Opinion
NOT TO BE PUBLISHED.
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC360360, Kenneth R. Freeman, Judge.
Neufeld Law Group, Timothy L. Neufeld and John M. Kennedy for Plaintiffs and Appellants.
Law Offices of Ehsan Afaghi, Ehsan Afaghi and Firouzeh Simab; Law Offices of Saul Reiss and Saul Reiss for Defendants and Respondents.
DOI TODD, Acting P. J.
Plaintiffs and appellants Enpalm LLC and Pico 26 LLC appeal from a judgment entered in favor of defendants and respondents Fred and Simin Yadegar (the Yadegars) in an unlawful detainer action filed by appellants. The trial court ruled that the Yadegars were not in violation of their long-term lease and had a right to remain on the property. Appellants contend that this result was barred by the doctrine of collateral estoppel, arguing that the term of the Yadegars’ tenancy was litigated in a prior action and found to be month to month.
We affirm. In prior litigation, the trial court excluded from evidence a lease addendum extending the Yadegars’ tenancy and further concluded that any determination regarding the operative terms of the Yadegars’ lease agreement exceeded the scope of the pleadings. Accordingly, because the terms of the Yadegars’ tenancy as provided by their lease and the addenda thereto were not issues actually litigated and determined in the prior action, appellants cannot satisfy the requisite elements of collateral estoppel.
FACTUAL AND PROCEDURAL BACKGROUND
The Yadegars’ Lease.
The leased premises consisted of a penthouse apartment in a seven-unit building located at 408 North Palm Drive in Beverly Hills. On August 12, 2002, the Yadegars entered into a lease agreement (Lease) with the Teitler Family Trust (Trust), which then owned the property. The Lease was comprised of three pages—the first two were a standard form lease drafted by the Trust’s representative, Tracy P. Pieper (Pieper), and the third was a one-page addendum drafted by Fred Yadegar (Yadegar). The standard form portion of the Lease indicated a lease term of one year and a rental amount of $3,500 per month. The one-page addendum modified those terms, extending the lease term to three years and increasing the rent to $3,600 per month in the second year and $3,700 per month in the third year. The three-year lease term ended on November 30, 2005.
In March 2003, Pieper asked Yadegar for an advanced payment of rent at about the same time the Trust’s property taxes were due. In a further addendum to the Lease, signed by Pieper and Yadegar on March 20, 2003, the rent amount was modified according to a sliding scale that corresponded to the number of months in advance rent was paid. At that point, the Yadegars elected to pay rent six months in advance at a rate of $3,000 per month. Pieper accepted and cashed a check in the amount of $18,000 from the Yadegars, meaning that rent was paid through October 30, 2003.
In June 2003, as a result of cash flow problems, Pieper asked Yadegar for a further advance payment of rent. Pieper and Yadegar corresponded regarding the amount of any discount the Yadegars would receive for prepayment. On June 23, 2003, Yadegar drafted a third addendum (Addendum) which contained Pieper’s and Yadegar’s signatures and provided that rent would be reduced to $32,000 annually in exchange for a 12-month advance rent payment, with the Yadegars receiving credit for their previous $18,000 prepayment. Accordingly, the Yadegers tendered and Pieper accepted an additional $14,000 check, meaning that rent was paid through April 30, 2004. The Addendum contained further provisions—one stating that there would be no rent increases during the term of the Lease and another extending the Lease term for five years to November 30, 2010, with one option to extend the Lease for an additional five years to November 30, 2015.
Pieper denied signing the Addendum. A handwriting expert was unable to offer an opinion as to whether Pieper’s signature was genuine or a forgery.
The Prior Action.
In December 2003, appellants acquired from the Trust the building located at 408 North Palm Drive. Pieper did not inform appellants of any addenda to the Lease or of appellants’ prepayment of rent. In response to appellants’ January 2004 request for the monthly rent, the Yadegars informed them of their rental prepayment through April 2004. On May 6, 2004, the Yadegars tendered a check for $32,000 for one year’s rent, and appellants returned the check. One month later, the Yadegars tendered another check for the same amount, together with copies of documents establishing their extended Lease term and prepayment rights; appellants did not return that check but gave it to their attorneys.
