Opinion
B330310
05-28-2024
FITNESS INTERNATIONAL, LLC, Plaintiff, Cross-defendant and Appellant, v. WW WESTWOOD, L.P., Defendant, Cross-complainant and Respondent.
Ellenoff Grossman & Schole and Bryan M. McGarry for Plaintiff, Cross-defendant and Appellant. Allen Matkins Leck Gamble Mallory & Natsis, Charles D. Jarrell and Karine Akopchikyan for Defendant, Cross-complainant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. 21SMCV00143 Helen Zukin and Alison Mackenzie, Judges. Affirmed.
Ellenoff Grossman & Schole and Bryan M. McGarry for Plaintiff, Cross-defendant and Appellant.
Allen Matkins Leck Gamble Mallory & Natsis, Charles D. Jarrell and Karine Akopchikyan for Defendant, Cross-complainant and Respondent.
WEINGART, J.
In 1996, plaintiff, cross-defendant and appellant Fitness International, LLC (Fitness) leased a suite in a building from defendant, cross-complainant and respondent WW Westwood, L.P. (Westwood) to operate an L.A. Fitness health club. In March 2020, state and local regulations resulting from the COVID-19 pandemic barred the operation of public gyms and fitness centers such as the L.A. Fitness health club for most of the following year.
The question presented by this appeal is whether Fitness was obligated to continue paying rent during the period when state and local regulations prevented persons from visiting a public gym. Fitness argues the answer is no, both under provisions in the lease relating to quiet possession and force majeure, and as a matter of contract law under the doctrine of temporary frustration of purpose. Westwood disagrees, arguing that there is no doctrine of temporary frustration of purpose in California, and that the relevant provisions in the lease did not excuse Fitness from paying rent.
The trial court agreed with Westwood and granted summary judgment in its favor both as to Fitness's complaint seeking reimbursement for rent it paid early in the pandemic, and as to Westwood's cross-complaint for unpaid rent. We agree judgment was properly entered in Westwood's favor and affirm for the reasons explained below.
FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
The original lease, dated January 5, 1996, was captioned "health club lease" (capitalization omitted). It stated that Fitness was permitted to use the space for "the operation of a health, fitness and athletic club," including various ancillary uses such as "massage therapy" and "retail sales of sports equipment, clothing, nutritional foods and vitamins." All other uses were prohibited "without [Westwood]'s prior written consent, which consent [Westwood] shall not unreasonably withhold." The lease called for a 10-year term, but over the ensuing years, the parties agreed to a series of extensions and amendments that collectively extended the term through January 31, 2032. Fitness has never used the space for any other purpose than as a health club, nor with one short-lived exception has it ever requested permission to do so.
Fitness requested permission in January 2021 for a healthcare provider to operate a COVID-19 vaccination site in the space. Westwood consented to this use, but Fitness informed Westwood the day after making the request that the vaccination program did not select the space for use.
On March 4, 2020, Governor Gavin Newsom declared a state of emergency in response to the COVID-19 pandemic, and two weeks later, on March 16, the Los Angeles County Public Health Officer issued an order "prohibit[ing] all indoor public and private gatherings" and requiring all gyms and fitness centers within the county to close. On June 12, 2020, gyms and fitness centers were permitted to reopen on a limited basis, but they were once again ordered to close on July 13, 2020. Los Angeles County allowed gyms to reopen at 10 percent capacity on March 15, 2021, with capacity increasing over the next few months until the Governor rescinded the state of emergency on June 11, 2021.
We refer to these orders collectively as the closure orders.
As part of the COVID-19 emergency response, state and local governments imposed moratoriums on commercial evictions, but did not relieve tenants of the obligation to pay rent. Shortly after the closure orders were imposed, Fitness ceased paying rent to Westwood. In March 2021, Fitness reopened its facility and resumed paying rent. By Westwood's calculation, Fitness owed $840,929.17 in unpaid rent by the time the closure orders were rescinded.
