Gifford Business Park, LLC v. Michael Shay, et al

TENTATIVE RULING FOR AUGUST 25, 2026 Department R12 - Judge Kory Mathewson Gifford Business Park, LLC v. Michael Shay, et al – CIVSB2326280 Motion(s): Summary Judgment Movant(s): Plaintiff and Cross-Defendant Gifford Business Park, LLC Respondent(s): Defendant and Cross-Complainant Michael A. Shay Ruling: Summary Judgment is GRANTED on both the complaint and cross- complaint.

Evidentiary Basis: No material facts in dispute; Declaration of Phil Matchett and attached Exhibits 1-26; declaration of Taylor McElroy and attached Exhibits 1-9; the Shay declarations, Ziprick declarations, and the deposition testimony of Shelly Watanabe Yamamoto. Plaintiff/Cross-Defendant, Gifford, to provide Order and give notice. ______________________________________________________________________________

Plaintiff and Cross-Defendant, Gifford, brings this motion for summary judgment on the grounds that the evidence shows there are no material facts in dispute with respect to all causes of action as well as Shay’s cross-complaint.

Evidentiary Objections With the Reply, Gifford submits nine objections to the evidence submitted by Shay. The Court sustains the first objection (Shay Dec. ¶ 3) for lack of foundation and the fourth objection (labeled Obj. 1 to Ziprick Decl. ¶¶ 2-3) on the grounds stated, but overrules the remaining objections.

Gifford’s Undisputed Material Facts (UMF) American was a tenant under the Gifford Lease for Unit 1 that was executed on September 25, 2020, for a term of 60 months and under the Central Lease that was executed for Unit 2 on October 11, 2022. (UMFs 1-2, 28.) The Leases required a monthly rental payment of base rent plus additional rent (including common area reimbursement charges and property tax reimbursement charges). (UMFs 3, 30.) American took possession of the units and began operating. (UMFs 4, 31, 76, 105.)

On November 10, 2020, an amendment was executed expanding the leased premises by Gifford’s predecessor-in-interest. (UMFs 5, 77.) With respect to the Central Lease, it had a provision whereby the landlord’s predecessor-in-interest agreed to expand the roll-up door and a rent concession from December 1, 2022, through February 29, 2023, but it did not provide a right to withhold, abate, or offset rent as a remedy for the landlord’s alleged default. (UMFs 32-33, 106-107.) The Central Lease contains an Inducement Recapture Clause in the event of American’s default allowing the landlord to recapture all inducements, concessions, and benefits (including any rent concessions and the cost of the roll-up door) upon a breach by American. (UMFs 34, 108.)

On February 10, 2023, Gifford obtained ownership of the premises, which included the assignment of the Gifford and Central Leases. (UMFs 6, 37, 78, 111.) At that time, American

was already in arrears on rent and failed to pay rent for the remainder of February and March 2023 and the roll-up door expansion had not been completed. (UMFs 7, 38, 79, 112.) Completion of the roll-up door expansion was not practicable given Gifford had only acquired the Central Premises 18 days prior but following its acquisition, Gifford made good faith efforts to complete the roll-up door expansion. (UMFs 39-40, 113-114, 124.) Yet, American failed to tender rent for the Central Premises for March 2023, and this continued until American vacated in August 2023. (UMFs 41-42, 115-116.)

The Central Lease also provided that all Inducement Provisions were conditioned upon the tenant’s full and faithful performance of all terms, covenants, and conditions. (UMFs 43, 119.) American’s failure to pay rent was a breach and resulted in the rollup door expansion obligation to be automatically deleted from the Central Lease as of that date. This also resulted in a deletion of the rental concession for the months of December 2022 through February 2023. (UMFs 44, 47, 49, 121-123, 127-128, 160.)

Gifford served a 3-day Notice to Pay Rent or Quit on April 3, 2023. (UMFs 8, 80, 126.) Given the 3-day Notice, Gifford stopped work on the roll-up door expansion as well. (UMFs 52, 126.) American failed to pay rent until it vacated the premises in August 2023 with respect to the Central Premises and in September 2023 with respect to the Gifford Premises and thereafter through the end of the lease term. (UMFs 9, 55, 81, 129.) Thus, American vacated prior to the expiration of the Gifford and Central Leases. (UMFs 10, 82, 129.) American also failed to deliver the premises in the condition required under the Lease. It was not clean, full of trash and debris, and it required substantial repairs. (UMFs 11, 56, 83, 130.) At all times, Gifford performed its obligations under the Leases. (UMFs 12, 57, 84, 131.)

