Case Number: KC066135    Hearing Date: October 31, 2014    Dept: O

RadioShack Corporation v. Azusa Pacific University (KC066135)

1. Plaintiff RadioShack Corporation’s MOTION FOR SUMMARY JUDGMENT

Respondent: Defendant Azusa Pacific University

2. Defendant Azusa Pacific University’s MOTION FOR SUMMARY JUDGMENT

Respondent: Plaintiff RadioShack Corporation

TENTATIVE RULING

1. RadioShack’s MSJ

Plaintiff RadioShack Corporation’s motion for summary judgment is GRANTED.

STANDARD:
A Plaintiff has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once met, the burden then shifts to the Defendant to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. (CCP 437c(p)(1).)

MERITS:
On 7/3/00, Plaintiff RadioShack entered into a Lease with Golden Mountain Investments, Inc. (Defendant Azusa Pacific University’s predecessor) for retail space, which was subsequently extended through 1/31/18. (Stipulated Facts, Pars. 1-2, 5, 11.) The Lease contained a rent reduction provision in the event a Major Tenant discontinues operations. (Lease, Par. 38A.) “Tenant shall have the right to… pay Landlord three percent (3%) of Gross Sales monthly, in arrears, within twenty (20) days after the end of each calendar month, in lieu of Tenant’s obligation to pay fixed Minimum Rent.” (Lease, Par. 38B.) On 1/31/11, the Major Tenant, Big Lots, vacated the premises, and from 7/1/11 – 9/1/12, Defendant accepted rent equal to 3% of the Gross Sales in lieu of fixed rent. (Stipulated Facts, Par. 9.) On 9/1/12, Triad Fitness Center occupied the space formerly occupied by Big Lots. (Stipulated Facts, Par. 10.) Thereafter, Defendant refused to accept reduced rent, contending that Triad Fitness is a “Similar Tenant” as defined by Par. 38A of the Lease. Plaintiff contends Triad Fitness is not a “Similar Tenant,” and therefore, it is owed rent reduction. Plaintiff seeks a determination of its rights under the Lease. [The court notes that Azusa Pacific University has also filed an MSJ seeking the same determination of its opposing rights under the Lease.]

The basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. (Founding Members of the Newport Beach Country Club v. Newport Country Club, Inc. (2003) 109 Cal. App. 4th 944, 955.) When a contract is reduced to writing, the parties’ intention is determined from the writing alone, if possible. (Id.) The words of a contract are to be understood in their ordinary and popular sense. (Id.) Clear and explicit meaning of contract’s words construed in their ordinary and popular sense generally controls judicial interpretation unless parties used words in technical sense or special meaning was given to words by usage. (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal. App. 4th 1253, 1263.)

Par. 38A of the Lease provides, “‘Similar Tenant’ is a tenant which occupies all of the leasable area of the space previously occupied by the Major Tenant that has discontinued operations and which has the SAME OR HIGHER QUALITY OF GOODS TO BE SOLD and equal or better customer traffic.”

For purposes of this motion, the parties stipulated that Triad Fitness Center occupied all of Big Lots’ former space, and that “customer traffic” and “lesser or higher quality” of goods are not disputed issues. (Stipulation of Facts, Pars. 10, 15 and 16.)

RadioShack contends that Triad Fitness Center does not constitute a “Similar Tenant” because it does not sell the “same” goods sold by Big Lots.

Clear and explicit meaning of contract’s words construed in their ordinary and popular sense generally controls judicial interpretation unless parties used words in technical sense or special meaning was given to words by usage. (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal. App. 4th 1253, 1263.)

There is no indication from the Lease that the word “same” carries a special meaning other than what it is understood to mean in its ordinary and popular sense. “Same” is understood to mean, “not different,” “identical,” “exactly like something else,” or “not changed.” (See Merriam-Webster definition.) Further, the court finds that the word “same” is not vague or ambiguous in any way.