On January 21, 2021, Fitness filed a complaint alleging causes of action for breach of contract, monies had and received, monies paid by mistake, and declaratory relief. Fitness claimed the issuance of the closure orders constituted a force majeure event under the terms of the lease, and that this excused payment of rent. Fitness also alleged that in the lease, Westwood covenanted and warranted Fitness quiet and peaceful possession and enjoyment of the premises, and that the closure orders represented a breach of this covenant and warranty. Fitness lastly alleged that its obligation to pay rent was excused by the doctrine of frustration of purpose. Fitness demanded that Westwood repay $554,800 in rent Fitness paid for periods from March to September 2020 while the closure orders were in effect.
Before the trial court, Fitness further alleged that its obligation to pay rent was excused by operation of law under Civil Code section 1511, as well as by the doctrine of impracticability. Fitness has abandoned these two arguments on appeal, and we do not discuss them further.
One month later, on February 23, 2021, Westwood filed a cross-complaint. In the operative first amended cross-complaint, Westwood alleged causes of action for breach of lease, breach of the implied covenant of good faith and fair dealing, fraudulent inducement, and declaratory relief. Westwood demanded that Fitness pay all amounts due under the lease, and requested that the court declare that Fitness remained obligated to do so.
On December 22, 2021, Westwood filed a motion for summary judgment on Fitness's complaint. In response, Fitness voluntarily dismissed its cause of action for breach of contract, but otherwise opposed the motion. The trial court granted the motion as to Fitness's remaining causes of action, finding that neither the terms of the lease nor the legal principles Fitness advocated excused it from continuing to pay rent while the closure orders were in effect.
Westwood then moved for judgment on the pleadings as to its cross-complaint, arguing that the trial court's previous decision on summary judgment resolved all outstanding issues in the case. The trial court granted the motion as to Fitness's affirmative defense of frustration of purpose, but otherwise denied the motion.
Westwood filed a new motion for summary judgment on its cross-complaint. The trial court granted the motion and entered judgment in Westwood's favor for $840,929.17 for unpaid rent, plus $215,744.77 in prejudgment interest and late charges under the lease.
STANDARD OF REVIEW
At the summary judgment stage, "the court must 'consider all of the evidence' and 'all' of the 'inferences' reasonably drawn therefrom ([Code Civ. Proc.], § 437c, subd. (c)), and must view such evidence [citations] . . . [citations], in the light most favorable to the opposing party." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) We review the court's decision to grant a motion for summary judgment de novo. (Ryan v. Real Estate of Pacific, Inc. (2019) 32 Cal.App.5th 637, 642.)
DISCUSSION
A. The Lease's Quiet Possession Clause Was Not a Warranty Against Government Interference
Fitness argues that as part of the lease, Westwood warranted that Fitness would be able to operate its facility as a gym or fitness center. In Fitness's view, the issuance of the closure orders breached this warranty and thus the lease, such that Fitness was not obligated to pay rent until the orders were rescinded.
Although the lease barred Fitness from operating any business in the space other than a "health, fitness and athletic club" without Westwood's approval, the lease contains no express promise from Westwood that such a business would be legal to operate on the site. Nevertheless, Fitness purports to find a warranty against government action in the lease's quiet possession clause. That provision states that, "Upon [Fitness]'s timely paying all sums due hereunder and observing and performing all of the covenants, conditions and provisions on [Fitness]'s part to be observed and performed hereunder, [Fitness] shall have quiet possession of the [p]remises for the entire [t]erm hereof, subject to all of the provisions of this [l]ease." The trial court rejected this quiet possession argument on the ground that Fitness failed to "timely pay[ ] all sums due" under the lease and thus was not entitled to quiet possession. Fitness argues this was error because it stopped paying rent only after the closure orders became effective, and thus, in Fitness's view, Westwood breached the lease first.
