Free Motion for Summary Judgment - District Court of California - California

Case 5:07-cv-04808-JF

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Attorneys for Plaintiff and Counter-Defendant
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BP WEST COAST PRODUCTS LLC

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA
BP WEST COAST PRODUCTS LLC, a Delaware Limited Liability Company,
Plaintiffs,

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Case No.: C07 04808 JF

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BP WEST COAST PRODUCTS LLC'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT, OR IN THE v. AL TERNA TIVE, PARTIAL SUMMARY JUDGMENT AS TO THE STTN ENTERPRISES, INC., a California COUNTERCLAIM; MEMORANDUM OF Corporation; NAZIM F AQUIR Y AN, an individual; POINTS AND AUTHORITIES IN SA YED FAQUIRY AN, an individual; and SUPPORT THEREOF
MAGHUL FAQUIRY AN, an individual; and A V A GLOBAL ENTERPRISE, LLC, a California limited (Filed concurrently with Declarations of liability company, Deborah Yo on Jones, Thomas Reeder, Brad Christensen, and Cecile McDonnell; Appendix Defendants. of Non-Federal Authorities; and (Proposed)
Order. )

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Date: Time: Crtrm:

August 8, 2008 (reserved)
9:00 a.m.

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Honorable Jeremy Fogel

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Filing Date:

September 17, 2007

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AND RELATED CROSS-ACTION.

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T ABLE OF CONTENTS
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Page
i.
II.

INTRODUCTION .... ........... ... ...... .... ..... .... .............. ............ ....... .... ... ....... ... ......... ......... ........ ....3

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STATEMENT OF ISSUES TO BE DECIDED ........................................................................ 3

III.

STATEMENT OF UNCONTROVERTED FACTS .................................................................4
A.
B.

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STTN's Franchise Relationship with BPWCP ................................................ ..............4
STTN Fails to Pay for and Sell Gasoline and Breaches the Franchise

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Agreements.......................... ..................................................................................... ..... 5

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c.
D.

BPWCP Properly Terminates STTN's Franchise Agreements ..................................... 7

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BPWCP'S Loans to STTN Become Due Upon the Franchise Termination .................8
1.

BPWCP Funded the Store Loan ........................................................................ 8

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2.

BPWCP Did Not Fund the Gasoline Loan """"""...............................,........" 1 0

iv.

BPWCP'S TERMINATION OF STTN'S FRANCHISE WAS PROPER UNDER
THE PMPA AND FRANCHISE AGREEMENTS AS A MATTER OF LAW .....................10
A.

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STTN's Failure To Pay For Gasoline Delivered Justifies The Franchise
Termination Under the PMP A..................................................................................... 11

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B.

STTN's Failure to Operate The Station For At Least 12 Days Justifies The
Franchise Termination Under The PMP A................................................................... 12

c.
D.

STTN's Failure to Make All Grades of Gasoline Available Justifies the
Franchise Termination Under the PMPA ....................................................................14

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Less Than 90 Days Notice of the Termination Was Reasonable, As A Matter
of Law, Because STTN Failed To Pay for Gasoline Deliveries..................................

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V.

STTN'S SECOND THROUGH FIFTH COUNTERCLAIMS FOR BREACH OF
CONTRACT FAIL AS A MATTER OF LAW ......................................................................15
A.

The Conditional Commitment Letter Is Not A Valid Enforceable Contract..............15
1.
BPWCP's CCL Does Not Contain All Material Terms of the Loan...............

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2.

The Store and Gasoline Loan Agreements Supersede the CCL.....................17

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B.

BPWCP Did Not Breach the Store Loan Agreement..................................................18
BPWCP Did Not Breach the Gasoline Loan or the Disbursement Agreements .........19

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C.

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TABLE OF CONTENTS
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Vi.

THE BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING CLAIM FAILS AS A MATTER OF LA W..........................................................20
A.
B.
The Implied Covenant Claim is Duplicative of the Breach of

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Contract Claims.........21

BPWCP and Counterclaimants Are Not in a Special or Fiduciary Relationship ........21

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VII.

THE FRAUD CLAIM FAILS AS A MATTER OF LAW..................................................... 22
A.
B.
The Fraud Allegations are Impermissibly Duplicative of

the Contract Claims ..........22
Fraud by BPWCP .......................23

Counterclaimants Fail to Present Any Evidence of

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VIII. COUNTERCLAIMANTS' NEGLIGENT MISREPRESENTATION CLAIM FAILS AS A MATTER OF LAW....................................................................................................... 24

ix.

CON CL USI ON ....................................................................................................................... 25

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TABLE OF AUTHORITIES
Page
CASES

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250 L.L.C v. Photopoint Corp.
(2005) 131 CaL.AppAth 703 ....................................................................................................17

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Adickes v. S H Kress & Co.
(1970) 3 98 U.S. 144 ................................................................................................................ 15

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Admiral Oil Co. v. Lynch (1961) 188 CaL.App.2d 269........... ...... ............. ......... ............. ............................ .......... ........... 18
Banco Do Brasil, SA. v. Latian, Inc. (1991) 234 CaL.App.3d 973 ............. ....... .................. ........ ..................... ................ ........ .......... 17
Bank of America v. Pendergrass
(1935) 4 CaL.2d 258 ................................................................................................................. 22

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Bennett v. Carlen (1963) 213 CaL.App.2d 307 .....................................................................................................18

Benton v. Hofmann Plastering Co.
(1962) 207 CaL.App.2d 61 """"'"'''''''''''''''''''''''''''''''''''''''''''''''''''''''''' ................ .................. 21

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Bionghi v. Metro. Water Dist. (1999) 70 CaL.AppAth 1358 .................................................................................................... 21

Careau & Co. v. Security Pacifc Business Credit, Inc.
(1990) 222 CaL.App.3d 1371 ............................................................................................. .21-22

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Casa Herrera, Inc. v. Beydoun

(2004) 32 CaL.4th 336............................. ...... ................. ..................................... ............... ...... 17

Celador Int 'i Ltd. v. Walt Disney Co.
(C.D. CaL. 2004) 347 F. Supp. 2d 846.....................................................................................21

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Celotex Corp. v. Catrett (1986) 477 U.S. 317 .......................................................................................................... 15,23
Charter Marketing Co. v. Burgin

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(D. Conn. 1989) 1989 U.S. District Lexis 18393....................................................................13
Clinkscales v. Chevron, USA., Inc. (11 th Cir. 1987) 831 F.2d 1565 ...............................................................................................11

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II
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TABLE OF AUTHORITIES
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Consolidate World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 CaL.App.4th 373 ........................................................................................................18

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Desofosses v. Wallace Energy, Inc.
(1 st Cir. 1987) 836 F.2d 22................................................................................................11, 15

Eichman v. Fotomat Corp.
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(9th Cir. 1989) 871 F.2d 784................. ......................... ......... ........................... ........ ....... .21-22

Erlich v. Mendezes (1999) 21 CaL.4th 543.... ................................. ............ .............. ........ ................... ........ ...... 22, 24

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First Commercial Mortgage Co. v. Reece (2001) 89 CaL.AppAth 731 ....................... ......................................... ...................................... 16
Foley v. Interactive Data Corp. (1988) 42 CaL.3d 654.................................................................................................... ........... 22

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Freeman & Mils v. Belcher Oil Co.
(1995) 11 CaL.4th 85................................................................................................................ 22

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Gruber v. Mobil Oil Corp. (D. Mich. 1983) 570 F. Supp. 1088.........................................................................................11
Guz v. Bechtel Nat 'i, Inc.

