Raven Aeronautical Holdings v. Royal Jet CA4/1 ( 2013 )

Filed 10/25/13 Raven Aeronautical Holdings v. Royal Jet CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
RAVEN AERONAUTICAL HOLDINGS, D061177
LLC,
Plaintiff and Respondent,
(San Diego Super. Ct. Nos.
v. 37-2009-00103575-CU-BC-CTL,
37-2011-0035164-CU-UD-EC,
ROYAL JET, INC., 37-2011-00066191-CU-UD-EC,
37-2011-00089522-CU-BC-CTL)
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of San Diego County, John S.
Meyer, Judge. Affirmed.
Boudreau Williams, Jon R. Williams for Defendant and Appellant.
Buchalter Nemer, Robert M. Dato; Godes & Preis, Joseph M. Preis and Oliver B.
Dreger for Plaintiff and Respondent.
The principal issue in this unlawful detainer action is one of contract
interpretation. Royal Jet, Inc. (Royal) appeals a judgment in favor of Raven Aeronautical
Holdings, LLC (Raven) entered after the trial court determined Raven's predecessor's
voluntary surrender of a master lease with the County of San Diego (the County)
simultaneously terminated Royal's "Lease and Sublease" (sublease) with Raven's
predecessor. Paragraph 15 of the sublease provides that "[in] the event of the termination
of the Sublessor's interest as Lessee under the Master Lease for any reason, then this
Sublease shall terminate coincidentally therewith without any liability of Sublessor or
County to Sublessee." (Italics added.) Royal contends the court misinterpreted the
sublease by narrowly focusing on paragraph 15 and not considering other contract
provisions and extrinsic evidence showing the contracting parties intended to protect
Royal against the early termination of the master lease. Royal also contends Raven lacks
standing to pursue this action because the requisite landlord-tenant relationship is absent.
We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 1998 Royal entered into a 30-year master lease with the County for the use of
three parcels of undeveloped property adjacent to Gillespie Field. Royal improved the
property with facilities for its private jet charter business, including an office building and
three hangars.
Royal later wanted to downsize, and in 2005 it assigned its interest in the master
lease to Jet Air FBO, LLC (Jet Air) in exchange for Jet Air's payment of $5 million. The
County consented to the assignment. Royal and Jet Air then entered into a sublease,
under which Royal retained one of the hangars "at a rental far below market value." As
required by the County, paragraph 15 of the sublease provides that termination of Jet
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Air's interest as lessee under the master lease "for any reason" shall terminate Royal's
sublease without liability of either Jet Air or the County to Royal.
Further, paragraph 4 of the sublease provides: "The Term of this [sublease] shall
commence on June 1, 2005 or such later date when the Master Landlord consents to the
terms of this [sublease] and any other consent required by the Master Landlord. This
[sublease] will terminate with termination of Master Lease or any extension of Master
Lease, unless sooner terminated in accordance with the provisions of this [sublease]."
(Italics added.) Paragraph 7(a) provides: "If the Master Lease terminates, this [sublease]
shall terminate and the parties shall be relieved of any further liability or obligation under
this [sublease]."
A dispute eventually arose between Royal and Jet Air, and in 2009 Royal sued Jet
Air. Jet Air cross-complained against Royal. Further, in March 2011 Jet Air filed an
unlawful detainer action against Royal.
In June 2011 Jet Air voluntarily surrendered the master lease to the County as part
of a deal in which Raven purchased Jet Air for $5 million and entered into a new lease
with the County. It is undisputed that the master lease terminated on June 21, 2011.
Royal, however, refused to vacate the property. Raven brought an unlawful
detainer action against it, alleging that under the plain language of the sublease it
terminated simultaneously with the master lease. Royal filed a new action against Jet Air
for fraud, breach of contract based upon the commercial lease, and breach of the implied
covenant of good faith and fair dealing. It also named Raven and the County on counts
for intentional and negligent interference with contract.
