Opinion
D071054
10-20-2017
CIF HOLDINGS, LP, Plaintiff and Appellant, v. RFG OIL, INC., et al., Defendants and Respondents.
Keehn Law Group, Loren Scott Keehn; Jonathan R. Zeko and Jonathan R. Zeko for Plaintiff and Appellant. Rosenberg, Shpall & Zeigen, Tomas A. Shpall and Amy C. Lea for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2012-00084288-CU-BC-CTL) APPEAL from a judgment of the Superior Court of San Diego County, Judith F. Hayes, Judge. Affirmed. Keehn Law Group, Loren Scott Keehn; Jonathan R. Zeko and Jonathan R. Zeko for Plaintiff and Appellant. Rosenberg, Shpall & Zeigen, Tomas A. Shpall and Amy C. Lea for Defendants and Respondents.
I.
INTRODUCTION
This appeal arises from the lease of real property used for an automobile oil changing service center. Appellant CIF Holdings, LP (CIF), the property owner, filed a complaint alleging an unlawful detainer cause of action against respondents, RFG Oil, Inc. (RFG) and its president David R. Gong. CIF also filed a separate action against respondents alleging breach of contract and ejectment. The matters were consolidated and RFG then filed a cross-complaint for breach of lease, as well as declaratory and injunctive relief. After conducting a bench trial, the trial court issued a statement of decision in favor of respondents on all of CIF's claims. In connection with RFG's cross-complaint, the trial court found that RFG admitted that it owed $140,597 in back rent and ordered RFG to pay CIF this amount. The court subsequently entered a judgment in favor of respondents consistent with its statement of decision.
On appeal, CIF contends that the trial court erred in concluding that Gong is not personally liable on the lease; erred in determining that RFG properly exercised an option to extend the term of the lease; erred in determining that RFG established that it was entitled to pay a reduced amount of rent based on a modification of the lease; failed to adequately describe the basis for its determination as to the amount of rent owed; and erred in concluding that RFG's tender of rent in response to a notice issued by CIF to RFG to pay rent or quit was unconditional. We affirm the judgment.
II.
FACTUAL AND PROCEDURAL BACKGROUND
Our factual and procedural background is drawn largely from the trial court's statement of decision.
Our ability to address CIF's claims on the merits has been greatly hampered by the inadequate record that it provided. The record does not contain either of the operative complaints in the underlying actions or RFG's cross-complaint. In addition, the record indicates that respondents filed a trial brief, CIF and respondents filed briefs at the close of evidence, respondents filed a proposed statement of decision, the trial court filed a tentative statement of decision, CIF filed an objection to the tentative statement of decision, and respondents filed a response to CIF's objection to the tentative statement of decision. None of these documents is in the record. CIF's failure to include respondents' proposed statement of decision in the record is particularly problematic, since the trial court expressly stated in its statement of decision that it was "adopt[ing] the reasoning and authority of [respondents'] proposed statement of decision filed March 11, 2016 as if fully set forth herein."
A. The Lease
CIF and RFG entered into a lease in 1997 that provided that RFG would construct a building in order to operate an automobile oil changing business on real property owned by CIF (the Lease). The initial term of the Lease was 15 years and was scheduled to end on August 31, 2013. The Lease provided that RFG could exercise up to three 5-year options, as long as RFG was not in default and timely exercised the option(s).
CIF contends that Gong also entered into the Lease. We address that contention in part III.A, post.
For the initial five years of the Lease, from September 1, 1998 to August 31, 2003, the Lease provided that monthly rent would be $4,500 plus common area maintenance (CAM) charges. The Lease also stated that CIF would recalculate the CAM charges yearly, and that there would be up to a 30 percent increase in rent every five years based on the consumer price index. From September 1, 2003, to August 31, 2008, the rent increased to $5,175 a month plus CAM changes. B. The modifications of the Lease and RFG's exercise of its option
Between 2007 and 2008, RFG suffered financial difficulties during the "nationwide economic downturn." On September 1, 2008, the rent was scheduled to increase to $6,172 a month plus CAM charges. RFG requested that CIF forego the scheduled rent increase and CIF agreed to waive the increase. In addition, in November 2009, RFG sought a modification of the Lease to further reduce the rent. CIF agreed. In June 2010, CIF formalized the agreement. CIF's representative sent Gong an e-mail on June 7, 2010 in which CIF agreed to reduce the rent to $4,000 a month plus CAM charges of $625, conditioned upon RFG "stay[ing] current." The e-mail further stated, "If you are given any future notice of default under the [L]ease and fail to cure the default, all the rent reductions will immediately cease and all past reductions of rents will be immediately due on demand."
Gong responded by e-mail that same day, thanking CIF for reducing the rent, and stating that RFG wished to exercise its option to extend the Lease for an additional 5-year term (i.e., to August 31, 2018). C. The parties' disputes
In early 2011, RFG failed to make a rent payment. In March 2011, CIF sent RFG a notice demanding unpaid rent totaling $60,658. RFG responded by tendering the amount of rent that CIF claimed was owed. On February 27, 2012, CIF sent RFG a notice stating that RFG owed $74,751 in unpaid rent. RFG timely sent a cashier's check for this amount to CIF.
