Opinion
H047846 H047846
02-26-2024
MOSS LANDING COMMERCIAL PARK, LLC, Plaintiff and Appellant, v. GRUPO FLOR, LLC, et al., Defendants and Respondents. GRUPO FLOR, LLC, Plaintiff and Appellant, v. MOSS LANDING COMMERCIAL PARK, LLC, Defendant and Respondent.
NOT TO BE PUBLISHED
Monterey County Super. Ct. Case Nos. 17CV004079, 18CV000204
LIE, J.
Moss Landing Commercial Park, LLC owns a commercial property with multiple buildings. Grupo Flor, LLC occupied and subleased several of Moss Landing's buildings to third parties. The parties dispute whether Grupo had the right to do so. With this litigation pending, Grupo vacated Moss Landing's buildings, allowing Moss Landing to either retake the buildings or lease them directly to Grupo's former subtenants. In distinct but competing actions, Moss Landing pursued damages for fraud and breach of fiduciary duty against Grupo and one of its principals, Mustafa "Mike" Bitar, while Grupo pursued damages for contractual claims and business torts against Moss Landing, its managing partner Nader Agha, and its agent Norman Morales. After a consolidated jury trial, the trial court entered a judgment awarding no damages in either case. Moss Landing and Grupo appealed in their respective roles as plaintiffs in each case. Moss Landing also responded to Grupo's appeal by filing a protective cross-appeal. We affirm the judgment.
Grupo has had different names at different times. There is no dispute that the actions and agreements of other Grupo entities are properly attributed to Grupo for the purposes of this litigation.
I. BACKGROUND
A. The Leases 1. Building 18
Pursuant to a lease agreement dated February 22, 2015, Moss Landing leased Grupo building 18 at the commercial park for a period of 60 months. Under section 3.a., Grupo was required to pay $4,000 per month rent, beginning after Moss Landing provided "water to the property with a water meter" and "a meter for electrical power for a total of 400amps three phase 480V and install extra conduit for future power upgrade." Under section 3.b., Grupo was required to pay $4,000 per month rent "commencing section 3.A and after the first (2) months have ended and continue through and including March 20, 2020." Grupo was granted two options to extend the lease for five years each, subject to a rent increase designated in the contract. Grupo was required to pay the utilities, but if "shared utilities are prorated" was entitled "upon request" to a "basic accounting" of the proration calculations and supporting utility invoices. Grupo was permitted to sublease the premises under certain conditions. The parties were required to submit disputes arising out of the agreement to non-binding mediation before bringing suit. The failure "to exercise good faith in the scheduling, attendance or participation in mediation" results in waiver of the attorneys' fees to which the prevailing party would otherwise be entitled under the contract.
Pursuant to an addendum dated May 15, 2017, Grupo was required to "put interior upgraded fixtures," "remove all concrete interior blocks," and "obtain all permits and licensing." Pursuant to that addendum, rent payments were to begin on August 1, 2017.
2. Building 16
Pursuant to an undated lease agreement, Moss Landing leased Grupo building 16 at the commercial park for a period of 60 months beginning in March 2015. Grupo was required to pay $12,000 per month rent, beginning after Moss Landing provided "water to the property with a water meter" and "a meter for electrical power for a total of 600 amps 3 Phase." Grupo was granted an option to extend the lease for five years, subject to a rent increase designated in the contract. Grupo was required to install a foam interior wall on the premises. Grupo was required to pay the utilities, but if "shared utilities are prorated" was entitled "upon request" to a "basic accounting" of the proration calculations and supporting utility invoices. The lease contained ambiguous language concerning subletting. It also required the parties to submit disputes arising out of the agreement to non-binding mediation before bringing suit. The failure "to exercise good faith in the scheduling, attendance or participation in mediation" results in waiver of the attorneys' fees to which the prevailing party would otherwise be entitled under the contract.
Paragraph 27 of the lease provides, in full, "ASSIGNMENT: LESSEE shall not be entitled to assign or sublet the premises on the following conditions."
A competing version of the lease agreement had somewhat different terms. In particular, the competing version called for the installation of only a 400 amps electric meter, with an additional 200 amps in eight months, but granted Grupo three 5-year options, each at a $2,000 per month increase over the preceding rental cost.
Pursuant to an addendum dated May 15, 2017, Grupo was required to "put interior upgraded fixtures," "put a 4[-]inch concrete slab in the entire 14,000[-square foot] space," and "obtain all permits and licensing." Pursuant to that addendum, rent payments were to begin on August 15, 2017.
3. Building 19
Pursuant to an undated lease agreement, Moss Landing leased Grupo building 19 at the commercial park for a period of 60 months beginning in March 2015. Grupo was required to pay $8,000 per month rent, beginning after Moss Landing provided "water to the property with a water meter" and "a meter for electrical power for a total of 400 amps 3 Phase." Grupo was granted three options to extend the lease for five years each, subject to a rent increase of $2,000 for each option. Grupo was required to pay the utilities, but if "shared utilities are prorated" was entitled "upon request" to a "basic accounting" of the proration calculations and supporting utility invoices. The lease contained the same language as the building 16 lease concerning subletting. The parties were required to submit disputes arising out of the agreement to non-binding mediation before bringing suit. The failure "to exercise good faith in the scheduling, attendance or participation in mediation" results in waiver of the attorneys' fees to which the prevailing party would otherwise be entitled under the contract.
4. Buildings 2-6 and 33
Pursuant to a lease agreement prepared on the California Association of Realtors Commercial Lease Agreement form, dated March 15, 2016, Moss Landing leased Grupo buildings 2-6 and 33 at the commercial park for a period running from May 2016 through March 2021. Grupo was required to pay $63,756 per month rent. Grupo was permitted to improve the premises. Grupo was required to pay all utilities directly billed to it and its proportionate share of Moss Landing's estimated monthly operating expenses, including utilities. The lease authorized subleasing if certain conditions were met. The parties were required to submit disputes arising out of the agreement to non-binding mediation before bringing suit. The commencement of an action "without first attempting to resolve the matter through mediation" or the refusal "to mediate after a request has been made" results in waiver of the attorneys' fees to which the prevailing party would otherwise be entitled under the contract.
An option agreement dated March 1, 2015 gave Grupo the right to negotiate a lease for the buildings "upon terms to be negotiated" until May 31, 2016.
A typewritten addendum dated and signed on the same date granted Grupo three 5-year options. Although it did not specify the rent during the option periods, the original lease had designated a rent increase on the fifth anniversary of the lease.
A handwritten addendum signed by Bitar, dated March 19, 2016, provided that Bitar and his brother would each give Agha a five percent interest "for the manufacturing site" at the commercial park, such that Agha would have "10% ownership in the operation." Pursuant to the addendum, rent was to start on May 24, 2016.
A typewritten addendum dated March 15, 2016, but signed May 15, 2017, stated that "[r]ent shall start May 15, 2017 due to roofing and power drop."
B. The Execution of the Leases and the Relationship between Grupo and Moss Landing
As of December 2013, Bitar was a licensed real estate broker operating a brokerage with his brother, Omar Bitar. But at that time his license was suspended. Accordingly, he was unable to function as a real estate broker until October 2014, when the suspension was lifted in favor of a restricted license.
Although the brothers share a surname, our references to "Bitar" are to Mustafa Bitar.
In December 2013, the Bitar brothers hosted a Christmas party. Agha attended the party at Bitar's invitation. Prior to that time, Bitar had long been familiar with Agha as a member of the community. At the Christmas party, Bitar told Agha about his licensing situation and Agha offered various ideas for how Bitar could make money, including by working for Agha on various tasks.
In the ensuing years, Bitar began performing work for Agha. The two became close-they regularly traveled to mosque together, went on joint family vacations, and were in constant communication.
By early 2016, Bitar was a leasing agent for Moss Landing. In that role, Agha expected Bitar to rent space at Moss Landing for the best rent available. At the time, Agha's central office was short staffed and operations were suffering. There was testimony that Agha trusted Bitar enough to sign documents Bitar presented to him based on Bitar's oral representations, without reviewing them, although Bitar and Agha both indicated that Agha paid closer attention to the material terms of certain agreements. Bitar had access to Agha's desk drawers and files containing Moss Landing's lease agreements. Moreover, during 2016 Moss Landing park staff relied on Bitar to handle property management issues.
In early 2016, Moss Landing needed tenants, it was not at capacity and needed to generate revenue. Agha had financed the acquisition of the commercial park and initial improvements with a loan. Around 2013, Morales was engaged to either refinance the loan or find an investor to pay it off. It took years to complete the task. Far West Industries, which was owned by the Lissoy Family Trust, purchased the debt in a transaction that closed in December 2015. Pursuant to that transaction, the Lissoy family secured an option to claim a 50 percent interest in the commercial park, which could be exercised at any time. Moreover, Moss Landing was required to make substantial monthly payments under the agreement.
