Court Opinion

ID: 6343863
Source: CourtListenerOpinion
Date Created: 2022-05-25 18:01:15.574855+00
Date Added: 2024-06-11T08:43:50.224672
License: Public Domain

Filed 5/25/22 BRE Atlas Prop. Owner LLC v. KS Development, LLC CA2/2
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                        DIVISION TWO

BRE ATLAS PROPERTY                                        B310957
OWNER LLC et al.,
                                                          (Los Angeles County
     Plaintiffs, Cross-                                   Super. Ct. No. 20STCV12247)
defendants and Respondents,

         v.

KS DEVELOPMENT, LLC,

     Defendant, Cross-
complainant and Appellant.

     APPEAL from a judgment of the Superior Court of Los
Angeles County, David J. Cowan, Judge. Affirmed.
     Park & Lim, S. Young Lim and James E. Adler for
Defendant, Cross-complainant and Appellant.
     Paul Hastings, D. Scott Carlton, Timothy D. Reynolds and
Alyssa K. Tapper for Plaintiffs, Cross-defendants and
Respondents.
       This breach of contract action involves an unconsummated
purchase and sale of nine hotels. The parties, defendant, cross-
complainant and appellant KS Development, LLC (Buyer), and
plaintiffs, cross-defendants and respondents BRE Atlas Property
Owner LLC, BRE SSP Property Owner LLC, BRE SH Brisbane
Owner LLC, BRE Newton Hotels Property Owner LLC, BRE SSP
Thousand Oaks LLC, and BRE Polygon Property Owner LLC
(collectively Seller),1 each contended the other party breached the
purchase and sale agreement, and each claimed entitlement to a
$9 million deposit held in escrow.
       The trial court found that Buyer breached the purchase
and sale agreement and that Seller was entitled to the $9 million
deposit as liquidated damages. Substantial evidence supports
the trial court’s findings, and we therefore affirm the judgment.

                          BACKGROUND
The purchase and sale agreement
      On January 3, 2020, Buyer and Seller signed an agreement
for the purchase and sale of nine select service hotels located in
California2 for a total purchase price of $265 million (the PSA).
The PSA specified a 45-day due diligence period (ending on

1      The Seller entities are subsidiaries of, or under the control
of, Blackstone Real Estate Group.
2     The nine hotels were the Courtyard by Marriott San Luis
Obispo, Courtyard by Marriott Thousand Oaks, Town Place
Suites by Marriott Thousand Oaks, Hampton Inn & Suites
Thousand Oaks, SpringHill Suites by Marriott Irvine, Homewood
Suites by Hilton San Francisco, Hampton Inn & Suites West
Sacramento, Residence Inn by Marriott San Marcos, and
Residence Inn by Marriott Bakersfield. Select service hotels are
generally room-only operations or hotels with limited services.

                                  2
February 18, 2020) and an initial closing date 30 days thereafter
on March 19, 2020.3
Deposit and liquidated damages
       Section 2.3 of the PSA required Buyer to make two deposits
totaling $9 million. The first deposit of $3 million was due upon
signing the PSA. The second $6 million deposit was due at the
close of the 45-day due diligence period. At any time before the
close of the due diligence period, Buyer could terminate the
transaction and have its initial $3 million deposit returned. At
the close of the due diligence period, the entire $9 million deposit
became nonrefundable; however, the parties designated the $9
million deposit as liquidated damages for breach of the PSA.
Seller’s representations, warranties, and covenants
       Section 3.2 of the PSA sets forth Seller’s representations
and warranties. As relevant here, section 3.2(i) states:
       “Financial Statements. The financial statements
       provided to Buyer with respect to each Hotel are the
       same financial statements that each applicable
       Manager has provided to Seller with respect to such
       Hotel with respect to the periods covered thereby,
       and Seller generally relies on the accuracy of such
       financial statements for its own use.”

3     Section 7.1(b) provides that, “during the Due Diligence
Period, Buyer may review at each Hotel, to the extent that such
items are existing and in Seller’s possession or control, the
current books and records concerning such Hotel, certificates of
occupancy, as built plans and specifications, surveys, rent rolls,
tax statements, inventory lists, service and maintenance
agreements, and other instruments, documents and agreements,
reasonably requested by Buyer to investigate such Hotel . . . .”

