Judge: Virginia Keeny, Case: 20VECV01321, Date: 2023-02-06 Tentative Ruling
Case Number: 20VECV01321 Hearing Date: February 6, 2023 Dept: W
SHOWROOM
INTERIORS, LLC V. 4519 HASKEL, LLC, et al.
Defendants 4519 HASKEL LLC and
MOSES SHEMTOV’s motion for summary judgment or, in the altnerative, summary
adjudication
Date of Hearing: February
6, 2023 Trial Date: July 17, 2023
Department: W Case No.: 20VECV01321
Moving Party: Defendants 4519 Haskel, LLC and Moses Shemtov
Responding Party: Plaintiff
Showroom Interiors, LLC
BACKGROUND
On November 13, 2020, Plaintiff filed a
Complaint against 4519 Haskel, LLC and Moses Shemtov for (1) breach of written
contract; (2) breach of written guaranty; and (3) conversion. Plaintiff alleges
the parties entered into an Agreement in which Plaintiff leased certain
personal property (Inventory) to Defendant 4519 Haskel, LLC to be used to stage
the property for sale. After termination of the staging term, Defendants
requested to keep the Inventory at the Property. Plaintiff demanded access to
remove the Inventory when it learned that Defendants had leased the Property to
third parties and were collecting extra rent for the Inventory, in violation of
the Agreement.
Defendants now move for summary
judgment or, in the alternative, summary adjudication. Plaintiff opposes.
[Tentative] Ruling
Defendants’ Motion for Summary
Judgment, or in the alternative, Summary Adjudication is DENIED.
EVIDENTIARY OBJECTIONS
Plaintiff
Showroom Interiors, LLC submits evidentiary objections and request to strike portions
of the Declaration of Defendant Moses Shemtov and Separate Statement of Undisputed
Material Facts, Numbers 3, 4, 6, 9, 10, 11, 12, 13, 14, 17, 18, 19, 21, 22 and
23.
Shemtov
Declaration – Objection
nos. ¶5, ¶6 are sustained.
SSUMF – Objection nos. ¶3 is sustained.
In Reply,
Defendants submit evidentiary objections and request to strike portions of the
Declaration of Julian Buckner and Fay Pugh.
Pugh
Declaration – Objections
nos. ¶16 and ¶18 are sustained.
Buckner
Declaration – Objection
nos. ¶7, ¶8, ¶10 are sustained.
The court
notes neither party complied with California Rules of Court, Rule 3.1354(b).
Plaintiff and Defendants fail to number each objection consecutively.
The court
further notes Defendants, in reply, argues Plaintiff’s 179 additional purported
disputed facts are procedurally defective and must be disregarded. While the
court does not disregard Plaintiff’s additional 179 purported disputed facts,
the court does agree that it does not include only additional material facts as
required by CRC 3.1350.
REQUEST FOR JUDICIAL NOTICE
Plaintiff
Showroom Interiors, LLC requests this court take judicial notice of the
following documents: (1) Plaintiff’s Complaint filed in this action (Exh. 1);
(2) Defendants’ Answer to the Complaint (Exh. 2); (3) Articles of Organization
and Statements of Information of Defendant 4519 Haskel LLC from the California
Secretary of State website (Exh. 3); (4) Grant Deed, Instrument Number
20160784839 (Exh. 4); (5) Grant Deed Instrument Number 20170300060 (Exh. 5);
(6) Grant Deed, Instrument Number 20218240270064 (Exh. 6); and (7) Minute Order
dated October 19, 2022 (Exh. 7).
Defendants
oppose Plaintiff’s request for judicial notice on several grounds. First,
Defendants oppose the request on the grounds Plaintiff fails to identify the
specific grounds within the Evidence Code upon which Plaintiff makes their
request. The court does not deny the request on these grounds. Although
Plaintiff does not specifically refer to the subdivision of the Evidence Code
they rely on, Plaintiff generally refers to Evidence Code section 451, 452, and
453 as their basis. Defendants also oppose the request to the extent Plaintiff
seeks to take judicial notice of facts within recorded documents. The court
agrees that the judicial notice should only be to the face of the documents and
not the truth of factual matters asserted within. Lastly, Defendants oppose the
request on the grounds Plaintiff fails to include Exhibit 7. However, since
Exhibit 7 exists within the court file, Plaintiff need not provide a copy as
they have specified which part of the court file they seek judicial notice of
and it is electronically accessible to the court.
