Judge William A. Crowfoot, Case Number: 22AHCV00646, Date: 2024-02-01 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00646, Date: 2024-02-01 Tentative Ruling

On September 6, 2022, plaintiff Claim Jumper Acquisition Company, LLC (“Plaintiff” or “Tenant”) filed this action against defendants Richard T. Hale, Jr. (“Mr. Hale”) and Susan L. Hale as trustees of the Hale Family Trust (“Trust” or “Landlord”). Plaintiff asserts causes of action for breach of oral contract, promissory estoppel, unjust enrichment, fraud in the inducement, and declaratory relief.

On May 4, 1994, Mr. Hale and Claim Jumper Enterprises, Inc. entered into a lease (“Lease”) for a restaurant space located at 820 Huntington Drive in Monrovia, California (“Premises”). (Compl., ¶ 4.) The Trust became Mr. Hale’s successor in interest and Plaintiff became Claim Jumper Enterprises, Inc.’s successor-in-interest. (Compl., ¶ 4.) Plaintiff and its predecessors have operated a Claim Jumper restaurant at the premises for many years. (Compl., ¶ 5.) In early 2020, nonparty Chick-Fil-A approached Plaintiff and sought an assignment of the lease. The Trust allegedly wanted to have Chick-Fil-A replace Plaintiff as a tenant and supported a proposed assignment. (Compl., ¶ 6.) While Chick-Fil-A contemplated the assignment, Plaintiff granted Chick-Fil-A an option (“Option”) to take an assignment of the Lease, provided that Chick-Fil-A paid all rent under the Lease during the period of the option, less $10,000 a month. (Compl., ¶ 7.) A copy of the Option is attached as Exhibit A to the Complaint. At the same time, in March 2020, Mr. Hale, on behalf of the Trust and Michael Kelly, on behalf of Plaintiff, “orally agreed that [the Trust] would consent to the assignment of the Lease to [Chick-Fil-A], and if [Plaintiff] granted to [Chick-Fil-A] the option to assign [the] Lease, [Plaintiff] would pay $10,000 per month to Landlord, provided that should [Chick-Fil-A] exercise its option and take an assignment of the Lease, [the Trust] would pay back all sums to [Plaintiff] upon [Chick-Fil-A]” becoming the new tenant under the Lease. (Compl., ¶ 8.)

In May 2022, Chick-Fil-A exercised its Option and became the tenant under the Lease. (Compl., ¶ 12.) At that time, Plaintiff had made 26 payments of $10,000 to the Trust. (Ibid.) Plaintiff demand reimbursement for this amount after Chick-Fil-A took the assignment but the Trust refused to pay. (Compl., ¶ 13.) This action followed.

Many of the facts at issue in this case are undisputed. The parties agree that Mr. Hale and third-party Claim Jumper Enterprises, Inc. (“CJE”) entered into a Lease for the Premises in 1994 and that the Lease expressly barred any future modifications thereof except by a writing signed by both parties thereto. (Defendants’ Undisputed Material Fact (“UMF”) Nos. 2-3.) CJE operated a Claim Jumper restaurant before Plaintiff succeeded as the tenant of the Premises. (UMF No. 4) When Plaintiff took over as the tenant, Defendants and Plaintiff entered into a Third Amendment to Retail Lease on June 27. 2017 (“Third Amended Lease”). (UMF No. 5.) The Third Amended Lease had an initial term that was set to terminate on June 30, 2020. (UMF No. 8.) The Third Amended Lease gave Plaintiff an option to extend its tenancy until December 2022 as long as Plaintiff gave Mr. Hale written notice of an intent to exercise this option by December 31, 2019. (UMF No. 10.)

