Filed 12/31/19 Lateef v. Dutt CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
FIRST APPELLATE DISTRICT
DIVISION TWO
ABDUL LATEEF,
Plaintiff, Cross-defendant and Respondent,
v.
SAVENDRA DUTT,
Defendant, Cross-complainant and Appellant;
RAVI SEKHON
Defendant, Cross-complainant and Respondent.
A150824
ABDUL LATEEF,
Plaintiff and Appellant,
v.
RAVI SEKHON et al.,
Defendants and Respondents.
A154350
(Alameda County
Super. Ct. No. RG 14743008)
These two consolidated appeals concern a dispute between a landlord and tenant over the terms of commercial lease. The first appeal (A150824) addresses the trial court’s rulings on the merits of the dispute. The trial court conducted a bench trial and issued a statement of decision that ruled in large part, but not entirely, in favor of the landlord. The tenant, who after assigning the lease remained liable under it, has appealed the ruling. The landlord has cross-appealed. The second appeal (A154350) addresses the trial court’s subsequent ruling denying the motion by the landlord for attorney fees. As will be seen, we affirm the trial court’s decision in the first appeal, including the cross-appeal. On the fee appeal, we reverse in part and affirm in part.
BACKGROUND
Plaintiff Abdul Lateef owns commercial property located on Castro Valley Boulevard in Castro Valley, California (the property). For many years, Lateef owned and operated a Speedee Oil Change & Tune-Up franchise (Speedee) on the property. In 2002, Lateef both sold Speedee and leased the property to Savendra Dutt. These two transactions occurred at a meeting between the parties also attended by their joint real estate agent, Prakash Chand. At the meeting, Lateef and Dutt signed a form commercial lease. In 2005, Dutt both sold Speedee and assigned the lease (Assignment) to Ravi Sekhon. Lateef consented to this Assignment but did not release Dutt from his liability under the lease.
I.
The Previous Litigation
In 2012, Sekhon gave notice to Lateef of his intention to exercise an option to extend the lease for five years. Lateef contended that Sekhon, prior to exercising the option, had violated the lease by failing to pay rent and property taxes when due and failing to maintain the property. The resulting dispute culminated in Lateef serving Sekhon and Dutt with a 10-day notice to pay rent or quit and, when Sekhon failed to relinquish the property and Dutt did not exercise a right to reclaim possession, filing an unlawful detainer action against them.
During the unlawful detainer dispute, it came to light that there were different versions of the original lease. The parties disputed which was the operative version and in particular who had the burden to maintain the property. Lateef provided a version of the lease showing that the tenant had this burden. Sekhon responded that Lateef’s version was “totally different from the one” Lateef had given him a few years prior. Sekhon claimed that Lateef or Dutt had changed the lease in many places and, in doing so, committed a fraud against him.
Two years later, on the eve of trial, in a settlement conference with Judge Wynne Carvill, the parties settled the issue of possession, with Sekhon agreeing to vacate the property without removing any fixtures. The parties tried, but were unable, to resolve all of the disputes between them, including Lateef’s claims for back rent, costs of maintenance and costs of cleaning up the property.
II.
The Present Lawsuit
In 2014, Lateef again sued Dutt and Sekhon, this time alleging fraudulent concealment (against Dutt only), breach of the lease and the Assignment, and interference with contractual relations, and also seeking declaratory relief. In a first amended complaint, Lateef sought a judicial declaration that he, as lessor, entered into a written and oral lease agreement with Dutt that contained specified material terms and requested that the court determine the parties’ rights and duties under that lease.
Dutt and Sekhon demurred to the first amended complaint on three grounds. They contended that the complaint, first, was uncertain because Lateef did not attach a full copy of the lease or lease assignment or set forth the complete terms of either; second, failed to state a cause of action under “any specific hybrid verbal and written lease”; and, third, was a sham pleading. The trial court overruled the demurrer as to the uncertainty and sham pleading grounds but sustained the demurrer with leave to amend as to the failure to state a claim ground because it could not be ascertained from the first amended complaint whether the contract was written, oral or implied by conduct.
Thereafter, Lateef filed a second amended complaint supplementing his allegations about the terms of the lease that Lateef and Dutt agreed to in writing and the terms they agreed to orally with the proviso that their mutual broker, Chand, would write these oral agreements into the already signed lease.
