Filed 12/7/05 Green v. Boehrig CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Patricia A. Y. Cowett, Judge. Judgment affirmed in part, reversed in part.

Julie Ann Boehrig appeals a judgment entered in favor of Randall Green on his claims for breach of a commercial lease and retaliatory eviction against her individually and as the personal representative of her stepfather's estate. Boehrig contends that (1) as a matter of law, Green did not properly exercise his option to renew the lease, which otherwise expired in March 2001, and thus she was entitled to terminate his tenancy; (2) the court's imposition of punitive damages was improper because (A) Green did not submit evidence of her financial condition in support of the award, (B) the underlying wrongful conduct consisted of a breach of contract, which will not support a punitive damage award, and (C) there was insufficient evidence to support its findings of malice, fraud or oppression; and (3) as a matter of law, neither the compensatory nor the punitive damage components of the judgment could not be entered against her as the personal representative of the estate. We agree that the trial court erred in imposing a punitive damage award as to Green's cause of action for breach of lease. We also conclude that the trial court was statutorily precluded from awarding punitive damages against Boehrig as the personal representative of the estate and that Green's evidence was insufficient to support a punitive damage award against Boehrig individually. Accordingly, we reverse the judgment insofar as it awards Green punitive damages, but affirm in all other respects.

FACTUAL AND PROCEDURAL BACKGROUND

Beginning in 1983, Green leased commercial space on Bacon Street (the Property) in Ocean Beach to operate his auto body repair business, Ocean Beach Auto Body. Boehrig's stepfather and mother, Donald and Barbara Toole acquired the Property in 1986 or 1987 and they continued to lease the space to Green; Mr. Toole also operated his business (Ocean Beach Auto Repair) on the Property, adjacent to the leased premises. In April 1997, Green signed a new written lease (the Lease) for a five-year term, with two options to renew the Lease first for a three-year period and thereafter for another two years. The Lease provided for monthly rent of $1,400 for the first month and $1,500 thereafter, although Mr. Toole later orally agreed to keep the rent at $1,400 in lieu of doing certain maintenance on the leased premises. The Lease also provided that the Tooles were responsible for maintaining the leased premises in compliance with all applicable governmental codes.

In 1999 and 2000, Green complained to the Tooles about the general conditions at the leased premises, particularly the condition of the paint spray booth, the walls and the bathroom facilities, and asked them to make various repairs. In March 2002, the City of San Diego Fire Department (the City) inspected the premises and determined that the spray booth and various other conditions on the site were not in compliance with applicable code requirements. The City issued a written order requiring that the violations be corrected immediately.

Intending to exercise the option to renew the Lease, Green had his girlfriend prepare a revised copy of the first two pages of the Lease, modified to show a lease term of three years beginning in April 2002 at a monthly rent of $1,400 (the Revised Document). On March 29, Green took the Revised Document to Mr. Toole's office so that they could both sign it, but Mr. Toole was not in, so he gave the document and a copy of the City's order to Les Williams, Mr. Toole's on-site manager, with instructions that Williams give both documents to Mr. Toole. At or about the same time, Green paid the next month's rent, which would be the first month's rent for the new lease period.

Williams delivered the materials to Mr. Toole as Green requested and Mr. Toole showed the Revised Document to Mrs. Toole. Mrs. Toole did not question what the Revised Document was, but expressed dissatisfaction that it provided for monthly rent of $1,400 over the three-year renewal period and told Mr. Toole that she would "take care of it." Thereafter Boehrig and Mrs. Toole created a revised lease that differed in several respects from the original Lease, including the amount of the rent (revised to be $1,500, $1,600 and $1,700 for each of the three years, respectively) and the omission of any right of renewal on Green's part.

A week or so later, the Tooles and Boehrig stopped in at Ocean Beach Auto Body, presenting their newly drafted lease and asking Green to sign it as quickly as possible; Green told them that he already had a lease on the premises, but agreed to look at their proposal. After showing the proposed lease to an attorney, Green declined to sign it. Thereafter, Mrs. Toole died and Boehrig succeeded to her interest in the Property. Green made certain repairs required by the City's order and asked Mr. Toole to make the other repairs, which were structural in nature, in accordance with the lessors' obligations under the Lease. Mr. Toole declined to make the repairs, saying that he did not have the money.

