Court Opinion

ID: 9946568
Source: CourtListenerOpinion
Date Created: 2024-02-29 21:02:32.770241+00
Date Added: 2024-06-11T14:25:25.392392
License: Public Domain

Filed 2/29/24 Culver City Mall v. Shanghai No. 1 Seafood Village CA2/1
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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This opinion has not been certified for publication or ordered published for purposes of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 ONE

CULVER CITY MALL LLC et al.,                                    B322183

        Plaintiffs and Respondents,                             (Los Angeles County
                                                                Super. Ct. No. 21STCV16837)
        v.

SHANGHAI NO. 1 SEAFOOD
VILLAGE, INC., et al.,

        Defendants and Appellants.

     APPEAL from a judgment of the Superior Court of
Los Angeles County, Michael L. Stern, Judge. Affirmed.
                        _______________
      P&N Law Firm, Ruben R. Newell and Pooja Patel for
Defendants and Appellants.
      Ballard Spahr, Brian D. Huben and Nahal Zarnighian for
Plaintiffs and Respondents.
       Shanghai No. 1 Seafood Village, Inc. (Shanghai) and
Eric Qian (Qian) appeal from a judgment against them in a
breach of lease and guarantee lawsuit by Shanghai’s former
landlords, Culver City Mall LLC (Culver City Mall) and Valencia
Town Center Venture, L.P. (Valencia Mall) (collectively, the Malls).
At trial, Shanghai and Qian argued that governmental restrictions
on dine-in restaurants during the COVID-19 pandemic excused
their obligations to pay rent. Their only challenge is to the
sufficiency of the evidence to support the trial court’s findings in
rejecting the pandemic-related affirmative defenses. As discussed
below, we conclude that regardless of governmental restrictions or
the challenged factual findings, the leases obligated the restaurants
to pay rent. We affirm.

                     FACTUAL BACKGROUND
       Shanghai entered into two virtually identical leases
(collectively, the leases) with the Malls. Qian personally
guaranteed the lease with Valencia Mall. The leases required
that Shanghai use the leased spaces solely for “the operation of
an Azabu Sabo [the trade name for the restaurant listed in the
agreements] Japanese restaurant.”
       The leases contain force majeure clauses addressing the
possibility that either party is “delayed in the performance of its
initial construction, or maintenance and/or repair obligations, by
reasons of [, inter alia,] . . . Acts of God . . . restrictive governmental
laws or controls; [or] judicial orders.” These clauses permit such
delayed performance to “be excused for the period of the delay . . .
provided, however, that the time for performance shall in no
event be extended due to[, inter alia,] financial or economic
problems of either party.” The force majeure clauses impose
notice requirements as “a condition of [Shanghai]’s right to claim

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an extension of time as a result [of a force majeure event].” These
clauses further provide: “Notwithstanding anything to the contrary,
the occurrence of any of the events of force majeure herein described
shall not excuse [Shanghai]’s obligations to pay minimum annual
rental, percentage rental and additional rent [1] . . . or excuse such
obligations as this lease may otherwise impose on the party to obey,
remedy or avoid such event.” (Capitalization omitted & italics
added.)
       Beginning in January 2020, Shanghai failed to pay any rent
and Qian paid nothing to Valencia Mall under the guaranty. The
Malls filed a breach of lease and breach of guaranty complaint
against Shanghai and Qian.
       Following a bench trial, the court issued a judgment in
favor of the Malls. In its written judgment, the trial court rejected
Shanghai and Qian’s affirmative “defenses of frustration of purpose,
excuse of performance, impossibility or force majeure based on
their inability to operate restaurants and pay rent . . . due to the
shutdowns of their business locations due to the Covid pandemic.”
As to frustration of purpose, the judgment provided that the “value
of [the] lease” had not been “destroyed by a governmental order.”
The court noted Shanghai’s restaurants “had some ‘inside’ dining
capacity, but were take-out or take-and-carry food establishments
where customers would order and take their food with them while
shopping at the mall locations.” The court acknowledged the
possibility that Shanghai “could no longer sell food to the public due
to mall inaccessibility or foot trade restrictions due to governmental

      1 The leases include exceptions to this provision for situations
involving the partial or total destruction of the premises or a taking
of the premises under the power of eminent domain. Shanghai and
Qian do not argue that these exceptions apply.

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Covid regulations followed by [the Malls] that limited access
to customers.” It noted, however, that Shanghai and Qian had
“presented no evidence that they contacted [the Malls], at any
level, or made attempts or requests for permission to modify their
business practices to allow continued and adapted food sales or
sought to negotiate rent modifications or abatements.” Nor had
they presented any evidence “showing that it was more likely
than not that they attempted to operate a functioning business.”
       As to impossibility, the court further noted that the leases’
force majeure clauses contemplate situations in which performance
becomes either impossible or valueless, and that Shanghai and
Qian had not established any right to relief under the terms of
those clauses.
       This appeal followed.

