M&M Media Group v. ACE Outdoor Advertising CA2/4 ( 2013 )

Filed 10/8/13 M&M Media Group v. ACE Outdoor Advertising CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
M&M MEDIA GROUP, INC., B242772
Plaintiff, Cross-Defendant and (Los Angeles County
Respondent, Super. Ct. No. BC411585)
ACE OUTDOOR ADVERTISING, LLC,
Cross-Defendant, Cross-
Complainant and Respondent,
v.
REGENCY OUTDOOR ADVERTISING,
INC.,
Defendant, Cross-Complainant,
Cross-Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Rita Miller, Judge. Affirmed.
Manatt, Phelps & Phillips, Ronald Turovsky; Russ August & Kabat, Steven
M. Goldberg; Horvitz & Levy, H. Thomas Watson and David M. Axelrad for
Defendant, Cross-Complainant, Cross-Defendant and Appellant.
Greenberg Glusker Fields Claman & Machtinger, Lee A. Dresie and
Megan F. Rivetti for Respondents M&M Media Group, Inc. and Ace Outdoor
Advertising, LLC.
INTRODUCTION
Plaintiff M&M Media Group, Inc. (M&M) owns a building on Sunset
Boulevard in West Hollywood, California, that houses the famed music venue
“Whisky a Go Go” (the Whiskey). Atop the building is a billboard structure that,
as relevant here, M&M leased to defendant Regency Outdoor Advertising, Inc.
(Regency). When M&M terminated the lease, and entered a new lease with cross-
complainant Ace Outdoor Advertising, Inc. (Ace), Regency initially refused to
recognize the termination of its lease, and later asserted ownership of horizontal
beams affixing the billboard structure to the roof of the Whiskey. The dispute
resulted in M&M (as plaintiff) and Ace (as a cross-complainant) suing Regency for
various causes of action, and Regency cross-complaining against M&M and Ace.
In a court trial, M&M prevailed on its claims against Regency for breach of a lease
agreement and intentional interference with business advantage, and Ace prevailed
on its claims for interference with contract and prospective business advantage.
The trial court awarded compensatory damages of $676,000 to M&M and
$302,932.50 to Ace, and punitive damages to M&M and Ace in the same amounts.
Regency appeals from the judgment, contending that the trial court violated
the litigation privilege (Civ. Code § 47, subd. (b))1 by finding Regency liable based
on legal positions Regency asserted during the parties‟ dispute over ownership of
the billboard structure. We disagree. Regency‟s liability was based not on its
articulated legal positions, but on its non-communicative conduct of wrongfully
1
All subsequent undesignated references to code sections are to the Civil Code.
2
holding over after the termination of the lease. Further, substantial evidence
supports the trial court‟s finding that Regency held over. Finally, we find no error
in the court‟s damages calculations.
FACTUAL AND PROCEDURAL BACKGROUND
The Regency Lease
Since at least the 1960s, a billboard structure has been in place atop the
Whiskey. Eller Media Company, and then its successor Clear Channel, leased the
pre-existing billboard structure from M&M from February 1, 1997 to June 30,
2003. On September 25, 2000, M&M signed an agreement to lease to Regency the
rooftop of the Whiskey (the Regency Lease), “for the sole purpose of erecting and
maintaining one (1) outdoor advertising structure” (the Structure). The Regency
Lease provided that “Regency shall at all times remain the owner of the Structure
and all advertising signs, supporting structures, devices, illumination facilities,
connections and improvements erected or made by Regency, and . . . Regency shall
have the right to remove said signs, structures and improvements at the expiration
of this Agreement.” The Regency Lease was to commence after the expiration of
the Clear Channel lease in June 2003 and remain in force until at least December
31, 2008, and would continue for a successive term unless M&M or Regency
served written notice of termination 60 days prior to December 31, 2008.
In May 2003, Regency and Clear Channel entered into a letter agreement, to
which M&M consented, providing that Clear Channel would leave its sign
structures, lights, supports and facings in place on the rooftop, and those items
would become Regency‟s property.
3
On August 9, 2007, M&M sent a notice to Regency terminating the Regency
Lease effective December 31, 2008. On December 20, 2007, M&M entered into a
lease with Ace giving Ace the right to possession of M&M‟s rooftop for the
purpose of billboard advertising, beginning on January 1, 2009. On October 29,
2008, M&M sent another notice to Regency confirming its termination of the
Regency Lease, effective December 31, 2008.
The Parties’ Dispute and Regency’s Refusal to Vacate
Regency challenged M&M‟s notices of termination as inadequate under the
Regency Lease provisions because they were provided more than 60 days prior to
the end of the lease term, rather than exactly 60 days before. Thus, Regency took
the position that its right to operate the billboards would not cease on December
31, 2008. M&M responded by asserting that the notice was proper, and alerting
Regency to the fact that it had made other business arrangements for lease of the
billboards to commence January 1, 2009.
Regency subsequently asserted that it owned horizontal wood beams that
were embedded in the roof, and to which the billboard structure was attached, and
stated it would not remove any of its property from the Whiskey rooftop unless it
was also allowed to remove the beams. M&M would not give Regency permission
to remove the beams because doing so would damage the roof and possibly
compromise the structural integrity of the building, and because M&M did not
believe Regency had the right to remove the beams. Because Regency refused to
remove any of its property and threatened to sue if M&M removed it, Ace was
unable to install billboard advertising pursuant to its lease. In April 2009, M&M
contracted with Ace to dismantle and remove all parts of the billboard structure
that Regency claimed to own, except the horizontal beams, and Regency
subsequently picked up the parts after their removal from the roof.