Dutt and Sekhon answered the second amended complaint and filed a cross-complaint for declaratory relief. Their answer asserted 11 affirmative defenses, including the failure to state a cause of action and the failure to mitigate damages. They did not assert as an affirmative defense that the lease or any part of it was barred by the statute of frauds. Their cross-complaint alleged that true and correct copies of the lease were attached as exhibits and that Lateef was claiming that a different version of the lease containing substantially different terms was a true and correct copy of the operative lease. Nothing in the cross-complaint referred or alluded to the statute of frauds either.
The case was tried over seven days by the court, Judge Dennis Hayashi presiding, in August 2016. The court issued a 12-page statement of decision in December 2016 and entered judgment in January 2017.
In its statement of decision, the court recounted that Lateef (and his wife) met with Dutt and their joint agent, Chand, in August 2002. At the meeting, the parties executed a “Business Purchase Agreement” and a “Commercial Lease Agreement.” Lateef sold Speedee to Dutt for $190,000. The sale included all the inventory and equipment of the business. The lease consisted of a California Association of Realtors Form, was signed by both Lateef and Dutt and was for a 10-year period with a five-year option. The terms of the lease were not filled out before the parties signed it; rather Chand agreed to fill out the terms afterward and deliver copies to the parties.
According to the statement of decision, “[a]t trial, the parties disagreed on key terms of the Lease, primarily regarding which party was responsible for maintenance of the property.” They offered multiple copies of the lease at trial, which contained differing terms. Versions Lateef introduced, including a copy from the broker’s file, did not check any boxes on paragraph 17, which (if unchecked) provided the tenant would be responsible for certain maintenance of the property and the landlord would maintain the roof, foundation, exterior and common areas of the property. The version introduced by Dutt had an “X” in paragraph 17, Box A only, which meant “the landlord is effectively responsible for all maintenance of Speedee.” Every version of the lease introduced by either party contained the handwritten notation “triple net” in paragraph 39 (entitled “other terms”), which the trial court found “was presumptively filled out by Chand.”
In 2005, Dutt sold Speedee to Sekhon for $545,000, and Dutt, Lateef and Sekhon executed the Assignment. The Assignment provided that Lateef did not release Dutt from any liability under the lease. At trial, Sekhon testified that Dutt’s representatives, pointing to paragraph 17 of the lease, told him all maintenance would be the landlord’s responsibility and the “triple net” language meant he would be responsible for rent and taxes only.
In June 2012, Sekhon informed Lateef he was exercising the five-year option to extend the lease. In September 2012, Lateef’s attorney sent Sekhon a draft of a new lease and a notice that Sekhon had failed to pay rent for September 2012. Between October 2012 and July 2013, Sekhon sent checks for the rent, but Lateef’s representatives returned them and filed an unlawful detainer action. After Lateef’s first unlawful detainer action was dismissed in August 2013, Lateef accepted rent from Sekhon for August 2013. But when he attempted to cash rent checks Sekhon tendered for September and October 2013, the checks were returned for insufficient funds. Sekhon did not tender any further rent after that point.
The trial court found “much of the testimony of the parties to be questionable and frequently non-credible”—“particularly regarding disputed Lease terms involving property maintenance and use of the term ‘triple net’, which was not added to the Lease by any party.” More specifically, the lease versions introduced by the parties contained “dramatic differences,” and “neither party was credible in trying to explain or justify the differences” or in accusing the other party of “deliberately forg[ing] and/or alter[ing] the documents.” Because of this, the trial court “examined closely whether parties had met their burden of proof with respect to their allegations.”
The court was “unable to find that any of the multiple proffered copies of the Lease by the parties represents the actual agreement between them.” It also found the parties agreed Chand was to fill in key terms after they signed the lease, including in paragraph 17 (regarding property maintenance), the rental amount and the “triple net” reference in paragraph 39. In the absence of “an authentic copy of the Lease,” the court proceeded to determine “what terms, if any, were enforceable between the parties.”
As for specific terms, the court found the original rent Lateef and Dutt had agreed to was $6,000, and that from at least August 2013, Lateef and Sekhon agreed to rent of $6,300 per month. Regarding maintenance, the court concluded Lateef had “not [met] his burden of proof that either Sekhon or Dutt understood that ‘triple net’ meant the tenant was ultimately responsible for maintenance or that there was an agreement to add this term.” He found the testimony on this issue “self-serving and non-credible” and noted the absence of any testimony by Chand, “who hand-wrote the term [‘triple net’] into copies of the Lease, about what the understanding of the parties was on this point.” The court therefore could not find Dutt or Sekhon responsible for property maintenance. The court also rejected Lateef’s claim that Sekhon and Dutt were liable to Lateef for damage to the “premises, fixtures and equipment” because the evidence showed Lateef had “conveyed all ownership interest in the fixtures and equipment to Dutt” when he sold Speedee to him.