In the last quarter of 2019, Plaintiff began discussions with Chick-Fil-A about acquiring Plaintiff’s interest under the Third Amended Lease. (UMF No. 10.) Chick-Fil-A had reviewed Plaintiff’s properties and made offers on more than one location. (UMF No. 11.) On November 20, 2019, Plaintiff’s representative, Michael Kelly, emailed Defendants informing them of Chick-Fil-A's interest in the Premises. (UMF Nos. 12-13.) The email also stated, “We’d also ask for some reduction in rent once they go hard, to keep the store open until [Chick-Fil-A] is ready to take over the property. (UMF No. 14.) Mr. Hale replied and asked for Chick-Fil-A to contact him directly to initiate a letter of intent (“LOI”). (UMF No. 15.) Mr. Kelly replied, “[T]his is part of a larger transaction we have with [Chick-Fil-A]. At this point, it would be an amendment to our lease, so we’re looking for consent.” (UMF No. 16.) Mr. Hale responded that he “would not entertain a lease amendment nor give consent to execute an assumption of the existing lease.” (UMF No. 16.)

On January 6, 2020, Mr. Hale received an email from Eric Lofgran, the Vice President of the Kelly Investment Group, which attached a proposed Fourth Amendment to Lease; the email stated, “Michael Kelly asked that I forward you the attached Lease amendment for your review, which reflects the terms outlined by Chick-Fil-A.” (UMF No. 20.) Over the next two months, Plaintiff moved forward with its deal with Chick-Fil-A. (UMF No. 21.) Plaintiff and its managing member, Mr. Kelly, kept track of Defendants’ progress towards accepting Chick-Fil-A as a replacement tenant. (UMF Nos. 22-24.) On March 2, 2020, Mr. Hale sent an email attaching a copy of the Fourth Amendment to Retail Lease which was executed by Defendants as trustees. Plaintiff also executed the Fourth Amended Lease and sent a copy to Chick-Fil-A. (UMF No. 27.) The Fourth Amended Lease provides that upon Chick-Fil-A becoming the tenant, the monthly payments would be $32,700 until February 28, 2025. (UMF No. 30.) This amount is less than the monthly rent that Plaintiff paid under the Third Amended Lease, which was $32,773.68 from January 1, 2018 through June 30, 2020, and $34,412.36 from July 1, 2020 through December 31, 2022. (UMF No. 31.)

On March 18, 2020, Chick-Fil-A and Plaintiff executed the Option Agreement, which, in part, required Chick-Fil-A to pay Plaintiff $600,000 for an option to receive an assignment of Plaintiff’s interest in the lease and purchase certain assets. (UMF No. 34.) The Option Agreement also required Chick-Fil-A to reimburse Plaintiff for all rent incurred under the lease, minus $10,000 per month. Chick-Fil-A had until March 18, 2022, to exercise the option. (UMF No. 36.) Also on March 18, 2020, Plaintiff and Chick-Fil-A entered into a memorandum of option to assume lease (“Memorandum”). Plaintiff and Chick-Fil-A were the only parties to the Memorandum but Defendants were asked to – and did – sign the Memorandum.

Chick-Fil-A did not exercise its option by March 18, 2022, but entered into a First Amendment to the Option Agreement to pay the entirety of Plaintiff’s rent directly to Defendants for the months of March, April, and May in 2022, rather than the monthly rent less $10,000 per month. (UMF Nos. 47, 52, 53.) In return, Chick-Fil-A received more time to consider whether to exercise this option. (UMF No. 54.)

On April 30, 2022, Chick-Fil-A exercised its option and entered into an Assignment and Assumption Agreement with Plaintiff. (UMF No. 56.)

In reviewing a motion 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.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).)

To meet this burden of showing a cause of action cannot be established, a defendant must show not only “that the plaintiff does not possess needed evidence” but also that “the plaintiff cannot reasonably obtain needed evidence.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) A moving defendant need not conclusively negate an element of plaintiff’s cause of action, but it is insufficient for the defendant to merely point out the absence of evidence. (Id. at p. 854; Gaggero v. Yura (2003) 108 Cal.App.4th 884, 891.) The supporting evidence can be in the form of affidavits, declarations, admissions, depositions, answers to interrogatories, and matters of which judicial notice may be taken. (Aguilar, supra, 25 Cal.4th at p. 855.) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) The plaintiff may not merely rely on allegations or denials of its pleadings to show that a triable issue of material fact exists, but instead, “shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action.” (Ibid.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both, or that there is no merit to a claim for damages . . . or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. 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.” (Code Civ. Proc., § 437c, subd. (f)(1).) A motion for summary adjudication shall proceed in all procedural respects as a motion for summary judgment. (Id., subd. (f)(2).)

