Motion for Summary Judgment and/or Adjudication filed by Defendant WKS Restaurant Corporation
The Motion for Summary Judgment or Adjudication brought by Defendant WKS Restaurant Corporation is DENIED, in its entirety.
Initially, the Court interprets this Motion as a Motion for Summary Judgment, only, given Defendant failed to submit requests for adjudication which comply with C.C.P. §437c(f).
Moreover, while Defendant attempted to invoke C.C.P. §437c(t), this provision requires the parties submit a Joint Stipulation agreeing to adjudication of the issues, along with Declarations which assert the Motion will further the interests of judicial economy. (C.C.P. §437c(t)(1)).
Following compliance with these requirements, the Court is required to notify the parties whether the Motion will be permitted. (C.C.P. §437c(t)(2)). The record of this action does not reveal compliance with C.C.P. §437c(t).
Thereafter, the Motion for Summary Judgment is DENIED as the contracts which form the basis of this action are ambiguous and triable issues exist, as to the intent of the parties.
“The basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting.” (See People v. International Fidelity Ins. Co. (2010) 185 Cal.App.4th 1391, 1396). “When a contract is reduced to writing, the parties’ intention is determined from the writing alone, if possible.” (Id.). “The words of a contract are to be understood in their ordinary and popular sense.” (Id.).
Courts “must give a ‘reasonable and commonsense interpretation’ of a contract consistent with the parties’ apparent intent.” (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 526). “The language ‘in a contract must be construed in the context of that instrument as a whole.’” (Id.). “Further, if possible, the court should give effect to every provision of the contract.” (Id.).
“The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civil Code §1638). Moreover, “[s]everal contracts relating to the same matters, between the same parties, and made as part of substantially one transaction, are to be taken together.” (Civil Code §1642).
Here, several agreements were executed between the parties which potentially outline or affect the rights to the subject building.
On September 27, 2004, Plaintiff Northridge Foods, Inc. and Defendant W.K.S. Restaurant Corporation entered into an “Asset Purchase Agreement,” which indicates “Seller desires to sell to Purchaser all, but not less than all, of the operating assets of the restaurant and related personal property, and Purchaser desires to purchase all of such assets…” (¶10 of Spongberg Declaration and Exhibit 2 [emphasis added]).
The Agreement defines “Real Property” to mean “all land and improvements subject to Leases” and “Assets” is defined to include personal, rather than real, property. (Id. at §1.1 of Exhibit 2). Nowhere in the Asset Purchase Agreement is the right to real property clearly transferred. At most, the Asset Purchase Agreement requires transfer of “all records and files related to the Real Property,” but not the Real Property itself. (See §1.1 of Exhibit 2).
Despite the above, ambiguities exist in connection with the Assignment of the Ground Lease and the Lease Agreement:
The Ground Lease between Balboa Nordhoff Center and Northridge Foods provides, in relevant part: “Title to the building and all other improvements on the leased premises and any repairs, alterations, additions or improvements to said building or improvements shall be vested in and remain in Lessee’s name at all times during the original term of this Lease and any renewal or extension thereof… ” (¶12 of Spongberg Declaration and §17 of Exhibit 4 [emphasis added]).
On December 20, 2004, an “Assignment of and Second Amendment to Lease” was executed between Balboa Nordhoff Center (“Landlord”), Northridge Foods, Inc. (“Assignor”) and W.K.S. Restaurant Corporation (“Assignee”), which provides: “Assignor hereby assigns and transfer to Assignee…all of Assignor’s right, title and interest in and to the Lease and Assignee accepts from Assignor all right, title, and interest, subject to the terms and conditions set forth in this Agreement.” (§2 of Exhibit 5).
A reasonable interpretation of these provisions is that Plaintiff transferred its interest in the building; however, it is equally possible the Ground Lease, rather than providing ownership of the building to the Lessee, intended to maintain the status quo, prior to requiring transfer to the Ground Lessor.
Whether or not the Ground Lease originated Plaintiff’s interest in the building or transferred interest in the building to Plaintiff is a triable issue.
Similar ambiguity exists in the Lease between Plaintiff and Defendant.
On December 27, 2004, Northridge Foods, Inc. and W.K.S. Restaurant Corporation executed a Standard Industrial/ Commercial Single-Tenant Lease, for the lease of the building at a rental rate of $4,000 per month. (See ¶14 of Spongberg Declaration and Exhibit 6).
The Lease defines the Premises as “[t]hat certain building including all improvements therein or to be provided by Lessor under the terms of this Lease and commonly known as 16950 Nordhoff Boulevard, Northridge, California 91343.” (§1.2 of Exhibit 6). The Lease was set to expire on December 31, 2018. (§1.3 of Exhibit 6).
