Carizona Properties v. FRI-M, LLC, et al

Case Number

22CV02430

Case Type

Hearing Date / Time

Wed, 12/06/2023 - 10:00

Nature of Proceedings

Motion for Summary Judgment

Tentative Ruling

For Plaintiff Carizona Properties: Erik D. Black, Black & Black

For Defendants FRI-M, LLC, Shari’s CP LLC, Shari’s Management Company, and Shari’s Management Corporation: Benjamin P. Tarczy, Miller Nash LLP

RULING

For all reasons discussed herein, the motion of Plaintiff Carizona Properties for summary judgment is denied.

The Trial Date of 2/7/24 and the MSC date of 1/19/24 are confirmed.

The final CMC set for 12/13/23 is vacated.

Background

On June 28, 2022, Plaintiff Carizona Properties (Carizona) filed its complaint against Defendants FRI-M, LLC (FRI-M), and Sharis CP, LLC (Sharis CP) (collectively, Defendants). The Judicial Council form complaint asserts one cause of action for breach of contract. As alleged in the complaint:

On December 20, 1973, Carizona entered into a written agreement (the agreement) with Carrows Restaurants, LLC, Catalina Restaurant Group Inc., and Carrows Restaurants, Inc. (Complaint, ¶ BC-1 & Attachment BC-1.) The essential terms of the agreement are: “[p]aragraph 4B - percentage rent provides for rent of 5% of gross sales annually”; “[p]aragraph 1 – [d]efendants pay all real property taxes and assessments”. (Complaint, ¶ BC-1.)

On July 1, 2018, and continuing, Defendants breached the agreement by failing to pay real estate taxes and assessments for the leased property and by failing to provide gross sales records and full payment of 5 percent rents or base monthly rent payments for May and June 2022 as required by the agreement. (Complaint, ¶ BC-2.)

The prayer of the complaint seeks as remedies: damages of “$65,000+”, interest from January 1, 2014, and attorney fees according to proof. (Complaint, ¶ 10.) In the cause of action attachment, damages are alleged as “$65,000 or more since June 2018 through 2012, and increasing.” (Complaint, ¶ BC-4.)

On June 29, 2022, Carizona filed two amendments to the complaint identifying Doe 1 as Defendant Shari’s Management Company (Shari’s Company) and Doe 2 as Defendant Shari’s Management Corporation (Shari’s Corp).

On July 5, 2023, the Court granted the motion of Defendants Shari’s Company, Shari’s Corp, FRI-M, and Shari’s CP (collectively, Defendants), to set aside the judgment entered on December 21, 2022, and the defaults entered on November 9, 2022, and December 20, 2022. (See July 5, 2023, Minute Order.) The Court ordered the judgment vacated and the defaults set aside and deemed the proposed answer attached as Exhibit G to the motion filed and served as of July 5, 2023. The Court further ordered Defendants to file a copy of the answer with the Court within 10 days for clarity in the Court’s docket.

On July 17, 2023, Defendants filed a copy of their answer to the complaint, generally denying its allegations and asserting three affirmative defenses.

On September 15, 2023, Carizona filed a motion for summary judgment on the grounds that each Defendant entered into a valid lease with Carizona, that Carizona performed all obligations required of it under the lease, that each Defendant committed “separate and distinct” breaches of paragraphs A, B, and l of the lease by failing to timely pay rent and property taxes as required by the lease, and that Defendants’ breaches caused and continue to cause damages to Carizona in the amount of $135,544.93. (Motion at p. 1, ll. 7-13.)

Defendants oppose the motion.

