8451 Melrose Property v. Akhtarzad CA2/8 ( 2013 )

Filed 7/30/13 8451 Melrose Property v. Akhtarzad CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
8451 MELROSE PROPERTY, LLC, B237052
Plaintiff and Respondent, (Los Angeles County
Super. Ct. Nos. BC414854, BC415957)
v.
SINA AKHTARZAD,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County. Holly E.
Kendig, Judge. Reversed and remanded.
Benedon & Serlin, Gerald M. Serlin and Kelly R. Horwitz, for Defendant and
Appellant Sina Akhtarzad.
Law Offices of Ramin Azadegan, Ramin Azadegan and Roger Furman, for
Plaintiff and Respondent 8451 Melrose Property, LLC.
_______________________________________
8451 Melrose Property, LLC (Melrose) sued Sina Akhtarzad for breach of a
commercial lease. Akhtarzad cross-complained and filed a separate complaint against
Melrose and its manager, Jack Simantob, for breach of a lease, fraud and deceit, and
rescission. Following a bench trial, the trial court entered judgment for Melrose.
On appeal, Akhtarzad contends: (1) the trial court made a number of erroneous and
prejudicial evidentiary rulings; (2) the trial court’s damages award was not supported by
the evidence and was legally improper in a number of respects; (3) the trial court was
prejudicially biased against Akhtarzad’s counsel; and (4) the trial court abused its
discretion in denying a trial continuance after Akhtarzad fired his counsel.
While this appeal was pending, the California Supreme Court issued an opinion in
Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013)
55 Cal.4th 1169 (Riverisland), overruling long-standing precedent regarding the
admissibility of parol evidence to prove fraud. Though the trial court was correct to
follow then-existing case law which had been in effect for 75 years (see, e.g., Auto Equity
Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450), we find Riverisland is applicable
here and warrants reversal of the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
“Following the usual rules on appeal after a trial on the merits, we construe the
facts in the light most favorable to the judgment.” (Fulton v. Medical Bd. of California
(2010) 183 Cal.App.4th 1510, 1513.) In March 2008, Melrose and Akhtarzad entered
into a lease for a commercial retail property at 8451 Melrose Avenue. The lease was for
an 11-year term, with two five-year options to extend. The tenant was to pay a fixed
minimum annual rent of $660,000, with three percent increases each year. As a “triple
net” lease, the tenant was also responsible for additional charges, defined as “all charges,
fees and expenses and other amounts” due under the provisions of the lease, including
expenses associated with the property and real estate taxes. The lease indicated
Akhtarzad would use the property as a “selective, first-class retail development.”
The parties anticipated Akhtarzad would engage in construction or renovation at the
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property. The lease accordingly included a substantial section regarding the terms and
conditions of the improvements to be undertaken.
In January 2009, rent for the property was due. Akhtarzad told Simantob he could
not pay the rent and had no potential subtenants for the property. In February 2009,
Melrose’s attorney sent Akhtarzad a notice of abandonment. Akhtarzad sent Melrose a
check for $25,000, yet he owed around $130,000. When Simantob asked Akhtarzad why
he had sent the $25,000 check, Akhtarzad responded it was the last payment Melrose
would receive, Melrose should not expect more, and Simantob should lease the property
to a new tenant.
In March 2009, Simantob and Akhtarzad spoke again. Akhtarzad said he could do
nothing with the property, and Melrose could have it back. Simantob made arrangements
with Akhtarzad to retrieve the key to the property. Simantob found the property in
disarray. The building was stripped of everything, including fixtures. After cleaning up
debris, Melrose attempted to rent the property again. Melrose listed the property with a
realtor familiar with the property and high-end tenants. Only one potential tenant
expressed interest in leasing the property, at a reduced rent, but no agreement was
reached. The property remained vacant at the time of trial.
Melrose filed suit against Akhtarzad for breach of contract. Akhtarzad cross-
complained for breach of lease, fraud, restitution and rescission, and an accounting.
Akhtarzad also filed a separate complaint alleging the same causes of action against
Simantob. In his answer to Melrose’s complaint, Akhtarzad asserted an affirmative
defense for fraud and misrepresentation.
The trial court conducted a bench trial on the consolidated actions. Near the
conclusion of Melrose’s case, Akhtarzad dismissed his trial counsel and began
representing himself. Akhtarzad later informed the court he could not effectively
represent himself. He requested a two-week continuance to secure new counsel.
