Opinion
A099312.
7-16-2003
JOHN C. PAXTON, Plaintiff and Appellant, v. JAMES GILLER et al., Defendants and Respondents.
Introduction
John C. Paxton appeals from a judgment of the San Francisco Superior Court, following a court trial on his complaint for declaratory relief against the owners of the apartment building in which he has resided since 1974.
Procedural Background
This is the second time the provisions of this unusual Lease agreement are before us. On a previous appeal by Paxton, we reversed the trial courts grant of judgment on the pleadings and summary judgment in favor of defendant owners. In an unpublished opinion, we explained that while the 1986 residential Lease between Paxton and the owners predecessor contained language supporting the trial courts construction of the Lease as "converting appellants tenancy into a month-to month tenancy after expiration of the initial five-year term," the Lease was also "reasonably susceptible to the interpretation that gives appellant greater rights with regard to imposition of new Lease terms than those of a month-to-month tenant." (Paxton v. Giller et al. (Apr. 3, 2001, A088989) [nonpub. opn.], p. 8.) Consequently, we concluded that judgment on the pleadings and summary judgment were inappropriate where the Lease was "ambiguous as to its duration and legal effect."
Following reversal, Paxton amended his complaint and a trial was held during which the court considered extrinsic evidence as to the intent of the parties entering into the 1986 Lease agreement.
At the conclusion of trial, the trial court denied Paxtons claim that he possessed a fee simple or other ownership interest in the property, finding that "under the Lease, the plaintiff received a leasehold interest with an initial five year term, and thereafter a month-to-month tenancy with very strong tenant protections against eviction." The court granted declaratory relief for Paxton on the second cause of action, finding that a 1997 residential agreement Lease proposed by the owners was invalid and that the 1986 Lease was still binding on the parties. The court granted in part and denied in part Paxtons third cause of action for a declaration that the provisions of the 1986 Lease were covenants running with the land. The court concluded "the 1986 lease runs with the land for as long, but only as long, as the lease is valid." The court denied Paxtons claim that "the provisions of the 1986 lease run with the land for plaintiffs lifetime or in perpetuity." Thereafter, the court concluded that neither party had prevailed in the action and therefore ordered that "neither party shall recover costs or attorneys fees in this action, except [Paxton] shall recover the sum of $ 763.07 in undisputed costs on [his first] appeal."
Paxton appealed, contending (1) that the trial court erred in determining he did not have a fee simple or any kind of ownership interest in the property; (2) although the trial court correctly found he was not bound by the 1997 agreement, it erred in concluding he was not released from his obligations as a tenant under the 1986 Lease (including his obligation to pay rent) when respondents unilaterally sought to impose the 1997 agreement; (3) the trial court erred in determining that the provisions of the 1986 Lease did not run with the land for his lifetime or in perpetuity and in refusing to find that the covenants were binding on and inure to the benefit of his heirs and assigns; and (4) the court abused its discretion in determining that there was no prevailing party and in refusing to award him his attorney fees and costs (other than those costs incurred in the prior appeal). We shall affirm the judgment.
Facts
Paxton moved to augment the record on appeal to include the transcript of a January 1992 trial and depositions of various persons, as well as the record in the prior appeal in this case. We deny the request. The trial court properly focused on evidence of the intent of the then landlord and tenants upon entering into the Lease, granting respondents motion to exclude evidence other than that related to negotiations that led to entering the 1986 Lease.
In the prior appeal, we summarized the facts as follows:
"In 1974, Paxton became a tenant of a three-bedroom residential apartment located in a multi-unit building at 330 Presidio Avenue in San Francisco (the property). In July 1986, Paxton and respondents predecessor in interest, Cesar Viajar (Viajar), executed a written Residential Lease (Lease/lease) that was entered into in partial resolution of pending litigation between Paxton and Viajar over attempts by Viajar to evict Paxton from his apartment. Appellant alleged in his complaint that the specific intention of the parties in entering into the Lease was to ensure that appellants tenancy could continue until he elected to terminate it. A memorandum of the Lease signed by Paxton and Viajar was recorded on July 11, 1986 in the county recorders office.
