Opinion
G043936 Super. Ct. No. 30-2010-00348329
11-22-2011
MITCHELL LAND AND IMPROVEMENT COMPANY, Plaintiff and Respondent, v. RISTORANTE FERRANTELLI, INC., Defendant and Appellant.
Alston, Alston & Diebold and Donald A. Diebold for Defendant and Appellant. Stradling Yocca Carlson & Rauth, Donald J. Hamman, and Eve A. Brackmann for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINION
Appeal from a judgment of the Superior Court of Orange County, Linda S. Marks, Judge. Affirmed.
Alston, Alston & Diebold and Donald A. Diebold for Defendant and Appellant.
Stradling Yocca Carlson & Rauth, Donald J. Hamman, and Eve A. Brackmann for Plaintiff and Respondent.
Mitchell Land and Improvement Co. (MLIC) brought an unlawful detainer action against its tenant, Ristorante Ferrantelli, Inc. (Ristorante), after receiving notice that Ristorante's insurance policy had been cancelled. Following a bench trial, the court entered judgment in MLIC's favor. Ristorante appeals, arguing that: (1) the lease agreement provided for an applicable grace period of 30 days; (2) the alleged default was trivial; and (3) MLIC's unlawful detainer action was retaliatory. Ristorante contends MLIC's unlawful detainer action should have been dismissed and Ristorante should be determined to be the prevailing party. We disagree and affirm the judgment.
Subsequent to entering judgment in MLIC's favor, the court awarded MLIC about $68,000 in attorney fees and costs and granted Ristorante relief from forfeiture of the lease agreement. Because the court granted Ristorante relief from forfeiture, MLIC asks us to dismiss this appeal as moot and frivolous, and to impose sanctions on Ristorante. MLIC argues that Ristorante "has already gained in superior court the relief it now seeks on appeal." MLIC's motions are denied. The appeal is not moot because the judgment designated MLIC as the prevailing party entitled to attorney fees and costs, a designation which formed the basis for the court's subsequent award of attorney fees and costs to MLIC. Nor is the appeal frivolous or sanctionable. "[A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive — to harass the respondent or delay the effect of an adverse judgment — or when it indisputably has no merit — when any reasonable attorney would agree that the appeal is totally and completely without merit." (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) "Here, it cannot be said that 'any reasonable person would agree that [Ristorante's position] is totally and completely devoid of merit . . . .'" (Id. at p. 651.)
FACTS
Pursuant to a lease agreement dated November 12, 2001 (the Lease), Ristorante leased from MLIC certain property where Ristorante operates a restaurant. Paragraph 8 of the Lease governs insurance. Subparagraph 8.2(a) requires Ristorante to "obtain and keep in force a Commercial General Liability policy of insurance protecting [Ristorante] and [MLIC] as an additional insured . . . ." Subparagraph 8.4(a) requires Ristorante to "obtain and maintain" insurance coverage for Ristorante's personal property, fixtures, and alterations and to "provide [MLIC] with written evidence that such insurance is in force." Paragraph 8.5 provides that no required insurance policy "shall be cancelable . . . except after 30 days prior written notice to [MLIC]." It also requires Ristorante to, "prior to the Start Date, deliver to [MLIC] certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance," and thereafter, to furnish MLIC "with evidence of renewals or 'insurance binders' evidencing" the renewal of expired policies.
Yamamoto Enterprises, Inc. signed the Lease as the lessor. In MLIC's notice of default dated February 12, 2010, MLIC stated it is the successor-in-interest to Yamamoto Enterprises, Inc.
Paragraph 13 of the Lease governs defaults and breaches thereunder, and provides in relevant part: "13.1 Default; Breach. A 'Default' is defined as a failure by [Ristorante] to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A 'Breach' is defined as the occurrence of one or more of the following Defaults, and the failure of [Ristorante] to cure such Default within any applicable grace period: [¶] (a) The abandonment of the Premises; or the vacating of the Premises . . . where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof . . . . [¶] (b) The failure of [Ristorante] when due . . . to provide reasonable evidence of insurance . . . , where such failure continues for a period of 3 business days following written notice to [Ristorante]. [¶] (c) The failure by [Ristorante] to provide . . . (viii) any other documentation or information which [MLIC] may reasonably require of [Ristorante] under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to [Ristorante]. [¶] (d) A Default by [Ristorante] as to the terms, covenants, conditions or provisions of this Lease, . . . other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of [Ristorante]'s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if [Ristorante] commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion."
