California State Lands Commission vs Signal Hill Service Inc et al

Case Number

19CV04295

Case Type

Hearing Date / Time

Fri, 01/12/2024 - 10:00

Nature of Proceedings

Motion for Summary Judgment

Tentative Ruling

For the reasons set forth herein, the motion of plaintiff, cross-defendant, and cross-complainant California State Lands Commission for summary judgment or alternatively for summary adjudication is granted in part and denied in part. The motion is granted in favor of cross-defendant California State Lands Commission for summary adjudication of the first and second causes of action of the fourth amended cross-complaint of Signal Hill Service, Inc., and cross-complainant Carone Petroleum Corporation. Summary judgment is granted in favor of cross-defendant California State Lands Commission and against cross-complainant Carone Petroleum Corporation. In all other respects, the motion is denied.

Background:

Plaintiff State Lands Commission (Commission) and defendant Signal Hill Service, Inc. (Signal Hill) are parties to Lease PRC 3914.1 (the Lease). (Defendants’ Response Separate Statement [DSS], fact 1 [undisputed on this point], undisputed facts 2-3; Bugsch decl., ¶ 6; Commission Evidence, exhibit A [the Lease].) The Lease contains the following provisions (see also DSS, undisputed facts 2, 3, 7, 8):

“LAND USE OR PURPOSE: The use and maintenance of four pipelines from Platform Hogan to an onshore point: one 4-inch water pipeline, two 10-inch oil pipelines, one 12-inch gas pipeline; and one 8-inch non-operational outfall pipeline from shore.

“TERM: 10 years; beginning March 1, 2013; ending February 28, 2023, unless sooner terminated as provided under this Lease.

“CONSIDERATION: $57,575 per year. Subject to modification by Lessor as specified in Paragraph 2(b) of Section 3 - General Provisions.

“AUTHORIZED IMPROVEMENTS: Five submarine pipelines, including one 4-inch water pipeline, two 10-inch oil pipelines, one 12-inch gas pipeline, and one 8-inch non-operational outfall pipeline.

“ X_ EXISTING[.] [¶] … [¶]

“SURETY BOND OR OTHER SECURITY: No less than $50,000.” (Lease, exhibit A, § 1, p. 17, emphasis omitted.)

“All plans for abandonment and/or removal and restoration shall be to the satisfaction of Lessor and shall be completed within 90 days after the expiration or sooner termination of this Lease or after Lessee has obtained all required permits or other governmental approvals that may be required by lawful authority and has complied with all applicable laws.” (Lease, exhibit A, § 2, ¶ 7, p. 18.)

“Lessee agrees to submit no later than two years prior to the expiration of this lease either: (a) an application and minimum expense deposit for a new lease for the continued use of the Lease Premises, or (b) a plan for the restoration of the Lease Premises to be completed prior to the expiration of the lease term, pursuant to Paragraph 12 of Section 3, General Provisions, of this Lease. Failure to submit the application and minimum expense deposit or the restoration plan shall be deemed a default of the Lease under Paragraph 11(b) of Section 3, General Provisions, of this Lease.” (Lease, § 2, ¶ 11, pp. 19-20.)

“Lessee shall pay the annual rent as stated in this Lease to Lessor without deduction, delay, or offset, on or before the beginning date of this Lease and on or before each anniversary of its beginning date during each year of the Lease term.” (Lease, § 3, ¶ 2(a)(1), p. 21.)

“Any installments of rental accruing under this Lease not paid when due shall be subject to a penalty and shall bear interest as specified in Public Resources Code Section 6224 and the Lessor’s then existing administrative regulations governing penalty and interest.” (Lease, § 3, ¶ 2(c), p. 21.)

“Lessee shall provide a surety bond or other security device acceptable to Lessor, for the specified amount, and naming the State of California as the assured, to guarantee to Lessor the faithful observance and performance by Lessee of all of the terms, covenants, and conditions of this Lease.” (Lease, § 3, ¶ 9(a), p. 23.)

“The surety bond or other security device shall be maintained in full force and effect at all times during the Lease term and subsequently until all of the Lease Premises have been either accepted as improved, by Lessor, or restored by Lessee as provided elsewhere in this Lease.” (Lease, § 3, ¶ 9(c), p. 23.)

“Upon expiration or sooner termination of this Lease, Lessor upon written notice may take title to any or all improvements, including fills, or Lessor may require Lessee to remove all or any such improvements at its sole expense and risk; or Lessor may itself remove or have removed all or any portion of such improvements at Lessee’s sole expense.” (Lease, § 3, ¶ 12(a), p. 24.)

“In removing any such improvements Lessee shall restore the Lease Premises as nearly as possible to the conditions existing prior to their installation or construction.” (Lease, § 3, ¶ 12(b), p. 24.)

“All plans for and subsequent removal and restoration shall be to the satisfaction of Lessor and shall be completed within ninety (90) days after the expiration or sooner termination of this Lease or after compliance with paragraph 12(d), whichever is the lesser.” (Lease, § 3, ¶ 12(c), p. 25.)

“In removing any or all improvements Lessee shall be required to obtain any permits or other governmental approvals as may then be required by lawful authority.” (Lease, § 3, ¶ 12(d), p. 25.)

Signal Hill initially obtained the required security bond with American Motorists Insurance Company (AMICO) in 1997. (DSS, undisputed fact 4.) On May 10, 2013, the bond lapsed. (DSS, fact 5 [undisputed on this point].) Signal Hill never acquired a new bond. (DSS, undisputed fact 6.) According to defendants, Signal Hill offered the Commission several alternatives, including moving bonds from unused state oil and gas leases to the Pipeline Lease or, alternatively, taking cash on such a bond. (DSS, response to fact 6 & evidence cited.)

In 2015, Signal Hill made two partial payments and owed $5,525.63 in rent. (DSS, undisputed fact 10.) Signal Hill failed to pay any rent between November 13, 2015 and June 23, 2019. (DSS, undisputed fact 11.)

Any year of unpaid rent was subject to a 5 percent penalty and 18 percent interest. (DSS, undisputed fact 9.)

On September 14, 2017, the Commission sent Signal Hill a Notice of Default (NOD) for failing to pay rent on the Lease. (DSS, undisputed fact 12.) The NOD explained that the Commission would consider terminating the Lease at its October 19, 2017 Commission meeting due to Signal Hill’s failure to pay rent. (DSS, undisputed fact 13.)

On September 22, 2017, Signal Hill met with Commission staff to discuss how to bring Signal Hill into compliance with the Lease terms. (DSS, fact 14 [undisputed on this point].)

On February 20, 2018, Signal Hill proposed a payment plan to resolve the rent and bond issues, but tendered no payment. With regards to the lapsed bond, Signal Hill proposed repurposing a bond applicable to another state lease, not reinstating the bond. (DSS, undisputed fact 15.)

The Commission tolled the accrual of interest from February 20, 2018, through February 28, 2019. (DSS, undisputed fact 16.) According to the Commission, Signal Hill never followed up with the Commission on its proposal to become current on its arrears. (Plaintiff’s Separate Statement [PSS], fact 17 & evidence cited.) According to defendants, Signal Hill’s proposal in its February 20, 2018, letter to the Commission included a proposal to make up payment on the rent in arrears. (DSS, response to fact 17; Commission Evidence, exhibit S.) (Note: Defendants date the letter as February 18 in text, but the letter is on its face dated February 20. (Commission Evidence, exhibit S.))

On January 31, 2019, after Signal Hill had still made no rent payments, the Commission sent Signal Hill a letter stating:

“This letter is to advise you that California State Lands Commission (Commission) staff has yet to receive the good faith payment discussed at our meeting on February 13, 2018, in Sacramento. Staff apologizes for the delay in responding to the proposal you provided on February 22, 2018. Staff is still considering your proposal and we hope to have a response to it shortly. However, this does not relieve Signal Hill of its obligation to pay rent, and staff expects Signal Hill to comply with its existing lease obligations and make a good faith payment toward the rental amount due while we are working to resolve this matter. Please be advised that if a good faith payment for the 2019 rent is not received, on or before March 1, 2019, Penalty & Interest will begin being assessed for any additional unpaid rents including the 2019 rental year. [¶] We look forward to working with you to resolve this matter.” (DSS, fact 18 [undisputed on this point]; Commission Evidence, exhibit T.)

By June 17, 2019, Signal Hill had still not made any rent payments on its outstanding balance since November 13, 2015. (DSS, fact 19 [undisputed on this point].) According to defendants, Signal Hill was waiting for the Commission to respond to the proposal stated in its February 20, 2018, letter. (DSS, response to fact 19 & evidence cited.) Signal Hill claims it started saving money after receiving the Commission’s January 31, 2019, letter to make a payment, but Signal Hill never informed the Commission of this prior to litigation. (DSS, undisputed fact 20.)

