Tentative Rulings

Case Number: *******7664 Hearing Date: February 21, 2023 Dept: 40

LUXE HOLDINGS, LLC, a California Limited Liability Company Plaintiffs, v. NATIONWIDE PALLET, INC., a California corporation; CLASSIC PALLET, INC., a California corporation; JOSE J. REYES, an individual; JUAN PEREZ, an individual; and DOES 1 through 50, inclusive, Defendants.

Case No.: *******7664 Hearing Date: February 21, 2023 Trial Date: February 21, 2023 [TENTATIVE] RULING RE: Defendants’ Motion for Judgment on the Pleadings.

On October 12, 2022, Defendants Classic Pallets, Inc. and Juan Perez filed this instant motion for judgment on the pleadings (“JMOP”), which Plaintiff opposed on February 3, 2023 and to which Defendants replied on February 14, 2023.

After review, the Court GRANTS Defendants’ motion as to the Seventh Cause of Action and DENIES Defendants’ motion as to the Third, Fourth, Fifth, and Sixth Causes of Action.

Background Allegations

This case arises from a lease agreement between Plaintiff Luxe Holdings LLC and Defendant National Pallets, Inc. The two parties entered into a commercial lease agreement to rent the real property located at 4851 S. Alameda St., Los Angeles, CA 90058 (“the Property”) on or about July 2017. The lease was for a term of one year, after which the tenancy would become periodic from month to month. The lease also had a clause charging Nationwide Pallets 150% of the base rent if it ever holds over on the tenancy. Finally, the lease allegedly prohibited assignment of the lease or sublease by Nationwide Pallets unless prior permission from Luxe was first obtained.

Luxe alleges that in or around April 2020, Nationwide Pallets assigned or sublet its lease in the Property to Classic Pallets, Inc. and its President, Juan Perez. Luxe alleges neither Nationwide nor Classic Pallets and Juan Perez informed Plaintiff of the new arrangement for the Property. Luxe further alleges that Nationwide was prohibited from assigning or subletting the Property to Classic Pallets without first obtaining permission from Luxe. On July 29, 2020, Plaintiff served on Nationwide a 30-day termination notice, demanding Nationwide quit the property by August 29, 2020. Nationwide did not respond and Classic Pallets allegedly remained in possession of the Property between August 2020 and at least October 1, 2020.

On October 1, 2020, Plaintiff Luxe filed a Complaint with this Court alleging counts of (1) breach of contract against Nationwide Pallets, (2) holding over against Nationwide Pallets, (3) intentional interference with prospective economic advantage against all defendants, (4) negligent interference with prospective economic advantage against all defendants, and (5) fraud against all defendants. The causes of action are all premised on the foregoing facts and base damages against Classic Pallets and Juan Perez on the idea that Plaintiff Luxe could have engaged with unknown third parties to rent the Property had Luxe been informed of the assignment or sublease that took place between Nationwide Pallets and Classic Pallets in April 2020.

Motion

Timing for Judgment on the Pleadings

A motion for judgment on the pleadings may be made after the time to demur has expired, and an answer has been filed. (Code Civ. Proc., 438, subd. (f).) However, “[n]o motion may be made pursuant to this [statutory] section if a pretrial conference order has been entered pursuant to Section 575, or within 30 days of the date the action is initially set for trial, whichever is later, unless the court otherwise permits.” (Code Civ. Proc., 438, subd. (e).) Courts have discretion to consider late statutory motions for judgment on the pleadings, without any requirement of good cause. (Burnett v. Chimney Sweep (2004) 123 Cal. App. 4th 1057, 1063.) A non-statutory motion for judgment on the pleadings may be made any time before or during trial. (Stoops v. Abbassi (2002) 100 Cal. App. 4th 644, 650; see also Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586 [the non-statutory motion for judgment on the pleadings can be made at any time, even during trial, since the grounds for a general demurrer are never waived].)

Here, Defendants’ JMOP is made pursuant to Code of Civil Procedure sections 438 and 430.10, subdivision (e). Plaintiff contends that the instant motion is untimely because the Court set the initial trial date for April 5, 2022 at the January 8, 2021 case management conference, and Defendants’ motion was filed more than seven months after the deadline for hearing the motion – on October 12, 2022, and the hearing on Defendants’ motion is currently set for February 21, 2023 – more than eleven months after the deadline for hearing the motion. However, the Court will consider the motion because it is based on Plaintiff’s Second Amended Complaint (“SAC”) which was filed on June 24, 2022, which is after both January 8, 2021 (case management conference) and March 7, 2022 (initial trial date). Thus, at the time the initial trial date was set, the pleadings were not yet set. Consequently, the motion is timely.

Judgment on the Pleadings Analysis

Either prior to trial or at the trial—and barring statutory provisions otherwise—the plaintiff or the Defendants may move for judgment on the pleadings where the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791.) Here, Defendants moved for judgment on the pleadings “pursuant to California Code of Civil Procedure Section 438(c)(1)(B)(ii)” and a general inability to state sufficient facts to state a cause of action.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., 430.10, subd. (e).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., 430.30, subd. (a).) A demurrer challenges only legal sufficiency of complaint, not truth or accuracy of its factual allegations or plaintiff's ability to prove those allegations. (Assurance Co. of Am. v. Haven (1995) 32 Cal.App.4th 78, 82.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., 430.30, subd. (a).) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at p. 747.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Here, Defendants were only charged as defendants in the for the third, fourth, fifth, sixth, and seventh causes of action in the SAC. Consequently, Defendants’ JMOP is analyzed only as to the intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, trespass, unjust enrichment, and breach of contract [in the alternative] claims therein.

Third Cause of Action, Intentional Interference with Prospective Economic Advantage: DENIED.

“Intentional interference with prospective economic advantage [requires a pleading alleging]: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

“[T]he alleged interference must have been wrong by some measure beyond the fact of the interference itself. [Citation.] For an act to be independently wrongful, it must be ‘unlawful, that is, …it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ [Citation.] The independently wrongful act must be the act of interference itself, but such act must itself be independently wrongful. That is, ‘[a] plaintiff need not allege the interference and a second act independent of the interference. Instead, the plaintiff must plead and prove that the conduct alleged to constitute interference was independently wrongful, i.e., unlawful for reasons other than that it interfered with a prospective economic advantage. [Citations.]’ [Citation.]” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404.)

The SAC’s third cause of action alleges Intentional Interference with Economic Prospective against Classic Pallets, Juan Perez, and Does 31 through 40 on the grounds that: (1) as of July 2020, Luxe Holdings had secured Geovedy Cifuentes as a tenant wishing to immediately rent the Subject Premises; (2) Classic was informed of this desire through Juan Perez on July 29, 2020, when Luxe’s Principal—Tal Hassid—visited the Subject Premises and informed Defendant Perez of the same; (3) despite this knowledge, Classic Pallets and Perez refused to vacate the Subject Premises; (4) the potential relationship with Geovedy Cifuentes was disrupted between August 1, 2020 and June 30, 2021; and (5) Luxe has been damaged in an amount to be determined at trial, but no less than $23,190 per month from August 1, 2020, to June 30, 2021. (SAC, 32-38.)

Here, Plaintiff alleges sufficient facts to support each of these elements. Contrary to Defendants’ contention that the SAC does not allege Defendants’ knowledge of the relationship, the SAC provides that Plaintiff’s Principal, Tal Hassid, informed Defendants of a specific tenant, Geovedy Cifuentes, wished to immediately rent the Subject Premises. Thus, Plaintiff sufficiently identifies a specific third party in which there was a likely future business relationship. Plaintiff’s lack of awareness of Defendants’ existence at the time Hassid communicated to Defendants on July 29, 2020, does not prevent this element from being satisfied because the issue is whether Defendants had knowledge of a third-party relationship. Additionally, Plaintiff sufficiently alleges that Defendants engaged in intentionally wrongful acts designed to disrupt the relationship by stating that they “refused to vacate the Property.” (SAC 35.) The Court finds this allegation sufficient to constitute an act independently wrongful in itself given that this act also supports Plaintiff’s claims of trespass and unjust enrichment against Defendants.

Thus, the Court DENIES Defendants’ motion as to the third cause of action.

Fourth Cause of Action, Negligent Interference with Economic Prospective: DENIED.

The tort of Negligent Interference with Economic Prospective—fourth cause of action in the SAC—shares the first element of an Intentional Interference with Economic Prospective claim: “(1) the existence of an economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff ….” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1005.)

