First S. Capital Dev. Corp. v. M

• Decision Date: 30 October 2017
• Docket Number: B276724
• Citation: First S. Capital Dev. Corp. v. Sheet Metal Workers' Pension Plan , B276724 (Cal. App. Oct 30, 2017)
• Parties: FIRST SOUTHERN CAPITAL DEVELOPMENT CORPORATION, Plaintiff and Appellant, v. SHEET METAL WORKERS' PENSION PLAN OF SOUTHERN CALIFORNIA, ARIZONA AND NEVADA et al., Defendants and Respondents.
• Court: California Court of Appeals

FIRST SOUTHERN CAPITAL DEVELOPMENT CORPORATION, Plaintiff and Appellant, v. SHEET METAL WORKERS' PENSION PLAN OF SOUTHERN CALIFORNIA,ARIZONA AND NEVADA et al., Defendants and Respondents.

B276724

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

October 30, 2017

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. YC065531)

APPEAL from a judgment of the Superior Court of Los Angeles County, Ramona G. See, Judge. Affirmed.

Kenneth D. Sisco for Plaintiff and Appellant First Southern Capital Development Corporation.

Gilbert & Sackman, Michael D. Weiner and Benjamin M. O'Donnell for Defendants and Respondents Sheet Metal Workers' Pension Plan of Southern California, Arizona and Nevada; Board of Trustees of the Sheet Metal Workers' Pension Plan of Southern California, Arizona and Nevada; Sheet Metal Benefit Plans Administrative Corporation and Melanie Shepherd.

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First Southern Capital Development Corporation appeals from the judgment entered after the trial court granted summary judgment in favor of Sheet Metal Workers' Pension Plan of Southern California, Arizona and Nevada and related parties¹ (collectively Pension Plan) on First Southern's complaint for breach of a lease agreement. The trial court concluded, because First Southern was not a party to the lease or a third party beneficiary of that agreement, as a matter of law it could not prevail on its contract claims for damages. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Commercial Lease

Pension Plan owns Manhattan Plaza, an office building located in Manhattan Beach. In June 2009 Pension Plan entered into a new five-year lease with Aviation Mortgage Partners, Inc., doing business as Milestone Mortgage. Richard Thomas andDenise Thomas, Aviation Mortgage's shareholders and executive officers, personally guaranteed the lease on Aviation Mortgage's behalf.

The lease prohibited assignment or transfer by the tenant of its interest in the lease without the written consent of the landlord, "which consent shall not be unreasonably withheld or delayed." In the event of a merger or sale of all the tenant's assets, the lease provided the tenant could seek approval by giving timely notice to the landlord of the proposed assignment and providing the landlord with "detailed financial information (including references) regarding the creditworthiness and financial condition of the proposed assignee . . . and such other information and documentation as the Landlord may require," including new lease guarantees or "lease guarantor estoppel certificates, affirmations and agreements." In connection with the landlord's covenant not to withhold its consent to assignment unreasonably, the lease specified, "[T]he Landlord's withholding or delaying approval will be deemed reasonable if it is based on . . . Landlord's good faith analysis of the prospective assignee'[s], sublessee's or other transferee's credit, character and business or professional standing."

2. The Asset Sale and Proposed Assignment

In April 2010 First Southern agreed to purchase all of Aviation Mortgage's assets. Although the asset purchase agreement contemplated the assignment to First Southern of Aviation Mortgage's existing real property leases, including its lease of the office space in Manhattan Plaza, the agreementspecified assignment of that lease was subject to Pension Plan's approval and not a condition of the asset sale.²

In May 2010 First Southern moved into Aviation's offices in Manhattan Plaza and began paying the monthly rent Aviation Mortgage owed under the lease. Richard Thomas informed Melanie Shepherd, Pension Plan's building manager for Manhattan Plaza, of Aviation Mortgage's asset sale and proposed assignment of its lease to First Southern and requested she identify the documents or paperwork Pension Plan would need to investigate and approve the proposed assignment. In response Shepherd requested two years of First Southern's audited financial statements, the company's tax returns and a completed lease application from Michael Jones, First Southern's principal owner. Concerned about First Southern's limited credit history (First Southern had been in business for only one year), in October 2010 Shepherd requested additional documentation,including First Southern's business plan, a list of its investors with amounts invested and key executive biographies. Pension Plan also retained a tenant risk assessment firm to advise it on the creditworthiness of First Southern.