4
Ensuing Lawsuits
M&M filed two successive unlawful detainer actions against Regency, but
after multiple demurrers and iterations of the complaints, ultimately dropped the
unlawful detainer cause of cause and added claims for breach of lease, trespass,
intentional interference with business advantage, and declaratory relief. Regency
filed a cross-complaint alleging causes of action for declaratory relief, breach of
contract, forcible entry and forcible detainer, trespass, conversion, unjust
enrichment, imposition of constructive trust, claim and delivery, violations of
Business and Professions Code section 17200, and specific performance. Ace filed
a cross-complaint against Regency alleging interference with contract and
prospective business advantage.
The Trial – Phase I
The bench trial was conducted in two phases. Phase I, starting on September
28, 2010 and ending October 8, 2010, determined issues of liability and
compensatory damages. Phase II, which was held on January 24, 2011, concerned
the amount of punitive damages.
During Phase I, considerable evidence was introduced concerning
communications between M&M and Regency and their respective counsel leading
up to and during the litigation proceedings between the parties. Regency did not
object during trial to the admission of such evidence,2 and stipulated to the
2
Regency‟s answer to M&M‟s complaint invoked the litigation privilege as an
affirmative defense to the claims for trespass and intentional interference with business
advantage, but not the claim for breach of lease, and Regency did not assert the litigation
privilege as an affirmative defense in its answer to Ace‟s cross-complaint.
5
admissibility of, and relied upon, numerous communications between the parties
relating to the prospective or actual litigation.
Evidence was thus admitted demonstrating Regency‟s consistent assertion
that it owned the entire billboard structure as well as the underlying horizontal
wood beams and would not remove any of its property from the Whiskey rooftop
unless it was also allowed to remove the beams, even though such action could
jeopardize the structural integrity of the building. The evidence of
communications included the following: (1) a December 29, 2008 letter from
Regency‟s counsel to M&M‟s counsel denying that Regency had stated that it
intended to vacate the premises on or before December 31, 2008, and indicating
that “Regency was considering the alternative of removing its property” but
“wanted [M&M‟s] unequivocal acknowledgement that Regency owned the
billboard structures located on the roof of the subject premises”; (2) Regency‟s
February 2009 pleading filed in the unlawful detainer action asserting that it owned
the entire billboard structure, including the supporting structures, and accusing
M&M of seeking to “convert” the billboards; (3) statements in another pleading
filed by Regency in April 2009 that “Regency owns the horizontal beams which
support the billboards, and plaintiffs cannot „acquire‟ them by interfering with
Regency‟s removal efforts and then suing in unlawful detainer to secure Regency‟s
property”; (4) an April 22, 2009 letter from Regency‟s counsel to M&M‟s counsel
asserting that M&M had illegally dismantled and removed Regency‟s billboards,
and that Regency had a remedy against M&M in tort for M&M‟s allegedly illegal
self-help; (5) an April 27, 2009 letter from Regency‟s counsel to M&M‟s counsel
asserting that M&M had converted Regency‟s property by prohibiting Regency
from removing the horizontal beams and by illegally removing the signs; (6) a May
1, 2009 letter from Regency‟s counsel to M&M‟s counsel asserting that Regency
owned the entirety of the sign structures and the horizontal beams and accusing
6
M&M of seeking “to convert and control Regency‟s beams”; and (7) testimony by
Regency‟s Chief Executive Officer Brian Kennedy that he insisted on removing
the horizontal beams from the roof and would not remove anything else unless he
was permitted to do so.
In addition, Kennedy‟s testimony left little doubt that the insistence on
removing the beams was intended to interfere with the lease between M&M and
Ace. Kennedy testified that he knew that Regency had neither erected nor made
the horizontal beams (the lease gave Regency the right to remove only items
“erected or made by Regency”). He knew that removal of the beams – which he
estimated would cost $50,000 or more -- would cost more than the beams were
worth. Further, Regency had no plans to use the beams after their removal.
According to Kennedy, M&M offered to supply Regency with brand-new
horizontal beams in lieu of the ones on the rooftop, but Kennedy refused the offer
because he had no use for the beams. Ultimately, after the sign structure (except
for the horizontal beams) was removed and returned to Regency, Regency sold the
pieces for scrap.
Kennedy insisted on removing the horizontal beams in part because they
were a key part of the structure, without which “you cannot have that sign.” Also,
it was Regency‟s standard practice to remove every piece of the supporting
structure when it lost a lease because of “liability issues” and “so you don‟t have to
revisit the situation.”
Ace‟s general manager, Andrew Bilanzich, testified that he approached
Kennedy and asked if there was a sum that would resolve the dispute and give Ace
access to the billboard structure. According to Bilanzich, Kennedy replied, “There
is no amount of money and I‟m going to make your life miserable.”
7
Tentative Statement of Decision After Phase I
After Phase I of the trial, on October 26, 2010, the court issued a tentative
decision concluding that Regency did not have the right to remove the horizontal
beams at the base of the billboard structure, and finding that Regency‟s insistence
on removing those beams constituted a breach of the lease. The decision also
found that Regency did not want to relinquish the rooftop to a new billboard
advertising competitor, Ace, and that Regency and its counsel took “numerous
untenable positions designed to delay Ace‟s takeover of the rooftop as long as
possible and to make it as difficult and expensive as possible for M&M and Ace.”
