Gietzen v. Goveia CA2/6 ( 2015 )

Filed 12/7/15 Gietzen v. Goveia CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
ROD E. GIETZEN et al., 2d Civil No. B255925
(Super. Ct. No. 56-2012-00413479-
Plaintiffs, Cross-defendants and CU-CO-VTA)
Respondents, (Ventura County)
v.
JOSEPH D. GOVEIA et al.,
Defendants, Cross-complainants and
Appellants.
A landlord of a shopping center leased space to a gym whose clients
monopolized the parking spaces in the center's common area lot. A restaurant tenant
brought an action against the landlord and the landlord's agent for breach of lease, fraud
and misrepresentation, and unfair competition. The landlord, its agent and an individual
who is a principal in the landlord cross-complained for declaratory relief as to its duties
with regard to the parking lot.
The trial court awarded damages against the landlord and its agent for
breach of lease. The court also found for the tenant on the cross-complaint. We reverse
the judgment for breach of lease against the landlord's agent. We affirm the judgment
against the landlord. We also amend the judgment on the cross-complaint for declaratory
relief to declare that neither the landlord's agent nor an individual who is a principal in
the tenant are parties to the lease.
FACTS
Yolanda's, Inc. owns four restaurants in Ventura County. Its founder is
Rod E. Gietzen. In 2005, Gietzen was considering moving his Oxnard restaurant to a
new location at the Seabridge Shopping Center. Seabridge's owners are
K & G/Seabridge II, LLC and Rocklin Covenant Group, LP (collectively "K & G" or
"Landlord"). Gietzen negotiated with Seabridge's management company, Kahl and
Goveia Commercial Real Estate ("KGCRE"). Joseph Goveia is a principal in both
K & G and KGCRE. Amy Williams, vice president of KGCRE, was the principal
negotiator for K & G.
To gain Gietzen's interest in becoming a tenant, Williams told him that
West Marine, a marine hardware company, was likely to become the "anchor tenant."
Williams was aware Gietzen was concerned about the tenant mix because he asked who
the other tenants were going to be.
By July 2006, K & G's negotiations with West Marine ended without a
lease. Instead, K & G began negotiations with 24 Hour Fitness. Goveia testified it was
important that Seabridge have 24 hour Fitness as an anchor tenant. It was a thriving
business and could pay well.
Williams knew from her prior experience at a different shopping center that
24 Hour Fitness could cause major parking congestion problems. Gietzen testified that
had he known 24 Hour Fitness was going to be a tenant, he would not have entered into
the lease and "would have been out of there like a jack rabbit."
On September 25, 2006, K & G received a letter of intent to enter into a
lease from 24 Hour Fitness. Two days later, Williams, Goveia and Kahl met with
Gietzen to discuss the Yolanda's lease. They did not mention the negotiations with 24
Hour Fitness.
On October 2, 2006, Gietzen signed the lease as president of Yolanda's, Inc.
He also signed a personal guarantee of the lease. At the time the lease was signed, no one
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had informed Gietzen that West Marine would not be the anchor tenant and that 24 Hour
Fitness was close to signing a lease.
The Yolanda's lease provisions include:
Article 9.1: "The Common Area shall be available for the nonexclusive use
of Tenant during the full term of this Lease or any extension of the term hereof . . . ."
Article 27.2 provides for attorney fees to the prevailing party in any
litigation to enforce or interpret the lease.
Article 39 limits the liability of the landlord to the landlord's interest in the
shopping center.
Article 40 is an integration clause providing that all agreements and
negotiations are merged in the lease and that there are no implied covenants.
Yolanda's took possession of the premises in May 2008 and invested $1.2
million in improvements. It was not until July 2008, after most of the improvements had
been made, that Gietzen learned K & G leased to 24 hour Fitness instead of West Marine.
From the beginning of Yolanda's opening, the parking lot was "virtually
full" with 24 Hour Fitness customers' cars. The peak hours for the gym coincided exactly
with the peak hours for the restaurant. A survey conducted from November 17, 2009,
through November 23, 2009, revealed that approximately 95 percent of the automobiles
using the parking lot belonged to patrons of 24 Hour Fitness.
