Opinion
H024058, H024404.
7-21-2003
NMSBPCSLDHB, Plaintiff and Appellant, v. SUN MICROSYSTEMS, INC., Defendant and Respondent.
In this dispute over fair market rent, judgment was entered for Sun Microsystems, Inc. (Sun) and NMSBPCSLDHB (NMSB) appeals. We conclude that (1) the trial court properly confirmed the appraisal award setting the fair market rent; (2) the trial court correctly denied NMSBs request for mandatory relief based upon attorney mistake (Code Civ. Proc., § 473, subd. (b)); and (3) the trial court properly granted Suns summary judgment motion. We also uphold the trial courts order granting attorney fees to Sun.
FACTS AND PROCEDURAL BACKGROUND
In 1993, NMSB and Taligent, Inc. (Taligent) entered into a lease (Master Lease) for a commercial office building in Cupertino, California. The initial term was June 7, 1994 through June 30, 1999. Base monthly rent was $ 115,489, payable on the first of each month. In 1996, Sun began subleasing the premises from Taligent.
The Master Lease provides: "For the purposes of this Lease, fair market rent shall be deemed to mean the base amount of rental which would typically be paid by a tenant under a lease such as this for premises of a similar type, size, design, and quality in the same area under market leasing conditions existing at that time, including rent concessions and tenant improvements being offered on comparable properties."
Under the Master Lease, market rent disputes were to be resolved by an appraisal. The Master Lease states: "If the parties are unable to agree on the fair market rent for the purpose of calculating the Base Monthly Rent under Section 16.1.1, then each party may, at its election, at its own cost and by giving notice to the other party, each appoint an MAI real estate appraiser . . . to appraise the then fair market rent. If a party does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the fair market rent as provided herein."
In 1998, NMSB and Sun entered into an "Option To Lease Agreement" (Option Agreement). Under that agreement, the Master Lease and Suns sublease would be extended for one year, through June 30, 2000, and then Sun would have the option to lease the premises directly from NMSB for a term of one, two, three or five years (the Direct Lease).
The rent under the Direct Lease was "a flat rental rate of 90% of the fair market rent for leases of a similar term, with a comparable tenant and a comparable building in Cupertino." The Direct Lease contains no provision for resolving disputes over fair market rent.
In the Option Agreement, it states that the Direct Leases terms are "substantially the same as in the master lease between Landlord [NMSB] and Sublessor [Taligent] with such additional or different terms as the parties may negotiate."
On June 28, 1999, Sun exercised its option to lease the premises directly from NMSB for a two-year term, starting July 1, 2000. The Option Agreement required that Sun give a years notice. On July 30, 1999, NMSB acknowledged Suns exercise of the option. On September 15, 1999, NMSB indicated that there was "no rush" to resolve the rental rate, understanding that Sun "wanted to wait to resolve this until the occupancy date [was] closer."
On April 28, 2000, NMSB asked to meet so that the fair market rental rate could be resolved before July 1, 2000. On May 17, 2000, NMSB wrote to Sun, advising that Sun had failed to respond and that NMSB needed to hear from Sun regarding the issue of fair market rent.
Sun proposed meeting on June 12, 2000, but NMSB was unable to meet at that time.
On July 7, 2000, the parties met but were unable to agree. On July 9, 2000, NMSB informed Sun that Suns position was untenable. On July 20, 2000, NMSB wrote Sun to say Sun was in default.
On July 24, 2000, Sun offered to pay $ 5.00 per square foot as an interim payment until the dispute could be resolved and the rental rate retroactively adjusted to July 1, 2000. Sun also informed NMSB that it intended to appoint an appraiser pursuant to the procedure specified under the Master Lease.
On July 31, 2000, NMSBs general partner, Robert Granum, "advised [Sun] that [NMSB] disputed there was an arbitration provision, and insisted that any dispute was to be decided by a jury."
According to Granum, "There is no arbitration provision. . . . There is no incorporation of the lease into the option agreement. The agreement says what it says, no more and no less, . . . The agreement and this matter are not subject to arbitration. This is a process we would never accept. The arbitration process compromises, favors those with power and influence, and is not bound by the law. My family is only willing to proceed with any legal contest in a forum where all rules of law apply and where there would be a jury of our peers."
On August 8, 2000, Sun informed NSMB that it intended to follow the appraisal procedure. On August 31, 2000, Sun told Granum that it was "proceeding with plans to hire an appraiser per Section 16.2 Fair Market Rent Determination of the Lease."