Beginning in 2012, CIF sent RFG at least six notices to quit the tenancy based on its claim that RFG had violated the Lease by permitting involuntary judgment liens to be placed on the leasehold. CIF also began to return RFG's rent checks. D. CIF's June 30, 2014 Notice to Terminate and CIF's July 9, 2014 Notice to Pay Rent or Quit
On June 30, 2014, CIF served RFG with a Notice to Terminate. CIF sought to terminate RFG's tenancy on the ground that RFG had purportedly not validly exercised its option to extend the Lease and that CIF was therefore permitted to terminate RFG's month to month tenancy.
On July 9, 2014, CIF served RFG with a Three-Day Notice to Pay or Quit seeking $87,754.00 in rent. E. The current actions
In October 2012, CIF filed a civil action for breach of contract and ejectment against RFG and Gong.
In October 2014, CIF filed an unlawful detainer action against RFG, which was consolidated with the October 2012 action. After the matters were consolidated, RFG filed a cross-complaint against CIF, alleging breach of the Lease and requesting declaratory and injunctive relief. F. The bench trial and the trial court's statement of decision and judgment
The trial court indicated in its statement of decision that CIF "sues on its three day notice to quit or pay rent served on July 9, 2014, and on its Notice of Termination of a month to month tenancy served on June 30, 2014."
The trial court held a bench trial on the matters in February 2016 during which the court heard testimony from Gong and CIF's representatives.
In May 2016, the trial court issued a statement of decision in favor of respondents on CIF's ejectment and breach of contract causes of action. The court also declared that the Lease was in effect through August 31, 2018 and that RFG was to pay $140,597 in back rent that RFG admitted was owing.
In June 2016, the trial court entered a judgment in favor of respondents, consistent with its statement of decision. G. The appeal
CIF timely appeals the judgment.
III.
DISCUSSION
A. The trial court did not err in concluding that Gong is not personally liable under the Lease
CIF contends that the trial court erred in concluding that Gong is not personally liable under the Lease. In its opening brief, CIF contends that Gong is liable because Gong "signed both of the 'Tenant' signature lines" on the Lease, "once in his capacity as the President of RFG, and again under the line labeled 'Personally and Individually.' "
Respondents contend that Gong is not a tenant under the Lease and cannot be held liable as a surety for RFG's obligations under the Lease because the statute of frauds requires a signed writing evincing a suretyship relationship, and the Lease does not contain any such writing.
In its reply brief, CIF makes clear that it does not contend that Gong is liable as a surety. Rather, CIF contends that Gong is liable as a "principal" to the Lease, which CIF defines as a "party[ ] to a contract."
CIF argues, "Respondents' statute of frauds argument is unavailing.[ ] While they are correct that (a) Cal. Civ. Code Section 2793 requires a writing signed by the surety in order to answer for the debts of another, and (b) Mr. Gong never signed such a writing, they have missed the point. . . . Mr. Gong's liability flows from his manifest status as a principal under the Lease, and [CIF's] reliance on that appearance - which he created." (Italics added.)
1. Factual and procedural background
The first sentence of the Lease provides in relevant part:
"THIS LEASE AGREEMENT (hereinafter referred to as "lease"), is made as of February 20, 1997 by and between CIF Holdings, L.P. hereinafter referred to as 'Landlord', and RFG Oil, Inc., DBA: Valvoline Instant Oil Change hereinafter referred to as 'Tenant', who agree . . . ."
The signature blocks of the Lease appear as follows: Dated: 3/11/97 LANDLORD: CIF Holdings, L.P.
By: Pacific View Companies, Inc.
We have redacted the actual signatures that appear on the Lease.
General Partner By: [Redacted]
Robert D. Houck
Vice President Dated: 3/3/97 TENANT: RFG Oil, Inc.
DBA: Valvoline Instant Oil Change By: [Redacted] Title:/s/_________ PERSONALLY AND INDIVIDUALLY: By: [Redacted]
Apart from the signature blocks, there is no language in the Lease referring to Gong, nor is there any language in the Lease referring to any personal guarantees of the tenant's obligations under the Lease.
At trial, CIF's representative, Robert Houck, acknowledged that Gong is not listed as a tenant in the first paragraph of the Lease. However, Houck stated that he believed that Gong was a guarantor of RFG's lease obligations. While Houck agreed that there was no language in the Lease that stated that Gong agreed "to be obligated for the obligations of the tenant," Houck explained that he believed that "the second signature" on the Lease made it clear to Gong that he was personally guaranteeing RFG's obligations under the lease. Houck also testified concerning his familiarity with lease guarantee agreements as follows:
Houck signed the lease on behalf of CIF. Houck testified that he is the president of PVCC, Inc. (PVCC) and that PVCC is the general partner of CIF. Houck also stated that PVCC manages CIF's properties.
"[Respondents' counsel]: And you've had leases where you do have an individual personally guaranteeing the obligations of the tenants in a separate document? You know what this is; right?
"[Houck]: I do now, yes.
