Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment and an order of the Superior Court of Los Angeles County, No. S.C. 100748, Lisa Hart Cole, Judge.
Freeman, Freeman & Smiley, Gregory M. Bordo, Jared A. Barry and Donna Eyerly for Plaintiff and Appellant.
Mayer Brown, Donald M. Falk, Bronwyn F. Pollock and Joseph W. Goodman for Defendant and Respondent.
FLIER, J.
Appellant Freeman, Freeman & Smiley, LLP (Freeman) is a tenant of a building on which freeway-visible, supergraphic advertisements are displayed. Respondent SMIII Sepulveda Center, LLC (SMIII) is the lessor and landlord of the building. Freeman alleges that the supergraphic advertisements on the exterior of the building breach certain provisions of its lease with SMIII. In this action, Freeman seeks specific performance of the lease provisions, injunctive relief, and declaratory relief.
SMIII demurred to all three causes of action below. The trial court sustained SMIII’s demurrers without leave to amend and dismissed the complaint. In addition, the trial court awarded attorney fees to SMIII as the prevailing party. Freeman appeals from both the judgment of dismissal and the attorney fees award.
We conclude that leave to amend should be granted to Freeman to cure the defects in the complaint. We reverse the judgment of dismissal and the order awarding attorney fees to SMIII.
FACTUAL AND PROCEDURAL BACKGROUND
We summarize the facts as they are alleged in the complaint.
Freeman entered into the lease at issue on or about January 1, 1992. Under the lease, Freeman currently occupies the 11th and 12th floors of a commercial building owned by SMIII. Freeman uses the space to operate a law firm specializing in real estate law, corporate law, estate planning, and litigation, among other things.
In or around October 2007, SMIII began affixing supergraphic advertisements to the exterior of the building. SMIII had contracted with a third party who paid SMIII to place the advertisements on the building. The advertisements are not related to any of the businesses operated by tenants inside the building. The advertisements consist of screens that are numerous stories in height. Previous displays include advertisements for an insurance company, the Del Taco fast-food chain, and movies. One advertisement for Del Taco depicted a giant taco. Another advertisement for a movie about World War II Germany depicted the main character in a Nazi uniform.
The advertisements moved Freeman to serve SMIII with a written notice of default under the lease on August 18, 2008. After SMIII failed to take down the advertisements, Freeman filed suit on November 25, 2008, alleging claims for specific performance, injunctive relief, and declaratory relief. Specifically, Freeman alleged that the advertisements breached certain sections of the lease, which lease Freeman attached to the complaint. The first relevant section of the lease provides in pertinent part: “Landlord warrants and represents to Tenant that all improvements within the Building have been and/or shall be constructed in a first-class manner and be of such decor and contain such furnishings as are consistent with a first-class office building.” Freeman contends that the advertisements are “wholly inconsistent with maintaining the Building as a ‘first class office building’.”
The second relevant section is entitled “Prohibited Uses” (underscoring omitted) and provides: “Landlord covenants and agrees that throughout the Entire Term of this Lease, the Land and Improvements shall be used only for professional and commercial offices, commercial banking, and, on the ground floor thereof, commercial offices, restaurant facilities and retail facilities open to the general public, and Landlord shall prohibit any other uses of the Building unless Tenant consents in writing thereto, which consent will not be unreasonably withheld.” Freeman contends that the supergraphic advertisements are a prohibited use of the building in violation of section 7.3(c).
SMIII contends that the advertisements do not breach these sections of the lease and points to another section of the lease that it maintains gives it the unrestricted right to place signage and advertisements on the building.
On or about January 20, 2009, SMIII filed demurrers to all three causes of action in Freeman’s complaint. The trial court heard argument on the demurrers on March 25, 2009. The court then entered an order sustaining the demurrers without leave to amend and dismissing the complaint on April 6, 2009. SMIII thereafter moved for a determination of prevailing party status and an award of attorney fees. The trial court granted this motion and awarded attorney fees to SMIII in the amount of $55,607.50. Freeman timely appealed from both the judgment of dismissal and the attorney fees order.
