Opinion
B296192
04-27-2021
GARLAND CONNECT, LLC, Plaintiff and Appellant, v. HRRP GARLAND, LLC, Defendant and Respondent.
Arias Sanguinetti Wang & Torrijos, Mike Arias and Alfredo Torrijos, Kellner Law Group, Richard L. Kellner, for Plaintiff and Appellant. Gibson, Dunn & Crutcher, James P. Fogelman, Jay P. Srinivasan, Harper Gernet-Girard, and Lori Arakaki, for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC692951) APPEAL from a judgment of the Superior Court of Los Angeles County, Richard Rico, Judge. Affirmed. Arias Sanguinetti Wang & Torrijos, Mike Arias and Alfredo Torrijos, Kellner Law Group, Richard L. Kellner, for Plaintiff and Appellant. Gibson, Dunn & Crutcher, James P. Fogelman, Jay P. Srinivasan, Harper Gernet-Girard, and Lori Arakaki, for Defendant and Respondent.
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INTRODUCTION
Garland Connect, LLC appeals from a judgment of dismissal entered after the trial court sustained without leave to amend the demurrers filed by defendant HRRP Garland, LLC to Garland Connect's first amended complaint. The trial court also denied Garland Connect's motion to compel arbitration.
Garland Connect argues that the trial court erred by ruling on HRRP's demurrers before addressing Garland Connect's motion to compel arbitration and erred in denying the motion to compel arbitration. Garland Connect also argues that HRRP's demurrers should not have been sustained. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
"In considering whether a demurrer should have been sustained, 'we accept as true the well-pleaded facts in the operative complaint.'" (Beacon Residential Community Assn. v. Skidmore, Owings, & Merrill LLP (2014) 59 Cal.4th 568, 571.)
A. The Garland Center
The Garland Center (the Center) is a commercial building in Los Angeles containing offices and a data center. In 2011 Wells Fargo Bank owned the land under the Center. Wells Fargo leased the land to Trumbull Associates Limited Partnership; Trumbull owned the Center. Trumbull leased the land and the Center to RML Leasing Corp. (the Master Lease). RML in turn leased the land and the Center to Charter Holdings, Inc., known as "Charter Parent" (the RML Lease). Charter Parent subleased space in the Center to Charter Garland MMR, Inc., known as "Charter Sub." B. The Operating Agreement and the Extension Options
On March 7, 2011 Garland Connect and Charter Sub entered into an agreement pursuant to which Garland Connect agreed to provide telecommunications-related services, known as "Meet-Me Room" or "MMR" services, at the Center in return for a monthly fee (the Operating Agreement). The Operating Agreement had a 92-month term, "in all events ending on February 28, 2019 . . . , subject to the Extension Options."
The Operating Agreement granted Garland Connect options to extend its term for two successive five-year periods. The Operating Agreement states in relevant part:
"Each Extension Option granted to [Garland Connect] is expressly subject to, and conditioned upon (a) RML, in its sole and absolute discretion, exercising its option to extend the term of the Master Lease for the Land and the Building through the applicable Option Term, and (b) Charter Parent, in its sole and absolute discretion, exercising its option to extend the RML Lease such that the RML Lease shall extend through the applicable Option Term."
Charter Sub could assign the Operating Agreement "along with all of the rights, benefits, duties, liabilities and obligations contained therein without obtaining [Garland Connect's] approval or consent." If Charter Sub notified Garland Connect of such an assignment, Garland Connect had to "immediately recognize such transferee, as having full power and authority under this Operating Agreement as if such transferee were the original maker of this Operating Agreement." C. HRRP Purchases the Center, the Land, and the Lease Interests
On June 3, 2016 HRRP purchased the Center, the land, and the lease interests of Charter Parent and Charter Sub. As part of the transaction, Charter Sub assigned the Operating Agreement to HRRP, and HRRP succeeded to Charter Sub's rights and obligations under the agreement.
