Opinion
B316030
10-31-2023
DRG CONTINENTAL CANOGA, Plaintiff and Respondent, v. SOLARIS TRADING CORPORATION et al., Defendants and Appellants.
Salisian Lee, Neal S. Salisian, Glenn R. Coffman, and Woody L. Jones for Defendants and Appellants. Boren, Osher & Luftman, Stephen Z. Boren, and Steven F. Kuehl for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. 20STCV22840, Daniel S. Murphy, Judge. Reversed.
Salisian Lee, Neal S. Salisian, Glenn R. Coffman, and Woody L. Jones for Defendants and Appellants.
Boren, Osher & Luftman, Stephen Z. Boren, and Steven F. Kuehl for Plaintiff and Respondent.
LAVIN, Acting P.J.
INTRODUCTION
Plaintiff DRG Continental Canoga (DRG) leased property to defendant Solaris Trading Corporation (Solaris) under a one-year commercial lease agreement. Defendant Stefan Bostanian personally guaranteed Solaris's performance under the lease.Shortly after Solaris took possession of the property, a roll-up door malfunctioned and a water heater serving the property broke, causing the property to flood. DRG fixed both issues, but Solaris was unable to use the property for about three months. Although Solaris paid rent for those three months, it did not pay rent for several other months and demanded DRG abate Solaris's rent for the time the property was unusable. DRG sued Solaris for breach of the lease agreement and Bostanian for breach of the personal guaranty. Solaris filed a cross-complaint, claiming DRG breached the lease agreement and the covenant of quiet use and enjoyment.
We sometimes collectively refer to Solaris and Bostanian as "defendants."
The trial court granted summary adjudication in DRG's favor on both causes of action asserted in its complaint, finding it was undisputed that Solaris breached the lease agreement by, among other things, failing to pay several months' rent and that Bostanian was liable for Solaris's breach as the guarantor of the lease agreement. The court also found that under the terms of the lease agreement, DRG was not obligated to abate Solaris's rent for the months the property was unusable. The court later granted DRG's motion for judgment on the pleadings as to Solaris's cross-complaint, finding both of Solaris's cross-claims were mooted by its ruling on the summary adjudication motion, and entered judgment in DRG's favor on the complaint and the cross-complaint.
Because triable issues exist as to DRG's breach of contract and related breach of guaranty claims, the court erred by granting DRG's summary adjudication motion and motion for judgment on the pleadings. We therefore reverse the judgment.
FACTS AND PROCEDURAL BACKGROUND
1. The Lease
DRG owns an industrial warehouse in Canoga Park. The building has two units, Unit A and Unit B. Bostanian is the president and chief executive officer of Solaris, which operates a business that sells and distributes car tires.
In mid-October 2019, Bostanian and DRG began negotiating an agreement for Solaris to lease Unit A, which Solaris intended to use to store and distribute tires and other products related to its business. While Bostanian was inspecting the property, he noticed that a metal roll-up door and a "man door" "appeared deteriorated and had mechanical problems and limited functionality." Bostanian informed DRG that Solaris was willing to lease Unit A "As Is" so long as "all electrical system[s] and the roll up door are in operable condition."
In late October 2019, DRG agreed to lease Unit A to Solaris for one year, beginning on November 1, at a monthly rate of $11,457.60 plus other charges (Lease). Bostanian personally guaranteed Solaris's performance under the Lease (Guaranty).
When Solaris took possession of Unit A on November 1, 2019, Bostanian noticed that the roll-up door "was still malfunctioning, inoperable and could not be secured or locked." On November 11, DRG hired a contractor to fix the door. According to Bostanian, Solaris couldn't use Unit A as an "automotive tire warehouse" until the door was fixed.
In mid-November 2019, a water heater located above Unit A's and Unit B's adjacent bathrooms burst, flooding Unit A and causing water damage to the property's ceiling, walls, and floor. Although DRG promptly replaced the water heater and hired a contractor to clean Unit A and repair its damaged areas, the work took several weeks to complete. As a result, Solaris was unable to use Unit A as a tire warehouse until the end of January 2020.
