2017-00214939-CU-UD

Arden Fair Associates, LP vs. First Capital Retail, LLC

Nature of Proceeding: Motion for Relief from Forfeiture

Filed By: Griffin, Tory E.

Defendant First Capital Retail, LLC’s Motion for Order Granting Relief from the Forfeiture of the lease declared in the unlawful detainer judgment rendered and entered on August 10, 2017 in favor of Plaintiff Arden Fair Associates, LP, (“Arden Fair”) is denied. CCP 1179. Defendant’s alternative request to stay the execution of the judgment pursuant to CCP 918 is denied.

Arden Fair owns the Arden Fair Mall regional shopping center in Sacramento, California. First Capital assumed a lease for commercial space at the Mall to operate a Cinnabon franchise but breached the lease by failing to pay rent and make promised repairs. First Capital was assigned the lease in 2015 by former tenant Cinnaworks, LLC and expected the lease to go through 2025. On February 23, 2017, Rameshwar Prasad entered into a “Membership Purchase Agreement” with First Capital and its member Suneet Singal to acquire all of Singal’s interest in defendant, the Tenant of Space 2002. Prasad contends that the former owner, Singal, subsequently defrauded him, took out multiple loans on behalf of First Capital contending he [Singal] was the current owner, resulting in insufficient funds to pay the on-going commercial lease payments. ((Declaration of Prasad)

First Capital was served with a Complaint in unlawful detainer but failed to respond. The clerk entered a default judgment for possession on August 10, 2017 and a writ of possession subsequently issued. Thereafter the parties entered a Stipulation to Judgment in which First Capital promised to pay all amounts owed to the plaintiff by September 8, 2017 and to remodel the premises beginning January 15, 2018. If the conditions were not met, First Capital agreed to voluntarily submit to eviction. First Capital failed to make the required payment, and on September 14, 2017 it filed for bankruptcy to avoid the eviction. Arden Fair contends that First Capital’s filing for bankruptcy does not provide any assurance that it will be able to pay all damages and complete the long-promised remodeling.

Pursuant to CCP 1179:

The court may relieve a tenant against a forfeiture of a lease or rental agreement, whether written or oral, and whether or not the tenancy has terminated, and restore him or her to his or her former estate or tenancy, in case of hardship, as provided in Section 1174. The court has the discretion to relieve any person against forfeiture on its own motion.

An application for relief against forfeiture may be made at any time prior to restoration of the premises to the landlord. The application may be made by a tenant or subtenant, or a mortgagee of the term, or any person interested in the continuance of the term. It must be made upon petition, setting forth the facts upon which the relief is sought, and be verified by the applicant. Notice of the application, with a copy of the petition, must be served at least five days prior to the hearing on the plaintiff in the judgment, who may appear and contest the application. Alternatively, a person appearing without an attorney may make the application orally, if the plaintiff either is present and has an opportunity to contest the application, or has been given ex parte notice of the hearing and the purpose of the oral application. In no case shall the

application or motion be granted except on condition that full payment of rent due, or full performance of conditions or covenants stipulated, so far as the same is practicable, be made.

Arden Fair has shown that First Capital has, for more than two years, repeatedly breached its contractual and legal obligations,: i) to pay the rent fully and on time; and

ii) to complete remodeling and repair of the premises. (Declaration of Arden Fair Senior Property Manager Tod Strain) Arden Fair contends that this is not a case where payment of money can be made and verified, and the pending debt thereby discharged. The Court and Arden Fair would be required to monitor for the next coming months the remodel First Capital is required to make, and is already more than two years overdue, while all the time Arden Fair would be at legal risk that it might be held responsible for the cost of the improvements should First Capital again falter. Arden Fair states it has found a prospective replacement tenant who would be more likely to comply with a lease, provide a superior remodel and be a better addition to the commercial environment at the Mall. (Declaration of Strain)

In addressing the application, it bears noting that the granting or denying of an application for relief from forfeiture of a lease under Code Civ. Proc. § 1179 rests in the trial court’s discretion (Hignell v. Gebala (1949) 90 Cal. App. 2d 61, 70; Olympic Auditorium, Inc. v. Superior Court (1927) 81 Cal. App. 283, 285.). The finding of hardship alone is an insufficient ground to grant relief from a lease’s forfeiture under Code Civ. Proc. § 1179; rather, the court is required to balance the equities between parties. See, Olympic Auditorium, Inc. v. Superior Court, supra, at pp. 285-286. Under Code Civ. Proc. § 1179, the court, in balancing equities, should take into consideration the circumstances of the case, any hardship to the lessee from forfeiture, any hardship to the lessor from relieving the lessee from forfeiture, and the willful or other character of the lessee’s breach and then use its best discretion in determining whether to grant relief. (Thrifty Oil Co. v. Batarse (1985) 174 Cal. App. 3d 770, 777-778; Hignell v. Gebala, supra, at pp. 70-71.)

Thus, to obtain relief from forfeiture of the lease under Code of Civil Procedure §1179, the Defendant Tenant must show “extreme hardship” and that it would be “manifestly unjust” to hold it to the Judgment. “The mere fact that a hardship exists will not, automatically, be a basis upon which to set aside the forfeiture since hardship will exist in almost all cases where relief is not granted.” Thrifty Oil Co. v. Batarse (1985) 174 Cal.App.3d 770, 777. The inquiry is whether forfeiture would be “manifestly unjust.” Id. at 778. As summarized in the following treatise:

“Extreme hardship standard: ‘Hardship’ generally, is the only guideline provided in the statute. But in the interest of promoting finality of judgments and, in particular, the fundamental purpose of summary possession proceedings (to speedily resolve the possession issue), trial courts tend to require an extreme or ‘convincing’ showing of tenant hardship.” Rutter Group,Postjudgment Motions, Cal. Prac. Guide Landlord-Tenant Ch.

9:437.

As noted, in balancing the equities, the Court is not required to grant relief simply on a showing of hardship. Olympic Auditorium Inc. v. Super.Ct. (1927) 81 Cal.App.283, 285. Rather, exercising its equitable powers, the court will balance the equities on both sides, weighing the alleged hardship to the tenant if the forfeiture is declared against the likely prejudice to the landlord if it is not. Hignell v Gebala (1949) 90 Cal.App.2d 61,

70-71. See Rutter Group, Postjudgment Motions, Cal. Prac. Guide Landlord-Tenant Ch. 9:438.

In weighing the equities in this case, the Court finds that the hardship on the plaintiff if the motion were to be granted would outweigh the hardship to the defendant if the motion is denied.