"[Respondents' counsel]: Okay. You didn't 18 years ago[]?
"[Houck]: I don't recall [if] I did 18 years ago."
The Lease was executed in March 1997, approximately 19 years before the trial in this case.
Gong testified that he negotiated the Lease with Houck. Gong stated that on February 21, 1997, during the negotiation of the Lease, Gong wrote a note to Houck (Exhibit 105). Gong stated that the note advised Houck that Gong would "sign the lease as president [of RFG] and sign as RFG's shareholder." According to Gong, the note informed Houck that Jeff Gong was also a shareholder and a board member of RFG and inquired whether Houck wanted "all of the RFG shareholders [and] board members to sign [the Lease]." Gong further testified that Houck never informed him that Houck wanted Gong to provide a personal guarantee of RFG's obligations in the Lease. In addition, when defense counsel asked Gong whether he understood that the manner by which he signed the Lease indicated that he was "personally liable for the tenant's obligations of the [L]ease," Gong responded, "No." When asked why he had signed the Lease twice, Gong explained:
The parties stipulated that Exhibit 105 would be admitted in evidence.
"Just 'cause there was a signature line to sign it underneath it. I thought maybe, you know, it was -- a lot of times we have people with signatures. They want the shareholders or board members to sign, I guess, giving authority to the president to sign."
In its statement of decision, the trial court ruled as follows:
"Defendant Gong is not personally liable under the lease.
"[CIF] has offered no authority for the position that signing in an individual capacity is effective to create a personal guarantee. Defendant David R. Gong is not personally liable on the lease. [CIF's] argument that signing the lease both on an individual basis and as RFG's representative is effective to create a personal guarantee is expressly rejected. There is no evidence of any agreement that Gong would assume personal liability for the lease. This is particularly true in this case where Defendant Gong sent a note to [CIF], (exhibit 105) dated 2/21/07[] in which he advised that he would be signing the lease as the President and shareholder of RFG." (Boldface omitted.)
The record indicates that Exhibit 105 was dated February 21, 1997, rather than February 21, 2007.
2. Governing law
The law governing the interpretation of contracts is well established:
" 'Under long-standing contract law, a "contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." [Citation.] Although "the intention of the parties is to be ascertained from the writing alone, if possible" [citation], "[a] contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates" [citation]. "However broad may be the terms of a contract, it extends only to those things . . . which it appears that the parties intended to contract." [Citation].' [Citation.]
" 'Extrinsic evidence is admissible to prove a meaning to which the contract is reasonably susceptible. [Citations.] If the trial court decides, after receiving the extrinsic evidence, the language of the contract is reasonably susceptible to the interpretation urged, the evidence is admitted to aid in interpreting the contract. [Citations.] Thus, "[t]he test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." ' " (Iqbal v. Ziadeh (2017) 10 Cal.App.5th 1, 7-8 (Iqbal).)
3. Application
CIF argues that Gong is a "principal under the Lease." CIF supports its argument by stating that "Mr. Gong signed both of the 'Tenant' signature lines." Thus, we understand CIF to argue that Gong is a tenant under the Lease.
This argument fails for several reasons. It appears from both the trial court's statement of decision and Houck's testimony discussed above that CIF's theory at trial was that Gong was liable as a guarantor of RFG's obligations under the Lease, not that he was a principal or tenant under the Lease. However, as discussed in part I, ante, CIF did not include the operative complaints or any of the trial briefing in the record. CIF is not entitled to reversal of the judgment in favor of Gong on the ground that Gong is a tenant under the Lease because we are unable to determine from the record on appeal whether CIF sought to hold Gong liable pursuant to this theory at trial. (Cf. Acqua Vista Homeowners Assn. v. MWI, Inc. (2017) 7 Cal.App.5th 1129, 1159 [" '[N]ew theories of liability, may not be asserted for the first time on appeal' "].)
In addition, while CIF argues that Gong signed the " 'Tenant' signature lines" on the Lease, the signature blocks (an image of which we have included above) are, at best, ambiguous, with respect to the meaning of Gong's second signature. The first signature block states "TENANT" in all capital letters and then, directly below, in typeface, lists RFG as the tenant. Under the typeface of RFG, Gong signed as "President." Gong also signed the Lease a second time under the words "PERSONALLY AND INDIVIDUALLY." Gong's second signature under the words "PERSONALLY AND INDIVIDUALLY" does not clearly and unambiguously indicate that Gong signed the Lease as a tenant. This is particularly true since the first paragraph of the Lease expressly denotes RFG as the sole tenant, and the Lease does not otherwise reference Gong. In short, it cannot be said that the only reasonable construction of the Lease is that Gong is a tenant thereunder.
Another plausible meaning for Gong's signature is that the parties intended for his signature to effectuate some manner of personal guarantee of the Lease that was ineffectual for failure to comply with the statute of frauds.
