FITNESS INTERNATIONAL, LLC, Defendant and Appellant, v. KB SALT LAKE III, LLC, Plaintiff and Respondent.
B320562
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN
Filed 9/26/23
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. 21CHCV00790)
Dorsey and Whitney, Bryan M. McGarry, Lynnda A. McGlinn, and Jill A. Gutierrez; Elenoff, Grossman & Schole and Bryan M. McGarry for Defendant and Appellant.
Loeb and Loeb, Thomas E. Lombardi and Matthew C. Anderson for Plaintiff
INTRODUCTION
Fitness International, LLC was operating an indoor gym and fitness center in the Los Angeles neighborhood of Chatsworth in 2016 when it entered into an amended lease with KB Salt Lake III, LLC that required Fitness International to renovate the premises. Construction began in November 2019 and was expected to be completed in August 2020. In March 2020, however, the COVID-19 pandemic prompted government orders that closed indoor gyms but that allowed commercial construction to continue. Fitness International nevertheless stopped construction at the Chatsworth site, remained in possession of the premises, and stopped paying rent. KB Salt Lake filed this unlawful detainer action, and the trial court granted KB Salt Lake‘s motion for summary judgment and entered judgment in its favor.
Fitness International asserted various arguments and affirmative defenses that rested, at least in part, on its contention the state and local COVID-19 closure orders did not allow commercial construction, like the renovation Fitness International was making to the gym, to continue. The trial court rejected Fitness International‘s arguments and ruled the closure orders did not prevent Fitness International from continuing construction work at the Chatsworth site. We agree with the trial court‘s interpretation of the COVID-19 closure orders and reject the arguments by Fitness International that rely on the lease‘s force majeure provision and the doctrines of frustration of purpose and temporary impossibility and impracticability. Therefore, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Fitness International Leases the Premises for an Indoor Gym
Fitness International acquired a lease for the premises in Chatsworth from another fitness company in 2011. In November 2016 Fitness International and KB Salt Lake entered into an amended lease agreement for a term of approximately 11 years, with options to renew for up to 20 additional years. The lease defined the “Primary Uses” of the premises as “the operation of a health club and fitness facility.”
A rent schedule set the monthly base rent at $11,850 until the end of 2016 and increased the base rent each year throughout the term of the lease. In exchange for the rent payments, KB Salt Lake leased the premises to Fitness International “subject to the terms, conditions and provisions set forth in [the
The lease required Fitness International to renovate and expand the existing gym according to a “Work Letter” attached to the lease. The Work Letter required Fitness International to begin the “Tenant‘s Work” within 20 business days after obtaining a building permit and to “proceed with due diligence thereafter.”
The lease included a force majeure provision at section 22.3, which stated:
“If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of strikes, lockouts, inability to procure labor or materials, retraction by any Government Authority of the Building Permit . . . once it has already been issued, failure of power, restrictive laws, riots, insurrection, war, fire, inclement weather or other casualty or other reason of a similar or dissimilar nature beyond the reasonable control of the party delayed, financial inability excepted (each, a ‘Force Majeure Event‘), subject to any limitations expressly set forth elsewhere in this Lease, performance of such act shall be excused for the period of delay caused by Force Majeure Events and the period for the performance of such act shall be extended for an equivalent period (including delays caused by damage and destruction caused by Force Majeure Events). Delays or failures to perform resulting from lack of funds or which can be cured by the payment of money shall not be Force Majeure Events. Force Majeure Events shall also include, without limitation, hindrance and/or delays in the performance of Tenant‘s Work or Tenant obtaining certificates of occupancy or compliance for the Premises by reason of any of the following (i) any work performed by Landlord in or about the Project from and after the Effective Date . . . ; and/or (ii) the existence of Hazardous Substances in, on or under the Project not introduced by Tenant.”
B. The COVID-19 Pandemic Temporarily Shuts Down Indoor Gyms, and Fitness International Invokes the Force Majeure Provision
Fitness International obtained a building permit to renovate the premises and commenced construction in November 2019. At that time Fitness International closed the gym that was operating on the premises and continued paying rent to KB Salt Lake. Fitness International estimated that construction would last approximately eight months and that the newly renovated gym would open sometime in August 2020.
Executive Order N-33-20 gave the state public health officer authority to identify additional sectors as critical to protecting the health and well-being of Californians. (Ibid.)
Also on March 19, 2020 the Mayor of Los Angeles issued a “Safer at Home” order that stated, “Wherever feasible, City residents must isolate themselves in their residences, subject to certain exceptions provided below.” (Los Angeles Public Order Under City of Los Angeles Emergency Authority (Mar. 19, 2020).) Those exceptions allowed residents to leave their homes to engage in certain activities, including to “perform any work necessary to the operations, maintenance and manufacturing of essential infrastructure, including without limitation construction of commercial and institutional buildings, residential buildings and housing, . . . provided that they carry out those services and [they] work in compliance with social distancing practices as prescribed by the Centers for Disease Control and Prevention and the Los Angeles County Department of Public Health, to the extent possible.” (Id., § 5(ix) [“Essential Infrastructure“].) The City revised and extended this order on May 27, 2020. (Los Angeles Public Order Under City of Los Angeles Emergency Authority (May 27, 2020).) The revised order continued to allow “[i]ndividuals [to] leave their residences to provide any services or goods or perform any work necessary to build, operate, maintain or manufacture essential infrastructure, including without limitation construction of public health operations, commercial, office and institutional buildings, residential buildings and housing.”
