Judge: Yolanda Orozco, Case: 21STCV44977, Date: 2022-12-05 Tentative Ruling
Case Number: 21STCV44977 Hearing Date: December 5, 2022 Dept: 31
DEMURRER
TO FIRST-AMENDED CROSS-COMPLAINT IS OVERRULED
Background
On December 09, 2021, Plaintiff Azusa Rowland, LLC filed a Complaint against Fitness Sports Clubs, LLC; Fitness International, LLC (collectively “Defendant”) and Does 1 to 10.
The operative First Amended Complaint (FAC) alleges causes of action for:
(1) Breach of
Lease; and
(2) Declaratory Relief.
Defendant filed a Cross-Complaint against Plaintiff alleging causes of action for on January 24, 2022. The operative First Amended Cross-Compliant (FACC) alleges causes of action for:
(1) Breach of
Contract,
(2) Declaratory Relief
On July 05, 2022,
Plaintiff filed a demurrer to Defendant’s FACC.
Defendant filed opposing papers on November 18, 2022. Plaintiff filed a
reply on November 28, 2022.
Legal Standard
Where pleadings are defective, a party may
raise the defect by way of a demurrer.¿ (Coyne v. Krempels (1950)
36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the
grounds for a demurrer must appear on the face of the pleading or from
judicially noticeable matters.¿ (Code Civ. Proc., § 430.30(a); Blank
v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the
court accepts the complainant’s properly-pled facts as true, and ignores
contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co.
(1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584,
591.) Moreover, the court does not consider whether a plaintiff will be able to
prove the allegations, or the possible difficulty in making such proof. (Fisher
v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)¿
Leave to amend must be
allowed where there is a reasonable possibility of successful amendment. (Goodman
v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to
show the Court that a pleading can be amended successfully. (Id.)¿¿¿
MEET AND CONFER
Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred, in person or telephonically, to determine whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc. (CCP) § 430.41.)
The meet and confer requirement has been met. (Wentworth Decl. ¶ 2.)
Request for Judicial Notice
The Court may take judicial notice of “[r]egulations and
legislative enactments issued by or under the authority of the United States or
any public entity in the United States.” (Evid. Code § 452(b).) While
judicial notice may be taken of court records under Evidence Code
section 452, subdivision (d), the truth of matters asserted in such documents
is not subject to judicial notice. (Copenbarger v.
Morris Cerullo World Evangelism, Inc. (2018)
29 Cal.App.5th 1, 14–15.)
Defendant requests Judicial Notice of the following:
Exhibit A: County of Los Angeles Department of Public Health Order of the Health Officer – Order for Control of COVID-19; Date Order issued on March 16, 2020.
Exhibit B: Executive Department State of California issued by Governor Gavin Newsom – Governor of California on March 19, 2022.
Exhibit C: County of Los Angeles Department of Public Health Order of the Health Officer – Safer at Home Order for Control of COVID-19; Date Order issued on March 19, 2020.
Exhibit D: County of Los Angeles Department of Public Health Order of the Health Officer – Safer at Home Order for Control of COVID-19; Revised Order issued on March 21, 2020.
Exhibit E: County of Los Angeles County Emergency Operations Center COVID-19 Update- Public Health Emergency issued on March 27, 2020.
Exhibit F: County of Los Angeles Department of Public Health Order of the Health Officer – Safer at Home Order for Control of COVID-19; Revised Order issued on April 10, 2020.
Exhibit G: County of Los Angeles Department of Public Health Order of the Health Officer – Continuation of Safer at Home Order for Control of COVID-19; Revised Order issued on May 13, 2020.
Exhibit H: County of Los Angeles Department of Public Health Order of the Health Officer – Reopening Safer at Work and in the Community for Control of COVID-19; Revised Order issued on May 29, 2020.
Exhibit I: County of Los Angeles Department of Public Health Order of the Health Officer – Reopening Protocol for Gyms and Fitness Establishments: Appendix L effective as of Friday, June 12, 2020.