The court concluded Lateef failed to meet his burden of proving that Dutt engaged in fraud by giving Sekhon an altered copy of the lease. The court found “[m]uch of [Lateef’s] evidence and testimony relies on speculation and conjecture.”
The court ruled in Lateef’s favor on three aspects of his contract claim and awarded him damages. First, it found Sekhon had breached “an obligation to leave Speedee in a clean, serviceable condition after vacating it,” including by not removing hazardous material. It awarded Lateef $1,500 in damages for this breach.
Second, the court found Dutt and Sekhon owed Lateef back rent from October 2012 through September 2014, except for August 2013. The court did not find credible Sekhon’s testimony that he had mailed rent checks to Lateef during the rest of the period and held that even if he had, Civil Code section 1500 provides that only where rent is deposited in the landlord’s account and then returned is the tenant’s obligation to pay back rent extinguished. Defendants did not show any such deposit. The court awarded Lateef $6,300 per month plus interest for the rent that was owed.
Third, the court found Lateef showed he paid property taxes for 2013 and 2014 and that Sekhon failed to reimburse him for those amounts. It held Lateef was entitled to those unpaid taxes.
On Dutt and Sekhon’s cross-complaint against Lateef, the trial court ruled in Lateef’s favor.
The court awarded judgment to Lateef and against Dutt and Sekhon jointly in the amount of $211,795.80, consisting of $144,900 in unpaid rent, unpaid taxes of $16,570.80, interest of $48,825, and clean-up costs of $1,500.
Dutt timely appealed from the judgment and Lateef timely cross-appealed. The trial court subsequently denied Lateef’s motion for attorney fees on the ground that the attorney fee clause in the lease made prevailing party attorney fees conditional on the prevailing party attempting to mediate the parties’ underlying dispute before filing suit, which it found Lateef had not done prior to initiating the unlawful detainer action. Lateef timely appealed from that order. At the request of the parties, this court has consolidated Lateef’s attorney fee appeal, designated case number A154350, with the merits appeal and cross-appeal, designated A150824.
DISCUSSION
I.
Dutt’s Appeal
Dutt’s appeal challenges, first, the trial court’s order overruling part of Dutt’s demurrer to Lateef’s first amended complaint, and second, certain aspects of the trial court’s statement of decision. We will address each in turn.
A. Dutt’s Challenge to the Trial Court’s Demurrer Ruling Is Moot.
B.
Dutt contends the trial court erred in overruling part of his demurrer to Lateef’s first amended complaint, namely that the complaint was uncertain and a sham pleading. Lateef responds, first, by challenging the appealability of the trial court’s ruling on the ground that Dutt did not specifically list a challenge to the demurrer ruling in his notice of appeal. He also argues that even if Dutt can bring his appellate claim, it is meritless for multiple reasons. We conclude Dutt can assert this appellate claim, but that it is moot because the first amended complaint was superseded by the second amended complaint Lateef subsequently filed.
Regarding appealability, as Dutt points out, an order overruling a demurrer may be reviewed on an appeal from the final judgment. (San Diego Gas & Elec. Co. v. Superior Court (1996) 13 Cal.4th 893, 912-913.) Indeed, an order sustaining or overruling a demurrer is interlocutory and not appealable, and any appeal must be taken from the subsequently entered judgment. (Ibid.) When a party appeals from the judgment, we may review “any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party.” (Code Civ. Proc., § 906.) Further, rule 8.100 of the California Rules of Court provides that a notice of appeal “must be liberally construed” and “is sufficient if it identifies the particular judgment or order being appealed.” (Cal. Rules of Court, rule 8.100(a)(2).) Rule 8.100 does not require identification of any intermediate or interlocutory rulings from which the appellant cannot directly appeal. Thus, “[a] prior nonappealable order or ruling need not be specified in the notice of appeal from a subsequent appealable order.” (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs ¶ 3:119 (The Rutter Group 2019) [citing Gavin W. v. YMCA of Metropolitan Los Angeles (2003) 106 Cal.App.4th 662, 668-669], italics added.) In short, Lateef’s appealability argument is without merit.