On June 17, 2019, the Commission sent Signal Hill a letter that stated the Commission staff would recommend terminating both the pipeline lease and oil and gas leases at the Commission’s June 28, 2019 meeting. (DSS, undisputed fact 21.) On June 24, 2019, after receiving the Commission’s June 17, 2019 letter. Signal Hill tendered a partial payment of $172,000, which included $150,000 for its Lease, and $22,000 for defendant Carone Petroleum Corporation’s (Carone) state oil and gas leases. (DSS, undisputed fact 22.)

In an email on June 24, 2019, Signal Hill offered to pay $15,000 a month until the balance due was paid, and that they would work to provide the $50,000 bond within 90 days. (DSS, undisputed fact 23.)

According to the Commission, as of the June 28, 2019, Commission meeting, Signal Hill owed $235,825.63 in unpaid rent on the Lease and $67,715.30 in interest and penalties, for a total owed of $303,540.93. (PSS, fact 24; Pett decl., ¶ 9 & exhibit H.) According to defendants, the amount is incorrect. The Commission’s staff report No. 99 stated that Signal Hill owed $282,094.34 in unpaid rent including penalties for the period November 22, 2015, through June 28, 2019 (Commission Evidence, exhibit P, p. 148), and the Commission waived interest and penalties for a period of time (id., exhibits C-G [invoices not including penalties and interest].) In reply, the Commission states that the staff report included an incorrect total of the amount of rent, penalties, and interest due.

At the June 28, 2019, Commission meeting, Bruce Cowen, a Signal Hill agent and investor, again offered the partial amount of $172,000, $150,000 of which was for the Lease, and then offered to pay any remaining debts himself. (DSS, fact 25 [undisputed on this point].) Cowen acknowledged during the Commission meeting that the Commission could elect to terminate the Leases. (DSS, undisputed fact 26.) The Commission rejected Cowen’s offer to make a payment at the meeting (DSS, fact 27 [undisputed on this point]); defendants dispute that Cowen’s offer was for a partial payment (DSS, response to fact 27 & evidence cited). At that meeting, the Commission voted to terminate the Lease. (DSS, fact 28 [undisputed on this point].)

According to the Commission, after the 2019 rent was prorated following the Lease termination, Signal Hill owes the Commission $197,179.40 in unpaid rent and $207,137.30 in penalties and interest, calculated through July 14, 2023, for a total of $404,316.70. (PSS, fact 29; Pett decl., ¶ 13 & exhibit J.) According to defendants, proration through July 14, 2019, is an admission that the Lease was not terminated until after the July 1, 2019, letter (identified below) was received, and the calculation is incorrect for the same reasons discussed above. (DSS, response to fact 29.)

In a July 1, 2019, letter to Signal Hill, the Commission gave notice that the Lease was terminated. (DSS, fact 30 [undisputed on this point].) The July 1 letter reminded Signal Hill of its end-of-lease obligations to make safe and flush, inert, and shut in, the pipelines by July 31, 2019, and to submit a plan for the permanent abandonment, decommissioning of the pipelines, and restoration of the lease premises by September 30, 2019. (DSS, undisputed fact 39.)

On July 12, 2019, Signal Hill sent the Commission a check for $282,094.34 with its request for reconsideration of the termination. (DSS, fact 31 [undisputed on this point].) The Commission denied Signal Hill’s request for reconsideration. (DSS, undisputed fact 32.)

Signal Hill continued to move oil and gas through the pipelines after the Lease was terminated. (DSS, undisputed fact 34.) Signal Hill stopped moving oil and gas through the pipelines on or after October 26, 2019. (DSS, undisputed fact 35.)

According to the Commission, Signal Hill’s pipeline use between June 29, 2019, and October 26, 2019, which is 119 days, resulted in the loss of $18,711 of rental value, based on a daily rental value of the Commission’s property of $157.74, which is determined by dividing the annual rent of $57,575 by 365 days. (DSS, fact 36 & evidence cited [defendants’ response is “[u]ndisputed as to the math”].)

According to the Commission, Signal Hill has only temporarily placed the pipelines out of service. (PSS, fact 40 & evidence cited.) According to defendants, Signal Hill has placed the pipelines in inactive status, flushing them and filling them with a corrosive inhibitor, as supervised by BSEE. (DSS, response to fact 40 & evidence cited.) Signal Hill has not submitted any plans to decommission, abandon, or remove the pipelines. (DSS, undisputed fact 41.)

On August 14, 2019, the Commission filed its complaint in this action against defendants Signal Hill and Pacific Operators, Inc., dba Pacific Operators Offshore Inc. (Pacific Operators), asserting causes of action for breach of contract, trespass, and declaratory relief.

On October 15, 2019, defendants Signal Hill and Pacific Operators filed their demurrer to the complaint. On December 13, 2019, the court sustained the demurrer in part and overruled the demurrer in part, granting leave to amend.

On December 27, 2019, Commission filed its first amended complaint (FAC).

On January 28, 2020, Signal Hill and Pacific Operators filed their answer to the FAC, admitting and denying allegations therein and asserting six affirmative defenses. Signal Hill, Pacific Operators, Carone, and Carone Energy Corporation (CEC) concurrently filed their original cross-complaint (CC) in this action asserting a claim for inverse condemnation against Commission and the State of California (State).

On January 30, 2020, the federal defendants—newly added to the FAC—filed their notice of removal of this action to the United States District Court.

On March 2, 2020, the United States District Court issued its order dismissing the federal defendants and remanding this action to this court.

On April 24, 2020, the Commission and State filed their demurrer to the CC.

On August 28, 2020, the court heard the demurrer and sustained the demurrer with leave to amend.

On October 1, 2020, Signal Hill (by itself) filed its first amended cross-complaint (FACC). On November 23, 2020, upon stipulation of the parties and order of the court, Signal Hill, Carpinteria Offshore Project Partnership, Carone, and CEC filed their second amended cross-complaint. On January 7, 2021, upon stipulation of the parties and order of the court, Signal Hill and Carone filed their third amended cross-complaint (TACC). Following the sustaining in part of the Commission’s demurrer to the TACC, on May 3, 2021, Signal Hill and Carone filed their fourth amended cross-complaint (4ACC) asserting two causes of action for breach of the Lease against the Commission.

On June 21, 2021, the Commission filed its answer to the 4ACC, admitting and denying allegations therein and asserting 12 affirmative defenses. The Commission concurrently filed a cross-complaint against Signal Hill for indemnity and declaratory relief (Indemnity CC).

On July 20, 2021, Signal Hill filed its answer to the Indemnity CC, generally denying the allegations thereof and asserting two affirmative defenses.

On July 14, 2023, the Commission filed this motion for summary judgment, or alternatively for summary adjudication, as to (1) the Commission’s FAC against Signal Hill, (2) Signal Hill and Carone’s 4ACC against the Commission, and (3) the Commission’s Indemnity CC against Signal Hill.

The motion is opposed by defendants.

Analysis:

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., § 437c, subd. (a)(1).) “A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment.” (Id., subd. (f)(2).)

“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(2).)

(1)       Commission FAC

“For purposes of motions for summary judgment and summary adjudication: [¶] (1) A plaintiff … has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff … has met that burden, the burden shifts to the defendant … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The defendant … shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)

The Commission seeks to summarily adjudicate each of the causes of action of its FAC against Signal Hill. The FAC asserts causes of action for: (1) breach of contract; (2) trespass; and (3) declaratory relief.

            (A)       Breach of Contract

The Commission’s first cause of action is for breach of contract. “A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) In order for a plaintiff to be entitled to summary judgment on a breach of contract claim, the plaintiff must show both the fact and amount of damages. (Ibid.)

The Commission presents evidence of the existence of the contract (the Lease) and of defendant’s breach by failure to pay rent and to maintain a surety bond. These elements are conceded by defendants. (Opposition, at p. 9 [“It is undisputed that Signal Hill was in default under the terms of the Lease in that it had not paid rent since 2015 and its bond had lapsed because the bonding company went out of business.”].)

In opposition, defendants assert that the Commission’s breach of the implied covenant of good faith and fair dealing precludes summary adjudication of the breach of contract claim. It is somewhat unclear from defendants’ opposition whether this argument is intended to negate the element of plaintiff’s performance or to be an affirmative defense to the cause of action. As legal authority for its argument, defendant cite California Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474 (Lettuce Growers), Perdue v. Crocker National Bank (1985) 38 Cal.3d 913 (Perdue), and Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695 (Serpa). All of these cases state the general principle that: “[A] provision in an agreement permitting one party to modify contract terms does not, standing alone, render a contract illusory because the party with that authority may not change the agreement in such a manner as to frustrate the purpose of the contract.” (Serpa, supra, 215 Cal.App.4th at p. 706; accord, Lettuce Growers, supra, 45 Cal.2d at p. 484 [“where a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing” in context of finding contract not illusory]; Perdue, supra, 38 Cal.3d at p. 923 [same, quoting Lettuce Growers].)

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made. [Citation.] The covenant thus cannot ‘ “be endowed with an existence independent of its contractual underpinnings.” ’ [Citation.] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349–350 (Guz).)

