Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. SC089348, Linda K. Lefkowitz, Judge.
Lightfoot & Northup, Stephen K. Lightfoot and Robert W. Northup, Jr., for Plaintiffs and Appellants.
Lewis Brisbois Bisgaard & Smith and Jon P. Kardassakis for Defendant and Respondent.
CROSKEY, J.
Susan D. Augustson and Clyde W. Augustson, as trustees of the Augustson Family Trust, appeal a summary judgment in favor of Texaco Inc. (Texaco). The Augustsons are the owners of real property that was subject to a written lease dated April 14, 1969, between a prior owner and Texaco. Texaco as lessee assigned its interest in the lease to Texaco Refining and Marketing Inc. (TRMI). After the assignment and the exercise of two options extending the lease term, Susan Augustson and TRMI entered into a series of agreements purporting to modify the lease and further extend the lease term. TRMI later assigned its interest in the lease to another entity, which became a holdover tenant after the expiration of the lease term. The Augustsons sued Texaco for breach of the lease, alleging nonpayment of rent and physical damage to the property all arising from the holdover period. The trial court concluded that Texaco as assignor was not contractually liable for the damages alleged in the complaint, and awarded summary judgment in favor of Texaco.
The Augustsons contend Texaco’s obligations under the original lease continued during the period of holdover by Equilon, including the obligations to pay rent and to maintain the premises in good condition. We conclude that the original lease terminated upon the expiration of its term on February 28, 1991, that the parties created a new lease with TRMI to which Texaco was not a party, and that the summary judgment was proper.
FACTUAL AND PROCEDURAL BACKGROUND
1. Original Lease and Lease Extensions
The Dickson Company leased real property to Texaco for use as a service station under a written lease dated April 14, 1969. The agreed rent was $3,270 per month plus 2 and one-half cents per gallon of gasoline delivered to the site in excess of 1,080,000 gallons per year. The 15-year lease term commenced on March 9, 1970.
The lease provided Texaco with options to extend the lease term for two five-year periods, and stated that the rent payable during the extended terms would be $3,250 per month plus 2 and one-half cents per gallon of gasoline delivered to the site in excess of 1,200,000 gallons per year. The lease did not provide for any further extensions. It stated that Texaco could assign its interest in the lease “only to a corporation acquiring all or a substantial portion of [its] assets,” provided that Texaco “shall remain liable to lessor for the performance of all the terms hereof.” The lease also stated that the lessee’s continued occupancy of the property after the expiration of the lease would result in a month-to-month holdover tenancy on the same terms as the lease, absent a written agreement to the contrary.
Texaco exercised its first option to extend the lease term in August 1984, extending the lease term to March 1990. Texaco assigned its interest in the lease to TRMI in December 1984. TRMI expressly agreed to assume all lease obligations, while Texaco agreed that it would continue to be bound by the terms and conditions of the lease. TRMI exercised the second option in March 1989, extending the lease term to March 1995.
The assignment was effective as of December 31, 1984. Getty Refining and Marketing Company, a Delaware corporation, changed its name to Texaco Refining and Marketing Inc. on that same date. In December 1989, Texaco Refining and Marketing Inc. changed its name to TRMI Holdings Inc., and a new corporation by the name Texaco Refining and Marketing Inc. was incorporated.
Susan Augustson acquired the property by grant deed in December 1986. She conveyed her interest in the property to herself and Clyde Augustson, as trustees of the Augustson Family Trust, in March 2001.
2. Purported Lease Modifications and Further Extensions
Susan Augustson and TRMI entered into a First Modification of Lease on April 1, 1991. The agreement stated that paragraphs 26 and 27 of the original lease, entitled “Cancellation” and “Payment of Amortized Cost of Improvements,” were deleted, that new paragraphs 33 and 34 were added to the lease, and that the other lease terms remained in effect. New paragraph 33 stated that the five-year extension that had commenced in March 1990 was terminated as of February 28, 1991, that the lease term was extended for five years commencing on March 1, 1991, and ending on February 28, 1996, and that the rent payable during the new extended term was $10,000 per month. New paragraph 34 stated that upon the termination of the lease, TRMI would remediate any contamination caused by Texaco, TRMI, or their sublessees, and that TRMI could holdover under the same terms as the lease until the completion of any remediation. Texaco was not a party to the First Modification of Lease.