On June 3, 2016 HRRP notified Garland Connect that it had purchased the Center; that the sellers' interests in the Operating Agreement had been assigned to HRRP; that HRRP had "acquired all fee and leasehold interests in the Property, including the interests in the RML Lease and Master Lease"; and that, upon the transaction closing, "all such leasehold interests merged into the fee interest in the Property and all such agreements granting the leasehold interests, including the RML Lease and the Master Lease, terminated in their entirety." HRRP also informed Garland Connect that "[a]ll rights contingent upon the existence and renewal of the Master Lease and RML Lease, including any extension rights, are hereby extinguished in connection with and as a result of the termination of such agreements as a result of the acquisition of the Property." D. Garland Connect Sues HRRP in Los Angeles County Superior Court
On February 6, 2018 Garland Connect sued HRRP. Garland Connect alleged that it had notified HRRP "of its intention to exercise the first of its extension options," but HRRP claimed the extension options had been extinguished. Garland Connect sought a declaration that it "ha[d] the right to extend the Operating Agreement for the two 5-year option periods," and specific performance "of [the] options to extend the term of the Operating Agreement."
Garland Connect alleged that the extension options were "subject to" the extension of the Master Lease and the RML Lease, and that those leases "were merged into HRRP's fee interest in the Building after the Operating Agreement was signed." Garland Connect further alleged:
"[O]ne of the conditions to the extension options . . . is that the Master Lease and the [RML Lease] be extended through the extended option term. . . . [W]hen HRRP acquired the Building, it purchased both leasehold interests from RML and Charter, and also the fee interest from Trumbull Associations, and all such interests merged. Through this merger, HRRP acquired the fee and all leasehold interests, and the Master Lease and [RML Lease] were eliminated because HRRP owned all such interests."Garland Connect asserted that because HRRP's acquisition of the Master Lease and the RML Lease "eliminated" those leases, the agreement no longer required extension of those leases for Garland Connect to exercise its extension options.
HRRP moved for judgment on the pleadings. Before the hearing on HRRP's motion, Garland Connect moved to amend its complaint. At the hearing on the motions, the trial court apparently granted Garland Connect permission to file its first amended complaint without ruling on HRRP's motion for judgment on the pleadings. In its first amended complaint, Garland Connect added causes of action for breach of the agreement based on HRRP's alleged refusal to honor Garland Connect's extension options, and breach of the implied covenant of good faith and fair dealing based on HRRP's alleged "efforts to deprive Garland Connect of the extension options." Garland Connect attached the Operating Agreement to the first amended complaint. E. HRRP Files Demurrers to the First Amended Complaint and Sends Garland Connect a Letter About Its Transition Obligations
The record does not contain a minute order or other document memorializing the proceedings at the motion hearing. HRRP states, and Garland Connect does not dispute, that rather than ruling on HRRP's motion for judgment on the pleadings, the trial court granted Garland Connect leave to file its first amended complaint.
On December 21, 2018 HRRP filed demurrers to the first amended complaint. HRRP argued that none of Garland Connect's four causes of action stated facts sufficient to constitute a cause action because the Operating Agreement plainly states that Garland Connect did not have an absolute right to extend the agreement, but only a conditional right dependent on discretionary decisions by third parties.
On January 7, 2019, after HRRP had filed its demurrers but before the demurrer hearing, HRRP wrote to Garland Connect about its transition obligations under the Operating Agreement. Section 6.2(k) of the Operating Agreement states that "[u]pon the expiration or earlier termination of th[e] Operating Agreement," Garland Connect must cooperate with Charter Sub or its designee to effect an orderly transition of the services Garland Connect had been providing. Garland Connect's "Primary Transition Obligations" include returning keys and passwords, vacating office space, and delivering assignments of service contracts.