Relatedly, while CIF contends that Exhibit 105, the note that Gong sent to Houck during lease negotiations, could not " 'be admitted to show [an] intention independent of an unambiguous written instrument' " (italics omitted), both parties stipulated to the introduction of this exhibit in evidence. CIF fails to present any argument that the court erred in relying on the parties' stipulation in admitting the note in evidence. Further, despite the fact that the trial court expressly relied on Exhibit 105 in its statement of decision in rejecting CIF's contention that Gong could be held personally liable, CIF failed to ensure that Exhibit 105 is before this court. Thus, even assuming that CIF had not stipulated to the admission of Exhibit 105, CIF cannot establish that the trial court erred in admitting the exhibit in evidence and relying on the exhibit in determining that Gong is not personally liable under the Lease. (See Iqbal, supra, 10 Cal.App.5th at p. 8 [" 'Extrinsic evidence is admissible to prove a meaning to which the contract is reasonably susceptible' "].)
CIF did not include Exhibit 105 in its Appellant's Appendix or request that the exhibit be transmitted to this court pursuant to California Rules of Court, rule 8.224.
Finally, in addition to Exhibit 105, the trial court heard considerable testimony from both Gong and Houck concerning the issue. Given that we reject CIF's contention that the Lease clearly and unambiguously provides that Gong is a tenant, CIF's failure to address this extrinsic evidence further demonstrates that it has not established that the trial court erred in determining that Gong is not personally liable under the Lease. B. CIF has not established that the trial court erred in determining that RFG properly exercised its option to extend the Lease and in determining that CIF was therefore not entitled to terminate the Lease on the ground that RFG is a holdover tenant
CIF contends that the trial court erred in determining that RFG properly exercised its option to extend the term of the Lease. CIF further maintains that because "the putative exercise of the option was ineffective . . . [CIF's] termination of the Lease was effective." As discussed below, CIF's claim fails because the argument on which it bases its contention that RFG failed to properly exercise its option was made for the first time in CIF's reply brief.
1. Factual and procedural background
It is undisputed that the initial 15-year term of the Lease ended on August 31, 2013.
Paragraph 3, subdivision (d) of the Lease permitted RFG to extend the Lease beyond the initial 15-year term as follows:
"If Tenant is not currently in default of any terms, conditions and covenants of this Lease, the Tenant or Valvoline Instant Oil Change Franchising, Inc. shall have the right and option to extend this Lease for Three (3) additional Five (5) year period(s) by giving Landlord written notice of its election to do so within Nine (9) months of Lease expiration." (Italics added & underscore omitted.)
Respondents introduced in evidence a June 7, 2010 e-mail from Gong to CIF's representative (Exhibit 107) that states in relevant part, " 'Business is slowly improving, so we have decided to stay another five years after our current [L]ease term expires.' "
The trial court's statement of decision states in relevant part:
"According to exhibit 107, [RFG] timely exercised [its] option to extend on June 7, 2010. At the time the option was exercised[,] [RFG] was not in breach of the [L]ease agreement. [¶] Additionally, on November 3, 2012, [RFG] again notified [CIF], in a letter written on or before that date, that RFG had elected to extend its lease on the subject property for the period of 5 additional years."
2. CIF's shifting contentions on appeal
In its opening brief, CIF argues, "The trial court applied incorrect legal principles to determine that the [L]ease had been effectively extended in November 2011 [sic][] despite the fact that (a) RFG was in default when the option to extend the [L]ease was ostensibly exercised, and (b) the lease expressly conditioned the right to extend the lease upon the tenant not being in default of any of the [L]ease terms at the time that the option was exercised . . . ." (Italics added.)
As discussed below, the trial court's statement of decision indicates that the court found that RFG "timely exercised [its] option to extend on June 7, 2010," and that "on November 3, 2012, [RFG] again notified [CIF], in a letter written on or before that date that RFG had elected to extend its lease . . . ." (Italics added.)
Respondents note in their brief that the trial court found that RFG timely exercised its option to extend its Lease on June 7, 2010 and that RFG was not in default as of that date.
CIF argues, for the first time in reply, that RFG was required to have not been in default on "both the date that the option is exercised and the effective date upon which the new term begins." (Italics added.) CIF contends that this is the only commercially reasonable interpretation of the Lease and that to interpret the phrase "not currently in default" (italics omitted), in the Lease's option provision as pertaining only to the date on which RFG exercised the option is "unrealistic at best, and absurd at worst."
3. Governing law
The law is well established that " ' "points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before." ' " (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 (Reichardt).) The rule is based on the premise that " ' "[t]o withhold a point until the closing brief would deprive the respondent of his [or her] opportunity to answer it or require the effort and delay of an additional brief by permission." ' " (Ibid.)
4. Application
In its opening brief, CIF stated that the Lease "expressly conditioned the right to extend the [L]ease upon the tenant not being in default of any of the [L]ease terms at the time that the option was exercised." (Italics added.) CIF did not present any argument that the Lease's option provision also required that RFG not be in default at the time the extended term under the Lease was to begin. Further, in its reply brief, CIF presented no good reason for why it failed to present this latter argument in its opening brief.
CIF's failure to present its argument that the Lease required that RFG not be in default at the time the extended term under the Lease was to begin (August 31, 2013) deprived respondents of the opportunity to respond to CIF's alternative contractual interpretation argument offered for the first time in reply. Under these circumstances, we decline to consider CIF's argument. (See Reichardt, supra, 52 Cal.App.4th at p. 764.)