On September 6, 2000, NMSB again told Sun that it disagreed with Suns position. NMSB demanded that Sun pay "90% of 75% of what we estimate a ten year lease rate . . . to be which is approximately $ 7.50/ square foot" for a rental payment of $ 524,950 per month. NMSB threatened to have Sun evicted for cause if Sun did not pay. NMSB also stated "We will also proceed, if needed, in the legal forum required by the option agreement."
On September 15, 2000, Sun gave NMSB notice of its appointment of Mr. Chris Carnehi, MAI, to appraise the fair market rent. (JA 131, 149, 433, 239) Citing Master Lease paragraph 16.2.1, Sun told NMSB that "to preserve your rights, please notify [Sun] of the Landlords appraiser with ten (10) days."
NMSB did not appoint an appraiser. On September 22, 2000, NMSBs counsel again informed Sun that the appraisal provision was inapplicable. NMSB demanded that Sun pay the $ 5.00 per foot that Sun had previously offered. NMSBs counsel stated that "based on information available to the owner, the fair market rent for the premises is around $ 7.50 per square foot on a ten year lease with five percent (5%) annual increases, plus a monthly three percent (3%) management fee." NMSBs counsel said NMSB would sue for unlawful detainer and breach of contract. "Furthermore, nothing contained in this letter should be construed as a waiver of any of the owners rights or remedies, including its right to counter-designate an appraiser in the event a trier of fact determines the Taligent lease controls the meaning of the terms fair market rent as used in the option agreement, all of which are expressly reserved."
On October 5, 2000, Suns appraiser asked NMSBs counsel to "forward to [him,] . . . a copy of the information [counsel] referred" to in support of the rental rate NMSB requested, so he could "consider it before concluding [the] appraisal." Neither NMSB nor counsel provided any such information or participated in any way in the appraisal process.
On October 19, 2000, NMSB served Sun with a three-day notice to pay or quit, demanding a minimum monthly rent increase of $ 324,892 for four months, July through October 2000.
On October 20, 2000, the appraisal was served on the parties. Mr. Carnehi decided the fair market rent was $ 5.10 per square foot, or $ 535,600 per month, which included a premium, based upon the Direct Leases two year term, of 11.25 percent.
In making his determination, Mr. Carnehi decided "the definition of market rent to be used in this appraisal is as provided by the Master Lease agreement with consideration to the additional language stated in the [Option Agreement]." Mr. Carnehi evaluated the neighborhood, market and property description. He then considered three comparable leases for office property in Cupertino. The three comparable leases were signed between April and June 2000; their lease terms were scheduled to start between October 2000 and January 1, 2001. According to Mr. Carnehi, the three leases were "for similar space in buildings of comparable type, size, design and quality to the subject [premises]" with terms "most closely adhering to the definition of Fair Market Rent required by the lease."
On October 26, 2000, Sun paid NMSB $ 1,299.568, the amount stated in the three-day notice. Sun also stated that Sun "has been and remains willing to pay the amount determined by the Leases appraisal procedure" and "Sun will pay the monthly amount" for the "remainder of the Lease."
NMSB had previously agreed to extend the deadline for Suns response to the three-day notice.
NMSB agreed to accept Suns payment as interim rent but said it represented only the minimum amount due. Sun continued making monthly rent payments per the appraisal.
Approximately eight months later, on June 22, 2001, NMSB sued for declaratory relief and breach of contract. In its complaint, NMSB alleged, among other things, that there was an extreme shortage of office space in Cupertino in June 2000 and an extremely high demand for such space. According to NMSB, this created an unprecedented market for landlords, not reflected by the appraisal, since the appraisal occurred in Fall 2000 when real estate conditions were changing in Suns favor. Thus, NMSB claimed that the rent for the premises was much higher than the rent Sun was paying.
On September 29, 2001, Sun answered the complaint and also petitioned to confirm the appraisal award.
In NMSBs opposition, NMSB never disputed that the Master Lease contained an appraisal agreement, did not dispute Suns contention that an appraisal agreement was the equivalent of an arbitration agreement, and did not dispute Suns claim that appraisal was a favored means of dispute resolution. Rather, NMSB argued that "despite the favored position held by appraisal, a party cannot be compelled to arbitrate disputes which it has not agreed to arbitrate" and said "whether the parties have agreed to arbitrate the dispute is a matter for judicial determination."