The letter, entitled "Notice of Breach of Primary Transition Obligations," states:
"[P]lease take notice that Garland Connect, LLC ("Operator") is in breach of its Primary Transition Obligations ("PTO") per Section 16.1(a)(vii) of the Meet-Me Room Operating Agreement (the "Agreement"). Per Section 6.2(k) of the Agreement, Operator is required to perform its various transition obligations, including its PTO, on or before the Agreement's February 28, 2019 expiration date. Given the impending expiration date, HRRP requested Operator to begin engaging in its transition obligations in a November 21, 2018 email with a December 5, 2018 follow-up email. On December 7, 2019, Operator sent a response, declining HRRP's request. . . . Operator's refusal to engage in its transition obligations, including its PTO, constitutes a clear breach of Section 6.2(k).Garland Connect responded on January 16, 2019 that it had not breached its Primary Transition Obligations. Garland Connect proposed that the parties meet "to discuss [their] respective obligations (including and especially the Primary Transition Obligations) under the MMR Operating Agreement." F. Garland Connect Moves To Compel Arbitration
We hope you reconsider this decision. If you do, please contact us so we can meet to discuss Operator's transition obligations within ten days of this Notice." (Bold and italics in original.)
On January 30, 2019, the day before Garland Connect's opposition to HRRP's demurrers was due, Garland Connect filed a motion to compel arbitration of its lawsuit against HRRP. Garland Connect argued that HRRP's January 7, 2019 letter rendered all of Garland Connect's causes of action arbitrable. Garland Connect also sought a stay of its lawsuit pending completion of the arbitration.
In a section entitled "Default by Operator," the agreement defines the circumstances under which Garland Connect would be in "Default." A "Default" includes when "the Operator fails to perform the Primary Transition Obligations within 10 days following the date of delivery by Charter Sub to Operator of written notice alleging a breach of a Primary Transition Obligation."
The agreement states that "[i]n the event of any dispute between the parties as to whether or not a Default has occurred hereunder, the parties agree to submit such dispute to binding arbitration in accordance with the arbitration provisions set forth in Exhibit R attached hereto." Exhibit R, entitled "Arbitration Procedures," defines when the arbitration procedures apply:
When Applicable . It is acknowledged and agreed that the arbitration provisions set forth in this Exhibit R shall apply only with respect to the following disputes under the Operating Agreement; or as may otherwise be agreed upon by the parties in writing (each, an "Arbitration Dispute"):
• whether a Default has occurred under the Operating Agreement, as referenced in Section
16.1(c) thereof . . . . (Underlining and italics in original.)The parties initialed Exhibit R to indicate their agreement "to submit disputes arising out of any matter included in this Exhibit R to neutral arbitration." (Original underlining.)
The arbitration procedures state that "[i]n the event of any Arbitration Dispute between the parties," the parties would submit "such Arbitration Dispute to binding arbitration" before JAMS "according to the then rules of commercial arbitration," and the arbitration would "be administered by JAMS pursuant to its streamlined rules." Garland Connect asserts, and HRRP does not dispute, that Rule 8 of JAMS' "streamlined rules" states:
"Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought . . . shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter."
Garland Connect argued that as a result of HRRP's January 7, 2019 letter stating that Garland Connect was in "breach of [its] Primary Transition Obligations," a dispute had arisen between Garland Connect and HRRP about whether a Default had occurred. Garland Connect asserted that "the question of whether a default has taken place is inseparable from, and a legal predicate for, the claims Garland Connect has alleged in this action." Garland Connect claimed that all of its causes of action must be arbitrated "[b]ecause HRRP's new assertion of default brings the claims in this action within the plain terms of the arbitration agreement." Garland Connect also asserted that the trial court "should defer ruling" on HRRP's demurrers until "after the arbitration is resolved or Garland Connect has exhausted its appeal rights." G. The Trial Court's Rulings on the Demurrers and the Motion To Compel Arbitration
The trial court heard the demurrers and the motion to compel arbitration on February 28, 2019. At the hearing, the trial court stated, "[i]f I sustain the demurrer[s], then there is no motion to compel arbitration." The court also stated, "first we have to have some breach . . . before we even get to the arbitration."
