Opinion
NOT TO BE PUBLISHED
Superior Court County of Ventura No. 56-2008-00330217 David Worley, Judge
Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor Peter E. Garrell, John M. Kennedy, for Defendant and Appellant.
Mafredi, Levine, Eccles, Miller & Lanson, Don E. Lanson, David V. Hadek, for Plaintiff and Respondent.
COFFEE, J.
Mountaingate Associates, LLC (Mountaingate) appeals from an order granting new trial to SBD Enterprises, Inc.'s (SBD) following summary judgment in Mountaingate's favor. We conclude that the trial court properly granted summary judgment, and erred when it ordered a new trial. We reverse.
FACTUAL AND PROCEDURAL BACKGROUND
Mountaingate is SBD's commercial landlord. SBD decided to sell its business, Elmer's Grill. SBD's sale to a third party fell through when Mountaingate did not give written consent to assignment. A written lease between SBD and Mountaingate required Mountaingate's written consent to assignment, not to be unreasonably withheld. The lease also prohibited oral modification and precluded damages for certain claims.
The original lessor was actually Mountaingate's predecessor in interest, RPP Mountaingate LLC. For convenience, we will refer to these entities collectively as Mountaingate.
SBD sued Mountaingate, alleging that it breached the lease contract because it gave oral consent to the assignment, and then unreasonably revoked that oral consent. SBD did not attach the lease to its initial complaint. It sought equitable relief and monetary damages. In a series of demurrers and motions to strike, Mountaingate invoked the provisions of the lease that required written consent, precluded oral modification, and limited remedies.
The third amended complaint withstood demurrer. In it, SBD alleged that the lease had been orally modified to permit oral consent to assignment, by executed oral modification. (Civ. Code, § 1698, subd. (b).) Alternatively, SBD alleged that Mountaingate waived the writing requirement, or was estopped from relying on it. (§ 1698, subd. (d).)
All statutory references are to the Civil Code unless otherwise stated.
SBD's third amended complaint asserted seven causes of action. It sought damages for breach of an orally modified contract, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation. It also sought rescission of the agreement to extend the lease term, and declaratory relief to establish that the lease had been orally modified to permit oral approval of a lease assignment, that the provision precluding monetary damages did not apply to claims based on revocation of previously granted consent, and that Mountaingate's revocation of approval was not valid.
Mountaingate moved for summary judgment or adjudication on the grounds that SBD's claims were precluded by the provisions of the written lease agreement. It presented the lease, correspondence, excerpts of the depositions of SBD's broker and SBD's president, and a declaration from Mountaingate's senior vice president. In opposition to the motion, SBD offered a declaration from its president and additional excerpts of its broker's deposition.
The lease between Mountaingate and SBD states that the tenant shall not assign or otherwise transfer the lease without "prior written consent of Landlord, which consent Landlord will not reasonably withhold." This provision is part of paragraph 14, which is entitled "Assignment and Subletting." It also provides that "if Tenant... claims that Landlord has unreasonably withheld or delayed its consent to a proposed Transfer or otherwise has breached its obligations under this Section 14, Tenant's... only remedy shall be to seek a declaratory judgment and/or injunctive relief, and Tenant... waives all other remedies against Landlord, including, without limitation, the right to seek monetary damages or to terminate this Lease." Another paragraph of the lease provides that the lease contains all agreements between the parties and, "No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest."
Correspondence between the parties and undisputed testimony established the following additional facts: SBD hired a restaurant broker to find a buyer for Elmer's Grill. SBD had about 15 months remaining on the lease term at the time. It also had an option to extend the lease by five years. On April 8, 2008, SBD's broker requested consent to the assignment by letter to Cynthia May, Mountaingate's property manager, and transmitted financial information about the buyer. On April 29, SBD's president exercised SBD's option to renew the lease for another five year term. He declares that he did so after his broker told him that May had said that the buyer was approved. He declares he was relying on that oral approval.
The trial court initially sustained Mountaingate's hearsay objections to this declaration, and later overruled the objections when it ruled on the motion for new trial.
Mountaingate does not concede that May said the buyer was approved. It does acknowledge that SBD "exercised its option to renew the Lease as a result of [the broker's] advising that Ms. May had approved [the buyer] for assignment of the Lease."
