OS Pacific v. Trio Pasadena CA2/5

Filed 2/28/22 OS Pacific v. Trio Pasadena CA2/5
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
OS PACIFIC, LLC, B305601 c/w B308346
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 19GDCV00317)
v.
TRIO PASADENA, LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Curtis A. Kin, Judge. Affirmed as modified.
Mohajerian and Al Mohajerian and Ann Anooshian for
Plaintiff and Appellant.
Hamburg, Karic, Edwards & Martin and Gregg A. Martin
and Ann S. Lee for Defendant and Respondent.
__________________________
OS Pacific, LLC (tenant) appeals from a judgment in favor
of Trio Pasadena, LLC (landlord) involving the renewal of a
commercial lease. In a separate appeal, tenant challenges the
posttrial award of attorney fees and costs to landlord. We
consolidated the two appeals for argument and decision. We
modify the costs award by taxing the fees for landlord’s expert
witness but otherwise affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 2007, the predecessors to landlord and tenant entered
into a lease to operate a Roy’s restaurant in a mixed-use building
in Pasadena. At the time the lease was signed, the buildout of
the restaurant was not yet completed so the lease contained
blank spaces for certain dates. These blank spaces would become
relevant as facts would unfold. On December 12, 2008,
construction now completed, the parties entered into a Term
Commencement and Expiration Agreement which included the
missing dates: the initial term of the lease commenced on
May 10, 2008 – when the tenant was required to begin paying
rent – and expired on May 31, 2018, unless by September 3, 2017,
tenant exercised the first of two, five-year renewal options.
In 2013, tenant took over the lease as part of its purchase
of over 20 Roy’s restaurants.1 In 2016, landlord purchased the
property. As part of the transaction, the lease was transferred to
landlord. Although notice was given to residential tenants of the
sale of the property, it is unclear whether notice was also given to
the commercial tenants.
1 The lease was assigned several times between 2007 and
2013 to different entities operating the Roy’s restaurant in the
building. These assignments are not relevant to our discussion.
2
1. The Relevant Lease Terms
The lease provided for an initial term of 10 years and two
consecutive renewal terms of five years each. To trigger the first
renewal, tenant was required to notify landlord in writing by
September 3, 2017, of its intent to exercise the option. The lease
provision for the renewal options and a forfeiture savings clause
(italics added) follow:
“Renewal Options. Tenant shall have the option to
renew this Lease for two (2) consecutive renewal terms (each a
“Renewal Term”) of five (5) years each, commencing on the first
day following the expiration of the Initial Term or the then
current Renewal Term, subject to the terms and conditions set
forth herein. If Tenant is not in default beyond the expiration of
any applicable cure period of a monetary covenant or a material
non-monetary covenant under this Lease, Tenant may renew this
Lease as provided above upon giving Landlord written notice of
such renewal not less than two hundred seventy (270) days and
not more than eighteen (18) months prior to the expiration of the
then current Term. It is the intention of the parties to avoid
forfeiture of Tenant’s right to extend the Term of this Lease under
any of the options set forth in this Section through inadvertent
failure to give notice of exercise thereof within the time limits
prescribed. Accordingly, if Tenant should fail to give notice to
Landlord of Tenant’s election to extend the Term of this Lease for
any of the aforesaid Renewal Terms on or before the date such
notice was due, Tenant shall not be deemed to forfeit its right to
renew if Tenant can provide reasonably satisfactory evidence to
Landlord that Tenant’s failure to exercise such Renewal Term
within the required time frame was the result of an administrative
error or oversight.”
3
If tenant failed to renew the lease, the following “holding
over” provision applied upon expiration of the initial term.
“HOLDING OVER. This Lease and the term created by
this Lease shall cease and terminate at the end of the Initial
Term hereof, unless extended as provided herein, without the
necessity of notice, and Tenant hereby waives notice and agrees
that Landlord shall be entitled to summary recovery of the
Premises.
“Any holding over after the expiration of the Term hereof,
without the written consent of Landlord, shall be construed to
create a tenancy at will, under all the terms, covenants and
conditions of this Lease, except Landlord shall be entitled to
collect rental [sic] in the amount of one hundred fifty percent (150
[percent]) of Base Rent, together with Additional Rent and
Percentage Rent due hereunder. Any holding over after the Term
hereof with the consent of Landlord, shall be construed to create
tenancy from month to month at the Base Rent and Additional
Rent in effect for the last month of the Term and under all the
other terms, covenants and conditions of this Lease.”
2. Tenant Attempts to Renew
On September 1, 2017 – two days before the expiration of
the first renewal option deadline – tenant’s consultant contacted
landlord’s property manager to arrange a meeting to discuss the
renewal of the lease and tenant improvements. Landlord
scheduled the meeting for September 7, 2017, a date that was
after the option deadline. At this meeting, landlord informed
tenant’s consultant that the September 3d deadline to exercise
the option to renew had passed. According to landlord, tenant’s
consultant stated he was unaware of the September 3d deadline,
and he would need to “go back and check.”
4
At trial, tenant’s consultant would testify he attended the
meeting believing the deadline to renew was October 3, 2017.
Previously, tenant had provided him with a copy of the lease,
which contained no dates, and a lease abstract, which listed an
October 3d deadline. According to the consultant, at the meeting
he informed landlord he had relied on the lease abstract. The
consultant did not show landlord a copy of the abstract at the
meeting. A copy of the 13-page lease abstract was admitted into
evidence at trial. The October 3d deadline is shown on page 9
with no particular emphasis in typeface such as bold or italics.