"The Lease included the following pertinent provisions: " Term The term of this agreement shall be for 5 years, beginning October 1, 1986 and terminating September 30, 1991, and shall continue on a month-to-month basis thereafter, absent a material violation of this lease which shall constitute a just cause for eviction. "`After September 30, 1991, Tenant may only be evicted for those causes stated in subsections 1, 2, 3, 4, 5 and 6 of section 37.9(a) of the attached San Francisco Rent Stabilization Ordinance, or its successor Ordinance. [P] . . . [P] "`Termination Upon 30 days written notice, Tenant may terminate this Agreement and vacate the premises. [P] . . . [P] "`Binding on Heirs This lease shall be binding on and shall inure to the benefit of the heirs, assigns, executors, administrators, and successors of Landlord." "In addition, the rent clause of the Lease set a monthly rental for the unit of $ 596.24 and established a method for determining annual rent increases "for the term of the lease." It then provided that "at the end of this five year term, the rent may be adjusted on an annual basis thereafter" by the lesser of an agreed CPI factor or 3 percent, not to exceed the increase permitted under San Franciscos Rent Stabilization and Arbitration Ordinance. "Respondents James Giller, Barbara Wheeler, Frank Wheeler and Stuart Jacobson purchased the property from Viajar in January 1988 with notice of Paxtons lease. In connection with the financing of the purchase, respondents executed a Deed of Trust and Assignment of Rents (Assignment) in favor of Bay View Federal Savings and Loan Association (Bay View). "In March 1997, more than five years after expiration of the initial term of the 1986 Lease, respondents mailed to Paxton a "Residential Tenancy Agreement" (Agreement) with a cover page captioned NOTICE OF CHANGE TO TERMS OF TENANCY. The cover page, signed by respondents attorney, informed Paxton that at the expiration of 30 days `your month-to-month tenancy of the premises you now occupy will be changed, pursuant to Civil Code Section 827 . . . . The notice advised Paxton that the terms and conditions of his tenancy would thereafter be governed by the Agreement attached to the notice. The Agreement provided for a one-year lease at an increased rental. It further provided that after the one-year term of the Agreement expired, either party could terminate the tenancy by giving the other party 30 days written notice. Unlike the 1986 Lease, the Agreement, by its terms, placed no limitations on the landlords ability to evict appellant after its stated term of one year expired. The monthly rental amount for the stated term was $ 772.78. "Appellant declined to agree to the new terms and filed this action in September 1998." (Paxton v. Giller et al., supra, at pp. 1-3.)
Section 37.9, subdivision (a) of the San Francisco Rent Stabilization and Arbitration Ordinance enumerates all allowable grounds for eviction from residential units subject to its provisions. Subsections (1)-(6) permit eviction of tenants for material breaches such as nonpayment of rent, permitting the unit to be used for an illegal purpose, violation of material covenants or creation of a nuisance.
Following our reversal and remand of the matter for trial, the court considered extrinsic evidence relating to the intentions of the parties to the 1986 Lease. Remarkably, most of the persons involved in events surrounding the creation of the Lease and negotiations leading to its execution were available to testify: original landlord Viajar; tenants Paxton and John Migdal (Paxtons roommate at the time the Lease was negotiated); and Paxtons then-attorney Robert Sheppard, who negotiated the Lease on his behalf. Walter Condon, Viajars attorney, had died, but in his absence the court received into evidence prior testimony he had given in a related lawsuit regarding parking rights in the building.