On November 27, 2019, Bostanian sent a letter demanding that DRG abate Solaris's rent for the months Unit A was unusable for Solaris's business. DRG denied Solaris's request.
Solaris paid rent for November 2019 through March 2020 and for August and September 2020, but it did not pay rent for any other months covered by the Lease.
2. The Lawsuit
In June 2020, before the Lease expired, DRG sued Solaris and Bostanian. DRG asserted two causes of action, one against Solaris for breach of the Lease and another against Bostanian for breach of the Guaranty. DRG alleged Solaris breached the Lease by failing to pay several months' rent, as well as other fees and late charges, and that Bostanian was personally responsible for Solaris's breach of the Lease.
In August 2020, Solaris filed a cross-complaint against DRG for breach of the Lease and breach of the covenant of quiet use and enjoyment. Both of Solaris's claims arise out of allegations that DRG failed to: (1) deliver Unit A in good working condition; and (2) abate Solaris's rent for the three months that Unit A was unusable due to the inoperable roll-up door and damage caused by the broken water heater.
On October 31, 2020, the final day of the Lease, Solaris failed to surrender Unit A to DRG. After DRG filed an unlawful detainer action, Solaris vacated the property on November 30, 2020.
In February 2021, DRG moved for summary adjudication of both causes of action asserted in its complaint. In support of its motion, DRG submitted copies of the Lease and the Guaranty. DRG also submitted evidence that it delivered possession of Unit A to Solaris at the beginning of the Lease and allowed Solaris to occupy the property until the end of the Lease's term. DRG also submitted evidence showing Solaris failed to pay several months' rent and refused to vacate Unit A at the end of the Lease's term. DRG claimed it suffered nearly $100,000 in damages as a result of: (1) Solaris's missed rent payments; (2) Solaris's failure to pay late charges associated with the missed rent payments; (3) Solaris's failure to pay "holdover" rent for the month it occupied Unit A after the Lease expired; (4) DRG's out-of-pocket expenses to fix Unit A's roll-up door; and (5) interest on all of Solaris's outstanding payments.
Defendants opposed DRG's summary adjudication motion. They didn't dispute that Solaris breached the Lease by failing to pay several months' rent and failing to vacate Unit A at the end of the Lease. Rather, they argued there were disputed issues of material fact concerning DRG's performance under the Lease and the amount of damages DRG suffered as a result of Solaris's breach of the Lease. Specifically, defendants claimed that under the Lease, DRG was required to abate, or offset, Solaris's rent payments for the several months that Unit A was unusable due to the inoperable roll-up door and the damage caused by the broken water heater. At a minimum, defendants argued, DRG's claimed damages were "subject to a reduction and/or setoff equal to the amount of the rent abatement[] of at least $35,712.99."
The court granted DRG's summary adjudication motion in its entirety. The court found DRG met its initial burden to establish Solaris breached the Lease and that Bostanian was liable for that breach under the Guaranty. The court also rejected defendants' claim that there is a disputed issue of material fact concerning Solaris's entitlement to rent abatement under the Lease.
In June 2021, DRG filed a motion for judgment on the pleadings, challenging Solaris's cross-complaint. DRG argued both of Solaris's cross-claims were mooted by the court's ruling on the summary adjudication motion.
The court granted DRG's motion for judgment on the pleadings and entered judgment in DRG's favor on DRG's complaint and Solaris's cross-complaint. The court later awarded DRG attorney fees and costs and entered an amended judgment reflecting that award.
Defendants appeal.
DISCUSSION
1. Summary Adjudication
Defendants contend the court erred in granting summary adjudication in DRG's favor on both causes of action asserted in DRG's complaint. According to defendants, triable issues of fact exist as to whether DRG breached the Lease by failing to abate Solaris's rent and whether DRG's damages should be offset to account for Solaris's rent that should have been abated. We agree.