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(2000) 24 CaL.4th 317......................... ................................. ...... ......... ........... ....... ........ ..... ...... 21
Harris v. Atlantic Richfield Co.

(1993) 14 CaL.AppAth 70.. ...... ...................................... ........ .............. ................... .................22

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Hickman v. London Assur. Corp.
(1920) 184 CaL. 524 .................................................................................................................18

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Hinkleman v. Shell Co. (4th Cir. 1992) 962 F.2d 372 ..............................................................................................11-12

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Horcasitas v. Crown Cent. Petroleum Corp. (D. Maryland 1986) 649 F. Supp. 1163................................................................................... 10

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In re Napster, Inc. (Copyright Litgation) (9th Cir. 2007) 479 F .3d 1078................................................................................................. 23
Khoury v. Getty Petroleum Corp. (D.R.I. 1993) 1993 U.S. District LEXIS 19641 ......................................................................12

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Kramis v. Security Gas & Oil (9th Cir. 1982) 672 F.2d 766 ................................................................................................... 23
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Laks v. Coast Fed. Sav. and Loan Ass 'n

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(1976) 60 CaL.App.3d 885 .......................................................................................................16

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Little Oil Co., Inc. v. Atlantic Richfeld Co. (9th Cir. 1988) 852 F.2d 441 ...................................................................................................22
Loomis v. Gulf Oil Corp. (M.D. Fla. 1983) 567 F. Supp. 591.................................................................................. 11, 15
Magerian v. Exxon Corp.

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(9th Cir. 1997) 124 F.3d 212, 1997 WL 525273............. ............................... ............ ............. 10

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Marathon Petroleum Co. v. Pendleton (6th Cir. 1989) 889 F.2d 1509 .................................................................................................12
Martin v. V-Haul Co. of Fresno
(1988) 204 CaL.App.3d 396..................................................................................................... 22
Masterson v. Sine

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(1968) 68 CaL.2d 222 ...............................................................................................................17

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Mitri v. Arnel Management Co.
(2007) 157 CaL.AppAth 1164 ..................................................................................................17

Peterson Development Co., Inc. v. Torrey Pines Bank
(1991) 233 CaL.App.3d 103 ...................... ........................... ............ ..... ........... ..... .......... ......... 16
Price v. Wells Fargo Bank (1989) 213 CaL.App.3d 465 ............................... ................ ................... ................. ..................22

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Rodgers v. Sun Refining and Marketing Co. (3d Cir. 1985) 772 F.2d 1154 ..................................................................................................1 0
Russo v. Texaco

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(2d Cir 1986) 808 F.2d 221 .....................................................................................................11
Sheldon Builders, Inc. v. Trojan Towers
(1967) 255 CaL.App.2d 781 .....................................................................................................18

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Shell Oil Company v. Kozub (N.D. Ohio 1983) 574 F. Supp. 114 ........................................................................................11
Simmons v. Mobil Oil Corp. (9th Cir. 1994) 29 F.3d 505 .....................................................................................................22

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Smoot v. Mobil Oil Corporation (D. Mass. 1989) 722 F. Supp. 849.....................................................................................13, 15
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Storek & Storek, Inc. v. Citcorp Real Estate, Inc.
(2002) 100 CaL.AppAth 44..... ......... ................. ..................................... ........... ......... "'''''''''''' 21

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Townsend v. Mobil Oil Corporation (D. Mass 1992) 1992 WL 17252 .............................................................................................13
Unocal Corp. v. Kaabipour

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(9th Cir. 1999) 177 F.3d 755 ...................................................................................................1 0
Wagner v. Glendale Adventist Med. Ctr.
(1989) 216 CaL.App.3d 1379 ................................................................................................... 17

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Youngblood v. Silvagni
(1959) 173 CaL.App.2d 731 .....................................................................................................18

Zumbrun v. United Services Auto. Assoc. (E.D.CalI989) 719 F. Supp. 890 ............................................................................................15

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STATUTES

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15 U.S.C. § 2802(b )(2)(A)................................... ................................................ .......................... 10
15 U .S.C. § § 2802( c)( 1) .................... ........... ............. ....... .................... .......... ........... ....... .............11

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15 U.S. C. § 2802( c )(8) .............................................................................................................. 3, 11
15 U .S.C. § 2802( c )(9) ............................ ............................................................... ......... ....... ..12-13

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15 U.S.C. § 2804(b )(b)( 1 )(A) .............. ........... .......... ............ ...... ..... .............. ........ ........................ 14

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Civ. Proc. Code Section 1856........................................................................................................17

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OTHER AUTHORITIES

Fed.R.Civ.P. 56( c) ...... ................................................................................... ......... ....... ........... ..... 15

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NOTICE AND MOTION

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TO THE CLERK OF THE U.S. DISTRICT COURT, NORTHERN DISTRICT OF
CALIFORNIA, TO ALL PARTIES, AND TO THEIR ATTORNEYS OF RECORD HEREIN:
PLEASE TAKE NOTICE that on August 8, 2008, at 9:00 a.m., or as soon thereafter

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as the matter may be heard, in the Courtroom of the Honorable Jeremy Fogel, Judge for the United

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States District Court, Northern District of California, located at 280 S. First Street, San Jose,
California, Plaintiff and Counter-Defendant BP West Coast Products LLC ("BPWCP") will and
hereby does move the Court, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for an

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order granting summary judgment, or in the alternative, partial summary judgment against
Defendants and Counterclaimants STTN Enterprises, Inc. ("STTN"), Nazim Faquiryan, Sayed
Faquiryan, Maghul Faquiryan and A V A Global Enterprise, LLC (collectively hereinafter referred to

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as "Counterclaimants"), on the claims alleged in the Counterclaim on the grounds set forth below:
1.
Wrongful Termination/iolation of

BPWCP Is Entitled to Summary Judgment On STTN's First Counterclairn for

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the PMPA: BPWCP's decision to terminate was properly based

upon enumerated grounds in the Petroleum Marketing Practices Act, 15 U.S.C. § 2801, et seq.
("PMP A") (see Sections 2802( c )(8) and 2802( c )(9)), the franchise agreements, and the applicable
legal authority.

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2.

BPWCP Is Entitled to Summar Judgment On STTN's Second Counterclaim

for Breach of the Conditional Commitment Letter: STTN canot maintain a cause of action for

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breach of the Conditional Commitment Letter ("CCL") because the CCL is not an enforceable
contract.
3.

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BPWCP Is Entitled to Summary Judgment On STTN's Third Counterclaim

for Breach of the Store Loan Agreement: BPWCP did not breach the Store Loan Agreement
because BPWCP fully funded the $150,000 contemplated in that loan (which has yet to be repaid
even though repayment is owed) and did so pursuant to the terms and conditions of the loan.
4.

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BPWCP Is Entitled to Summary Judgment On STTN's Fourth and Fifth

Counterclaims for Breach of the Gasoline Loan Agreement and Disbursement Agreement: BPWCP
did not breach the Gasoline Loan Agreement or Disbursement Agreement because STTN (1) was in
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default of the loan agreement and disbursement agreement terms, and never met all the requisite
conditions to funding; and (2) was and continues to owe BPWCP over $126,000 for unpaid gasoline
deliveries.
5.

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BPWCP Is Entitled to Summary Judgment On Counterclaimants' Sixth Cause

of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing: BPWCP is entitled

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to summary judgment against STTN on defendants' claim for Breach of the Implied Covenant of
Good Faith and Fair Dealing because (1) the parties' relationship is governed by detailed written
agreements and a tort claim cannot be assert in this commercial setting where no independent

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fiduciary relationship exists; (2) the franchise and lender relationships here are not special
relationships under which tort liability attaches when there is a contract; and (3) the covenant does
not apply to rights expressly provided for in the contract.
6.