As part of the purchase and sale transaction for the Gifford and Central Premises, American executed an Estoppel Certificate on January 23, 2023. (UMFs 13, 35, 85, 109.) In this, American certified there were no defaults by the landlord. (UMFs 14, 86.) It also certified American had no claims, defenses, or rights to offset under the Gifford Lease as of the date of execution. (Ibid.)

With respect to the Central Lease, the Estoppel Certificate identified the roll-up door as a piece of outstanding work to be completed. (UMFs 36, 110.) American never notified Gifford of any alleged default, which was required under the Lease’s notice and cure provisions. (UMFs 16- 17, 58-59, 88-89, 132-133.) Following American’s default, Gifford undertook reasonable efforts to mitigate its damages by marketing the premises and seeking a replacement tenant, but it was unable to do so for the Gifford Premises; however, as to the Central Premises, a tenant was secured on April 1, 2024, but no sooner. (UMFs 18, 60-61, 90, 134, 148-149, 162-163.) This was due in part to the condition the premises were left in. (UMFs 19, 61, 91, 135, 150, 164.)

American breached the terms of the leases by failing to pay all sums due and owed. (UMFs 26, 68, 93, 137, 146, 159.)

Gifford maintained a rent ledger, which reflects all rent charges due and owing from February 10, 2023, through October 31, 2025, for the Gifford Premises and through March 31, 2024, for the Central Premises. (UMFs 20, 62, 92, 136.) The ledger reflects an outstanding balance of $421,102.13 for Gifford and $51,590.14 for Central. (UMFs 21, 63, 94, 138.) Gifford incurred additional loses in the amount of $74,742 plus $2,843.38 (for each premises) for the

cost of removing junk and debris and repairing the premises after American left. (UMFs 22, 64, 95, 139.) The total damages, therefore, are $498,687.51 for Gifford and $54,433.51 for Central. (UMFs 23, 65, 96, 140, 151.) American is in suspended status and default was entered on October 21, 2025. (UMFs 24-25, 66-67.)

As to the guaranty, American was a tenant under the Gifford and Central Leases (UMFs 70, 99.) Shay was authorized and executed, in his individual capacity and on behalf of American as its president and owner, the Gifford and Central Leases. (UMFS 71, 100.) Under the Leases, Gifford’s predecessor-in-interest agreed to let Units 1 and 2 to American. (UMFs 72, 101.) The Leases required monthly base rent plus additional rent charges, noted above. (UMFs 73, 102.) Concurrent with the execution of the leases, Shay also executed a “Guaranty of Lease” for both Leases. (UMFs 74, 103.)

The guaranties provide that: “Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee the prompt payment by Lessee of all rents and all other sums payable by Lessee under said Lease and the faithful and prompt performance by Lessee of each and every one of the terms, conditions and covenants of said Lease to be kept and performed by Lessee.” (UMFs 75, 104.)

American’s default constitutes an admission of the material allegations of the Complaint, including its breach by failing to pay rent and by causing damage and leaving junk and debris at the Premises, which resulted in Gifford’s damages. (UMFs 97, 141.) Shay filed an Answer on December 20, 2023, and did not allege he lacked notice of American’s default and breach of the terms of the Leases. (UMFs 98, 142.)

Shay executed an unconditional, irrevocable, and continuing Guaranty of Lease as a material inducement to execution of the Gifford and Central Leases, jointly and severally guaranteeing the prompt payment of all rents and sums payable by American and the faithful performance of each and every term, condition, and covenant of the Gifford Lease. (UMFs 143, 156.) The Gifford and Central Guaranties expressly provide that: (a) no notice of default need be given to Shay; (b) Gifford may proceed immediately against Shay following any breach or default by American without first proceeding against American and without previous notice or demand; and (c) the guaranties shall not be released, modified, or affected by any failure or delay by Landlord to enforce its rights under the leases. (UMFs 144, 157.)

Both guaranties expressly provide that the leases may be modified by agreement or course of conduct and may be assigned by Landlord without consent or notice to Shay, and that the guaranties shall guarantee performance of the leases as so modified. The term "Lessor" under the guaranties includes Landlord’s successors and assigns, such that Gifford’s acquisition of the Premises does not affect or diminish Shay’s continuing obligations. (UMFs 145, 158.)