For present purposes, is it undisputed that on December 3, 1973, Real Estate (Investment) Counselors (REIC), who is Carizona’s predecessor in interest, entered into a Land Lease with the fee owner of land that is located in Phoenix, Arizona (the land). (Opp. Sep. Stmt., UMF No. 4 & evidence cited therein.) On December 20, 1973, REIC entered into a Lease (the lease) with Carrows Restaurants Inc. (Carrows), who is Defendants’ predecessor in interest, for property located at 2026 N. 7th Street, Phoenix, Arizona (the property). (Opp. Sep. Stmt., UMF No. 2 & evidence cited therein.) The land and property consist of two parcels known as lot 12 and lot 13 in Maricopa County, Arizona (the leased premises). (Opp. Sep. Stmt., UMF Nos. 4, 5 & evidence cited therein.)

On May 31, 1974, the lease was amended and assigned to Carizona under an Amendment Of Lease And Guarantee. (Opp. Sep. Stmt., UMF Nos. 3, 6, & evidence cited therein.) On July 3, 1974, REIC assigned the Land Lease to Carizona under a Memorandum of Lease and Assignment Lease. (Opp. Sep. Stmt., UMF No. 4 & evidence cited therein.) On March 27, 1975, Carizona and Carrows executed a second amendment of the lease (the second amendment). (Opp. Sep. Stmt., UMF No. 6 & evidence cited therein.)

The lease allowed for two renewal periods of 10 years each. (Opp. Sep. Stmt., UMF No. 7 & evidence cited therein.) On April 8, 2004, Carizona and Carrows executed a third amendment (the third amendment) of the lease, extending it until December 31, 2014. (Opp. Sep. Stmt., UMF No. 6 & evidence cited therein.) Pursuant to a notice dated March 31, 2014, from the president of Carrows, the lease was extended for a second 10-year term through December 31, 2024. (Opp. Sep. Stmt., UMF No. 7 & evidence cited therein.) The lease was amended a fourth time on April 7, 2021, by way of a letter agreement (the Letter Agreement) between Defendants and Carizona. (Opp. Sep. Stmt., UMF No. 6 & evidence cited therein.) (Note: Pursuant to the undisputed material facts set forth by the parties and for clarity and ease of reference, the Court will refer to the lease and each of its amendments, collectively.)

Pursuant to the Letter Agreement, Shari’s Company, as a tenant, agreed to, among other things, bring current the unpaid rents that were owed from December of 2018 through March 31, 2021, to be paid in installments through June 1, 2023, and agreed to pay real property taxes. (Opp. Sep. Stmt., UMF Nos. 15, 16, 18, 19 & evidence cited therein [not reasonably disputed on this point].) Defendants made the payments for 4 months. (Opp. Sep. Stmt., UMF No. 36 & evidence cited therein.) Defendants have not paid the “catch-up” payments under the Letter Agreement for October 2021, December 2021, and January 2022 through June 1, 2023, as required. (Opp. Sep. Stmt., UMF No. 37 & evidence cited therein.)

In mid-2022, Carizona was advised by the fee owner of the premises that the real property taxes were not being paid by Defendants. (Opp. Sep. Stmt., UMF No. 22 & evidence cited therein.) On December 31, 2022, Defendants abandoned and vacated the leased premises, returning it to the fee owner. (Opp. Sep. Stmt., UMF No. 29 & evidence cited therein.)

The above summary is not intended to be exhaustive, and the Court has considered all admissible evidence offered in support of and in opposition to the motion.

Analysis

A 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 judgment as a matter of law.” (Code Civ. Proc. § 437c, subd. (c).) “From commencement to conclusion, the moving party bears the burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845, 850 (Aguilar).)

A Plaintiff moving for summary judgment must prove each element of the cause of action. (Aguilar, supra, 25 Cal.4th at pp. 850, 853 [also noting that a Plaintiff is not required to disprove any defense asserted by the Defendant]; see also Code Civ. Proc., § 437c, subd. (o)(1).) “Thus, if a Plaintiff who would bear the burden of proof by a preponderance of evidence at trial moves for summary judgment, he must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not….” (Id. at p. 851.)