                          DISCUSSION
      On appeal, Shanghai and Qian argue that the trial court
erred in rejecting their affirmative defenses, because the court
premised this rejection on a finding that is not supported by
substantial evidence: namely, that Shanghai’s restaurants “were
take-out or take-and-carry food establishments” and thus capable
of operating despite pandemic-related governmental restrictions.
They describe Shanghai’s restaurants as “serving hot pot, Japanese
food known as Shabu-Shabu,” which is necessarily a dine-in
experience in that “the food is served uncooked at the table and
the patrons put the food into a bowl of hot broth to let it cook at
the table.” They point to uncontradicted testimony, including
testimony from the Malls’ witnesses, that the express purpose of the
leases was to operate dine-in Shabu-Shabu restaurants. Their sole
argument on appeal is that, because of the court’s unsupported

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factual finding about the nature of the restaurants, the court
reversibly erred in rejecting their COVID-19 affirmative defenses.
        Whether or not the court correctly found that Shanghai could
offer take out at the leased spaces, and whether or not the purpose
of the leases was to operate exclusively dine-in restaurants,
Shanghai and Qian still have not established reversible error. We
briefly analyze each defense below, and for the purposes of these
analyses, we assume that the restaurants were dine-in only and
that the purpose of the leases was to operate such dine-in only
restaurants.2
        As to impossibility, Shanghai and Qian argue COVID-19
pandemic government closure orders made it illegal for Shanghai to
operate a dine-in restaurant. But Shanghai’s obligation under the
lease was to pay rent, and government closure orders did not make
it illegal for Shanghai to pay rent.

      2 As to whether the lease permitted Shanghai to operate
a take-out restaurant at the leased spaces, we note that the
“permitted use[s]” (capitalization omitted) section of the leases
provides that Shanghai “shall use the premises only for the purpose
of conducting the business specifically set forth in the data sheet
and for no other purpose.” (Capitalization omitted.) The portion
of the leases titled “data sheet” provides that the “premises shall
be used for the operation of an Azabu Sabo [the trade name for the
restaurant listed in the agreements] Japanese restaurant preparing
and serving the following traditional Japanese menu items as its
primary offerings: Katsu dishes (pork) and curry dishes, Japanese
noodle dishes such as ramen, and udon and similar dishes,
Japanese confections and deserts plus a variety of coffee and tea
drinks . . . prepared and served on [the] premises. . . . The premises
shall be used solely for the use stated above and for no other use
or purpose.” (Capitalization omitted.)

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       As to the affirmative defense of excused nonperformance,
Shanghai and Qian cite Civil Code section 1151, which can excuse
“[t]he want of performance of an obligation . . . [¶] . . . [¶] . . . [w]hen
it is prevented or delayed by an irresistible, superhuman cause.”
Even if the pandemic had prevented Shanghai from fulfilling its
obligations to pay rent under the leases, Civil Code section 1151
expressly states it does not excuse performance when, as here, “the
parties have expressly agreed to the contrary.” (Civ. Code, § 1511,
subd. (2).) Specifically, the parties agreed that “the occurrence
of any of the events of force majeure herein described”—including
“restrictive governmental laws or controls [or] judicial orders” or
“Acts of God”—“shall not excuse [Shanghai]’s obligations to pay
[rent due under the leases].”
        Shanghai and Qian argue that this language cannot
prevent their frustration of purpose defense, because it appears
in a force majeure clause that “only applied to initial construction
[obligations].” (Boldface omitted.) Specifically, they point to the
first clause in the first sentence of that provision: “In the event
either party . . . shall be delayed in the performance of its initial
construction, or maintenance and/or repair obligations, by reasons
of [various force majeure events] . . . then performance of such
act shall be excused for the period of the delay.” (Italics added.)
Shanghai and Qian contend, with no further analysis, that this
“ ‘plain language’ ” shows the inapplicability of the force majeure
clause because initial construction on both locations had concluded
before the pandemic began. They fail, however, to read this first
clause in the context of the entire force majeure provision.
       The first clause of the force majeure provision excuses
delays in performing initial construction, maintenance and/or
repair obligations—it does not speak to the obligation to pay rent
under the lease. Another portion of the force majeure clause does

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speak to the payment of rent, however, and provides—without
limitation—that it will never be excused by an act of force majeure:
“Notwithstanding anything to the contrary, the occurrence of any
of the events of force majeure herein described shall not excuse
[Shanghai]’s obligations to pay minimum annual rental, percentage
rental and additional rent . . . or excuse such obligations as this
lease may otherwise impose on the party to obey, remedy or avoid
such event.” (Capitalization omitted.) Thus, although some terms
of the force majeure clause address only situations involving certain
construction, repair, and maintenance obligations, those terms are
inapplicable here. The term in the clause that is applicable—the
term addressing the payment of rent—reflects an agreement that
Shanghai would continue to pay rent, even in the face of force
majeure events.
       The force majeure clauses likewise preclude the frustration
of purpose affirmative defense. The doctrine of frustration excuses
contractual obligations where “ ‘[p]erformance remains entirely
possible, but the whole value of the performance to one of the
parties at least, and the basic reason recognized as such by both
parties, for entering into the contract has been destroyed by a
supervening and unforeseen event.’ ” (Dorn v. Goetz (1948) 85
Cal.App.2d 407, 410.) However, “ ‘[i]t is settled that if the parties
have contracted with reference [to the frustrating event] or have
contemplated the risks arising from it, they may not invoke the
doctrine of frustration to escape their obligations.’ [Citations.]”
(Glenn R. Sewell Sheet Metal, Inc. v. Loverde (1969) 70 Cal.2d
666, 676.) Here, the leases expressly address a situation where
“restrictive governmental laws or controls” or “Acts of God” prevent
or delay performance and provide that such events do not relieve
Shanghai of its obligation to pay rent.

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       Thus, regardless of whether or not substantial evidence
supports the court’s finding regarding the nature of the restaurant
Shanghai planned to or was permitted to operate on the leased
premises, and regardless of whether or not the purpose of the lease
was to operate an exclusively dine-in restaurant, the court did not
err in rejecting their COVID-19 pandemic-related affirmative
defenses.

                          DISPOSITION
      We affirm the judgment. Respondents are awarded their
costs on appeal.
     NOT TO BE PUBLISHED.

                                         ROTHSCHILD, P. J.
We concur:

                 BENDIX, J.

                 WEINGART, J.

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