Shay is not a party to the Leases and is not a third party beneficiary of the leases. As such, Shay lacks standing to assert defenses, claims, or rights of offset arising from or dependent upon the terms or performance of the leases, including any defense based upon an alleged breach of the leases by Landlord. Shay also lacks standing for a breach of contract defense. (UMFs 147, 153, 161, 167, 170-171.) To the extent Shay asserts any affirmative defense based upon any alleged act, omission, or breach by Gifford under the Central Lease/Central Guaranty, such

defense fails as a matter of law because the two leases/guaranties are separate and independent agreements and any alleged breach of one lease does not excuse performance under the other. (UMF 152.) The guaranties are unconditional, irrevocable, and continuing. No written discharge or release of Shay’s obligations has been executed by Gifford, no act or omission of Gifford has discharged or modified those obligations, and Shay has expressly waived any statute of limitations defense relating to the guaranties or the leases. (UMF 154, 168.) American’s breach and Shay’s unconditional obligations under the guaranties entitles Gifford to a judgment against Shay in an amount no less than $498,687.51. (UMF 155.) Gifford also states damages are established in the amount of $73,394.51 with respect to the Central Guaranty. (UMFs 165,169.)

Gifford acted in good faith and Shay has presented no evidence of any inequitable or wrongful conduct and lacks standing to assert unclean hands (UMF 166.) Gifford’s obligations under the Central Lease ran solely as to American. (UMF 172.) Shay’s cross-complaint seeks damages representing the amount that Shay sold American for, but Gifford was not a party to that agreement, never agreed to make any payments thereunder, and never agreed to indemnify American or Shay. (UMF 173.) Shay claims San Bernardino Code Enforcement advised American it had to move indoors, but American has produced no evidence of this. (UMF 175.)

Shay admitted in discovery that American continued to service trucks outside, contradicting the allegation it was prohibited. (UMF 176.) Because American serviced trucks outside, it cannot establish the failure to complete the roll-up door expansion caused or contributed to any decline in American’s revenues or business operations. (UMFs 177, 180, 182.) Both leases provide that Gifford has no obligation to provide guard service or other security measures. (UMF 178.) American has produced no evidence of theft losses. (UMF 179.)

American produced no evidence they lost customers as a result of the incomplete roll-up door. (UMF 181.) Bain was the property manager employed by Gifford’s predecessor-in-interest and was not employed or an agent of Gifford at the time of the relevant allegations made in the Cross-Complaint. (UMFs 183, 185.)

When Gifford obtained the premises on February 10, 2023, Bain advised he’d been working on the roll-up door but directed the vendor to stop shortly before escrow. (UMF 184.) The Central Lease expressly provided American with the right to pay rent under protest in the event of any dispute with Gifford, thereby preserving American’s rights while maintaining its obligations under the Central Lease. American never exercised this right and made no rent payments under protest at any time. (UMF 186.) The Central Lease also provided a right to perform by American for any Gifford obligation, including the roll-up door expansion, but American never exercised this right. (UMF 187.)

By failing to avail itself of either contractual remedy, American failed to take reasonable steps to mitigate its damages. (UMF 188.) The cost of completing the roll-up door would have been substantially less than Gifford’s damages. (UMF 189.)

In his discovery responses, Shay confirmed that he sold American to Rick Spaise on or about January 1, 2023, prior to the period of American’s default. During his deposition in this action, Shay admitted the following: (1) He did not read the Gifford Guaranty prior to signing it because he “was in a hurry”; (2) He did not step in to pay the rent owed by American because he was no longer part of the company as of January 1, 2023; (3) He had no evidence of any income loss attributable to the roll-up door expansion; (4) He had no evidence establishing any causal link between the loss of any customer and Gifford’s alleged failure to complete the expansion;

(5) American did not complete the roll-up door expansion on its own because it “was not a contractor”; (6) American did not keep track of alleged theft losses, filed only one police report, and submitted no insurance claim; and (7) He entered into a Consulting Agreement directly with American following its sale. (UMF 190.)

Shay’s responses to UMFs 15, 26, 30, 32-34, 36, 39-53, 55-65, 68, 79-82, 84, 86, 88-98, 106-108, 110, 113-127, 129-142, 144-155, 157-177, 179-182, 185-186, and 188-190 contain either only objections or disputes that do not cite to any supporting evidence, which is procedurally deficient. Code of Civil Procedure section 437c, subdivision (b)(3) provides:

The opposition papers [to a motion for summary judgment] shall include a separate statement that responds to each of the material facts contended by the moving party to be undisputed, indicating if the opposing party agrees or disagrees that those facts are undisputed. The statement also shall set forth plainly and concisely any other material facts the opposing party contends are disputed. Each material fact contended by the opposing party to be disputed shall be followed by a reference to the supporting evidence. Failure to comply with this requirement of a separate statement may constitute a sufficient ground, in the court’s discretion, for granting the motion. (Emphasis added.)