After the September 7th meeting had concluded, tenant’s
general counsel read the lease and confirmed for herself tenant
had missed the deadline.2 At trial, general counsel would testify
she forwarded the lease abstract to tenant’s consultant and relied
on it herself. She believed the lease abstract was prepared by the
real estate department of tenant’s parent company.3
2 Although we identify the attorney as tenant’s general
counsel, she actually worked for a company that provided
management services, including legal, accounting, and human
resources, to tenant and others.
3 There was evidence at trial that the lease abstract may
have been prepared for tenant’s parent company by a third-party
vendor, Accruent, Inc. Admitted into evidence was a letter
tenant had sent to Accruent, Inc. on December 31, 2018, advising
Accruent, Inc. of the mistake on the lease abstract and stating
tenant was holding Accruent Inc. responsible for any damages
resulting from this error. General counsel also indicated in a
May 24, 2018, letter that the lease abstract came as part of the
documentation provided by the seller of the 20 Roy’s restaurants.
In any case, it is undisputed neither tenant nor landlord created
the lease abstract.
5
Also on the same day, general counsel mailed landlord a
letter that stated: “As you know, the Initial Term of the above-
referenced Lease currently expires on May 31, 2018. Pursuant to
Article 1.3.C, Tenant has two (2) Renewal Options of five (5)
years each. [¶] This letter constitutes Tenant’s written notice to
Landlord exercising the first five (5) year Renewal Option. The
new expiration date for the Lease shall be May 31, 2023. [¶] If
you have any questions or concerns regarding this notice, please
contact the undersigned.”
The letter did not acknowledge the renewal was untimely
or indicate the delay was a result of administrative error or
oversight. Nor did the letter include any explanation of the facts
leading up to, or supporting, the error or oversight. General
counsel would explain at trial she drafted the letter with the
understanding the time to renew had passed but she believed
tenant’s consultant had advised landlord at the September 7,
2017 meeting about the error involving the lease abstract.
By letter dated September 13, 2017, landlord rejected
tenant’s attempt to renew, stating its position was that the lease
would expire on May 31, 2018. Landlord also advised tenant it
planned to market and solicit offers after May 31. Tenant was
invited to submit its own offer. This letter was mailed not to
tenant directly, but to its former parent company in Tampa,
Florida as well as to tenant’s contractual guarantor.4
4 By this time, tenant had been acquired by a new parent
company and was a wholly-owned subsidiary of United Ohana,
LLC. Tenant’s previous parent was OSI Restaurant Partners.
The landlord’s September 13, 2017, letter was erroneously sent to
OSI Restaurant Partners as well as to Roy’s Holdings, Inc., the
guarantor on the lease. OSI Restaurant Partners also served as
6
General counsel would testify that, because tenant did not
receive, and was unaware of, landlord’s rejection letter, tenant
made plans to “refresh” the restaurant because it believed it had
properly renewed the lease. In internal emails in January 2018,
landlord and its property manager discussed tenant’s plan to
make improvements to the premises. Landlord expressed
confusion as to why tenant would make these plans without a
lease extension in place.
By April 6, 2018, landlord had advised tenant’s general
counsel personally of the September 13, 2017, letter that rejected
tenant’s attempt to renew and had forwarded a copy to her.
Around mid-April of 2018, general counsel explained to landlord’s
attorney the situation regarding the lease abstract from her
client’s perspective. The attorney dismissed tenant’s attempt to
renew the lease and said landlord “didn’t care why it was late,
that it was late. . . .” On May 7, 2018, tenant’s director of real
estate told landlord he believed tenant had validly exercised its
renewal option.
In letters sent in April and May 2018, the parties continued
to dispute whether the lease would end on May 31, 2018. In its
correspondence with landlord, tenant did not specify it was
relying on the savings clause to renew the lease. Nor did tenant
provide evidence of the administrative error or oversight – the
erroneous lease abstract. At trial, general counsel would testify
she spoke to landlord’s property manager and attorney about the
circumstances surrounding the renewal attempt, including the
mistake in the lease abstract, but did not provide the lease
abstract because “they hadn’t requested that.” She continued to
guarantor. General counsel testified she did not receive this
letter and was unaware of its contents until April 2018, some six
months after the letter’s date.
7
believe she did not need to include facts regarding the lease
abstract in correspondence because it had been explained orally
to landlord’s representatives.
On May 24, 2018, one week before the lease expired,
tenant, for the first time, set forth in a writing that it intended to
renew under the savings clause, quoted from the clause, stated
the reasons for its untimely renewal, and enclosed the lease
abstract. The next day, landlord rejected tenant’s explanation for
the untimely exercise of the renewal option. After May 31, 2018,
tenant continued to pay rent in the base amount. It did not pay
the holdover rent, which was 150 percent of the base rent. On
December 21, 2018, landlord served tenant with a 10-day notice
to pay rent or quit, although no unlawful detainer action was
filed around that time.
3. The Lawsuits
On March 12, 2019, tenant filed its own lawsuit against
landlord for breach of contract and declaratory relief. In the
breach of contract cause of action, tenant alleged that landlord
had breached the covenant of quiet enjoyment by disrupting
tenant’s business when it posted eviction notices and showed the
property to prospective tenants.5 Tenant also sought declaratory
5 The trial court granted landlord’s motion to strike the
breach of contract/quiet enjoyment cause of action under the
strategic lawsuits against public participation or anti-SLAPP
statute. (Code Civ. Proc., § 425.16.) Tenant argues the court’s
dismissal of its breach of contract cause of action was “in error
and an abuse of discretion” but provides this court with no
analysis or citation to legal authority. Tenant does not discuss
the anti-SLAPP ruling at all. Tenant forfeits its argument on
this point. (Sviridov v. City of San Diego (2017) 14 Cal.App.5th
514, 521 [failure to present reasoned argument constitutes
forfeiture] (Sviridov).)