                                 3
       Section 3.3 of the PSA governs amendments to and
limitations on Seller’s representations and warranties. Section
3.3(a) states:
       “(a) Amendments to Schedules. Seller shall have the
       right to amend and supplement the representations,
       warranties and schedules to this Agreement from
       time to time prior to the Closing by providing a
       written copy of such amendment or supplement to
       Buyer; provided, however, that if any such
       amendment or supplement provided to Buyer after
       the expiration of the Due Diligence Period discloses
       any condition, fact or other matter that (i) is either
       (A) within Seller’s Knowledge as of the Effective Date
       or (B) within Seller’s reasonable control after the
       Effective Date and in violation of this Agreement and
       (ii) would materially adversely impact the ownership
       or value of the Assets in the aggregate (a ‘Material
       Adverse Effect’), then Buyer, as its sole remedy, shall
       have the option of (x) waiving the breach of
       representation or warranty and proceeding with the
       Closing, or (y) terminating this Agreement, in which
       event the Deposit (including, for the avoidance of
       doubt, the Non-Refundable Portion of the Deposit)
       shall be returned to Buyer and neither party shall
       have any further obligations under this Agreement
       other than those which explicitly survive a
       termination hereof.”
     Section 3.3(b) states:
     “(b) Limitations on Representations and Warranties
     of Seller Notwithstanding anything in this
     Agreement to the contrary, Seller shall have no
     liability, and Buyer shall make no claim against
     Seller, for (and Buyer shall be deemed to have waived
     any failure of a condition hereunder by reason of) a
     failure of any condition or a breach of any

                                4
      representation or warranty, covenant or other
      obligation of Seller under this Agreement or any
      amendment or supplement described in Section 3.3(a)
      or any document executed by Seller in connection
      with this Agreement (including for this purpose any
      matter that would have constituted a breach of
      Seller’s representations and warranties had they
      been made on the Closing Date) if the failure or
      breach in question constitutes or results from a
      condition, fact or other matter that was (i) known to
      Buyer (i.e., within Buyer’s Knowledge) prior to the
      expiration of the Due Diligence Period, (ii) known to
      Buyer (i.e., within Buyer’s Knowledge) prior to
      Closing and Buyer proceeds with the Closing, (iii) not
      within Seller’s Knowledge as of the Effective Date or
      (iv) not within the reasonable control of Seller after
      the Effective Date (or, if within Seller’s reasonable
      control, not in violation of this Agreement); provided,
      however, and notwithstanding Seller’s lack of
      liability and Buyer’s waiver of any claim for
      condition, fact or other matter referenced in clause
      (iii) directly above, nothing referenced in clause (iii)
      above shall prevent Buyer from terminating this
      Agreement in accordance with Section 3.3(a) above
      and receiving a return of the Deposit. . . .”
      Section 3.4 of the PSA sets forth Seller’s covenants prior to
closing. As relevant here, Section 3.4(b) states:
      “Covenants of Seller Prior to Closing. From the
      Effective Date until the Closing or earlier
      termination of this Agreement, Seller or Seller’s
      agents shall: [¶] . . . [¶]
      “(b) Conduct of Business, Maintenance and
      Operation of Hotel. Continue to carry on the
      business and maintain the Hotels substantially in the
      same manner as currently conducted and maintained

                                 5
      (or if not within Seller’s control under the applicable
      Management Agreement, use commercially
      reasonable efforts to cause such Manager to do so)
      including, to the extent expressly defined and
      required in each applicable Existing Franchise
      Agreement, maintaining all hotel operating supplies
      in accordance with par levels set forth therein.”
The transaction
       Buyer paid the initial $3 million deposit into escrow on
January 3, 2020, commencing the 45-day due diligence period.
Seller, at Buyer’s request, thereafter provided 2017, 2018, and
2019 financial statements prepared by Seller’s accounting staff.
The financial statements were not prepared by the hotel
managers themselves but contained financial data from each of
the managers for the nine hotels in three formats: (1) last 12
months, (2) month to date and year to date, and (3) forecast.
Seller relied on these financial statements for its own use in its
business.
       The close of the due diligence period coincided with the
onset of the COVID-19 pandemic. Buyer became concerned about
the impact of COVID-19 on the hospitality industry and Buyer’s
ability to obtain financing for the transaction. To address these
concerns, the parties executed, on February 18, 2020, a first
amendment to the PSA that gave Buyer the right, upon an
additional deposit of $1 million, to extend the closing date “solely
in the event that Buyer’s acquisition lender states in writing that
it is unable to close by the then-scheduled Closing Date due to
concerns solely relating to the current COVID-19 coronavirus
epidemic.” Upon execution of the first amendment, Buyer
deposited into escrow the $6 million due at the close of the due
diligence period.