The trial court granted Suns petition to confirm the appraisal award. It found that appraisal was tantamount to arbitration, that the Direct Lease incorporated the Master Lease, including the appraisal provision, that the appraisal provision was self-executing, and that NMSBs reservation of rights was ineffective because NMSB failed to participate in the appraisal, failed to seek to stay it, and failed to petition to vacate within the statutory period.
NMSB moved for mandatory relief under Code of Civil Procedure section 473. Arguing that an appraisal is the same thing as arbitration for the purpose of the arbitration statutes, NMSB claimed that an appraisal award taken without NMSBs participation was therefore the equivalent of a default for purposes of qualifying for section 473 relief. According to NMSB, default "was entered solely as a result of inadvertence, surprise, mistake, or excusable neglect of [NMSBs] counsel." NMSB also moved for a new trial.
All further unspecified statutory references are to the Code of Civil Procedure.
Sun then moved for summary judgment on NMSBs declaratory relief and breach of contract action, claiming that the confirmed appraisal award set the rental rate, so NMSB was not entitled to a judicial declaration of it, and maintaining that Sun did not breach the Direct Lease by seeking appraisal.
After hearing arguments on the section 473, new trial, and summary judgment motions, the trial court ruled in Suns favor. It denied NMSBs request for section 473 relief, concluding among other things, that NMSBs failure to participate in the appraisal was intentional and strategic. Suns summary judgment motion was granted on res judicata and collateral estoppel grounds. Judgment was entered in Suns favor. Sun was later awarded $ 140,389 in attorney fees and $ 339 in costs. (SJA 180-181)
NMSB appeals from the judgment, and also appeals the award of attorney fees.
We consolidated the two appeals for the limited purpose of briefing, oral argument, and decision.
DISCUSSION
I. Confirmation Of Arbitration Award
A. Appraisal As Arbitration
NMSB says the appraisal provision is not binding, is not mandatory, has limited effect, and lacks essential attributes of arbitration and therefore does not constitute an arbitration agreement subject to the California Arbitration Act (Act). For this reason, NMSB says the Act was improperly used to convert the appraisal into an arbitration award, and therefore the appraisal award should not have been confirmed. We disagree.
1. Waiver
NMSBs argument is waived because NMSB did not raise it below. Not only did NMSB not raise it below, but also NMSB repeatedly conceded that an appraisal is the equivalent of arbitration. For example, in NMSBs opposition to Suns petition to confirm, NMSB states that it "does not dispute [Suns] argument that an appraisal agreement is the equivalent of an arbitration agreement, . . ." Acknowledging that concession, the trial court observed that "as described here, and generally conceded by both parties, the appraisal award of October 22, 2000, is the same as an arbitration award."
It is improper for NMSB to now change its position in this appeal. "[A] change of position on appeal from the theory of trial is unfair to the trial court and unjust to the opposing party, and [the doctrine barring it] is justified as an invocation of the invited error doctrine and implied waiver in the trial court by the appellant of the new theory. [Citation.]" (Planned Protective Services, Inc. v. Gorton (1988) 200 Cal. App. 3d 1, 13, 245 Cal. Rptr. 790; see also Childrens Hospital & Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 776.)
In NMSBs view, the issue relates to subject matter jurisdiction and therefore may not be waived. We disagree. The issue conceded by NMSB is whether the appraisal is the same as arbitration and therefore subject to the Act. That issue is decidedly different from the question of the appraisers jurisdiction, i.e., whether the appraiser had the authority to resolve this dispute in the first instance. National Union Fire Ins. Co. v. Stites Prof. Law Corp. (1991) 235 Cal. App. 3d 1718, cited by NMSB, highlights this difference: "Subject matter jurisdiction, in this case meaning the arbitrators authority or power to adjudicate a certain type of fee dispute, cannot be conferred by consent, waiver, or estoppel. [Citations.]" (Id . at pp. 1723-1724.) NMSB never conceded the authority or power of the appraiser to determine fair rental value-in fact that is the heart of the parties dispute. What NMSB did concede was that appraisal was the same as arbitration. Consequently, the rule of waiver applies.
2. The Appraisal Agreement Was An Arbitration Agreement
Even if the issue were not waived, we would reject it on its merits. The appraisal agreement here constitutes an arbitration agreement, is subject to the requirements of the Act, and therefore was properly the subject of Suns petition to confirm.
The Act expressly includes appraisals within the definition of arbitration. It provides that arbitration under the Act "includes but is not limited to agreements providing for valuations, appraisals and similar proceedings." (Code Civ. Proc., § 1280, subd. (a), italics added.)
