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Filed 6/29/23 Elqare Enterprises v. Red Whale CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or 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. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

ELQARE ENTERPRISES, INC.,

Plaintiff and Respondent,

v.

RED WHALE, LLC,

Defendant and Appellant.

 A166085

 (Marin County

 Super. Ct. No. CIV 

 2200151)

In 2019, Red Whale, LLC (Red Whale or the company) leased 

commercial space from Elqare Enterprises, Inc. (Elqare). During the COVID19 pandemic, the company failed to pay all rent due, prompting Elqare to file

an unlawful detainer complaint against the company and its manager, Sean 

Boyd. After an unreported bench trial, the court entered judgment against 

the company, concluding it failed to prove the affirmative defense of

frustration of purpose. We affirm.

BACKGROUND

In May 2019, Elqare leased space in a commercial building in Mill 

Valley to Red Whale, a coffee company.

1 Red Whale intended to remodel the 

1 In lieu of a reporter’s transcript, Red Whale filed a modified settled 

statement containing the parties’ respective summaries of the evidence 
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premises before opening, so Elqare offered it a six-month grace period. The 

five-year lease — which began in October 2019 and had two five-year options 

to renew — gave the company the right to use the premises to operate 

a coffee shop “and for no other purpose” without Elqare’s “prior written 

consent.” An addendum to the lease permitted the company to use the 

premises for “other products typically sold in a majority of [the company]’s 

stores, subject to exclusive uses granted” to the building’s other tenants, and 

it allowed the company to sell certain company apparel and food items. The 

lease does not contain a force majeure provision.

Red Whale was unable to acquire permits and open for business before 

the pandemic began in early March 2020. In November, the company opened 

for takeout. Over the next year, the company intermittently paid partial rent 

or no rent at all. By March 2022, the company owed nearly $180,000 in 

unpaid rent. After serving a notice to pay or quit, Elqare filed an unlawful 

detainer action and sought possession of the premises, past-due rent, and 

damages. Red Whale’s answer raised several affirmative defenses, including

frustration of purpose. The matter proceeded to trial.

In its trial brief, Red Whale relied on the frustration of purpose 

defense — it asserted an emergency proclamation issued by Governor 

Newsom in March 2020 precluded it from using the “premises for any 

purpose, specifically the intended use in the Lease as a coffee shop” and, as 

a result, its obligation to pay rent was excused for periods of time “when no 

use of the premises was allowed.” The company urged the trial court to take 

judicial notice of Governor Newsom’s Executive Order No. N-33-20, known 

adduced at trial. (See Cal. Rules of Court, rule 8.137; all rule references are 

to the Rules of Court.) Our factual summary is drawn in part from the 

modified settled statement, with quotations of the parties’ testimony taken

from that document.
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colloquially as the March 2020 “stay-at-home order,” and of a November 2020 

Marin County news release closing indoor dining (collectively, temporary 

closure orders). The court judicially noticed the existence of the documents, 

but not their meaning.

At a one-day bench trial, Elqare’s manager testified Elqare gave Red 

Whale a six-month grace period to get its “business up and running,” but the

company “had an issue with [its] builder” and spent more than six months 

preparing to open. The manager further testified the lack of “proper permits” 

prevented the company from partially opening during the pandemic. Boyd 

testified he paid rent on the company’s behalf “until May 2020, when he was 

prohibited by the state and county governments from utilizing the premises 

at all due to the emergency created by” the pandemic. He admitted, however, 

that the company failed to obtain “proper permits to open” before the 

temporary closure orders were issued. The company offered evidence it 

opened for take-out service in November 2020, and that it served takeout for 

periods of time in 2020 and 2021. Boyd acknowledged the company’s second 

location in Marin County operated continuously throughout the pandemic.

Thereafter, the trial court issued a minute order with its findings. The 

court determined judgment “shall enter” for Elqare and against Red Whale 

for possession of the premises, $153,119 in unpaid rent, and $46,246.62 in 

damages. As relevant here, it concluded the company had not proven the 

affirmative defense of “frustration of purpose by a preponderance of the 

evidence. That defense requires an [unforeseen] law or regulation that 

renders performance under the lease impossible.” (All capitals omitted.) As 

the court observed, the company had not explained the “meaning or impact”

of the temporary closure orders on its “operations at any particular period of 

time.” (All capitals omitted.) The court, however, declined to find Boyd 
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individually liable under an alter ego theory; it later denied Elqare’s motion 

to reconsider that ruling. In June 2022, the court entered judgment for 

Elqare.

