The Claremont Colleges v. So. Cal. School of Theology CA2/1 ( 2021 )

Filed 6/4/21 The Claremont Colleges v. So. Cal. School of Theology CA2/1
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
THE CLAREMONT B301897
COLLEGES, INC., B304065
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. 19PSCV00419)
SOUTHERN CALIFORNIA
SCHOOL OF THEOLOGY, et
al.,
Defendants and
Respondents.
APPEAL from an order and a judgment of the Superior
Court of Los Angeles County, Gloria White-Brown, Judge.
Affirmed in part; reversed in part.
Loeb & Loeb, Paul Rohrer, W. Allan Edmiston; Greines,
Martin, Stein & Richland, Robin Meadow and David E. Hackett
for Plaintiff and Appellant.
Jackson Tidus, Charles M. Clark and Kathryn M. Casey for
Defendant and Respondent Southern California School of
Theology.
Law Offices of Anthony C. Duffy and Anthony C. Duffy for
Defendant and Respondent Yalong Investment Group, LLC.
____________________________
SUMMARY
This case grew out of a property dispute between Southern
California School of Theology (SCST)1 and The Claremont
Colleges, Inc. (Claremont).2 The dispute centered on the 1957
1“SCST does business as the Claremont School of Theology.
SCST is not one of the Claremont Colleges, but is an ‘affiliate’ of
the Claremont Colleges. According to the Claremont University
Consortium’s policy and procedure manual, affiliate ‘status . . .
has recognized a special collaborative educational relationship
between the affiliate and at least one of the member Claremont
Colleges . . . [and a] mutual benefit to both the affiliate and
members of The Claremont Colleges.’ ” (Southern California
School of Theology v. Claremont Graduate University (2021) 60
Cal.App.5th 1, 3, fn. 2 (Claremont I).)
2 The named parties we referred to as Claremont in
Claremont I were the Claremont University Consortium (CUC)
and Claremont Graduate University (CGU). CGU was
established in 1925 as Claremont College. For most of the
Claremont Colleges’ history, CGU oversaw centralized planning,
services, and programs for all seven of the colleges—CGU,
Pomona College, Scripps College, Claremont McKenna College,
Harvey Mudd College, Pitzer College, and Keck Graduate
Institute. In 2000, CUC was formed as a separate entity and
took over the centralized functions from CGU for the seven
Claremont Colleges. When CUC took those functions over from
CGU, CGU assigned to CUC all of the colleges’ real property
2
deed transferring the land on which SCST’s campus sits from
Claremont College (now CGU, which is CUC’s and therefore
Claremont’s predecessor-in-interest) to SCST. The deed
contained two conditions subsequent, which we recite in full
below. One of the restrictions dealt with permissible uses of the
property; we’ve referred to this deed restriction as the
Educational Use Clause. (Claremont I, supra, 60 Cal.App.5th at
p. 4.) The other dealt with conditions that would require SCST to
offer the property for sale to Claremont on terms defined in the
deed restriction and in an agreement that the parties executed
concurrently with the deed (the 1957 Agreement); we have
referred to this deed restriction as the First Offer Clause. (Ibid.)
In the trial court litigation underlying Claremont I, the
trial court entered judgment enforcing the Educational Use and
First Offer Clauses as equitable servitudes under the Marketable
Record Title Act (MRTA) (Civ. Code, § 880.020 et seq.). The trial
court’s judgment in that matter enforced the Educational Use
Clause as written. But the trial court concluded that interpreting
the First Offer Clause as written would constitute a forfeiture to
SCST, and instead “chose ‘to interpret the [First Offer Clause] as
a “First Right of Refusal,” ’ and then created the terms of the
First Right of Refusal by injunction.” (Claremont I, supra, 60
Cal.App.5th at p. 4.) The net effect of the trial court’s judgment
was to free SCST to sell the property at market value subject only
to the Educational Use Clause and a requirement that it allow
Claremont to match any offer it received for sale of the property
assets not associated with the operation of CGU. CUC changed
its name to The Claremont Colleges, Inc. effective January 1,
2018—during the pendency of the litigation underlying
Claremont I.
3
rather than being required to offer the property to Claremont
according to the terms of the First Offer Clause. The trial court
concluded that the difference between the two property value
calculations was “as much as $36 million.” (Id. at p. 6.)
The trial court entered judgment in that matter on January
23, 2019. (Claremont I, supra, 60 Cal.App.5th at p. 7.)
On February 5, 2019, SCST entered into a lease agreement
with Yalong Investment Group, LLC (Yalong) that purports to
lease its entire campus to Yalong for 21 years beginning on July
1, 2020. The lease agreement contains what it terms a “Purchase
Obligation”—an agreement that Yalong would, “in the event that
SCST obtains a final, non-appealable judicial determination . . .
in [Claremont I] that the [property is] not restricted by a right of
first offer and that [SCST] may offer to sell the [property] but
subject to a right of first refusal, [Yalong] shall enter into [an
attached purchase agreement] providing for the purchase of the
[property] from [SCST] . . . .”
Claremont filed suit against SCST and Yalong based on
allegations that the lease agreement between SCST and Yalong
violated the Educational Use Clause and whichever of the First
Offer Clause or the trial-court-created First Right of Refusal
eventually survived to final judgment. We consolidated appeals
from an order denying Claremont’s request for a preliminary
injunction against SCST and Yalong that would essentially
prohibit the lease agreement from going into effect (case No.
B301897) and from a judgment entered after the trial court
sustained SCST’s demurrers to Claremont’s verified first
amended complaint (FAC) without leave to amend (case No.
B304065).
4
As we explore more fully below, the resolution of both of
these appeals turns on the trial court’s interpretation of the word
“transfer” as that term is used in the First Offer Clause. Because
we disagree with the way the trial court interpreted that term,
we will reverse.
BACKGROUND
A. SCST’s History with Claremont
“SCST withdrew from the University of Southern
California in 1956. In 1957, it affiliated with the Claremont
Colleges and purchased the land it now sits on (adjacent on two
sides to [CGU] and near the remaining Claremont Colleges) for
approximately $107,500.
“As part of the transaction transferring land and affiliating
SCST and the Claremont Colleges, SCST and Claremont
executed, among other documents, a grant deed and a written
agreement (the 1957 Agreement).[3] The deed contained two
conditions subsequent: ‘1. That no industrial or commercial
activity, or any activity or condition contrary to any law or
ordinance, or any activity or condition not usual and appropriate
for an educational institution of collegiate grade, shall be
conducted or suffered to be conducted or to exist on the real
property granted’—the Educational Use Clause; and ‘2. That if
3 “In 2001, the parties entered into an agreement to ‘amend
and reaffirm’ the 1957 Agreement. The 2001 agreement
specifically referenced the First Offer and Educational Use
Clauses and restated terms of the 1957 Agreement. In 2006,
Claremont and SCST were both parties (among several other
entities) to an agreement that acknowledged the 1957 Agreement
and that it had been ‘amended and reaffirmed’ by the 2001
agreement.
