Preview
Dennis M. Wilson (State Bar No. 43877)
1
dwilson@wilsonlawfirmca.com 5/25/2021
2 Justin A. Berg (State Bar No. 335451)
jberg@wilsonlawfirmca.com
3 Wilson Law Firm, A Professional Corporation
50 Iron Point Circle, Suite 115
4 Folsom, California 95630
Telephone: (916) 608-8891
5 Facsimile: (916) 608-8892
6 Attorneys for HK Deluxe, LLC
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 IN AND FOR THE COUNTY OF BUTTE
10
No. 19CV01079
11 CPI CHICO BENEFICIARY LLC et al.,
12 Plaintiffs,
Defendant HK Deluxe, LLC's, Points and
13 vs. Authorities in Reply to Plaintiffs'
Opposition to Demurrer to Second
14 HK DELUXE, LLC,
Amended Complaint
15
Defendant.
Dept: 1
16 Date: June 2, 2021
And Related Cross-Action. Time: 9:00
17 Judge: Hon. Tamara Mosbarger
18
INTRODUCTION
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1. Plaintiffs again have failed to cure their failure to state a cause of action.
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Plaintiffs again conflate the meaning of the contracts and this Court's prior
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rulings to support their position that their cause of action for Declaratory Judgment is
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sufficiently pled. However, they continue to disregard the Ground Lessor's rights and
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their own obligations under the Ground Lease, Sublease, and CND Agreement
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(hereinafter "Agreements"). Plaintiffs misstate and misinterpret the court's prior
25
rulings so that it is consistent with their cause of action, even though the court has never
26
held that "Plaintiffs do not need Defendant's consent to terminate the sublease."
27
(Opposition, p. 1; 19-20.) Rather, this Court held that "each cause of action in Plaintiffs
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1
Detendant's Pomts and Authorities in Reply to O_ppos1t10n to Demurrer to Second
Amended Complamt
1 complaint is based solely on Defendant's alleged unreasonable withholding of consent to
2 Walgreens' termination of the sublease under Section 4 of the CND Agreement." (Order,
3 January 21, 2020.) "Therefore, Defendant's motion for judgment on the pleadings is
4 granted." (Ibid.) Plaintiffs ignore this Court's main point in ruling that Plaintiffs' causes
5 of action are all entirely based on Defendant's unreasonable withholding of consent
6 under Section 4, then jump to the conclusion that they do not need Defendant's consent
7 at all. (Emphasis added.) This conclusion is not at all consistent with this Court's
8 holding. The Court held that Plaintiffs' causes of action failed to state facts sufficient to
9 state a cause of action because Defendant was not prohibited from unreasonably
10 withholding consent to the request under the CND Agreement, not because Defendant's
11 consent was not required at all. In fact, Plaintiffs argued in their Opposition to the
12 Demurrer to the First Amended Complaint that Defendant has no right to prohibit
13 termination of the Sublease. (Opposition to Demurrer to FAC, p. 6; 3-12.) The Court
14 rejected that argument when it granted Defendant's Motion for Judgment on the
15 Pleadings in finding that Ground Lessor's consent was indeed required, but was not
16 subject to the requirement that it cannot be unreasonably withheld under Section 4 of
17 the CND Agreement. (Motion for Judgment on the Pleadings, p. 12; 17-19.)
18 2. Factual background.
19 Plaintiffs want it both ways. They originally requested Ground Lessor's consent
20 to the termination of the Sublease with Walgreens, then sued Defendant when it
21 allegedly "unreasonably withheld consent" in breach of the CND Agreement, then now
22 allege that they seek an order that they do not need Ground Lessor's consent at all to
23 terminate the Sublease. Ground Lessor has always maintained the position that all the
24 parties must consent to the termination of the Sublease, and that Plaintiffs' causes of
25 action based on Ground Lessor unreasonably withholding consent do not constitute
26 these causes of action. (Emphasis added.) Yet Plaintiffs continue to rely on the same
27 theories that the Court dismissed in its prior rulings. Plaintiffs' new cause of action for
28 Declaratory Judgment again misconstrues Ground Lessor's position, the interpretation
2
orit1es m Rep y to O_pposit10n to Demurrer to Secon
Amended Complamt
1 of the lease agreements, and the Court's prior rulings. Plaintiffs go further to state that
2 they are "deprived of any remedy in response to Defendant's tortious conduct."
