Chosen Few Information Systems v. M&N Rug Enterprises

0Filed 4/24/07 Chosen Few Information Systems v. M&N Rug Enterprises CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County,

C. Edward Simpson, Judge. Affirmed.

Dongell Lawrence Finney, John A. Lawrence and Jason M. Booth for Plaintiffs and Appellants.

Gutierrez, Preciado & House, Calvin House; Schwartz Wisot & Wilson and John D. Wilson for Defendants and Respondents M&N Rug Enterprises, LLC, Mansour Mehrabanian, Iraj Nauriyalian, Faramarz David Mehrabahn, Monireh Mehrabianian and Farideh Mehrabianian.

James S. Link for Defendants and Respondents Dong I. Jhung and Dong Jhung & Associates.

________________________

Chosen Few Information Systems, Inc. (CFIS), Chosen Few Personnel Services, Inc, and James L. Perry appeal a judgment entered following a jury verdict in favor of defendants and respondents M&N Rug Enterprises, LLC (M&N Rug), Mansour Mehrabanian, Iraj Nauriyalian, Faramarz David Mehrabahn, Monireh Mehrabianian, Farideh Mehrabianian, Dong I. Jhung and Donald Jhung & Associates.

Appellants claim the trial court committed several instances of evidentiary error that prejudiced their right to a fair trial. We reject these contentions and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

1. Overview.

On November 29, 2002, CFIS, through its president, Perry, leased a storefront at 2316 East Colorado Boulevard from M&N Rug. This case concerns the extent of the leasehold. CFIS claimed the lease included a theatre directly behind the storefront; M&N Rug asserted the lease included only the storefront and the lobby of the theater.

2. Trial evidence.

Perry testified he telephoned Donald Jhung, M&N Rugs real estate agent, after seeing Jhungs sign on the commercial real property at 2300-2320 East Colorado Boulevard in November of 2002. Over the course of several meetings at the property, Jhung showed Perry the storefront at 2316 East Colorado Boulevard, which had been vacated, and the theatre behind it, portions of which were being used for storage by tenants of the storefronts. Jhung told Perry the entire 8,500 square foot theater was available for lease and indicated the owner wanted to rent the theatre for 40 to 50 cents per square foot. Jhung said the storage tenants were on a month-to-month basis and would be evicted if Perry were interested in leasing the theater.

On November 9, 2002, Jhung gave Perry a proposed five-year lease to review. The lease initially indicated the permitted uses of the premises included retail sales of antiques and art; Perry added wholesale/auction to the description. An addendum to the lease, prepared by Perry, indicated the leased property included the storefront at 2316 Colorado Boulevard. The lease provided for rent of $2,500 per month. On November 29, 2002, Perry signed the lease and the addendum and gave Jhung a check payable to M&N Rug for $32,500 for the first years rent. Jhung gave Perry keys to the premises. Perry refurbished the storefront, which included the lobby and snack bar area of the theater, and commenced operation of an antique shop.

M&N Rug did not execute the lease signed by Perry but transmitted another version of the lease to him.

On December 10, 2002, Perry applied for a business license from the City of Pasadena. In the application, Perry indicated the business name was Antiques n coffee.com, and that the business would be operated at 2316 East Colorado Boulevard. Perry described the business as a retail and wholesale art, antique and architectural concern.

On December 20, 2002, Perry returned the signed lease to M&N Rug with a letter complaining about various problems with the condition of the premises.

David Mehrabahn, the manager of M&N Rug, testified he met with Perry and Jhung at the property on December 28, 2002, to discuss these issues. In that meeting, Perry said he wanted to rent the cage area of the theater to store some chairs. Perry also mentioned he wanted to lease the theater and asked when it would be available. Mehrabahn said he could not commit to rental of the theater because the existing tenants would have to be removed. However, Mehrabahn agreed to rent Perry the cage area if Perry agreed in writing to vacate the area if they did not come to terms for the lease of the theater.

