BFCAP Investments v. Lifehouse Parkview etc. CA2/4 ( 2021 )

Filed 2/2/21 BFCAP Investments v. Lifehouse Parkview etc. CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
BFCAP INVESTMENTS, B303550
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC128812)
v.
LIFEHOUSE PARKVIEW
PROPERTIES, et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Mark A. Young, Judge. Affirmed.
Polsinelli, Jonathon E. Cohn for Plaintiff and Appellant.
Shumener, Odson & Oh, Betty M. Shumener, Benjamin L.
Hicks for Defendants and Respondents.
INTRODUCTION
In this breach of contract action, plaintiffs Kingston
Healthcare Center, LLC and BFCAP Investments, LLC
contracted to purchase licenses to operate a skilled nursing
facility and lease its parcel of property from defendants Lifehouse
Parkview Operations, LLC (OpCo) and Lifehouse Parkview
Properties, LLC (PropCo). The parties entered into a series of
agreements relating to the purchase; one issue the agreements
addressed was which party would be responsible for paying
quality assurance fees (QAFs), state-imposed licensing fees on
skilled nursing facilities. Plaintiffs alleged that defendants
breached the parties’ contracts because defendants were required
to pay all outstanding QAFs due prior to the close of the sale, and
they did not.
Defendants moved for summary judgment, asserting in
part that Kingston—not BFCAP—paid the outstanding QAFs, so
BFCAP could not prove the element of damages on its breach of
contract claim. In their opposition, plaintiffs submitted an
indemnity agreement created after defendants’ motion for
summary judgment was filed, which stated that BFCAP agreed
to indemnify Kingston for any losses associated with the QAFs or
the litigation. Plaintiffs argued that the indemnity agreement
constituted evidence of BFCAP’s damages resulting from
defendants’ breach.
The trial court granted the motion and entered summary
judgment for defendants against BFCAP. BFCAP appealed,
asserting that the indemnity agreement is evidence of its
damages. BFCAP also contends on appeal that it paid a higher
price for the lease in exchange for defendants’ promise to pay the
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outstanding QAFs, and therefore it was damaged because it did
not receive the benefit of this bargain.
We affirm. The scope of summary judgment is limited to
the pleadings, and plaintiffs cannot avoid summary judgment
with a new indemnity agreement that extends beyond the scope
of the complaint. In addition, BFCAP did not assert in the trial
court that the sale price of the lease constituted damages, so that
contention has been forfeited and may not be asserted for the
first time on appeal.
BACKGROUND
A. Factual background
For purposes of this appeal, the following facts are
generally undisputed. PropCo leased the “land, improvements,
and certain personal property” relating to a skilled nursing
facility in Bakersfield, California (the facility). OpCo subleased,
operated, and held the license for the facility. The parties
entered into a series of three agreements in which BFCAP would
purchase PropCo’s lease of the property, and Kingston would
acquire OpCo’s facility license.
The parties’ dispute centers around which party was liable
for the payment of QAFs that accrued before the sale. QAFs,
according to the parties, are “licensing fees administered by the
California Department of Health Care Services (‘DHCS’) and
imposed on skilled nursing facilities.” (See Health & Saf. Code,
§ 1324.21.) Plaintiffs explain that QAFs are “charged by
multiplying the total number of bed days reported by a facility
times a rate set by DHCS.” “When a skilled nursing facility fails
to pay all or part of the quality assurance fee within 60 days of
the date that payment is due, the department may deduct any
unpaid assessment, including any interest and penalties owed,
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from any Medi-Cal payments to the facility until the full amount
is recovered.” (Health & Saf. Code, § 1324.22, subd. (e)(2)(A).)
DHCS will “continue to assess and collect the quality assurance
fee, including any previously unpaid quality assurance fee, and
any interest or penalties owed, from each skilled nursing facility,
irrespective of any changes in ownership or ownership interest or
control or the transfer of any portion of the assets of the facility to
another owner.” (Id., subd. (f)(1).)
On January 14, 2016, defendants and BFCAP entered into
the Purchase and Sale Agreement (PSA) to sell PropCo’s
leasehold interests to BFCAP. Addressing the outstanding
QAFs, the PSA stated, “Effective as of the Closing Date, [BFCAP]
shall be deemed to assume and agree to pay, jointly and severally
with [Kingston], Quality Assurance Fees accrued but unpaid with
respect to the Facility as of the Closing Date up to the QA Fee
Assumed Amount. The QA Fee Assumed Amount shall be
applied to and credited against the Purchase Price at Closing.”