On March 21, 2020 the Los Angeles County Public Health Officer issued the “Safer at Home Order for Control of COVID-19.” This order extended
On June 12, 2020 the Los Angeles County Public Health Officer issued an order permitting gyms and fitness centers to reopen, but a month later the County closed them again. On March 15, 2021 the County Public Health Officer allowed gyms and fitness centers to reopen at limited capacity, and on June 11, 2021 the Governor‘s Executive Order N-07-21 ended restrictions on all sectors. (Los Angeles County Dept. of Public Health, Order of the Health Officer, § 9.5(c) (Mar. 15, 2021); Governor‘s Exec. Order No. N-07-21, §§ 1-2 (June 11, 2021).)
Meanwhile, Fitness International notified KB Salt Lake on March 20, 2020 that certain “COVID-19-Related Occurrences” constituted a force majeure event under section 22.3 of the lease. Specifically, Fitness International claimed “delays in obtaining governmental inspections, entitlements, permits and/or approvals, restrictive laws, Tenant‘s inability to procure labor or materials and other delay/hindrance-causing occurrences beyond the reasonable control of Tenant that are the result of and/or associated with the global and national emergency caused by the spread of COVID-19” were “COVID-19-Related Occurrences” that excused Fitness International from performing its “pre-opening and development/construction-related obligations” under the lease “for the period of delay caused by the COVID-19-Related Occurrences.” Fitness International stopped paying rent beginning with the April 2020 payment and never resumed.
On September 10, 2021 KB Salt Lake served Fitness International with a notice of potential event of default. The notice stated Fitness International would be in default unless within 10 days it paid the then-delinquent rent amount of $336,707.63. On September 30, 2021, after Fitness International failed to make the requested payment, KB Salt Lake served Fitness International with a five-day notice to pay $239,598.35 in rent or quit the premises.3 The notice stated that, if Fitness International failed to pay the sum due within five days, KB Salt Lake would take legal action to terminate and forfeit the lease and recover possession of the premises. Fitness International did not make a rent payment by October 6, 2021, and KB Salt Lake filed this action for unlawful detainer on October 7, 2021. Fitness International answered and admitted it remained in possession of the premises.
Following discovery, KB Salt Lake moved for summary judgment, arguing there were no triable issues of material fact on the elements of its cause of action for unlawful detainer or on five affirmative defenses Fitness International identified in its discovery responses. First, KB Salt Lake argued Fitness International‘s defense based on force majeure did not apply because the lease excluded from the definition of “Force Majeure Events” any “[d]elays or failures to perform resulting from lack of funds or which can be cured by the payment of money.” KB Salt Lake argued the only breach alleged in the unlawful detainer action was failure to pay rent, which Fitness International could cure by making a payment of money. KB Salt 3
Lake also argued Fitness International had the funds to pay rent and could not blame the COVID-19 closure orders for failing to make rent payments. Finally, KB Salt Lake argued the force majeure clause did not apply because the closure orders did not prevent Fitness International from continuing construction on the premises or using them for other purposes. KB Salt Lake contended Fitness International‘s obligation to pay rent continued so long as it occupied the premises, regardless of the closure orders.
Second, KB Salt Lake argued Fitness International‘s defense under
Fourth, KB Salt Lake argued Fitness International could not rely on the doctrine of impossibility or impracticality because the COVID-19 closure orders did not make it unlawful or impossible for Fitness International to perform its obligations under the lease, including paying rent. KB Salt Lake argued Fitness International‘s performance was not legally impractical because the closure orders did not sufficiently increase the cost of Fitness International‘s performance.
Finally, KB Salt Lake argued there were no triable issues of material fact concerning Fitness International‘s defense based on alleged breaches of the lease by KB Salt Lake. In discovery responses, Fitness International stated KB Salt Lake breached the lease by failing to comply with KB Salt Lake‘s representation and warranty that Fitness International could use the premises for all uses permitted by the lease, including as a health club and fitness facility. KB Salt Lake argued it was Fitness International‘s failure to complete the renovations to the premises, not KB Salt Lake‘s actions or the COVID-19 closure orders, that prevented Fitness International from using the premises as a fitness facility. KB Salt Lake also argued that, even if it had breached the lease, any such breach would not relieve Fitness International of its obligation to pay rent, so long as Fitness International retained possession of the premises.