If the moving party carries its burden of production, this “causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Aguilar, supra, 25 Cal.4th at p. 850.) However, there is no obligation by the opposing party to establish anything unless and until the moving party has “by affidavit stated ‘facts establishing every element necessary to sustain a judgment in his favor.’ [Citation.]” (Canifax v. Hercules Powder Co. (1965) 237 Cal.App.2d 44, 50, original italics; accord, Consumer Cause, Inc. v. SmileCare (2001) 91 Cal.App.4th 454, 468.)

The pleadings frame the issues to be considered on a motion for summary judgment. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1253.) In the complaint, Carizona alleges a sole cause of action against Defendants for breach of contract. “[T]he very existence of a contract is what gives rise to the duty to perform, and [] damages generally flow from the breach of that duty[.]” (Piedmont Capital Management, L.L.C. v. McElfish (2023) 94 Cal.App.5th 961.) Accordingly, Carizona bears the burden of proving the existence of a contract with each Defendant, Carizona’s performance or excuse for nonperformance of the contract, each Defendants’ breach of the contract, and resulting damages. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Notwithstanding whether Carizona has met its burden to demonstrate generally the existence of a contract (here, the lease), Carizona’s performance, a breach of the contract, or damages, for all reasons discussed herein, there exist triable issues of fact with regard to whether a contract exists between Carizona and each Defendant named in the complaint that gives rise to a duty to perform by each named Defendant.

For example, Carizona asserts that the lease requires each Defendant named in the complaint to pay a minimum base monthly rent, subject to increases, as well as property taxes and assessments. (Sep. Stmt., UMF Nos. 8-10.) Carizona contends that in 2020 and 2021, “Defendants” fell behind on payment for rent and taxes owed under the lease due to Covid-19 problems. (Sep. Stmt., UMF No. 13 & evidence cited therein.) Therefore, Carizona contends, “Defendants” breached the lease. (Sep. Stmt., UMF Nos. 23, 28 & and evidence cited therein.) Carizona further contends that “Defendants” failed to make the required payments under the Letter Agreement. (Sep. Stmt., UMF Nos. 27, 28 & evidence cited therein.)

To support its argument that each Defendant named in the complaint breached the lease, Carizona offers the following facts which Carizona contends are undisputed:

Carrows assigned the lease to FRI-M “and its other subsidiaries/affiliates named as [d]efendants”. (Sep. Stmt., UMF No. 11.) In a letter dated August 29, 2018, “Defendants” advised Carizona that FRI-M had assumed the lease and responsibility for Carrows’ restaurants with Shari’s Corp to provide management oversight and direction. (Sep. Stmt., UMF No. 11 & evidence cited therein [Carizona Exh. 5].)

On April 29, 2020, Sam Borgese (Borgese), in his capacity as Defendants’ President and Chief Executive Officer, sent an email to Carizona (the April Borgese letter) confirming that “Defendants” were sending payment for March 2020 rent, “CAM” charges, and property taxes pursuant to the lease. (Sep. Stmt., UMF No. 12 & evidence cited therein [Carizona Exh. 6].)

In a letter dated November 24, 2020, written on “Shari’s, Coco’s, and Carrows’ letterhead” (the November Borgese letter), Borgese assured Carizona that any breaches of the lease would be cured by “Defendants” who were undergoing “re-forecasting”, that “Defendants” would be paying all property taxes due, and that Defendants would contact Carizona to restructure the lease to meet their obligations. (Sep. Stmt., UMF Nos. 13, 14 & evidence cited therein [Carizona Exh. 7].)

Defendants do not for present purposes dispute or effectively dispute that FRI-M assumed the lease, or that Shari’s Company became a “tenant” at the premises pursuant to the Letter Agreement. (Opp. Sep. Stmt., UMF Nos. 11, 16.) However, based on the Court’s review of the information and evidence offered by Carizona, there are no facts showing that the lease was assigned to Sharis CP, Shari’s Company, or Shari’s Corp (collectively, the Shari Defendants), that the Shari Defendants agreed to pay either rent or property taxes, or that FRI-M or Shari’s Corporation would make the payments described in the Letter Agreement.