The purchase price was $3.1 million. The PSA defined the “QA
Fee Assumed Amount” as “$928,746, which is the amount of
Quality Assurance Fees accrued but unpaid with respect to the
Facility as of the Closing Date.” The PSA further stated that “in
the event that Quality Assurance Fees accrued but unpaid as [of]
the Closing Date are determined to be less than the QA Fee
Assumed Amount, then [BFCAP] shall promptly reimburse
[defendants] for the difference. If the actual amount of Quality
Assurance Fees accrued but unpaid as of the Closing Date exceed
the QA Fee Assumed Amount, (a ‘QA Deficiency’), then
[defendants] shall be responsible for the QA Deficiency as part of
the True Up contemplated” by another section of the PSA.
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The same day, OpCo and Kingston entered into the
Management and Operations Transfer Agreement (MOTA),
which addressed transferring operations of the facility from OpCo
to Kingston. The MOTA stated that Kingston “jointly and
severally with [BFCAP] assumes and agrees to pay Quality
Assurance Fees . . . accrued but unpaid with respect to the
Facility as of the Operations Transfer Date up to the QA Fee
Assumed Amount, as that term is defined in the PSA.”
According to plaintiffs, after the parties signed the PSA and
MOTA, the non-party “landlords refused to accept the structure
as agreed upon in the PSA whereby Plaintiffs would be
responsible for the previously accrued QAFs in exchange for a
lower purchase price.” In addition, “days before the close of the
transaction, Defendants informed Plaintiffs they required an
extra $200,000 in the purchase price, or else the deal would fail,”
because defendants’ “investors want to kibosh this deal and
maybe go to someone else.” Thus, on March 22, 2016, defendants
and BFCAP signed an “Amendment to Purchase and Sale
Agreement” (Amendment). The Amendment stated, in part, that
the parties “agree that Quality Assurance Fees accrued prior to
the Closing Date shall remain the responsibility of [defendants],
[BFCAP] shall receive no credit against the Purchase Price for
Quality Assurance Fees, and no Quality Assurance Fees accrued
prior to the Closing Date shall be among the Assumed
Liabilities.” The purchase price was raised to $3.3 million. The
MOTA was not similarly amended.
The transaction was completed on August 31, 2016.
According to plaintiffs, “[O]nce Kingston assumed operations of
the Facility, DHCS initiated a withhold of Kingston’s revenue in
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the amount of $517,000 for QAFs attributable to the years 2005-
2008 and 2014-2015.”
Plaintiffs sued defendants on February 8, 2018. In their
third amended complaint, the operative pleading at the time of
the motion for summary judgment, plaintiffs asserted five causes
of action. The only cause of action relevant to the appeal is the
second cause of action, “breach of contract under PSA,” asserted
by both BFCAP and Kingston; the other four causes of action
were asserted by Kingston alone.1 In this cause of action,
plaintiffs alleged that “Defendants defaulted on their obligations
pursuant to the Amendment which obligated them to pay for the
unpaid QAFs that was [sic] due and owing by Defendants at the
time of closing.” Plaintiffs asserted that defendants were
required to indemnify BFCAP for the QAFs, and that Kingston
was a third-party beneficiary to the PSA and the Amendment.
B. Summary judgment
1. Motion
Defendants moved for summary judgment on July 9, 2019,
asserting in part that BFCAP did not suffer any damages from
1In the first cause of action for breach of contract, Kingston
alleged defendants breached the MOTA by failing to reimburse
Kingston for the QAFs, and in the third cause of action for fraud,
fourth cause of action for negligent misrepresentation, and fifth
cause of action for breach of the implied covenant of good faith
and fair dealing, Kingston alleged that defendants failed to
accurately represent the state of the facility before the sale. The
court granted defendants’ motion for summary adjudication of
the fraud and misrepresentation claims. Defendants represent in
their respondents’ brief that Kingston’s contract claim regarding
the QAFs has been settled.
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unpaid QAFs.2 Defendants asserted that in discovery, “BFCAP
admit[ted] it has not paid a penny in QAFs, Defendants paid the
only QAFs reasonably owed prior to closing, and Kingston is
contractually obligated to pay the QAFs at issue” under the
MOTA. Defendants submitted interrogatory responses in which
BFCAP stated that it had not paid any QAFs. Defendants also
submitted evidence demonstrating that on March 31, 2016, OpCo
paid DHCS $931,150.54 in outstanding QAFs—slightly more
than the “QA Fee Assumed Amount” in the PSA. Defendants
further argued, “Since the only alleged breach is a failure to
indemnify BFCAP for QAFs, and BFCAP has paid none, there is
nothing to indemnify.” Defendants stated that plaintiffs “claim
there are fees in addition to those contemplated by the PSA, [but]
there is no admissible evidence that those fees are owed by
Defendants under the PSA.”