The court asked Garland Connect whether any part of the case would remain to be arbitrated if the court sustained HRRP's demurrers without leave to amend. Garland Connect agreed that if the court sustained the demurrers without leave to amend, nothing would remain to be arbitrated, but that if the court sustained the demurrers with leave to amend, the motion to compel arbitration would remain at issue.
Following the hearing, the court issued an order sustaining HRRP's demurrers without leave to amend. The court found that the Operating Agreement's express terms "make clear that Plaintiff only had a conditional option to extend the agreement, subject to the discretionary decisions of the upstream leaseholders," not "an absolute option to renew." The court denied Garland Connect's motion to compel arbitration as moot "in light of" the demurrer ruling. The court subsequently awarded HRRP attorneys' fees pursuant to a prevailing-party attorneys' fees provision in the agreement.
Garland Connect timely appealed the trial court's judgment of dismissal and attorneys' fees order. This court granted Garland Connect's motion to consolidate the appeals.
DISCUSSION
A. The Motion To Compel Arbitration
1. Standard of Review
An order denying a motion to compel arbitration is appealable. (Code of Civ. Proc., § 1294, subd. (a).) '"Generally, the standard of review applicable to the denial of a petition to compel arbitration is determined by the issues presented on appeal [citation]. To the extent the denial relies on a pertinent factual finding, we review that finding for the existence of substantial evidence. [Citation.] In contrast, to the extent the denial relies on a determination of law, we review the trial court's resolution of that determination de novo. [Citation.] Nonetheless, we are not bound by the trial court's rationale, and thus may affirm the denial on any correct legal theory supported by the record, even if the theory was not invoked by the trial court."' (Bautista v. Fantasy Activewear, Inc. (2020) 52 Cal.App.5th 650, 655.) Here, because the trial court did not make any factual findings in denying the motion to compel arbitration, we review the decision de novo.
All further statutory references are to the Code of Civil Procedure.
2. The Sequence of the Trial Court's Rulings
The trial court denied Garland Connect's motion to compel arbitration as moot "in light of" its ruling sustaining HRRP's demurrers without leave to amend. Garland Connect argues the trial court should have addressed its motion to compel arbitration before HRRP's demurrers, and that the trial court's failure to do so requires reversal of the order denying arbitration.
Section 1281.2 states that on petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, "the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists," unless it determines that: (a) the right to compel arbitration has been waived by the petitioner; or (b) grounds exists for rescission of the agreement. (§ 1281.2.) Section 1281.2, subdivision (d), provides that "[i]f the court determines that there are other issues between the petitioner and the respondent which are not subject to arbitration and which are the subject of a pending action or special proceeding between the petitioner and the respondent and that a determination of such issues may make the arbitration unnecessary, the court may delay its order to arbitrate until the determination of such other issues or until such earlier time as the court specifies." (§ 1281.2, subd. (d).)
HRRP argues that section 1281.2, subdivision (d), authorizes a trial court to "delay its order to arbitrate" until after the court decides any non-arbitrable issues. HRRP contends the trial court may have concluded that Garland Connect's causes of action were not arbitrable, and that ruling on the demurrers first would render arbitration unnecessary and the motion to compel arbitration moot.
We cannot discern from the trial court's remarks and order why it addressed the demurrers before the motion to compel arbitration. We need not resolve this question, however, because, as discussed below, the trial court properly denied the motion to compel arbitration. Any error in the sequence in which the court considered the demurrers and the motion to compel was therefore harmless.
3. The Trial Court Did Not Err in Denying the Motion To Compel Arbitration
Garland Connect contends that HRRP's January 7, 2019 letter about Garland Connect's transition obligations "swept" Garland Connect's lawsuit about the extension options "within the bounds of the arbitration provision." The Operating Agreement does not support Garland Connect's argument.