Viajar testified that he purchased the apartment building at 330 Presidio in the early 1970s and sold it to Giller in 1986. Paxtons apartment was located on the top floor of a three-story building containing six units, two on each floor. Viajar testified that the relationship was strained between himself and tenants Paxton and Migdal. Viajar repeatedly tried to evict the pair. The 1986 Lease had been part of the settlement of a lawsuit by Paxton and Migdal against him. In addition, Viajars insurance company paid Paxton and Migdal $ 25,000 and had made certain specified repairs to the apartment. Viajar stated he was not involved in the negotiations of the Lease, but was represented by attorney Condon and was in touch with Condon with respect to the negotiations. He believed the Lease Condon presented him was a standard Lease, but he noticed provisions regarding non-harassment by the landlord were spelled out in detail. Viajar knew a memorandum of Lease was recorded against the property. No one ever told him that Paxton would become a part owner of the building as a result of entering into the Lease or that Paxton was obtaining a fee simple interest by signing the Lease. He understood that Paxton was the tenant and he was the landlord. Paxton never paid any money to obtain an interest in the property. Paxton never paid real estate taxes on the property and never informed Viajar that he had an ownership interest in the property or any interest that would have to be accommodated in any sale. Paxton never obtained any of the proceeds from the sale of the building in 1986.
Robert J. Sheppard, an attorney with extensive real estate practice experience, testified that he had represented Paxton and Migdal in their wrongful eviction suit for damages against Viajar and as part of the settlement had negotiated the Lease on their behalf. Sheppard testified that the wrongful eviction lawsuit involved the "worst case of landlord violations" he had seen in his then six to seven years of practice, including 15 to 20 attempts by Viajar to remove Paxton and Migdal from their rent controlled apartment, two lawsuits for eviction and two illegal rent increases. It involved both tort and personal injury claims (including two instances of Viajar kicking in the glass front door of the apartment). Consequently, Sheppard valued the lawsuit at between $ 200,000 to $ 300,000. The lawsuit settled for a cash payment of $ 25,000 and "future lease security," which Sheppard explained was obtained by creating a leasehold that would "satisfy my clients desire to prevent future encroachment or infringement or interference with his tenancy in the future." Negotiations with attorney Condon over the Lease lasted four to five months in 1986. Sheppard drafted the initial Lease and it went back and forth between the attorneys many times. Paxton told Sheppard he wanted "the strongest lease that Bob Sheppard and his firm can produce." Sheppard combed his lease files and found "a very very strong pro-tenants form" published by Richard Blumberg of the Berkeley National Law Project. Condon rejected that draft, and negotiations continued. A draft form of the lease was introduced into evidence as Exhibit 10. Sheppard testified that Condon indicated in red changes that he wanted to make in the draft. There was a sentence in the draft lease which stated, "This lease shall be binding on and shall inure to the benefit of the heirs, assigns, executors, administrators and successors of landlord and tenant." Sheppard testified that Condon put a period after "Landlord" and crossed out "and tenant" in this provision of the draft lease, noting on the draft that "this combined with the rent control ordinance will give tenant a virtual fee simple." Sheppard testified that he thought Condon was right and agreed to delete the phrase "and tenant" from that provision.
In the final lease, the rent escalation was more restrictive than allowed under the San Francisco Rent Ordinance. Paxton was allowed to sublet and assign the Lease, with the consent of the landlord, whose consent could not be unreasonably withheld. The Lease had a unique clause requiring the landlord to meet and confer with the tenant before serving an eviction notice, if the tenant failed to pay rent. The Lease also gave Paxton authority to withhold rent for the purpose of making repairs more often than the once a year the law then provided.