On January 3, 2003, Perry wrote to M&N Rug. The caption of the letter indicates it is a Letter of Intent for leasing full theatre at 2316 East Colorado Boulevard. In the letter, Perry states: I am writing this letter to confirm our agreement that [CFIS] will lease the entire theatre area in your shopping center for a flat 50 cents per square foot per month of usable space within the theatre area as soon as it is available and vacant without any existing storage tenants. In the letter, Perry confirmed CFISs intent to lease the cage area of the theatre for the month of January 2003, in order to store church pews for a client. Per our agreement if we do not take the full theatre space, we will have our client move out the pews by February 1, 2003. [] I estimate in total we will need about 800 sq. ft. for the pews x 50 cents [equals] $400.00 for the month of January. Thereafter, we would lease the entire space at the same rate for the first five years . . . .

The balance of the letter discusses the actual measurements of the theatre. In that context, Perry states the snack bar area is already included in the front store lobby area rental lease and must be deducted from the total gross area as it extends into the main theatre area. Perry concluded the actual usable space within the theatre was 6679 square feet and suggested a monthly rental of $3,340 for the theatre area. Perry testified his intent in attempting to establish the square footage of the lobby area was to avoid double counting that area upon renewal of the lease in five years.

In a letter dated January 8, 2003, Mehrabahn advised Perry he did not wish to lease the theatre on those terms.

On January 21, 2003, M&N Rug delivered to Perry an executed version of the lease they had been negotiating since November. The description of the premises, the $2,500 monthly rent and the substantive provisions of the operative lease were the same as the provisions of the lease Perry signed on November 29, 2002.

On February 19, 2003, Mehrabahn wrote to Perry offering to lease the theatre to CFIS for $4,600 per month. Perry declined this offer.

Perry claimed he and two employees did extensive cleaning and refurbishing in the theatre and that Jhung, Mehrabahn and the other principals of M&N Rug observed this work being done but never said Perry was not entitled to occupy the theatre.

Mehrabahn testified that when the operative lease was signed on January 21, 2003, Perry had not cleaned any portion of the theater. Mehrabahn claimed M&N Rug, not CFIS, took down the interior walls that partitioned the storage space in the theatre and cleaned the theatre.

Perry and Mehrabahn met several times in March of 2003. Mehrabahn testified that, at the first of these meetings, Perry tried to reduce the square footage of the theater and refused to pay more than $3,300 per month. Mehrabahn insisted on $4,350, even though he believed the theater was approximately 10,000 square feet. Mehrabahn claimed Perry requested time to see if he could obtain the necessary permits.

Mehrabahn testified that in a meeting at the end of March, 2003, Mehrabahn insisted that Perry decide whether he wanted to lease the theater. When Perry again argued about the square footage, Mehrabahn told Perry either to rent the theater for $4,350 or Mehrabahn would rent it to someone else. After further discussion, Perry pounded Mehrabahn on the back and said, My son, you dont know real estate. You need to learn what real estate is about. Perry then told Mehrabahn the existing lease already included the theater. Mehrabahn asked why Perry sent the letter of intent if that were the case. Perry responded the letter of intent was void because Mehrabahn signed the operative lease after Perry wrote the letter of intent. Perry showed Mehrabahn a check in the amount of $100,000, which he said he had just received in a court case involving a dispute over a commercial lease.

Perry testified that at the meeting at the end of March, 2003, Mehrabahn said some of his tenants were moving out and he needed $4,300 or $4,600 more to cover his mortgage payments. Perry told Mehrabahn that CFIS already had a lease for the theatre and he refused to pay more. However, Perry admitted he previously had filed a lawsuit against TIAA Realty and had obtained a settlement in his favor in the approximate amount of $100,000.

Shortly after this meeting, M&N Rug commenced eviction proceedings against CFIS alleging various breaches of the lease agreement.

3. Jury verdict and judgment in favor of the defendants.

Appellants filed this lawsuit on June 18, 2003. In a bifurcated trial, the case went to the jury on a single issue special verdict that posed the following question: Did the leases between [CFIS] and M&N Rug Enterprises LLC include both the storefront and the theater portion of 2316 East Colorado Boulevard[?] The jury unanimously responded, No. The trial court thereafter entered judgment in favor of the defendants.

