Filed 5/19/16 Thee Aguila v. ERDM CA2/5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

THEE AGUILA INC.,
Plaintiff and Appellant,

v.
ERDM, INC. et al.,
Defendants and Respondents. B263005
(Los Angeles County Super. Ct. No. VC063679)

APPEAL from a judgment of the Superior Court of Los Angeles County, Thomas I. McKnew, Jr. Affirmed

. Law Offices of Guinevere M. Malley and Guinevere M. Malley for Plaintiff and Appellant. Century Law Group and Karen A. Larson for Defendants and Respondents.2 I. INTRODUCTION

Plaintiff
, Thee Aguila, Incorporated
, appeals from a judgment entered in an
unlawful detainer action following a bench trial. Plaintiff filed an unlawful detainer action against defendants, ERDM, Incorporated
, Edgar Fragoso, San tiago Acuna and Eva
Meneses. Plaintiff relied on a commercial lease between it and defen dants. Under the lease, defendants were required to maintain public liability insurance which includes a

cross

- liability endorsement

. We shall describe a cross

- liability endorsement later in this opinion. Plaintiff asserted defendants did not provide th e required cross

- liability

covera ge. Plaintiff served a default notice indicat ing the lease would be terminated if the
default was not cured within 30 days

. Defendants did not cure the default. The trial
court found defendants did not have the required insurance coverage. But , the trial court
did not find the breach meri ted forfeiture of the lease. The trial court found in defendants’ favor and against plaintiff on the unlawful detainer claim

. We affirm.

II. BACKGROUND

A. Plaintiff ’ s Comp laint and the Lease

On December 5, 2013, plaintiff filed an unlawful detaine r action against
defendants. Plaintiff owns real property , which is used as a nightclub, located at 8825 East Washington Boulevard in Pico Rivera , California (the property). Pl aintiff and
ERDM , Incorporated are California corporations. ERDM, Incorporated, Mr. Fragoso, Mr. Acuna, and Ms. Meneses are tenants and parties to a lease agreement. On May 1, 2000, the previous property owner , Jose G. Hernandez, Mr. Acuna and Mr. Frag oso entered into a comme rcial lease of the property. The lease ’ s term was from May 1 , 2000 until April 30, 2015. Paragraph 11, subparagraph (b) of the lease describes the requirements for liability insurance on the property: “ Tenant at its sole cost and expense shall maintain during the term of this Lease public liability insurance . . . and3

property damage limits . . . , insuring against all liability of Tenant and its authorized representatives arising out of and in connection with Tenant ’ s use or occu pancy of the Premises [the property]. . . . Both Landlord and Tenant shall be named as additional insureds, and the policies shall contain cross

- liability endorsements. Subject to review by Tenants insurer. [sic] If Tenant shall fail to procure and mai ntain such insurance the Landlord may, but shall not be required to, procure and maintain same at the expense of Tenant and the cost thereof, together with interest thereon . . . shall become due and payable as additional rental to Landlord . . . . ” Parag raph 15, subparagraph (b) describes
the l essor’s remedies: “ The Landlord shall have the following remedies if Tenant
commits a default under this Lease. These remedies are not exclusive but are cumulative and in addition to any remedies now or hereafter allowed by law. ” Paragraph 32
describes what are covena nts and conditions of the lease, “ Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition. ” Paragraph 15, subparagraph (a) provides how a default occurs: “ The occurrence of any one or more of the following events shall constitute a default and b r each of this
L ease by Tenant: [¶] . . . [¶] (2) F ailure to perform any other provision of this Lease is [sic] the failure to perform is not cured within thirty ( 30) days after written notice thereof has been given to Tenant by Landlord. If the default cannot reasonably be cured within said thirty (30) day period, Tenant shall not be in default under this Lease if Tenant
commences to cure the default within the th irty (30) day period and diligently prosecutes the same to completion. [¶]

. . . Notices given under this paragraph shall specify the alleged default and the applicable lease provisions, and shall demand that Tenant perform the provisions of this Lease

. . . within the applicable period of time. No such notice
shall be deemed a forfeiture or termination of this Lease unless Landlord so elects in the
notice. ” On February 1, 2006, plaintiff and defendants en tered into a lease addendum.
Plaintiff bec ame the lessor

. De fendants became the tenants. All other terms and
conditions of the lease remained the same. On February 7, 2006, the parties entered into4

another lease addendum. The parties agreed to increase the occupancy of the property in exchange for a rental increase. All other terms remained in effect. Plaintiff allege s defendants failed to procure insurance which include s cross

liability coverage

. On October 30, 2013, plaintiff served defendants a default notice regarding the lack of cross