As for the merits of Dutt’s argument, he contends the trial court erred by failing to sustain his demurrer to Lateef’s first amended complaint on the grounds of uncertainty because that complaint failed to distinguish between oral and written portions of the lease, thereby running afoul of the statute of frauds, and because it was a sham pleading in that its allegations regarding the lease contradicted allegations Lateef had made in his prior unlawful detainer complaints. Lateef argues that Dutt waived these challenges by his failure to demur to Lateef’s subsequent second amended complaint or to raise the affirmative defense of the statute of frauds in his answer. We agree with Lateef, but in our view the issue does not so much fall under the rubric of waiver but rather is one of mootness or justiciability.
As our colleagues in Division Five explained in State Compensation Ins. Fund v. Superior Court (2010) 184 Cal.App.4th 1124 (State Fund), “ ‘ “It is well established that an amendatory pleading supersedes the original one, which ceases to perform any function as a pleading.” ’ [Citation.] Thus, an amended complaint supersedes all prior complaints. [Citations.] The amended complaint furnishes the sole basis for the cause of action, and the original complaint ceases to have any effect either as a pleading or as a basis for judgment. [Citation.] [¶] Because there is but one complaint in a civil action [citation], the filing of an amended complaint moots a motion directed to a prior complaint.” (Id. at pp. 1130-1131.) The State Fund court held the trial court had erred in adjudicating the defendant’s motion for summary judgment directed to the original complaint because the plaintiff had filed an amended complaint that rendered the motion moot. (Id. at p. 1131.) The court cited Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, in which the court observed that the filing of a plaintiff’s first amended complaint rendered the defendant’s demurrer to the original complaint moot. (Id. at p. 1054, cited in State Fund, at p. 1131.)
Here, Lateef’s second amended complaint superseded his first amended complaint. Dutt could have, but did not, demur to the second amended complaint. Lateef’s second amended complaint contained materially different allegations that were relevant to Dutt’s previous uncertainty and sham pleading contentions. Since Dutt did not demur to the second amended complaint, the case went to trial and judgment was entered on the basis of that pleading. Just as the trial court’s demurrer ruling had no bearing on the judgment, so any decision we might make concerning Dutt’s claimed deficiencies in the first amended complaint likewise would not affect the judgment. For that reason, his appellate claim is moot. (See McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368, 375 [demurrer became moot because court was not capable of granting relief]; Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1574 [court should not proceed with case where event occurs that renders it impossible for court, if it should decide case in favor of party, to grant him any effectual relief].)
B. Dutt’s Claims of Error in the Statement of Decision Lack Merit.
Dutt next contends that the trial court erred in its statement of decision for three reasons. We conclude none of his arguments have merit.
1. Statute of Frauds
Dutt first argues that the trial court erred in failing to rule that Lateef’s contract-related causes of action are barred by the statute of frauds. He contends there is no “factual dispute that [Lateef] failed to submit any evidence at trial that Defendant Sekhon ever signed a writing that attached or incorporated any specific version of one of the written leases that were introduced into evidence at trial.” Therefore, he argues, we must reverse the judgment on those causes of action because “Sekhon cannot be charged with liability for breach of a written lease that he did not in some way execute.”
Dutt has forfeited this argument by his failure to raise a statute of frauds defense in the trial court, despite having multiple opportunities to do so. Dutt cites nothing in the record indicating he and Sekhon argued at trial that there was no lease or that Sekhon was not bound to a lease by reason of the statute of frauds or otherwise. Indeed, in closing argument, defendants’ counsel argued there was a lease, it had been assigned to Sekhon, Sekhon had been provided a copy of the lease, and although some of the terms were in dispute others were not and Sekhon was bound by the latter. Counsel further contended that Sekhon had paid or tendered the rent checks under the lease and that Lateef had relinquished his right to rent by refusing to accept many of the checks. In any event, Sekhon indisputably took possession of the property and operated Speedee there from 2005 through 2014, thereby indicating he acted pursuant to a lease of some kind.