8
relief to determine whether it had validly exercised the renewal
option and to discover the identity of the true owner of the
property. Tenant claimed it had never received notice of the
transfer of ownership as required under the lease.
Two days later, landlord filed its unlawful detainer
complaint, seeking restitution of the premises, forfeiture of the
lease, and unpaid holdover rent calculated at 150 percent of the
base rent. The cases were consolidated for bench trial.
At trial, the parties presented the evidence we have
described. Tenant offered expert testimony that lease abstracts
were commonplace in commercial real estate transactions. Its
expert testified that tenant, as the buyer of 20 Roy’s restaurants
from a sophisticated seller, would be more inclined to rely on a
lease abstract than any document provided by the seller.
Tenant argued the intent of the parties as expressed in the
savings clause governed whether it had validly exercised the
renewal option. According to tenant, the savings clause
contained no deadline for invoking the clause, which was
triggered only after there was a “deemed forfeiture.” By that,
tenant meant landlord was required to reject the renewal notice
before tenant was required to invoke the savings clause. Tenant
claimed the landlord’s September 13, 2017, rejection letter did
not trigger the obligation to invoke the savings clause because
tenant had not received the letter, it having been sent to the
wrong entity. Tenant first heard about the letter in mid-April
2018. By that time, tenant had made various improvements to
the space and claimed it had detrimentally relied on landlord’s
failure to reject tenant’s renewal of the lease.
Tenant also argued any failure to renew was excused by
landlord’s breach of the lease by failing to notify tenant of the
sale of the property and assignment of the lease.
9
Landlord’s theory at trial was that tenant’s failure to read
the actual lease and reliance on a lease abstract prepared for
tenant’s parent company by a third party was objectively
unreasonable. Tenant failed to demonstrate its untimely renewal
was the result of an “administrative error or oversight.”
Landlord presented expert testimony that it was contrary to
custom and practice in the industry to rely on a lease abstract
prepared by a third party and that a party to a lease must look at
the actual lease to be certain of its obligations.
Landlord posited that tenant failed to timely renew the
lease because it sought to receive tenant improvement
concessions from landlord and because tenant was required to,
but had not yet, received permission from the guarantor (its
former parent company) for renewal. Landlord presented
evidence that the guarantor sued tenant in Florida because
tenant renewed other leases without prior approval.
The trial court found in landlord’s favor. As to that part of
its declaratory relief cause of action to discover the identity of the
true owner of the property, the court found the evidence
established landlord was in fact the landlord of the property and
that tenant had conceded as much in its trial brief. Tenant does
not challenge this determination on appeal.
As to the part of its declaratory relief claim to determine
whether tenant had validly exercised the renewal option, the
court found tenant’s September 7, 2017, letter did not timely
renew the lease, as it was four days past the September 3, 2017,
renewal deadline. It found tenant’s detrimental reliance
argument to be unavailing because the evidence showed most of
the tenant improvements were made in or after April 2018, when
it was undisputed tenant knew landlord had rejected its renewal
attempt. The trial court reasoned, “The timing of such
10
expenditures for improvements to the Premises is less consistent
with a mistaken belief that the September 7, 2017 renewal notice
was effective than it is with an attempt to bolster [tenant’s]
detrimental reliance litigation position after having learned
through means it could not ignore in April and May 2018 that
[landlord] did not consider the option validly exercised . . . .”
The court also found tenant failed to renew under the
savings clause. The court framed the issue the way the parties
had presented the argument: “[T]he proper analysis is whether it
was objectively reasonable for [landlord] to determine that
[tenant] had not provided reasonably satisfactory evidence of
administrative error or oversight in connection with its untimely
renewal.” The court concluded that landlord did not breach the
lease by failing to honor the savings clause. The court’s ruling
described the chronology of events beginning in September 2017,
and referenced repeated instances when tenant failed to invoke
the savings clause or provide evidence of administrative error or
oversight.6
The court found untimely tenant’s May 24, 2018, renewal
letter which, for the first time, cited to the savings clause and
provided a copy of the lease abstract. The court explained,
“Although the Lease does not explicitly provide a time frame by
which the tenant must provide evidence under the savings
6 For tenant to successfully invoke the savings clause, tenant
was required to provide “reasonably satisfactory evidence to
Landlord that Tenant’s failure to exercise such Renewal Terms
within the required time frame was the result of an
administrative error or oversight.” The court focused on the word
“evidence,” and expressly found that tenant’s letters of
September 7, 2017, April 6, 2018 and May 11, 2018 did not
provide any evidence of claimed administrative oversight or
error.
11
clause, the Court finds it was reasonable to conclude [tenant] did
not comply with the savings clause. Here, [tenant] made no
attempt to satisfy the requirements of the savings clause until
one week prior to the expiration of the Lease. Such delay was
unreasonable, rendering [tenant’s] May 24, 2018 attempt non-
compliant. (See Civ. Code, § 1657 [‘If no time is specified for the
performance of an act required to be performed, a reasonable
time is allowed’].)” The court found persuasive testimony from
the attorney for the original landlord that he had negotiated a
270-day advance notice requirement for renewal of the lease to
ensure his client had sufficient time to market the space.
As an alternative ground, the court concluded tenant’s
untimely renewal was not the result of administrative error or
oversight. It found tenant’s reliance on the lease abstract was
not reasonable in light of the custom and practice in the industry
and the size of the original transaction, which involved the
purchase of 20 Roy’s restaurants. The court concluded that
landlord had reasonably determined that tenant had failed to
provide reasonably satisfactory evidence of administrative error
or oversight.
