Opinion
C082993
07-27-2018
HUSEIN SHEHADEH, Plaintiff and Respondent, v. ALEX ALTOH, Defendant and Appellant.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 34201000082378CUBCGDS)
Defendant and appellant Alex Altoh and plaintiff and respondent Husein Shehadeh jointly leased commercial property from the Azevedo Family Trust (Trust). The property, which is located in Citrus Heights, included several buildings used for automobile sales and repair. Shehadeh operated an automobile sales business on one part of the property, while Altoh operated an automobile repair business on another. A fire occurred, disrupting Shehadeh's sales business and destroying Altoh's repair business. Shehadeh sued Altoh for negligence and premises liability, claiming the fire originated in Altoh's automobile service garage. Following a bench trial, the trial court entered judgment in Shehadeh's favor, awarding damages in the amount of $210,750. Shortly thereafter, Shehadeh filed a motion for attorneys' fees pursuant to a prevailing party provision in the lease. The trial court granted the motion and awarded Shehadeh $237,080 in attorneys' fees. Altoh appeals, arguing the attorneys' fee provision does not apply to disputes between joint tenants. We disagree and affirm the award.
The Trust was dismissed as a party prior to trial.
I. BACKGROUND
Shehadeh operated a used car dealership in Roseville. Altoh was a finance representative for an automotive finance company. Shehadeh and Altoh became acquainted through work and eventually became friends.
In 2007, Shehadeh opened a second used car dealership. The new dealership, which became known as Angel's Motors, was originally located in Sacramento. Shehadeh operated Angel's Motors as a sole proprietorship.
Shehadeh hired Altoh as a finance manager for Angel's Motors in 2008. The property, which is owned by the Trust, became available for lease around the same time. Shehadeh, believing the property to be an excellent location for a car dealership, decided to relocate Angel's Motors to Citrus Heights.
A meeting was held to discuss possible lease terms. The meeting was attended by Shehadeh, Altoh, and Gregg Azevedo, who was acting on behalf of Kathryn Azevedo, the trustee of the Trust. During the meeting, the parties reviewed a preprinted form of lease entitled, "AIR Commercial Real Estate Association Standard Industrial/Commercial Single-Tenant Lease." They made several handwritten revisions to the form, but did not make any changes to the paragraphs implicated by the present dispute. Following this discussion, Shehadeh and Altoh, as tenants, entered into the lease with the Trust, as landlord.
The meeting was also attended by Azevedo's real estate broker (who supplied the form) and the former tenant of the property.
The lease, which has an effective date of June 15, 2008, identifies the parties as follows: "Parties: This Lease ('Lease') . . . is made by and between Azevedo Family Trust ('Lessor') and Husein Shehadeh and Alex Altoh dba Angels Motors ('Lessee'), (collectively the 'Parties,' or individually a 'Party')." The lease contains a signature block, which similarly identifies the "Lessee" as "Husein Shehadeh and Alex Altoh dba Angels Motors." The lease was signed by Shehadeh and Altoh in their capacities as "owner[s]," presumably of Angel's Motors. During the trial, Shehadeh testified that Gregg Azevedo, who is now deceased, wanted Altoh to sign the lease. Altoh, for his part, testified that he was eager to sign the lease because he believed that doing so gave him some kind of job security.
This designation appears to have been incorrect, as Altoh does not have an ownership interest in Angel's Motors.
The lease contains an attorneys' fee provision, which provides in pertinent part: "If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees."
Although Shehadeh and Altoh were both identified as lessees under the lease, and were each jointly and severally liable for the rent, only Shehadeh made monthly rent payments to the Trust.
In August 2008, Shehadeh entered into a sublease with nonparty Gary Razo for an automobile service garage on the property. By April 2009, Razo had stopped paying rent and terminated possession of the garage. Altoh saw an opportunity to take over the automobile repair business (which was called Auburn Automotive), and asked Shehadeh about subletting the garage. Although Altoh was a joint lessee on the Lease, Altoh and Shehadeh agreed that Altoh's wife, Cherie Al-Tuaimeh, would sublet the garage from Shehadeh, and Altoh would operate Auburn Automotive at that location. Shehadeh and Al-Tuaimeh entered into an agreement entitled "Commercial Sub-Lease Agreement" on or about June 30, 2009.