                                 6
       On February 21, 2020, Buyer entered into a rate lock
agreement with Credit Suisse First Boston (Credit Suisse) to
secure the interest rate on the loan for the acquisition. In early
March, however, Credit Suisse proposed new loan terms to
Buyer. Buyer informed Seller that Credit Suisse was threatening
to revoke its loan commitment and that Buyer needed additional
time to negotiate new loan agreements.
       From March 11, 2020, through March 17, 2020, Seller
provided additional financial information requested by Buyer,
including monthly financial statements, to facilitate Buyer’s
negotiations with Credit Suisse. To expedite delivery of the
requested information, Seller forwarded to Buyer reports and
financial statements Seller received directly from the managers
of the subject hotels.
       On March 13, 2020, Buyer informed Seller that it needed to
extend the closing date to consider alternative financing terms
presented by Credit Suisse. That same day, the parties entered
into a second amendment to the PSA extending the closing date
by two weeks, from March 19, 2020, to April 1, 2020.
       On March 16, 2020, Buyer requested that Seller provide
either a six-month option to further extend the closing date at no
additional cost or a $212 million, 24-month bridge loan to finance
the acquisition. Seller declined the request.
Buyer’s notice of election to terminate
       On March 18, 2020, Buyer terminated its rate lock
agreement with Credit Suisse. That same day, Buyer sent Seller
a letter from Buyer’s counsel, that alleged that Seller had
violated its covenant in section 3.4(b) of the PSA because
“operations, occupancies, and revenues have significantly
changed as a result of the COVID-19 virus since the time that

                                7
Agreement was executed on January 3, 2020.” The letter stated
that hotel managers had “provided financial statements to Seller
that reflect substantially different results of operations,
occupancies and revenues for the respective Hotels than those
reflected in the financial statements previously provided to
Buyer” and that Seller had not provided any amendments or
supplements to the representations, warranties, and schedules to
the PSA. Buyer’s letter further stated: “This letter constitutes
notice that Buyer is electing the option of terminating the
Agreement.” The letter stated that unless Seller cured the
alleged unsatisfied conditions precedent by the closing date,
“Buyer will elect the option of terminating the Agreement.”
       On March 19, 2020, Seller responded in writing to Buyer’s
notice of termination. Seller’s letter claimed violations of the
PSA were baseless and that Buyer’s letter was a “pretextual
attempt to excise itself from the Agreement and seek return of
the deposit through accusations against Seller.” Seller’s letter
urged Buyer to reconsider its position and to retract its notice to
terminate. Seller’s letter countered that if Buyer did not do so,
Seller would deem Buyer to have anticipatorily breached the
PSA. Buyer did not respond to Seller’s March 19, 2020 letter.
       On March 19, 2020, Buyer sent an e-mail to Marriott, one
of the franchisors for several of the subject hotels, saying “[d]ue to
the disruptions caused by the covid-19, we are suspending any
further work on this transaction. We’ve let Seller know that this
transaction cannot move forward at this time.” Later that day,
Marriott’s counsel asked for confirmation as to whether Buyer
intended to terminate the transaction or simply put it on hold.
Buyer responded, “Yes. We will be terminating PSA and

