95 Cal.App.5th 1032
Cal. Ct. App.2023Background
- Fitness International leased a Chatsworth property and agreed (in a 2016 amended lease) to renovate it per a Work Letter; construction began Nov. 2019 with estimated completion Aug. 2020.
- In March 2020 COVID-19 orders closed indoor gyms but the City and County orders expressly exempted commercial construction as "Essential Business/Infrastructure."
- Fitness International stopped construction, remained in possession, and stopped paying rent beginning April 2020; it invoked the lease's force majeure clause and other defenses.
- KB Salt Lake served notices for unpaid rent, filed an unlawful detainer action, and moved for summary judgment asserting Fitness was in default and had no viable defenses.
- The trial court granted summary judgment for KB Salt Lake; the Court of Appeal affirmed, holding (inter alia) the closure orders allowed construction and the defendant’s contract defenses failed.
Issues
| Issue | KB Salt Lake (Plaintiff) Argues | Fitness Int'l (Defendant) Argues | Held |
|---|---|---|---|
| Whether COVID-19 closure orders prohibited renovation (construction) | Orders exempted commercial construction; renovations lawful | Orders effectively barred "retail" construction and made renovation illegal | Closure orders allowed commercial construction; Fitness could have continued work |
| Whether the lease force majeure clause excused rent | Clause excludes delays curable by payment; tenant admitted funds; clause doesn't excuse rent | COVID was a force majeure that delayed performance and thus excused rent | Clause does not excuse rent here; tenant not prevented from paying and clause covers "acts," not abstract "purpose" |
| Frustration of purpose (including alleged temporary frustration) | Lease purpose not destroyed; tenant stayed in possession so rent still owed | Pandemic temporarily destroyed lease purpose (cannot operate gym) | Frustration doctrine inapplicable; value not destroyed and tenant remained in possession so rent due |
| Impossibility / impracticability (temporary) | Not impossible or excessively impracticable to pay rent; no evidence of extreme cost | Pandemic made payment impracticable (lost revenues, furloughs) | No triable issue: defendant produced no evidence paying rent was impossible or unreasonably costly; admitted funds available |
| Civil Code § 1511 (operation of law; irresistible cause) | Orders did not prevent or delay payment of rent | Operation of law / irresistible cause excuses performance | § 1511 inapplicable because pandemic/orders did not prevent payment |
| Landlord breach (right to use premises) as excuse for nonpayment | Tenant's cessation of construction, not landlord, prevented use; lease did not guarantee future laws would allow use | Landlord breached warranty promising right to operate as health club | Tenant failed to show landlord breach that excuses rent; lease qualified use rights "subject to all applicable laws" |
Key Cases Cited
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (2001) (summary judgment burdens and necessity of evidentiary showing by opposing party)
- Stancil v. Superior Court, 11 Cal.5th 381 (2021) (tenant in default for nonpayment is liable in unlawful detainer)
- Borden v. Stiles, 92 Cal.App.5th 337 (2023) (procedures for unlawful detainer and summary judgment framework)
- SVAP III Poway Crossings, LLC v. Fitness International, LLC, 87 Cal.App.5th 882 (2023) (force majeure and pandemic — tenant’s admission of funds defeats excuse for rent)
- West Pueblo Partners, LLC v. Stone Brewing Co., LLC, 90 Cal.App.5th 1179 (2023) (similar force majeure analysis rejecting rent excuse where tenant had resources)
- Lloyd v. Murphy, 25 Cal.2d 48 (1944) (frustration/impossibility principles in lease contexts)
- Autry v. Republic Productions, Inc., 30 Cal.2d 144 (1947) (distinguishing frustration of purpose from impossibility of performance)
- Grace v. Croninger, 12 Cal.App.2d 603 (1936) (lessee who remains in possession remains liable for rent despite subsequent illegality of use)