The Court need only rules on evidentiary objections to evidence that the Court found material to the disposition of this motion. (Code Civ. Proc., § 437c, subd. (q).) Accordingly, the Court rules on Defendants; objections to Mr. Kelly’s deposition testimony as follows:

Plaintiff alleges that it entered into an oral contract with Defendants in March 2020 which required Defendants to repay the monthly payments of $10,000 made by Plaintiff in the period between the formation of the Option Agreement with Chick-Fil-A and Chick-Fil-A’s decision to exercise its option to assume the Lease. (Compl., ¶¶ 15, 17.)

Defendants argue that Plaintiff’s cause of action for breach of oral contract fails because: (1) Plaintiff did not contribute consideration to support the alleged oral contract, (2) the Lease required all modifications to be in writing, and (e) the statute of frauds barred enforcement of the alleged oral contract. (Motion, pp. 10-15.)

“A promise is not enforceable unless consideration was given in exchange for the promise.” (U.S. Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 128; Passante v. McWilliam (1997) 53 Cal.App.4th 1240, 1247; Civ. Code §1550.) “A promise to perform a preexisting legal duty is not supported by consideration.” (U.S. Ecology, 92 Cal.App.4th at p.129 (citation omitted).) However, consideration may be “forbearance to sue on a claim, extension of time, or any other giving up of a legal right, in consideration of some promise.” (1 Witkin, Summary 11th Contracts § 211 (2023).)

Defendants argue that Plaintiff provided no consideration to support the alleged oral promise because Plaintiff was always obligated to pay the entirety of the monthly lease payments and merely continuing to pay the rent does not do anything more than what Plaintiff was legally bound to do. (Motion, pp. 10-11.) In opposition, Plaintiff argues that its decision to grant an option to Chick-Fil-A was sufficient consideration for its oral contract with Defendants because it surrendered its legal right to continue its tenancy. The Court agrees with Defendants. Plaintiff benefitted from the Option Agreement with Chick-Fil-A and does not show any “forbearance” sufficient to constitute consideration.

Defendants argue that any alleged oral contract is unenforceable because the Lease required all modifications to be in writing. It is undisputed that the Fourth Amended Lease, executed on March 2, 2020, does not contain any language providing for Defendants’ reimbursement of rent and that the alleged promise was oral. (UMF Nos. 66, 68.) It is also undisputed that the Fourth Amended Lease prohibits oral modifications. (UMF No. 67.)

A “modification” of a contract is a change in the obligations of a party by a subsequent mutual agreement of the parties. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 798 [citing (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 964, p. 1055.) “A contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties.” (See Coldwell Banker & Co. v. Pepper Tree Office Center Associates (1980) 106 Cal.App.3d 272, 280; Civil Code section 1698.) In D. L. Godbey & Sons Const. Co. v. Deane (1952) 39 Cal.2d 429, 246, the court held that an oral modification of a written contract is “executed” when one party has fully performed and there was consideration for the oral modification. (Id. at pp. 433—434, 246 P. 946.) Therefore, where the terms of a written contract require that modifications be in writing, this provision may be altered or waived by performance of the terms of the oral modification.

Here, Plaintiff contends that it performed their part of the contract by entering into the Option Agreement with Chick-Fil-A; Defendants do not dispute that Plaintiff entered into this Option Agreement. (UMF No. 33.) However, this is insufficient to show a valid oral modification of the Fourth Amended Lease. In D. L. Godbey & Sons Const. Co. v. Deane (1952) 39 Cal.2d 429, 246, the court held that an oral modification of a written contract is “executed” when one party has fully performed and there was consideration for the oral modification. (Id. at pp. 433—434, 246 P. 946.) As stated above, no consideration was offered for the oral modification. Accordingly, the oral “modification” is invalid because it is not in writing.