Susan Augustson and TRMI entered into a Second Modification of Lease on February 16, 1996. The agreement stated that the lease term was extended to February 28, 1997, that the rent payable during the new extended term was $11,500 per month, and that the other lease terms remained in effect.
Susan Augustson and TRMI entered into a Third Modification of Lease on January 13, 1997. The agreement stated that the lease term was extended to February 28, 1998, that the rent payable during the new extended term was $11,800 per month, and that the other lease terms remained in effect.
TRMI assigned its interest in the lease to Equilon Enterprises LLC (Equilon), and Equilon assumed TRMI’s lease obligations, in July 1998.
The Assignment and Assumption of Lease identified TRMI as the sole “Assignor,” but the signature line listed both TRMI and Texaco.
3. Prior Action and Settlement
Susan Augustson filed a complaint against Texaco, TRMI, and Equilon in December 2002, seeking declaratory relief and damages for breach of the lease. She alleged that Equilon had ceased operating a service station on the property and, beginning in January 2000, had excavated portions of the property causing damage to improvements and utilities. She also alleged that Equilon was a holdover tenant and that it had failed to pay any rent due after April 14, 2002. TRMI and Equilon settled the action and moved for entry of judgment pursuant to the settlement. The trial court granted the motion and entered a judgment in August 2004. The judgment dismissed the complaint against TRMI and Equilon with prejudice, released all claims by Susan Augustson against those defendants, and declared the lease terminated as between those parties. The judgment also ordered Equilon to pay Susan Augustson $150,000 and stated that Equilon must remediate any contamination “in accordance with all applicable governmental agency standards.” Texaco was not a party to the judgment and was dismissed from the action in December 2005, apparently without prejudice.
Susan Augustson appealed the judgment, contending evidence of the settlement was inadmissible and the settlement agreement was unenforceable. Division Five of the Second District Court of Appeal rejected those contentions and affirmed the judgment in a nonpublished opinion. (Augustson v. Texaco Refining & Marketing, Inc. (Sept. 20, 2005, B179029).)
4. Present Action
The Augustsons as trustees of the Augustson Family Trust filed their complaint against Texaco in the present action in April 2006. They allege that Texaco “through its assignee” TRMI exercised the second option to extend the lease term and entered into the three lease modifications further extending the lease term. They also allege that Texaco and TRMI assigned the lease to Equilon and that Equilon continued to occupy the property as a holdover tenant after the expiration of the extended lease term. The Augustsons allege that beginning in January 2000, Texaco’s “assignees and agents” excavated portions of the property and damaged improvements and utilities, and that Texaco is contractually obligated to pay unpaid rent from and after April 15, 2002, and other damages. The complaint alleges a single count against Texaco for breach of contract.
Texaco moved for summary judgment, arguing that its lease had terminated no later than February 28, 1991, that it was not a party to the subsequent agreements purporting to modify the lease and extend the lease term, and that those agreements created a new lease to which it was not a party. Texaco argued that it had agreed to remain liable for the lessee’s obligations under the lease after an assignment, but that it never agreed to guarantee the performance of a lessee under a new lease. Texaco also argued that the judgment in the prior action established res judicata precluding the Augustsons’ complaint in this action, and that the settlement in the prior action exonerated any surety obligation by operation of law (Civ. Code, § 2819).
The Augustsons argued in opposition that the purported lease modifications did not exonerate Texaco from its lease obligations, that Texaco continued to be involved in the lease after the assignment and failed to establish that TRMI was a separate corporation, that the judgment in the prior action was not res judicata as to Texaco, and that Texaco was not a surety but a principal obligor.