5
[SCST] . . . desire[s] to sell or transfer the said real property or
any portion thereof, or if [SCST] does not within three years from
the date of this Deed establish upon the said real property its
headquarters and reasonably develop the said real property as its
principal establishment and headquarters, or if [SCST] should
cease to exist, or if [SCST] should cease to use the said real
property as its principal place of carrying on its activities, then
the said real property shall be offered for sale to [Claremont]
upon the terms and conditions provided in [the 1957 Agreement]
made by [Claremont] and [SCST] upon the same date as the date
of this deed’—the First Offer Clause. The deed made the
conditions subsequent enforceable by a power of termination and
right of reentry clause . . . .
“The 1957 Agreement incorporated ‘the terms and
conditions of the said Deed’ and set forth in detail the ‘terms and
conditions’ of the First Offer Clause and, among other provisions,
a number of obligations by each party giving contour to the
Educational Use Clause.
“In 2015, SCST approached [Claremont] to determine
whether it or any of the Claremont Colleges had an interest in
purchasing or leasing any part of the SCST campus or otherwise
helping SCST to financially leverage the property through
‘partnership opportunities for new development’ or by ‘[c]o-
locating services or functions.’ [Claremont] and SCST negotiated,
but never reached any agreement regarding SCST’s campus
property. SCST marketed the property for sale, and ultimately
received offers.” (Claremont I, supra, 60 Cal.App.5th at pp. 4-5,
fns. omitted, italics added.)
6
B. SCST’s Lawsuit -- Claremont I
“SCST filed suit against Claremont in August 2016 asking
the trial court to quiet title against Claremont and to declare that
the Educational Use Clause and First Offer Clause had expired
pursuant to the MRTA. Claremont cross-complained, alleging
that SCST had breached the deed, the 1957 Agreements, and
other agreements by marketing the property without first
offering it for sale to Claremont on the terms of the First Offer
Clause and seeking specific performance of the First Offer Clause
and a declaration that the terms of the parties’ agreements
remain valid in spite of the MRTA.
“The matter was tried to the court in September 2018, and
on December 18, 2018, the trial court issued a lengthy written
statement of decision. The trial court concluded that the
Educational Use and First Offer Clauses had expired by
operation of the MRTA on January 1, 1988. The provisions in the
parties’ various agreements were [also] not enforceable under a
breach of contract theory . . . .
“The trial court noted, however, that under the MRTA, ‘an
expired power of termination may still be enforced by injunctive
relief where it also constitutes an equitable servitude.’ The trial
court concluded that the Educational Use Clause and First Offer
Clause ‘constitute equitable servitudes enforceable by injunction.’
Nevertheless, the trial court concluded that ‘strict enforcement of
the [First Offer Clause], and its method of calculating the price to
repurchase the property, would result in [SCST] suffering a
forfeiture of as much as $36 million, being the difference between
the purchase price calculation under the 1957 Agreement and the
current fair market value of the property.’ Based on its
conclusion that enforcement of the First Offer Clause would
7
result in a forfeiture by SCST, the trial court ‘therefore [chose] to
interpret the [First Offer Clause] as a “First Right of Refusal.” ’
The trial court then set forth extensive and detailed terms by
which Claremont could exercise the first right of refusal the trial
court created.
“The trial court entered judgment on January 23, 2019,
setting forth in judgment form the same findings and conclusions.
Claremont filed a timely notice of appeal.” (Claremont I, supra,
60 Cal.App.5th at pp. 5-7, fns. omitted.)
C. The Lease Agreement
SCST and Yalong negotiated and, on February 5, 2019,
entered into a 65-page lease agreement purporting to lease
SCST’s entire campus to Yalong for 21 years beginning on July 1,
2020 (what the lease terms the “Rent Commencement Date” or
the beginning of the “Basic Term”).4
From the date of the execution of the lease agreement (or
the “Lease Commencement Date”) until the Rent Commencement
Date—termed the agreement’s “Initial Period”—SCST gave
Yalong “access to the entire Premises” and agreed to reimburse
Yalong for insurance premiums Yalong paid to insure the
property during the Initial Period. SCST reserved for itself the
right to occupy the property rent free during the Initial Period,
and agreed to “withdraw from the [property] and surrender
4 Claremont’s FAC alleges that “[a]fter the trial of
[Claremont I], on December 26, 2018, [SCST] secretly entered
into a sale agreement with a real estate investment and
development company called Yalong.” Although the record
reveals obvious ambiguities regarding execution of the lease
agreement between December 2018 and February 5, 2019, we
defer to the date that the parties handwrote onto the lease
agreement’s cover—February 5, 2019.
8
possession thereof to [Yalong] upon the Rent Commencement
Date.” “During the Basic Term,” SCST and Yalong agreed that
Yalong “shall lawfully, peacefully and quietly hold, occupy and
enjoy the [property] without disturbance, interruption or
hindrance by [SCST], or any Person claiming by or through
[SCST.]”
Yalong also agreed that it would pay SCST three deposits
totaling $10 million to be applied either to purchasing the
property or to rent due under the lease. The first two deposits
were due on the lease’s “Effective Date”—a date to be calculated
based on the outcome of the Claremont I litigation.5 The third
was due within 30 days of the Effective Date. The lease contains
a “Purchase Obligation” provision, described more fully below. If
the purchase happened, the deposits would be applied to the
property’s purchase price ($35 million). If the purchase did not
happen, the deposits would be applied as follows: the first
deposit ($5.8 million) would be applied to monthly rent due from
March 1, 2034 to December 1, 2038; the second deposit ($1.2
million) would be applied to monthly rent due in 2039; the third
deposit ($3 million) would be applied to rent due in the 30 months
following the Rent Commencement Date.
The lease’s Article 19 is entitled “Obligation to Purchase.”
“[I]n the event that [SCST] obtains a final, non-appealable
judicial determination . . . in [Claremont I] that the [property is]
not restricted by a right of first offer and that [SCST] may offer to
sell the [property] but subject to a right of first refusal, [Yalong]
5Although it is unclear from the record whether any party
believes the lease’s Effective Date has been triggered, Yalong had
paid the three deposits to SCST by—at the latest—September 23,
2019.
9
shall enter into the Purchase Agreement [attached as an exhibit
to the lease] providing for the purchase of” SCST’s campus from
SCST. The Purchase Agreement was to be executed within 10
business days after SCST notified Yalong of a final judgment in
the Claremont I matter and escrow opened to administer the
transaction.6 If SCST could not deliver good title, Yalong would
retain an option to purchase the property on “substantially
similar” terms for the entire term of the lease.
Among other attachments, the lease agreement attached a
“Memorandum of Lease” that was to be recorded (an executed
copy was recorded on February 6, 2019), the referenced Purchase
Agreement, a grant deed, and a leaseback agreement (leasing the
property from Yalong to SCST) that would have terminated on
June 30, 2020.
