Thrifty Payless v.
The Americana> at Brand

 

 

 

 

 

 

 

 

 

 

Filed 7/19/13 
Thrifty Payless v. The Americana at Brand CA2/1

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>NOT TO
BE PUBLISHED IN THE OFFICIAL REPORTS

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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  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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 ONE

 

 
>

THRIFTY PAYLESS, INC.,               Plaintiff and Appellant,               v.   THE AMERICANA AT BRAND, LLC,               Defendant and Respondent.

B242573         (Los Angeles County       Super. Ct. No. BC468465)

 

 

            APPEAL from a judgment of the Superior Court of Los
Angeles County, Malcolm H. Mackey, Judge.  Reversed.

            Snell & Wilmer, Mary-Christine Sungaila; Corfield
Feld, Richard G. Feld and Michael A. Corfield for Plaintiff and Appellant.

            Gordon & Rees, Theresa A. Kirstovich, Eleanor M.
Welke and  Joel M. Moskowitz for
Defendant and Respondent.

——————————



            Plaintiff
Thrifty/Payless, Inc. (Thrifty) dba Rite Aid, is a tenant of defendant Americana at Brand’s (Americana) eponymous shopping center in Glendale. 
Negotiations held through letters of intent before the execution of
Thrifty’s lease contained Americana’s per square foot estimates concerning Thrifty’s probable pro rata
share of property taxes, insurance, and common area maintenance (CAM).  The final lease stated that
Thrifty would pay its pro rata share of such expenses and did not contain any
formulas, figures or percentages regarding Thrifty’s share of such expenses.  After Thrifty moved into the shopping center,
its share of these expenses substantially exceeded Americana’s estimates and Thrifty sued for fraud,
rescission based mutual mistake and mistake of fact, and breach of lease and
breach of the implied covenant of good
faith and fair dealing.  The trial
court granted Americana’s demurrer without leave to amend, finding that
the prior negotiations constituted estimates and could not be statements of
fact upon which a claim of fraud could be based, and Thrifty failed to allege
facts establishing innocent misrepresentation, mistake, breach of lease, and
breach of the implied covenant of good faith and fair dealing.  We reverse.

FACTUAL BACKGROUND AND PROCEDURAL
HISTORYhref="#_ftn1" name="_ftnref1"
title="">[1]>

            Thrifty is a tenant of Americana’s shopping center known as the “Americana at Brand” located in Glendale.  In
September 2004, before the development of the shopping center, Thrifty and Americana entered into negotiations for Thrifty to lease
retail space at the shopping center.  James
Ashton of AFC Commercial Real Estate Group, Americana’s agent, submitted a letter of intent (LOI) dated
February 17, 2004
to Thrifty.  The LOI detailed the
specific terms and conditions of the proposed lease.  Three salient items are Thrifty’s share of real
property taxes, insurance, and common area expenses.  Those were estimated as follows:

            1.         Annual
real property taxes at $3 per square foot;

            2.         Annual
insurance premiums for the first year of the lease at 80 cents per square foot;

            3.         Annual
common area maintenance for the first year of the lease term at $14.50 per
square foot.

            On May 13, 2004, Tracy Verastegui, Real Estate Director
for Thrifty, made changes to the LOI by interlineations and returned it to
Ashton.  Verastegui requested a breakdown
of the common area maintenance obligations for the first year, writing
“[p]lease provide [a] budget which justifies the $14.50 estimate as I am not
agreeing to this amount [without] seeing the line items.”

            On May 17, 2004, Ashton returned a revised LOI (final
LOI) to Verastegui, providing that Thrifty would pay its pro rata share of CAM,
with no caps, estimated at $14.50 per square foot annually.  Thrifty crossed out the estimate, and
Verastegui wrote in, “Budget to be provided to Tenant prior to lease execution.”

            On or about September 1, 2004, Howard Durchslag, the Vice
President of Leasing and Acquisitions of Americana’s parent company, provided
Verastegui with a detailed breakdown of the CAM.  Durchslag’s letter stated, “I have . . . 
attached our preliminary CAM budget for your eyes only, so that you may be
armed with necessary explanations as to CAM costs.  Please remember that the costs reflected are
purely estimated values.”  The breakdown
provided that the total square footage of the shopping center participating in
sharing of CAM would be 450,000 square feet of gross leasable area.  Thrifty’s proportionate share, based upon its
square footage, was 2.2 percent of the total CAM, estimated to be $14.35 per
square foot.