                                  8
requesting a refund.” Buyer allowed its loan commitment with
Credit Suisse to expire on March 21, 2020.
Seller’s notice of election to terminate and the current
lawsuit
       On March 26, 2020, Seller sent Buyer notice of its
termination of the PSA based on Buyer’s anticipatory breach of
the agreement. That same day, Seller filed a complaint alleging
claims for declaratory relief, specific performance, and breach of
contract, seeking release of the $9 million deposit as liquidated
damages. Buyer filed a cross-complaint on May 12, 2020,
alleging claims identical to Seller and seeking the same relief.
       The matter proceeded to an eight-day bench trial at which
witnesses for both Buyer and Seller testified. After the trial
concluded, a 24-page statement of decision issued in which the
trial court found that Seller had not breached any contractual
obligation; that Buyer’s March 18, 2020 letter and associated
conduct was a repudiation and anticipatory breach of the PSA;
and that Seller was entitled to terminate the PSA and obtain the
$9 million deposit as liquidated damages. Judgment was entered
in Seller’s favor, and this appeal followed.

                  CONTENTIONS ON APPEAL
      Buyer raises the following contentions on appeal:
      1. Seller’s failure during the due diligence period to provide
Buyer with the same financial statements Seller received from
the managers of the subject hotels violated section 3.2(i) of the
PSA and was a material failure of a condition to closing.
      2. The substantial decrease in profitability reflected in
financial statement forecasts provided by Seller to Buyer during
the due diligence period when compared to actual and updated

                                 9
forecast results provided to Buyer after the due diligence period
ended was a material failure of a condition to closing under the
PSA.
      3. Seller breached the PSA by failing to implement at the
subject hotels the same cost reducing measures for COVID-19
that Seller implemented at its other hotels.
      4. Buyer’s March 18, 2020 letter was not a repudiation or
anticipatory breach of the PSA.
      5. The trial court erred by finding that expiration of
Buyer’s loan commitment with Credit Suisse was evidence of
Buyer’s repudiation and anticipatory breach of the PSA.
      6. Seller’s March 26, 2020 letter to Buyer was an
anticipatory breach of the PSA.

                           DISCUSSION
I.    Standard of review
      The parties do not dispute that the terms of the PSA are
unambiguous and require no extrinsic evidence for
interpretation. Interpretation of a contract that is unambiguous
and that is not based on extrinsic evidence is subject to de novo
review. (Colaco v. Cavotec SA (2018) 25 Cal.App.5th 1172, 1183.)
Application of contractual terms to the facts and circumstances of
a given case is reviewed for substantial evidence. (Bowers v.
Bernards (1984) 150 Cal.App.3d 870, 873.)
      We review Buyer’s challenge to the sufficiency of the
evidence supporting the trial court’s factual findings under the
substantial evidence standard. (Thompson v. Asimos (2016) 6
Cal.App.5th 970, 981.) “Under this deferential standard of
review, findings of fact are liberally construed to support the
judgment and we consider the evidence in the light most

                                10
favorable to the prevailing party, drawing all reasonable
inferences in support of the findings.” (Ibid.)
II.    Financial statements
       Whether a breach of an obligation is material, thereby
excusing performance by the other party, is ordinarily a question
of fact. (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277; see
Sanchez v. County of San Bernardino (2009) 176 Cal.App.4th
516, 529-530.) Substantial evidence supports the trial court’s
factual determination that Seller’s failure to provide Buyer with
the same financial statements that Seller received from the
managers at each of the subject hotels was not a material breach
of Seller’s obligations under section 3.2(i) of the PSA.
       The evidence presented at trial showed that the financial
statements Seller provided to Buyer during the due diligence
period contained information that did not differ materially from
that contained in the financial statements that Seller received
from the managers of the subject hotels. Guy Johnston, a senior
associate at Blackstone, Inc.’s real estate management team,
testified at trial that the financial statements Seller provided to
Buyer contained the same financial information the hotel
managers provided to Seller. Mark Sample, Seller’s asset
manager for the subject hotel properties, similarly testified that
the hotel managers provided Seller with financial data files that
Seller’s accounting and finance department verified for accuracy
and completeness and then reformatted for Seller’s use.
Johnston and Sample also testified that Seller used and relied on
the same financial information that Seller provided to Buyer.
       Buyer does not dispute that the financial statements it
received from Seller did not differ materially from the financial
information Seller received from the subject hotel managers.