D. Claremont’s Lawsuit
In early March 2019, Claremont learned of the lease and
what it believed was an “ ‘option’ to purchase,” but did not know
Yalong’s identity or the terms of the lease. Claremont requested
6 A written amendment to the lease dated February 4,
2019—also attached to the FAC—appears to have set what the
parties call an “Outside Date” to execute the Purchase
Agreement. The amendment recognized, however, that the
judgment in Claremont I might not be final before the Outside
Date—December 31, 2020, and left intact the 10-business-day
requirement in the lease agreement for execution and opening of
escrow after notification of a final, non-appealable judgment in
Claremont I. The amendment also provided for extension of the
Outside Date in the event Claremont “challenge[d] [Yalong’s]
status as a qualified buyer” under the Educational Use Clause,
but stated that “in no event shall the Outside Date be extended
beyond December 31, 2022” without the parties’ further written
agreement.
10
a copy of the lease agreement and related documents from SCST,
but SCST declined to provide them. Claremont filed a post-
judgment motion for preliminary injunction in the Claremont I
action seeking to obtain a copy of the lease agreement. In its
opposition to the motion for preliminary injunction filed April 22,
2019, SCST gave Claremont a copy of the recorded Memorandum
of Lease, which identified the parties to the lease agreement.
On May 3, 2019, Claremont filed a verified complaint
against both SCST and Yalong essentially alleging in 11 causes of
action that the lease agreement violated the First Offer and
Educational Use Clauses and seeking to prevent the lease from
having any practical effect until after the Claremont I judgment
was final; Claremont withdrew its motion for preliminary
injunction in the Claremont I case.7 On June 6, 2019, SCST filed
general and special demurrers and a motion to strike portions of
the original complaint.
SCST included a copy of the lease in a request for judicial
notice it filed in support of its demurrers and motion to strike.
On June 26, 2019, Claremont filed the verified FAC—the
operative pleading for purposes of this appeal—and attached,
among other documents, the 1957 deed, the 1957 Agreement, the
2001 agreement, and the lease. The FAC alleges 10 causes of
action (listed below) alleging, at base, that the lease agreement
violates the Educational Use Clause and either the First Offer
7 The original complaint also alleged causes of action
related to a repurchase option in a 1972 deed related to property
Claremont had gifted to SCST. Those allegations do not appear
in the FAC. Because this appeal is about allegations contained
only in the FAC, we have omitted substantial discussion of the
original complaint.
11
Clause or the right of first refusal the trial court created in its
judgment in Claremont I. “Whatever the outcome on appeal,”
Claremont alleged, SCST “will be prohibited from ‘selling or
transferring’ [its campus] to a third party without first providing
[Claremont] with the opportunity to purchase or acquire the
[property] (either in accordance with the [First Offer Clause] if
the [Claremont I judgment] is reversed, or in accordance with the
First Right of Refusal if the [j]udgment is affirmed).”
The First Offer Clause is set forth above in section A (in
connection with the 1957 deed and 1957 Agreement). The 2001
agreement contained the following terms: “[Claremont] has
heretofore conveyed to [SCST] and [SCST] accepted, certain real
property located in Claremont, California, by a Grant Deed,
dated June 5, 1957, and [SCST] agreed to the terms and
conditions of the said Deed. [¶] The terms and conditions of the
offer of sale required of [SCST] by the said Deed were and
continue to be . . . .” The 2001 agreement then recited in full the
terms and conditions contained in the 1957 Agreement.
The FAC characterizes the lease agreement as a “Sale
Agreement” and alleges that it “confirms that [SCST] entered
into a binding agreement, dated as of February 5, 2019, to sell
the [property] to Yalong upon the occurrence of a contingency.”
Claremont alleged that SCST had triggered the First Offer
Clause because it had “formed a ‘desire to sell or transfer’ ” the
property and because it either had ceased to use the property “ ‘as
its principal place of carrying on its activities’ ” or would do so in
the near future. Claremont also alleged that Yalong was a “for-
profit real estate and development company” and was not “a bona
fide educational institution of collegiate grade,” so the lease
would also violate the Educational Use Clause.
12
Consistent with those allegations, the FAC alleges causes
of action against SCST for: breach of the 1957 agreement (first
cause of action); breach of the 1957 deed (second cause of action);
breach of the 2001 agreement (third cause of action); specific
performance of the First Offer Clause (sixth cause of action);
specific performance of the first right of refusal under the
judgment in Claremont I (seventh cause of action). It alleges
causes of action against Yalong for: intentional interference with
the First Offer Clause (fourth cause of action); quiet title based
on the First Offer Clause (fifth cause of action); intentional
interference with the first right of refusal under the judgment in
Claremont I (eighth cause of action). The FAC alleges causes of
action against both SCST and Yalong for declaratory (ninth cause
of action) and injunctive (tenth cause of action) relief.
SCST moved to strike portions of the FAC and again
generally and specially demurred.8
While SCST’s demurrers were pending, Claremont moved
the trial court for a preliminary injunction requesting relief
pending the outcome of both the appeal in Claremont I and trial
in this matter. Claremont asked the trial court to enter an order
8 Yalong also demurred to the FAC. The notices of appeal
in these consolidated matters do not implicate the trial court’s
orders on Yalong’s demurrers. The matter is still pending in the
trial court as to Yalong. We discuss Yalong’s demurrers to the
extent necessary for a full understanding of the issues presented
by these appeals. The trial court ruled on Yalong’s demurrers,
but granted Claremont leave to amend as to Yalong. The
appellant’s appendix contains an order sustaining Yalong’s
demurrers to a second amended complaint, deferring a ruling on
Claremont’s request for leave to amend, and staying the matter
pending finality of the appeal in Claremont I.
13
prohibiting SCST from transferring any interest in SCST’s
campus to Yalong (and Yalong from acquiring any interest in
SCST’s campus), requiring SCST and Yalong to “cancel and
annul their agreement to sell and/or lease” the campus or
prohibit SCST and Yalong from taking further steps to
implement the lease or sale, to prohibit Yalong from “occupying,
using, or remaining in possession” of SCST’s campus, prohibiting
SCST and Yalong from subdividing or altering the campus in any
way, prohibiting Yalong from entering into any agreements with
any third parties related to the property, and requiring SCST to
hold any funds it received from Yalong under the agreement in
constructive trust and prohibiting SCST from concealing or
dissipating those funds.
1. Claremont’s Motion for Preliminary Injunction
Before hearing the matter on October 15, 2019, the trial
court issued a tentative ruling denying Claremont’s motion.
Regarding Claremont’s likelihood of success on the merits of the
litigation, the trial court stated: “Here, the [l]ease does not
violate the [trial-court-created first right of refusal] or the
terminated [First Offer Clause]. The scope of the [first right of
refusal] is ‘purchase or acquire’ the property and the scope of the
terminated [First Offer Clause] is ‘sell or transfer’ the property.
The [trial] court in [Claremont I] declined to include
[Claremont’s] proposed ‘lease’ language into the [first right of
refusal] procedure set forth in its Final Statement of Decision. A
‘transfer,’ moreover, is defined as ‘an act of the parties, or of the
law, by which the title to property is conveyed from one living
person to another.’ (Civ[.] Code[,] § 1039.) Further, there has
been no sale, and any potential future option is contingent upon
compliance with any possible restriction on the Property. [¶]
14
The [l]ease likewise does not violate the Educational Use
[Clause]. Under the [l]ease, Yalong’s use of the Property does not
commence until July 1, 2020. When its use starts, Yalong is
required to use the Property in conformance with the Educational
Use [Clause]. [¶] [Claremont], then, has not demonstrated a
reasonable likelihood of prevailing on the merits at the time of
trial.”