By early 2016, Bitar was interested in entering the cannabis business. In furtherance of that interest, Bitar co-founded Grupo. The first Grupo legal entity was formed in January 2016. Bitar was aware that Moss Landing's buildings were suitable to grow and process cannabis, and that Moss Landing already had cannabis tenants, some of whom Bitar recruited to the park in 2015.
The lease agreements identifying Grupo and Moss Landing as parties were signed starting in March 2016. According to Bitar, he negotiated the agreements with Agha and the two signed the agreements together. According to Agha, the lease agreements were forgeries and he was unaware of their existence, except for one that he might have signed at Bitar's request without looking at it or knowing what it was. Instead, Agha testified that he agreed to lease only building 6 to Bitar, for three years with an option for two more, although there was no signed lease agreement relating to only building 6. Moreover, Agha generally described the terms of the lease agreements as unfair and identified the subleasing provisions and the provision of multiple five-year options as terms he would not have consented to.
Several witnesses confirmed that with the exception of the lease dated in 2016, the lease agreements were backdated in an effort to mislead Monterey County officials. Specifically, the leases were backdated as part of an effort to demonstrate that Grupo had made "substantial progress" in pursuing cannabis cultivation at the park prior to July 7, 2015, as required to obtain permitting under then-existing rules. Bitar described this as a common practice at Moss Landing during the relevant time period, directed by Agha; but Agha denied the existence of such a practice and his own knowledge or involvement.
After the lease agreements came into existence, Grupo occupied the buildings, either directly or by subleasing them to cannabis businesses. Grupo's subleases set rents far in excess of the rents specified in Grupo's lease agreements with Moss Landing. Agha was generally aware at least that there were cannabis tenants on the property. Moreover, Agha was present at events Grupo hosted in late 2016 and early 2017 related to the regulatory environment concerning cannabis.
Grupo began collecting rent from its subtenants in or around January 2017. But Bitar described the payments as irregular and often short. Bitar testified that he had "no idea" how much money Grupo ultimately received from its subtenants.
By January 2017, Agha was aware that Grupo was on the Moss Landing rent rolls and that Grupo was Bitar's business. In his testimony, Agha described the presence of Grupo on the rent roll as a "red flag" that made him suspicious. Even so, Agha testified that Bitar persuaded him not to worry about it.
That same month, Bitar e-mailed Agha's lawyer a set of "Moss Landing Deal Points" for the lawyer to draft an agreement between Bitar and Agha. According to Bitar, the genesis for the e-mail was a conversation in December 2016 between himself and Agha in which they "went over in detail every building, how much [Grupo was] leasing it for, how much [Grupo was] subleasing it for." The conversation was followed by a walkthrough of the operation. Bitar testified that, at Agha's direction, he sent the deal points to Agha's lawyer so that the lawyer could draw up an agreement. The deal points called for Grupo to contract with Agha for rents on various Moss Landing buildings and for Grupo to share profits derived from those buildings with Agha in various amounts. The deal points also made Agha a partner in another building in Salinas.
By early 2017, with Grupo not paying rent to Moss Landing and information hard to come by, the Lissoy family was concerned that Moss Landing, though occupied, was not performing as well as expected. In an April 2017 letter, Ira Glasky, a vice president and general counsel for Far West Industries, sent a letter in an effort to "get [Agha's] attention." In the letter, Glasky expressed "great concern that just about all of the leases at Moss Landing with marijuana cultivators ha[d] been assigned . . . to Grupo Flor" on terms that minimized "the rental revenue received by [Moss Landing] (which [was] to be shared 50/50 with [the Lissoy Family Trust]) and put[] the bulk of the profits into the hands of Grupo Flor," with which Agha had "a separate deal to share in their profits."Glasky demanded copies of all leases between Moss Landing and its tenants, and any subleases between Grupo and its subtenants.
Morales had discovered the Grupo leases in the fall of 2016. Glasky's concern about profit sharing derived from the handwritten addendum addressing that subject appended to the lease for buildings 2-6 and 33.
Agha read Glasky's letter around the time it was sent. He stated that upon reading the letter, he became aware of Grupo's conduct and that Bitar "double-crossed" him, thereby revealing himself to be "a traitor and worse than the Nazis."
On or shortly after May 1, 2017, Agha reviewed a profit-sharing agreement drafted by his attorney at Bitar's direction and signed by Bitar. Upon reviewing the agreement, Agha appeared angry and, raising his voice, expressed that he had not understood Grupo was subleasing buildings at the park. According to Agha, he had expected the profit-sharing agreement to reflect a deal he and Bitar negotiated regarding certain ventures unrelated to Moss Landing. Agha testified he was shocked that the profit-sharing agreement "talks about Grupo Flor who I never heard of" and about leasing various buildings. Agha refused to sign the draft agreement.
Bitar testified that Agha signed each of the lease addenda that were dated May 15, 2017 on that date. Agha gave somewhat equivocal testimony, but to the general effect that he either did not sign them or else did not believe they had any effect because there were no underlying agreements.
By the summer of 2017, Grupo had cashflow from subtenants and operations and was making payments to Moss Landing, although it had not made any profit distributions to its members. Moss Landing believed that Grupo was not paying everything it owed, including in particular its share of Moss Landing's sizable utility bills. That summer, Moss Landing authorized Morales to collect as much as he could on its behalf, after which Morales began collection efforts.
During that summer, Morales and the Lissoy Family Trust became aware of the lease addenda, which Morales described as relieving Grupo of rent liabilities of more than $1 million. Morales presented Agha the documents in person, and Agha, appearing surprised and upset, indicated that he did not recognize a lot of the documents. In July, Agha met with the Lissoys, Glasky, as well as Morales; at the meeting, Agha denied any recollection of so many buildings being leased to Grupo and said," 'I need to look into them more carefully.'" According to Bitar, Agha called him in a panic after meeting with the Lissoys, saying the Lissoys could "take [Agha's] property, they can get [Agha] for fraud."
At some point, Moss Landing decided to remove Grupo from the premises based on Agha's contention that the leases were forged. In an August e-mail chain with Agha, Morales discussed his efforts to collect payments from Bitar and stated that he would "get rid of" Bitar with a "three-day letter" after a California Coastal Commission meeting in November. Agha testified at trial that the plan as of August 3, 2017 was for Morales to try to collect $300,000 from Grupo prior to an October Coastal Commission meeting and then serve Grupo or Bitar with a three-day notice to pay or quit. Consistent with that plan, Moss Landing continued collection efforts until the end of October 2017, around which time it shifted to initiating legal processes. According to Agha, Moss Landing collected $1.1 million of $7 to $12 million that Grupo owed it through its collection efforts. At the end of October, for each leased property, Moss Landing served Grupo with a "Thirty Day Notice" of its intent to terminate Grupo's "occupancy."
The reference to the Coastal Commission appears to be related to Grupo's efforts to secure favorable regulatory treatment for Moss Landing, related to the use of the park to grow and process cannabis.
During the collections process, Morales sent an internal e-mail to Moss Landing staff directing an employee not to provide "any information" about utilities bills to tenants, although Morales testified that he could not remember the e-mail.
C. The Lawsuits
On November 7, 2017, Moss Landing filed its complaint against Grupo and Bitar. Moss Landing alleged that Bitar was acting as its real estate broker in June 2014 when he "concocted a scheme" to lease buildings in the commercial park to himself through Grupo and then sublease those buildings to third parties at a profit. Moss Landing alleged that Bitar formed Grupo to advance that scheme. Moss Landing attached the four purported lease agreements between itself and Grupo and associated addenda to its complaint. Moss Landing acknowledged signing one of the lease agreements but alleged that Bitar both fraudulently induced it to do so and also added a provision permitting subleasing "by forgery." Moss Landing attributed the remaining agreements to "forgery." Moss Landing alleged causes of action for cancelation of instruments, fraud, declaratory relief, injunctive relief, and restitution. Moss Landing sought both to invalidate the purported leases and damages.
Between December 21 and 27, 2017, Moss Landing filed four unlawful detainer complaints against Grupo. Through those actions, Moss Landing sought to wrest from Grupo possession of each building purportedly leased to Grupo on the ground that the lease agreements and addenda were void. Moss Landing voluntarily dismissed each unlawful detainer action on February 16, 2018.
We grant Moss Landing's unopposed request for judicial notice of the four unlawful detainer complaints and the four requests for dismissal, consistent with the trial court's grant of judicial notice at trial. We deny as unnecessary judicial notice of Grupo's pleadings in this action.