The court found that M&M had proved its claim for interference with business
advantage, and that Ace had proved its claims for interference with contract and
prospective business advantage.
On November 15, 2010, Regency requested a statement of decision. M&M
drafted a proposed statement, to which Regency objected primarily on the ground
that it violated the litigation privilege (§ 47, subd. (b)) by imposing tort liability
based on Regency‟s assertion of defenses, contentions, and litigation positions,
related to or in anticipation of litigation. In particular, Regency objected that its
litigation position concerning its rights to the horizontal beams was used as a basis
to impose liability.
The court invited M&M to submit a revised proposed statement of decision.
M&M‟s January 14, 2011 revision stated that Regency‟s liability was premised not
on its litigation conduct, but rather on its conduct amounting to a failure to
surrender possession and a “wrongful holdover.” Regency objected to the revised
proposed statement, arguing that M&M‟s complaint had not alleged a holdover and
that Regency‟s liability continued to be predicated on its litigation positions.
8
Phase II
Prior to the start of Phase II of the trial on January 24, 2011, Regency filed a
motion in limine under section 47, subdivision (b) to exclude evidence or
arguments regarding positions taken by Regency in anticipation of or during
litigation, for purposes of assessing the punitive damages award. The only new
evidence sought to be admitted during Phase II were records demonstrating
Regency‟s financial condition. However, during the hearing, M&M‟s counsel
sought to rely on evidence demonstrating Kennedy‟s bad faith adduced during
Phase I. The court generally suggested that evidence of Regency‟s statements
during the litigation, as opposed to conduct, was not admissible to prove punitive
damages, but postponed its ruling on the issue of punitive damages and the
applicability of the litigation privilege as to Phase I. The court requested briefing
concerning the applicability of the litigation privilege.
Post-Trial Submissions and Rulings
The parties submitted briefing regarding the applicability of the litigation
privilege, and at a hearing on the issue on May 5, 2011, the trial court requested
additional briefing on the question whether the litigation privilege can be waived,
which the parties provided.
The trial court issued a second tentative decision on June 15, 2011,
concluding that Regency had held over on its lease, with the intent of making it
impossible for M&M to give Ace possession. The court found that the holdover
constituted a breach of the lease as well as an intentional interference with the
business relationship between M&M and Ace. The court further held that it did
not need to reach the issue whether Regency had waived the protections of section
47, subdivision (b), because Regency‟s liability was based on its conduct in
holding over, not on its litigation communications. Regency filed objections to the
9
second tentative decision, objecting that its liability was still premised on its
litigation conduct, and that the holdover theory was not pled in M&M‟s complaint.
M&M then submitted a proposed final statement of decision on July 14, 2011, and
Regency again asserted the same objections.
On August 18, 2011, over Regency‟s objection, the court granted M&M‟s
motion to amend the complaint to conform to proof at trial to include a cause of
action for wrongful holdover, finding that the cause of action was already inherent
in the complaint and that the substance of the claim had been litigated at trial.
Thus, the complaint was amended to add the following allegation: “Regency failed
to tender or surrender possession of the leased premises on December 31, 2008
when the written lease period terminated. This was a breach of the written lease
and a holdover. In addition, it was an action taken for the purpose of intentionally
interfering with [the] advantageous business relationships between M&M and Ace
and potential lessees of the billboard space. In addition, M&M seeks a declaration
that Regency held over by failing to tender or surrender possession of the leased
premises on December 31, 2008 when the written lease period terminated.
Regency‟s holdover and failure to tender and surrender possession of the leased
premises caused plaintiffs to incur damages.”3
Final Statement of Decision
In its final statement of decision, filed on August 23, 2011, the court
summarized its interpretation of the Regency Lease, concluding that the agreement
did not give Regency the right to remove the horizontal beams from the rooftop,
but gave it the right (not the duty) at the termination of the lease to remove the
3
On appeal, Regency does not challenge the court‟s decision to permit this
amendment.
10
parts that it had “erected or made.” These parts included the following small, non-
structural items: (1) plaques or nameplates on the front of the billboards bearing
the legend “Regency” that alerted potential advertisers to call Regency if they
wanted to advertise there; (2) wood slats or panels in the facings to which the
advertising was attached; (3) “possibly” some light fixtures; and (4) the actual
advertisements affixed to the facings.
The court ruled that Regency‟s failure to remove this property did not give
rise to liability for trespass, given the lack of any duty to remove it, but found that
Regency had engaged in affirmative conduct amounting to a wrongful holdover of
the rooftop. The court relied on Regency‟s failure to do or say anything to tender
possession of the leased premises to M&M after the termination of the lease, and
the fact that it left its property on M&M‟s rooftop with the intent to convey the
message to M&M and Ace that it was not going to vacate possession and intended
to prevent Ace from taking timely possession under its new lease. The court relied
on evidence that, after receiving the termination notices from M&M, Regency
signed a contract with a client for Whiskey billboard advertisements to extend two
weeks past the lease termination date. Further, Regency failed to apply for
municipal removal permits prior to the lease termination date. The court further
found that the holdover constituted both a breach of the Regency Lease and an
interference with M&M‟s relationship with Ace and Ace‟s relationships with
potential and actual advertisers, because Regency‟s holdover made it impossible
for M&M to give Ace possession of the rooftop that Ace had leased. The court
stated that Regency‟s liability was not based on Regency‟s communications
associated with the litigation, but rather on Regency‟s conduct amounting to a
holdover. Because the litigation privilege therefore did not apply, the court “need
not reach the issue of waiver” of the privilege. However, the court held, “[e]ven if
the litigation privilege were otherwise applicable, Regency waived . . . the
11
privilege” with respect to Phase I of the trial. The court also found that Regency
was estopped from raising the privilege because it had itself injected the privileged
communications into Phase I of the trial.
