Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, Michael B. Orfield, Judge. Super. Ct. No. GIN042545
HALLER, J.
San Marcos Enterprises, Inc. (San Marcos) is a commercial tenant in a shopping center owned by Young Joo Park. After the parties became involved in lease disputes, San Marcos filed a complaint against Park, and then Park filed a cross-complaint against San Marcos. Each party sought damages and declaratory/injunctive relief for alleged breaches of the lease agreement. A jury trial was held on the damages claims, and a court trial was held on the declaratory/injunctive relief claims.
On the damage claims, the sole issue presented for the jury's resolution was San Marcos's allegation that Park breached the lease agreement by renting to competitor businesses. The jury found in San Marcos's favor on this claim and awarded San Marcos $41,100.34. On appeal, Park contends the damages measure used by the jury is not legally correct or factually supported. This contention is without merit.
On the declaratory relief claims, the court made several rulings defining the parties' rights under the applicable lease, including that San Marcos has the right to install a cement slab adjacent to the store and place a freestanding cooler on the slab. Park contends the court erred in interpreting the lease to permit San Marcos to place the slab and cooler outside of the building footprint. We reject this contention.
Accordingly, we affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
In 1996, the owners of San Marcos (Mark and Nadia Younan) began operating a convenience grocery and liquor store, Corner Liquor & Food Market, in a shopping center owned by Park. San Marcos subleased the property from the existing tenant (referred to here as "Thibodo"). The lease agreement between Park and Thibodo consisted of a 1972 lease agreement (Original Lease) and a 1983 amendment (First Lease Amendment). Under these agreements, the lease terms (with options) continued through 2007.
The shopping center was also owned by Park's husband, who died during the litigation in this case. For ease of reference, we shall refer to Park as the owner during all relevant times.
Five years before the Park-Thibodo lease was scheduled to terminate, in October 2002, San Marcos and Park entered into a direct lease agreement, whereby San Marcos became the primary tenant (the Second Lease Amendment). The Second Lease Amendment reaffirmed the existing 1972 and 1983 lease agreements, but modified certain provisions. Of particular relevance here, San Marcos agreed to a substantially increased rent from about $1,200 to $3,950 with certain annual rent increases. In exchange, Park agreed it would not "lease property . . . within a three-mile radius for any use competitive to that of" San Marcos (the "noncompetition provision"). Park also agreed to extend the lease term for 15 years, and to provide San Marcos with the option to extend this term for an additional 15 years.
Park later leased a space in the shopping center to a store (Mariposa Nutrition) that sold products also sold in San Marcos's store, such as milk, juice, coffee, canned goods, eggs, and cheese. The Mariposa Nutrition store did not accept cash for its goods, and instead accepted only government coupons known as WIC. The Younans complained that Park had improperly rented to a competitive business, but Park did not take any responsive action. In 2003 and 2004, the profits of the San Marcos store decreased for the first time since the Younans began operating the store. In response, the Younans decided to begin offering refrigerated and frozen foods that needed additional refrigeration space.
In October 2004, San Marcos's attorney wrote a letter to Park, stating San Marcos intended to add cooler and freezer units outside the building, and seeking Park's consent to make these improvements. The letter concluded: "If the Landlord objects to such improvements, please provide written objections . . . within ten (10) days from the date of this letter. If I do not receive such objections . . . within this period of time[,] my client will necessarily assume the Landlord has no objection to such action and consents to these improvements." Park did not respond to this letter.
A few months later, San Marcos poured a cement slab in an area adjacent to the store where it had previously kept the trash cans. San Marcos purchased a large freestanding walk-in cooler and electrical equipment to place on the slab. Before San Marcos could compete the installation of the cooler, Park objected and both parties filed suit.
Pursuant to the parties' agreement, the trial had three separate phases.
In the first phase, the court, sitting without a jury, heard evidence and arguments as to the meaning of the leased "premises" as used in the lease. This issue was relevant to determining whether San Marcos was entitled to place the cooler and cement slab outside of the building footprint. During this phase, San Marcos called a real estate expert, Robert Griswold, who testified that the "leasehold premises" referred to the building and the surrounding area. Griswold explained that the original lease had been a "build-to-suit" lease that pertained to vacant property, and therefore the subject of the lease would not have been limited to the building because the building was nonexistent when the lease was signed.