Defendants also contended that because Kingston was not
a party to the PSA, it could not recover for breach of the PSA.
Defendants noted that the PSA expressly barred any third-party
beneficiary claims.
2. Opposition and reply
In their opposition, plaintiffs stated that the QA Fee
Assumed Amount in the PSA was an estimate, which was “only a
ballpark for purposes of defining the Assumed Liabilities that
BFCAP agreed to purchase.” Thus, defendants’ payment of a
similar amount to DHCS did not necessarily satisfy defendants’
contractual obligations, because the PSA contemplated that
2The portions of defendants’ motion for summary judgment
pertaining to causes of action not relevant to this appeal are not
summarized here.
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defendants would also pay any “QA Deficiencies” that were
“accrued but unpaid as of the Closing Date . . . as part of the True
Up contemplated” in the PSA.
Plaintiffs explained that after the parties signed the PSA
and MOTA, the non-party “landlords refused to accept the
structure as agreed upon in the PSA whereby Plaintiffs would be
responsible for the previously accrued QAFs in exchange for a
lower purchase price.” Defendants and their investors also
wanted an extra $200,000 as part of the purchase price.
Therefore, the parties entered into the Amendment, in which
“Defendants agreed to be responsible for all of the previously
accrued QAFs,” an amount “not limited to the QA Fee Assumed
Amount,” and BFCAP would no longer receive a credit against
the purchase price for outstanding QAFs. Plaintiffs stated, “In
exchange for Defendants’ promise to pay all of the previously
accrued QAFs and Defendants’ request for more money, the
parties modified the purchase price to be $3,300,000,” $200,000
more than the purchase price in the PSA.
BFCAP noted that the MOTA was not similarly amended,
which “resulted in even more ambiguity and confusion as to the
terms of the agreement and as to who was ultimately responsible
for the QAFs. The ambiguity and confusion underlies the entire
basis for the litigation in this case and cannot be easily
adjudicated without a trial on the facts.” Plaintiffs argued that
“Defendants failed to pay all QAFs accrued but unpaid prior to
the transfer date as they had agreed. Because of that failure,
DHCS recouped [the unpaid QAFs] from Kingston’s revenue.”
BFCAP rejected defendants’ argument that BFCAP had not
suffered damages because DHCS withheld QAFs from only
Kingston. BFCAP asserted that it had “agreed to indemnify
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Kingston from and against any and all claims, damages,
liabilities, judgments, awards, costs, losses and expenses
resulting from this litigation.” Plaintiffs submitted as evidence a
“Letter of Indemnification” signed on August 13, 2019—more
than a month after defendants filed their motion for summary
judgment. The letter stated that BFCAP agreed to indemnify
Kingston from any losses, damages, or legal fees “resulting from,
or being in any way connected with the payment of the QAFs and
the litigation regarding same.” BFCAP argued that “because it
has agreed to indemnify Kingston, BFCAP is also directly
harmed by Defendants’ conduct.” Plaintiffs did not assert any
other bases for BFCAP’s alleged damages.
In their reply, defendants asserted that BFCAP’s “post-hoc
agreement to indemnify co-plaintiff Kingston is not damages.
BFCAP and Kingston are Plaintiffs in this lawsuit; there is no
liability for BFCAP to indemnify. That BFCAP now volunteers to
indemnify Kingston for hypothetical liability is not damages.”
Defendants noted that BFCAP’s breach of contract claim was
based solely on an allegation that defendants failed to indemnify
BFCAP for QAFs, but BFCAP had not paid any QAFs.
Defendants also argued that BFCAP could not assert new
damages that were not alleged in the pleadings by creating a
“sham indemnity agreement” with Kingston.
3. Court ruling
In a written ruling, the court granted defendants’ motion as
it pertained to BFCAP. The court stated that BFCAP “cannot
proceed” on its breach of contract cause of action, because “it has
admitted that it did not pay any QAFs nor did it have any
payments withheld. BFCAP’s only alleged damages stem from
the fact that it agreed to indemnify Kingston for the $517,000.00
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in withheld payments. Plaintiffs have admitted that BFCAP did
not have any QAFs withheld, and that it entered into the
indemnity agreement with Kingston on August 13, 2019. . . . This
agreement cannot be a basis for BFCAP to collect damages that it
would not have otherwise suffered had it not voluntarily agreed
to incur a debt to Kingston. [¶] For the foregoing reasons, the
MSJ to plaintiffs’ contract causes of action is GRANTED as to
BFCAP because that plaintiff has suffered no damages . . . .” The
court entered judgment in favor of defendants and against
BFCAP. BFCAP timely appealed.