In addition, the court ruled that the evidence demonstrated that Regency held
over to prevent Ace, a new competitor, from entering the billboard market, and that
Regency had a malicious and oppressive intent towards M&M and Ace. The court
concluded that, “[d]isregarding all of the communications by Regency personnel
that are outlined in this Statement of Decision, there was sufficiently abundant
clear and convincing evidence to support an award of punitive damages based on
Regency‟s conduct alone. If the communications were admissible by reason of a
waiver of the litigation privilege or for some other reason, the content of the
communications certainly would have reinforced the findings of malice,
oppression and intent to cause harm to M&M and Ace and to interfere with the
relationships between M&M and Ace as well as Ace and potential billboard
advertisers. [¶] However, in an abundance of caution, the court has disregarded all
potentially privileged communications in reaching its decision. . . . It has limited
itself to Regency‟s non-communicative conduct and the circumstances that
surrounded it.”
The court awarded M&M a total of $676,000 in compensatory damages:
$420,000 for lost income during the first six months of 2009, and $256,000 for
expenses in removing and replacing the billboard structures that Regency refused
to remove but continued to claim as its property. Punitive damages of $676,000
were also imposed. The court awarded Ace $302,932.50 in compensatory
damages based on a lost profits analysis, and the same amount in punitive
damages.
This timely appeal followed.
12
DISCUSSION
I. Wrongful Holdover Theory Based on Regency’s Property Left on Rooftop
Regency challenges the trial court‟s determination that it wrongfully held
over by leaving its nameplates, wood panels, light fixtures, and billboard
advertisements in place for almost four months after the expiration of its lease of
the Whiskey‟s rooftop.4 According to Regency, it did not wrongfully hold over, as
a matter of law, because it did not remain in possession of the rooftop after
expiration of the lease, and M&M was in exclusive control and possession of the
premises when the lease ended. However, a tenant‟s failure to remove equipment
or other property from the leased premises at the end of the lease “may constitute a
holding over which deprives the landlord of his right to possession. [Citation.]”
(Cohen v. Superior Court (1967) 248 Cal.App.2d 551, 554 [whether tenants‟
failure to remove a boiler, dryer, large counter, shelves and racks, and vapor return
tank effectively deprived petitioner of possession of the premises was issue
remaining to be resolved at trial].) Here, there is no dispute that Regency left
property on the rooftop that it claimed to own. Thus, the question is whether such
conduct constituted a holdover in violation of the lease.
The parties disagree as to whether the determination that a holdover
occurred by virtue of Regency‟s failure to remove its property is a question of fact
4
The parties correctly note that the trial court‟s determination that Regency was a
holdover tenant was inconsistent with its determination that Regency did not trespass. A
holdover tenant is deemed a trespasser. (Fragomeno v. Insurance Co. of the West (1989)
207 Cal.App.3d 822, 829 (Fragomeno) [failure by lessee to vacate the premises without
consent renders lessee a trespasser], disapproved of on other grounds by Vandenberg v.
Superior Court (1999) 21 Cal.4th 815, 841, fn. 13; 7 Miller & Starr, Cal. Real Estate (3d
ed. 2011) § 19:46, p. 126 [“A tenant for a fixed term who remains in possession after the
expiration of the original term without the consent of the landlord is a trespasser.”].)
However, M&M did not file a cross-appeal and does not challenge the dismissal of the
trespass claim.
13
or law. M&M cites California decisions holding that the determination whether a
tenant has abandoned or surrendered a rental property is a question of fact, to
which evidence of the tenant‟s intent is highly relevant. (See Wiese v. Steinauer
(1962) 201 Cal.App.2d 651, 656 [“„“Abandonment is a question of intention, to be
determined only upon an investigation of all the facts and circumstances, and the
trier of fact is ordinarily the exclusive judge of the existence of the elements
thereof, including the cardinal element of intention.”‟”]; Chacon v. Litke (2010)
181 Cal.App.4th 1234, 1252 (Chacon) [“„Whether in any given case there has been
a surrender of leased premises by a lessee and an unqualified acceptance of
possession by the lessor are primarily questions of fact to be determined by the trial
court from the whole transaction. [Citations.]‟ [Citations.].”)
Regency counters that the terms “abandonment” and “surrender,” as used in
the cases relied upon by M&M, concern the relinquishment of a leasehold prior to
the end date of the lease, rather than holding over beyond the expiration of the
lease. We agree,5 but the principles of analysis – examining all the circumstances,
including the tenant‟s intent – are equally applicable to whether the tenant‟s
conduct after the expiration of a lease constitutes a holdover in violation of the
lease. Indeed, although we have not found any California authority directly on
point, other jurisdictions have held that whether a tenant‟s failure to remove
property or fixtures constitutes a holdover is a question of fact judged by the
surrounding circumstances. (See Niagara Frontier Transp. Authority v. Euro-
5
(See Millikan v. American Spectrum Real Estate Services Cal., Inc. (2004) 117
Cal.App.4th 1094, 1100 [“„[I]f a lessee of real property breaches the lease and abandons
the property before the end of the term . . . , the lease terminates.‟”]; § 1951.3, subd. (b)
[rent must have been due and unpaid for 14 consecutive days in order for a landlord to
send a notice of abandonment]; Chacon, supra, 181 Cal.App.4th at p. 1252 [“„Generally,
a surrender of [leased] premises occurs only through the consent or agreement of the
parties‟” to terminate the lease].)
