Opinion
D074815
12-12-2019
6401 BALBOA AVENUE, LLC, Plaintiff and Respondent, v. CALIFORNIA FOOD MANAGEMENT, LLC, Defendant and Appellant.
Mulvaney Barry Beatty Linn & Mayers and Patrick L. Prindle, John A. Mayers and M. Todd Ratay for Defendant and Appellant. Steven L. Victor, Attorney At Law and Steven L. Victor; Worthington Law and Brian P. Worthington for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2016-00005798-CU-BC-CTL) APPEAL from a judgment and postjudgment order of the Superior Court of San Diego County, Eddie C. Sturgeon, Judge. Reversed and remanded with directions. Mulvaney Barry Beatty Linn & Mayers and Patrick L. Prindle, John A. Mayers and M. Todd Ratay for Defendant and Appellant. Steven L. Victor, Attorney At Law and Steven L. Victor; Worthington Law and Brian P. Worthington for Plaintiff and Respondent.
Defendant and appellant California Food Management, LLC appeals from a judgment and postjudgment order denying its motion for judgment notwithstanding the verdict (JNOV) following a jury trial on claims by plaintiff and respondent 6401 Balboa Avenue, LLC (Balboa) for breach of lease and waste in connection with commercial premises leased by defendant, who remodeled it without Balboa's consent. The jury returned special verdicts in Balboa's favor, awarding it $280,000 in damages on the waste cause of action, and $351,592 for breach of lease damages. Defendant contends: (1) Balboa cannot recover waste or breach of lease damages before termination of the lease; (2) the verdict as to waste is against the law because there was no evidence of permanent injury to the reversion interest; (3) the jury awarded duplicative damages; (4) there was no evidence of the property's condition at the beginning or end of the lease to support the jury's damage award; (5) the trial court abused its discretion by barring the testimony of its construction forensics expert, Stephen Wilson; and (6) Balboa's damages are limited to the lesser of cost of repair or diminution in value of the property. Defendant asks us to reverse the judgment and enter judgment in its favor, or alternatively remand for a new damages trial.
We agree the judgment must be reversed. It is undisputed that the lease at issue is still in effect, and we conclude its provisions cannot be interpreted as giving Balboa a present right during the lease term to sue for and recover cost of repair damages. On defendant's breach of the covenant not to alter the premises without Balboa's consent, Balboa was entitled only to damage to the value of its reversion interest, rendering the jury's award of cost of repair damages improper as a matter of law. Further, even when viewed in the light most favorable to Balboa, the evidence is insufficient as a matter of law to support the jury's award of waste damages. We reverse with directions that the court enter judgment in defendant's favor.
FACTUAL AND PROCEDURAL BACKGROUND
For our review of the jury's verdict generally, as well as the trial court's order denying defendant's motion for JNOV, we state the facts in the light most favorable to plaintiff, resolving all conflicts and indulging all reasonable inferences to support the judgment. (Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68; see Hurley v. Department of Parks and Recreation (2018) 20 Cal.App.5th 634, 644.)
In 2013, Balboa obtained title to commercial property on Balboa Avenue in San Diego. The property, which has an existing franchise restaurant, is subject to a 20-year lease. Balboa took an assignment of that lease and was subject to all of its terms and conditions. Defendant also took an assignment of the lease as the tenant and was subject to the lease terms and conditions. These terms and conditions include provisions obligating defendant to undertake repairs and maintenance (section 5.2), and to avoid any alterations to the premises without Balboa's prior written consent (section 5.4). The lease includes a $75,000 tenant allowance for improvements. It permits the defendant at the end of the lease term to remove personal property ("personalty") so long as it has fully complied with the lease and has "restored [the premises] to their original condition as of the Lease Date, normal wear and tear excepted."
The lease provides: "The term of this Lease (the "Term") shall commence on September 1, 2011 (the "Commencement Date"), and shall expire on August 31, 2031 (the "Term Expiration Date"), unless sooner terminated as provided in this Lease. If requested in writing by Lessee, the Commencement Date shall be designated by the parties in a form capable of being recorded in the public real estate records of the county where the Premises are located."
Section 5.4 of the lease provides in part: "Lessee shall not at any time make any alteration, change, addition or improvement (hereinafter collectively the "Alterations") in or to the interior or exterior of the Premises without the prior written consent of Lessor."
The lease contains a section entitled "LESSOR'S REMEDIES" that provides: "Upon the occurrence of an event of default by Lessee under this Lease, Lessor, at its option, and without limiting the exercise of any other right or remedy Lessor may have on account of such event of default, and without any further demand or notice, may give to Lessee three (3) days' notice of termination . . . of this Lease, in which event this Lease and the Term shall come to an end and expire . . . and Lessee shall then quit and surrender the Premises to Lessor, but Lessee shall remain liable for damages as provided in this Article 8 . . . .
"If Lessor elects to terminate this Lease, pursuant to Section 1951.2 of the California Civil Code, Lessor shall be entitled to recover from Lessee the aggregate of:
"(a) The worth at the time of award of the unpaid rent and charges equivalent to rent earned as of the date of the termination hereof;
"(b) The worth at the time of award of the amount by which the unpaid rent and charges equivalent to rent which would have been earned after the date of termination hereof until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided;
"(c) The worth at the time of award of the amount by which the unpaid rent and charges equivalent to rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided;
"(d) Any other amount necessary to compensate Lessor for the detriment proximately caused by Lessee's failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom; and
"(e) Any other amount which Lessor may hereafter be permitted to recover from Lessee to compensate Lessor for the detriment caused by Lessee's default."
The lease contains another provision (section 8.7) entitled "SUITS," that provides: "Suit or suits for the recovery of the deficiency or damage or for any installment or installments of rent, additional rent or any other charge due under this Lease may be brought by Lessor at any time or, at Lessor's election, from time to time, and nothing in this Lease shall be deemed to require Lessor to wait until the Term Expiration Date to bring suit."
In 2014, defendant made renovations—removing a large greenhouse structure from the existing building, adding a sidewalk, removing landscaping, and building new columns and a new entrance—without notifying Balboa, showing Balboa any plans or specifications, or obtaining Balboa's consent. In 2015, Balboa's counsel retained a contractor to inspect the building and thereafter notified defendant of numerous alterations that the contractor determined were performed in a substandard manner, in violation of building codes, and/or contrary to City-approved plans. In part, Balboa's counsel advised defendant that its remodel "resulted in the destruction and removal of 348 [square feet] of the building" and claimed it "negatively impact[ed] and diminish[ed] the value of the property." Balboa demanded that defendant repair the property and "put [it] in a condition which is acceptable to the landlord, conforms to the plans and specifications . . . and any subsequent amendments thereto, meet[s] the ADA requirements as set forth in the plans and are in full compliance with all lease terms and conditions." Balboa did not terminate the lease and it continued to collect rent from defendant.
In February 2016, Balboa sued defendant for breach of lease, damages arising out of injuries and waste to real property, and declaratory relief. Defendant answered and the matter proceeded to a jury trial, during which defendant admitted it had made a mistake in failing to obtain Balboa's approval for the remodel, but took the position that Balboa had not sustained damage to its reversion interest or suffered any diminution in value.