The sublease contains an attorneys' fee provision, which provides as follows: "It is further understood and agreed by and between the Sub-Lessor and Sub-Lessee that [if], on account of breach or default by either party of any of their obligations hereunder, it shall become necessary for the other party to employ and/or consult with an attorney to give advice, or to enforce or demand any of either party's rights or remedies hereunder, then, and in any such event, the defaulting or breaching party shall pay all attorney fees, court costs and other expenses occasioned by such default(s) or breach(es)."
A fire broke out in the automobile service garage in the early morning hours of September 18, 2009. The fire consumed the garage and everything inside it. The modular buildings used by Shehadeh for Angel's Motors were spared; however, the fire and emergency response caused a cessation of utilities to Angel's Motors, such that Shehadeh could no longer conduct business. After several months without sales, Shehadeh's financing dried up, and he decided that it no longer made economic sense to renew his dealer bond. On December 21, 2009, the Department of Motor Vehicles informed Shehadeh that his failure to reinstate the bond resulted in automatic cancellation of his dealer's license for Angel's Motors. Shehadeh commenced the instant action some seven months later.
The second amended complaint, which is the operative pleading, asserts causes of action for negligence, premises liability, conversion, breach of the sublease, common counts, and breach of a promissory note in the amount of $54,000 against Altoh and Al-Tuaimeh. The second amended complaint also asserts causes of action for negligent misrepresentation, negligence, and breach of the lease against Kathryn Azevedo, as trustee of the Trust. Shehadeh dismissed the causes of action against the Trust prior to trial. He also dismissed Al-Tuaimeh, leaving Altoh as the only remaining defendant, and his causes of action for negligence and premises liability as the only remaining causes of action.
The matter was tried as a bench trial in July 2015. On February 8, 2016, the trial court issued a final statement of decision finding, inter alia, that Altoh failed to use reasonable care in the maintenance of the automobile service garage. Among other things, the trial court found that Altoh used "homemade" extension cords to increase the number of electrical outlets in the garage and failed to properly store waste materials from oil changes and other services on cars, setting the stage for an electrical fire hazard that was exacerbated by flammable vapors and other fuel sources in the garage. Based on the evidence presented, the trial court found that Altoh's negligence was a substantial factor in causing the fire which, in turn, disrupted the business of Angel Motors, thereby causing harm to Shehadeh. Accordingly, the trial court found that Shehadeh proved the elements of negligence and premises liability by a preponderance of the evidence, and awarded damages in the amount of $210,750.
Following entry of judgment, Shehadeh moved for attorneys' fees under the lease, seeking an award of $253,780. Altoh opposed the motion arguing, as he does on appeal, that the attorneys' fee provision in the lease does not apply because (1) the term "Party," as used in the attorneys' fee provision, was specially defined in the lease to mean Shehadeh and Altoh, and not Shehadeh orAltoh, and (2) the lease governs disputes between Shehadeh and Altoh, as joint tenants, on the one hand, and the Trust, as landlord, on the other, and not disputes between Shehadeh and Altoh. The trial court heard argument on the motion on May 27, 2016. In anticipation of the hearing, the trial court issued a tentative ruling granting Shehadeh's motion for attorneys' fees, and rejecting Altoh's argument that the attorneys' fee provision in the lease is inapplicable.
Shehadeh's moving papers refer to the attorneys' fee provision in the sublease, but do not seek an award under that provision.
The trial court explained: "Here, the attorney's fees clause plainly states that 'any Party' may be entitled to fees as provided in that section. [Citation.] The Court finds that the term 'Party,' is specially defined and individually refers to the Azevedo Family Trust, Husein Shehadeh, and Alex Altoh. [Citation.] The Court is unpersuaded by [Altoh's] argument that neither [Shehadeh] nor [Altoh] is a 'Party' under the terms of the Lease. [Altoh] argues: 'Here, the words "Parties" or "Party" are used in a technical sense or special meaning to mean the "Lessor" and/or the "Lessee" and do not mean each individually named person on the Lease.' [Citation.] However, the Lease does not state so. Rather, while it is true that Shehadeh and Altoh are also specially and collectively defined as 'Lessee,' the Lease makes clear that where the term 'Party' is used, it is an individual reference to the identified parties to the Lease. Further, had the parties intended the attorney's fees clause to apply strictly to actions in which the 'Lessor' and "Lessee' are adverse, they could have simply stated so in the clause. Instead, when it came to the attorney's fees clause, the parties elected not to use 'Lessor' and 'Lessee,' but instead, they used the clearly broader term, 'any Party.' This permits [Shehadeh] to seek attorney's fees against [Altoh] in this action."