                                11
Buyer nevertheless claims it was deprived of “the assurance of
reliability it had negotiated and agreed to” in section 3.2(i) of the
PSA. Buyer presented no evidence, however, that the financial
information it received was unreliable, inaccurate, or in violation
of the PSA. To the contrary, Buyer’s executive vice president Phil
Wolfgramm testified that he was familiar with the appearance
and format of monthly financial reports prepared by managers
for Marriott and Hilton, that he never objected to the form of the
financial reports Seller provided to Buyer during the due
diligence period, and that he never asked during the due
diligence period for reports prepared directly by the Marriott and
Hilton managers.
       Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195
Cal.App.3d 1032, on which Buyer relies as support for its
position, is distinguishable. The court in that case found the
subtenant’s appointment of a receiver to be a material breach of a
master lease provision prohibiting the bankruptcy, insolvency, or
receivership of the lessee, despite the subtenant’s continued
payment of rent. (Id. at p. 1052.) The court found that the
sublessor, who had assigned its interests and obligations under
the master lease to the subtenant in exchange for the subtenant’s
stock, had lost the value of its consideration for the sublease. (Id.
at p. 1055.) No such circumstances are present here.
       Sacket v. Spindler (1967) 248 Cal.App.2d 220, which lists
the factors to be considered in determining whether a breach is
material, undermines rather than supports Buyer’s position. The
first of those factors cited by the court in Sacket is “[t]he extent to
which the injured party will obtain the substantial benefit which
he could have reasonably anticipated.” (Id. at p. 229.) The
evidence here showed that financial statements Buyer received

                                  12
during the due diligence period contained all material financial
information concerning the subject hotels that Buyer could
reasonably have expected.
       Substantial evidence supports the finding that Seller did
not breach section 3.2(i) of the PSA.
III. Forecasts
       Buyer contends a net decline in forecasted profits for the
subject hotels that became evident in March 2020 because of
reduced occupancy rates triggered by COVID-19 rendered Seller’s
previous forecasts inaccurate4 and resulted in a failure of
condition under section 5.2(a) of the PSA. Section 5.2(a) states
that Buyer’s obligation to close the transaction is subject to the
condition that “[e]ach of the representations and warranties
made by Seller in this Agreement . . . shall be true and correct in
all material respects when made and on and as of the Closing
Date as though such representations and warranties were made
on and as of the Closing Date (unless such representation or
warranty is made on and as of a specific date, in which case it
shall be true and correct in all material respects as of such
date) . . . .”5

4     Specifically, Buyer contends financial forecasts for March
2020 that Seller provided in February 2020, which showed
estimated EBITDA (earnings before interest, taxes, depreciation,
and amortization) profit for the nine hotels of $2,494,359 in
March 2020 and $7,159,424 in the second quarter of 2020 were
inaccurate when compared to actual results for the subject hotels
in March 2020, which showed aggregate profits of only $128,324
for March 2020 and an updated forecast for the second quarter of
2020, which projected a loss of $1,905,999.
5     Section 5.2(a) provides:

                                13
       The PSA contains no representation or warranty by Seller,
however, with respect to financial forecasts or forecasted profits.
Seller’s representations and warranties are set forth in section
3.2. The only representation and warranty in that section
remotely related to financial matters is 3.2(i), which states that
the financial statements provided to Buyer with respect to each
hotel are the same financial statements that each hotel manager

            “Conditions to Buyer’s Obligations. The
      obligation of Buyer to purchase and pay for the
      Assets is subject to the satisfaction (or waiver by
      Buyer) as of the Closing of the following conditions:
             “(a) Representations and warranties. Each of
      the representations and warranties made by Seller in
      this Agreement (as the same may be amended or
      supplemented in accordance with Section 3.3) shall
      be true and correct in all material respects when
      made and on and as of the Closing Date as though
      such representations and warranties were made on
      and as of the Closing Date (unless such
      representation or warranty is made on and as of a
      specific date, in which case it shall be true and
      correct in all material respects as of such date),
      excluding, however, any inaccuracies or changes in
      the representations and warranties made by Seller
      resulting from any action, condition or matter that (i)
      is expressly permitted or contemplated by the terms
      of this Agreement, (ii) was within Buyer’s Knowledge
      prior to the expiration of the Due Diligence Period,
      or, subject to Section 3.3, prior to the Closing, (iii)
      was not within Seller’s Knowledge as of the Effective
      Date or (iv) is a result of events or occurrences
      outside of the reasonable control of Seller after the
      Effective Date.”