3 (Opposition, p. 2, 8-9.) However, the Second Amended Complaint (hereinafter "SAC")
4 does not allege any tortious conduct because the Court has already held that Defendant's
5 withholding of consent was permitted and not tortious, whether reasonable or
6 unreasonable, since it had no obligation under the CND Agreement to not unreasonably
7 withhold consent to plaintiffs' request for termination of the Sublease as would be
8 required for a request for a material modification of the Sublease. Indeed, Defendant
9 does have the right to prohibit termination of the Walgreens Sublease because it is the
10 owner of the property and has contractual rights as a party to the contracts and as a
11 third-party beneficiary.
12 In Plaintiffs' Amended Complaint they sought "a declaration that Defendant's
13 consent to the termination of the Sublease is not necessary and/or deemed given." (First
14 Amended Complaint ("FAC"), p. 9, ,i 2.) In Plaintiffs' Second Amended Complaint they
15 seek "a declaration that Plaintiff is entitled to terminate the Sublease without
16 Defendant's consent." (SAC, p.5, ,i 1.) While the wording is slightly differently, their
17 meaning is identical. The court specifically ruled that this issue was already addressed
18 in the Court's prior ruling on Defendant's Motion for Judgment on the Pleadings when
19 the Court granted Defendant's motion for Judgment on the Pleadings as to all causes of
20 action, including ruling against Plaintiffs twice on the issue of whether Plaintiff is
21 entitled to terminate the Sublease without Defendant's consent.
22 Plaintiffs go further to boldly state that "The Court resolved this issue twice
23 before... each time, this Court has made plain that the only instance which Defendant's
24 consent is contractually required is with respect to a 'material amendment,' as that term
25 is defined in the CND Agreement, and that termination is outside the scope of that
26 definition." (Opposition, p. 5, 24-27.) This Court has never made such a ruling. It ruled
27 in favor of Defendant as to all causes of action and it is not clear what basis Plaintiffs
28 have for believing that their new cause of action is consistent with the Court's prior
3
ont1es m Rep y to O_ppos1t10n to Demurrer to Secon
Amended Complamt
1 rulings. The Court dismissed the original complaint after it found that Defendant could
2 reasonably or unreasonable withhold consent to Plaintiffs and Walgreens' agreement to
3 terminate the Sublease and was therefore not restricted by Section 4 of the CND
4 Agreement prohibiting Defendant from unreasonably withholding consent to a material
s modification. The Court did not rule that Plaintiffs are not required to get Defendant's
6 consent at all and did not make any such conclusion in any of its orders.
7 ARGUMENT
8 1. Because the documents specifically provide for the time and the
9 procedure for termination of the sublease by Walgreen Co., HK Deluxe,
10 LLC, has the right to refuse termination of the sublease at any other
11 time.
12 "Contract provisions specifying the time and manner of termination must be
13 complied with in order to effect a termination by one party." (Kuffel v. Seaside Oil Co.
14 (1970 5th Dist.) 11 Cal. App. 3d 354, 368 [90 Cal. Rptr. 209] (express term of contract is
15 not shortened or affected by termination clause unless termination clause is exercised in
16 manner prescribed by contract).) Thus, where the contract sets a limited time in which
17 one party must elect to terminate, that party will not be permitted to terminate after tha
18 time has elapsed. (Santa Clara Properties Co. v. R. L. C., Inc. (1963 1st Dist.) 217 Cal.
19 App. 2d 840, 853 [32 Cal. Rptr. 333] (also holding that if agreement is silent as to time
20 within which option is to be exercised, that option must be exercised within reasonable
21 time)] Similarly, a contract provision requiring a certain number of days' notice of
22 election to exercise an option to terminate must be complied with. (Black v. City of
23 Santa Monica (1936 2d Dist.) 13 Cal. App. 2d 4, 6 [56 P.2d 256]; Martin v. U-Haul Co.
24 ofFresno (1998 5th Dist.) 204 Cal. App. 3d 396, [251 Cal. Rptr. 17]. (Contract provision
25 for termination or cancellation, Cal. Civ. Prac. Business Litigation § 29:3) Courts may
26 find an implied term in a contract only under "limited circumstances" on grounds of
27 "'obvious necessity"' "where the term is 'indispensable to effectuate the expressed
28 intention of the parties."' (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App-4th 468, 473 [47
4
orities in Rep y to O_pposit10n to Demurrer to Secon
Amended Complamt
1 Cal.Rptr.2d 12].) Here, the term is indispensable to effectuate the expressed intention of
2 the parties because of the overwhelming circumstances involved in executing these
3 agreements to demolish the operating motel, build, lease, and operate a Walgreens
4 store.