'"California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration."' (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 890 (Aanderud).) The party opposing arbitration bears the burden to show the arbitration provision cannot be interpreted to cover the claims in the complaint. (Ibid.) There is no public policy, however, that favors the arbitration of disputes the parties did not agree to arbitrate. (Ibid.)
"[A] court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute." (Granite Rock Co. v. International Brotherhood of Teamsters (2010) 561 U.S. 287, 297 (original italics) (Granite Rock).) Arbitration agreements are construed to give effect to the intention of the parties. (Aanderud, supra, 13 Cal.App.5th at p. 890.) "If contractual language is clear and explicit, it governs. [Citation.]" (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) "No authority permits sending a matter to arbitration simply because the same parties agreed to arbitrate a different matter." (Moritz v. Universal City Studios LLC (2020) 54 Cal.App.5th 238, 247.)
The parties agreed to arbitrate disputes about "whether a Default has occurred" under the Operating Agreement. In the event of such a dispute, the parties agreed to submit "such dispute" to binding arbitration "in accordance with the arbitration provisions" in Exhibit R. The arbitration provisions apply "only" to disputes about whether a Default has occurred.
The arbitration provisions also apply to disputes about the determination of a fair market rate with respect to the second option term, or as the parties may otherwise agree in writing. The parties do not contend that either of these terms applies here.
Garland Connect's lawsuit is not a dispute about "whether a Default has occurred." As Garland Connect describes its lawsuit, "[t]he subject of this First Amended Complaint is the right of Garland Connect to extend the term of the Operating Agreement." Each of Garland Connect's four causes of action addresses that same issue. Garland Connect seeks a declaration that it "has the right to extend the Operating Agreement for the two 5-year option periods." Garland Connect alleges that HRRP "breached the terms of the Operating Agreement by repudiating and refusing to honor Garland Connect's exercise of its option to extend the term of the Operating Agreement." Garland Connect asserts that HRRP breached the implied covenant of good faith and fair dealing "through its concerted efforts to deprive Garland Connect of the extension options . . . ." Garland Connect seeks "specific performance of its option to extend" the agreement.
None of Garland Connect's causes of action addresses a Default, whether a Default has occurred, or a dispute about an alleged Default. Indeed, Garland Connect conceded in the trial court, and concedes again on appeal, that its first amended complaint does not allege any arbitrable causes of action.
Garland Connect argues that "to send the issue of Default to arbitration while [Garland Connect's] related contract-based claims are litigated in court would threaten inconsistent rulings." The record does not contain any evidence that any dispute about an alleged default related to Garland Connect's transition obligations is in arbitration. There is thus no risk of inconsistent rulings because there is only one proceeding—Garland Connect's lawsuit against HRRP.
Arbitration requires an agreement to arbitrate the specific dispute sought to be arbitrated. (Granite Rock, supra, 561 U.S. at p. 297.) Here, there is no written agreement to submit the controversy encompassed by Garland Connect's causes of action to arbitration. The parties' separate dispute about whether Garland Connect is in default as to its transition obligations does not transmogrify the extension options lawsuit into an arbitrable dispute.
Because we find that the parties did not agree to arbitrate Garland Connect's causes of action, we need not address the parties' contentions regarding Garland Connect's alleged waiver of a right to compel arbitration.
For the same reason, Garland Connect's claim that the trial court lacked authority to decide whether its causes of action were subject to arbitration also fails. Garland Connect contends that by incorporating JAMS Rule 8 into the arbitration procedures, the parties delegated to the arbitrator the question of whether Garland Connect's option extension causes of action should be arbitrated.
JAMS Rule 8 states that jurisdictional and arbitrability disputes over the formation, existence, validity, interpretation, or scope "of the agreement under which the Arbitration is sought" shall be resolved by the arbitrator. Here, the "agreement under which the Arbitration is sought" is an agreement to arbitrate disputes about "whether a Default has occurred." The parties agreed the JAMS rules would apply to such disputes.