Section 581d of the Code of Civil Procedure provides that written orders of dismissal signed by the court and filed in the action “shall constitute judgments and be effective for all purposes.” The dismissal order becomes a judgment when entered. (White v. Ostly (1959) 173 Cal.App.2d 636, 639-640.) Thus, “[a]n order sustaining a demurrer without leave to amend is not an appealable order, but an order dismissing a case is an appealable order.” (Hudis v. Crawford (2005) 125 Cal.App.4th 1586, 1590, fn. 4.) Here, the trial court’s order sustaining the demurrers without leave to amend also states: “[The] Court dismisses the complaint pursuant to CCP 581(f)(1).” Accordingly, the court’s order was also an order of dismissal and constituted a judgment from which Freeman was entitled to appeal. (Ibid. [treating the trial court’s order sustaining a demurrer without leave to amend as an appealable dismissal order where it also stated, “‘the case is dismissed’”].)
On the unopposed motion of Freeman, we consolidated these appeals for all purposes.
DISCUSSION
1. Standard of Review
When the trial court sustains a demurrer, we review the complaint de novo to determine whether it contains sufficient facts to state a cause of action. (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) “‘As a reviewing court we are not bound by the construction placed by the trial court on the pleadings but must make our own independent judgment thereon, even as to matters not expressly ruled upon by the trial court.’” (Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 127.) We accept as true all properly pleaded material factual allegations of the complaint and other relevant matters that are properly the subject of judicial notice, and we liberally construe all factual allegations of the complaint with a view to substantial justice between the parties. (Ibid.) We also consider any exhibits to the complaint. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.)
When the trial court sustains a demurrer without leave to amend, we review that decision for abuse of discretion. (Hernandez v. City of Pomona, supra, 49 Cal.App.4th at p. 1497 .) We will reverse for abuse of discretion if we determine that there is a reasonable possibility the plaintiff can cure the pleading by amendment. (Id. at p. 1498.)
Applying these principles, we conclude that Freeman fails to allege a cause of action for specific performance, although there is a reasonable possibility that Freeman can cure the defect by amendment. We also hold that Freeman has adequately alleged causes of action for injunctive relief and declaratory relief.
2. Freeman’s Cause of Action for Specific Performance
Specific performance is an equitable remedy available for breach of contract. (Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 49; Tamarind Lithography Workshop, Inc. v. Sanders (1983) 143 Cal.App.3d 571, 575.) A plaintiff seeking specific performance of a contract must demonstrate that: (1) the legal remedy is inadequate; (2) the underlying contract is reasonable and supported by adequate consideration; (3) a mutuality of remedies exists; (4) the contractual terms are sufficiently certain such that the court knows what it is to enforce; and (5) the requested performance is substantially similar to that promised in the contract. (Tamarind Lithography Workshop, Inc. v. Sanders, supra, at p. 575.) SMIII contends that Freeman’s claim is defective because: (1) the lease provisions cited by Freeman are not sufficiently certain; (2) Freeman has an adequate remedy at law; and (3) the remedy would cause inequity or injustice to an innocent third party. We address each of these grounds in turn.
a. Certainty
Freeman argues that the lease provisions on which it relies clearly and unambiguously prohibit the supergraphic advertisements on the exterior of the building. SMIII, on the other hand, argues that the lease provisions at issue are not susceptible to Freeman’s interpretation and do not provide the court with the certainty required to order specific performance. We agree that the lease provisions do not clearly and unambiguously prohibit the advertisements on the building’s exterior. This is not fatal, however, as Freeman has asserted that it can amend its complaint to provide certainty with additional facts.
Although a court cannot specifically enforce an obligation when the terms of the agreement “are not sufficiently certain to make the precise act which is to be done clearly ascertainable” (Civ. Code, § 3390, subd. (5)), “[t]he defense of uncertainty has validity only when the uncertainty or incompleteness of the contract prevents the court from knowing what to enforce.” (Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500.) “[I]n determining whether the material factors in a contract are sufficiently certain for specific performance, the modern trend of the law favors carrying out the parties’ intention through the enforcement of contracts and disfavors holding them unenforceable because of uncertainty.” (Ibid.)