The trial court denied the request. In his own case, Akhtarzad offered testimony from
two defense witnesses and examined Simantob as an adverse witness. Akhtarzad did not
testify. After resting his case, he informed the trial court he was unavailable on the next
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scheduled day for trial due to an emergency trip to New York. He was not present for
Melrose’s closing statement or the trial court’s issuance of a tentative judgment. The trial
court found in favor of Melrose on all claims. In a statement of decision the court
concluded Akhtarzad failed to present any credible evidence to support any of his claims
or defenses. It awarded Melrose $8,549,307.33, including attorney fees and costs.
The damages portion of the award consisted of unpaid past and future rent, for the length
of the full term of the lease, as well as unpaid past and future additional charges, late
charges, and interest, as set forth in the lease.
The trial court denied Akhtarzad’s motion for a new trial and a motion asking the
court to retain jurisdiction to assess future damages. Akhtarzad timely appealed from the
judgment in November 2011.1
DISCUSSION
I. The Trial Court Erroneously Excluded Parol Evidence Relevant to
Akhtarzad’s Fraud Claim
A. Background
Akhtarzad’s cross-complaint alleged Melrose falsely represented the entire
property could be used for retail sales, and concealed that a portion of the property was
limited to use as a warehouse. The cross-complaint further alleged Melrose
misrepresented and concealed that, in remodeling the second story portion of the
property, Melrose made misrepresentations to the City of West Hollywood, thus portions
of the property were added illegally. According to the cross-complaint, the property
“required” 12 parking spaces, but only had six.
The cross-complaint alleged Akhtarzad intended to sublease the entire property as
retail space. He allegedly relied on Melrose’s representations that all of the property was
zoned for retail, the entire rentable area was 10,000 square feet, and no portion of the
existing structures were added illegally. According to the cross-complaint, the
1 In late December 2011, Akhtarzad filed for bankruptcy, which automatically
stayed this appeal. The bankruptcy stay was lifted in March 2012.
4
“concealment of material facts and the fraudulent misrepresentations” induced Akhtarzad
to enter the lease, and caused him to suffer “economic loss and out-of-pocket expenses in
an amount exceeding $25,000 . . . .”
The record does not reveal whether Akhtarzad’s fraud claim was tested by
demurrer or a motion for summary judgment and/or summary adjudication. However,
the claim remained at issue by the time of trial. Akhtarzad attempted to question
Melrose’s witnesses about the warehouse portion of the property and whether that space
could lawfully be used for retail. He also attempted to ask questions related to his claim
that the second story of the property was added illegally. We detail the questions and
trial court rulings below.
1. Cross-examination of Simantob: retail space
During cross-examination of Simantob, Akhtarzad’s counsel asked whether
Simantob made representations to Akhtarzad that the entire building was legal for use as
retail space. Melrose’s counsel objected based on the parol evidence rule and relevance.
The court sustained the objection. The court explained the lease was an integrated
document. The court further noted no party had ever asserted there was an ambiguity in
the lease.
2. Cross-examination of Simantob: discussions about the lease
On cross-examination of Simantob, Akhtarzad’s counsel asked a general question
about the content of Simantob’s discussions with Akhtarzad about the property, prior to
the signing of the lease. Melrose’s counsel asserted a parol evidence objection. The
court heard argument and allowed additional briefing. Melrose contended parol evidence
could not be offered to prove fraud when the fraud alleged addressed a matter covered by
the terms of the written agreement. Melrose relied on two cases, West v. Henderson
(1991) 227 Cal.App.3d 1578, and Green v. Del-Camp Investment, Inc. (1961) 193
Cal.App.2d 479. Melrose alleged a lease provision allowing the tenant to use the
premises for any use allowed by law, and another provision requiring the tenant to
procure and maintain any necessary permits, contradicted Akhtarzad’s allegation that the
property did not have appropriate permits for retail use. Similarly, Melrose asserted the
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provision requiring the tenant to secure all necessary permits contradicted the allegation
that the property had insufficient parking spaces.
Akhtarzad argued parol evidence could be offered to prove misrepresentations of
fact, as opposed to promissory fraud. He also contended an “as-is” provision in the lease
would not provide a defense to a fraudulent inducement claim. Akhtarzad asserted his
claims fell within the fraud exception to the parol evidence rule set forth in Code of Civil
Procedure section 1856, subdivision (g).
