Meskla Ent. Inc. v. DKY Cruz, Inc.

Opinion

FILE w I

*

2020 Flaf au x t Ll: us

SUPER_lOR COURT Qt* 53U¢*iM IN THE SUPERIOR COURT O F GUAM

MESKLA ENTERPRISES, LLC, Superior Court Case No. CV1026-18 Plaintiff, DECISION AND ORDER vs. RE MOTION TO DISMISS AND DKY CRUZ, INC., MOTION FOR PARTIAL Defendant. SUMMARY JUDGMENT

In this lawsuit concerning a lease agreement, the Court considers the lessor Defendant

DKY Cruz, Inc.'s Motion to Dismiss and the lessee Plaintiff Meskla Enterprises, LLC's Motion

for Partial Summary Judgment. DKY's Motion asks the Court to either dismiss the Complaint in

its entirety, or in the alternative, grant it summary judgment and find that Meskla's claims are

time-barred. Meskla's Motion seeks summary judgment on its first and second causes of action

for breach of contract and breach of the covenant of quiet enjoyment. Having considered the

parties' evidence and arguments and the applicable law, the Court DENIES DKY's Motion to

Dismiss, GRANTS IN PART and DENIES IN PART DKY's Motion for Summary Judgment in

the alterative, and DENIES IN PART and GRANTS IN PART Meskla's Motion for Partial

Summary Judgment.

I. UNDISPUTED FACTS

1. On August 27, 2013, the parties entered into a Lease Agreement over Lot No.

5136-1-1-1, Dededo, Guam. The lease term is for ten years, and Meskla continues to

occupy the leased property. Decl. Leonard Campos, Ex. 1 W 1, 2, 11 (Dec. 6, 2019)

(referred to herein as "Lease Agreement").

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2. Three months after execution of the Lease Agreement, on November 8, 2013, a

Relocation Survey map procured by Meskla indicated that the lot at issue was in fact "Lot

5136-1-1-1-Rl." Decl. Leonard Campos, Ex. 2. The survey also indicates that the

"existing building" on Lot 5136-1-1-1-Rl encroaches onto the adjoining lot, Lot

5136-1-3. Id.

3. The portion of the building on the adjoining lot was demolished on October 10, 2015, at

the request of the adjoining lot's owner. Decl. Leonard Campus 1]9.

4. "Up until the building was demolished, Meskla retained possession and control of the

entire building." Decl. Leonard Campus 1] 10.

5. The Lease Agreement contains an "as is" provision:

8. CONDITION OF PREMISES (Maintenance and Repair; Right of Inspection): Lessee has inspected the premises an [sic] acknowledge that there are no damages and hereby accepts in "as is" condition, and that no statement or representation as to the condition has been made by Lessor. Lessee specifically waive any right to make repairs of the premises at the expense of Lessor or to compel Lessor to make repairs, however, Lessor may at Lessor's option enter upon the premises at any reasonable time to examine the same and to make such repairs or perform such maintenance as Lessor may deem necessary or desirable. Lessee agrees to maintain the interior of the premises at all times during the term hereunder in good clean condition and as good as the present condition of the premises (reasonable wear and tear excepted) and to return the premises to Lessor in such condition at the end of the term.

Lease Agreement 118.

6. The Lease Agreement makes several references to a building:

a. The Lessor is responsible for paying "real estate taxes assessed and levied against

the current building." Lease Agreement 1] 10.

b. The Lessee was responsible for obtaining permits that met the current building

code. Lease Agreement 1[ 11.

IF CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 3 MOTION FOR PARTIAL SUMMARY JUDGMENT

c. T he Les s ee indemnified t he Les s or for t he cos t s of da ma ge "t o t he gener a l

complex resulting from" the Lessee's negligent or willful acts, including leaving

Windows and doors open and unnecessary flows of water from faulty pipes and

faucets. Lease Agreement 1] 12(a).

d. T he Lessee a gr eed to pr otect "the building" fr om sever e wea ther conditions.

Lease Agreement 'H 12(b).

e. The Lessee agreed to obtain insurance "covering the entire building," and

optional earthquake and fire insurance "to cover any potential damages to the

building." Lease Agreement 1] 14.

f. The parties agreed to limit the Lessor's liability for "the making of necessary

repairs to the building of which the premises are a part." Lease Agreement 117.