By October 2002, the relationship between Green and Mr. Toole became strained and Mr. Toole threatened to evict Green from the leased premises. Green received an e-mail from the City indicating that Mr. Toole had not responded to its attempted contacts and that, absent some plan, the matter was going to be referred over to the City Attorney. In November 2002, Mr. Toole and Boehrig served Green with a notice of termination of the tenancy.

Mr. Toole died in December 2002 and the following month, Green met with Boehrig and her husband, asking whether they were planning to do any of the required repairs before the fire department came to inspect the leased premises. Boehrig responded that repairs were largely attributable to Green's business rather than Ocean Beach Auto Repair and would cost $20,000 to $25,000; she indicated that she was not planning to put any money into having the repairs completed. Thereafter, she filed an unlawful detainer action against Green, seeking to evict him from the premises. All the while, however, Green continued to pay rent, which Williams continued to accept, and Green continued to conduct his business at the leased premises.

In February 2003, the City posted the premises with a notice that required Green to stop all work in the spray booth portion of the leased premises until authorized to do otherwise. As a result of the posting, Green's ability to conduct his business on the premises was substantially limited, so he moved his business to another location on Voltaire Street in March 2003; unfortunately, the new location did not have a spray booth, so Green was not able to perform larger paint jobs there.

In June, Green filed this action for breach of contract, retaliatory eviction, wrongful eviction, return of deposit and declaratory relief against Boehrig. Boehrig cross-complained against Green for breach of lease, contending that he left the premises in a damaged condition. After a nonjury trial, the court awarded Green $110,589 in compensatory damages and $43,000 in punitive damages against Boehrig personally and as the representative of the estate and found that Boehrig was not entitled to any damages on her cross-claims against Green. The court's statement of decision made findings that: (1) Green had properly renewed the Lease by delivering the Revised Document to Williams; (2) the Tooles had actual notice of Green's exercise of the renewal option prior to the expiration of the Lease period; (3) after the expiration of the original Lease term, Green continued in possession of the premises and continued to pay rent for the leased premises, which the Tooles and Boehrig accepted without objection. It subsequently awarded Green $27,354.20 in attorney fees and $2,941.91 in costs.

Boehrig thereafter moved to vacate the judgment and for a new trial, reasserting her contentions that Green did not properly exercise the renewal option and also arguing that the evidence was not sufficient to support a finding of malice, fraud or oppression and that Green had failed to introduce evidence of her financial condition as necessary to support a punitive damage award. The court denied her motions and this appeal ensued.

DISCUSSION

1. Exercise of the Option to Renew

Where a lease specifies the manner in which a renewal option is to be exercised, the lessee must strictly comply with those terms. (Bekins Moving & Storage Co. v. Prudential Ins. Co. (1985) 176 Cal.App.3d 245, 250.) This policy is intended to provide greater certainty to the contracting parties, which is especially appropriate in the context of an option, where the optionor is bound in advance to make a contract if the optionee elects to exercise the option. "Since the optionor is bound while the optionee is free to accept or not as he chooses, courts are strict in holding an optionee to exact compliance with the terms of the option. [Citation.]" (Ibid., quoting Hayward Lbr. & Inv. Co. v. Const. Prod. Corp. (1953) 117 Cal.App.2d 221, 229; Simons v. Young (1979) 93 Cal.App.3d 170, 182, 187.)

Here, section 6 of the Lease provided in relevant part:

"Lessor grants Lessee two subsequent options at the end of the original lease. First option will be to renew the lease first for a period of three (3) years. After the expiration of the first option[,] a second option may be exercised for an additional two (2) years. Said options can be exercised by Lessee at any time during the period of the original lease or renewal in accordance with his option to renew. The terms, covenants and conditions to be the same as those herein."

As described above, Green attempted to exercise the first renewal option by providing Williams, the Tooles' manager, with the Revised Document, which consisted of the first two pages of the Lease, modified to show a lease term of three years beginning in April 2002 at a monthly rent of $1,400.