DISCUSSION

Red Whale contends the trial court erred by concluding it failed to 

prove frustration of purpose. Before reaching that issue, we must 

address Elqare’s assertion that the appeal is untimely. (Santa Clarita 

Organization for Planning & Environment v. Castaic Lake Water Agency

(2016) 1 Cal.App.5th 1084, 1095 [timeliness of appeal is a “threshold 

procedural question”].) Generally, a notice of appeal must be filed on or 

before the earliest of 60 days after the superior court clerk or a party serves 

a file-endorsed copy of the judgment or notice of entry of judgment showing 

the date either was served or — if no such notice is given — within 180 days 

after entry of judgment. (Rule 8.104(a)(1)(A)–(C).) Here, judgment was 

entered on June 13, 2022, but the record contains no evidence the superior 

court clerk or a party served a file-endorsed copy of the judgment or notice 

of entry of judgment. Thus, the time to appeal did not expire until 180 

days after judgment was entered, and the notice of appeal — filed on 

September 8 — is timely. (Thiara v. Pacific Coast Khalsa Diwan Society

(2010) 182 Cal.App.4th 51, 56–58.) The company’s service of notice of entry 

of the order denying Elqare’s reconsideration motion did not trigger the 

deadline to appeal the judgment. (See Reynolds v. City of Calistoga (2014) 

223 Cal.App.4th 865, 871.)

We now turn to the merits. If proven, the frustration of purpose 

doctrine “is a defense to an unlawful detainer action.” (Underwood v. Corsino

(2005) 133 Cal.App.4th 132, 135; SVAP III Poway Crossings, LLC v. Fitness 

Internat., LLC (2023) 87 Cal.App.5th 882, 895 (Fitness Internat.) The 
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doctrine is rooted in Restatement Second of Contracts, which provides that 

when, “after a contract is made, a party’s principal purpose is substantially 

frustrated without [their] fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made, 

[their] remaining duties to render performance are discharged, unless the 

language or the circumstances indicate the contrary.” (Rest.2d Contracts,

§ 265; see also 1 Witkin, Summary of Cal. Law (11th ed. 2023) Contracts, 

§§ 868–869, pp. 914–915.) Put another way, the doctrine “excuses 

contractual obligations where performance 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.” (Fitness Internat., at 

p. 895, internal quotation marks and brackets omitted.)

“A party seeking to escape the obligations of its lease under the 

doctrine of frustration must show: (1) the purpose of the contract that has 

been frustrated was contemplated by both parties in entering the contract; 

(2) the risk of the event was not reasonably foreseeable and the party 

claiming frustration did not assume the risk under the contract; and (3) the 

value of counterperformance is totally or nearly totally destroyed.” (Fitness 

Internat., supra, 87 Cal.App.5th at p. 895.) When commercial frustration of 

purpose applies, “ ‘the legal effect . . . is the immediate termination’ ” of the 

lease. (Id. at p. 896.) For this reason, California law does not recognize 

a “ ‘temporary’ frustration defense.” (Ibid.)

“Governmental acts that merely make performance unprofitable or 

more difficult or expensive do not suffice to excuse a contractual obligation.” 

(Fitness Internat., supra, 87 Cal.App.5th at p. 895.) And frustration of 

purpose is not available when “counterperformance has been and remains 
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valuable.” (Id. at pp. 895–896.) Applying these principles, Fitness Internat.

recently held a “temporary government closure of a fitness facility for 

a period of months” during the pandemic when the premises were leased for 

“more than 19 years . . . [did] not amount to the kind of complete frustration 

required for the doctrine to apply.” (Id. at p. 895.)

At trial, Red Whale had the burden to prove frustration of purpose by 

a preponderance of the evidence. (Aguilar v. Atlantic Richfield Co. (2001) 

25 Cal.4th 826, 861; Wong v. Markarian (2022) 82 Cal.App.5th Supp. 24, 34.)

The trial court concluded the company failed to satisfy its burden. Thus — to 

prevail on appeal — the company must show the evidence at trial compelled 

a finding in its favor “as a matter of law,” i.e., that its “evidence was 

uncontradicted and unimpeached and of such character and weight that 

there is no room for a trial court determination that it was insufficient to 

support a finding in [its] favor.” (In re D.C. (2021) 60 Cal.App.5th 915, 921.) 

We presume the “judgment is correct, indulge all intendments and 

presumptions in favor of the trial court, and only reverse if [the company] 

meets its burden of establishing prejudicial error.” (65283 Two Bunch Palms 

Building LLC v. Coastal Harvest II, LLC (2023) 91 Cal.App.5th 162, 168.) 

We review the result reached by the court, not its reasons, and we affirm if 

the judgment is “correct on any legal basis.” (Id. at p. 169.)

Red Whale cannot meet this demanding standard. At trial, Elqare 

established it leased the premises to the company in May 2019 for five years

with an option to renew the lease for an additional 10 years. The lease 

authorized the company to operate a coffee shop and to sell certain clothing 

and food items. Elqare gave the company a six-month grace period to 

complete renovations and prepare to open, but the company was unable to do 

so before March 2020 due to construction- and permit-related delays. Elqare
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offered evidence that the absence of permits — not the temporary closure 

orders issued during the pandemic — delayed the company’s opening. 

Although Boyd testified the orders prohibited the company from using the 

premises during the pandemic, he acknowledged the company served takeout 

for periods of time, and that its other Marin County location continued to 

operate during the pandemic. He also conceded the company’s failure to 

obtain permits before the pandemic began contributed to his inability to use 

the premises. Additionally, there is no indication the company attempted to 

rescind the lease.