5 The Sublease specifically provides that the Term shall be adjusted so that it
6 commences on the Possession Date...and shall continue for twenty-five (25) years and
7 five (5) five (5) year renewal periods." (SAC, Ex. B. Art. 3(a).) Article 3(d) provides
8 precise termination options that begin at the end of the 25-year period. (SAC, Ex. B, 3
9 (d).) This section goes on to say that "Tenant shall send notice to exercise this option 12
10 months prior to the initial 25-year term .. .if Tenant does not send notice of termination
11 to Landlord, this lease shall carry on in full force and effect during the term until
12 Tenant's next option to terminate accrues." (Ibid.)
13 Contrary to Plaintiffs arguments in their Opposition to the Demurrer, the
14 Sublease does specifically provide for when the Sublease shall be terminated and does
15 not provide for early termination. While statutory contract law allows that all the
16 parties may rescind the contract, this requires all parties to mutually agree to rescinding
17 the contract. (Civ. Code§ 1689(a).) A contract, made expressly for the benefit of a third
18 person, may be enforced by him at any time before the parties thereto rescind it. (Civ.
19 Code.§ 1559.) This especially requires the agreement of the owner of the property and
20 the Ground Lessor under the Ground Lease, CND Agreement, and Sublease that
21 specifically entered into these agreements so that Walgreens would operate a store for
22 an initial term of 25 years. These agreements do not allow Walgreens to sign 25-year
23 subleases, then cancel the subleases whenever they want for whatever reason they want.
24 Ground Lessor would never have entered into these agreements if that was what
25 everyone agreed to. The contract was for an initial 25-year term. The parties are all
26 contractually required to perform under these agreements unless the Ground Lessor
27 consents to the rescission of the agreements. Termination is itself not an option except
28 for after the specific terms set forth in the agreements.
5
ont1es m Rep y to O_ppos1tion to Demurrer to Secon
Amended Complamt
1 2. Plaintiffs were obligated by the ground lease to sublease the property to
2 Walgreen Co., and once the defendant's property was demolished
3 plaintiffs and Walgreen Co. could not terminate the sublease except as
4 provided in the documents.
5 Ground Lessor was operating a fully functioning Best Western Hotel on the
6 property before it entered into these Agreements with Ground Lessor and Sublessee to
7 demolish the hotel and build a Walgreen's store with an initial term of 25 years. Ground
8 Lessor relied on the promises and conditions set forth in the agreement and agreed to
9 the terms set forth in the Sublease when it signed the CND Agreement. Plaintiffs argue
10 that there is no explicit provision in any of the agreements that prohibits Plaintiffs from
11 terminating the Sublease, however, the agreements clearly prohibit them from doing so.
12 These contracts would be meaningless if the Ground Lessee and Walgreens could simply
13 terminate at will. While rescission is possible, all the parties and third-party
14 beneficiaries must agree to rescind the contract. So far Plaintiffs have maintained the
15 position that they have the right to terminate the sublease in exchange for a termination
16 fee paid solely to the Ground Lessee. This is not provided for in the Agreements.
17 Plaintiffs argue that Ground Lessor has not provided a provision in the Sublease
18 for its status as a third-party beneficiary, however, the very fact that a percentage of
19 gross sales beyond the ordinary ground rent would be paid to Ground Lessor expressly
20 makes Ground Lessor a third-party beneficiary to the Sublease as well as a party to that
21 Sublease. Plaintiffs contend that "it is axiomatic that motivating intent to enter into a
22 sublease to confer a direct benefit upon the lessee-sublandlord, who is relieved of its
23 obligation to pay rent to the lessor, and upon the subtenant, who obtains the right to use
24 and occupy the premises." (Opposition, p. 10; 25-28.) Plaintiffs then go on to interpret
25 the arrangement and agreements as they see fit under this flawed premise. The parties
26 all negotiated the contracts and explicitly agreed to demolish the Best Western Hotel,
27 build a Walgreens store, and sublet the store to Walgreens. This idea that it is axiomatic
28 appears to stem from the fact that Plaintiffs were assigned their interest as Ground
6
ontles m Rep y to Opposition to Demurrer to Secon
Amended Complamt
1 Lessee and Landlord to Walgreens and took no part in the negotiation and execution of
2 the agreements. Yet they claim the Defendant continues to "create a right that does not
3 exist in the Sublease." (Opposition, p. 11, 15-17.) In fact, the agreement to demolish the
4 then existing hotel, build a Walgreens store, and sublet to Walgreens with Ground
5 Lessor's consent is particularly stated throughout all the agreements. Plaintiffs' dispute
6 about whether Ground Lessor has third-party beneficiary rights is not something that
7 can be adjudicated in this case for the sake of preserving plaintiffs' cause of action
8 because that is well-established in the agreements as well.
