Leon Lunt et al vs Novacoast Inc et al

Case Number

24CV04434

Case Type

Hearing Date / Time

Fri, 05/23/2025 - 10:00

Nature of Proceedings

CMC; Demurrer

Tentative Ruling

For reasons discussed herein, the demurrer of defendants to plaintiffs’ complaint is sustained with leave to amend. Plaintiffs shall, on or before June 6, 2025, file and serve their first amended complaint.

Background:

On August 9, 2024, plaintiffs Leon Lunt (Leon), Joyce Lunt (Joyce) (the Lunts), and SeaLunt US, LLC (SeaLunt) (collectively, plaintiffs) filed a complaint against defendants Novacoast, Inc. (Novacoast), Paul Arthur Anderson (Anderson), and Adam Gray (Gray) (collectively, defendants), alleging six causes of action: (1) breach of contract (1515 Chapala Street, Santa Barbara, California) (against Novacoast and Anderson); (2) breach of contract (1517 Chapala Street, Santa Barbara, California) (against Novacoast and Anderson); (3) breach of contract (1505 Chapala Street, Santa Barbara, California) (against Novacoast and Anderson); (4) breach of contract (1511 Chapala Street, Santa Barbara, California) (against Novacoast and Anderson); (5) intentional misrepresentation (against all defendants); and (6) elder abuse (against all defendants). (Note: To avoid confusion due to common surnames, the court refers to the individual plaintiffs by their first names. No disrespect is intended.)

As alleged, or effectively alleged, in the complaint:

SeaLunt is the current owner of 1501-1517 Chapala Street (the Chapala Building), which is located in Santa Barbara, California. (Compl., ¶ 1.) The Lunts, as trustees of their revocable trust, are the sole member and, individually, the managers of SeaLunt. (Compl., ¶ 2.) The Lunts were the previous owners of the Chapala Building. (Ibid.)

The Chapala Building consists of six office spaces with addresses at 1501, 1505, 1509, 1511, 1515, and 1517 Chapala Street. (Compl., ¶¶ 8-9 & Exh. A [building map].) In February 2006, the Lunts entered into a written “Standard Multi-Tenant Office Lease” (the 1505 Lease) with Novacoast and Anderson, who is Novacoast’s Chief Executive Officer, for the office space located at 1505 Chapala Street (1505 Chapala). (Compl., ¶¶ 4 & 9.)

In March 2011, the Lunts, Novacoast, and Anderson negotiated a written extension of the 1505 Lease, and entered into a written “Standard Multi-Tenant Office Lease” commencing on May 1, 2011, which included an initial term of ten years with an option to extend for an additional five years, and annual cost-of-living rent adjustments. (Compl., ¶ 10 & Exh. C [identified by plaintiffs as the “relevant document”].) Anderson personally guaranteed that lease. (Compl., ¶ 10.)

Also in March 2011, Novacoast took possession of 3,225 square feet of office space located at 1515 Chapala Street (1515 Chapala). (Compl., ¶ 10.) The Lunts, Novacoast, and Anderson entered into a written “Standard Multi-Tenant Office Lease” which is dated March 22, 2011 (the 1515 Lease), which is the operative agreement with respect to 1515 Chapala, and which commenced on May 1, 2011, for an initial term of ten years with an option to extend for an additional five years, among other things. (Compl., ¶ 10 & Exh. B.) Anderson personally guaranteed the 1515 Lease. (Compl., ¶ 10.) A copy of a “Guaranty of Lease” (the 1515 Guaranty) which concerns the 1515 Lease and which was ostensibly executed by Anderson on April 19, 2011, is attached to the complaint as exhibit B. (Ibid.)

In December 2015, Novacoast took possession of 2,250 square feet of office space at 1511 Chapala Street (1511 Chapala), and on December 10, 2015, the Lunts, Novacoast, and Anderson entered in to a written “Standard Multi-Tenant Office Lease” (the 1511 Lease) for that office space. (Compl., ¶ 11 & Exh. D [identified as the “relevant document” and ostensibly setting forth the date of the 1511 Lease].) 

In November 2016, the Parties renegotiated the terms of the 1505 Lease, the 1515 Lease, and the 1511 Lease, and executed written lease amendments which, among other things, included ten year terms which would expire on February 1, 2027. (Compl., ¶ 12.)