DISCUSSION
BFCAP asserts on appeal that the trial court erred in
finding there was no triable issue of material fact as to damages
to BFCAP. Summary judgment is appropriate “if all the papers
submitted show that there is no triable issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law.” (Code Civ. Proc., § 437c, subd. (c).) “We review
the trial court’s grant of summary judgment de novo and decide
independently whether the parties have met their respective
burdens and whether facts not subject to triable dispute warrant
judgment for the moving party as a matter of law.” (Jessen v.
Mentor Corp. (2008) 158 Cal.App.4th 1480, 1484.) “There is a
triable issue of material fact if, and only if, the evidence would
allow a reasonable trier of fact to find the underlying fact in favor
of the party opposing the motion in accordance with the
applicable standard of proof.” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850.) “A cause of action has no merit if . . .
[o]ne or more of the elements of the cause of action cannot be
separately established.” (Code Civ. Proc., § 437c, subd. (o)(1).)
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“A breach of contract is not actionable without damage.”
(Bramalea California, Inc. v. Reliable Interiors, Inc. (2004) 119
Cal.App.4th 468, 473.) BFCAP admits that “BFCAP had not yet
paid any damages related to the QAF issue, and the only
recoupment had come out of Kingston’s revenue stream, not
BFCAP’s.” BFCAP asserts that the “Indemnification Agreement
established, at a minimum, a dispute of fact as to whether
BFCAP had suffered any damages and should have been
determined by a trier by fact [sic]. However, the trial court erred
in rejecting this plain evidence of the Indemnification
Agreement.”
Defendants point out that the indemnity agreement did not
exist at the time plaintiffs filed their complaint, and plaintiffs did
not allege any damages based on an indemnity agreement
between the plaintiffs. They argue that a motion for summary
judgment is limited to the pleadings, and plaintiffs cannot defeat
summary judgment by creating a new, unpled basis for liability.3
We agree with defendants. It is well established that the
pleadings “‘set the boundaries of the issues to be resolved at
summary judgment.’” (Conroy v. Regents of University of
California (2009) 45 Cal.4th 1244, 1250; see also Oakland
Raiders v. National Football League (2005) 131 Cal.App.4th 621,
629 [“The pleadings determine the issues to be addressed by a
summary judgment motion”]; Laabs v. City of Victorville (2008)
163 Cal.App.4th 1242, 1253 (Laabs) [“‘The pleadings delimit the
3Defendants assert on appeal that there was also no
evidence demonstrating a triable issue of fact as to whether they
breached the PSA. The trial court addressed only the element of
damages, and we do not address defendants’ contentions
regarding a breach.
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issues to be considered on a motion for summary judgment’”].)
Here, in the statement of facts in the third amended complaint,
plaintiffs alleged, “The state recouped QAFs from Kingston.” In
the only cause of action that includes BFCAP, plaintiffs asserted
that “Defendants breached the PSA and the Amendment by
failing to pay the QAFs and failing to indemnify BFCAP
according to the terms of the agreements.” Plaintiffs also alleged
that “the PSA and the Amendment show a clear intent to benefit
Kingston, a third-party beneficiary to both the PSA and
Amendment.” They asserted that plaintiffs “suffered damages
proximately caused by Defendants’ breach of the PSA and
Amendment.” Plaintiffs did not allege that BFCAP was
separately damaged due to an obligation to indemnify Kingston
for payment of QAFs. Nor did plaintiffs allege that defendants’
actions affected any obligations between the two plaintiffs. The
indemnity agreement was not created until August 2019—eight
months after the third amended complaint was filed in December
2018, and a month after defendants’ motion for summary
judgment was filed in July 2019.
BFCAP may not rely on this new obligation to defeat
summary judgment. “Evidence offered on an unpleaded claim,
theory, or defense is irrelevant” in an opposition to a motion for
summary judgment “because it is outside the scope of the
pleadings.” (California Bank & Trust v. Lawlor (2013) 222
Cal.App.4th 625, 637 fn. 3; see also Distefano v. Forester (2001)
85 Cal.App.4th 1249, 1264 [“To create a triable issue of material
fact, the opposition evidence must be directed to issues raised by
the pleadings.”].) “It would be patently unfair to allow plaintiffs
to defeat [defendants’] summary judgment motion by allowing
them to present a ‘moving target’ unbounded by the pleadings.”