Numerous cases have likewise determined that appraisals constitute arbitration and are subject to the Acts requirements. (Michael v. Aetna Life & Casualty Ins. Co . (2001) 88 Cal.App.4th 925, 934; see also Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886, 893; Louise Gardens of Encino Homeowners Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 658; Unetco Industries Exchange v. Homestead Ins. Co. (1997) 57 Cal.App.4th 1459, 1465-1466; Hennefer v. Butcher (1986) 182 Cal. App. 3d 492, 503, 227 Cal. Rptr. 318; Helzel v. Superior Court (1981) 123 Cal. App. 3d 652, 659, 176 Cal. Rptr. 740.)
Consequently, "An agreement providing for an appraisal is therefore considered to be an arbitration agreement subject to statutory contractual arbitration law in the California Arbitration Act. [Citation.]" (Michael v. Aetna Life & Casualty Ins. Co., supra, 88 Cal.App.4th at p. 934.) As noted by the California Supreme Court, "enforcement procedures respecting arbitration have been made applicable to appraisals." (Jefferson Ins. Co. v. Superior Court (1970) 3 Cal.3d 398, 401, fn. 4, 90 Cal. Rptr. 608, 475 P.2d 880.)
NMSB cites Cheng-Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676. In that case, the court decided that the employers review committee procedure was not the equivalent of arbitration because management ran it, it was slanted in managements favor and there was no impartial third party decision maker. Cheng found that "although arbitration can take many procedural forms, a dispute resolution procedure is not an arbitration unless there is a third party decision maker, a final and binding decision, and a mechanism to assure a minimum level of impartiality with respect to the rendering of that decision." (Id. at pp. 687-688, fn. omitted.)
Contrary to NMSBs argument, the appraisal procedure here satisfied the requirements identified in Cheng.
First, it provided for an impartial third party decision; NMSB does not contend otherwise.
Second, the appraisal was binding even though there was no express provision so stating. "It is the general rule that parties to a private arbitration impliedly agree that the arbitrators decision will be both binding and final." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 832 P.2d 899, fn. omitted.) In other words, even if no provision says the arbitration is binding, the arbitrators decision is still treated as final. (Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 588-589 ["regardless of such a provision, it is commonly expected, in the absence of a contrary provision, that the arbitrators decision will be final"].)
We believe it is eminently sensible to apply this same rule in the context of an appraisal. When contracting parties include an appraisal provision, we think they impliedly agree, in the absence of contrary language, that the appraisal will be binding, rather than meaningless and of no import. In the context of arbitration, the reasoning behind the rule that parties impliedly agree the arbitration is binding is that " conclusiveness is expected; the essence of the arbitration process is that an arbitration award shall put the dispute to rest. " (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10, quoting Comment, Judicial Deference to Arbitral Determinations: Continuing problems of Power and Finality (1976) 23 UCLA L.Rev. 948-949.) This reasoning applies with equal force in the context of an appraisal: the purpose of the provision is to resolve the dispute, and that purpose cannot be achieved if the provision is not binding.
The presumption that parties impliedly agree that the arbitrators decision will be binding may be rebutted by evidence showing the parties different intent. (See Trabuco Highlands Community Assn. v. Head (2002) 96 Cal.App.4th 1183, 1190-1191.) Applying that rule here, NMSB has failed to rebut the presumption that the appraisal provision was binding.
NMSB says the appraisal provision had limited effect because under the Master Lease it applied only to a five-year extended term and provided a range for the permissible award. However, we do not believe that a limitation upon the matter to be submitted to arbitration or of the arbitrators allowable remedies makes an award issued on that matter and within those allowable remedies not "binding."
Third, we disagree with NMSBs characterization of the appraisal as voluntary. Relying upon the provisions use of the term "may," NMSB argues that appraisal was voluntary, and therefore cannot be characterized as arbitration. But the context of the appraisal provision as a whole belies NMSBs contention.
In particular, the Direct Lease provided that either party "may, at its election, . . . appoint an MAI real estate appraiser." "If a party does not appoint an appraiser . . ., the single appraiser appointed shall be the sole appraiser" and "shall set" the rent. In this context, the use of the word "may" does not undercut the mandatory nature of the appraisal provision. "California decisional law . . . construes the word may as mandatory in arbitration contracts." (Stockton Metropolitan Transit Dist. v. Amalgamated Transit Union (1992) 132 Cal. App. 3d 203, 214, 183 Cal. Rptr. 24.) As stated in Pacific Gas & Electric Co. v. Superior Court, supra, 15 Cal.App.4th at page 595, "If that connotation were not employed the arbitration provision would serve little or no purpose, a disfavored result under the canon that contracts should be construed so as to make them operative. [Citation.] This reasoning is persuasive, all the more so since the clause in this case is explicit in specifying that any dispute may be submitted by either party to arbitration . . . . If either party may do so, the consent of both is manifestly not required. In this context the may signifies the right of the party to invoke arbitration."