The SAC premises this claim on Luxe Holdings’ alleged relationship with Geovedy Cifuentes as of July 2020. (SAC, 41-42.)

For the same reasons cited in the discussion ante as to Intentional Interference with Economic Prospective, the Court DENIES the Defendants’ motion as to the fourth cause of action.

Sixth Cause of Action, Unjust Enrichment: DENIED.

Plaintiff claims that Defendant’s motion as to the sixth cause of action is moot because on December 8, 2022, the Court granted Plaintiff’s motion for summary adjudication as to the sixth cause of action for unjust enrichment. However, this only moots the motion as to Defendant Classic Pallets, Inc. only, and not Defendant Perez since the motion for summary adjudication was only granted as to Defendant Classic Pallets, Inc.

California law is unclear as to whether Unjust Enrichment in and of itself is a claim on which relief can be granted. The Court of Appeal for the First District has held that “[u]njust enrichment is not a cause of action, [but rather, is] just a restitution claim.” (Hill v. Roll Int’l Corp. (2011) 195 Cal.App.4th 1295, 1307 [quoting to McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1490 [quotations omitted]; see also McKell, 142 Cal.App.4th at p. 1490 [“[t]here is no cause of action for unjust enrichment”; “[r]ather, unjust enrichment is a basis for obtaining restitution based on quasi-contract or imposition of a constructive trust”].) By contrast, the Court of Appeal for the Second District has held that the elements of a cause of action for unjust enrichment are simply stated as receipt of a benefit and unjust retention of the benefit at the expense of another where “[t]he term ‘benefit’ ‘denotes any form of advantage’” and which “may take any form, direct or indirect” or “consist of services as well as property,” where “[a] saved expenditure or a discharged obligation is no less beneficial to the recipient than a direct transfer.” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238 [citing Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 51].)

For the purposes of this discussion, the Court adopts the elements stated in Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc., supra.

The SAC’s sixth cause of action alleges Unjust Enrichment against Classic Pallets, Juan Perez, and Does 61 through 70 based on these parties’ failure to pay rent on the premises from April 2020 to May 2021 for total damages of $347,850, i.e., $23,190 for rent from April 2020 to June 2021. (SAC, 55-60.)

In the December 8, 2022 Minute Order, the Court stated there was sufficient evidence to “convince a reasonable factfinder that Classic Pallets was unjustly enriched when it received a benefit in the form of a saved expenditure between May 1, 2020 and June 30, 2021, thus carrying Luxe’s burden on summary adjudication.” (12/8/22 Minute Order p. 13.) Given that the SAC also alleges that Plaintiff is informed and believes that Defendant Perez is the president and/or owner of Classic, the Court finds that Defendant Perez would also have received any benefit that Classic would have received.

Thus, the Court DENIES Defendants’ motion as to the sixth cause of action.

Seventh Cause of Action, Breach of Contract: GRANTED.

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

Here, the Court finds there to be insufficient facts to support this cause of action because Plaintiff fails to specify which duties it performed under the lease or how it has been excused from performance.

Accordingly, the Court GRANTS Defendants’ motion as to the seventh cause of action.

Conclusion

Defendants Classic Pallets, Inc. and Juan Perez’ Motion for Judgment on the Pleadings is GRANTED as to the Seventh Cause of Action and DENIED as to the Third, Fourth, Fifth, and Sixth Causes of Action.

Case Number: *******7664 Hearing Date: December 8, 2022 Dept: 40

MOVING PARTY: Plaintiff Luxe Holdings, LLC.

Plaintiff Luxe Holdings, LLC sues Defendants Nationwide Pallets, Inc., Jose Reyes (alleged President of Nationwide), Classic Pallets, Inc., Juan Perez (CEO, Secretary, and CFO of Classic Pallets), and Does 1 through 70 pursuant to claims of (1) Breach of Contract, (2) Holding Over, (3) Intentional Interference with Economic Advantage, (4) Negligent Interference with Economic Advantage, (5) Trespass, (6) Unjust Enrichment, and (7) Breach of Contract (in the Alternative) on the grounds that between May 1, 2020 and June 30, 2021, the Defendants failed to compensate Luxe Holdings, Inc. for possession of and trespassed on commercial property owned by the Plaintiff.

Now before the Court is Plaintiff Luxe Holdings, Inc.’s opposed Motion for Summary Adjudication in favor of the operative Second Amended Complaint’s third to sixth causes of action as directed at Defendant Classic Pallets, Inc. alone.

Background Allegations

Plaintiff Luxe Holdings, LLC owns the real property located at 4851 S. Alameda St., Los Angeles, CA 90058 (the “Property”) and has owned it since at least February 2016.

On or about July 31, 2017, Plaintiff Luxe Holdings, LLC (“Luxe Holdings” or “Luxe”) and Nationwide Pallets, Inc. (“Nationwide”) executed a written lease (“Lease”) pursuant to which Nationwide leased certain portions (the “Subject Premises”) of the Property for a term of one year expiring on July 31, 2018. The Lease established a base rent of $15,460. Luxe argues that the Lease explicitly prohibited holding over and increased the rent to 150% of the base rent in the event of holdover. The Lease also precluded Nationwide from assigning or subletting “all or any part of [its] interest in th[e] Lease or in the Premises without [Luxe’s] prior written consent.”

The one-year lease expired on July 31, 2018, for which reason Luxe Holdings argues on motion that, as of August 1, 2018, the rent for the Subject Premises was $23,190 per month.

Luxe Holdings next argues that unbeknownst to it, in October 2019, Classic Pallets, Inc. (“Classic Pallets”) moved into the Premises pursuant to a purported sublease with Nationwide. (Classic Pallets refurbishes, repairs, and delivers pallets for use in commercial shipping operations.) Luxe Holdings claims that, at that time, it was giving Nationwide a discount on the rent for the Subject Premises based on its ongoing relationship but would not have given a new tenant such a discount. (It is unclear to the Court whether the “discount” argued by Luxe Holdings connotes keeping Nationwide’s rent down to $15,460 despite the holdover nature of the tenancy.)

Classic Pallets argues that it made every rent payment since taking possession of the Subject Premises until shortly after the outbreak of the COVID-19 pandemic in May 2020, at which time a sharp falloff in orders took place for Classic Pallets.

(Luxe Holdings argues in hearsay fashion—for which reason this ‘fact’ is not considered for the purposes of this Motion, but rather, included solely for the purpose of clarifying the discussion infra—that in July 2020, it had secured Goevedy A. Cifuentes as a potential tenant for the Subject Premises at a rate of $20,000 per month with Mr. Cifuentes willing to begin tenancy immediately. Mr. Cifuentes is a commercial tenant of Luxe Holdings who, at that time, leased the commercial space adjacent to the Subject Premises.)

On or about July 29, 2020, Tal Hassid, Luxe Holdings’ principal, visited the Premises, and met with Defendant Juan Perez. (Defendant Perez CEO, Secretary, and CFO of Classic Pallets.) The parties dispute on summary adjudication whether Tal Hassid knew Defendant Perez to be a representative of Nationwide or a subletter through Classic Pallets.

On motion, Luxe argues that during this meeting, Mr. Hassid informed Defendant Perez that Luxe had a tenant ready to move into the Premises, that the proposed tenant would be paying $20,000 per month in rent, and that because the Lease had expired in June 2018 and rent had not been paid since April 2020, Luxe needed the Premises cleared out immediately. Luxe also argues on motion that during the visit, it delivered a 3-day notice to pay rent or quit to Defendant Perez, which notice was also delivered to Nationwide, and that not until after this meeting did Luxe Holdings find out Classic Pallets rather than Nationwide was operating out of the Subject Premises. According to Classic Pallets, on or about July 29, 2020, Mr. Hassid did deliver a Notice notifying Classic Pallets that the lease had been terminated and that Classic Pallets had 30 days to vacate, but no 3-day notice to pay rent or quit.

Luxe Holdings next claims that on August 24, 2020, Tal Hassid emailed Classic Pallets, notifying it, among other things, that Luxe had not approved of any purported sublease between Classic and Nationwide, for which reason Classic Pallets’ occupation of the Subject Premises was unauthorized and amounted to trespassing. The communication also demanded that Classic vacate the Premises no later than August 28, 2020. It is undisputed between the parties on motion that Luxe never consented to Nationwide’s sublease to Classic Pallets.

