Aloha Trading v. Despras

Filed 8/15/07 Aloha Trading v. Despras CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. H. Morgan Dougherty, Judge. Reversed.

BEST BEST & KRIEGER, Douglas S. Phillips and Kira L. Klatchko for Plaintiff and Appellant.

Law Offices of Michael Zitomer and Michael Zitomer for Defendant and Respondent.

1. Introduction

Ted Llewellyn entered into a five-year lease with E.M.T., Inc. to lease a restaurant. The lease was written on a standard, prewritten commercial lease which the parties modified by addendum entered into prior to May 1, 1998, the effective date of the original lease. The addendum provided that Llewellyn, or his assignee, would have two options to extend the lease for an additional five years each.

Llewellyn exercised the first five-year option on December 22, 2002, for an additional five years. On January 30, 2003, Llewellyn assigned the lease to Aloha Trading Company, to which E.M.T. consented. On December 30, 2004, E.M.T. sold the property to the Michel Despras Trust. In October and November, 2005, Aloha attempted to exercise the last five-year option. Despras refused to grant the option, asserting the option could only be exercised by the original lessee, Ted Llewellyn.

Despras demurred to the Aloha complaint which the trial court granted without leave to amend. We find a substantial factual question regarding the effect of the addendum upon the request of Aloha for the second five-year option, and reverse the judgment.

2. Facts

On April 1, 1998, E.M.T., Inc entered into a 10-page, prewritten form real estate lease with Ted Llewellyn or his assignee. The lease provided for a five-year restaurant lease of E.M.T.s property.

The parties also entered into an addendum to the commercial lease. The parties to that addendum were E.M.T., Inc, lessor, and Ted Llewellyn, or his assignee, lessee. The addendum provided that the parties agree to change, amend, modify, add to and supplement the prior lease. The addendum provided that lessee would have two options to extend the term of the lease for an additional period of five years each, running consecutively, and commencing on the expiration of the original term. Lessee was required to renew the term of the lease by delivering to lessor the request for extension, at least ninety (90) days prior to the original term or any extended term of the lease. The addendum provided for a modification of the lease payment for each year of the original lease and a 4 percent per annum increase for each and every year of the extension to the original term.

On December 22, 2002, Llewellyn exercised his right to renew the lease for an additional five years. On January 30, 2003, Llewellyn assigned his lease to Aloha Trading Company, with E.M.T.s written consent. On July 22, 2003, E.M.T. sold the property to Despras. When Aloha requested Despras renew the lease for the five years from 2008 to 2013, Despras denied the request, relying upon paragraph 39.2 of the Standard Industrial/Commercial Single-Tenant Lease. That provision provides:

39.2. Options Personal To Original Lessee. Each Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

After Desprass refusal to honor the second five-year option, Aloha Trading Company filed this action seeking damages. The trial court sustained the demurrer of Despras without leave to amend.

3. Does the ComplaintState a Cause of Action

for Damages

The trial court granted Desprass demurrer without leave to amend based upon its finding that paragraph 39.2 of the lease barred assignment to Aloha of the second five-year option to extend contained in the first addendum. (Ex. 2 to Alohas Complaint.)

On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. . . . However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)

In addition, when a demurrer is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Despras relies upon paragraph 39.2 of the Standard Industrial/Commercial Single-Tenant Lease entered into between E.M.T., Inc. and Ted Llewellyn. That paragraph is recited above.

Before the provisions of paragraph 39.2 of the standard lease became effective, E.M.T., Inc. and Ted Llewellyn entered into the First Addendum To Standard Industrial/Commercial Single Tenant Lease-Net. That addendum provided that it was made by E.M.T., Inc. LESSOR and Ted Llewellyn, or his assignee, LESSEE. It also provided that LESSOR and LESSEE agree to change, amend, modify, add to and supplement said Lease form as follows:

2. Option to Extend. LESSEE shall have two (2) options to extend the term of this Lease for an additional period of five (5) years each, running consecutively, and commencing on the expiration of the original term as specified in this Lease provided: [] . . . []

(b) Written notice of LESSEEs election to renew the term of this Lease is delivered to LESSOR at least ninety (90) days prior to the expiration of the original term or any extended term of the Lease.

