Los Portales Association v. Fitness International CA4/2 (2022) · DecisionDepot
Los Portales Association v. Fitness International CA4/2
California Court of Appeal Nov 10, 2022 No. E078152Unpublished
Filed 11/10/22 Los Portales Association v. Fitness International CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
LOS PORTALES ASSOCIATION, LP
Plaintiff, Cross-defendant and E078152 Respondent, (Super.Ct.No. CVRI2102808) v. OPINION FITNESS INTERNATIONAL, LLC
Defendant, Cross-complainant and Appellant.
APPEAL from the Superior Court of Riverside County. Irma Poole Asberry,
Judge. Affirmed.
Dorsey & Whitney, Bryan M. McGarry, Lynnda A. McGlinn and Jessica M.
Leano for Defendant, Cross-complainant and Appellant.
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Law Offices of Daniel A. Kaplan, Daniel A. Kaplan and Daniel C. Pierce for
Plaintiff, Cross-defendant and Respondent.
In 2015, the predecessor in interest of Los Portales Associates, LP (Los Portales or
plaintiff), leased building space to Fitness International, LLC (Fitness or defendant), for
the commercial purpose of conducting a fitness club and other related business
enterprises. In March 2020, Fitness, like other businesses, was required to cease indoor
operations due to Covid-19 and informed Los Portales of its inability to pay rent. To
address the problem, Los Portales and Fitness entered into three successive letter
agreements modifying the lease to forgive or defer certain nonpayments of rent and
related expenses, while confirming Fitness’s obligation to repay the deferred rent
beginning in 2021. Fitness, which continued to occupy the rental premises throughout
the lease period, failed to repay the unpaid rent amounts and related expenses as agreed.
Los Portales filed a complaint against Fitness for recovery of the unpaid rent to which
Fitness filed a cross-complaint. Los Portales sought a prejudgment writ of attachment to
secure the amounts as yet unpaid, which was granted. Fitness appealed.
On appeal, Fitness argues (a) that the trial court abused its discretion in
considering two declarations which were originally filed (but were corrected prior to the
hearing) without indicating the state in which they were executed; (b) there is insufficient
evidence to support the order granting plaintiff Los Portales’s right to attach (1) due to
Los Portales’s breach of various provisions of the lease agreement; and (2) lack of
evidence Los Portales was likely to prevail on the merits. We affirm.
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BACKGROUND
In 2015, defendant Fitness entered into a retail lease agreement with the
predecessor in interest of plaintiff Los Portales, to lease certain premises, described in the
agreement, located in a then proposed shopping center at Menifee Lakes Plaza, in
Riverside County, including the right to use common areas. The primary term of the
lease was for 184 months (15 years, 4 months), with options to extend the term for three
consecutive 5-year terms. The rent for the premises comprised a minimum rent of
$886,160.00 per year ($73,846.67 per month), plus a share of the common area expenses,
insurance, and a pro rata portion of the real estate taxes. The primary use of the premises
was for the operation of a health club and fitness facility, along with various ancillary or
incidental uses of a retail nature as well as for other related uses. However, the lease
terms also permitted defendant to change its use of the premises to any alternate legal use
which is not otherwise expressly prohibited by the Lease and is not in conflict with any
exclusive use agreement then in effect.
In 2020, the Covid-19 pandemic interrupted businesses, and on April 6, 2020,
defendant failed to pay rent. As a preemptive matter, defendant emailed correspondence
to the various lessors to which it owed rent, indicating it would discuss lease
modifications. In addition, defendant’s general counsel emailed correspondence taking a
rather more aggressive tactic of asserting that the landlords were responsible for the
business closures by preventing Fitness from operating its business, interfering with
Fitness’s quiet possession and enjoyment of the premises, and for falsely representing
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that Fitness’s use of the premises would not violate any restrictions on its use. The letter
also asserted that due to the unforeseen occurrence of the pandemic closures, Fitness’s
operation of its business has been made impossible, and that its business purpose has
been frustrated, warranting abatement of all rents.
After engaging in negotiations, plaintiff and defendant executed a series of three
successive letter agreements, amending the lease and reaffirming Fitness’ obligation to
repay deferred rents at a later date. The first such agreement was dated June 9, 2020, and
provided that 50 percent of the rent due for the months of April and May was abated and
forgiven by plaintiff, while 35 percent of the rents for those months would be deferred
until January 2021, when it would be repaid by installments between January 1, 2021 and
June 30, 2022. The amendment further provided that the additional rents due under the
original lease (for common area maintenance and taxes) would also be delayed and
deferred until August 2020.