Appellants are single purpose entities formed to hold ownership in a property.
In January 2005, Enpalm and its property manager filed a first amended complaint against Yadegar, the Trust and others, alleging causes of action for negligence, negligent misrepresentation, fraud, conspiracy to defraud and breach of contract (the prior action). According to the complaint, the sellers represented that no tenant at the property had a long-term lease and that Yadegar’s lease was month-to-month, at the rate of $3,500 per month. Yadegar, on the other hand, represented that his lease contained two five-year options, the first exercisable in April 2004, and that his advance rental payments were below market rate.
In April 2005, the Yadegars again tendered a $32,000 check which appellants did not return.
A four-day court trial in the prior action ensued in May 2006. At the conclusion of trial, Enpalm filed a request for a statement of decision which sought the factual and legal bases for multiple controverted issues at trial. Yadegar objected. On June 26, 2006, the trial court filed its statement of decision in the prior action.
Though we granted appellants’ request to take judicial notice of certain pleadings filed in the prior action, we find irrelevant the additional pleadings and transcripts from the prior action for which appellants seek judicial notice, and therefore deny appellants’ supplemental request for judicial notice. (See, e.g., Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 295, fn. 21 [“reviewing court need not take judicial notice of irrelevant court records”]; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1089, fn. 4 [same].)
The trial court granted the motions for nonsuit against Enpalm brought pursuant to Code of Civil Procedure section 631.8 on the ground that there was no credible evidence to support the allegations of the first amended complaint. More specifically, the trial court noted that before trial it had held a hearing pursuant to Evidence Code section 402 and granted Enpalm’s oral motion to exclude trial exhibit 11, a copy of the Addendum, on the ground of lack of authenticity. With respect to the factual bases for its nonsuit ruling, the trial court preliminarily observed that all references to a “long term lease” implied a lease having a duration of five to ten years, depending on the exercise of options by the tenant. There was no evidence that such a long term lease was embodied in the operative lease documents before the court contained in trial exhibits three and four, the original Lease and March 2003 addendum. Thus, the trial court found: “At the time of the close of escrow, Yadegar was on a month to month lease, but had prepaid rent and had the right to remain at the Property at least until November 2005. While this was not disclosed by any Defendant to Plaintiffs . . . at or before the close of escrow, all causes of action in Plaintiff’s First Amended Complaint derive from the alleged failure to disclose the existence of a long term lease for five to ten years. The Court finds that the operative lease on the Property was embodied in Trial Exhibits Three and Four (the August 13, 2002 and March 20, 2003 addenda, respectively).” Accordingly, the trial court determined “that all causes of action of the First Amended Complaint as against the Teitler Defendants were predicated both as to liability and damages upon the validity and enforceability against Plaintiffs of a long term lease as embodied in Exhibit 11. Since Exhibit 11 was excluded on Plaintiff’s Motion, there was no evidence of any long term lease which could be either valid or enforceable.”
In response to Enpalm’s request to address the issue “What was the operative lease agreement, including term and rent amount, between Yadegar and Teitler Trust as of the closing of the sale of the Property from Teitler Trust to Enpalm, LLC and Pico 26, LLC?” the trial court stated in the statement of decision “The objection is sustained to the extent that this issue exceeds the allegations of the First Amended Complaint.”
Judgment was also entered in June 2006; no appeal was filed from the judgment.
The Instant Action.
On April 26, 2006, during the pendency of the prior action, the Yadegars tendered a $32,000 check to appellants which they did not return. On October 2, 2006, appellants posted three-day notices to pay rent or quit, demanding rent in the amount of $36,000 for the preceding year. On October 3, 2006, appellants posted 30-day notices to quit.
Appellants filed their unlawful detainer action on October 13, 2006. Attached to the complaint were two pages of the Lease, dated August 12, 2002, and two three-day notices to pay rent or quit. Appellants alleged that the total rent due was $90,000, but that they sought only $36,000 as unpaid rent during the preceding 12 months. The Yadegars answered separately; each asserted several affirmative defenses including that appellants had accepted rent checks from them that covered periods after the date of the three-day notices. In November 2006, appellants filed a notice of related cases indicating that the unlawful detainer action was related to the prior action.