At trial, Balboa presented evidence from an expert general and engineering contractor, Tim DeLise, that $351,000 was the approximate cost to repair the structure. DeLise had inspected the premises for defective or poor workmanship and to determine whether the work conformed with the approved building plans or relevant codes; based on his observations he then did a cost of repair analysis. (Trial Exhibit 82.) He included in his cost of repair analysis line items totaling $121,497.35 for the cost of demolishing the existing face of the building and restoring the 348 square feet of greenhouse removed without Balboa's authorization. DeLise testified about code-noncompliant work, improper repairs, and electrical work done that was not called for in the building plans. Among other things, DeLise stated the flashing (also known as "weep screeds") around the building did not meet code requirements and though defendant had attempted to repair it, the repair was improperly done and "compounded the problem." He testified the repair "would allow water to leak into the building because it's open." DeLise stated: "If you had . . . this condition at home and you were doing a remodel, and you didn't have this on the plans or the contractor didn't do it, it would cause a defect to your property, and most likely, it would be leaking. . . . [¶] . . . [¶] . . . We know it's going to have a problem." DeLise testified the defendant did "a lot" of electrical work not called for in the plans.
Balboa also presented testimony from roofing consultant James Eddington, who conducted site visits on several different occasions. Eddington conducted roof core samples and reviewed defendant's remodel project's plans and specifications. He testified that the roof in places did not conform to what was called out in the stamped and approved building plans, and contained penetrations likewise not shown on the plans, some with cracks around their base. He found deficient workmanship and problematic areas in the roof that could allow water to travel inside, as well as standing water on the roof at one of his visits.
One penetration was a vent stack with a storm collar having some white sealant that was not a "long-term" sealant. According to Eddington, "only having the white coating being the barrier against water getting in, it becomes a maintenance item and can be subject to cracking over time." He explained further: "Also, the reflective coating will break down because the difference in thermal between the heating up of that stack and the base flashing will continue to work to make that crack open up over time. [¶] So it becomes a maintenance item. And if [it] leaks and gets into the kitchen, whatever, you get up and put the sealant on it, but it's still not a proper insulation."
Balboa played deposition testimony of Vigen Baghdassarian, a contractor who stated he handled the remodel project, including demolishing the greenhouse and replacing the roof. Baghdassarian also made roof repairs. Baghdassarian testified his work on the men's restroom complied with federal disability requirements and did not require a permit from the city. He testified he did not believe the city was required to inspect the roofing work.
Defendant presented testimony from a commercial real estate appraiser expert, Robert Caringella, who reviewed the lease as well as depositions of the owner and builder, and gave his opinion about the value of the property after defendant's remodel, using the 2013 purchase price as a benchmark and other factors. Caringella testified the property's value in March 2015 was $2,425,532, and its value in September 2017 was $2,736,000. He concluded the property value was not impacted by the greenhouse's removal; the loss of the small amount of dining area was inconsequential to the franchise, and it was aesthetically outweighed by the extensive remodel and design update. The jury returned two special verdicts. In the first on waste, the jury found the lease did not permit defendant to make alterations to the premises, defendant's removal of the greenhouse caused permanent injury to the property, and Balboa incurred $280,000 in damages as a result of defendant's remodel. In the second verdict for breach of lease, the jury found Balboa and defendant entered into a lease, Balboa did all or substantially all of the significant things the lease required it to do and defendant was not excused from doing those things, defendant failed to do something the lease required, and Balboa was harmed by that failure. The jury found Balboa incurred $351,592 in damages as a result of defendant's conduct. The court entered judgment on the special verdicts.
Caringella's report concluded: "Based on the preceding data and analysis, there is no negative impact on the property value caused by the remodel effort as of either 2015 or 2017 . . . . The primary reasons include the combination of the requirement to run a [franchise] at this location, the income stream called for in the lease, and the extensive renovations made by the tenant to benefit the property and the business. The income and reversion are not negatively impacted. As noted above, there is more evidence that the value has actually been enhanced somewhat, not diminished."
Defendant moved for a new trial and for JNOV. In part, it argued the verdict was contrary to law in that the jury could not award damages for breach of lease and waste absent termination or expiration of the lease. It also argued Balboa presented no evidence of permanent damage to its reversion interest to support the claim for waste. The trial court denied the motions.
DISCUSSION
I. Standards of Review
Defendant appeals from both the judgment and the court's postjudgment order denying a new trial and JNOV. For the order denying JNOV, " 'the standard of review is whether any substantial evidence—contradicted or uncontradicted—supports the jury's conclusion. [Citations.]' [Citation.] Accordingly, we may reverse an order denying a JNOV motion 'only if, reviewing all the evidence in the light most favorable to [plaintiff], resolving all conflicts, and drawing all inferences in [plaintiff's] favor, and deferring to the implicit credibility determinations of the trier of fact, there was no substantial evidence to support the jury's verdict in [plaintiff's] favor.' " (Hurley v. Department of Parks & Recreation, supra, 20 Cal.App.5th at p. 644; see also ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266.) Both parties apply the substantial evidence standard in advocating their respective positions regarding the jury's damage awards.
The appeal challenging the judgment and the order denying JNOV also raises purely legal questions concerning the state of the law for recovering damages for breach of lease and for waste, and the interpretation of the parties' lease. We review these issues de novo. (Brennan v. Townsend & O'Leary Enterprises, Inc. (2011) 199 Cal.App.4th 1336, 1345; ASP Properties Group, L.P. v. Fard, Inc., supra, 133 Cal.App.4th at p. 1266.) " 'The precise meaning of any contract, including a lease, depends upon the parties' expressed intent, using an objective standard. [Citations.] When there is ambiguity in the contract language, extrinsic evidence may be considered to ascertain a meaning to which the instrument's language is reasonably susceptible. [Citation.] . . . [¶] We review the agreement and the extrinsic evidence de novo, even if the evidence is susceptible to multiple interpretations, unless the interpretation depends upon credibility. [Citation.] If it does, we must accept any reasonable interpretation adopted by the trial court. [Citation.]' [Citation.] '[W]here . . . the extrinsic evidence is not in conflict, construction of the agreement is a question of law for our independent review. [Citation.]' [Citations.] In contrast, '[i]f the parol evidence is in conflict, requiring the resolution of credibility issues, we would be guided by the substantial evidence test. [Citation.]' [Citation.] However, extrinsic evidence is not admissible to ascribe a meaning to an agreement to which it is not reasonably susceptible." (ASP Properties, at pp. 1266-1267.)
II. The Avalon Case
Both parties begin their arguments by either relying on, or distinguishing, Avalon Pacific-Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183 (Avalon), a decision by our colleagues in the Fourth District, Division Three Court of Appeal. Defendant contends that under Avalon as well as Civil Code section 1951.2, a lessor cannot recover damages for breach of lease or waste before lease termination; thus, defendant argues that even if it breached the lease in this case, Balboa as a matter of law cannot recover damages because the lease is still in effect. Defendant contends that the lease language is consistent with this outcome. According to defendant, while section 8.7 of the lease allows Balboa to sue before August 31, 2031, (the defined "Term Expiration Date"), that provision does not modify or supplant the lessor's remedies provision that gives the lessor the option to terminate the lease and seek damages for the lessee's default. Thus, it argues, "upon [defendant's] default, [Balboa] has the option of giving a 3-day notice of termination, terminate the lease, and then sue for damages. [Balboa] does not have to wait until the end of the 20-year lease term to recover deficiency or damages under [section] 8.7, but the lease must first be terminated." Defendant contends this outcome is confirmed by section 1951.2.
Undesignated statutory references are to the Civil Code.
Balboa responds that the lease in this case differs from that in Avalon in two ways, and thus Avalon is inapposite. It maintains the lease here permits the lessor to file suit before the end of the lease term to make repairs, and also gives the lessor an "immediate possessory interest" in the property in order to make repairs caused by any of the lessee's alterations. According to Balboa, we cannot apply Avalon because the lessor in that case had only a future reversionary interest in the property, not a right of immediate possession. Balboa further argues that because Avalon was decided before the parties entered into the lease, we must infer that the original lessor and lessee intended that its reasoning and holding would not apply. Balboa characterizes this as giving effect to the "parties' mutual intent at the time of contracting."