Fitness International‘s opposition to KB Salt Lake‘s motion for summary judgment rested on the premise the COVID-19 closure orders made it “illegal” for Fitness International to complete the renovations to the property. Fitness International argued that, despite language in the COVID-19 closure orders exempting construction workers and commercial construction from the stay-at-home orders, “retail construction was not included on the list of approved construction.” Fitness International asserted the orders’ reference to “construction of . . . commercial, office and institutional buildings” impliedly excluded “retail construction,” as distinct from “commercial construction.” Thus, Fitness International contended, it “ceased all activities, including all construction related activities,” to avoid violating state law and to protect its employees.
Regarding its force majeure defense, Fitness International argued it did not claim “financial inability or lack of funds, but rather that its obligation [to pay
Regarding its defenses under section 1511, Fitness International argued it presented evidence the COVID-19 closure orders prevented it from renovating and using the premises for its intended use, thus excusing it from paying rent while the closure orders were in effect. Regarding the doctrines of frustration of purpose, impossibility, and impracticality, Fitness International argued California law recognized “temporary” versions of these doctrines as grounds to excuse rent payments during the time that the purpose of the contract was frustrated or that performance of obligations was impossible or impractical. Fitness International argued it produced evidence sufficient to raise a triable issue of material fact regarding whether the COVID-19 closure orders frustrated the purpose of the lease.
Regarding Fitness International‘s defense KB Salt Lake‘s alleged breaches of the lease excused the obligation to pay rent, Fitness International argued KB Salt Lake violated its covenant under the lease to ensure Fitness International could use the premises as a health club and fitness facility. Fitness International contended its obligation to pay rent was dependent on “its right to complete construction of the fitness facility and occupy the Premises for its intended use, and because Fitness [International] was prevented from such, it [was] excused from paying rent.”
The trial court agreed with KB Salt Lake on every issue and granted the motion for summary judgment. The court first ruled KB Salt Lake established each element of its unlawful detainer cause of action. The court then concluded the COVID-19 pandemic did not excuse Fitness International‘s failure to pay rent under the force majeure clause because that provision excluded “failures to perform . . . which can be cured by the payment of money.” The court also ruled that, even if the COVID-19 closure orders were a “Force Majeure Event” under section 22.3, Fitness International did not cite any evidence showing the closure orders prevented it from paying rent; “[i]n fact,” the court said, Fitness International “admitted it had the funds to pay rent.” The court also concluded the closure orders did not prevent Fitness International from using the premises as a fitness club because “there was no fitness club building at the Premises to operate” due to Fitness International‘s decision to stop construction.
The trial court similarly rejected Fitness International‘s defenses based on impossibility and impracticality. The court ruled the COVID-19 closure orders did not make it unlawful or more costly for Fitness International to perform its obligation to pay rent, nor did they hinder, delay, or prevent Fitness International from continuing its renovation of the premises.
Finally, the court rejected Fitness International‘s defense based on KB Salt Lake‘s alleged breach of the lease. First, the court ruled, nothing in the lease required KB Salt Lake to guarantee Fitness International could use the premises as a health and fitness club. Second, the court concluded, Fitness International breached its obligation to “proceed with due diligence” to complete the renovations on the premises by “abandon[ing] construction of the property rationalizing it under an incorrect interpretation of the [COVID-19 closure orders] and while admittedly having funds to pay for construction.” The court ruled that, as a result of Fitness International‘s actions, the premises were “unfit to operate as a fitness facility.” Finally, the court agreed with KB Salt Lake‘s argument that, even if KB Salt Lake breached the lease, any such breach would not relieve Fitness International of its obligation to pay rent under California law.
The trial court entered judgment for KB Salt Lake. Fitness International timely appealed.
A. Applicable Law and Standard of Review
A “tenant of real property is guilty of unlawful detainer” where the tenant, among other circumstances, “is in default for nonpayment of rent.” (Stancil v. Superior Court (2021) 11 Cal.5th 381, 395; see
“Summary judgment should be granted when there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law.” (Brewer v. Remington (2020) 46 Cal.App.5th 14, 23; see
“On appeal, we review the record and the determination of the trial court de novo, viewing the evidence in the light most favorable to” the losing party. (Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange (2022) 77 Cal.App.5th 971, 982; see Hampton v. County of San Diego, supra, 62 Cal.4th at p. 347; Rheinhart v. Nissan North America, Inc. (2023) 92 Cal.App.5th 1016, 1024.) “‘[W]e take the facts from the record that was before the trial court when it ruled on [the] motion. [Citation.] . . . We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.‘” (Hampton, at p. 347; see Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286.)
“We apply de novo review to questions of law regarding statutory interpretation. [Citation.] ‘We also independently review contractual agreements, including the question of whether the language used in a contract is ambiguous.‘” (Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange, supra, 77 Cal.App.5th at pp. 982-983; see Brown v. Goldstein (2019) 34 Cal.App.5th 418, 433 [trial court‘s ruling on whether contractual language is ambiguous is a question of law subject to independent review].) “We are not bound by the trial court‘s reasons for granting summary judgment because we review the trial court‘s ruling, and not its rationale.” (Dameron, at p. 983; Rheinhart v. Nissan North America, Inc., supra, 92 Cal.App.5th at p. 1024.)