Exhibit J: Opinion issued on April 6, 2022 in the matter of BAI Century LLC v. Fitness Int’l, LLC, Case No. 2021 L 1322 (Cook Cty. Ill. Sept. 30. 2021).
Exhibit K: Judgment entered June 27, 2022 in the matter of VEREIT Real Estate, L.P. et al. v. Fitness International, LLC, Case No. DC-20-18444 (Dallas Cnty. 14th Dist. Ct. Apr. 29, 2022).
Exhibit L: Opinion issued on February 3, 2022 in the matter of National Retail Properties, LP v. Fitness International, LLC, Circuit Court for Wayne County, Michigan, Case No. 20-014449-CB.
Defendant’s request for
Judicial Notice is GRANTED.
Discussion
Plaintiff/Cross-Defendant demurrers to Defendant/Cross-Complainant’s First Amended Cross-Complaint (FACC) on the basis that Defendant fails to state sufficient facts to support the causes of action for Breach of Lease and Declaratory Relief. (Code Civ. Proc., § 430.10 subd. (e).)
Allegations
in FACC
Defendant operates indoor health clubs and fitness centers. (FACC ¶ 2.) Defendant leased the subject premises in West Covina, California from Plaintiff, who is the landlord. (FACC ¶ 13, Ex. 1.) The lease was last amended on February 2, 2015 (the “Lease Agreement”). (Id, Ex. 1.) Due to COVID-19 and government-mandated restrictions, all indoor clubs in California were closed completely or had capacity restrictions through June 15, 2022. (FACC ¶ 2.)
Therefore, Defendant
was prohibited from using the leased premises due to the COVID-19-mandated
government closures. (FACC ¶¶ 4, 33, 35.) Due to the closures, the purpose for
entering into the lease was temporarily frustrated and Defendant’s performance
was made impracticable. (FACC ¶ ¶ 5, 38, 48.) Consequently, Defendant argues
that it was unable to access the leased premises, generate revenue, or collect
membership dues, fees, or payments. (FAC ¶ 5.) Therefore, Defendant was unable
to pay rent in full. (FAC ¶¶ 7, 57, 58, Ex. 2.)
During the closure, Defendant put Plaintiff on notice that it would be unable to operate its business and that rent should be excused or equitably reduced. (FACC ¶ 43, citing Civ. Code, § 15111)
Moreover, due to the COVID-19 closures, Defendant alleges that it was deprived of quiet enjoyment of the premises while being legally and contractually obligated to comply with the government-mandated closures. (FACC ¶¶ 41, 42.) Specifically, Defendant alleges it did not have full, quiet, and peaceful possession and enjoyment of the premises as covenanted and warranted by Plaintiff. (FACC ¶ 50.) Therefore, Plaintiff breached the lease because Plaintiff did not deliver the premises for Defendant’s use and enjoyment due to the government-mandate closures. (FACC ¶¶ 50, 51., 69)
“In failing to (a) deliver the use and enjoyment of the Premises as a health club and fitness center, (b) allow Tenant full, quiet and peaceful possession and enjoyment of the Premises, (c) provide a credit to Tenant for Rent paid during the Closure Periods, (d) excuse Tenant from payment of Rent during the Closure Periods, and (e) proportionately abate Rent during the time period in which Tenant’s operations were subject to capacity restrictions, Landlord has breached the Lease.” (FACC ¶ 61.)
Breach of Contract –
Written Lease
“The lease has a dual character; it is a conveyance of an estate for years, and a contract between lessor and lessee. The result is that dual obligations arise,—contractual obligations from the terms of the lease, and obligations under the law from the creation of the tenancy.” (Ellingson v. Walsh, O’ Connor & Barneson (1940) 15 Cal.2d 673, 675.) “To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)
“A written
contract may be pleaded either by its terms—set out verbatim in the complaint
or a copy of the contract attached to the complaint and incorporated therein by
reference—or by its legal effect. In order to plead a contract by its legal
effect, plaintiff must ‘allege the substance of its relevant terms. This is
more difficult, for it requires a careful analysis of the instrument,
comprehensiveness in statement, and avoidance of legal conclusions.’” (Heritage
Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993 [internal
quotations omitted].)