The initial lease term was to be five years. "But then I insisted on, at my clients request, after the five years, that the landlord [be] encumbered legally, contractually from evicting unless theres one of six narrow factual circumstances." These six circumstances provided a far more limited ability for the landlord to evict a tenant than under the San Francisco Rent Ordinance, which at the time had 13 "just cause" bases for eviction. Asked for his understanding at the time as to how long Paxton would have the right to remain on the tenancy after the initial five years, Sheppard replied. "I cant tell you that I had a duration in my mind. But I expected that if Paxton did not create [a] wrongful act to trigger just causes 1,2,3,4,5 or 6, that he could stay as long as he wanted or as long as an approved subtenants [sic]. That was my state of mind in negotiating and finalizing the lease." Sheppard also testified that he had communicated to Condon the principle that the landlord was losing his discretionary right to evict the tenants-"That we had to limit either Mr. Viajar or Mr. Viajars successors[] ability to undermine the Paxton tenancy in the future so that he wouldnt be put through prospectively what happened to him during the previous six to eight years." Asked whether he had an understanding at the time of negotiating the lease whether the landlord or its successor could subsequently amend the lease to reinsert various items that had been negotiated away, Sheppard replied: "I did, yes. If they could unilaterally take away the benefits that were bargained for, then the lease wouldnt have the value that I thought were bargaining for it to have. [P] . . . [P] So my intention in negotiating this, is that the landlord could not amend this lease so as to undermine the protections that [were] bargained for in it."
Sheppard also testified that it was his view at the time that if Paxton violated any covenant of the negotiated lease, "he can receive a three day notice to cure or quit, and not any other covenants even if unilaterally amended by the landlord." Sheppard told Condon that, "Mr. Paxton would have the right to terminate. . . . Landlord would not have the right to terminate either directly with a 30 day notice unless its for one of those six just causes . . . ." Nor would the landlord be able to terminate "in an indirect way such as amending the lease to prevent [Paxtons] rights to remain in possession."
The Lease was recorded in order "to place the world on notice including prospective future buyers that there is an encumbrance on this property . . . that the apartment occupied by Paxton or his successor, that there is an on-going limitation of the landlord to either terminate the tenancy or undermine the lease terms which were in effect. [P] And Mr. Paxton wanted that for the remainder of his tenancy or the remainder of subtenant approved by the landlord. Thats why it was recorded." This was the only non-commercial residential lease Sheppard had recorded in 23 years of law practice.
Sheppard testified that he never communicated to Paxton that what he had negotiated for him was a fee simple interest in the property. Nor did he ever communicate to Condon that he was attempting to obtain a fee simple interest or ownership interest in the property for Paxton. Paxton never stated to Sheppard that his objective was to have an ownership interest in the property. Sheppard did not think that Paxton could simply "hand [the leasehold] to someone." He also agreed that the tenancy ended at the time of death of the tenant.
Sheppard related that during a previous suit over parking spaces in the building, Condon, testifying as a witness, had stated "that the Paxton lease `basically gives a tenant a [life] estate." In response, Sheppard had stated "that it could be debated as true and applicable to all tenants [living under the San Francisco Rent Control laws]. Sheppard testified that "this lease gives the tenant rights that go beyond the rent law and state law." Sheppard also testified as to a number of bases in the lease and from its recordation that would prevent a landlord from unilaterally changing the lease or undermining the leasehold security.
John Migdal, Paxtons roommate at the time the lease was negotiated, participated in the negotiations. Asked whether it was his understanding at the time the lease was negotiated that the lease was going to give Paxton an ownership interest in the building, he testified: "Im not sure what an ownership interest is. But certainly nothing like a percentage share, anything like that, was ever discussed as part of this.
Paxton testified that in agreeing to settle the lawsuit "we would insist on taking away the landlords power to terminate the lease unless theres tenant default." He believed that understanding was accomplished in the lease. He understood "that [the Lease] was a contract that would continue unless I chose to terminate it. I understood that it would be an open-ended time, that would be of indeterminate duration." He did not believe it could be amended by the landlord without his consent.