At the conclusion of this phase, the court issued a tentative written ruling, entitled "Decision and Analysis." In this ruling, the court found the lease consisted of three documents: the Original Lease, the First Lease Amendment, and the Second Lease Amendment (together the Lease Agreements). The court found the Original Lease defined the leased premises by an attached legal description and plot plan, but these attachments had been lost. The court also found that the "leased premises" in the Original Lease referred to an area of land larger than just the building, roughly equivalent to the area outlined on a plot map produced by the parties. But the court concluded that the "lease and its amendments, taken together, prohibits [San Marcos] from expanding the building beyond its original footprint." (Italics omitted.)
In the second phase, a jury trial was held on: (1) San Marcos's claim that Park violated the noncompetition lease provision; and (2) Park's claims that San Marcos violated lease provisions by placing the concrete pad outside its store and cutting down trees near the store. During trial, the court noted that Park had not produced any evidence pertaining to damages relating to the concrete pad and trees. The court thus decided (with the parties' agreement) that it would resolve those claims "under the banner of the declaratory relief cause of action," and submit to the jury only the issue of the claimed breach of the noncompetition clause.
At trial, San Marcos's damages expert opined that San Marcos suffered damages based on Park's renting to competitive businesses. He provided two different alternative methods for measuring the damages: (1) the amount of profits lost; and (2) the reduction in the value of the lease caused by the breach. San Marcos additionally claimed damages in attempting to mitigate the losses. In instructing the jury on the noncompetition provision claim, the court told the jury that if it found a breach, it could choose between these two alternate damage measures, plus any mitigation damages. The court gave the jury a special verdict form that permitted the jury to award "Lost Profits" damages "OR" "loss of rental value" (past and future).
After deliberating, the jury returned a verdict in favor of San Marcos. The jury found Park breached the noncompetition provision, and San Marcos was "harmed" by the breach. With respect to damages, the jury found San Marcos suffered $23,877.75 in "Past loss of rental value" and $17,222.59 in "Future loss of rental value." The jury put "N/A" in the blank space asking whether San Marcos suffered lost profits, and wrote "0.00" in the space asking whether San Marcos suffered "Mitigation Damages."
In the third phase of the trial, the court decided the declaratory relief claims. The court relied primarily on the lease terms and the evidence that had been presented in the first and second phases. This evidence included the testimony of San Marcos's real estate expert (Griswold), who opined in the second phase of the trial that the slab/cooler constituted a "trade fixture" and therefore it was a permissible addition to the building under the Lease Agreements.
After taking the declaratory relief matter under submission, the court issued a written decision, entitled "DECISION RE DECLARATORY RELIEF" (Decision), finding in San Marcos's favor on the cement slab/cooler issue. In the Decision, the court discussed the lease provisions at length, and then stated San Marcos was entitled to the following declaratory relief:
"[San Marcos] has the right to install the following equipment adjacent to the building: [¶] . . . A cement slab and freestanding cooler, covered with a roof that is supported by the cooler. For appearance purposes, a structure can be placed around the cooler to make it blend into the existing building. The already existing door can be used for access, but only for employees of the store. This space may not be used by customers as this would comprise an unauthorized extension of the building, taking the structure out of the 'trade fixture' category. [¶] . . . [¶] . . . Reasonable limitations exist regarding the placement of trade fixtures, such as the cooler. Such trade fixtures must be adjacent to or affixed to the now-existing building, must be reasonably necessary for the operation of the Lessee's business, and shall be built as to blend with the existing building, or be hidden from view (for example, wall, landscape)."
Park filed objections to the Decision, and San Marcos responded that the objections were untimely and improper, and asserted that the Decision did not constitute a "statement of decision" under the relevant statutes. The court found Park's objections to be without merit. At a later hearing, the court clarified that it had intended that its Decision be a written statement of decision, but declined to more precisely clarify this issue on the record. The court stated that it had followed its "modus operandi" which "is to immediately announce that I'm going to render a statement of decision, making it obviously moot for someone to later request a statement of decision." The trial court noted that the parties could later "take a look at the record and tell the appellate court here's what happened."
The court's final judgment awarded San Marcos $41,100.34 and incorporated the written Decision, recognizing San Marcos's right to place the cement slab and freestanding cooler adjacent to the building. The court found San Marcos was a prevailing party and awarded San Marcos $159,467.50 in attorney fees under an attorney fees provision in the lease.
Park appeals.