9 3. Defendant's arguments have been twice sustained.
10 The Court granted Defendant's Motion for Judgment on the Pleadings as to all
11 causes of action and the demurrer to the amended complaint as to all causes of action.
12 All these causes of action were based on Plaintiffs' own request under Section 4 of the
13 CND Agreement for Defendant's consent to the termination of the Sublease. The Court
14 found that Section 4 only applied to requests for material modifications rather than
15 requests for total termination. The Court has never ruled that Defendant's consent is not
16 required for termination. It only ruled that Plaintiffs failed to state facts sufficient to
17 state a cause of action based on defendant "unreasonably withholding" consent to their
18 request for termination of the Sublease. The Court determined that this was not a
19 proper request under Section 4 of the CND Agreement and therefore Defendant's
20 response was not wrongful to support their causes of action.
21 Plaintiffs argue that "Defendant's Argument has been Twice Rejected."
22 (Opposition, p. 11, 24.) This is based on their twisted interpretation that the Court
23 somehow ruled that "the breach of contract claim was not viable in light of the fact that
24 nothing in the CND Agreement required Defendant to consider, and consent to, a
25 termination of the Sublease, and without such an obligation to consent to termination,
26 defendant could not breach any such agreement by unreasonably withholding consent
27 to terminate." (Opposition, p. 12, 4-8.) The Court did not make this determination. The
28 Court specifically focused on the fact that Plaintiffs' request for termination was made
7
ont1es in Rep y to Opposit10n to Demurrer to Secon
Amended Complamt
1 under Section 4 of the CND Agreement that prohibits Ground Lessor from unreasonably
2 withholding consent to a request for a material modification. As discussed above, the
3 Court rejected the argument that defendant's consent was not required when it granted
4 Defendant's Motion for Judgment on the Pleadings. This Court determined that Ground
5 Lessor's consent was indeed required but was not subject to the requirement that it
6 cannot be unreasonably withheld under Section 4 of the CND Agreement. (Motion for
7 Judgment on the Pleadings, p. 12; 17-19.)
8 Their request for termination of the Sublease was not a request for a material
9 modification and therefore regardless of whether or not Ground Lessor's refusal to
10 consent was unreasonable, which it was not, Plaintiffs' causes of action based on Groun
11 Lessor allegedly unreasonably withholding consent had no application under the
12 circumstances. There is no lack of provisions governing termination as plaintiffs argue.
13 (Opposition, p. 12, 14-18.) There are specific provisions that the parties negotiated and
14 agreed to for an initial term of 25 years, then options to terminate after the initial term
15 or renew for additional 5-year terms. (SAC, Ex. B, p. 5, Art. 3(a) and 3(d).) The
16 agreements as written make it plain that Plaintiffs are not entitled to totally terminate
17 the Sublease without Ground Lessor's consent.
18 IN CONCLUSION, THE COURT SHOULD DISMISS WITHOUT LEAVE TO
19 AMEND.
20 Plaintiffs' Original Complaint was dismissed with leave to amend and then
21 Plaintiffs' Amended complaint was dismissed with leave to amend. Their Second
22 Amended Complaint again falls short of stating facts sufficient to state a cause of action
23 for Declaratory Judgment because it maintains the same positions and arguments in
24 defending their first two versions of their complaint. For the reasons stated in the
25 Demurrer and in this Reply, Plaintiffs again have failed to state facts sufficient to state a
26 cause of action. Therefore, this Court should sustain this Demurrer. Based on Plaintiffs'
27 failure to cure their original complaint by amendment and again based on their latest
28 attempt to do so, it is evident that they will not be able to cure their last remaining cause
8
ont1es in Rep y to Oppos1t1on to Demurrer to Secon
Amended Complamt
1 of action by amendment. Therefore, this Court should not grant Plaintiffs another
2 opportunity to amend. Respectfully submitted.