The trial court concluded that the evidence presented by Texaco showed that TRMI was a separate corporation and that the Augustsons failed to create a triable issue of material fact as to that showing. The court also concluded that Texaco was not a party to the First Modification of Lease and that new paragraph 34, in which TRMI agreed to remediate any contamination on the property and to pay rent during the remediation, relieved Texaco of any obligation to do the same. The court concluded further that the purported lease modifications and extensions executed without Texaco’s consent were not binding on Texaco and created a new lease between the Augustsons and TRMI. The court therefore concluded that Texaco was not contractually liable for the damages alleged in the complaint, and did not address the issues of res judicata and exoneration of a surety. The court granted the summary judgment motion and entered a judgment in favor of Texaco. The Augustsons timely appealed the judgment.
CONTENTIONS
The Augustsons contend (1) the lease modifications did not relieve Texaco of its lease obligations, including the obligation to pay rent during the holdover period and its liability for any property damage caused by the holdover tenant; (2) the prior action is not res judicata; and (3) the settlement in the prior action did not relieve Texaco of its lease obligations.
DISCUSSION
1. Standard of Review
A party is entitled to summary judgment only if there is no triable issue of material fact and the party is entitled to a judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment must show that one or more elements of the plaintiff’s cause of action cannot be established or that there is a complete defense. (Id., subd. (p)(2).) A defendant can satisfy its burden by presenting evidence that negates an element of the cause of action or evidence that the plaintiff cannot reasonably obtain needed evidence. (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003.) If the defendant meets this burden, the burden shifts to the plaintiff to set forth “specific facts” showing that a triable issue of material fact exists. (Code Civ. Proc., § 437c, subd. (p)(2).) We review the trial court’s ruling de novo, liberally construe the evidence in favor of the party opposing summary judgment, and resolve all doubts concerning the evidence in favor of the opposing party. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.)
2. The Lease with Texaco Terminated in February 1991
A lease is a contract formed by the mutual consent of the contracting parties. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1268-1269.) A lessee’s assignment of a lease is the sale of a leasehold interest. (Flynn v. Mikelian (1962) 208 Cal.App.2d 305, 310.) Although an assignment transfers the right of possession to the assignee, the assignor continues to be bound by its contractual obligations to the lessor under the lease, including the obligation to pay rent. (De Hart v. Allen (1945) 26 Cal.2d 829, 832.) This is true even if the lessor consents to the assignment and the assignee expressly assumes the lease obligations. (Ibid.) The assignor is relieved of its contractual obligations only if the lessor agrees to relieve the assignor of those obligations. (Civ. Code, § 1457.)
A lessee’s assignment of a lease transfers to the assignee the right to exercise an option to extend the lease term, if the lease provides such an option. (Cf. Penilla v. Gerstenkorn (1927) 86 Cal.App. 668, 670.) Texaco and then TRMI exercised the two options to extend the lease term, first to March 1990 and then to March 1995. TRMI then agreed with Susan Augustson to terminate the extended lease term as of February 28, 1991, and to “modify” the lease and “extend” its term for another five years beginning on March 1, 1991.
Realty & Rebuilding Co. v. Rea (1920) 45 Cal.App. 673, 677-678, held that an assignor was liable for rent accrued after the assignee had exercised an option to extend the lease term and before the expiration of the extended lease term.
We conclude that the Augustsons, as successors in interest to Susan Augustson, and TRMI are bound by the agreement between Susan Augustson and TRMI to terminate the extended lease term as of February 28, 1991. The original lease provided no option to extend the term beyond the second extension. The agreement between Susan Augustson and TRMI to extend the term beyond February 1991 was not an extension of the lease term pursuant to the provisions of the lease, and therefore was not binding on Texaco as assignor. Rather, the so-called First Modification of Lease was an agreement between Susan Augustson, as lessor, and TRMI, as lessee, to lease the property on some of the same terms as the original lease, and some different terms, for a five-year period. Texaco was not a party to that agreement and therefore was never bound by its terms. Moreover, because the original lease did not provide for a third extension of its term, the obligation to pay rent after February 1991 was not an obligation arising under the original lease and therefore was not an obligation binding on Texaco as assignor.