Fitness International challenges the trial court‘s ruling KB Salt Lake met its burden to show there is no triable issue of material fact concerning the third element of a cause of action for unlawful detainer, i.e., that the tenant is in default for nonpayment of rent. In particular, Fitness International argues it was not in default because the lease did not obligate Fitness International to pay rent while the COVID-19 closure orders were in effect. Fitness International also argues the trial court erred in ruling Fitness International failed to show a triable issue of material fact on any of its affirmative defenses. All of Fitness International‘s arguments are based, to some extent, on its assertion the COVID-19 closure orders “made it illegal” to complete the renovations to the premises. Thus, we begin with Fitness International‘s arguments challenging the trial court‘s ruling to the contrary.
Fitness International argues the trial court erred in interpreting the COVID-19 closure orders to exclude commercial construction, including the renovations to the premises, from the orders’ restrictions. In making this argument, Fitness International invents the term “retail construction,” which did not appear in the closure orders, and asserts the term‘s absence from the closure orders meant the orders prohibited “retail construction.” The plain language of the closure orders does not support Fitness International‘s fanciful attempt at excusing its decision to cease construction.
As stated, the COVID-19 closure orders issued by the City of Los Angeles allowed residents to continue to work on “Essential Infrastructure” projects, including ”without limitation construction of commercial and institutional buildings.” (Los Angeles Public Order Under City of Los Angeles Emergency Authority (Mar. 19, 2020) § 5(ix), italics added; see Los Angeles Public Order Under City of Los Angeles Emergency Authority (May 27, 2020) § 5(ix) [allowing residents to perform work necessary “to build, operate, maintain or manufacture essential infrastructure, including without limitation construction of . . . commercial, office and institutional buildings“], italics added.) Neither the original nor the revised order referred to “retail construction” or otherwise qualified the ordinary meaning of “construction of commercial . . . buildings.”
Similarly, the COVID-19 closure orders issued by the County of Los Angeles allowed “Essential Businesses,” including commercial construction, to continue. The original order issued March 21, 2020 stated: “All persons are to remain in their homes or at their place of residence, except to travel to and from Essential Businesses, to work at . . . Essential Infrastructure, . . . or to participate in an individual or family outdoor activity, while practicing social distancing.” (Los Angeles County Dept. of Public Health, Order of the Health Officer, § 1 (Mar. 21, 2020), italics added.) The order defined “Essential Businesses” and “Essential Infrastructure” to include commercial construction, without excepting or referring to construction of retail establishments. “Essential Businesses” included “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).” (Id., § 13(x).)4 “Essential Infrastructure” included “construction of commercial, office, and institutional buildings,” again without any qualification concerning “retail”
We interpret city ordinances and agency rules and regulations the same way we interpret statutes, by starting with the text as the best indication of the measure‘s intent and purpose. (Fischl v. Pacific Life Insurance Company (2023) 94 Cal.App.5th 108, 121; see O‘Brien v. Regents of University of California (2023) 92 Cal.App.5th 1099, 1117 [“‘Generally, the rules that govern interpretation of statutes also govern interpretation of administrative regulations,’ as well as the interpretation of ‘policies promulgated by administrative bodies.‘“]; Ngu v. City Bail Bonds (2021) 71 Cal.App.5th 644, 649 [“Rules of ‘statutory construction govern [the] interpretation of regulations promulgated by administrative agencies.‘“]; TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1374 [“the rules of construction applying to statutes apply equally to ordinances“].) “If the text is unambiguous and consistent with the purpose of the regulation, our analysis ends.” (Fischl, at pp. 121-122; see Aguiar v. Superior Court (2009) 170 Cal.App.4th 313, 324.) If not, we may look to a variety of extrinsic aids, including the measure‘s legislative history and public policy. (Fischl, at p. 122; Butts v. Board of Trustees of California State University (2014) 225 Cal.App.4th 825, 836;
Aguiar, at p. 324.) The plain language of the City and County closure orders, and the orders continuing their effective dates, excluded commercial construction, such as the renovations of the premises, from businesses that had to cease operations. Thus, as a matter of law, the COVID-19 closure orders did not prevent Fitness International from continuing the renovations to the premises.