Neither party refutes that a written lease agreement exists between the parties. (See FACC Ex. Therefore, Defendant has properly pled the existence of a written contract and that Defendant’s performance from paying rent was excused due to COVID-19 Closures under California Civil Code section 1511. (FACC ¶¶ 44.) Defendant also pleads that it was damaged due to Plaintiff’s breach of the Lease Agreement. (FACC ¶¶ 69, 76, 82.)
Plaintiff argues that Defendant’s cause of action for breach of contract fails because Defendant cannot establish Plaintiff breached the Lease Agreement. As to breach, Defendant alleges that Plaintiff breached the following:
a.
Breach of Landlord’s Representations, Warranties and Covenants
Defendant alleges that Plaintiff breached the Lease Agreement by failing to deliver the use and enjoyment of the premises and allow Defendant full, quiet and peaceful possession and enjoyment of the premises as represented, warranted and covenanted by Plaintiff. (FACC ¶ 66.) Defendant asserts it provided notice of the breach to Plaintiff who failed to cure the breach. (FACC ¶ 67.)
The covenant of quiet enjoyment insulates the tenant against any act or omission on the part of the landlord, or anyone claiming under him, which interferes with a tenant's right to use and enjoy the premises for the purposes contemplated by the tenancy. (Petroleum Collections Inc. v. Swords (1975) 48 Cal.App.3d 841, 846.)
The fact that the COVID-19 government-mandated closures deprived Defendant of the use, enjoyment, and alleged possession of the leased premises does not equate to Plaintiff having breached the lease because Plaintiff was not responsible for the government closures. It would be illogical to read the Lease Agreement as obligating Plaintiff to ensure that the government does not establish regulations that inhibit Defendant’s use of the leased premises.
Defendant’s sole justification for imputing liability of Plaintiff for loss of use, enjoyment and possession of the property is Reynolds v. McEwen (1952) which stated as a general rule:
“The duty of the landlord to deliver possession of the demised premises to the tenant, in order to entitle him to the payment of rent, does not extend to the point of requiring actual delivery, and his covenant is satisfied if there is no impediment to the tenant's taking possession or if the tenant is given a legal right of entry and enjoyment during the term.” (Reynolds v. McEwen (1952) 111 Cal.App.2d 540, 542–543.)
Defendant argues that under Reynolds, Plaintiff breached the Lease Agreement by failing to deliver possession of the leased premises since Defendant had no legal right of entry due to the government-mandated closures. However, Reynolds does not stand for the position that liability is imposed on the landlord for failure to deliver the premises when the right of entry and delivery of possession is due to the actions of a third party or entity that the landlord does not control.
Defendant fails to cite any legal authority that places liability on the landlord for government-mandated closures when the closure is not due to the landlord’s acts or omissions. Moreover, Defendant cannot cite any legal authority that places any obligation on Plaintiff to prevent or allow Defendant not to comply with the government closures. For this reason, Defendant has not stated sufficient facts to establish that Plaintiff breached the Lease Agreement or that any actions attributable to Plaintiff caused Defendant’s alleged loss of use, enjoyment, and possession of the leased premises.
Accordingly, Defendant cannot
establish breach for Defendant’s loss of use, enjoyment, and possession of the
leased premises.
b. Breach for Failure to Provide Credit, Excuse Tenant from Rent Payment, and Proportionally Abate Rent During Closure Periods
Defendant alleges that Plaintiff breached the lease by failing to provide credit for Rent paid during the closure period and during the time the reduced capacity restrictions were in place despite Defendant’s repeated requests. (FACC ¶¶ 73, 75.) Defendant asserts the failure to provide credit and abate rent was in breach of the Lease Agreement, California Civil Code section 1511, and the common law doctrine of frustration of purpose. (FACC ¶¶ 75, 81.)