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BPWCP Is Entitled to Summary Judgment On Counterclaimants' Seventh

Cause of Action for Fraud and Eighth Cause of Action for Negligent Misrepresentation: BPWCP is

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entitled to summary judgment against STTN on defendants' counterclaims for Fraud and Negligent

Misrepresentation because (1) the parties' relationship is governed by detailed written agreements
and a tort claim cannot be assert in this commercial setting where no independent fiduciary

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relationship exists; and (2) STTN has no evidence supporting fraud or negligent misrepresentation
by BPWCP.

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This Motion is based upon this Notice of Motion, the accompanying Memorandum of
Points and Authorities, the Declarations of Deborah Y oon Jones, Thomas Reeder, Brad Christensen, Cecile McDonnell, and the exhibits attached thereto, all filed concurrently herewith, and all the other

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records and files in this case, such further papers and records as may be submitted to the Court at or
before the hearing on this motion, the oral argument of counsel and any other or further information
that may be presented or which the Court deems proper and necessary.

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RELIEF REQUESTED

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BPWCP requests that the Cour enter judgment in BPWCP's favor and against
Conterclaimants on each of the Counterclaims asserted.

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MEMORANDUM OF POINTS AND AUTHORITIES
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i.

INTRODUCTION
A gasoline station franchisee who fails to pay its franchisor for gasoline delivered and

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then fails to keep the station open for business can, and obviously should, have its franchise
terminated under the governing Petroleum Marketing Practices Act (28 U.S.C. § 2801 et seq.,

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hereinafter "PMP A"). Indeed, among the specifically "per se" reasonable enumerated grounds for a
proper termination of a gasoline station franchisee under the PMP A are: (1) the failure to pay for all

sums due to the franchisor (§2802(c)(8)J; and (2) the failure to operate the Station for seven
consecutive days (§2802(c)(8)). This action involves a franchisee who undisputedly failed to
operate the gasoline station for at least twelve consecutive days and currently owes the franchisor

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hundreds of thousands of dollars. Incredibly, the franchisee and its representatives here have
counterclaimed against the franchisor for $1.7 milion dollars.

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Here, franchisee STTN Enterprises, Inc. ("STTN") and the other counterclaimants
("Counterclaimants") contend that even though they admit to owing BP West Coast Products LLC

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("BPWCP") over $126,000 for unpaid gasoline deliveries and $150,000 for repayment on a loan

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provided by BPWCP to remodel the former ARCO-branded gasoline station and am/pm mini

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market, BPWCP has acted wrongfully and in breach of the parties' applicable agreements.
However, as discussed more fully below, the undisputed facts and applicable legal authority support

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otherwise, and BPWCP is entitled to summar judgment, in its favor, on each of the counterclaims
asserted. i

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II.

ST A TEMENT OF ISSUES TO BE DECIDED

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Based upon the uncontroverted facts and applicable authorities, BPWCP is entitled to
summary judgment in its favor:

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1 Many of the same arguments set forth herein are duplicated in the concurrently filed BPWCP's

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Motion for Summary Judgment, or in the Alternative, Parial Summary Judgment as to the Second Amended Complaint brought by BPWCP filed herewith. In both instances, the undisputed facts and unequivocally applicable statutory and legal authority warrant a judgment in BPWCP's favor. Indeed, the granting of one of BPWCP's Motions for Summary Judgment should result in the
granting ofBPWCP's other Motion.

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1.

On the First Counterclaim for Wrongful Termination/iolation of the PMP A

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on grounds that BPWCP's decision to terminate STTN's franchise was proper under the franchise;
2.

On the Second Counterclaim for breach of the Conditional Commitment

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Letter dated May 25,2006 on the ground that it is not an enforceable contract;
3.

On the Third Counterclaim for breach of the Store Loan on grounds that
the Store Loan;

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BPWCP performed pursuant to the terms and conditions of

4.

On the Fourth and Fifth Counterclaim for breach of the Gasoline Loan and

Disbursement Agreement because Counterclaimants never met all requisite conditions to justify the
release of funds pursuant to the Gasoline Loan and Disbursement Agreement.
5.

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On the Sixth Cause of Action for Breach of Implied Covenant of Good Faith

and Fair Dealing as an improper and unavailable claim; and
6.

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On the Seventh Cause of Action for Fraud and Eighth Cause of Action for

Negligent Misrepresentation on grounds that the causes of action are inapplicable in this action and
are unsupported by any facts or evidence.

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III.

STATEMENT OF UNCONTROVERTED FACTS
A.

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STTN's Franchise Relationship with BPWCP
BPWCP and STTN Enterprises, Inc. ("STTN") entered into a franchise relationship

involving an ARCO-branded gasoline station and am/pm mini market located at 631 San Felipe
Road, Hollister, California ("Station")?

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The written franchise agreements that governed the

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franchise relationship are: (1) a Contract Dealer Gasoline Agreement dated July 11, 2006, which

includes any and all amendments and addendums ("Gasoline Agreement,,)3; and (2) an am/pm Mini

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2 Nazim Faquiryan is the 51 % shareholder of STTN. (Nazim Deposition ("Nazim Depo."), at 36:48.) Sayed is the 49% owner and was the primary representative of STTN during its franchise relationship with BPWCP. (Sayed Deposition ("Sayed Depo."), at 108:14-110:22; Nazim Depo., at 28: 12-29:21.) True and correct copies of the relevant excerpts and exhibits from the depositions of

Sayed Faquiryan and Nazim Faquiryan are attached as Exhibits 1 and 2 to the Declaration of
Deborah Y oon Jones ("Jones Decl.").

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3 On October 12, 2006, STTN signed an Amendment to the Contract Dealer Gasoline Agreement and a I-year Contract Dealer Gasoline Agreement. At the time, BPWCP believed this was necessary since it was allowing STTN to operate the gasoline station only during the remodeling of the mini
market store located at the Station. (Sayed Depo. at 39:24-40:12 and Exh. B; Nazim Depo., at
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Market Agreement dated July 11, 2006, which includes any and all amendments and addendums

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("Mini Market Agreement"). (Sayed Depo. at 35:13-36:2 and 40:13-42:5, and Exhs. A and C;
Nazim Depo. at 10:18-21, 87:6-8,12:4-7,87:9-11, and 87:23-88:1; and Declaration of Thomas

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Reeder ("Reeder Decl."), ~ 3 and Exh. A and Exh. B.) The Mini Market Agreement, the Gasoline
Agreement, and the Franchise Guaranties shall be referred to collectively as the "Franchise
Agreements. "
B.

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STTN Fails to Pay for and Sell Gasoline and Breaches the Franchise Agreements
As of January 2007, payments for delivered gasoline product by BPWCP to STTN

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were accomplished by way of an Electronic Funds Transfer ("EFT"), which automatically drew from

STTN's account at the time the gasoline was delivered.

(Declaration of Brad Christensen

("Christensen Decl."), ~ 4.) However, throughout January 2007, STTN ordered gasoline but then
refused to pay BPWCP for the gasoline by either placing a stop payment order on the EFTs or failing

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to have sufficient funds in its account for the EFTs on January 8, 16, 19, 26, and 31. (Christensen
Decl., ~ 5.) By the end of Januar 2007, STTN was delinquent on gasoline balances due to BPWCP

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to the sum of$104,580.68. (Id.)
Given STTN's interference with the EFT process, BPWCP required STTN to present
a cashier's check to the driver of the gasoline delivery truck in order to receive gasoline product.