In light of our conclusion in the text, we need not consider whether CIF was entitled to terminate the Lease on the ground that, at the time the extended term under the Lease began (August 31, 2013), there were purportedly involuntary liens on the leasehold in violation of the Paragraphs 21 and 25 of the Lease. Nor need we consider CIF's related contention that the trial court erred in determining that Civil Code section 695.035 rendered Paragraphs 21 and 25 of the Lease "void and ineffective."
CIF does not suggest in either its opening brief or in its reply brief that there is any evidence that RFG was in default of its obligations under the Lease as of June 7, 2010. Moreover, the trial court expressly found that RFG "timely exercised [its] option to extend on June 7, 2010," and that RFG was not "in breach of the [L]ease agreement," as of that date.
Accordingly, we conclude that CIF has not established that the trial court erred in determining that RFG properly exercised its option to extend the Lease and in determining that CIF therefore was not entitled to terminate the Lease on the ground that RFG was a holdover tenant. C. There is substantial evidence in the record to support the trial court's determinations that the Lease was modified to reduce RFG's rent and that RFG established its entitlement to pay the reduced rent amount
CIF claims that the trial court erred in determining that RFG proved that the Lease was modified to reduce the amount of the monthly rent and erred in determining that RFG "establish[ed] the claimed rent reductions." (Capitalization & boldface omitted.)
1. Factual and procedural background
The trial court's statement of decision contains the following factual findings relevant to CIF's claims:
"In 2007-2008, during a nationwide economic downturn, RFG suffered financial difficulties. In 2008, [RFG] sought and obtained permission from [CIF] to forego the scheduled rent increase for that year. [CIF] permitted RFG to continue to pay rent in the amount of $5,175 plus [CAM] charges from September, 2008 through October, 2009. In November, 2009, [Gong] wrote in a letter, "Can you help me by allowing me to pay $4,645 per month for rent and CAM [charges] until I get through this crisis? . . .' [CIF] agreed.
"Thereafter, between November 2009 and March 21, 2011, RFG paid [CIF] and [CIF] accepted [RFG's] $4,645 monthly payment of rent and [CAM] charges without notice of default to [RFG]. In an email from [CIF's] representative, Ralph Griffiths, to Defendant dated June 7, 2010, [CIF] formally agreed 'to reduce your rent one last time, [but] you must stay current on your account and pay the $4,000 plus [CAM charges] of $625 and you cannot have any other uncured defaults under the [L]ease. This rent will be subject to the normal increases per the [L]ease when your current term expires and if you elect your option to extend the [L]ease. If you are given any
future notice of default under the [L]ease and fail to cure the default, all the rent reductions will immediately cease and all past rent reductions of rents will be immediate due on demand.' "
The trial court also concluded in its statement of decision that the parties modified the Lease to reduce RFG's rent as follows:
"[RFG's] rent was reduced on two occasions. [CIF] agreed to a waiver of the rent increase of September, 2008, and in November, 2009. On June 7, 2010, the lease modification was reduced to writing in that rent was reduced to $4,000 per month plus [CAM] charges by agreement of the parties as set forth specifically in exhibit 107. [¶] Taken in context and in consideration of all of the surrounding circumstances, including the conduct . . . of the parties following its transmission, the Court finds that this email from CIF to RFG in which CIF agrees to a reduction in rent (Exhibit 107) satisfies the requirement of the [L]ease to have a written signed agreement to modify the terms of the [L]ease (Civil Code Section 1633.7[, subd.] (c), (d)[)], J.B.B. Investment Partners, Ltd. v. Fair [(2014)] 232 Cal.App.4th 974 [(J.B.B. Investment Partners, Ltd.)]."
The trial court also concluded that, after agreeing to the modification, CIF "failed to give the required notice of default and an opportunity to cure," before initiating an action in 2011 to regain possession. In support of this conclusion, the trial court determined that "[a]ccording to the terms of the June 7, 2010 modification[,] [CIF] had a duty to give notice and an opportunity to cure to [RFG] prior to initiating an action to regain possession." The trial court further found that "RFG has offered timely payment of rents as they came due and offered all back rent, which payments were wrongfully rejected."
2. Standard of review
An appellate court reviews findings by the trier of fact, express or implied, under the substantial evidence standard. (See, e.g., Faigin v. Signature Group Holdings, Inc. (2012) 211 Cal.App.4th 726, 736.) Substantial evidence is evidence that a reasonable person " 'might accept as adequate to support a conclusion,' " (Estate of Teed (1952) 112 Cal.App.2d 638, 644), or evidence " 'that is reasonable, credible and of solid value.' " (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.)