We need not decide the correctness of the trial court's reasoning or Fitness's response to it, as "it is well settled that on appeal following summary judgment the trial court's reasoning is irrelevant, and the matter is reviewed on appeal de novo. [Citations.] We exercise our independent judgment as to the legal effect of the undisputed facts [citation] and must affirm on any ground supported by the record." (Jiminez v. County of Los Angeles (2005) 130 Cal.App.4th 133, 140.) In our view, the fundamental problem with Fitness's argument is that the quiet possession clause did not protect it against government action in the first place.
The covenant of quiet possession or quiet enjoyment is well-established in California law and serves to "insulate[ ] the tenant against any act or omission on the part of the landlord, or anyone claiming under him, which interferes with a tenant's right to use and enjoy the premises for the purposes contemplated by the tenancy." (Petroleum Collections Inc. v. Swords (1975) 48 Cal.App.3d 841, 846, italics added.) Because this covenant "runs between the tenants and the landlord from whom they are renting the property" (Andrews v. Mobile Aire Estates, supra, 125 Cal.App.4th at p. 590, fn. 9), it does not apply to actions over which the landlord has no control. Thus, for example, "while nuisance activities on neighboring premises, not owned or controlled by the aggrieved tenant's landlord, may interfere with a tenant's quiet enjoyment, such conduct does not amount to a breach of the covenant of quiet enjoyment as between tenant and landlord." (Ibid.)
The terms "quiet possession" and "quiet enjoyment" are used interchangeably. (See, e.g., 10 Miller & Starr, Cal. Real Estate (4th ed. 2023) § 34:63; Erlach v. Sierra Asset Servicing, LLC (2014) 226 Cal.App.4th 1281, 1299; Andrews v. Mobile Aire Estates (2005) 125 Cal.App.4th 578, 588.)
We are aware of no law holding a landlord liable under a covenant of quiet possession or quiet enjoyment for restrictions imposed by the government, and Fitness does not cite any. Fitness instead attempts to tether its argument to the language of the lease itself, claiming that the quiet possession clause includes language indicating that the parties intended it to include governmental action. Unlike leases into which Fitness entered with other landlords, which protected against "interference by the [l]andlord" or "interruption or disturbance from [the] [l]andlord," the lease with Westwood guaranteed "quiet possession of the [p]remises for the entire [t]erm hereof," with no reference to actions by Westwood. Fitness argues we must interpret this lack of a limitation as proof of the parties' intent for the covenant of quiet possession to encompass all manner of interference, including governmental restrictions, or alternatively that ambiguity in the quiet possession covenant language made summary judgment inappropriate.
"Whether language in a contract is ambiguous is a question of law." (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912.) "A contract is ambiguous only if it 'is susceptible of more than one reasonable interpretation'" (Rojas v. HSBC Card Services Inc. (2023) 93 Cal.App.5th 860, 894), and "ambiguity cannot be based on a strained interpretation" of contractual language (Producers Dairy Delivery Co., supra, at p. 912). We do not find Fitness's proffered interpretation reasonable, as the language Fitness cites from other leases does not suggest the language of the lease at issue here was broader than it plainly states. "[T]he tenant under a commercial lease may agree to limit the scope of the covenant of quiet enjoyment" (Frittelli, Inc. v. 350 North Canon Drive, LP (2011) 202 Cal.App.4th 35, 43), including by exempting the landlord from liability for the actions of other tenants within the building (ibid., citing Conterno v. Brown (1968) 263 Cal.App.2d 135, 135-137). Fitness's other leases, by specifying protection only against actions of the landlord, thus exempted actions by other parties over whom the landlord had authority. The lack of such a limitation in the lease with Westwood indicates that Westwood's guarantee to Fitness did include other tenants within the building, but it does not support the inference that the parties intended to expand the covenant of quiet possession into a guarantee that it would be legally permissible to operate a health club on the premises regardless of actions outside the control of the landlord.