Because the covenant of good faith and fair dealing is an implied term in the contract, breach of the covenant of good faith and fair dealing is a type of breach of contract. (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1344.) “ ‘A party complaining of the breach of a contract is not entitled to recover therefor unless he has fulfilled his obligations.’ [Citation.]” (Wiz Technology, Inc. v. Coopers & Lybrand (2003) 106 Cal.App.4th 1, 12.) So, in a proper case, a breach of the covenant of good faith and fair dealing could amount to negating the element of plaintiff’s performance.

The breach of the covenant of good faith and fair dealing which defendants claim preclude summary adjudication are based upon two events. The first event is the delay in considering Signal Hill’s proposal in its letter of February 20, 2018, as set forth in the Commission’s response letter of January 31, 2019. (Opposition, at pp. 10-11; see Commission Evidence, exhibits S, T.) The second event is determination to terminate the Lease notwithstanding other, alternative remedies available under the Lease to address Signal Hill’s breach. (Opposition, at pp. 11-12.) Within this argument, defendants also argue that the Commission has not shown that that Signal Hill had failed to cure its default.

With respect to the defaults conceded here, the Lease provides: “The occurrence of any one or more of the following events shall immediately and without further notice constitute a default or breach of the Lease by Lessee: [¶] (1) Lessee’s failure to make any payment of rental, royalty, or other consideration as required under this Lease; [¶] (2) Lessee’s failure to obtain or maintain liability insurance or a surety bond or other security device as required under this Lease.” (Lease, § 3, ¶ 11(a)(1), (2).) The Lease also provides: “Lessee’s failure to observe or perform any other term, covenant or condition of this Lease to be observed or performed by the Lessee when such failure shall continue for a period of thirty (30) days after Lessor’s giving written notice; however, if the nature of Lessee’s default or breach under this paragraph is such that more than thirty (30) days are reasonably required for its cure, then Lessee shall not be deemed to be in default or breach if Lessee commences such cure within such thirty (30) day period and diligently proceeds with such cure to completion.” (Lease, § 3, ¶ 11(b).) Thus, under the express terms of the Lease, there is no cure period required for either of the two breaches asserted in this cause of action.

With respect to remedies for default, the Lease provides: “In the event of a default or breach by Lessee and Lessee’s failure to cure such default or breach, Lessor may at any time and with or without notice do any one or more of the following: [¶] (1) Re-enter the Lease Premises, remove all persons and property, and repossess and enjoy such premises; [¶] (2) Terminate this Lease and Lessee’s right of possession of the Lease Premises. Such termination shall be effective upon Lessor’s giving written notice and upon receipt of such notice, Lessee shall immediately surrender possession of the Lease Premises to Lessor; [¶] (3) Maintain this Lease in full force and effect and recover any rental, royalty, or other consideration as it becomes due without terminating Lessee’s right of possession regardless of whether Lessee shall have abandoned the Lease Premises; and/or (4) Exercise any other right or remedy which Lessor may have at law or equity.” (Lease, § 3, ¶ 11(c).)

“The obligations of the parties to a contract are either dependent or independent. [Citation.] The parties’ obligations are dependent when the performance by one party is a condition precedent to the other party’s performance. In that event, one party is excused from its obligation to perform if the other party fails to perform. [Citations.] If the parties’ obligations are independent, the breach by one party does not excuse the other party’s performance. Instead, the nonbreaching party still must perform and its remedy is to seek damages from the other party based on its breach of the contract.” (Colaco v. Cavotec SA (2018) 25 Cal.App.5th 1172, 1182–1183.) Thus, the asserted breach of the covenant of good faith and fair dealing would only negate the element of the plaintiff’s performance if the Commission’s obligation of good faith and fair dealing as to the claimed breaches of that obligation were a condition precedent to Signal Hill’s performance.

Here, the breach of contract shown, and admitted by defendants, is based upon (1) the nonpayment of rent between November 2015 and June 2019, and (2) the failure to maintain a bond since 2013. (DSS, undisputed facts 5-6, 10-12.) Defendants have presented no evidence to show that at the time they assert the Commission breached the covenant of good faith and fair dealing Signal Hill had fully performed its obligations under the Lease. It has long been held that “[a] breach of contract cannot be justified by anything the other party to the contract may have done or omitted to do afterwards; and where a breach of contract is not such as to defeat a right of action the defendant cannot plead it in bar, but must take advantage of it by proper pleading in recoupment of damages.” (California Prune & Apricot Growers v. Baker (1926) 77 Cal.App. 393, 398.) Consequently, no breach of the covenant of good faith and fair dealing that may have occurred in consideration of Signal Hill’s proposal to remedy its existing default would have excused Signal Hill’s own performance under the Lease of obligations then in default.

Thus, the Commission has presented evidence of its own performance under the Lease meeting its initial burden on summary adjudication as to this element of the cause of action and for which defendants have not shown a triable issue of fact.

The final element of the cause of action, however, is problematic in multiple ways. As noted above, the element of damages includes not only the fact of damage but the amount of damages. The Commission has presented evidence, and meets its initial burden on summary adjudication, showing that the amount of damages for breach of contract is $303,540.93. (PSS, fact 24; Pett decl., ¶ 9.) However, the Commission’s own evidence from its staff report is that the amount owed through the same period was $282,094.34. (Commission Evidence, exhibit P, p. 148 [“The Lessee owes $282,094.34 in unpaid rent including penalties for the period from November 22, 2015, through June 28, 2019, and interest, for the period from November 22, 2015, to February 20, 2018, and March 1, 2019, to June 28, 2019, with interest accruing daily.”].) In reply, the Commission asserts that the staff report calculation is in error. Whether or not that is true, the evidence is in conflict as to the amount due, which constitutes a triable issue of material fact precluding summary adjudication.

Another issue arises from the claim of breach based upon the failure to maintain the required security bond. The Commission asserts this in its complaint as an independent breach of contract for which it seeks an award of damages. (FAC, ¶ 23.) In this motion, the Commission continues to assert the failure to maintain the bond as a separate basis for breach of contract. (E.g., Motion, at p. 18.) In argument, the Commission asserts that Signal Hill must pay $50,000 for that bond. (Ibid.) However, under the terms of the Lease, the bond is merely security for performance (Lease, § 3, ¶ 9(a)), and hence the face amount of the bond is merely duplicative of damages sought for other breaches of the Lease. The Commission seeks by its complaint, and would be entitled to receive on a proper showing, its damages attributed the absence of the bond. However, the Commission provides no evidence of such damages from the absence of the bond and thus fails to meet its initial burden on summary adjudication as to that part of its claim for breach of contract. Because summary adjudication cannot be granted as to part of a cause of action, even if there were no triable issue as to the amount of damages on the basis of the nonpayment of rent, summary adjudication is improper as to the entire cause of action for breach of contract.

It is important to note that to the extent that defendants’ argument as to the breach of the covenant of good faith and fair dealing is in the nature of an affirmative defense, defendants’ argument does not demonstrate the existence of a triable issue of material fact. For the reasons discussed above, the affirmative defense would not excuse their failure to fully perform timely under the Lease, but may, upon an appropriate showing, potentially reduce damages owed under their breach of contract. To whatever extent the conduct asserted by defendants constitutes a breach of the covenant (and for the reasons discussed above, there are strong arguments that no such breach occurred), defendants do not present evidence of any amount of offsetting damages so as separately to dispute the amount claimed as damages.

Accordingly, the motion for summary adjudication will be denied as to the first cause of action of the FAC.

            (2)       Trespass

The Commission’s second cause of action is for trespass/ ejectment. The Commission identifies the elements of trespass as (Motion, at p. 18): “The elements of trespass are: (1) the plaintiff’s ownership or control of the property; (2) the defendant’s intentional, reckless, or negligent entry onto the property; (3) lack of permission for the entry or acts in excess of permission; (4) harm; and (5) the defendant’s conduct was a substantial factor in causing the harm.” (Ralphs Grocery Co. v. Victory Consultants, Inc. (2017) 17 Cal.App.5th 245, 262.)

The first element is shown, and not effectively disputed, by statute: “The commission may eject from any tide and submerged lands, beds of navigable channels, streams, rivers, creeks, lakes, bays, and inlets under its jurisdiction, any person, firm, or corporation, trespassing upon any such lands, through appropriate action in the courts of this state.” (Pub. Resources Code, § 6302; DSS, fact 33 [undisputed that the Commission has jurisdiction, notwithstanding difference between legal description of location of pipeline and actual location of pipeline].)

The second element of entry is met by undisputed evidence of the Lease and use of the pipelines.