            On or about February 22, 2005, Thrifty and Americana
executed a written lease.href="#_ftn2"
name="_ftnref2" title="">[2]  The
minimum rent commencement date as set forth in the Lease was May 2, 2008.  On or about November 6, 2008, Americana and
Thrifty executed an amendment to the lease.

            The first full year in which Thrifty was obligated to pay
its share of taxes, insurance, and CAM was 2009.  In 2009, Americana charged Thrifty $169,686
in taxes, instead of the $43,836 that would have been due under the rate
specified in the final LOI; Americana charged $28,110 insurance, instead of the
$11,689.60 that would have been due under the rate specified in the final LOI;
and Americana charged $412,307 for CAM, instead of the $211,874 that would have
been due under the rate specified in the final LOI.  Despite the LOIs and the breakdown provided
to Thrifty by Americana that showed its share of expenses would be 2.2 percent,
Thrifty’s actual share was more than double at 5.67 percent.

            Thrifty’s complaint alleged claims for fraud and deceit,
negligent misrepresentation, innocent misrepresentation, mutual mistake, breach
of the implied covenant of good faith and fair dealing, and breach of
lease.  Thrifty sought damages and
rescission of the lease.

            Specifically, for its fraud and negligent
misrepresentation claims, Thrifty alleged that Americana knew that the
estimated taxes, insurance, and CAM charges were material to Thrifty and that
Thrifty was relying on these estimates to evaluate the suitability of the
project.  Thrifty alleged Americana knew
the representations were false at the time they were made, or were made with no
reasonable basis to believe they were true. 
Thrifty asserted its reliance was reasonable based on Americana’s
superior knowledge and experience building and operating shopping centers of
similar size and scope; because Americana was familiar with the level of common
area services to be provided, the terms of other leases contemporaneously being
negotiated, the insurance policies to be obtained; and because Thrifty had an
existing landlord/tenant relationship with an affiliate of Americana and
regularly received accurate additional rent estimates from such affiliate.

            For its innocent misrepresentation and mutual mistake
claims, Thrifty alleged that even if Americana innocently believed the
representations were true at the time they were made, because of the parties’
mutual mistake, the lease failed to conform to the parties’ original intention
as to material terms.  Thrifty contended
that it and Americana were mistaken regarding Thrifty’s true share of the
taxes, insurance, and CAM, and Thrifty’s consent to the lease was negated by
the parties’ mutual mistake.

            Thrifty alleged that Americana breached paragraph 1.1. of
the lease by failing to allocate additional renthref="#_ftn3" name="_ftnref3" title="">[3] obligations to the nonretail portion of the
shopping center.href="#_ftn4"
name="_ftnref4" title="">[4]  Further,
Americana breached the implied covenant by entering into leases with other
tenants which disproportionately shifted costs to Thrifty, failed to allocate
additional rent obligations to the nonretail portions of the project as
required by the lease, and failed to properly account for and apply revenue
generated by landlord’s use of the common areas to the ongoing expense of the
common areas.

            Americana’s demurrer argued that Thrifty agreed in the
lease at paragraph 20.3href="#_ftn5"
name="_ftnref5" title="">[5] that it was entering into the lease based on its
own investigation; Thrifty failed to allege that Americana had breached a
specific term of the lease; implied terms of the contract could not contradict
the express terms, and thus the lease permitted Americana to collect the CAM charges
in the manner it did; and the lease contained an integration clause at
paragraph 20.3 such that prior negotiations and discussions, which were no more
than “estimates,” were merged into the lease.

            In response, Thrifty argued that the integration clause
did not bar its claims because evidence of the prior negotiations were
admissible to show fraud and mistake; defendant had superior knowledge
regarding CAM expenses and Thrifty was entitled to rely on its representations;
and sections 1.1, 6.5, and 6.8.2 of the lease set forth the CAM allocation
obligations pursuant to a series of formulas, definitions and cross-references.href="#_ftn6" name="_ftnref6" title="">[6]

            In reply, Americana asserted that the integration clause
meant the final LOI was superseded by the lease, and they were nothing more
than estimates on which Thrifty was not entitled to rely; Thrifty failed to
plead any mistake on the part of Americana; and Thrifty could not show the
estimates were false when made.