The second letter agreement was dated August 13, 2020, and further amended the
terms of the original lease and the June 9, 2020 letter agreement by deferring and
delaying the payment of the minimum rent for the month of August 2020 until January
2021, under the same terms as the previously deferred rents, but requiring payment of the
additional rent as provided under the original lease.
On October 9, 2020, a third letter agreement was executed, deferring 100 percent
of the minimum rent due for September 2020, subject to repayment as provided in the
previous letter agreements. No further or later modifications are alleged to have been
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requested by defendant Fitness. But in January 2021, defendant failed to initiate the
installment payments of the deferred rent.
On June 25, 2021, plaintiff filed a complaint comprising two causes of action: (a)
for rent and damages pursuant to Civil Code section 1951.4, and (b) for rescission based
on fraud in the inducement respecting the execution of the three modifications to the
lease for rent deferral, seeking recovery of $706,186.99 in damages for the first cause of
action, and for restitution of the full monthly rents ($73,846.67 per month as minimum
rent) under the original lease for the second cause of action, along with attorneys’ fees.
On August 6, 2021, plaintiff filed an application for a right to attach order and an
order for issuance of a writ of attachment to secure the amount of $796,232.87 plus costs
in the amount of $1,008.42, and attorneys’ fees in the amount of $89,391.1 Thereafter,
on August 11, 2021, defendant Fitness answered the complaint and filed a cross-
complaint against Los Portales alleging two causes of action for breach of contract
(referring to the force majeure provision and the provision governing the lessor’s
representations, warranties and covenants), three causes of action sounding in common
counts (for money had and received, for money paid by mistake, and monies paid and
expended), and two causes of action for declaratory relief (referring to the closure period
and ongoing restrictions).
1 The application was supported by two declarations which, although executed within the State of California, omitted to state that the declarations were executed in the state. Fitness objected to the declarations. Thereafter, plaintiff submitted corrected declarations, with the same substantive averments, but with the execution in proper form. The corrected declarations were submitted prior to the hearing, and there is no evidence in the record that defendant objected to their filing.
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The hearing on plaintiff’s application for order and issuance of a writ of
attachment took place on October 6, 2021, when it was taken under submission. On
November 4, 2021, the court issued its ruling on the submitted matter, granting plaintiff’s
application for order regarding the writ of attachment subject to an undertaking in the
amount of $10,000. Upon proof of the undertaking, the right to attach order and order for
issuance of writ of attachment were issued. Defendant appealed.
DISCUSSION
Defendant argues that the trial court erred in granting plaintiff’s application for
order and issuance of the writ of attachment because (a) the declarations submitted in
support of plaintiff’s application were not in proper form, lacking the statements that they
were executed under the laws of the State of California pursuant to Code of Civil
Procedure section 2015.5, and (b) there is insufficient evidence to support the finding of
plaintiff’s likelihood of prevailing on the merits in light of the force majeure provision of
the lease and the plaintiff’s breach of various warranties and duty to indemnify. We
disagree.2
2 The parties filed competing requests for judicial notice in this court: On February 22, 2022, defendant Fitness requested that we take judicial notice of a trial level decision from a Michigan Circuit court in a case that is wholly inapposite to the issues involved in the current case. We deny that request for judicial notice. Thereafter, on April 15, 2022, Los Portales made a request that we take judicial notice of several documents. One document was Governor Newsome’s Executive Order N-28-20, which apparently was not submitted to the trial court although the trial court apparently took notice of several other executive orders. The other documents attached to Los Portales’s request pertain to trial court orders in other cases involving Fitness, International, LLC, from other counties, which also were not considered by the trial court. We deny this request for judicial notice, also. [footnote continued on next page]
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First, the argument that the declarations submitted by Los Portales in support of its
application for writ of attachment should have been rejected is a non-issue. Defendant,
who prepared the appendix on appeal, failed to acknowledge that the place of execution
was duly included in corrected declarations, which were submitted prior to the hearing,
and were filed without objection by defendant. We are disappointed by defendant’s
counsel’s act of submitting an incomplete version of the corrected declarations sans
execution pages, where the record demonstrates defendant did receive the complete
versions of the corrected declarations, while arguing that the very portion omitted was
defective. Such conduct, at a very minimum, is disrespectful of the court.
