Camino Village v. Red Fit CA4/1 ( 2024 )

Filed 2/21/24 Camino Village v. Red Fit CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
CAMINO VILLAGE, LLC, D081273
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2021-
00028574-CU-BC-NC)
RED FIT, LLC et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of San Diego County,
Blaine K. Bowman. Affirmed and remanded with directions.
Trio Law and Briar Siljander for Defendants and Appellants.
Niddrie Addams Fuller Singh and Rupa G. Singh; Raffee Law Group
and Jill Raffee for Plaintiff and Respondent.
This appeal involves a contract interpretation dispute between property
owner Camino Village, LLC, and its tenant Red Fit, LLC and Red Fit’s
guarantors Josh, Hayden, Sarah, and Melissa Epstein (collectively Red Fit).
In 2018, Camino Village rented a property in its shopping center to Red Fit to
operate as a fitness studio. After Red Fit fell behind on rent because of the
COVID-19 pandemic and related restrictions, Camino Village agreed to
amend the lease, abating Red Fit’s past-due rent and accepting partially
abated rent going forward so long as Red Fit was “open for business” when
permitted by local regulations. But when gyms were again allowed to
operate, Red Fit did not reopen for business as Camino Village expected
under their agreement. Camino Village notified Red Fit that it was in breach
of the parties’ lease, declared the lease’s abated rent provisions null and void,
and demanded payment of the full rent. When Red Fit continued to pay only
the partially abated rent, Camino Village filed a breach of contract action,
retook possession of the leased property, and changed the locks. In response,
Red Fit filed a cross-complaint.
At the conclusion of a five-day bench trial, the trial court ruled that Red
Fit breached the lease by failing to be “open for business,” Red Fit therefore
owed Camino Village the full previously abated back rent, and Red Fit’s
cross-complaint was dismissed.
Red Fit contends on appeal that the trial court erred in construing the
lease and dismissing its cross-complaint, and that we must reverse the
judgment. Camino Village argues that the trial court correctly interpreted
the lease, substantial evidence supported the court’s finding that Red Fit was
not “open for business,” the lease’s provision for abated and partially abated
rents was therefore nullified, and Camino Village properly terminated the
lease. We agree with Camino Village and thus affirm.
I.
In May 2018, Red Fit signed a 10-year lease (the Original Lease) with
Camino Village to operate its Red Effect Infrared Fitness franchise gym in
Camino Village’s shopping center. Under the Original Lease, Red Fit agreed
to pay a Minimum Annual Rent of $14,000 per month. Brothers Josh and
Hayden Epstein and their wives, Sarah and Melissa Epstein, owned and ran
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the Red Fit gym and personally guaranteed performance of the lease on Red
Fit’s behalf.
By early 2020, the COVID-19 pandemic and associated governmental
restrictions forced indoor gyms like Red Fit to close. Over the next year, Red
Fit froze its customers’ memberships and stopped charging monthly fees. By
January 2021, Red Fit owed Camino Village over $200,000 in late rent based
on the Minimum Annual Rent.
Over the next months, California began lifting its COVID-19
restrictions on various businesses, including gyms. On March 31, 2021,
Camino Village agreed to amend the Original Lease—through a document
titled the Second Amendment—to abate Red Fit’s past due rent for the period
it had been required to close because of COVID-19 restrictions. Under the
Second Amendment, during those times Red Fit could legally operate, Red Fit
would receive partially abated rent so long as it stayed “open for business to
the public . . . in full compliance with §§ 10.2 and 10.3 of the Original Lease.”
Throughout that period, Red Fit would owe a partially abated rent of $3,615
per month instead of the Original Lease’s Minimum Annual Rent of $14,000
per month.