Paxton based his claim to have a fee simple interest in the property upon his own research. He knew that he had bargained for something more than a month-to-month tenancy, but did not know what to call his interest. All the terms of the lease were to continue in effect after the initial five-year period. Paxton testified that at the end of the meeting at which the final 1986 Lease agreement was hammered out, "I certainly did not understand that Mr. Viajar had given me-let me make that very clear. There was no understanding whatsoever that Mr. Viajar had given me a fee simple interest in the building. [Italics added.] [P] . . . [P] I certainly knew that I had been granted some variation on a theme of a five year Lease. I knew that I had thereafter [a] term that gave me extra ordinary rights from landlord termination. . . ." Paxton testified he did not have the opinion that he had taken a fee simple interest in the property at the time he recorded the Lease. He arrived at that opinion sometime after March 1997. Paxton testified that he never paid a transfer tax for obtaining such interest; he never paid any property tax for his interest; he did not demand a share of the proceeds when Viajar sold the property and he did not inform the purchasers that he was a co-owner with them. Asked how much he paid for his interest in the property, he stated: "Ive often wondered that." Asked how he would calculate his capital gain if he were to sell his interest in the property, he testified, "Thats an interesting issue that noted my mind. I have no conclusion." Nevertheless, he maintained he had an ownership interest in the property.
Discussion
I. Standard of review.
Well established principles guide our review. "A lease has aspects of both a contract and a conveyance. The general rules applicable to the interpretation of contracts are applied for the interpretation of a lease. [P] . . . The lease must be interpreted reasonably, giving consideration to the entire document and not merely an individual clause in order to give effect to the intentions of the parties. It should be interpreted in a reasonable manner to provide each party with their reasonable expectations without violating the intentions of either party. [P] . . . [P] Except where modified by express provisions to the contrary, applicable statutory provisions are an integral part of the lease and affect its interpretation and enforcement." (7 Miller & Starr, Cal. Real Estate (3d ed. 2001) § 19:47, pp. 124-126, fns. omitted.)
"Parole evidence is admissible as an aid in interpretation where the lease is susceptible to the interpretation offered by the evidence. The parol evidence may be received by the trial court as an aid to ascertaining the intent of the parties, but the parol evidence rule prohibits the introduction of testimony of collateral oral agreements that contradict or modify the terms of the written lease." (Id. at pp. 126-127, fns. omitted.)
"On appeal, where the trial court has admitted extrinsic evidence as an aid to interpretation, and this evidence is in conflict, the appellate court is bound by any reasonable construction given to the lease by the trial court. Where . . . competent extrinsic evidence has been admitted but is not in conflict, the appellate court is not bound by the trial courts interpretation of the lease, and it may review the document and any other evidence admitted in reaching its own construction of the lease." (Id. at p. 127.)
II. The trial court correctly determined Paxton had no fee simple or other ownership interest in the property.
Applying the foregoing principles, we make short work of appellants claim that he acquired a fee simple or other ownership interest in the property from the 1986 Lease. Every person who testified about the Lease, including appellant, stated they did not intend or understand at the time the Lease was negotiated and executed that the Lease conveyed an ownership interest to appellant. This testimony was wholly consistent with the physical evidence of the draft lease containing the red markings and Condons comments in the margin. Substantial evidence clearly supported the trial courts conclusion that "it was definitely a lease hold interest that the parties had in mind when they negotiated, and finally signed the Lease. The interest conveyed to plaintiff pursuant to the 1986 Residential Lease was merely possessory, as a tenant, and not a fee simple interest or any kind of ownership interest in the subject property. Under the Lease, the plaintiff received a Leasehold interest with an initial five year term, and thereafter a month-to-month tenancy with very strong tenant protections against eviction." (Statement of Decision, p. 4.)
Moreover, as the trial court found, the Lease "contains both rights and obligations on the landlord and the tenant. Both must comply with these requirements." Thus, the trial court impliedly rejected any claim that the Lease provided Paxton with a "life estate." The hyperbole of Condons statement during his testimony in another matter that the Lease "basically gives a tenant a [life] estate" and Sheppards response that such a proposition was debatable with respect to all tenants living under the San Francisco Rent Control laws, did not persuade the trial court and do not persuade us that appellants Leasehold interest is anything other than a tenancy with extraordinary protections against eviction. Nevertheless, the parties intended that Paxton could be evicted should he breach the Lease by the occurrence of one or more of the six specified just causes contained in the San Francisco Rent Control Ordinance.
The trial court did not err in determining that the Lease did not convey to Paxton a fee simple estate or other ownership interest. He is a tenant, not an owner.