By way of further example, the August 29, 2018, letter submitted in support of Carizona’s motion as Exhibit 8 states that FRI-M assumed responsibility for the Carrows “[r]estaurants” and that Shari’s Corp “will provide the management oversight and direction”].) Though it can be reasonably inferred from this letter that FRI-M assumed the lease effective March 30, 2018, there is no information in the letter to demonstrate that the Shari Defendants also assumed responsibility for the lease or that Carrows assigned the lease to the Shari Defendants. Rather, it can be inferred from the contents of Exhibit 8 that Shari’s Corp assumed only the management of the premises.

For these reasons, though the evidence offered by Carizona appears to indicate that FRI-M assumed the lease effective March 30, 2018, a fact which is not for present purposes effectively disputed by Defendants, there is no evidence to show that the Shari Defendants also assumed responsibility for the lease or that Carrows also assigned the lease to the Shari Defendants.

In addition, there is no evidence demonstrating that the Shari Defendants are subsidiaries or affiliates of, or related to, FRI-M. Even if Carizona could establish that Defendants are related entities, this does not require the Court to conclude that each Defendant in this matter was therefore a party to the lease.

By way of further example, the Letter Agreement demonstrates that Shari’s Company agreed to pay rent and CAM charges beginning on April 1, 2021, as well as outstanding rent, among other things, a fact which is also not effectively disputed by Defendants. However, the Letter Agreement does not demonstrate, nor can it be inferred from its terms, that Shari’s CP or Shari’s Corp were parties to the Letter Agreement or agreed to pay the items described in the Letter Agreement.

As there exists no evidence to demonstrate that the Shari Defendants assumed or were assignees of the lease, Carizona’s contention that each Defendant in this matter is a party to the lease constitutes a conclusion of fact and law. “[S]tatements of ultimate facts, conclusions of law, conclusions of fact, argumentative matter and statements based on hearsay” are insufficient to sustain a summary judgment. (Colvig v. KSFO (1964) 224 Cal.App.2d 357, 365; accord, West v. Sundown Little League of Stockton, Inc. (2002) 96 Cal.App.4th 351, 363 [statements of undisputed facts must have evidentiary support].)

Furthermore, a triable issue of fact exists “if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar, supra, 25 Cal.4th at p. 850.) For all reasons discussed above, a reasonable trier of fact could find that the Shari Defendants were not parties to the lease by way of assignment or otherwise, and that the Letter Agreement constitutes a contract between Carizona and Shari’s Company only, and not each of the Shari Defendants.

Carizona bears the burden of persuasion to demonstrate that that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law with respect to the sole cause of action for breach of contract alleged in the complaint. For all reasons discussed above, Carizona has failed to meet its burden to demonstrate the existence of a contract with each named Defendant. Therefore, Carizona has also failed to establish that each Defendant breached a duty to perform under a contract.

Moreover, assuming without deciding that Carizona could prove that there exists a contract between it and FRI-M or Shari’s Company, or that FRI-M and Shari’s Company breached either the lease or the Letter Agreement (and the Court makes no findings in this regard), Carizona has not given notice that it is requesting summary adjudication as to any individual cause of action for breach of contract against any specific or individual Defendant. Therefore, the Court cannot consider summary adjudication of the cause of action for breach of contract as against FRI-M or Shari’s Company. (See Gonzales v. Superior Court (1987) 189 Cal.App.3d 1542, 1545-1546.)

For all reasons discussed above, at this stage of the proceedings and for present purposes, Carizona has failed to meet its burden to demonstrate that there exist no disputed issues of fact with regard to the existence of a contract with each named Defendant as alleged in the complaint, and a breach of that contract by each Defendant. Therefore, the Court will deny the motion.

As the burden did not shift to Defendants, the Court declines to consider Defendants’ evidentiary objections.