In negotiating the Second Amendment, the Epsteins told Camino
Village they would need a couple of weeks to prepare and market the gym
before reopening. Yet, over three weeks later and after gyms were permitted
to reopen, Red Fit remained closed. When Camino Village contacted the
Epsteins about not being open, they told Camino Village they were not
offering workout classes but were “open for sauna use,” which Camino Village
later learned meant that nonpaying customers could use the sauna. Camino
Village responded that sauna use did not constitute “open for business” under
the Second Amendment.
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On April 26, 2021, Camino Village sent a letter to Red Fit, stating that
Red Fit was in breach by not being open for business.1 In its letter, Camino
Village requested the full rent of $14,000 per month for every day that Red
Fit had remained closed when regulations did not require closure. Red Fit,
however, continued to pay only the partially abated $3,615 monthly rent.
On July 1, 2021, Camino Village sent another letter to Red Fit, again
stating that Red Fit was in breach by not being open for business. This time,
Camino Village requested the $310,824.25 in full rent owed under the
Original Lease within five days. On July 6, 2021, Camino Village filed the
underlying lawsuit.
After Camino Village did not hear from Red Fit and believed the
property had been abandoned, it served on Red Fit a Notice of Belief of
Abandonment in late July 2021. In early September 2021, Camino Village
retook possession of the gym property and changed the locks.
The trial court held a five-day bench trial and issued its oral ruling in
Camino Village’s favor. It found Red Fit was not “open for business” as
required by the Second Amendment because Red Fit had not complied with
section 10.3 of the Original Lease, which listed the hours Red Fit was
required to operate, and because Red Fit was not engaged in group activities.
It further ruled that, under the Second Amendment, Red Fit owed all
previously abated rent once it failed to “open for business.” On Red Fit’s
cross-complaint against Camino Village for breach of contract and to release
the Epsteins from their guarantor obligations, the trial court found Red Fit
1 Camino Village’s correspondences with Red Fit also alleged that Red
Fit breached the lease by violating a confidentiality provision, which is not at
issue on appeal.
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and the Epsteins did not meet their burden and ordered “the cross-
complainants take nothing in their cross-complaint.”
II.
On appeal, Red Fit contends (1) the trial court erroneously interpreted
the term, “open for business,” (2) substantial evidence did not support the
trial court’s finding that Red Fit was not “open for business,” (3) the trial
court erroneously construed section 2.1.3. of the Second Amendment to
require that all abated rent became reversed and due once Red Fit failed to
“open for business” on a day it could do so, and (4) substantial evidence did
not support the trial court’s dismissal of Red Fit’s cross-complaint. We
disagree on all points and therefore affirm.
A.
Red Fit’s appellate challenges require us to interpret the parties’ lease.
A lease agreement is subject to the general rules governing contract
interpretation. (ASP Properties Group, L.P. v. Fard, Inc. (2005)
133 Cal.App.4th 1257, 1269 (ASP Properties).) We interpret contracts “to
give effect to the mutual intention of the parties as it existed at the time of
contracting.” (Civ. Code, § 1636.) When possible, the parties’ mutual
intention is determined solely from the language of the lease. “The ‘clear and
explicit’ meaning of these provisions, interpreted in their ‘ordinary and
popular sense,’ . . . controls judicial interpretation.” (ASP Properties, at
p. 1269.) “The test of admissibility of extrinsic evidence to explain the
meaning of a written instrument is not whether it appears to the court to be
plain and unambiguous on its face, but whether the offered evidence is
relevant to prove a meaning to which the language of the instrument is
reasonably susceptible.” (Pacific Gas & E. Co. v. G.W. Thomas Drayage etc.
Co. (1968) 69 Cal.2d 33, 37 (Pacific Gas & E. Co.).)
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The trial court’s construction of a contract presents a question of law
we review de novo. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861,
865.) When a contract is ambiguous and its interpretation requires assessing
the credibility of properly admitted but conflicting extrinsic evidence,
however, interpreting the contract is a question of fact. (City of Hope
National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395.) If the
extrinsic evidence conflicts, we uphold any reasonable construction supported
by substantial evidence. (ASP Properties, supra, 133 Cal.App.4th at
pp. 1267-1268, fn. 4.)