DISCUSSION
I. Statement of Decision
We assume for purposes of this appeal that the court's "DECISION RE DECLARATORY RELIEF" was a statutory statement of decision under Code of Civil Procedure section 632. The Decision explained the legal and factual basis for the court's determinations on the principal issues, both parties had the opportunity to timely challenge the statement as a statement of decision, and the court indicated that it intended the written statement to be a statement of decision. Although we have reached this conclusion, we strongly urge the trial court to more precisely follow the rules pertaining to the preparation of statements of decision. (See generally Cal. Judges Benchbook: Civil Proceedings—Trial (CJER 1997) § 2.17 to 2.39; Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2007) ¶¶ 16:21 to 16:193.) In a nonjury trial, the "statement of decision provides the trial court's reasoning on disputed issues and is [the] touchstone [for an appellate court] to determine whether . . . the trial court's decision is supported by the facts and the law. [Citation.]" (Slavin v. Borinstein (1994) 25 Cal.App.4th 713, 718.) By failing to strictly abide by the procedures for a statement of decision, the trial court created unnecessary confusion and complexity for the parties and the court in resolving this appeal.
II. Cement Slab and Cooler
Park contends the court erred in concluding that the parties' lease permitted San Marcos to install the cement slab and freestanding cooler next to its store, even assuming the structure "can in some sense be called a trade fixture."
The resolution of this issue depends on an interpretation of the parties' lease agreement. A lease is a contract, governed by the same rules of interpretation as other types of contracts. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266-1267 (ASP Properties).) Under these rules, " ' "the overriding goal of interpretation is to give effect to the parties' mutual intentions as of the time of contracting. . . ." ' " (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1605.) " 'The precise meaning of any contract, including a lease, depends upon the parties' expressed intent, using an objective standard.' " (ASP Properties, supra, 133 Cal.App.4th at p. 1266.) " ' "Where contract language is clear and explicit and does not lead to absurd results, we ascertain intent from the written terms and go no further." ' " (Amtower, supra, 158 Cal.App.4th at p. 1605.) " 'When there is ambiguity in the contract language, extrinsic evidence may be considered to ascertain a meaning to which the instrument's language is reasonably susceptible.' " (ASP Properties, supra, 133 Cal.App.4th at p. 1266.)
The interpretation of a written document is a question of law. In the absence of conflicting extrinsic evidence, a reviewing court applies a de novo review standard. (ASP Properties, supra, 133 Cal.App.4th at p. 1266.) We agree with Park that there was no conflicting extrinsic evidence on the relevant contract interpretation issues, and therefore we conduct a de novo review. In conducting this review, we are not bound by, or concerned with, the trial court's reasoning. (See Qualcomm, Inc. v. Certain Underwriters at Lloyd's, London (2008) 161 Cal.App.4th 184, 203-204; Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1001.) We apply a substantial evidence review only to the factual determinations made by the court. (See ASP Properties, supra, 133 Cal.App.4th at p. 1266.)
The governing lease consists of three separate documents. First, the 1972 Original Lease, under which Park's predecessor (Mission Center) leased to San Marcos's predecessor ("McNamee") vacant land on which Mission Center agreed to construct a building and improvements, and McNamee agreed to bear the expenses of installing the equipment and fixtures necessary to operate the business. Although there was some dispute at trial as to the precise boundaries of the leased premises, the court found the leased premises initially included not only the building that was to be constructed, but also the surrounding land on that particular parcel of property, as defined in an attached plot map. This finding is supported by the record, and Park does not challenge this determination on appeal.
The Original Lease gave the tenant broad rights to use the property and to add improvements and alterations as necessary to support the tenant's business. Section 6 stated that "Lessee shall have the right to use the premises for any lawful purpose. . . . It is further provided that Lessee shall have the right to change the use of the building and improvements as economic or social developments require." Section 9 imposed the obligation on the tenant to keep both the building interior and building exterior in good repair, and to maintain the surface parking lot area. Section 10 provided the tenant with the right to make alterations: "[D]uring the term of this lease Lessee may . . . make alterations . . ., but Lessee shall not make any alterations involving weight bearing partitions without securing Lessor's written consent, which consent shall not be unreasonably withheld." Section 12 gave the tenant the right to install fixtures, and did not limit the installation of the equipment to the inside of the building: "Lessee may install or cause to be installed such equipment and trade and other fixtures as are reasonably necessary for the operation of its business." This section also specifically provided that the tenant had the right "within its leased area" to construct a self-service gasoline pump island at the tenant's sole cost and expense.