III. The court properly determined the 1986 Lease was still binding and that Paxton was not released from his Lease obligations.
The court found that the 1997 residential agreement was not binding upon Paxton as that agreement attempted to impose new terms and conditions upon him that were not within the contemplation of the parties at the time they entered into the 1986 Lease. (Statement of Decision, p. 6.) However, the court rejected his claim that the 1997 agreement acted as a release, converting his interest from a fee subject to a condition subsequent, to a fee simple estate without condition and relieving him of his obligations under the 1986 Lease "including the covenant to pay rent."
First, as pointed out by respondent, the argument contradicts Paxtons testimony and theory at trial, that the 1986 Lease was fully in force and binding on all parties. Paxton testified: "In my own mind, Im very clear that my-that I should be governed by the 1986 residential lease." At trial, Paxtons counsel argued that Paxton sought "first and foremost, the declaration from this court that the terms and conditions of the 1986 lease are still binding against the parties." Counsel stated Paxton wanted "a determination that the 1997 lease is invalid, that the 1986 lease is in effect, that the memorandum of lease is binding. We could stop our analysis there. That is the primary purpose why Mr. Paxton has pursued this case."
Second, we find no support in the law for Paxtons contention that by seeking to impose the new lease agreement, respondents released him from his obligations under the 1986 Lease, but that respondents, nevertheless, remained bound by it. Appellant characterizes this as a "unilateral release." Paxtons citation of Colyear v. Tobriner (1936) 7 Cal.2d 735, 62 P.2d 741, in support of this claim is exceedingly odd. That case holds that although the tenant was not required to pay the rent unilaterally imposed by the notice and new agreement that he rejected, nevertheless the tenancy under the agreement was terminated and the tenant remained in the premises as "a tenant at sufferance, who must pay the reasonable value of the use for such time as he holds over." (Id. at p. 742.) Moreover, such "reasonable value" is not determined under the applicable rent control ordinance. "It is . . . settled that rent control regulations have no application to an award of damages for unlawfully withholding property. [Citation.]" (Adler v. Elphick (1986) 184 Cal. App. 3d 642, 649, 229 Cal. Rptr. 254.) This is certainly not the result Paxton seeks.
Paxton also argues that the court erred by "ruling" that the deed of trust and assignment of rents executed by the owners in favor of Bay View Bank was a security interest. He argues that the deed of trust and assignment of rents conveyed all title and interest in the rents at the property to Bay View Bank, "which in turn divested Respondents of the requisite authority necessary to change the terms of the Lease." Appellant argued that consequently only Bay View Bank had "standing under the Lease to modify its terms." We disagree.
Paxton dismissed Bay View Bank as a defendant on June 23, 1999. No evidence was introduced at trial concerning the deed of trust and assignment of rents or of the intention of the parties at the time the document was executed. There was absolutely no testimony which could support an inference that Paxton was a third party beneficiary of that document. Although the argument was raised by Paxton-and we believe was effectively refuted by respondent-in the parties trial briefs, the argument was not pursued in the trial court. What Paxton characterizes as the courts "ruling" was the mere description of the deed of trust and assignments of rents as a "security agreement whereby Bay View Federal Savings and Loan provided the capital to defendants . . . ." There was little reason for the trial court to know that appellant continued to raise this theory at trial. (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.)
Were we to consider the issue adequately preserved for review, we would nonetheless conclude it to be wholly without merit. The result that Paxton urges is absurd. Lending institutions are not transformed into fee owner landlords when they finance the purchase of real property. "An examination of the decisions shows that the deed of trust gives the trustee only such interest as is necessary to carry out the trust; that in practical effect it is `little more than a mortgage with power to convey; and that the trustee takes the legal title for security only, leaving a legal estate and the ordinary rights of ownership in the trustor. [Citations.]" (3 Witkin, Summary of Cal. Law (9th ed. 1987) Security Transactions in Real Property, § 6, p. 519.) "In most situations, . . . the deed of trust has been deemed to create a mere lien upon the property." (Ibid.)