The trial court did not definitively rule on the issue. Instead, the court indicated it
would hear the evidence before deciding whether the parol evidence rule applied.
Akhtarzad’s counsel did not return to the line of questioning interrupted by the parol
evidence objection.
3. Cross-examination of the realtor: legal uses of the property
While cross-examining the realtor retained to re-lease the property, Akhtarzad’s
counsel asked whether the entire building could legally be used for retail. Melrose’s
counsel made relevance and parol evidence objections. Melrose argued any
representations the realtor made were irrelevant because they could not be used to
contradict provisions in the lease indicating it was an integrated lease, or to contradict
provisions stating the landlord made no representations or warranties about the suitability
of the property for the tenant’s business. Akhtarzad’s counsel argued parol evidence
could be admitted to show fraud, and the questions to the realtor were relevant to
mitigation issues. The trial court sustained Melrose’s objections “on all grounds.”
4. Direct examination of Simantob: the allegedly illegal addition
On direct examination, Akhtarzad asked Simantob whether the property was a one
or two story building when Simantob’s family purchased it in 1991. Melrose’s counsel
objected based on relevance. Akhtarzad responded he wished to show that before the
lease was signed, Simantob misrepresented that the building had two stories when his
family purchased the building. Akhtarzad explained he wished to show the second story
was an illegal addition. The court responded, in part: “What you need to understand is
that with respect to the fraud claim, what the West case and various other cases have
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established is that I – if it is contradicted, what you’re asking of the witness to testify
about contradicts the terms of the written lease, it’s not admissible.” Melrose’s counsel
then argued the parol evidence rule “excludes and should exclude all evidence in
connection to any purported misrepresentations.”
The court subsequently told Akhtarzad: “[Y]ou cannot ask about fraudulent
representations. You can ask, but I can’t admit evidence about representations before the
lease was signed if they conflict with the written terms of the lease.” The court sustained
Melrose’s objection to the pending question. Akhtarzad protested he was trying to show
Simantob misrepresented the facts. The court responded: “You have a fraud claim, but
your fraud claim has to be on something else other than varying the terms of the written
lease. The cases that everybody has cited to me make that very clear. . . . [W]hat you’re
trying to do is introduce testimony about representations prior to the signing of the lease,
prior to the time when you signed a document that said . . . it included everything, and the
law does not allow that. The case law is very clear. You can’t offer these representations
to vary the terms of a written lease.”
In its Statement of Decision, the court stated Akhtarzad failed to present any
credible evidence he was fraudulently induced to enter into the lease, or that the lease was
unenforceable. In addition, “Akhtarzad did not present any substantial evidence
supporting any of the alleged misrepresentations or concealments he alleged against”
Melrose and Simantob. In a footnote, the court explained evidentiary problems precluded
Akhtarzad from pursuing some of his allegations. Specifically, “[the] integration clause,
together with the parol[] evidence rule, precluded Akhtarzad from pursuing any
misrepresentation or concealment allegations that contradict matters addressed in the
Lease. However, because of Akhtarzad’s failure of proof in his case in chief, this
evidentiary issue became secondary, since no substantial evidence was ultimately
introduced by Akhtarzad.”
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B. Parol Evidence, Pendergrass, and Riverisland
As codified in Code of Civil Procedure section 1856 and Civil Code section 1625,
the parol evidence rule provides “that when parties enter an integrated written agreement,
extrinsic evidence may not be relied upon to alter or add to the terms of the writing.”
(Riverisland, supra, 55 Cal.4th at p. 1174, fn. omitted.) The rule “is founded on the
principle that when the parties put all the terms of their agreement in writing, the writing
itself becomes the agreement. The written terms supersede statements made during the
negotiations. Extrinsic evidence of the agreement’s terms is thus irrelevant, and cannot
be relied upon. [Citation.] ‘[T]he parol evidence rule, unlike the statute of frauds, does
not merely serve an evidentiary purpose; it determines the enforceable and
incontrovertible terms of an integrated written agreement.’ [Citations.]” (Ibid.)