On the unlawful detainer claim, the court found in
landlord’s favor and awarded holdover rent. It ordered
restitution of the premises, forfeiture of the lease, and back rent
of $30,349.48 (calculated at the holdover rate of 150 percent of
the base rent from June 1, 2018 to December 31, 2018) plus
$924.96 per day of occupancy from January 1, 2019 onward. The
court also awarded attorney fees and costs to landlord.
Tenant timely filed a notice of appeal from the judgment.
DISCUSSION
At the outset, we observe that on appeal tenant raises a
multitude of arguments that challenge the trial court’s findings
12
and rulings. Many of these contentions are unsupported by
reasoned argument, legal authority, or record citations and thus
violate rule 8.204(a) of the Rules of Court. For example, tenant
sets out a point-by-point criticism of the trial court’s statement of
decision in a 14-page section in its opening brief entitled, “Trial
Court’s Abuse of Discretion and Errors of Law.” Despite this
heading, there is not one citation to legal authority in that
section, nor a discussion of how the trial court committed “errors
of law.” This is but one example of tenant’s failure to adequately
present its arguments on appeal — although it is the most
egregious one. We decline to address those issues for which
tenant has failed to provide reasoned argument based on relevant
authority. We consider these arguments to be forfeited. 7 (Cahill
v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956;
Jones v. Superior Court (1994) 26 Cal.App.4th 92, 99 [“Issues do
not have a life of their own: if they are not raised or supported by
argument or citation to authority, we consider the issues
waived”].)
With that caveat, we address tenant’s arguments that
adequately challenge: (1) the trial court’s finding that tenant’s
7 Along the same vein, landlord faults tenant for failing to
fairly state the evidence. “A party who challenges the sufficiency
of the evidence to support a finding must set forth, discuss, and
analyze all the evidence on that point, both favorable and
unfavorable.” (Doe v. Roman Catholic Archbishop of Cashel &
Emly (2009) 177 Cal.App.4th 209, 218.) Tenant’s failure,
landlord argues, means tenant’s substantial evidence argument
is waived. (Ibid.) Tenant fails to address this point in its reply
brief. While we agree tenant omitted certain unfavorable
evidence, such as testimony by the attorney for the original
landlord about its rejection of renewal notices, we decline to
affirm the judgment on this basis.
13
attempts to exercise the renewal option were untimely and failed
to provide reasonably satisfactory evidence of administrative
error or oversight; (2) the trial court’s award of holdover rent in
the unlawful detainer action; and (3) the attorney fees and costs
award to landlord.
1. Standard of Review
“In reviewing a judgment based upon a statement of
decision following a bench trial, we review questions of law de
novo. [Citation.] We apply a substantial evidence standard of
review to the trial court’s findings of fact. [Citation.] Under this
deferential standard of review, findings of fact are liberally
construed to support the judgment and we consider the evidence
in the light most favorable to the prevailing party, drawing all
reasonable inferences in support of the findings. [Citation.] [¶]
A single witness’s testimony may constitute substantial evidence
to support a finding. [Citation.] It is not our role as a reviewing
court to reweigh the evidence or to assess witness credibility.
[Citation.] ‘A judgment or order of a lower court is presumed to
be correct on appeal, and all intendments and presumptions are
indulged in favor of its correctness.’ [Citation.] Specifically,
‘[u]nder the doctrine of implied findings, the reviewing court
must infer, following a bench trial, that the trial court impliedly
made every factual finding necessary to support its decision.’
[Citation.]” (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)
“When an appellant challenges a trial court’s interpretation
of a written contract, the substantial evidence standard of review
applies when the contract is ambiguous and conflicting extrinsic
evidence is admitted to assist the court in interpreting the
contract. [Citation]. However, if interpretation of the contract
does not turn on the credibility of conflicting extrinsic evidence,
the trial court’s interpretation of the contract is a question of law
14
we review de novo, or independently.” (Tribeca Companies, LLC
v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088,
1110–1111.)
2. The Renewal Option Was Not Exercised
Tenant challenges the trial court’s determination that it
failed to validly renew the lease. Although tenant acknowledges
its attempt to renew was untimely, tenant posits two grounds for
its effective renewal. First, tenant contends its breach was
“minor” and may be excused, and landlord’s own material breach
of the lease discharged tenant from its duty to perform. For its
second ground, tenant relies on the savings clause and argues the
parties’ intent as expressed in the clause’s first sentence is
paramount: “It is the intention of the parties to avoid forfeiture
of [t]enant’s right to extend the Term of this Lease under any of
the options set forth in this [s]ection through inadvertent failure
to give notice of exercise, thereof, within the time limits
prescribed.” (Emphasis omitted.) With that provision at the fore,
tenant asserts the savings clause must be interpreted broadly,
and any uncertainties must be resolved in its favor.
We first consider whether the untimely renewal was
excused by landlord’s conduct and then address tenant’s reliance
on the savings clause.
A. Tenant’s Attempt to Renew Was Untimely and
Not Excused
Tenant concedes its initial attempt to renew the lease by
letter dated September 7, 2017, was late. Tenant did not comply
with the express terms of the renewal option — that is, tenant
did not provide written notice of its intent to renew by
September 3, 2017. We state the general principle that applies to
this setting: “courts are strict in holding an optionee to exact
compliance with the terms of the option.” (Hayward Lumber &
15
Inv. Co. v. Construction Products Corp. (1953) 117 Cal.App.2d
221, 229; Bekins Moving & Storage Co. v. Prudential Ins. Co.
(1985) 176 Cal.App.3d 245, 250; Jeffrey Kavin, Inc. v. Frye (2012)
204 Cal.App.4th 35.)
Tenant contends that there are exceptions to this rule, and
this was a “minor breach” the trial court should have excused.