The trial court permitted appellants to file a first amended complaint in January 2007 which added a second cause of action to terminate the Yadegars’ month-to-month tenancy based on the 30-day notice. The Yadegars filed a single answer to the amended complaint.
On January 30, 2007, the trial court denied appellants’ motion for summary adjudication of the second cause of action on the ground that the nature of the Yadegars’ tenancy had been determined in the prior action. According to the trial court, “the terms and conditions of Yadegar’s tenancy was never decided, since it appears that the court decided that issue was not placed in issue by the operative pleading. And there’s no final judgment on the precise issue that plaintiffs claim was finally adjudicated.”
Trial commenced on February 27, 2007. At the beginning of trial, appellants renewed their argument that the Yadegars were collaterally estopped to assert they had anything but a month-to-month tenancy, and the trial court indicated it would make a finding on that issue at the conclusion of trial. Several witnesses testified at trial, including Pieper, Pieper’s listing agent, appellants’ property manager and Yadegar.
On June 5, 2007, the trial court filed its statement of decision, in which it addressed several specific questions submitted by appellants. It again ruled that collateral estoppel did not apply to bar the Yadegars from asserting that they had a valid lease consisting of five pages and identified at trial as trial exhibits 101, 130, 131 and 137. The trial court expressly rejected as not credible the testimony and evidence offered by appellants to show that the Addendum, trial exhibit 137, was not a valid lease addendum, and instead accepted Yadegar’s testimony. After examining the statement of decision in the prior action, the trial court further found “the court specifically declined to issue any findings as to the operative lease agreement between the Plaintiff and the Defendant, or any terms and conditions thereof.”
The trial court declined to exclude the Addendum from evidence, ruling: “The Court finds that Trial Exhibit ‘137’ (Defendants’ Exhibit ‘11’) should be admitted into evidence and at the time of the trial, the Court did in fact admit both Exhibits ‘137’ and ‘11’ into evidence. The [trial] Court specifically finds that although Trial Exhibits ‘137’ and ‘11’ were photocopies, no bona fide dispute existed as to their authenticity and accuracy as a duplicate of the original document executed by the parties. Trial Exhibit ‘137’ is consistent with the other documentary evidence introduced at the time of the trial. Plaintiffs’ own expert, David L. Oleksow, testified that he found no evidence that Trial Exhibit ‘137’ was a forgery or the product of any form of manipulation and rendered no opinion whatsoever as to the authenticity of the signatures on the document. Accordingly, the Court must determine the authenticity of the signatures based on the testimony of Defendant Fred Yadegar and the testimony of Tracy P. Pieper, as well as the other documentary evidence admitted. [¶] As set forth above, the Court accepted the testimony of Defendant Fred Yadegar and therefore determined the document to be an authentic and accurate copy of an original which was duly executed by all parties. In addition, the Court finds that based upon her custom and practice, the preponderance of the evidence supports the conclusion that the original of Trial Exhibit ‘137’ was at all times in the possession of Tracy P. Pieper and that under the circumstances, Defendants’ only recourse was to offer a copy and have it admitted into evidence.”
The trial court concluded the Addendum was in full force and effect at the time appellants purchased the building and that they were bound by it. In turn, it found that neither the three-day nor the 30-day notices to quit were appropriate, because the Yadegars were not in violation of the Lease and were operating under a Lease that did not expire until 2010.
Judgment was entered in June 2007. This appeal followed.
DISCUSSION
The sole basis of appellants’ appeal is their renewed argument that the ruling in the prior action collaterally estopped the Yadegars from asserting that their tenancy was anything other than month-to-month. We find no merit to their argument.
I. Standard of Review.
When we review a trial court’s statement of decision, we independently review questions of law and apply the substantial evidence test to findings of fact. (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513; People ex rel. Dept. of Motor Vehicles v. Cars 4 Causes (2006) 139 Cal.App.4th 1006, 1012.) Correspondingly, the trial court’s application of the doctrine of collateral estoppel or issue preclusion is a question of law subject to de novo review. (Noble v. Draper (2008) 160 Cal.App.4th 1, 10.)