Viewing these provisions as a whole, we conclude the tenant's use rights broadly encompassed the right to place necessary equipment immediately outside the constructed building. The subject of the original lease concerned an area larger than the store building. The use and alteration lease provisions reflected the parties' intent that the tenant would be entitled to use an adjacent area of the building if the use was reasonably necessary to the tenant's business. This use included the tenant's rights to make improvements and add fixtures and other equipment. Substantial evidence supported the court's conclusion that the cooler was reasonably necessary for the operation of San Marcos's business. Further, the evidence established that the cement slab and cooler would not affect weight bearing walls so there was no need to specifically obtain permission from the landlord under Section 10.
In the proceedings below, Park did not argue that the Original Lease expressly limited Park's rights to use and improve the building to the building interior. Instead, Park relied primarily on Paragraph 5 in the First Amended Lease, which pertained to taxes, to argue the parties subsequently agreed to limit the tenant's use of the property to only the building footprint. Paragraph 5, entitled "Taxes," states: "The Parties agree that the leasehold estate is a Premises Lease, however to equitably establish a pro-ration of the property taxes Lessee is to pay the taxes based on percentage. The Parties agree that the leasehold consists of [2,565] square feet . . . . The total premise owned by Lessor consists of [35,928] square feet . . . . [¶] Lessee's pro-rata percentage of the property tax assessed shall be seven and one thousandth thirty-nine (7.139%) percent." (Italics added.)
In response to this argument, San Marcos presented extrinsic evidence that the purpose of the amendment was to resolve disputes about the relative tax burdens of the tenants in the shopping center, and was not intended to change the scope of the "leased premises" for any other purpose. Even without this evidence, the language of the paragraph supports this construction. Paragraph 5 begins by reaffirming that the leasehold estate is a "Premises Lease," which refers to a type of lease concerning a parcel of property, rather than just a building structure. Paragraph 5 then states "however to equitably establish the pro-ration of property taxes" the leasehold would include only the building. Reading these statements in context, the only reasonable interpretation is that the parties intended to maintain the broad definition of the leased premises, but to limit the tenant's pro rata tax responsibility vis-à-vis the other shopping center tenants.
On appeal, Park does not directly rely on the First Amended Lease to support her position. Instead, Park now relies on Section 3 of the Original Lease to argue that the tenant had the right to install fixtures only within the building to be constructed. Park is making this argument for the first time on appeal, and therefore waived the argument. (See Hepner v. Franchise Tax Bd. (1997) 52 Cal.App.4th 1475, 1486.) To allow an appellant to " ' "adopt a new and different theory on appeal [is] unfair to the trial court [and] manifestly unjust to the opposing litigant." ' " (Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th 820, 847.) If Park had made the Section 3 argument below, San Marcos would have had the opportunity to present extrinsic evidence to counter Park's proposed interpretation of Section 3, and/or articulate legal points in opposition to the argument.
Even in the absence of waiver, Section 3 is unhelpful to Park's position. Section 3, entitled "CONSTRUCTION," pertains to the parties' rights and obligations during the construction phase of the lease agreement. Section 3 provides that the Lessor shall "at Lessor's expense construct on the demised premises a building and other improvements in accordance with plans [and] specifications furnished and owned by Lessee, with an adjacent paved parking area and suitable approach ramps . . . ." The Lessee then bears the cost of "install[ing] all exterior and interior signs and in the building the equipment, fixtures, and utensils necessary to operate the business of Lessee on the demised premises." (Italics added.) Park argues that the phrase "in the building" must mean that "trade fixtures could only be installed in the building."
Viewing the entire lease, this is not a reasonable interpretation of the phrase. The express purpose of Section 3 was to allocate responsibility for the construction of the new building. There is nothing in Section 3 that shows the parties intended this provision to govern the parties' rights after the building was constructed. Moreover, there is nothing in Section 3 that provides fixtures can be installed "only" in the building. Read in context, the "in the building" phase is merely identifying the location of the equipment for which the tenant (as opposed to the landlord) must bear the expense.
