Filed 3/6/15 Sapinish Inn v. Nara Bank 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 

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 This opinion has not been certified for publication 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. 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

SPANISH INN, INC.,

Cross-Complainant and Appellant,

v.

NARA BANK et al.,

Cross-Defendants and Respondents.

 D066487

 (Super. Ct. No. INC1104681)

APPEAL from a judgment of the Superior Court of Riverside County, John G. 

Evans, Judge. Affirmed.

Law Offices of Nejat Kohan, Nejat Kohan; and Robert S. Gerstein for CrossComplainant and Appellant.

The Song Law Group, Joon Song, Steven Han; Westrup Klick and Rhonda Klick 

for Cross-Defendant and Respondent Nara Bank.

Woodruff, Spradlin & Smart and Mark M. Monachino for Cross-Defendant and 

Respondent City of Palm Springs.
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Grant & Zeko, Jonathan R. Zeko; The Grant Law Firm and Alexander J. Kessler 

for Cross-Defendant and Respondent Pacific L 39.

This action arises out of two loans, one in the amount of $6 million and one in the 

amount of $1.3 million, Nara Bank (Nara) made to Spanish Inn, Inc. (Spanish Inn) to 

rebuild and expand its hotel. The loans were personally guaranteed by Spanish Inn's 

owners, Nejat Kohan and Hormoz Ramy. 

The terms of the loans required Spanish Inn to receive a certificate of occupancy 

from the City of Palm Springs (the City) by a certain date, but Spanish Inn failed to 

comply with that condition. Thereafter, the loans matured and Spanish Inn defaulted on 

both loans by failing to pay the amounts due. 

Nara brought a foreclosure action against Spanish Inn, Kohan and Ramy. Nara 

thereafter assigned its interest in the loans to Pacifica L 39, LLC (Pacifica), and Nara

dismissed its complaint. 

Spanish Inn, Kohan and Ramy filed several cross-complaints against Nara, the 

City, Pacifica and others (collectively, cross-defendants). Thereafter, Kohan and Ramy's 

cross-complaints were dismissed, and Ramy and Kohan do not appeal those dismissals. 

In the last and operative cross-complaint, Spanish Inn asserted causes of action 

against Nara for breach of contract, breach of the covenant of good faith and fair dealing, 

fraud, and indemnity. As against the City, Spanish Inn alleged causes of action for 

breach of contract, breach of the covenant of good faith and fair dealing, unlawful taking 

of private property, and indemnity. However, as against the City, Spanish Inn has limited 

its appeal to the breach of contract and breach of the covenant of good faith and fair 
3

dealing causes of action. As against Pacifica, Spanish Inn asserted causes of action for 

rescission, interference with contractual relationship and interference with prospective 

economic advantage. 

Nara, Pacifica and the City filed demurrers, which the court sustained without 

leave to amend, finding the cross-complaint failed to state facts sufficient to state a cause 

of action against any of the cross-defendants.

Spanish Inn appeals, asserting its cross-complaint stated sufficient facts against 

Nara, Pacifica, and the City. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

I. FACTUAL BACKGROUND

Because this matter comes before us as a result of the court's sustaining crossdefendants' demurrers, we take the factual background from the applicable crosscomplaint, exhibits attached thereto, and matters of which the court took judicial notice.

A. Subdivision Map Approval

On September 7, 2005, the City adopted Resolution No. 21388 conditionally 

approving a tentative subdivision map permitting the subdivision of a 1.46-acre parcel for 

a hotel and residential condominium units at the location of 640 North Indian Canyon, 

Palm Springs (the project). The project also included a use permit authorizing multifamily construction as a part of the project. 

Among the conditions of approval was condition 5 requiring Spanish Inn to be 

"responsible for the design and construction of the street improvements required to 

implement the 'Movie Colony Traffic Calming Program' [Traffic Program]." Condition 6 
4

stated, "The Engineering Division has estimated the total cost of the 'Movie Colony 

Traffic Calming Program' at approximately $362,000 with an estimated fair share of the 

$111,000 assigned to the proposed development." Condition 6 also provided that 

Spanish Inn could request the City to enter into a reimbursement agreement providing for 

reimbursement from other property owners (reimbursement Agreement) also subject to 

the street traffic program: "Reimbursement shall be determined as the proportionate 

share of the cost of constructing the street improvements, as approved by the City 

Engineer, and reimbursement shall be made to the applicant as reimbursements are 

received, if any, in accordance with the terms of the reimbursement agreement."