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(Reeder Decl., ~ 6; Christensen Decl., ~ 6.) Despite this change in procedure, STTN continued to be

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delinquent on the payment for gasoline deliveries. For example, on February 2, 2007, BPWCP
delivered another load of gasoline, but STTN did not pay for the gasoline. (Christensen Decl., ~ 6.)
On February 6, 2007, BPWCP discussed STTN's failure to pay for the February 2 gasoline load, and

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reached an agreement with Sayed Faquiryan a cashier's check for $44,000 would be presented at the

next delivery to account for the $22,000 owed for the February 2 gasoline delivery as well as
$22,000 for that next delivery. (Id.) On February 7, 2007, BPWCP delivered another load of

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11:11-14; and Reeder Decl., ~ 4 and Exhs. C and D.) However, the terms and conditions in the Gasoline Agreement (a 20-year agreement) continued in full force. (Reeder Decl., ~ 4.) Moreover,
STTN's obligations concerning the payment for and sale of gasoline remained the same in the Gasoline Agreement and the I-year agreement. (Id.)
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gasoline but STTN only presented a check for $22,500. (Id.) On March 5, 2007, STTN's bank

2
3

returned a cashier's check in the amount of $20,851.09 for payment of gasoline due to a stop
payment order by STTN. (Id.) As of

March 2007, the net due to BPWCP given the gasoline balance

4
5

delinquencies has risen to $164,950.81. (Id.)

In a letter dated May 4, 2007, Nazim Faquiryan and Sayed Faquiryan acknowledged
the gas balance delinquencies, confirmed the total balance due to BPWCP as of that date had risen to

6
7
8

$184,075.50, and, in writing, agreed to pay $30,000 per month unti the total outstanding balance of
the gasoline debt was paid in full ("Payment Plan Agreement"). (Sayed Depo., at 164:15-165:12 and

9
10
11

Exh. 0; Nazim Depo., at 79:2-4; Reeder Decl., ~ 7 and Exh. E; Christensen Decl., ~ 7 and Exh. A)
Yet, as of September 5, 2007, an outstanding balance of over $126,000, for gasoline product

deliveries remained.

(Reeder Decl., ~ 8; Christensen DecI, ~ 8.) Sayed Faquiryan admits that he

12
13

never made any payments pursuant to the Payment Plan Agreement. (Sayed Depo., at 166:3-13;

Christensen Decl., ~ 9.) Under the Franchise Agreements, BPWCP required STTN to maintain

14
15

adequate supplies of gasoline for sale and, of course, to pay BPWCP for gasoline delivered. (Reeder
Decl., Exh. A at Art. 2; Sayed Depo., Exh. A at Art. 2.)

16 17
18

In addition to paying for gasoline loads, the Franchise Agreement also required STTN

to operate the Station and if it failed to do so for seven (7) or less consecutive days, BPWCP had a
right to terminate the franchise. (Sayed Depo., Exh. A at Ar. 2 and Art. 17.1(i); Reeder Decl., Exh.

19

A at Art. 2 and Art. 17.1(i).) From the evening of August 23, 2007 through at least September 4,
2007, STTN failed to operate the Station and sell gasoline product for at least 12 consecutive days in

20
21

violation of the Franchise Agreements. (Reeder DecI, ~ 10 and Exh. F; Christensen Decl., ~ 10 and
Exh. B.) In fact, STTN taped offthe Station dispensers from any use by customers from the evening
of August 23, 2007 through at least September 4,2007. (Sayed Depo., at 167:23-168:5, and 170:19-

22
23

24
25

21 and Exh. P; Christensen Decl., ~ 10 and Exh. B; Reeder Decl., ~ 10 and Exh. F.) BPWCP's

franchise consultant also attempted to pump gasoline from the dispensers and was unable to do so.
(Christensen Decl., ~ 10.) Furthermore, BPWCP's last delivery of gasoline to the Station prior to the
Termination was on or about August 18,2007. (Reeder Decl., ~ 11 and Exh. G.) At best, STTN

26
27 28

would have run out of the amounts delivered within 3-5 days. (Id.; and Christensen Decl., ~ 11.)
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Thus, unless STTN was purchasing gasoline from sources other than BPWCP (which it was not
2
3

permitted to do under the Gasoline Agreement), STTN would not have had any product to sell by
August 24, 2007.4 (Id.)

4
5

The Franchise Agreements also required STTN to "order and make available for sale
all grades of Gasoline which BPWCP offers to (STTN)" and "wil at all times have available for sale
some of each grade of Product." (Reeder Decl., Exh. A at Art. 2.) During the August 24 through

6
7
8

September 4 time frame, however, STTN failed to have all grades of gasoline available for sale to
the public. (Sayed Depo., at 170: 19-21 and Exh. P; Reeder Decl., ~ 10 and Exh. F; Christensen

9
10
11

Decl., ~ 10 and Exh. B.) In fact, STTN admits that from August 24,2007 through at least September 4,2007, it was not selling unleaded grade gasoline. (Sayed Depo., at 170:19-25, and Exh. P.)
BPWCP issued numerous defaults concerning these breaches. (Sayed Depo., Exh. P;

12
13

Reeder Decl., Exh. F; Christensen Decl., ~ 12 and Exh. B.) STTN admits that it received the
numerous default notices regarding the failures to pay for gasoline deliveries and sell gasoline.
(Sayed Depo., at 166:19-167:4; and Nazim Depo., at 82:24-83:8.)

14
15

c.

BPWCP Properly Terminates STTN's Franchise Agreements

16 17
18

BPWCP sent a Notice of Termination letter dated September 6, 2007, to STTN,
advising that the Franchise Agreements would be immediately terminated ("Termination Notice").

(See Reeder Decl., ~ 13, Exh. H; Sayed Depo., at 173:5-16 and Exh. R.) The Termination Notice
cited STTN's Gasoline Agreement provisions and set forth the following grounds for termination:

19

20
21

(1) STTN's failure to pay for gasoline product sold and delivered; (2) STTN's failure to have
gasoline products available for sale for at least 12 consecutive days, and (3) STTN's failure to offer

22
23

all grades of gasoline. (Reeder DecI, ~ 13, Exh. H, Exh. A at ~ 17.1; Sayed Depo., Exh. Rand Exh.

Aat~17.1.)

24
25

26
27 28

4 In an attempt to create a factual dispute concerning this ground for termination, STTN may contend that even though the gasoline dispensers were cautioned taped off that exterior dispensers were stil "open" for customer use. However, given the delivery schedule, it is undisputable that STTN was not operating the Station for more than 7 consecutive days. Moreover, by taping off the dispensers, the Station was not in operation as required by the Franchise Agreement.
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D.
2
3

BPWCP'S Loans to STTN Become Due Upon the Franchise Termination

In addition to the requirement that STTN purchase gasoline and operate its business,

the Franchise Agreements also required STTN to complete a remodel or retrofit of the station.
(Reeder Decl., ~ 14 and Exh. A at ~ 1.2 and Exh. B at ~ 5.03(a); Sayed Depo., Exh. A at ~ 1.2 and

4
5

Exh. C at ~ 5.03(a).) To assist STTN in complying with this "remodel and retrofit" requirement,
BPWCP offered STTN a special loan program to provide funds specifically for completing

6 7
8

construction and remodeling of its gasoline station and am/pm mini market store. (Reeder DecI, ~
14.) This loan program allowed STTN to make repayments either based on reaching a certain level

9

of performance at the Station, or, alternatively, through a five percent (5%) per year payment for

10
11

twenty years. (Id., ~ 14; see, e.g., Exh. J at ~~ 1.4 - 1.6; Sayed Depo., Exh. F at ~~ 1.4 - 1.6.)
BPWCP and STTN entered into two loan agreements, whereby BPWCP agreed to loan STTN the
total sum of $475,000 to be used toward BPWCP-approved capital improvements for the ARCO-

12
13

branded gasoline station and the am/pm mini market. (Reeder Decl., ~~ 15-16 and Exh. J at ~ 1.1
and Exh. K at ~ 1.1.)
1.