3. Application
At the outset of its legal discussion of whether respondents "[e]stablish[ed] the [c]laimed [r]ent [r]eductions" (boldface omitted), CIF appears to suggest that the trial court erred in determining that the Lease was modified by the June 7, 2010 e-mail exchange, on the ground that the e-mail exchange did not constitute a "writing signed by CIF and RFG," as required by the Lease. In concluding that the e-mail exchange constituted an enforceable modification of the Lease, the trial court cited both a relevant statute and a case, neither of which CIF discusses in its brief. (See J.B.B. Investment Partners, Ltd., supra, 232 Cal.App.4th at p. 988 [concluding that "a printed name or some other [electronic] symbol might, under specific circumstances, be a signature under UETA [Uniform Electronic Transactions Act (Civ. Code, § 1633.1 et seq.)]".) Indeed, CIF fails to discuss any pertinent legal authority in support of its suggestion that the trial court erred in finding that the June 7, 2010 e-mail exchange was enforceable. Accordingly, we conclude that CIF has not established that the trial court erred in determining that the June 7, 2010 e-mail exchange constituted an enforceable modification of the Lease.
CIF's primary argument is that RFG was not entitled to the rent reduction formalized in the June 7, 2010 e-mail exchange because RFG failed to "stay current" on its rent. In support of this argument, CIF maintains that a computerized printout that it offered in evidence demonstrated that RFG failed to make four payments on a timely basis in late 2010 and early 2011. We reject this argument because the trial court expressly found that the computer printouts were not a reliable basis on which to determine the amounts that RFG owed in rent or had paid. The trial court found, "Although computer printouts . . . utilized by [CIF] to compute rent payments and shortfalls [were] received into evidence, these printouts cannot be reconciled by the Court in any meaningful way with the agreements by the parties to reduced rent, to payments made, which may or may not have been retained, or which were returned." CIF failed to present any argument in its opening brief that the court erred in so finding.
For example, the computerized printouts do not reflect the modification of the Lease to reduce the rent to $4,000 memorialized in the June 7, 2010 e-mail exchange.
In any event, even assuming that RFG failed to timely make its rental payments during the beginning of 2011, the trial court found that CIF failed to provide RFG with notice of its alleged untimely payments and an opportunity to cure, which the court found was required pursuant to the Lease as modified by the June 7, 2010 e-mail exchange. CIF fails to demonstrate that the trial court erred in making this determination.
CIF also argues that RFG failed to pay rent from April 2011 through February 2012. However, CIF again fails to present any argument that it provided RFG with notice of its alleged untimely payments and opportunity to cure. Indeed, CIF acknowledges that RFG delivered a cashier's check for $74,751 in late February 2012 or early March 2012 in response to CIF's notice requesting payments.
CIF also argues that RFG's payment of CIF's rent demand in February 2012 demonstrates the lack of an enforceable modification of the Lease reducing the rent because RFG's "cashier's check is to the penny according to CIF's position of what the correct amount payable was." Similarly, CIF contends that RFG's payment of rents throughout early 2012 in the amount demanded by CIF (e.g., $6,780) rather than the amount of rent referred to in the June 7, 2010 e-mail (e.g., $4,625), and the fact that RFG tendered the full amount of rent requested by CIF in an April 2013 notice are actions "consistent with CIF's calculation of rent," and demonstrate that RFG was not entitled to pay the modified rent amount formalized in the June 7, 2010 e-mail. We are not persuaded. The trial court could have reasonably found that RFG's payment of the amounts demanded by CIF was simply, as Gong testified, an attempt to maintain possession of the premises in the face of CIF's repeated efforts to regain possession, rather than reflecting RFG's admission that it was not entitled to pay the modified rent amount.
The trial court found, "In total, from March, 2011, to July, 2014, at least 11 notices to quit on various grounds were served on [RFG]. At least 3 unlawful detainer actions were filed."
Accordingly, we conclude that there is substantial evidence in the record to support the trial court's determinations that the Lease was modified to reduce RFG's rent and that RFG established its entitlement to pay the reduced rent amount. D. The trial court adequately explained its determination regarding the amount of rent that RFG owes CIF
CIF contends that the trial court erred in failing to adequately explain its determination with respect to the amount of rent that RFG owes CIF.
In its statement of decision, with respect to the amount of rent that RFG owes to CIF, the court stated:
"Breach of contract by [RFG] has not been shown, but the Court finds in connection with the cross complaint for declaratory relief, [CIF] is entitled to back rent, based on a calculation taking into account the 2010 agreement approving the two rent reductions (1) the waiver of the September, 2008 rent increase, and (2) the reduction to $4,000 per month, effective November 1, 2009. Plaintiff's witnesses each expressed their uncertainty as to how much rent was due and were uncertain even as to whether certain payments were kept or returned.
"Although computer printouts . . . utilized by [CIF] to compute rent payments and shortfalls [were] received into evidence, these printouts cannot be reconciled by the Court in any meaningful way with the agreements by the parties to reduced rent, to payments made, which may or may not have been retained, or which were returned. The amount of rent due as claimed on exhibit 73,[] calculated on the overstated rent amounts and otherwise lacking in analysis is rejected as inaccurate.
"Pursuant to paragraph 4(a.)(2) of the Lease, on September 1, 2013 the current monthly rent of $4,000 was increased by the minimum 15% to $4,600 and continues through August 31, 2018, the end of the option period.