In addition, because the appellate record here lacks a statement of
decision, we apply the doctrine of implied findings and presume the trial
court made all necessary findings supported by substantial evidence.
(Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959,
970.)
B.
In construing the term “open for business,” the trial court was required
to give effect to the parties’ mutual intent, inferred if possible from the
written provisions of the contract, and by considering the circumstances
under which the contract was made and the matter to which it relates.
(Civ. Code §§ 1639, 1647.) In addition, the trial court’s interpretation
required considering the contract as a whole to give effect to each provision,
rather than interpreting its language in isolation. (Civ. Code §§ 1641, 1650.)
We conclude it did so and that there was no prejudicial error.
1.
Red Fit contends the trial court erred by ignoring the plain meaning of
the Second Amendment’s term “open for business.”
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We first consider the plain language of the parties’ Second Amendment
and Original Lease. Section 2.1.3. of the Second Amendment provides:
At all times that [Red Fit] is not required to be closed for
indoor business Operations to the public from the Premises
due to mandatory governmental restrictions, governmental
regulations, or governmental controls, imposed because of
the COVID-19 coronavirus relating to gyms and fitness
facilities in San Diego County, [Red Fit] covenants to be
open for business to the public from the Premises as
specified in Sections 10.2 and 10.3 of the Original
Lease, but subject to any limitations or restrictions
otherwise required by to [sic] mandatory governmental
restrictions[.]
(Emphasis added.) Section 2.1.3. also provides that if Red Fit “fails to be
open for business to the public from the Premises in full compliance with
sections 10.2 and 10.3 of the Original Lease . . . then the Abated Rent and
Partially Abated Rent provided for in this Amendment shall immediately be,
without the need for notice to [Red Fit], null and void and of no further force
and effect[.]”
Under section 10.2 of the Original Lease, Red Fit “covenants to open for
business to the public with the Premises fully fixtured and stocked with
merchandise and inventory” and to “operate continuously and
uninterruptedly in the entire Premises the business which it is permitted to
operate under this Lease[.]” In addition, Red Fit “shall at all times employ
its best judgment, efforts and abilities to operate its business on the Premises
in a manner reasonably designed to enhance the reputation and
attractiveness of the Center.”
And, under section 10.3, Red Fit “shall keep the entire Premises
continuously open for business during at least the following days and hours:
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8 hours per day, Monday through Friday, and 4 hours per day, Saturday and
Sunday[.]”
The trial court considered these provisions together with the lease as a
whole, including the Original Lease’s section 1.13 “Use of Premises,” which
provides “the Premises shall be used only for the operation of a typical Red
Effect . . . offering group personal fitness training, infrared fitness, sauna
therapy, kickboxing, yoga, cycling . . . and for other fitness uses that are
implemented in a majority of the other Red Effect . . . Studios, and for no
other use or purpose.”
Reading these clear and explicit provisions together, we see no error in
the trial court’s construction of “open for business” to mean that Red Fit
would be open “continuously and uninterruptedly” during the particular
hours specified in section 10.3 and would provide group activities like a
“typical Red Effect,” as outlined in section 1.13.
Red Fit, however, complains the trial court should have considered the
dictionary definition of “open for business”—“able to be entered and used by
customers”—in construing the Original Lease and Second Amendment. We
disagree. The trial court was required to determine the parties’ mutual
intent from the plain language of these documents where possible. It did so.
We see no abuse of discretion in the trial court’s finding that here, the
dictionary definition was not relevant to the parties’ mutual intent based on
the Original Lease’s and Second Amendment’s plain language. (See ASP
Properties, supra, 133 Cal.App.4th at p. 1269.)
2.
Although Red Fit does not appear to dispute the trial court’s
consideration of extrinsic evidence at trial, Red Fit argues the trial court
erroneously relied on some of that evidence—Camino Village’s subjective
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intent through the testimony of its Vice President, Victor Port—in construing
“open for business.” Again, we are unpersuaded.