Although section 6 of the Lease did not specify any particular manner of giving notice of the exercise of a renewal option, Boehrig contends that Green was required by section 21 of the Lease to give written notice of such exercise; section 21 provided in relevant part that "[n]otice given pursuant to the provisions of this lease, or necessary to carry out its provisions, shall be in writing, and delivered personally to the person to whom the notice is to be given . . . , or mailed postage prepaid, addressed to such person." The trial court apparently agreed that section 21 was applicable, but concluded that Green's delivery of revised Lease pages to the Tooles' manager was sufficient to constitute the giving of notice of his intent to exercise the renewal option.

In making the finding that the personal delivery of the Revised Document to the Tooles' manager was sufficient to comply with the notice requirements of section 21, the court relied on the parties' similar conduct in giving notice to each other in the past. Because the parties' prior conduct provides evidence of their mutual intent as to the meaning of the Lease terms, this evidence supports the court's conclusion that Green's delivery of the Revised Document to Williams was sufficient to constitute delivery of the Revised Document to the Tooles. (See City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 474 ["The mutual intention to which the courts give effect is determined by objective manifestations of the parties' intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent acts and conduct of the parties."].)

Boehrig challenges the court's finding on the ground that the Revised Document was "patently ambiguous" and thus was not sufficient to constitute notice that Green intended to renew the lease. However, the evidence in the record and inferences drawable therefrom support the trial court's finding that the Tooles were aware that by delivering the Revised Document, Green intended to exercise the renewal option. Specifically, there was no evidence that the Tooles were confused about the import of the Revised Document when they received it and the record supports a contrary inference. The Tooles never made any inquiry to Green about what the Revised Document was, but rather created a new lease containing terms more favorable to them and pressured him to sign it. Further, the Tooles (and later Boehrig) continued to accept the rent in accordance with the original Lease terms. Although there was evidence contradicting the court's finding in the record, the court was free to reject such evidence and thus its existence does not support a reversal of the judgment on appeal. (Orange County Employees Assn. v. County of Orange (1988) 205 Cal.App.3d 1289, 1293 [an appellate court has no power to judge the effect or value of the evidence, weigh such evidence, consider the credibility of the witnesses or resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom].)

Boehrig makes a related argument that the Revised Document purported to create another option to renew the Lease two more successive periods (one for three years followed by another for two years) and thus, as a matter of law, did not constitute a valid exercise of the renewal option. However, although the acceptance of an option must be in accordance with the terms of the option agreement and must be free from conditions that the optionor is not bound to perform (Riverside Fence Co. v. Novak (1969) 273 Cal.App.2d 656, 660), the Revised Document merely provided that Green had two options to renew "at the end of the original lease." This is consistent with California law, which provides that the exercise of the option does not create a new agreement but merely extends the term of the original lease. (See Schmitt v. Felix (1958) 157 Cal.App.2d 642, 645, quoting Knox v. Wolfe (1946) 73 Cal.App.2d 494, 502.) Based on the evidence presented at trial, the court concluded that the provision did not purport to create a new three-year renewal period and thus the Revised Document was not conditioned on terms in addition to what was provided for in the Lease, but was instead merely a means of communicating Green's election to exercise the option. The language of the Revised Document and Green's testimony at trial provided substantial evidence to support this finding.

For the foregoing reasons, we conclude that Green's exercise of the renewal option under the Lease was not ineffective as a matter of law and that there is substantial evidence in the record to support the trial court's findings that Green in fact exercised the option before the original term of the Lease expired. In light of these conclusions, Boehrig's challenge to the amount of compensatory damages awarded based on the argument that Green became a month-to-month tenant after the expiration of the original Lease term is moot.

2. Punitive Damages

In his complaint and trial brief, Green requested that the court award punitive damages in addition to compensatory damages for retaliatory eviction. During trial, and in response to a document request by Green, Boehrig lodged financial records relating to Mr. Toole's estate and Ocean Beach Auto Repair, but moved that the evidence be excluded unless and until the court made the findings necessary to support such an award. Although Green's counsel suggested that the evidence be submitted in the main proceedings since the court was acting as the trier of fact, the court granted Boehrig's motion, indicating that the evidence of Boehrig's financial condition would be considered in a second phase of the trial.