            At the hearing, Thrifty argued that a fraud case could be
based on estimates, citing McClain v.
Octagon Plaza, LLC (2008) 159 Cal.App.4th 784 (McClain) and Furla v. Jon
Douglas Co. (1998) 65 Cal.App.4th 1069 for the proposition that if a party
makes an estimate that it knew or should have known was inaccurate, the party can
be liable for misrepresentation.  The
trial court responded that Americana’s statements were estimates, putting the
duty on Thrifty to verify the figures. 
Thrifty advised the court that since the time it had filed the
complaint, it had learned that Americana was telling other tenants that their
pro rata shares would be substantially higher than the rates represented to
Thrifty, and Americana had cut a deal with a movie theater to charge it less
than its pro rata share based on square footage.  Further, paragraph 1.1. of the lease stated
that landlord had a duty to reasonably allocate the CAM charges among the
tenants.  The trial court sustained the
demurrer without leave to amend, finding the figures in the final LOI were only
estimates; Thrifty pleaded no facts showing Americana was mistaken about the
figures; Thrifty pleaded no facts showing Americana made any innocent
misrepresentations or the parties were mutually mistaken, and Thrifty pleaded
no facts showing a breach of contract or the implied covenant.

>DISCUSSION

I.          Standard
of Review

            “The function of a demurrer is to test the sufficiency of
[a pleading] as a matter of law,” and “we apply [the] de novo standard of
review [in an] appeal” following the sustaining of a demurrer without leave to
amend.  (Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413,
1420.)  A complaint “is sufficient if it
alleges ultimate rather than evidentiary facts,” but the plaintiff must “set
forth the essential facts of his [or her] case with reasonable precision and
with particularity sufficient to acquaint [the] defendant with the nature,
source, and extent” of the plaintiff’s claim. 
Legal conclusions are insufficient. 
(Doe v. City of Los Angeles
(2007) 42 Cal.4th 531, 550 & 551, fn. 5.) 
“We assume the truth of the allegations in the complaint, but do not
assume the truth of contentions, deductions, or conclusions of law.”  “[T]he trial court [errs in] sustain[ing] a
demurrer if the plaintiff has stated a cause of action under any possible legal
theory, and it is an abuse of discretion for the court to sustain a demurrer
without leave to amend if the plaintiff has shown there is a reasonable
possibility a defect can be cured by amendment.”  (California
Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247.)

II.        Analysis

            Thrifty argues that the trial court erroneously concluded
that estimates are never actionable; on the contrary, estimates can support a
claim for fraud, and Thrifty could reasonably rely on Americana’s estimates due
to Americana’s superior knowledge of the shopping center.  Further, the complaint adequately alleged
innocent misrepresentation and mutual mistake because it alleged Americana was
mistaken when it understated the common area expenses.  Finally, Thrifty contends Americana’s
discretion to allocate costs must be exercised reasonably, and its failure to
do so would support Thrifty’s claims for breach of contract and breach of the
covenant of good faith and failing dealing. 
Americana counters that its estimates were nonactionable opinions and
predictions; Thrifty had not alleged that Americana had information that the
true costs would be higher than its estimates; Americana couched the estimates
as such and advised Thrifty the payments were not capped by the estimate, thus
Thrifty could not reasonably rely on them; the lease’s integration clause bars
introduction of the prior negotiations; and there is no breach of contract or
of the implied covenant because Americana in its discretion could allocate
expenses.

            A.        Fraud
Exception to Parol Evidence Rule: 
Thrifty’s Claims for Fraud and Negligent Misrepresentation (First and
Second Causes of Action)

            “‘The elements of fraud, which give rise to the tort
action for deceit, are (a) misrepresentation (false representation, concealment,
or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to
defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting
damage.’”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)  “In contrast, . . . [a
claim for] negligent misrepresentation does not require knowledge of falsity”;
rather, the plaintiff must show “(1) the misrepresentation of a past or
existing material fact, (2) without reasonable grounds for believing it to be
true, (3) with intent to induce another’s reliance on the fact misrepresented,
(4) justifiable reliance on the misrepresentation, and (5) resulting
damages.”  (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158
Cal.App.4th 226, 243.)  Every element of
the fraud cause of action must be pleaded specifically, and the policy of
liberal construction of the pleadings will not sustain a defective
pleading.  (Wilhelm v. Pray, Price, Williams & Russell (1986) 186
Cal.App.3d 1324, 1332.)  Thus, the
plaintiff must plead the “‘“how, when, where, to whom, and by what means the
representations were [made].”’”  (>Lazar, at p. 645.)