The trial court also concluded that Claremont had not
demonstrated that it would suffer any interim harm absent the
requested relief. The trial court concluded that “[t]he terms of
the [lease] . . . reflect that no restrictions will be violated.
[Yalong’s] use, moreover, does not commence until July 1, 2020.
[Claremont’s] argument that ‘[t]here is also a substantial risk
that the Property will be irreparably harmed’ . . . is speculative
and not supported by any evidence. [¶] On the other hand,
[SCST] has shown that it would sustain great injury if the court
were to grant the preliminary injunction. [SCST’s] President . . .
states that in 2016, [SCST] was in financial peril as it had
difficulty making payments to its lenders, which was causing
accreditation issues. . . . [SCST] decided to search for a tenant
who could lease the premises to generate revenue to resolve these
financial issues and had discussions with potential lessee about
larger upfront rental deposit payments. . . . Under the terms of
the [l]ease with Yalong, Yalong has paid approximately $10
[million] in deposits to [SCST]. . . . [SCST] has survived because
of the [l]ease and was able to use the deposits for loan payments
and to keep its . . . accreditation. . . . If the [l]ease were
invalidated and [SCST] was somehow forced to claw back the
approximately $10 [million] [SCST] used to pay off its lenders,
[SCST] would not be financially sustainable.”
15
The trial court issued a minute order on October 17, 2019
denying Claremont’s motion for preliminary injunction. On
October 22, 2019, Claremont filed a notice of appeal from the
October 17 minute order. On October 23, 2019, the trial court
issued a written order denying Claremont’s motion for
preliminary injunction and attached its tentative ruling.
Claremont filed a notice of appeal from the trial court’s second
order on October 25, 2019. Those notices of appeal initiated
number B301897.
2. SCST’s Demurrers
The trial court heard SCST’s demurrers to and motion to
strike portions of the FAC on December 5, 2019.9 Before the
hearing, the trial court issued a tentative ruling sustaining
SCST’s demurrers without leave to amend and denying its
motion to strike as moot.
The trial court concluded that Claremont’s causes of action
against SCST “fail on the basis that the lease agreement does not
violate the [first right of refusal the trial court created in
Claremont I], the [First Offer Clause] and/or the Educational Use
[Clause].”
The court listed the elements of causes of action for breach
of contract, specific performance, declaratory relief, and
injunctive relief. It then stated that “[e]ach cause of action, then,
9 As noted above at footnote 3, Yalong also demurred to the
FAC. Its demurrers were heard at the same hearing as SCST’s
demurrers and motion to strike. But no judgment has been
entered on Claremont’s claims against Yalong, and the trial
court’s rulings on Yalong’s demurrers are not yet appealable.
(See Lopez v. Brown (2013) 217 Cal.App.4th 1114, 1132.)
16
alleges, at least in part, that the restrictions were violated by
[SCST] leasing the subject property to Yalong.”
The trial court concluded that: “Here, the lease agreement
does not violate the [first right of refusal] or the terminated [First
Offer Clause]. The scope of the [first right of refusal] is ‘purchase
or acquire’ the property and the scope of the terminated [First
Offer Clause] is ‘sell or transfer’ the property. A ‘transfer,’
moreover, is defined as ‘an act of the parties, or of the law, by
which the title to property is conveyed from one living person to
another.’ (Civ[.] Code[,] § 1039 [“There is no “transfer” of title by
a lease within the meaning of this section”]; see also San Pedro,
L.A. & S.L.R. Co. v. Hamilton (1911) 161 Cal. 610.) The terms of
the lease agreement reflect that Yalong received a possessory
interest, for a fixed period of time, will pay rent for that interest,
and will surrender possession of the subject property upon
expiration of the term. The rent payment structure in the lease
agreement does not somehow turn the lease agreement into a
sale, as § 3.2 therein provides that the $10 [million] is a rent
payment and will go to the rental obligation for the duration of
the lease agreement. Said provision also provides that the funds
are not refunded if Yalong is unable to purchase the subject
property. [¶] The lease agreement likewise does not violate the
Educational Use [Clause]. Under the lease agreement, Yalong’s
use of the subject property does not commence until July 1, 2020.
[Claremont] makes much of the fact that Yalong admitted in
discovery that its listed place of business is the subject
property. . . ; this admission, however, does not contradict the
commencement date in the lease agreement, but simply confirms
that Yalong is going to conduct business at the subject property.
When its use starts, moreover, Yalong is required to use the
17
subject property in conformance with the Educational Use
[Clause].” (Citations and parenthetical in original.)
The trial court issued a minute order on December 17, 2019
adopting its tentative ruling. It entered judgment for SCST
against Claremont on January 24, 2020.
Claremont filed a timely notice of appeal, which initiated
case number B304065.
Claremont filed an application in this court on June 1, 2020
asking us to consolidate its appeals from the trial court’s order
denying its motion for preliminary injunction and the trial court’s
judgment entered after the trial court sustained SCST’s
demurrers to the FAC without leave to amend. We granted that
request.
DISCUSSION
A. SCST’s Demurrers to the FAC
1. Legal Standards
a. Standard of Review
“A demurrer tests the sufficiency of the allegations in a
complaint as a matter of law. [Citation.] We review the
sufficiency of the challenged complaint de novo. [Citation.] We
accept as true the properly pleaded allegations of fact in the
complaint, but not the contentions, deductions or conclusions of
fact or law. [Citation.] We also accept as true facts which may be
inferred from those expressly alleged. [Citation.] We consider
matters which may be judicially noticed, and we ‘give the
complaint a reasonable interpretation, reading it as a whole and
its parts in their context.’ [Citation.] The interpretation of a
written contract is a judicial function subject to an independent
determination, unless interpretation turns on the credibility of
extrinsic evidence. [Citation.] The complaint’s ‘allegations must
18
be liberally construed, with a view to substantial justice between
the parties.’ [Citation.] The judgment or order of dismissal
entered after the demurrer is sustained must be affirmed if any
of the grounds for demurrer raised by the defendant is well taken
and disposes of the complaint. [Citation.] But it is error to
sustain a general demurrer if the complaint states a cause of
action under any possible legal theory.” (In re Electric Refund
Cases (2010) 184 Cal.App.4th 1490, 1500.)
b. Contract Interpretation
“ ‘The goal of contractual interpretation is to determine and
give effect to the mutual intention of the parties.’ [Citations.]
Thus, a ‘court’s paramount consideration in construction [a]
[contract] is the parties’ objective intent when they entered into
it.’ [Citations.] ‘That intent is to be inferred, if possible, solely
from the written provisions of the contract.’ [Citation.] ‘ “All the
rules of interpretation must be considered and each given its
proper weight, where necessary, in order to arrive at the true
effect of the instrument.” ’ [Citation.] ‘Generally speaking, “the
rules of interpretation of written contracts are for the purpose of
ascertaining the meaning of the words used therein . . . .” ’
“Thus, ‘[a] contract must be so interpreted as to give effect
to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.’