After the court made its decision that Green had properly exercised the renewal option and was thus entitled to compensatory damages, it took the amount of such damages under submission and proceeded to the punitive damage issue. It found that Boehrig and the Tooles had acted with malice, fraud or oppression and indicated that it would be willing to consider testimony as to the appropriate amount of punitive damages, as well as the financial records previously submitted by Boehrig. When the court inquired whether Boehrig was objecting to its consideration of the records (which Boehrig's counsel admitted represented "what [his] client . . . inherited" when Mr. Toole died), Boehrig's counsel strenuously argued that the court should not impose punitive damages at all in light of the facts of the case.

The court nonetheless admitted the financial records into evidence and awarded Green $43,000 in punitive damages as to his breach of contract and retaliatory eviction causes of action. The award was made against Boehrig personally and as the representative of the estate. In her posttrial motions to vacate the judgment and for a new trial, Boehrig argued in part that there was no evidence tying the financial records to her in any way (i.e., showing that she was a beneficiary under the estate or that she owned Ocean Beach Auto Repair) and that thus the records did not support an award of punitive damages against her. Green responded (mistakenly) that Boehrig herself had testified that she was the sole heir of Mr. Toole's estate and the owner of Ocean Beach Auto Repair and that this was sufficient to permit the court to rely on the submitted records. The court agreed that it could properly rely on the records as a basis for its punitive damage award.

On appeal, Boehrig challenges the award on the grounds that (i) it was improper because the underlying wrongful conduct was a breach of contract; (ii) there was insufficient evidence to support the trial court's findings of malice, fraud or oppression; and (iii) the evidence submitted by Green was insufficient to support the award against her because Green did not submit evidence to establish her overall net worth. We also requested that the parties brief the more fundamental issue of how Code of Civil Procedure section 377.42, which precludes an award of punitive damages against a personal representative of a decedent's estate based on misconduct of the decedent, impacts this case. We address each of these issues in turn below.

A. Propriety of the Award of Punitive Damages as Against Boehrig as the Personal Representative of the Estate

Code of Civil Procedure, section 377.42 provides: "In an action or proceeding against a decedent's personal representative or, to the extent provided by statute, against the decedent's successor in interest, on a cause of action against the decedent, all damages are recoverable that might have been recovered against the decedent had the decedent lived except damages recoverable under Section 3294 of the Civil Code or other punitive or exemplary damages." (Italics added.) In his supplemental letter brief, Green candidly admits that the trial court's award of punitive damages as against Boehrig as the personal representative of Mr. Toole's estate is violative of this statute, but contends that we should nonetheless confirm the award because Boehrig failed to raise this issue on appeal or in the proceedings below.

Where a particular substantive issue was not raised in the trial court, thus precluding the trial court from having the opportunity to consider or rule on it, an appellate court will normally decline to decide it. (Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal.App.4th 1236, 1249.) However, where the newly raised issue presents a question of law and the relevant facts are undisputed, an appellate court has the discretion to decide it. (Ibid.) Such a situation is presented here and we exercise our discretion to decide the issue.

For the foregoing reasons, we conclude that the statute precludes an award of punitive damages against Boehrig as the personal representative of Mr. Toole's estate and thus we reverse the judgment insofar as it includes such an award.

B. Propriety of an Award Arising out of a Breach of Contract

Boehrig contends that the court could not award punitive damages because the underlying wrongful conduct constituted a breach of contract. Boehrig's argument is well-taken insofar as the trial court awarded punitive damages relating to Green's breach of contract cause of action. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 516 [punitive damages cannot be awarded for breach of contract even if the defendant's conduct in breaching the contract was willful, fraudulent or malicious].)

However, conduct that amounts to a breach of contract may also be tortious, and thus support an award of punitive damages, when it violates an independent duty arising from principles of tort law. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at pp. 515-516.) Retaliatory eviction is such an independent tort. (See Aweeka v. Bonds (1971) 20 Cal.App.3d 278, 281 [acknowledging the availability of punitive damages for common law retaliatory eviction pursuant to Civ. Code, § 3294]; Civ. Code, § 1942.5 [authorizing limited punitive damages for statutory retaliatory eviction].) The trial court could properly award punitive damages against Boehrig personally on Green's claim for retaliatory eviction.