On February 10, 2010, Ristorante's insurance agent notified Ristorante and MLIC that the "Commercial Package Policy has been cancelled by the Insurance Company, as of [January 25, 2010] due to non-payment of premium. [¶] **Please be advised that there has been no coverage in force under the above-mentioned policy through Right Insurance Marketing, as of 01-25-10 @ 12:01 a.m." (Italics added.) This February 10, 2010 letter from Ristorante's insurance agent was MLIC's first notice that Ristorante's insurance policy had been cancelled over two weeks earlier for nonpayment of premiums.
Both parties agree that Right Insurance Marketing was Ristorante's insurance agent.
On February 12, 2010, MLIC served on Ristorante a notice of default (the Notice of Default), notifying Ristorante that it was in default and had violated the conditions, covenants, and terms of the Lease. The notice continued: "In pertinent part, the Lease requires that [Ristorante] obtain and keep in force (i) a commercial general liability policy of insurance, (ii) insurance covering all of [Ristorante's] personal property, Trade Fixtures and [Ristorante] Owned Alterations and Utility installations (as such terms are defined in the Lease) and (iii) loss of income and extra expense insurance, all pursuant to the terms of Paragraph 8 of the Lease. [MLIC] has received written notice from [Ristorante's] insurer that, as of January 25, 2010, it cancelled such insurance policies required of [Ristorante]. [¶] [Ristorante] IS IN DEFAULT for failing to keep in force (i) a commercial general liability policy of insurance, (ii) insurance covering all of [Ristorante's] personal property, Trade Fixtures and [Ristorante] Owned Alterations and Utility Installations and (iii) loss of income and extra expense insurance, which is a violation of Paragraph 8 of the Lease. [¶] PLEASE TAKE NOTICE that [Ristorante] has ten (10) days to cure such default and to provide [MLIC] with evidence of such required insurance. If [Ristorante] fails to remedy such default within ten (10) days after service of this Notice, [MLIC] will and does hereby declare a forfeiture of the Lease, and will seek any and all remedies and/or damages, including unlawful detainer, possession, and damages, as may be allowed by law, in equity or otherwise."
On February 24, 2010 (two days after the expiration of the 10-day grace period specified in the Notice of Default), Ristorante's insurance agent faxed Ristorante a certificate of liability insurance and an evidence of property insurance for the policy period from August 30, 2009 to August 30, 2010.
On February 25, 2010, MLIC filed an unlawful detainer complaint against Ristorante. At trial, the parties stipulated that on or about February 25, 2010, Ristorante's counsel informed MLIC's counsel that Ristorante had "obtained insurance certificates showing reinstatement of coverage and would provide the certificates to [MLIC's counsel] by e-mail. [MLIC's counsel] stated that [MLIC's unlawful detainer] complaint had been filed or was on its way for filing. Exhibit 103, the certificate of insurance, was provided to [MLIC's counsel] on February 25th, 2010 by e-mail, received at 4:21 p.m." (Trial exhibit No. 103 showed the reinstatement of Ristorante's policies for general liability insurance and automobile liability insurance. Trial exhibit No. 104 showed the reinstatement of Ristorante's policies for business personal property insurance and business income insurance, but the foregoing stipulation does not specify whether or when MLIC's counsel received this exhibit.)
On February 26, 2010, MLIC filed a first amended unlawful detainer complaint against Ristorante. Attached as exhibits were copies of: the Lease; the Notice of Default; and the proof of service of such notice on Ristorante. MLIC sought reasonable attorney fees, Ristorante's forfeiture of the Lease, and damages for Ristorante's possession of the leased property through entry of judgment.
On March 2, 2010, Ristorante's insurance agent faxed Ristorante an endorsement from Allied Insurance. The endorsement stated the policy had been reinstated, effective January 25, 2010, for the period August 30, 2009 to August 30, 2010.
After a bench trial on April 5 and 6, 2010, the court ruled: "I'm going to find that based on the notice of default . . . that the notice . . . was adequately provided to the tenant; that the notice clearly laid out what the default provision required of the lessee in terms of performance. [¶] Pursuant to the lease agreement I'm going to find that it was a ten-day time frame. And based upon the documentation that is in the file, compliance should have been provided by the date of February 22nd, 2010. And the failure to comply by that date has resulted in the notice that the lessor had provided, which would be forfeiture of the lease and, in this case, the returned possession of the premises."
