Opinion
B224685
08-24-2011
GARY DUNN et al., Plaintiffs and Respondents, v. MAJID ESMAEILI, Defendant and Appellant.
The Law Office of John Derrick, John Derrick for Defendant and Appellant. Law Office of Anthony D. Zinnanti, Anthony D. Zinnanti for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. GC041088)
APPEAL from a judgment of the Superior Court of Los Angeles County. Jan A. Pluim, Judge. Affirmed.
The Law Office of John Derrick, John Derrick for Defendant and Appellant.
Law Office of Anthony D. Zinnanti, Anthony D. Zinnanti for Plaintiffs and Respondents.
Majid Esmaeili appeals from the judgment entered against him and in favor of respondents Jenkin Dunn, Xu Zhen Ruan Dunn, and Gary Dunn and Grace Dunn as trustees of the Gary and Grace Dunn Revocable Trust, on respondents' complaint for breach of a lease. We affirm.
Facts
Respondents' case was simple. They produced evidence that on March 31, 2006, they leased Unit B of 8204 Huntington Drive, San Gabriel, to a man named Reno Iannini. (Actually, Iannini leased the property from respondents' predecessors in interest, but this makes no difference.) The lease had a ten year term.
The property at 8204 Huntington is a shopping complex, and the lease describes the property through a plan which is attached to the lease. The plan shows that the complex is located on the corner of Huntington Drive and San Gabriel Boulevard and is adjacent to a school.
On October 26, 2006, at appellant's and Iannini's request, the lease was amended to add Esmaeili as a tenant. As of March 2008, Esmaeili and Iannini stopped paying rent. Respondents evicted Esmaeili and Iannini, then sued for the money damages.
Appellant's defense was mistake of fact. He sought rescission of the lease, and produced evidence in support of that theory:
Appellant filed a cross-complaint, which, by time of trial, had a single cause of action, for rescission. As appellant notes, the court treated this as an affirmative defense and entered judgment on the complaint only. Iannini was named as a defendant in the complaint and in the cross-complaint. His default was taken on the complaint, and he was dismissed from the cross-complaint.
Appellant, who is a dentist, and Iannini, who is a broker of dental practices, decided to work together on a project. The two planned to lease a space and build out a dental office, then sell it. To this end, they looked at three properties on the same day in October of 2006. One property was in Covina. One was the property at 8204 Huntington, which was apparently still under construction.
One was a property at 8984 Huntington Drive, at the corner of Huntington and Rosemead. It was also owned by respondents (actually, their predecessor in interest) and Iannini had a lease on this property, too. It, like the 8204 Huntington property, was still under construction. This property was close to a place where a Kohl's department store was going to be built.
Appellant's business model (he practiced dentistry from three locations) was to locate his offices in areas with a lot of foot traffic which generated walk-ins. He preferred the location near the proposed Kohl's store, which was also near a Trader Joe's and other retail. He disliked the location near the school (8204 Huntington).
Appellant presented evidence that he and Iannini agreed on the property near the proposed Kohl's.
Iannini contacted the landlord's agent, Kelly Harrison of CBM, who spoke to both appellant and Iannini about the lease. There was disputed evidence about her conversations with appellant. Appellant testified that he spoke to her about opening a dental office at the Kohl's Plaza location, that they spoke about the potential for advertising at Kohl's and at the Trader Joe's, and that he and Harrison referred to the property as "Kohl's Plaza."
Harrison testified that Iannini told her that he wanted to add appellant to the lease at 8204 Huntington. Appellant never spoke to her about Kohl's Plaza and they never discussed advertising at Kohl's or Trader Joe's. In her correspondence with appellant, she always referred to "8204 Huntington" or "Huntington and San Gabriel." She never referred to 8984 Huntington as Kohl's Plaza but instead referred to it as 8984 Huntington or as Huntington and Rosemead. She was not the leasing agent for the Kohl's property and did not know much about it.
Harrison testified she was never confused about the transaction and that there was no doubt in her mind that Iannini had told her that appellant was to be added to the lease at 8204 Huntington.
Respondents introduced exhibits which are described in the record as emails from Harrison to appellant which refer to "Huntington and San Gabriel." There were also emails between Harrison and Iannini which differentiated between his solo project at 8984 Huntington and his project with appellant, at 8204 Huntington.
The exhibits themselves are not in our record.
The lease amendment which Harrison prepared and sent to appellant and Iannini was for 8204 Huntington. Appellant and Iannini signed the lease amendment. Appellant testified that he never saw the lease itself.
As appellant and Iannini had agreed, appellant hired an interior designer, who designed the space, obtained permits, and supervised construction. There was disputed evidence about whether the designer showed appellant a site plan which placed the office at the corner of Huntington and San Gabriel. The designer testified that she showed appellant such a plan, and appellant testified to the contrary.
Neither appellant nor Iannini went to the site during construction.
Construction of the dental office was almost complete by May or June of 2007. Appellant told another dentist, Mehrdad Mortaz, that there was an opportunity for Mortaz to open his own dental practice in San Gabriel. Appellant gave Mortaz the address on the lease and told him it was in the Kohl's center, and near a Trader Joe's. Mortaz went to the address on a weekend in June. He called appellant from the location, saying that he could not find the property and that there was no Kohl's or Trader Joe's.
Appellant concluded that Mortaz's GPS system was faulty, but the next day, decided to stop by the location on his way to a party. Appellant put the address, 8204 Huntington, into his car's navigation system and was shocked when the system took him past the Kohl's Plaza location, to Huntington and San Gabriel. He called Iannini. Appellant testified that Iannini was shocked, too, and said, "I knew you wanted Kohls Plaza, and that's what I told Kelly that you wanted Kohls Plaza."