3. The Unraveling of the Asset Purchase Agreement Between Aviation Mortgage and First Southern

While Pension Plan considered Aviation Mortgage's request for approval of the proposed assignment, the asset purchase agreement between Aviation Mortgage and First Southern began to unravel for a variety of reasons, many unrelated to the lease. In late December 2010 Richard Thomas notified First Southern that Aviation Mortgage was exercising its termination rights under the asset purchase agreement due to First Southern's failure to perform. He also notified Shepherd that Aviation Mortgage was withdrawing its request for approval of the proposed assignment and would be serving First Southern with a notice to vacate the premises.

In January 2011, at Richard Thomas's request, Pension Plan denied First Southern access to the office space in Manhattan Plaza, resulting in a physical altercation between Richard Thomas and Emile Auguste, First Southern's chief financial officer. Following this confrontation, First Southern obtained a temporary restraining order enjoining the Thomases from entering the office in Manhattan Plaza and from using the name Aviation Mortgage Partners, doing business as Milestone Mortgage. First Southern then reoccupied the premises.

4. The Unlawful Detainer Action

After neither Aviation Mortgage nor First Southern paid rent for January or February 2011, Pension Plan initiated unlawful detainer proceedings naming both Aviation Mortgageand First Southern as defendants. Pension Plan obtained a judgment in its favor for possession of the premises and $120,728.94 in rent and attorney fees.

5. This Lawsuit and Pension Plan's Special Motion To Strike

After judgment was entered in the unlawful detainer action, First Southern filed this lawsuit against Pension Plan, asserting in its initial complaint causes of action for breach of contract, wrongful eviction, negligence, civil conspiracy and negligent and intentional interference with contract and prospective economic advantage. Underlying each of First Southern's claims was the allegation the Thomases and Pension Plan had conspired to delay approval of the assignment to give the Thomases time to cancel the asset purchase agreement with First Southern and resell Aviation Mortgage to another firm at a greater profit and to allow Pension Plan to recapture the office space and rent it to the new tenant at a higher rate.

Pension Plan moved to strike the complaint pursuant to Code of Civil Procedure section 425.16 on the ground it arose from its protected activity of prosecuting the unlawful detainer action. The trial court denied the special motion to strike, and we affirmed that order in a nonpublished opinion (First Southern Capital Development Corp. v. Sheet Metal Workers' Pension Plan of Southern California, Arizona and Nevada et al. (Jan. 23, 2014, B239824)).

6. Pension Plan's Motion for Summary Judgment Directed to the Operative Second Amended Complaint

In its second amended complaint, the operative pleading, First Southern asserted three contract causes of action based on alternative theories of express contract, implied contract andthird party beneficiary of an express contract. In each cause of action First Southern alleged Pension Plan had breached the provision in its lease with Aviation Mortgage that prohibited it from unreasonably withholding its consent to assignment.

Pension Plan moved for summary judgment and, in the alternative, summary adjudication, arguing First Southern could not prevail on its contract claims as a matter of law because it was not a party to the lease agreement between Pension Plan and Aviation Mortgage or a third party beneficiary of that contract and no other express or implied agreement concerning the proposed assignment existed between them. Alternatively, it argued, Pension Plan acted reasonably in response to the proposed assignment and did not breach the lease agreement.

In its opposition to Pension Plan's motion, First Southern argued it was a party to an express or implied contract or a third party beneficiary of an express or implied contract as a matter of law and, at a minimum, triable issues of material fact existed on each of those questions. In addition, citing statements made in Auguste's declaration, First Southern argued triable issues of material fact also existed as to whether Pension Plan unreasonably and in bad faith delayed its decision on the proposed assignment.

The trial court granted Pension Plan's summary judgment motion, concluding as a matter of law that First Southern was not a party to the lease or an implied contract incorporating the lease terms or a third party beneficiary of the lease and, therefore, could not prevail on any of its contract claims.

DISCUSSION

1. Standard of Review

A motion for summary judgment is properly granted only when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) We review a grant of summary judgment de novo and decide independently whether the facts not subject to...