Moreover, even assuming the lease now pertains only to the building, we would still conclude the court did not err in ruling that San Marcos had the right to place the cement slab and cooler outside the building under the circumstances here. Generally, "[a] tenant . . . has no other rights to the property than such as are given to him by the agreement or instrument by which his tenancy is acquired . . . ." (Civ. Code, § 820.) However, " 'in some cases a court will imply that the tenant also has such additional easements in the property owned by the landlord as are reasonably necessary for the tenant's beneficial enjoyment of the premises leased. [¶] The easements may be implied even though they are outside of the demised premises described in the lease, but they are not implied if the express provisions of the lease exclude them.' " (Dubin v. Robert Newhall Chesebrough Trust (2002) 96 Cal.App.4th 465, 473; accord Owsley v. Hamner (1951) 36 Cal.2d 710, 717-720.) To imply such permissible use, it is not necessary that the outside areas to be used by the tenant are "absolutely necessary . . . to make the leased property tenantable. The prevailing test . . . is whether they are 'reasonably necessary for the beneficial enjoyment of the property leased.' " (Owsley v. Hamner, supra, 36 Cal.2d at p. 718.)
These principles apply here to allow San Marcos to use a narrow strip immediately outside the building to place the cooler. The Lease Agreements did not prohibit an expansion of the building. Instead, the Agreements gave the tenant: (1) the rights to use the premises for any lawful purpose; (2) the obligation to maintain the internal and external grounds; (3) the right to make alterations (with landlords' consent regarding changes to weight bearing walls); and (4) the right to add trade fixtures without seeking consent from the landlord. The record shows that San Marcos needed to add the cooler unit to maintain its business profitability and that, before it did so, it asked for permission from Park, and Park never responded to that request. The evidence also shows that the concrete slab was placed in an area that previously had been used for the store trash cans, and there was no evidence San Marcos's new use would conflict with the use of the property by the landlord or any other tenant. Given the broad rights accorded to the tenant by the lease and the particular circumstances of the case, the court did not err in exercising its equitable powers to permit San Marcos to keep the cement pad outside the building and to place a freestanding cooler on the pad.
In her reply brief, Park argues the court's declaratory relief order would create "economic unfairness" because San Marcos would not be required to pay property taxes on the additional construction. The argument fails because there is no factual support in the record that the cement slab and freestanding cooler would necessarily increase property taxes, and/or that Park cannot pass the increased taxes on to San Marcos. Park raised this tax issue in a motion for reconsideration, but the court denied the motion. The court did not abuse its discretion in doing so.
Finally, we reject Park's argument that we must reverse the declaratory relief order because the court improperly relied on the testimony of Griswold, San Marcos's real estate expert. During the second phase of the trial, Griswold testified (without objection) that San Marcos's installation of the cement pad with the cooler did not violate the lease because the lease provided San Marcos with the right to augment the property with trade fixtures. We agree that an expert is not permitted to offer a legal opinion on the meaning of a contract. (See Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1444-1445; Cooper Companies v. Transcontinental Ins. Co. (1995) 31 Cal.App.4th 1094, 1100.) Although an expert may testify to industry custom and usage with respect to particular contractual terms, it is not appropriate for the expert to opine on the ultimate contract interpretation issue.
However, the admission of this evidence did not prejudice Park. First, it is not clear the court relied on the expert opinion in reaching its conclusions on the declaratory relief claim. Although the court referred to Griswold's testimony in discussing posttrial motions, there is nothing in the statement of decision indicating the court necessarily relied on this opinion testimony in reaching its legal conclusion on the declaratory relief claim. In any event, this court has conducted a de novo review of the contract and the undisputed extrinsic evidence, and we have not relied on Griswold's testimony on the legal issue. Thus, even if the trial court improperly relied on Griswold's testimony, we have independently reviewed the record and conclude that the court's conclusion was legally correct.
III. Damages Issue
The jury found San Marcos proved $41,100.34 in damages resulting from Park's breach of the noncompetition provision. The special verdict reflects the jury awarded these damages under the "loss of rental value" theory, rather than a "lost profits" theory. On appeal, Park contends California law permits only a lost profit damages measure for breach of a noncompetition lease provision, and therefore we must reverse the damages award. Alternatively, Park challenges the sufficiency of the evidence to support that San Marcos suffered $41,100.34 in lost rental value. We conclude these contentions are without merit and affirm.
A. Relevant Factual Background on Damages
Under well settled appellate rules, we view the relevant facts in the light most favorable to San Marcos, the prevailing party. (See Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1137-1138.)
From 1996 to 2002, San Marcos's total sales from its store increased on an annual basis. In October 2002, San Marcos and Park entered into the Second Lease Amendment, in which San Marcos agreed to pay approximately three times the amount of its existing rent (even though the lease term would continue for five more years), in exchange for two primary benefits: (1) Park's agreement that it would not rent to a tenant with a "use competitive to that of [San Marcos]"; and (2) Park's agreement to extend the lease term an additional 15 years, with another 15-year option to extend that term.