3 Dated: May 25, 2021 aw Firm, A Professional Corporation
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5 By: - +-+-- - - - - - - ---+-------,'' - - -----1
Jusf A. Berg, Attorney for De
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ont1es in Rep y to Opposition to Demurrer to Secon
Amended Complamt
Preview
Dennis M. Wilson (State Bar No. 43877) 1 dwilson@wilsonlawfirmca.com 5/25/2021 2 Justin A. Berg (State Bar No. 335451) jberg@wilsonlawfirmca.com 3 Wilson Law Firm, A Professional Corporation 50 Iron Point Circle, Suite 115 4 Folsom, California 95630 Telephone: (916) 608-8891 5 Facsimile: (916) 608-8892 6 Attorneys for HK Deluxe, LLC 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 IN AND FOR THE COUNTY OF BUTTE 10 No. 19CV01079 11 CPI CHICO BENEFICIARY LLC et al., 12 Plaintiffs, Defendant HK Deluxe, LLC's, Points and 13 vs. Authorities in Reply to Plaintiffs' Opposition to Demurrer to Second 14 HK DELUXE, LLC, Amended Complaint 15 Defendant. Dept: 1 16 Date: June 2, 2021 And Related Cross-Action. Time: 9:00 17 Judge: Hon. Tamara Mosbarger 18 INTRODUCTION 19 1. Plaintiffs again have failed to cure their failure to state a cause of action. 20 Plaintiffs again conflate the meaning of the contracts and this Court's prior 21 rulings to support their position that their cause of action for Declaratory Judgment is 22 sufficiently pled. However, they continue to disregard the Ground Lessor's rights and 23 their own obligations under the Ground Lease, Sublease, and CND Agreement 24 (hereinafter "Agreements"). Plaintiffs misstate and misinterpret the court's prior 25 rulings so that it is consistent with their cause of action, even though the court has never 26 held that "Plaintiffs do not need Defendant's consent to terminate the sublease." 27 (Opposition, p. 1; 19-20.) Rather, this Court held that "each cause of action in Plaintiffs 28 1 Detendant's Pomts and Authorities in Reply to O_ppos1t10n to Demurrer to Second Amended Complamt 1 complaint is based solely on Defendant's alleged unreasonable withholding of consent to 2 Walgreens' termination of the sublease under Section 4 of the CND Agreement." (Order, 3 January 21, 2020.) "Therefore, Defendant's motion for judgment on the pleadings is 4 granted." (Ibid.) Plaintiffs ignore this Court's main point in ruling that Plaintiffs' causes 5 of action are all entirely based on Defendant's unreasonable withholding of consent 6 under Section 4, then jump to the conclusion that they do not need Defendant's consent 7 at all. (Emphasis added.) This conclusion is not at all consistent with this Court's 8 holding. The Court held that Plaintiffs' causes of action failed to state facts sufficient to 9 state a cause of action because Defendant was not prohibited from unreasonably 10 withholding consent to the request under the CND Agreement, not because Defendant's 11 consent was not required at all. In fact, Plaintiffs argued in their Opposition to the 12 Demurrer to the First Amended Complaint that Defendant has no right to prohibit 13 termination of the Sublease. (Opposition to Demurrer to FAC, p. 6; 3-12.) The Court 14 rejected that argument when it granted Defendant's Motion for Judgment on the 15 Pleadings in finding that Ground Lessor's consent was indeed required, but was not 16 subject to the requirement that it cannot be unreasonably withheld under Section 4 of 17 the CND Agreement. (Motion for Judgment on the Pleadings, p. 12; 17-19.) 18 2. Factual background. 19 Plaintiffs want it both ways. They originally requested Ground Lessor's consent 20 to the termination of the Sublease with Walgreens, then sued Defendant when it 21 allegedly "unreasonably withheld consent" in breach of the CND Agreement, then now 22 allege that they seek an order that they do not need Ground Lessor's consent at all to 23 terminate the Sublease. Ground Lessor has always maintained the position that all the 24 parties must consent to the termination of the Sublease, and that Plaintiffs' causes of 25 action based on Ground Lessor unreasonably withholding consent do not constitute 26 these causes of action. (Emphasis added.) Yet Plaintiffs continue to rely on the same 27 theories that the Court dismissed in its prior rulings. Plaintiffs' new cause of action for 28 Declaratory Judgment again misconstrues Ground Lessor's position, the interpretation 2 orit1es m Rep y to O_pposit10n to Demurrer to Secon Amended Complamt 1 of the lease agreements, and the Court's prior rulings. Plaintiffs go further to state that 2 they are "deprived of any remedy in response to Defendant's tortious conduct." 