Filed 10/28/19 Samuel v. Brake Masters Holdings SAC CA3

NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

—-

AIAD SAMUEL et al., as Trustees, etc.,

Plaintiffs and Appellants,

v.

BRAKE MASTERS HOLDINGS SAC, INC.,

Defendant and Respondent.

C082083

(Super. Ct. No. 34201100115950CUBCGDS)

This case arises out of a commercial lease between landlord Aiad and Hoda Samuel, as trustees of the Aiad and Hoda Samuel Family Trust, and tenant Brake Masters Holdings Sac, Inc. (Brake Masters). The Samuels sued Brake Masters for partial payment of rent, common area maintenance (CAM) charges, and damage to the property. A five-day bench trial resulted in the trial court’s rejection of all claims asserted by the Samuels.

On appeal, the Samuels contend the trial court erred (1) in determining their acceptance of partial payment of rent constituted a waiver of unpaid rent, and (2) in interpreting the lease to require “some special form of ‘certification’ of CAM charges.”

We conclude the trial court’s uncontested findings of fact support the legal conclusion the Samuels’ acceptance of partial payment of rent constituted a waiver of unpaid rent. The trial court properly construed the lease agreement’s requirement that statements of CAM charges be certified. We also reject an assertion implicit within the Samuels’ argument that Brake Masters waived the certification requirement. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

The Samuels emphasize the trial “court’s decision accurately sets forth the facts of the case.” For this reason and because the findings made by the trial court are key to our analysis of the case, we quote extensively from the trial court’s decision.

Partial Payment of Rent

In a tentative ruling, later adopted as a final ruling, the trial court made the following findings:

“This dispute concerns a property owned by [the Samuels] and located at 6955 Stockton Boulevard and leased to Brake Masters. [The Samuels] claim that Brake Masters owes them rent. Both sides agree that, in the months immediately prior to March 1, 2009, Brake Masters was paying $5,411 each month. The written lease, as modified by a Revised Form of Tenant Estoppel, was supposed to terminate on March 31, 2010.

“In February 2009, Hoda Samuel and Brake Masters entered into a written agreement to reduce the rent by $650 to $4,761 per month. This reduction was supposed to start on March 1, 2009 and last one year. The written agreement, in the form of a letter drafted by Brake Masters and signed by both parties, stated that the rent decrease was sought to address a ‘sharp decline in the economic conditions that have dramatically affected our operations.’ It further stated that the rent reduction was intended to ensure that Brake Masters could remain a viable tenant ‘throughout the duration of our lease and potentially beyond.’

“The rent reduction ended by March 1, 2010. At this point, the rent reverted to $5,411 per month on the lease, which was in effect for one more month. Although there may have been additional communications between the parties regarding financial conditions at the Brake Masters store, there is no showing of any additional agreement.

“Aiad Samuel testified that he thought that Brake Masters should be required to pay [the Samuels] for the reduced rent that was foregone between March 1, 2009 and February 28, 2010.” In a footnote, the trial court noted: “[Aiad] Samuel made this statement even though his attorney made it clear that [the Samuels] were not contending that the $650 per month rent reduction was a loan and even though it directly contradicted the written record. This was only one of several statements [Aiad] Samuel made that were of questionable credibility.”

The trial court further found that “the rent agreement clearly stated that the rent was being reduced. There was no evidence to suggest that the [Samuels] were allowing Brake Masters to run up debt during that year-long period.”

“From March 1, 2010 to October 31, 2011, Brake Masters paid, and the [Samuels] accepted, various levels of rent for the property. In March, April, May and June 2010, Brake Masters paid $4,761. In July 2010, Brake Masters paid $2,639. From August 2010 to March 2011, Brake Masters paid $3,700. From April 2010 to July 2011, Brake Masters paid $3,500. Finally, in August, September and October 2011, Brake Masters paid $3,000. [The Samuels] claim $33,937 in rent owing, calculated as the difference between the rent due under the expired lease and the actual payments received.” (Italics added.)

CAM Charges

On the issue of CAM charges, the trial court found: “The lease provides that the landlord shall furnish the tenant a statement showing common area expenditures, referred to by the parties as ‘CAM Charges’[,] with[in] 30 days of the end of each calendar quarter or the end of the calendar year. The lease further provides that the statement must be certified by a certified public accountant or by an authorized representative of the landlord.