Further, Dutt’s statute of frauds claim directly contradicts arguments Dutt and Sekhon made in their trial brief. They urged that even if the trial court determined that neither party produced a true copy of the lease or that there was no written lease, the court should “still find that a lease existed, and determine the obligations of the parties according to the words in the lease that are expressed without dispute.” (Italics added.) It was “not essential,” they argued, for the lessee to sign the lease; rather, “delivery to and acceptance by him is sufficient, and his acceptance may be indicated by taking possession or paying rent. Upon such acceptance, both lessor and lessee become bound under the lease,” except as to special covenants. (Italics added.) Defendants’ counsel acknowledged that Sekhon and Dutt had both “testified that the same copy of the lease was delivered to each of them” and that the court therefore had “sufficient evidence to find that there was a lease,” only some of the terms of which were disputed. There was “no question that the parties believed and acted as though there was a lease, thus, the Court must find that some lease existed.” (Italics added.) By making these arguments, too, Dutt waived any statute of frauds defense.
Finally, Dutt and Sekhon did not raise any statute of frauds argument in response to the court’s tentative decision. Rather, in opposition to Lateef’s objections to the tentative statement of decision, Dutt and Sekhon argued there was no error in the trial court’s findings, including the findings that Sekhon executed the Assignment, that the Assignment did not release Dutt from liability under the lease, that “at least from August, 2013, until the property was vacated in September, 2014, Plaintiff and Sekhon agreed to rent of $6300.00 per month” and that Sekhon had “an obligation to leave Speedee in a clean, serviceable condition after vacating it,” which included the removal of hazardous material. Dutt and Sekhon did not challenge the trial court’s findings that Sekhon had failed to pay rent from July 2012 through September 2014, with the exception of one month, that Sekhon and Dutt were jointly responsible for the back rent owed, and that defendants had not contested their responsibility for property taxes. All of these findings supported the trial court’s implied finding of ultimate fact that there was an enforceable lease and that Dutt and Sekhon were obligated by it. Defendants’ failure to raise the statute of frauds argument and their affirmative support for the trial court’s findings that there was a lease provide a further ground for finding a forfeiture.
In short, Dutt forfeited any statute of frauds argument. A party may not engage in a bait-and-switch with the courts by relying on one theory at trial and asserting a different—and in this case inconsistent—theory on appeal. (Findleton v. Coyote Valley Band of Pomo Indians (2018) 27 Cal.App.5th 565, 569-570.) It is well established that a defense can be forfeited by a failure to properly raise it in the trial court. (See Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 551-552; Bank of America Nat. Trust & Sav. Assn. v. Hutchinson (1963) 212 Cal.App.2d 142, 149 [appellant trying entire case without objecting that contract evidence was barred by statute of frauds foreclosed from raising it on appeal].) Further, Dutt, along with Sekhon, invited this error by contending without reservation that there was an enforceable lease of some kind. (See Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403.)
2. Unclean Hands
Dutt next argues that the trial court committed an “abuse of discretion” by failing to address defendants’ affirmative defense that Lateef had unclean hands. He contends the trial court “ignored” evidence that showed Lateef “lied repeatedly” and that Lateef or his attorney “intentionally deceived the Court.” Lateef responds that, first, Dutt has waived this claim by “fail[ing] to set forth all of the evidence relevant to the subject matter” and, second, that substantial evidence supported the trial court’s finding. We agree with Lateef.
Because Dutt and Sekhon did not file objections either to the trial court’s tentative or final statement of decision, we must imply that the trial court “made every factual findings necessary to support its decision” rejecting this defense. (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 48 [if the appellant fails to bring ambiguities and omissions in the factual findings of the statement of decision to the trial court’s attention, “the reviewing court will infer the trial court made every implied factual finding necessary to uphold its decision, even on issues not addressed in the statement of decision”]; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [recitation of only appellant’s evidence is not a demonstration of the absence of substantial evidence and waives the purported error].) Thus, to prevail on his unclean hands argument, Dutt must show either that there was no substantial evidence to support such implied factual findings (see Fladeboe, at pp. 63-64) or that for some other reason the court abused its discretion in declining to apply it. (Dickson, Carlson & Campillo v. Pole (2000) 83 Cal.App.4th 436, 447 (Dickson, Carlson).)
As Lateef contends, Dutt’s statement of facts in his opening brief is incomplete, one-sided and argumentative. For example, Dutt states that Sekhon sent Lateef monthly checks from October 2012 through July 2013, but omits that Lateef testified he did not receive a rent check from Sekhon for October 2012, the November 2012 check did not clear the bank, checks Lateef received in August or September 2013 and in October 2013 were dishonored by the bank for insufficient funds and after October 2013 Lateef did not receive any more rent payments from Sekhon. Nor does Dutt mention the testimony from Lateef’s expert, Patricia Fisher, that documents Sekhon produced at trial to show he had continued to mail checks to Lateef over a certain period were fabricated.