On January 16, 2018, Grupo filed a separate lawsuit against Moss Landing, Agha, and Morales. Grupo alleged that it had entered into four valid lease agreements with Moss Landing pursuant to which it was leasing buildings 2-6, 16, 18-19, and 33 at the commercial park. Grupo alleged that it was subleasing buildings 2, 3, 5, 16, and 18 with Moss Landing's knowledge and consistently with its leases. Further, Grupo alleged that it had a revenue sharing agreement with a non-party relating to its operations at buildings 3-6. Grupo alleged that Moss Landing, Agha, and Morales had manufactured claims of fraud in an attempt to force Grupo out of the commercial park while simultaneously demanding excessive rental payments. Moreover, Grupo alleged that Moss Landing, Agha, and Morales had filed suit without engaging in alternative dispute resolution in violation of requirements under the leases. Grupo alleged causes of action for declaratory relief against all defendants, breach of contract against Moss Landing, breach of the implied covenant of good faith and fair dealing against Moss Landing, breach of the covenant of quiet enjoyment against Moss Landing, intentional interference with prospective economic advantage against all defendants, intentional interference with contract and business against all defendants, misrepresentation against all defendants, promissory estoppel against all defendants, and constructive eviction against Moss Landing. Grupo prayed for a declaration that it had "the right to use and occupy the Park under the terms of the lease agreements" as well as damages.
On or about February 13, 2018, Grupo filed its first amended complaint. The amended complaint retained the same causes of action. The amended complaint retained the prayer for a declaration that Grupo had "the right to use and occupy the Park under the terms of the lease agreements" as well as damages.
On September 4, 2018, Grupo filed its operative second amended complaint. There, Grupo dispensed with the declaratory relief cause of action, retaining the other eight and continuing to seek damages. Grupo alleged for the first time that Moss Landing had engaged in conduct that had caused Grupo "to vacate its leaseholds at the Park." Grupo alleged three theories of breach of the four lease agreements: (1) Moss Landing demanded rent payments for time covered by a grace period; (2) Moss Landing "disavow[ed]" Agha's signatures on lease documents; and (3) Moss Landing materially obstructed Grupo's right of occupancy "such as by locking doors." Grupo subsequently dismissed its third, sixth, and eighth causes of action, and only its claims against Moss Landing for breach of contract and breach of the implied covenant and its interference torts against Moss Landing, Agha, and Morales remained for trial.
On April 24, 2019, Moss Landing filed its operative first amended complaint. Based on substantially the same factual allegations, Moss Landing alleged causes of action against Grupo and Bitar for fraud, breach of fiduciary duty, and quasi contract. Moss Landing sought actual damages, punitive damages, and restitution.
Moss Landing's action and Grupo's action were consolidated. The consolidated action went to trial in the fall of 2019.
D. The Special Verdict, Judgment, and Appeals
As to Moss Landing's suit, the jury found: (1) Moss Landing established all of the essential elements of fraud based on intentional misrepresentation and fraudulent concealment; (2) Moss Landing established all of the essential elements of breach of fiduciary duty by Bitar; (3) Moss Landing established that Grupo authorized and aided and abetted Bitar's conduct; (4) Grupo and Bitar established that Moss Landing, with full knowledge of the facts, subsequently adopted "the contract"; and (5) Grupo and Bitar established that Moss Landing acted with unclean hands-that is, Moss Landing or its agents engaged in conduct that violates conscience, good faith, or fairness and was directly related to Moss Landing's claims.
As to Grupo's suit, the jury found: (1) Grupo established all of the essential elements of breach of contract and the implied covenant of good faith and fair dealing by Moss Landing; (2) as to Grupo's implied covenant claim, but not its breach of contract claim, Moss Landing established the affirmative defense of unclean hands; (3) Grupo should not be awarded damages on its breach of contract claim; (4) Grupo established all of the essential elements of its interference tort claims against Moss Landing, Agha, and Morales; and (5) Moss Landing, Agha, and Morales established the affirmative defense of unclean hands as to Grupo's interference tort claims, but did not establish the affirmative defense of privilege to protect a legitimate financial interest.
Both Moss Landing and Grupo moved for a new trial and for judgment notwithstanding the verdict. After denying the motions, the trial court entered a defense judgment in each case, ordering that Moss Landing and Grupo would each recover nothing from the defendants in their respective suits. Moss Landing timely appealed in its role as an unsuccessful plaintiff, naming Grupo and Bitar as respondents. Grupo timely cross-appealed.
Grupo's appeal addresses its contractual claim against Moss Landing. Accordingly, although Agha and Morales were defendants with respect to some of Grupo's other claims, they have not appeared as respondents on appeal.
II. DISCUSSION
A. Moss Landing's Appeal
The special verdict contains findings for Grupo and Bitar on two affirmative defenses-unclean hands and ratification. Moss Landing separately challenges the verdict on each affirmative defense, raising challenges to the jury instructions and the sufficiency of the evidence. We conclude that the special verdict's findings on unclean hands are supported by substantial evidence and are not infected by any instructional error. Because the unclean hands affirmative defense is sufficient to support the trial court's judgment in Moss Landing's action, we affirm the judgment in that action.
1. Standards of Review a. Jury Instructions
" 'A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence.' [Citation.] 'The independent or de novo standard of review is applicable in assessing whether instructions correctly state the law [citation] and also whether instructions effectively direct a finding adverse to a [party] by removing an issue from the jury's consideration.'" (Strouse v. Webcor Construction, L.P. (2019) 34 Cal.App.5th 703, 713.)" '[I]nstructional error in a civil case is not grounds for reversal unless it is probable the error prejudicially affected the verdict.'" (Evans v. Hood Corp. (2016) 5 Cal.App.5th 1022, 1045.)
"In assessing prejudice from an erroneous instruction, we consider, insofar as relevant, '(1) the degree of conflict in the evidence on critical issues [citations]; (2) whether respondent's argument to the jury may have contributed to the instruction's misleading effect [citation]; (3) whether the jury requested a rereading of the erroneous instruction [citation] or of related evidence [citation]; (4) the closeness of the jury's verdict [citation]; and (5) the effect of other instructions in remedying the error [citations].'" (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 570-571; see also Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1217 (Major).)
b. Substantial Evidence
" 'When a trial court's factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination.'" (Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)
c. Presumption of Correctness and Prejudice
In general," '[a] judgment or order . . . is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.'" (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) Even where an appellant affirmatively demonstrates error, the California Constitution forbids reversal unless the appellant further demonstrates that the error resulted in a miscarriage of justice. (Cal. Const., art. VI, § 13.)" 'Moreover, we will affirm a judgment correct on any legal basis, even if that basis was not invoked by the trial court. [Citation.] There can be no prejudicial error from erroneous logic or reasoning if the decision itself is correct.' [Citation.]" (Wolstoncroft v. County of Yolo (2021) 68 Cal.App.5th 327, 347.)
But a "special verdict presents to the jury each ultimate fact in the case, so that 'nothing shall remain to the Court but to draw from them conclusions of law.'" (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 285.) "With a special verdict, we do not imply findings on all issues in favor of the prevailing party, as with a general verdict." (Ibid.) Moreover," '[t]he appellate court is not permitted to choose between inconsistent answers'" within a special verdict. (Zagami, Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1092 (Zagami).)
2. Unclean Hands
Bitar identifies four theories of unclean hands: (1) Moss Landing worked with Grupo to backdate the leases to mislead the County; (2) Moss Landing entered a side deal with Grupo that it hid from investors; (3) Moss Landing accepted a $192,000 cash payment for three months' rent from Grupo and did not apply it as a credit to rent or other charges; and (4) Moss Landing did not elect between standing on the allegedly fraudulent contracts and suing for damages or rescinding the contracts, instead attempting to do both by collecting contractual payments until it was convenient to rescind the contracts. To these, Grupo adds a fifth theory that Moss Landing leased Buildings 2-6 and 33 to Grupo while another tenant still had the right to occupy two of the buildings. Bitar's fourth theory is both independently sufficient to support the unclean hands affirmative defense and supported by substantial evidence. Accordingly, we uphold the application of the unclean hands defense.
a. Legal Principles
"Generally, the equitable doctrine of unclean hands applies when a plaintiff has acted unconscionably, in bad faith, or inequitably in the matter in which the plaintiff seeks relief. [Citations.]' "The misconduct which brings the clean hands doctrine into operation must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants."' [Citation.] If the required showing is made, unclean hands may be a complete defense to legal as well as equitable causes of action." (Salas v. Sierra Chemical Co. (2014) 59 Cal.4th 407, 432.) "[C]ourts have developed and now consistently apply a 'three-pronged test to determine the effect to be given to the plaintiff's unclean-hands conduct. Whether the particular misconduct is a bar to the alleged claim for relief depends on (1) analogous case law, (2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed injuries.'" (Padideh v. Moradi (2023) 89 Cal.App.5th 418, 426 (Padideh).) To the extent Moss Landing challenges the sufficiency of the evidence to support the jury's determination that its recovery is barred by the doctrine of unclean hands, we will review for substantial evidence. (Id. at p. 438.)