Also in November 2016, Novacoast took possession of 1,839 square feet of office space at 1517 Chapala Street (1517 Chapala), and the Lunts, Novacoast, and Anderson executed a “Standard Multi-Tenant Office Lease” for 1517 Chapala (the 1517 Lease), which is the operative agreement with respect to 1517 Chapala, and is dated November 28, 2016. (Compl., ¶ 12 & Exh. E.) Anderson personally guaranteed the 1517 Lease. (Compl., ¶ 12.) A copy of a “Guaranty of Lease” (the 1517 Guaranty) which concerns the 1517 Lease and which was ostensibly executed by Anderson, is attached to the complaint as exhibit E. (Compl., ¶ 12 & Exh. E.)

Novacoast failed to comply with its obligations and, by March 2021, owed the Lunts $128,862 in past due rent. (Compl., ¶ 13.) On March 17, 2021, Novacoast, Anderson, and the Lunts negotiated two written termination agreements, one for the leased space at 1505 Chapala (the 1505 Termination Agreement), and one for the leased space at 1511 Chapala (the 1511 Termination Agreement) (collectively, the Termination Agreements). (Compl., ¶ 14.) The 1515 Lease and 1517 Lease (collectively, the Operative Leases), and the 1515 Guaranty and 1517 Guaranty (collectively, the Guarantees), continued unchanged and in effect, with expiration dates of February 1, 2027. (Ibid.)

Under the terms of each of the Termination Agreements, the Lunts forgave one-half of the past due rent owed by Novacoast, in the amount of $64,431, and agreed that the remaining balance of $64,431 would be paid over the course of seventy months to coincide with the terms of the Operative Leases. (Compl., ¶ 15.) The Lunts also agreed pursuant to the Termination Agreements that, once Novacoast paid one-half of the remaining balance (i.e., the amount of $34,431), the Lunts would apply the security deposits for 1505 Chapala and 1511 Chapala so that they would be paid in full for the past due rent owed under the 1505 Lease and the 1511 Lease. (Ibid.)

Novacoast timely paid to the Lunts the rent due under the Operative Leases, and the payments due under the Termination Agreements until April 1, 2023. (Compl., ¶¶ 16-17.) On April 1, 2023, Novacoast failed to pay its obligations under the Operative Leases and Termination Agreements, which each had approximately forty-six months left in their respective terms. (Compl., ¶ 18.)

On April 8, 2023, Joyce sent an email to Novacoast’s Chief Operating Officer, Janice Newlon (Newlon), asking for assistance in calculating the annual rent adjustment pursuant to the Operative Leases, and stating, among other things, that Leon was 89 years old, that Joyce had taken over the paperwork for the subject property, that Joyce was “confused” as she tried to calculate the May 1, 2023, rent, and that Joyce was “ ‘trying to determine how things were calculated as Leon’s memory is in decline.’ ” (Compl., ¶ 19 & Exh. F.)

After Joyce did not hear back from Newlon, the Lunts’ building manager made several telephone calls to Newlon, who indicated that she did not know why payment was not made, and that Gray, who is Novacoast’s Chief Technology Officer, would be calling the Lunts. (Compl., ¶¶ 20-22 & 53.)

On April 14, 2023, Joyce received a telephone call from Gray who claimed that, among other things, Novacoast could no longer pay any rent to the Lunts, or keep its doors open. (Compl., ¶ 24.) Gray also stressed that, because Novacoast only had a little bit of cash left, the Lunts needed to make a decision regarding the termination of the Operative Leases in order to receive any money. (Ibid.)

On April 20, 2023, Gray emailed Joyce stating that he had spoken with Novacoast’s Chief Financial Officer, that Novacoast was getting a contract together to try to sublease, and offering $40,000 to get out of the lease by the end of the following week. (Compl., ¶ 25.) The Lunts believe that Novacoast had been preparing to vacate the office space and had transferred its headquarters from Santa Barbara to Wichita, Kansas the year before. (Compl., ¶ 26.)

In a subsequent email exchange with Gray on April 22, 2023, Joyce stated “having no idea that you are having current financial problems, we are certainly unprepared for a last minute offer to cancel a lease in exchange for $48,000, which puts us further out on a limb[,]” to which Gray replied “I will find 8k more if 48k works. I have to let our other offices know very soon and I want to give you guys all we have left.” (Compl., ¶ 27.) Joyce explained that she had “been up half the night trying to figure out how to make something work and typed $48k in error. Can you gather 60k….” (Ibid.)

The Lunts believe that Gray was aware that Novacoast was not closing its offices nationwide, and intended to close only its Santa Barbara offices and transition its Santa Barbara employees to remote work. (Compl., ¶ 28.)