14
15 16

BPWCP Funded the Store Loan

Pursuant to the Store Loan Agreement dated February 12, 2007, BPWCP agreed to
loan STTN the total sum of $150,000 (of the $475,000) to be used toward BPWCP-approved capital

17

l8
19

improvements for the am/pm mini market convenience store (hereinafter "Store Loan Agreement").

(Reeder Decl., ~ 16 and Exh. J at ~ 1.1.) STTN, Sayed Faquiryan and Nazim Faquiryan agreed to
the terms and conditions of the Store Loan Agreement by virtue of their signatures thereto. (Sayed
Depo., at 78:11-21 and Exh. F at ~ 1.1; Nazim Depo., at 14:4-8.)

20
21

22
23

Although STTN and BPWCP entered the Store Loan Agreement effective Februar

12, 2007, funds on the loan did not become available for disbursement until approximately May 29,

24
25

2007 and the first check was issued to the general contractor on or about June 5, 2007. (Declaration

of Cecile McDonnell ("McDonnell Decl."), ~ 7.)

The Store Loan Agreement provides that:

26
27 28

"(b )efore Lender (BPWCP) becomes obligated to make any Disbursement under this Agreement, all

conditions to such Disbursement set forth below shall have been satisfied at Borrower's sole cost
and expense in a manner acceptable to Lender in the exercise of its reasonable judgment." (Reeder
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1

Decl., Exh. J at ~ 2; Sayed Depo., at 78:11-21 and Exh. F; Nazim Depo., at 14:4-8.) Moreover,

2
3

delays are contemplated and addressed in the Store Loan Agreement, at paragraph 2, as follows:
"Borrower acknowledges that delays in the Disbursement may result from the time necessary for
Lender to verify satisfactory fulfillment of any and all conditions to a given Disbursement.

4
5

Borrower consents to all such delays." (Reeder Decl., Exh. J at ~ 2; Sayed Depo., at 78:11-21 and
Exh. F; Nazim Depo., at 14:4-8.)

6
7
8

Any purported "delay" was a result of delays that were undisputedly caused by
someone or some entity (for the most part Counterclaimants) other than BPWCP. For example,
many documents submitted by STTN contained erroneous information and had to be corrected.
(McDonnell Decl.,~ 5.) As of March 22, 2007, the required budget worksheet to be submitted by
STTN to BPWCP was still incorrect (after numerous correction attempts). (Id.) As of April 9, 2007,
there was still a lien for $92,974 and Franchise Tax Board lien for $9,429 on the Real Property. (Id.)

9 10
11

12
13

As of April 11, 2007 new liens were filed on the property for $46,400 for the Board of Equalization
and a $14,011 mechanics lien. (Id.) As of April 16, 2007, there were stil

14
15

liens on the Real Property

totaling $158,941.51. (Id.) As of April 2007 issues arose concerning the proper corporate designee

16 17

of STTN - - Sayed Faquiryan had been acting as the representative but since he was only the 49%

shareholder certain documentation need to be provided to BPWCP. (Id.) Throughout April 2007,
BPWCP was negotiating various changes to the Disbursement Agreement with STTN's general

l8
19

contractor, who was insisting that changes be made to BPWCP's form Disbursement Agreement.
(Id.) As of May 2, 2007, STTN still needed to provide a signed promissory note, the amendment re
corporate documents naming Sayed as the corporate designee, and the revised disbursement

20
21

22
23

agreement from STTN's general contractor. (Id.) In mid-May 2007, BPWCP had to process an
"exception to the policy" in order to fud the Store Loan prior to the Gasoline Loan as it was not a

24
25

usual practice to fund only one of the two loans offered; BPWCP was not disbursing any of the
Gasoline Loan unless and until STTN brought its gasoline delinquencies current. (Id., ~ 6.) BPWCP

26 27
28

issued additional checks to STTN's contractors in June, July and August 2007, once proper
documents including, but not limited to, detailed invoices, releases, and lien releases, were provided
by STTN. (Id., ~ 7.)
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1

By early August 2007, BPWCP had disbursed all $150,000 from the Store Loan.
(McDonnell Decl., ~ 7.) Counterclaimants readily admit that the entire Store Loan proceeds were
disbursed. (Sayed Depo., at l06:1-5 and 141 :24-l42:12; see also CC, ~ 211.) 2.

2
3

4
5

BPWCP Did Not Fund the Gasoline Loan

Under the Gasoline Loan Agreement dated February 12, 2007, BPWCP agreed to
loan STTN the total sum of$250,000 (of

6
7
8

the $475,000)5 to be used toward BPWCP-approved capital

improvements for the ARCO-branded gasoline station (hereinafter "Gasoline Loan Agreement").

(Reeder Decl., ~ 16 and Exh. K.) Similar to the Store Loan Agreement, STTN had to comply with
certain terms and conditions before receiving the funds. Unlike the Store Loan Agreement, which

9
10
11

was funded, STTN did not comply with the terms and conditions - - because it owed $126,000 in
outstanding balances on gasoline deliveries - - and thus BPWCP did not disburse any funds under
the Gasoline Loan Agreement. (McDonnell Decl., ~~ 6-8.)

12
13

Despite the above-described undisputed facts, the Counterclaimants seek over $1.7

14
15

milion for purported damages suffered as a result of BPWCP's actions. However, as discussed

further below, the undisputed facts and applicable authority justify an order granting summary
judgment in favor of BPWCP and against the Counterclaimants.

16 17 18 19

iv.

BPWCP'S TERMINATION OF STTN'S FRANCHISE WAS PROPER UNDER THE
PMP A AND FRANCHISE AGREEMENTS AS A MATTER OF LAW
The PMP A allows termination for breaches of the franchise agreement that are of

20
21

"reasonable and material significance to the franchise relationship." 15 U.S.C. § 2802(b)(2)(A).

The PMP A was designed to prevent "sham, pretextual, or discriminatory" franchise termination, but
does not invite the courts to second-guess the reasonable business judgments of

22
23

the franchisors. See,

e.g., Magerian v. Exxon Corp. (9th Cir. 1997) 124 F.3d 212, 1997 WL 525273 at *2; Rodgers v. Sun
Refining and Marketing Co. (3d Cir. 1985) 772 F.2d 1154, 1158; Horcasitas v. Crown Cent.

24
25

Petroleum Corp. (D. Maryland 1986) 649 F. Supp. 1163, 1166; Unocal Corp. v. Kaabipour (9th Cir.

26 27
28
10
1208773.2
5 The remaining $75,000 of

the loan offer was for BPWCP's option of disbursing for refreshing and

refurbishing the store on the 11 th anniversary after the loan disbursement. (Reeder Decl., Exh. J.)

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1999) 177 F.3d 755, 767; and Gruber v. Mobil Oil Corp. (D. Mich. 1983) 570 F. Supp. 1088, 1091

2
3

n.5, 1093-1094. To that end, the PMPA contains a list of safe harbor instances which are lJer se
defined as constituting reasonable and materially significant grounds for franchise termination. 15
U.S.c. §§ 2802(c)(1)-(12). Failure to pay for gasoline (§2802(c)(8)) and failure to operate the

4
5

Station for seven consecutive days (§2802(c)(8)) are some of the "per se" reasonable grounds for

6
7
8

termination. Id.