The court
grants Plaintiff’s request for judicial notice as to the existence of the
documents. (See also Fontenot v. Wells
Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265; Yvanova v. New Century Mortgage Corp. (2016) 62 Cal. 4th 919, 924,
fn. 1.)
DISCUSSION
Defendants 4519 Haskel, LLC and Moses
Shemtov move the court pursuant to Code of Civil Procedure section 437c for an
order granting summary judgment or, in the alternative, summary adjudication.
Defendants make the motion on the grounds (1) the rental provision contained in
Paragraph 11 of the Staging Agreement provides for an unenforceable liquidated
damages penalty for a breach in violation of Civil Code section 1671; and (2)
Plaintiff cannot otherwise establish any damages.
Liquidated Damages
Defendants do not dispute that whether
they used the staged furniture for a non-staging purpose is a triable issue of
fact. Defendants argue, however, that the liquidated damages provision in the Staging
Agreement for four times the rental rate is an unenforceable penalty that bears
no reasonable relationship to the actual damages the parties could have
anticipated and thus, the motion for summary judgment must be granted. Defendants further argue they were not
represented by counsel regarding the negotiation or drafting the Staging Agreement
nor did the parties discuss how the provision bears reasonable relationship to
Plaintiff’s actual damages.
A liquidated damages provision in an
action for breach of contract is valid unless the party seeking to invalidate
the provision establishes such provision was unreasonable under the
circumstances existing at the time the contract was made. (Civ. Code § 1671.) The amount of liquidated damages must
represent the result of a reasonable endeavor by the parties to estimate a fair
average compensation for any loss that might be sustained, but will be
unreasonable if there is no relationship to the range of actual damages that
the parties could have anticipated would occur from a breach. (Greentree Financial Group, Inc. v.
Execute Sports, Inc. (2008) 163 Cal.App.4th 495, 499.) Whether a provision
is an enforceable liquidated damages provision or an unenforceable penalty is a
legal question for the court. (Beasley v. Wells Fargo Bank (1991) 235
Cal.App.3d 1383 (to answer this question the court examines the provision’s
true function and operation and not the manner in which the provision is
characterized in the contract).)
In opposition, Plaintiff argues
Defendants mischaracterize the Staging Agreement. Plaintiff contends it is not
a liquidated damage provision but instead, merely establishes
a different rental rate, which the renting party may elect if it decides to use
the furniture for non-staging purposes. “It is important to recognize,
however, that a provision in a contract that appears at first glance to be
either a liquidated damages clause or an unenforceable penalty provision may
instead merely be a provision that permissibly calls for alternative performance
by the obligor. ‘A contractual provision that merely provides an option of
alternative performance of an obligation does not impose damages and is not
subject to section 1671 limitations.’ (Cellphone Termination Fee Cases
(2011) 193 Cal.App.4th 298, 328, 122 Cal.Rptr.3d 726.) Thus, notwithstanding
the limitations on liquidated damages clauses provided in Civil Code section
1671, the courts ‘recognize ... the validity of provisions varying the
acceptable performance under a contract upon the happening of a contingency.’ (Garrett
v. Coast & Southern Fed. Sav. & Loan Assn. (1973) 9 Cal.3d 731,
738, 108 Cal.Rptr. 845, 511 P.2d 1197 (Garrett).)” (McGuire v.
More-Gas Investments, LLC (2013) 220 Cal.App.4th 512, 522–523.)
The court finds the disputed provision
is not a liquidated damages provision. Here, the ‘four times the rental fee’
provision varies when the furniture is not used for staging purposes. If the
furniture is used for staging purposes beyond the termination of the agreement,
Defendants are to pay $3,000 a month. If Defendants choose to use the furniture
for any other purpose than staging, Defendants are to pay four times the agreed
upon rental fee, i.e., $12,000 a month.
Defendants contend this is unlike McGuire
because the contractual language makes clear that Defendants had no “rational
choice” regarding compliance. However, this is not an additional charge
contingent on the breach of the performance. The ‘four times the rental fee’
provision is not triggered by Defendant’s breach of the agreement but instead,
triggered if Defendants decide to use the inventory for any other purpose.