The meaning of a writing “can only be found by interpretation in the
light of all the circumstances that reveal the sense in which the writer used
the words.” (Pacific Gas & E. Co., supra, 69 Cal.2d at pp. 38–39.) Consistent
with the principle that “[t]he test of admissibility of extrinsic evidence to
explain the meaning of a written instrument is not whether it appears to the
court to be plain and unambiguous on its face,” we examine the extrinsic
evidence to determine whether it is “relevant to prove a meaning to which the
language of the instrument is reasonably susceptible.” (Id. at p. 37.)
Here, the record reflects the trial court properly accepted extrinsic
evidence, including testimony and documentary evidence, from all parties to
resolve any purported ambiguity. For example, the trial court heard
testimony from Josh and Hayden Epstein about their understanding of “open
for business,” including as meaning that Red Fit needed only to be “open to
the public” with the doors “not closed,” even though they acknowledged Red
Fit lacked any revenue because it did not conduct any sales or have any
paying members. Josh testified Red Fit did not hold any fitness classes, for
example, in August of 2021, but they believed Red Fit was “open for business”
because its doors were open so that unspecified people could come in and talk
with them. Josh and Hayden also testified to their understanding that Red
Fit was “open for business” because Josh would go into the gym and perform
“Red Effect work stuff” on a company computer there. Hayden could not
specify any marketing efforts made, marketing expenses paid, or if and when
they had paid the monthly Red Effect franchise fee in 2021. Instead, he
testified that the gym was available for unspecified individuals to use the
sauna and work out for free.
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The trial court also considered testimony from Vice President Port that
Camino Village had a different understanding of “open for business.”
According to Port, the term meant Red Fit would hire trainers, market itself
to members, and offer full class schedules like a “typical” Red Effect
franchise. In negotiating the Second Amendment with the Epsteins, Port
said he relied on the Epsteins’ projections about membership numbers,
marketing costs, and revenue. However, contrary to Red Fit’s argument that
the court improperly considered Camino Village’s subjective intent in
construing the contract, the trial court explained to Port why it could not
consider his subjective intent to read in a marketing expectation into “open
for business” when the Second Amendment contained no such requirement.
The trial court’s comments reflect its correct understanding of its obligation
to “look” to the Second Amendment for what the parties intended “open for
business” to mean.
The trial court also heard and admitted other evidence, including
testimony, text messages, and emails from customers and trainers indicating
that Red Fit was not open from April to June 2021; a Camino Village
manager’s observations about Red Fit’s doors being locked during her visits
to the property; and Hayden’s text message with a trainer in May 2021 that
Red Fit was in “a battle to open” and that they were “still trying to negotiate
and find additional capital to reopen.”
On this record, we presume from the trial court’s determination of the
relative credibility of Port’s testimony over the Epstein brothers’ testimony,
that the trial court considered and resolved the relevant conflicting extrinsic
evidence in determining the parties’ intent and reaching its contractual
interpretation. That interpretation was not error.
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C.
Next, Red Fit contends the trial court erred by finding Red Fit was not
“open for business” as a “typical Red Effect.” We disagree and conclude
substantial evidence supported the court’s finding.
As outlined above, substantial evidence in the record showed that Red
Fit never reopened. Even after COVID-19 restrictions on gyms were lifted,
there is no evidence that Red Fit ever offered any classes, unfroze any
membership accounts, or hired any fitness trainers. Red Fit’s website and
social media were devoid of present or anticipated class schedules or other
signs of activity. Although customers received messages from Red Fit that it
hoped to reopen in March 2021, they did not receive any additional
communications or responses from Red Fit until after Camino Village retook
possession in September 2021.