C. Sufficiency of the Evidence to Establish Malice, Fraud or Oppression

Boehrig contends that the evidence was insufficient to establish malice, fraud or oppression as necessary to support an award of punitive damages under Civil Code section 3294, subdivision (a). She reiterates her argument that Green's exercise of the renewal option was at best ambiguous and the "undisputed evidence" (consisting largely of her own testimony and the testimony of another witness that the trial court clearly discredited) showed that she was justified in believing that Green had not exercised the renewal option. On appeal, we review the record to see if there is substantial evidence to support the trial court's award. (See Orange County Employees Assn. v. County of Orange, supra, 205 Cal.App.3d at p. 1293.)

The trial court found that Boehrig (and the Tooles) acted in conscious disregard of Green's rights by refusing to make repairs in accordance with the lessor's obligations under the Lease, insisting that Green sign a new lease that included higher rent and no renewal option as a condition of making the overdue repairs and evicting him with knowledge that he had exercised the renewal option and in retaliation for his repair demands. Although the evidence submitted at trial was conflicting, the testimony by Green and by Boehrig, the written evidence and the inferences drawable from the foregoing were sufficient to support the trial court's findings in support of its punitive damage award.

D. Sufficiency of the Evidence of Boehrig's Financial Condition

Boehrig finally contends that the financial records Green introduced only related to the condition of Mr. Toole's estate and his business, Ocean Beach Auto Repair, but were never tied to her and thus cannot support such an award against her. However, to the extent that Boehrig was sued individually, the evidence in the record showed that she was in fact the sole heir to Mr. Toole's estate and the owner of the Property. Boehrig's answer to the complaint admitted that Boehrig was a co-owner of the Property and her cross-complaint (which was filed on behalf of the estate and herself personally) contained similar admissions. The evidence also showed that Boehrig filed unlawful detainer actions against Green in her own name; in those actions, she alleged under penalty of perjury that she was the owner of the Property. In addition, the verified petition for the probate of Mr. Toole's estate showed Boehrig as his sole heir and Boehrig's trial testimony strongly suggested that, after the Tooles passed away, she was acting on her own behalf with respect to the Property. Finally, as noted above, Boehrig's counsel admitted to the court that the financial records represented what Boehrig inherited from Mr. Toole. This evidence amply established that Boehrig inherited the Ocean Beach Auto Repair and its principal asset, the Property, and thus the financial records were relevant for the court's consideration in setting the punitive damage award.

Boehrig also contends that Green's evidence was insufficient to establish her overall financial condition and thus the punitive damage award against her must fail. We agree. Evidence of a defendant's financial condition must be considered in imposing punitive damages, to ensure that a particular award is not excessive (that is, that the award is not "disproportionate to the defendant's ability to pay"). (Adams v. Murakami (1991) 54 Cal.3d 105, 110-112; see also Lara v. Cadag (1993) 13 Cal.App.4th 1061, 1064.) Where, as here, there is no evidence as to the defendant's overall financial condition, such a determination cannot be made. (See Adams v. Murakami, supra, 54 Cal.3d at p. 116, fn. 7 [although a plaintiff need not necessarily present evidence of the defendant's net worth as the measure of the ability to pay a punitive damage award, there must be some measure by which the propriety of the award can be determined.]) Here, the financial records before the court showed only the financial condition of the estate; no evidence was submitted to establish Boehrig's financial condition. On this record, the trial court could not have properly assessed whether the amount of the punitive damage award was excessive and thus the award must be reversed.

3. Judgment against Boehrig as the Personal Representative of the Estate

It is well settled that an action cannot be maintained against the personal representative of an estate in his representative capacity for a tort committed by him, but instead must be brought against the representative individually. (Monahan v. Blossom (1948) 88 Cal.App.2d 951, 952; Luscomb v. Fintzelberg (1912) 162 Cal. 433, 443.) Contrary to Boehrig's contention, this principle of law does not preclude the judgment for compensatory damages against her in her capacity as the personal representative of the estate; Green's claims were asserted against her in her representative capacity for Mr. Toole's wrongful conduct and against her individually for her own wrongful conduct relating to the Lease. The judgment for compensatory damages against Boehrig as the personal representative of the estate was proper.

DISPOSITION

The judgment is reversed insofar as it awards Green punitive damages. In all other respects, the judgment is affirmed. Each party is to bear his or her own costs on appeal.

McINTYRE, J.

WE CONCUR:

NARES, Acting P.J.

O'ROURKE, J.

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