            “‘Except in the rare case where the undisputed facts
leave no room for a reasonable difference of opinion, the question of whether a
plaintiff’s reliance is reasonable is a question of fact.’”  (Alliance
Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)  On the other hand, “‘[i]f the conduct of the
plaintiff in the light of his own intelligence and information was manifestly
unreasonable, however, he will be denied a recovery.’”  (Id.
at p. 1240; Seeger v. Odell (1941) 18
Cal.2d 409, 415.)  Plaintiff must also
plead the injury or damage suffered and its causal connection to plaintiff’s
reliance on the defendant’s misrepresentations. 
(Service by Medallion, Inc. v.
Clorox Co. (1996) 44 Cal.App.4th 1807, 1818.)  A defrauded party may elect to stand on the
contract and recover damages, or rescind the contract.  (McClain,
supra, 159 Cal.App.4th at p. 793, fn. 1.)

            The parol evidence provides that an integrated written
agreement may not be varied by extrinsic evidence to alter or add to the terms
of the writing.  (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343.)  The parol evidence rule protects the
integrity of written contracts by making their terms the exclusive evidence of
the parties’ agreement.  Yet an
established exception to the rule allows a party to present extrinsic evidence
to show that the agreement was procured by fraud.  (Code Civ. Proc., § 1856, subd. (g); >Riverisland Cold Storage, Inc. v.
Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1174–1175 (>Riverisland).)

            Riverisland
revisited and reaffirmed the
vitality of this exception and overruled Bank
of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258 (>Pendergrass).  Criticized but followed by California courts,
Pendergrass required that evidence
offered to prove fraud “must tend to establish some independent fact or
representation, some fraud in the procurement of the instrument or some breach
of confidence concerning its use, and not a promise directly at variance with
the promise of the writing.”  (>Pendergrass, at p. 263; see >Riverisland, supra, 55 Cal.4th at p.
1172.)  Quoting Ferguson v. Koch (1928) 204 Cal. 342, 347, Riverisland reaffirmed that “‘[i]t was never intended that the
parol evidence rule should be used as a shield to prevent the proof of
fraud.’”  (Riverisland, at p.
1182.)  Thus, characterizing >Pendergrass as “an aberration,” that
“finds no support in the language of the statute codifying the parol evidence rule
and the exception for evidence of fraud,” the Supreme Court overruled >Pendergrass. 
(Riverisland,> at pp. 1172, 1182.)

            Applying the fraud exception rule is McClain, supra,> 159 Cal.App.4th 784, where the
prospective tenant, McClain, investigated leasing space at defendant’s shopping
center.  She was informed the premises
consisted of 2,624 square feet at a rent of $1.45 per month, plus 23 percent of
the shopping center’s common expenses based on this square footage.  (Id. at
p. 793.)  Before entering into the
lease, she attempted to measure the square footage of the space but was
rebuffed by the landlord, who was “offended” by her request.  (Ibid.)  “[T]he lease described the size of the unit
leased by McClain as ‘approximately 2,624 square feet,’ and attached to the
lease . . . a diagram of the shopping center that
represent[ed] the size of the unit as 2,624 square feet.”  The lease further provided, “‘Unless
otherwise provided herein, any statement of size set forth in this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less.’”  Finally, the lease stated, “‘Lessee
acknowledges that:  (a) it has been
advised by Lessor . . . to satisfy itself with respect to
the condition of the Premises . . . , and their suitability
for Lessee’s intended use, [and] (b) Lessee had made such investigation as its
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to its occupancy of the Premises.’”  (Id. at
p. 790.)  When the plaintiff obtained the
earthquake insurance for the property, she discovered the square footage of her
retail space and her percentage of the gross square footage of the mall were
substantially overstated.  (>Id. at p. 793.)

            McClain, >supra, 159 Cal.App.4th 754> held the landlord’s statements were
actionable fraud even though the lease stated she had verified the square
footages.  McClain applied the rule that a party to a contract who committed
fraud in the inducement cannot absolve himself or herself from fraud by any
stipulation in the contract, either that no representations were made, or that
any right that might be grounded upon them was waived.  “‘Such a stipulation or waiver will be
ignored, and parol evidence of misrepresentations will be admitted, for the
reason that fraud renders the whole agreement voidable, including the waiver
provision.’  [Citation.]”  (Id. at
p. 794, italics omitted.)