Red Fit’s reliance on isolated pieces of contrary evidence does not
require a different conclusion. Red Fit emphasizes a Camino Village property
manager’s email that she saw Red Fit was “open” and wondered when it
would start functioning as a gym again. At trial, the court questioned the
property manager about her use of the word, “open,” and she explained that
she was referring to Red Fit having a light on and showing some signs of
occupancy, not that she believed Red Fit was “fully engaged in activities” as a
gym. Resolving all evidentiary conflicts in favor of the trial court’s finding, as
we must, we conclude this email did not show Red Fit was “open for
business.” But even assuming it had, that scant evidence cannot overcome
the substantial contrary evidence showing Red Fit remained closed. Our
authority on appeal begins and ends with a determination as to whether, on
the entire record, there is any substantial evidence, contradicted or
uncontradicted, in support of the trial court’s findings. (ASP Properties,
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supra, 133 Cal.App.4th at p. 1266.) Here, we have little difficulty concluding
the requisite substantial evidence supports the trial court’s finding.
D.
Red Fit also challenges the trial court’s interpretation of the Second
Amendment’s section 2.1.3. This section provides that if Red Fit:
fails to be open for business to the public from the Premises
in full compliance with Sections 10.2 and 10.3 of the
Original Lease . . . then the Abated Rent and Partially
Abated Rent provided for in this Amendment shall
immediately be, without the need for notice to [Red Fit],
null and void and of no further force and effect as to each
day that the business is closed to the public, and all
amounts due under the Lease, including the Minimum
Annual Rent as specified in the Original Lease, will be due
and owing without reference to the Abated Rent and
Partially Abated Rent specified [previously] . . ., for each
day that the business is closed to the public.
The trial court construed this section to mean that if Red Fit was not
“open for business to the public in full compliance with sections 10.2 and
10.3,” then all previously abated rent became due and payable
immediately. Red Fit, however, disputes that interpretation, contending
instead the full rent—Minimum Annual Rent specified in the Original Lease
of $14,000—was due only as to “each day that the business [wa]s closed to the
public” but could have been open. We agree with Camino Village and the
trial court. Section 2.1.3’s plain language, when considered in context to give
effect to each provision of the Original Lease and Second Amendment (Civ.
Code § 1641), provides that Red Fit’s failure to be “open for business”
nullified the Second Amendment’s provision for Abated and Partially Abated
Rents and caused “all amounts due under the Lease” to be “due and owing.”
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We do not read the provision to limit itself to only the particular days on
which Red Fit failed to be open but could have been.
Regardless, another section of the Second Amendment also required
Red Fit to pay all previously abated rent. Under section 2.2.1, if Red Fit
“defaults with respect to any of [its] monetary obligations under the Lease”
and fails to timely cure the default, then Camino in its “sole and absolute
discretion, may elect to declare the abatements provided . . . null and void,
whereupon the Abated Rent and Partially Abated Rent shall not be
deemed to have been forgiven or abated, but shall become immediately
due and payable as unpaid rent.” (Emphasis added.)
As discussed previously and supported by the record, Red Fit was not
“open for business” and did not pay the Minimum Annual Rent, even for
“each day” that it was closed but could have been open after signing the
Second Amendment on March 31, 2021. Three weeks later, Camino Village
sent a letter to Red Fit stating that Red Fit was in breach by failing to be
open for business when it could have been and requesting full rent of $14,000
for every day of closure. Ten weeks after that, on July 1, 2021, Camino
Village again notified Red Fit in writing of its breach by failing to be open
and demanded Red Fit pay the full rent owed under the Original Lease
within five days. Red Fit, however, continued to pay only the partially
abated rent of $3,615 per month. Thus, we agree with Camino Village that
Red Fit was “in default on a monetary obligation” under the lease by July 1,
2021, triggering section 2.2.1. In turn, section 2.2.1. allowed Camino Village
to declare all abated and partially abated rent no longer forgiven and
immediately due as unpaid rent. Accordingly, even assuming the trial court
incorrectly interpreted section 2.1.3., any error was harmless because
section 2.2.1. independently permitted the same result.