To make matters worse, the 24 Hour Fitness lease granted it a "protected
parking area." The protected parking area covered more than half the parking lot.
The problem got worse over time. Many of Yolanda's potential customers
gave up trying to find a parking space and went to eat elsewhere.
Yolanda's and other tenants complained to K & G about the parking.
Initially K & G ignored their complaints. Eventually K & G attempted several strategies
including on-site valet parking, requiring tenant employees to park off-site, and providing
security guards. None of the strategies worked.
On March 2, 2012, Gietzen, on behalf of himself and Yolanda's, Inc., filed
a complaint alleging causes of action for breach of contract, breach of the covenant of
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good faith and fair dealing, fraud in the inducement, negligent misrepresentation and
negligence and unfair competition. The complaint named as defendants Goveia, as an
individual, and K & G and KGCRE.
Goveia, K & G and KGCRE filed a cross-complaint seeking declaratory
relief to determine who are the parties to the lease and what rights and duties concerning
parking are created by the lease. Ultimately Gietzen and Goveia as individuals were
removed as parties to the complaint. The parties stipulated that the trial would be heard
by a retired judge sitting as a referee.
Based on the referee's findings, the trial court found K & G had a duty to
disclose that 24 Hour Fitness would be a tenant and that K & G intentionally concealed
the fact. The court also found, however, that Yolanda's causes of action for fraud and
negligent misrepresentation are time barred. The court found Yolanda's did not prove its
cause of action for unfair competition.
The trial court found for Yolanda's on its causes of action for breach of
contract and breach of the covenant of good faith and fair dealing. The court found
K & G breached article 9.1 of the lease giving Yolanda's nonexclusive use of the
common areas. In a separate phase of the trial, the court awarded Yolanda's damages in
the amount of $1,892,835 against all defendants, plus attorney fees and costs.
As to the cross-complaint for declaratory relief, the trial court found that
Gietzen, by virtue of his personal guarantee, is a party to the lease. The court found
against all defendants and Goveia on the cross-complaint for declaratory relief.
DISCUSSION
I
K & G contends it was error for the trial court to find a breach of contract.
The trial court found K & G breached article 9.1 of the lease: "The
Common Area shall be available for the nonexclusive use of Tenant during the full term
of this Lease or any extension of the term hereof . . . ." A contract must receive such an
interpretation as will make it lawful, operative, definite, reasonable, and capable of being
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carried into effect, if it can be done without violating the intention of the parties. (Civ.
Code, § 1643.)
The reasonable interpretation of the clause is that the common area shall
actually be available for the tenant's use, not some hypothetical availability. Where a
single tenant takes up the vast majority of the parking spaces (a survey showed 95
percent), it is reasonable to conclude other tenants have been denied use of the common
area. In addition, where the landlord at the time of leasing is well aware of the tenant's
propensity to deny use to other tenants, it is reasonable to conclude the landlord
authorized the denial of use.
K & G argues that the prior experience of Williams, its property manager,
at one shopping center is not a basis for concluding it knew the gym's customers would
be making parking difficult for other customers. But the court could reasonably conclude
Williams's experience at one other shopping center forewarned her of the parking
problem a gym would cause.
K & G argues, without citation to authority, that Williams's knowledge
cannot be imputed to it. But it is undisputed that Williams was the agent for K & G in
negotiating the Yolanda's lease. In most cases a principal will be charged with the
knowledge of its agent. (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and
Employment, § 150, p. 195.) K & G fails to explain why it would not be true in this case.
In any event, Williams's experience with another shopping center is not the
only evidence that K & G knew a gym's customers would take over the parking lot.
Williams testified that all tenants in a new shopping center are very interested in who the
other tenants will be. That is a statement of the obvious. But K & G failed to disclose to
Gietzen that 24 Hour Fitness, and not West Marine, would be the anchor tenant. The trial
court could reasonably conclude K & G did not inform Gietzen because it knew the
gym's customers would monopolize the parking lot.