Shortly after this lease amendment was signed, Park leased a store to the European Market and Delicatessen, and in April 2003 the owner of this market subleased certain of the premises to the Mariposa Nutrition store. In April 2004, Park leased a larger space directly to the Mariposa Nutrition store under a five-year lease.
The evidence showed these stores (at least the Mariposa Nutrition store) sold items that were competitive with items sold by San Marcos's store. The evidence also showed this use was competitive even if Mariposa Nutrition accepted coupons instead of cash for the items. The evidence further showed that although the San Marcos store had annual sales increases for the previous six years, the sales dropped substantially in 2003. In 2002, the sales total was $863,000, but there was an approximate $100,000 decline in 2003 and an additional $8,436.44 decline in 2004. The total decline in sales revenues compared to 2002 was $226,413.44. San Marcos presented evidence that it spent approximately $225,000 to make improvements to the store to regain its customer share. Thereafter, San Marcos's sales increased.
At trial, San Marcos presented the expert testimony of Wisam Salem, a certified public accountant who specializes in accounting services for convenience stores and had ownership interests in several convenience stores similar to San Marcos's store. Based on Salem's review of the accounting records and other facts, Salem opined that Park's breach of the noncompetition clause resulted in damage to San Marcos's business. Salem provided two alternative measures of damages for the breach. First, he estimated the lost profits caused by the competition. He opined that approximately 28.5 percent of San Marcos's sales constitute profits. Based on that figure, Salem estimated that the total amount of lost profits for 2003 and 2004 (and the first two months of 2005) was $64,628. He later clarified in cross-examination that only about "85 to 95 percent" of the sales decline would have been caused by the increased competition from the stores in the center. Thus, he estimated that the lost profits amount was $58,076. Park's damages expert opined that even assuming Park breached the noncompetition provision and Salem's figures were accurate, the lost profits damages would be only $19,000.
Second, Salem determined the difference in the rental value of the premises with and without the noncompetition clause. Salem said he had substantial experience with valuing these provisions, and had valued noncompetition lease covenants "probably over 100 times," many of those in the same convenience store industry. Salem said that in reaching his valuation determinations "each case stands on its own; depending on the location of the store, depending on the length of the lease, sometimes even depends on the [business owner] itself." He testified that in 2002, he contemplated purchasing the San Marcos business and conducted a valuation analysis in connection with this potential purchase. At that time, he advised San Marcos to seek a lease amendment to add a noncompetition provision to substantially increase the value of the business.
Based on this analysis and on the fact that San Marcos paid approximately $2,000 more in monthly rent after the 2002 lease amendment, Salem determined that the noncompete covenant was worth approximately 50 percent of the rental value. Based on this testimony, San Marcos's counsel argued that San Marcos was entitled to: (1) $89,700 (approximately one-half of the amount paid for rent since the parties signed the Second Amended Lease that added the noncompetition provision); plus (2) $51,782 (the present value of one-half of the rental price for the next 30 months of the remaining lease between Park and Mariposa Nutrition store). Counsel also argued San Marcos was entitled to recover $225,200 reflecting improvements to the store necessary to increase sales and regain its customer base.
It was unclear from Salem's testimony whether he was stating that the value was 50 percent of the increase in rent or 50 percent of the total rent. In any event, the lack of clarity is not material here, because the jury selected an amount that was lower than each of these amounts.
The jury was instructed that if it determined San Marcos proved its claim for breach of contract, it must decide whether San Marcos proved damages resulting from the breach. The jury was told it could award damages under one of two alternative theories: (1) loss of profits; or (2) loss of rental value. The court explained the meaning of each damage measure, and instructed the jury it "should use the method that you find produces the most accurate and certain result."
In its jury verdict, the jury found Park breached the noncompetition provision of the lease and San Marcos was harmed by the breach, and the jury awarded $41,100.34 in damages based on the loss of rental value theory. The jury's damage figures show it did not fully accept Salem's opinion that the value of the lease without the noncompetition covenant was reduced by one-half. Instead, it appears that the jury found that the breach of the noncompetition provision reduced the rental value by a substantially lower amount, less than one-third the amount sought by San Marcos. Following the court's instructions, the jury declined to reach the alternate lost profits damage measure.
B. Damages Measure
As her primary appellate challenge to the damages award, Park contends the diminution in rental value is an improper legal measure of damages.