In Avalon, the lessor and lessee entered into a long-term lease of commercial property, providing among other things that the lessee was to convert the property into a retail facility. (Avalon, supra, 192 Cal.App.4th at p. 1191.) The lease imposed on the lessee repair and maintenance obligations, as well as obligations on lease termination to surrender the premises clean and in good operating condition. (Id. at p. 1192.) The lessee commenced renovations but suspended them after some months, after which time vandals and vagrants damaged the premises. (Id. at pp. 1192-1193.)
The lessor did not terminate the lease, but commenced a lawsuit against the lessee for breach of lease and waste damages, alleging the lessee had demolished a portion of the premises and then abandoned construction, failed to return the property to its preexisting condition, and failed to repair the damages from theft and vandalism, which it allowed to occur. (Avalon, supra, 192 Cal.App.4th at pp. 1193, 1195.) The lessor alleged the lessee committed waste by failing to secure the premises, abandoning the construction, and leaving the property available for intruders. (Id. at p. 1195.) A jury awarded the lessor over a million dollars in damages for waste and breach of lease, representing the cost of repairing the premises. (Id. at pp. 1195-1196.)
On appeal from orders denying the lessor a new trial and JNOV, the Court of Appeal reversed the jury verdict in the lessor's favor and directed the court to enter judgment for the lessee. (Avalon, supra, 192 Cal.App.4th at pp. 1189, 1221.) It explained that in a lease situation, the lessee has exclusive possession of the premises, including as against the owner, for the lease term. (Avalon, supra, 192 Cal.App.4th at p. 1190.) The lessor has a future reversionary interest—entitling the lessor to " 'the possession of the property only at a future period' "—and retains fee title. (Ibid.) "Thus, the lessee has the right during the term of the lease to the full use and enjoyment of the leased property limited only by a restriction not to commit waste and by the terms of the lease." [Citation.] Every lease includes an implied covenant of quiet enjoyment protecting the lessee from any act or omission by the lessor which interferes with the lessee's right to use and enjoy the premises for the purposes contemplated by the lease." (Id. at pp. 1190-1191.) In Avalon, the lease remained in effect, so the lessee still had a present right of possession and the lessor only had a reversion interest. (Id. at p. 1200.)
Avalon held that though the lessee had breached the repair and maintenance covenant of the lease, the lessor had not terminated the lease, the lease had not expired, and the lessee continued to pay its monthly rent without abandoning the lease. (Avalon, supra, 192 Cal.App.4th at p. 1189.) Those being the "facts driving [its] decision" (ibid.), the court stated the measure of damages was the diminution in value of the lessor's reversion interest, not cost of repair damages, which according to Avalon was the measure of damages applicable when the lease has expired or been terminated and the lessor has regained possession. (Id. at p. 1189.) Avalon held that "under the terms of the lease, California case law, and prevailing law across the nation, a lessor may not recover cost of repair damages for breach of a lease's maintenance and repair obligations when the lease has neither expired nor been terminated. A lessor is limited to damages it actually suffered: injury to the reversion interest—the interest the lessor has in the leased property. Similarly, to recover for waste while a lease remains in effect, a lessor must prove the acts of waste caused damage that was sufficiently substantial and permanent to injure the lessor's reversion interest." (Id. at pp. 1189-1190.)
Further, the terms of the lease in Avalon did not permit the lessor to recover cost of repair damages without terminating the lease. (Avalon, supra, 192 Cal.App.4th at p. 1200.) Specifically, the "Remedies" covenant of the lease in Avalon provided that if the lessee was in default, the lessor was "entitled, at its election, to bring suit for the collection of the rent or other amounts for which Tenant may be in default, or for the performance of any other covenant or agreement . . . all without entering into possession or terminating this Lease." (Ibid.) The lease also entitled the lessor on default "at its election, to terminate this Lease, re-enter the Premises and take possession thereof." (Ibid.) The Avalon court rejected the lessee's argument that the language "other amounts for which Tenant may be in default" included the cost of repairs when the lessee had breached maintenance and repair covenants. (Ibid.) It held that under a reasonable construction of that language, the phrase meant specific monetary obligations imposed by the lease on the lessee. (Ibid.) To enforce the nonmonetary covenants without terminating the lease, the lessor's remedy was to sue the lessee for specific performance, which it had not done. (Id. at pp. 1200-1201.) This, the court held, was consistent with California law (§ 1951.2 ) governing a lessor's remedies for breach of lease, which conditions recovery of specified damages—including costs incurred in making repairs or damages for breach of a maintenance and repair obligation—on lease termination. (Avalon, at p. 1201 ["section 1951.2, subdivision (a) permits the lessor to recover cost of repair damages '[u]pon such termination' of the lease. The Lease, consistent with section 1951.2, subdivision (a), does not permit the lessor to recover cost of repair damages without terminating the Lease"].)
Section 1951.2, subdivision (a) provides in part: "Except as otherwise provided in Section 1951.4 [regarding collecting rent upon the lessee's abandonment of the property], if a lessee of real property breaches the lease and abandons the property before the end of the term or if his right to possession is terminated by the lessor because of a breach of the lease, the lease terminates. Upon such termination, the lessor may recover from the lessee: [¶] . . . [¶] (4) Any other amount necessary to compensate the lessor for all the detriment proximately caused by the lessee's failure to perform his obligations under the lease or which in the ordinary course of things would be likely to result therefrom."
Avalon also relied on case law that it found permitted recovery of cost of repair damages only after the lease expired or was terminated. (Avalon, supra, 192 Cal.App.4th at p. 1201.) In part, it pointed to the California Supreme Court's decision in Gold Mining & Water Co. v. Swinerton (1943) 23 Cal.2d 19 (Gold Mining), in which lessees under a duty to maintain and repair a water system were found to have repudiated their lease, permitting the lessor to recover damages for the reasonable cost of the improvements or repairs which the lessees agreed to make under the terms of the lease. (Id. at pp. 24, 27, 38.) Avalon observed: "Gold Mining endorses the rule that a landlord may recover cost of repair damages only in a lawsuit brought after the lease has expired or has been terminated; before then, the landlord's damages are limited to the amount of injury to the reversion. The Gold Mining court permitted the lessor to recover the cost of repair only because the lessees had repudiated the lease, in effect terminating it. [Citation.] We are bound by Gold Mining because it is a California Supreme Court decision." (Avalon, 192 Cal.App.4th at p. 1203.)
The Avalon court held it was not required to reconcile a split in authority as to whether a lessor could recover damage to its reversion interest before or after lease termination, because the plaintiff in that case had failed at all to present injury to the reversion: "That testimony did not segregate injury to the reversion interest, did not calculate the monetary value of the injury to the reversion interest, and failed to take into consideration the fact the Premises were already subject to the Lease, which continues to generate about $50,000 in monthly rent and extends at least into 2017. [¶] The only damages sought by [plaintiff] and awarded on its breach of contract claim were for cost of repairs." (Avalon, supra, 192 Cal.App.4th at p. 1210.) Because the evidence was insufficient as a matter of law to support that judgment, the court reversed it. (Ibid.)