7. Meskla brings this action seeldng damages for breach of contract and breach of the

covenant of quiet enjoyment, and also seeks reformation of the Lease Agreement.

11. LAW AND DISCUSSION

A. DKY'S Motion to Dismiss

A claim may be dismissed under Rule l2(b)(6) statute of limitations grounds only when

"the running of the statute is apparent on the face of the complaint." Huynh v Chase Manhattan

Bank, 465 F.3d 992, 997 (9th Cir. 2006).1 "When a motion to dismiss is based on the running of

the statute of limitations, it can be granted only if the assertions of the complaint, read with the

required liberality, would not permit the plaintiff to prove that the statute was tolled." Jablon v

Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980),Dewitz v TeleGuam Holdings, LLC,2014

1 Because the Guam Rules of Civil Procedure are generally derived from the Federal Rules of Civil Procedure, federal decisions that construe the federal counterparts to the Guam Rules of Civil Procedure are persuasive authority. Gov 't of Guam u O7(eefe on behalf ofl-Ieirs of Torres Estate, 2018 Guam 41] 9.

I v Q . K. , * . I. CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 4 MOTION FOR PARTIAL SUMMARY JUDGMENT

WL 1389326, at *2-3 (D. Guam Apr. 9, 2014), report and recommendation adopted, 2014 WL

3028660 (D. Guam July 3, 2014).

The Complaint on its face does not indicate a limitations bar. All causes of action pertain

to a written instrument and thus carry a four-year statute of limitations. 7 GCA § 11303. As

such, they had to accrue no earlier than October 2014. However, it was not until September

2015 that the building was tom down thereby affecting Meskla's lease. Con pl. 11 7 (Oct. 25,

2018). Using that date--and DKY mentions no other date or event in the Complaint to use--it

appears that Meslda's action is not subject to dismissal under Rule 12(b)(6).

B. DKY'S Motion for Summary Judgment in the Alternative

A court may grant summary judgment "if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to a judgment as a

matter of law." GRCP 56(c). A genuine issue of fact exists when "there is 'sufficient evidence'

which establishes a factual dispute requiring resolution by a fact-finder." liuka Corp. la

Kawasho Int'l (Guam), Inc., 1997 Guam 10 1] 7 (citing TW Else. Serf, Inc. u Pacy'ic Elec.

Contractors Ass 'n, 809 F.2d 626, 630 (9th Cir. 1987)). "A 'material' fact is one that is relevant to

an element of a claim or defense and whose existence might affect the outcome of the

suit...Disputes over irrelevant or unnecessary facts will not preclude a grant of summary

judgment." l i u k a Corp., 1997 Guam 10 1] 7. "If the movant can demonstrate that there are no

genuine issues of material fact, the .non-movant cannot merely rely on allegations contained in

the complaint, but must produce at least some significant probative evidence tending to support

the complaint." Edwards VI Pacyic Fin. Corp., 2000 Guam 27 'H 7. "The Court must view the

evidence and draw inferences in the light most favorable to the non-movant." Id.

r

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1. Statute of Limitations.

Reviewing the same limitations issue under the summary judgment standard, Meskla has

not provided any evidence opposing DKY's evidence that Meskla knew of the encroachment

issues sometime in November 2013 when it received an as-built survey of the property. Thus, for

the contractual claims to be timely, they had to be tiled by November 2017. For any fraud claims

to be timely, it had to be filed by November 2016. 11 GCA § 11305.

Meskla argues that the Lease Agreement is an executors contract, and therefore the

limitations period does not begin until the final performance occurs. The Court has difficulty

construing the Lease Agreement as an executors contract and Meskla's cited caselaw does not

appear helpful.

However, the Court finds the continuing contract doctrine applicable. When there is a

continuing obligation in a contract, a party's ongoing non-performance constitutes a continuing

breach while the contract remains in effect. Grove Isle Ass'n, Ire. 14 Grove Isle Assoes., LLLP,

137 So.3d 1081, 1095 (Fla. Dist. Ct. App. 2014), Uni-Sys., LLC v United States Tennis Ass 'n,

Inc., 350 F. Supp. ad 143, 182 (E.D.N.Y 2018), Garcon u Bristol House, Inc., 162 A.D.3d 857,

79 N.Y.S.3d 265 (N.Y. App. Div. 2018) (continuing wrong doctrine tolled six year statute of

limitations for breach of contract and breach of the implied warranty of habitability claims

brought against apartment corporation by owner of apartment seeking monetary damages for

persisting damage to apartment walls and floor allegedly caused by renovations to unit directly

below his parent).