3 (Opposition, p. 2, 8-9.) However, the Second Amended Complaint (hereinafter "SAC") 4 does not allege any tortious conduct because the Court has already held that Defendant's 5 withholding of consent was permitted and not tortious, whether reasonable or 6 unreasonable, since it had no obligation under the CND Agreement to not unreasonably 7 withhold consent to plaintiffs' request for termination of the Sublease as would be 8 required for a request for a material modification of the Sublease. Indeed, Defendant 9 does have the right to prohibit termination of the Walgreens Sublease because it is the 10 owner of the property and has contractual rights as a party to the contracts and as a 11 third-party beneficiary. 12 In Plaintiffs' Amended Complaint they sought "a declaration that Defendant's 13 consent to the termination of the Sublease is not necessary and/or deemed given." (First 14 Amended Complaint ("FAC"), p. 9, ,i 2.) In Plaintiffs' Second Amended Complaint they 15 seek "a declaration that Plaintiff is entitled to terminate the Sublease without 16 Defendant's consent." (SAC, p.5, ,i 1.) While the wording is slightly differently, their 17 meaning is identical. The court specifically ruled that this issue was already addressed 18 in the Court's prior ruling on Defendant's Motion for Judgment on the Pleadings when 19 the Court granted Defendant's motion for Judgment on the Pleadings as to all causes of 20 action, including ruling against Plaintiffs twice on the issue of whether Plaintiff is 21 entitled to terminate the Sublease without Defendant's consent. 22 Plaintiffs go further to boldly state that "The Court resolved this issue twice 23 before... each time, this Court has made plain that the only instance which Defendant's 24 consent is contractually required is with respect to a 'material amendment,' as that term 25 is defined in the CND Agreement, and that termination is outside the scope of that 26 definition." (Opposition, p. 5, 24-27.) This Court has never made such a ruling. It ruled 27 in favor of Defendant as to all causes of action and it is not clear what basis Plaintiffs 28 have for believing that their new cause of action is consistent with the Court's prior 3 ont1es m Rep y to O_ppos1t10n to Demurrer to Secon Amended Complamt 1 rulings. The Court dismissed the original complaint after it found that Defendant could 2 reasonably or unreasonable withhold consent to Plaintiffs and Walgreens' agreement to 3 terminate the Sublease and was therefore not restricted by Section 4 of the CND 4 Agreement prohibiting Defendant from unreasonably withholding consent to a material s modification. The Court did not rule that Plaintiffs are not required to get Defendant's 6 consent at all and did not make any such conclusion in any of its orders. 7 ARGUMENT 8 1. Because the documents specifically provide for the time and the 9 procedure for termination of the sublease by Walgreen Co., HK Deluxe, 10 LLC, has the right to refuse termination of the sublease at any other 11 time. 12 "Contract provisions specifying the time and manner of termination must be 13 complied with in order to effect a termination by one party." (Kuffel v. Seaside Oil Co. 14 (1970 5th Dist.) 11 Cal. App. 3d 354, 368 [90 Cal. Rptr. 209] (express term of contract is 15 not shortened or affected by termination clause unless termination clause is exercised in 16 manner prescribed by contract).) Thus, where the contract sets a limited time in which 17 one party must elect to terminate, that party will not be permitted to terminate after tha 18 time has elapsed. (Santa Clara Properties Co. v. R. L. C., Inc. (1963 1st Dist.) 217 Cal. 19 App. 2d 840, 853 [32 Cal. Rptr. 333] (also holding that if agreement is silent as to time 20 within which option is to be exercised, that option must be exercised within reasonable 21 time)] Similarly, a contract provision requiring a certain number of days' notice of 22 election to exercise an option to terminate must be complied with. (Black v. City of 23 Santa Monica (1936 2d Dist.) 13 Cal. App. 2d 4, 6 [56 P.2d 256]; Martin v. U-Haul Co. 24 ofFresno (1998 5th Dist.) 204 Cal. App. 3d 396, [251 Cal. Rptr. 17]. (Contract provision 25 for termination or cancellation, Cal. Civ. Prac. Business Litigation § 29:3) Courts may 26 find an implied term in a contract only under "limited circumstances" on grounds of 27 "'obvious necessity"' "where the term is 'indispensable to effectuate the expressed 28 intention of the parties."' (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App-4th 468, 473 [47 4 orities in Rep y to O_pposit10n to Demurrer to Secon Amended Complamt 1 Cal.Rptr.2d 12].) Here, the term is indispensable to effectuate the expressed intention of 2 the parties because of the overwhelming circumstances involved in executing these 3 agreements to demolish the operating motel, build, lease, and operate a Walgreens 4 store. 