With respect to the third element of lack of permission, the FAC asserts a claim of trespass based upon remaining in possession of the previously-leased lands by continuing operations and the transport of oil through the pipelines. (FAC, ¶ 26.) The Commission asserts trespass between June 29, 2019, and October 26, 2019. (PSS, fact 36; FAC, ¶ 25.) However, the Commission fails in its initial burden to show lack of permission during this entire period. The Commission voted to terminate the lease on June 28, 2019, (DSS, fact 28 [undisputed on this point]) and sent a July 1, 2019, letter providing notice of the termination based upon the June 28, 2019, action (DSS, fact 30 [undisputed on this point].) (Note: Separate statement facts 1 through 32 are incorporated by reference into the second requested adjudication. (PSS, at p. 13.)) The Lease, on the other hand, provides that termination in the event of default “shall be effective upon Lessor’s giving written notice and upon receipt of such notice, Lessee shall immediately surrender possession of the Lease Premises to Lessor.” (Lease, § 3, ¶ 11(c)(2).) There is evidence from the Commission that written notice did not occur until after June 29, 2019, and no direct evidence presented of when such notice was received so that Signal Hill had an obligation to surrender possession of the Lease Premises. At least until receipt of the written notice of termination, under the evidence presented here, Signal Hill was in possession of the premises with permission, i.e., as a tenant under the Lease, and not trespassing. Because the Commission seeks summary adjudication over the entire time period, including an assessment of damages based on that entire time period, and the court may not adjudicate part of a cause of action, the Commission has failed in its initial burden for summary adjudication as  to this cause of action.

(Note: The Lease specifically contemplates that Signal Hill would complete abandonment or restoration of the leased premises “within 90 days after the expiration or sooner termination of this Lease” and that such obligations survive termination of the Lease. (Lease, § 2, ¶¶ 7, 12.) Because performance of these post-termination activities would necessarily involve “possession” of the leased premises, it is unclear whether this element of trespass would be met after Signal Hill’s obligation to surrender the premises arose but while post-termination obligations remained. (See also Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1780 [“Where one has permission to use land for a particular purpose and proceeds to abuse the privilege, or commits any act hostile to the interests of the lessor, he becomes a trespasser.”].) Based on the court’s determination that summary adjudication is improper as to this cause of action as sought in this motion, the court need not determine whether this is a separate basis for denying the motion as to this requested adjudication.)

            (C)       Declaratory Relief

The Commission’s third cause of action is for declaratory relief. The Commission seeks a declaration “the Lease obligates Signal Hill to submit a plan to the Commission for the cessation of use of the sovereign owned land and removal and restoration of all improvements subject to the Lease by September 30, 2019.” (FAC, prayer, ¶ 5.)

On the one hand, as quoted above, section 3, paragraph 12 of the Lease gives the Commission upon notice the right to require restoration of the leased premises. Section 2, paragraph 7, requires plans for abandonment and/or removal and restoration to be to the satisfaction of Lessor and completed within 90 days after the termination of the Lease or after the Lessee has obtained all required permits or other approvals. It is undisputed that Signal Hill has not submitted plans to the Commission. (DSS, undisputed fact 41.)

On the other hand, the evidence presented shows that the termination of the Lease was effective on July 1, 2019, and the deadline sought by the requested declaration was more than four years ago.

“Any person interested under a written instrument, … or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.” (Code Civ. Proc., § 1060.)

“The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc., § 1061.)

When this action was filed in August 2019, the deadline that was the subject of the requested declaration had not yet passed. At this point, there is no showing by the Commission that there is any proper utility to this requested declaration, at least by summary adjudication where other causes of action remain pending.

“ ‘The “actual controversy” referred to in this statute is one which admits of definitive and conclusive relief by judgment within the field of judicial administration, as distinguished from an advisory opinion upon a particular or hypothetical state of facts. The judgment must decree, not suggest, what the parties may or may not do. [Citations.]’ [Citation.] Moreover, declaratory relief ‘ “operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” [Citations.]’ [Citation.]” (Baxter Healthcare Corp. v. Denton (2004) 120 Cal.App.4th 333, 360.)

Because the obligation that is the subject of the requested declaration is now an obligation that has not been performed by the time set forth in the declaration, the effect of the declaration would be to declare that Signal Hill has breached its surviving obligation for restoration under the Lease. This is not prospective. The Commission is thus seeking to establish liability for breach of contract on a basis that is not now sought in its breach of contract claim. In the absence of a showing that declaratory relief is now proper, the court exercises its discretion not to provide declaratory relief now in the context of this request for summary adjudication. Such a determination that declaratory relief is not now proper should not be construed by any party that declaratory relief may not be determined to be proper at a later time, particularly following trial on the merits.

Accordingly, the motion for summary adjudication of the third cause of action will be denied. Based on the foregoing, the motion for summary judgment as to the Commission’s FAC will also be denied.

(2)       Defendants’ Cross-Complaint

“For purposes of motions for summary judgment and summary adjudication: [¶] … [¶] (2) A … cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the … cross-defendant has met that burden, the burden shifts to the … cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The … cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).)

The Commission further seeks summary adjudication of the first and second causes of action of the 4ACC of Signal Hill and Carone. (Note: For consistency in writing, Signal Hill and Carone are collectively referred to herein as defendants although for purposes of this discussion these parties are in their capacities as cross-complainants.) The Commission asserts two separate legal theories why summary adjudication should be granted as to both of these causes of action and one additional legal theory why summary adjudication should be granted as to the second cause of action only.

The first cause of action of the 4ACC is for breach of the Lease. As alleged in the 4ACC:

“Cross-defendant State Lands Commission breached the lease with Signal Hill by its notice of July 1, 2019 which purported to terminate the pipeline lease without recognizing the tender and cure made by Signal Hill prior to and at the hearing on June 28, 2019. Cross-defendant unreasonably rejected the tender and cure. As a result, the Commission was without the power or authority to terminate the pipeline lease under Section 11 (c) or any other provision of it.” (4ACC, ¶ 33.)

“Cross-defendant State Lands Commission further breached the lease by violating the implied covenant of good faith and fair dealing contained in all leases and contracts in California. Under that covenant, the Commission had a duty to notify cross-complainant that Signal Hill’s offer to resolve the rent and insurance disputes was rejected prior to notifying Signal Hill that the Commission intended to terminate the Pipeline Lease.” (4ACC, ¶ 34.)

The second cause of action is also for breach of lease but is asserted by Carone as a third-party beneficiary of the Lease.

            (A)       Timeliness of Government Claim

The Commission first argues that it is entitled to summary adjudication because the defendants’ government claim was untimely. This argument involves two different factors. The first factor is the requirement that a claim be presented. “A claim shall be presented by the claimant or by a person acting on his or her behalf and shall show all of the following: [¶] … [¶] (c) The date, place and other circumstances of the occurrence or transaction which gave rise to the claim asserted.” (Gov. Code, § 910, subd. (c).)

The claim form submitted by defendant lists the “date of incident” as June 28, 2019, on the first page of the form. (PSS, fact 43; Plaintiff’s Request for Judicial Notice [PRJN], exhibit II, p. 225.) The Commission argues that the “date of incident” is the one and only date upon which to determine the timeliness of the submission of the claim.

The second factor is the requirement that the claim be presented timely. “A claim relating to a cause of action for death or for injury to person or to personal property or growing crops shall be presented as provided in Article 2 (commencing with Section 915) not later than six months after the accrual of the cause of action. A claim relating to any other cause of action shall be presented as provided in Article 2 (commencing with Section 915) not later than one year after the accrual of the cause of action.” (Gov. Code, § 911.2, subd. (a).)

Because the two causes of action asserted in the 4ACC are both claims for breach of contract, the one-year period in the second sentence of section 911.2, subdivision (a), applies. This one-year period was extended during the COVID-19 emergency. Governor Newsom issued two executive orders extending the time for presenting a claim by a total of 120 days. (Governor’s Exec. Order Nos. N-35-20, ¶ 11 (Mar. 21, 2020), N-65-20, ¶ 10 (May 19, 2020). Combining these periods, in order to be timely, a claim must be presented within one year plus 120 days.

Defendants’ claim was mailed on October 28, 2020, and received on October 29, 2020. October 28, 2019, was one year and 122 days after June 28, 2019. On that basis, the Commission argues that the claim is untimely and the causes of action barred. In support of this construction, the Commission cites Estill v. County of Shasta (2018) 25 Cal.App.5th 702 (Estill).

In Estill, the plaintiff was employed by the Shasta County Sheriff’s Office and worked at the Shasta County jail. (Estill, supra, 25 Cal.App.5th at p. 706.) In July 2009, the Sheriff’s Office initiated an internal affairs investigation regarding allegations that the plaintiff has improper communications with an inmate. (Ibid.) Later that year, the plaintiff learned that correctional officers were discussing her investigation and not maintaining confidentiality. (Ibid.) On September 29, the Sheriff’s Office served the plaintiff with a notice charges in support of proposed termination. (Ibid.) The plaintiff then realized jail staff had improperly received information about here and complained. (Id. at pp. 706-707.) The plaintiff’s employment was terminated effective January 11, 2010, and her administrative appeal was denied on September 10, 2010. (Id. at p. 707.)