Classic Pallets nevertheless remained in possession of the Subject Premises. (Possession lasted through May 13, 2021.)

On October 1, 2020, Luxe Holdings commenced an unlawful detainer action against Nationwide and Classic Pallets. No 3-Day Notice to Pay Rent or Quit was attached to the Complaint.

Also on October 1, 2020, Luxe Holdings filed the instant lawsuit against Nationwide, Juan Perez, Classic Pallets, Jose Reyes, and Does 1 through 50 pursuant to claims of (1) Breach of Contract, (2) Hold Over, (3) Intentional Interference with Economic Advantage, (4) Negligent Interference with Economic Advantage, and (5) Fraud.

On May 13, 2021, Luxe and Classic Pallets entered a stipulation in the unlawful detainer action, pursuant to which Classic Pallets was allowed to remain on the Premises until August 31, 2021. Pursuant to that same stipulation, Classic paid $30,000 to occupy the Premises for July and August 2021. The parties dispute whether all rent from June 2021 and earlier was left unpaid and available as damages in this lawsuit.

On August 20, 2021, Classic Pallets and Juan Perez made an opposed Motion for Judgment on the Pleadings against the original Complaint’s third to fifth causes of action.

On or after September 1, 2021, Geovedy Cifuentes moved into the Subject Premises after Classic Pallets vacated the same on August 31, 2021 and commenced paying rent of $24,000 per month.

On December 16, 2021, the Court granted the Motion for Judgment on the Pleadings.

On January 4, 2022, Luxe Holdings filed a First Amended Complaint (“FAC”) alleging (1) Breach of Contract, (2) Holding Over, (3) Intentional Interference with Economic Advantage, (4) Negligent Interference with Economic Advantage, (5) Trespass, (6) Quasi-Contract, and (7) Breach of Contract (in the Alternative) against Nationwide, Jose Reyes, Classic Pallets, Juan Perez, and Does 1 through 70.

On February 4, 2022, Classic Pallets and Juan Perez made an opposed Demurrer to the FAC’s third to seventh causes of action and an opposed Motion to Strike punitive damages and attorney’s fees allegations made in the FAC.

On June 9, 2022, the Court sustained the Demurrer as to the third, fourth, sixth, and seventh causes of action, overruled the Demurrer as to the fifth cause of action (Trespass), and granted the Motion to Strike as to allegations of punitive damages and attorney’s fees in the FAC.

On June 24, 2022, Luxe Holdings filed the operative Second Amended Complaint (“SAC”) against Nationwide, Jose Reyes, Classic Pallets, Juan Perez, and Does 1 through 70 pursuant to claims of (1) Breach of Contract, (2) Holding Over, (3) Intentional Interference with Economic Advantage, (4) Negligent Interference with Economic Advantage, (5) Trespass, (6) Unjust Enrichment, and (7) Breach of Contract (in the Alternative).

On September 21, 2022, Luxe Holdings made the instant and opposed Motion for Summary Adjudication of the SAC’s third to sixth causes of action as directed solely at Classic Pallets. This Motion is at issue at this hearing.

On October 12, 2022, Classic Pallets and Juan Perez made a Motion for Judgment on the Pleadings, which is currently set for hearing on February 7, 2023.

Trial is scheduled in this matter for January 31, 2023.

Request for Judicial Notice

Per Plaintiff Luxe Holdings’ request, the Court TAKES Judicial Notice of the Stipulation for Entry of Judgment in LASC Action No. 20STUD03435, an Unlawful Detainer Action for the Subject Premises. (Mot., RJN, p. 2 & Hassid Decl., Ex. 3; see Evid. Code, 452, subds. (d), (h).) The Court OVERRULES the Objection thereto by Defendant Classic Pallets. (See infra.)

Per Defendants Classic Pallets’ request, the Court TAKES Judicial Notice of (1) the Complaint in LASC Action No. 20STUD03435 (Opp’n, RJN, Ex. 1; see Evid. Code, 452, subd. (d)) and (2)-(4) County of Los Angeles COVID-19 Moratorium dated June 3, 2020, Moratorium Extension dated June 30, 2020, and Los Angeles City Municipal Code Section 49.99.3 (Opp’n, Supp. RJN, Exs. 2-4; see Evid. Code, 452, subds. (b), (c).) The Court OVERRULES the Objection thereto by Plaintiff Luxe Holdings. (See infra.)

Evidentiary Objections

Defendant Classic Pallets’ Objections

Obj. to Plaintiff’s Request for Judicial Notice: OVERRULED.

Hassid Decl., 6, 18: OVERRULED and 11: SUSTAINED.

Plaintiff Luxe Holdings’ Objections

Obj. Nos. 1-2, 6, 8, 15-24: OVERRULED.

Obj. Nos. 3-5, 7, 9-14: SUSTAINED.

Motion for Summary Adjudication

Third Cause of Action, Intentional Interference with Economic Prospective, Against Classic Pallets, Inc. Only [Issue No. 1]: DENIED.

“Intentional interference with prospective economic advantage [requires a pleading alleging]: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

The Third cause of action alleges Intentional Interference with Economic Prospective against Classic Pallets, Juan Perez, and Does 31 through 40 on the grounds that: (1) as of July 2020, Luxe Holdings had secured Geovedy Cifuentes as a tenant wishing to immediately rent the Subject Premises; (2) Classic was informed of this desire through Juan Perez on July 29, 2020, when Luxe’s Principal—Tal Hassid—visited the Subject Premises and informed Defendant Perez of the same; (3) despite this knowledge, Classic Pallets and Perez refused to vacate the Subject Premises; (4) the potential relationship with Geovedy Cifuentes was disrupted between August 1, 2020 and June 30, 2021; and (5) Luxe has been damaged in an amount to be determined at trial, but no less than $23,190 per month from August 1, 2020, to June 30, 2021. (SAC, 32-38.)

Luxe Holdings repeats these grounds in its Motion for Summary Adjudication. (Mot., 7:1-17.) In support of first element of this claim (economic relationship with a third party), Luxe Holdings presents two pieces of evidence.

The first of these is the Declaration of Hal Tassid—Luxe’s Principal—which provides in relevant part that “[a]s of July 2020, another Luxe tenant, Geovedy A. Cifuentes (the ‘New Tenant’), advised [Hassid] that he wished to lease the [Subject] Premises at a rate of $20,000 per month starting immediately, and [Hassid] agreed (on behalf of Luxe) to rent the Premises to him as soon as it was vacated.” (Mot., 2:27-3:2 [referencing Mot., Separate Statement, UMF No. 10]; Mot., Separate Statement, UMF No. 10 [referencing Mot., Evidence, Hassid Decl., 11 (containing the quote statements)].)

The Court, however, has Sustained an Objection to this piece of evidence (Evidentiary Objections supra; see Opp’n, Objections to Hassid Decl., 2:1-6) based on hearsay because this statement is an out of court statement provided for the truth of the matter asserted—i.e., that Geovedy Cifuentes was willing to rent the Subject Premises as of July 2020, therefore comprising a third party amounting to a prospective economic relationship in favor of Luxe Holdings.

The case law and statutory arguments advanced by Luxe Holdings against this objection are unavailing. (See Reply, Reply to Objections to Hassid Decl., 3:10-24.)

Luxe cites to Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 316 for the position that “the words forming an agreement” “are not hearsay.” (Reply, Reply to Objections to Hassid Decl., 3:14-15). However, a review of Jazayeri shows that the expanded quote cited to by Luxe is “documents containing operative facts, such as the words forming an agreement, are not hearsay,” implicating the operative facts/verbal acts exception to hearsay, which provides that “[w]here ‘“the very fact in controversy is whether certain things were said or done and not ... whether these things were true or false, ... in these cases the words or acts are admissible not as hearsay[,] but as original evidence.”’” (Jazayeri v. Mao, at p. 316 [citation omitted]; see People v. Dell (1991) 232 Cal.App.3d 248, 258 [words spoken by defendant to solicit prostitution are operative facts or “‘verbal acts’”].) However, the controversy here is not whether “certain things were [said by Geovedy Cifuentes]” as to form a contract between Cifuentes and Luxe Holdings (Jazayeri v. Mao, at p. 316), the type of controversy that might be contemplated in a breach of contract action between the two. Rather, the controversy here is whether Classic Pallets interfered with an economic prospective of Luxe Holdings. As such, the verbal acts exception does not apply. The proper form of evidence to advance the statements attributed for Mr. Cifuentes is instead a declaration from Mr. Cifuentes himself, which the record fails to reflect.