Next, Defendants argue that the statute of frauds (Civil Code section 1624) applies to the alleged oral contract because it is an agreement relating to a real estate interest. (Motion, pp. 11-12.) Defendants further argue that they are not equitably estopped from asserting the statute of frauds because they did not receive any unjust enrichment and Plaintiff cannot show that it suffered unconscionable injury.

Section 1624 of the Civil Code provides that an agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged. Part performance allows enforcement of a contract lacking a requisite writing in situations in which invoking the statute of frauds would cause unconscionable injury. (Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 555, as modified on denial of reh'g (Nov. 3, 2008).)

In opposition, Plaintiff argues that its full performance of its obligations under the oral contract, by executing the Option Agreement with Chick-Fil-A, estops Defendants from asserting the statute of frauds as a defense and requires enforcement of Defendants’ promise in equity. (Opp., pp. 12-13.)

On reply, Defendants cite to Secrest for the proposition that estoppel of the statute of frauds should only be applied in limited circumstances where “performance consisted of conveying property, rendering personal services, or doing something other than payment of money.” (Reply, p. 3.) Secrest does not support Defendants’ position because here, Plaintiff alleges that it performed by conveying its option in real property to Chick-Fil-A. Therefore, it would fall into those limited circumstances identified in Secrest.

However, in addition to having partially performed, the party seeking to enforce the contract must have changed position in reliance on the oral contract to such an extent that application of the statute of frauds would result in an unjust or unconscionable loss, amounting in effect to a fraud. (Secrest, supra, 167 Cal.App.4th at p. 555.) Defendants argue that Plaintiff’s decision to enter into the Option Agreement does not constitute “performance” which would take the alleged oral contract out of the statute of frauds because the Option was being negotiated before the formation of the oral contract and the performance was not made for Defendants’ benefit. (Reply, pp. 2-3.) Defendants also point out that Plaintiff did not suffer “unconscionable injury” because it received $600,000 from Chick-Fil-A for the Option Agreement alone and as well as rent and tax payments in the amount of $580,908.60 for a total of about $1.18 million. Defendants argue that Plaintiff actually benefitted from entering into the Option Agreement because the restaurant was floundering.

In opposition, Plaintiff argues that a triable issue of fact exists and cites to Mr. Kelly’s deposition testimony, in which he stated that the option agreement with Chick-Fil-A would not have gone through as a “guaranteed deal” because he did not want to “take the risk of losing $10,000 a month for two, who knows, it could have been three years.” (Padula Decl., Ex. 5.) Plaintiff does not dispute that it received $1.18 million dollars as a result of the Option Agreement. It would be speculation to infer detrimental reliance based only on Mr. Kelly’s vague testimony of risk, especially in light of the calculable benefits received by Plaintiff as the result of the Option Agreement.

Plaintiff also fails to show that Defendants benefited from unjust enrichment. Mr. Kelly’s testimony that introducing Chick-Fil-A as a tenant increased the amount of rent received and the property value of the Premises is vague and unsubstantiated. Plaintiff does not dispute that Chick-Fil-A’s monthly rent payment is $32,700 until February 28, 2025, which is less than the amount of rent that Plaintiff paid. (UMF Nos. 30, 31.)