After the tentative map approval, in 2005 Spanish Inn commenced construction of 

the Traffic Program's offsite street improvements and needed to complete that 

construction before the final subdivision map would be approved by the City. On 

February 13, 2008, the City approved Spanish Inn's final subdivision map, and the offsite 

street improvements were completed at that time. 

B. The Loans

In April 2008 Nara loaned Spanish Inn $6 million for the purpose of constructing 

improvements on the property. The original maturity date of the loan was October 18, 

2009. 

On March 25, 2010, Nara Bank and Spanish Inn agreed to extend the maturity date 

of the $6 million loan. At the time of the extension of the $6 million loan, Nara Bank 

loaned Spanish Inn an additional $1.3 million. 
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In need of further funds, Spanish Inn requested financial assistance from the City. 

On January 10, 2010, the City approved a $500,000 loan agreement, subject to a number 

of covenants and conditions. 

Under article II, paragraph 2.1 of the loan agreement with the City, disbursements 

would be made to Spanish Inn only after a number of conditions were satisfied. Among 

the conditions to disbursement of loan funds were the requirements that (1) no condition 

of default as defined in the agreement has been committed; (2) Spanish Inn was to submit 

to the City an amended use permit application to convert 20 condominium units in the 

previously approved plan to no more than 34 additional hotel units and fully cooperate 

with the City regulatory entities and officials in the City's review of the amended use 

permit application; and (3) all remaining work must be fully completed and a certificate 

of occupancy be completed on or before February 9, 2011. 

Because Spanish Inn was unable to complete construction in a timely fashion, 

Nara extended the maturity dates of the $6 million and $1.3 million loans on two 

occasions, to March 31, 2011, and May 15, 2011, respectively. 

Both loans required Spanish Inn to obtain a certificate of occupancy from the City 

by May 6, 2011. Spanish Inn agreed to this obligation in a change in terms agreement 

(CITA). 

C. Spanish Inn Changes Project

Spanish Inn originally planned for the Spanish Inn Hotel to offer hotel rooms and 

sell condominiums. Spanish Inn thereafter decided to convert the project to only 

providing hotel rooms. However, Spanish Inn concedes that it did not obtain a building 
6

permit for the hotel-only project until May 12, 2011, after the final maturity dates of both 

loans and the deadline for obtaining a certificate of occupancy. 

D. The City Imposes Additional Conditions

In April of 2011 the City notified Spanish Inn of changes that needed to be made 

to the project in order to comply with the Americans With Disabilities Act (ADA). As 

Spanish Inn concedes in its cross-complaint, however, "The changes the City imposed 

meant that the project could not possibly be completed with a Certificate [of Occupancy] 

issued by May 9, 2011."

E. Reimbursement Agreement

Attached to Spanish Inn's fourth amended cross-complaint, but not to its sixth 

amended cross-complaint, is a reimbursement agreement with the City, dated March 7, 

2011. The reimbursement agreement provided for collection and reimbursement of funds 

from the owners of two neighboring properties, Colony Palms Hotel and Indian Manor. 

Upon Spanish Inn substantiating its costs, the City agreed that within a reasonable time it 

would use reasonable efforts to collect up to $45,288 from the Colony Palms Hotel and 

up to $50,000 from the Indian Manor property. Upon receipt of payments from these 

other property owners, the City would then forward the payments on to Spanish Inn. The 

reimbursement agreement stated that it "supersedes all negotiations and previous 

agreements between the parties with respect to all or part of the subject matter 

hereof . . . ." 

According to Spanish Inn, that agreement was contrary to the resolution that 

estimated its share of the costs for the Traffic Project at $111,000. As a result of the 
7

reimbursement agreement, according to Spanish Inn, it was to be reimbursed 

"substantially less than the approximately $400,000 they should have been reimbursed." 

Although acknowledging it signed the reimbursement agreement, Spanish Inn alleges it 

did so only because the City threatened to revoke its permit if it did not do so.1 

F. Spanish Inn Defaults on the Loans

On May 6, 2011, Spanish Inn defaulted on the $6 million and $1.3 million loans 

by failing to obtain the certificate of occupancy. 

On May 15, 2011, the $6 million and $1.3 million loans became due. Spanish Inn 

defaulted on the $6 million and $1.3 million loans by failing to repay the amounts due. 