Therefore, Shay fails to dispute any of these UMFs. In addition, as to the objections in the opposing separate statement, they are improper. California Rules of Court, rules 3.1352 and 3.1354 both state that they apply to “objections to evidence,” and Code of Civil Procedure section 437c, subdivision (b)(5), also refers to “[e]videntiary objections.” Separate statements are not evidence. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 178, fn. 4.) Because undisputed facts and argument are not evidence, they cannot be objected to. Thus, the “evidentiary” objections are improper and are overruled.

In addition, California Rules of Court, rule 3.1354 states: All written objections to evidence must be served and filed separately from the other papers in support of or in opposition to the motion. Objections to specific evidence must be referenced by the objection numbers in the right column of a separate statement in opposition or reply to a motion, but the objections must not be restated or reargued in the separate statement. (Cal. Rules of Court, rule 3.1354, subd. (b).)

ANALYSIS

Gifford argues that American’s breach is established as a matter of law. Although not cited with respect to summary judgment proceedings, Gifford relies on the following: “[t]he default admits the allegations of the complaint.” (Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1303.) Nevertheless, Gifford also provides that the evidence establishes that there are no material facts in dispute with respect to the breaches of the two leases by American. According to Gifford, undisputed evidence establishes (1) that American failed to pay rent for the Gifford Premises commencing February 10, 2023, abandoned the Gifford Premises prior to expiration of the Gifford Lease and vacated the premises in a damaged condition; and (2) that

American failed to pay rent for the Central Premises commencing March 1, 2023, abandoned the Central Premises prior to expiration of the Central Lease and vacated the premises in a damaged condition. Additionally, Gifford claims Shay has not disputed these facts, nor has he raised any affirmative defense that would excuse American’s nonpayment under either Lease. Therefore, Gifford argues that American’s breaches are established as a matter of law.

Gifford also argues that evidence supports each element of Shay’s Breach of Guaranty. “Under California law, “[a] surety or guarantor is one who promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor.”” (Gray1 CPB, LLC v. Kolokotronis (2011) 202 Cal.App.4th 480, 487.) “A lender is entitled to judgment on a breach of guaranty claim based upon undisputed evidence that (1) there is a valid guaranty, (2) the borrower has defaulted, and (3) the guarantor failed to perform under the guaranty.” (Id. at p. 486.)

It is established that Shay was the guarantor for the leases and that he admitted this in discovery. Next, Gifford argues that American’s breaches are established as a matter of law and therefore it is also established that the borrower has defaulted. American has established it still has damages as a result, and thus there is evidence the guarantor failed to perform under the guaranty. Gifford maintains that Shay admitted he was guarantor and did not pay the rent on American’s behalf.

Finally, Gifford argues that because it has met its burden, Shay must establish the genuineness of a defense; however, Gifford argues that it has also established that Shay is unable to meet this burden. In his Answer, however, Gifford notes that Shay asserted affirmative defenses for failure to state a claim, failure to state a cause of action, failure to mitigate damages, lack of damages, damage as the result of acts of others, estoppel, unclean hands, offset/offset due to willful wrongful conduct of Plaintiff, negligence in mitigating damages, breach of contract, comparative fault of Plaintiff; false claims; lack of causation; guaranty; discharge; limitations and liabilities; DOE liability; speculative damages; and lack of due diligence.

Each of the foregoing affirmative defenses, Gifford argues, are inapplicable as applied to Gifford’s cause of action for breach of guaranty. Regardless, Gifford is not required to eliminate the affirmative defenses in seeking summary judgment.

Gifford also argues it is entitled to summary judgment on Shay’s cross-complaint. Gifford claims Shay cannot establish that he is a third-party beneficiary of the leases. “Under California law, a non-signatory is a third-party beneficiary only to a contract “made expressly for [its] benefit.” Cal. Civ. Code § 1559. [The non-signatory] was obligated to prove that “express provisions of the contract,” considered in light of the “relevant circumstances,” show that (1) “the third party would in fact benefit from the contract;” (2) “a motivating purpose of the contracting parties was to provide a benefit to the third party;” and (3) permitting the third party to enforce the contract “is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.”” (Ngo v.

BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 946, citing Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830.)

Gifford argues that Shay’s claim that he is a third-party beneficiary of the leases fails as a matter of law. According to Gifford, the Leases were executed between Gifford and American.