Big Lots sold “affordable furniture, appliances, clothing, electronics, packaged food items, sundries, garden supplies, linens, cookware, auto supplies, home furnishings, seasonal merchandise such as Christmas trees and decorations, and other consumer items.” (Stipulated Facts, Par. 7.) Triad Fitness offers “patrons the use of its gym equipment and physical fitness instruction, Triad sells drinks, snack bars, and clothing.” (Stipulated Facts, Par. 10.)

This court finds as a matter of law that the goods sold by Triad are clearly not the “same” type of goods sold by Big Lots, and no reasonable trier of fact would find otherwise. A reasonable interpretation of “same goods” means the “same merchandise” like “furniture, appliances, clothing, electronics, packaged food items, sundries, garden supplies, linens, cookware, auto supplies, home furnishings, seasonal merchandise such as Christmas trees and decorations, and other consumer items”; not the sale of a service (providing fitness equipment for individual use) with a single or isolated “good” such as water or snacks which may also be found in BigLots. Such an interpretation would ignore the mutual intent of RadioShack and its landlord about what a replacement tenant had to be to qualify as a Similar Tenant.

When RadioShack contracted the Lease, it bargained for a specific clientele, due in part to the nature of the Major Tenant that occupied the premises at that time, i.e. Big Lots. The Lease specifically provided that if the Major Tenant were to vacate the premises, Lessor would rent the space to “Similar Tenants” who sell the “same” goods as the Major Tenant. In actuality, the new tenant here primarily sells a service.

Defendant argues that RadioShack’s literal interpretation of the “same” goods produces “absurd” results such that any other anchor tenant like Home Depot, Ralphs, or Nordstrom’s would not qualify. However, this court cannot speculate about RadioShack’s business judgment. For whatever reason, RadioShack decided that the target customers who shopped at Big Lots were favorable to RadioShack’s business, and RadioShack is entitled to protect its interests by inserting its definition of “Similar Tenants” under Par. 38A. The court can speculate that the type of person who would be attracted to a fitness center, grocery, clothing or food store is not the type of customer who would then be as attracted to visit a RadioShack, but those who shop at a retailer of household goods would. Regardless, If the new tenant does not sell the “same” goods as Big Lots, then RadioShack is entitled to reduced rent. Clearly, Triad does not sell the “same” goods.

Defendant also argues that RadioShack was aware that Triad was occupying the premises when it exercised its option to extend the lease on 10/18/12. (Stipulated Facts, Par. 11.) However, this argument fails because RadioShack exercised its option to “extend” the lease term, not an option to “renew” the lease. The exercise of the option on 10/18/12 does not create a new lease.

Accordingly, the court finds Triad Fitness Center does not qualify as a “Similar Tenant” as defined at Par. 38A. The failure to abide by the terms of a lease specific to the payment or acceptance of specified rent is a material breach.

Motion is GRANTED.

2. Azusa’s MSJ

For the same reasons, Defendant Azusa Pacific University’s motion for summary judgment in its favor is DENIED.

The court finds Defendant breached the lease when it refused to give Plaintiff a reduction in rent because Triad Fitness Center does not qualify as a Similar Tenant.

Defendant also contends CC 3275 bars Plaintiff’s claim, but CC 3275 is an equitable doctrine providing relief in case of forfeiture. This court finds enforcement of this particular Lease does not result in any forfeiture, as contemplated by the statute. Holidays Inns of America v. Knight (1969) 70 Cal.2d 327 is distinguishable because there, the court relieved Plaintiff from an unjust result due to untimely payment of a check that was due on July 1st , sent on June 30th, but not received until July 2nd. The court applied CC 3275 because Defendant had not suffered any injury justifying termination of the contract and none of his reasonable expectations have been defeated. Here, Plaintiff’s reasonable expectation pursuant to the contract was to receive rent reduction for which Defendant refused to grant. Plaintiff has suffered injury in the form of an amount equal to the difference between 3% of the Gross Sales of the RadioShack store and the Fixed Minimum Rent. Regardless, Defendant did not raise CC 3275 as an affirmative defense.

Motion is DENIED.