[Citation.] ‘The language of a contract is to govern its
interpretation, if the language is clear and explicit, and does not
involve an absurdity.’ [Citation.] ‘When a contract is reduced to
writing, the intention of the parties is to be ascertained from the
writing alone, if possible . . . .’ [Citation.] ‘The whole of a
contract is to be taken together, so as to give effect to every part,
if reasonably practicable, each clause helping to interpret the
19
other.’ [Citation.] ‘A contract must receive such an
interpretation as will make it lawful, operative, definite,
reasonable, and capable of being carried into effect, if it can be
done without violating the intention of the parties.’ [Citation.]
‘The words of a contract are to be understood in their ordinary
and popular sense, rather than according to their strict legal
meaning; unless used by the parties in a technical sense, or
unless a special meaning is given to them by usage, in which case
the latter must be followed.’ [Citation.]
“In sum, courts must give a ‘ “reasonable and commonsense
interpretation” ’ of a contract consistent with the parties’
apparent intent. [Citation.] The language ‘ “ ‘in a contract must
be construed in the context of that instrument as a whole.’ ” ’
[Citation.] Further, if possible, the court should give effect to
every provision of the contract.” (People ex rel. Lockyer v. R.J.
Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 525-526 (R.J.
Reynolds).)
2. Analysis
Claremont’s causes of action at issue on appeal from the
trial court’s judgment sustaining SCST’s demurrers are: breach
of the 1957 Agreement (based on the First Offer and Educational
Use Clauses), breach of the 1957 deed (on the same bases),
breach of the 2001 agreement (on the same bases), specific
performance of the First Offer Clause, specific performance of the
first right of refusal the trial court created in its judgment in
Claremont I, declaratory relief associated with the trial court’s
judgment in Claremont I and interpretation of the parties’
contracts, and injunctive relief related to the same.
“[T]he elements of a cause of action for breach of contract
are (1) the existence of the contract, (2) plaintiff’s performance or
20
excuse for nonperformance, (3) defendant’s breach, and (4) the
resulting damages to the plaintiff.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 821.) “The availability of the
remedy of specific performance is premised upon . . . . [a] showing
by plaintiff of (1) the inadequacy of his legal remedy; (2) an
underlying contract that is both reasonable and supported by
adequate consideration; (3) the existence of a mutuality of
remedies; (4) contractual terms which are sufficiently definite to
enable the court to know what it is to enforce; and (5) a
substantial similarity of the requested performance to that
promised in the contract.” (Tamarind Lithography Workshop,
Inc. v. Sanders (1983) 143 Cal.App.3d 571, 575.) A cause of
action for declaratory relief “is sufficient if it sets forth facts
showing the existence of an actual controversy relating to the
legal rights and duties of the respective parties under a contract
and requests that the rights and duties be adjudged.” (Bennett v.
Hibernia Bank (1956) 47 Cal.2d 540, 549-550; Civ. Code, § 1060.)
The trial court concluded that each of the causes of action
failed because it concluded that SCST’s agreement to lease its
campus to Yalong “does not violate the [first right of refusal], the
[First Offer Clause,] and/or the Educational Use [Clause].” We
need not determine whether the FAC alleged a violation of each
of the three clauses; allegations constituting a cause of action
under any theory will defeat demurrers. (In re Electric Refund
Cases, supra, 184 Cal.App.4th at p. 1500.)
We address the FAC’s cause of action for injunctive relief
separately below.
a. Specific Performance of First Right of Refusal
The litigation between the parties has overtaken
Claremont’s complaint in this matter as to at least one cause of
21
action in the FAC. SCST filed its action seeking to invalidate the
First Offer and Educational Use Clauses in August 2016. The
trial court entered judgment in that matter in January 2019,
declining to enforce the First Offer Clause and creating a first
right of refusal in its stead. Claremont filed a notice of appeal in
that matter on February 1, 2019.
On February 5, 2019, SCST and Yalong entered into the
lease agreement. Claremont learned about the lease the
following month.
After unsuccessfully seeking a copy of the lease agreement,
Claremont filed this action on May 3, 2019, and ultimately filed
the FAC on June 26, 2019. The trial court heard SCST’s
demurrers on December 5, 2019, and entered judgment on
January 24, 2020 after dismissing the FAC as to SCST.
Almost a year later—on January 22, 2021—we filed our
opinion in Claremont I. In our disposition in Claremont I, we
directed the trial court to “vacate its judgment and enter
judgment enforcing as written the First Offer Clause and
Educational Use Clause as equitable servitudes under Civil Code
section 885.060, subdivision (c).” (Claremont I, supra, 60
Cal.App.5th at pp. 10-11.)
The Supreme Court denied review in Claremont I on April
28, 2021. We remitted the case to the trial court on April 30,
2021. Our decision in that matter is now final. (Cal. Rules of
Court, rules 8.264(b), 8.532(b)(2)(A), 8.272(b)(1)(A).)
Consistent with our decision in Claremont I, the first right
of refusal the trial court created in its statement of decision and
judgment in that matter no longer exists.
“Moot cases . . . are ‘[t]hose in which an actual controversy
did exist but, by the passage of time or a change in
22
circumstances, ceased to exist.’ ” (Wilson & Wilson v. City
Council of Redwood City (2011) 191 Cal.App.4th 1559, 1573.) “A
case is considered moot when ‘the question addressed was at one
time a live issue in the case,’ but has been deprived of life
‘because of events occurring after the judicial process was
initiated.’ ” (Id. at p. 1574.) “The pivotal question in determining
if a case is moot is . . . whether the court can grant the plaintiff
any effectual relief.” (Ibid.)
The FAC’s seventh cause of action seeks specific
performance of the first right of refusal created by the trial court
judgment in Claremont I. The finality of our decision in
Claremont I renders that cause of action moot. Because the first
right of refusal no longer exists, Claremont would not be able to
state a cause of action based on that provision in the trial court’s
Claremont I judgment. On that basis, we will affirm the trial
court’s order sustaining SCST’s demurrer as to the seventh cause
of action.
b. Breach of Contract, Specific Performance of
First Offer Clause, Declaratory Relief
The trial court’s ruling on SCST’s demurrers concluded
that each of the FAC’s causes of action failed because the lease
agreement between SCST and Yalong “does not violate the [first
right of refusal], the [First Offer Clause,] and/or the Educational
Use [Clause].”10 Claremont disagrees with each of those
10 As explained in our discussion of the FAC’s seventh
cause of action—for specific performance of that first right of
refusal—our opinion in Claremont I mooted allegations and
arguments based on the first right of refusal the trial court
created in its judgment in Claremont I. We do not address those
allegations or arguments again here.
23
conclusions. Claremont contends that the lease evidenced SCST
ceasing use of the campus and of SCST’s desire to sell the
property, which it alleged triggered the First Offer Clause.
Claremont also contends that Yalong has offered to purchase the
campus, which Claremont argues would violate the First Offer
Clause. In an argument directed at the conclusion underlying
the trial court’s order, Claremont contends that a lease can be a
“transfer” as that term is used in the First Offer Clause, and that
the transfer evidenced by the lease agreement breached the First
Offer Clause. Finally, Claremont contends that Yalong’s use of
the campus violates the Educational Use Clause in the parties’
deed and agreements.