Avalon reached the same conclusion as to the jury's damage award for waste, even though the defendant's conduct in failing to complete construction could have resulted in waste. (Avalon, supra, 192 Cal.App.4th at pp. 1211-1213.) The court explained: "Waste is injury to the lessor's reversion interest, not to the lessee's present possessory interest. Indeed, while a lease is in effect, the only damage a lessor could suffer from waste is injury to the reversion interest because that is the interest the lessor has in the property. To cause injury to the reversion interest, damage from waste likely would have to be both substantial and permanent, particularly when there is a long period remaining on the lease term; in other words, waste occurs when damage is sufficiently substantial and permanent to cause an injury to the reversion interest." (Id. at p. 1215.) Because the plaintiff had not presented evidence of damage to its reversion, and the lease had not expired or been terminated, it did not prove waste damages. (Id. at p. 1220.)
Avalon rejected disjunctive language in Rowe v. Wells Fargo Realty Services, Inc. (1985) 166 Cal.App.3d 310 and other cases suggesting that waste could be proven with evidence of "substantially or permanently diminished" market value, because that would permit recovery for waste without establishing injury to an owner's reversion interest. (Avalon, supra, 192 Cal.App.5th at pp. 1216, 1217.) Avalon observed that Rowe had misinterpreted Smith v. Cap Concrete, Inc. (1982) 133 Cal.App.3d 769 on that point. Avalon also disagreed with Smith to the extent it could be read to permit the appellants to recover cost of repair damages while the lease was still in effect. (Avalon, supra, 192 Cal.App.5th at pp. 1219-1220.) It reasoned "several critical facts are missing from the Smith opinion, preventing us from determining whether the case applies to the situation here, in which the lessor sued for waste without terminating the lease." (Id. at p. 1220.) Avalon questioned the Smith court's reasoning, observing it applied the law on waste "in a circular fashion, concluding the broken concrete material would become permanent if not removed." (Avalon, at p. 1220.) It also observed Smith cited cases involving the measure of tort damages for trespass to support the proposition that the landowners could recover for loss of market value or cost of removal. (Ibid.) Avalon held damages for waste based on cost of repairs would permit the lessor to receive a windfall. (Ibid.) Here, Balboa does not purport to seek cost of repair damages for waste, as it claims there is independent evidence of lost market value via the testimony of its witnesses recounted below.
III. Lease Interpretation
We agree, like the Avalon court, that the lease terms here are essential in resolving the issues and the proper measure of damages, if any, since a lease agreement establishing a landlord-tenant relationship is a contract to which the parties are bound. (See ASP Properties Group, L.P. v. Fard, Inc., supra, 133 Cal.App.4th at p. 1268.) We interpret the lease under contract principles as a question of law as the parties did not present conflicting extrinsic evidence of their intent on the meaning of the lease terms. (Id. at pp. 1266-1267; Thee Aquila, Inc. v. Century Law Group, LLP (2019) 37 Cal.App.5th 22, 26; Eucasia Schools Worldwide, Inc. v. DW August Co. (2013) 218 Cal.App.4th 176, 181; Robert T. Miner, M.D., Inc. v. Tustin Ave. Investors (2004) 116 Cal.App.4th 264, 271.)
Commercial leases "should be construed according to the rules for the interpretation of contracts generally and in conformity with the fundamental principle that the intentions of the parties should be given effect as far as possible." (Medico-Dental Bldg. Co. of Los Angeles v. Horton & Converse (1942) 21 Cal.2d 411, 418-419; ASP Properties Group, L.P. v. Fard, Inc., supra, 133 Cal.App.4th at pp. 1268-1269.) The parties' " ' "intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' . . . controls judicial interpretation. [Citation.]" [Citations.] . . . [L]anguage in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. [Citation.] Courts will not strain to create an ambiguity where none exists.' " (ASP Properties, at p. 1269.)
" 'The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping interpret the other.' " (R.W.L. Enterprises v. Oldcastle, Inc. (2017) 17 Cal.App.5th 1019, 1026 [interpreting contractual attorney fee provision, quoting section 1641]; Robert T. Miner, M.D., Inc. v. Tustin Ave. Investors, supra, 116 Cal.App.4th 264, 271 [interpreting lease and estoppel certificate together].) " ' "An interpretation which gives effect to all provisions of the contract is preferred to one which renders part of the writing superfluous, useless or inexplicable." ' " (R.W.L., at p. 1026, quoting Carson Mercury Insurance. Co. (2012) 210 Cal.App.4th 409, 420.) We interpret a contract so that it is fair and reasonable, not leading to absurd conclusions, and to make it " 'lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.' " (ASP Properties Group, L.P. v. Fard, Inc., supra, 133 Cal.App.4th at p. 1269.)
Here, Balboa isolates and relies on two provisions in the lease. First based on the "suits" provision, section 8.7, it argues that unlike in Avalon, it is not required to terminate the lease in order to sue for breach of lease cost of repair damages or damages for waste. According to Balboa, the lease "expressly permits [it] to enter the premises now, before the end or termination of the lease, make the repairs that are a consequence of [defendant's] alterations that breached the lease provisions, and sue to seek the cost of those repairs." It argues that the cost of repair is "any other charge due under this Lease," within the meaning of that section and thus it is permitted to sue for such damages at any time or at its election. Second, it relies on the repairs and maintenance provision (section 5.2) of the lease to argue it has not just a future reversionary interest as did the landlord in Avalon, but an "immediate possessory interest" in the property for the purpose of making repairs caused by defendant's alterations. A. The Repairs and Maintenance Provision Does Not Grant Balboa a Present Possessory Interest in the Premises
We begin with the latter point. In full, the repairs and maintenance provision of the lease reads: "REPAIRS AND MAINTENANCE. Lessee shall, at all times during the Term, at its own cost and expense, keep and maintain the Premises and all fixtures and personalty located on it in good order and condition, and subject to all applicable terms of paragraphs 5.4 [pertaining to alterations] and 5.8 [regarding licenses and laws], shall make all necessary and desirable repairs, restorations and replacements thereof, structural and nonstructural, seen or unforeseen (hereinafter collectively called 'Repairs'), and shall use all reasonable precaution to prevent waste, damage or injury. Lessee shall also maintain in good repair and free from dirt, snow, ice, rubbish and other obstructions or encumbrances, the sidewalks, parking areas, yards, plantings, gutters and curbs in front of and adjacent to the Premises. [¶] In the event that Lessee fails or neglects to make all necessary Repairs or fulfill its other obligations as set forth above, Lessor or its agents may enter the Premises for the purpose of making such Repairs or fulfilling those obligations. All costs and expenses incurred as a consequence of Lessor's action shall be repaid by Lessee to Lessor within fifteen (15) days after Lessee receives copies of receipts showing payment by Lessor for such Repairs or other obligations. These receipts shall be prima facie evidence of the payment of the charges paid by Lessor. Except in the case of emergency, Lessor shall give Lessee ten (10) days' notice before taking any such action." (Italics added.)