1.1. Standard of Review
A court may grant a motion for summary adjudication "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).) "On review of an order granting summary adjudication, we apply the same standard of review applicable on appeal from a grant of summary judgment." (Schofield v. Superior Court (2010) 190 Cal.App.4th 154, 156.) The moving party bears the initial burden of production to make a prima facie showing that no triable issues of material fact exist and that it is entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party meets this burden, the burden of production shifts to the opposing party to show a triable issue of material fact exists. (Id. at pp. 850-851.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850.)
We independently review a trial court's ruling on a motion for summary adjudication. (King v. Wu (2013) 218 Cal.App.4th 1211, 1213.) We liberally construe the evidence in favor of the opposing party and resolve all doubts about the evidence in that party's favor. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.) We consider all evidence the parties submit in connection with the motion, except that which the court properly excluded. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)
1.2. Triable issues exist as to DRG's claims for breach of contract and breach of guaranty.
To prevail on a claim for breach of contract, a plaintiff must prove: (1) the existence of a contract; (2) the plaintiff's performance, or excuse for nonperformance, under the contract; (3) the defendant's breach of a term of the contract; and (4) damages resulting from that breach. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
DRG met its initial burden to show it was likely to prevail on its breach of contract claim. The parties don't dispute the Lease is a valid contract. DRG presented evidence that, among other things, Solaris did not pay several months' rent and failed to vacate Unit A at the end of the Lease's one-year term. DRG also presented evidence that it performed under the Lease when it delivered Unit A to Solaris at the Lease's start date and allowed Solaris to occupy the property for the Lease's duration. As for DRG's breach of guaranty claim, the parties don't dispute it is dependent on DRG's breach of contract claim.
Since DRG met its initial burden of production, the burden shifted to defendants to show a triable issue exists as to at least one element of DRG's breach of contract claim or an affirmative defense to that claim. Defendants contend they met that burden by presenting evidence that DRG breached the Lease by failing to abate Solaris's rent for the months Unit A was unusable due to the inoperable roll-up door and the damage caused by the broken water heater. Because there is a triable issue as to whether DRG was required to abate Solaris's rent, defendants argue, there is also a triable issue concerning whether DRG's damages should be reduced.
Whether the Lease required DRG to abate Solaris's rent involves a question of contract interpretation, which we review de novo. (Wolf v. Walt Disney Pictures &Television (2008) 162 Cal.App.4th 1107, 1125.) The purpose of contract interpretation is to give effect to the parties' mutual intention. (Canyon Vineyard Estates I, LLC v. DeJoria (2022) 78 Cal.App.5th 995, 1003.) If the contract's language is clear and explicit, that language governs interpretation. (Civ. Code, § 1638.) Thus, if a contract "is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible." (Id., § 1639.)
Paragraph 9.6(a) of the Lease addresses when DRG is required to abate Solaris's rent. That provision provides, in relevant part, that if Unit A suffers "Partial Damage" for which Solaris "is not responsible under the Lease, the Rent payable by [Solaris] for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which [Solaris's] use of [Unit A] is impaired ... ." The Lease defines "Partial Damage" as "damage or destruction to the improvements on [Unit A], other than [Solaris] Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction."
Thus, according to Paragraph 9.6(a), DRG was required to abate Solaris's rent only if Solaris was not responsible for the damage to Unit A that affected its use of the property. Three provisions of the Lease-Paragraphs 2.2, 7.1, and 7.2-address Solaris's and DRG's respective obligations for maintaining and repairing Unit A.
Under Paragraph 7.2, DRG is responsible for keeping "in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof ... ."