As discussed, Garland Connect's lawsuit is not a dispute about whether a default has occurred. It is a dispute about extension options. The rules the parties agreed would apply to a different type of dispute do not apply to a dispute the parties did not agree to arbitrate. B. The Demurrers to the First Amended Complaint
In Henry Schein, Inc. v. Archer and White Sales, Inc. (2019) 139 S.Ct. 524 the Supreme Court rejected a judicially created exception to the Federal Arbitration Act by which courts determined arbitrability where the "argument for arbitration [was] wholly groundless," irrespective of whether the agreement delegated the arbitrability decision to an arbitrator. (Id. at pp. 527-528, 531.) The Supreme Court decided Henry Schein before Garland Connect and HRRP filed their appellate briefs, yet neither party cites it, perhaps because the Supreme Court also made clear that "before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists." (Id. at p. 530.) As discussed, Garland Connect and HRRP did not agree to arbitrate a dispute about the extension options.
1. Standard of Review
A demurrer tests the legal sufficiency of the factual allegations in a complaint. (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 190.) We independently review the trial court's ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. (Ibid.; see also Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20.)
We liberally construe the pleading with a view to substantial justice between the parties. (§ 452; Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1340; see Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [complaint must be read in context and given a reasonable interpretation].) But "[u]nder the doctrine of truthful pleading, the courts 'will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed.'" (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400; see Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767 ["[w]hile the 'allegations [of a complaint] must be accepted as true for purposes of demurer,' the 'facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence'"]; SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83 ["[i]f the allegations in the complaint conflict with the exhibits, we rely on and accept as true the contents of the exhibits"].) "A judgment of dismissal after a demurrer has been sustained without leave to amend will be affirmed if proper on any grounds stated in the demurrer, whether or not the court acted on that ground." (Carman v. Alvord (1982) 31 Cal.3d 318, 324; accord, Heshejin v. Rostami (2020) 54 Cal.App.5th 984, 992.)
2. The Trial Court Did Not Err in Sustaining HRRP's Demurrers Without Leave To Amend
Garland Connect's four causes of action rest on the same theory: that Garland Connect had a right to exercise a five-year extension option and thereby extend the Operating Agreement's February 28, 2019 termination date. The trial court found "the express terms of the Operating Agreement make clear that [Garland Connect] only had a conditional option to extend the agreement, subject to the discretionary decisions of the upstream leaseholders." Garland Connect argues that the agreement is ambiguous about the effect on the extension options of an acquisition of the Master Lease and the RML Lease and that the trial court thus erred in sustaining HRRP's demurrers.
The Operating Agreement had a 92-month term, "in all events ending on February 28, 2019 . . . subject to the Extension Options." The extension option provision states that each extension option is "expressly subject to, and conditioned upon" RML and Charter Parent exercising their options to extend their respective leases.
Garland Connect pleads no facts suggesting that the plain terms of the extension options are ambiguous or uncertain. The Operating Agreement unequivocally states that Garland Connect had no right to extend the agreement beyond February 28, 2019 unless RML and Charter Parent exercised their respective extension options. Garland Connect acknowledged the conditional nature of its extension options in its first amended complaint, which alleges that the agreement "state[s] that Garland Connect's extension options [are] conditioned on the corresponding extension of the Master Lease and RML Lease through the extended term granted by Garland Connect's option." In the absence of any factual allegations supporting Garland Connect's claim of ambiguity, the trial court did not err in concluding that the first amended complaint did not allege facts sufficient to state causes of action premised on an argument that Garland Connect's extension options were not conditional.
Garland Connect argues that HRRP frustrated the conditions precedent to Garland Connect's exercise of its extension options by acquiring the Master Lease and the RML Lease. Garland Connect asserts that HRRP's acquisition of the Master Lease and the RML Lease excused the requirements that RML and Charter Parent exercise their respective extension options before Garland Connect could exercise its options, and rendered Garland Connect's extension options absolute.