Defendants further contend that Plaintiff omits a critical component of the analysis
from McGuire. “‘[W]hen it is manifest that a contract expressed to be performed
in the alternative is in fact a contract contemplating but a single, definite performance
with an additional charge contingent on the breach of that performance, the
provision cannot escape examination in light of pertinent rules relative to the
liquidation of damages.’ [Citation.]” (McGuire, supra, 220
Cal.App.4th at p. 523.) However, again, the court finds breach of the Staging
Agreement is not necessary to effect to the ‘four times the rental fee’. (Id.
at fn. 6.) Plaintiff has not alleged that Defendants breached the Staging
Agreement by using the furniture for non-staging purposes. Plaintiff alleges
Defendants breached the Staging Agreement by failing and refusing to pay the
additional rent that became due when the furniture was used for non-staging
purposes. (Compl. ¶¶31, 35.) Moreover, Defendants have not provided how renting
furniture lends itself to being a transaction where damages are difficult to
ascertain. (See Vrgora v. Los Angeles Unified School Dist. (1984) 152
Cal.App.3d 1178, 1186, holding “one of the major purposes of the allowance of
liquidated damages—to provide a remedy—where damages are not easily
ascertainable.”)
Even if the court were to find the
provision a liquidated damages provision, Defendants have not demonstrated the
provision is unreasonable under the circumstances existing at the time the
contract was made. Defendants claim they were not represented by counsel, they
did not make any revisions to the Staging Agreement, and they did not even
discuss the provision with Plaintiff. Even so, Defendants have not demonstrated
Plaintiff had a higher bargaining power. The provision is not hidden away but
in fact bolded and italicized. Charging a higher fee for when furniture becomes
used bears a reasonable relationship to actual damages Plaintiff would incur
for then having to use and/or sell worn-out furniture.
Accordingly, Defendants’ motion for
summary judgment is DENIED. The court does not need to reach Defendants’
argument regarding damages as Defendants have failed to meet their burden that
the provision is an unenforceable liquidated damages provision.
First and Second Causes of Action
Defendants move in the alternative for
summary adjudication of the first and second causes of action on the grounds the
only damages alleged or claimed are based on an unenforceable liquidated
damages provision and Plaintiff cannot show that it sustained any
resulting damages out of Defendants’ alleged “breach”.
However, as discussed above, the court
finds that the provision is not an unenforceable liquidation provision but an
alternative performance and therefore, Plaintiff has been damaged when
Defendants failed to pay the $12,000 rental fee for the furniture.
Third Cause of Action
Defendants move in the alternative for
summary adjudication of the third cause of action for conversion. Defendants
argue Plaintiff’s consent to the transfer at issue defeats a claim for
conversion and moreover, Plaintiff’s claim for conversion amounts to nothing
more than a demand for penalty money to be paid to it as Defendant has returned
the furniture.
“Conversion is the wrongful exercise of
dominion over the property of another. The elements of a conversion claim are:
(1) the plaintiff’s ownership or right to possession of the property; (2) the
defendant’s conversion by a wrongful act or disposition of property rights; and
(3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) However,
“a mere contractual right of payment, without more, will not suffice.” (Farmers
Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)
Defendants present evidence Plaintiff
continued to receive monthly rental sum of $3,435.00, which included $150.00
for insurance and $285.00 for taxes, from the date the furniture was installed
until the furniture was returned to Plaintiff on August 18, 2021. (UMF 5.) Defendants
also present evidence they returned the furniture to Plaintiff. (UMF 7.)
However, as noted by Plaintiff, despite the return of the furniture, Plaintiff
may still have a conversion claim against Defendant. (See White v. Molfetta (2021)
64 Cal.App.5th 628, 636 holding a “plaintiff can still sue for damages from
conversion even if the property is returned.”) Similar to White, even
after Defendants returned the furniture, Plaintiff has presented evidence of
actual harm as furniture diminishes in value when used.
Moreover, the court finds Plaintiff is
alleging more than a mere contractual right of payment. The Staging Agreement
provides that at any time, whether default or following the Staging Term
expiration, Plaintiff may remove the inventory from the property and
Defendants’ refusal will be deemed conversion of the inventory for Defendants’
personal use. Here, Plaintiff alleges it demanded the inventory back and
Defendants refused to return the furniture. The fact that Plaintiff continued
to accept payment does not indicate they impliedly assented to or ratified
Defendant’s conduct. Plaintiff presents evidence they made repeated demands for
the furniture thereby trying to minimize Defendants’ alleged wrongful taking.
Accordingly, Defendants’ motion for
summary adjudication as to the third cause of action is DENIED.