Here, Meskla continues to pay the full monthly rent under the Lease, though part of the

building originally leased to Meskla was demolished. Decl. Leonard Campus 11 ll. Construing

2 Meskla's third claim seeks reformation of the lease and alleges in part that DKY committed fraud or that one or more parties committed mutual mistake. Comal. 1] 17. CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 6 MOTION FOR PARTIAL SUMMARY JUDGMENT

these facts in a light most favorable to Meskla, DKY had a continuing obligation to lease and

allow Meskla the right to enjoy the building Meskla originally contracted for. Accordingly,

although contractual breaches prior to October 2014 have now become stale, breaches beyond

that time are timely.

For Meskla's reformation action--to the extent it is grounded in fraud--the p eg have

presented disputed issues of fact. For a fraud cause of action, the statute of limitations accrues

when the plaintiff suspects or should suspect that his injury was caused by wrongdoing or that

someone has done something wrong to him. Burkhart u Miranda, 2013 Guam 2 1126 (citing

Custodio v Bo onprakong, 1999 Guam 5 1] 27). DKY claims Meskla suspected an injury back in

2013 when it received a survey of the property, Meskla contends the injury occurred in October

2015, when the building was demolished. The Court is unable to resolve whether Meskla filed a

timely reformation claim based on the evidence presented. The issue of the timeliness of any

fraud-based claim must be resolved at trial.

2. "As is" Provision's Impact on Alleged Breach.

DKY asks the Court to rule as a matter of law that the "as is" provision bars the

contractual claims. The Court closely reviews the "as is" provision, and finds there is no genuine

issue of material fact that the provision concerns the condition of the building as opposed to the

validity of the premises. See 18 GCA § 87105 ("When a contract is reduced to writing, the

intention of the parties is to be ascertained from the writing alone, if possible....). First, the

provision establishes that Lessee agrees that "there are no damages" and Lessor makes no

representation to the contrary. Lease Agreement 'H 8. Second, the Lease Agreement discusses

how the Lessee has decided not to request repairs, but that the Lessor may make repairs at its

election. Lease Agreement 1] 8. Finally, the "as issz provision discusses the Lessee's maintenance CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 7 MOTION FOR PARTIAL SUMMARY JUDGMENT

of the premises. Lease Agreement 1] 8. While DKY interprets the provision to indicate the

building size, location, and dimensions are also "as is," lacking within this provision is any

mention as to the size or location or dimensions of the leased building. The only reasonable

interpretation is that the parties agreed that Meskla will lease the building in the condition as it

was, waived further repairs, and agreed that its condition shall be maintained throughout the

lease period. The Court therefore finds as a matter of law that the "as is" provision has no impact

on the central issue of whether DKY breached the Lease Agreement by leasing and collecting

rent for a building partially located on an adjoining lot.

C. Meskla's Motion for Partial Summary Judgment

Meskla seeks a ruling that as a matter of law, DKY breached the Lease Agreement and/or

breached the covenant of quiet enjoyment. In response, DKY characterizes the parties'

agreement as a "Ground Lease," meaning that the Lease Agreement carried no contractual

obligation to lease Meskla any building: "the subject written agreement is only a Ground Lease

and does not expressly address any existing stnlcture." Opp. Mot. Partial Summ. J. at 3 (Dec. 12,

2019). The plain language of the Lease Agreement establishes otherwise, however. As listed by

the Court earlier in this Decision and Order, the Lease Agreement contains at least six references

to a building. Paragraphs 10, 11, 12(a), l2(b), 14, and 17 discuss the responsibility for the taxes

imposed on a building, building code permits, indemnification for damages to the complex,

insurance for the building, and the limitation of liability for "repairs to the building of which the

premises are a part." Notably, the Lease Agreement does not define or reference a "Ground

Lease." Based on the four corners of the document, there is no genuine issue of material fact that

Meskla's lease included the lease of a building. CVl026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 8 MOTION FOR PARTIAL SUMMARY JUDGMENT