For this, it relies on Kaliterna v. Wright (1949) 94 Cal.App.2d
926, disapproved on a different ground by State Farm Mut. Auto.
Ins. Co. v. Superior Court of San Francisco (1956) 47 Cal.2d 428,
431 and Title Ins. & Guaranty Co. v. Hart (9th Cir. 1947)
160 F.2d 961. Tenant’s reliance is misplaced. In both Kaliterna
and Hart, the tenants timely and validly renewed according to
the terms of their leases. The Kaliterna and Hart courts held the
tenants were entitled to renew even though tenants had
previously breached the lease. Both courts found that the
respective landlords had waived the minor breaches. (Kaliterna,
at p. 936; Hart, at pp. 970–971.) Neither case involved a tenant’s
failure to comply timely with the express terms of a renewal
option.
Tenant also contends landlord’s own material breach of the
lease discharges tenant from its duty to timely exercise the
option. The litany of breaches described by tenant were: “by
failing to provide required renewal notices, stalling the meeting
until after the September 3, 2017 deadline, or by wrongfully
‘rejecting’ an in-person production of evidence of ‘oversight’, or by
wrongfully rejecting a written notice provided the same day as
the meeting wherein [landlord] admitted they intended to have
an entirely new lease and raise rent dramatically.” While tenant
correctly observes that one party’s breach may discharge the
second party from its duty to perform (Brown v. Grimes (2011)
192 Cal.App.4th 265, 277), tenant has failed to demonstrate
16
landlord breached the lease. Notably, tenant makes factual
assertions purporting to support its claim of breach without
citation to the record. We parse tenant’s claims of breach and
address them separately.
Renewal Notices and Meeting Date. Tenant repeatedly
asserts in its appellate briefs that landlord was required to
provide renewal notices. By this, we understand that landlord
was required to give notice of the impending renewal deadlines.
Yet, tenant cites to nothing in the lease that obligates landlord to
serve renewal notices, nor does tenant provide other evidentiary
support. Perhaps that is because the evidence is to the contrary.
The attorney who negotiated the lease for the original landlord
testified the first landlord expressly rejected a notice
requirement. The trial court could reasonably credit that
testimony.
Given that landlord was not responsible for alerting tenant
to pending renewal deadlines, it was also not responsible for
ensuring that tenant met with landlord’s representatives prior to
September 3, 2017. The evidence shows tenant asked to meet
with landlord and landlord set a date that tenant accepted. The
trial court’s implied finding that this conduct did not breach the
lease is supported by substantial evidence.
In-Person Offer of Proof. Nor does tenant provide any
evidence to support its argument that landlord rejected an in-
person production of the lease abstract. Again, the evidence is to
the contrary. Tenant’s consultant testified he did not show
landlord a copy of the lease abstract. Tenant’s general counsel
testified she did not provide landlord with the abstract until
May 24, 2018, because “they hadn’t requested that.” As the trial
court observed, tenant had plenty of opportunities to provide
timely evidence of an administrative error or oversight.
17
Rejection of Renewal. We do not credit tenant’s claim
that landlord “wrongfully” rejected the September 7, 2017 notice
of renewal. The purported renewal was untimely and landlord
was entitled to reject it. Finally, tenant provides no legal or
factual support for its assertion that landlord’s purported desire
for a new lease and higher rent was a breach of the lease.8
B. Substantial Evidence Supports the Trial
Court’s Findings Regarding the Savings Clause
Tenant argues the savings clause cures any forfeiture of its
renewal option. The argument continues: Tenant properly
notified landlord of its intent to invoke the savings clause by
orally explaining the circumstances of the delay to landlord. And,
also that it validly renewed on May 24, 2018, when it quoted the
savings clause and provided by letter a copy of the erroneous
lease abstract. Tenant argues a plain reading of the savings
clause reveals there was no time constraint on invoking the
clause and the trial court was not authorized to “write in” one.
Tenant also declines to read into the savings clause a written
notice requirement.
We need not address tenant’s interpretation of the savings
clause because we conclude substantial evidence supports the
trial court’s finding that tenant’s reliance on the lease abstract
was not objectively reasonable. This evidence also provides the
basis for the trial court’s finding that tenant failed to provide
reasonably satisfactory evidence of the administrative error or
oversight required under the lease.
8 We observe tenant asserted in closing argument that its
failure to timely renew was also excused by landlord’s breach of
the lease requiring it to notify tenant of the sale of the property
and assignment of the lease. Tenant appears to have abandoned
this argument on appeal.
18
The trial court found tenant, a sophisticated business
entity that owned dozens of restaurants, acted unreasonably by
relying solely on a lease abstract that it did not prepare.
Substantial evidence supports the trial court’s finding.
Landlord’s expert testified it was contrary to custom and
practice in the industry to rely on a lease abstract prepared by a
third party and that a party to a lease must look at the actual
lease to be certain of its obligations. Tenant’s own expert
admitted a tenant “on average” should read its lease and should
take reasonable precautions to timely exercise an option,
including review of the option expiration date. He also testified
that the custom and practice of the industry was to create one’s
own lease abstract, especially for a transaction that included the
purchase of 20 restaurants.
The testimony of the opposing experts comports with the
rule that “one who assents to a contract is bound by its provisions
and cannot complain of unfamiliarity with the language of the
instrument.” (Madden v. Kaiser (1976) 17 Cal.3d 699, 710.) Even
if the lease itself failed to specify the dates for renewal, the Term
Commencement and Expiration Agreement, which landlord’s
expert testified was part of the lease, provides the renewal
deadline.