IV. The trial court correctly determined that provisions of the 1986 Lease do not run with the land for Paxtons lifetime or in perpetuity.
The trial court granted in part and denied in part Paxtons third cause of action request for declaratory relief that the covenants of the 1986 Lease constituted covenants running with the land. The court found: "The 1986 lease runs with the land for as long, but only as long, as the lease is valid. Plaintiffs claim in his third cause of action is denied insofar as it claims that the provisions of the 1986 lease run with the land for plaintiffs lifetime or in perpetuity." (Statement of Decision, p. 7.) Paxton contends the court erred in determining that the benefits of the leasehold did not extend to Paxtons children or heirs.
"A covenant that runs with the land is binding on successors. A personal covenant, on the other hand, only obligates the original parties." (Miller & Starr, supra,$ S 19:54, p. 144, fns. omitted. Appellant argues that any legal successor is entitled to the benefit of the covenants of the lease agreement, as if the successor were an original covenantee, quoting from Miller & Starr: "In general, most lease covenants run with the land `touch and concern the land and are binding on the heirs, successors, grantees, and assigns of the original landlord and tenant." (Ibid., fns. omitted.) However, the examples provided by that treatise support the trial courts finding that the benefits of the 1986 Lease did not "run with the land" for Paxtons lifetime or to his heirs and successors. "The landlords covenant of quiet enjoyment and the grant of an option to the tenant to purchase, or renew the lease, run with the land. Also, the tenants covenants to pay rent, taxes or assessments, to repair and surrender the premises at the end of the term, and to keep the premises free from mechanics liens, run with the land and are binding on subsequent assignees." (Id. at pp. 144-145, fns. omitted.) None of these examples include just cause eviction protections. On the other hand, "[a] restriction against assignment or subletting is a personal covenant made for the benefit of the landlord, and does not run with the land in the absence of a specific lease provision indicating an intent to bind the heirs and assigns of the parties. [P] However, the covenant is binding on the assignees and sublessees of the tenant and can be enforced against the tenants successors when the lease provides that it is binding on successors and assigns. (Id. at p. 145, fns. omitted, italics added.)
Here, the parties struck out the phrase providing that the Lease "inure to the benefit of the heirs, assigns, executors, administrators and successors" of the tenant and the evidence presented amply supports the trial courts determination that the lease covenants run with the land only so long as the lease is valid and do not extend for Paxtons lifetime or to his heirs and successors.
Paxtons argument stands or falls with his claim to a fee simple interest in the property. We have heretofore concluded that substantial evidence supported the trial courts determination that Paxton did not have a fee simple or ownership interest in the property and that such evidence was consistent with the terms of the lease. Paxton has a month-to-month tenancy for an indeterminate time with strong protections against eviction and the tenancy does not extend beyond his lifetime. This is consistent with the rule for month-to-month tenancies.
In Miller v. Desatnik Management Co. v. Bullock (1990) 221 Cal. App. 3d Supp. 13, 270 Cal. Rptr. 600, the court held that a month-to-month tenancy terminates by operation of law upon the death of the tenant. (Id. at p. 18.) "Miller arose in a rent control jurisdiction and involved a situation where a mother continued possession of an apartment after her daughter, the original tenant, died, even though the mother had never been a tenant. The mother continued rent payments and visited the apartment frequently in an apparent effort to remain close to her deceased daughter. The judgment was for the landlord against the holding-over mother." (Cal. Civ. Prac., Real Property Litigation § 21:7.) The Miller court observed that such rule "prevents the inequitable result of requiring the landlord to participate in a potentially indefinite Lease with a tenant he never contracted with in the first place. This result is even more compelling in situations where, as here, rent control laws prevent landlords from evicting tenants except under limited circumstances." (Miller & Desatnik Management Co. v. Bullock, supra,
221 Cal. App. 3d Supp. at p. 19; see also Friedman et al., Cal. Prac. Guide, Landlord-Tenant (The Rutter Group, 2002) P 7:95.1.)