Fundamental principles of both tenancy and contract interpretation prevent us from interpreting this lease provision as granting Balboa a possessory or property interest beyond its reversionary interest. The lease agreement as a matter of law gave defendant as the tenant the right to exclusive possession as against the whole world, including Balboa. (Avalon, supra, 192 Cal.App.4th at p. 1190; Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1040; San Jose Parking, Inc. v. Superior Court (2003) 110 Cal.App.4th 1321, 1328 [the " ' "distinguishing characteristic[] of a leasehold estate [is] that the lease gives the lessee the exclusive possession of the premises against all the world, including the owner" ' "]; see California State Teachers' Retirement System v. County of Los Angeles (2013) 216 Cal.App.4th 41 55 ["A 'possessory interest consists of a right to the possession of real property for a period less than perpetuity by one party, the holder of the possessory interest, while another party, the fee simple owner, retains the right to regain possession of the real property at a future date' "].) The lessee's right of possession continues as long as the lessee timely pays rent and the lease is not terminated, which is the case here. (Accord, Multani v. Knight (2018) 23 Cal.App.5th 837, 851-852 [tenant's failure to pay rent gave other party option to terminate the contract, and failure to comply with notice to pay rent terminated tenant's legal right to possession of the premises].) A plain language interpretation of the lease does not support Balboa's view that the repair and maintenance provision changed the lease's legal grant of exclusive possession. The plain and unambiguous language of section 5.2 gives Balboa nothing more than a temporary and limited right of entry—conditioned on 10-days' notice absent an emergency—solely to make repairs or remedy unauthorized construction or waste while the lease remains in effect. The provision is not a grant of a property right of possession, much less immediate possession. And, another provision of the lease gives Balboa the option of reentry and repossession in the event of lease cancellation or termination (section 8.3), showing the drafter knew what language to use in order to return the right of possession to the lessor. In sum, section 5.2 of the lease does not distinguish this case from Avalon. Like the landlord in Avalon, during the pendency of the lease term, Balboa retained only a future reversionary interest in the premises. B. The Suits Provision Does Not Give Balboa the Right to Sue for Cost of Repair Damages During the Lease Term
There is no trial evidence that Balboa exercised this right or entered the premises to perform work to repair or remedy defendant's defective or unauthorized construction. Balboa's principal Andy Kam testified that he had not paid any plumbing bills, he did not pay for roof or flashing repairs, and he did not pay to restore the landscaping. At the time of trial, he had not yet taken any steps to reconstruct the greenhouse on the building.
We likewise disagree that the "suits" provision in the lease gave Balboa the right to sue for cost of repair damages as "any other charge due" under the lease without having to wait until lease termination. This conclusion is compelled by a comprehensive reading of the lease and its provisions in context, giving the lease an interpretation that does not render its remedies provision meaningless and ensures the lease is lawful. The suits provision immediately follows provisions giving Balboa the legal right (section 1951.4) in the event of a default and the lessee's abandonment to recover rent as it becomes due (section 8.5) or relet the premises (section 8.6). More specifically, section 8.5 permits the lessor to enforce its right to recover rent and enforce any of its other rights and remedies "if Lessor does not elect to terminate this Lease . . . " and it further states: "Nothing in this paragraph 8.5 shall be deemed to affect Lessor's right to indemnification, under the indemnification clauses contained in this Lease, for claims, losses and damages arising from events occurring prior to the termination of this Lease." The next lease provision (section 8.6) specifies how rents are to be applied in the event Balboa elects to relet the premises, including to reimburse costs and expenses of reletting, pay any of the defendant's indebtedness, or pay due and unpaid rent. It states that if the rents as applied are less than the total amount owed by the lessee, "then Lessee shall pay such deficiency to Lessor . . . ." The lease provides that if the lessee does not pay such a deficiency within a specified time, the lessor "may bring an action against Lessee for recovery of such deficiency or pursue its other remedies hereunder" or under specified laws and related statutes.
The entire section 8.5 of the lease provides: " Upon any event of default, in addition to any other remedies available to Lessor at law or in equity or under this Lease, Lessor shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Lessor does not elect to terminate this Lease, Lessor may, from time to time, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due. Such remedy may be exercised by Lessor without prejudice to its right thereafter to terminate this Lease in accordance with the other provisions contained in this paragraph 8.5. Lessor's re-entry to perform acts of maintenance or preservation of, or in connection with efforts to relet, the Premises, or any portion thereof, or the appointment of a receiver upon Lessor's initiative to protect Lessor's interest under this Lease shall not terminate Lessee's right to possession of the Premises or any portion thereof and, until Lessor elects to terminate this Lease, this Lease shall continue in full force and Lessor may pursue all its remedies hereunder. Nothing in this paragraph 8.5 shall be deemed to affect Lessor's right to indemnification, under the indemnification clauses contained in this Lease, for claims, losses and damages arising from events occurring prior to the termination of this Lease." Section 7.1 of the lease requires defendant to indemnify Balboa "from and against all costs, expenses, liabilities, losses, damages" or other claims arising out of, among other things, defendant's failure to perform any of its obligations under the lease or any other matter arising from or relating to defendant's occupation of the premises. Balboa did not assert a claim for indemnity against defendant.
Immediately after these sections the "suits" provision (section 8.7) appears, stating that lawsuits "for the recovery of the deficiency or damage or for any installment or installments of rent, additional rent or any other charge due under this Lease may be brought by Lessor at any time . . . ." Read in context and in keeping with section 1951.2, that section's reference to the deficiency or damage is to the deficiency that may occur as a result of inadequate receipt of rent on reletting, and to other damages referenced in the preceding sections, including the costs, expenses or indebtedness mentioned in section 8.6, or personal injury and property damage to the premises arising from events occurring prior to the termination of this Lease for which defendant must indemnify Balboa as mentioned in section 8.5. Notably, the suits provision of the lease does not refer to any damage, but the deficiency or damage, limiting lawsuits brought during the lease term to those damages legally available to Balboa while the lease remains in effect. And, as in Avalon, we read the phrase "any other charge due under this Lease" (italics added) to mean not any type of damage such as cost of repair, but specific monetary obligations imposed by the lease on defendant. (Avalon, supra, 192 Cal.App.4th at p. 1200.) The lease includes as "charges" monies "that would have been due under this Lease" in a holdover tenancy (section 2.3); late charges (section 3.2, subd. (d)); "additional charges," (section 3.4) which include taxes, costs, common area maintenance fees, expenses or charges relating to the Premises "which may arise or become due during the Term or any extension of this Lease"; and property taxes, assessments, public utilities charges, excises, levies, license and permit fees, and other governmental impositions and charges "that may become due and payable." (Section 6.1, entitled "TAXES AND OTHER CHARGES.") The lease's reference to "charges payable under this Lease" or charges "due and payable" (section 5.9, subd. (b), italics added; section 8.1, subdivision (e)), indicates specific monetary obligations, not nonmonetary obligations stemming from the duty to repair or avoid altering the premises without the landlord's permission. (Accord, Avalon, at p. 1200.)
Section 1951.2, subdivision (e) provides: "Nothing in this section affects the right of the lessor under a lease of real property to indemnification for liability arising prior to the termination of the lease for personal injuries or property damage where the lease provides for such indemnification." (Italics added.)
Were we to read the lease as Balboa urges, we would render portions of the lessor's remedies section of the lease superfluous. That section expressly conditions recovery of section 1951.2 damages, including "[a]ny other amount necessary to compensate Lessor for the detriment proximately caused by Lessee's failure to perform its obligations under this Lease," on lease termination. We cannot ignore the conditional phrase, "If Lessor elects to terminate this Lease . . . " in our construction of the lease in this case. Enforcing that condition is consistent with the law, which allows the lessor to obtain these damages "[u]pon such [lease] termination . . . ." (§ 1951.2, subd. (a).)
Finally, this interpretation results in a reasonable and fair outcome in this context involving a long term lease. (Accord, Eucasia Schools Worldwide, Inc. v. DW August Co., supra, 218 Cal.App.4th at p. 182 [interpreting lease for an elementary school so as to be fair and reasonable, not leading to absurd conclusions].) The lease in this case does not expire until August 31, 2031, and the defendant continues to have exclusive possession of the premises until the end of the lease term. "It would not be fair or just, particularly where the lease has a long time to run, to take the amount necessary to put the premises into repair as the measure of the damages; for in such cases, when the damages are awarded to the landlord, he is not bound to expend them in repairs, nor can he do so without the tenant's permission to enter on the premises." (Gold Mining & Water Co. v. Swinerton, supra, 23 Cal.2d at p. 38; see also Avalon, supra, 192 Cal.App.4th at p. 1202.) The lease (section 2.4) even gives defendant the option at the end of the lease term to keep its personal property if it restores the premises to its "original condition as of the lease date" (some capitalization omitted). If defendant were to exercise that option as it may so long as the lease is in effect, Balboa's recovery of cost of repair damages during the lease term would be duplicative, and a windfall.