Luxe’s second and final argument against the objection to paragraph 11 of the Declaration of Tal Hassid that is the statements attributed to Mr. Cifuentes are not offered for their truth, but rather, “offered to show that Classic had the necessary prior notice of Luxe’s prospective business relationship.” (Reply, Reply to Objections to Hassid Decl., 3:16-17.) The Court does not find merit to this position. The statements attributed to Mr. Cifuentes at paragraph 11 of the Tal Hassid Declaration are advanced to satisfy the first element of Intentional Interference with Economic Prospective (economic relationship with third party), whereas the statements at paragraph 12 of the same Declaration are advanced to satisfy the prior notice element of this claim. (Mot., Evidence, Hassid Decl., 12 [“On or about July 29, 2020, when [Hassid] visited the Premises …, [Hassid] informed [Defendant Perez] that Luxe had a business that was prepared to rent the Premises for $20,000 per month, and as such, [Hassid] needed the Premises vacated”].)

the Court reiterates that it has Sustained the Objection to paragraph 11 of the Tal Hassid Declaration and does not consider the statements attributed to Geovedy Cifuentes as evidence advancing the first element of the tort of Intentional Interference with Economic Prospective.

The only other piece of evidence presented by Luxe Holdings to meet the first element of the tort of Intentional Interference with Economic Prospective is the Deposition of Juan Perez. (Mot., 2:27-3:2 [citing to Mot., Evidence, Hassid Decl., 11 & Mot., Evidence, Zohar Decl., Ex. 6, Perez Depo., 41:13-42:9].) However, a review of Exhibit 6 to the Zohar Declaration (1) fails to include a copy of page 42 of the Perez Deposition and (2) fails to show that Juan Perez testified to receiving notice that Geovedy Cifuentes was ready to rent the Subject Premises in July 2020 specifically, as claimed by Luxe Holdings’ Motion. (Mot., Evidence, Zohar Decl., Ex. 6, Perez Depo., 41:13-22.) The page included as evidence prior to page 41 of the Perez Deposition is page 32 of the same Deposition and the page following page 41 in evidence is page 47 of the Deposition, thereby depriving this Court of the context of the pages immediately preceding and following Juan Perez’s testimony at page 41 of his Deposition. Last, even if Juan Perez were shown to have acknowledged that Tal Hassid informed Defendant Perez in July 2020 that Mr. Cifuentes was ready and able to rent the Subject Premises immediately, such evidence would not amount to a prima facie showing that Mr. Cifuentes in fact had made this representation to Tal Hassid.

As a result, at this hearing, Luxe Holdings fails to present any evidence to show “the existence, between the plaintiff and some third party, of an economic relationship that contain[ed] the probability of future economic benefit to the plaintiff,” Luxe Holdings. (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., supra, 2 Cal.5th at p. 512.)

The Motion is DENIED as to the Third cause of action.

Fourth Cause of Action, Negligent Interference with Economic Prospective, Against Classic Pallets, Inc. Only [Issue No. 2]: DENIED.

The tort of Negligent Interference with Economic Prospective—fourth cause of action in the SAC—shares the first element of an Intentional Interference with Economic Prospective claim: “(1) the existence of an economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff ….” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1005.)

The SAC premises this claim on Luxe Holdings’ alleged relationship with Geovedy Cifuentes as of July 2020. (SAC, 41-42.) The evidence cited for such a relationship in the summary adjudication motion is the same as that discussed ante. (See Mot., 2:27-3:2, 7:18-8:15 [citing to Mot., Evidence, Hassid Decl., 11 & Mot., Evidence, Zohar Decl., Ex. 6, Perez Depo., 41:13-42:9]; compare Mot., Separate Statement, UMF No. 10 with UMF No. 36 [citing to Mot., Evidence, Hassid Decl., 11].)

Therefore, for the same reasons cited in the discussion ante as to Intentional Interference with Economic Prospective, the Court DENIES the Motion for Summary Adjudication as to the fourth cause of action pleaded in the SAC.

The Motion is DENIED as to this Fourth cause of action.

Fifth Cause of Action, Trespass, Against Classic Pallets, Inc. Only [Issue No. 3]: DENIED.

“Generally, landowners and tenants have a right to exclude persons from trespassing on private property; the right to exclude persons is a fundamental aspect of private property ownership.” (Ralphs Grocery Co. v. Victory Consultants, Inc. (2017) 17 Cal.App.5th 245, 258.) “‘Trespass is an unlawful interference with possession of property.’ 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. (See CACI No. 2000.)” (Ibid. at pp. 261-62 [citation omitted].)

The SAC’s Fifth cause of action alleges that (1) Luxe Holdings owns the Subject Premises, (2)-(3) Classic Pallets, Juan Perez, and Does 41 to 50 entered the property by assuming the leasehold thereof without the consent of Luxe, and (4) Classic’s trespass damaged Luxe in an amount to be proven at trial, but in no case less than $347,850, thus amounting to (5) Classic, Perez, and Does being a substantial factor in Luxe’s harm. (SAC, 48-51.)

On motion, Luxe Holdings reiterates these grounds for Trespass against Classic Pallets but limits the trespass window from May 1, 2020 (the date on which Luxe first failed to receive rent for the Subject Premises at a time when Classic Pallets had assumed possession of the Subject Premises) to May 13, 2021 (when Luxe and Classic Pallets/Juan Perez entered a stipulation in the unlawful detainer action guaranteeing the vacatur of the Subject Premises by the end of August 2021). (See Mot., 5:7-10, 6:5-26.)

To support this claim, Luxe provides a variety of evidence, including: (1) evidence that Luxe owns the Subject Premises (see Mot., Separate Statement, UMF No. 53); (2) evidence that Classic Pallets entered the property in October 2019 pursuant to a sublease with Nationwide (see Mot., Separate Statement, UMF No. 57); (3) evidence that Luxe never consented to such sublease (see Mot., Separate Statement, UMF No. 61; and (4)-(5) unpaid rent damages substantially caused by Classic Pallets and Juan Perez at $20,000 per month between May 1, 2020 and May 13, 2021 (see Mot., Separate Statement, UMF Nos. 60 [May 1, 2020], 65 [May 13, 2021], 69 [$20,000 per month].)

The Court finds this evidence could convince a reasonable factfinder that no triable issues exist as to whether Classic Pallets trespassed on the Subject Premises between May 1, 2020 and May 13, 2021 based on non-payment of rents during that period, carrying Luxe’s burden on summary adjudication.

On Opposition, and in relevant part, Classic Pallets points to case law and statutes providing that restraints on transferability of a lease may not be strictly construed. (Opp’n, 4:19-25 [citing to Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488, 494; Chapman v. Great Western Gypsum Co. (1932) 216 Cal. 420, 426; Cal. Civ. Code, 1995.220 [ambiguity in restriction on transfer of a commercial tenant’s interest shall be construed in favor of transferability].) Such argument relates to consent, the third element in a Trespass claim.

Kendall found that “both the policy against restraints on alienation and the implied contractual duty of good faith and fair dealing militate in favor of adoption of the rule that where a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignee or the proposed use.” (Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488, 506-07.) Of particular importance, in recognizing the minority rule regarding the restraint of alienation on subleases, the Court highlighted that “[d]enying consent [of subleasing] solely on the basis of personal taste, convenience or sensibility is not commercially reasonable,” “[n]or is it reasonable to deny consent ‘in order that the landlord may charge a higher rent than originally contracted for.’” (Ibid. at p. 501.)

The relief requested on summary adjudication as to the Trespass claim is $20,000 per month for rent from May 1, 2021 through May 13, 2021, i.e., $20,000 per month times 12 and 12/31 months, totaling $247,741.94. (Mot., 9:16-21 & n. 4; compare SAC, 50 [“Classic’s trespass damaged Luxe in an amount to be proven at trial, but in no case less than $347,850”], Prayer for Relief, 1-2 [calculated at holdover rent rate of $23,190 times 15 months between April 2020 and June 2021].) Luxe Holdings advances the $20,000 per month figure as “the reasonable fair market value” of the Subject Premises from May 2020 to August 2021 as based on the figure Mr. Cifuentes was allegedly willing to pay in July 2020 and based on Tal Hassid’s experience in calculating fair market value based on his professional experience. (Mot., 9:1-6.)