II. The Trial Court Properly Concluded That the Doctrine of Collateral Estoppel Did Not Apply to the Determination of the Yadegars’ Operative Lease.
“Collateral estoppel, or issue preclusion, ‘precludes relitigation of issues argued and decided in prior proceedings.’ [Citation.]” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) As recently explained in Johnson v. Glaxosmithkline, Inc. (2008) 166 Cal.App.4th 1497, 1507–1508: “A prior decision precludes relitigation of an issue under the doctrine of collateral estoppel only if five threshold requirements are satisfied: ‘First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.’ [Citations.]” As emphasized by the court in Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 346, “‘the first judgment “operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.”’” “The party asserting collateral estoppel bears the burden of establishing these requirements. [Citation.]” (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.)
After examining the statement of decision in the prior action in great detail, the trial court in the instant action concluded that the prior action had no collateral estoppel effect with respect to the validity of the Addendum. More specifically, the trial court found that several elements of collateral estoppel were not satisfied. Initially, it concluded that the issues in the prior action and the unlawful detainer action were not identical. The only related claim in the prior action was the sixth cause of action for breach of contract, in which Enpalm alleged that Yadegar breached the original Lease by failing to make monthly payments between April 2004 and April 2005. The unlawful detainer complaint, on the other hand, alleged that the lease agreement became a month-to-month tenancy no later than December 1, 2005, and that the Yadegars owed monthly rent from May 2004 to October 2006.
Second, the trial court determined that the question of the Yadegars’ operative lease was not actually litigated in the prior action. Rather, in direct response to a request to make findings as to “[w]hat was the operative lease agreement, including term and rent amount, between Yadegar and Teitler Trust” at the time of appellants’ purchase, the trial court sustained Yadegar’s and the Trust’s objections to the request on the ground that “this issue exceeds the allegations of the First Amended Complaint.” The trial court sustained further objections on the same ground and declined to make any findings with respect to whether there were “any terms of Yadegar’s tenancy that were not included in the original lease,” “[w]hat are the terms and conditions of Yadegar’s current tenancy at the Property” and “[i]s Yadegar liable to either of the plaintiffs for breach of contract.”
Finally, the trial court ruled that the issue of the Yadegars’ operative lease was not necessarily decided in the prior action because any determination with respect to the validity of the Addendum rested on evidentiary considerations. The trial court found that the exclusion of the Addendum in the prior action “was based on foundational hearing and the court indicated that based on the evidence proffered at trial, the authenticity of the document had not been established.” Moreover, to the extent that the trial court in the prior action reached a determination with respect to the Yadegars’ tenancy, the trial court observed that the finding Yadegar was on a month-to-month tenancy was inconsistent with the additional finding that he had a right to remain on the property through November 2005, and therefore did not preclude a subsequent finding that the tenancy was for a term of years.
We find no basis to disturb the trial court’s careful analysis. The issue of the validity of the Addendum was not actually litigated or determined in the prior action. As the court explained in Johnson v. Glaxosmithkline, Inc., supra, 166 Cal.App.4th at page 1513: “‘Being a matter of issuepreclusion, collateral estoppel is naturally confined to issues “actually litigated.” [Citations.] [¶] A corollary is that the issue decided previously be “identical” with the one sought to be precluded. [Citations.] [¶] Accordingly, where the previous decision rests on a “different factual and legal foundation” than the issue sought to be adjudicated in the case at bar, collateral estoppel effect should be denied.’ [Citations.]” Here, the factual and legal foundation for the trial court’s ruling in the prior action rested on evidentiary considerations. The trial court concluded that Yadegar failed to meet his burden to establish the authenticity of the Addendum, finding “that neither Yadegar nor Pieper were credible in their testimony regarding the purported signing or non-signing of Exhibit 11 and that Pieper was not credible about what documents she did or did not possess relative to the subject lease and addenda in the December 2003 period.” Because the trial court excluded the Addendum, it expressly declined to issue any findings regarding the validity of the Addendum or Enpalm’s knowledge thereof, explaining that the Addendum’s exclusion rendered it “irrelevant to the issues presented to the Court.”