To this end, “[e]ven when the uncertainty of a written contract goes to ‘the precise act which is to be done’ (Civ. Code § 3390), extrinsic evidence is admissible to determine what the parties intended.” (Crescenta Valley Moose Lodge v. Bunt (1970) 8 Cal.App.3d 682, 689.) Only when the extrinsic evidence fails to remove the ambiguity in the contract must the court refuse specific performance. (Hennefer v. Butcher, supra, 182 Cal.App.3d at p. 500; Crescenta Valley Moose Lodge v. Bunt, supra, at p. 689.)
Neither the section regarding prohibited uses of the building, nor the section regarding the completion of improvements in a “first class manner, ” clearly and unambiguously requires the removal of the advertisements. By the same token, the lease does not clearly and unambiguously allow SMIII to affix supergraphic advertisements on the building over the objection of Freeman.
Freeman stated at oral argument that it could amend its complaint to refer to provisions of the lease that support its argument, to add facts regarding the parties’ intent at the time the lease was negotiated from the Freeman representatives who negotiated the lease, to provide information as to what was discussed in drafting the sections at issue, and to add any additional evidence of intent. Extrinsic evidence to clarify the meaning of the contract, including the circumstances surrounding the making of the agreement (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 40), the parties’ history of conduct subsequent to the execution of the contract (Okun v. Morton (1988) 203 Cal.App.3d 805, 819), and custom and usage (Hennefer v. Butcher, supra, 182 Cal.App.3d at p. 501), is appropriate to consider.
Although we cannot conclude that Freeman can allege a breach of specific lease provisions, Freeman has adequately demonstrated how its complaint can be amended. Even when such a showing is made for the first time in the appellate court, we must permit a plaintiff to amend its complaint. (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) Accordingly, we reverse the order sustaining the demurrer to this cause of action without leave to amend.
b. Adequacy of Legal Remedy
SMIII contends that the specific performance claim also fails because Freeman has an adequate legal remedy. While we conclude that Freeman does not properly allege lack of an adequate legal remedy, again, Freeman is entitled to leave to amend.
Among the factors determining the inadequacy of a legal remedy is “the difficulty of proving damages with reasonable certainty.” (Rest. 2d Contracts, § 360(a); see also Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 306 [citing the difficulty in ascertaining monetary damages as a relevant factor in determining the adequacy of a legal remedy].) Conclusory allegations that the legal remedy is inadequate will not suffice. (Wait v. Kern River Mining etc. Co. (1909) 157 Cal. 16, 24.) A plaintiff must allege specific facts justifying the conclusion. (Ibid.) For instance, if the facts alleged demonstrate that the property at issue “is of such a nature that the value of the performance cannot be estimated in money with any degree of certainty and taken in lieu of it, the inadequacy of the legal remedy is apparent.” (Ibid.)
Freeman alleges that it “has no adequate remedy at law as it would be impossible to place a precise dollar value on the adverse impact of Defendants’ breaches.” These conclusory allegations cannot support the inadequacy of Freeman’s remedy at law. (Wait v. Kern River Mining etc. Co., supra, 157 Cal. at p. 24.) There is a reasonable possibility, however, that Freeman can allege facts demonstrating that its losses are of such a nature that they cannot be estimated in money with any degree of certainty. (Hernandez v. City of Pomona, supra, 49 Cal.App.4th at p. 1498 .) Freeman gave a preview of these facts in its briefs and at oral argument. Freeman should be given the opportunity to allege these facts.
c. Inequity or Injustice to an Innocent Third Party
SMIII argues that the specific performance claim fails for the additional reason that it would require performance by the third party who contracts with SMIII to display the advertisements, causing injustice to the third party. SMIII’s appeal to supposed injustice to a third party is unavailing.
SMIII relies on Casady v. Modern Metal Spinning & Manufacturing Co., which explains that specific performance is unwarranted “where the agreement, by its nature, requires the assent of a third person not a party thereto.” (Casady v. Modern Metal Spinning & Mfg. Co. (1961) 188 Cal.App.2d 728, 731 (Casady).) Thus, “‘[w]here the defendant’s performance depends on the consent or approval of one not a party to the contract who is free to withhold his consent, specific performance of the contract will not be decreed where it does not appear that such consent or approval has been or can be obtained, or where it appears that such consent or approval is withheld or refused or has become impossible.’” (Ibid.) The court noted that “[a]ccordingly, specific performance has been denied where the result of enforcement would be inequitable, or unjust as to an innocent third person for example, where specific performance would result in compelling a defendant to violate a prior contract with such third person.” (Ibid.)