K & G argues the trial court erred in implying a lease term that gyms are
prohibited tenants. But the court implied no such term. Nor did the court imply a lease
term that Yolanda's is entitled to a set number of parking spaces or exclusive parking
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spaces. Instead the court based its decision on the breach of the express lease covenant
allowing Yolanda's nonexclusive use of the common area. Yolanda's was, for all
practical purposes, deprived of that use.
II
K & G contends the trial court erred in finding it breached the covenant in
bad faith.
There is implied in every contract a covenant of good faith and fair dealing.
(1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 798, p. 892.) The covenant
requires each party not to do anything that would deprive the other party of the benefits
of the contract. (Ibid.) The trial court's finding that K & G breached the lease covenant
in bad faith is simply another way of saying that it breached the implied covenant of good
faith and fair dealing.
K & G points to the general integration clause of the lease. That clause
states there are no implied covenants. But it would be unreasonable to construe that
clause as meaning K & G is not required to act in good faith.
The good faith of the parties is essential to all contracts. No agreement, no
matter how finely crafted, will protect a party if the other party is not acting in good faith.
If indeed K & G is contending that the lease allows it to act in bad faith, it must point to a
clause more specific than a general clause against implied covenants.
III
K & G contends it is error for the judgment not to confine its liability to its
interest in the shopping center.
Article 39 of the lease provides in part: "The liability of Landlord under
this Lease shall be limited to Landlord's interest in the Shopping Center. Tenant agrees
to look solely to Landlord's interest in the Shopping Center for the satisfaction of any
liability, duty or obligation of Landlord with respect to this Lease, or the relationship of
Landlord and Tenant hereunder, and no other assets of Landlord shall be subject to any
liability therefor. . . ."
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Yolanda's points out that K & G failed to raise the matter in the trial court.
Thus, K & G has waived the issue for the purposes of this appeal. (Citing Tiernan v.
Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 221-222, fn. 15.)
Yolanda's also argues the provision raises a post-judgment collection issue, not one that
should be addressed in the judgment.
K & G cites no authority for the proposition that a provision such as article
39 must be included in the judgment. The matter is best left for post-judgment
proceedings.
IV
K & G contends the trial court erred in finding that Gietzen is a party to the
lease.
Although Gietzen is not a tenant, he personally guaranteed the lease. The
trial court found Gietzen to be a party to the lease based on his guarantee. The guarantee
is referenced in the lease.
K & G argues that there is no authority for the proposition that the landlord
owes any duty to the guarantor. K & G also points out that the guarantee was only for the
first 24 months of the lease. The guarantee had expired by the time Gietzen bought suit.
Gietzen does not contest K & G's contention that the guarantee expired
prior to the time Gietzen filed suit. Thus, even if a guarantor can be considered a party to
the lease, Gietzen was no longer a party.
K & G is entitled to a declaration that it owes no duty to Gietzen with
regard to the parking.
V
K & G contends that the judgment needs to be amended if it awards
damages to Gietzen.
But Gietzen was not a party to the action as of the filing of the first
amended complaint. K & G points to nothing in the judgment that would indicate it
contains an award to Gietzen. The judgment need not be amended.
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VI
KGCRE contends that it cannot be liable for breach of contract.
KGCRE points out that it was only an agent for K & G. It is not a party to
the lease. Only a party to a contract may be held liable for its breach. (Software Design
& Application, Ltd. v. Price Waterhouse (1996) 49 Cal.App.4th 464, 471.)
Yolanda's argues that an agent is liable to third parties where the agent's
acts constitute wrongful conduct. (Citing Civ. Code, § 2343; Ruiz v. Herman Weissker,
Inc. (2005) 130 Cal.App.4th 52, 65.) Undoubtedly an agent may be liable in tort for its
own wrongful conduct. But only a party to a contract can breach the contact.
Here the trial court found Yolanda's tort causes of action against KGCRE
are time barred. The trial court based its judgment exclusively on the contract causes of
action. KGCRE cannot breach a contract between K & G and Yolanda's.