Fitness International argues its (invented) distinction between “retail” commercial construction and other commercial construction “makes sense in the context of the Pandemic” because the construction of nonessential retail establishments was not necessary to maintain critical infrastructure such as hospitals, airports, and roadways. But the COVID-19 closure orders allowed more than “critical” infrastructure projects to continue. They also allowed “Essential Businesses” to continue, and both the City and County orders defined “Essential Businesses” to include commercial construction. In addition, the Los Angeles County COVID-19 closure orders listed many types of commercial properties and businesses that had to close or shut down, and “retail construction” was not one of them. (See, e.g., Los Angeles County Dept. of Public Health, Order of the Health Officer, § 3 (Mar. 21, 2020).) The omission of any reference to “retail construction” among the lengthy list of businesses that had to close confirms the COVID-19 closure orders did not require “retail construction” projects to stop. (See Gikas v. Zolin (1993) 6 Cal.4th 841, 852 [“The expression of
Moreover, Fitness International does not identify any ambiguity in the language of the COVID-19 closure orders that would allow us to consider extrinsic interpretive aids such as public policy (see Butts v. Board of Trustees of California State University, supra, 225 Cal.App.4th at p. 836), and even if it did, Fitness International did not identify any evidence that would support a policy distinction between non-retail commercial construction and retail commercial construction. Fitness International cites cases, mostly from other jurisdictions, having nothing to do with the COVID-19 closure orders that (according to Fitness International) “refer[] separately to commercial and retail development,” but which do so for reasons specific to those cases and which do not cite or rely on any such distinction. (See, e.g., San Franciscans Upholding the Downtown Plan v. City & County of San Francisco (2002) 102 Cal.App.4th 656, 679 [referring to “commercial and retail space” in describing downtown San Francisco‘s preservation policies]; T-C Forum at Carlsbad, LLC v. Thomas Enterprises, Inc. (S.D.Cal., Aug. 14, 2017, No. 16-cv-2119 DMS (BGS)) 2017 WL 3492159, p. 6 [plaintiff sought a permanent injunction against the defendant‘s use of the word “Forum” in connection with “commercial or retail real estate“]; Friends of Roeding Park v. City of Fresno (E.D.Cal. 2012) 848 F.Supp.2d 1152, 1158 [plaintiff objected to a city‘s approval of a zoo expansion plan, arguing “it would result in commercial and retail development of land previously used for open space recreational uses“].)
Fitness International also argues that, “[a]t the very least,” whether its interpretation of the COVID-19 closure orders was “reasonable” is a factual issue. But interpreting city ordinances and agency rules and regulations is a question of law, not fact, and Fitness International‘s subjective understanding of the COVID-19 closure orders is irrelevant. (See Segal v. ASICS America Corp. (2022) 12 Cal.5th 651, 662 [interpreting a statute is
C. The Force Majeure Provision Did Not Excuse Fitness International from Paying Rent
Fitness International argues the trial court misinterpreted and misapplied the force majeure provision in section 22.3 of the lease. “When interpreting a contract, a court seeks to ascertain the mutual intent of the parties solely from the written contract so long as possible.” (West Pueblo Partners, LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179, 1185 (West Pueblo Partners); see Gilkyson v. Disney Enterprises, Inc. (2021) 66 Cal.App.5th 900, 916.) “When the contract is clear and explicit, the parties’ intent is determined solely by reference to the language of the agreement.” (Gilkyson, at p. 916; see Brown v. Goldstein, supra, 34 Cal.App.5th at p. 432.)
First, Fitness International argues section 22.3 applies when the “purpose” of the lease is delayed, hindered, or prevented by a “Force Majeure Event.” Fitness International further argues that the purpose of the lease was for Fitness International “to operate the Premises as an indoor gym (and to perform [the renovations] in order to do so)” and that the COVID-19 pandemic prevented Fitness International from operating the premises as a gym. The language of section 22.3 does not support Fitness International‘s interpretation. Section 22.3 applies “[i]f either party is delayed or hindered in or prevented from the performance of any act required hereunder because of . . . a ‘Force Majeure Event’ . . . .” The provision further provides that the “performance of such act shall be excused for the period of delay caused by Force Majeure Events and the period for the performance of such act shall be extended for an equivalent period . . . .” Section 22.3 plainly applies only when an “act” required under the lease, not its “purpose,” is delayed, hindered, or prevented. Fitness International admitted it had the funds to pay rent, despite the COVID-19 closure orders. Thus, because the COVID-19 pandemic did not delay, hinder, or prevent Fitness International from the act of paying rent, section 22.3 did not excuse Fitness International‘s obligation to pay rent. And, in any event, the COVID-19 pandemic did not delay, hinder, or prevent the parties from fulfilling the purpose of the lease Fitness