Shay is not a party to the Leases in his individual capacity—he appears in the Leases solely in his capacity as President of American and as personal guarantor of American’s obligations. His execution of the guaranties confirms that his individual obligations flow from the leases, not to him as a beneficiary of them.

Shay’s initial Opposition argued that there were material facts in dispute because he contends that he has valid defenses against Gifford based on the breach of contract by Gifford for its failure to expand a roll up door as provided in one of its two leases with American, causing the failure of American as a going concern. Gifford claims that it was excused from its obligation to expand the roll up door due to American’s failure to pay rent. Shay responds that Gifford’s breach of contract caused American’s failure to pay rent and that he has raised numerous material issues of fact.

When Gifford defaulted in its expansion of the roll up door, Shay maintains that American had to cease servicing most of its customers because it could not work on them inside its building as the unexpanded door was too small. Shay submits that it was a legal requirement that American service its customers’ vehicles and heavy equipment inside a building and that American was constructively evicted when Gifford decided to breach the contract and did not expand the roll up door. Shay also contended that discovery was ongoing and submitted an affidavit on July 9, 2026 (via Robert H.

Ziprick) requesting a continuance. The Court continued the matter to August 25, 2026, and the request was for a date after September 1, 2026; however, since then, Shay filed a second opposition and more declarations. Though these were technically unauthorized, the Court will consider them since the continuance was scheduled a week earlier than requested and another continuance will not be granted. Additionally, based on the additional filings, it appears Shay was able to complete the discovery for which he originally sought to continue the hearing.

Subsequently, on August 5, 2026, Shay filed his supplemental Opposition. Shay argues there is no issue as to whether Gifford had a contractual relationship with American, its tenant. Shay notes that, in fact, Gifford acknowledges that it had an obligation to expand the roll up door in the Gifford Premises. Shay notes that Gifford argues that because American defaulted in rent payments, that Gifford did not have to perform. Gifford claims that American was in default when Gifford acquired the real property in which the leases were located on the date when Gifford acquired the real property.

This claim, Shay argues, is disputed. According to Shay, the Central Lease dated 2022 specifically provides that no rent is due until after February 28, 2023. The other lease for the Gifford Premises was current, according to Shay. (Shay Decl. ¶ 4; Exh. 1.). Thus, Shay argues there is a material dispute as to whether American was current on February 10, 2023. Meanwhile, Shay notes there is no dispute that Gifford failed to expand the roll-up door.

This, however, does not place a material fact in dispute. Shay does not point to anywhere in the Leases where rent was able to be withheld in the event of a landlord breach. Meanwhile, American has shown that even if the landlord breached, American was required to provide notice and nevertheless still pay “rent under protest.” By not complying with the terms of the leases, it was American who breached, which deleted the obligation to fix the roll-up door and required the past rent to be paid. (See UMFs 7, 12, 14, 16-17, 32-34, 36, 38-44, 47, 49, 57-59, 79, 84, 86, 88-89, 106-108, 110, 112-116, 119, 121-124, 127-128, 131-133, 160, and 186.)

The only other attempt to place a material fact is Shay’s claim that the condition of the premises is disputed. But this is based on the testimony of Shelley Watanabe Yamamoto and her testimony that the premises were 90% empty, that there was not a great deal of junk, and that garbage was not piled up all over the floor.

It is unclear how this disputes the UMFs and Gifford’s claim that there was trash and other debris on the premises, it was not broom clean, and it required substantial repairs. (See e.g., UMFs 11, 56, 83, and 130.) This seems to confirm that there was trash and debris left behind. Even construing Shay’s evidence in a light most beneficial to him, the testimony of Yamamoto does not place this fact in dispute. Upon closer inspection, she testified that the big stuff had been moved out but there were some items left in the space. (Ziprick Decl. ¶ 3; Exh. 1 at 81:7-9.)

Additionally, when she was asked about where there was a “lot of junk” she testified “I don’t know what you consider a lot” and that there was junk but “not a huge amount.” (Id. at 82: 17- 19.) This does not contradict or dispute Gifford’s claims. Additionally, it is well-argued in the Reply that her testimony does not dispute the invoices submitted that detail the restoration costs, or damages.

As to the cross-complaint, Shay did not effectively dispute any of the UMFs. As Gifford met its burden with respect to all claims and crossclaims, but Shay has failed to place a material fact in dispute, the Court grants summary judgment on both the Complaint and Cross-Complaint.

Dated: August 25, 2026

____________________________ Judge Kory Mathewson

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