An Addendum to the Lease executed on December 27, 2004 included the following provision: “Ownership. All Alterations and Utility Installations made by Lessee shall be the property of Lessee. On the termination or expiration of the Lease or any extension thereof, the Premises, including all Improvements, all Alterations and Utility Installations, all Lessee Owned Alterations and Utility Installations, all Trade Fixtures, and all personal property of Lessee, shall be the property of Lessee.” (¶16 of Spongberg Declaration and §7.4 of Exhibit 7).
As noted above, “Premises” is defined to expressly refer to the building and, thus, the language of this specific provision appears to provide for the transfer of the building at the expiration of the Lease; however, despite this fact, the remainder of the Lease provisions render the contract ambiguous.
“Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.” (Civil Code §1652). “Words in a contract which are wholly inconsistent with its nature, or with the main intention of the parties, are to be rejected.” (Civil Code §1653).
Similarly, “[p]articular clauses of a contract are subordinate to its general intent.” (Civil Code §1650).
Here, as noted by Plaintiff, the remainder of the Lease terms indicate the parties were entering into a rental rather than a purchase Agreement.
The Lease provides for rental payments within §1.5. (See ¶14 of Spongberg Declaration and Exhibit 6). Similarly, §4.1 states that “[a]ll monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent.” (Id.).
Moreover, §26 of the Lease states: “No Right to Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration [of] Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately on termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by the Lessee.” (Id.).
Similarly, the original Lease contains two options to extend by 60-months and for rental increases, in the event the options are exercised. (§51 of Option to Extend, included in Exhibit 6). Thereafter, within the Addendum, the parties amended ¶51 to provide for four options to extend by 60-months and accompanying rental increases. (See §53 of Addendum, attached as Defendant’s Exhibit 7).
The provision which prevents holdover (§26 of the Lease) is directly contrary to the provision providing for transfer of the building (§7.4 of the Addendum). Likewise, §7.4 which provides for transfer of the building is contrary to the Amended §53, which provides options for extension and increased payments.
Here, the Lease Agreement includes contrary language which makes the intention of the parties unclear. Consequently, the Court may consider extrinsic evidence as to intent. (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448).
Contrary evidence of intent exists which requires denial of the Motion for Summary Judgment. Per the Declaration of Mr. Spongerg, the Amended §7.4 reflects the intentions of the parties, that Defendant was purchasing the building. (¶14 and ¶16 of Amended Spongberg Declaration); however, in contrast Mr. Lundin provides 1099 forms for 2014, 2015 and 2018, which he declares he received from Defendant in connection with rent payments. (¶18 of Lundin Declaration). These documents identify payments to Mr. Lundin as “rents.” (¶18 of Lundin Declaration and Exhibit 16 thereto).
Ultimately, as the Court is “required to view the evidence and the reasonable inferences therefrom in the light most favorable to the party opposing the summary judgment motion” and as “doubts as to whether there are any triable issues must be resolved in favor of the opposing party,” the Motion for Summary Judgment is DENIED. (Essex Ins. Co. v. Heck (2010) 186 Cal.App.4th 1513, 1522).
The Agreements executed between the parties are ambiguous and conflicting evidence exists, as to the parties’ intent.
Additionally, the Motion as brought based on standing is DENIED: Defendant asserts the Estate of Diane Kolodziejski is a necessary party to this action, as Ms. Kolodziejski was a 25% owner of Plaintiff; however, the “Agreement and Release” cited by Defendant demonstrates that “Northridge Foods, Inc. shall concurrently with the execution of this Agreement, or as soon thereafter as practical, execute an assignment of its entire interest in the Northridge Lease to Lundin or their assigns.” (¶ 4 of Cooper Declaration and Exhibit 9).
While Defendant asserts the above is insufficient to convey any interests held by Diane Kolodziejski, the Agreement was executed by Leonard H. Lundin, in his individual capacity and as the Executor of the Estate of Diane Kolodziejski. (See Defendant’s Exhibit 9).
Thereafter, Defendant seeks judgment on the basis “Mr. Lundin has never provided proof of the assignment and right to collect the alleged rent.” (See SSUF No. 39). In support of this position, Defendant cites Deposition testimony from Mr. Lundin; however, the testimony relied on is ambiguous. (See ¶5 of Cooper Declaration and Exhibit 10 thereto). Throughout the relevant testimony Mr. Lundin insists the assignment was completed. (Id.).
While Defendant asserts that a separate assignment has not been provided, this fails to meet Defendant’s initial burden: “Pointing out the absence of evidence to support a plaintiff’s claim is insufficient to meet the moving defendant’s initial burden of production.” (Gaggero v. Yura (2003) 108 Cal.App.4th 884, 891). “The defendant must also produce evidence that the plaintiff cannot reasonably obtain evidence to support his or her claim.” (Id., citing Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 855, fn. 23).
While factually devoid discovery responses may shift the burden on a Motion for Summary Judgment, Defendant has not provided any responses to Requests for Production, which indicate Plaintiff does not have possession of such a document. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 580-581).