- lia bility insurance. Defendants were provided 30 days to cure
the defect or be found in default. The following appears in the October 30, 2013 default
notice: “ Under P aragraph 15(a)(2) of the Lease you have 30 days to provide written proof that the sub

ject policy has a cross

- liability endorsement or doesn ’ t exclude insured
vs. insured claims. You are currently in default under the terms of the Lease and [plaintiff] as [lessor] hereby terminates the Lease, pursuant to the terms of the Lease, if you fail to cure said default within the next 30 days. ” Defendants did not provide proof they had secured cross

- liability insurance coverage

. Plaintiff request s the following as relief : attorney ’ s fees ; possession of the premises; forfeiture of the lease ; the r emainder
of the rent owed for the lease term ; and such other relief as proper

. The matter proceeded to a bench trial on July 3, 2014.

B. Trial

1. Cynthia Rodriguez ’ s Testimony

Ms. Rodriguez served as defendants’ insurance agent. In September 2013 , she helped provide insurance on the property for defendants. Topa Insurance Co mpany provided the insurance. The Topa Insurance Company policy went into effect on September 6, 2013. The Topa Insurance Company policy covered : general liability ; liquor liability ; and assault and battery. Ms. Rodriguez e

- mailed the Topa Insurance Company policy to Henry Aguila, plaintiff ’ s owner

. Mr. Aguila sent a responsive e

- mail inquiring whether the Topa Insurance Company policy provided insured versus insur ed exclusion, also known as a cross

- suit o r cross

- liability exclusion. The Topa Insurance Company policy did have cross

- liability coverage

. Ms. Rodriguez informed Mr. Aguila5

she would attempt to acquire a cross

- liability endorsement o n the Topa Insurance Company policy

. On September 23, 2013, Topa Insurance Company notified Ms. Rodriguez it
would cancel the insurance. The Topa Insurance Company policy was cancelled in
November 2013. Ms. Rodriguez later acquired another policy through Golden Bear
Insu rance Co mpany

. The Golden Bear Insurance Company policy was effect ive November 18, 2013. Ms. Rodriguez could not identify a provision of the Golden Bear Insurance Company policy that specifically exclud ed cross

- liability coverage. Golden
Bear Insurance Company sent notice to Ms. Rodriguez that it was cancelling the policy
sometime i n November or December 2013. The Golden Bear Insurance Company policy was subsequently ca ncelled on January 23, 2014. Ms. Rodriguez did not send information regarding the Go lden Bear Insurance Company policy to Mr. Aguila.

2. Charles Wright ’ s Testimony

Mr. Wright was an insu rance broker for defendants. He helped to broker liability insurance for the property. Mr. Wright helped defendants obtain liability insurance from Navigators Specialty Insurance Company. The Navigators Specialty Insurance Company policy provided for coverage between August 3 0 through September 9, 2013. Mr. Acuna
cancelled the Navigators Specialty In surance Company because Ms. Rodriguez obtained a cheaper policy from Topa Insurance Company

. The Navigators Specialty Insurance Company did include a cross

- suit exclusion, but only between named insureds. Mr. Wright classified plaintiff as an additional insured, not a named insured. Mr. Wright became defendants ’ insurance broker again in Januar y 25, 2014. Mr. Wright helped defendants acquire insurance through th e Kinsale Insurance Company.
The Kinsale Insurance Company policy was in effect at the tim e of trial. The Kinsale Insurance Company policy excluded coverage for cross

- suits between the lessor and a
tenant.6 3. Marjorie Segale ’ s Testimony

Ms. Segale , an insurance agent, broker, consultant an d instructor, testified on plaintiff’s behalf involving co mmercial insurance policies. She explained that a named insured was the policy holder on the insurance. The named insured paid the premium and
received the refunds. An additional insured is covered under the policy. Ms. Segale
testified cros s

- liability coverage protects an insured against claims brought by another
insured under the same policy. Standard commercial general liability p olicies covered

cross

- suits. Ms. Segale testified the Navigators Specialty Insurance Company policy
would not exclude a lawsuit between a lessor and a tenant. The Golden Bear Insurance Company policy did not exclude cross

- suits. The Kinsale Insurance Company policy did
have an insured versus insured exclusion.