Where an event falls within the Section 2802( c) list. the franchise termination is
conclusively presumed to be reasonable. Desofosses v. Wallace Energy, Inc. (1 st Cir. 1987) 836

9
10
11

F.2d 22, 26 ("(i)fan event falls within (Section 2802(c)) list, termination is conclusively presumed to
be reasonable as a matter of law"); Russo v. Texaco (2d Cir 1986) 808 F .2d 221, 223 ("(0 )nce having

ascertained that an event is encompassed by one of the twelve enumerated events (in Section

12
13

2802(c)), a court need make no further inquiry as to the reasonableness of the termination");
Clinkscales v. Chevron, USA., Inc. (11 th Cir. 1987) 831 F.2d 1565, 1573; and Hinkleman v. Shell

14
15

Co. (4th Cir. 1992) 962 F.2d 372, 378 (the enumerated list under Section 2802(c) sets forth
termination grounds which are "per se reasonable").

16
17 18 19

BPWCP's grounds for terminating STTN's franchise relationship are among such
''per se" reasonable and materially significant grounds, as follows:
A.

STTN's Failure To Pay For Gasoline Delivered Justifies The Franchise
Termination Under the PMP A

20
21

STTN's failure to pay all sums to which BPWCP is legally entitled affords a separate
and per se basis for franchise termination. 15 U.S.c. § 2802(c)(8). Consistent with the PMPA,

22
23

BPWCP's Gasoline Agreement with STTN provides that BPWCP may terminate the Franchise

Agreements if STTN fails to timely pay all sums due to and which BPWCP is legally entitled.
(Reeder DecI, Exh. A at ~ 17.1(h); Sayed Depo., Exh. A at ~ 17.1 (h).)

24
25

Summary judgment in favor of franchisors is appropriate when the franchisee's
failure to pay is undisputed. See, e.g., Loomis v. Gulf

26 27
28

Oil Corp. (M.D. Fla. 1983) 567 F. Supp. 591,

598 (failure to pay $56,233.52 for gasoline is a default in the franchise agreements entitling

franchisor to summary judgment); Shell Oil Company v. Kozub (N.D. Ohio 1983) 574 F. Supp. 114,
11
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1

118 (in accordance with Section 2802( c )(8), of the franchisee's failure to pay for gasoline entitles the

2
3

franchisor to summary judgment.); Marathon Petroleum Co. v. Pendleton (6th Cir. 1989) 889 F.2d

1509, 1510 (affrming summary judgment for the franchisor based on an overdue balance of
$3,347.93, and missed payments on a note for other funds owned); Khoury v. Getty Petroleum Corp.
(D.R.I. 1993) 1993 U.S. District LEXIS 19641 (termination of

4
5

a franchise due to failure to pay rent

6
7
8

and for gasoline is conclusively presumed to be reasonable.); Hinkleman v. Shell Oil Co. (4th Cir.
1992) 962 F.2d 372, 378 (failure to make payments is a "per se reasonable" ground for termination
of

the PMPA.).

9 10
11

Here, it is undisputed that STTN has failed to pay BPWCP for gasoline products in a

timely manner, incurring an outstanding balance of over $126,000, for gasoline product deliveries
that are due and payable at the time of delivery. (Reeder Decl., ~~ 7-9; Christensen Decl., ~~ 8-9;

12
13

Sayed Depo., at 159:8-11 and 166:3-13; Nazim Depo., at 74:25-75:2 and 76:4-5.) Moreover,

BPWCP gave STTN ample opportunity to pay these outstanding amounts back, even agreeing to a
payment plan. (See Nazim Depo., at 79:2-4; Sayed Depo., at 162:5-22 and 164:15-165:12 and Exh.
0; Reeder Decl., ~~ 7-9 and Exh. E.) STTN, Sayed Faquiryan and Nazim Faquiryan, however,

14
15

16 17 18 19

never made any payments to BPWCP pursuant to the Payment Plan Agreement. (Reeder Decl., ~~
8-9; Sayed Depo., at 166:3-13.)

PMP A authorities hold that BPWCP should not be forced to continue doing business
with a franchisee who continuously fails to pay for products provided; BPWCP's termination on this

20
21

ground was proper and summary adjudication on BPWCP's First Cause of Action to affrm that the
franchise termination was proper under the PMP A is warranted.

22
23

B.

STTN's Failure to Operate The Station For At Least 12 Days Justifies The
Franchise Termination Under The PMP A

24
25

Failure by a franchisee to operate the marketing premises for seven consecutive days

is specifically defined in the PMP A as an event relevant to the franchise relationship warranting
termination. See, 15 U.S.C. § 2802(c)(9). Failing "to operate the premises for seven consecutive

26 27
28

days," are material provisions of the agreement. (Reeder Decl., Exh. A at ~~ 17.1(h) and (i); Sayed

Depo., Exh. A at ~~ 17.1 (h) and (i).) The Gasoline Agreement requires STTN to "order and make
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1

available for retail sale all grades of Gasoline which ARCO offers. . . (hereinafter collectively,

2
3

"Product"), in amounts sufficient to satisfy all foreseeable retail customer demand for Product at the

Premises." (Reeder Decl., Exh. A at ~ 2; Sayed Depo., Exh. A at ~ 2.) Failure to offer any fuel is
not only a breach of paragraph 2 of the Gasoline Agreement, which is patently material and

4
5

significant to the franchise relationship, but also a failure to operate the premises, also waranting
termination under Paragraph 17.1 (0) of the agreement and PMP A § 2802( c )(9).

6
7
8

The case law also supports such a proper ground for termination. Indeed, it has been

held that a service station franchisee's failure to sell gasoline frustrates the very purpose of the
franchise. See, e.g., Townsend v. Mobil Oil Corporation (D. Mass 1992) 1992 WL 17252 ("(t)he
primary purpose of a Mobil franchise is to sell Mobil products"). For that reason, the failure to sell

9 10
11

gasoline for seven days is a suffcient basis for termination of the franchise. Smoot v. Mobil Oil
Corporation (D. Mass. 1989) 722 F. Supp. 849, 855 ("(b )ecause the fundamental purpose of any

12
13

Mobil franchise is to sell Mobil products," the court granted franchisor's motion for summary
judgment based on franchisee's failure to sell gas for seven days); Charter Marketing Co. v. Burgin

14
15

(D. Conn. 1989) 1989 U.S. District Lexis 18393, CCH Franchise Business Guide Paragraph 9504
(franchisor's motion for summary judgment was granted based on the franchisee's failure to operate
the Station for seven days or pay rent).

16 17
18

Here, commencing on the evening of August 23, 2007 through at least September 4,

19

2007, STTN placed a caution tape around the dispensers such that customers were unable to
purchase (or, at the very least, dissuaded from purchasing) gasoline at the Station; in other words,

20
21

STTN was failing to operate the Station as required to do so under the Gasoline Agreement.
(Christensen Decl., ~ 10.)

22
23

BPWCP's representative confirmed the non-sale of gasoline by

attempting to pump gasoline from a dispenser that was located on the exterior of the pump station

24
25

islands (and therefore not technically taped off), and was unable to pump or purchase any gasoline.

(Id.) Furthermore, as discussed above, BPWCP's last delivery of gasoline was on August 18,2007.