The principles expressed in Casady do not compel dismissal of Freeman’s claim. First, the pertinent lease provisions, section 7.3(c) and section 2.4, do not by their nature require the assent of a third party. The sections require action only by SMIII and Freeman namely, that they refrain from using the building in prohibited ways and maintain certain building features in a first-class manner. If a third party’s action were required for specific performance, it would only be because SMIII allegedly breached its preexisting obligations to Freeman by entering into the contract with the third party. There are no facts before us demonstrating that the contract with the third party advertiser is a “‘prior contract.’” (Casady, supra, 188 Cal.App.2d at p. 731 .)
Second, there are no facts before us demonstrating that the third party’s “‘consent or approval has [not] been or can[not] be obtained, ’” or “‘that such consent or approval is withheld or refused or has become impossible.’” (Casady, supra, 188 Cal.App.2d at p. 731 .) For example, SMIII’s contract with the third party is not before us, and we do not know whether SMIII actually sought the consent or approval of the third party and was refused. Without these or similar facts before us, we cannot determine whether SMIII’s performance is impossible.
In sum, we affirm the trial court’s sustaining of the demurrer on the specific performance cause of action, as the complaint does not demonstrate certainty in the lease, nor does it properly allege lack of an adequate legal remedy. Because it is reasonably possible that Freeman can cure these defects, we reverse the trial court’s decision to deny leave to amend.
3. Freeman’s Cause of Action for Injunctive Relief
The trial court properly sustained the demurrer to this cause of action, but again, leave to amend should be granted to Freeman.
Civil Code section 3423, subdivision (e) holds that the court may not grant an injunction “[t]o prevent the breach of a contract the performance of which would not be specifically enforced.” Because Freeman has not adequately alleged its entitlement to specific performance, section 3423 precludes injunctive relief. However, as we have discussed, Freeman may be able to allege facts sufficient to show a breach of specific lease provisions, in which case injunctive relief would be available to it.
4. Freeman’s Cause of Action for Declaratory Relief
Similarly, leave to amend should be granted to Freeman on the declaratory relief cause of action.
“[I]n an action for declaratory relief the complaint is sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a contract and requests that the rights and duties be adjudged.” (Bennett v. Hibernia Bank (1956) 47 Cal.2d 540, 549-550.) A court may refuse to grant declaratory relief “in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc., § 1061.) Because the trial court has the discretion to refuse declaratory relief, we review a court’s decision to grant or deny declaratory relief for abuse of discretion. (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974.)
Freeman has not properly alleged the existence of an actual controversy inasmuch as it has not alleged facts sufficient to show a breach of the lease. It may be able to amend the complaint to allege facts to support the judicial declaration it seeks.
5. Appeal of the Attorney Fees Order
After sustaining the demurrers without leave to amend, the trial court awarded attorney fees to SMIII based on a provision in the lease entitling the “prevailing party” in litigation to a reasonable sum for attorney fees. SMIII moved for a prevailing party determination pursuant to Civil Code section 1717, subdivision (a), which states: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” “The prevailing party determination is to be made only upon final resolution of the contract claims....” (Hsu v. Abarra (1995) 9 Cal.4th 863, 876.)
The claims in this matter have not been finally resolved, as Freeman is entitled to leave to amend. The court must await the final resolution of the claims before determining the prevailing party and awarding attorney fees. (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1120.) Because there is no final resolution of the claims, we reverse the trial court’s order determining that SMIII is the prevailing party and awarding attorney fees.
DISPOSITION
The judgment of dismissal is reversed. The trial court shall vacate its order sustaining the demurrers without leave to amend and enter a new order sustaining the demurrers with leave to amend. The order granting SMIII’s motion for determination of prevailing party and attorney fees is reversed. The matter shall proceed in accordance with the views expressed in this opinion. The parties shall bear their own costs on appeal.
WE CONCUR: BIGELOW, P. J., GRIMES, J.