B. The Force Majeure Provision Did Not Excuse Payment of Rent by Fitness
Next, Fitness contends the closure orders constituted force majeure events under the lease, such that Fitness was excused from paying rent while those orders were in effect. We disagree. The force majeure provision in the lease explicitly excludes "[d]elays or failures to perform resulting from . . . lack of funds or which can be cured by the payment of money" from its definition of force majeure events. The trial court, relying on an analysis in SVAP III Poway Crossings, LLC v. Fitness International, LLC (2023) 87 Cal.App.5th 882, 892-893 (Poway) of almost identical contractual language held that the force majeure provision did not relieve Fitness of its obligation to pay rent. Fitness argues that we should reconsider Poway's holding because that court misconstrued the contract's language. We decline to do so and find Poway's interpretation of the force majeure provision persuasive.
The original lease between Fitness and Westwood contained what Fitness describes as "an anti-force majeure provision," which provided that "this [l]ease and the obligations of [Fitness] hereunder shall not be affected or impaired, and [Fitness] shall not be entitled to any rent abatement, because [Westwood] is unable to fulfill any of its obligations hereunder or is delayed in doing so, including its obligations to provide certain services, if such inability or delay results from any stoppage, reduction or interruption of such services caused by governmental rules, regulations or ordinances, breakdowns, accidents, necessary repairs or other cause or from unavailability of materials, riot or civil unrest, strike or other labor troubles, earthquake, natural disaster, or any other cause previously or at such time beyond the reasonable control of [Westwood]."
As part of the fourth amendment to the lease in 2016, the parties deleted the section quoted above and replaced it with the following provision: "If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of strikes, lockouts, inability to procure labor or materials, failure of power, restrictive laws, riots, insurrection, war, fire, inclement weather or other casualty or other reason of a similar nature beyond the reasonable control of the party delayed, financial inability excepted (each, a '[f]orce [m]ajeure [e]vent'), subject to any limitations expressly set forth elsewhere in the [l]ease (as hereby amended), performance of such act shall be excused for the period of delay caused by the [f]orce [m]ajeure [e]vent and the period for the performance of such act shall be extended for an equivalent period (including delays caused by damage and destruction caused by such [f]orce [m]ajeure [e]vent). Delays or failures to perform resulting from inability to obtain governmental permits or approvals in a timely fashion, lack of funds or which can be cured by the payment of money shall not be [f]orce [m]ajeure [e]vents." (Bold omitted.)
The court in Poway, in analyzing a force majeure provision nearly identical to the language applicable here, stated, "While we agree with Fitness that the closure orders are 'restrictive laws,' we do not agree that these laws delayed, hindered, or prevented Fitness from performing under the contract. . . . First, as we have already explained, the lease does not require [the landlord] to guarantee Fitness the unlimited right to use the premises as a health club and fitness facility even when prohibited by law. Rather, the obligation owed by [the landlord] was the delivery of the premises to Fitness. [The landlord] fulfilled that obligation. Second, the trial court properly concluded that the obligation owed by Fitness was the payment of rent. There is no evidence or argument before us that the pandemic and resulting government orders hindered Fitness's ability to pay rent. Even if they had, the lease explicitly excludes from the definition of force majeure event any 'failures to perform resulting from lack of funds or which can be cured by the payment of money.' We thus conclude that the plain text of the force majeure provision precludes its application here." (Poway, supra, 87 Cal.App.5th at pp. 892-893.)
Fitness argues we should decline to follow Poway because it misinterpreted the portions of the force majeure provision dealing with inability to pay. In Fitness's view, the exclusion regarding lack of funds "merely states what cannot be a [f]orce [m]ajeure [e]vent (i.e., anything that can be cured by the payment of money). . . . It does not address what may be excused by a [f]orce [m]ajeure [e]vent" (bold omitted). According to Fitness, the closure orders met the definition of a force majeure event because they were "restrictive laws" that "delayed or hindered" Fitness in meeting its obligations under the lease.