G. Foreclosure Proceedings and Instant Action

On May 27, 2011, Nara recorded a notice of default. 

On June 8, 2011, Nara filed this action against Spanish Inn, Kohan, and Ramy. 

Thereafter, Nara sold the $6 million and $1.3 million loans to Pacifica. As part of the 

sale, Nara assigned its rights under the deed of trust to Pacifica. The assignment was 

recorded on August 2, 2011. 

On September 1, 2011, Pacifica, as assignee, recorded a notice of sale of the 

Spanish Inn Hotel, setting the trustee's sale for September 22, 2011 at 9:00 a.m. 

However, prior to the sale, Spanish Inn filed a chapter 11 bankruptcy petition. The 

automatic stay thus prevented the trustee's sale from going forward on the date scheduled.

 

1 As we shall explain, post, on appeal Spanish Inn does not assert that the City 

breached the reimbursement agreement. 
8

Thereafter, the bankruptcy court granted Pacifica relief from the automatic stay, 

allowing the trustee's sale to be rescheduled. On December 14, 2011, Pacifica purchased 

Spanish Inn at the trustee's sale. 

H. The Cross-Complaints

On August 1, 2011, Spanish Inn, Kohan, and Ramy filed their first crosscomplaint against Nara, the City of Palm Springs, and three other cross-defendants. 

Spanish Inn did not name Pacifica as a cross-defendant in its initial cross-complaint. 

Thereafter, Spanish Inn filed several additional amended cross-complaints, with the last 

one being the sixth amended cross-complaint, which is the operative pleading in this 

action.

In the sixth amended cross-complaint Spanish Inn asserted three causes of action 

against Pacifica, for rescission of the foreclosure, intentional interference with contractual 

relationship, and intentional interference with prospective economic advantage. The 

sixth amended cross-complaint alleged four causes of action against the City, for breach 

of contract, breach of the covenant of good faith and fair dealing, unlawful taking of 

private property, and indemnity. Spanish Inn's appeal as against the City, however is

limited to the breach of contract and breach of the covenant of good faith and fair dealing

causes of action. Moreover, Spanish Inn asserts in its opening brief that it "is not 

contending on appeal that the Reimbursement Agreement was breached by the City."

The court sustained the City's demurrer without leave to amend. In doing so, the 

court found, as to the causes of action for breach of contract, breach of the covenant of 

good faith and fair dealing, and indemnification asserted against the City:
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"[T]he alleged contracts consist of the tentative tract map approval, 

loan agreement and reimbursement agreement. However the tract 

map approval is 'legislative adjudicatory' in nature not contractual. 

[Citation.] The loan agreement required Spanish Inn to timely 

obtain the certificate of occupancy, which [cross-complainants]

allege they did not do. [Cross-complainants] admit they mistakenly 

included allegations regarding breach of the reimbursement 

agreement. . . . The twelfth cause of action [for indemnification] is 

sustained without leave to amend because [cross-complainants] have

failed to allege any basis for indemnification. [Cross-complainants] 

have not and cannot allege facts showing that they are joint 

tortfeasors."

The court also sustained Nara's demurrer without leave to amend. In doing so, the 

court found as follows:

"As to the 1st and 2nd causes of action [for breach of contract and 

breach of the covenant of good faith and fair dealing], [crosscomplainants] have failed to plead a breach of contract by Nara. 

Although these causes of action [are] are titled 'Breach of Contract', 

[cross-complainants] identify the 'contracts' which were allegedly 

breached simply as: 'Construction Loan Agreements and other 

Related Loan Documents.' No further description is provided, not 

even the dates of the alleged contracts, let alone identification of the 

parties to the 'contracts' . . . . Further, the 'contracts' referred to in 

this cause of action are not attached to the pleading, nor are the 

applicable terms pled verbatim. Although one particular 

'Construction Loan Agreement,' dated April 18, 2008, executed only 

between Spanish Inn and Nara Bank . . . is referred to earlier in the 

pleading [citation] and is attached to the pleading as Exhibit 'D', the 

First Cause of Action does not refer to that Exhibit 'D', or indicate 

that it is the contract that was allegedly breached. Although [crosscomplainants] complain about a whole litany of actions by Nara 

Bank [citation], it is impossible to know whether any of those are 

actually a breach of contract without the required identification of 

the contract and its terms. Further, due to the vagueness of the 

pleading, it is not possible to determine whether the alleged contract 

is written, oral, or implied. [Citation.] [¶] As to the 3rd cause of 

action, [cross-complainants] have failed to plead fraud with the 

requisite specificity. Cross-complainants generally allege that Nara 

fraudulently induced them to pay additional monies. . . . In addition, 

in complaints against a corporation, plaintiff must allege the names 
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of the persons who made the misrepresentations and their authority 

to speak for the corporation. [Citation.] [¶] As to the 12th cause of 

action, [cross-complainants] have failed to allege any basis for 

indemnification."