4. Mr. Fragoso ’ s Testimony

Mr. Fragoso received the 30

- day notice of default from Mr. Aguila. He informed
his insurance brokers sometime in November 2013 of the issue. Ms. Rodriguez and Mr. Wright both said to Mr. Fragoso that it was almost impossible to secure cross

- liability

cov erage

. The difficulty in securing cross

- liability coverage arose because Mr. Aguila
had ma de several insurance claims. Mr. Fragoso relied on his insurance broker to handle
the insurance matter. Mr. Fragoso did not correspond with Mr. Aguila in any manne r regarding the 30

- day notice of default. Mr. Fragoso did not know there was an issue until Mr. Aguila served the unlawful detainer action.

5. Mr. Aguila ’ s Testimony

On October 30, 2013, Mr. Aguila mailed a 30

- day notice regarding lack of cross

liab i lity coverage to defendants. Mr. Aguila never received proof a policy providing

cross

- liability coverage durin g this 30

- day notice period. Mr. Aguila never received a7

copy of the Golden Bear Insurance Company policy

. Mr. Aguila would not have filed
the unlawful detainer action if defendants provided the Golden Bear Insurance Company policy to him. Mr. Aguila did not receive a copy of the Topa Insurance Company policy until January 2014. Ms. Rodriguez never sent Mr. Aguila a copy of the Topa Insuranc e Company policy

. Ms. Rodriguez did send Mr. Aguila a December 27, 2013 e

- mail which contained the certificate of liability insurance and a casualty department binder. That
information indicated Topa Insurance Company policy exclud ed cross

- liability cove rage. Mr. Aguila was not notified Topa Insurance Company policy had ca ncelled its insurance policy.

C. Statement of Decision and Judgment

On September 8, 2014, the trial court issue d its statement of decision. The trial court found, “ [T] he tenants did not have the required coverage during part of the lease term nor at time of trial nor during the time the 30 days cure notice was in effect. ” But
the trial court refused to find a forfeiture: “ Both sides rely on the old case of Knight v. Black (1912) 19 Cal.App. 518. This case does control the outcome of this case. In Knight, supra, the court said: ‘ Ordinarily ’ to avoid forfeiture due to breach of terms and provisions contained in a lease, the language ‘ shall be construed as covenants when it can be reasonably done , but a covenant instead of a condition will never be implied contrary
to the clear intent of the parties. ’ (Underlining added for emphasis). In Knight, supra, pages 527

- 528, the court further stated, ‘ waste, non

- repair or non

- insurance ’ are conditions and do not excuse a forfeiture. [¶] This case is far different than Knight, supra, as there is a clear remedy available to landlord if tenant fails to acquire cross

liability insurance. Although landlord need not obtain the coverage and charge it back to tenants as rent, such option is specifically expressed and available. The court will interpret the lease most favorable to tenants to avoid forfeiture. The lease provides the sole remedy available to landlord should the tenants for wha tever reason fail to provide8

cross

- liability coverage. The court deems this to be a reasonable interpretation of paragraph 11. Therefore
, the pertinent language is deemed to be a covenant. ” The trial
court determined defendant s were the prevailing party

. Plaintiff filed objections to the
trial court ’ s sta tement of decision. The trial court overruled plaintiff ’ s objections and adopted its statement of decision as its final ruling.

D. Plaintiff ’ s New Trial Motion

On December 8, 2014, plaintiff fil ed a new trial motion

. Plaintiff asserted there

was newly discovered evidence that could not be secured prior to trial. Plaintiff relied on Mr. Aguila’s declaration. After the trial completed, Mr. Wright , on defendant’s behalf

was able to obtain insuran ce wi th cross

- liability coverage. Plaintiff also argued the trial

court ’ s ruling was unsupported by the law. Plaintiff requested the matter be converted to a regular civ il action for contract breach. Mr. Wright filed a declaration stating that after
tri al cross

- liability coverage was secured and it applies for the balance of the lease term. During the trial, such coverage was unavailable. Plaintiff ’ s new trial motion was denied and judgment was entered in defendant’s favor on February 3, 2015. This ap peal
followed.

III. DISCUSSION

A. Key Legal Standard s

We review the trial court ’ s findings of fact, whether express or implied, to determine if they are supported by substantial evidence. ( Palm Property Investments, LLC v. Yadegar (2011) 194 Cal.App.4th 1419, 1425; SFPP, L.P. v. Burlington Northern & Santa Fe Railway Co. (2004) 121 Cal.App.4th 452, 462.) We review the trial court ’ s legal conclusions de novo. ( Palm Property Investments, LLC v. Yadegar , supra, 194 Cal.App.4th at pp . 1425

- 1426; ASP Properties Group, L.P. v. Fard, Inc. (2005) 1339

Cal.App.4th 1257, 1266.) Code of Civil Procedure, section 1161 subdivision (3) defines
when the tenant is guilty of unlawful detainer: “ When he or she continues in possession, in person