NMSB cites Titan Group, Inc. v. Sonoma Valley Sanitation Dist. (1985) 164 Cal. App. 3d 1122, 211 Cal. Rptr. 62 but it involved an arbitration provision worded quite differently from the provision here. (See Pacific Gas & Electric Co. v. Superior Court, supra, 15 Cal.App.4th at p. 596 [distinguishing Titan based upon its specific wording].) Unlike Titan, our provision, despite its initial use of the word "may," explains exactly what happens when one of the parties fails to designate an appraiser: "If a party does not appoint an appraiser within ten (10) days after the other party has given notice of the name of the appraiser, the single appraiser appointed shall be the sole appraiser and shall set the fair market rent as provided herein." (Italics added.) Given this language, we reject NMSBs argument that the appraisal provision was voluntary and therefore not the equivalent of arbitration.
B. Was the Appraisal Provision Incorporated Into the Direct Lease?
Having concluded that the appraisal provision is subject to the Act, we next consider NMSBs contention that the appraisal provision was not incorporated into the Direct Lease. As we explain, this argument is without merit.
Parties may validly incorporate by reference into their contract the terms of another document so long as the reference is clear and unequivocal and the terms of the incorporated document are "known or easily available to the contracting parties." (Spellman v. Securities, Annuities & Ins. Services, Inc . (1992) 8 Cal.App.4th 452, 457; Baker v. Aubry (1989) 216 Cal. App. 3d 1259, 1264, 265 Cal. Rptr. 381.) The contract "need not recite that it incorporates another document, so long as it guides the reader to the incorporated document. " (Shaw v. Regents of the University of California (1997) 58 Cal.App.4th 44, 54.)
In the Option Agreement, it states that the Direct Lease terms "shall be substantially the same as in the Master Lease between Landlord and Sublessor with such additional and different terms as the parties may negotiate." Thus, the Option Agreement "guides the reader" to the Master Lease, the terms of which were "known" and "easily available" to both parties since they had been operating under the Master Lease for several years. In fact, the intent to incorporate is evident from the face of the documents-the Option Agreement is an option, not a lease, is less than two pages long, and includes very few terms regarding the parties rights and obligations under the Direct Lease. We conclude that the Master Lease was unambiguously incorporated into the Direct Lease, by virtue of the language set forth in the Option Agreement.
The full sentence states "Landlord hereby grants to Sun an option to lease the Premises directly from the Landlord for a term of one, two, three or five years pursuant to a lease the terms of which shall be substantially the same as in the master lease between Landlord and Sublessor with such additional and different terms as the parties may negotiate."
Given this conclusion, we need not consider NMSBs claimed "extrinsic" evidence that NMSB only contemplated an informal appraisal process. In any event, the evidence NMSB cites does not show that the appraisal provision was inapplicable.
NMSB cites Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal. App. 3d 632, 223 Cal. Rptr. 838 but it differs sharply from the facts here. In Chan, the stockbroker agreed to " abide by the Statute(s), Constitutions(s), Rule(s) and By-Laws " (id. at p. 636) of organizations to which she applied. She had applied to the New York Stock Exchange. Under Rule 347 of the New York Stock Exchange, arbitration of employment disputes was required. Refusing to compel arbitration, Chan decided "the reference did not identify any document or source by title. The reference was amphorous, and did not guide the reader to the incorporated document." (Chan v. Drexel Burnham Lambert, Inc., supra, 178 Cal. App. 3d at p. 643.) Unlike Chan, in this case the incorporated document was not a general document applying to an organization as a whole, of which the plaintiff happened to be a member, was specifically referred to, and was a document with which the parties were quite familiar, since it had governed their relationship for several years. Because it is inapposite, Chan does not apply here.
NMSB emphasizes that the Master Lease and Direct Lease have differing definitions of the term "fair market rent." Because the appraisal provision in the Master Lease is situated under the heading "Fair Market Rent Determination," and the definition of fair market rent in the Master Lease is different from the definition under the Direct Lease, NMSB says that the appraisal provision does not apply to disputes regarding fair market rent under the Direct Lease.