To prove oral consent, SBD offered the testimony of its broker that May told him, "It looks like the buyer is approved." The broker testified that May also asked him whether the buyer was aware that only 15 months remained on the lease. He testified that he relayed both statements to SBD's President.
More specifically, he testified that before SBD exercised its option, he "had received a verbal from Cyndy approving the buyer." When asked "what words did she use?, " he responded, "She said, 'It looks like he' -- again, this is a year and a half ago. To the best of my knowledge, she said, 'It looks like the buyer is approved, '" for the remaining term. The trial court initially sustained Mountaingate's hearsay objections to these excerpts, and then overruled them in its ruling on the motion for new trial.
SBD's president testified that he understood May's statements (as relayed by the broker) to be an invitation to exercise the option. He testified that the broker told him May approved the buyer and he needed to exercise the option. He "assumed" that May had said he needed to do so. He declared that he would not have exercised the option if he thought the buyer was not approved. He acknowledged that he signed the lease and was aware "there was something in the lease" requiring landlord consent to the sale.
"I was notified by [the broker] that he had talked to Cyndy May and that Cyndy May had said that [the buyer] was approved and that I needed to exercise the option so that I could -- so that [the buyer] would have the full seven years. [¶]... [¶]... Now, I don't know if Cyndy May told him that I had to exercise the option, but I know that in my conversation with [the broker], I assumed that Cyndy May had stated that only because the way he had stated -- stated it to me."
SBD's broker testified that he understood May's statements to mean that there was verbal consent to the assignment, but only for the remaining 15 months. He also understood that he would still need written consent to go forward with the sale and
that he would need additional consent for an extended five year term. He acknowledged that he had read the lease and understood that it required written approval. He said, "[V]erbal, you know, is usually just as good as written, but, inevitably, you usually get something in writing after you get verbal."
The broker testified, "I had received a verbal from Cyndy approving the buyer, letting me know but there is only -- the term left on the lease. [Q] So was that consent or wasn't it? [¶] [A] To the best of my knowledge, it's consent for a 15-month period.... [Q] So did you feel that once the option was exercised, you needed to get another consent from Cyndy May? [A] Well, I needed something in writing to go forward, yes." He was further questioned, "So as of the time of that conversation, it was your understanding, then, that you had had approval for the 15-month period, but you did not have approval for the 15-month period plus the option period? [A]: Right."
About a month after SBD exercised its option, on May 28, the broker wrote to May: "We're still waiting for the landlord's consent to the lease assignment.... It has been over a month and we're about ready to lose the buyer and the deal here. It has been over a month since we sent the request to transfer the lease. [¶] Obviously, we'd rather not take the position that this delay is unreasonably with [sic] holding consent to the lease.... [¶] So please consider this notice that unless within the next 10 days we don't [sic] get consent to the lease assignment, we'll consider your silence as consent and we will move forward with closing this deal."
On May 31, Ms. May responded, in writing, that Mountaingate had rejected the assignment due to the buyer's financial status. The broker replied, "Cyndy you told me before that everything looked good with him and that you wanted to be sure he was aware of the lease only having less than 2 years left, now that Bill exercised his option and has 6+ years on [the] lease what has changed with our buyer?" May did not provide further explanation. As the broker described the events in deposition, he talked to SBD's president about exercising the option, and "[a]ll of a sudden, he exercised the option, got that taken care of, and then we were -- we were then informed that the buyer was not approved."
Mountaingate submitted written objections to all of SBD's evidence. The trial court sustained each objection and granted summary judgment.
The court found that, "[t]he evidence submitted by Plaintiff, in the form of declarations by Messers Schemm [SBD's president] and Bowers [SBD's attorney, who authenticated the deposition excerpts], is almost entirely hearsay and/or without adequate foundation for admission. Each of Defendant's objections, as stated in Defendant's Objections to Plaintiff's Supplemental Statement of Facts, are sustained."