None of the cases Garland Connect relies on for this argument supports overruling HRRP's demurrers. Several of the cases emphasize that contractual language determines the rights and obligations of contracting parties. (See Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313 ["Under the law of contracts, parties may expressly agree that a right or duty is conditional upon the occurrence or nonoccurrence of an act or event."]; Northridge Hospital Foundation v. Pic 'N' Save No. 9, Inc. (1986) 187 Cal.App.3d 1088, 1098 [sublease held to contain implied agreement of sublessor to protect sublessee "in the absence of clear and unequivocal language to the contrary"]; Jacobs v. Freeman (1980) 104 Cal.App.3d 177, 189 [escrow instructions "clear" that sales contract would be submitted to seller's board of directors for approval]; Sosin v. Richardson (1962) 210 Cal.App.2d 258, 264 ["Express conditions are stated in the contract and are determined by the intention of the parties as disclosed by the agreement."].) These cases underscore that the language of the Operating Agreement governs.
Garland Connect cites other cases stating that a party that "prevents fulfillment of a condition of his own obligation . . . cannot rely on such condition to defeat his liability." (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 868-869; see also Rains v. Arnett (1961) 189 Cal.App.2d 337, 347-348 [requirement of parties' agreement that debt be paid from specific fund excused where defendant repossessed equipment it agreed would remain with plaintiff to generate repayments, thus preventing plaintiff from creating fund]; Jacobs v. Tenneco West, Inc. (1986) 186 Cal.App.3d 1413, 1418 [board of directors' required approval of sales contract excused because seller's officers did not submit contract to board for approval].) Garland Connect does not argue that HRRP failed to perform a required contractual obligation.
Frustration of purpose also does not apply here. Frustration of purpose is a defense to breach of contract. It applies "[w]here, after a contract is made, a party's principal purpose is substantially frustrated without his [or her] fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made." (Rest.2d Contracts, § 265.) Under those circumstances, the party's "remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary." (Ibid.)
Garland Connect alleges breach of contract; Garland Connect is not defending against an allegation of breach of contract. Furthermore, in light of the contract language, Garland Connect cannot plausibly argue that RML and Charter Parent were certain to exercise their extension options. Indeed, Garland Connect alleges the opposite in its first amended complaint: "[A]t the time the Operating Agreement was executed, the parties to that agreement had no control whatsoever over whether the conditions precedent to Garland Connect's option rights would be satisfied." The language of the Operating Agreement, and Garland Connect's allegations, demonstrate that frustration of purpose is irrelevant to Garland Connect's causes of action.
A trial court abuses its discretion by sustaining a demurrer without leave to amend where "'there is a reasonable possibility that the defect can be cured by amendment.'" (Loeffler, supra, 58 Cal.4th at p. 1100; accord, City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) "'The plaintiff has the burden of proving that [an] amendment would cure the legal defect, and may [even] meet this burden [for the first time] on appeal.'" (Sierra Palms Homeowners Assn. v. Metro Gold Line Foothill Extension Construction Authority (2018) 19 Cal.App.5th 1127, 1132; accord, Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 971.)
Garland Connect has not demonstrated any reasonable possibility that the deficiencies in its causes of action can be cured by amendment. The trial court did not err in sustaining HRRP's demurrers without leave to amend.
DISPOSITION
The judgment of dismissal and the order awarding attorneys' fees are affirmed. HRRP shall recover its costs on appeal.
Garland Connect appeals the trial court's order awarding attorneys' fees on the basis that the trial court erred in dismissing the case. Garland Connect does not challenge the basis for or the amount of the attorneys' fees award. As discussed, the trial court did not err in denying Garland Connect's motion to compel arbitration and in sustaining HRRP's demurrers. The order awarding attorneys' fees is thus affirmed.
Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
SEGAL, Acting P. J.
FEUER, J.