Additionally, Plaintiff does not provide evidence showing that it suffered an unconscionable injury. Plaintiff states that mass resignations of management and staff occurred after its restaurant employees learned of the Option Agreement and therefore caused the restaurant to cease operations and lose almost a year’s revenue as a result of the Option Agreement. (AMF Nos. 88-90.) However, this alleged injury is nowhere in the Complaint and, even if it were, there is no evidence of the amount of net revenue that would have been generated if Plaintiff were obligated to pay its rent in full (as opposed to having Chick-Fil-A pay any or all of it). In ruling on a motion for summary judgment, the Court is bound by the issues framed the complaint. “The pleadings play a key role in a summary judgment motion. “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues’ and to frame ‘the outer measure of materiality in a summary judgment proceeding.’” (Hutton v. Fidelity National Title Co. (2013) 213 Cal.App.4th 486, 493; Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250 [“The materiality of a disputed fact is measured by the pleadings [citations], which ‘set the boundaries of the issues to be resolved at summary judgment.’ [Citations.]”].) “Accordingly, the burden of a defendant moving for summary judgment only requires that he or she negate plaintiff’s theories of liability as alleged in the complaint; that is, a moving party need not refute liability on some theoretical possibility not included in the pleadings. [Citations.]” (Hutton, supra, 213 Cal.App.4th at p. 493.) "[T]he [papers] filed in response to a defendant's motion for summary judgment may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings." (Ibid. [quotations and citations omitted].) "If the motion for summary judgment presents evidence sufficient to disprove the plaintiff's claims, . . . the plaintiff forfeits an opportunity to amend to state new claims by failing to request it." (Ibid. [quotations and citations omitted].) And even if the Court considered Plaintiff’s newly-raised argument, Plaintiff did not produce evidence of its revenues or that show that it lost money that it would have received if the Option Agreement was never executed and the restaurant remained open.

Accordingly, Defendants’ motion for summary adjudication of the First Cause of Action is GRANTED.

The elements of a claim for promissory estoppel are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal. App.4th 1661, 1672, [quoting U.S. Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901. A plaintiff must show a “substantial change in position” due to reliance on the alleged promise. (Smith v. City and County of SF (1990) 225 Cal.App.3d 38, 48 (“a promisor is bound when he should reasonably expect a substantial change in position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement”).)

Defendants argue that Plaintiff has no evidence that it changed position in reliance on any purported promise by Defendants to reimburse Plaintiff $10,000 per month. Defendants argue that Plaintiff has “no contemporaneous evidence of having relied on any alleged oral promise by Defendants when executing the Option and Assignment Agreement.” (Motion, p. 16.) Defendants point out that Plaintiff’s representatives continually asked for progress on executing the Fourth Amended Lease so that Plaintiff could, in turn, execute the Option Agreement with Chick-Fil-A. (Motion, p. 16.) Defendants also state that any claim for reimbursement was not made until May 2020 (several months after the Fourth Amended Lease was executed). (UMF No. 58.) Defendants argue that Plaintiff’s cause of action for promissory estoppel fails because Plaintiff cannot prove that: (1) it changed its position in reliance on a promise or (2) suffered injury therefrom. (Motion, pp. 15-17.)

As discussed above, Plaintiff fails to show evidence of a “change in position” that resulted in injury. Plaintiff solely relies on Mr. Kelly’s deposition testimony which is insufficient to show that a triable issue of material fact exists. Plaintiff also argues that it transferred its right to continue its tenancy and operations to Chick-Fil-A, but there is no evidence that any injury resulted from that transfer.

Defendants argue that Plaintiff’s cause of action for unjust enrichment fails because it is not a cause of action with a remedy but a general principle. (Motion, p. 17.) Plaintiff does not dispute this argument. Accordingly, the motion for summary adjudication is GRANTED as to the Third Cause of Action.

Defendants argue that Plaintiff’s cause of action for fraud in the inducement fails because it cannot show: (1) that Defendants had an intent to deceive, (2) reliance on a misrepresentation made by Defendants, or (3) any damage suffered therefrom. (Motion, pp. 18-19.)

For the reasons discussed above, Plaintiff fails to show that a triable issue of material fact exists regarding the elements of reliance and resulting damage.

Defendants argue that Plaintiff cannot obtain declaratory relief because there is no underlying contract or enforceable promise. The Court agrees because there are no triable issues of fact as to the existence of the contract or an enforceable promise, specifically whether Plaintiff changed its position or relied on Defendants’ representations.

Hon. William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.