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The parties stipulated to the consolidation of the four actions, with Raven's
unlawful detainer action to be heard first. After a two-day bench trial, in which the court
considered extrinsic evidence, it issued a statement of decision in Raven's favor. The
court noted that while under California law the rights of a subtenant cannot ordinarily be
terminated by a voluntary surrender of a master lease (Buttner v. Kasser (1912) 19
Cal.App.755, 759-760), the rule is inapplicable here because the sublease expressly
provides for its termination if the master lease was terminated for any reason. (Chumash
Hill Properties, Inc. v. Peram (1995) 39 Cal. App. 4th 1226, 1233 ["The Buttner rule has
been held inapplicable as a matter of law where the termination of the lease terminated
the sublease."].)
The court noted the "language is clear, unambiguous and repeated in the
Sublease." The court also noted, "[a]lthough Royal . . . may have wished to remain until
at least 2028, it accepted the provision in the Sublease required by the County and took
the risk of early termination." The court issued a judgment evicting Royal from the
premises. Royal's motion for a new trial was unsuccessful.
DISCUSSION
I
Contract Interpretation
Royal contends the court misinterpreted the sublease. " 'The basic goal of contract
interpretation is to give effect to the parties' mutual intent at the time of contracting.
[Citations.] When a contract is reduced to writing, the parties' intention is determined
from the writing alone, if possible. [Citation.] "The words of a contract are to be
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understood in their ordinary and popular sense." ' [Citations.] 'The language of [the]
contract is to govern its interpretation, if the language is clear and explicit, and does not
involve an absurdity.' " (Banning Ranch Conservancy v. Superior Court (2011) 193
Cal. App. 4th 903, 913.)
It is undisputed that paragraph 15 clearly and explicitly calls for the termination of
the sublease on the termination of the master lease for any reason and thus if only
paragraph 15 is considered the court's ruling is correct. Royal, however, contends that
read as a whole the sublease is ambiguous and subject to explanation through extrinsic
evidence. "The whole of a contract is to be taken together, so as to give effect to every
part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code,
§ 1641; Code Civ. Proc., § 1858.)
"An ambiguity can be patent, arising from the face of the writing, or latent, based
on extrinsic evidence." (Solis v. Kirkwood Resort Co. (2001) 94 Cal. App. 4th 354, 360-
361.) "Extrinsic evidence is admissible to prove a meaning to which the contract is
reasonably susceptible. [Citations.] If the trial court decides, after reviewing the
extrinsic evidence, the language of the contract is reasonably susceptible to the
interpretation urged, the evidence is admitted to aid in interpreting the contract.
[Citations.] Thus, '[t]he test of admissibility of extrinsic evidence to explain the meaning
of a written instrument is not whether it appears to the court to be plain and unambiguous
on its face, but whether the offered evidence is relevant to prove a meaning to which the
language of the instrument is reasonably susceptible.' [Citation.] [¶] The threshold issue
of whether to admit the extrinsic evidence that is, whether the contract is reasonably
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susceptible to the interpretation urged is a question of law subject to de novo review."
(Founding Members of the Newport Beach Country Club v. Newport Beach Country
Club, Inc. (2003) 109 Cal. App. 4th 944, 955, italics added.)
Royal relies on Northridge Hospital Foundation v. Pic 'N' Save No. 9, Inc. (1986)
187 Cal. App. 3d 1088 (Northridge), in which a paragraph of a sublease provided it "was
subject to the master lease, and that in the event the 'overlease shall terminate for any
reason whatsoever, then this lease shall also terminate simultaneously therewith and
neither party hereunder shall acquire any right or cause of action against the other by
reason of such termination." (Id. at p. 1092.) The trial court in Northridge found that,
under the plain language of the sublease, the termination of the master lease terminated
the sublease. (Id. at pp. 1093-1094.)