On Reply, and in relevant part, Luxe argues that “[t]his is not a case where a landlord refused to consent to a sublease” because “neither Nationwide nor Classic sought Luxe’s consent to the sublease” and that “there is not only no evidence before the Court that consent was ever sought, but also no evidence that consent was unreasonably withheld.” (Reply 4:22-5:8.)

Based on the representations by Luxe in its Motion and Reply, the Court finds merit to the Opposition. While it is accepted that between May 2020 and some undisclosed point in time on or after July 29, 2020, Luxe claims not to have been aware of Classic Pallets’ sublease (Mot., Evidence, Hassid Decl., 4-8), questions of material fact remain as to whether Luxe Holdings thereafter reasonably declined an implicit request to permit Classic Pallets to sublease the Subject Premises after Luxe was informed by Nationwide as to Classic Pallets’ possession of the Subject Premises, which began in October 2019. While Luxe argues that the Defendants never requested consent for the sublease and Luxe never consented to the sublease (Reply 4:22-5:8), this position is overly rigid insofar as a reasonable factfinder could determine that Nationwide requested implicit consent for the sublease when it informed Luxe of the sublease sometime on or after July 19, 2020, i.e., after the transfer had already taken place. (See Mot., Evidence, Hassid Decl., 6.) Further, any refusal by Luxe to sublease the Subject Premises to Classic Pallets after finding out about the sublease appears unreasonable when juxtaposed against the third and fourth causes of action for interference with economic prospective, which could lead a reasonable factfinder to determine that Luxe wanted Classic Pallets out of the Subject Premises as to raise or collect rent therefrom. This ‘refusal to consent to sublessee to secure new tenant on which rent could be raised or collected from’ conclusion is further reinforced where Classic Pallets was unable to make rent payments beginning May 2020 and Luxe was allegedly attempting to secure a new tenant for the Subject Premises at a rate of $20,000 per month beginning in or around July 2020, as against the backdrop of the Los Angeles County Board of Supervisors imposing a moratorium on the collection of rent payments on commercial properties between March 4, 2020 and (ultimately) January 31, 2022. (Opp’n, Separate Statement, AMF No. 13 [referencing Opp’n, Perez Decl., 12 (inability to pay rent as of May 2020)]; Mot., Separate Statement, UMF No. 69 [referencing Mot., Evidence, Hassid Decl., 18 (new tenant willing to pay $20,000 allegedly secured in July 2020)]; see Los Angeles County, Consumer & Business Affairs, About L.A. County’s COVID-19 Tenant Protections Resolution, p. 8, IV.J & p.10, VI.A.1. & p. 17, VI.C.5. (2022) <https: dcba.lacounty.gov/wp content/uploads/2022/02/Resolution_1.25.2022.pdf> [as of Dec. 7, 2022] [non-payment of rent permissible between March 4, 2020 and January 31, 2022].)

Again, by Luxe’s own admission, it never consented to the sublease, even after finding out about Classic Pallets’ possession of the Subject Premises from Nationwide. (Mot., Separate Statement, UMF No. 61 [referencing Mot., Evidence, Hassid Decl., 8 & Mot., Evidence, Zohar Decl., Ex. 6, Perez Depo., 48:19-22 (recognizing Luxe “[n]ever g[a]ve its written consent for Classic Pallets to sublease or use the premises)].) Such disputed facts give rise to questions as to whether consent was unreasonably denied to Classic Pallets to sublease the Subject Premises during a time when Classic Pallets was not paying rent for the Premises, which was permissible due to the COVID-19 moratorium in Los Angeles County, thus carrying Classic Pallets’ burden on summary adjudication.

The Motion is DENIED as to the Fifth cause of action.

Sixth Cause of Action, Unjust Enrichment, Against Classic Pallets, Inc. Only [Issue No. 4]: GRANTED.

California law is unclear as to whether Unjust Enrichment in and of itself is a claim on which relief can be granted. The Court of Appeal for the First District has held that “[u]njust enrichment is not a cause of action, [but rather, is] just a restitution claim.” (Hill v. Roll Int’l Corp. (2011) 195 Cal.App.4th 1295, 1307 [quoting to McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1490 [quotations omitted]; see also McKell, 142 Cal.App.4th at p. 1490 [“[t]here is no cause of action for unjust enrichment”; “[r]ather, unjust enrichment is a basis for obtaining restitution based on quasi-contract or imposition of a constructive trust”].) By contrast, the Court of Appeal for the Second District has held that the elements of a cause of action for unjust enrichment are simply stated as receipt of a benefit and unjust retention of the benefit at the expense of another where “[t]he term ‘benefit’ ‘denotes any form of advantage’” and which “may take any form, direct or indirect” or “consist of services as well as property,” where “[a] saved expenditure or a discharged obligation is no less beneficial to the recipient than a direct transfer.” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238 [citing Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 51].)

For the purposes of this discussion, the Court adopts the elements stated in Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc., supra.

The SAC’s Sixth cause of action alleges Unjust Enrichment against Classic Pallets, Juan Perez, and Does 61 through 70 based on these parties’ failure to pay rent on the premises from April 2020 to May 2021 for total damages of $347,850, i.e., $23,190 for rent from April 2020 to June 2021. (SAC, 55-60.)

This position is reiterated on motion with a damages window of May 1, 2020 through June 30, 2021 calculated at a rental rate of $20,000 per month for damages of $280,000. (Mot., 4:21-24, 5:11-22, 9:7-9.) To support this position on motion, Luxe Holdings points to the Declaration of Luxe Principal Tal Hassid and the Deposition of Juan Perez, CEO/Secretary/CFO of Classic Pallets, which both show that Luxe Holdings ceased to receive rent from Classic Pallets beginning in May 2020. (Mot., 2:24-26 [referencing UMF No. “X,” which review finds touches upon UMF No. 78]; Mot., Separate Statement, UMF No. 78 [referencing Mot., Evidence, Hassid Decl., 3 (no rent payments received after April 2020) & Mot., Evidence, Zohar Decl., Ex. 6, Perez Depo., 31:15-18, 32:14-18 (last check from Classic Pallets to Luxe Holdings on April 1, 2020)].) Luxe also provides evidence that pursuant to a stipulation in the unlawful detainer action, Luxe Holdings received $30,000 in rent from Classic Pallets for the purpose of occupying the Subject Premises for the months of July and August 2021. (Mot., 3:25-4:1 [referencing UMF No. 22, identical to UMF No. 81]; Mot., Separate Statement, UMF No. 81 [referencing Mot., Evidence, Hassid Decl., 16 & Ex. 3, p. 2, 7.) Last, Luxe provides evidence of a new tenant commencing tenancy over the Subject Premises after August 2021 following Classic Pallets’ vacatur thereof. (Mot., 4:1-3 [referencing UMF No. 23]; Mot., Separate Statement, UMF No. 82 [referencing Mot., Evidence, Hassid Decl., 17 & Ex. 4 (rental agreement)].)

This evidence could convince a reasonable factfinder that Classic Pallets was unjustly enriched when it received a benefit in the form of a saved expenditure between May 1, 2020 and June 30, 2021, thus carrying Luxe’s burden on summary adjudication.

On opposition, Classic Pallets argues that (1) California does not recognize Unjust Enrichment as a viable cause of action (Opp’n, 10:7-24) and (2) Luxe Holdings fails to present any evidence that Classic Pallets was unjustly enriched at the expense of Luxe Holdings because the $20,000 per month fair market value figure provided by Luxe and evidence supporting it (a) is self-serving, (b) contradicts affirmations made by Luxe Holdings as to according lower rent to Nationwide, and (c) lacks expert evidence, as well as because the evidence (d) does not show deceit or attempt at deceit by Classic Pallets, (e) fails to distinguish between benefits received by Classic Pallets over any other tenant leasing like commercial property, (f) does not show the tenancy agreement was terminated before the end of the unlawful detainer action, and (g) contradicts the permission granted to Classic Pallets through the unlawful detainer settlement (Opp’n, 11:1-12:27).

The first position is unavailing on summary adjudication because the Court has explained ante how the Court of Appeal for the Second District has permitted causes of action for Unjust Enrichment.

The second position fails on summary adjudication in all respects because in no way do these seven grounds explain how Classic Pallets’ possession of the Subject Premises—from which it operated a business for profit—does not comprise a benefit in the form of a saved expenditure to the detriment of the landlord, Luxe Holdings, which did not receive any rental income from May 1, 2020 to June 30, 2021.