As to Pacifica's demurrer, the court found:

"[Cross-complainants] have failed to allege any basis for rescission. 

[Cross-complainants] allege only that 'Pacifica and Roes . . . were 

not bona fide purchasers of the promissory note because they were 

aware of the claims . . . herein above alleged before they purchased 

the promissory note.' [Citation.] As noted above, however, [crosscomplainants] have failed to allege any viable claims against, 

presumably, NARA. Moreover, [cross-complainants] have failed to 

allege a basis for setting aside the trustee's sale. [¶] As to the 

[interference claims], [cross-complainants] have failed to allege any 

actions designed to induce a breach of [cross-complainants'] contract 

with NARA or acts that disrupted [cross-complainants'] relationship 

with NARA. [Cross-complainants] allege only that Pacifica 

presented a scheme to NARA under which NARA would withhold 

funding to [cross-complainants] so that [cross-complainants] would 

not be able to timely obtain the certificate of occupancy. In other 

words, Pacifica is alleged to have caused NARA's breach of 

contract. However, as noted above, [cross-complainants] have not 

sufficiently alleged a breach of contract by NARA. [¶] As to the 

12th cause of action [for indemnity] see the court's discussion on

Nara's demurrer."

DISCUSSION 

I. STANDARDS GOVERNING DEMURRERS

When reviewing a demurrer ruling, we determine whether the complaint states a 

cause of action. (Moore v. Regents of University of California (1990 51 Cal.3d 120,

125.) Although we assume that the complaint's well-pleaded allegations are true, we do 

not assume the truth of conclusions of fact or law. (Ibid.) Appellate courts interpret the 

complaint reasonably by "reading it as a whole and all its parts in their context." (Ibid.)
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Facts appearing in exhibits to a complaint, like well-pleaded allegations in the 

complaint, are taken as true on demurrer. (Dodd v. Citizens Bank of Costa Mesa (1990) 

222 Cal.App.3d 1624, 1627.) When the facts in exhibits are contrary to the facts alleged 

in the complaint, however, the exhibits take precedence. (Ibid.)

We need not accept as true allegations that are contradicted by, or inconsistent 

with, matters subject to judicial notice, including exhibits attached to the complaint. (Del 

E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604; Holland v. 

Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.) Appellate courts may rely 

on and accept as true the contents of exhibits attached to the complaint and "treat as 

surplusage the pleader's allegations as to the legal effect of the exhibits." (Barnett v. 

Fireman's Fund. Ins. Co. (2001) 90 Cal.App.4th 500, 505.) 

II. ANALYSIS

A. Nara's Demurrer

1. Breach of contract cause of action

"To state a cause of action for breach of contract, a party must plead the existence 

of a contract, his or her performance of the contract or excuse for nonperformance, the 

defendant's breach and resulting damage. [Citation.] If the action is based on alleged 

breach of a written contract, the terms must be set out verbatim in the body of the 

complaint or a copy of the written agreement must be attached and incorporated by 

reference." (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

Here, the first cause of action against Nara for breach of contract only identifies 

the contracts sued upon as the "Construction Loan Agreements and other Related Loan 
12

Documents." However, the terms of the alleged "contracts" are not specified, nor are the 

particular terms that were allegedly breached. Nor are the alleged contracts attached to 

the cross-complaint and incorporated by reference. Accordingly, the court did not err in 

sustaining Nara's demurrer to this cause of action.

Spanish Inn asserts that because this was Nara's first demurrer, "Spanish Inn was 

never made aware of these claimed deficiencies and was not afforded the opportunity to 

remedy these clearly correctable errors." However, this ignores the fact that the court had 

previously sustained Pacifica's demurrer to that cause of action in the fourth amended 

cross-complaint, without leave to amend, on the same basis. Therefore, Spanish Inn had 

the opportunity to correct this deficiency when it filed its sixth amended cross-complaint

against Nara.