The plaintiff in Estill served defendant Shasta County with a government claim on February 23, 2012. (Estill, supra, 25 Cal.App.5th at p. 707.) The claim said the date of the incident was September 2009, but the plaintiff represented that the date she first became aware of the incident was September 9, 2011, when an employee of the Sheriff’s Office revealed a communication to the plaintiff. (Ibid.) The plaintiff filed her complaint within six months of the denial of the claim. (Ibid.) The trial court first granted summary judgment and then granted a motion for new trial on the grounds that the plaintiff had failed to file a claim within the six-month period for government claims. (Id. at pp. 707-708.)

On appeal, the Estill court found that the plaintiff had filed her government claim more than six months after the claim had accrued. (Estill, supra, 25 Cal.App.5th at p. 708.) The undisputed facts showed that the plaintiff was aware in 2009 and 2010 that information from her internal affairs investigation case had been leaked and was being discussed by people at the Sheriff’s Office and other agencies. (Ibid.) The plaintiff had information of circumstances that would put a reasonable person on inquiry, which was sufficient to trigger accrual of the causes of action. (Ibid.) Thus, on the record on summary judgment, the causes of action accrued by July 2010 and the government claim filed in 2012 was untimely absent an applicable exemption or excuse. (Id. at pp. 708-709.)

“Under the Government Claims Act, (§ 810 et seq.), if a government claim is untimely and there is no application for leave to present a late claim, the public entity may give written notice that the claim is untimely and return it without further action. (§ 911.3, subd. (a).) The notice must warn the person making the government claim that his or her only recourse is to apply without delay to the public entity for leave to present a late claim. (§ 911.3, subd. (a).) Failure to give the warning within 45 days after the claim was presented results in waiver of the defense that the government claim was untimely. (§ 911.3, subd. (b).)” (Estill, supra, 25 Cal.App.5th at p. 709.)

The plaintiff in Estill argued that because Shasta County did not give a section 911.3 advisement of untimeliness, Shasta County had waived the defense of untimeliness. (Estill, supra, 25 Cal.App.5th at p. 709.) The Estill court held that the plaintiff’s government claim did not give the County an initial reason to question when she first became aware of the alleged incident. (Id. at p. 710.) Because the claim did not state facts showing that the plaintiff was aware of alleged wrongdoing prior to September 9, 2011, Shasta County did not err in treating the claim as timely. (Ibid.) Moreover, the plaintiff was estopped to assert a waiver of the defense because she represented on her claim form the date she first became aware of the incident was September 9, 2011. (Id. at p. 711.)

“When she submitted her government claim form, [the plaintiff] knew the true facts about when she first became aware of the alleged unlawful conduct, but the County did not. Consistent with the trial court’s findings, the only reasonable inference to be drawn from the record is that [the plaintiff] intended the County to treat her claim as timely, and the County relied on her representation and treated the claim as timely, denying the claim on the merits. Given that [the plaintiff] repeatedly represented in her government claim that the date she first became aware of the incident was September 9, 2011, it would be unfair to allow her to subsequently assert that under section 911.3, subdivision (b), defendants waived their section 911.2 timeliness defense by accepting her repeated representations. Under these circumstances, the County was not required to give the section 911.3, subdivision (a) notice and warning.” (Estill, supra, 25 Cal.App.5th at p. 711.)
 

Thus, in Estill, the court concluded that the plaintiff was estopped from asserting waiver of the defense of untimeliness. (Estill, supra, 25 Cal.App.5th at p. 713.) Here, the Commission argues that defendants should be estopped from asserting that their claim accrued any later than June 28, 2019, because, like the plaintiff in Estill, that was the date reported as the incident on the claim form and the Estill court estopped the claimant there. Applying the standards on summary judgment, there are several reasons why this argument fails under the circumstances here.

First, the claim in Estill depended upon the correctness of the Estill plaintiff’s assertion of delayed accrual, the underlying facts of which were not included with the claim. Here, the attachment to the claim form provides a detailed chronology of events including both the June 28, 2019, hearing at which the Commission terminated the Lease (PRJN, exhibit II, ¶ 28, p. 233) and the formal notice of termination of the Lease within three days of July 12, 2019 (id., ¶ 30, p. 234). The accrual date upon which claim of the plaintiff in Estill was based depended upon the Estill plaintiff’s own knowledge and not upon facts either known to the Commission or appearing in the claim. (See Estill, supra, 25 Cal.App.5th at p. 710 [“While the County was not required to accept [the plaintiff’s] representation, the claim did not alert the County that [the plaintiff’s] claim might be untimely.”].) Here, the information included in the claim did provide sufficient information for the Commission to investigate and to consider fully the issue of timeliness.
 

Second, the “date of incident” as a line in the claim form must be understood in context, including both the legal context of the underlying claim and the standards for construing government claims.

“Government Code section 945.4 provides that ‘no suit for money or damages may be brought against a public entity on a cause of action for which a claim is required to be presented in accordance with ... Section 910 ... until a written claim therefore has been presented to the public entity and has been acted upon by the board, or has been deemed to have been rejected by the board....’ Section 910, in turn, requires that the claim state the ‘date, place, and other circumstances of the occurrence or transaction which gave rise to the claim asserted’ and provide ‘[a] general description of the ... injury, damage or loss incurred so far as it may be known at the time of presentation of the claim.’ ” (Stockett v. Association of Cal. Water Agencies Joint Powers Ins. Authority (2004) 34 Cal.4th 441, 445, fns. omitted (Stockett).)

“The purpose of these statutes is ‘to provide the public entity sufficient information to enable it to adequately investigate claims and to settle them, if appropriate, without the expense of litigation.’ [Citation.] Consequently, a claim need not contain the detail and specificity required of a pleading, but need only ‘fairly describe what [the] entity is alleged to have done.’ [Citations.] As the purpose of the claim is to give the government entity notice sufficient for it to investigate and evaluate the claim, not to eliminate meritorious actions [citation], the claims statute ‘should not be applied to snare the unwary where its purpose has been satisfied’ [citation].” (Stockett, supra, 34 Cal.4th at p. 446.)

The underlying claim is for breach of contract based upon defendants’ allegations that the Commission’s termination of the contract was improper.

“There can be no actual breach of a contract until the time specified therein for performance has arrived. [Citations.] Although there may be a breach by anticipatory repudiation: ‘(b)y its very name an essential element of a true anticipatory breach of a contract is that the repudiation by the promisor occur before his performance is due under the contract.’ [Citation.]” (Taylor v. Johnston (1975) 15 Cal.3d 130, 137.) “Anticipatory breach occurs when one of the parties to a bilateral contract repudiates the contract. The repudiation may be express or implied. An express repudiation is a clear, positive, unequivocal refusal to perform [citations]; an implied repudiation results from conduct where the promisor puts it out of his power to perform so as to make substantial performance of his promise impossible [citations].” (Ibid.)

“When a promisor repudiates a contract, the injured party faces an election of remedies: he can treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relation between the parties, or he can treat the repudiation as an empty threat, wait until the time for performance arrives and exercise his remedies for actual breach if a breach does in fact occur at such time. [Citation.] However, if the injured party disregards the repudiation and treats the contract as still in force, and the repudiation is retracted prior to the time of performance, then the repudiation is nullified and the injured party is left with his remedies, if any, invocable at the time of performance.” (Taylor v. Johnston, supra, 15 Cal.3d at pp. 137–138.)

The terms of the Lease explain the difference, as applied here, between anticipatory repudiation and actual breach. As more fully quoted above, termination is one alternative remedy for breach, which “shall be effective upon Lessor’s giving written notice and upon receipt of such notice, Lessee shall immediately surrender possession of the Lease Premises to Lessor.” (Lease, § 3, ¶ 11(c)(2).) Because termination is not effective until the receipt of notice, the Commission’s vote to terminate the Lease is reasonably characterized as anticipatory repudiation of the Lease. The termination of the Lease, upon its effectiveness, would then constitute the breach of the Lease under defendants’ allegations.

Under these circumstances, the “date of incident” correctly reflects the date of repudiation, which authorized the giving of the notice of termination effecting the alleged breach. This chronology is reflected in the text of the attachment incorporated in the claim. When considered from the point of view of facilitating the review of the underlying claim by the Commission, the date of repudiation and authorization to terminate is the most reasonable date as the date of the “incident” even though accrual of the cause of action for breach of contract occurred a few days later. Consequently, the “date of incident” when construed with the entirety of the claim is not, as a matter of law, the date upon which to determine the timeliness of the claim.

Fourth, “whether the breach is anticipatory or not, when there are ongoing contractual obligations the plaintiff may elect to rely on the contract despite a breach, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract.” (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 489.) Thus, as the above discussion reflects, the underlying cause of action for breach of contract did not accrue until the termination of the contract by receipt of the notice. Because the underlying breach of contract claim did not accrue until after July 1, the government claim was timely filed based upon the accrual of that cause of action. To the extent that the date listed under the heading, “date of incident,” should for technical reasons be that later date, there is substantial compliance with the date requirement of section 910.