Classic Pallets thus fails to carry its burden on summary adjudication as to the Sixth cause of action, for which reason the Motion is GRANTED as to the SAC’s Unjust Enrichment claim, specifically as alleged against Defendant Classic Pallets, Inc.

Conclusion

Plaintiff Luxe Holdings, LLC’s Motion for Summary Adjudication is GRANTED in Part and DENIED in Part:

(1) DENIED as to the Second Amended Complaint’s Third and Fourth causes of action for Intentional and Negligent Interference with Economic Prospective because Luxe Holdings failed to carry its burden on summary adjudication of these claims;

(2) DENIED as to the Second Amended Complaint’s Fifth cause of action for Trespass because Classic Pallets, Inc. was able to carry its burden on rebuttal as to summary adjudication of this claim; and

(3) GRANTED as to the Second Amended Complaint’s Sixth cause of action for Unjust Enrichment because Classic Pallets, Inc. failed to properly rebut Luxe Holdings’ carrying of its burden on summary adjudication as to this claim.

Case Number: *******7664 Hearing Date: June 9, 2022 Dept: 40

MOVING PARTY: Defendants Classic Pallet, Inc. and Jose J. Reyes.

Plaintiff Luxe Holdings, LLC sues its former tenant (Defendant Nationwide Pallet, Inc. and its President Jose J. Reyes) and two others (Defendant Classic Pallet, Inc. and Juan Perez), on the grounds that Luxe Holdings rented a commercial space (“the Property”) to Nationwide Pallets under a lease containing a non-assignability/sublet provision, and that Nationwide Pallets breached the lease and that provision by assigning/subletting to Classic Pallet and Perez in October or November 2019, and then altogether ceasing to pay rent in April 2020, after with Classic Pallet and Perez remained on the Property without payment of rent until approximately May 2021, vacating the premises on August 31, 2021 (after the parties reached a settlement in a separate unlawful detainer action).

Classic Pallet and Perez now bring this second Demurrer challenging the Third to Seventh Causes of Action as insufficiently and uncertainly pled, as well as a Motion to Strike paragraphs in the FAC related to exemplary/punitive damages and attorney’s fees.

For the following reasons, the Court (1) SUSTAINS the Demurrer against the FAC’s Third to Seventh Causes of Action, With Leave to Amend, and (2) GRANTS the Motion to Strike insofar as it challenges Paragraph 3 of the FAC’s Prayer for Relief for punitive damages.

The Court also Strikes on its own, three cause of action added after the last demurrer without leave of Court.

Background

On or around July 31, 2017, Luxe Holdings LLC and Nationwide Pallets, Inc. entered in a commercial lease agreement for 4851 S. Alameda St., Los Angeles, California 90058 (“the Property”), with Luxe Holdings as the landlord and Nationwide Pallets as tenant. The lease was for a term of one year, after which the tenancy would become periodic from month to month. The lease also included: a clause charging Nationwide Pallets 150% of the base rent if it ever held over on the tenancy; a prohibition on assignments of the lease or sublease by Nationwide Pallets unless prior permission from Luxe was first obtained; and a clause for attorney’s fees for the prevailing party in the event of a lawsuit between the parties.

Sometime around October or November 2019, Nationwide Pallets assigned or sublet its lease on the Property to Classic Pallet, Inc. and its President, Juan Perez. (Luxe Holdings alleges not to have been aware of this assignment until July 29, 2020 or later.) Around April 2020, Nationwide Pallets stopped paying rent on the Property. As a result, on July 29, 2020, Luxe Holdings served on Nationwide Pallets and “all other tenants in possession of the premises” a 30-day termination notice, which demanded that any tenants quit the property by August 29, 2020 and further demanded that any tenants pay outstanding rent in 3 days or quit the Property. The termination notice also alerted the Defendants that Geovedy A. Cifuentes—a tenant of Luxe Holdings who rented commercial space abutting the Nationwide/Classic Pallet rental Property—wished to rent and would be granted tenancy over the Property by Luxe Holding as soon as the holdover tenants vacated the premises.

Nationwide Pallets did not respond to the notice, and Classic Pallet did not quit the premises. Instead, Nationwide Pallets informed Luxe Holdings—for the first time—that Nationwide Pallets was no longer in possession of the Property. (The FAC is not clear as to when Luxe Holdings discovered the identity of Classic Pallet and Perez.)

On October 1, 2020, Luxe Holdings filed this action alleging counts of (1) Breach of Contract against Nationwide Pallets, (2) Holding Over against Nationwide Pallets, (3) Intentional Interference with Prospective Economic Advantage against all Defendants, (4) Negligent Interference with Prospective Economic Advantage against all Defendants, and (5) Fraud against all Defendants. Luxe Holdings also initiated an unlawful detainer action against—at the least—Classic Pallet and Juan Perez.

On May 13, 2021, Luxe Holdings (through unpled means) assented to Classic Pallet and Perez’s tenancy of the Property.

On August 20, 2021, Defendants Classic Pallet and Juan Perez made a Motion for Judgment on the Pleadings against Luxe Holding’s Complaint’s Third to Fifth Causes of Action on the ground that these claims were insufficiently pled as to Classic Pallet and Perez.

On August 31, 2021, Classic Pallet and Reyes vacated the Property following a settlement in the unlawful detainer action between the parties.

On December 16, 2021, this Court Granted the Motion for Judgment on the Pleadings against the Complaint’s claims for Intentional Interference, Negligent Interference, and Fraud claims, with Leave to Amend only as to these three specific claims.

On January 4, 2022, Plaintiff filed a First Amended Complaint (“FAC”) alleging the original causes of action for (1) Breach of Contract, (2) Holding Over, (3) Intentional Interference with Prospective Economic Advantage, and (4) Negligent Interference with Prospective Economic Advantage. However, the FAC also (5) replaced the initial Complaint’s Fifth Cause of Action for Fraud with a Trespass claim and added two new claims against Classic Pallet and Perez: (6) Quasi-Contract and (7) Breach of Contract in the Alternative.

On February 4, 2022, Classic Pallet and Perez filed a Demurrer to the FAC’s Third to Seventh Causes of Action on grounds of insufficiency and uncertainty in pleading. (The Demurrer does not address the change changed and new causes of action alleged in the FAC as compared to the Complaint.) Classic Pallet and Perez also made a Motion to Strike Portions of Plaintiff’s First Amended Complaint as it relates to punitive damages, exemplary damages, and attorney’s fees. Luxe Holdings has Opposed the Demurrer and Motion to Strike, and Classic Pallet and Perez have Replied to these Oppositions.

Demurrer: SUSTAINED in Whole, With Leave to Amend.

Third Cause of Action – Intentional Interference with Prospective Economic Advantage: SUSTAINED, With Leave to Amend.

The Third Cause of Action for Intentional Interference with Prospective Economic Advantage alleges that all the defendants in this action intentionally interfered with Luxe Holdings’ ability to rent the Property to Geovedy A. Cifuentes at a rate of $20,000.00 to $24,000.00 per month between August 1, 2020 and June 30, 2021, resulting in damages to Luxe Holdings. (FAC, 31-39.)

“Intentional interference with prospective economic advantage [requires a pleading alleging]: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

Classic Pallet and Perez challenge the Third Cause of Action on various grounds. (See Mot., 2:19-5:17.) In relevant part, these defendants challenge the Intentional Interference claim on the ground that the FAC does not allege that Classic Pallet and Perez intentionally held over Nationwide Pallets’ tenancy on the Property with the express purpose of disrupting Luxe Holdings’ ability to rent the Property to Geovedy A. Cifuentes. (Mot., 3:11-28.) The Court finds this position present a proper ground on which to sustain Classic Pallet and Perez’s Demurrer to the Intentional Interference claim.

The Third Cause of Action on its face fails to plead any facts relating to an actual express intent by Classic Pallet or Reyes to intentionally disrupt Luxe Holdings’ ability to rent the Property to Geovedy A. Cifuentes. (See FAC, 9-19 [background facts], 20-30 [First and Second Causes of Action], 31-39 [Third Cause of Action, which incorporates prior allegations].) At most, the FAC’s Third Cause of Action alleges that Classic Pallet and Reyes were aware—through the July 29, 2021 termination notice or some other unpled means—that Luxe Holdings was attempting to rent the Property to Nonparty Geovedy A. Cifuentes but alleges nothing regarding intent to disrupt as contemplated by an Intentional Interference claim. (See FAC, 32, 34-36 [paragraphs alleging awareness but no intent].)