Balboa maintains that the California Supreme Court in Gold Mining stated that cost of repair can be the measure of damages for a breach of lease claim before lease termination. The Gold Mining court at that point in its opinion quoted from an American Jurisprudence treatise (32 Am.Jur., Landlord and Tenant, section 801). (Gold Mining & Water Co. v. Swinerton, supra, 23 Cal.2d at p. 38.) That treatise, after setting out the general rule that a lessor's damages during the lease term is to the reversion, observed without further citation or explanation: "In some cases, however, it has been held that a landlord is entitled to recover the cost of putting the premises in proper repair, although the action is brought by him before the termination of the lease." (Gold Mining & Water Co. v. Swinerton, supra, 23 Cal.2d at p. 38.) The Gold Mining court did not adopt that unsupported assertion, discuss it further, or make it any part of its holding. We do not read Gold Mining as entitling Balboa to cost of repair damages in this case while the lease is still in effect.
The Avalon court examined the out-of-state authorities cited by the American Jurisprudence treatise for that proposition (Avalon, supra, 192 Cal.App.4th at p. 1206), and found in one, the lease had terminated by the time of trial, and in another the landlord had actually paid for the repairs. (Id. at pp. 1206-1207.)
In sum, the lease is not reasonably interpreted to equate charges with cost of repair damages. Because we do not construe the lease in this case to permit Balboa to sue for cost of repair damages during the pendency of the lease term, Avalon is not distinguishable. As in Avalon, there was no dispute here that Balboa had not terminated the lease, the lease had not expired, and defendant continued to pay its monthly rent without abandoning the premises. (Avalon, supra, 192 Cal.App.4th at p. 1189.) Thus, Balboa was limited to recovering damage to its future reversion interest. (Id. at pp. 1189-1190.) But Balboa did not present such evidence with respect to its claim for breach of lease.
Under Avalon, our conclusions above as to the damages available while the lease is still in effect apply equally to Balboa's claim for waste, to the extent it sought waste damages amounting to the expense required to repair or restore the property to its pre-remodeled condition. That is, as a matter of law, Balboa is not entitled to recover cost of repair damages for waste while the lease remains in effect. (Avalon, supra, 192 Cal.App.4th at p. 1213.) Though Balboa characterizes Smith v. Cap Concrete, Inc., supra, 133 Cal.App.3d 769 as permitting lessors to sue for waste during the lease term, we need not decide the correctness of that position. Regardless of whether Smith can be read as Balboa urges, that case made clear that waste must be proved by conduct that has resulted in substantial and permanent depreciation of the market value of the land. (Id. at pp. 776, 777 ["Waste will be found only when the market value of property is permanently diminished or depreciated"].) Though Balboa argues there is evidence of permanent and substantial injury to its reversion interest to support the jury's damage award for waste separate and apart from cost of repair damages, as we explain, we disagree.
IV. Jury's Damage Award for Waste
A. Background
At trial, Balboa's theory of waste was that when defendant remodeled the restaurant, it permanently damaged the property by removing the 348 square-foot greenhouse structure, which constituted 10 percent of the restaurant building. Its counsel argued to the jury that this constituted damage to Balboa's reversion interest: "Reversionary interest means it's what you get back at the end of the period of time. It's what you get back at the end of the lease. In other words, . . . if you have the property and it's missing 10 percent, your reversionary interest is impacted because ten percent of the building was removed. That's reversionary interest." Under that theory, Balboa's counsel told the jury that the "range of damages is $273,000 . . . ." Balboa's counsel also told the jury that the greenhouse removal constituted "destruction" under section 5.9 of the lease, which defendant was required to, but did not, promptly repair.
The trial court defined waste for the jury as "permanent injury to an out-of-possession owner by an offending party in possession." It instructed the jury at Balboa's request that "[a]n action for waste requires redress in the form of damages for cost of repair or diminution in value to the reversionary interest." The jury awarded Balboa $280,000 in damages for waste. B. The Jury's Award of Waste Damages is Unsupported by the Evidence
More fully, as to waste, the court instructed the jury: "If you decide that [Balboa] has proved its claim against [defendant] for waste, then you must decide how much money will reasonably compensate [Balboa] for that harm. This compensation is called 'damages.' [¶] The amount of damages must include an award for each item of harm that was caused by [defendant's] wrongful conduct, even if the particular harm could not have been anticipated. [¶] [Balboa] does not have to prove the exact amount of damages that will provide reasonable compensation for the harm. However, you must not speculate or guess in awarding damages. [¶] The following are the specific items of damages claimed by [Balboa]: [¶] The reasonable cost of repairing the harm."
The court read Balboa's proposed special instruction on waste as follows: " 'Waste' is conduct including both acts of commission and of omission on the part of the person in possession of land which is actionable to protect owners against the improper conduct of the person in possession which harmed and affected the land. [¶] To constitute waste, there must be a permanent injury to an out-of-possession owner by the offending party in possession. [¶] An action for waste requires redress in the form of damages for cost of repair, or diminution in value to a reversionary interest."
Defendant contends the jury's verdict for waste damages is against the law as there was no evidence of permanent injury to Balboa's reversion interest. It points out that Balboa's expert DeLise testified that any damage resulting from the greenhouse demolition was not permanent; that it would cost $121,497.35 to restore the greenhouse structure, which could be accomplished in approximately two months. Defendant argues, "Damage cannot be both permanent and repairable. If the greenhouse can be rebuilt in two months, any 'damage' to it is simply not permanent."
Balboa responds that it presented evidence of permanent and substantial injury to the premises separate from any cost of repair, and thus the jury's award of waste damages is supported by substantial evidence. It correctly argues that under Avalon and other authorities, to recover damages for waste the injury must be to its reversion interest, and must be " 'sufficiently substantial and permanent,' " that is, it must have "a degree of irremediableness sufficient to cause injury to a reversion interest that will not become a possessory interest until the end of the lease term." (Avalon, supra, 192 Cal.App.4th at p. 1215; see also Schellinger Brothers. v. Cotter (2016) 2 Cal.App.5th 984, 999.) Balboa acknowledges that loss of market value is the "ultimate test" (Schellinger, at p. 1000, quoting Smith v. Cap Concrete, Inc., supra, 133 Cal.App.3d at p. 777), but urges us to apply the measure "flexibly, having in mind the 'quantity and quality of the estate, the nature and species of property, [and] the relation of it to the person charged to have committed the wrong.' " (Smith v. Cap Concrete, Inc., at p. 777.) It was Balboa's burden to prove depreciation of market value of the land as a result of waste. (Eastman v. Peterson (1968) 268 Cal.App.2d 169, 176.)