Red Whale’s evidence may support an inference the temporary closure 

orders made the company’s performance under the lease “unprofitable or 

more difficult” for a period of time, but the evidence does not compel a finding 

the value of the five-year lease was “totally or substantially destroyed.”

(Fitness Internat., supra, 87 Cal.App.5th at pp. 895–896.) To the contrary, 

ample evidence suggests the company’s performance remained valuable. (Id. 

at p. 896.) On this conflicting factual record, we cannot conclude the 

company established the frustration of purpose defense as a matter of law. 

(See In re D.C., supra, 60 Cal.App.5th at p. 922; Fitness Internat., at pp. 895–

897; see also Lloyd v. Murphy (1944) 25 Cal.2d 48, 56; Grace v. Croninger

(1936) 12 Cal.App.2d 603, 605.)2

The authority cited by Red Whale does not compel a contrary 

conclusion. For example, the company likens this case to Umnv 205-207 

2 Having reached this result, we need not determine whether Red 

Whale established the first two elements of the defense as a matter of law. 

(See Fitness Internat., supra, 87 Cal.App.5th at p. 895.) We decline the 

company’s invitation to conclude Fitness Internat. is wrongly decided and to

create an exception to the rule that commercial frustration of purpose 

functions to terminate the lease. (Id. at p. 896.)
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Newbury, LLC v. Caffé Nero Americas Inc. (Mass.Super. Ct., Feb. 8, 2021, No. 

145768) [2021 Mass.Super. Lexis 12] (Caffé Nero). We are not bound by outof-state authority and, in any event, we find the case distinguishable. There, 

the lease permitted the business to operate a “sit-down restaurant ‘and for no 

other purpose.’ ” (Id. at p. 12.) The business, however, could offer takeout 

from its sit-down menu. (Id. at p. 3.)

A Massachusetts trial court concluded the COVID-19 orders issued by 

the governor barring businesses from serving customers indoors from March 

to June 2020 completely frustrated the “entire purpose” of the lease for that

three-month period. (Caffé Nero, supra, 2021 Mass.Super. Lexis 12 at pp. 5–

6, 11.) The court’s conclusion rested on the fact that the lease allowed the 

business to use the premises for “a single purpose” — to “operate a café with 

a sit-down restaurant menu ‘and for no other purpose.’ ” (Id. at p. 12.) As the 

court observed, a different result might obtain if the lease had permitted the 

business “to use the leased premises for other purposes not barred by 

government order.” (Id. at pp. 12–13.) Here, the lease was not so restrictive: 

it allowed Red Whale to serve takeout and sell apparel, and to deviate from 

the original purpose of the lease with Elqare’s prior written permission. 

Unlike Caffé Nero, the temporary closure orders did not bar the only possible 

use of the premises.

The other cases upon which Red Whale relies are also distinguishable. 

(La Cumbre Golf & Country Club v. Santa Barbara Hotel Co. (1928) 205 Cal. 

422, 425–426 [frustration of purpose defense established where premises

were destroyed by fire]; Industrial Development & Land Co. v. Goldschmidt

(1922) 56 Cal.App. 507, 508–509 [lessee excused from performance when 

prohibition amendment took effect and made running a liquor business 

“unlawful”].) We reject the company’s reliance on In re Hitz Rest. Grp.
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(Bankr. N.D.Ill. 2020) 616 B.R. 374 for the reasons expressed in West Pueblo 

Partners, LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179, 1189.

Finally, Red Whale argues reversal is required because the trial court

conflated the doctrines of frustration and impossibility. Frustration of 

purpose and impossibility are related — but distinct — legal doctrines. (See 

Lloyd v. Murphy, supra, 25 Cal.2d at p. 53.) Briefly, impossibility “is defined 

‘as not only strict impossibility but [also] impracticability because of extreme 

and unreasonable difficulty, expense, injury, or loss involved.’ ” (Fitness 

Internat., supra, 87 Cal.App.5th at p. 893.) The impossibility defense may 

apply when “a government order makes it unlawful for a party to perform its 

contractual obligations.” (Ibid.) In its minute order, the court stated the 

frustration of purpose “defense requires an [unforeseen] law or regulation 

that renders performance under the lease impossible.” The court’s brief 

reference to impossibility does not require reversal; on appeal, the company 

has not shown the evidence at trial compelled a finding in its favor “as a 

matter of law.” (In re D.C., supra, 60 Cal.App.5th at p. 921; Fitness Internat., 

at pp. 895–896 [lessee’s performance not excused where “value of the lease 

has not been totally or substantially destroyed”].)

DISPOSITION

The judgment is affirmed. In the interests of justice, each party is to 

bear its own costs. (Rule 8.278(a)(5).)
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_________________________

Rodríguez, J.

WE CONCUR:

_________________________

Tucher, P. J.

_________________________

Petrou, J.

A166085