. . . , after a neglect or failure to perform other conditions or covenants of the lease or agreement under which the property is held, including any covenant not to assign or sublet, than the one for the payment of rent, and three days ’ notice, in writing,

r equiring the performance of such conditions or covenants, or the possession of the property, shall have been served upon him or her

. . . . Within three days after the service of the notice, the tenant

. . . may perform the conditions or covenants of the lease or pay the stipulated rent, as the case may be, and thereby save the lease from forfeiture

. . . . ” The lease provides for a 30

- day notice period. At the time of trial, defendants were i n possession of the property. However, the breach of a lease ’ s condition or covenant may be insufficient to permit a plaintiff to secure termination of a lease and restitution of the premises. T he
breach of the lease term must be material: “ Plaintiff argues in its opening brief that

‘ [t]here is nothing in CC P 1161(3) that requires that the breach be substantial before a tenant can be guilty of unlawful detainer.

. . . ’ Although not expressly set forth in Code of Civil Procedure section 1161(3), this requirement is set forth in case law. ( Keating v.
Preston (1940) 42 Cal.App.2d 110, 115; Feder v. Wreden Packing & Provision Co. (1928) 89 Cal.App. 665, 673.) Whether a particular breach will give plaintiff landlord the right to declare a forfeiture is based on whether the breach is material. ‘“ The law
sensibl y recognizes that although every instance of noncompliance with a contract ’ s terms constitutes a breach, not every breach justifies treating the contract as terminated. [Citations.] Following the lead of the Restatements of Contracts, California courts al low termination only if t he breach can be classified as ‘ material, ’ ‘ substantial, ’ or ‘ total. ’ [Citations.] ”’ ( Superior Motels, Inc. v. Rinn Motor Hotels, Inc., supra, 195 Cal.App.3d at p. 1051.) ” ( NIVO 1 LLC v. Antunez (2013) 217 Cal. App. 4th Supp. 1, 5 ; Boston LLC v. Juarez (2016) 245 Cal.App.4th 75 , 82 .)10 B. Cross

- Liability Coverage

Cross

- liability insurance provides coverage for an insured when sued by another insured under the same policy. A Texas appellate court described such coverage:

“ Under the lease, [Volume Millwork, Inc.] was required to obtain a policy in which the
landlord was named as an additional insured with a cross

- liability endorsement. A cross

liability endorsement provides liability coverage when an additional insured sues the named insured for negligence even though they are both covered by the same policy. See Rod D. Margo, Aspects of Insurance in Aviation Finance , 62 J. Air L. & Com. 423, 457 (1996) ( ‘ A cross

- liability clause is a provision in a liability policy under w hich it is agreed that the inclusion of more than one insured in the policy will not preclude the right of the original insured to recover for claims made against the original insured by additional insureds or their employees. ’ ). Therefore, parties to the lease contemplated [[Volume Millwork, Inc.] ] would obtain $1,000,000 in liability coverage that would benefit the landlord by providing indemnification for [[Volume Millwork, Inc.] if the hangar were damaged because of [Volume Millwork, Inc. ’ s] negligenc e. ” ( West Houston Airport, Inc. v. Millennium Ins. Agency (Tex.App. 2011) 349 S.W.3d 748, 753

- 7 54 ; see City of Santa Monica v. Royal Indem. Co. (1958) 157 Cal.App.2d 50 , 53, 56.)

C

. Breach of Lease

As noted, the trial court found
, “ [T] he tenants did not have the required coverage during part of the lease term nor at time of trial nor during the time the 30 days cure
notice was in effect. ” The trial court thus implicitly found defendants had breached the
lease. We defer to the trial court ’ s resolutio n of factual issues and its credibility assessment. ( Marriage of Boswell (2014) 225 Cal.App.4th 1172, 1175; Maslow v.
Maslow (1953) 117 Cal.App.2d 237, 243 , disapproved on another point in Liodas v.
Shadi (1977) 19 Cal.3d 278 .) Substantial evidence supports the trial court ’ s finding. The Topa Insurance Company policy , which was in effect when plaintiff served the 30

- day11

default notice of default, exclud ed cross

- liability coverage. The Golden Bear Insurance Company policy insurance, which purportedl y did cover cross

- liability, was cancelled shortly after it was obtained. Neither defendants nor their insurance broker responded to plaintiff ’ s 30

- day notice of default. The Kinsale Insurance Company policy , which was in effect at the time of trial, spe cifically excluded cross

- liability coverage between
landl ord and tenant.
Defendants assert the term “ [s]ubject to review by Tenants[’ ] insurer ” absolved them of responsibility for obtaining insurance wi th cross

- liability coverage. Defendants
cite to te stimony which suggested they could rely solely upon their insurance broker to obtain the proper insurance. The language “ [s] ubject to review by Tenants [’ ] insurer ” does not excuse the duty to secure cross

- liability coverage . Insurance brokers are not
ins urers. Defendants present no legal argument which would permit us to reverse the
trial court ’ s finding they breached the lease.