Under these circumstances, we are guided by Gonzalez v. Toews (2003) 111 Cal.App.4th 977, where the court declined to give preclusive effect to an issue eliminated by an in limine order in a previous action. There, the plaintiff sought to void a sheriff’s foreclosure sale on the ground that a court order was required because the property contained a dwelling. In an earlier unlawful detainer proceeding, though the trial court initially ruled inadmissible evidence regarding whether the property constituted a dwelling, it later permitted the plaintiff to introduce evidence showing the property contained a dwelling. In ruling on posttrial motions, the court acknowledged that its in limine ruling had been incorrect, but found no basis to disturb the judgment because the plaintiff had, in fact, introduced evidence of the existence of a dwelling. (Id. at pp. 979–980.) The appellate court rejected the plaintiff’s argument that the sheriff’s sale was void because the unlawful detainer court’s judgment acted as res judicata or collateral estoppel on the issue of whether there was a dwelling on the property. The court explained that the dwelling issue was never actually litigated or determined: “[T]he unlawful detainer judge, in denying defendants’ posttrial motions, specifically pointed out that the issue whether the Milpitas property was a dwelling was not tried. Given that the issue was not tried, defendants never had any adversary hearing, let alone a fair one. What is more, however, is that the judge then effectively decided the case against defendants on the very issue that was not tried by giving credit to plaintiff’s evidence (that was presumably introduced for nondwelling purposes since there was no dwelling issue) while implicitly denying defendants the opportunity to offer contrary evidence and argument to the jury.” (Id. at p. 982.)
The circumstances here are also comparable to those in Johnson v. Lewis (2004) 120 Cal.App.4th 443, where the court rejected the plaintiff’s argument that the dismissal of a reckless driving charge collaterally estopped the defendant law enforcement agencies from arguing in the plaintiff’s tort action that her arrest was supported by probable cause. Preliminarily observing that “collateral estoppel applies only when it is shown that a factual issue which is identical to an issue in the current case was actually litigated and necessarily determined in a prior, final adjudication,” the court determined: “There was no litigation on the criminal charge. The charge was dismissed at the behest of the prosecutor, citing insufficient evidence. The validity of plaintiff’s arrest was neither actually litigated nor necessarily resolved in the criminal court. Consequently, collateral estoppel cannot apply.” (Id. at p. 456.)
Though criminal cases involve additional considerations not pertinent here, the nonpreclusive effect of the trial court’s evidentiary ruling may also be analogized to cases holding the doctrine of collateral estoppel does not apply in a later criminal proceeding to an order suppressing evidence made in an earlier criminal proceeding. (E.g., People v. Torres (1992) 6 Cal.App.4th 1324, 1330–1332; People v. Gephart (1979) 93 Cal.App.3d 989, 997–1000.)
Here, likewise, the terms of the Yadegars’ tenancy were neither actually litigated nor determined in the prior action because of the trial court’s evidentiary ruling. Indeed, the issues presented and determined in the instant action relating to the Yadegars’ tenancy were precisely those deemed “irrelevant” in the prior action because of the exclusion of evidence. Those issues included “[w]hat was the type and duration of [the Yadegars] tenancy in Unit 301 of the Property as of the close of escrow for the Property on or about December 31, 2003,” “[w]hat documents contained the terms governing [the Yadegars] tenancy in Unit 301 of the Property as of the close of escrow for the Property on or about December 31, 2003” and “[d]id [the Yadegars] have the right to pay rent one year in advance, for the annual rent sum of $32,000, for Unit 301 of the Property as of the close of escrow for the Property on or about December 31, 2003.” These issues were distinct from those actually litigated and determined in the prior action. (See generally Plumley v. Mockett (2008) 164 Cal.App.4th 1031, 1049–1050 [judgment finding that the defendant misappropriated the plaintiff’s invention had no collateral estoppel effect on the issue of whether the defendant had reasonable cause to believe he did so]; Noble v. Draper, supra, 160 Cal.App.4th at p. 15 [because Labor Commissioner’s finding that employees quit was not essential to administrative decision, it had no collateral estoppel effect on later action alleging fraud and unfair business practices on the ground employees were induced to come to the country to work and then terminated]; Apartment Assn. of Greater Los Angeles v. City of Los Angeles (2001) 90 Cal.App.4th 1162, 1168–1169 [judgment finding interim code enforcement program exempt from environmental review had no collateral estoppel effect on challenge to permanent code enforcement program].) Accordingly, the trial court properly ruled that collateral estoppel did not apply because the issues it was asked to decide were not those litigated and determined in the prior action and, more to the point, were the precise issues the trial court in the prior action declined to adjudicate as irrelevant.