14
United Corp. (N.Y. 2003) 757 N.Y.S.2d 174, 177 [303 A.D.2d 920, 922], amended
on other grounds on reargument, 763 N.Y.S.2d 786 [306 A.D.2d 952] (Niagara)
[Whether the leaving by the tenant of property on the leased premises after
expiration of the lease constitutes a holding over “„is usually a question of fact, to
be determined by taking into consideration the nature of the property leased, the
amount paid as rent, the value of the real property, the value of the personal
property left on the leased premises, the intent with which it was left, and all other
facts and circumstances surrounding the transaction.‟ [Citations.]”]; Nehi Bottling
Co., Inc. v. All-American Bottling Corp. (4th Cir. 1993) 8 F.3d 157, 163 [whether
tenant‟s leaving equipment in building rose to the level of a “holdover” was an
issue of fact, not law]; Lordae Realty Corp. v. Montefiore Med. Ctr. (N.Y. 1996)
648 N.Y.S.2d 598 [232 A.D.2d 338]; Canfield v. Harris & Co. (1927) 225 N.Y.S.
709 [222 A.D. 326, 329]; Analogic Corp. v. Rich (Mass. 2012) 2012 WL 192192;
Beck v. Troiano (D.C. 1958) 138 A.2d 492, 493 [whether failure to remove fixtures
constituted a holding over by the tenant was a question of fact]; see also 68
Am.Jur.3d Proof of Facts 1, Landlord‟s Recovery of Damages for Tenant‟s
Wrongful Holding Over of Leased Premises [“Whether a tenant‟s act of leaving
property on the premises after expiration of the lease amounts to a holdover
tenancy is a question of fact to be decided in light of the surrounding
circumstances, including . . . the intent with which it was left.”].)
Because the question whether Regency held over is a question of fact, we
review the trial court‟s finding for substantial evidence. (M&F Fishing, Inc. v.
Sea–Pac Ins. Managers, Inc. (2012) 202 Cal.App.4th 1509, 1519, fn. 12 [Where
there is a statement of decision containing factual findings and conclusions of law,
“we review the trial court‟s conclusions of law independently and its findings of
fact for substantial evidence.”].) “The testimony of a single witness may be
sufficient to constitute substantial evidence.” (Lui v. City and County of San
15
Francisco (2012) 211 Cal.App.4th 962, 969.) “The ultimate determination is
whether a reasonable trier of fact could have found for the respondent based on the
whole record.” (Kuhn v. Department of General Services (1994) 22 Cal.App.4th
1627, 1633 (Kuhn).) As we explain, substantial evidence supports the trial court‟s
decision that Regency held over.
Regency first argues that its failure to remove its property from the billboard
structure did not interfere with M&M and Ace‟s lease. The reason: M&M could
have restored its exclusive possession of the rooftop by dismantling Regency‟s
property and storing it for Regency pursuant to sections 1993 et seq. The argument
is disingenuous. Sections 1993 et seq. create an “optional procedure for the
disposition of property that remains on the premises after a tenancy of commercial
real property has terminated and the premises have been vacated by the tenant.”
(§ 1993.02, subd. (a), italics added.) The landlord is not required to use that
procedure. The reason M&M did not pursue that option in the present case is
obvious: Regency threatened to sue M&M if it removed any of Regency‟s
property from the rooftop, and when M&M finally removed it almost four months
after the expiration of the lease and made it available to Regency, Regency took
the position that M&M had violated the law. Having demanded that M&M leave
the property in place, Regency is hardly in a position to complain that M&M
should have removed and stored the property. In any event, M&M‟s decision not
to use the optional procedure of section 1993, et seq., does not immunize Regency
from liability for its holdover and interference with M&M‟s lease with Ace.
Next, Regency argues that because the Regency Lease gave it the right, but
not the duty, to remove its property at the end of the lease, the mere failure to
remove the parts or to apply for a removal permit prior to the expiration of the
lease does not amount to a holdover. Regency also notes that it was entitled to a
reasonable time after termination of the lease to remove its property. (See Clark v.
16
Talmadge (1937) 23 Cal.App.2d 703, 707 [“[A] tenant who has an express
agreement permitting him to remove fixtures has a larger right as to the time within
which they must be removed than is the case where no such agreement exists, and
. . . may remove them within a reasonable time after the expiration of his term.”];
United Pacific Ins. Co. v. Cann (1954) 129 Cal.App.2d 272, 275 [Where the lease
gives a tenant the right to remove fixtures or property at the end of his lease term,
the tenant must exercise this right “within a reasonable time thereafter.”].)
True enough, but this does not mean that Regency‟s course of conduct in
leaving its property on the rooftop did not constitute a holdover, when done not
with the intent to relinquish the property to M&M or remove it within a reasonable
time and allow M&M to lease the structure to a new tenant, but rather with the
intent to continue to occupy the premises and with the effect of interfering with
M&M‟s right of possession and Ace‟s ability to begin installing billboards. (See
Niagara, supra, 757 N.Y.S.2d at p. 177 [303 A.D.2d at p. 922] [intent with which
property is left on the leased premises after the expiration of the lease, as well as
all the surrounding facts and circumstances, is relevant to determine whether a
holdover occurred].) As we now discuss, considerable evidence was introduced at
trial demonstrating Regency‟s intent to continue occupying the rooftop in order to
interfere with M&M and Ace‟s new leasing arrangement.