SBD moved for new trial. The court reversed its evidentiary rulings and granted the motion. The court stated, "I must say, I don't know what I was thinking.... [¶]... [¶] [A]s I look back on some of the evidentiary rulings, it is a mystery to me as to how the Court came to the rulings it did on the initial motion, and I think they are clearly in error." It found, "Plaintiff has carried its burden of establishing triable issues of material fact, " and reversed its decision on the summary judgment. It did not specify the triable issues of fact upon which it based its decision. This appeal followed.
DISCUSSION
Mountaingate contends that, even assuming all of SBD's evidence was admissible, there is no triable issue of material fact and it is entitled to summary judgment in its favor. We agree.
Standard of Review
We generally review orders granting new trial under the deferential abuse of discretion standard. (Mercer v. Perez (1968) 68 Cal.2d 104, 112.) But after a grant of summary judgment, we review an order granting new trial de novo to the extent the order relies on the resolution of a question of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 859; Doe v. United Air Lines, Inc., (2008) 160 Cal.App.4th 1500, 1505.) Whether a triable issue of fact exists is a question of law. Because Mountaingate does not contest the ultimate evidentiary rulings, we are not influenced by what the trial judge thought of SBD's evidence, either initially or eventually. Our analysis is based solely on de novo review and limited to the question whether any triable issue of material fact exists.
Each of SBD's claims depends on proof that Mountaingate gave enforceable oral consent to the assignment, and then revoked that consent. It is undisputed that the commercial lease required written consent. It is also undisputed that Mountaingate did not give written consent. To circumvent the writing requirement, SBD contends that the lease was modified to permit oral consent by operation of one of these legal principles: (1) executed an oral agreement (§ 1698, subd. (b)), (2) waiver, or (3) estoppel (§ 1698, subd. (d)).
SBD is correct that even a fully integrated agreement may be modified by executed oral agreement, waiver, or estoppel. Section 1698 provides that a contract in writing may be modified (1) by a contract in writing (subd. (a)); (2) by executed oral agreement (subd. (b)); (3) by oral agreement and new consideration unless the contract provides otherwise (subd. (c)); or by application of equitable doctrines including waiver and estoppel (subd. (d)). Modification by executed oral agreement, waiver, or estoppel is possible even if the written contract expressly precludes oral modification. (Cal. Law Revvision Com. Com., 9 West's Ann. Civ. Code (1985 ed) § 1698, pp. 721, 722; Miller v. Brown (1955) 136 Cal.App.2d 763, 775 [executed oral agreement]; Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 141 [waiver]; Conely v. Matthes (1997) 56 Cal.App.4th 1453, 1466 [estoppel].) We will consider each of SBD's three theories in turn.
Oral Modification By Executed Oral Agreement (§ 1698, subd. (b))
Modification by executed oral agreement requires proof by a preponderance of evidence of each element of the oral agreement and its execution. (Barrett v. Bank of America (1986) 183 Cal.App.3d 1362, 1370-1371.) Whether the parties modified their contract by executed oral agreement is a jury question. (See CACI No. 313.) An agreement is "executed" when the parties have fully performed. (§ 1661.) As with any agreement, proof of mutual assent is required. (Wade v. Diamond A Cattle Co. (1975) 44 Cal.App.3d 453, 457.)
Here, SBD presented no evidence of offer, acceptance, or execution of an agreement to modify the lease. SBD offered no evidence of words or conduct of Mountaingate, May, SBD, or SBD's broker that could be construed to be an offer to modify the contract to eliminate the writing requirement, or acceptance of such an offer. There is evidence of a conversation between May and the broker, in which she said it looked like the buyer was approved, but she did not refer to the writing requirement and the broker testified that he understood that written consent was still required. His understanding is reinforced by his letter, written one month later, in which he states that SBD is still waiting for consent. SBD's president declared that he understood May's statement to be an invitation to exercise an option, but his unexpressed subjective understanding is not evidence of mutual assent. (Stewart v. Preston Pipeline, Inc. (2005) 134 Cal.App.4th 1565, 1587.) As a matter of law, SBD cannot prevail on its theory that there was a fully executed oral agreement to modify the lease to eliminate the writing requirement.