Fitness International argues that interpreting section 22.3 to apply where “the fundamental purpose of the Lease is hindered or prevented by the occurrence of a Force Majeure Event” is “more reasonable” than the trial court‘s “hyper-technical” interpretation. But because section 22.3 is “clear and explicit” in this regard, we look only to its plain language to determine the parties’ intent. (West Pueblo Partners, supra, 90 Cal.App.5th at p. 1185; Gilkyson v. Disney Enterprises, Inc., supra, 66 Cal.App.5th at p. 916.) We consider extrinsic evidence only when a contract is ambiguous, “that is, reasonably susceptible to more than one interpretation.” (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 986; see State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 195 [a contract provision is ambiguous “when it is capable of two or more constructions, both of which are reasonable“].) There is nothing ambiguous in section 22.3‘s reference to the word “act,” which is employed twice in the same way in that provision. In both instances, section 22.3 refers to the “performance” of an “act” “required” by the lease.7 Parties do not typically “perform” purposes of a contract, nor are purposes of a contract generally “required” by its terms. We will not give the word “act” an unreasonable interpretation to deem section 22.3 ambiguous. (See La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37 [“Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.“]; Alameda County Flood Control & Water Conservation Dist. v. Department of Water Resources (2013) 213 Cal.App.4th 1163, 1180 [same].)8
Fitness International also argues that its interpretation of section 22.3 is “consistent with
Second, Fitness International argues the trial court erroneously interpreted section 22.3 by “conflating what constitutes a Force Majeure Event with what may be excused by a Force Majeure Event.” The first sentence of section 22.3 provides a nonexclusive list of examples of potential Force Majeure Events, such as strikes, insurrection, war, and fire. According to Fitness International, the second sentence “states what cannot constitute a Force Majeure Event,” namely, “[d]elays or failures to perform resulting from lack of funds or which can be cured by the payment of money.” Section 22.3 states that such delays or failures “shall not be Force Majeure Events.” KB Salt Lake argues that, instead of defining what shall not “be” a Force Majeure Event, the second sentence of section 22.3 identifies the types of performance, such as the payment of rent, that a Force Majeure Event does not excuse. But regardless of who wins this battle, Fitness International has lost the war: Even if the COVID-19 pandemic is, under the lease, a Force Majeure Event that could excuse obligations requiring only the payment of money, Fitness International cannot show it was delayed, hindered, or prevented from paying rent “because of” the COVID-19 pandemic, as required by section 22.3. As discussed, Fitness International conceded it had the funds to pay rent, despite the COVID-19 closure orders. Thus, Fitness International was not prevented from performing “because of” the COVID-19 pandemic. (See SVAP III Poway Crossings, LLC v. Fitness International, LLC (2023) 87 Cal.App.5th 882, 892-893 (Poway Crossings) [force majeure clause did not excuse Fitness International from paying rent where there was “no evidence
Fitness International similarly argues that the parties did not carve out “rent” from section 22.3, meaning any Force Majeure Event would excuse the parties from performing all obligations under the lease, including payment of rent, regardless of whether the Force Majeure Event was the cause of the delay in performance. Again, that‘s not what section 22.3 says. It says: “If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of . . . a ‘Force Majeure Event,‘” then “performance of such act shall be excused . . . .” Thus, the performance of a specific act, such as payment of rent, must be delayed or hindered by the Force Majeure Event before section 22.3 excuses the obligation to perform the act. (See West Pueblo Partners, supra, 90 Cal.App.5th at p. 1188 [“[a]lthough a force majeure provision is often included in a contract to specify which qualifying events will trigger its application, the qualifying event must have still caused a party‘s timely performance under the contract to ‘become impossible or unreasonably expensive,‘” italics omitted].)
Fitness International argues in its reply brief the COVID-19 pandemic “hindered” its ability to pay rent because it could not bill members when the gym was closed, was forced to stop operating its California locations and close its corporate office, furloughed over 25,000 employees, and could not continue renovating the premises in Chatsworth. Fitness International, however, did not have a cash flow problem. It admitted it had the funds to pay rent. Moreover, even if Fitness International were operating at a loss (and there is no evidence it was), that alone would not excuse Fitness International from paying rent under section 22.3. For example, in West Pueblo Partners, supra, 90 Cal.App.5th 1179 the court rejected an argument of a commercial tenant, which operated a brewpub,9 that the force majeure provision in its lease excused it from paying rent while local COVID-19 closure orders restricted the brewpub‘s operations. (Id. at pp. 1191-1192.) Like Fitness International, the tenant in West Pueblo Partners admitted that it could have made rent payments, but argued that it would have been more costly to do so because local restrictions on
Fitness International argues West Pueblo Partners is distinguishable because the tenant in that case “was able to operate in some capacity during the entire closure period.” But so was Fitness International. It could have continued construction on the renovated gym so that the gym could reopen as soon as the COVID-19 closure orders allowed. Instead, the gym remained unusable even after the closure orders permitted indoor gyms to operate “in some capacity.” Because the COVID-19 pandemic did not delay, hinder, or prevent Fitness International from paying rent, section 22.3 did not excuse that obligation.