In any event, the corrected declarations fully conform with Code of Civil
Procedure section 2015.5, disposing of this non-issue, so we will not be further
distracted. We turn to the propriety of the trial court’s order granting the requested
prejudgment relief on the merits.
Next, on May 16, 2022, Fitness submitted a supplemental request for judicial notice in support of its reply brief. We deny this request as moot. Finally, on May 31, 2022, Los Portales filed a supplemental request for judicial notice in opposition to Fitness’s supplemental request for judicial notice. We deny this request as moot, also. The parties may wish to review the rules governing requests for judicial notice in the reviewing court. (See, Cal.Rules of Ct., rule 8.252; Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1141, fn. 6, citing Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1064 [overruled on a different point in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276; see also, Ross v. Creel Printing & Publishing Co. (2002) 100 Cal.App.4th 736, 743 [judicial notice is limited to the fact of the existence of hearsay documents, and not the truth of the contents thereof].) Given that decisions of other inferior courts, especially out-of-state courts, necessarily involve the application of different legal principles to different facts, as well as the fact none of the decisions posited for judicial notice is a decision by a reviewing court, their usefulness in this appeal is nil.
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a. General Principles Governing Prejudgment Attachments
Code of Civil Procedure section 483.010, subdivision (a), provides that “an
attachment may be issued only in an action on a claim or claims for money, each of
which is based upon a contract, express or implied, where the total amount of the claim or
claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500)
exclusive of costs, interest, and attorney’s fees.” “The term ‘contract’ as used in Code of
Civil Procedure section 483.010, subdivision (a) has been interpreted to include leases of
real or personal property.” (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc.
743, 751; California Ins. Guarantee Assn. v. Workers’ Comp. Appeals Bd. (1992) 10
Cal.App.4th 988, 997.)
Defendant does not appear to acknowledge the impact of the modifications to the
lease, and instead asserts that defenses under the original, unmodified, lease excused its
obligation to pay rent. We agree that under the provisions of the original lease, the force
majeure provision might have excused the obligation to pay rent, but instead of vacating
the premises promptly following notice to the lessor of the conditions that would give rise
to that excuse, as required under the force majeure clause, defendant continued in
possession of the leasehold premises, made some payments of rent during the period of
the lockdown, and entered into negotiations by which the lease was modified. In this
respect, any defense under the lease, including alleged violations of covenants or
warranties, were forfeited by defendant’s subsequent agreement to pay the deferred rent.
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On this basis alone, plaintiff demonstrated probable validity of its claim. Moreover,
defendant’s tactic of repudiating the modifications supports plaintiff’s claim for
rescission and restitution due to fraud, as alleged in its complaint.
Notwithstanding the force majeure provisions of the original lease, as well as the
statutory provisions of Civil Code section 1511, subparagraph (1), governing the
principle of impossibility of performance, defendant and plaintiff entered into three
separate letter agreements by which the original lease was modified. In those letter
agreements, plaintiff forgave a portion of the unpaid rent and agreed to a deferment of its
right to collect monthly payments of rent in return for defendant’s agreement to repay the
deferred rents in monthly installments beginning in 2021.
At this point we note that the sole authorities relied upon by defendant in support
of its force majeure defense are two unpublished trial level decisions from an out-of-state
jurisdiction, involving the same parent company but not involving similar facts. (ROIC
Four Corner Square, LLC v. Fitness International, LLC, Case No. 21-2-04531-9 (Oct. 8,
2020, Wash. Super. Ct., Pierce Cnty; BAI Century LLC v. Fitness International, LLC, No.
2021 L 1322 (Cook Cty, Ill. Sept. 30, 2021.) We take defendant’s reliance on such
decisions to be a concession that its position lacks support under relevant and citable
California authority. While unreported appellate decisions may be considered persuasive
in an appropriate case (Charpentier v. L.A. Rams Football Co. (1999) 75 Cal.App.4th
301, 310, fn. 8, citing People v. Davis (1998) 19 Cal.4th 301, 306, in turn citing State v.
Higgs (Ohio Ct. App., Jan. 12, 1990, No. WD-89-6) 1990 WL 1351), outside the judicial
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district which gave rise to an unreported trial level decision, such a cited reference has
minimal-to-no precedential value. We are also unpersuaded by out-of-state bankruptcy
opinions from trial level motions which do not involve facts or legal principles relevant to
those presented here. Thus, while defendant may cite the out-of-state authority3, we are
not bound to follow it.