We reject appellants’ effort to give preclusive effect not only to the determination of issues in the prior action but also to the trial court’s evidentiary ruling preceding that determination. The authority on which they rely, Davis v. Edmonds (1933) 218 Cal. 355, 359, involved the distinctly unrelated question of whether an evidentiary ruling is binding in a retrial of the same action—not whether it is binding in a completely separate action. Indeed, appellants fail to cite any authority to support their central argument that an evidentiary ruling in a prior action should be given collateral estoppel effect in a separate action.
We likewise reject appellants’ further argument that public policy mandates application of the collateral estoppel doctrine. “[T]he public policies underlying collateral estoppel—preservation of the integrity of the judicial system, promotion of judicial economy, and protection of litigants from harassment by vexatious litigation—strongly influence whether its application in a particular circumstance would be fair to the parties and constitutes sound judicial policy.” (Lucido v. Superior Court, supra, 51 Cal.3d at p. 343.) But public policy considerations operate to limit—not to extend—application of collateral estoppel and are evaluated only in the event the requisite elements of the doctrine are met. (See id. at pp. 342–343 [“Even assuming all the threshold requirements are satisfied, however, our analysis is not at an end. We have repeatedly looked to the public policies underlying the doctrine before concluding that collateral estoppel should be applied in a particular setting”]; accord, Smith v. Selma Community Hospital (2008) 164 Cal.App.4th 1478, 1505; Plumley v. Mockett, supra, 164 Cal.App.4th at pp. 1049–1050.) Because appellants have failed to satisfy the threshold elements necessary to invoke collateral estoppel, public policy considerations do not come into play.
Given that the issue of the terms of the Yadegars’ operative lease was not adjudicated in the prior action, the trial court properly determined “that the doctrine of collateral estoppel does not apply in this lawsuit to bar the Defendants from asserting that they have a valid lease which consists of five (5) pages” and that notices to quit were ineffective because the Yadegars were not in violation of their Lease.
III. We Decline to Impose Sanctions on Appeal.
The Yadegars have filed a motion requesting that this court impose sanctions on appellants for filing a frivolous appeal. (See Code Civ. Proc., § 907; Cal. Rules of Court, rule 8.276.) The court in In re Marriage of Flaherty (1982) 31 Cal.3d 637 (Flaherty) set forth thestandards for determining whether an appeal is frivolous. An appeal may be found frivolous and sanctions imposed when (1) the appeal was prosecuted for an improper motive to harass the respondent or delay the effect of an adverse judgment; or (2) the appeal indisputably has no merit—that is, when any reasonable attorney would agree the appeal is totally and completely without merit. (Id. at p. 650.) But the Flaherty court cautioned that “any definition [of a frivolous appeal] must be read so as to avoid a serious chilling effect on the assertion of litigants’ rights on appeal. Counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win on appeal. An appeal that is simply without merit is not by definition frivolous and should not incur sanctions.” (Ibid.)
Although appellants’ contentions are not meritorious, we do not find the appeal to be sufficiently egregious so as to be considered frivolous or brought in bad faith and, accordingly, we deny the motion for sanctions.
DISPOSITION
The judgment is affirmed. The Yadegars are entitled to their costs on appeal.
We concur: ASHMANN-GERST, J., CHAVEZ, J.