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(Melican v. Regents of University of California (2007) 151
Cal.App.4th 168, 176.) If a plaintiff determines that its pleadings
must be expanded to address an issue raised in a motion for
summary judgment, “it is incumbent on plaintiff to seek leave to
amend the complaint either prior to the hearing on the motion for
summary judgment, or at the hearing itself.” (Laabs, supra, 163
Cal.App.4th at p. 1258.) Plaintiffs made no such effort here, and
the trial court was correct in rejecting plaintiffs’ indemnity
agreement as evidence of BFCAP’s damages.
BFCAP also asserts that the trial court erred by
determining “that the Indemnification Agreement was not valid
because it was entered into voluntarily.” It also contends the
court erred in “holding the Indemnification Agreement invalid
because of its date of execution.” These arguments misstate the
record. In holding that the indemnity agreement did not support
BFCAP’s claim for breach of contract against defendants, the
court did not find that the indemnity agreement itself was
invalid. Instead, the court simply found that the indemnity
agreement “cannot be a basis for BFCAP to collect damages” from
defendants. Thus, we do not address BFCAP’s contentions
regarding the validity of the indemnity agreement.
BFCAP asserts an alternative argument that it suffered
damages because in agreeing to the Amendment, it consented to
pay $200,000 more for the lease in exchange for defendants’
payment of the outstanding QAFs. It asserts, “BFCAP did not
get what it bargained for – which directly damaged BFCAP. [¶]
BFCAP would not have paid an additional $200,000 above the
purchase price if [defendants] had not agreed to pay the
outstanding QAFs.” Defendants respond that BFCAP did not
make this argument in the trial court or submit any evidence to
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support such a finding. Defendants also assert that the increased
purchase price does not constitute damages, and that BFCAP is,
in essence, attempting to assert a new cause of action for
fraudulent inducement.
Defendants are correct that BFCAP did not assert in the
trial court that it suffered damages in the form of an increased
purchase price. The third amended complaint says nothing about
the purchase price reflecting damages. In the recitation of facts
in plaintiffs’ opposition to defendants’ motion for summary
judgment, plaintiffs discussed the terms of the Amendment,
including the increased sale price demanded by defendants “days
before the close of the transaction,” and the shift of the burden to
pay outstanding QAFs from BFCAP to defendants due to the
“refusal of the landlords to consent to the original transaction.”
However, plaintiffs did not contend in their opposition that the
increased sale price constituted damages resulting from
defendants’ breach. Plaintiffs also did not support such a
contention in the separate statement. For example, for the
material fact in which defendants noted BFCAP’s interrogatory
responses stating that it had not paid any outstanding QAFs,
plaintiffs stated that the fact was undisputed, but that BFCAP
had suffered damages due to the August 2019 indemnity
agreement. Plaintiffs did not point to any evidence to support a
finding that BFCAP’s damages stemmed from the increased
purchase price.
“[A] factual question . . . cannot be raised for the first time
on appeal, particularly . . . [in] an appeal from a motion for
summary judgment [where] appellants did not identify this as a
fact in their separate statements.” (Los Angeles Unified School
District v. Torres Construction Corp. (2020) 57 Cal.App.5th 480,
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at pp. 496, 497; see also Ochoa v. Pacific Gas & Electric Co.
(1998) 61 Cal.App.4th 1480, 1488 fn. 3 [“It is axiomatic that
arguments not asserted below are waived and will not be
considered for the first time on appeal.”].) In addition, a plaintiff
may not “change [its] theory of the case for the first time on
appeal.” (Flatley v. Mauro (2006) 39 Cal.4th 299, 321 fn. 10.)
BFCAP did not assert a claim for damages in the trial court
based on the sale price in the Amendment, and it may not assert
it for the first time here.
In short, BFCAP alleged that defendants breached the
Amendment by failing to pay all outstanding QAFs. The
evidence showed that Kingston, not BFCAP, incurred damages
when it paid the outstanding QAFs. Without evidence that
BFCAP was damaged by defendants’ breach, summary judgment
was warranted, and on appeal BFCAP has failed to demonstrate
error.
DISPOSITION
The judgment is affirmed. Defendants are entitled to their
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
COLLINS, J.
We concur:
MANELLA, P. J.
WILLHITE, J.
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