DISCUSSION
The Applicable Grace Period was 10 Days
Ristorante argues that the Notice of Default did not identify its default as: jeopardizing any insurance by abandoning the premises under subparagraph 13.1(a); failing to provide reasonable evidence of insurance under subparagraph 13.1(b); or failing to provide any other required documentation under subparagraph 13.1(c). Rather — according to Ristorante — the Notice of Default identified the default as its failure to maintain the insurance required by the Lease. Ristorante asserts the failure to maintain insurance is not a default defined in subparagraphs 13.1(a), 13.1(b), or 13.1(c), and is therefore subject to subparagraph 13.1(d)'s 30-day grace period. Ristorante concludes the court erred by ruling the applicable grace period was 10 days.
"Unlawful detainer is a summary proceeding to determine the right to possession of real property. Generally, in order to take advantage of this summary remedy, the landlord must demonstrate strict compliance with the statutory notice requirements contained in [Code of Civil Procedure] section 1161 et seq. . . ." (Culver Center Partners East #1, L.P. v. Baja Fresh Westlake Village, Inc. (2010) 185 Cal.App.4th 744, 749; 12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 703, p. 825 ["Because of its summary nature and its effect of forfeiting the tenant's right of possession, strict compliance with the statutory requirements is required"].) Under section 1161, a landlord must give a tenant three days' written notice to pay rent or perform other covenants of the lease, or suffer forfeiture of the lease. (§ 1161, subds. (2), (3).) "In commercial leases the landlord and commercial tenant may lawfully agree to notice procedures that differ from those provided in the statutory provisions governing unlawful detainer." (Culver Center Partners East #1, L.P., at p. 751.) Thus, "the parties may, in their lease, provide for the termination thereof upon a longer notice than the three-day notice of default required by the statute . . . ." (Fifth & Broadway Partnership v. Kimny, Inc. (1980) 102 Cal.App.3d 195, 200.) A trial court's findings on the sufficiency of a notice of default are reviewed for substantial evidence. (See National Dollar Stores v. Wagnon (1950) 97 Cal.App.2d 915, 922.)
All statutory references are to the Code of Civil Procedure unless otherwise specified.
Ristorante does not challenge the sufficiency of the Notice of Default under section 1161. (§ 1161, subd. (3); see National Dollar Stores v. Wagnon, supra, 97 Cal.App.2d at p. 922 [default notice to quit premises sufficiently stated nature of default, amount of default, and time for compliance].) Rather, Ristorante interprets the Notice of Default to identify Ristorante's sole default as the failure to maintain insurance required under the Lease. Assuming Ristorante's reading of the Notice of Default is correct, we find no merit in its contention that the Lease provides a 30-day grace period for the fundamental default of failing to maintain insurance.
In support of this interpretation, Ristorante argues that "[s]pecific terms and exact terms are given greater weight than general language" and that, because MLIC drafted the Notice of Default, any ambiguities in the document should be interpreted against MLIC.
We independently construe the Lease because this case involves no extrinsic evidence. (Mayer v. C.W. Driver(2002) 98 Cal.App.4th 48, 57.) We apply the principles of contractual interpretation set forth in Civil Code section 1635 et seq. (Civ. Code, § 1637.) We look first to the contract's language (Civ. Code, § 1638) and ascertain the parties' intent "from the writing alone, if possible" (Civ. Code, § 1639). We consider the entire contract and try "to give effect to every part." (Civ. Code, § 1641.) If possible, we interpret the contract in a way that makes it "operative, definite, reasonable, and capable of being carried into effect." (Civ. Code, § 1643.)