CONTENTIONS

Appellants contend the trial court erroneously limited the jurys consideration of Jhungs statements to Perry and the trial court improperly excluded exhibit Nos. 1 and 2 from evidence.

DISCUSSION

1. The trial courts limitation on the jurys use of Jhungs statements to Perry.

a. Relevant trial proceedings.

When Perry sought to relate Jhungs statements about the space CFIS was leasing, the trial court suggested the jury be instructed that Jhungs statements were not admissible against any of the other defendants. Perry objected to any limitation on Jhungs testimony, noting Jhung was a licensed real estate broker working on behalf of M&N Rug. Thus, Jhungs statements properly were imputed to M&N Rug. The trial court indicated it had heard no evidence that Jhung was authorized to make statements on behalf of the other defendants. After hearing argument, the trial court decided Jhungs statements could go to the jury but could not be imputed to M&N Rug.

Perrys counsel then argued Mehrabahn had ratified Jhungs statements by encouraging Perry to continue working in the theatre area. Also, there was an issue of estoppel because Perry changed his position in reliance on the statements by Jhung. Unswayed by these arguments, the trial court indicated it would instruct the jury that any statement Jhung made to Perry could only be used as evidence against Jhung. The trial court indicated any other ruling would violate the equal dignities rule, which requires that authority for executing a written agreement be in writing.

The trial court thereafter instructed the jury as follows: Mr. Perry is entitled to testify as to conversations that he had with Mr. Jhung; however, that testimony is limited to any claims which he may have directly against Mr. Jhung and cannot be used by you as evidence against the remaining defendants. [] In other words, the conversations that Mr. Perry had with Mr. Jhung [are] admissible only against Mr. Jhung and his company [and] are not admissible against the remaining defendants.

Perry thereafter testified Jhung told him the space CFIS was leasing included the theater. Jhung testified he did not recall such a conversation.

b. Appellants argument.

Appellants contend statements made by an agent in the performance of an act within the scope of the agents authority are in legal effect the statements of the principal and admissible as evidence. (Dart Industries Inc., v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059, 1077.) Appellants argue Jhung was listed as M&N Rugs broker on the operative lease and Mehrabahn admitted at trial that Jhung was M&N Rugs real estate broker for the property. As such, Jhung had authority to make representations regarding the nature and extent of the space available and Perry was entitled to rely on Jhungs representations. (Handley v. Guasco (1958) 165 Cal.App.2d 703, 708.)

Appellants further assert M&N Rug held Jhung out as its broker and Mehrabahn allowed Perry to perform costly and time-consuming improvements to the theater, thereby leading Perry to believe Jhung had authority to offer the storefront and theater in a single lease. Because M&N Rug put Jhung in a position to negotiate with Perry and articulated no limitation on his authority, Perry reasonably believed he would be leasing both the storefront and the theater. Also, Mehrabahns silence in the face of Perrys obvious belief the leasehold included the theater estops M&N Rug from claiming Jhung was not its agent. Thus, M&N Rug ratified Jhungs representations by his subsequent conduct. (Houk v. William Bros., Ltd. (1943) 58 Cal.App.2d 573, 579.)

Finally, appellants argue the trial court inappropriately relied on the equal dignities rule in refusing to allow Jhungs statements to be admitted against M&N Rug. Appellants assert this rule does not apply after the principals have entered into a written contract. Appellants conclude Jhungs statements were binding on M&N Rug, were influential on Perrys expectation as to the scope of the lease, and were relevant to the ultimate question presented the jury as to the actual scope of the lease. Thus, the case must be remanded for retrial.

c. Resolution.

Even if we assume, for the sake of discussion, that the trial court erroneously limited the jurys use of Jhungs statements to Perry, any error was harmless. Appellants claim the lease included the theatre was eviscerated by Perrys letter of intent dated January 3, 2003. This letter revealed that, even after CFIS commenced possession of the storefront on November 29, 2002, Perry sought to enter into a second lease for the theatre. The letter of intent offered to lease the cage area of the theatre for $400 for the month of January 2003 and promised to vacate that area if the parties did not reach an agreement for the lease of the theatre. Thus, regardless of what Jhung told Perry in November of 2002, the trial evidence demonstrated that, as of January 3, 2003, Perry did not believe the operative lease included the theatre.