The Opposition fails to explain how intent to disrupt is properly pled in the FAC. (See Demurrer Opp’n, 1:13-4:14.)

The Court thus SUSTAINS the Third Cause of Action, With Leave to Amend.

Fourth Cause of Action – Negligent Interference with Prospective Economic Advantage: SUSTAINED, With Leave to Amend.

The Third Cause of Action for Negligent Interference with Prospective Economic Advantage alleges that all the defendants in this action negligently interfered with Luxe Holdings’ ability to rent the Property to Geovedy A. Cifuentes at a rate of $20,000.00 per month between August 1, 2020 and June 30, 2021, resulting in damages to Luxe Holdings. (FAC, 32, 37, 40, 41-46.)

“The elements [that must be pled for a] negligent interference with prospective economic advantage [claim] are (1) the existence of an economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s knowledge (actual or construed) that the relationship would be disrupted if the defendant failed to act with reasonable care; (4) the defendant’s failure to act with reasonable care; (5) actual disruption of the relationship; (6) and economic harm proximately caused by the defendant’s negligence.” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1005.)

In relevant part, these defendants challenge this claim by “incorporat[ing] the arguments raised in section (A)(1) - (3)” relating to the Third Cause of Action for Intentional Interference. (Demurrer, 6:13-16.) One of the incorporated arguments explains that the FAC does not plead that Classic Pallet and Perez had knowledge of Luxe Holding’s Prospective Economic Advantage with Geovedy A. Cifuentes. (Demurrer, 4:13-5:7.) The Court agrees.

The FAC alleges that on July 29, 2020, Luxe Holdings (1) “served Nationwide a 30-day termination notice terminating the … tenancy,” (2) “served Nationwide and ‘all other tenants in possession of the premises’ a three-day notice to pay rent or quit” on the same day,” and (3) “notified Defendants [without further elaboration] that [Geovedy A. Cifuentes] … was ready and willing (and had agreed) to rent the space occupied by Classic” Pallet. (FAC, 14-15.) However, the FAC also alleges that it was only AFTER July 29, 2020 that “Nationwide informed Luxe – for the first time – that Nationwide was no longer in possession of the Property.” (FAC, 16.) If the FAC alleges that Plaintiff Luxe Holdings was not aware of the existence of Classic Pallet and Perez until AFTER Luxe Holdings gave notice to Nationwide regarding Geovedy A. Cifuentes’s desire to rent the Property, then it follows that the July 29, 2020 communication cannot be the basis for Classic Pallet’ and Perez’s “knowledge” as contemplated by the tort of Negligent Interference with Prospective Economic Advantage. (See Demurrer, 4:13-5:7.) The FAC does not plead another avenue of “knowledge” for Classic Pallet—actual or implied—regarding Cifuentes’ desire to rent the Property. (FAC, 14-19 [background facts], 20-39 [first three claims], 40-46 [Fourth Cause of Action, which incorporates prior allegations].)

The Opposition fails to explain how knowledge is properly pled in the FAC. (See Demurrer Opp’n, 1:13-5:11.)

The Court thus SUSTAINS the Fourth Cause of Action, With Leave to Amend.

The Court Sua Sponte

Fifth to Seventh Causes of Action – Trespass, Quasi-Contract, Breach of Contract: STRICKEN, Without Prejudice.

Though not raised by the Parties, “[f]ollowing an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order.” (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018 [citing to People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785 (leave to amend complaint did not constitute leave to amend to add new defendant)].)

On December 16, 2021, the Court Granted Classic Pallet and Perez’s Motion for Judgment on the Pleadings against the Third to Fifth Causes of Action—(3) Intentional Interference with Prospective Economic Advantage, (4) Negligent Interference with Prospective Economic Advantage, and (5) Fraud—With Leave to Amend only these claims. (See Dec. 16, 2021 Minute Order, pp. 2-6.)

Luxe Holdings’ new First Amended Complaint alleges (3) Intentional Interference with Prospective Economic Advantage and (4) Negligent Interference with Prospective Economic Advantage as the Third and Fourth Causes of Action but changes the Fifth Cause of Action from Fraud into a Trespass claim and adds two new claims: the Sixth Cause of Action for Quasi-Contract and a Seventh Cause of Action for Breach of Contract in the Alternative. (Compare Complaint p. 1, with FAC p. 1.)

Luxe Holdings did not request LEAVE from the Court to add three new causes of action to the FAC, nor does the face of the FAC show that Luxe Holdings and the Defendants stipulated to the filing of a new complaint alleging three new causes of action not alleged in the original Complaint. (See Dec. 16, 2021 Minute Order.) To the extent that the Court granted leave to the amend operative complaint on December 16, 2021, this leave to amend was limited to the original Complaint’s causes of action alleging (3) Intentional Interference with Prospective Economic Advantage, (4) Negligent Interference with Prospective Economic Advantage, and (5) Fraud. (See Dec. 16, 2021 Minute Order, pp. 2-6.)

The Court thus STRIKES the Fifth to Seventh Causes of Action due to lack of leave from this Court or a stipulation with the Defendants allowing Plaintiff Luxe Holdings to allege these claims of (5) Trespass, (6) Quasi-Contract, and (7) Breach of Contract in the Alternative, Without Prejudice.

Motion to Strike: GRANTED in Part, DENIED in Part.

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“[m]atter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

Defendants Classic Pallet and Reyes seek to the prayer for attorney’s fees and for exemplary/punitive damages. (Mot., 4:19-7:15.) Defendants argue that no contractual arrangement or law requires that Classic Pallet or Reyes pay attorney’s fees and exemplary/punitive damages to Luxe Holdings. (See Mot., 4:19-7:15.)

The Court agrees in part.

The FAC fails to properly plead that Luxe Holdings is entitled to exemplary and punitive damages from Classic Pallet or Perez. A “punitive damages theory cannot be predicated on the breach of contract cause of action without an underlying tort.” (Palmer v. Ted Stevens Honda, Inc. (1987) 193 Cal.App.3d 530, 536.) The FAC’s first two claims are Breach of Contract and Holding Over (FAC, 20-30) and thus cannot support a claim for punitive damages without an additional tort claim (Palmer, at p. 536). However, the Court has sustained Classic Pallet and Perez’s Demurrer to the FAC’s remaining claims for (3) Intentional Interference with Prospective Economic Advantage, (4) Negligent Interference with Prospective Economic Advantage, (5) Trespass, (6) Quasi-Contract, and (7) Breach of Contract in the Alternative. (See discussions supra.) Consequently, no claims remain to support a theory of exemplary or punitive damages.

The Court thus GRANTS the Motion to Strike and does STRIKE Paragraph 3 of the Prayer for Relief in its entirety. (The Motion to Strike is MOOT as to Paragraphs 39 and 50 of the FAC because these paragraphs were alleged in the Third and Fifth Causes of Action, and both these claims were struck down on Demurrer per the Demurrer discussion ante.)

However, the FAC properly pleads relief for attorney’s fees and contains sufficient facts to allege that Classic Pallet and Perez assumed Nationwide’s duties under the July 2017 Luxe Holdings-Nationwide Lease Agreement, including the attorney’s fees provision. (FAC, 3, 12 [alleging assignment or sublease of the Property to Classic Pallet and Perez by Nationwide Pallets in or around October or November 2019].) The FAC also contains a copy of the July 2017 Luxe Holdings-Nationwide Lease Agreement, which shows that an attorney’s fees provision applies to any lawsuits—whether in contract or tort—as between the parties tied to the agreement. (FAC, Ex. 1, p. 14, 31.)

The Court therefore DENIES the instant Motion to Strike insofar as it seeks to challenge Paragraph 5 of the Prayer for Relief, which requests “attorney’s fees allowed by law.”

Conclusion

Defendants’ Demurrer is SUSTAINED as to the Third to Seventh Causes of because these claims are insufficiently pled within the meaning of Code of Civil Procedure section 430.10, subdivision (e).

Defendants’ Motion to Strike Portion of Plaintiff’s First Amended Complaint is Moot, Granted, and Denied in Part.

The Motion is MOOT insofar as it relates to paragraphs 39 and 50 in the FAC because the causes of action housing these paragraphs were successfully challenged on demur.

The Motion is GRANTED as to Paragraph 3 of the Prayer for Relief in the FAC because the FAC does not plead a valid basis for exemplary or punitive damages.