However, under Code of Civil Procedure section 1856, subdivision (f): “Where
the validity of the agreement is the fact in dispute, this section does not exclude evidence
relevant to that issue.” Thus, evidence to prove that a contract is void or voidable for
fraud is admissible. (Riverisland, supra, 55 Cal.4th at pp. 1174-1175, citing 2 Witkin,
Cal. Evidence (5th ed. 2012) Documentary Evidence, § 97, p. 242.) Code of Civil
Procedure section 1856, subdivision (g) explicitly provides: “This section does not
exclude other evidence of the circumstances under which the agreement was made or to
which it relates . . . to establish illegality or fraud.”
In 1935, the California Supreme Court narrowed the fraud exception in Bank of
America Etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258 (Pendergrass). In Pendergrass,
the court held parol evidence may only be offered to prove fraud if the evidence
establishes an independent fact or representation that does not directly contradict the
written terms of the contract. (Id. at p. 263.) In this case, Akhtarzad contended he would
show Simantob made false representations about the property and fraudulently induced
Akhtarzad to sign the lease. The trial court excluded the purported evidence in reliance
on West v. Henderson (1991) 227 Cal.App.3d 1578, which in turn relied on Pendergrass.
(West, at pp. 1583-1584.) The trial court accepted Melrose’s argument that a
representation about whether the entire property was permitted for retail use contradicted
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a provision of the written lease, as did any alleged representation that the second story
was a legal addition to the property. And, as noted above, the trial court ultimately
advised it would not admit any evidence about representations about the property, made
before the lease was signed, if they conflicted with the written terms of the lease.
This reasoning was generally consistent with Pendergrass.2
In January 2013, after the instant appeal was filed and Melrose had submitted its
respondent’s brief, the California Supreme Court overruled Pendergrass and its progeny
in Riverisland.3 (Riverisland, at p. 1182.)
The Riverisland court noted the Pendergrass rule had survived for over 75 years
and lower courts had followed it, “albeit with varying degrees of fidelity.” (Riverisland,
at p. 1176.) Nevertheless, our high court explained the Pendergrass rule was criticized,
both academically and by some lower courts. (Ibid; see e.g., Coast Bank v. Holmes
(1971) 19 Cal.App.3d 581, 591-592 [noting significant criticism and suggesting decisions
liberalizing the parol evidence rule cast doubt on the “continued vitality” of the
Pendergrass rule].) The Riverisland court recognized that, in contrast to Pendergrass,
the Restatements of contracts and torts, most treatises, and the majority of other
jurisdictions agree the parol evidence rule does not bar evidence of fraud. (Riverisland,
at pp. 1176-1177.) Lower courts in California had interpreted the Pendergrass rule in
different ways to avoid applying it. (Id. at pp. 1177-1178.) A 1977 California Law
Revision Commission ignored Pendergrass when proposing modifications to the
2 The parties disagreed about whether the alleged false representations actually
conflicted with any terms of the lease. In his opening brief on appeal, Akhtarzad argued
the specific misrepresentations he alleged did not conflict with the general provisions of
the lease Melrose identified as contradictory. Under Riverisland, this distinction is not
relevant, therefore we do not resolve this issue.
3 Akhtarzad addressed Riverisland in his reply brief. We granted Melrose’s request
for leave to file a supplemental brief to address Riverisland and its application to this
case. We also allowed Akhtarzad to provide a supplemental response. In its
supplemental brief, Melrose does not contend the trial court’s rulings remained valid
even under Riverisland. Instead, Melrose argues the judgment should stand because
Akhtarzad has not shown prejudice, and Riverisland should not be applied retroactively.
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statutory statement of the parol evidence rule. (Id. at p. 1178.) The Riverisland court
further acknowledged the Pendergrass rule was inconsistent with the governing statute
and California law at the time Pendergrass was decided. (Id. at pp. 1179-1182.) Cases
prior to Pendergrass “routinely stated without qualification that parol evidence was
admissible to prove fraud,” without conditions. (Id. at pp. 1180-1181.)
Ultimately, the Riverisland court determined Pendergrass was an “aberration,”
inconsistent with the statute and settled case law. The court thus overruled Pendergrass
and its progeny, and “reaffirm[ed] the venerable maxim: . . . ‘[I]t was never intended that
the parol evidence rule should be used as a shield to prevent the proof of fraud.’”
(Riverisland, at p. 1182.)
C. Application
The parol evidence rule is one of substantive law, although it results in the
exclusion of evidence. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343.)
Thus, while evidentiary rulings are generally reviewed for an abuse of discretion, we
review the trial court’s application of the parol evidence rule de novo. (Wagner v.