The trial court continued: "Similarly, the Court rejects [Altoh's] argument that there were no contractual obligations between [Shehadeh] and [Altoh] and no intention for the Lease to allow them to recover attorney's fees against each other. As an initial matter, [Altoh's] bare assertion that [Shehadeh] and [Altoh] have no obligations to each other is arguable. As a general matter, for instance, joint lessees would have implied covenants of good faith and fair dealing to each other and all other parties to the contract. Also, an action for indemnity between lessees would be based upon their individual liability as separate lessees on the contract. Further, the attorney's fees clause at issue, by its plain terms, is intended to be broad. It is not restricted to obligations to one another based in contract, but instead, also applies to claims founded in tort and equity. [Citation.] While the most typical disputes arising out of a lease are between lessor and lessee, there is certainly nothing unlawful or absurd about an attorney's fees clause which ensures that should a dispute arise between or among lessees themselves (or lessors themselves), such claims also fall within the scope of the clause. Such is the reasonable construction of the attorney's fees clause at issue."
At the hearing, Altoh, through counsel, urged the trial court to reconsider the tentative ruling, arguing that the parties intended to govern their relationship according to the terms of the sublease (which contains a narrow attorneys' fee provision that would not cover the present tort causes of action), and not the lease (which contains a broader attorneys' fee provision, that would cover the present tort causes of action). The trial court rejected Altoh's argument, stating: "I understand your argument you are making, which is the fact that a sublease was entered even though it was entered with—entered into by [Shehadeh] and [Altoh's] wife, should be viewed as evidence to suggest that the main lease was not an operative construction of obligation between the two lessees. [¶] However, the main lease still needs to be—I understand the argument. The main lease still has to be construed pursuant to the rules of contractual interpretation."
The trial court continued: "These are parties that did not seek your counsel, did not seek anybody's counsel, before they entered into this agreement. [¶] We have an agreement that specially defines the Azevedo [T]rust as the lessor, specially defines Husein Shehadeh and Alex Altoh as the lessee, and then states that collectively they are the parties, or individually a party. [¶] There is nothing that actually states that the use of the term [']party['] is actually a reference back to another specially defined term, meaning [']lessor['] and [']lessee.['] [¶] There is nothing that states that. Could it have said that[?] Had a good lawyer given advice about it, of course it could."
The trial court continued: "And then we have all of these many provisions in this standard lease which specifically use the terms [']lessor['] and [']lessee['] to draw distinction between the fact that those two parties and their obligations are being defined vis a vis each other, vis a vis lessor and lessee. [¶] And then that distinction, which is heavily used throughout this entire contract, is then abandoned when we get to the attorneys' fees clause. [¶] While that distinction could be used, and while it could be crafted to make a distinction to suggest that a dispute among a lessee, among lessees, is not an—is not included, the attorneys' fees clause abandons the use of lessor and lessee, and instead elects to use the broader term [']party,['] any party."
The trial court went on: "So the problem here is that in order to reach the conclusion that the attorneys' fees clause in the lease does not cover a dispute between lessees, one has to reach the conclusion that when the contract says any party, it does not mean any party. When it says any party, it does not mean any party. [¶] What it instead means is lessor and lessee to the exclusion of the two lessees being separate parties. Well, a contract can conceivably do that, but there is nothing in that form contract that says that. [¶] And that is the problem. Where the plain language of the instrument is going to be the guide of the agreement of the parties at the time it was made, the sublease was made at some later time, and with technically a different party. [¶] But to construe this contract for what it represents, and the language therein as the agreement between the parties at the time it was made, they did not seek any counsel to determine whether there is something else that should be done, or some other modifications that should be made to this contract. [¶] Which, by the way, they did for some other things, it appears, but they did not do that."
The trial court concluded: "So we are left with this very difficult position that you are in now where you have to argue to this court that when the contract says any party, it doesn't actually mean any party to the lease, which is a difficult position to articulate and to argue. [¶] Any party doesn't mean any party. It's hard to swallow." Following further argument, the trial court took the matter under submission.
On June 20, 2016, the trial court entered an order affirming its tentative ruling and awarding attorneys' fees to Shehadeh in the amount of $237,080. Altoh filed a timely notice of appeal.