Resolution of the propriety of the jury's waste award in this case does not depend on an interpretation of the lease provisions. Balboa maintains the waste damage award is supported by the testimony of four witnesses: construction expert DeLise, roofing expert Eddington, remodeling contractor Baghdassarian, and Balboa's principal Andy Kam. Viewing the record for acts of waste causing "damage that was sufficiently substantial and permanent to injure [Balboa's] reversion interest" (Avalon, supra, 192 Cal.App.4th at pp. 1189-1190), we reject Balboa's claim that the jury's $280,000 waste award is supported by substantial evidence. As we explain, none of the testimony concerning the unauthorized or defective construction separately or cumulatively permitted the jury to conclude or reasonably infer that the property suffered substantial or permanent injury, much less $280,000 in reduced market value, because of the reduced footprint of the building or any other construction deficiency. (See Dreyer's Grand Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 839 [court applying substantial evidence standard must review the whole record to determine whether it supports the judgment, and not confine its consideration to isolated bits of evidence].)
1. DeLise's Testimony
Balboa contends DeLise's testimony supports the jury's award of waste damages. It points out that DeLise's cost of repair document (Trial Ex. 82) observed interior and electrical work was done, and structural changes were made, without city approval or permits. Balboa argues that even though DeLise allocated zero dollars in repair costs for those issues, "[t]he evidence shows that the property has been permanently and substantially injured by these problems." It argues it is reasonable to infer "the jury concluded that a property with unpermitted structural elements could threaten the property's integrity, and thus diminish the property's value." Balboa also maintains the jury could have concluded that these deficiencies diminish the property's value because when it sells the property, these items "will be discovered by and/or have to be disclosed to a prospective buyer, who may be unwilling to pay full market value for the property because of these issues that truly permeate the property." Balboa finally argues that up until the defective weep screeds are addressed, "there has been water seeping or leaking inside the stucco that had no way to get out" which "a prospective buyer may discover," or "would have to be disclosed." Balboa states: "A property whose building has been subject to water intrusion with no means for the water's escape may be less desirable a property, diminishing its value. . . . The jury could reasonably have included this in its waste award separate from the cost of repair." Balboa characterizes these items as "stigmatic, non-market factors that impact the property and diminish its value" to a prospective buyer.
We are not convinced. Even assuming DeLise's designation of zero damages for these permitting issues did not contradict Balboa's claims, DeLise's testimony at most presented evidence of defective, deficient or unauthorized construction (the improperly built weep screeds, the greenhouse removal) that is by nature repairable, not so substantial and permanent as to constitute an injury to Balboa's future reversion interest. DeLise's cost of repair chart described the steps necessary to restore the 348 square foot greenhouse element to the building. As defendants point out, he testified it would take "[p]robably at least two months" to do that work.
Further, we conclude Balboa's proposed inferences and theories of permanent damage are speculative on this record. " 'Whatever the proper measure of damages may be, in a given case, the recovery therefore is still subject to the fundamental rule that damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery.' " (Lueter v. State of California (2002) 94 Cal.App.4th 1285, 1302.) " 'Inferences may constitute substantial evidence as long as they are the product of logic and reason rather than speculation or conjecture.' " (Poncio v. Department of Resources Recycling & Recovery (2019) 34 Cal.App.5th 663, 673.)
Balboa does not describe, or point to evidence describing, the nature of the assertedly unpermitted structural changes to the property. Absent more detail as to the type or nature of the structural changes, a conclusion that they "permeate" the property or "diminish the property's value" is conjecture. We also disagree that electrical changes or interior modifications permit a jury to infer permanent and substantial injury to Balboa's reversion interest. Such construction problems are not by nature irremediable, and Balboa points to no evidence demonstrating or suggesting they are in this case. The fact that the defective weep screeds will at some point allow water to leak into the building does not permit a conclusion that water damage (assuming it is inevitable), will be so permanent and lasting that the property will suffer a loss in value when Balboa recovers possession in 2031. Though Balboa asserts a building subjected to water intrusion "may be less desirable a property, diminishing its value," the assertion is conclusory and conjectural on this record.
2. Eddington's Testimony
Balboa also points to Eddington's testimony as support for the jury's waste award. Admitting some of his testimony went to cost of repair, Balboa nevertheless argues Eddington's testimony shows diminution in the property's value apart from the repair measure of damages: "[T]he cost of repair does not address the fact that, before those repairs are made, the property has been subjected to water intrusion that will spread out everywhere throughout the building." Balboa argues "this would be something a prospective buyer may discover, or something that would have to be disclosed. A property whose building has been subject to water intrusion may be less desirable a property, diminishing its value."
We do not find support for these propositions in Eddington's testimony. Eddington did not address the property's market value. At trial, Eddington described the parts of the roof that did not conform to the plans, as well as deficiencies in the roof membrane leaving openings ("fishmouths") which, according to Eddington, "in a heavy rain, water could travel into that area of the roof." He found insufficient sealing on roofing material on one vertical wall, the significance of which was that "even a light rain, water is going to get in, soak up that wood framing, run downhill and eventually get inside the building." Eddington observed leak stains on an interior wall in an area of an opening, but he "didn't actually correlate that particular fishmouth to any particular leak . . . ." In the area of an electrical junction box, Eddington observed wrinkles causing him to question how the area was sealed; when asked whether the area was likely to leak, he testified, "It's a possibility. . . . [I]t shows a lack of some workmanship there as far as the quality of installation." He found problematic areas by air conditioning units: one had a gap "that would allow definitely water into the building" and the other was without sealing or flashing, such that "water could actually flow in through that crack" in a heavy storm with wind, "where water could actually pond and blow in there . . . ." Eddington also saw darkened areas with residue or sediment indicating to him "that there may be some standing water there"; he stated at those locations "there may be standing water issues" or there were "possible standing water issues." Eddington characterized the residue or sediment as "more than likely" evidence of ponding. In Eddington's last visit, he observed standing water on more than half of the roof surface over 48 hours after a rainstorm. He testified that several seams were under water, which "can be detrimental to roof performance." According to Eddington, water should have been moving toward the roof drain; there was an absence of a slope sufficient to drain within a 48-hour period.
Counsel asked Eddington about the condition of the roof with respect to its water-tight integrity, and whether the roof had a "useful life." He responded: "Well, I didn't do a correlation study to connect any dots between a source and an interior leak. I did see stains on the ceiling tiles at various locations on the interior. [¶] . . . [¶] There is [a useful life to the existing roof] if you make certain corrections, notwithstanding the fact that there's ponding. I mean, it would be constant maintenance. There's things you can do to build up, retrofit materials over those ponds. They become large band-aids in many cases. So I believe that in its current condition, it's going to be subject to continual maintenance." When asked if he would recommend the roof be constructed according to the original plans, Eddington said: "Well, certainly that would be a satisfactory application. There are other systems that would work as well. The most important thing is that all the roofing should be torn off down to the sheathing and identifying any damage there, providing a system for positive drainage and a new roof system that has some type of a manufacturer's warranty with it."
On cross-examination, Eddington admitted he did not look for roof leaks during his first visit, and never in any of his other visits lifted up any of the ceiling tiles at the building to observe the roof sheathing where he could have identified roof leak sources. He did not observe any damage to the roof sheathing on any of his core samples. With respect to the stained interior tiles, he could not say and did not determine when they became stained. He had no opinion as to how many active roof leaks were going on at any particular time. On counsel's request that Eddington address the relationship between the ponding on the roof and increased maintenance, Eddington stated: "The relationship is that you can expect problems; you just don't know when it's going to happen. It's just a ticking time bomb, basically. It's also to the expectation of the building owner, if they want to just wait and react to the leak, or if they want to try to prevent it before it happens. If it's not broken, don't fix it, kind of thing. Some owners are of that ilk."