A. Evidence of Regency’s Intent to Hold Over
In finding a holdover, the trial court relied on evidence that, after Regency
had received notice that its lease would be terminated effective December 31,
2008, Regency signed an advertising contract with a customer for advertising on
the Whiskey billboard through January 14, 2009. Based on this affirmative
conduct, the court reasonably inferred that Regency planned to leave its property in
place, thereby retaining control over the use of the premises, and to interfere with
17
M&M‟s right of possession and Ace‟s ability to begin installing billboards.6 This
evidence in itself constitutes substantial evidence of Regency‟s intent to hold over.
Moreover, other undisputed evidence introduced at trial, largely consisting
of communications between M&M and Regency before and after litigation began,
demonstrates Regency‟s intent to hold over.7 As the trial court noted in finding
that Regency acted with malice, M&M invited Regency to remove from the roof
what it had erected or made, and subsequently invited it to remove everything
except the horizontal beams, but Regency consistently refused to remove any of its
property unless M&M also agreed to let it remove the beams. However, Regency
had no legitimate reason for wanting to remove the beams, because they were
merely large, weathered lengths of wood with no real value or use once they were
removed. Indeed, it would have been more costly for Regency to detach and
remove the beams from the roof than to replace them.8 Although Kennedy testified
6
On appeal, Regency points to trial testimony by Kennedy that Regency intended to
remove the billboard advertisement under that contract by December 31, 2008, and that
Regency ultimately collected no revenue under that contract. Of course, on appeal, we
must infer that the trial court did not credit that testimony or did not find that it
outweighed the inference of Regency‟s intent to hold over by signing a contract
committing to display a customer‟s billboard advertisement for two weeks after the
termination of the Regency Lease. (Citizens Business Bank v. Gevorgian (2013) 218
Cal.App.4th 602, 613 [“On review of a judgment based upon a statement of decision
following a bench trial, we resolve any conflict in the evidence and reasonable inferences
to be drawn from the facts in support of the determination of the trial court.”].)
7
We recognize that the statement of decision is ambiguous as to the extent to which
the trial court considered these communications as evidence of such an intent.
Nonetheless, because we review the entire record for substantial evidence (Kuhn, supra,
22 Cal.App.4th at p. 1633), regardless of whether the trial court relied on these
communications, we may rely on them to the extent we are not barred from doing so by
the litigation privilege (§ 47, subd. (b)), discussed further below.
8
Although not relied upon by the trial court, the record also includes an admission
by Kennedy that M&M offered to supply Regency with brand-new horizontal beams in
18
that he wanted to remove the beams to obviate unspecified “liability” issues, the
court specifically found that testimony not credible. Further, when one of the Ace
principals approached Kennedy and asked if there was a sum that would resolve
the dispute and give Ace access to the billboard structure, Kennedy replied, “There
is no amount of money and I‟m going to make your life miserable.” This evidence,
besides supporting the trial court‟s finding that Regency acted with malice and
oppression, also demonstrated that Regency‟s intent in not removing its property
was to hold over and prevent Ace from erecting advertising there.
B. Inapplicability of the Litigation Privilege
Regency argues that the trial court could not lawfully rely on any of the
above communications or testimony, because to do so amounts to basing
Regency‟s liability on its assertion of legal positions prior to and during the
litigation with M&M and Ace, in violation of the litigation privilege (§ 47, subd.
(b)). We disagree. The trial court properly found Regency liable based on its
course of conduct in leaving its property in place with the intent not to relinquish
it, but with the intent to interfere with M&M and Ace‟s contractual arrangements.
As we discuss below, the litigation privilege does not bar consideration of
communications by Regency evidencing its intent to hold over for this purpose,
regardless whether the communications were related to litigation between the
parties.
“The interpretation of section 47, subdivision (b) is a pure question of law
which we review independently. [Citations.]” (Rothman v. Jackson (1996) 49
Cal.App.4th 1134, 1139-1140.) “The litigation privilege is broadly applied
lieu of the ones on the rooftop, but Kennedy refused the offer because he had no use for
the beams.
19
[citation] and doubts are resolved in favor of the privilege [citation].”
(Ramalingam v. Thompson (2007) 151 Cal.App.4th 491, 500.)
The litigation privilege “reflect[s] a legislative determination that „witnesses
should be free from the fear of protracted and costly lawsuits which otherwise
might cause them either to distort their testimony or refuse to testify altogether.
[Citations.]‟ [Citation.]” (Moore v. Conliffe (1994) 7 Cal.4th 634, 642.) “A four-
part test determines whether a statement is within the litigation privilege. „To be
privileged a statement must (1) be made in a judicial proceeding, (2) by litigants or
other authorized participants, (3) aim to achieve the litigation‟s objects, and
(4) have some logical connection or relation to the proceeding. [Citation.]‟
[Citation.]” (Silk v. Feldman (2012) 208 Cal.App.4th 547, 555.) “The privilege
extends to „any publication . . . that is required [citation] or permitted [citation] by
law in the course of a judicial proceeding to achieve the objects of the litigation,
even though the publication is made outside the courtroom and no function of the
court or its officers is invoked.‟ [Citation.]” (A.F. Brown Electrical Contractor,
Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1126-1127.)