Glendale Adventist Medical Center (1989) 216 Cal.App.3d 1379, 1386.)
It is undisputed that Akhtarzad attempted to offer extrinsic evidence to prove fraud
or fraudulent inducement. The trial court did not allow him to present evidence regarding
Melrose’s alleged false representations about the property on the ground that they would
constitute impermissible parol evidence: extrinsic evidence contradicting one or more
provisions of the written lease. In light of Riverisland, we must conclude that this change
in the law makes the court’s evidentiary rulings based on parol evidence inconsistent with
Code of Civil Procedure section 1856, subdivisions (f) and (g), and therefore erroneous.
D. Prejudice
Our analysis does not end with the above conclusion. Under Evidence Code
section 354, a judgment may not be reversed because of the erroneous exclusion of
evidence unless the reviewing court determines the error resulted in a miscarriage of
justice. The appellant must show it is reasonably probable a more favorable result would
have been reached if the challenged evidence had been admitted. (Bowman v. Wyatt
10
(2010) 186 Cal.App.4th 286, 327; Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th
1202, 1223.)
Under the circumstances of this case, we find reversal warranted. Akhtarzad was
barred from eliciting any testimony regarding Simantob’s representations about the
property prior to the signing of the lease, both on cross-examination, and in Akhtarzad’s
case in chief. This completely prevented Akhtarzad from proving his claim of fraud,
either as an affirmative claim, or as a defense to Melrose’s breach of contract claim.
(Filet Menu, Inc. v. C.C.L. & G., Inc. (2000) 79 Cal.App.4th 852, 861-862.) Courts have
held that when a party is not allowed to present any evidence relating to a claim, the error
is reversible per se “because it deprives the party offering the evidence of a fair hearing
and of the opportunity to show actual prejudice.” (Gordon v. Nissan Motor Co., Ltd.
(2009) 170 Cal.App.4th 1103, 1114 (Gordon), collecting cases; Southern Pacific
Transportation Co. v. Santa Fe Pacific Pipelines, Inc. (1999) 74 Cal.App.4th 1232, 1246,
1248 [erroneous exclusion of extrinsic evidence and all expert reports was prejudicial];
see also People v. Nigri (1965) 232 Cal.App.2d 348, 350-351 [evidence excluded based
on law that changed after case was tried; appropriate remedy was reversal to allow for
new trial].)
Melrose contends Akhtarzad cannot establish prejudice because other factors
determined the adverse judgment, including his decision to fire his counsel, his failure to
present evidence regarding his knowledge of the permitted uses of the property, and his
failure to prove he relied on Melrose’s alleged misrepresentations. We disagree.
Akhtarzad’s firing of his counsel did not, as a legal matter, affect the viability of any of
the claims asserted at trial. Even without counsel, Akhtarzad attempted to put on his own
case. But, near the beginning of his presentation of evidence, the trial court explicitly
ruled it would not admit any evidence of fraudulent misrepresentations that conflicted
with the terms of the lease. This made it impossible for Akhtarzad to prove the very first
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element of a fraud claim – that Melrose made misrepresentations.4 As a result, evidence
concerning the other elements of fraud, including reliance and harm, was irrelevant.
Any attempt to offer evidence proving the other elements of the fraud claim would have
been futile. (Evid. Code, § 354, subd. (b); Gordon, supra, 170 Cal.App.4th at p. 1113.)
We conclude the exclusion of parol evidence relevant to Akhtarzad’s fraud claim
was prejudicial error. (See Riverisland, supra, 55 Cal.4th at p. 1183 [in summary
judgment context, declining to consider reliance element of fraud in the first instance].)
E. Retroactivity
We also reject Melrose’s contention that Riverisland should not be applied
retroactively.5 “As a general rule, judicial decisions are given retroactive effect, even if
they represent a clear change in the law.” (Godinez, supra, 132 Cal.App.4th at p. 91.)
And, “ ‘[a]ppellate decisions in civil cases are almost always given retroactive effect and
applied to all pending litigation. [Citations.]’ ” (Abramson v. Juniper Networks, Inc.