"Defendant agreed through counsel that he owes $140,597 in back rent. The Court accepts this admission and finds that $140,597 is the total rent which is due and owing up to and including February 29, 2016."
Exhibit 73 contains the computerized printouts.
CIF contends that the trial court erred by "simply accept[ing], without analysis," RFG's admission as to the amount of rent owed. We disagree. The trial court explained that CIF had failed to establish the amount of rent owed and that the court relied on RFG's admission as to the amount owed. The trial court's reasoning in this regard is straightforward.
Further, the court specifically rejected CIF's reliance on computerized printouts showing that RFG allegedly owed $300,497 in rent and other charges. As noted in footnote 13, the computerized printouts did not reflect the reduction of RFG's rent to $4,000 per the June 7, 2010 modification of the Lease. In addition, CIF does not argue that it presented any evidence with respect to the proper amount of rent owed, assuming the enforceability of the June 7, 2010 modification.
Under these circumstances, CIF is not entitled to reversal of the judgment with directions to the trial court to "explain the analytical underpinnings" of its determination as to the amount of rent due. E. CIF has not established that its June 10, 2014 three-day notice to pay rent or quit was sufficient to state an unlawful detainer claim
CIF claims that the trial court erred in determining that RFG had made an unconditional tender of rent in response to CIF's June 10, 2014 three-day notice to pay rent or quit. We need not consider whether the trial court erred in determining that RFG's tender was unconditional, because we conclude that CIF has not established that its June 10, 2014 three-day notice to pay rent or quit was sufficient to support an unlawful detainer claim.
1. Governing law
"A valid three-day pay rent or quit notice is a prerequisite to an unlawful detainer action. [Citations.] Because of the summary nature of an unlawful detainer action, a notice is valid only if the lessor strictly complies with the statutorily mandated notice requirements." (Bevill v. Zoura (1994) 27 Cal.App.4th 694, 697.)
Code of Civil Procedure section 1161 defines an unlawful detainer for nonpayment as rent as follows:
Unless otherwise specified, all subsequent statutory references are to the Code of Civil Procedure.
"A tenant of real property, for a term less than life, or the executor or administrator of his or her estate heretofore qualified and now acting or hereafter to be qualified and act, is guilty of unlawful detainer: [¶] . . . [¶] 2. When he or she continues in possession, in person or by subtenant, without the permission of his or her landlord, or the successor in estate of his or her landlord, if applicable, after default in the payment of rent, pursuant to the lease or agreement under which the property is held, and three days' notice, in writing, requiring its payment, stating the amount which is due . . . .
"The notice may be served at any time within one year after the rent becomes due."
Levitz Furniture Co. v. Wingtip Communications, Inc. (2001) 86 Cal.App.4th 1035, 1038 (Levitz Furniture Co.) summarized case law interpreting section 1161(2) as follows:
"A notice that seeks rent in excess of the amount due is invalid and will not support an unlawful detainer action. [Citation.] In addition, a three-day notice must be served within one year after the rent 'becomes due.' [Citation.] If the landlord waits over a year to sue for unpaid rent, he or she is limited to collecting such rent in a
standard breach of contract action, 'which results only in a money judgment without restitution of the demised property.' "
Section 1161.1 provides an alternative method of providing notice of a rent default that a landlord may use with respect to commercial real property:
"With respect to application of Section 1161 in cases of possession of commercial real property after default in the payment of rent:
"(a) If the amount stated in the notice provided to the tenant pursuant to subdivision (2) of Section 1161 is clearly identified by the notice as an estimate and the amount claimed is not in fact correct, but it is determined upon the trial or other judicial determination that rent was owing, and the amount claimed in the notice was reasonably estimated, the tenant shall be subject to judgment for possession and the actual amount of rent and other sums found to be due. However, if (1) upon receipt of such a notice claiming an amount identified by the notice as an estimate, the tenant tenders to the landlord within the time for payment required by the notice, the amount which the tenant has reasonably estimated to be due and (2) if at trial it is determined that the amount of rent then due was the amount tendered by the tenant or a lesser amount, the tenant shall be deemed the prevailing party for all purposes. If the court determines that the amount so tendered by the tenant was less than the amount due, but was reasonably estimated, the tenant shall retain the right to possession if the tenant pays to the landlord within five days of the effective date of the judgment (1) the amount previously tendered if it had not been previously accepted, (2) the difference between the amount tendered and the amount determined by the court to be due, and (3) any other sums as ordered by the court.
"[¶] . . . [¶]
"(e) For the purposes of this section, there is a presumption affecting the burden of proof that the amount of rent claimed or tendered is reasonably estimated if, in relation to the amount determined to be due upon the trial or other judicial determination of that issue, the amount claimed or tendered was no more than 20 percent more or less than the amount determined to be due."