By engaging in these negotiated letter agreements, defendant induced plaintiff to
defer payment of previously due rents that had accrued under the original lease and was
permitted to remain in possession of the leased premises. Defendant intended for
plaintiff to rely on its modified promises, which plaintiff did, ignorant that defendant
would refuse to pay the deferred rent by relying on provisions of the lease in effect prior
to the modifications. This was detrimental to plaintiff. “‘It is well settled that a person
by his conduct may be estopped to rely upon [certain] defenses.’ [Citations.]” (Benner v.
Industrial Acci. Com. (1945) 26 Cal.2d 346, 350, quoting Adams v. California Mut. B. &
L. Assn. (1941)18 Cal.2d 487, 488.) By inviting plaintiff’s participation in the lease
modification discussions, which reaffirmed plaintiff’s right to collect the deferred rents,
Fitness forfeited the right to claim defenses under the original lease by negotiating
3 In support of its reliance on out-of-state trial level decisions, defendant refers us to California Rules of Court, rule 8.111(a), which is no longer in effect. In its stead is rule 8.115, which permits the citation of unpublished appellate opinions in appropriate circumstances. Defendant also cites opinions supporting this assertion, one of which has been disapproved by the California Supreme Court (without indicating the subsequent history of the decision), for the propriety of its reliance without recognizing that the cases cited merely reaffirm the propriety of citing unpublished appellate decisions in certain circumstance. These cases are inapposite and are not authority for the proposition that we should consider unpublished out-of-state rulings from inferior tribunals.
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successive modifications to the original lease. (See Leasequip, Inc. v. Dapeer (2002) 103
Cal.App.4th 394, 403.)
It bears noting that it was defendant who initiated the negotiations which led to the
modifications or amendments to the original lease and transmitted that invitation
concurrently with the emailed letter from defendant’s general counsel, informing plaintiff
that defendant was excused from paying rent under the force majeure provisions, as well
as by plaintiff’s alleged violation of warranties and covenants under the original lease.
The clear import of defendant’s coordinated actions was to threaten to cancel the lease
under the force majeure clause unless plaintiff provided some relief from the duty to pay
rent. It is reasonable to conclude that defendant’s subsequent decision to agree to the
modifications to the lease signaled an intent to abandon those defenses under the lease
during the period of rent deferment in return for retaining possession of the leasehold,
having motivated plaintiff to defer the collection of the rent by its threat of relying on the
lease terms excusing payment.
The modifications to the original lease are the elephant in the room. Because
defendant expressly reaffirmed plaintiff’s entitlement to unpaid and deferred rents in
return for agreements allowing it to retain possession of the premises during the months
in which no rents were paid, plaintiff established its claim was of “probable validity.”
Absent any citation to relevant California authority, the trial court properly rejected
defendant’s arguments that its duty to pay rent was excused.
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Defendant also asserts the court erred in granting plaintiff’s application due to the
availability of other defenses under the original lease. For instance, it asserts plaintiff
breached the lease provisions governing defendant’s right to quiet enjoyment of the
leased premises when the State of California ordered the shutdowns, as if plaintiff was
responsible for the executive orders issued during the pandemic. Again, defendant relies
on inapposite authority and an improbable premise to make the case that plaintiff is
responsible for the executive orders requiring businesses to shut down in such a way as to
give rise to liability for interfering with defendant’s quiet enjoyment. We reject these
arguments.
First, the argument ignores the legal effect of the three consecutive letter
agreements which defendant executed agreeing to repay the deferred rent, commencing
January 1, 2021. Second, cases cited by defendant involving dangerous conditions of the
premises created by a lessor (ref. Stowe v. Fritzie Hotels, Inc. (1955) 44 Cal.2d 416, 423),
are not relevant to the issues presented here where the cessation of business is not due to
a dangerous condition created by plaintiff, or the result of any action on plaintiff’s part.
Similarly, we are unwilling to hold that the plaintiff violated a lease provision
agreeing to indemnify defendant where the condition of business closure was not
attributed to any conduct by plaintiff which may have exposed defendant to liability.
Defendant seeks to evade its obligation by pointing to the dependent nature of its
obligation respecting the covenant for indemnification. The authority cited does not
support the defendant’s premise. In Kulawitz v. Pacific Woodenware & Paper Co.