In a supplemental letter brief Spanish Inn has cited two cases in support of its 

breach of contract cause of action against Nara, California Bank & Trust v. DelPonti 

(2014) 232 Cal.App.4th 162, and Dameron Hospital Assn. v. AAA Northern California, 

Nevada & Utah Ins. Exchange (2014) 229 Cal.App.4th 549, that were filed after briefing 

was completed. However, those cases are inapposite. 

In California Bank & Trust v. DelPonti, supra, 232 Cal.App.4th 162, the Court of 

Appeal was presented with the question of whether a waiver of defenses was enforceable 

in guarantees. (Id. at p. 166.) The court there was not presented with the question of 

whether a breach of contract claim had been adequately alleged in a pleading. 

Similarly, Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah 

Ins. Exchange, supra, 229 Cal.App.4th 549 only addressed the well-settled principle that 
13

contract terms may be inferred from usage of the parties. (Id. at p. 569.) Here, in its 

cross-complaint, Spanish Inn did not allege that any terms should be inferred in the loan 

agreements (which, as discussed, are not even identified in the cross-complaint) based 

upon usage of the parties.

Spanish Inn also cites in its letter brief to two cases decided before the briefing in 

this matter that it failed to cite in either of its briefs. These cases also do not assist 

Spanish Inn's position. In Construction Protective Services, Inc. v. TIG Specialty Ins. 

Co. (2002) 29 Cal.4th 189, 198-199, the California Supreme Court held that "[i]n an 

action based on a written contract, a plaintiff may plead the legal effect of the contract 

rather than its precise language." Here, however, not only did Spanish Inn fail to plead 

the legal effect of the contracts it was suing on, it failed to identify them at all. 

Last, in its letter brief, Spanish Inn cites Locke v. Warner Bros., Inc. (1997) 57 

Cal.App.4th 354, 363-368, for the proposition that the covenant of good faith and fair 

dealing bars a party to a contract from acting in a way that frustrates the other party's 

ability to receive the benefits of the contract. However, as we discuss, post, because 

Spanish Inn cannot state a cause of action for breach of contract against Nara, it cannot 

state a claim for breach of the covenant of good faith and fair dealing.

2. Second cause of action for breach of the covenant of good faith and fair 

dealing

A covenant of good faith and fair dealing is implied by law in every contract. 

(Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349.) This covenant, however, is 

tied to the underlying contract from which it arises, and cannot "'"be endowed with an 
14

existence independent of its contractual underpinnings."'" (Ibid.) In other words, the 

covenant "cannot impose substantive duties or limits on the contracting parties beyond 

those incorporated in the specific terms of their agreement." (Id. at pp. 349-350, italics 

added.)

Thus, because the breach of contract cause of action was properly dismissed based 

upon a failure to plead the terms of the contract that were allegedly breached, this cause 

of action likewise fails. 

3. Third cause of action for fraud

Our Supreme Court requires fraud claims to be "pled specifically; general and 

conclusory allegations do not suffice." (Lazar v. Superior Court (1996) 12 Cal.4th 631, 

645.) As our high court explained, "'This particularity requirement necessitates pleading 

facts which "show how, when, where, to whom, and by what means the representations 

were tendered."' [Citation.] A plaintiff's burden in asserting a fraud claim against a 

corporat[ion] is even greater. In such a case, the plaintiff must 'allege the names of the 

persons who made the allegedly fraudulent representations, their authority to speak, to 

whom they spoke, what they said or wrote, and when it was said or written.'" (Ibid.)

Here, Spanish Inn has not met the particularity requirement for pleading a fraud 

claim. In its fraud cause of action Spanish Inn asserts, "Cross Complainants received 

repeated assurances that Nara Bank would promptly honor draws resulting from 

construction work at the Project, and consistent with its prior custom and practice, extend 

the Maturity Date if necessary . . . ." Spanish Inn further alleges, "Nara Bank also 

represented that it would Reallocate the Funds as necessary to enable Cross Complainants 
15

to complete construction and obtain the Certificate of Occupancy." However, there are 

no allegations containing the names of the persons who on behalf of Nara made the 

allegedly fraudulent representations, their authority to speak, to whom they spoke, what 

they said or wrote, and when the representations were said or written. Therefore, the 

court did not err in sustaining Nara's demurrer to this cause of action.