Moss Landing does not dispute that the unclean hands defense may be raised as a defense to the types of claims Moss Landing prosecuted in this action.
b. Substantial Evidence of Unclean Hands
The jury's determination that Moss Landing's claims against Grupo and Bitar are barred by the doctrine of unclean hands is supported by substantial evidence. The record supports the inference that Moss Landing, upon discovering Grupo's lucrative use of Moss Landing's buildings, chose to collect on Grupo's obligations under the putative contracts while secretly implementing a plan to repudiate Moss Landing's own obligations under the contracts.
On appeal, Moss Landing does not dispute the sufficiency of the evidence to support these inferences, only the sufficiency of those inferences to support a defense of unclean hands. Moss Landing concedes the sufficiency of the evidence showing that it was aware of Grupo's purportedly fraudulent use of Moss Landing property at the time it entered the addenda-May 2017. The record supports the inference that by August 2017 Moss Landing decided to collect under the lease until Grupo secured regulatory approvals that benefit Grupo only as a tenant, while secretly preparing to evict Grupo once the regulatory approvals were secured. At the end of October 2017 Moss Landing initiated its attempts to evict Grupo consistent with that plan.
This conduct is sufficiently related to the underlying transaction-the execution of the contracts-and of sufficient magnitude to support the invocation of the unclean hands defense. Moreover, this conduct occurred after Moss Landing knew of the fraud.
Because we hold that this theory is sufficient to support the jury's verdict, we do not reach Bitar and Grupo's other theories of unclean hands. The special verdict form gives no indication as to the theory of unclean hands on which the jury relied. But, assuming one or more of the other theories may be deficient, we will not assume that the jury relied on a deficient theory when a sufficient theory was available.
The evidence adduced at trial could support the inference that Moss Landing, through Agha, was aware of the fraud much sooner. For example, Bitar's testimony regarding his negotiations with Agha in December 2016, if credited, would support the theory that Agha knew about Grupo's subleasing but chose to go along with it for his own personal benefit.
Moss Landing argues that this conduct does not support invocation of the unclean hands defense for only three reasons: (1) Moss Landing's conduct was insufficient to ratify the contracts because Moss Landing did not secure an additional substantial benefit; (2) Moss Landing's conduct occurred well after the fraud; and (3) Grupo and Bitar bore a greater share of fault than Moss Landing.
The first argument is a non sequitur. Unclean hands and ratification are two distinct defenses; whether or not Moss Landing's execution of addenda or attempts to collect under the leases were legally sufficient to ratify the agreements is immaterial to whether its attempts to collect under the leases-in combination with a plan to rescind those same agreements only when it was most advantageous to do so-gave rise to an unclean hands equitable defense.
To the extent Moss Landing is contending that its conduct cannot, by its nature, constitute unclean hands, the threshold question here is simply whether the conduct "violates conscience, or good faith, or other equitable standards of conduct." (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 979 (Kendall-Jackson).) As taken up here, the unclean hands conduct consisted of inducing Grupo to perform under the same contract Moss Landing intended to rescind as fraudulent. The record here supports the jury's determination that Moss Landing's conduct violated the applicable standard.
When a contracting party discovers fraud in the inducement, that party may elect to either rescind the contract or stand on the contract and sue for damages. (Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 750 (Bagdasarian).) A party electing to rescind must provide the other party with"' "prompt notice"' and an' "offer to restore the consideration received, if any." '" (Village Northridge Homeowners Assn. v. State Farm Fire &Casualty Co. (2010) 50 Cal.4th 913, 921; see also Saret-Cook v. Gilbert, Kelly, Crowley &Jennett (1999) 74 Cal.App.4th 1211, 1226 [waiver of right to rescind].) Put simply, one who has been fraudulently induced to enter a contract does not have absolute freedom to keep the benefits of the contract and terminate the contract when it is most advantageous for it to do so.
Moss Landing, in contrast, seized upon both remedies, returning nothing to Grupo. The evidence in the record is sufficient to support the conclusion that Moss Landing acted in bad faith to use the fraudulently induced contracts to its benefit, both by letting Grupo work to secure regulatory approvals and by collecting payments from Grupo, all while preparing to evict Grupo when its ongoing involvement was no longer useful.
Moss Landing's second argument, relying on the mere lapse of time between discovery of the fraud and the double-dealing found by the jury, does not defeat application of the doctrine of unclean hands here. There is a direct relationship between the misconduct and the transaction concerning which Moss Landing's complaint was made. (See Kendall-Jackson, supra, 76 Cal.App.4th at p. 984 [unclean hands misconduct "must infect the cause of action involved and affect the equitable relations between the litigants"].) Moss Landing's claims against Grupo and Bitar focus on the process by which Moss Landing came to be in an alleged contractual relationship with Grupo. Moss Landing's unclean hands conduct concerns its effort to profit from those contracts' terms even as it surreptitiously planned to rescind it and sue Grupo for damages for the fraud. (See Bagdasarian, supra, 31 Cal.2d at p. 750.) The contracts are accordingly at the heart of both Moss Landing's complaint and its inequitable conduct.
Moss Landing is unable to support its assertion that the unclean hands misconduct must occur no later than the conduct giving rise to the complaint to have a direct relationship. "The purpose of the directness requirement . . . is to rule out application of the unclean-hands defense when the plaintiff is 'merely guilty of unrelated improper past conduct.' [Citation.]' "Broad as the [unclean-hands] principle is in its operation, it must still be taken with reasonable limitations; it does not apply to every unconscientious act or inequitable conduct on the part of a plaintiff. The maxim . . . is confined to misconduct in regard to, or at all events connected with, the matter in litigation, so that it has in some measure affected the equitable relations . . . between the two parties, and arising out of the transaction; it does not extend to any misconduct, however gross, which is unconnected with the matter in litigation, and with which the opposite party has no concern." '" (Padideh, supra, 89 Cal.App.5th at p. 448.) The fact that Moss Landing's inequitable conduct occurred after the contracts were entered does not attenuate the direct connection between its inequitable conduct and the matter in litigation. (See id. at p. 425 [plaintiff must" 'come into court with clean hands, and keep them clean, or [they] will be denied relief' "].)
For the proposition that conduct occurring after fraud cannot support a finding of unclean hands, Moss Landing repeatedly cites Wilson v. S.L. Rey, Inc. (1993) 17 Cal.App.4th 234, 244 (Wilson). The Wilson court affirmed a finding that Wilson "came before [the trial court] with unclean hands" because the finding of misconduct "in the particular transaction or connected with the subject matter of the litigation" was supported by substantial evidence. (Id. at pp. 244-245.) In so doing, the court disregarded as "not probative" Wilson's bad acts occurring after the date of the foreclosure sale she challenged in the lawsuit. (Id. at p. 244.) Nothing in Wilson suggests that the court contemplated the bright line rule proposed by Moss Landing, that a fraud plaintiff is immune from an unclean hands affirmative defense so long as its bad faith or inequitable conduct occurs after it has been defrauded. Indeed, such a rule would be inconsistent with the general rule repeated by Wilson, one "who comes into equity must come with clean hands." (Ibid.)
Moss Landing's third argument, relying on the parties' relative cleanliness, would require us to reweigh the evidence in Moss Landing's favor, rather than in favor of the judgment. Moss Landing argues that its conduct, if inequitable, pales in comparison to Bitar-"a trusted friend"-"steal[ing] leaseholds" from Moss Landing through "[d]ummy leases" used to "take advantage of [Moss Landing and Agha]" while Agha was grieving the loss of his first wife. Our task is not to determine whether there was a theory on which the jury could plausibly have rejected the unclean hands defense, but whether there was substantial evidence supporting the jury's decision to uphold the defense. (See Padideh, supra, 89 Cal.App.5th at p. 438.) The jury was not required to adopt Moss Landing's narrative-the jury could reasonably have concluded that Moss Landing resorted to bad-faith self-help in an effort to exploit the purported leases.
Moss Landing contends that-even if its conduct could support invocation of the unclean hands defense-Bitar cannot raise the defense because Moss Landing's conduct was directed only at Grupo. But the evidence in this case permits a factfinder to reject the distinction Moss Landing seeks to draw.