“[T]he protective mantle of the privilege embraces not only the courtroom
testimony of witnesses, but also protects prior preparatory activity leading to the
witnesses‟ testimony.” (Gootee v. Lightner (1990) 224 Cal.App.3d 587, 594.)
In determining whether the litigation privilege bars liability, a key issue is
“whether the alleged injury arises from a communicative act or noncommunicative
conduct.” (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th
1232, 1248.) Our Supreme Court has “drawn „a careful distinction between a
cause of action based squarely on a privileged communication, such as an action
for defamation, and one based upon an underlying course of conduct evidenced by
the communication.‟ [Citation.] „As a general rule, the privilege “„applies only to
communicative acts and does not privilege tortious courses of conduct.‟”‟
20
[Citations.]” (Id. at pp. 1248-1249; see also Rusheen v. Cohen (2006) 37 Cal.4th
1048, 1058 (Rusheen) [“[T]he key in determining whether the privilege applies is
whether the injury allegedly resulted from an act that was communicative in its
essential nature”]; White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 888
[holding that “even if liability cannot be founded upon a judicial communication, it
can be proved by such a communication,” and thus concluding that admission of a
low settlement offer at trial was permissible under § 47, subd. (b), to prove breach
of covenant of good faith and fair dealing and bad faith by insurance company],
superseded by statute on another ground as stated in Lee v. Fidelity National Title
Ins. Co. (2010) 188 Cal.App.4th 583, 596; Shade Foods, Inc. v. Innovative
Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 914-915 [statements
made during a judicial proceeding may be used to prove the existence of bad faith
in an action against an insurer].)
In this case, the basis for Regency‟s liability was its “independent, non-
communicative” conduct in leaving its property in place on the roof, with the intent
to interfere with M&M‟s and Ace‟s ability to implement their lease agreement.
(Rusheen, supra, 37 Cal.4th at p. 1065; see Chacon, supra, 181 Cal.App.4th at p.
1257 [holding that the litigation privilege did not apply to landlord‟s conduct in
refusing to allow tenants to reoccupy the apartment after their temporary eviction
and an unlawful detainer action]; cf. Rubin v. Green (1993) 4 Cal.4th 1187, 1196
[where plaintiff‟s claims were founded upon alleged misrepresentations made by a
law firm in the course of discussions with potential clients over the possibility of
being retained to prosecute a lawsuit as well as upon the filing of pleadings in the
subsequent lawsuit, acts “were communicative in their essential nature and
therefore within the privilege of section 47(b).”].) Section 47 does not bar
consideration of litigation-related communications to prove that Regency‟s intent
in leaving its property on the Whiskey was to hold over for the purpose of
21
interfering with Ace‟s ability to conduct its advertising business. “„The privileges
of Civil Code section 47, unlike evidentiary privileges which function by exclusion
of evidence [citation], operate as limitations upon liability.‟ . . . [I]t is quite clear
that section 47(2) has never been thought to bar the evidentiary use of every
„statement or publication‟ made in the course of a judicial proceeding. . . .‟ Thus,
while section 47(2) bars certain tort causes of action which are predicated on a
judicial statement or publication itself, the section does not create an evidentiary
privilege for such statements. Accordingly, when allegations of misconduct
properly put an individual‟s intent at issue in a civil action, statements made during
the course of a judicial proceeding may be used for evidentiary purposes in
determining whether the individual acted with the requisite intent.” (Oren Royal
Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc. (1986) 42 Cal.3d
1157, 1168.)
In sum, Regency‟s liability was based on its non-communicative conduct of
failing to remove its property with the intent of interfering with the lease between
M&M and Ace, thus constituting a holdover in violation of the lease.9 Substantial
9
Regency argues that the trial court‟s final statement of decision finding Regency
liable as holdover tenant merely masked the court‟s actual, improper findings, stated in
the court‟s first tentative decision, which based liability on Regency‟s litigation positions.
The contention is meritless. A “tentative decision does not constitute a judgment and is
not binding on the court.” (Cal. Rules of Court, rule 3.1590(b).) “[W]here a matter is
tried to the court . . . , the trial judge has broad discretion to reopen the matter prior to
final judgment, even over the objection of the litigants.” (Coit Drapery Cleaners, Inc. v.
Sequoia Ins. Co. (1993) 14 Cal.App.4th 1595, 1611.) Here, the trial court‟s reasoning
evolved after Regency objected to the first tentative decision on the grounds that the
litigation privilege applied (Regency having failed to object on such grounds during
Phase I of the trial). Regency has shown no abuse of discretion in the trial court‟s
procedure leading to the final statement of decision, and there is nothing to suggest that
the court‟s findings in that decision were dishonest. To the contrary, as we have
explained, the court‟s findings are supported by the evidence and do not run afoul of the
litigation privilege.
22
evidence supports that determination, and the litigation privilege does not provide
Regency with immunity.10
II. Intentional Interference
Regency asserts that M&M‟s and Ace‟s claims for interference with contract
and business advantage fail because they are based on Regency‟s assertion of
“ownership rights to the billboards,” which, Regency contends, did not constitute a
tort. (See Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47
Cal.App.4th 464, 479 [“A contracting party‟s . . . breach of contract . . . cannot be
transmuted into tort liability by claiming that the breach detrimentally affected the
promisee‟s business.”].)
However, the trial court found that Regency had engaged in conduct
amounting to a wrongful holdover, which constitutes a tort. (See Drybread v.