5 The Sublease specifically provides that the Term shall be adjusted so that it 6 commences on the Possession Date...and shall continue for twenty-five (25) years and 7 five (5) five (5) year renewal periods." (SAC, Ex. B. Art. 3(a).) Article 3(d) provides 8 precise termination options that begin at the end of the 25-year period. (SAC, Ex. B, 3 9 (d).) This section goes on to say that "Tenant shall send notice to exercise this option 12 10 months prior to the initial 25-year term .. .if Tenant does not send notice of termination 11 to Landlord, this lease shall carry on in full force and effect during the term until 12 Tenant's next option to terminate accrues." (Ibid.) 13 Contrary to Plaintiffs arguments in their Opposition to the Demurrer, the 14 Sublease does specifically provide for when the Sublease shall be terminated and does 15 not provide for early termination. While statutory contract law allows that all the 16 parties may rescind the contract, this requires all parties to mutually agree to rescinding 17 the contract. (Civ. Code§ 1689(a).) A contract, made expressly for the benefit of a third 18 person, may be enforced by him at any time before the parties thereto rescind it. (Civ. 19 Code.§ 1559.) This especially requires the agreement of the owner of the property and 20 the Ground Lessor under the Ground Lease, CND Agreement, and Sublease that 21 specifically entered into these agreements so that Walgreens would operate a store for 22 an initial term of 25 years. These agreements do not allow Walgreens to sign 25-year 23 subleases, then cancel the subleases whenever they want for whatever reason they want. 24 Ground Lessor would never have entered into these agreements if that was what 25 everyone agreed to. The contract was for an initial 25-year term. The parties are all 26 contractually required to perform under these agreements unless the Ground Lessor 27 consents to the rescission of the agreements. Termination is itself not an option except 28 for after the specific terms set forth in the agreements. 5 ont1es m Rep y to O_ppos1tion to Demurrer to Secon Amended Complamt 1 2. Plaintiffs were obligated by the ground lease to sublease the property to 2 Walgreen Co., and once the defendant's property was demolished 3 plaintiffs and Walgreen Co. could not terminate the sublease except as 4 provided in the documents. 5 Ground Lessor was operating a fully functioning Best Western Hotel on the 6 property before it entered into these Agreements with Ground Lessor and Sublessee to 7 demolish the hotel and build a Walgreen's store with an initial term of 25 years. Ground 8 Lessor relied on the promises and conditions set forth in the agreement and agreed to 9 the terms set forth in the Sublease when it signed the CND Agreement. Plaintiffs argue 10 that there is no explicit provision in any of the agreements that prohibits Plaintiffs from 11 terminating the Sublease, however, the agreements clearly prohibit them from doing so. 12 These contracts would be meaningless if the Ground Lessee and Walgreens could simply 13 terminate at will. While rescission is possible, all the parties and third-party 14 beneficiaries must agree to rescind the contract. So far Plaintiffs have maintained the 15 position that they have the right to terminate the sublease in exchange for a termination 16 fee paid solely to the Ground Lessee. This is not provided for in the Agreements. 17 Plaintiffs argue that Ground Lessor has not provided a provision in the Sublease 18 for its status as a third-party beneficiary, however, the very fact that a percentage of 19 gross sales beyond the ordinary ground rent would be paid to Ground Lessor expressly 20 makes Ground Lessor a third-party beneficiary to the Sublease as well as a party to that 21 Sublease. Plaintiffs contend that "it is axiomatic that motivating intent to enter into a 22 sublease to confer a direct benefit upon the lessee-sublandlord, who is relieved of its 23 obligation to pay rent to the lessor, and upon the subtenant, who obtains the right to use 24 and occupy the premises." (Opposition, p. 10; 25-28.) Plaintiffs then go on to interpret 25 the arrangement and agreements as they see fit under this flawed premise. The parties 26 all negotiated the contracts and explicitly agreed to demolish the Best Western Hotel, 27 build a Walgreens store, and sublet the store to Walgreens. This idea that it is axiomatic 28 appears to stem from the fact that Plaintiffs were assigned their interest as Ground 6 ontles m Rep y to Opposition to Demurrer to Secon Amended Complamt 1 Lessee and Landlord to Walgreens and took no part in the negotiation and execution of 2 the agreements. Yet they claim the Defendant continues to "create a right that does not 3 exist in the Sublease." (Opposition, p. 11, 15-17.) In fact, the agreement to demolish the 4 then existing hotel, build a Walgreens store, and sublet to Walgreens with Ground 5 Lessor's consent is particularly stated throughout all the agreements. Plaintiffs' dispute 6 about whether Ground Lessor has third-party beneficiary rights is not something that 7 can be adjudicated in this case for the sake of preserving plaintiffs' cause of action 8 because that is well-established in the agreements as well. 9 3. Defendant's arguments have been twice sustained. 