The fact that terms of the Direct Lease were somewhat different from the Master Lease does not convince us that the Master Lease appraisal/dispute resolution provision was not incorporated into the Direct Lease. The incorporation language says that the Direct Lease terms "shall be substantially the same as in the Master Lease between Landlord and Sublessor with such additional and different terms as the parties may negotiate." No additional or different terms regarding dispute resolution were added to the Direct Lease. Differing terms for fair market rent is not the equivalent, in our view, of differing terms for resolving disputes over that rent. As Sun persuasively argues, "On NMSBs theory, the sophisticated parties to this multi-year, multi-million dollar contract entered into it with no method for resolving disputes about a central term — price — except to commence lengthy, expensive litigation . . . rather than relying upon a speedy and relatively inexpensive expert resolution pursuant to terms the parties had agreed to for years."
C. Did Sun Properly Invoke Appraisal?
According to NSMB, Sun had a duty to resolve the rental rate prior to July 1, 2000. Because Sun did not do so, NMSB says that as of July 1, 2000, Sun was in default, and that Suns default means that all of the provisions of Article 16 of the Master Lease, which includes the appraisal provision, do not apply. NMSB emphasizes that Article 16 provides "If the tenant is not in default of this Lease, Tenant shall have, . . . the option to extend the term of this Lease." Since Sun was in default, NMSB claims, Sun could not extend the lease, and therefore the appraisal provision could not be invoked.
We reject NMSBs argument that Sun was in default. First, the Article 16 language applies if the tenant is in default when the tenant chooses to extend; the quoted language has nothing to do with the fair rental rate and nothing about the language obligates Sun to resolve the rental rate on its own.
Second, when Sun chose to extend, it was not in default. Specifically, the Option Agreement required that Sun give "at least twelve (12) months" notice of its election to lease the premises directly. Sun elected in 1998 to extend the Master Lease. Sun elected in 1999 to exercise its option. At neither of those times was Sun in default. It is those time periods, rather than July 2000, that are relevant for the purposes of the Article 16 default language.
NMSB next argues that the lease was terminated on September 6, 2000, when it notified Sun that if an interim payment were not made immediately, Sun would be evicted. But the September 6, 2000 notice says nothing about terminating the lease. Further, shortly after NMSBs September 6, 2000 letter, Sun invoked the appraisal provision, the parties quarreled about that issue, but there was no mention of the lease being terminated, or any action taken by NMSB to evict Sun. On October 19, 2000, one day before the appraiser issued his report, NMSB served another three-day notice to quit upon Sun. In a timely response, Sun then paid NMSB $ 1,299,568. Sun continued to pay NMSB rent, through the remainder of the lease term, and NMSBs lawsuit was not filed until June 22, 2001. Given these circumstances, we reject NMSBs claim that the lease was terminated in September 2000.
Finally, NMSB says Sun waived its right to appraisal by its unreasonable and unjustifiable delay. We disagree. In September 1999, NMSB told Sun that it understood that Sun "wanted to wait to resolve this [fair market rent] until the occupancy date [was] closer" and said there was no "rush." On April 28, 2000, NMSB asked to meet with Sun about the rental rate. NMSB was unable to meet on June 12, 2000, the meeting date proposed by Sun. On July 7, 2000, the parties met but were unable to agree. They continued to negotiate. By July 24, 2000, Sun had indicated its intent to invoke the appraisal provision. The parties quarreled about the applicability of that provision, with Sun finally formally invoking the provision on September 15, 2000. Viewed as a whole, we do not believe these circumstances can fairly be characterized as demonstrating an unreasonable delay by Sun. We also note that NMSBs acceptance of Suns rent payments, and failure to file suit until June 2001, undercuts NMSBs position that Sun delayed unreasonably.
For these reasons, we conclude the trial court properly granted Suns petition to confirm the appraisal award.
II. Motion For Section 473 Relief
NMSB argues that the trial court erred in denying its request for mandatory relief under section 473, subdivision (b). We disagree.
Under section 473, subdivision (b), "Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorneys sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any . . . resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorneys mistake, inadvertence, surprise, or neglect."
Under the mandatory provision of section 473, subdivision (b), a party is entitled to relief if a default judgment or dismissal is the result of its attorneys mistake, inadvertence, surprise, or neglect, even if the neglect is inexcusable. (J.A.T. Entertainment, Inc. v. Reed (1988) 62 Cal.App.4th 1485, 1492.) In this way, the provision alleviates the hardship suffered by parties who lose their day in court due solely to their attorneys inexcusable failure to act. (Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 257; citing Huens v. Tatum (1997) 52 Cal.App.4th 259, 264.) "Thus, the Legislature created a narrow exception to the discretionary relief provision for default judgments and dismissals." (Zamora v. Clayborn Contracting Group, Inc., supra, 28 Cal.4th at p. 257, italics added.)