            Similarly, in Furla
v. Jon Douglas Co., supra,> 65 Cal.App.4th 1069, a broker listed a
home in the multiple listing service as having 5,500 square feet, and included
the statement, “‘Information Deemed Reliable But Not Guaranteed.’”  The broker told the plaintiff that the plans
used the construct the house showed it was 5,500 square feet.  (Id. at
pp. 1072–1073.)  Plaintiff, an investor,
based his real estate investment strategy on the square footage of distressed
properties that he bought.  (>Id. at. p. 1073.)  The written offer stated that the buyer was
aware that the broker made no representations with respect to the square
footage.  (Id. at pp. 1073–1074.)  An
appraisal obtained during escrow established the square footage at 4,311, but
plaintiff did not receive the appraisal during escrow.  (Id. at
p. 1076.)  Furla rejected the broker’s defense based upon exculpatory language
in the contract, finding that it was a fact question that could not be resolved
on summary judgment whether the plaintiff reasonably relied on the defendant’s
approximations of square footage.  “A
statement couched as an opinion, by one having special knowledge of the
subject, may be treated as an actionable misstatement of fact.”  (Id. at
p. 1080.)

            Here, under Riverisland,
supra, 55 Cal.4th 1169,> extrinsic evidence is admissible to
establish fraud or negligent misrepresentation in the face of the lease’s
integration clause.  Thus, Thrifty can
allege both intentional and negligent misrepresentations based upon Americana’s
grossly inaccurate estimates.href="#_ftn7" name="_ftnref7" title="">[7]  In
addition, the information Thrifty presented at the hearing on the motion
further establishes that Americana knew or should have known the information
was inaccurate—Americana told other prospective tenants that their pro rata
shares would be substantially higher than the rates represented to Thrifty, and
Americana cut a deal with a movie theater to charge it less than its pro rata
share based on square footage.  Thus,
although the express language of lease (such as in paragraph 6.8) may sanction
such conduct, the conduct can also support an inference that Americana had
misrepresented to Thrifty its share of the common expenses.  At the demurrer stage, Thrifty should be able
to amend its complaint to allege additional facts in support of its
misrepresentation theory.

            Further, Thrifty had adequately pleaded facts to show its
reliance was reasonable given the parties’ previous dealings (through an
affiliate of Americana) and because Americana had superior knowledge and
information:  Americana likely had a
better understanding of how the property would be assessed for tax purposes and
what insurance coverage would cost; such knowledge would form the basis of its
share calculations for its tenants, and as an owner and manager of other
shopping malls, could better calculate the cost of running the common
facilities.  Since Americana had all or
most of the information regarding the unfinished shopping center, Thrifty was
not in a position to discover for itself a close approximation of the ultimate
common costs.

            For this reason, Americana’s reliance on >Hinesley v. Oakshade Town Center (2005)
135 Cal.App.4th 289, is misplaced. 
There, a landlord falsely represented to a prospective tenant that
large, national chains would be leasing space in the mall and asserted that
such statements were nonactionable opinion. 
Hinesley disagreed,
stating:  “The definite description of
where [the tenants] were going to be located and that they were going to be
operating by the end of the calendar year suggested they were already tenants
of [the shopping mall] in the process of opening their businesses.  This was a false assertion of existing fact,
not an opinion regarding future actions of third parties.”  Hinesley
concluded factual issues existed with respect to the extent of the
misrepresentations.  (>Id .at p. 297.)  However, the lease contained a provision that
expressly accorded the landlord the exclusive right to select other tenants,
and recited that the plaintiff had not relied on any representation regarding
other tenants, but the provision did not absolve the landlord of fraud because
the lease was merely a factor to be considered in evaluating justifiable
reliance.  (Id. at pp. 296–297.)

            The trial court therefore erred in sustaining Americana’s
demurrer to Thrifty’s first and second causes of action for href="http://www.fearnotlaw.com/">fraud and negligent misrepresentation,
and Thrifty should be permitted to amend its complaint to set forth additional
facts supporting these claims.