Yolanda's reliance on Koehrer v. Superior Court (1986) 181 Cal.App.3d
1155 is misplaced. There the court stated, "The covenant of good faith and fair dealing
imposes obligations on the contracting parties separate and apart from those
consensually agreed to . . . ." (Id. at p. 1169, italics added.) KGCRE is not a contracting
party. We must reverse the judgment against KGCRE.
It follows that the trial court, in giving judgment on the cross-complaint,
should have declared that KGCRE is not a party to the lease and it owes no contractual
duties to Yolanda's.
VII
Goveia contends he voluntarily dismissed his cross-complaint for
declaratory relief, thus the trial court erred in awarding attorney fees and costs against
him.
After the trial court issued its statement of decision, the defendants raised
objections to the proposed judgment. At the hearing on the judgment, Goveia made a
motion to dismiss his cross-complaint with prejudice, for himself as an individual only.
Goveia made the motion pursuant to Code of Civil Procedure section 581, subdivision
(e). Yolanda's did not object to the motion. The trial court's minute order states the court
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grants the unopposed motion to dismiss. The parties left the hearing to try to settle their
differences on the judgment. When that proved impossible, the parties returned to the
court. Yolanda's then raised an objection to Goveia's motion to dismiss at the same
hearing. The court's minute order of April 9, 2014, states, "The Court confirms and
executes the proposed judgment." The proposed judgment provides for judgment against
Goveia on the cross-complaint, as well as an award of costs and attorney fees against
him.
Goveia filed a notice of entry of dismissal of his cross-complaint. The
notice is dated April 15, 2014, but the document in the appellant's appendix contains no
file stamp. Goveia filed a notice of appeal on April 23, 2014.
On July 2, 2014, in response to Goveia's notice of entry of dismissal,
Yolanda's submitted a proposed order denying Goveia's request for dismissal. The trial
court signed the order on July 24, 2014.
Code of Civil Procedure section 581, subdivision (e) provides: "After the
actual commencement of trial, the court shall dismiss the complaint, or any causes of
action asserted in it, in its entirety or as to any defendants, with prejudice, if the plaintiff
requests a dismissal, unless all affected parties to the trial consent to dismissal without
prejudice or by order of the court dismissing the same without prejudice on a showing of
good cause."
The section is mandatory. It provides that the trial court "shall dismiss" if
the plaintiff so requests. It does not require the defendants' consent to a dismissal with
prejudice. The trial court initially dismissed Goveia's cross-complaint. It was without
authority to rescind the dismissal.
Goveia is mistaken, however, as to the effect of the dismissal. It does not
prevent a judgment from being entered against him or an award of costs and attorney fees
against him. Thus, although the trial court erred in rescinding the dismissal, the court
was correct in entering judgment against Goveia and awarding cross-defendants costs and
fees. (See Foreman Roofing, Inc. v. United Union of Roofers, etc. Workers (1983) 144
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Cal.App.3d 99, 108-109.) In fact, a defendant in whose favor a dismissal is entered is the
prevailing party as a matter of law. (Code Civ. Proc. § 1032, subd. (a)(4).)
On the complaint, the judgment against KGCRE is reversed. In all other
respects, the judgment is affirmed.
On the cross-complaint, the judgment shall be amended to provide that
Gietzen is not a party to the lease and K & G owes him no duties with regard to parking,
and that KGCRE is not a party to the lease and owes no duties as to parking.
Costs on appeal are awarded to Yolanda's against K & G and Goveia.
Costs on appeal are awarded to KGCRE against Yolanda's.
NOT TO BE PUBLISHED.
GILBERT, P.J.
We concur:
YEGAN, J.
PERREN, J.
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Kent M. Kellegrew, Judge
Superior Court County of Ventura
______________________________
Voss, Cook & Thel, LLP, Francis T. Donohue III for Defendants, Cross-
complainants and Appellants Joseph D. Goveia; K & G/Seabridge II, LLC; Rocklin
Covenant Group, LP; and Kahl & Goveia Commercial Real Estate.
Lurie & Seltzer, Barak Lurie, Michael J. Conway for Plaintiffs, Cross-
defendants and Respondents Rod E. Gietzen and Yolanda's, Inc.
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