Chipain Chiropractic Corp. (2007) 151 Cal.App.4th 1063, 1075 (Drybread) [“„If
the right to recovery is based upon a civil wrong such as possession of property by
a . . . holdover tenant as a resulting trespasser . . . then the right to recover
possession of the property by way of the summary and statutory procedure of
unlawful detainer has its inception in tortious conduct.‟” (Italics added.)];
10
Because we conclude that Regency‟s liability was not based on privileged
communications, we need not address Regency‟s argument that the litigation privilege
applies to breach of contract claims as well as tort claims. (See Navellier v. Sletten
(2003) 106 Cal.App.4th 763, 773 [litigation privilege “is generally described as one that
precludes liability in tort, not liability for breach of contract”].)
In addition, our conclusion that the litigation privilege is inapplicable here
obviates any need to address whether Regency forfeited the right to invoke the litigation
privilege by failing to object during Phase I of the trial, or was estopped from asserting
the privilege because it injected the same communications into evidence at trial to
support its own claims.
23
Fragomeno, supra, 207 Cal.App.3d at pp. 830-831.)11 A wrongful holdover thus
may constitute a basis for a tortious interference claim. (See Ramona Manor
Convalescent Hospital v. Care Enterprises (1986) 177 Cal.App.3d 1120, 1133
[“[A tenant‟s] decision to hold over beyond the termination of the lease under
which it had possession was made with the knowledge that such action would
frustrate the legitimate contractual expectations of a specific, albeit unnamed, new
lessee. That is all it was required to know to incur liability [for tortious
interference].”].) As we have explained, the trial court‟s finding that Regency held
over is supported by substantial evidence, and thus Regency was properly held
liable in tort.
III. Damages
Regency contends that the trial court made errors in calculating both
M&M‟s and Ace‟s compensatory damage awards. The amount of damages to be
awarded is a fact question, and an award of damages will not be disturbed if it is
supported by substantial evidence. (Rony v. Costa (2012) 210 Cal.App.4th 746,
753.)
First, Regency complains that the trial court erred in awarding M&M
$240,000 to compensate it for the amount it paid Ace to dismantle and remove the
existing billboard structure and build a new one. The court found as follows: “In
its reasonable, good faith efforts to mitigate its damages and to avert possible
11
In the earlier appeal involving M&M‟s first unlawful detainer action against
Regency based on the same set of facts as here, we held in an unpublished decision that
“M&M‟s unlawful detainer action sounds in tort because it seeks relief for Regency‟s
tortious holding over after expiration of the lease. (See Drybread, supra, 151
Cal.App.4th at p. 1076.)” (M&M Media Group, Inc. v. Regency Outdoor Advertising,
Inc. (2010) 2010 WL 3064379.) The logic of that holding stands, despite the fact that
M&M converted its unlawful detainer claim into a cause of action for wrongful holdover.
24
liability to Regency for trespass, forcible detainer, conversion and other causes of
action, M&M had to bear the cost of removing and rebuilding the billboard
structures that Regency was claiming to own. This was financed through a rent
reduction to Ace of $20,000 per month for 12 months ($240,000). In exchange
Ace agreed to perform and pay for the removal and reconstruction of the
structures.”
Regency argues that the $240,000 M&M paid Ace was not a reasonable
mitigation cost because it was unnecessary to remove the entire structure. It argues
that instead M&M should have removed only the small non-structural parts that
Regency had erected or made and thus had the legal right to remove, and then
permitted Ace to use the existing structure. However, at that time (spring of 2009),
Regency claimed ownership of the entire structure (as well as the horizontal
beams) and had threatened M&M with a claim for conversion if M&M let Ace use
the existing structure. Regency acknowledges that M&M‟s decision to dismantle
the whole billboard structure and make it available for Regency to pick up was a
reaction to Regency‟s litigation position. Regency contends that the litigation
privilege protects it from liability for damages “caused by M&M‟s response to
Regency‟s assertion of its legal positions.” However, Regency provides no
authority for its assertion that the litigation privilege would extend so far as to
protect Regency from all secondary effects of its litigation positions, including
mitigation efforts by M&M in response to litigation threats by Regency. The trial
court did not err in awarding compensatory damages in the amount of $240,000 for
the removal and rebuilding costs.
Second, Regency contends that the trial court failed to properly offset Ace‟s
damages award with the amount Ace received in the form of a rent reduction from
M&M. No such offset was warranted. As noted above, M&M reduced Ace‟s rent
by $20,000 a month for the 12-month period from July 2009 through June 2010, as
25
an agreed-upon means to compensate Ace for its costs to remove the existing
billboard structure and construct a new one. Regency misreads the court‟s decision
and states that the trial court “accounted” for the rent reduction Ace received
during the first six months of the lease, July 1, 2009 through December 31, 2009,
but failed to account for the benefit Ace received from the continued rent reduction
from January 1, 2010 through June 30, 2010. However, the court did not apply an
offset for the rent reduction Ace received for the period from July 1, 2009 through
December 31, 2009. Rather, the court subtracted from the damages award the rent
that Ace would have paid Regency from January through June 2009 (totaling
$420,000), had Regency not held over. Regency was not entitled to any offset for
the $20,000 a month rent reduction Ace received as fair compensation for its work
tearing down the billboard structure and building of a new one.
DISPOSITION
The judgment is affirmed. Regency to bear costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
WILLHITE, Acting P. J.
We concur:
MANELLA, J. SUZUKAWA, J.
26