SCST primarily counters by arguing—directly contrary to
the trial court’s order—that the FAC is not ripe for adjudication
and that the lease agreement does not violate the First Offer
Clause because it makes any future purchase of the property
subject to that Clause. SCST filed no notice of cross-appeal and
therefore generally may not “urge error on appeal.” (California
State Employees’ Assn. v. State Personnel Bd. (1986) 178
Cal.App.3d 372, 382, fn. 7; accord Henigson v. Bank of America
Nat. Trust & Savings Ass’n (1948) 32 Cal.2d 240, 244; and Celia
S. v. Hugo H. (2016) 3 Cal.App.5th 655, 665.)
In its order on SCST’s demurrers, the trial court concluded
that “a ripe dispute exists.” We will not revisit that finding here
except to note the circularity of SCST’s argument. Claremont
and SCST disagree whether a lease can be a “transfer” as that
term is used in the First Offer Clause. If a lease can be a
transfer, then a present breach is alleged; if not, then SCST
contends (even in spite of Claremont’s remaining arguments) that
there has not yet been a breach. Even if we were to consider
24
SCST’s ripeness contentions, they would be unavailing without
an analysis of each of the remaining contentions.
The causes of action at issue—the first, second, third, sixth,
and ninth (we address the tenth below)—each state that the lease
violates the terms of both the First Offer and Educational Use
Clauses, and therefore violate the terms of the 1957 deed, the
1957 Agreement, and the 2001 agreement. We note that the
parties’ central arguments here focus largely on whether the
lease or any actions taken in advance of the lease constitute a
breach of the First Offer Clause.11 We begin our analysis there.
Claremont also argues, however, and the FAC alleges, that
the First Offer Clause was triggered by SCST’s “desire” to sell as
evidenced by both the lease and by an Offering Memorandum
through which SCST offered the campus for sale or lease in
January 2018. The Offering Memorandum, attached to the FAC,
states: “[SCST] intends to lease or sell all, or a large portion, of
its campus in Claremont, California, thus allowing [SCST] to
11 At oral argument, SCST insisted that Claremont had not
argued or otherwise raised in the trial court that the SCST-
Yalong lease agreement constituted a “transfer” of the property
that would trigger the First Offer Clause. We disagree with
SCST’s assertion. Correspondence between Claremont’s
attorneys and SCST’s attorneys dating from early 2018—shortly
after SCST listed the property for sale or lease—reveals the
genesis of the parties’ discussions of this issue. Although the
FAC largely refers to the lease agreement as a “Sale Agreement,”
there is no question about what agreement is at issue or what
constituted its terms. And there has never been a question about
whether the FAC’s central allegations are that the SCST-Yalong
agreement, whether it is termed a lease or a “Sale Agreement”
purports to “transfer” property interests from SCST to Yalong.
25
potentially embed itself into the Willamette University campus in
Salem, OR.” We also address this contention.
i. Is the Lease a Transfer?
The First Offer Clause provided: “That if [SCST] desire[s]
to sell or transfer the said real property or any portion thereof, or
if [SCST] does not within three years from the date of this Deed
establish upon the said real property its headquarters and
reasonably develop the said real property as its principal
establishment and headquarters, or if [SCST] should cease to
exist, or if [SCST] should cease to use the said real property as its
principal place of carrying on its activities, then the said real
property shall be offered for sale to [Claremont] upon the terms
and conditions provided in [the 1957 Agreement] made by
[Claremont] and [SCST] upon the same date as the date of this
deed. [¶] The [First Offer Clause] shall be satisfied by the giving
of an offer of sale as therein provided, and upon the rejection, or
nonacceptance as therein provided, of said offer of sale by
[Claremont], this said condition shall thereupon be, and be
deemed, satisfied in that instance, and the real property, or
portions thereof as to which said offer of sale has been rejected or
not accepted may be sold by [SCST] to some other person or
corporation, but subject, however, to the [Educational Use
Clause].” (Italics added.)
The trial court concluded the “scope of the terminated
[First Offer Clause] is ‘sell or transfer’ the property. A ‘transfer,’
moreover, is defined as ‘an act of the parties, or of the law, by
which the title to property is conveyed from one living person to
another.’ (Civ[.] Code[,] § 1039 [‘There is no “transfer” of title by
a lease within the meaning of this section’]; see also San Pedro,
26
L.A. & S.L.R. Co. v. Hamilton (1911) 161 Cal. 610.)” (Citations
and parenthetical in original.)
The trial court’s order turned on its interpretation of the
term “transfer” as the parties used that term in the First Offer
Clause. As an initial observation, we note again that “ ‘[t]he
words of a contract are to be understood in their ordinary and
popular sense, rather than according to their strict legal meaning
. . . .’ ” (R.J. Reynolds, supra, 107 Cal.App.4th at pp. 525-526.)
A leading California treatise on real property law explains
that “[i]n the strict legal sense of the term, ‘property’ means the
totality of rights that a person has in the tangible and intangible
things classified in the generic sense. In other words, land has no
significance as ‘property’ except with reference to the rights a
person can exercise in relation to it . . . .” (3 Miller & Starr, Cal.
Real Estate (4th ed. 2020) § 9:1 [in chapter 9: “Transferable
Property Interests”].) “Property rights in a physical thing include
the right to acquire, use, possess, and dispose of the object or
interest.” (3 Miller & Starr, Cal. Real Estate (4th ed. 2020) § 9:2.)
“The first of the rights in property is the right of acquisition.”
(Ibid.) “A person may acquire the ‘fee,’ which is the highest, most
exclusive estate in real property, or a fee subject to a power of
termination. A person may acquire a lesser estate, limited in
time, such as a life estate or a leasehold.” (Ibid., italics added,
fns. omitted.) At the very least, this implies that a property
owner may transfer by lease, and a lessor may acquire, property
rights.
California courts have frequently used the term “transfer”
in connection with leases. Decades ago, our Supreme Court said
that “[a] lease is primarily a conveyance in that it transfers an
estate to the lessee[.]” (Medico-Dental Bldg. Co. of Los Angeles v.
27
Horton & Converse (1942) 21 Cal.2d 411, 418, italics added.)
More recently, the court in Vallely Investments, L.P. v.
BancAmerica Commercial Corp. (2001) 88 Cal.App.4th 816, 822,
explained that “[a] lease of real property is both a conveyance of
an estate in land (a leasehold) and a contract. It gives rise to two
sets of rights and obligations—those arising by virtue of the
transfer of an estate in land to the tenant (privity of estate), and
those existing by virtue of the parties’ express agreements in the
lease (privity of contract).” (Italics added.) Each of these cases,
then, supports the conclusion that a lease may “transfer” a set of
property rights.
We note that the trial court relied not on an “ordinary and
popular” sense of the word, but on a statutory definition of the
term “transfer.” Civil Code section 1039 states in its entirety:
“Transfer is an act of the parties, or of the law, by which the title
to property is conveyed from one living person to another.”
