Filed 12/14/05

CERTIFIED FOR PARTIAL PUBLICATION*

 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

FIRST APPELLATE DISTRICT

 

DIVISION ONE

 

 

LILI BUTLER-RUPP et al., Plaintiffs and Appellants, v. ROSEANNA LOURDEAUX et al., Defendants and Appellants.

A102706, A103925   (Sonoma County Super. Ct. No. SCV 218869)

 

In this litigation arising from a landlord-tenant relationship, the landlords, Roseanna Lourdeaux and Wallace Lourdeaux (hereafter the Lourdeauxs), and their property manager, Evelyn Phelan (hereafter Phelan) appeal a judgment in favor of the tenant, Lili Butler-Rupp (hereafter Butler-Rupp) and Lili Butler Studio, Inc. (hereafter referred to collectively as plaintiff). The plaintiff separately appeals from an order denying a motion for attorney fees. We affirm in part and reverse in part the judgment in favor of plaintiff and reverse the order denying plaintiff's motion for attorney fees.

PROCEDURAL BACKGROUND

Plaintiff filed a complaint on April 10, 1998, against the Lourdeauxs and Phelan alleging breach of contract and several tort causes of action, and later added additional tort causes of action in a second amended complaint filed on July 7, 2000. At the conclusion of a lengthy trial, the court instructed the jury on seven causes of action: breach of contract, promissory fraud, negligent misrepresentation, defamation, interference with tenant's quiet enjoyment, intentional infliction of emotional distress, and negligent infliction of emotional distress.

On March 5, 2003, the jury returned a special verdict, responding to 23 questions, which found the Lourdeauxs liable on all causes of action except promissory fraud and intentional infliction of emotional distress. Phelan was found liable on causes of action for defamation, interference with tenant's quiet enjoyment, and negligent infliction of emotional distress. The jury further found that the Lourdeauxs and Phelan were liable for punitive damages predicated on the defamation verdict and a finding of oppression, malice or fraud.

The special verdict form asked for a single award of damages for the findings of liability for breach of contract, negligent misrepresentation and interference with quiet enjoyment. The jury awarded plaintiff damages of $855,000 on these causes of action. Responding to separate questions in the verdict form, the jury awarded plaintiff damages of $80,000 for defamation and $500,000 for negligent infliction of emotional distress. In a subsequent proceeding, it awarded plaintiff punitive damages against the Lourdeauxs in the amount of $5,000 and against Phelan in the amount of $500.

In post-judgment proceedings, the court denied the motion of the Lourdeauxs and Phelan for a new trial by an order filed June 19, 2003, and denied plaintiff's motion for attorney fees by an order entered August 12, 2003. The Lourdeauxs and Phelan (hereafter appellants) filed a notice of appeal from judgment, and plaintiff filed a separate notice of appeal from the denial of the request for attorney fees. We have consolidated both appeals.

FACTUAL BACKGROUND

Butler-Rupp is a clothes designer and manufacturer based in Sonoma County, California. After early successes as an artist, she began producing monoprints that she sold to local customers at prices appropriate for original works of art. In 1987, she leased a space of 900 square feet in the Lakeville Building in Petaluma, California, which was owned and managed by the Lourdeauxs. The initial lease was for a one-year term and called for a monthly rental of $350; the next year the rental rose to $600. In succeeding years, Butler-Rupp began to achieve a toehold in national markets and developed a line of high-end products for a national market. In 1991, she participated in her first New York fashion show and hired three employees, including an office manager, Anne Sachs.

The business continued to expand rapidly, with sales doubling for several consecutive years. In 1994, Butler-Rupp achieved gross sales of over $1 million, incorporated her business as Lili Butler Studio, Inc., and leased a showroom for the Dallas market. She added a new line of clothes called Tiger Lili and began plans for other lines, called Day Lili and Water Lili, which were targeted at different price ranges and clientele. Her staff continued to increase, reaching a high of 26 employees at one point in the 1990's.

In 1993 Butler-Rupp leased adjacent warehouse space in the Lakeville Building, designated suite 117, which she converted into a showroom and office. Her rent then rose to $1200. She testified that she agreed to lease suite 117 after receiving the assurance of Wallace Lourdeaux that he would upgrade the heating system. Lourdeaux later provided two vents to the room, but Butler-Rupp complained that the heating system still didn't work adequately.

The following year, Butler-Rupp explored the option of moving to another location since she calculated that she needed 3000–4000 square feet of production space to accommodate future business. In an effort to keep her as a tenant, Wallace Lourdeaux offered to convert a small area into a kitchen and to expand the leased area to include a bare, cement-floor warehouse space known as suite G. According to Butler-Rupp, her main concern was the adequacy of the heating system both in suite 117 and in the new suite G, which was then unheated. As an inducement to stay in the building, Lourdeaux represented that he would repair the heating system in suite 117 and â€