“[The Samuels] provided no evidence that they gave a certified statement of CAM Charges to Brake Masters within the time period established in the contract. [The Samuels’] only evidence on this point was a spreadsheet attached to an email October 12, 2011 from Hoda Samuel to Jim Egan, a representative of Brake Masters.[ ]” In a footnote, the trial court noted that “[Aiad] Samuel also testified that he had delivered quarterly statements to Brake Masters. [The Samuels] did not produce such statements, and [Aiad] Samuel’s testimony on this point was exceedingly vague and subject to the same credibility concerns explained above” in the prior footnote.

The trial court made the further findings that: “The spreadsheet purported to summarize property-related charges for parts of 2010 and 2011. However, the spreadsheet was not certified by anyone and would not have been timely for many of the charges in any event. The court finds that [Brake Masters] does not owe CAM Charges.”

Damage to Premises

Regarding the Samuels’ claim that Brake Masters had left the premises in a damaged condition, the trial court stated: “As explained above, [Aiad] Samuel’s testimony lacked credibility. With regard to the claims of damage to the facility, [Aiad] Samuel’s testimony was contradicted by [James ] Estep. [Estep] testified regarding the steps taken to clean up the facility. [Estep] also took pictures of the premises that belied [Aiad] Samuel’s testimony that Brake Masters left the facility in poor condition. The court therefore finds in favor of the defense on this claim.”

Judgment

The trial court entered judgment in favor of Brake Masters. On a post-judgment motion by Brake Masters, the trial court awarded $80,000 in attorney fees and $4,592.04 in costs. The Samuels timely filed a notice of appeal from the judgment.

DISCUSSION

I

Partial Payment of Rent

The Samuels contend the trial court erred as a matter of law in determining they waived unpaid rent when they accepted the partial payments of rent from Brake Masters. The contention has no merit.

A.

Acceptance of Partial Payment of Rent as a Waiver

In the absence of local rent controls or other laws governing the amount of rent that a landlord may charge, a tenant must pay rent in the amount specified in the lease agreement. (Bevis v. Terrace View Partners, LP (2019) 33 Cal.App.5th 230, 249.) Partial payment of contractual rent constitutes a breach by the tenant of the lease agreement. (Kern Sunset Oil Co. v. Good Roads Oil Co. (1931) 214 Cal. 435, 440 (Kern).) Mere breach of the lease for partial payment does not, by itself, terminate the lease. (Salton Community Services Dist. v. Southard (1967) 256 Cal.App.2d 526, 533.) Instead, the landlord may waive the breach caused by partial payment of rent. “The acceptance of rent by the landlord from the tenant, after the breach of a condition of the lease, with full knowledge of all the facts, is a waiver of the breach, and precludes the landlord from declaring a forfeiture of the lease by reason of said breach. This is the general rule, and is supported by ample authority.” (Kern, supra, at p. 440.)

Whether a landlord has waived a breach of the lease for partial payment presents a question of fact. (EDC Associates Ltd v. Gutierrez (1984) 153 Cal.App.3d 167, 170 (EDC Associates).) When a landlord accepts partial payment of rent, a waiver is presumed. (Ibid.; Kern, supra, 214 Cal. at p. 445.) The presumption of waiver accompanying acceptance of partial payment of rent may be rebutted. However, “the cases have required some positive evidence of rejection on the landlord’s part or a specific reservation of rights in the lease to overcome the presumption that tender and acceptance of rent creates. Thus, in Karbelnig v. Brothwell (1966) 244 Cal.App.2d 333, the Court of Appeal noted, in finding a lack of waiver, ‘[h]ere the lessor not only relied upon the express agreement in the contract of the lease against waiver of its right to assert a forfeiture for the acceptance of rent after knowledge of the breach . . . but it also gave notice that its acceptance of the rent after the breach . . . became known was not to be construed as a . . . waiver of its right to assert a forfeiture.’ (Id., at p. 342.)” (EDC Associates, supra, at p. 170.)

B.

The Samuels’ Waiver

The trial court did not err in concluding the Samuels’ acceptance of partial payment of rent constituted a waiver of the breach of the lease. In reaching this conclusion, we note the Samuels expressly accept the trial court’s factual findings. The trial court made the factual finding that Brake Masters paid partial rent and the Samuels accepted the partial payments. The trial court did not find the Samuels protested the partial payments or gave notice that they reserved any rights under the lease.