We examine the relevant language of the Lease. Paragraph 13.1(b) provides a three-day grace period for a tenant's failure "to provide reasonable evidence of insurance . . . ." Subparagraph 8.4(a) requires Ristorante to maintain insurance coverage for its personal property, fixtures, and alterations and to "provide [MLIC] with written evidence that such insurance is in force." Subparagraph 8.4(a) does not, however, state when the written evidence of insurance is due from Ristorante. This potential ambiguity may have dissuaded MLIC from relying on the three-day grace period provided in subparagraph 13.1(b). But subparagraph 13.1(c)(viii) provides a 10-day grace period where MLIC has demanded "documentation or information which [MLIC] may reasonably require of [Ristorante] under the terms of [the] Lease." Surely it was reasonable for MLIC to demand evidence of insurance coverage when it received notice that Ristorante's insurance had been cancelled for non-payment of premium. That notice alerted MLIC that Ristorante had failed to maintain its insurance coverage and thus was not in compliance with its obligations under subparagraph 8.4(a). Any alerted landlord would "reasonably require" documentation evidencing the restoration of its commercial tenant's insurance coverage, and that is precisely what MLIC demanded. The 10-day grace period was thus appropriately extended under the provisions of subparagraph 13.1(c)(viii). Moreover, paragraph 8.5 requires insurance policies to be cancellable only upon 30 days prior written notice to MLIC, and obligates Ristorante to furnish MLIC with evidence of the renewal of expired policies. These contractual provisions manifest the parties' intent that the insurance coverage required under the Lease be kept in force at all times. It would be illogical for the Lease to provide a three-day grace period for the default of failing to provide evidence of insurance, but a 30-day grace period for the more serious default of failing to have any insurance at all. As noted by MLIC, "proof of insurance cannot be procured without first obtaining insurance." We construe the Lease to make it reasonable and capable of being carried into effect. We conclude the default of failing to maintain insurance is arguably subject to a three-day grace period under the Lease, but, without question, when the landlord has reason to be insecure about the existence of insurance coverage, it may reasonably demand evidence of coverage be provided within subparagraph 13.1(c)(viii)'s 10-day grace period.
Ristorante failed to cure the default within that 10-day period. The court did not err by ruling Ristorante failed to cure the default within the applicable grace period.
Substantial Evidence Supports the Court's Finding Ristorante's Default Was Not Trivial
Ristorante asserts its insurance policies were reinstated without lapse in coverage as of February 24, 2010, i.e., only two days after the expiration of the 10-day grace period, and therefore the default was trivial. MLIC contends this assertion "is a half-truth at best" and, moreover, the failure to maintain insurance "is no trivial matter from [MLIC's] perspective."
"[A]lthough every instance of noncompliance with a contract's terms constitutes a breach, not every breach justifies treating the contract as terminated. [Citations.] . . . California courts allow termination only if the breach can be classified as 'material,' 'substantial,' or 'total.' [Citations.] [¶] . . . 'Where the line is to be drawn between the important and the trivial cannot be settled by a formula. . . . The question is one of degree, to be answered, if there is doubt, by the triers of the facts . . . .'" (Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051-1052.)
Substantial evidence supports the court's implied finding the default was not trivial. As discussed above, Ristorante failed to reinstate its insurance policies within the 10-day grace period, thereby subjecting MLIC to at least two more days of bearing a significant risk of liability or loss. This risk was not trivial, especially because Ristorante had failed to complete "an update of the fire suppressant system above the cooking surfaces" which was mandated by ordinance and by the insurance company. Substantial Evidence Supports the Court's Finding the Eviction Was Not Retaliatory Ristorante asserts it brought a lawsuit against MLIC over a year before MLIC filed its unlawful detainer complaint. Ristorante concludes it "is clear that [MLIC] seeks to retaliate against [Ristorante] in response to [Ristorante's] Complaint alleging harassing conduct by [MLIC], thereby denying [Ristorante's] right to due process and [Ristorante's] day in court, in violation of public policy."
A tenant who raises the common law or statutory defense of retaliatory eviction bears the burden of proving that the "landlord acted with a retaliatory motive." (Western Land Office, Inc. v. Cervantes (1985) 175 Cal.App.3d 724, 736, 742.) At the unlawful detainer trial, Ristorante provided scant evidence of a retaliatory motive on MLIC's part. In fact, the only evidence concerning Ristorante's lawsuit was the parties' stipulation that the trial in Case No. 30-2009-119363 was initially set for April 5, 2010, then continued to June 7, 2010. On the other hand, there was strong evidence of a non-retaliatory motive for MLIC's unlawful detainer action, since Ristorante's insurance had been cancelled for nonpayment of premiums. In sum, substantial evidence supports the court's implied finding the constructive eviction of Ristorante (who was later granted relief from forfeiture) was not retaliatory.
Ristorante's appendix contains a copy of its complaint against MLIC in Case No. 30-2009-119363. Although the complaint was marked for identification during the unlawful detainer trial, the record does not reflect it was ever admitted into evidence.
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DISPOSITION
The judgment is affirmed. MLIC is entitled to costs on appeal.
IKOLA, J. WE CONCUR: RYLAARSDAM, ACTING P. J. O'LEARY, J.