In another email exchange on April 23, 2023, Gray offered “50k” stating “it will take me a few days to pull that together….” (Compl., ¶ 29.) Joyce replied stating “I have consulted with Leon and he said OK.” (Ibid.) On April 26, 2023, Novacoast deposited $50,000 into the Lunts’ account, and Gray sent an email to Joyce requesting release documents. (Compl., ¶ 30.)

Joyce subsequently became aware that Novacoast was not closing its business as Gray had claimed, and had offices open across the United States. (Compl., ¶ 30.) On April 28, 2023, Joyce sent an email to Gray and returned the $50,000 deposit, due to Gray’s misrepresentation of Novacoast’s purported business closure and financial situation. (Compl., ¶ 31.) The wire transfer was completed the next business day, on May 1, 2023. (Compl., ¶ 32.) Novacoast acknowledged receipt of the returned $50,000 deposit. (Compl., ¶ 33.)

On June 21, 2023, Novacoast’s counsel sent a letter to the Lunts’ counsel stating “ ‘[Novacoast] has closed its Santa Barbara headquarters and transitioned all of those employees to remote status. Had Novacoast not terminated the Leases when it did, then it would have been in jeopardy, perhaps finding itself in a position when it would need to terminate the Leases without notice or the ability to make a payment. As such, Novacoast communicated the situation to the Lunts and negotiated a considerable lump sum payment to assist in the transition. The Lunts accepted this Termination Agreement. They cannot back out not [sic].’ ” (Compl., ¶ 34.)

On December 20, 2024, defendants filed a demurrer to each cause of action alleged in the complaint on the grounds that, among other things, the complaint is uncertain and fails to state facts sufficient to constitute a cause of action. The demurrer is opposed by plaintiffs.

Analysis:

“When any ground for objection to a complaint … appears on the face thereof, or from any matter of which the court is required to or may take judicial notice, the objection on that ground may be taken by a demurrer to the pleading.” (Code Civ. Proc., § 430.30, subd. (a).) A demurrer to a complaint may be made on any of the grounds set forth in Code of Civil Procedure section 430.10, which include that there exists “a defect or misjoinder of parties”, that the complaint “does not state facts sufficient to constitute a cause of action[,]” or is “uncertain….” (Code Civ. Proc., § 430.10, subds. (d)-(f).)

Defendants assert that the allegations of the complaint show that SeaLunt is the owner of the Chapala Building, and is not a party to the Operative Leases or the Termination Agreements. Defendants contend that plaintiffs have failed to allege facts showing when the Lunts transferred ownership of the Chapala Building to SeaLunt, or whether the Lunts assigned rights or retained some rights to the Operative Leases or the Termination Agreements following the transfer of ownership of the Chapala Building from the Lunts to SeaLunt. In addition, defendants assert that the Lunts and SeaLunt cannot both be parties to an action for breach of the Operative Leases or the Termination Agreement.

Defendants further contend that there are no allegations establishing why any defendant has wronged SeaLunt, or whether SeaLunt, as an entity, is a proper party to the fifth and sixth causes of action for, respectively, fraud and elder abuse. For these and all reasons noted above, defendants argue, it is impossible to know which plaintiff brings each cause of action, what matters defendants should admit or deny as against which plaintiff, and what defenses should be raised. Defendants further contend that the allegations of the complaint show that neither the Lunts nor SeaLunt have standing.

California Rules of Court, rule 2.112, requires that each separately stated cause of action state “[t]he party asserting it if more than one party is represented on the pleading ….” (Cal. Rules of Court, rule 2.112(3).) Noted above, SeaLunt, Joyce, and Leon are each represented as plaintiffs on the complaint. Though each of these parties are represented as plaintiffs on the complaint, each separately stated cause of action alleged in the complaint does not state which party plaintiff is asserting the cause of action, nor does the complaint state whether all plaintiffs represented on the complaint assert each cause of action. For these reasons, the complaint fails to comply with California Rules of Court, rule 2.112.

The deficiencies noted above also create ambiguity as to the nature of the claims alleged in the complaint, and the identity of the real party in interest with standing to assert each cause of action alleged in the complaint. (Code Civ. Proc., § 367 [requiring that an action be prosecuted “in the name of the real party in interest”].)

For example, the first and second causes of action alleged in the complaint arise from a purported breach of the Operative Leases by Novacoast and Anderson. The third and fourth causes of action arise from a purported breach by Novacoast and Anderson of the Termination Agreements. “[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The exhibits to the complaint show that the Lunts each signed the Operative Leases (i.e., the 1515 Lease and the 1517 Lease) and the Termination Agreements. (Compl., Exhs. B & E at pp. 17 [signature pages] & Exhs. C & D at pp. 4 [same].) Noted above, the allegations of the complaint also show that SeaLunt is the current owner of the Chapala Building. Notwithstanding these allegations, there is no information in the complaint, including its exhibits, which indicates or suggests whether or to what extent the Lunts signed the Operative Leases and Termination Agreements in an individual capacity, or as the sole member or individual managers of SeaLunt.