“ ‘ “ ‘Substantial compliance, as the phrase is used in the decisions, means actual compliance in respect to the substance essential to every reasonable objective of the statute.’ [Citation.] Where there is compliance as to all matters of substance[,] technical deviations are not to be given the stature of noncompliance. [Citation.] Substance prevails over form.” [Citations.] Our high court has more recently explained with respect to the above quoted passage ... : “This formulation is unobjectionable so long as it is understood to mean that each objective or purpose of a statute must be achieved in order to satisfy the substantial compliance standard, but this language cannot properly be understood to require ‘actual compliance’ with every specific statutory requirement.” [Citation.] An appellate court in a more recent case succinctly observed: “Substantial compliance with a statute is dependent on the meaning and purpose of the statute.” ’ [Citation.]” (Andrews v. Metropolitan Transit System (2022) 74 Cal.App.5th 597, 606.)

As discussed above, the purposes of the statute are efficiently and effectively achieved by directing the Commission to the date of its action from which the claim flowed, notwithstanding the accrual of the cause of action a few days later. To the extent that the date listed under the “date of incident” heading should have instead been the date as to the giving and receipt of the notice of termination, particularly in light of the fuller chronology provided in the attachment to the claim, the date given on page one of the claim would constitute merely a technical deviation for which there is substantial compliance with the statute.

The Commission argues that substantial compliance is not permissible because the claim is untimely. This reasoning is circular. The time for presenting the claim had not elapsed at the time the claim form had been submitted. The only way the claim is untimely is if the “date of incident” is construed in the abstract as the date of accrual notwithstanding the fact that the date of accrual is different by a few days. In arguing that defendants should be bound by the “date of incident” as the date of accrual, the Commission is arguing estoppel.

“ ‘The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury. [Citation.]’ [Citations.]” (City of Goleta v. Superior Court (2006) 40 Cal.4th 270, 279.)

Among other things, there are at least triable issues of fact as to whether the Commission prejudicially relied upon the “date of incident.” The response letter from the California Department of General Services states, “GPC staff reviewed your claim and determined that the cause of action accrued 06/28/2019.” (DRJN, exhibit II, p. 280.) This text states that there was a review of the entire claim, not just the “date of incident,” including the material that, as discussed above under the standards for summary adjudication, the underlying cause of action accrued later and within the extended period for the government claims. The court cannot apply the doctrine of estoppel under the facts presented in this motion for summary adjudication.

Based upon the foregoing, the court determines that either the Commission has failed to meet its initial burden on summary adjudication as to this issue or there are triable issues of fact precluding summary adjudication on this requested adjudication.

            (B)       Good Faith and Fair Dealing

As quoted above, defendants assert as the basis for their first cause of action breach of the Lease “by its notice of July 1, 2019, which purported to terminate the pipeline lease without recognizing the tender and cure made by Signal Hill prior to and at the hearing on June 28, 2019” and “by violating the implied covenant of good faith and fair dealing” by which “the Commission had a duty to notify cross-complainant that Signal Hill’s offer to resolve the rent and insurance disputes was rejected prior to notifying Signal Hill that the Commission intended to terminate the Pipeline Lease.” (4ACC, ¶¶ 33, 34.)

This requested adjudication is the complement to the adjudication of the Commission’s action for breach of the Lease and so requires a similar analysis but with a different focus. As a cross-defendant, the Commission here need only negate one or more elements of the cause of action rather than prove the elements of its own claim for breach of contract. (See Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1598 [the defendant may utilize the “tried and true” technique of negating an essential element of the plaintiff’s cause of action].) (Note: The Commission does not appear to utilize the alternative technique of showing that the plaintiff cannot establish an element of the plaintiff’s cause of action by showing that the plaintiff does not possess, and cannot reasonably obtain, needed evidence. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.)) Based upon the above allegations and the arguments made by the Commission, the Commission asserts that it is negating the elements of contractual duty, performance, and breach, i.e., that defendants did not perform their obligations under the Lease prior to the alleged breach and that the Commission did not have any duty under the Lease that was breached.

The Commission meets its initial burden on the elements of performance and breach by presenting evidence that it had the right to terminate the Lease and that it had no duty to notify Signal Hill of its rejection of Signal Hill’s compromise offer prior to termination. The Commission presents evidence of the terms of the Lease. The Lease provides that nonpayment of rent and failure to maintain the surety bond each constitutes an immediate default without further notice. (Lease, § 3, ¶ 11(a)(1)-(2), (b); DSS, response to facts 3, 8 [undisputed on these points].) The Lease further provides that in the event of a default and failure to cure, the Commission “may at any time and with or without notice” terminate the Lease. (Lease, § 3, ¶ 11(c)(2); DSS, response to facts 3, 8 [undisputed on this point].) The Commission presents undisputed evidence that Signal Hill failed to pay any rent between November 13, 2015, and June 23, 2019. (DSS, undisputed fact 11.) On June 23, 2019, Signal Hill tendered partial payment of $172,000, which included $150,000 for its Lease and $22,000 for Carone’s state oil and gas leases. (DSS, undisputed fact 22.) It is also undisputed that the bond lapsed on May 10, 2013, and that Signal Hill never acquired a new bond. (DSS, undisputed facts 5, 6.) This evidence is sufficient to show that Signal Hill was in breach of the Lease prior to termination, and therefore the evidence negates the element of cross-complainant’s performance. This evidence is also sufficient to show that when the Commission terminated the Lease, Signal Hill was in default, so that under the terms of the Lease, the Commission had no obligation to provide any notice or other opportunity to Signal Hill to cure the lease. This evidence is thus sufficient to negate the element of cross-defendant’s breach. The burden thus shifts to defendants to demonstrate the existence of a triable issue of fact.

In opposition to this requested adjudication of defendants’ cause of action for breach of Lease, defendants refer to their argument in opposition to the requested adjudication of the Commission’s cause of action for breach of Lease. In particular, defendants point to the facts of (i) the Commission’s delay of one year in responding to Signal Hill’s January 20, 2018 written offer, the Commission’s letter of January 31, 2019 stating that it was still considering Signal Hill’s offer of a year earlier and the threat in that letter to start charging interest and penalties if a good faith payment, in an unstated amount, was not received by March 1, 2019, (ii) the Commission’s decision in April 2019 to terminate the lease without telling Signal Hill, and then notifying Signal Hill of a termination hearing in 10 days in June 2019, and (iii) the Commission’s refusal to accept the tendered checks or Mr. Cowan’s offers to cure the breaches at the hearing. (Opposition, at p. 19.)

In reviewing the evidence of defendants, it is first important to note that this evidence is insufficient to show an offer of full performance. (See Civ. Code, § 1485.) In addition to the issue of payment of rent, it is undisputed that Signal Hill failed to maintain the bond and thus remained in default under paragraph 11(a)(2). The evidence presented by defendants regarding offers involving a new bond shows only that Signal Hill requested that the Commission accept something different by way of a substitution, which was not responded to by the Commission. (Carone depo., at pp. 89-90.) There is no evidence that Signal Hill could not comply with the express terms of the contract or that the Signal Hill ever tried to comply with the express terms of the contract. Moreover, this evidence shows that the substitute bond request was tied in with Signal Hill’s compromise offer regarding past due rent. (Ibid.) “An offer of partial performance is of no effect.” (Civ. Code, § 1486.) There is therefore no factual dispute that Signal Hill was in default at the time of the termination of the Lease and thus, by the express terms of the Lease, the Commission had the right to terminate the Lease without further notice to defendants.

Defendants’ argument therefore resolves to a question of whether the Commission had any duty under the implied covenant of good faith and fair dealing to accept a compromise or to provide notice of its rejection of the compromise prior to termination of the Lease notwithstanding the express provisions of the Lease to the contrary. The case of Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026 (Racine) is instructive.

In Racine, the plaintiff was a concessionaire occupying and operating premises in Old Town San Diego State Historic Park under a contract, which bears many attributes of a long-term lease, with the California Department of Parks and Recreation (Department). (Racine, supra, 11 Cal.App.4th at p. 1028.) The contract was executed in 1974 for a term of 40 years. (Ibid.) After about a decade, the plaintiff negotiated with the Department for modifications in the contract to expand operations of the premises, which negotiations continued over a period of several years. (Ibid.) When negotiations broke down, the plaintiff sued the Department. (Ibid.) The plaintiff ultimately went to trial on the sole cause of action for breach of the implied covenant of good faith and fair dealing. (Ibid.) At trial, the jury found for the plaintiff that the Department was guilty of breach of the implied covenant in its negotiations of an amended contract. (Ibid.)