Defendant’s only support for
the assertion that the Lease Agreement provides for a release of liability and
rent abatement is paragraph 24 of the FACC related to condemnation and partial
takings:
Though Defendant fails to include a citation to the specific language above, a search of the Lease Agreement attached to the FACC reveals that the provisions can be found under Article XI of the Lease Agreement titled “Condemnation.” (FACC Ex. 1, Art. XI.)
Plaintiff argues that rent abatement under a lease is a defense rather than a claim, but the citation is to a District Court case and has no binding effect on this Court. (See Store SPE LA Fitness 2013-7, LLC v. Fitness International, LCC (C.D. Cal., Dec. 9, 2020, No. SACV20953JVSADSX) 2020 WL 8116171, at *3.) Plaintiff fails to cite any case holding that rent abatement provisions in a lease are a defense rather than a claim. Taking Defendant’s allegations as true for purposes of a demurrer, the Court cannot as a matter of law interpret the Lease Agreement as not requiring Plaintiff to abate rent due to government orders.
Therefore, Defendant has properly alleged that Plaintiff breached the Lease Agreement by failing to provide credit or abate rent as Plaintiff was obligated to under the Lease Agreement.
Moreover, any allegation that the purpose of the Lease Agreement was frustrated or made impossible or impracticable by the COVID-19 closures are defenses that Defendant is required to prove to show that performance was excused under the contract. (See Lloyd v. Murphy (1944) 25 Cal.2d 48, 54.) Accordingly, the fact that the purpose of the lease may have been frustrated or made impossible or impracticable does not establish that Plaintiff breached the Lease Agreement only that Defendant’s performance may be excused.
Moreover, Civil Code section 1511 is also a defense to the enforcement of a contract rather than an imposition of a legal obligation. (Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1185 [“The effect of this rule is that the nonperformance does not constitute a breach of contract and does not give rise to a remedy for breach of contract.].) “A party who has contracted to perform an act for an agreed consideration can maintain an action upon the contract even though he himself has failed to fully perform if performance on his part was prevented by operation of law, the act of the other party to the contract, the act of God, or of the public enemy. Civ. Code, §§ 1511, 1512, 1514.” (Gray v. Bekins (1921) 186 Cal. 389, 394.
Here, the fact that Defendant’s obligation to pay rent may be
excused under section 1511, does not support the assertion that Plaintiff
breached the Lease Agreement by failing to excuse Defendant’s performance. Defendant
fails to cite any legal authority holding that section 1511 imposes a legal duty
on a party to excuse the performance of another party. Therefore, Defendant has
failed to establish that Plaintiff breached the Lease Agreement by failing to
excuse Defendant’s performance under section 1511.
Since Defendant can establish that Plaintiff breached the terms of the Lease Agreement by failing to credit or abate rent, the demurrer is OVERRULED as the breach of contract cause of action on this basis.
Declaratory Relief
“A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court .... If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to favorable declaration.” (Cardellini v. Casey (1986) 181 Cal.App.3d 389, 395.) A request for declaratory relief may be brought alone or with other relief. (Code Civ. Proc., § 1060.) “But ‘[a] general demurrer is usually not an appropriate method for testing the merits of a declaratory relief action, because the plaintiff is entitled to a declaration of rights even if it is adverse to the plaintiff's interest.’ [Citation.]” (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 751.)
Defendant seeks declaratory relief as to whether it was obligated to pay rent during the closure period and during the time the reduced capacity restrictions were in place and whether Defendant’s performance was excused. (FACC ¶¶ 87, 89 - 97.)
Plaintiff argues that Defendant’s request for declaratory relief fails because relates to a past controversy, but there is a present controversy between the parties as to whether Defendant’s obligation to pay rent is excused.
Accordingly, the demurrer is OVERRULED as to Defendant’s request for declaratory relief.
Conclusion
Plaintiff’s/Cross-Defendant’s demurrer to the First Amended Cross-Complaint is OVERRULED.
Plaintiff to give notice.