It is also unclear from the manner in which the separate causes of action are stated, and the factual allegations of the complaint including information appearing in its exhibits and described above, whether the Lunts or SeaLunt, are parties to the Operative Leases and the Terminating Agreements. For these reasons, and considering the ambiguities detailed above, plaintiffs have effectively failed to sufficiently plead the purported written contracts with Novacoast and Anderson. (See Civ. Code, § 1550 [setting forth essential elements of a contract]; McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489 [discussing manner in which a written contract may be pleaded]; Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811 [general discussion].)

A reasonable interpretation of the complaint also suggests that, at some time before, during, or after the term of the Operative Leases and the Termination Agreement, the Lunts transferred ownership of the Chapala Building to SeaLunt. As SeaLunt is represented as a party on the complaint, it can be inferred that SeaLunt has some right to prosecute the first through fourth causes of action alleged in the complaint.

“Absent a contrary agreement of the parties, ‘ “a sale by a lessor of real property during an unexpired term does not of itself abrogate the lease. Its effect is to grant all the rights of the original lessor to the grantee of the reversion. The grantee then becomes the landlord by operation of law and the tenant becomes a tenant of the grantee of the reversion.” [Citations.]’ [Citations.]” (Kirk Corp. v. First American Title Co. (1990) 220 Cal.App.3d 785, 809.) Though the allegations of the complaint appear to suggest that SeaLunt has rights under the Operative Leases and the Termination Agreements, the complaint does not state that SeaLunt asserts the first through fourth causes of action. To the extent the Lunts assert the first through fourth causes of action, the complaint fails to allege whether or to what extent any sale of the Chapala Building granted to SeaLunt any rights under the Operative Leases or the Termination Agreements, or whether the Lunts expressly reserved any rights notwithstanding the ostensible sale of the Chapala Building to SeaLunt.

For all reasons discussed above, the complaint violates court rules, and is uncertain as to the identity of the real party in interest with respect to the Operative Leases and the Termination Agreements, and the plaintiff with standing to assert the claims alleged in the first through fourth causes of action of the complaint. (Killian v. Millard (1991) 228 Cal.App.3d 1601, 1605 [party with no “substantive right in the contract” lacked standing to assert cause of action to void that contract]. For these reasons, defendants have shown why they cannot reasonably respond to the complaint. (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292 [demurrer for uncertainty will be granted if defendant cannot reasonably respond].)

The same analysis and reasoning apply as to the fifth cause of action for intentional misrepresentation and the sixth cause of action for elder abuse. (See, e.g., Hilliard v. Harbour (2017) 12 Cal.App.5th 1006, 1015-1016 [controlling member of limited liability company lacked standing to sue for elder abuse]; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124-125 [failure to allege elements of personal cause of action for fraud that resulted in injury to a corporation]; Sam v. Kwan (2024) 101 Cal.App.5th 556, 566 [discussion of standing to assert claims on behalf of a limited liability company].)

The examples provided above are intended to be illustrative, but not exhaustive. For all reasons discussed above, the court will sustain the demurrer, with leave to amend. (Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th 406, 411-412). The court expects that any amended pleading will specifically state the plaintiff or plaintiffs who assert each separately stated cause of action. The court further expects that any amended pleading will state facts sufficient to show that each plaintiff asserting each separately stated cause of action is the real party in interest with standing to prosecute that cause of action. (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1345 [standing to sue must be resolved before a matter can be reached on its merits].)

Defendants’ request for judicial notice:

In support of the demurrer, defendants submit a request for judicial notice of a “Grant Deed” recorded in the official records of the County of Santa Barbara on May 15, 2017, which defendants contend show that the Lunts transferred title to the Chapala Building to SeaLunt. (Def. RJN, ¶¶ 2-3 & Exh. 1.)

For present purposes, the Grant Deed is not necessary to the court’s determination of the demurrer. For these reasons, the court will deny defendants’ request for judicial notice of the Grant Deed. (Larner v. Los Angeles Doctors Hospital Associates, LP (2008) 168 Cal.App.4th 1291, 1298, fn. 2.) The court’s denial of defendants’ request for judicial notice of the Grant Deed is without prejudice to any future request for judicial notice of this document that may be filed by defendants in support of a future pleading challenge.