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(1944) 25 Cal.2d 664, 669, the court stated: “A covenant not to let other premises in the
lessor’s property or permit their use for certain purposes during the existence of the lease
with the covenantee is binding and a breach thereof entitles the lessee to terminate the
lease. [Citation.] The result in such cases is based on the rule that the condition broken
by the covenantor excuses performance by the covenantee.”
Here, plaintiff did not violate any covenant of the lease and nothing in the
authority cited supports the notion that the plaintiff is responsible for the closure of
defendant’s business pursuant to an executive order issued by the governor. Nor does the
cited authority involve a modification of the lease following the tenant’s breach of the
obligation to pay rent, where the modification reaffirmed the tenant’s rent obligation
despite the circumstances.
Defendant also argues that its duty to pay rent is dependent on its right to operate
its business. Again, the authorities cited are inapposite, because in each case, the lessor
violated an express covenant in the lease, which did not occur here. Defendant relies
heavily on the case of Medico-Dental Bldg. Co of Los Angeles v. Horton & Converse
(1942) 21 Cal. 2d 411, where the lease stated that the lessor was not to lease any other
premises in the building to another entity which operated a drug store. A doctor moved
into the building and signed a lease in which he covenanted he would not operate a drug
store, but soon violated that covenant by operating a drug store in the same building. The
original lessee advised the lessor of the breach of the restrictive covenant not to lease to a
drug store, but the lessor was unable to stop the doctor’s operations, so the lessee vacated
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before another rent payment was due. The court held that the tenant did not breach his
lease by vacating the premises because the lessor, in failing to abate the competing drug
store, violated the restrictive covenant. (Medico-Dental Bldg., supra, 21 Cal.2d at p.
434.)
The above authority does not support an inference that plaintiff breached a
covenant without some showing that plaintiff was responsible for the closure orders
issued by the State of California. Additionally, the authority cited supports our
conclusion that in order to rely on the affirmative defense of breach of a covenant,
defendant was required to vacate the premises. Further, the authorities relied upon by
defendant do not address the all-important fact in this case regarding defendant’s active
participation in successive letter agreements after the declaration of the state of
emergency, reaffirming its obligation to pay back the deferred rent.
Defendant agreed to pay the deferred rents in 2021, so it cannot argue with a
straight face that its duty to pay rent was dependent on its ability to operate its business.
Nor can it have it both ways: reliance on the excuses for nonpayment of rent under the
original, non-modified provisions of the lease, required defendant to vacate the premises,
which defendant did not do. Instead, defendant sought to have it both ways: avoid the
payment of rent during the shutdown, while also avoiding the need to terminate the lease
based on force majeure or Civil Code section 1511, and vacating the premises.
Further, defendant asserts the trial court misconstrued the purpose of the lease as
being for the occupancy of the premises, as opposed to the operation of a business. We
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disagree. The trial court correctly concluded that while the lease permitted or authorized
defendant to conduct business as a health club on the premises, it by no means required
defendant to do so, and, in fact, authorized defendant to conduct other types of business
on the premises. In other words, the basic object of the lease was for the right to occupy
certain premises in which defendant was permitted to conduct its business. Of note is the
fact that during the period of the shutdown, defendant continued to occupy the premises,
subject to a modification of the lease permitting it to defer rent payments until 2021.
Further, other provisions of the lease permitted defendant to conduct other forms of
business on the premises, so it was not limited to running a health club. Thus,
defendant’s duty to pay rent was not dependent on its ability to conduct business as a
health club.
To summarize, defendant’s tortured interpretation of plaintiff’s obligations,
warranties and covenants under the lease do not aid its position that plaintiff’s claim was
not of probable validity, where defendant agreed to modifications to the lease which
included a reaffirmation of its obligation to pay deferred rent and affirmance of the
lessor’s right to enforce the same.
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DISPOSITION
The judgment is affirmed. Respondent is entitled to costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS RAMIREZ P. J.
We concur:
McKINSTER J.
MILLER J.
19
AI Brief
AI-generated · verify before citing
Holding. The court held that the trial court properly granted a prejudgment writ of attachment because the parties' subsequent lease modification agreements, in which the tenant agreed to repay deferred rent, established the probable validity of the landlord's claim and precluded the tenant from asserting prior lease defenses.
Issues
Whether the trial court abused its discretion in considering corrected declarations that were filed prior to the hearing.
Whether the trial court erred in finding the landlord's claim had 'probable validity' for purposes of a prejudgment writ of attachment.