                                14
has provided to Seller and that Seller generally relies on the
accuracy of those financial statements for its own use.
      Even if the forecasted financial information could be
deemed to be a representation and warranty by Seller, the
forecasts were made as of a specific date. Buyer does not claim
the forecasts were false or inaccurate on the date they were
made.
      Seller’s representations and warranties, moreover, are
limited by sections 3.3(b) and 5.2(a) of the PSA, which relieve
Seller from liability for failure of any condition or breach of any
representation or warranty resulting from a condition “not within
the reasonable control of Seller after the Effective Date [of
January 3, 2020].”6 Buyer does not dispute that reduced hotel
occupancy because of COVID-19 was outside of Seller’s
reasonable control. The trial court found that differences
between forecasted and actual financial performance resulting
from reduced occupancy levels were similarly outside of Seller’s
reasonable control and ability to cure.
      Substantial evidence supports the trial court’s
determination that forecasts Buyer received after the due
diligence period ended did not cause Seller’s representations and
warranties to be false or misleading. Multiple witnesses,
including Johnston, Sample, and Byron Blount, the managing
director of Blackstone, Inc.’s real estate group, testified that the
monthly financial forecasts are “snapshots in time” that change

6      We do not address Buyer’s argument as to whether sections
3.3(b) and 5.2(a) constitute force majeure provisions, as this
argument was not raised in the trial court below. (In re Marriage
of Eben-King & King (2000) 80 Cal.App.4th 92, 117 [issues not
raised in trial court will not be addressed on appeal].)

                                15
or are updated over time as managers obtain more information.
Buyer’s executive vice-president Wolfgramm admitted during his
testimony that monthly financial forecasts are expected to change
over time.
       Substantial evidence supports the determination that
Seller did not breach any representation or warranty concerning
forecasted profits.
IV. Operation and maintenance of subject hotels
       Substantial evidence supports the trial court’s finding that
Seller fulfilled its obligations under section 3.4(b) of the PSA to
“[c]ontinue to carry on the business and maintain the Hotels
substantially in the same manner as currently conducted and
maintained” from the date the parties executed the PSA until the
closing. Seller’s asset manager Sample testified that each of the
subject hotels was staffed, open, accepting reservations, and
operating in March 2020 as they had been previously, because
Seller was cognizant of its obligation to do so under the PSA.
Sample contrasted operations at the subject hotels with reduced
operations at approximately 100 other hotels owned by Seller at
the time, where hotel staff was furloughed or laid off.
       We reject Buyer’s argument that Seller was required to
reduce staffing at the subject hotels because of reduced occupancy
resulting from COVID-19 as inconsistent with the plain language
of section 3.4(b) of the PSA. The trial court found, moreover, that
Buyer failed to show that retaining staffing at the subject hotels
was an improper or unnecessary expense, or that employees
should have been laid off to keep operations as profitable as
possible.

                                16
V.     Buyer’s March 18, 2020 letter
       “[R]epudiation is ordinarily a question of fact and intent,
and [whether a contract has been repudiated] must be
determined by the facts in the particular case.” (Gold Min. &
Water Co. v. Swinerton (1943) 23 Cal.2d 19, 28 (Gold Mining).)
Substantial evidence supports the trial court’s factual
determination that Buyer’s March 18, 2020 letter and associated
conduct was a repudiation of its obligations under the PSA and
an anticipatory breach of contract.
       The March 18, 2020 letter plainly states that it “constitutes
notice that Buyer is electing the option of terminating the
Agreement.” Although the letter purports to condition exercise of
that option on Seller’s failure to cure alleged unsatisfied
conditions precedent to closing, the trial court found no
unsatisfied conditions existed. As discussed previously,
substantial evidence supports those findings. Conditioning one’s
performance under a contract on actions that the other party has
no duty or obligation to perform is an anticipatory breach. (Gold
Mining, supra, 23 Cal.2d at p. 28.) An anticipatory breach is a
total breach of the contract. (Id. at p. 29.)
       Buyer never responded to Seller’s March 19, 2020 letter,
which gave Buyer the opportunity to “reconsider its position”
with regard to terminating the PSA. Rather, Buyer’s subsequent
conduct further supports the trial court’s finding of anticipatory
breach. On March 18, 2020, the same day Buyer sent its notice of
termination letter to Seller, Buyer terminated its rate lock
agreement with Credit Suisse. One day later, on March 19, 2020,
Buyer sent an e-mail to Marriott, one of the hotel franchisors,
stating that Buyer was “suspending any further work on this
transaction.” The following day, on March 20, 2020, in response