The trial court’s parenthetical to its statutory citation—
“ ‘There is no ‘transfer’ of title by a lease within the meaning of
this section’ ”—does not appear in the statute or in any case that
we have been able to locate. The attribution of this language as a
quote from the statute appears to have originated in a February
14, 2018 letter from SCST to Claremont: “See [Civ. Code, §] 1039
stating ‘There is no “transfer” of title by a lease within the
meaning of this section[.]” SCST continued to misquote section
1039 in its briefing to the trial court: “A lease does [not] convey
title to property from one party to another, so a lease is not a
transfer or assignment. (Cal. Civ. Code, §1039 [‘There is no
transfer’ of title by a lease within the meaning of this section’];
see also San Pedro, L.A. & S.L.R. Co. v. Hamilton (1911) 161 Cal.
610.)”
28
The trial court’s order tracks SCST’s misquote and appears
to adopt what we explain below is an incorrect statutory
interpretation.
Even if (a) the contract should have been interpreted by
reference to a statutory definition of the term “transfer,” and (b)
SCST’s interpretation of Civil Code section 1039 had not been
based on misquoted statutory language, section 1039 is not the
only California statutory definition of the term “transfer.” The
Uniform Voidable Transactions Act (Civ. Code, §§ 3439 et seq.)
defines a “[t]ransfer” as “every mode, direct or indirect, absolute
or conditional, voluntary or involuntary, of disposing of or parting
with an asset or an interest in an asset, and includes payment of
money, release, lease, license, and creation of a lien or other
encumbrance.” (Civ. Code, § 3439.01, subd. (m), italics added.)
In the context of the interpretation of a contract, where the trial
court was bound to use the language’s “ordinary and popular
sense” absent an expression by the parties that it have a special
meaning, SCST offers no meaningful explanation for selection of
one statutory definition of the term over another.
Moreover, Civil Code section 1039 does not exist in
isolation. It is part of a broader statutory scheme. Civil Code
section 1000 explains that a “Transfer” is one of five methods by
which “[p]roperty is acquired . . . .” (Civ. Code, § 1000, subd. (3).)
Moreover, “title,” as that term is used in section 1039, is not
limited to the fee simple estate defined in section 762.
Section 1006 explains that occupancy of property—“for any
period”—is sufficient to convey limited title. “Occupancy for any
period confers a title sufficient against all except the state and
those who have title by prescription, accession, transfer, will, or
succession; but the title conferred by occupancy is not a sufficient
29
interest in real property to enable the occupant or the occupant’s
privies to commence or maintain an action to quiet title, unless
the occupancy has ripened into title by prescription.” (Civ. Code,
§ 1006, italics added.) And section 1091, defining the statutory
“method of transfer,” establishes that something less than a fee
simple estate can be “transferred”: “An estate in real property,
other than an estate at will or for a term not exceeding one year,
can be transferred only by operation of law, or by an instrument
in writing, subscribed by the party disposing of the same, or by
his agent thereunto authorized by writing.” (Civ. Code, § 1091.)
The 21-year lease appears to meet those requirements.
We are most persuaded, however, by our Supreme Court’s
explanation (in a discussion of Civil Code section 1039) about the
“ordinary” use of the word “transfer.” The Court began with the
correct statutory language of section 1039 and explored different
meanings the word “transfer” might have: “In legal phraseology[,
transfer] is commonly used to denote the passing of title in
property, usually realty, or an interest therein from one person to
another. [Citations.] In Estate of Peabody, 154 Cal. 173 . . . , it
was said that while the word “transfer” as used in the Civil Code
indicates the passing of title from one person to another, in its
ordinary use it has a very general meaning, including the removal
of a thing from one place or person to another, the changing of its
control or possession or the conveyance of title to it. It is also true
that a “transfer” of property may be effected by delivery of its
possession to another.” (Commercial Discount Co. v. Cowen
(1941) 18 Cal.2d 610, 614, italics added.)
Even if we were convinced that the definition of the term in
Civil Code section 1039 was the only permissible definition of the
term “transfer,” San Pedro, L.A. & S.L.R. Co. v. Hamilton (1911)
30
161 Cal. 610, does not change our analysis. Hamilton did not
comment on the meaning of the term “transfer” as defined by
section 1039. Instead, the Hamilton case determined that in the
context of constitutional interpretation if a “word [has] a
technical[,] as well as popular meaning, the latter will be given
it[,] unless the context forces the conclusion that it was otherwise
used.” (Id. at p. 617.) The Court then construed constitutional
language that did not include the word “transfer,” stating that “in
the ordinary and general acceptation of the word ‘grant’ and of
the word ‘sale,’ and particularly where the two are used in
conjunction, as here, they convey the idea of parting with the fee
for a monetary or other consideration, and do not embrace the
concept of a lease.” (Ibid.) “Only by a resort to meanings given to
the words in extreme cases, and not to their generally accepted
meaning,” the Court said, “can they be stretched to cover and
include the idea of leasing.” (Id. at p. 618.) Hamilton is
inapposite; it supported a constitutional construction based on
the generally accepted meaning of a term rather than the
statutory meaning of the term, and nothing in the Hamilton case
turned on the definition of the word “transfer.”
We also remain mindful that the First Offer Clause’s
triggering language does not only include the word “transfer.”
The First Offer Clause’s initial trigger language centers on
SCST’s “desire to sell or transfer the [campus] or any portion
thereof . . . .” (Italics added.) We must construe the First Offer
Clause “ ‘to give force and effect, not only to every clause but to
every word in it, so that no clause or word may become redundant
. . . .’ ” (Pico Citizens Bank v. Tafco, Inc. (1958) 165 Cal.App.2d
739, 746.) At SCST’s urging, the trial court construed the term
“transfer” in isolation. That construction, however, essentially
31
limited the definition of “transfer” in the First Offer Clause to an
event that would accompany a sale. Giving effect to the First
Offer Clause’s language further suggests to us that Claremont
and SCST intended to include transactions other than only those
that would convey a fee simple estate in the “sell or transfer”
triggering language.
By any of the measures that we construe the term
“transfer”—and we expressly limit our construction of the term to
the parties’ use of it in and with the context of the First Offer
Clause—the lease agreement attached to Claremont’s FAC
purports to have transferred property interests, including
immediate possession of the property, to Yalong.12 Specifically,
we conclude that the lease agreement between SCST and Yalong
is a transfer that triggers the First Offer Clause. By any of these
measures, then, the allegations in the FAC are sufficient to state
causes of action for breach of the 1957 Agreement (first cause of
action), the 1957 deed (second cause of action), and the 2001
agreement (third cause of action), and to support causes of action
for specific performance of the First Offer Clause (sixth cause of
action), and declaratory relief based on First Offer Clause (ninth
cause of action). We will reverse the trial court’s order sustaining
demurrers to these causes of action.
ii. The FAC alleges SCST’s “Desire” to Sell or
Transfer
Claremont argues here that SCST triggered the First Offer
Clause before it purportedly leased the property to Yalong.
Claremont attached to the FAC a property listing and an Offering
12Indeed, the trial court judicially noticed interrogatory
responses by Yalong identifying SCST’s campus address as
Yalong’s principal place of business.