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E.
Lastly, Red Fit challenges the dismissal of its cross-complaint. Red
Fit’s cross-complaint, however, is not included in the record before us. As the
appellant, it is Red Fit’s duty to provide an adequate record from which
prejudicial error is shown. (Kurinij v. Hanna & Morton (1997)
55 Cal.App.4th 853, 865.)
Moreover, even if we were to accept as accurate Red Fit’s
representation of its cross-complaint, we would affirm the trial court’s
dismissal. According to Red Fit, its cross-complaint alleged that Camino
Village breached the lease by terminating it without proper notice or
opportunity to cure and by changing the locks at the leased premises despite
Red Fit paying rent. On appeal, Red Fit argues the trial court erred by
dismissing its cross-complaint “without explanation.” Red Fit contends that
even assuming the trial court properly concluded it was not “open for
business” at some point in 2021, the lease required that Red Fit be “closed for
business for a period of ninety (90) consecutive days or more” and be given
30 days’ notice before Camino Village could terminate the lease on that basis.
We disagree.
First, as Camino Village argues, the appellate record here lacks a
statement of decision. For that reason, we assume the trial court found every
fact essential to the judgment, and findings are implied in favor of Camino
Village as the successful litigant. (Childers v. Childers (1946) 74 Cal.App.2d
56, 59.)
Second, Red Fit focuses on the wrong source of the breach. Its
argument assumes the trial court found that it breached the lease by failing
to be “open for business” under section 10.2. Implying all findings in favor of
the trial court’s judgment as we must, however, we assume the trial court
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found Red Fit breached the lease by failing to pay the full minimum rent due
for the days it failed to reopen—a monetary default that Red Fit never cured.
section 18.1 of the Original Lease “Events of Default” gave Red Fit “five days
after written notice” from Camino Village to cure any default in payment. If
Red Fit failed to cure the default or “vacate or abandon the Premises,” this
section permitted Camino Village to “treat the occurrence . . . as a breach of
this Lease” and gave it the right “without further notice or demand of any
kind to [Red Fit] . . . (a) to declare the Term ended and to re-enter and take
possession of the Premises.” Before terminating the lease, Camino Village
twice mailed notice to Red Fit to demand back rent and additionally served a
Notice of Belief of Abandonment. Red Fit did not respond to cure the default
or to dispute its alleged abandonment of the property. Camino Village did
not re-enter the property and change the locks until more than a month after
serving the Notice of Belief of Abandonment and more than four months after
first notifying Red Fit in writing of its breach and monetary default. Thus,
we are unpersuaded by Red Fit’s suggestion that its rent payments—which
were only for the partially abated rent of $3,615—cured its monetary default
for the past due full rent.
Accordingly, on this record, Camino Village had the right to terminate
the lease under section 18.1 for two independent reasons: (1) Red Fit’s
failure to cure the monetary default within five days of notice and (2) Red
Fit’s abandonment of the premises. We see no error in the trial court’s
dismissal of Red Fit’s cross-complaint.
As none of Red Fit’s appellate arguments persuade us, we affirm.
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III.
In its respondent’s brief, Camino Village asks us to award its
contractual prevailing party fees and costs on appeal with the amount to be
decided by the trial court. Although we have the power to award attorney
fees on appeal, we decline to do so here because, as Camino Village
acknowledges, the trial court will determine the amount of any such award.
(See Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA,
Inc. (2005) 129 Cal.App.4th 1228, 1267.) Accordingly, we remand the case to
the trial court with directions to determine if Camino Village is entitled to
attorney fees incurred on appeal, and if so, the amount of those fees. (See
ibid.)
IV.
We affirm. The matter is remanded with directions to the superior
court to consider Camino Village’s request for attorney fees incurred on
appeal. Camino Village is entitled to costs on appeal.
CASTILLO, J.
WE CONCUR:
HUFFMAN, Acting P. J.
O’ROURKE, J.
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