standards at the property” which would encompass Unit A, Unit B, and the common areas. (Cross-Complaint, ¶ 33; FACC, ¶ 34.)

The court then addresses where Cross-Complainants stated a claim for negligence. The basic of elements of a negligence claim are (1) duty, (2) breach, (3) causation, and (3) damages. (Leslie G. v. Perry & Associates (1996) 43 Cal.App.4th 472, 480.) Cross-Defendants maintain the SACC fails to establish Cross-Defendants owed a duty to Cross-Complainants. Cross-Defendants point to Section 7.1 of the lease agreement, arguing it requires the tenant to “keep the Premises [and] Utility Installations . . . in good order, condition and repair.” That same clause also defines “Utility Installations” as those “intended for Lessee’s exclusive use, no matter where located.” Section 7.3(b) prohibits tenants from making “any Alterations or Utility Installations to the Premises without Lessor’s prior written consent.”

Cross-Complainants allege the lease agreement created a duty for the Cross-Defendants to maintain electrical standards at the property by placing common areas under their “exclusive control and management” per Section 2.9, giving sole right to Cross-Defendants to make changes to utilities under Section 2.10 to Cross-Defendants, to maintain and repair common areas per Section 4.2, and to maintain utility systems serving the common areas per Section 7.2. (SACC, ¶ 34.)

However, the court finds the lease agreement does not create the overarching duty to maintain electrical standards at the property as Cross-Complainants claim. “[F]or purposes of a demurrer, a court is not required to accept as true a plaintiff's allegations of contractual terms where, in light of the written agreement attached to the pleading, such allegations would place a ‘clearly erroneous construction upon the provisions’ of the attached agreement.” (Chisom v. Board of Retirement of Fresno County Employees’ Retirement Assn. (2013) 218 Cal.App.4th 400, 415-416, quoting Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 128.) “When interpreting a contract, courts give effect to the parties’ mutual intentions, first examining the contract's plain language.” (Estate of Jones (2022) 82 Cal.App.5th 948, 952 (Estate of Jones), citing Civ. Code, § 1636.) The court reads contractual provisions “in the context of the whole instrument and circumstances of the case,” giving “effect to all provisions without inserting or omitting text.” (Id., at p. 953.) 

Here, while Section 2.9 gives exclusive control over common areas to Cross-Defendants, it refers to “the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order.” Furthermore, Section 2.10 does not give Cross-Defendants sole right to make changes to utilities beyond changing utility raceways. In addition, tenant obligations to maintain utilities for their units that apply “no matter where located,” obligations to make repairs “whether or not the portion of the Premises requiring repairs . . . are reasonably and readily accessible to Lessee,” and responsibility for repair “whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises” suggest the overarching duty to maintain electrical utility systems applies to tenants like the Cross-Complainants, not Cross-Defendants. (Section 7.1(a).)

Thus, Cross-Complainants have not established any basis for the duty they are alleging as it is unsupported by a plain reading of the lease agreement. While Cross-Complainants suggest Cross-Defendants can be held responsible for the potential fault of tenants in Unit A where the fire started, Cross-Complainants cite no authority to support this premise. Furthermore, this directly conflicts with the lease agreement which places the responsibility for maintaining each unit’s utilities on the tenant as noted above. Even though Cross-Complainants have added allegations that Cross-Defendants negligently maintained electrical utilities in the common areas, this does not cure their failure to establish Cross-Defendants had a duty to maintain electrical utilities for the entire property. While they make a conclusory allegation that Cross-Defendants have such a duty (SACC, ¶ 33), that allegation is unsupported by the lease agreement.

Accordingly, the court SUSTAINS Cross-Defendants’ demurrer to this cause of action.   

Breach of Contract (Fourth and Fifth Causes of Action)

Cross-Defendants contend Cross-Complainants fail to state a claim for breach of contract with regards to Unit B (fourth cause of action) and Unit A (fifth cause of action). The court agrees with regards to the fourth cause of action but disagrees as to the fifth cause of action.

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.) 

With regards to Unit B, Cross-Complainants’ FACC fails to state a claim for the same reasons it fails to state a claim for negligence. As detailed in the previous section, Cross-Complainants have failed to establish the lease agreement made Cross-Defendants responsible for the entire property’s electrical systems. Instead, the lease agreement establishes each tenant is responsible for maintaining and repairing the electrical utilities in and connected to their unit. Thus, Cross-Complainants cannot establish Cross-Defendants breached the contract when the obligations at issue belonged to Cross-Complainants and the tenants in Unit A. While Cross-Complainants point to Section 7.3 which requires tenants to receive approval from Cross-Defendants before making alterations or utility installations, Cross-Complainants have not pled any facts alleging that they requested and were denied the opportunity to make such repairs under the lease agreement.

With regards to Unit A, Cross-Defendants claim the lease agreement in unenforceable because it was unsigned pursuant to Civil Code sections 1624 and 1091 as well as Code of Civil Procedure section 1971. Civil Code section 1624 requires contracts to be in writing and subscribed to by the parties when they cannot be performed within a year (Civ. Code, § 1624, subd. (a)(1)) or when they provide for a leasing period to exceed one year (Civ. Code, § 1624, subd. (a)(3)). Civil Code section 1091 and Code of Civil Procedure section 1971 both require transfers of an estate in real property for terms exceeding one year to be made in writing.

In this case, Cross-Complainants provided a copy of an addendum for their lease agreement that referenced Unit A but lacks any signatures. (SACC, Ex. 1.) Cross-Complainants claim in their opposition that the document was electronically signed as evidence by a screenshot attached to the complaint depicting the signatures of Robinson and Matthew Sawyer dated October 18, 2017. (SACC, Ex. 1.) Cross-Complainants also state in their SACC that parties “executed a lease for 5020 Heintz Street, Unit A . . . on October 16, 2017” and that Matthew Sawyer executed the lease through DocuSign. (SACC, ¶ 17.) Given the court accepts well-pleaded facts in a complaint as true when considering a demurrer, the court finds this sufficient to satisfy the statute of frauds at this stage. Thus, Cross-Defendants have failed to demonstrate this cause of action fails to state a claim.

Accordingly, the court SUSTAINS Cross-Defendants’ demurrer as to Cross-Complainants’ fourth cause of action but OVERRULES the demurrer as to the fifth cause of action.

Breach of the Covenant of Good Faith and Fair Dealing (Seventh Cause of Action)

Cross-Defendants maintain Cross-Complainants fail to state a claim for breach of the covenant of good and fair dealing with respect to the agreement involving Unit A. Because Cross-Defendants entire argument is premised on the court finding no signed and written agreement existed as argued in Cross-Defendants’ demurrer to Cross-Complainants’ fifth cause of action, the court also OVERRULES this demurrer.

CONCLUSION

Based on the foregoing, Cross-Defendants’ demurrer to Cross-Complainants’ SACC is SUSTAINED with 30 days leave to amend as to the second and fourth causes of action only.

Cross-Defendant Wendy Sawyer’s special demurrer is OVERRULED.

Cross-Defendants’ demurrer is OVERRULED as to Mudita’s capacity to sue, the fifth cause of action, and the seventh cause of action.

Based upon the court’s rulings above, Cross-Defendants’ motion to strike is deemed MOOT.