The appellate court reversed. It concluded that while the paragraph at issue was
unambiguous standing alone, the sublease considered as a whole was uncertain, and the
uncertainty must be construed against the sublessor as the drafting party. (Northridge,
supra, 187 Cal.App.3d at pp. 1095, 1099.) In Northridge, both the master lease and the
sublease contained an absolute option to renew, which the court construed as "an implied
agreement of the sublessor to protect its sublessee" by renewing the master lease and
sublease. (Id. at p. 1098.)
Northridge, supra, 187 Cal. App. 3d 1088 is distinguishable, however, because here
the sublease contains no type of option to renew. Rather, paragraph 4 of Royal's
sublease, which sets forth the term of the sublease, states, "This Lease [sublease] will
terminate with termination of Master Lease or any extension of Master Lease, unless
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sooner terminated in accordance with the provisions of this [sublease]." (Italics added.)
This does not create an ambiguity or impliedly protect Royal from the early termination
of the sublease.
In an attempt to overcome the plain language of paragraph 15 and to fall within
the ambit of Northridge, supra, 187 Cal. App. 3d 1088, Royal cites paragraph 31, which
provides: "Sublessor shall use its reasonable efforts to seek to obtain a commercially
reasonable non-disturbance agreement from Master Lessor for the benefit of Sublessee."
"Nondisturbance agreements between a lessor and a sublessee typically provide that
notwithstanding a default under or termination of the prime lease, the sublease will
remain undisturbed as a lease between the prime lessor and sublessee if the sublessee is
paying and performing its obligations under the sublease." (Miller & Starr, Cal. Real
Estate Digest 3d (2012) Landlord and Tenant, § 123.)
Paragraph 31, however, did not create ambiguity or impliedly require Jet Air to
protect Royal by not voluntarily surrendering the master lease. Rather, paragraph 31
would protect Royal from the early termination of the master lease only if the County
would cooperate, a matter Royal surely realized was beyond Jet Air's control, as well as
unlikely given the County's insistence on paragraph 15.1 Indeed, the remainder of
paragraph 31 acknowledges that Jet Air's inability to obtain a nondisturbance agreement
1 The court's statement of decision explains, "Upon inquiry, Dan Gayet [principal]
of Jet Air was advised that the County did not issue non-disturbance agreements.
Royal . . . never pursued the matter and Hadi Stein's [Royal's principal] testimony to the
contrary is not credible."
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"shall not impair the validity or enforceability of this Sublease." This is not a similar
scenario to that in Northridge or to that in Texas Co. v. Adelman (1939) 186 Okla. 663
[99 P.2d 874], the opinion upon which Northridge relied. (Northridge, supra, 187
Cal.App.3d at p. 1097.)
Royal's reliance on paragraphs 7(a) and 7(b) of the sublease is similarly misplaced.
In relevant part, paragraph 7(a) provides: "Lessor specifically shall not amend the terms
of the Master Lease without the consent of Lessee." In relevant part, paragraph 7(b)
provides: "Lessor is obligated to send to Lessee a copy of any notice or correspondence
with Master Landlord regarding 'Master Premises' immediately after receiving such
letter." Neither of these provisions renders paragraph 15 of the sublease uncertain or
impliedly protects Royal from the voluntary surrender of the master lease. As the trial
court explained, "unlike in Northridge, there is no factual basis to imply an agreement to
contradict the clear, unambiguous language of the Sublease calling for contemporaneous
termination of the Sublease upon termination of the Master Lease for any reason."
Contrary to Royal's assertion, the court did not ignore these additional sublease
terms. Rather, the court considered them and specifically rejected the applicability of
Northridge. Ignoring evidence and finding it unpersuasive are different matters.