Eddington's testimony established that the roof problems were remediable with a roof replacement. In the face of that evidence, a jury could not reasonably infer the roof defects he observed would result in permanent and lasting injury to the property. Even if that were not the case, Eddington did not testify the building had suffered water damage from any defects in the roof; as stated, he expressly did not correlate any of those defects to interior damage. And Eddington's description of the problem was couched in possibilities and expectancies; that water "could" "possibl[ly]" enter, pond, or "eventually get inside." He described "possible" standing water issues. Balboa's statement that the building "has been subjected to water intrusion that will spread out everywhere throughout the building" and that it "may be less desirable a property" is simply not supported by Eddington's testimony; it is supposition on this record.
3. Andy Kam's Testimony
Andy Kam, whose English was halting, testified that the removal of the greenhouse affected the value of his property in this way: "If I have a new tenant, I have a square footage charge, so how they can use it [sic]." He was asked how Balboa was otherwise damaged, and stated: "The damage is that they build this thing, it's not passed by the government law and regulation. Eventually, I don't have a—there's a potential risk damage [sic] because if anything happens, this building is not legal built [sic] and anything, people will fine the owner for the liability for the deficiency and not pass the law of building."
Balboa contends that an owner like Kam may offer opinions as to how a property's value has been diminished. While Evidence Code section 813 permits opinion testimony from the owner on the value of property, the owner's right to testify is not absolute. (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 950; Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 241.) Ownership itself does not supply the foundation. (See Jones, at pp. 950-951.) Rather, an owner's opinion " 'is limited to such an opinion as is based on matter perceived by or personally known to the witness . . . that is of a type that reasonably may be relied upon by an expert in forming an opinion as to the value of property . . . .' " (Fragale v. Faulkner, at p. 241, quoting Evidence Code section 814; see Contra Costa Water District v. Bar C-Properties (1992) 5 Cal.App.4th 652, 660-661 [rejecting "the maxim that an owner is always qualified to testify to the value of his own property"; an owner is bound by the same rules of admissibility as any other witness in stating an opinion as to property value].)
The first part of Kam's testimony was that his building had less square feet for a new tenant to use. But as we have stated, any purported damage from the greenhouse's removal is repairable and not sufficiently permanent to support waste damages. As for the other part of Kam's testimony as to the construction not being "legal[ly] built," even if we strain to characterize it as an opinion of diminished market value caused by defective or unpermitted construction, Kam provided no basis for his opinion. In short, Kam's statement is not sufficient evidence—evidence that is reasonable, credible or of solid value—of serious, substantial and permanent injury so as to support the jury's waste damage award. (Accord, Fragale v. Faulkner, supra, 110 Cal.App.4th at pp. 240-241 [rejecting opinion of layperson as to effect on market value of code violations and structural defects as without foundation where offer of proof showed only that owner obtained information on the value of comparable houses in the neighborhood]; Dreyer's Grand Ice Cream, Inc. v. County of Kern, supra, 218 Cal.App.4th at p. 840 ["A layperson's opinion without a factual foundation does not appear to be any more weighty or convincing" than an expert's opinion without a factual foundation; rejecting testimony of external obsolescence for purpose of property tax assessment absent evidence of market demand].) As a result, the sole competent evidence of market value was presented by defendant's expert Caringella, whose conclusion was that the reversion interest was not impacted as a result of the remodel work, and particularly the greenhouse removal.
4. Baghdassarian's Testimony
Finally, Balboa contends Baghdassarian's testimony supports the jury's verdict of damage to its reversion interest. It points to the weakness of Baghdassarian's trial testimony, his failure to produce documents responsive to document requests, and general lack of record-keeping with regard to the work he did at the property. It argues: "The result is that . . . Balboa now has a property whose structural components are unpermitted and in violation of code, and whose exact condition cannot be confirmed through any as-is plans and specifications. DeLise's [c]ost of [r]epair did not address these issues, and thus the jury's cost-of-repair damages do not account for these issues either." Balboa further argues "[t]he jury could conclude from Baghdassarian's shoddy work and sloppy record-keeping that the property has suffered permanent and substantial injury in the form of diminution of value because these flaws in the property could affect . . . Balboa's ability to obtain refinancing or sell the property for full value."
We see these assertions, which are not accompanied by any record citation, as insufficient to show substantial and permanent injury to Balboa's reversionary interest. And they are speculative. Balboa points to no testimony showing or suggesting that a contractor's failure to keep plans or other records, including inspection records, would so permanently diminish the property's value so as to cause a buyer to pay less or a bank to forego financing. We cannot, without speculation, reasonably infer such consequences from mere shoddy construction work, which is repairable by nature.
None of the witnesses discussed above separately or collectively permitted the jury to find or infer the sort of substantial and permanent loss of market value that would support a verdict for waste. The circumstances here are akin to those in Rowe v. Wells Fargo Realty Services, Inc., supra, 166 Cal.App.3d 310, where the Court of Appeal found plaintiff commercial lessors' complaint seeking to allege waste for purposes of unlawful detainer insufficient as a matter of law. In Rowe, the lessor alleged the lessee tampered with the temperature control on the premises causing simultaneous heating and cooling, damage to the plenum temperature control, and damage to the thermostat; left office machinery running after regular work hours; and used and installed light fixtures and/or bulbs without the lessor's express authorization. (Id. at pp. 315, 319.) Pointing out an action for damages resulting from waste "can only be proved ' "by evidence of acts which injuriously affect the market value of the property" ' " (id. at p. 319, quoting Eastman v. Peterson, supra, 268 Cal.App.2d at p. 175), the Rowe court held such alleged conduct "would not cause depreciation of the premises nor a substantial decrease in its market value such that a forfeiture of the lease is warranted. [The lessors'] allegation that the thermostats and temperature controls were physically damaged, if true, shows only a temporary condition. Further, [the lessors'] allegations that [the lessee] installed and used light fixtures and bulbs without appellants' authorization does not show that the 'physical condition' of the premises was injuriously affected." (Id. at p. 320.) The court held the lease "impliedly condoned" the lessee's office machinery use after work hours as it provided for heat and air conditioning, as reasonably required, on a seven-day, twenty-four-hour basis. (Ibid.) It held "there was no injury to the premises which could properly be termed 'waste.' " (Ibid.)
In sum, the trial court should have granted defendant's motion for JNOV, as Balboa was not entitled to cost of repair damages as a matter of law, and there is not substantial evidence to support the jury's $280,000 award of waste damages. As in Avalon, Balboa "is not entitled to a new trial to prove some other measure of damages because it had ' " 'full and fair opportunity to present the case, and the evidence is insufficient as a matter of law to support [Balboa's waste] cause of action . . . .' " ' [Citation.] ' " 'Certainly, where the plaintiff's evidence is insufficient as a matter of law to support a judgment for plaintiff, a reversal with directions to enter judgment for the defendant is proper . . . . [¶] . . . [A] reversal of a judgment for the plaintiff based on insufficiency of the evidence should place the parties, at most, in the position they were in after all the evidence was in and both sides had rested.' " ' " (Avalon, supra, 192 Cal.App.4th at p. 1210.)
Having held Balboa failed to prove permissible measures of damages, we conclude the jury's verdicts cannot stand and the judgment must be reversed. Our disposition renders it unnecessary to reach defendant's challenge to the trial court's discretionary (see People v. McDowell (2012) 54 Cal.4th 395, 429-430; Du-All Safety, LLC v. Superior Court (2019) 34 Cal.App.5th 485, 494-495) decision to exclude the testimony of defendant's expert Stephen Wilson.
DISPOSITION
The judgment is reversed and the matter remanded with directions that the trial court enter judgment in favor of defendant. Defendant shall recover its costs on appeal.
O'ROURKE, Acting P. J. WE CONCUR: AARON, J. IRION, J.