The Samuels argue they were entitled to accept partial rent, continue with the lease, and then later sue for the unpaid portion of the rent. In so arguing, they attempt to limit the California Supreme Court’s holding in Kern, supra, 214 Cal. 435 to breaches not involving partial payment of rent. We are not persuaded.

Kern involved a lease requiring the tenant to drill 2 oil wells per year until a total of 16 oil wells were drilled and placed into production. (Kern, supra, 214 Cal. at p. 437) The tenant, however, only drilled 13 oil wells over the course of 13 years. (Ibid.) During those 13 years, the landlord accepted rent without protest. (Id. at pp. 440, 443.) Having accepted the rent without protest, the Kern court held there could be “no question” but that the landlord waived the breach. (Id. at p. 443)

As Kern explains, “The theory upon which the courts hold that acceptance of rent, after breach of the covenants of the lease with knowledge of all the facts surrounding said breach, constitutes a waiver of such breach is that by accepting the rent under these circumstances the lessor recognizes the existence of the lease, and that it is inconsistent and not permissible for a party to recognize the existence of a lease and accept benefits under it, and at the same time claim that it is forfeited and seek to recover the fruits of a forfeiture.” (214 Cal. at p. 445, italics added.) This reasoning applies here. The Samuels may not accept the benefits of the lease in the form of partial payment, and then later take the diametrically opposite position – all without any prior notice of breach at the time of partial payment.

While the Samuels cite Civil Code sections 1951.2 and 1951.4, they do so only to distinguish them as inapplicable. They do not argue that these statutes actually help their position. Instead, the only authority the Samuels muster in favor of their argument is a California Law Revision report stating partial payment of rent allows the landlord the “right to treat the breach as partial, regard the lease as continuing in force, and recover damages for the particular default.” (9 Cal. Law Revision Com. Rep. 401, 409 (1968).) The quoted portion of the California Law Revision Commission report refers to the remedy available under Civil Code section 3308. (Ibid.) Civil Code section 3308, however, does not apply to this case. In pertinent part, it provides:

“The parties to any lease of real or personal property may agree therein that if the lease shall be terminated by the lessor by reason of any breach thereof by the lessee, the lessor shall thereupon be entitled to recover from the lessee the worth at the time of the termination, of the excess, if any, of the amount of rent and charges equivalent to rent reserved in the lease for the balance of the stated term or any shorter period of time over the then reasonable rental value of the property for the same period.” (Civ. Code, § 3308, italics added.)

Here, the Samuels did not terminate the lease on grounds of breach for partial payment of rent. The trial court found, “To the contrary, the evidence showed that [the Samuels] and Brake Masters engaged in discussions about whether the [Samuels] could take over the operation of the franchise during the months prior to the closure of the Brake Masters business.” For lack of any indication that the Samuels initiated a termination of the lease, Civil Code section 3308 and the related California Law Revision Commission report do not aid the Samuels’ argument.

II

CAM Costs

The Samuels argue the trial court erred in construing the lease to require “some special form of ‘certification’ of CAM charges.” We disagree.

A.

Certification of CAM Charges

Article 16, subdivision (ii), of the lease in this case required: “Within thirty (30) days following the end of each calendar quarter or, at Landlord’s option, each calendar year, Landlord shall furnish Tenant a statement covering the calendar quarter or year just expired, certified as correct by a certified public accountant or an authorized representative of Landlord, showing the total of such common area expenses, the amount of Tenant’s share of such common area expenses for such calendar quarter or year . . . .” (Italics added.)

Regarding certification requirement, the trial court found the Samuels “provided no evidence that they gave a certified statement of CAM Charges to Brake Masters within the time period established in the contract. [The Samuels’] only evidence on this point was a spreadsheet attached to an email October 12, 2011 from Hoda Samuel to Jim Egan, a representative of Brake Masters. The spreadsheet purported to summarize property-related charges for parts of 2010 and 2011. However, the spreadsheet was not certified by anyone and would not have been timely for many of the charges in any event.”

B.