Moss Landing relies on cases concerning unclean hands conduct directed at third parties independent of the litigant asserting the defense. (See Germo Mfg. Co. v. McClellan (1930) 107 Cal.App. 532, 545; Brown v. Grimes (2011) 192 Cal.App.4th 265, 282-283; see also Kendall-Jackson, supra, 76 Cal.App.4th at p. 979 [unclean hands must affect equitable relations between the litigants].) Here, in contrast, Bitar was one of the co-founders of and a partner in Grupo, a nascent company that was heavily invested in its operations at Moss Landing's commercial park. In its initial stages, Grupo's funding came from the co-founders. Accordingly, when Moss Landing "squeez[ed]" Grupo for money, it was Bitar who paid. Underscoring the unity of interests between Grupo and Bitar, when Morales discussed with Agha the plan to evict Grupo, it was Bitar who Morales said would be kicked out. In short, there is substantial evidence to support the finding that Moss Landing's bad-faith conduct was directed at, impacted, and affected the equitable relations between Moss Landing, on one side, and both Grupo and Bitar, on the other.
c. Mediation
During trial, Grupo elicited testimony from one of its principals that Moss Landing did not attempt mediation before filing suit but that an unsuccessful mediation occurred before Grupo later filed suit. During closing arguments, Grupo argued that Moss Landing's failure to mediate before filing was a breach of express contractual provisions and the implied covenant of good faith and fair dealing.
Moss Landing contends that the trial court should have instructed the jury:" 'You have heard testimony about the parties' attempts to resolve this dispute by mediation. You are not to consider those facts in your deliberations.'" Moss Landing suggests that the failure to do so was prejudicial with respect to its affirmative case because the jury may have considered its failure to mediate in support of the unclean hands defense raised by Bitar and Grupo. Further, having raised the issue in its unsuccessful motion for a new trial, Moss Landing contends that the order denying that motion must be reversed. However, Moss Landing does not dispute that it failed to object to the introduction of evidence concerning the mediation and "is not assigning error to the introduction of evidence." Moss Landing contends only that an instruction to disregard the evidence should have been given.
Moss Landing does not contend that the information disclosed at trial was made inadmissible by the mediation privilege codified by Evidence Code section 1119. Rather, Moss Landing focuses on Evidence Code section 1128.
Evidence Code section 1128 provides, "Any reference to a mediation during any subsequent trial is an irregularity in the proceedings of the trial for the purposes of Section 657 of the Code of Civil Procedure." But testimony that Moss Landing did not mediate-or respond to any efforts Grupo made to invoke the mediation provision in the contracts-before Moss Landing filed suit in November 2017 does not reference "a mediation." The point of the testimony in dispute is that there was no such mediation to refer to. The reference to "a mediation" during trial was different: Grupo elicited testimony that the parties had an unsuccessful mediation in January 2018, before Grupo filed suit.
Moss Landing's proposed instruction, however, is broader than required by Evidence Code section 1128. Although testimony that Moss Landing ignored Grupo's requests to mediate before it filed suit is not testimony about "a mediation," it is testimony "about the parties' attempts to resolve this dispute by mediation," which Moss Landing asked the trial court to instruct the jury to disregard.
Even assuming for the sake of argument that Moss Landing was entitled to have the jury instructed to disregard testimony about the parties' attempts to resolve the dispute by mediation, including the fact that Moss Landing ignored Grupo's request to mediate before it filed suit, the trial court's refusal to give the instruction was not prejudicial.
"[I]nstructional error in a civil case is not grounds for reversal unless it is probable the error prejudicially affected the verdict." (Major, supra, 169 Cal.App.4th at p. 1217; see also Code Civ. Proc., § 657 [authorizing new trial based on "[i]rregularity in the proceedings" that "materially affect[s] the substantial rights" of the aggrieved party by "preventing]" the party "from having a fair trial"].) Where it is reasonably probable that a jury would have arrived at a different verdict in the absence of the error, the moving party is entitled to a new trial. (Enyart v. City of Los Angeles (1999) 76 Cal.App.4th 499, 508.)
As we have explained, the unclean hands defense here was sufficient to support the judgment denying Moss Landing any recovery and was supported by substantial evidence without reference to any of the mediation-related evidence that would have been covered by its requested instruction. The question posed by the prejudice inquiry here is whether it is reasonably probable that such evidence nevertheless impacted the jury's determination that Moss Landing acted with unclean hands. We conclude that it is not.
To begin, disregarding the mediation-related evidence covered by Moss Landing's proposed instruction would not meaningfully impact the weight of the evidence supporting the unclean hands theory described above.
Grupo's unclean hands defense implicated only one aspect of Moss Landing's mediation-related conduct. As Grupo argued posttrial, Moss Landing's failure to abide by the contractual requirement to file suit only after a mediation had occurred could legitimately support Grupo's unclean hands defense. Under this theory, filing suit despite a failure to mediate was representative of Moss Landing's repudiation of the contracts while claiming their benefits. But the mere fact that there had been no mediation at the time Moss Landing filed suit-without reference to Moss Landing's refusal to respond to Grupo's request to mediate-would neither be excluded by Evidence Code section 1128 nor within the ambit of Moss Landing's broader proposed jury instruction.
The remaining facts-that Moss Landing, before suing, ignored Grupo's request to mediate but the parties ultimately attempted mediation before Grupo sued-are at best tangential to the theory of unclean hands addressed above. Given the strong evidence- including Agha's own testimony and Morales's e-mail-that Moss Landing formulated its plan by August 2017 and Moss Landing's conduct consistent with this plan, it is not reasonably probable that the jury would have reached a result more favorable to Moss Landing had it been instructed not to consider Grupo's requests for mediation or the fact that the parties ultimately participated in an unsuccessful mediation in January 2018.
The jury may just as well have concluded that Moss Landing's failure to defer filing suit until after mediation was meaningless in the broad arc of this dispute, given the unsuccessful mediation that followed shortly thereafter.
More broadly, there is nothing to suggest that the jury relied on any failure on Moss Landing's part to respond to Grupo's request for mediation before it filed suit or to settle the case in mediation as either an independent or balance-tipping factor in its assessment of the unclean hands defense. Moss Landing conceded in its opening brief that Grupo did not in its summation argue even that Moss Landing's failure to mediate constituted unclean hands. Nor was any suggestion made that Moss Landing, once engaged in postfiling mediation, failed to mediate in good faith. (See Harb v. City of Bakersfield (2015) 233 Cal.App.4th 606, 617-618, 622 [identifying several factors to consider in assessing whether instructional error was prejudicial, including the winning side's arguments to the jury].) Accordingly, given the ample evidence that Moss Landing tried to take the benefits of the contract from Grupo while strategically timing its repudiation of the contracts in a way that was most beneficial to it, it is not reasonably probable that the facts about the parties' attempts to mediate the dispute impacted the verdict.
We also think it improbable that Moss Landing's failure to wait until a mediation had occurred to file suit was either independently determinative or balancetipping. But because we have determined that fact was beyond the ambit of the requested instruction, we do not address it.
B. Grupo's Cross-Appeal as to its Contract Claims
Grupo contends that (1) the jury's special verdict was hopelessly ambiguous with respect to Grupo's breach of contract claim against Moss Landing; (2) the trial court erred in dismissing Juror No. 6 and that error was prejudicial with respect to Grupo's breach of contract claim against Moss Landing; and (3) if the special verdict is accepted, the trial court erred in failing to award Grupo nominal damages against Moss Landing. We reject the first two contentions and conclude that the failure to award Grupo nominal damages in this case does not constitute reversible error. Accordingly, we affirm the judgment with respect to Grupo's claims without reaching Moss Landing's protective cross-appeal.
1. Special Verdict
The jury found that Grupo was harmed by Moss Landing's breach of contract, but that Grupo should not be awarded damages. Grupo contends that these findings rendered the special verdict hopelessly ambiguous. But the apparent discrepancy can be resolved by reference to Moss Landing's mitigation defense. Accordingly, the trial court did not err in its interpretation of the special verdict.
a. Standard of Review
In the event of an ambiguous special verdict" 'the party adversely affected should request a more formal and certain verdict. Then, if the trial judge has any doubts on the subject, [the judge] may send the jury out, under proper instructions, to correct the informal or insufficient verdict.' [Citations.] But where no objection is made before the jury is discharged, it falls to 'the trial judge to interpret the verdict from its language considered in connection with the pleadings, evidence and instructions.' [Citations.] Where the trial judge does not interpret the verdict or interprets it erroneously, an appellate court will interpret the verdict if it is possible to give a correct interpretation. [Citations.] If the verdict is hopelessly ambiguous, a reversal is required, although retrial may be limited to the issue of damages." (Woodcock v. Fontana Scaffolding &Equip. Co. (1968) 69 Cal.2d 452, 456-457, fn. omitted.)