In this case, the mandatory provision does not apply because the circumstances here do not involve a default, default judgment, or dismissal. Instead, there was an appraisal, a petition to confirm the appraisal/arbitration award, hearing and argument on that petition, and the trial courts ruling confirming the appraisal/arbitration award. These facts plainly do not reflect a default or a default judgment. (See, e.g., English v. IKON Business Solutions, Inc. (2001) 94 Cal.App.4th 130, 133 [mandatory relief under section 473, subdivision (b) does not apply to summary judgments because a summary judgment is not a default, default judgment, or a dismissal].) Nor are they a dismissal. (Ibid.) Consistent with section 473, subdivision (b)s plain language, and the narrow application that it is intended to have, we conclude the mandatory provision does apply here.
Even if section 473, subdivision (b) applied despite the fact that there was no technical default, default judgment, or dismissal, it would still be inapplicable here because these circumstances do not pose the problem that section 473, subdivision (b) was intended to alleviate. The mandatory provision was intended to alleviate the hardship suffered by parties who lose their day in court due solely to their attorneys inexcusable failure to act. No such situation exists here.
Specifically, NMSB had its day in court when it vigorously contested Suns petition to confirm the arbitration award. (See Gotschall v. Daley (2002) 96 Cal.App.4th 479, 484 [mandatory provision did not apply when counsel "did not fail to oppose dismissal motion" and "plaintiff had an opportunity to contest the dismissal"]; Generale Bank Nederland v. Eyes of the Beholder Ltd. (1998) 61 Cal.App.4th 1384, 1398 [same].) " Day in court does not guarantee a trial on the merits, but, rather, is interpreted to confer an opportunity to present evidence and argument in opposition to a motion to dismiss. [Citation.]" (Gotschall v. Daley, supra, 96 Cal.App.4th at p. 484.) Just as plaintiffs who oppose a motion to dismiss are deemed to have had their day in court, so too has NMSB had its day in court by virtue of its opposing and contesting the petition to confirm the arbitration award. NMSB vigorously challenged the appraisal during the confirmation proceedings, and strenuously argued that the facts did not warrant invocation of the appraisal provision. In short, this is not the type of case section 473s mandatory provision was meant to address.
Finally, even if we were to reach a different conclusion with respect to the preceding two arguments, there is yet another reason for upholding the trial courts denial of mandatory relief. NMSBs decision not to participate in the appraisal stemmed from a strategic choice, rather than any mistake. NMSB was fully aware of the appraisal provision, and Suns decision to rely upon it, but steadfastly maintained its position that appraisal did not apply. Further, NMSBs position that appraisal did not apply was initially communicated to Sun by NMSBs general partner; it was only later when NMSBs counsel espoused this same view. Plainly, this is not a situation where counsel overlooked the appraisal date, or somehow missed participating in the appraisal. NMSB purposely elected to refuse to participate in the appraisal. Such circumstances do not reflect the type of attorney "mistake, inadvertence, surprise or neglect" mandating relief under section 473, subdivision (b). (See Gotschall v. Daley, supra, 96 Cal.App.4th at p. 484 [section 473, subd. (b) not intended to provide " perfect escape hatch " for any and all tactical errors]; Huens v. Tatum, supra, 52 Cal.App.4th at p. 264 [mandatory provision not meant to be a "catch-all remedy for every case of poor judgment" by counsel]; Yeap v. Leake (1997) 60 Cal.App.4th 591, 601 ["the only question is whether or not the dismissal was in fact caused by attorney neglect rather than, for example, actions of the client or an intentional strategic decision"].)
We also reject NMSBs argument that section 473s discretionary provision applies. NMSB did not request, produce evidence, or argue in support of, discretionary relief. Therefore we conclude the issue is waived. (See Gotschall v. Daley, supra, 96 Cal.App.4th at p. 485; English v. Ikon Business Solutions, Inc., supra, 94 Cal.App.4th at p. 149.)
III. Motion For Summary Judgment
NMSB contends summary judgment should not have been granted. It argues the confirmed appraisal award was not res judicata or collateral estoppel, that there are triable issues of fact, and that a continuance to conduct discovery should have been granted. These arguments are without merit.