26 27
28

(Reeder Decl., ~ 11 and Exh. G.) BPWCP issued numerous defaults concerning this breach and
issued many warnings to STTN that the franchise would be terminated if STTN did not remedy the
breach. (Reeder Decl., Exh. F.) However, STTN failed to sell ARCO-branded gasoline to the public
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for at least 12 consecutive days, and as such, BPWCP had reasonable grounds to terminate STTN.
2
3

Summar judgment should be granted in favor of BPWCP on its First Cause of Action for a
declaration that the franchise termination was proper.

4
5

c.

STTN's Failure to Make All Grades of Gasoline Available Justifies the Franchise
Termination Under the PMP A

6 7
8

Yet another basis for franchise termination is STTN's failure to make all grades of
gasoline available for sale to the public. Paragraph 2 of the Gasoline Agreement requires STTN to
"order and make available for retail sale all grades of Gasoline which BPWCP offers to Buyer

9
10
11

(hereinafter collectively, "Product"), in amounts suffcient to satisfy all foreseeable retail customer
demand for Product at the Premises" and "at all times have available for sale some of each grade of
Product." (Reeder Decl., Exh. A at ~ 2; Sayed Depo., Exh. A at ~ 2.) Furthermore, the Gasoline

12
13

Agreement also expressly provides that termination wil occur where the franchisee "fails to exert
good faith efforts to carry out the provisions of the Agreement following written notice and
opportunity to cure. . .." (Reeder Decl., Exh. A at ~ 17.1 (a); Sayed Depo., Exh. A at ~ 2.)

14
15

As stated in the Termination Notice, BPWCP sent STTN a total of 12 Default Notices

16 17
18

for, inter alia, STTN's failure to offer all grades of gasoline for sale. (Reeder Decl., Exhs. F and H;
Christensen Decl., ~~ 10-12 and Exhs. Band C; Sayed Depo., at 166:19-167:4 and Exhs. P and R)

STTN, however, continued its breaches and as such, BPWCP's termination ofSTTN's franchise was

19

proper and warranted under the PMP A. Accordingly, this Court should grant summar judgment in

20
21

favor of BPWCP on its First Cause of Action for Declaratory Relief to affrm the franchise
termination was proper under the PMP A.

22
23

D.

Less Than 90 Days Notice of the Termination Was Reasonable. As A Matter of
Law. Because STTN Failed To Pay for Gasoline Deliveries
Finally, part of STTN's wrongful termination counterclaim includes an allegation that

24
25

the immediate notice provided by BPWCP was improper.

However, under 15 U.S.C. §

26 27 28

2804(b )(b)( 1 )(A), the PMP A provides that BPWCP may notify the franchisee "on the earliest date

on which furnishing of such notification is reasonably practicable" if it would not be reasonable to
furnish notification 90 days prior to the termination.

"The purose of the PMPA's notice of
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termination requirements is to give the dealer sufficient advance notice of the impending termination
2
3

so that he can make appropriate arrangements." Desfosses v. Wallace Energy, Inc. (1st Cir.1987)

836 F.2d 22,29 (quoting Avaramidis v. Arco Petroleum Products Co. (1st Cir.1986) 798 F.2d 12,

4
5

17). Where there is an "enduring problem with a fundamental aspect of its relationship" with a

franchisee, courts have held that it would be "unreasonable to require that problem be tolerated for
another ninety days." Smoot v. Mobil Oil Corp. (D.Mass. 1989) 722 F. Supp. 849, 855 (accelerated

6
7
8

notice permissible for failure to sell gasoline); Loomis v. Gulf Oil Corp. (M.D. Fla. 1983) 567 F.
Supp. 591, 597 (accelerated notice permissible for deficiency in payment of over $56,000).

9 10
11

By September 5, 2007, STTN had failed to timely pay BPWCP for gasoline products
in a timely manner, incurring an outstanding balance of over $126,000, for gasoline product

deliveries that are due and payable at the time of delivery. (Reeder Decl., ~~ 8-9 and Exh. F;
Christensen Decl., ~ 8; Sayed Depo., at 166:3-13 and Exh. P.) Moreover, as discussed above, the

12
13

gasoline delinquencies had been tolerated by BPWCP since at least January 2007. In addition,

14
15

STTN had persistently failed to comply with its obligation to have ARCO-branded gasoline
available for sale, despite many warnings that STTN's franchise would be terminated if he did not
do so. (Reeder Decl., ir~ 10-11 and Exh. F; Christensen Decl., ~~ 10-12 and Exh. B; Sayed Depo.,

16 17
18

Exh. P.) Accordingly, it was not reasonable for BPWCP to provide any additional notice to STTN;
immediate termination was proper.
V.

19

STTN'S SECOND THROUGH FIFTH COUNTERCLAIMS FOR BREACH OF
CONTRACT FAIL AS A MATTER OF LAW
Summary judgment of the Second through Fifth Counterclaims is appropriate because

20
21

22
23

no genuine issues of fact exist concerning any of these contract claims. See Celotex Corp. v. Catrett
(1986) 477 U.S. 317,323; Adickes v. SH Kress & Co. (1970) 398 U.S. 144, 157; Zumbrun v.

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United Services Auto. Assoc. (E.D.CalI989) 719 F. Supp. 890,892; Fed.R.Civ.P. 56(c).
A.

The Conditional Commitment Letter Is Not A Valid Enforceable Contract
STTN's Second Counterclaim is for breach of the Conditional Commitment Letter

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("CCL") dated May 25, 2006. (See Counterclaim ("CC"), ~~ 164, 196-202; Sayed Depo., 63 :20-

64:1, Exh. E.) STTN contends that the CCL is a valid contract between it and BPWCP. (CC, ~~
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164, 197-198.) This counterclaim is based, however, upon the faulty premise that the CCL is a valid
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enforceable contract, which it is not.
1.

BPWCP's CCL Does Not Contain All Material Terms of the Loan

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The elements of a claim for breach of contract are: (1) the existence of the contract;
(2) performance by the plaintiff or excuse for nonperformance; (3) breach; and (4) damages. First

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Commercial Mortgage Co. v. Reece (2001) 89 Cal.Appo4th 731,745. STTN cannot establish the

first element to support the breach of contract claim concerning the CCL here. Under usual
principles of lender liability, conditional commitment letters are generally "not binding on the lender

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unless it contains all of the material terms of the loan, and either the lender's obligation is
unconditional or the stated conditions have been satisfied." Peterson Development Co., Inc. v.

Torrey Pines Bank (1991) 233 Cal.App.3d 103 (quoting 9 Miler & Starr, Cal. Real Estate (2d ed.
1989) § 2804, at p. 8 (footnote omitted)).

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In Peterson, the Court held that letters of commitment,

for which a fee is paid, constitute an option to the applicant to obtain the loan at the specified terms.

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Id., citing Lowe v. Massachusetts v. Mut. Life Ins. Co. (1976) 54 CaL.App.3d 718, 725-28). The

Peterson Court further explained that "(w)hen the commitment letter does not contain all of the
essential terms. . . the prospective borrower cannot rely reasonably on the commitment, and the

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lender is not liable for either a breach of the contract or promissory estoppel." In another case
directly on point, Laks v. Coast Fed. Sav. and Loan Ass 'n (1976) 60 CaL.App.3d 885, the Court, on
an action for breach of contract, held that a conditional commitment letter of which indicated the

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paries were still in negotiating stage as to important conditions, failed to make a clear and
unambiguous promise on construction loan to plaintiffs who could not have had legitimate
expectations that the letter was a binding offer and could not reasonably have relied on such letter.
Id. at 891-93.