Fitness also argues that this case is distinguishable because, unlike in Poway, it presented evidence below that its payment of rent was hindered because the closure orders impacted its revenue. To the extent Fitness did present such evidence, that distinction is irrelevant given Poway's alternative holding that the language at issue explicitly excludes from the definition of force majeure event any" 'failures to perform resulting from lack of funds or which can be cured by the payment of money'" regardless of whether the pandemic and related closure orders hindered Fitness's financial ability to pay. (Poway, supra, 87 Cal.App.5th at p. 893.)
We are not persuaded. The distinction Fitness attempts to draw between force majeure events and acts excused by force majeure events would turn the provision on its head. Fitness had a contractual obligation to pay rent, and the lease makes clear financial inability to perform that obligation is not a force majeure event. (Poway, supra, 87 Cal.App.5th at p. 893.) Financial inability to pay rent does not arise in a vacuum; something causes it. And under Fitness's proffered interpretation, numerous causes of financial difficulty could be redefined as a force majeure event and excuse Fitness from paying rent despite the contract saying the opposite. For example, if an overseas war resulted in a domestic recession that made Fitness's business unprofitable, Fitness's interpretation would suggest that the war and resulting recession was a factor "beyond [Fitness's] reasonable control" that "hindered . . . or prevented" Fitness from paying rent. Because such an interpretation essentially reads out of the force majeure provision the exceptions for "financial inability," "lack of funds," and events that can be "cured by the payment of money," we reject it. (See VFLA Eventco, LLC v. William Morris Endeavor Entertainment, LLC (2024) 100 Cal.App.5th 287, 297 ["We will . . . avoid interpretations . . . 'which would result in an absurdity' "]; Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 957 ["An interpretation rendering contract language nugatory or inoperative is disfavored"].)
Fitness further argues the trial court erred by failing to consider extrinsic evidence of the parties' intent. In particular, Fitness submitted a declaration from Diann Alexander, a Fitness employee in charge of administering the company's leases, along with copies of force majeure provisions in two of Fitness's leases with other landlords. Westwood objected that the declaration lacks foundation because Alexander did not assert that she was involved with the negotiation of either the original lease with Westwood or the 2016 amendment that added the force majeure provision. The trial court overruled Westwood's objection but found the declaration represented only Fitness's subjective intent. (See Salehi v. Surfside III Condominium Owners' Assn. (2011) 200 Cal.App.4th 1146, 1159 [" '[E]vidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language' "].)
We need not decide whether the extrinsic evidence is admissible because, even if so, it is not sufficient to create a triable question of material fact as to the interpretation of the force majeure provision. (See Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.) Alexander stated that the other leases into which Fitness entered, as well as the original unamended lease with Westwood, show "how Fitness's landlords will sometimes insist that payment of rent be carved out from application of the force majeure clause, and how that is accomplished." We do not find these examples suggest the contractual language at issue is reasonably susceptible to Fitness's proffered interpretation (which as noted above is in any event unreasonable).
These example leases include one with a landlord in Amherst, New York, that states after defining "force majeure" that "the provisions of this [s]ection shall not be applicable to . . . [Fitness]'s obligations to pay [r]ent." Similarly, a lease with a landlord in Cerritos states, "nothing herein is intended to release or extend the time period for [Fitness] to pay any rent when due." The final example is the original lease's language in this case, which explicitly barred Fitness from "any rent abatement" if Westwood were prevented from meeting its obligations by an unanticipated event. The language in these leases is more specific than the language in the lease with Westwood, but the gist is the same: if a force majeure event occurs, Fitness still owes rent. The fact that the force majeure provision applicable here has broader rather than narrower language with regard to Fitness's financial inability to pay does not support a reasonable inference that the force majeure provision in the Westwood lease was designed to allow abatement of rent.
C. To the Extent California Law May Recognize it, the Doctrine of Temporary Frustration of Purpose Does Not Require Reversal
Fitness lastly contends the trial court erred in rejecting its argument that the doctrine of temporary frustration of purpose excused it from paying rent while the closure orders were in effect. Westwood disagrees, arguing that the court correctly concluded that there is no temporary frustration of purpose in California. We need not decide this question because, to the extent such a doctrine exists, it cannot apply in a case like this one, where a tenant seeks to remain in possession of a building without paying rent even as the landlord continues to fulfill its obligations under the lease.