The addendum entered into between Llewellyn and E.M.T., Inc. did not include the provision included in paragraph 39.2 of the prewritten real estate lease which limited the option to the original lessee.

Before E.M.T.s sale of the property to Despras, E.M.T. consented to the assignment from Ted Llewellyn to Aloha. Thereafter, pursuant to the terms of the lease and first addendum, Aloha sought extension of the lease for an additional five years, from 2008 to 2013. Despras refused Alohas request and Aloha filed this action asserting that the refusal damaged it in excess of $200,000, according to proof at the time of trial.

The trial court sustained the demurrer of Despras to the complaint, without leave to amend, concluding that paragraph 39.2 of the lease barred the assignment to Aloha. The scope of our appellate review is set forth in Estate of Dodge (1971) 6 Cal.3d 311: We begin our discussion with a statement of applicable principles of appellate review. As set forth in Parsons v. Bristol Development Co (1965) 62 Cal.2d 861, 865, it is a a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence. The possibility that conflicting inferences can be drawn from uncontroverted evidence does not relieve the appellate court of its duty independently to interpret the instrument; it is only when the issue turns upon the credibility of extrinsic evidence, or requires resolution of a conflict in that evidence, that the trial court determination is binding. (Parsons v. Bristol Development Co., Cal.2d at p. 866, fn. 2.) (Estate of Dodge, supra, at p. 318.) Here, . . . despite plaintiffs representations of the record to the contrary, there was no conflict in the extrinsic evidence; there were no issues of credibility, and so it is our task to arrive at an independent interpretation of the sales documents in light of section 2207 of the Commercial Code. (Therma-Coustics Manufacturing, Inc. v. Borden, Inc. (1985) 167 Cal.App.3d 282, 294-295.)

Here there are two documents to be considered: paragraph 39.2 in the preprinted lease and the first addendum. There was no issue regarding the credibility of the evidence. The trial court granted the demurrer without leave to amend and relied solely upon paragraph 39.2 of the Standard Commercial Lease, without reference to the first addendum to the lease between E.M.T., lessor, and Llewellyn or his assignee.

In this case, after Llewellyn entered into the Standard Industrial/Commercial Single-Tenant Lease-Net, Llewellyn and E.M.T. entered into the first addendum to which modified the standard lease form to grant the lessee, or his assignee, two options to extend the term of the lease for an additional period of five years. The complaint further alleges that the addendum was signed by E.M.T. and by Ted Llewellyn or assignee, that after entering the first addendum, Llewellyn assigned his interest to Aloha with E.M.T.s written consent. It was only after Despras acquired the leased premises that the second renewal of the lease was rejected.

Aloha alleges that E.M.T.s sale to Despras included, in addition to the standard industrial lease, the provisions of the first addendum of the lease that gave Aloha two options to extend the five-year term of the lease. Aloha asserts that Desprass refusal to comply with that option violated Alohas leasehold rights and entitled it to damages. Despras agrees that both the Lease and the First Addendum were entered into on behalf of Ted Llewellyn or his assignee but that the addendum did not change the specific term found in paragraph 39.2 in the original standard industrial commercial lease. Despras cites no authority for that assertion. Furthermore, that assertion appears to ignore the express language in the first addendum that Llewellyn, or his assignee, and lessor agree to change, amend, modify, add to and supplement said Lease form, referring to the Standard Industrial/Commercial Single Tenant Lease-Net. Based upon that modification, Aloha contends that it had the right to extend the terms of the lease for an additional five years.

We conclude that that the trial court failed to consider both the pertinent documents: paragraph 39.2 and the first addendum to the lease. Considered together the trial court could find that Llewellyn, or his assignee, was granted two options to extend the term of the original lease for five years each. [A] general demurrer should not be sustained if the pleading, liberally construed, states a cause of action on any theory. (County of El Dorado v. Spencer (1986) 182 Cal.App.3d 698, 701).

A trial of the claim of Aloha could find that Desprass denial of the application of Aloha to extend the five-year term violated the terms of the first addendum, entitling Aloha to compensatory damages for the refusal. We reverse the case.

4. Disposition

The case is reversed. Plaintiff is awarded its costs.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

s/Gaut

J.

We concur:

s/Hollenhorst

Acting P. J.

s/Miller

J.

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