Paragraph 7.1(a) requires Solaris "at [its] sole expense, [to] keep [Unit A,] Utility Installations (intended for [Solaris's] exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of [Unit A] requiring repairs, or the means of repairing the same, are reasonably or readily accessible to [Solaris,] and whether or not the need for such repairs occurs as a result of [Solaris's] use, any prior use, the elements or the age of such portion of [Unit A]) including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of [DRG] pursuant to Paragraph 7.2." Paragraph 7.1(a) also makes Solaris responsible for "restorations, replacements or renewals when necessary to keep [Unit A] and all improvements thereon or a part thereof in good order, condition and state of repair." And, together with Paragraph 7.1(b), Paragraph 7.1(a) requires Solaris, "in keeping [Unit A] in good order, condition and repair, [to] exercise and perform good maintenance practices, specifically including the procurement and maintenance of . [¶] [service] contracts . with contractors specializing and experienced in the maintenance of . (i) HVAC equipment, (ii) boiler and pressure vessels, and (iii) clarifiers."
Paragraph 2.2 provides, in relevant part, that "so long as the required service contracts described in Paragraph 7.1(b) are obtained by [Solaris] and in effect within thirty days following [the Lease's] Start Date, [DRG] warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ('HVAC'), loading doors, sump pumps, if any, and all other such elements in the Unit, other than those constructed by [Solaris,] shall be in good operating condition" for the first 30 days of the Lease (or the first 6 months of the Lease for issues related to the HVAC system). If one of those "systems or elements" "malfunction[s] or fail[s]" within the applicable warranty period, DRG guaranteed it would, "as [its] sole obligation with respect to such matter" rectify the failure or malfunction.
Reading these provisions together, the following is clear. Solaris generally was responsible under Paragraph 7.1(a) for maintaining and repairing Unit A, including most improvements on the property, while DRG was required under Paragraph 7.2 to maintain and repair the common areas outside Unit A, the exterior of Unit A, and some structural elements inside Unit A. Paragraph 2.2 provides a limited exception to Paragraph 7.1(a)'s language making Solaris generally responsible for maintaining and repairing Unit A. That is, under Paragraph 2.2, DRG guaranteed it would keep Unit A in good working condition, including repairing damage or other issues related to the property, for at least the first 30 days of the Lease "so long as" Solaris obtained the service contracts identified in Paragraph 7.1(b) within the same period.
In opposing summary adjudication, Solaris conceded it never obtained any of the service contracts identified in Paragraph 7.1(b). Thus, under a plain reading of the Lease, it appears Solaris never triggered DRG's warranty to maintain and repair the areas of Unit A identified in Paragraph 2.2. Accordingly, Solaris was responsible for maintaining and repairing any damage to Unit A that falls within the scope of Paragraph 7.1(a). As we explain, however, there is a triable issue as to whether the damage to Unit A caused by the broken water heater falls within Paragraph 7.1(a)'s scope.
As noted above, Paragraph 7.1(a) makes Solaris responsible for maintaining and repairing, among other things, "Utility Installations" that are "intended for [Solaris's] exclusive use, no matter where located." Paragraph 7.3(a) defines "Utility Installations" as "all floor and window coverings, air and/or vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises." (Italics added.) Reading these provisions together, Solaris was responsible for maintaining and repairing all plumbing that was intended for its "exclusive use."
In support of defendants' opposition to summary adjudication, Bostanian testified that the broken water heater that damaged Unit A was located above Unit A and Unit B and served both units. Defendants also asserted below that the water heater was part of Unit A's plumbing system, and DRG does not challenge that assertion on appeal.
Defendants, therefore, raised a triable issue as to whether the water heater constitutes a "Utility Installation" that was intended for Solaris's exclusive use-i.e., whether it was intended to serve only Unit A or both Unit A and Unit B. If the water heater was not intended for Solaris's exclusive use, then Solaris was not responsible for repairing the water heater and the damage caused by it under Paragraph 7.1(a). Indeed, DRG's conduct following the water heater's malfunction supports such an inference, as DRG promptly hired a contractor to fix the water heater and repair the damage it caused to the property.