            >B.        Innocent
Misrepresentation, Mutual Mistake (Third and Fourth Causes of Action)

            Where, through mistake, the contract does not reflect the
mutual intention of the parties, “such intention is to be regarded, and the
erroneous parts of the writing disregarded.” 
(Civ. Code, § 1640.)  In the
case of mutual mistake, the contract may be reformed to conform to the intent
of the parties.  (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.)  “In determining whether [there has been] a
mutual mistake . . . , [the] court may consider parol
evidence,” and such evidence may be introduced in the face of an integration
clause.  “Extrinsic evidence is necessary
because the court must divine the true intentions of the contracting parties
and determine whether the written agreement accurately represents those
contentions.”  (Id. at p. 525.)  Ordinary
negligence does not bar a claim for mutual mistake because “‘[t]here is an
element of carelessness in nearly every case of mistake.’”  (Id. at
p. 529.)  “Only gross negligence or ‘preposterous
or irrational’ conduct will [bar] mutual mistake.”  (Ibid.)  Mistake must be pleaded with some
particularity so that there is “a clear recitation of facts showing how, when
and why the mistake occurred.”  (>George v. Automobile Club of Southern
California (2011) 201 Cal.App.4th 1112, 1132.)  Generally, there is no tort of innocent
misrepresentation.  (See >Deidiker v. Peelle Financial Corp. (1997)
60 Cal.App.4th 288, 297 [if representation “‘is honest and
reasonable, . . . there is no tort liabnility”].)

            Here, Thrifty’s third cause of action for innocent
misrepresentation asserts in detail the following:  the names of the agents of Americana who made
the representations, the statements were made before the lease was executed,
and that Thrifty’s actual percentage of taxes, insurance and CAM was 5.67
percent, as opposed to the represented 2.2 percent in the final LOI.  Further, Thrifty alleged that although
Americana believed in the truth of the representations, they were false when
made, and that Thrifty reasonably relied on the representations because of
Americana’s superior knowledge of the size and scope of the shopping center,
the level of common area services to be provided, the tax basis of the shopping
center, and the insurance policies to be used. 
Thrifty’s fourth cause of action for mutual mistake claim solely asserts
that neither party was aware that Americana’s figures were understated.

            Although there is no tort of “innocent
misrepresentation,” taken together, Thrifty’s third and fourth causes of action
set forth sufficient particular facts to satisfy the pleading requirements to
entitle it to reformation and rescission based upon the lack of mutual assent
in the formation of the lease. 
Therefore, the trial court erred in sustaining the demurrer without
leave to amend to these claims seeking reformation and rescission.

            >C.        Breach
of Contract and Breach of the Implied Covenant (Fifth and Sixth Causes of
Action

            “[T]he elements of a cause of action for breach of
contract are (1) the existence of the contract, (2) plaintiff’s performance or
excuse for nonperformance, (3) defendant’s breach, and (4) the resulting
damages to the plaintiff.”  (>Oasis West Realty LLC v. Goldman (2011)
51 Cal.4th 811, 821.)  “‘The [implied]
covenant of good faith and fair dealing[ ] [is] implied by law in every
contract.’”  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1369.)  The covenant is read into contracts and
functions “‘as a supplement to the
express contractual covenants, to prevent a contracting party from engaging in
conduct which (while not technically transgressing the express covenants)
frustrates the other party’s rights to the benefits of the contract.’”  (Racine
& Laramie, Ltd. v. Department of Parks & Recreation (1992) 11
Cal.App.4th 1026, 1031–1032.)  The
covenant also requires each party to do everything the contract presupposes the
party will do to accomplish the agreement’s purposes.  (Harm
v. Frasher (1960) 181 Cal.App.2d 405, 417.) 
A breach of the implied covenant of good faith is a breach of the
contract (Careau & Co. v. Security
Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1393), and
“breach of a specific provision of the contract is
not . . . necessary” to a claim for breach of the implied
covenant of good faith and fair dealing (Carma
Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2
Cal.4th 342, 373 & fn. 12).

            Here, the terms of the contract simply provide for
Thrifty to pay its pro rata share of common expenses (taxes, insurance, and
CAM), and no precise “pro rata share” in terms of a percentage or a square foot
basis is set forth.  Merely charging
higher rates for these items than estimated during negotiations does not
ostensibly breach the express language of the lease.  However, Thrifty has alleged Americana has
breached paragraph 1.1 by improperly exercising its discretion in allocating
costs between retail and nonretail space; this conduct as alleged can
constitute both a breach of contract and breach of the implied covenant.  Thus, the trial court erred in sustaining the
demurrer to Thrifty’s fifth and sixth causes of action.

>DISPOSITION

            The judgment is reversed. 
Appellant is to recover its costs
on appeal.

            NOT TO BE PUBLISHED.

 

                                                                        JOHNSON,
J.

 

We concur:

 

            MALLANO, P. J.

 

            CHANEY, J.