"A court's instruction to the jury to deliberate further to correct a potentially ambiguous or inconsistent verdict is reviewed for abuse of discretion. [Citation.] However, a special verdict's correctness is analyzed as a matter of law and therefore subject to de novo review." (Zagami, supra, 160 Cal.App.4th at p. 1092.) b.
The Text of the Form, The Jury's Answers, and The Trial Court's Instructions
As set forth on the special verdict form, the jury found that (1) "Grupo and Moss Landing enter[ed] into a contract"; (2) "Grupo d[id] all, or substantially all, of the significant things that the contract required it to do"; (3) "Moss Landing breach[ed] the contract"; and (4) "Grupo [was] harmed by Moss Landing's conduct." Further, the jury found that (5) "Moss Landing unfairly interfere[d] with Grupo's rights to receive the benefits of the contract"; and (6) "Grupo [was] harmed by Moss Landing's interference." The jury then proceeded to answer questions 8 and 9 on the form, relating to Moss Landing's affirmative defense of unclean hands, indicating ["Yes"] that the jury found the defense was established as to Grupo's implied covenant theory, but ["No"] not as to Grupo's breach of contract theory.
When the jury initially presented its verdict, however, the jury had not answered question 10, which asked whether "any damages [should] be awarded to Grupo." Nor had the jury answered subsequent questions regarding the total amount of damages that should be awarded to Grupo or Moss Landing's contention that Grupo had failed to mitigate damages. Those questions were prefaced by an instruction to skip them if the jury had answered" 'Yes'" to questions 8 and 9. Moreover, there was an instruction following question 10 that directed the jury to skip the remaining questions in the series if their answer to question 10 was" 'No.' "
The trial court and the parties recognized the inconsistency between the jury's partial "[N]o" responses to questions 8 and 9 and their failure to answer the following series of questions beginning with question 10. Accordingly, the trial court gave the jury further instructions before directing further deliberations.
The trial court initially instructed the jury that because they had answered "no" to questions 8 and 9 with respect to the breach of contract theory, they had to proceed to question 10 with respect to that theory. Shortly thereafter, the trial court instructed the jury to reconsider both questions 8 and 10 as they related to breach of contract. Grupo's counsel requested that the trial court revert to the initial instruction to consider only question 10, and the trial court did so. Moss Landing's counsel then requested a conference, after which a recess was held. Following the recess, the jury foreperson expressed some confusion as to whether there was a contradiction between answering question 8 "no" for breach of contract but "yes" for the implied covenant. The trial court explained that there were two different causes of action to be considered separately, and if the answer was "no" for either theory that meant "there is no affirmative defense" so the jury would need to proceed to question 10. Moss Landing then requested the trial court to provide further clarification about the separateness of the claims and to reopen questions 8 and 9 for further consideration. In response, the trial court reiterated to the jury that Grupo's express contract and implied covenant claims could be considered differently and allowed the jury to reconsider questions 8 through 13.
Following further deliberation, the jury left its answers to questions 8 and 9 unmodified and answered "No" to question 10. No party requested further clarification of the verdict. The trial court ultimately entered a judgment stating that Grupo would recover nothing against the defendants in its action.
c. Propriety of the Trial Court's Post-Deliberation Instructions
Grupo contends that the verdict form was confusing and the trial court's instructions failed to dispel that confusion. Grupo's concern appears to be that the jury did not understand that questions 8 through 10 had to be answered separately for the breach of contract and implied covenant theories. But, after the jury's confusion became apparent due to its initial failure to answer question 10, the trial court repeatedly and consistently advised the jury that if they answered "no" to questions 8 and 9 for either theory, then they had to proceed to question 10 with respect to that theory. We identify no abuse of discretion in the trial court's instruction to the jury to deliberate further.Moreover, we note that following further deliberation, the jury completed the special verdict form in a way that conformed with that instruction.
The trial court's post-deliberation instructions evolved with respect to the questions the trial court directed the jury to reconsider. In that sense, they were inconsistent. But the decision to expand the scope of the further deliberations to encompass questions 8 and 9 was in direct response to a juror raising concerns about giving different answers to those questions for different theories of liability. In any event, the jury reaffirmed its previous answers to questions 8 and 9. The only response the jury changed was with respect to question 10, the question that they were directed to reconsider in all versions of the trial court's post-deliberation instructions.
d. Interpretation of the Special Verdict
Grupo contends that the special verdict is hopelessly ambiguous because the jury found that Grupo had been harmed by Moss Landing's breach of contract but found that Grupo should not be awarded damages, even while it rejected Moss Landing's unclean hands affirmative defense. Moss Landing argues that Grupo forfeited the issue by failing to raise this alleged inconsistency before the jury was discharged, and in any event that the special verdict is not inconsistent. For the reasons that follow, the findings that Grupo had been harmed but should not be awarded damages did not render the special verdict hopelessly ambiguous, and the trial court properly interpreted those findings to mean that Grupo should not be awarded damages.
We do not reach Moss Landing's forfeiture argument.
As preface, we note that the special verdict form leaves unaddressed a number of issues. As a result of the way the questions are framed, it is not clear which of multiple contracts the jury found that Moss Landing breached; which of multiple theories of breach the jury accepted; or what harm the jury found Grupo to have suffered as a result of the breach. Keeping those ambiguities in mind, we are not persuaded that the special verdict was hopelessly ambiguous in the sense Grupo contends.
Grupo argues that the jury's verdict should be interpreted to mean that Grupo was harmed but not damaged, which Grupo contends would constitute a legal error because harm and damage are synonymous. But this elides the distinction between question 5, which asked whether Grupo was harmed, and question 10, which asked whether Grupo "[s]hould . . . be" awarded damages.
Broadly, it is not a legal impossibility for a plaintiff to be both harmed by a breach of contract and denied damages. "No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin." (Civ. Code, § 3301.) That said, "[w]hen it is clear that a party suffered damages, 'the fact that the amount of damage may not be susceptible of exact proof or may be uncertain, contingent or difficult of ascertainment does not bar recovery. '" (Dillingham-Ray Wilson v. City of Los Angeles (2010) 182 Cal.App.4th 1396, 1406.) Even so," '[t]he doctrine of mitigation of damages holds that "[a] plaintiff who suffers damage as a result of . . . a breach of contract . . . has a duty to take reasonable steps to mitigate those damages and will not be able to recover for any losses which could have been thus avoided."' [Citation.] Under the doctrine, '[a] plaintiff may not recover damages avoidable through ordinary care and reasonable exertion.'" (Agam v. Gavra (2015) 236 Cal.App.4th 91, 111.)" 'Whether a plaintiff acted reasonably to mitigate damages . . . is a factual matter to be determined by the trier of fact.'" (Ibid.)
The jury's determination that Grupo was harmed by Moss Landing's breach of contract can be reconciled with its determination that Grupo should not be awarded damages.
In its closing argument, Grupo relied on two theories of damages, both of which quantified the harm Grupo suffered as a function of its lost use of the leased buildings. In turn, Moss Landing argued that Grupo could reasonably have mitigated its damages by continuing to use the leased buildings while the litigation played out, rather than choosing to vacate the premises.
Moss Landing's contention that Grupo could reasonably have remained in possession of the premises while the right to possession was litigated is supported by the record. In its February 2018 amended complaint, Grupo sought a declaration that it had the right to remain in possession. Three days later, Moss Landing dismissed its unlawful detainer complaints. But less than two weeks thereafter, Grupo sent an e-mail to "Moss Landing tenants" (some capitalization omitted) summarizing its dispute with Moss Landing and announcing that Grupo was leaving the commercial park, having "ceased all operations" and being in the process of dismantling and removing its property. As expressed in the letter, Grupo believed it was irrational to invest more "time or money" in the park.
The special verdict is not hopelessly ambiguous with respect to the relevant findings because the gap between the finding of harm caused by the breach and the refusal to award damages can be bridged by Moss Landing's mitigation affirmative defense. The jury may have been persuaded that it would have been reasonable for Grupo to retain possession of the buildings during the pendency of the litigation and that so doing would have avoided the harm it proved at trial.
Ryan v. Crown Castle NG Networks, Inc. (2016) 6 Cal.App.5th 775, on which Grupo relies, is distinguishable. There, "undisputed evidence established" that if the plaintiff's contract claims were sound, he was entitled to at least $326,250. (Id. at p. 787.) The jury found that the claims were sound, but awarded only $73,522. (Ibid.) The appellate court could identify "no basis whatsoever" for the lesser award. (Ibid.; see also Zagami, supra, 160 Cal.App.4th at p. 1094 [internally inconsistent damages award was hopelessly ambiguous].) Here, the jury found that Grupo was harmed but should not be awarded any damages. This result can be explained by reference to affirmative defenses on which the special verdict form did not require the jury to separately specify its findings.