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The CCL at issue here states that BPWCP is "pleased to consider the request of
(STTN) for a loan." (Reeder Decl., ~ 15 and Exh. I.) The CCL goes on to indicate that "(c)omplete
terms of the Loan will be set forth in BPWCP's form of documents and agreements to be signed by

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(STTN), which wil evidence and secure the Loan." (Id.) Clearly, BPWCP intended the CCL to set

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1

forth some of the essential terms of the proposed loans in order to determine whether to proceed
forward with the loan processing but the CCL was not a binding agreement. (Id. at ~ 6.)

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Furthermore, the STTN signatures state that they are for the "Acknowledgement of

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Receipt of Letter." (Reeder Decl., Exh. I.) Where a document signed by a plaintiff is merely an

acknowledgment receipt, it is not an enforceable contract. See Mitri v. Arnel Management Co.
(2007) 157 CaL.Appo4th 1164 (acknowledgment receipt form signed by plaintiffs did not constitute

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an agreement to arbitrate when the arbitration clause was in the handbook given out to the
employees). As such, the CCL is not an enforceable agreement and BPWCP cannot be liable for
breach of an unenforceable agreement.
2.

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The Store and Gasoline Loan Agreements Supersede the CCL

Even if the Court were to consider the CCL as an enforceable agreement, the CCL
was expressly superseded by the Store Loan Agreement and the Gasoline Loan Agreement signed by

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STTN, Sayed Faquiryan and Nazim Faquiryan. (See Reeder DecI, Exh. J at ~ 9.8, and Exh. K at ~
9.8; Sayed Depo., at 78:11-21 and 81:20-82:3 and Exh. F and Exh. H; Nazim Depo., at 14:4-8 and
15:15-18.)
Where a contract contains an express integration clause that states that the contract

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"embodies the entire agreement and understanding among the parties hereto and supersedes all prior

agreements and understandings relating to the subject matter thereof," courts have held that "(i)t is

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difficult to imagine how the parties could have more clearly expressed their intent to make the
written instrument a full and complete expression of their agreement." Banco Do Brasil, SA. v.
Latian, Inc. (1991) 234 Cal.App.3d 973. In addition, the law presumes a written contract supersedes

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all prior or contemporaneous oral agreements and, where the writing is integrated, the presumption
cannot be overcome. Wagner v. Glendale Adventist Med. Ctr. (1989) 216 CaL.App.3d 1379, 1385;
Casa Herrera, Inc. v. Beydoun (2004) 32 CaL.4th 336, 344; see also Civ. Proc. Code Section 1856

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(terms in writing intended by parties to be final expression cannot be contradicted by evidence of
any prior agreement); Masterson v. Sine (1968) 68 CaL.2d 222, 225; 250 L.L.C v. Photopoint Corp.
(2005) 131 CaL.Appo4th 703, 725. When there is a single and final memorial of

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the understanding of

the parties, prior and contemporaneous negotiations, oral or written, are excluded; or, as it is
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sometimes said, the written memorial supersedes these pnor or contemporaneous negotiations.
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Admiral Oil Co. v. Lynch (1961) 188 Cal.App.2d 269, 282; see also Youngblood v. Silvagni (1959)
173 Cal.App.2d 731, 743.
Here, the Store Loan Agreement and Gasoline Loan Agreement contain integration

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clauses that expressly merge and supersede all other prior oral and written agreements and limit the

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entire agreement of the parties with respect to the BPWCP-approved loans for the capital

improvements to the Loan Agreement and other "Loan Documents," which is expressly defined in
the Loan Agreements.6 (Reeder Decl., Exh. J at ~ 9.8, and Exh. K at ~ 9.8; Sayed Depo., at 78:11-21
and 81:20-82:3 and Exh. F and Exh. H; Nazim Depo., at 14:4-8 and 15:15-18.)

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As such, STTN cannot maintain a breach of contract counterclaim as to the CCL and
summary judgment in favor of BPWCP should be granted.
B.

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BPWCP Did Not Breach the Store Loan Agreement
STTN's Third Counterclaim for Breach of the Store Loan Agreement is based upon

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the contention that BPWCP delayed in funding the $150,000 in store loan proceeds.

It is undisputed that before the funding could take place, various conditions precedent

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set forth in the Store Loan Agreement had to be met. (Reeder Decl., Exh. J at ~ 2; Sayed Depo., at
78:11-21 and Exh. F; Nazim Depo., at 14:4-8.) The law is clear that, unless a condition precedent to

a party's obligation to perform its side of the contract is fulfilled, that pary is not obligated to
perform. Bennett v. Carlen (1963) 213 CaL.App.2d 307, 311. And, where a plaintiff fails to perform

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a condition to the contract, that plaintiff is without a cause of action for breach of contract against
the defendants. Hickman v. London Assur. Corp. (1920) 184 Cal. 524; see also Consolidate World

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Investments, Inc. v. Lido Preferred Ltd. (1992) 9 Cal.Appo4th 373; Sheldon Builders, Inc. v. Trojan
Towers (1967) 255 CaL.App.2d 781.

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Here, the Store Loan Agreement provides that: "(b)efore Lender (BPWCP) becomes
obligated to make any Disbursement under this Agreement, all conditions to such Disbursement set

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forth below shall have been satisfied at Borrower's sole cost and expense in a manner acceptable to
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Lender in the exercise of its reasonable judgment." (Reeder Decl., Exh. J at ~ 2; Sayed Depo., at
78:11-21 and Exh. F; Nazim Depo., at 14:4-8.) BPWCP could not disburse the $150,000 store loan

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amounts until (1) STTN provided all the necessary paper work, (2) STTN cleared its liens, (3)

corrected corporate documentation, and (4) submitted proper invoices, lien releases, and other
documentation from the contractors, etc. (McDonnell Decl., ~~ 5-7; Reeder Decl., Exh. J at ~~2.1(a),

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2.1(b), 2.1(c), 2.1(k) and 2.1(1).) Once STTN met all conditions, BPWCP funded the $150,000 store
loan. (McDonnell Decl., ~ 7; Sayed Depo., at 106:1-5.)

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Moreover, in terms of any delays that occurred, it is entirely appropriate that BPWCP

waited until STTN completed all of the conditions of the Store Loan Agreement before funding.
Indeed, such delays are contemplated and addressed in the Store Loan Agreement, at paragraph 2, as

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follows: "Borrower acknowledges that delays in Disbursement may result from the time

necessary for Lender to verify satisfactory fulfillment of any and all conditions to a given
Disbursement. Borrower consents to all such delays." (Emphasis added.) (Reeder Decl., Exh. J,
~ 2; Sayed Depo., at 78: 11-21 and Exh. F; Nazim Depo., at 14:4-8.)

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Given these undisputed facts, STTN's Counterclaim for Breach of the Store Loan
Agreement fails and BPWCP is entitled to summary judgment in its favor.

c.

BPWCP Did Not Breach the Gasoline Loan or the Disbursement Agreements
As discussed above, BPWCP cannot be liable for a breach of contract if STTN failed

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to perform a condition precedent. Here, BPWCP's contractual obligations to fund and disburse the

Gasoline Loan were not due until each of the conditions in the Gasoline Loan Agreement and the

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Disbursement Agreement had been completed. (Reeder Decl., Exh. K, ~ 2, and Exh. L, ~~ 2-3;
Sayed Depo., at 81:20-82:3 and 86:9-22 and 87:5-8 and Exhs. H, and I; Nazim Depo., at 15:15-18.)

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Paragraph 2.2(f) of the Gasoline Loan Agreement, states that "(i)n no event shall
Lender be required to make any Disbursement if. . . (u)nder any of

the Loan Documents, a default

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or Event of Default (as defined in that document) has occured and is continuing, or an event has
occurred that with notice or the passage of time could become