Interpretation of Lease Agreement

We apply the independent standard of review when presented with a challenge to the trial court’s interpretation of a lease agreement. (California National Bank v. Woodbridge Plaza LLC (2008) 164 Cal.App.4th 137, 143.) “We look initially to the language of the agreement, seeking its ‘ “clear and explicit” meaning’ ‘interpreted in [its] “ordinary and popular sense,” unless “used by the parties in a technical sense or [there is] a special meaning . . . [derived from] usage,” [citation]. . . .’ ([Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18]; see also Civ. Code, §§ 1636, 1638, 1639.) ‘[L]anguage in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. [Citation.]’ (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18.)” (California National Bank, supra, 164 Cal.App.4th at p. 143.)

Here, the lease required statements of CAM charges to be certified. Reinforcing this requirement, the lease allowed only two types of persons to satisfy the certification requirement: (1) a certified public accountant, or (2) an authorized representative of the landlord. Thus, the plain meaning of the lease agreement’s language is that statements of CAM charges had to be certified. To ignore the certification requirement and the limitation of persons who could satisfy that requirement would be to render express language in the contract mere surplusage. We decline to do so because we disfavor constructions that ignore contract language as mere surplusage. (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 503.)

We reject the Samuels’ contention that the lease agreement is vague regarding the requirement for certification. To “certify” means to declare something to be true or accurate or to issue a certificate or license upon meeting specified requirements. (Housing Authority v. Van de Kamp (1990) 223 Cal.App.3d 109, 113.) The certification requirement is clear: it requires a certified public accountant or an authorized representative of the landlord to verify the charges are correctly stated or to issue a certificate to the effect that the statement of CAM charges is correct. According to the trial court’s findings, neither requirement was met here.

The trial court did not err in construing the lease agreement to require statements of CAM charges to be certified. Notably, the Samuels offer no authority in support of the proposition that the certification requirement should be ignored. Consequently, we reject their contractual interpretation argument.

C.

Waiver

Under the rubric of an interpretation argument, the Samuels appear to actually contest the trial court’s conclusion that no evidence supported the enforcement of the certification requirement. Specifically, the Samuels argue, “the fact that no prior bill for CAM charges in the 30 years of the lease had ever been ‘certified’ and no objection had ever been made about this by this tenant, or any tenant” should excuse the certification requirement. (Italics added.) In essence, the Samuels argue Brake Masters waived the certification requirement for lack of any objection by Brake Masters to the CAM statements.

We begin with the presumption that the judgment is correct, and the burden is on the appellant to demonstrate error. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610.) To the extent the appellant challenges the factual findings of the trial court, we draw all reasonable inferences in favor of the judgment and decline to second-guess the express factual findings of the trial court. (Ibid.) Thus, we adhere to the trial court’s finding that the Samuels never provided Brake Masters with a certified statement of CAM charges as required by the lease.

As we noted in part IA., the question of waiver of a lease provision presents a question of fact. (EDC Associates Ltd, supra, 153 Cal.App.3d at p. 170.) Thus, the Samuels attempt to establish waiver by asserting that Brake Masters never objected to uncertified CAM charge statements. In support, the Samuels cite to the lease agreement itself, an e-mail from a representative of Brake Masters regarding CAM charges, and a spreadsheet listing CAM charges.

The lease agreement itself does not establish a waiver. Instead, as we explained above, the express terms of the lease require statements of CAM charges to be certified. The e-mail from Brake Masters’ representative does not constitute a waiver of the certification requirement but an offer to settle with the Samuels on the CAM charges. The e-mail states: “I am prepared to acknowledge the Cam charges. I think you know how I feel about the ‘rent.’ I am willing to exchange the existing equipment. Lifts overhead tanks and a compressor to satisfy the Cam charges.” In other words, Brake Masters offered to resolve the dispute over CAM charges by offering the Samuels some of the equipment used in the business. This offer to compromise did not constitute a waiver and cannot be used to establish Brake Masters’ liability for the CAM charges. (Evid. Code, § 1152, subd. (a) [offers to compromise inadmissible to prove liability].)

Finally, as to the spreadsheet of CAM charges, the trial court’s finding is conclusive. The trial court found the spreadsheet was not a certified document. Review of the spreadsheet confirms this finding. Moreover, a spreadsheet prepared by the Samuels does not establish a waiver by Brake Masters. Only conduct (whether by action or inaction) by Brake Masters can establish a waiver. On this point, however, the Samuels have not met their burden to establish waiver by Brake Masters.

DISPOSITION

The judgment is affirmed. Brake Masters Holdings SAC, Inc., shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).

/s/

HOCH, J.

We concur:

/s/

HULL, Acting P. J.

/s/

RENNER, J.