Tenant does not dispute the significance of the evidence we
have cited. It instead asserts, for the first time, that the savings
clause does not require that the administrative error or oversight
be reasonable. Tenant now contends the savings clause merely
requires the evidence be “reasonably satisfactory.” Tenant took
the contrary position at trial; it argued to the trial court and
presented evidence that it was reasonable for tenant to rely on
the lease abstract even though it was prepared by a third party.
Tenant may not change its theory on appeal. We need not
19
consider this argument. (Brown v. Boren (1999) 74 Cal.App.4th
1303, 1316.) In any event, the trial court found landlord acted
reasonably when it concluded tenant failed to provide satisfactory
evidence of administrative error or oversight. Substantial
evidence supports this finding.
3. The Trial Court Correctly Found for Landlord in the
Unlawful Detainer Proceeding
Tenant next challenges the trial court’s unlawful detainer
judgment in landlord’s favor. The trial court found that, because
tenant failed to validly renew the lease, tenant was subject to the
holdover provision in the lease, which required it to pay 150
percent of the base rent. Tenant does not dispute it paid only the
base rent after the lease expired. It instead argues landlord is
estopped from recovering damages in its unlawful detainer action
because it waived tenant’s late renewal by inducing it. In
particular, landlord induced the delay by failing to remind tenant
of the renewal deadline, setting the meeting for after the deadline
had passed, and sending the rejection notice to the wrong
address. This argument is essentially a rehash of tenant’s
assertions that the landlord’s conduct was a breach of the lease.
We have already rejected this argument, and it is not
resuscitated in the unlawful detainer action.
Indeed, Simons v. Young (1979) 93 Cal.App.3d 170, 178
(Simons), the case relied upon by tenant, supports our conclusion.
Simons presents substantially the same facts – the tenant there
failed to timely renew but had made extensive tenant
improvements of which the lessors were aware. (Id. at pp. 175–
177.) The trial court granted the Simons tenant equitable relief
from forfeiture and the court of appeal reversed. It found the
lessors did not do or say anything to induce the delay even
though they knew about the tenant’s improvements and his
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intent to make further additions to the property. (Id. at p. 185.)
Likewise, landlord here did not do or say anything to induce the
delay even though it knew about tenant’s improvements. We
have already discussed that landlord was not obligated to do any
of the things tenant claims would have prevented untimely
renewal.
We also reject tenant’s contention that landlord may not
recover any holdover rent because the holdover provision expired
with the lease on May 31, 2018. California courts have enforced
similar holdover provisions after the expiration of a commercial
lease. (Constellation-F, LLC v. World Trading 23, Inc. (2020)
45 Cal.App.5th 22, 26 [150 percent rent increase after commercial
lease expired was enforceable]; Vucinich v. Gordon (1942)
51 Cal.App.2d 434, 435, 437 [holdover provision containing 500
percent rent increase enforced].)
Relying on the same faulty logic, tenant contends it was
entitled to 30 days’ notice pursuant to Civil Code sections 789
and 790 because it became a tenant at will upon “termination” of
the lease. According to tenant, landlord’s 10-day notice to pay
rent or quit was insufficient to support the unlawful detainer. As
an initial matter, tenant failed to raise this argument below, and
it is forfeited. (Cinnamon Square Shopping Center v.
Meadowlark Enterprises (1994) 24 Cal.App.4th 1837, 1844.) In
any event, landlord complied with Code of Civil Procedure section
1161, subdivision (2), which specifies a tenant that continues in
possession without the permission of the landlord after default in
the payment of rent is entitled only to three-days’ notice.
Finally, tenant argues the holdover rent should not have
been calculated from June 1, 2018, since landlord’s unlawful
detainer action was not filed until March 14, 2019. The holdover
provision expressly entitled landlord to holdover rent once the
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lease expired on May 31, 2018. The trial court properly
calculated the rent owed.
4. Attorney Fees and Costs Were Properly Awarded
In the second of the two consolidated appeals, tenant
challenges the trial court’s award of $651,421.75 in attorney fees.
Tenant disputes both landlord’s entitlement to fees and the sum
awarded. We set out the fee provision and summarize the
posttrial proceedings. We then address landlord’s argument that
tenant’s attorney fees appeal should be dismissed as untimely
before considering the merits of tenant’s arguments. Finally, we
address tenant’s claim that landlord’s expert witness fees were
not allowable as costs.
A. Attorney Fees Provision
The lease contained the following attorney fees provision:
“COSTS OF ENFORCEMENT. In the event that
Landlord or Tenant shall bring an action to recover any sum due
hereunder or for any breach hereunder and shall obtain a
judgment in its favor, or in the event that Landlord or Tenant
retains an attorney for the purpose of collecting any sum due
hereunder or construing or enforcing any of the terms or
conditions hereof or protecting their interest in any bankruptcy,
receivership, or insolvency proceeding or otherwise against the
other, the prevailing party shall be entitled to recover all
reasonable costs and expenses incurred, including reasonable
attorneys’ and legal assistants’ fees prior to trial, at trial, and on
appeal and for post[]judgment proceedings.”
B. Proceedings Below
On March 3, 2020, the trial court entered judgment in
landlord’s favor and the clerk mailed a notice of entry of
judgment to the parties. The judgment granted attorney fees in
the amount of $25,234 to landlord for prevailing on its anti-
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SLAPP motion and stated, “Any additional costs and/or attorney
fees shall be sought separately and obtained, if at all, by Noticed
Motion and/or Memorandum of Costs.”
Landlord thereafter filed a memorandum seeking costs in
the amount of $32,474.89. Tenant moved to tax costs and
landlord filed its opposition. Landlord also filed a motion for
attorney fees in the amount of $771,399.75. Tenant opposed,
arguing landlord was not entitled to fees and the fees sought
were excessive.