Waiver of the Writing Requirement (§ 1698, subd. (d))
Parties may, by their conduct, waive their contractual rights under a provision that precludes oral modification. (Biren v. Equality Emergency Medical Group, Inc., supra, 102 Cal.App.4th at p. 141.) Waiver requires proof by clear and convincing evidence of the intentional relinquishment of a known right after full knowledge of the facts. (DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.Appp.4th 54, 59-60 (DRG/Beverly Hills).) "The pivotal issue in a claim of waiver is the intention of the party who allegedly relinquished the known legal right." (Id. at p. 60.) Doubtful cases are decided against waiver. (Ibid.) Ordinarily, the question of whether there has been a waiver is a question of fact for the jury, but the court may resolve the issue when the underlying facts are not disputed. (Old Republic Ins. Co. v. FSR Brokerage, Inc. (2000) 80 Cal.App.4th 666, 679.)
SBD cannot, as a matter of law, establish that Mountaingate intentionally relinquished a known right after full knowledge of the facts. SBD presented evidence that May told the broker it "looked like" the buyer was approved, but SBD presented no evidence that Mountaingate or May manifested any intent to relinquish the right to restrict assignments to those for which Mountaingate gave written consent. The lease, the declaration of Mountaingate's officer, the correspondence between the parties, and even the testimony of the broker all tend to prove that Mountaingate intended to exercise, not waive, its rights. SBD presented evidence that its broker thought he had verbal consent, and that SBD's President thought he had been invited to exercise the option, but we must focus on the evidence of Mountaingate's intent because Mountaingate is the party who is alleged to have relinquished its rights. (DRG/Beverly Hills, supra, 30 Cal.App.4th at p. 60.) Detrimental reliance has no place in the waiver analysis. Waiver refers to the act of only one side (Moutaingate) and requires no act or conduct by the other party. (Id. at p. 59.)
Estoppel to Rely Upon the Writing Requirement (§ 1698, subd. (d))
Equitable estoppel requires proof by clear and convincing evidence that (1) the party to be estopped knew the facts, (2) it intended that its conduct be acted upon, or acted in such a way that the party asserting estoppel had a right to believe that it was so intended, (3) the party asserting estoppel was ignorant of the true facts, and (4) the party asserting estoppel relied on the conduct to his injury. (DRG/Beverly Hills, supra, 30 Cal.Appp.4th at p. 59.) Estoppel may be applied to alter a written agreement. For example, in Wade v. Markwell & Co. (1953) 118 Cal.App.2d 410, 419, a pawn broker was estopped from relying on a written deadline for redemption because, when the borrower offered to redeem her coat, he assured her that he would hold it for at least another week. Estoppel is an equitable doctrine and its application presents questions of fact for the court. (DRG/Beverly Hills, at p. 61.)
SBD presented no evidence that Mountaingate intended that its conduct be acted upon, or acted in such a way that SBD had a right to believe that it so intended. The only evidence of conduct upon which SBD might have relied was Ms. May's equivocal statement that "[i]t looks like the buyer is approved" except there is only a "short period of time left on the lease." SBD's president declares that he "viewed the Landlord's and Ms. May's statements [as relayed by his broker] as an invitation to exercise the option, " and that SBD exercised the option in reliance on May's verbal consent. His subjective understanding was unreasonable as a matter of law. Even his agent, who relayed the statement, understood that written consent was still required, as evidenced by his testimony and his subsequent letter of May 28 in which he wrote that SBD was "still waiting for the landlord's consent." The May 28 letter also establishes that SBD did not actually rely on Ms. May's alleged oral consent. SBD is charged with knowledge of his agent. "Principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other." (§ 2332.) SBD argues that it is not bound by its broker's unexpressed erroneous conjecture, but the requirement of written consent was fact, not conjecture. Moreover, SBD's president is charged with knowledge of that requirement because he personally signed the lease. (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1124.)
There is no evidence from which any reasonable trier of fact could conclude that that Mountaingate intended for SBD to exercise its option in response to May's statement, or that SBD's president had any reasonable basis for believing that it so intended. Because SBD cannot prevail on any of its legal theories as a matter of law, we do not reach the scope of the contract's remedial limitations provision.
DISPOSITION
The judgment is reversed. Each party is to bear their own costs on appeal.
We concur: YEGAN, Acting P.J., PERREN, J.