B. Pacifica's Demurrer

1. Fourth cause of action for "rescission" and restitution

"Civil Code sections 2924 through 2924k . . . govern nonjudicial foreclosure sales 

pursuant to a power of sale contained in a deed of trust. 'The purposes of this 

comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, 

inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the 

debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly 

conducted sale is final between the parties and conclusive as to a bona fide purchaser. 

[Citation.]' [Citation.] '[T]he statutory scheme also evidences an intent that a properly 

conducted sale be a final adjudication of the rights of the creditor and debtor [citations] 

and the sanctity of title of a bona fide purchaser be protected.'" (Biancalana v. T.D. 

Service Co. (2013) 56 Cal.4th 807, 813-814.)

"'The purchaser at a foreclosure sale takes title by a trustee's deed. If the trustee's 

deed recites that all statutory notice requirements and procedures required by law for the 

conduct of the foreclosure have been satisfied, a rebuttable presumption arises that the 

sale has been conducted regularly and properly; this presumption is conclusive as to a 

bona fide purchaser.'" (Biancalana v. T.D. Service Co., supra, 56 Cal.4th at p. 814.)
16

Moreover, "[o]nce the [trustee's sale is completed], the trustor has no redemption 

rights." (Ballengee v. Sadlier (1986) 179 Cal.App.3d 1, 5.) Absent a "failure to comply 

with some required procedure which deprive[s] the trustor of his right of reinstatement or 

redemption," trustee's sales cannot be set aside or rescinded. (Moeller v. Lien (1994) 25 

Cal.App.4th 822, 831.) 

Spanish Inn asserts that it is entitled to rescind the foreclosure because when it 

purchased the promissory note from Nara, Pacifica was not a bonafide purchaser because 

it knew of Spanish Inn's claims at the time of the sale. Specifically, Spanish Inn asserts 

that, "[b]y virtue of the allegations alleged herein, [Nara] was not legally justified in 

declaring [Spanish Inn] in default under the promissory note," and therefore Pacifica, as 

Nara's successor, was also not entitled to foreclose. This contention is unavailing. 

As we have discussed, ante, Spanish Inn has not alleged any viable claims against 

Nara. Therefore, it cannot set aside the foreclosure by Pacifica based upon alleged 

wrongdoing by its predecessor, Nara. 

2. Fifth and sixth causes of action for interference with contract and prospective 

economic advantage

The elements of a claim of intentional interference with contractual relations are: 

"'(1) a valid contract between the plaintiff and a third party; (2) defendant's knowledge of this 

contract; (3) defendant's intentional acts designed to induce a breach or disruption of the 

contractual relationship; (4) actual breach or disruption of the contractual relationship; and 

(5) resulting damage.'" (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 

55.) The elements of a claim for intentional interference with prospective economic 
17

advantage are the same, except that instead of a contract between the plaintiff and a third 

party, there must exist between the plaintiff and a third party an economic relationship with 

the probability of future economic benefit to the plaintiff. (Korea Supply Co. v. Lockheed 

Martin Corp. (2003) 29 Cal.4th 1134, 1153.)

Causation is an essential element of a claim of intentional interference with 

contractual relations (as well as a claim of intentional interference with prospective economic 

advantage). (Franklin v. Dynamic Details, Inc. (2004) 116 Cal.App.4th 375, 391.) To 

establish causation, a plaintiff must prove that "but for" a defendant's interference, the 

plaintiff's contractual relationship with a third party would not have been disrupted and 

plaintiff would not have sustained the alleged losses. (Korea Supply Co. v. Lockheed Martin 

Corp., supra, 29 Cal.4th at pp. 1165-1166; Quelimane Co. v. Stewart Title Guaranty Co.,

supra, 19 Cal.4th at p. 55; Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 

271.) 

Here, the cross-complaint fails to allege any facts that support Spanish Inn's

allegation that Pacifica undertook intentional acts designed to induce a breach or 

disruption in Nara Bank's contractual relationship with Spanish Inn. Spanish Inn only 

asserts that Pacifica induced "NARA BANK to engage in acts that would prevent 

SPANISH INN from timely completing the project." The cross-complaint also alleges 

that Pacifica "presented a scheme to NARA BANK under which NARA BANK would 

withhold funds from SPANISH INN with the expectation that SPANISH INN would not 

be able to meet the deadline for obtaining the Certificate of Occupancy, thus allowing 

NARA BANK to declare SPANISH INN in default."
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However, Spanish Inn alleges no facts to support either of these allegations. 