In arguing that res judicata does not apply, NMSB relies upon National Union Fire Ins. Co. v. Stites Prof. Law Corp., supra, 235 Cal. App. 3d 1718. But National Union is easily distinguishable. In National Union , an insurers petition to confirm an arbitration award was denied. On appeal, the insurer argued that principles of res judicata barred the insured from relitigating in the trial court the issue of the arbitrators jurisdiction. The appellate court disagreed. It found that a judgment that is still open to direct attack by appeal or otherwise is not final, thereby rendering the doctrines of res judicata and collateral estoppel inapplicable. (Id . at p. 1726.)
Unlike National, in this case, the appraisal award was confirmed, and we have rejected NMSBs challenge to that confirmation. The appraisal award has binding res judicata effect. (See Klubnikin v. California Fair Plan Assn. (1978) 84 Cal. App. 3d 393, 397-399, 148 Cal. Rptr. 563 [binding confirmed appraisal award, and appellants failure to timely seek to vacate or modify award, justified summary judgment].)
NMSB argues that there are triable issues of fact regarding whether Sun was barred from invoking appraisal based upon Suns allegedly untimely demand, material breach, and/or waiver. We have already rejected NMSBs arguments regarding these issues. (See also Thibodeau v. Crum (1992) 4 Cal.App.4th 749, 755.) NMSB cites Four Star Electric, Inc. v. F & H Construction (1992) 7 Cal.App.4th 1375, 1380-1381 but it is distinguishable since it found there was no issue preclusion of matters " not necessary to uphold the judgment. "By contrast, NMSBs arguments here amount to an attack upon the appraisers jurisdiction, and the appraisers jurisdiction was a necessary issue, subject to issue preclusion.
NMSBs argument that there were triable issues regarding NMSBs right to recover statutory damages under Civil Code section 1951.2 is without merit. Civil Code section 1951.2 only affords a remedy when the lessee abandons the property or when the lessor terminates the lessees right to possession. That situation does not exist here.
Finally, NMSB says the trial court should have granted its request for a section 437(h) continuance so that it could conduct additional discovery to determine if Sun deliberately delayed resolution of the rent issue until market conditions changed in its favor. But this issue is no longer pertinent; we have already concluded that there was no unreasonable delay. (See, e.g., Allyson v. Department of Transportation. (1997) 53 Cal.App.4th 1304, 1321.) Further, NMSB has not demonstrated why it could not have taken the discovery earlier. (See, e.g., A&B Painting and Drywall, Inc. v. Superior Court (1994) 25 Cal.App.4th 349, 356-357.)
IV. Attorney Fees
NMSB contends that the trial court abused its discretion because the $ 140,389 in attorney fees awarded Sun was grossly excessive. MSB argues that the hours spent by Sun attorneys were excessive and unjustified.
The Master Lease provides: "In the event either Landlord or tenant shall bring any action or legal proceeding for an alleged breach of any provision of this Lease, to recover rent, to terminate this Lease, or otherwise enforce, protect, or establish any term or covenant of this Lease, the prevailing party shall be entitled to recover as part of such action or proceeding, or in a separate action brought for that purpose, reasonable attorneys fees, court costs and experts fees as may be fixed by the court."
The "experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong"-meaning that it abused its discretion.[] [Citations.]" " It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] . . . [Citation.] The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. " (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-1096, 997 P.2d 511.)
"The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court." (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479, 243 Cal. Rptr. 902, 749 P.2d 339.)
Here, the trial court reduced the fees requested by Sun by 31 percent. This matter was a multimillion dollar case and required Sun to respond to several motions, file an answer, engage in lengthy negotiations, respond to the many factual and legal issues raised by NMSB, and ultimately win the case via summary judgment. (See, e.g., Stokus v. Marsh (1990) 217 Cal. App. 3d 647, 657, 266 Cal. Rptr. 90 ["plaintiffs counsel were met at every step with learned, energetic, imaginative, concentrated, and extensive opposition by extremely able counsel who specialize in [these] matters. Defendants appear to be able to put up the stoutest resistance, which they did"].) The trial court itself said it "spent a lot of time on this." Given the trial courts discretion in these matters, coupled with the fact that the trial court already substantially reduced the requested fees, we decline to find that the attorneys fees awarded were an abuse of discretion or outside the bounds of reason.
DISPOSITION
The judgment is affirmed. The trial courts order awarding attorney fees to Sun is affirmed.
WE CONCUR: PREMO, J., WUNDERLICH, J.