The Motion is DENIED as to Paragraph 5 of the Prayer for Relief in the FAC because the FAC properly pleads a commercial lease agreement between Luxe Holdings and Nationwide, which can be imputed on Classic Pallet and Reyes, and which contains an attorney’s fees provision for the prevailing party in a lawsuit.

Plaintiff is permitted twenty (20) days’ leave to file an amended pleading in conformity with this Order.

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Case Number: *******7664 Hearing Date: December 16, 2021 Dept: 40

MOVING PARTY: Defendants, Classic Pallets, Inc. and

Juan Perez.

This case arises from a lease agreement between Plaintiff Luxe Holdings LLC and Defendant National Pallets, Inc. The two parties entered into a commercial lease agreement to rent the real property located at 4851 S. Alameda St., Los Angeles, CA 90058 (“the Property”) on or about July 2017. The lease was for a term of one year, after which the tenancy would become periodic from month to month. The lease also had a clause charging Nationwide Pallets 150% of the base rent if it ever “holds over” on the tenancy. The lease also allegedly prohibited assignment of the lease or sublease by Nationwide Pallets without prior permission from Luxe.

Luxe alleges that in or around April 2020, Nationwide Pallets assigned or sublet its lease in the Property to Classic Pallets, Inc. and its President, Juan Perez and that neither Nationwide nor Classic Pallets and Juan Perez informed Plaintiff of the new arrangement for the Property. Luxe alleges that Nationwide was prohibited from assigning or subletting the Property to Classic Pallets.

On July 29, 2020, Plaintiff served on Nationwide a 30-day termination notice, demanding Nationwide quit the property by August 29, 2020. Nationwide did not respond, and Classic Pallets allegedly remained in possession of the Property between August 2020 and at least October 1, 2020. Luxe filed a Complaint alleging counts of (1) breach of contract against Nationwide Pallets, (2) holding over against Nationwide Pallets, (3) intentional interference with prospective economic advantage against all defendants, (4) negligent interference with prospective economic advantage against all defendants, and (5) fraud against all defendants.

Defendants Classic Pallets and Juan Perez move for judgment on the pleadings (“Motion” or “MJOP”) arguing that the Complaint does not state sufficient facts to support the causes of action alleged against these them. Luxe opposed this Motion based on the argument that its Complaint sufficiently alleges claims against Classic Pallets and Juan Perez and that the Court should grant leave to amend if demurrers are sustained against these causes of action.

Motion for Judgment on the Pleadings: GRANTED

Timing for Judgment on the Pleadings: A motion for judgment on the pleadings may be made after the time to demur has expired, and an answer has been filed. (Code Civ. Proc., ; 438, subd. (f).) However, “[n]o motion may be made pursuant to this [statutory] section if a pretrial conference order has been entered pursuant to Section 575, or within 30 days of the date the action is initially set for trial, whichever is later, unless the court otherwise permits.” (Code Civ. Proc., ; 438, subd. (e).) Courts have discretion to consider late statutory motions for judgment on the pleadings, without any requirement of good cause. (Burnett v. Chimney Sweep (2004) 123 Cal. App. 4th 1057, 1063.) A non-statutory motion for judgment on the pleadings may be made any time before or during trial. (Stoops v. Abbassi (2002) 100 Cal. App. 4th 644, 650; see also Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586 [the non-statutory motion for judgment on the pleadings can be made at any time, even during trial, since the grounds for a general demurrer are never waived].)

Here, Defendants’ MJOP is made pursuant to Code of Civil Procedure sections 438 and 430.10, subdivision (e). (See Motion, 3:17-4:20.) Consequently, the Motion is untimely if, when it was made by Defendants, a pretrial conference order was entered pursuant to Section 575, or within 30 days of the date the action was initially set for trial, whichever is later, unless this Court otherwise permits. No pretrial conference order was entered in this matter pursuant to section 575 of the Code of Civil Procedure. On January 8, 2021, the Court set the initial trial date in this matter for April 5, 2022. 30 days prior to this trial date is Sunday, March 6, 2022, placing the last day on which Defendants can file an MJOP here on March 7, 2022. Defendants’ MJOP was made on August 2020, 2021, more than 30 days from the date initially set for trial and the Motion is timely.

Judgment on the Pleadings Analysis: Either prior to trial or at the trial—and barring statutory provisions otherwise—the plaintiff or the Defendants may move for judgment on the pleadings where the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791.)

Sufficiency Demurrer Legal Standard: A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., ; 430.10, subd. (e).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., ; 430.30, subd. (a).) A demurrer challenges only legal sufficiency of complaint, not truth or accuracy of its factual allegations or plaintiff's ability to prove those allegations. (Assurance Co. of Am. v. Haven (1995) 32 Cal.App.4th 78, 82.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., ; 430.30, subd. (a).) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at p. 747.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Classic Pallets and Juan Perez were only charged as defendants in the latter three of five causes of action in the Plaintiff’s Complaint. (See Complaint, 4:11-13, 5:1-3, 5:21-24, 6:13-16, 7:6-8; see also Mot., 3:8-12.) Consequently, Defendants’ MJOP is analyzed only as to the intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and fraud claims therein.

Third and Fourth Causes of Action, Intentional and Negligent Interference with Prospective Economic Advantage: GRANTED WITH LEAVE TO AMEND

“[A]n essential element of the tort of intentional interference with prospective business advantage is the existence of a business relationship with which the tortfeasor interfered. Although this need not be a contractual relationship, an existing relationship is required.” (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 546 [internal citations omitted].) Such a business relationship is also an essential element of the tort of negligent interference with prospective economic advantage. (See North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786 [“[t]he tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff […].”].)

The Complaint here alleges that Plaintiff “Luxe’s potential tenants for the Property represent an economic relationship likely to produce a future economic benefit in the way of leasing the subject Property.” (Complaint, ¶ 30.) A nebulous future business relationship between Luxe and a non-existent tenant for the Property at issue is insufficient for the purposes of establishing the torts of intentional or negligent interference with prospective business advantage.

Fifth Cause of Action, Fraud: GRANTED WITH LEAVE TO AMEND

“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

The Complaint does not sufficiently allege this cause of action. The fifth cause of action incorporates and realleges all prior allegations and adds that Defendants engaged in fraudulent conduct by concealing the assignment or sublease of the Property from Nationwide Pallets to Classic Pallets and that this conduct caused Luxe not to search for a replacement tenant for the Property, causing Luxe damages. (See Complaint, ¶¶ 43-46.) Nowhere in those facts does Luxe allege how Defendants Classic Pallets and its President Juan Perez have a duty to report to Luxe any assignment or sublease of the Property by Nationwide Pallets to Classic Pallets. While Nationwide Pallets may have had such a duty to report such assignment or sublease based on the contract with Plaintiff to request permission for subleases and assignments, (Complaint, ¶ 10), Classic Pallets was not a party to that contract. Consequently, Classic Pallets and Juan Perez cannot owe Luxe a duty to report any assignment or sublease of the Property based on Nationwide Pallets and Luxe’s original tenancy agreement unless Classic Pallets and Juan Perez are accepted as standing in the shoes of Nationwide Pallets, but this framing requires that Classic Pallets and Juan Perez had a valid tenancy contract with Luxe for the Property because no duty to report assignment or sublease can spring without an assumption of that duty. Even though Luxe argues in its Opposition at page 3 that the Classic Pallets and Juan Perez owed Luxe a duty based on their squatting on the Property and the foreseeability of harm that follows squatting, the Complaint is not sufficiently clearly written to convey this proposition.

The Complaint does not allege any facts to show that Classic Pallets and Juan Perez had the intention to conceal or suppress the assignment or sublease from Nationwide Pallets as to defraud Luxe. Instead, the Complaint accepts as a conclusion of fact that because Nationwide, not Classic or Juan Perez, acted maliciously in not reporting the assignment. (Complaint, ¶ 17.) While the Complaint alleges that Defendants Classic Pallets and Juan Perez have remained in possession of the Property without Luxe’s consent from August 1, 2020, to October 1, 2020, when the Complaint in this matter was filed, from this allegation alone, the Court cannot determine that Classic Pallets and Juan Perez failed to report the assignment or sublease with the intent to defraud Luxe of rental income or any other benefit due to Plaintiff.

Conclusion

Defendants Classic Pallets, Inc. and Juan Perez’ Motion for Judgment on the Pleadings is GRANTED WITH LEAVE TO AMEND within 15 days.

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