Dutt’s discussion of the “facts” in the section of his brief specifically addressing unclean hands is similarly one-sided and he continues to assert as “fact” his contentions that inconsistencies in Lateef’s statements and testimony, including regarding the different versions of the lease, were “simply not credible,” were “not truthful,” and that Lateef “lied.” He asks that we draw inferences against Lateef, and even goes so far as to argue we “should find” Lateef’s testimony “not truthful.”
Even if we construe this portion of Dutt’s brief as a challenge to the sufficiency of the evidence supporting the trial court’s ruling declining to apply the unclean hands doctrine to Lateef (rather than merely an “abuse of discretion” argument), Dutt’s argument consists almost entirely of rearguing the facts and doing so in a one-sided way. As our colleagues in the Sixth District observed, “This approach disregards the fundamental principles governing appellate review of factual findings, and the ‘daunting burden’ those principles impose upon an appellant who challenges the sufficiency of the evidence to support a judgment. [Citation.] ‘ “The rule is well established that a reviewing court must presume that the record contains evidence to support every finding of fact, and an appellant who contends that some particular finding is not supported is required to set forth in his brief a summary of the material evidence upon that issue. Unless this is done, the error assigned is deemed to be waived. [Citation.] It is incumbent upon appellants to state fully, with transcript references, the evidence which is claimed to be insufficient to support the findings.” ’ ” (Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 737.)
As in Schmidlin, Dutt “nowhere set[s] forth the version of events most favorable to plaintiff, although doing so is part of [his] fundamental obligation to this court, and a prerequisite to our consideration of [his] challenge. ‘A party who challenges the sufficiency of the evidence to support a particular finding must summarize the evidence on that point, favorable and unfavorable, and show how and why it is insufficient. [Citation.]’ [Citation.] Where a party presents only facts and inferences favorable to his or her position, ‘the contention that the findings are not supported by substantial evidence may be deemed waived.’ ” (Schmidlin v. City of Palo Alto, supra, 157 Cal.App.4th at pp. 737-738.)
Even in the absence of waiver, we would reject Dutt’s unclean hands argument on its merits. “The defense of unclean hands does not apply in every instance where the plaintiff has committed some misconduct in connection with the matter in controversy, but applies only where it would be inequitable to grant the plaintiff any relief,” and “[t]he decision of whether to apply the defense based on the facts is a matter within the trial court’s discretion.” (Dickson, Carlson, supra, 83 Cal.App.4th at pp. 446-447.) In exercising that discretion, “[t]he court must consider the material facts affecting the equities between the parties; the failure to do so is an abuse of discretion.” (Id. at p. 447.) However, here, as we have indicated, we must consider not only the court’s express findings, but also its implied findings. We conclude the evidence was sufficient to support implied findings that the parties were equally at fault in the dispute between them and the court’s resolution of the merits of the dispute without applying unclean hands was the just result.
There are multiple factors we presume the trial court considered in declining to apply unclean hands to deny any recovery to Lateef in this case. Even if the court found Lateef in some respects not credible, it found the same as to Dutt and Sekhon, stating it “found much of the testimony of the parties to be questionable and frequently non-credible.” It found “[t]he testimony offered by the Plaintiff, Dutt, and Sekhon was generally self-serving and not adequately supported by documentary evidence, particularly regarding disputed Lease terms involving property maintenance and use of the term ‘triple net’, which was not added to the Lease by any party,” and “that testimony by the parties was exaggerated.” (Italics added.)
The court also rejected arguments by both Lateef and defendants. It did not find the version of the lease offered by Dutt and Sekhon represented the “actual agreement” between the parties any more than it found the versions offered by Lateef to be so, finding “neither party was credible in trying to explain or justify the differences.” (Italics added.) In rejecting defendants’ contentions about Lateef’s return of some rent checks Sekhon had supposedly tendered, the trial court stated it did “not believe that Sekhon actually mailed monthly checks to [Lateef] when they were due” as Sekhon had testified, instead finding credible the testimony of Lateef’s expert that the documents purporting to represent those checks were “duplicates of each other” or, as the expert put it, were “fabrications.”