We conclude the trial court did not err in rejecting Paxtons claim that the Leasehold benefits could be passed on to his heirs and successors.
V. The court did not err in concluding there was no prevailing party and that each should bear its own costs and fees through trial.
The Lease contained a provision awarding reasonable attorney fees to the prevailing party in any lawsuit to enforce provisions of the lease agreement. The trial court determined in the exercise of its discretion pursuant to Code of Civil Procedure section 1032, subd. (a)(4) "that there was no `prevailing party in this action."
Code of Civil Procedure section 1032 provides in relevant part: "(a) As used in this section, unless the context clearly requires otherwise: [P] . . . [P] (4) `Prevailing party includes the party with a net monetary recovery . . . . When any party recovers other than monetary relief and in situations other than as specified, the `prevailing party shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides . . . ."
Further, pursuant to Presley of Southern California v. Whelan (1983) 146 Cal. App. 3d 959, 196 Cal. Rptr. 1, the court determined "that no attorneys fees should be awarded to [Paxton] for his successful appeal of the summary judgment and judgment on the pleadings initially entered in this case, because the appeal was merely an interim stage of the litigation and `a party who prevails on appeal is not entitled under a section 1717 fee provision to the fees he incurs on appeal where the appellate decision does not decide who wins the lawsuit but instead contemplates further proceedings in the trial court. [(Id. at p. 961.)]"
We believe the court acted within its discretion in so determining.
Where a contract provides for an award of attorneys fees and costs incurred to enforce the contract, "The court, upon notice and motion by a party shall determine who is the party prevailing on the contract for purposes of this section. . . . The party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section." (Civ. Code, § 1717, subd. (b)(1), italics added.)
As the California Supreme Court has observed: "When a party obtains a simple, unqualified victory by completely prevailing on or defeating all contract claims in the action and the contract contains a provision for attorney fees, section 1717 entitles the successful party to recover reasonable attorney fees incurred in prosecution or defense of those claims. (Hsu v. Abbara (1995) 9 Cal.4th 863, 877, 891 P.2d 804 . . . .) If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees. `In deciding whether there is a "party prevailing on the contract," the trial court is to compare the relief awarded on the contract claim or claims with the parties demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. (Id. at p. 876.)" (Scott Co. v. Blount, Inc . (1999) 20 Cal.4th 1103, 1109, 979 P.2d 974.)
"The trial courts determination that there was no prevailing party on the contract is an exercise of discretion. We will disturb it only if there has been a clear showing of an abuse of that discretion. [Citations.]" (McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal. App. 3d 1450, 1456, 282 Cal. Rptr. 828.) Clearly there has been no abuse of discretion here.
"As one Court of Appeal has explained, `typically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought. [Citation.]" (Hsu v. Abbara, supra, 9 Cal.4th 863, 875.) "Accordingly, we hold that in deciding whether there is a `party prevailing on the contract, the trial court is to compare the relief awarded on the contract claim or claims with the parties demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by `a comparison of the extent to which each party has succeeded and failed to succeed in its contentions. [Citation.]" (Id. at p. 876.)
Paxton achieved one of his main litigation objectives in obtaining declaratory relief that the 1997 Lease agreement was invalid and the 1986 Lease continues to bind the parties. However, he clearly failed to obtain other principal objectives: a declaration that he now has a fee simple or other ownership interest in the property; that he is released from his obligations to pay rent under the 1986 Lease; that the benefits of the 1986 Lease may be passed on to his heirs and successors. The trial court clearly acted within its discretion in determining there was no prevailing party in the trial court and in ruling that each party should bear its own fees and costs in the litigation, save for the costs (not including attorney fees) awarded by us in connection with the first appeal.
Disposition
The judgment is affirmed. Respondents shall recover their costs and their reasonable attorney fees on this appeal. The amount of attorney fees shall be set by the superior court.
We concur: Haerle, J., and Lambden, J.