Moreover, because Pacifica was the successor to Nara on the loan, it would be impossible 

for Pacifica to interfere with Spanish Inn's relationship with Nara. Further, Spanish Inn

does not allege what the inducement involved was or when it occurred. Finally, as we 

have discussed, ante, Spanish Inn has not alleged any facts showing that Nara breached 

any provision in any agreement with Spanish Inn. Therefore, because there was no 

breach, there could be no inducement by Pacifica.

C. The City's Demurrer

Spanish Inn contends that the City breached two agreements: Resolution No. 

21388 (the tentative map approval) and the March 2010 Loan Agreement.2 These 

contentions are unavailing. 

1. Resolution No. 21388

Spanish Inn contends that Resolution No. 21388 amounts to a contract because it 

imposed conditions upon Spanish Inn requiring offsite street work and further 

annunciated Spanish Inn's right to seek partial reimbursement of its total cost of 

construction. This contention is unavailing. 

Municipal land use approvals such as the tentative map approval in Resolution No.

21388 are not contractual agreements, but constitute an exercise of the City's police 

power under article XI, section 7 of the California Constitution. (Bownds v. City of 

 

2 The seventh cause of action also alleged that the City breached the reimbursement 

agreement. However, as previously noted, Spanish Inn has elected not to appeal this 

portion of the trial court's ruling. 
19

Glendale (1980) 113 Cal.App.3d 875, 879 ["Land use regulation in California has 

historically been a function of local government under the grant of police power 

contained in California Constitution, article XI, section 7."].) 

Under Government Code section 66474, a municipality may approve, or 

conditionally approve, a tentative subdivision map and when it does so, it is acting in a 

quasi-judicial capacity. (Griffis v. County of Mono (1985) 163 Cal.App. 3d 414, 426 

["approval of a tentative subdivision map . . . is an adjudicatory administrative 

decision"].) Thus, the City's adoption of Resolution No. 21388 did not create a contract 

as to the offsite improvements. 

Spanish Inn asserts that if Resolution No. 21388 is not a contract then that means 

that local agencies such as the City may escape any financial liability for the street 

improvements. However, the City's responsibility for collecting shares from the 

adjoining landowners is governed by the terms of the reimbursement agreement. 

However, as noted, ante, Spanish Inn has not challenged that agreement on appeal, and 

therefore this issue has been waived. 

2. The loan agreement 

In its seventh cause of action for breach of contract, Spanish Inn alleges that the 

City breached its loan agreement with Spanish Inn by "terminating the Loan Agreement 

and failing to disburse loan proceeds to Cross-Complainants after preventing CrossComplainants from performing a condition precedent to disbursement . . . ." Spanish Inn 

further alleges that, "[as] a direct and proximate result of City's conduct and breach of its 

agreements . . . Cross-Complainants . . . were unable to pay all of their subcontractors and 
20

material suppliers, unable to complete construction of the SPANISH INN project, and 

ultimately lost the project . . . ."

As we have discussed, ante, where a cause of action is based upon a written 

contract, "the terms must be set out verbatim in the body of the complaint or a copy of the 

written agreement must be attached and incorporated by reference." (Harris v. Rudin, 

Richman & Appel, supra, 74 Cal.App.4th at p. 307.) Spanish Inn's failure to do so dooms 

its breach of contract claim against the City. 

Moreover, the City's obligation to make loan disbursements under its loan 

agreement with Spanish Inn arose only upon Spanish Inn's performance of several 

conditions, including Spanish Inn's completion of the project. Spanish Inn's own 

allegations in the cross-complaint demonstrate it had no financial capacity to complete 

the project because of its dispute with Nara Bank over funding obligations. It was 

Spanish Inn's difficulty with Nara Bank in obtaining ongoing progress payments which 

caused the failure to meet the condition precedent of obtaining a certificate of occupancy 

by the loan agreement's deadline of May 6, 2011. Thus, Spanish Inn failed to allege a 

required element of its breach of contract cause of action: that the City's actions caused 

the damages Spanish Inn allegedly suffered. 

Moreover, because Spanish Inn cannot state a cause of action for breach of 

contract, its cause of action against the City for breach of the covenant of good faith and 

fair dealing fails as well. 
21

DISPOSITION 

The judgment is affirmed. Cross-defendants shall recover their costs on appeal. 

NARES, J.

WE CONCUR:

BENKE, Acting P. J.

McINTYRE, J.