On this record, the court was justified in impliedly finding that none of the parties had been entirely truthful or honest, either in his dealings with the other parties or in his testimony in court. Whether the parties acted honestly and in good faith was intertwined with the trial court’s assessment of their credibility—a factor it found lacking in all of them and an assessment we do not second guess. Further, as to the “degree of harm caused by the plaintiff’s misconduct and the extent of the plaintiff’s alleged damages,” factors also relevant to unclean-hands analysis (Dickson, Carlson, supra, 83 Cal.App.4th at p. 447), the evidence was undisputed that Sekhon had occupied and used the property to operate Speedee from 2005 through 2014, and the court found that for the last two of those years Lateef was not compensated for that occupancy. True, Sekhon was effectively evicted, vacating the property on the eve of trial in the last unlawful detainer action, but the court found he had breached the lease repeatedly by failing to pay rent and in other ways. Substantial evidence also supported an implied finding by the trial court that any misconduct by Lateef did not cause significant damages to the defendants, whereas Sekhon’s breaches of the lease deprived Lateef of rent to which he was entitled and caused him to incur other damages and that denying him any damages would be unjust.
Given these implied findings, the trial court’s ultimate conclusion that unclean hands should not bar Lateef from any recovery under the circumstances was not an abuse of discretion.
3. Failure to Mitigate Damages
Dutt’s final argument is that the trial court erred in “not considering any substantial evidence in support of” defendants’ affirmative defense that Lateef failed to mitigate damages. Dutt argues that Lateef should have cashed the rent checks Sekhon did send him rather than returning them, pointing to Sekhon’s testimony that Lateef did not accept the rent because his counsel advised him not to do so while the unlawful detainer actions were pending. Dutt contends this was unreasonable because Code of Civil Procedure section 1161.1, subdivision (c) (section 1161.1(c)), allows a commercial landlord to accept rent from a tenant being sued in an unlawful detainer action without derailing the action as long as he gives written notice to the tenant that he intends to accept partial payment while proceeding with the suit.
Lateef takes issue with Dutt’s interpretation of section 1161.1(c) as applied to the type of unlawful detainer action Lateef filed (pursuant to Code of Civil Procedure section 1161(2)) and asserts that when notice is given under that section and the landlord thereafter accepts rent, the landlord waives the breach and cannot evict the tenant for it. Lateef further chides Dutt for “criticiz[ing] the legal advice of [Lateef’s] prior counsel concerning acceptance of rent as a ‘waiver’ as ‘incorrect.’ ”
Dutt fails to persuade us of the merits of his failure to mitigate claim for several reasons. First, he does not cite any legal authority beyond section 1161.1(c) to support it. Second, he does not discuss all the relevant evidence and, in this case, lack of evidence. As we have indicated, the trial court found that Sekhon did not in fact send the rent checks to Lateef as he testified, and Dutt has not challenged that finding. Further, to the extent Lateef declined to accept some checks Sekhon sent, Dutt has not explained why or how this resulted in avoidable loss nor shown that he presented evidence at trial demonstrating there was a loss. Nor has Dutt demonstrated that he presented evidence at trial showing any such additional loss could have been foreseen and avoided. (See Carnation Co. v. Olivet Egg Ranch (1986) 189 Cal.App.3d 809, 818, fn. 12 [“ ‘A failure to attempt to mitigate damages will not bar plaintiff entirely from a recovery, but will only prevent the recovery of such damages as might have been avoided by reasonable efforts on his part’ ”].) Dutt’s legal argument about section 1161.1(c) is not such a showing and, moreover, is rebutted by Lateef.
Finally, in arguing to the trial court that Lateef’s failure to accept the checks should “bar [his] recovery for unpaid rent,” Dutt and Sekhon overreached. Again, the failure to mitigate damages does not bar all recovery. It merely reduces the recoverable damages by the amount the plaintiff could reasonably have avoided by undertaking reasonable efforts to mitigate. (Carnation Co. v. Olivet Egg Ranch, supra, 189 Cal.App.3d at p. 818, fn. 12; 1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts §§ 944, 945, pp. 998-999.)
For all these reasons, Dutt has not carried his burden of persuasion on appeal to demonstrate error.
II.
Lateef’s Cross-Appeal
Lateef filed a cross-appeal challenging the trial court’s rejection of his claim that defendants breached a lease obligation to maintain the property and that he was entitled to damages as a result. The trial court declined to award Lateef all but a small fraction of the $248,425.29 he sought as damages for this alleged breach because Lateef had failed to prove an agreement that defendants would be responsible for maintenance of the property. Lateef’s arguments lack merit.