The legal effect of the First Modification of Lease was to terminate the original lease and substitute a new lease in its place. In Douglas v. Schindler (1930) 209 Cal. 616, the lessor and the lessee’s assignee entered into a written agreement during the term of the original lease. The agreement stated that the parties were entering into a “ ‘lease contract’ ” under the same terms as the original lease. (Id. at p. 619.) The California Supreme Court concluded that the agreement between the lessor and the lessee’s assignee was a new lease that effected a rescission of the original lease. Douglas stated, “It is elementary that two valid and enforceable leases cannot be outstanding on the same property for the same term.” (Id. at p. 620.) Douglas held that the assignor had no continuing contractual obligation to the lessor after the execution of the new lease and could not be held liable for nonpayment of rent accrued after that date. (Ibid.)
Similarly here, we conclude that the First Modification of Lease terminated the original lease and created a new lease to which Texaco was not a party. Although the agreement purported to only modify the original lease and did not expressly create a new lease, the agreement expressly terminated the extended term of the original lease and created a new five-year term in its place, on some of the same terms of the original lease and some different terms. The legal effect of this was to terminate the original lease with Texaco and create a new lease with TRMI.
3. The Augustsons Have Shown No Error in the Summary Judgment
The Augustsons’ contention that Texaco continued to be bound by its contractual obligations under the original lease during the holdover period is based on the premise that the agreement between Susan Augustson and TRMI modified the lease and extended its term, and did not terminate the lease. We conclude that the original lease was terminated as of February 28, 1991, and that Texaco had no contractual obligation under the lease after that date, for the reasons we have stated.
The Augustsons also argue that TRMI was a division of Texaco rather than a separate corporation. In support of this argument they cite a letter to Susan Augustson dated December 19, 1984, with no letterhead, signed by S. R. Shaw, who was identified in the signature line as “Division Marketing Manager.” The letter did not state whether the sender was employed by Texaco or TRMI, but stated that TRMI was a wholly-owned subsidiary of Texaco. The Augustsons also cite a letter to Susan Augustson dated March 9, 1989, under “Texaco USA” letterhead, signed by D. B. Hill as “Assistant Division Manager” of TRMI; a letter to Susan Augustson dated March 12, 1990, under “Texaco, Inc.” letterhead, reporting the volume of gasoline deliveries to the property for the prior year; and a letter to Susan Augustson’s attorney dated September 20, 1991, under “Texaco Inc.” letterhead, enclosing a copy of the original lease and a memorandum of lease and offering to discuss Susan Augustson’s claim for damages. We conclude that this evidence is insufficient to controvert the declaration of Frank G. Soler describing TRMI’s corporate history as a separate entity, and fails to create a triable issue of material fact.
The Augustsons also offer a series of perfunctory arguments that do not merit extensive discussion. Their argument that Texaco is estopped from asserting that the assignment to TRMI relieved Texaco of its lease obligations because Texaco failed to satisfy the conditions for assignment under the lease is not supported by reasoned argument or citation of authority, and therefore is waived. (People v. Stanley (1995) 10 Cal.4th 764, 793.) Their argument that Texaco assigned the lease to Equilon in July 1998 and thereby ratified Texaco’s obligations under the lease is waived for the same reasons. Their argument that Texaco continued to be bound by the lease after February 1991 because it purportedly corresponded with Susan Augustson concerning the lease and paid rent fails to create a triable issue of fact material to Texaco’s showing that the original lease was terminated as of February 28, 1991. Finally, the Augustsons cite evidence purporting to show that Equilon was a “joint venture” between Texaco and Shell Oil Company, but fail to explain why Equilon should be regarded as a joint venture under the law or the significance of its designation as a limited liability company.
The argument is inapposite in any event. The termination of Texaco’s lease obligations resulted not from the assignment to TRMI, but from the expiration of the lease term on February 28, 1991, as we have stated.
We conclude that summary judgment was proper on the ground that Texaco had no continuing obligations under the lease after February 28, 1991. In light of our conclusion, we need not address the other grounds asserted for summary judgment.
DISPOSITION
The judgment is affirmed. Texaco is entitled to recover its costs on appeal.
We Concur: KLEIN, P. J., KITCHING, J.