Moreover, the trial court did not misinterpret the special verdict. Question 10, and question 10 alone, addresses whether Grupo should be awarded damages. The jury said that Grupo should not. Accordingly, the trial court did not.
2. Dismissal of Juror No. 6
Juror No. 6 wrote a three-paragraph note to the trial court after Moss Landing and Grupo had submitted their closing arguments, but prior to Bitar's closing argument or any party's rebuttal arguments. Juror No. 6 stated that it was "highly inappropriate to allow [Agha] to use racially charged language comparing a civil, non-criminal/non-violent business lawsuit defendant to '. . . the Nazis.' The tone and language used throughout the testimony was aggressive and at times offensive." Further, Juror No. 6 stated that it was "inappropriate to allow [Agha's counsel] to yell and use aggressive language and body language directed toward the jury during closing arguments.... As a professional in the healthcare industry, [Juror No. 6 could] say that [counsel's] communication style would never be tolerated in any meeting or presentation." Describing the behavior as "distracting at best and threatening/offensive at worst," the juror called on the court to "enforce strict, fair, and reasonable standards for the conduct that is allowed during jury trials," consistent with other professional settings, in the future.
We discern nothing in the record of Juror No. 6's note or her responses to the court's ensuing questioning that would affirmatively indicate that her reactions to the conduct of Agha and his counsel impaired her ability to fairly decide the merits. But assuming the trial court erred in excusing a sitting juror for cause, Grupo has not demonstrated that such an error was prejudicial.
a. Standard of Review
"A trial court has authority to discharge a juror upon good cause shown to the court that the juror is unable to perform his or her duty. [Citations.] An appellate court reviews such a determination for abuse of discretion. [Citations.] This discretion, however, is not unfettered." (Shanks v. Department of Transportation (2017) 9 Cal.App.5th 543, 550 (Shanks).) To be upheld on appeal, "the juror's inability to perform as a juror must '" 'appear in the record as a demonstrable reality.'" '" (Ibid.) "The demonstrable reality test . . . requires a showing that the court as trier of fact did rely on evidence that, in light of the entire record, supports its conclusion that bias was established. It is important to make clear that a reviewing court does not reweigh the evidence ....Under the demonstrable reality standard, however, the reviewing court must be confident that the trial court's conclusion is manifestly supported by evidence on which the court actually relied." (People v. Barnwell (2007) 41 Cal.4th 1038, 10521053, italics omitted (Barnwell).)
A party is entitled to qualified and competent jurors, not to any particular juror. (People v. Henderson (2022) 78 Cal.App.5th 530, 566-567 (Henderson) [addressing discharge of sitting juror in criminal context].) The dismissal of a sitting juror is prejudicial" 'only if it is reasonably probable that a result more favorable to the [appellant] would have been reached but for the error.'" (See id. at p. 564.)
We reject Grupo's unsupported contention that the dismissal of Juror No. 6 is not subject to a harmless error analysis. (See Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800-802 [discussing harmless error analysis, generally]; Shanks, supra, 9 Cal.App.5th at pp. 557-558; Henderson, supra, 78 Cal.App.5th at pp. 564-567; People v. Dell (1991) 232 Cal.App.3d 248, 256-257.)
b. Dismissal and Prejudice
Outside the presence of the other jurors and alternates, the trial court questioned Juror No. 6 about her note. Asked if she could "continue to be fair and unbiased," the juror replied, "I do think so, yes, absolutely." Asked whether, if she were Agha or his counsel, she would "feel comfortable" about having the author of the note on the jury, Juror No. 6 replied that she probably would not feel comfortable in their position, because she had made a "complaint . . . specific to the code of conduct or the type of communication that's in a professional setting" against them. Asked if their anticipated discomfort made it inappropriate for her to continue to serve as a juror, Juror No. 6 demurred, stating that she did not believe it was her place to make that decision. When the trial court told Juror No. 6 that it understood her to be stating that there might be a concern about her ability to be impartial, Juror No 6 responded, "I personally don't have a concern[,] but if I was [Agha or his counsel] would they be concerned, and . . . yes, I would probably be concerned" about the note. Asked whether she thought that Agha or his counsel "should" be concerned, the juror explained, "There is nothing in the note that states anything about bias, it's more about what's allowed in terms of communication style." Juror No. 6 added that their communication style did not cause her to favor one side or another as to the merits of the case.
The trial court decided "it would be best to substitute [Juror No. 6] out and an alternate juror in," citing the juror's acknowledgement "that if she were in the position of [Agha or his counsel,]" she would "understand why they would think she could not be fair." The trial court stated no other basis for the dismissal and gave no indication that Juror No. 6's stated concerns regarding Agha or his counsel were either unfounded or likely to have been unique to her.
We note that Agha repeatedly referred to his litigation opponents as "monkeys" and in one instance described Bitar as "worse than the Nazis" during his testimony. We note as well that Moss Landing's counsel more than once apologized for "get[ting] exercise[d]" out of frustration in closing argument.
We have not detected in this record a" 'demonstrable reality' . . . 'manifestly supported by evidence on which the court actually relied'" that Juror No. 6 was unable to perform her responsibilities. (See Shanks, supra, 9 Cal.App.5th at pp. 550-551; Barnwell, supra, 41 Cal.4th at pp. 1052-1053.) But Grupo has not demonstrated any prejudice from the juror's dismissal.
Preliminarily, Grupo's contention that it was error to excuse Juror No. 6 is in some tension with its contention that such error was prejudicial. The evidence regarding Juror No. 6's state of mind is limited to the note she wrote to the court and her answers to the trial court's questions. If this record does not indicate that she had begun to prejudge the case in Grupo's favor, then it undermines Grupo's effort to demonstrate prejudice. (Cf. Shanks, supra, 9 Cal.App.5th at pp. 557-558 [erroneously excused juror's inclination to vote for party losing issue on a nine to three vote was demonstrated by juror's declaration filed in support of motion for retrial].)
Grupo relies on the closeness of the special verdict as to whether to award Grupo damages to support its assertion that the dismissal of Juror No. 6 was prejudicial, either independently or together with other errors. But Grupo fails to draw any logical link between the closeness of the verdict to the dismissal of Juror No. 6.
Grupo cited two cases for the proposition that a close verdict may support an inference that trial errors were prejudicial, but it identified no cases addressing whether the dismissal of a juror was prejudicial. (See Robinson v. Cable (1961) 55 Cal.2d 425, 428; Victaulic Co. v. American Home Assurance Co. (2018) 20 Cal.App.5th 948, 987.)
Only one issue was decided by the minimum nine-to-three vote-whether Grupo should recover damages. (See Shanks, supra, 9 Cal.App.5th at p. 557.) On that issue, we acknowledge that the alternate juror who ultimately succeeded Juror No. 6 voted with the majority. But, unlike in Shanks, nothing in the record discloses Juror No. 6's views of any substantive issues from which we could infer that she was more likely to vote with the minority than the alternate who replaced her. (Cf. id. at pp. 557-558.) Unlike occasions of reported failures of or refusals to deliberate, or other reported misconduct in the privacy of deliberations, Juror No. 6 merely made a point of expressing to the court her discomfort with the behavior of Agha and Moss Landing's trial counsel. She did so openly, without any attempt at concealment or any apparent agenda beyond asking that the trial court exert greater control over the courtroom behavior of litigants and their counsel. She also expressly disavowed any inability to fairly judge the merits.
Moreover, because Juror No. 6 expressed her concerns before the jury began its deliberations, we must presume she had not yet formed an opinion on the merits. We apply the same presumption to the alternate juror who ultimately replaced her, and we note that Grupo has shown no reason to doubt the impartiality of any alternate, nor even that it exhausted its peremptory challenges before the alternate jurors were selected. Moreover, the jury did not deliberate for long-deliberations began the afternoon of November 14, 2019, then started anew (after a second substitution) the next morning and concluded that same afternoon. At bottom, although the vote on the dispositive issue on Grupo's breach of contract claim against Moss Landing was as close as can be, in the absence of any indication that Juror No. 6 favored Grupo's substantive positions we are not persuaded that her dismissal prejudiced Grupo. Grupo "had a right to an impartial jury. That is what [it] got." (Henderson, supra, 78 Cal.App.5th at p. 567.)