Consequently, even had the trial court permitted the jury to impute Jhungs statements to M&N Rug, no different result would have obtained. Accordingly, any error was harmless. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 574; Finney v. Gomez (2003) 111 Cal.App.4th 527, 550; Cal. Const., art. VI, 13.)

2. Exclusion of exhibit Nos. 1 and 2.

Appellants sought to introduce into evidence exhibit No. 1, referred to as the rent list, and exhibit No. 2, which was a diagram of the entire block and showed that only 2316 connected directly to the theater. Perry testified Jhung told him exhibit No. 1 had been given to M&N Rug in connection with M&N Rugs purchase of the property in April of 2002. Perry further testified that Jhung gave him exhibit No. 1 on his second visit to the property and that both exhibits were included with the operative lease when he received it on January 21, 2003.

The trial court excluded exhibit Nos. 1 and 2 on the grounds they contained hearsay and lacked foundation.

Appellants contend the trial court apparently believed the documents were being offered to prove the specific measurements of square footage indicated, which would have been hearsay. Appellants assert the exhibits were not offered to prove the truth of the matters asserted in the exhibits, namely, the actual square footage of the storefronts, the dimensions of the theater or the rents previously received. Rather, the exhibits were offered to show Perrys state of mind when he leased the property and why it was reasonable for him to believe the lease of 2316 included the theater. (Wiz Technology, Inc. v. Coopers & Lybrand (2003) 106 Cal.App.4th 1, 13.)

Appellants note that exhibit No. 1, the rent list, showed 2316 constituted 9,800 square feet, more than four times any of the other storefronts in the property. Appellants assert Perry logically could conclude, based on this document, that 2316 included the storefront and the theater behind it. This conclusion is bolstered by exhibit No. 2, which showed that only 2316 had a connecting hallway to the theater. Because both exhibits indicate 2316 included the theater, they were relevant to the questions of whether the lease included the theater. Appellants conclude that, because the intention of the parties was at the center of the controversy, exclusion of the documents unfairly prejudiced the trial of their case.

Appellants arguments are not persuasive. Appellants assertion Perry relied upon exhibit No. 1 to establish the square footage included in the lease of 2316 reveals that appellants sought to introduce the exhibit for the truth of the matter asserted. Thus, the information contained in the exhibit was hearsay. Although Perry established exhibit No. 1 was prepared by Bill Chu on January 17, 2002, in connection with the sale of the property to M&N Rug, Chus authorship of the exhibit did not establish the accuracy of the square footage information it contained. Moreover, the rents collected by the previous owner of the property were not relevant to determining the terms of the lease between CFIS and M&N Rug. Also, Mehrabahn testified that after M&N Rug purchased the property, he increased the rent for the storefronts to approximately $1.50 per square foot. Thus, neither the prior owners designation of the square footage of the storefronts or the rents charged for them was relevant to the current dispute.

In any event, as with the trial courts limitation on Jhungs testimony addressed above, any error in the exclusion of the two exhibits must be seen as harmless. The jury visited the premises during the trial and thus was aware of the layout of the property without the use of exhibit No. 2. Also, Perry testified with respect to his belief the lease included the theater. Appellants also presented the testimony of Chu who related what portions of the building the previous tenants of 2316 occupied and Jhung testified about the configuration of the storefronts and the amount of rent he collected for the various spaces.

In sum, any error in the exclusion of exhibit Nos. 1 and 2 must be seen as harmless. (Soule v. General Motors Corp., supra, 8 Cal.4th at p. 574; Finney v. Gomez, supra, 111 Cal.App.4th at p. 550; Cal. Const., art. VI, 13

DISPOSITION

The judgment is affirmed. Appellants to bear costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KLEIN, P. J.

We concur:

CROSKEY, J.

ALDRICH, J.

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