After argument, the trial court stated it would adopt its
tentative ruling that (1) landlord was the prevailing party and
(2) the declaratory relief and unlawful detainer actions sounded
in contract rather than tort. Thus, landlord was entitled to
attorney fees under the lease’s fee provision. The trial court
awarded landlord $651,421.75 in fees and $29,009.88 in costs. It
reduced landlord’s in-house counsel’s fees by 40 percent and
made a further reduction of $12,214 for fees incurred to address
noise complaints associated with tenant’s improvements to the
restaurant, finding they were not covered by the fee provision.
The trial court directed landlord to give notice and to
submit a “proposed order.” On July 24, 2020, landlord served
tenant with “Defendant’s Notice of Ruling” and attached a
printout of the tentative ruling. The court clerk converted the
tentative ruling into a minute order but did not serve it on the
parties.
One month after landlord served tenant with the notice of
ruling, the trial court issued an amended judgment that added
the attorney fees and costs it had awarded. On August 25, 2020,
the clerk mailed a notice of entry of amended judgment to the
parties. Tenant appealed from the amended judgment within 60
days.
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C. Timeliness of Appeal
Landlord argues the attorney fees appeal must be
dismissed because (1) the July 24, 2020 order awarding fees and
costs is an appealable, postjudgment order, and (2) tenant failed
to timely appeal from that order. (See Colony Hill v. Ghamaty
(2006) 143 Cal.App.4th 1156, 1171–1172 [appeal dismissed for
failure to timely appeal from attorney fees order].) Landlord
contends the amended judgment did not extend tenant’s time to
appeal from the earlier postjudgment order. (See Torres v. City of
San Diego (2007) 154 Cal.App.4th 214, 222 [“ ‘Where the
judgment is modified merely to add costs, attorney fees and
interest, the original judgment is not substantially changed and
the time to appeal it is therefore not affected’ ”].)
Tenant argues it was never served with a document
entitled “Notice of Entry” of judgment or postjudgment order
under California Rules of Court, rule 8.104(a)(1)(B). Thus, its
appeal is timely because it filed its notice of appeal within 180
days of the July 24, 2020 standalone order. We agree.
As relevant here, rule 8.104(a)(1) of the California Rules of
Court requires that “a notice of appeal must be filed on or before
the earliest of: [¶] . . . [¶] (B) 60 days after the party filing the
notice of appeal serves or is served by a party with a document
entitled “Notice of Entry” of judgment or a filed-endorsed copy of
the judgment, accompanied by proof of service; or [¶] (C) 180
days after entry of judgment.”
Here, landlord’s notice of ruling is not entitled “Notice of
Entry” of order and the print-out of the tentative ruling is not a
filed-endorsed copy of the order required under rule 8.104. Thus,
landlord’s notice of ruling did not trigger the customary 60-day
period within which to file a notice of appeal. (Sunset
Millennium Associates, LLC v. Le Songe LLC (2006)
24
138 Cal.App.4th 256, 257.) Instead, tenant had 180 days after
entry of the appealable order to file an appeal. Tenant’s notice of
appeal, filed 81 days after entry of the July 24, 2020 order, was
timely.
D. Attorney Fees Award
Tenant contends landlord is not entitled to attorney fees
because (1) landlord is not a prevailing party under the contract
since landlord recovered damages only in the unlawful detainer
proceeding, a tort action; (2) the fee provision terminated with
the lease on May 31, 2018, and is unenforceable; and
(3) landlord’s defense of the declaratory relief claim does not fall
within the attorney fee provision. We disagree.
i. Legal Principles
In an action on a contract that provides for attorney fees
and costs, the party prevailing on the contract is entitled to
reasonable attorney fees as well as other costs. (Civ. Code,
§ 1717, subd. (a); Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103,
1109.) Civil Code section 1717 does not extend to tort claims.
“ ‘[T]ort claims do not “enforce” a contract’ and are not considered
actions on a contract for purposes of section 1717.” (Kangarlou v.
Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178.)
We review the amount of an attorney fees award by the
abuse of discretion standard, but the legal basis for an attorney
fee award is reviewed de novo. (Mountain Air Enterprises, LLC v.
Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751 (Mountain
Air).)
ii. Landlord Is Entitled to Attorney Fees
Applying these rules, the trial court correctly found
landlord was the prevailing party and was entitled to attorney
fees because both actions were based on a contract – the lease.
We dispense in short order the question of the prevailing party:
25
tenant acknowledges landlord recovered holdover damages in its
unlawful detainer action and the trial court ruled in favor of
tenant and against landlord in the declaratory relief action.
a. action on a contract
Tenant disputes whether either action was “on a contract.”
“To determine whether an action is on the contract, we look to the
complaint and focus on the basis of the cause of action.
[Citations.] Any action that is based on a contract is an action on
that contract regardless of the relief sought.” (Brown Bark III,
L.P. v. Haver (2013) 219 Cal.App.4th 809, 821–822; Blickman
Turkus, LP v. MF Downtown Sunnyvale, LLC (2008)
162 Cal.App.4th 858, 894.)
We conclude the unlawful detainer proceeding was an
action on a contract because it alleged, and the court found, that
tenant breached its contractual lease obligation to pay rent at the
holdover rate. Tenant’s reliance on Drybread v. Chipain
Chiropractic Corp. (2007) 151 Cal.App.4th 1063 (Drybread) is
misplaced. The Drybread court was persuaded the unlawful
detainer action before it sounded in tort because the landlord did
not allege a contractual breach. It sought possession of the
premises as well as fair rental value and statutory damages for
the continued possession, which the landlord alleged was
malicious. (Id. at p. 1076.) Drybread is distinguished on its facts.