Fitness International next argues that whether the COVID-19 pandemic delayed, hindered, or prevented its renovations of the premises is a factual issue that precludes summary judgment. Had Fitness International produced any evidence of such delay, hindrance, or prevention, perhaps there may have been a factual issue. But it didn‘t. In the trial court Fitness International argued only that the COVID-19 closure orders “at a minimum delayed and hindered [its] construction activities,” but Fitness International did not submit any evidence of how or for how long or at what cost. “[I]t is axiomatic that the party opposing summary judgment ‘must produce admissible evidence raising a triable issue of fact.‘” (All Towing Services LLC v. City of Orange (2013) 220 Cal.App.4th 946, 960; see Santa Ana Unified School Dist. v. Orange County Development Agency (2001) 90 Cal.App.4th 404, 411.) Yet Fitness International produced none to support its claim the COVID-19 closure orders delayed, hindered, or prevented construction.11
Finally, and in connection with its argument the trial court erroneously interpreted section 22.3, Fitness International argues its obligation to pay rent was excused by KB Salt Lake‘s alleged breach of its covenant in section 1.9 that Fitness International would have the “right throughout the Term [of the lease] to operate the Premises . . . for uses permitted under [the] lease.” Section 1.9, however, qualifies that obligation by stating it is “[s]ubject to all applicable laws,” which included the COVID-19 closure orders. Thus, the lease did not obligate KB Salt Lake to guarantee future applicable laws would allow Fitness International to operate the premises as a construction site, gym, or health club throughout the term of the lease.
Fitness International argues, for the first time in its reply brief, that “[s]ubject to all applicable laws” meant subject to “laws that were foreseeable at the time of contracting.” Without citing any evidence, Fitness International asserts “[n]either party contemplated there would be an outright prohibition on operating indoor gyms at the time of contract.” But the parties did contemplate in section 22.3 that “restrictive laws . . . beyond the reasonable control” of the parties could delay, hinder, or prevent a party from performing an act under the lease. Thus, even if Fitness International had not forfeited this argument by failing to make it in its opening brief (see Doe v. McLaughlin (2022) 83 Cal.App.5th 640, 653), the phrase “subject to all applicable laws” would still be unambiguously broad enough to include the COVID-19 closure orders.
D. Temporary Frustration of Purpose Did Not Excuse Fitness International from Paying Rent
Fitness International argues the trial court erred in ruling the doctrine of frustration of purpose did not excuse Fitness International from paying rent. Specifically, Fitness International argues the trial court erroneously rejected its arguments that California law recognizes “temporary” frustration of purpose and that under that doctrine the COVID-19 pandemic temporarily excused Fitness International‘s obligation to pay rent. Even if temporary frustration of purpose is a viable theory under California law, however, Fitness International did not show the doctrine excused its obligation to pay rent.
At least two courts have held California law does not recognize “temporary” frustration of purpose, which ostensibly excuses a party‘s performance under a contract temporarily until the cause of the frustration abates. (See Poway Crossings, supra, 87 Cal.App.5th at p. 896; 20th Century Lites, Inc. v. Goodman, supra, 64 Cal.App.2d Supp. at p. 945.) This conclusion follows from the legal effect of the frustration doctrine, which terminates the contract. (Poway Crossings, at p. 896; 20th Century Lites, at p. 945.) Fitness International cites Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001 for the proposition California law does recognize temporary frustration of purpose, but Maudlin addressed the doctrine of temporary impossibility or impracticability, not temporary frustration of purpose. (See id. at p. 1017.) In so doing, the court in Maudlin quoted the Restatement Second of Contracts, section 269, which, contrary to California law, conflates impossibility (and impracticability) of performance and frustration of purpose. (Maudlin, at p. 1017; see Glenn R. Sewell Sheet Metal, Inc. v. Loverde (1969) 70 Cal.2d 666, 678, fn. 13 [doctrine of frustration of purpose “may, in consequence, appear to overlap” with doctrines such as impossibility of performance, but it is “a separate doctrine“]; Autry v. Republic Productions, Inc. (1947) 30 Cal.2d 144, 148 [“although the doctrines of frustration and impossibility are akin, frustration is not a form of impossibility of performance“]; Lloyd v. Murphy, supra, 25 Cal.2d at p. 53 [“frustration is not a form of impossibility“].)12 Thus, Maudlin does not stand for the proposition California law recognizes temporary frustration of purpose.
We need not decide this issue, however, because Fitness International did not show temporary frustration of purpose excused it from paying rent. Fitness International argues the purpose of the lease “was to possess and use the Premises for the . . . ‘operation of a health club and fitness facility.‘” Fitness International further argues “[t]his purpose was temporarily, but completely, extinguished by the Pandemic and government orders.” Fitness International conveniently leaves out the additional purpose it identified elsewhere in its opening brief and in the trial court, which was “to renovate and then operate an indoor gym at the leased Premises.” Fitness International did not submit any evidence the COVID-19 pandemic or the COVID-19 closure orders prevented it from completing the renovations, which were necessary for Fitness International to operate the premises as a gym or for other permitted uses under the lease. Thus, Fitness International did not show the COVID-19 pandemic or closure orders destroyed, even temporarily, “‘the whole value of the performance.‘” (Poway Crossings, supra, 87 Cal.App.5th at p. 895; see Lloyd v. Murphy, supra, 25 Cal.2d at p. 55.)
Fitness International argues that the lease is a “monthly installment contract” and that each month it could not operate the premises as a fitness facility frustrated the purpose of the contract. Neither the pandemic nor the COVID-19 closure orders, however, prevented Fitness International from reopening the gym; the gym was under construction at the time the City and County issued their closure orders, and Fitness International never recommenced construction (even after the government allowed gyms to reopen).