Frustration of purpose "is akin to the doctrine of impossibility of performance" in that "both have developed from the commercial necessity of excusing performance in cases of extreme hardship." (Lloyd v. Murphy (1944) 25 Cal.2d 48, 53 (Lloyd).) The doctrines differ, however, in the nature of the hardship. Where impossibility and impracticability require that it be either impossible or at least extremely or unreasonably expensive or difficult to perform one's obligations (Poway, supra, 87 Cal.App.5th at p. 893), frustration of purpose applies where" '[p]erformance remains entirely possible, but the whole value of the performance to one of the parties at least, and the basic reason recognized as such by both parties, for entering into the contract has been destroyed by a supervening and unforeseen event.'" (Dorn v. Goetz (1948) 85 Cal.App.2d 407, 410.)
Frustration of purpose may be triggered by government action. (20th Century Lites, Inc. v. Goodman (1944) 64 Cal.App.2d Supp. 938, 943.) Indeed, many of the published cases on the subject arose from governmental measures imposed during World War II. Lloyd, perhaps the seminal case on frustration of purpose in California, was one such case.
The defendant in Lloyd leased a parcel of land in 1941" 'for the sole purpose of conducting thereon the business of displaying and selling new automobiles,'" but a few months later, the United States entered the war, and the federal government severely restricted the sale of new vehicles. (Lloyd, supra, 25 Cal.2d at p. 51.) The defendant repudiated the lease and vacated the land shortly thereafter, and the landlord sued for unpaid rent. (Ibid.) The defendant argued that frustration of purpose excused him from liability, but the Supreme Court disagreed. "The question in cases involving frustration is whether the equities of the case, considered in the light of sound public policy, require placing the risk of a disruption or complete destruction of the contract equilibrium on defendant or plaintiff under the circumstances of a given case" (id. at pp. 53-54), and the answer to that question depends on the degree to which the risk was unanticipated, as well as whether the unexpected event completely destroyed the prospective value of the contract or merely made it less profitable. (Id. at pp. 54-58.) The advent of prohibition might excuse a tenant who leased a property for sole use as a saloon (id. at p. 57, citing Industrial Development & Land Co. v. Goldschmidt (1922) 56 Cal.App. 507), but not a tenant who leased a property both as a saloon and cigar store. In the latter case, "[i]t was clear that prohibition destroyed the main purpose of the lease, but since the premises could be used for bootblack and cigar store purposes, the lessee was not excused from his duty to pay the rent." (Lloyd, supra, at p. 58, citing Grace v. Croninger (1936) 12 Cal.App.2d 603.)
The defendant in Lloyd failed both parts of this test. At the time the lease was executed, war preparations were already well underway and the risk of war and its potential impact on restricting the production and sale of automobiles was not a remote or unforeseeable contingency. (Lloyd, supra, 25 Cal.2d at pp. 55-56.) In addition, the defendant had failed to show "that the value of the lease has been destroyed. The sale of automobiles was not made impossible or illegal but merely restricted," and "[i]ndeed, [the] defendant testified that he continued to sell new automobiles exclusively at another location in the same county." (Id. at p. 56.) In the view of the Lloyd court, frustration of purpose does not apply "when the purpose of the lease has not been totally destroyed or its accomplishment rendered extremely impracticable or where it has been shown that the lease remains valuable to the lessee." (Id. at p. 58.)