As noted, Shehadeh sought an award of $253,780. The trial court found some of the requested attorneys' fees reflected noncompensable attorney time, and reduced the request by $16,700 for a total award $237,080. --------
II. DISCUSSION
Altoh contends the trial court erred in interpreting the lease to allow recovery of attorneys' fees in the present dispute between joint tenants. We disagree.
" 'We review de novo a determination of an award of attorney fees under a contractual provision where, as here, no extrinsic evidence has been offered to interpret the contract, and the facts are not in dispute.' [Citation.] 'Our goal in interpreting a contract is to give effect to the mutual intention of the contracting parties at the time the contract was formed. [Citation.] We ascertain that intention solely from the written contract if possible, but also consider the circumstances under which the contract was made and the matter to which it relates. [Citation.] We consider the contract as a whole and interpret its language in context so as to give effect to each provision, rather than interpret contractual language in isolation. [Citation.] We interpret words in accordance with their ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given to them by usage. [Citation.] If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs. [Citation.]' [Citations.]" (Orien v. Lutz (2017) 16 Cal.App.5th 957, 961-962.)
Altoh contends the trial court erred in concluding that Altoh and Shehadeh were each a "party" within the meaning of the lease. According to Altoh, the term "party," as used in the lease, refers to Shehahdeh and Altoh, on the one hand, or the Trust, on the other. We are not persuaded.
The ordinary meaning of the term "party," in the commercial context, is someone who takes part in a transaction. (Black's Law Dictionary (10th ed. 2014) p. 1297, col. 2.) There is no question that Altoh took part in the lease transaction. He signed the lease and was jointly and severally liable to the Trust for rent and other lease obligations. Giving the term its ordinary meaning, we have little difficulty concluding that Altoh was a "party" to the lease, such that he could be liable for attorneys' fees as the nonprevailing party in litigation with another party; namely, Shehadeh.
In an effort to avoid this conclusion, Altoh argues that the terms "Party" and "Parties" have a special meaning derived from usage. (See Civ. Code, § 1644 ["The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed"].) Altoh is correct, to a point. As noted, the lease specially defines the terms "Party" and "Parties" as follows: "Parties: This Lease ('Lease') . . . is made by and between Azevedo Family Trust ('Lessor') and Husein Shehadeh and Alex Altoh dba Angels Motors ('Lessee'), (collectively the 'Parties,' or individually a 'Party')." Altoh suggests that the special definitions of the terms "Party" and "Lessee" are coextensive, such that the combination of Shehadeh and Altoh amounts to a single "Party" for purposes of the lease. But this interpretation would require an unnatural reading of the words "collectively" and "individually."
The adverb "collectively" derives from the adjective, "collective," which denotes "a number of persons or things considered as one group or whole." (Merriam-Webster's Collegiate Dict. (11th ed. 2003) p. 243, col. 2.) The adverb "individually" derives from the adjective, "individual," which means, "a particular being or thing as distinguished from a class, species, or collection: as (1): a single human being as contrasted with a social group or institution . . . (2): a single organism as distinguished from a group." (Id. at p. 635, col. 2.) If the Trust and Shehadeh and Altoh are "collectively" understood to comprise "Parties" (an interpretation that no one appears to dispute), then the Trust or Shehadeh or Altoh must each "individually" comprise a "Party."
Although the form of lease may have been primarily designed with a two-party transaction in mind, nothing in the lease suggests that the term "Party" can or should be understood to convey anything other than the usual meaning. If anything, paragraph 44 of the lease, on which Altoh relies, bolsters our conclusion that the term "Party," as used in the lease, means a single person or entity.
Paragraph 44 of the lease, entitled "Authority; Multiple Parties; Execution," deals with three subjects: (1) the authority of the Party executing the lease (subdivision (a)), (2) the joint and several liability of multiple lessees (subdivision. (b)), and (3) the execution of the lease in counterparts (subdivision (c)). Subdivision (b), which corresponds most clearly to the concept of "Multiple Parties," provides, "If this Lease is executed by more than one person or entity as 'Lessee[,'] each such person or entity shall be jointly and severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document." Although we hesitate to read too much into the title of paragraph 44, the use of the phrase "Multiple Parties" to refer to a situation in which "more than one person or entity" executes the lease as Lessee, strongly suggests that each such "person or entity" can and should be considered a "Party" within the meaning of the lease.