10 The Court granted Defendant's Motion for Judgment on the Pleadings as to all 11 causes of action and the demurrer to the amended complaint as to all causes of action. 12 All these causes of action were based on Plaintiffs' own request under Section 4 of the 13 CND Agreement for Defendant's consent to the termination of the Sublease. The Court 14 found that Section 4 only applied to requests for material modifications rather than 15 requests for total termination. The Court has never ruled that Defendant's consent is not 16 required for termination. It only ruled that Plaintiffs failed to state facts sufficient to 17 state a cause of action based on defendant "unreasonably withholding" consent to their 18 request for termination of the Sublease. The Court determined that this was not a 19 proper request under Section 4 of the CND Agreement and therefore Defendant's 20 response was not wrongful to support their causes of action. 21 Plaintiffs argue that "Defendant's Argument has been Twice Rejected." 22 (Opposition, p. 11, 24.) This is based on their twisted interpretation that the Court 23 somehow ruled that "the breach of contract claim was not viable in light of the fact that 24 nothing in the CND Agreement required Defendant to consider, and consent to, a 25 termination of the Sublease, and without such an obligation to consent to termination, 26 defendant could not breach any such agreement by unreasonably withholding consent 27 to terminate." (Opposition, p. 12, 4-8.) The Court did not make this determination. The 28 Court specifically focused on the fact that Plaintiffs' request for termination was made 7 ont1es in Rep y to Opposit10n to Demurrer to Secon Amended Complamt 1 under Section 4 of the CND Agreement that prohibits Ground Lessor from unreasonably 2 withholding consent to a request for a material modification. As discussed above, the 3 Court rejected the argument that defendant's consent was not required when it granted 4 Defendant's Motion for Judgment on the Pleadings. This Court determined that Ground 5 Lessor's consent was indeed required but was not subject to the requirement that it 6 cannot be unreasonably withheld under Section 4 of the CND Agreement. (Motion for 7 Judgment on the Pleadings, p. 12; 17-19.) 8 Their request for termination of the Sublease was not a request for a material 9 modification and therefore regardless of whether or not Ground Lessor's refusal to 10 consent was unreasonable, which it was not, Plaintiffs' causes of action based on Groun 11 Lessor allegedly unreasonably withholding consent had no application under the 12 circumstances. There is no lack of provisions governing termination as plaintiffs argue. 13 (Opposition, p. 12, 14-18.) There are specific provisions that the parties negotiated and 14 agreed to for an initial term of 25 years, then options to terminate after the initial term 15 or renew for additional 5-year terms. (SAC, Ex. B, p. 5, Art. 3(a) and 3(d).) The 16 agreements as written make it plain that Plaintiffs are not entitled to totally terminate 17 the Sublease without Ground Lessor's consent. 18 IN CONCLUSION, THE COURT SHOULD DISMISS WITHOUT LEAVE TO 19 AMEND. 20 Plaintiffs' Original Complaint was dismissed with leave to amend and then 21 Plaintiffs' Amended complaint was dismissed with leave to amend. Their Second 22 Amended Complaint again falls short of stating facts sufficient to state a cause of action 23 for Declaratory Judgment because it maintains the same positions and arguments in 24 defending their first two versions of their complaint. For the reasons stated in the 25 Demurrer and in this Reply, Plaintiffs again have failed to state facts sufficient to state a 26 cause of action. Therefore, this Court should sustain this Demurrer. Based on Plaintiffs' 27 failure to cure their original complaint by amendment and again based on their latest 28 attempt to do so, it is evident that they will not be able to cure their last remaining cause 8 ont1es in Rep y to Oppos1t1on to Demurrer to Secon Amended Complamt 1 of action by amendment. Therefore, this Court should not grant Plaintiffs another 2 opportunity to amend. Respectfully submitted. 3 Dated: May 25, 2021 aw Firm, A Professional Corporation 4 5 By: - +-+-- - - - - - - ---+-------,'' - - -----1 Jusf A. Berg, Attorney for De 6 HK Deluxe, LLC. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 ont1es in Rep y to Opposition to Demurrer to Secon Amended Complamt