(2004) 115 Cal.App.4th 638, 660 (Abramson).) However, courts have limited retroactive
application of a decision “when ‘considerations of fairness and public policy are so
compelling in a particular case that, on balance, they outweigh the considerations that
underlie the basic rule.’ [Citations.]” (Penn v. Prestige Stations, Inc. (2000) 83
Cal.App.4th 336, 341.) “Considerations of fairness take into account the factors of
4 “ ‘The elements of fraud, which give rise to the tort action for deceit, are (a)
misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of
falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance;
and (e) resulting damage.’ [Citations.]” (Lazar v. Superior Court (1996) 12 Cal.4th 631,
638.)
5 The Riverisland court did not directly address whether the decision should have
retroactive application. In that case, the trial court followed Pendergrass and excluded
evidence of fraud in a motion for summary judgment. The Court of Appeal reversed the
trial court ruling, based on a “promissory fraud exception” to Pendergrass. The Supreme
Court rejected the Court of Appeal reasoning, but affirmed the Court of Appeal
judgment, which reversed the order granting summary judgment. As a result, the change
effected by Riverisland was applied retroactively in that case. (Godinez v.
Schwarzenegger (2005) 132 Cal.App.4th 73, 91.)
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foreseeability and reliance, while public policy considerations include the purpose to be
served by the new rule and the effect on the administration of justice of retroactive
application.” (Ibid.)
The first inquiry is whether applying Riverisland would be unfair because its
holding was unforeseeable to the parties. Lower courts acknowledged the Pendergrass
rule was the law, but many also recognized the rule had been questioned. (Wang v.
Massey Chevrolet (2002) 97 Cal.App.4th 856, 872-873; Banco Do Brasil, S.A. v. Latian,
Inc. (1991) 234 Cal.App.3d 973, 1010.) As our high court noted in Riverisland,
Pendergrass was criticized, and several courts developed “detours” to avoid applying the
rule. Akhtarzad in fact attempted to rely on what the Riverisland court described as the
“most well-developed detour,” a distinction between false promises at variance with the
terms of a contract, and misrepresentations of fact about the contents of the document.
(Riverisland, supra, 55 Cal.4th at p. 1178, fn. 7.) Indeed, one of the Riverisland court’s
criticisms of Pendergrass was that it had “led to instability in the law, as courts have
strained to avoid abuses of the parol evidence rule.” (Id. at p. 1182.) The Supreme Court
had not addressed the issue since Pendergrass, in 1935. (Id. at p. 1176.) The lower
courts’ efforts to carve out exceptions to the Pendergrass rule arguably raised questions
as to the continuing vitality of the rule, and whether absolute reliance on the rule was
warranted. (Douglas v. Ostermeier (1991) 1 Cal.App.4th 729, 745 (Douglas).)
As to fairness, applying Riverisland retroactively will not jeopardize any party’s
legal rights in this case. (In re Retirement Cases (2003) 110 Cal.App.4th 426, 456.)
“[W]here a . . . statute has received a given construction by a court of last resort, and
contracts have been made or property rights acquired in accordance with the prior
decision, neither will the contracts be invalidated nor will vested rights be impaired by
applying the new rule retroactively. [Citation.]” (Peterson v. Superior Court (1982)
31 Cal.3d 147, 152; Kreisher v. Mobil Oil Corp. (1988) 198 Cal.App.3d 389, 395
(Kreisher).) But here, Melrose’s reliance on Pendergrass and its progeny was related
solely to litigation strategies and arguments at trial, not the conduct underlying the
litigation. Similarly, applying the clarified parol evidence rule retroactively in this case
13
will not deprive Melrose of any remedy. (Grafton Partners v. Superior Court (2005)
36 Cal.4th 944, 967; Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 990-991
(Newman); Douglas, supra, 1 Cal.App.4th at p. 743.)
We find untenable Melrose’s argument that under Pendergrass it had a vested
right to be immune from claims of fraud in connection with the lease. Melrose’s position
has been that it never engaged in any fraudulent conduct. It has not argued its conduct
prior to the signing of the lease was the result of its reliance on the rule that fraud could
not be established with the use of parol evidence if the alleged misrepresentations
conflicted with the terms of the written lease. (Sierra Club v. San Joaquin Local Agency
Formation Com. (1999) 21 Cal.4th 489, 509 [no issue of substantial detrimental reliance
where no one acquired vested right or entered into a contract based on the existence of
the rule being overturned].)