The Racine court reversed the judgment for the plaintiff and directed the trial court to enter judgment for the Department. (Racine, supra, 11 Cal.App.4th at p. 1035.) The court explained:

“We reverse because we conclude that the Department had no obligation to negotiate new terms of the concession contract, that its commencement and continuance of negotiations over a long period of time had no effect upon this lack of obligation, and that its assumption of an arbitrary stance at some point in the negotiations cannot therefore be a breach of any contract term, including implied contract terms of good faith and fair dealing, even though such conduct might be found by a jury to be unreasonable, unfair, or otherwise bad faith negotiation tactics.” (Racine, supra, 11 Cal.App.4th at p. 1031.)

“Our conclusion in this regard is based, we believe, on rather simple and unassailable contract law principles. The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. [Citation.] ‘The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ [Citation.] As we stated in Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136 at page 1153: ‘In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.’ (Racine, supra, 11 Cal.App.4th at pp. 1031-1032, parallel citation omitted.)

“The fact that parties commence negotiations looking to a contract, or to the amendment of an existing contract, does not by itself impose any duty on either party not to be unreasonable or not to break off negotiations, for any reason or for no reason. During the course of negotiations things may be done which do then impose a duty of continued bargaining only in good faith. [¶] For instance, a preexisting agreement may impose an obligation of good faith bargaining with respect to the modification of some term of the agreement. The preexisting agreement which vests a discretionary power of alteration of the terms of the agreement may impliedly require that such be done in good faith. Or, in anticipation of an agreement the parties may, by letter of intent or otherwise, agree that they will bargain in good faith for the purpose of reaching an agreement. Finally, in the course of negotiations it is possible for a party to so mislead another by promises or representations, upon which the second party detrimentally relies, as to bring into play the concept of promissory estoppel. [¶] Absent the existence of such special circumstances or conditions, however, there is no obligation in California to bargain for a new or amended contract in good faith.” (Racine, supra, 11 Cal.App.4th at pp. 1034–1035, fn. omitted.)

Similarly, in Los Angeles Equestrian Center, Inc. v. City of Los Angeles (1993) 17 Cal.App.4th 432 (LA Equestrian), the plaintiffs had a concession agreement with the City of Los Angeles (Los Angeles) for the operation of an equestrian facility on city-owned land. (Id. at p. 436.) The plaintiffs filed for Chapter 11 bankruptcy and paid Los Angeles only minimum rent, with substantial amounts of pre-petition and post-petition rent owing. (Id. at p. 439.) The plaintiffs proposed a reorganization plan that called for Los Angeles to receive a part payment on rent and a promissory note for the balance, as well as a modification of the concession agreement to approve a sublease. (Id. at p. 440.) Los Angeles rejected the reorganization plan, leading the plaintiffs’ secured-creditor to foreclose and assume operation of the facility. (Id. at pp. 440-442.) The plaintiffs sued Los Angeles asserting tort and contract claims. (Id. at p. 442.) The trial court later granted Los Angeles summary judgment. (Id. at pp. 442-443.)

On appeal, the LA Equestrian court affirmed. (LA Equestrian, supra, 17 Cal.App.4th at p. 451.) As to the contract claims, the court first found that there was nothing in the concession contract that obligated Los Angeles to negotiate a modification or amendment to the contract, and thus the refusal to approve the reorganization plan did not constitute a breach of contract. (Id. at p. 446.) The court then quoted from Racine, supra, and found that there was no breach of the covenant of good faith and fair dealing: “There is no express contractual obligation in the Concession Agreement or amendments thereto to negotiate a modification of the type of concession granted by the contract. In rejecting the reorganization plan, the City was simply rejecting a proposed new or different type of concession than the one that had been granted previously.” (Id. at p. 447.)

From Racine and LA Equestrian it is clear that merely negotiating in the presence of an existing contract is insufficient to give rise to any duty under the covenant of good faith and fair dealing contrary to the express provisions of the Lease. The undisputed facts here are that Signal Hill was in breach of the Lease at all times prior to the effectiveness of the termination of the Lease by the Commission and that Signal Hill was aware not only of the Commission’s claim of continuing breach but of the fact of such breach. Under the express provisions of the Lease, the Commission had no duty to provide notice in advance of termination of the Lease. The fact that the Commission had received an offer of compromise from Signal Hill did not impose upon the Commission duties contrary to its rights under the Lease. On this point, two other cases are instructive: Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342 (Carma), and Third Story Music, Inc. v. Waits (1995) 41 Cal.App.4th 798 (Third Story).

As summarized by Third Story:

“In Carma, the parties had entered into a lease agreement which stated that if the tenant procured a potential sublessee and asked the landlord for consent to sublease, the landlord had the right to terminate the lease, enter into negotiations with the prospective sublessee, and appropriate for itself all profits from the new arrangement.” (Third Story, supra, 41 Cal.App.4th at p. 803.) “[T]he court recognized that ‘[t]he covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another.’ [Citation.] The court expressed the view that ‘[s]uch power must be exercised in good faith.’ [Citation.]” (Ibid.)

“At the same time, the Carma court upheld the right of the landlord to freely exercise its discretion to terminate the lease in order to claim for itself—and deprive the tenant of—all profit from the expected sublease. In this regard, the court stated: ‘We are aware of no reported case in which a court has held the covenant of good faith may be read to prohibit a party from doing that which is expressly permitted by an agreement. On the contrary, as a general matter, implied terms should never be read to vary express terms. [Citations.] “The general rule [regarding the covenant of good faith] is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing.... [¶] This is in accord with the general principle that, in interpreting a contract ‘an implication ... should not be made when the contrary is indicated in clear and express words.’ [Citation.].... [¶] As to acts and conduct authorized by the express provisions of the contract, no covenant of good faith and fair dealing can be implied which forbids such acts and conduct. And if the defendants were given the right to do what they did by the express provisions of the contract there can be no breach.” ’ [Citation.]” (Third Story, supra, 41 Cal.App.4th at p. 803.)

The court in Third Story explained the problem it was addressing as: “In situations such as the present one, where a discretionary power is expressly given by the contractual language, the quoted passages from Carma set up an apparent inconsistency between the principle that the covenant of good faith should be applied to restrict exercise of a discretionary power and the principle that an implied covenant must never vary the express terms of the parties’ agreement. We attempt to reconcile the two.” (Third Story, supra, 41 Cal.App.4th at pp. 803–804.)

“We first emphasize a long-established rule concerning implied covenants. To be imposed ‘ “(1) the implication must arise from the language used or it must be indispensable to effectuate the intention of the parties; (2) it must appear from the language used that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it; (3) implied covenants can only be justified on the grounds of legal necessity; (4) a promise can be implied only where it can be rightfully assumed that it would have been made if attention had been called to it; (5) there can be no implied covenant where the subject is completely covered by the contract.” ’ [Citations.]” (Third Story, supra, 41 Cal.App.4th at p. 804.)

After analyzing Carma and the cases cited in Carma, the Third Story court concluded:

“In each of these cases, as in Carma, one of the parties was expressly given a discretionary power but regardless of how such power was exercised, the agreement would have been supported by adequate consideration. There was no tension between the parties’ express agreement and their intention to be bound, and no necessity to impose an implied covenant to create mutuality. The conclusion to be drawn is that courts are not at liberty to imply a covenant directly at odds with a contract’s express grant of discretionary power except in those relatively rare instances when reading the provision literally would, contrary to the parties’ clear intention, result in an unenforceable, illusory agreement. In all other situations where the contract is unambiguous, the express language is to govern, and ‘[n]o obligation can be implied ... which would result in the obliteration of a right expressly given under a written contract.’ [Citation.]” (Third Story, supra, 41 Cal.App.4th at p. 808.)

Here, at the time of termination, Signal Hill had not performed under the Lease, was in breach, and the Commission was under no duty to consider or to agree to a compromise. Thus, as discussed in Racine, Carma, and Third Story, only special circumstances or conditions could impose a greater duty. No special circumstances or conditions are shown to exist here. The Lease itself provides contrary provisions as to the Commissions rights and duties, including the right to terminate upon default with or without notice, which contrary provisions are not negated by the implied covenant of good faith and fair dealing. Signal Hill argues that because the Commission had alternative remedies, it was required to exercise its discretion consistently with the covenant of good faith and fair dealing. However, looking at the evidence most favorably to defendants, this argument is that Signal Hill was continuously in default under the Lease in both payment of rent and maintenance of the required bond, that Signal Hill was able to perform fully at the time of termination, but that Signal Hill failed to perform fully during the time when Signal Hill had submitted a compromise offer to the Commission to accept less than what Signal Hill owed under the Lease. These circumstances do not give rise to an implied duty to the Commission under the Lease contrary to its express rights under the Lease.

In its additional separate statement facts, defendants assert that they “reasonably relied” on the Commission’s communications. (DSS, fact 68.) Since reliance is generally not applicable to the issue of Signal Hill’s performance under the Lease, the reference to reliance appears to attempt to import into the discussion some form of estoppel. However, estoppel is neither pleaded nor argued here, and in any case it is questionable whether estoppel would apply to a government agency under these circumstances. (See Racine, supra, 11 Cal.App.4th at pp. 1032-1034; LA Equestrian, supra, 17 Cal.App.4th at pp. 448-449.)