As to the declaratory relief action, there is no dispute it is
founded on a contract: Tenant sought a judicial termination of its
rights under a contract, namely whether it had validly renewed
the lease.
b. expiration of the lease
Tenant also attempts to avoid the attorney fees provision
by repeating its earlier argument that the provision expired with
the lease on May 31, 2018. Tenant provides no authority for the
26
proposition that an attorney fees provision is unenforceable after
expiration of the agreement. The assertion is nonsensical.
Litigation over the applicability of an attorney fees provision
frequently, perhaps customarily, concludes after the expiration of
the underlying agreement. Numerous appellate decisions have
applied Civil Code section 1717 to award attorney fees to
prevailing parties even in situations where the contract
containing the attorney fees provision has expired, is
unenforceable, or has been rescinded. (North Associates v. Bell
(1986) 184 Cal.App.3d 860, 865 [citing cases].)
Tenant also argues landlord is not entitled to attorney fees
for defending against the declaratory relief claim because it had
not “brought” the claim. We reject tenant’s argument. Where an
attorney fee clause provides for an award of fees incurred in
enforcing a contract, “[i]t is settled that it is irrelevant if the fees
were incurred offensively or defensively.” (Shadoan v. World
Savings & Loan Assn. (1990) 219 Cal.App.3d 97, 107; Code Civ.
Proc., § 1032, subd. (a)(4) [a “prevailing party” includes “a
defendant in whose favor a dismissal is entered . . . .”].) We
disagree that Mountain Air, supra, 3 Cal.5th at p. 744 states a
general rule to the contrary. Here, tenant brought an action to
enforce its rights under a contract, and landlord was the
prevailing party in the action. Thus, under the lease, tenant was
entitled to attorney fees.
iii. The Trial Court Did Not Abuse Its Discretion in
Awarding $651,421 in Attorney Fees
We next consider whether the trial court abused its
discretion in awarding attorney fees of $651,421.75. We conclude
it did not. The trial court properly used the lodestar method
(number of hours worked times reasonable hourly rate) to
calculate the amount of attorney fees to award in a highly
27
contested lawsuit. (Robertson v. Fleetwood Travel Trailers of
California, Inc. (2006) 144 Cal.App.4th 785, 818–819 (Robertson);
Ketchum v. Moses (2001) 24 Cal.4th 1122, 1135.)
Here, the trial court found the hourly rates of landlord’s
attorneys were reasonable and in line with prevailing market
rates for counsel of similar skill and expertise. The trial court did
reduce landlord’s attorney fees by approximately $138,000 for
duplicative work performed by in-house counsel and for work not
encompassed by the fee provision.
Tenant does not challenge the trial court’s use of the
lodestar method to calculate attorney fees. Nor does he contend
the hourly rates for the attorneys were unreasonable. Without
any legal or factual support, tenant supplies its own “generous”
estimates of the reasonable number of hours it would take to
litigate this case. It suggests that landlord’s lead trial counsel
should be allocated 48 hours (six days at eight hours per day)
total for his presence at trial. This proffer does not account for
trial preparation or any other trial-related work. Tenant’s
estimate that attorney fees for the entire litigation, including
summary judgment and discovery, should total $110,000 is
nothing but speculation, and we need not credit it.
Tenant also argues landlord may not recover fees for work
incurred in connection with the two unlawful detainer actions
landlord voluntarily dismissed. The trial court found this time
was for pre-litigation work necessary to investigate and evaluate
landlord’s claims, and was compensable. The trial court did not
abuse its discretion. (Stokus v. Marsh (1990) 217 Cal.App.3d 647,
656.)
Tenant next contends landlord may not recover any fees for
work performed by in-house counsel. Our Supreme Court
disagrees: “We discern no basis for discriminating between
28
counsel working for a corporation in-house and private counsel
engaged with respect to a specific matter or on retainer. Both are
bound by the same fiduciary and ethical duties to their clients.
[Citation.] Both are qualified to provide, and do provide,
equivalent legal services. And both incur attorney fees and costs
within the meaning of Civil Code section 1717 in enforcing the
contract on behalf of their client.” (PLCM Group, Inc. v. Drexler
(2000) 22 Cal.4th 1084, 1094.) The trial court properly exercised
its discretion in awarding fees for time spent by in-house lawyers
and reducing them by 40 percent.
E. Cost Award
Relying on Code of Civil Procedure section 1033.5, tenant
sought to strike $2,950 from landlord’s expert witness fees. The
trial court found the expert fees were reasonably necessary to the
litigation and were recoverable under Code of Civil Procedure
section 1033.5, subdivision (c)(2). The trial court erred.
Although subdivision (a)(8) of Code of Civil Procedure
section 1033.5 allows for recovery of expert witness fees if they
are ordered by the court, subdivision (b)(1) of the same section
expressly disallows the recovery of fees for expert witness not
ordered by the court “except when expressly authorized by law.”
Landlord devotes two sentences to this argument, fails to cite the
relevant statute, and provides no authority for the award of
expert fees in this setting. We conclude that by statute, the
expert fees were not recoverable, and we modify the judgment
accordingly. (Thrifty Payless, Inc. v. Mariners Mile Gateway,
LLC (2010) 185 Cal.App.4th 1050, 1066; Carwash of America-PO
v. Windswept Ventures No. 1 (2002) 97 Cal.App.4th 540, 542.)
DISPOSITION
The posttrial award of costs is modified to tax $2,950 in
fees for landlord’s expert witness. The amended judgment shall
29
include an award of costs (exclusive of attorney fees) in the
amount of $26,059.88. The judgment, as amended, is affirmed.
Landlord to recover its costs on appeal.
RUBIN, P. J.
WE CONCUR:
BAKER, J.
KIM, J.
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