Moreover, as KB Salt Lake argues, frustration of purpose did not excuse Fitness International from its obligation to pay rent (even if the lease was an “installment contract“) because Fitness International did not attempt to rescind the lease and instead remained in possession of the premises. (See Poway Crossings, supra, 87 Cal.App.5th at p. 896 [Fitness International remained “obligated to pay rent while in possession of the premises“].) As the court in Grace v. Croninger (1936) 12 Cal.App.2d 603 explained, “even where the sole business to which premises are restricted by the terms of a lease becomes unlawful, the lease is not terminated merely by the enactment of the law declaring such business unlawful, but liability under the lease continues as long as the lessee continues in possession.” (Id. at p. 603.) The court in Grace relied on an opinion by the Supreme Court denying rehearing in Industrial Development & Land Co. v. Goldschmidt (1922) 56 Cal.App. 507, where the Supreme Court stated a lessee could not “continue to hold possession of the premises after the prescribed business became unlawful, and escape payment of the rent on the ground of such illegality, without surrendering to the lessor.” (Id. at p. 512; see Grace, at p. 606.) As discussed, Fitness International remained in possession of the premises at least until it answered KB Salt Lake‘s complaint on October 19, 2021 (well after the COVID-19 closure orders ended restrictions on indoor gyms). Thus, even if California law recognized temporary frustration of purpose, and even if the lease is an “installment contract,” Fitness International still had to make rent payments under the lease.13
E. Temporary Impossibility or Impracticability Did Not Excuse Fitness International from Paying Rent
Fitness International argues the trial court erred in rejecting its affirmative defense based on temporary impossibility or impracticability. The doctrine of impossibility includes “not only cases of physical impossibility but also cases of extreme impracticability of performance.” (Lloyd v. Murphy, supra, 25 Cal.2d at p. 53; accord, Dorn v. Goetz, supra, 85 Cal.App.2d at p. 412; see Kennedy v. Reece (1964) 225 Cal.App.2d 717, 724 [“The enlargement of the meaning of ‘impossibility’ as a defense . . . to include ‘impracticability’ is now generally recognized.“].) “Impossibility is defined ‘as not only strict impossibility but [also] impracticability because of extreme and unreasonable difficulty, expense, injury, or loss involved.’ [Citations.] The defense of impossibility may apply where, as here, a government order makes it unlawful for a party to perform its contractual obligations.” (Poway Crossings, supra, 87 Cal.App.5th at p. 893; see Autry v. Republic Productions, Inc., supra, 30 Cal.2d at pp. 148-149.)
In contrast to the doctrine of frustration, where “performance remains possible,” the doctrine of impossibility or impracticability excuses performance of a contractual obligation when performance is impossible or extremely impracticable. (Autry v. Republic Productions, Inc., supra, 30 Cal.2d at p. 148; see 30 Williston on Contracts (4th ed. 2023) § 77:94 [impracticability “makes performance of the obligation impossible or highly impracticable, whereas frustration of purpose makes performance of
Fitness International argues the trial court erred in ruling that, because it was neither impossible nor impracticable for Fitness International to pay rent when the COVID-19 closure orders were in effect, the doctrines of impossibility and impracticability did not apply. Fitness International maintains those doctrines excused its obligation to pay rent because “the cost to Fitness [International] of paying rent ha[d] increased exponentially.” In the trial court, however, Fitness International did not submit any evidence of such exponential cost increases. Thus, Fitness International failed to create a triable issue of material fact on whether paying rent during the COVID-19 closure orders was impossible or impracticable. (See All Towing Services LLC v. City of Orange, supra, 220 Cal.App.4th at p. 960; Santa Ana Unified School Dist. v. Orange County Development Agency, supra, 90 Cal.App.4th at p. 411.)
Moreover, the lease required Fitness International to pay rent for at least 10 months while it renovated the premises without collecting membership fees. Fitness International presented no evidence paying rent for an additional six or seven months (assuming the renovations were completed on schedule) until indoor gyms reopened in March 2021 would amount to an “‘excessive and unreasonable cost‘” (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, supra, 175 Cal.App.4th at p. 1336) sufficient to implicate the doctrines of impossibility and impracticability. (See Kashmiri v. Regents of University of California, supra, 156 Cal.App.4th at p. 839 [although a financial crisis resulting in severe budget cuts to a university made performance “more difficult or costly than contemplated when the agreement was executed,” it did not support an impossibility defense]; Kennedy v. Reece, supra, 225 Cal.App.2d at pp. 725-726 [“if a contractor agrees to build a structure and it is destroyed by fire or other casualty when only partly
F. Section 1511 Did Not Excuse Fitness International from Paying Rent
DISPOSITION
The judgment is affirmed. KB Salt Lake is to recover its costs on appeal.
We concur:
SEGAL, J.
PERLUSS, P. J.
FEUER, J.