This case is thus fundamentally different from Kreisher, in which the defendant
had an express contractual right, the defendant acted in reliance on that right and
consistent with current law, the plaintiff sued for breach of contract, and only after a trial
did the Supreme Court invalidate the law upon which the defendant had relied.
(Kreisher, supra, 198 Cal.App.3d at pp. 395-397.) The Kreisher court determined the
change in law should not be applied retroactively. It concluded it would be unfair to
penalize the defendant for “its nonconformity with standards which took effect only after
it conscientiously determined the state of the law and relied upon it in reasonable good
faith[.]” (Id. at p. 404.) In contrast, Melrose cannot point to any similar substantial
detrimental reliance on its part.6 (See Newman, supra, 48 Cal.3d at pp. 982-983
6 Claxton v. Waters (2004) 34 Cal.4th 367, is similarly inapposite. Claxton
concerned mandatory preprinted compromise and release forms in workers’
compensation claims, and a rule regarding the admissibility of extrinsic evidence to prove
whether the parties intended to release claims outside the workers’ compensation system.
(Id. at p. 371, 376-377.) The court concluded such extrinsic evidence is not admissible.
The court then determined its holding should only be applied prospectively because the
rule being changed was “one that parties in [that case] and other cases may have relied on
in settling claims. In particular, employers may have refrained from proposing and
14
[California courts consistently apply tort decisions retroactively, even when they expand
scope of existing torts in ways defendants could not have anticipated].)
“It is the general rule that a decision of a court of supreme jurisdiction overruling
a former decision is retrospective in its operation and that the effect is not that the former
decision was bad law but that it never was the law.” (County of Los Angeles v. Faus
(1957) 48 Cal.2d 672, 680-681.) “Judicial decisions do not establish a new rule of law
for purposes of exclusion from the rule of retroactivity when the court ‘ “gave effect to a
statutory rule that the courts had theretofore misconstrued . . . .” ’ ” (In re Retirement
Cases, supra,110 Cal.App.4th at pp. 452-453.) We also note another recent appellate
case has applied Riverisland retroactively to conclude a trial court properly admitted
parol evidence to prove fraud. (Julius Castle Restaurant Inc. v. Payne (2013) 216
Cal.App.4th 1423, 1440-1442; Abramson, supra, 115 Cal.App.4th at p. 661.) We see no
reason to depart from the general rule of retroactivity in this case.
F. No Remand to a Different Trial Judge
In light of our conclusions above, we need not consider Akhtarzad’s remaining
arguments regarding other evidentiary rulings, the award of damages, or other asserted
trial court error. However, in connection with his argument that the trial court exhibited
prejudicial judicial bias, Akhtarzad requests that we remand this case to a different trial
judge. We do not address Akhtarzad’s argument that judicial bias requires reversal of the
judgment. We find it appropriate to say, however, our review of the entire record finds
nothing to suggest the trial judge is biased against Akhtarzad.
executing separate documents expressly releasing claims outside the workers’
compensation system because they were confident they could prove by extrinsic evidence
a mutual intent to release such claims. Our holding barring the admission of extrinsic
evidence for this purpose has a substantive effect because it may, in individual cases,
effectively alter the legal consequences of executing the standard compromise and release
form.” (Id. at p. 379.) Melrose cannot identify any similar reliance, or substantive effect,
in this case.
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Nevertheless, because we reverse on other grounds and remand, we consider
whether we should exercise our discretion under Code of Civil Procedure section 170.1,
subdivision (c), to remand to a different trial judge. Our discretion to disqualify a judge
under Code of Civil Procedure section 170.1, subdivision (c) is to be exercised sparingly,
and only when the interests of justice require it. (Hernandez v. Superior Court (2003)
112 Cal.App.4th 285, 303.) We will not exercise it here. While the judge’s interactions
with one of Akhtarzad’s attorneys were often contentious, they do not suggest bias.
(Germ v. City & County of San Francisco (1950) 99 Cal.App.2d 404, 415-416.) It is
clear from the record that Akhtarzad’s counsel frequently interrupted and engaged in
combative colloquies with the court. But strained relations between a judge and counsel
are not evidence of bias. (Roitz v. Coldwell Banker Residential Brokerage Co. (1998) 62
Cal.App.4th 716, 724.)
DISPOSITION
The judgment is vacated and the matter remanded for a new trial. The parties are
to bear their own costs.
BIGELOW, P. J.
We concur:
FLIER, J.
GRIMES, J.
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