32
Memorandum through which SCST, beginning in January 2018,
sought offers for the sale or lease of its campus. Claremont
contends, and alleged in the FAC, that the listing and Offering
Memorandum evidenced SCST’s “desire to sell or transfer” its
campus, and therefore activated part of the triggering language
in the First Offer Clause—“That if [SCST] . . . desire[s] to sell or
transfer the said real property or any portion thereof[.]”
For its part, SCST relies on its interpretation of the term
“transfer” and argues that the lease is not a transfer. By
extension, according to SCST, an offer to lease the property
cannot evidence a desire to “sell or transfer,” even if the lease
itself contains a “Purchase Obligation.”
The FAC alleges the terms of three different contracts (the
existence of a contract); it alleges that Claremont has fully
performed its obligations under those contracts (the 1957
Agreement, the 1957 deed, and the 2001 agreement); it alleges
the conduct that it contends constituted a breach; and it alleges
damages. Specifically, the FAC alleges that SCST “triggered the
[First Offer Clause] by, among other things, ‘desir[ing] to sell or
transfer’ the Subject Property, entering into the [lease] with
Yalong, and ceasing to use the Subject Property as ‘its principal
place of carrying on its activities.’ ”
Regardless of our conclusion that a lease may constitute a
transfer as the parties used that term in the First Offer Clause,
the allegations in the FAC were sufficient to allege causes of
action for breaches of the contracts, specific performance of the
First Offer Clause, and declaratory relief under Claremont’s
“desire to sell or transfer” theory. The FAC’s allegations,
specifically citing language in a property listing, alleged that
SCST had formed the present “desire” to sell the property. The
33
documents attached to the FAC bear that out. A property listing
that sought offers for the sale or lease of the campus would be
sufficient to support Claremont’s cause of action. But Claremont
also attached an actual lease of the property that contained not
only a “Purchase Obligation”—a fully-formed sale agreement that
SCST and Yalong intended to imminently effect—but also an
“Option to Purchase” that makes clear that even if the Purchase
Obligation is somehow thwarted that Yalong retains throughout
the entire lease term the option to purchase the property if that
ever becomes feasible.
c. Injunctive Relief
The tenth cause of action in the FAC is a cause of action for
preliminary and permanent injunction.
“Injunctive relief is a remedy, not a cause of action.
[Citation.] ‘A permanent injunction is an equitable remedy for
certain torts or wrongful acts of a defendant where a damage
remedy is inadequate. A permanent injunction is a
determination on the merits that a plaintiff has prevailed on a
cause of action for tort or other wrongful act against a defendant
and that equitable relief is appropriate. A permanent injunction
is not issued to maintain the status quo but is a final judgment
on the merits. [Citation.] It is reviewed on appeal for the
sufficiency of the evidence to support the judgment. [Citation.]’
[Citation.] ‘A permanent injunction is merely a remedy for a
proven cause of action. It may not be issued if the underlying
cause of action is not established.’ ” (City of South Pasadena v.
Department of Transportation (1994) 29 Cal.App.4th 1280, 1293.)
Ultimately, while the complaint may contain a request for
injunctive relief, it must be based on other causes of action and
34
cannot survive independently. We will therefore affirm the trial
court’s order as it relates to the tenth cause of action.
3. Amendment
Claremont contends that the trial court abused its
discretion when it denied leave to amend the FAC. We do not
reach this contention based on our conclusion that the trial court
erred when it sustained SCST’s demurrers to most of Claremont’s
causes of action.
We recognize, however, that the landscape of the parties’
dispute may have changed significantly since Claremont filed the
FAC. We also recognize that litigation developments may have
changed the significance of certain allegations, and have mooted
others. Because we recognize developments may have overtaken
significant portions of the FAC, we will direct the trial court on
remand to grant Claremont leave to amend its complaint.
B. Claremont’s Motion for Preliminary Injunction
1. Legal Standards
“In determining whether to issue a preliminary injunction,
the trial court considers: (1) the likelihood that the moving party
will prevail on the merits and (2) the interim harm to the
respective parties if an injunction is granted or denied. The
moving party must prevail on both factors to obtain an
injunction. Thus, where the trial court denies an injunction, its
ruling should be affirmed if it correctly found the moving party
failed to satisfy either of the factors. [Citation.]
“Where the evidence before the trial court was in conflict,
its factual determinations, whether express or implied, are
reviewed for substantial evidence. We interpret the facts in the
light most favorable to the prevailing party. [Citation.]
35
“Generally, the standard of review for denial of a
preliminary injunction is whether the trial court committed an
abuse of discretion.” (Sahlolbei v. Providence Healthcare, Inc.
(2003) 112 Cal.App.4th 1137, 1145-1146.)
“All exercises of discretion,” however, “must be guided by
applicable legal principles . . . . [Citations.] If the court’s decision
is influenced by an erroneous understanding of applicable law or
reflects an unawareness of the full scope of its discretion, the
court has not properly exercised its discretion under the law.
[Citation.] Therefore, a discretionary order based on an
application of improper criteria or incorrect legal assumptions is
not an exercise of informed discretion and is subject to reversal.”
(Farmers Ins. Exchange v. Superior Court (2013) 218 Cal.App.4th
96, 106; see Great West Contractors, Inc. v. Irvine Unified School
Dist. (2010) 187 Cal.App.4th 1425, 1459-1460 [collecting cases].)
Where the trial court incorrectly applies legal principles of
contract interpretation, rulings premised on incorrect
interpretations constitute an abuse of the court’s discretion.
(Costa Serena Owners Coalition v. Costa Serena Architectural
Com. (2009) 175 Cal.App.4th 1175, 1203.)
2. Analysis
The trial court based its conclusion on both Claremont’s
likelihood of prevailing on the merits and Claremont’s
demonstration of interim harm on its conclusion that the SCST-
Yalong lease did not implicate the First Offer Clause. Citing
Civil Code section 1039—the same section analyzed above—the
trial court incorrectly concluded that the lease was not a
“transfer” within the meaning of the First Offer Clause. The trial
court applied that conclusion both to its analysis of Claremont’s
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likelihood of success on the merits and whether Claremont had
demonstrated interim harm.
We have concluded that the trial court’s interpretation of
the term “transfer” as the parties used it and in the context of the
First Offer Clause was incorrect. The trial court’s order denying
the motion for preliminary injunction was, therefore, premised on
an “incorrect interpretation” of the First Offer Clause and
constitutes an abuse of its discretion. We will reverse the trial
court’s order.
DISPOSITION
The judgment is reversed. The trial court’s order
sustaining SCST’s demurrers is reversed as to the FAC’s first,
second, third, sixth and ninth causes of action. The trial court’s
order sustaining SCST’s demurrers is affirmed as to the seventh
and tenth causes of action. On remand, the trial court will grant
Claremont leave to file an amended complaint. The trial court’s
order denying Claremont’s motion for preliminary injunction is
reversed. On remand, the trial court will allow Claremont to file
a renewed motion for preliminary injunction reflecting the
current circumstances of the dispute, and the trial court will
consider Claremont’s motion in light of this opinion. Claremont
is awarded its costs on appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J. BENDIX, J.
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