A landlord seeking to prevail on a three-day "estimate[ ] rent" notice issued pursuant to section 1116.1 must demonstrate that it sought to prosecute the unlawful detainer action in the trial court pursuant to section 1161.1. (Cinnamon Square Shopping Center v. Meadowlark Enterprises (1994) 24 Cal.App.4th 1837, 1843 (Cinnamon Square).) If the landlord fails to do so, an overstated rent demand, even if denominated as an "estimate" in the notice, is fatal to the landlord's unlawful detainer claim. (Id. at p. 1844.) Further, a landlord seeking to prosecute an unlawful detainer claim pursuant to section 1161.1 must demonstrate that its notice contained a reasonable estimate of rent due. (WDT-Winchester v. Nilsson (1994) 27 Cal.App.4th 516, 534 (WDT-Winchester).) If the amount of rent due is not reasonably estimated, the notice is "defective" and "is insufficient to support the judgment for unlawful detainer." (Ibid.)
A landlord is not required to proceed under section 1161.1, rather than section 1161(2) in order to prosecute an unlawful detainer claim, and, according to one practice guide, there are both "[a]dvantages," and "[d]isadvantages," to doing so in a given case. (Friedman et al., Cal. Practice Guide: Landlord-Tenant (The Rutter Group 2017) ¶ 7:104.5, pp. 7-57 to 7-58.)
2. Factual and procedural background
On July 9, 2014, CIF served RFG with a three-day notice to pay rent or quit dated June 12, 2014. The notice stated that the amount of rent due was $87,754, which represented a "reasonable estimate" of the amount of rent "due and unpaid through and including June 10, 2014."
The trial court's statement of decision states in relevant part:
"Under the unique circumstances of this case, any reasonable tenant would have inquired of the landlord as to the status of the lease
before paying the amount claimed in rent due and owing, especially where the amount claimed [in the June 12, 2014 three-day notice] could not in any way by reconciled with any obligation under the lease agreement, as modified." (Italics added.)
As discussed in part III.C, ante, the trial court found, based on substantial evidence, that RFG's "rent was reduced on two occasions," including a reducing of the monthly rent to $4,000 plus CAM charges in November 2009.
3. Application
As noted in part II, ante, CIF's failure to include the operative complaints in the record or any of the briefing from the trial court has greatly impeded this court's ability to assess its appellate claims. In particular, given CIF's failure to include the operative unlawful detainer complaint in the record, we are unable to determine whether CIF prosecuted its unlawful detainer action pursuant to Code of Civil Procedure section 1161.1 or section 1161(2). This omission is fatal to CIF's claim, because it cannot establish that its three-day notice to pay rent or quit dated June 12, 2014 constituted a reasonable estimate of the rent due sufficient to state an unlawful detainer claim under section 1161.1. (Cinnamon Square, supra, 24 Cal.App.4th at p. 1843.)
In Cinnamon Square, a landlord contended that it was entitled to reversal of the trial court's determination that its three-day notice was deficient because, even assuming the amount demanded in its notice to pay rent exceeded the amount actually owed, its notice "stated the amount demanded was designated as 'estimated rent' and 'estimated lease charges,' as authorized by Code of Civil Procedure section 1161.1." (Cinnamon Square, supra, 24 Cal.App.4th at p. 1843.) The Cinnamon Square court rejected this argument because the landlord had not demonstrated that it had prosecuted its unlawful detainer claim pursuant to section 1161.1:
"There is nothing in the record, including the pleadings, the statement of decision, the motion to vacate the judgment, or counsel's argument, to indicate landlord asked the court to consider its rights under Code of Civil Procedure section 1161.1. Landlord's failure to raise the issue below and its failure to request the trial court adjudicate the issue of the reasonableness of the amount of rent demanded precludes landlord from having this court determine the issue." (Cinnamon Square, supra, at p. 1844.)
In this case, the trial court found that "the amount claimed [in the June 12, 2014 three-day notice] could not in any way by reconciled with any obligation under the lease agreement, as modified." Moreover, there is nothing in the record to indicate that CIF asked the trial court to determine whether its June 12, 2014 notice constituted a reasonable estimate of the rent due under section 1161.1. Under these circumstances, CIF has failed to demonstrate that its June 12, 2014 notice was sufficient to support its unlawful detainer claim. (Cinnamon Square, supra, 24 Cal.App.4th at p. 1844; see also Levitz Furniture Co., supra, 86 Cal.App.4th at p. 1038 ["A notice that seeks rent in excess of the amount due is invalid and will not support an unlawful detainer action"].)
Even assuming that CIF had established that it prosecuted the action pursuant to section 1161.1, the trial court found that "the amount claimed [in the June 12, 2014 three-day notice] could not in any way by reconciled with any obligation under the lease agreement, as modified" (italics added), and CIF presents no argument on appeal that its notice contained a reasonable estimate of the rent due. (See WDT-Winchester, supra, 27 Cal.App.4th at p. 534 [concluding that notice issued pursuant to section 1161.1 must contain a reasonable estimate of the rent in order to support an unlawful detainer claim].)
Accordingly, we conclude that CIF has not established that its June 12, 2014 three-day notice to pay rent or quit was sufficient to state an unlawful detainer claim. CIF is therefore not entitled to reversal of the judgment on the ground that the trial court erred in determining that RFG rendered an unconditional tender of rent in response to CIF's notice.
IV.
DISPOSITION
The judgment is affirmed.
AARON, J. WE CONCUR: BENKE, Acting P. J. DATO, J.