D . Materiality of the Breach

Plaintiff argues the trial court erred in finding no forfeiture of the lease occurred

. Plaint iff reasons the lease’s express terms provide it may declare a forfeiture if
defendants breached a condition or covenant

. We first address whether procuring
insurance with cross

- liability coverage is a condition or covenant. Whether the provision
is a co ndition or a covenant is immaterial. Paragraph 32 of the lease provides, “ Each provision of this Lease performable by Tenant shall be deemed both a covenant and a
condition. ” Also, section 1161, subdivision (3) permits a judgment in unlawful detainer
be entered when a tenant is in violation of “ conditions or covenants ” of a lease

. The unlawful detainer statute does not distinguish between conditions and covenants. We turn now to the question of whether the trial court could find the breach of the
condition or covenant to provide cross

- liability coverage to be not material. As noted, a trial court retains discretion to refuse to issue a judgment in unlawful detainer if the breach of the covenant or condition is not material, substantial or total. ( Superior Motels,12

Inc. v. Rinn Motor Hotels, Inc., supra, 195 Cal.App.3d at p. 1051 ; NIVO 1 LLC v. Antunez , supra, 217 Cal.App.4th Supp. at p. 5 .) Generally, the materiali ty of a breach is a factual question. ( Brown v. Grimes (2011) 192 Cal.App.4th 265, 277; Superior Motels, Inc. v. Rinn Motor Hotels, Inc. , supra, 195 Cal.App.3d at pp. 1051

- 1052.) Whether
material breach of a contract has occurred is reviewed for substant ial evidence. (See Porter v. Arthur Murray, Inc. (1967) 249 Cal.App.2d 410, 423; Asso. Lathi ng etc. Co. v. Louis C. Dunn, I

nc. (1955) 135 Cal.App.2d 40, 51.) Here, the trial court found the breach was not material. Substantial evidence supports that con clusion. Defendants had maintained liability insurance and attempted, albeit unsuccessfully, to secure cross

- liability coverage. Further, the lease provided plaintiff could secure the coverage and then pass the costs on to defendants. Under these
circum stances, the trial court could reasonably find that the breach was not material,
substantial or total. The trial court c ould reasonably therefore enter judgment in
defendant ’ s favor.

E . Failure to Make a Finding in the Statement of Decision.

Plaintiff contends, “ The trial court fails to make a finding in regards to the uncontradicted evidence presented that appellant did attempt to exercise this remedy but respondent refused to provide appellant with the necessary documents. ” Plaintiff filed objections to the trial court ’ s statement of decision. In those objections, plaintiff argued that it was never provided with the necessary documents so that it could secure cross

liability coverage. Plaintiff has failed to demonstrate the failure to addr ess this collateral issue permits reversal. ( Central Valley General Hosp. v. Smith (2008) 162 Cal.App.4th 501, 513; In re Marriage of Burkle (2 006) 139 Cal.App.4th 712, 736, fn. 14.)13 F . New Trial Motion

Plaintiff argues the trial court erroneously denied its new trial motion premised on newly discovered evidence and errors at law. We review this contention for an abuse of
discretion. (

Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 859; Wall Street
Network Ltd. v. New York Tim es Co. (2008) 164 Cal.App.4th 1171, 1176.) In large part
, plaintiff reargued the issues that had previously been adjudicated by the trial court. As noted, Mr. Aguila and Mr. Wright filed declarations which indicated that after trial
defendants secured cr oss

- liability coverage for the lease term’s duration. W ithout abusing its discretion, the trial court could rule Mr. Aguila’s and Mr. Wright’s
declaration s added nothing to the issues it had previously decided. No abuse of
discretion occurred.14 IV. DISPOSITION

The February 3, 2015 judgment is affirmed

. Defendants, ERDM, Incorporated, Santiago Acuna, Edgar Fragoso, and Eva Meneses, shall recover their costs incurred on appeal from plaintiff, Thee Aguila, Incorporated . Any request for attorney fees incurred on appeal should be pursued pursuant to California Rules of Court, rules 3.1702 and 8.278(d)(2).
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

TURNER, P. J.

We concur:

BAKER, J.

KUMAR, J. *

* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.