Upon a landlord's breach of a lease, a tenant may remain in possession and recover contract damages. (Andrews v. Mobile Aire Estates (2005) 125 Cal.App.4th 578, 590.) As the jury was instructed, the measure of damages in a contract action is "the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." (Civ. Code, § 3300.) "The goal is to put the plaintiff 'in as good a position as he or she would have occupied' if the defendant had not breached the contract. [Citation.] In other words, the plaintiff is entitled to damages that are equivalent to the benefit of the plaintiff's contractual bargain. [Citations.]" (Lewis Jorge Const. Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 967-968.)
Under these principles, California courts have long recognized that an appropriate damages measure for a landlord's breach of a lease is the difference between the rental value of the premises before the breach and after the breach. (See Peterson v. Larquier (1927) 84 Cal.App. 174, 179 [breach of lease permits injured party to recover difference between rental value at date of breach and rent specified in lease for its term]; see also Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884; Collins v. Kobold (1956) 146 Cal.App.2d 868, 872; Noble v. Tweedy (1949) 90 Cal.App.2d 738, 743.) These damages seek to approximate the loss in value of the bargain caused by the breach. (See Peterson v. Larquier, supra, 84 Cal.App. at p. 179.)
Although no reported California decision has specifically addressed the issue of whether this rule applies to the breach of a noncompetition lease provision, courts in many other jurisdictions have upheld the use of this measure as the most accurate and straightforward reflection of the tenant's damages for this type of breach. (See Herman Miller, Inc. v. Thom Rock Realty Co. (2d. Cir. 1995) 46 F.3d 183, 188; Schreiber Company-Shurlington Plaza v. Norstan Apparel Shops of N.Y., Inc. (Ga.App. 2000) 541 S.E.2d 676, 678 (Schreiber); Parker v. Levin (Mass. 1934) 188 N.E. 502, 503-504; see generally Annot., Validity, Construction, and Effect of Lessor's Covenant Against Use of His Other Property in Competition with the Lessee-covenantee (1964) 97 A.L.R.2d 1, 111 ["A commonly accepted, although not necessarily exclusive, measure of damages for breach by the lessor of his covenant restricting the use of his other premises, is the difference in the rental value of the premises leased to the covenantee with the covenant unbroken and the rental value of such premises with the covenant broken"].)
Legal commentators have also recognized this reduced rental value rule as a proper damage measure for a breach of a noncompetition provision. (See 49 Am.Jur.2d (2006) Landlord and Tenant, § 90, p. 123 ["[t]he appropriate measure of damages recovered from a lessor who has breached such a restrictive covenant has been held to be the difference in value between the plaintiff's leasehold with the covenant against competition unbroken and the same leasehold with a competing store or other business on the adjacent premises"]; 3 Friedman & Randolph, Friedman on Leases (5th ed. 2008) § 28:6.4, pp. 29-29 to 28-35 [characterizing this damage measure as the "traditional[ ]" rule for breach of noncompetition provisions]; see also 7 Miller & Starr, Cal. Real Estate (3d ed. 2001) § 19.52, p. 143.)
In some jurisdictions, including California, a commercial tenant may alternatively recover lost profits if these damages are sufficiently certain. (Medico-Dental Bldg. Co. v. Horton & Converse (1942) 21 Cal.2d 411 (Medico-Dental); see 49 Am.Jur.2d, supra, Landlord and Tenant, § 90, pp. 123-124.) Other jurisdictions do not allow this measure because the amount of profits lost is often speculative, particularly with a new business or one without a long history of profitable operations. (See Schreiber, supra, 541 S.E.2d at p. 678.)
Relying on Medico-Dental, supra, 21 Cal.2d 411, Park argues that under California law lost profits is the sole measure of damages for breach of a noncompetition provision. Medico-Dental does not support this blanket rule. Medico-Dental concerned a tenant's right to abandon the premises upon a breach of a noncompetition agreement. The court held a noncompetition provision is a dependent covenant, and thus a landlord's breach allows a tenant to abandon the premises and be relieved of continuing rent liability. (Id. at pp. 418-424.) Although the court noted in dicta that a tenant has the option of remaining until the end of the term and suing for lost profits, the court did not state or suggest that the lost profits was the sole measure of damages for the breach. (Id. at pp. 433-434.) Thus, the decision does not support Park's argument in this case. (See People v. Banks (1993) 6 Cal.4th 926, 945 ["language contained in a judicial opinion is ' "to be understood in the light of the facts and issue then before the court, and an opinion is not authority for a proposition not therein considered" ' "].)