DRG argues Solaris nevertheless was responsible for the damage caused by the water heater because DRG disclaimed any responsibility for the condition of Unit A under Paragraph 50 of the Lease. Paragraph 50 provides, in relevant part, that Solaris shall lease Unit A" 'As Is', 'With All Faults', [and] 'without any representations or warranties' and [DRG] shall have no obligation to perform or pay for any improvements or modifications to" Unit A, except that DRG agreed to, at its "sole cost and expense," repair Unit A's "rear man door and door lock associated with [the] same." Paragraph 50 was part of an addendum to the Lease, which includes prefatory language that states, "[t]o the extent ... the provisions of this Addendum are inconsistent with the terms and conditions of the Lease, the terms of this Addendum shall[] supersede, prevail and control for all purposes."
According to DRG, Paragraph 50 establishes that Solaris accepted responsibility for repairing all damage caused to Unit A during the Lease term. To the extent Paragraphs 7 and 9.6(a) are inconsistent with Paragraph 50, DRG argues, those provisions are nullified by the prefatory language to the Lease's addendum. We disagree.
Courts must read contracts as a whole, "so as to give effect to every part, if reasonably practicable, [with] each clause helping to interpret the other." (Civ. Code, § 1641.) Thus, we must "interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless." (City of Atascadero v. Merrill Lynch, Pierce, Fenner &Smith, Inc. (1998) 68 Cal.App.4th 445, 473 (Atascadero).) Our primary goal is to give effect to the mutual intention of the parties, which "is determined by objective manifestations of the parties' intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent acts and conduct of the parties." (Id. at pp. 473-474.)
Reading the Lease as a whole, we do not interpret Paragraph 50 to disclaim any responsibility on DRG's part to repair Unit A regardless of when the underlying damage arose or where the cause of that damage was located. Paragraph 50 does not state that DRG has no obligation to repair Unit A. Instead, it expressly disclaims DRG's obligation to "improve[]" or "modif[y]" the property. To read into Paragraph 50 language disclaiming any duty on DRG's part to repair Unit A would nullify other provisions of the Lease, such as Paragraphs 2.2 and 7.2, which establish when DRG is responsible for repairing the property. We must avoid such a reading of the Lease. (Atascadero, supra, 68 Cal.App.4th at pp. 473-474.)
In addition, as we explained above, other provisions of the Lease-Paragraphs 2.2, 7.1, and 7.2-expressly reference the parties' respective obligations to repair damage to Unit A. Thus, the parties knew how to assign responsibility for repairing the property. Had they intended to disclaim any responsibility on DRG's part to repair the property through Paragraph 50, they knew how to include such language in that provision. (See Levi Strauss &Co. v. Aetna Casualty &Surety Co. (1986) 184 Cal.App.3d 1479, 1486 [courts will not add a term about which a contract is silent].) Finally, DRG's decision to promptly repair the water heater and the damage it caused to Unit A indicates the parties did not intend to disclaim DRG's responsibility to repair any damage to the property. (Atascadero, supra, 68 Cal.App.4th at p. 474 [courts may look to the parties' subsequent acts to ascertain their mutual intent under the contract].)
In short, a triable issue of fact exists as to whether Solaris was responsible for repairing the damage to Unit A caused by the water heater. Because Solaris's right to rent abatement under Paragraph 9.6(a) turns on whether Solaris was responsible for repairing that damage, there necessarily are triable issues as to whether DRG breached the Lease and whether DRG's damages caused by Solaris's breach should be reduced. The court, therefore, should not have granted summary adjudication on DRG's claims for breach of contract and breach of guaranty.
2. Judgment on the Pleadings
Solaris also challenges the court's order granting DRG's motion for judgment on the pleadings, which attacked Solaris's cross-complaint. DRG based its motion for judgment on the pleadings entirely on its argument that both of Solaris's cross-claims were rendered moot by the court's ruling granting summary adjudication in DRG's favor on its breach of contract claim. Because the court should not have summarily adjudicated DRG's breach of contract claim, we must reverse the court's order granting DRG's motion for judgment on the pleadings.
DISPOSITION
The judgment is reversed. Solaris and Bostanian shall recover their costs on appeal.
WE CONCUR: EGERTON, J., ADAMS, J.