Defendants therefore have failed to meet their burden to show the existence of a triable issue of fact. The court will grant summary adjudication as to the first and second causes of action of the 4ACC.

            (C)       Carone as Cross-Complainant

The Commission alternatively argues that Carone cannot assert the second cause of action because Carone is not a third party beneficiary of the Lease. As discussed above, the court will grant summary adjudication as to both the first and second causes of action of the 4ACC on the grounds that the Commission has negated the substantive elements of breach of contract. “[T]he third party beneficiary takes the benefits subject to the conditions and limitations set forth in the contract is consistent with settled law holding that a third party beneficiary cannot assert greater rights under the contract than those of the actual contracting party. [Citation.] Because the contract provides the foundation of the third party beneficiary’s rights, she must take that contract as [s]he finds it, rather than having the right to select the parts she finds advantageous and reject those she finds not to her liking.” (Mercury Casualty Co. v. Maloney (2003) 113 Cal.App.4th 799, 803.) Thus, assuming for purposes of this discussion only that Carone is a third party beneficiary of the Lease, Carone’s claims fail for the substantive reasons discussed above with respect to Signal Hill.

(3)       Commission’s Indemnity Cross-Complaint

The Commission also seeks to summarily adjudicate the first and second causes of action of its Indemnity CC. The first cause of action of the Indemnity CC is for express indemnity. The Commission alleges:

“[T]o the extent cross-complainant Carone Petroleum Corporation or anyone else claims to have suffered injury or damage as a result of the acts, omissions, incidents and/or occurrences alleged in cross-complainants’ fourth amended cross-complaint, Signal Hill is responsible, in whole or in part, for such injury or damage.” (Indemnity CC, ¶ 15.)

“In the event that any party should establish the Commission’s liability for breach of contract or the implied covenant of good faith and fair dealing of the Pipeline Lease, which liability the Commission expressly denies, that liability will arise solely by reason of the primary conduct of Signal Hill. Signal Hill is therefore bound and obligated to defend, indemnify, and hold harmless the Commission, in whole or in part, from any and all claims, losses, damages, judgment, expenses, and/or liability incurred or to be incurred in this action by the Commission, in accord with section 7 of the Pipeline Lease.” (Indemnity CC, ¶ 16.)

“Based on Signal Hill’s agreement to the express indemnity clause in section 7 of the Pipeline Lease, Signal Hill must defend, indemnify, and hold harmless the Commission against any and all claims, losses, damages, judgment, expenses, and/or liability arising from Signal Hill’s breach of the Pipeline Lease, connected in any way to Signal Hill’s breach of the Pipeline Lease, or arising from the acts, omissions, incidents and/or occurrences alleged in cross-complainants’ fourth amended cross-complaint.” (Indemnity CC, ¶ 18.)

Section 7, subdivision (a), of section 3 the Lease provides: “Lessor shall not be liable and Lessee shall indemnify, hold harmless and, at the option of Lessor, defend Lessor, its officers, agents, and employees against and for any and all liability, claims, damages or injuries of any kind and from any cause, arising out of or connected in any way with the issuance, enjoyment or breach of this Lease or Lessee’s use of the Lease Premises except for any such liability, claims, damage or injury solely caused by the negligence of Lessor, its officers, agents and employees.”

“Express indemnity refers to an obligation that arises ‘ “by virtue of express contractual language establishing a duty in one party to save another harmless upon the occurrence of specified circumstances.” ’ [Citation.] Express indemnity generally is not subject to equitable considerations or a joint legal obligation to the injured party; rather, it is enforced in accordance with the terms of the contracting parties’ agreement.” (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1158.)

The first cause of action for express contractual indemnity is thus a claim for breach of contract. As discussed above in the context of the Commission’s claims for breach of Lease in its FAC, to meet its initial burden on summary adjudication, a moving plaintiff or cross-complainant must provide evidence to support a finding in its favor as to each element of its cause of action. Under the Commission’s theory of indemnity alleged in the Indemnity CC, Carone is liable for all damages arising from “Carone’s claims for damages in this action.” (Motion, at p. 28.) As discussed above in the context of the second cause of action in the 4ACC, the court will grant summary adjudication as to that cause of action. There are therefore no damages to be awarded to Carone. To the extent that indemnity damages would include the costs of defense of Carone’s action as distinct from Signal Hill’s action (see Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 564), the Commission has failed to provide evidence of such damages. The Commission has therefore failed in its initial burden to establish its right to summary adjudication as to the entirety of the first cause of action. The motion for summary adjudication of the first cause of action will be denied.

The second cause of action is for declaratory relief. The second cause of action alleges:

“If Signal Hill, Carone, or any party establishes the Commission’s liability directly or indirectly for alleged damages arising from the acts, omissions, incidents and/or occurrences alleged in cross-complainants’ fourth amended cross-complaint, which liability the Commission expressly denies, the Commission will be damaged in the amount recovered and in the amount of the costs incurred in defending itself against such allegations. In such event, the Commission is entitled to recover such amounts from Signal Hill in accord with section 7 of the Pipeline Lease.” (Indemnity CC, ¶ 20.)

“An actual controversy has arisen and now exists relating to the legal rights and duties of Signal Hill and the Commission under the Pipeline Lease. The Commission contends that Signal Hill is obligated to defend, indemnify, and hold harmless the Commission against any and all claims, losses, damages, judgment, expenses, and/or liability arising from Signal Hill’s breach of the Pipeline Lease, connected in any way to Signal Hill’s breach of the Pipeline Lease, or arising from the acts, omissions, incidents and/or occurrences alleged in cross-complainants’ fourth amended cross-complaint, in accord with section 7 of the Pipeline Lease. The Commission is informed and believes, and on that basis alleges, that Signal Hill denies this obligation.” (Indemnity CC, ¶ 21.)

“The Commission desires a judicial declaration of the respective rights and contractual obligations of Signal Hill and the Commission on the issues described above. Such a declaration is necessary and appropriate in order that the Commission may ascertain its rights and duties with respect to claims against it, including its rights to defense, indemnity, reimbursement, and damages from Signal Hill and in order to avoid a multiplicity of lawsuits on these issues.” (Indemnity CC, ¶ 22.)

The Commission’s notice of motion seeks summary adjudication of “the Commission’s ‘Second Cause of Action for Declaratory Relief.’ ” (Amended Notice, at p. 3.) The Commission’s separate statement identifies its “Issue No. 6” as: “Summary judgment/adjudication should be granted on State Lands’ Cross-Complaint for Indemnity as a matter of law because the Lease requires Signal Hill to indemnify the Commission against Carone’s claims.” (PSS, at p. 24.)

“If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” (Cal. Rules of Court, rule 3.1350(b).) The Commission violates rule 3.1350(b) by failing to state verbatim the specific cause of action in both the notice of motion and in the separate statement. The notice makes clear that the requested adjudication is of the second cause of action and not of an issue of duty.

The Commission fails in its initial burden to show entitlement to an adjudication disposing of the entire second cause of action. (See Code Civ. Proc., § 437c, subd. (f)(1).) First, as set forth in paragraph 20 of the Indemnity CC, the declaratory relief sought is premised upon a finding of liability against the Commission. As discussed above, the court will summarily adjudicate the causes of action of the defendants’ 4ACC, thus demonstrating that the absence of the premise of the allegation. Second, as discussed above in the context of the Commission’s declaratory relief claim in its FAC, because the court will summarily adjudicate the second cause of action of the defendants’ 4ACC, part of this requested adjudication is redundant to the first cause of action for express indemnity for which the court will decline to provide unnecessary prospective declaratory relief. Third, the second cause of action appears to include claims for costs of defense against Signal Hill for Signal Hill’s own breach.

“Generally, an indemnification provision allows one party to recover costs incurred defending actions by third parties, not attorney fees incurred in an action between the parties to the contract. [Citation.] Courts look to several indicators to distinguish third party indemnification provisions from provisions for the award of attorney fees incurred in litigation between the parties to the contract. The key indicator is an express reference to indemnification. A clause that contains the words ‘indemnify’ and ‘hold harmless’ generally obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee becomes obligated to pay third persons—that is, it relates to third party claims, not attorney fees incurred in a breach of contract action between the parties to the indemnity agreement itself.” (Alki Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574, 600.)

Because the Commission has failed to meet its initial burden on summary adjudication, as to both causes of action of its Indemnity CC, the motion will be denied as to the Indemnity CC.

(4)       Conclusion

Based upon the foregoing, the court will deny the Commission’s motion for summary adjudication as to each of the causes of action of the Commission’s FAC and as to each of the causes of action of the Commission’s Indemnity CC. The court will grant the Commission’s motion for summary adjudication of the first and second causes of action of the 4ACC. Because this summary adjudication completely disposes of all claims by or against cross-complainant Carone Petroleum Corporation, the court will grant summary judgment in favor of the Commission and against cross-complainant Carone.