Park has not cited, nor have we found, any decision in this state precluding the use of a lost rental value damages measure for a breach of a noncompetition provision. To the extent Park is requesting that we adopt a new rule that lost profits is the sole and exclusive measure available for the breach of a noncompetition provision, we decline to do so. A diminution of rental value is a typical way of compensating a tenant for numerous analogous types of breaches. This measure allows the tenant to recover the benefit of the bargain by ensuring he or she is required to pay only for the true value of the lease without the covenant. With respect to a noncompetition provision, this damage measure properly seeks to compensate the tenant for the loss of protection from competition for which it paid, but did not receive.
In this regard, we reject Park's argument that a rule that "only lost profit as the measure of damages recoverable for breach of an anticompetition clause makes sense from an economic standpoint . . . ." Park says that because a tenant has the choice to terminate the lease and move out, the fact that a tenant does not do this "will always reflect that the lease remains substantially worth the rent that the tenant is paying." Although this assertion may be applicable in a particular case, it is a factual argument for the jury's determination. In this case, the jury found the lease did decrease in value because of the breach, and there was evidence supporting this loss in value.
C. Substantial Evidence Supports Damages Award
Park next argues that even assuming the loss in rental value is a proper measure, the evidence was insufficient to show a loss in value.
"[W]here a trial court's factual finding is challenged on the ground there is no substantial evidence to sustain it, the power of the reviewing court begins and ends with the determination as to whether, on the whole record, there is substantial evidence, contradicted or uncontradicted, that will support the trial court's determination. [Citation.] [¶] The appellate court views the evidence in the light most favorable to the respondents [citation], resolv[ing] all evidentiary conflicts in favor of the prevailing party and indulg[ing] all reasonable inferences possible to uphold the trial court's findings [citation]." (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.)
"No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin." (Civ. Code, § 3301.) Thus, damages that are remote or speculative cannot serve as a basis for recovery. (Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 989.) But "[w]here the fact of damages is certain, the amount of damages need not be calculated with absolute certainty. [Citations.] The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation." (Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1585.) Further, the selection of which measure of damages is most appropriate is within the sound discretion of the trier of fact. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 599; GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 873; Carlson Industries v. E. L. Murphy Trucking Co. (1985) 168 Cal.App.3d 691, 699.)
In this case, an accounting expert testified that the value of the noncompetition provision was 50 percent of the rent and/or 50 percent of the increased rent paid. The jury apparently believed this figure was too high, and awarded less than one-third of the expert's damage estimation. The jury's determination was a reasonable approximation of the damages and supported by the evidence.
In challenging the sufficiency of the evidence supporting this damage amount, Park argues Salem's opinion on the value of the noncompetition covenant was speculative because he did not perform an "appraisal or other acceptable method of valuing the business." On our review of the record, Salem's testimony was sufficient to establish a foundation to provide an opinion on valuation. Salem testified that he is highly experienced at determining the value of a noncompete lease provision, particularly with small grocery/liquor store type businesses, and that he was very familiar with the San Marcos market business. He explained that each lease must be evaluated based on the particular circumstances of the store and the lease, and he based his opinion on all of the relevant factors. Expert testimony is admissible to prove the value of a leasehold. (See Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at pp. 884-885.)
In her reply brief, Park challenges the evidence that the Mariposa Nutrition store is a competing business. However, because Park raised this challenge for the first time in her reply brief, the argument is waived. In any event, substantial evidence supported the jury's finding that this store was competitive with San Marcos's business. Given the substantial and unprecedented drop in sales in 2003 and 2004 (shortly after Mariposa Nutrition moved into the center) and the fact that the stores sold many of the same goods, there was sufficient evidence for the jury to conclude that Park had violated the noncompete provision. Although Mariposa Nutrition accepted only government coupons, rather than cash, there was evidence showing that customers would nonetheless purchase items in San Marcos's store if the Mariposa Nutrition store had not been there, because the closest store that accepted these coupons was approximately three miles away.
Park contends the attorney fees award must be reversed if any element of the judgment is reversed. Because we are affirming the judgment in its entirety, we also affirm the attorney fees award.
DISPOSITION
Judgment affirmed. Appellant to pay respondent's costs on appeal.
WE CONCUR: BENKE, Acting P. J. McINTYRE, J.