Anticipating this conclusion, Altoh directs our attention to the fact that subdivision (b) uses the phrase "person or entity" rather than "Party." The use of the phrase "person or entity" does not undermine our conclusion that each such person or entity is a "Party" within the meaning of the lease. Having previously defined the term "Party" to mean either the Lessor or the Lessee, the drafters reasonably chose another phrase to describe a situation involving multiple lessees, thereby avoiding a confusing construction in which the Lessor could technically (albeit nonsensically) be viewed as a lessee, jointly and severally liable to itself. Reading the lease as a whole, the use of the phrase "person or entity" in paragraph 44 appears to us to be an attempt at avoiding confusion, rather than an attempt to draw a novel distinction between a "Party" on the one hand, and a "person or entity" on the other. We therefore decline Altoh's invitation to view paragraph 44 as support for his strained interpretation of the term "Party."
Based on our independent review, we are convinced that the term "Party," as used in the lease, encompasses individual lessees, such as Shehadeh and Altoh. Our interpretation not only comports with the popular and ordinary meaning of the word "Party," it also complies with the rule that all words in a contract are to be given meaning. (See Civ. Code, § 1641 ["The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other"].) We therefore conclude that Shehadeh and Altoh are each, individually, a "Party" within the meaning of the lease.
Having so concluded, we further conclude that Shehadeh and Altoh are each entitled to seek attorneys' fees as the prevailing party in litigation against the other. Although the lease uses the terms "Lessor" and "Lessee" throughout, the attorneys' fee provision specifies that fees are available to "any Party" in a dispute involving the property. As the trial court observed, the use of the phrase "any Party" suggests that the parties intended for the attorneys' fee provision to have a broader reach than one limited to disputes between Lessor and Lessee, consistent with the decision to make attorneys' fees available in a wide range of possible disputes involving the property, "whether founded in tort, contract or equity." We agree with the trial court that the expansive attorneys' fee provision in the lease reaches the present dispute between Shehadeh and Altoh.
Altoh insists the lease was not intended to impose benefits or burdens on him vis-à-vis Shehadeh. He finds fault with the trial court's observation that joint lessees would have implied covenants of good faith and fair dealing to one another, noting that the implied covenant of good faith and fair dealing would not have been implicated by the present tort causes of action. Altoh's argument misses the point. That the implied covenant of good faith and fair dealing was not directly implicated by the underlying tort causes of action does not change the fact that Shehadeh and Altoh assumed duties to one another by operation of the lease.
Altoh also takes exception to the trial court's suggestion that joint lessees would have rights to indemnity against one another, noting that the lease does not expressly provide for indemnity between joint lessees. However, it is beyond genuine dispute that Shehadeh and Altoh were jointly and severally liable to the Trust under the lease, and either could have sued the other for contribution in the event of default. (See Civ. Code, § 1432 ["Except as provided in Section 877 of the Code of Civil Procedure, a party to a joint, or joint and several obligation, who satisfies more than his share of the claim against all, may require a proportionate contribution from all the parties joined with him"].) Although the right of contribution " 'exists as an entirely separate contract implied by law' " (Morgan Creek Residential v. Kemp (2007) 153 Cal.App.4th 675, 684), it " 'necessarily relate[s] to some former transaction or obligation;' " here, the contractual relationship between Shehadeh and Altoh as joint lessees under the lease. (Ibid.) We therefore conclude that the lease, though primarily focused on the relationship between Lessor and Lessee, also imposes duties on joint lessees as amongst themselves. The trial court correctly concluded that Shehadeh's negligence and premises liability causes of action against Altoh came within the scope of the attorneys' fee provision.
Finally, Altoh argues that the sublease demonstrates the parties' understanding that they were not bound by the lease. The trial court rejected this argument, noting that the sublease—which Altoh did not sign—does not express any intention to vary the provisions of the lease as they apply to Shehadeh and Altoh. We agree with the trial court that the sublease sheds no light on the meaning of the lease, and is ultimately irrelevant to our interpretation of the attorneys' fees provision. As we have discussed, the attorneys' fee provision in the lease clearly encompasses Shehadeh's negligence and premises liability causes of action. Accordingly, Shehadeh is entitled to attorneys' fees as the prevailing party.
III. DISPOSITION
The award is affirmed. Husein Shehadeh is entitled to recover his costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
/S/_________
RENNER, J. We concur: /S/_________
RAYE, P. J. /S/_________
MAURO, J.