The court rejected the rescission defense, finding that "there was never any confusion created by or mistake made by CBM as to which property Mr. Iannini and Dr. Esmaeili leased," that "[t]o the extent there was a mistake it was caused by Mr. Iannini and Dr. Esmaeili." The court also found that appellant and CBM never had any substantive discussion concerning the Kohl's Plaza location before appellant signed the lease amendment. The court concluded that to the extent that there was a mistake, it was a unilateral mistake by the lessees, and further found that the mistake was not due to any action or inaction of respondents, so that there were no grounds for rescission. The court awarded damages of $157,863.
Discussion
Appellant first argues that the mistake was mutual, and not unilateral, because there were (and had to be) three parties to the lease amendment, and that two of the three parties (appellant and Iannini) made the mistake. Appellant then argues that a mutual mistake provides a basis for rescission. The argument misunderstands the doctrine. Appellant and Iannini were on the same side of the transaction, and respondents were on the other side. The doctrine of mutual mistake of fact comes into play when both sides of a transaction are operating under the same mistake, not when only one side is mistaken, no matter how many people are on that side.
Balistreri v. Nevada Livestock Production Credit Assn. (1989) 214 Cal.App.3d 635, on which appellant relies, does not hold otherwise, but instead illustrates the principle.
In Balistreri "[a]ppellants signed a deed of trust in favor of respondent, in order to help their son get a loan from respondent. Appellants believed that the deed of trust covered the house in Sebastopol which they owned together with their son, and where their son resided. Appellants' belief was consistent with the cover letter to the deed of trust which respondent sent to appellants, which described the deed of trust as covering 'your Sebastopol residence for your son . . . .' In fact the deed of trust described appellants' own residence in Petaluma as the real property which would become encumbered thereby." (Balistreri v. Nevada Livestock Production Credit Assn., supra, 214 Cal.App.3d at pp. 637-638.) The Court of Appeal found "appellants and respondent made a mutual mistake of fact concerning the subject matter of the deed of trust. Respondent mistakenly believed appellants were granting a deed of trust on their own house in Petaluma. Appellants mistakenly believed, based upon respondent's representations in the cover letter to the deed of trust supported by respondent's subsequent communications, that they were granting a deed of trust on their son's house in Sebastopol which they co-owned." (Id. at p. 640.) The case thus involves a mistake made by both sides of the transaction.
Appellant argues that this case, like Balistreri, supra, involves a situation in which each side was mistaken about what the other side wanted. Perhaps, but this case also involves a situation in which appellant's side caused the mistake by not communicating its intent to the landlord. Further, in Balistreri, the appellants were misled by statements by respondents. As appellant argues, the trial court made several favorable comments about appellant's credibility at various times during the proceedings, but the trial court also found that (contrary to appellant's testimony) appellant and CBM did not have substantive discussions about Kohl's Plaza before the lease amendment was signed, and that any mistake was caused by appellant and Iannini. In other words, appellant was not misled by respondents or their agent.
Based on the same analysis, appellant argues there was no contract because there was no meeting of the minds, and asks us to conclude that no contract was entered into. The argument essentially asks us to find that a unilateral mistake leads to rescission in all cases. That is not the law. (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278.)
Appellant next argues that the court erred in denying rescission based on unilateral mistake.
The traditional rule was that a unilateral mistake would warrant rescission only if the party opposing rescission knew of or caused the mistake. Our Supreme Court rejected that rule in Donovan v. RRL Corp., supra, finding instead that the rule embodied by section 153 of the Restatement Second of Contracts applies. Section 153 allows rescission for unilateral mistake where the other party knows of or caused the mistake or where enforcement would be unconscionable.
As appellant acknowledges, under section 153 and Donovan, in order to obtain rescission for unilateral mistake of fact, the party seeking rescission must establish that his mistake was "regarding a basic assumption upon which [he] made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to [him]; (3) [he] does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable." (Donovan v. RRL Corp., supra, 26 Cal.4th at p. 282.) Appellant argues that all those factors are present, and that equitable factors weigh in favor of rescission.
We review the trial court's exercise of its equitable powers under an abuse of discretion standard of review (City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1224, 1256), and find none here.
It is certainly true that appellant produced evidence that the mistake was material and was regarding a "basic assumption." The elements concerning "the risk of mistake" is less certain. A party bears the risk of mistake where the risk is allocated to him by the court or by the contract, or where "the party is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient." (Donovan v. RRL Corp., supra, 26 Cal.4th at p. 283.) It may be that the contract did not allocate the mistake, but a tenant who signs a lease amendment without looking at the lease itself can surely be said to be operating with limited knowledge of the facts and to be treating that limited knowledge as sufficient.
However, even if the other elements were present, we can see no abuse of discretion in the trial court's finding on unconscionability. As to that element, appellant argues that "it is unconscionable to hold a tenant to a lease when he had a good-faith belief when signing it that it referred to another property."
The trial court had before it evidence from which it could reasonably have concluded that appellant made no effort to ascertain the address of the property he was leasing or to make sure that the address and his intent was communicated to the leasing agent. He did not look at the lease. He did not refer to the property by its address or its location on various cross-streets. He did not examine his email from Harrison, which noted the location's cross-streets. He took the one factor that mattered to him -- the proposed Kohl's -- and assumed that that factor was sufficient to identify the property to everyone. The court could properly have found that equity did not lie with rewarding the neglectful party, at the expense of a party which had done nothing wrong.
Disposition
The judgment is affirmed. Respondents to recover costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ARMSTRONG, Acting P. J. We concur:
MOSK, J.
KRIEGLER, J.