At the start of the trial, the court instructed the jury not to "form or express an opinion about this case while the trial is going on." There is no indication that Juror No. 6 deviated from this instruction. (See People v. McKinnon (2011) 52 Cal.4th 610, 670 [courts presume jurors generally understand and follow instructions].)
3. Nominal Damages
Grupo contends that, if the jury found both that Moss Landing committed a breach of contract and that Grupo failed to establish its entitlement to compensatory damages, then Grupo nonetheless was entitled to nominal damages. As an alternative to its new trial arguments, Grupo argues that we should reverse the judgment and remand with directions to enter a new judgment awarding Grupo nominal damages. Grupo contends that an award of nominal damages will impact the trial court's analysis of costs-to which Moss Landing is otherwise entitled as the prevailing party under the existing judgment-in that the trial court's analysis of costs would be more nuanced if Grupo were to secure nominal damages on one of its causes of action. In its briefing, Moss Landing argued that nominal damages are inappropriate because it prevailed on one of its affirmative defenses and, in any event, reversal for failure to award nominal damages is inappropriate in this case because Grupo would not necessarily be entitled to recover its costs if it were to recover nominal damages. At oral argument, Moss Landing stated that it either waives, or has waived, any entitlement to costs as the prevailing party, as a result of which a reversal as to nominal damages will have no impact on its practical entitlement to nominal damages. After oral argument, we requested and received supplemental briefing regarding the impact of Moss Landing's waiver. In this context, we conclude that the trial court's failure to award nominal damages is not reversible error.
Grupo violated California Rules of Court, rule 8.1115 by relying on five unpublished opinions in its supplemental brief. Grupo's apparent belief that it may argue the merits of unpublished authority so long as it refrains from supplying a citation is incorrect. Absent an exception, the rule prohibits citing or relying on unpublished opinions. Consistent with our obligation under the rule, we disregard the unpublished authorities described by Grupo.
"[W]here a judgment is erroneous only because it fails to give nominal damages it will not be reversed unless nominal damages in the given case would carry costs" or "the object of the action is to determine some question of permanent right." (Kenyon v. Western Union Tel. Co. (1893) 100 Cal. 454, 458-459; see also Elation Systems, Inc. v. Fenn Bridge LLC (2021) 71 Cal.App.5th 958, 967 (Elation Systems); Sweet v. Johnson (1959) 169 Cal.App.2d 630, 633 (Sweet).) The rationale for this rule is that "the law does not regard trifles" and nominal damages are" 'a trifling sum.'" (Sill Properties, Inc. v. CMAG, Inc. (1963) 219 Cal.App.2d 42, 55-56 (Sill).)
To carry costs, the nominal damages must impact an absolute entitlement to costs, either granting such an entitlement in the appellant or divesting such an entitlement from the respondent. (See Sweet, supra, 169 Cal.App.2d at pp. 633-635; Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1406 (Staples) [applying "the general rule that a judgment will not be reversed for a failure to award nominal damages" where an award of costs to plaintiff would be merely discretionary]; see also Elation Systems, supra, 71 Cal.App.5th at p. 967 [quoting Staples for the proposition that the failure to award nominal damages "is reversible where nominal damages would provide an 'absolute entitlement to costs' or 'determine some question of permanent right' "].)
Capell Associates, Inc. v. Central Valley Security Co. (1968) 260 Cal.App.2d 773 (Capell), on which Grupo relies, neither disagreed with Sweet nor addressed whether a failure to award nominal damages warrants reversal. The reversal in Capell was for an improper award of compensatory damages. (See id. at pp. 775, 785-786.) So we do not see the conflict Grupo posits between Capell and Sweet (or Staples).
Here, under the judgment entered by the trial court as to Grupo's case, Moss Landing was the prevailing party entitled to costs because Grupo was not awarded any monetary recovery. (Code Civ. Proc., § 1032, subds. (a)(4) &(b).) Were the judgment reversed to award Grupo only nominal damages, the trial court would have discretion to determine costs or any portion thereof. (Id., §§ 1032, subds. (a)(4) &(b), 1033, subd. (a).) Thus, nominal damages carry costs only in the sense that nominal damages would divest Moss Landing of its absolute entitlement to costs. (See Sweet, supra, 169 Cal.App.2d at p. 634; Staples, supra, 189 Cal.App.3d at p. 1406.)
An analogous scenario arose in Sweet. There, the court elected to affirm the judgment upon the respondent's demonstration that it had repaid the cost award to the appellant. (Sweet, supra, 169 Cal.App.2d at pp. 634-635.) That being so, reversal of the nominal damages award would not have impacted any claimed absolute entitlement to costs. Because Moss Landing has waived its entitlement to costs as the ostensible prevailing party, the same is true here. Accordingly, accepting Moss Landing's waiver and following Sweet, we will not treat the failure to award nominal damages as reversible error.
Responding to Moss Landing's waiver, Grupo contends that the present case also involves a potential contractual fee dispute, such that in Grupo's view the nominal damages issue could affect its right to pursue further relief under the breached contract. (See Elation Systems, 71 Cal.App.5th at pp. 967-968 [reversing where award of nominal damages could affect contractual right to equitable relief].) But the prevailing party analysis under a contractual fee provision is not necessarily the same as the prevailing party analysis under Code of Civil Procedure section 1032's provision for costs. The former turns on contract interpretation-including the meaning of the undefined term "prevailing party" as it is used in the contracts. For the reasons that follow, we are not persuaded that an award of nominal damages could affect Grupo's rights to attorney fees under the contract. (Cf. ibid.; see also Sill, supra, 219 Cal.App.2d at p. 56 [failure to award nominal damages on cross-complaint not reversible because respondent would still have been the prevailing party by virtue of an award of monetary damages, such that the appellant would not have been entitled to attorney's fees].)
Where a contractual term is undefined and lacks a settled technical meaning, it is appropriate to infer that the parties understood the term in its ordinary or popular sense, absent extrinsic evidence suggesting a particular meaning was intended. (See Santisas v. Goodin (1998) 17 Cal.4th 599, 609 (Santisas).) In Santisas, our Supreme Court did just that with the term" 'prevailing party'" in a contractual fee dispute. (Ibid.) Giving the term its ordinary or popular meaning, the Santisas court assessed which party as a practical matter had obtained its litigation objectives. (Ibid.; see also Harris v. Rojas (2021) 66 Cal.App.5th 817, 824 (Harris); Civ. Code, § 1717, subd. (b)(1).)
For example, in Harris the court upheld the trial court's determination that there was no prevailing party on abuse of discretion review. (See Harris, supra, 66 Cal.App.5th at pp. 823-824.) Harris appealed the trial court's ruling, having secured an award of five to six thousand dollars after three years prosecuting a claim for $200,000. (Id. at pp. 825-826.) Noting the difficulty of ascertaining a party's true litigation objectives on an appellate record lacking important indicia of those objectives, the court upheld as "commonsensical" (id. at p. 825) the trial court's determination that Harris did not "win" given his "slight recovery" after years of litigation. (Id. at p. 826.) Alternatively, the court noted that the parties had "divided between two courtrooms" what was fundamentally a "single dispute" (ibid.) and that a judgment of $13,000 to $17,000 against Harris in the other case signified that Harris on balance had "decisively lost the war." (Id. at p. 827.)
Here, we cannot perceive how an award of nominal damages, as a practical matter, could impact the trial court's prevailing party analysis. An award of nominal damages would not change Grupo's failure to prevail on its claim of $64.5 million in lost profits. Nominal damages would likewise provide no meaningful future benefit, when the parties have no active contractual relationship such that a determination of nominally harmful breach could benefit Grupo in some way. Nor would an award of nominal damages on Grupo's claims change the prevailing party calculus as it relates to Moss Landing's failures in prosecuting its own claims. While the parties may, at different times, also have had practical objectives worthy of consideration in assessing whether either party prevailed, recovery of nominal damages was not among them. "Litigation is a practical human endeavor, not an entertaining sport where rules can make a one-point margin into total victory. In litigation, spending great effort only to achieve little is not simple and unqualified success." (Harris, supra, 66 Cal.App.5th at p. 826.)
If it were to become necessary, the trial court would conduct the prevailing party analysis in the first instance. (See generally Harris, supra, 66 Cal.App.5th at p. 823 [reviewing trial court's prevailing party determination for abuse of discretion].) Here, we take up a slightly different question-whether an award of nominal damages could impact that analysis. We note that Grupo does not suggest that the parties intended to vest "prevailing party" with any extraordinary meaning, instead arguing that the fee provisions are "similar in the relevant respects to the fee language at issue in Santisas."
III. DISPOSITION
The judgment is affirmed. In the interests of justice, the parties shall bear their own costs on appeal.
WE CONCUR: GREENWOOD, P.J. BROMBERG, J.