                                17
to a request by Marriott for clarification, Buyer informed
Marriott that it was terminating the PSA.
       Buyer’s reliance on Thornton v. Victor Meat Co. (1968) 260
Cal.App.2d 452, California Canning Peach Growers v. Harris
(1928) 91 Cal.App. 654, and other cases stating that a mere
threat not to perform does not constitute repudiation is
misplaced. Buyer’s repudiation consisted of more than a mere
threat not to perform. Buyer’s conduct subsequent to its
March 18, 2020 letter, in addition to the letter itself, constitute
substantial evidence of repudiation and anticipatory breach.
VI. Expiration of loan commitment
       That Buyer allowed its loan commitment with Credit
Suisse to expire on March 21, 2020 is further evidence of its
repudiation of the PSA. Buyer’s conduct in the days preceding
expiration of its loan commitment—terminating its rate lock
agreement with Credit Suisse, sending notice of termination of
the PSA to Seller, not responding to Seller’s March 19, 2020
letter urging Buyer to rescind its notice of termination, and
informing Marriott that Buyer intended to terminate the PSA—
amply supports the trial court’s finding of anticipatory breach.
Given this factual context, Buyer’s allowing its loan commitment
to lapse further evidences its intent to terminate the transaction
with Seller.
       Buyer contends the lapse of its loan commitment with
Credit Suisse did not support a finding of anticipatory breach
because Seller did not prove that Credit Suisse was Buyer’s only
source of funds. Buyer claims there was evidence that it could
have financed the purchase itself or on different terms with
Credit Suisse or other lenders. That evidence consists of
testimony by Buyer’s principal, Ronnie Lam, that Buyer in the

                                18
past had made an all cash purchase of a hotel in Las Vegas. Lam
also testified, however, that Buyer did not proceed with an all
cash purchase in this case because it risked being “out of cash” at
closing. Although Lam testified that Buyer was negotiating loan
terms with other banks, such as Goldman Sachs and JP Morgan,
Buyer submitted no documentary evidence of negotiations with or
commitments from these other lenders. As the trial court noted
in its statement of decision, “[t]he Court cannot just assume
Buyer had $260 million then available even if Lam says he had.”
The trial court further noted that had Buyer needed additional
time to secure more reasonably priced financing, it could have
exercised its option to extend the closing date under the parties’
amendment to the PSA. Buyer did not do so.
       The trial court did not err by determining that Buyer’s
decision to allow its loan commitment with Credit Suisse to lapse
was further evidence of anticipatory breach.
VII. Seller’s March 26, 2020 letter
       When a party to a bilateral contract repudiates the
contract, the other party “can treat the repudiation as an
anticipatory breach and immediately seek damages for breach of
contract, thereby terminating the contractual relation between
the parties.” (Mammoth Lakes Land Acquisition, LLC v. Town of
Mammoth Lakes (2010) 191 Cal.App.4th 435, 463.) As discussed,
substantial evidence supports the trial court’s finding that
Buyer’s March 18, 2020 letter and subsequent conduct
constituted an anticipatory breach of the PSA. Although Seller
afforded Buyer an opportunity to retract its notice of termination,
Buyer did not do so. Seller was accordingly entitled to treat
Buyer’s repudiation as a material breach, terminate the PSA, and
recover the $9 million deposit as liquidated damages. (Ibid.)

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                       DISPOSITION
     The judgment is affirmed. Seller shall recover its costs on
appeal.

                                    ________________________
                                    CHAVEZ, J.

We concur:

________________________
LUI, P. J.

________________________
ASHMANN-GERST, J.

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