Beyond its ground lease and statute of limitations arguments, DKY offers no

substantiated facts to oppose Meslda's Motion. First, the Court finds that Meskla has established

the elements for a breach of contract claim. It must establish the existence of the contract, the

plaintiff's performance or excuse for nonperformance, the defendant's breach, and resulting

damages to the plaintiff. Hemlani ma Hemlani, 2015 Guam 16 'll 19. Meskla has satisfied these

elements by producing the Lease Agreement as well as evidence that it makes monthly payments

on the lease, that a portion of the leased building has been destroyed, and that Meskla has

suffered damages in the form of lease payments, attorney's fees, and other amounts, the extent of

which it will prove at trial.

DKY also contends that Meskla has violated the carol evidence rule by introducing

evidence of the set back problem. While the carol evidence rule in fact bars evidence from being

used to interpret a written contract, the evidence Meskla produces does not fall under the

category of carol evidence. Meskla's representative, Leonard Campos, does not offer any terms

to alter the Lease Agreement. Instead, he represents that after the Lease Agreement, Meskla

received a Relocation Survey map that indicates a portion of the leased building fell onto another

lot. Decl. Leonard Campos W 6, 8. This evidence does not change any term of the Lease

Agreement.

Unfo ately for DKY, it has presented no other genuine issues of material fact to defeat

the undisputed facts that on the plain language of the Lease Agreement, Meskla leased a building

from DKY and DKY breached that lease by not providing Meskla the building it contracted to

possess. Now left for trial is to what extent Meskla has suffered damages. The Court therefore

GRANTS Meskla's Motion as to its first count. CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 9 MOTION FOR PARTIAL SUMMARY JUDGMENT

On Meskla's second claim that DKY is liable for breach of the covenant. of quiet

enjoyment, the Court finds a disputed fact. Every lease contains an implied covenant of quiet

enjoyment. Erlaeh u Sierra Asset Servicing, LLC, 173 Cal. Rptr. ad 159, 171 (Cal. App. 2014).

The covenant of quiet enjoyment is implicated when there has been an actual or constructive

eviction. Petroleum Collections Inc. v. Swords, 122 Cal. Rptr. 114, 117 (Cal. App. 1975).

However, as Meskla recognizes, substantial interference is required to establish a breach of quiet

enjoyment. Mot. Partial Sums. J. at 12 (Dec. 6, 2019). Meskla provides no evidence that the

destroying part of the leased building amounted to a substantial interference. To the contrary,

Meskla continues to operate its business in the leased building today. Deal. Leonard Campos 1]5.

Having not established all elements of a breach of the covenant of quiet enjoyment, Meskla's

Motion is DENIED as to its second claim.

111. CONCLUSION

The Court determines the following:

1. DKY's Motion to Dismiss is DENIED as the face of the Complaint does not

indicate a limitations bar.

2. DKY's Motion for Summary Judgment in the alternative is GRANTED IN PART

as claims regarding contractual breaches prior to October 2014 are untimely and

DENIED IN PART as there are issues of fact as to the timeliness of the third

cause of action to the extent it is grounded in fraud.

3. Meskla's Motion for Partial Summary Judgment on its breach of contract claim is

GRANTED.

4. Meskla's Motion for Partial Summary Judgment on its breach of covenant of

quiet enjoyment claim is DENIED.

re

/ CV1026-18 DECISION AND ORDER RE MOTION TO DISMISS AND Page 10 MOTION FOR PARTIAL SUMMARY JUDGMENT

The Court will issue a separate Order setting a trial date.

SO ORDERED this nth day of March 2020.

$ERVICE vIA COURT BOX HON LYZE M. IRIARTE I acknowledge that a copy of the original hereto was placed inthe Judge, Superior Court of Guam f" n box of: . UM: lfW;lg,&~VICllSY»44

Qlwg u m * I0 /- Date:7:l "in `l1me: 1-E60 YY'

Deputy Clerk, Superior Court of Guam

Appearing Attorneys : Jon A. Visosky, Esq. of Roberts, Fowler & Visosky LLP for Meskla Enterprises, LLC. Gary Wayne Francis Gumataotao, Esq., Law Offices of Gumataotao & Pole, for DKY Cruz, Inc.