Royal also complains that the court refused to consider evidence outside the
sublease. In its opening brief, however, Royal does not specify any extrinsic evidence
the court disallowed. "It is the duty of counsel to refer us to the portion of the record
supporting his [or her] contentions on appeal. [Citations.] . . . [Citations.] 'It is neither
practical nor appropriate for us to comb the record on [the appellant's] behalf.' "
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(Schmidlin v. City of Palo Alto (2007) 157 Cal. App. 4th 728, 738; Cal. Rules of Court,
rule 8.204(a)(1)(C) & (a)(2)(C).) " 'If no citation "is furnished on a particular point, the
court may treat it as waived." ' " (Lonely Maiden Productions, LLC v. GoldenTree Asset
Management, LP (2011) 201 Cal. App. 4th 368, 384.) While Royal offers a few citations
in its reply brief, " '[w]ithholding a point until the reply brief deprives the respondent of
an opportunity to answer it . . . . Hence, a point raised for the first time therein is deemed
waived and will not be considered, unless good reason is shown for failure to present it
before.' " (People v. Clayburg (2012) 211 Cal. App. 4th 86, 93.)
In any event, our independent review of the record shows the court essentially
gave Royal carte blanche to present extrinsic evidence and the court considered it
provisionally to determine whether it was admissible to aid in the interpretation of the
sublease. Royal's assertion that the court "never considered [the] extrinsic evidence to
determine whether the Sublease is susceptible to Royal's interpretation" is far afield from
the facts. For instance, the court allowed Stein to testify at length as to the provisions in
the sublease, even over an objection that the document spoke for itself.2
Royal is also mistaken in asserting that the extrinsic evidence was admissible to
aid in the interpretation of the sublease. We agree with the court that, as a matter of law,
2 The court also allowed Royal to call Gayet, David Cohen (a Raven principal), and
Jeffrey Winslow, who is in the business of aircraft management and an acquaintance of
Stein. In its reply brief, Royal points out that the court sustained an objection to Gayet's
testimony as to his "understanding" of paragraphs 4 and 7 of the sublease, on the ground
the document spoke for itself. Royal does not, however, contend paragraph 4 shows
paragraph 15 is uncertain and thus Gayet's understanding is immaterial. Moreover, Royal
had taken Gayet's deposition and there was no offer of proof or suggestion that Gayet
would have testified favorably to Royal on either paragraph 4 or 7.
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the evidence was not reasonably susceptible to Royal's interpretation that paragraph 15 of
the sublease does not mean what it says. The only evidence Royal cites pertains to
Stein's belief that the sublease would be jeopardized only if Jet Air defaulted under the
master lease or attempted to modify the master lease to shorten its term. Under
California law, however, "the subjective, unexpressed beliefs of the parties do not serve
as the basis for [determining] whether or not a contract is formed. Instead, the mutual
assent necessary to form a contract is determined under an objective standard applied to
the outward manifestations or expressions of the parties." (Alexander v. Codemasters
Group Limited (2002) 104 Cal. App. 4th 129, 150; Central Building, LLC v. Cooper
(2005) 127 Cal. App. 4th 1053, 1064-1065.)3 We conclude the court's ruling is correct.
II
Standing
Additionally, Royal contends Raven lacked standing to bring an unlawful detainer
action because there was no landlord-tenant relationship between the parties, and thus
reversal for lack of jurisdiction is required. Royal is mistaken. Code of Civil Procedure
section 1161, subdivision 1, provides that a tenant is guilty of unlawful detainer when it
continues in possession after the expiration of the lease term "without the permission of
[its] landlord, or the successor in estate of [its] landlord, if applicable." The italicized
language logically extends the unlawful detainer remedy to a successor in interest such as
Raven. (See Bank of America Nat'l Trust & Sav. Asso. v. Button (1937) 23 Cal. App. 2d
3 As the court noted, "Whether Jet Air violated the covenant of good faith and fair
dealing is not before the court in this [unlawful detainer] proceeding."
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651, 652-653 [lessor's successor in interest had standing to bring unlawful detainer
action].) Royal ignores Code of Civil Procedure section 1161, subdivision 1, even in the
reply brief after Raven discussed the statute in the respondent's brief.
DISPOSITION
The judgment is affirmed. Raven is entitled to costs on appeal.
MCCONNELL, P. J.
WE CONCUR:
MCDONALD, J.
AARON, J.
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