Court of Appeal:
Health Club’s Forced Closure During Pandemic Didn’t Excuse Paying Rent
By a MetNews Staff Writer
The inability of a company that operates sports and fitness clubs to be open for business while government closure orders were in effect in light of the COVID-19 pandemic does not excuse a failure to pay rent during those periods Div. One of the Fourth District Court of Appeal held yesterday.
Justice Martin N. Buchanan authored the opinion affirming a judgment by San Diego Superior Court Judge Kenneth J. Medel awarding $520,361.29 in unpaid rent to SVAP III Poway Crossings, LLC. Rejecting defendant Fitness International, LLC’s contrary contentions, Medel ruled:
“[T]he contractual performance owed here by the tenant is payment of rent. The Landlord’s obligation was to provide possession of the premises. The tenant’s particular use of the premises was not the obligation under the contract. Covid did not prevent performance of the obligation to pay rent.”
In response to each of Fitness’s arguments as to why it owed no rent during periods it was compelled to be closed, Buchanan echoed Medel’s point: that it was precluded from operating its clubs, not from paying rent.
Addressing its defense based on “impossibility,” Buchanan wrote:
“Fitness contends that the defense of impossibility applies here because the government closure orders made it illegal for it to operate its fitness facility. But…Fitness’s obligation under the lease was to pay rent, not to operate a fitness facility. The government closure orders did not make it illegal for Fitness to pay rent. In fact, one of the orders explicitly stated that it did not relieve a tenant of the obligation to pay rent.”
“Fitness seems to be conflating impossibility with frustration of purpose, but in any event provides no support for this argument. Case law addressing the doctrine of impossibility almost invariably refers to impossibility of performance, and the question to be decided is whether the party asserting the defense has demonstrated that it was impossible to perform its own contractual obligations to the other contracting party such that it may avoid liability for its non-performance….Nothing about the pandemic or resulting closure orders has made Fitness’s performance of its obligation to SVAP—paying rent—impossible.”
The justice employed the same reasoning in rebuffing Fitness’s argument that the force majeure provision in the lease applied—noting that, aside from Fitness’s performance not being precluded, the provision, by its terms, did not come into play—and rejecting two statutory defenses and the defense of frustration of purpose.
As to the frustration-of-purpose defense, Buchanan said:
“Assuming, as Fitness argues, that the primary purpose of the lease was for Fitness to operate a health club and fitness facility (and the lease did not allocate the risk created by the government closure orders to Fitness alone), we still conclude that the orders did not result in the destruction of the lease’s purpose and value such that Fitness’s performance was excused. The parties entered into the lease in June 2002, and the current lease term ends in October 2025. The temporary government closure of a fitness facility for a period of months when the premises have been leased for more than 19 years—and the lease term spans more than 23 years total—does not amount to the kind of complete frustration required for the doctrine to apply.”
Buchanan noted that an executive order by Gov. Gavin Newsom specified that the temporary freeze on enforcement of rent obligations did not relieve tenants of the ultimate obligation to pay what was owed.
“We are sympathetic to the hardship Fitness and other businesses faced due to the pandemic and resulting closure orders. However, neither the terms of the lease nor the equitable doctrines invoked by Fitness afford it the requested relief.”
The case is SVAP III Poway Crossings, LLC v. Fitness International, LLC, D079903.
Copyright 2023, Metropolitan News Company