The trial court rejected Fitness's claim of frustration of purpose in this case on the ground that "the law does not recognize [a] 'temporary' frustration defense." (Poway, supra, 87 Cal.App.5th at p. 896.) Rather, "where commercial frustration does apply, the 'legal effect . . . is the immediate termination of the contract.' [Citations.]" (Ibid.) Thus, in 20th Century Lites, Inc. v. Goodman, supra, 64 Cal.App.2d Supp. 938, the owner of a drive-in restaurant successfully invoked commercial frustration to terminate his lease of neon signs from the plaintiff after World War II regulations forbade outdoor lighting at night. (Id. at pp. 941-944.) The regulations were lifted, and the plaintiff neon sign manufacturer petitioned for rehearing, arguing that the 14-month regulation had only suspended the contract, and it could now be reinstated. (Id. at p. 945.) The court disagreed. Because the regulation was expected to remain in place indefinitely, it was" 'so far permanent as naturally and justifiably to determine business judgment and action depending upon it.'" (Id. at p. 946, quoting Allanwilde Corp. v. Vacuum Oil Co. (1919) 248 U.S. 377, 386 [39 S.Ct. 147, 63 L.Ed. 312].)
Fitness argues that other case law supports the application of temporary frustration. For example, in Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001, the court held that temporary impossibility, a doctrine closely related to temporary frustration, applies in California. (Id. at p. 1017.) In U.S. Trading Corp. v. Newmark Grain Co. (1922) 56 Cal.App. 176 (Newmark), a case involving a shipment of barley delayed by an embargo, the court also applied temporary impossibility. The court concluded that the embargo did not dissolve the contract, but merely delayed the date of performance. (Id. at pp. 186-187.)
The doctrines are sufficiently related that the Second Restatement of Contracts addresses them as equivalents. (Rest.2d Contracts, § 269.)
Fitness cites a third case, Bergin v. Van Der Steen (1951) 107 Cal.App.2d 8, in which it claims the court applied the doctrine of temporary frustration of purpose. But the court in Bergin did not purport to decide the case under the doctrine of frustration of purpose and we do not see how Bergin supports Fitness's position on temporary frustration of purpose.
Whether or not the reasoning in these cases can extend to the context of temporary frustration, they reflect a broader principle: a party may not choose to suspend its own obligations under a contract while demanding that the other party continue to perform. In Newmark, the seller's delivery was delayed until after the embargo, but the buyer's obligation to pay was also delayed. (See Newmark, supra, 56 Cal.App. at pp. 177-178.) In Maudlin, the plaintiff had already rendered his performance by selling back shares of the company he worked for upon retirement. (Maudlin v. Pacific Decision Sciences Corp., supra, 137 Cal.App.4th at pp. 1005-1006.) The court held that the company was required to pay the plaintiff for the shares in monthly installments, and if it lacked sufficient retained earnings to do so, the doctrine of temporary impossibility merely suspended its obligation until its financial condition improved. (Id. at p. 1017.) The Second Restatement of Contracts, which accepts the doctrine of temporary frustration, reflects this principle of reciprocity, stating that when one party suspends performance due to temporary frustration, the other side's duty to perform may be suspended as well. (See Rest.2d Contracts, § 267.)
A tenant that remains in possession of real estate without paying rent, even as the landlord continues to perform, necessarily violates this principle. Westwood not only lost rent from Fitness but was unable to seek a new tenant for the space. Fitness, meanwhile, continued to benefit from occupying its suite in Westwood's building. Fitness was able to leave its equipment in place and reopen for business immediately once the closure orders were rescinded at the location its customers already knew, rather than having to lease, build out, and market a new location. A party invoking commercial frustration must prove "that the value of the lease has been destroyed" (Lloyd, supra, 25 Cal.2d at p. 56), not merely reduced. That is impossible for a defendant in Fitness's position, and that is why the courts considering the issue have held that "frustration of purpose did not excuse Fitness . . . from its obligation to pay rent . . . because Fitness . . . did not attempt to rescind the lease and instead remained in possession of the premises." (KB Salt Lake III, LLC v. Fitness Internat., LLC (2023) 95 Cal.App.5th 1032, 1057; accord, Poway, supra, 87 Cal.App.5th at p. 896.) We see no basis for reaching a different conclusion.
DISPOSITION
The trial court's judgment is affirmed. Westwood is awarded its costs on appeal.
We concur: ROTHSCHILD, P. J., CHANEY J.