A. The Evidence Does Not Compel a Finding That Exhibit 10 Was the Actual Lease.
B.
Lateef first contends the trial court erred by “disregarding the original lease in evidence and by interpreting the lease as if it were a verbal agreement.” He argues the court was compelled to find in his favor because “there was no controversy over the fact that Exhibit 10 accurately reflected the ‘complete’ Lease and bore the parties’ original signatures,” and because the trial court erred in finding that there were “ ‘dramatic differences’ ” between the versions of the lease admitted into evidence. Lateef goes on to argue that we should under a de novo standard of review reverse the trial court’s finding that none of the versions of the lease offered in evidence constituted the actual lease because “there was no conflict in the extrinsic evidence admitted at trial regarding the ‘original’ lease.”
Lateef’s arguments are wide of the mark. First, de novo review does not apply to the matters at issue here. The questions tried by the court were not ones of mere interpretation of a written lease indisputably entered into by the parties. Far from it. The parties raised and the court decided largely factual questions, including whether any of the differing versions of the written lease produced at trial reflected the parties’ actual agreement and, if not, what lease terms they did agree to. True, the meaning of those terms, once identified, was also in dispute, and that does present legal issues. But even as to those, there was conflicting parol evidence, as we will later discuss, which means we do not apply de novo review. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1166 [“When the competent parol evidence is in conflict, and thus requires resolution of credibility issues, any reasonable construction will be upheld as long as it is supported by substantial evidence”].)
Further, as to most of the factual issues, Lateef bore the burden of proof, which the trial court found he failed to meet. In these circumstances, we review Lateef’s challenges to the trial court’s factual findings using a variation of the substantial evidence rule. Under the general standard, “ ‘we review the entire record in the light most favorable to the judgment to determine whether there are sufficient facts, contradicted or uncontradicted, to support the judgment.’ ” (Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270 (Murray Dental).) “However, when the trier of fact has expressly or implicitly concluded the party with the burden of proof did not carry the burden and that party appeals,”—as is the case here—“ ‘ “it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment . . . . [¶] Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) ‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.’ ” ’ ” (Ibid.)
Under this standard, Lateef has a steep uphill climb. Where the judgment is against the party who has the burden of proof, “ ‘it is almost impossible for him to prevail on appeal by arguing the evidence compels a judgment in his favor. That is because unless the trial court makes specific findings of fact in favor of the losing [party], we presume the trial court found [that party’s] evidence lacks sufficient weight and credibility to carry the burden of proof. [Citations.] We have no power on appeal to judge the credibility of witnesses or to reweigh the evidence.’ ” (Murray Dental, supra, 19 Cal.App.5th at p. 270.)
Applying this standard, we conclude Lateef has failed to show the trial court erred in “fail[ing] to find” Exhibit 10 was the lease the parties entered into. Lateef points out evidence that Exhibit 10 came from the “ ‘original broker’s file’ ” for the transaction between Lateef and Dutt and that an “exact copy of Exhibit 10 was sent to Dutt’s brother and real estate agent, Chand, on May 2, 2005, obviously in connection with the sale of the business to Sekhon [Exhibit 5].” According to Lateef, “there was no controversy over the fact that Exhibit 10 accurately reflected the ‘complete’ Lease and bore the parties’ original signatures” and there was “no legal basis for the trial judge to be ‘unable’ to find that Exhibit 10 was the true lease.”
Lateef mischaracterizes this evidence as “clear, uncontradicted and unimpeached.” There was evidence that conflicted with Lateef’s Exhibit 10 theory, including the version of the lease proffered by Dutt and Sekhon, Exhibit 201. Lateef dismisses Exhibit 201 as “obviously altered,” but the trial court expressly found that neither party was “credible in their allegations that the other deliberately forged and/or altered the documents.” As we have already indicated, “ ‘[w]e have no power on appeal to judge the credibility of witnesses’ ” (Murray Dental, supra, 19 Cal.App.5th at p. 270), much less to disregard the trial court’s credibility-based findings.
Moreover, not only did Dutt and Sekhon proffer Exhibit 201, but Lateef himself offered at least two other versions of the lease , one of which, Exhibit 2, differs from Exhibit 10 in significant respects. For example, Exhibit 2 contains a handwritten term in paragraph 15 limiting the use of the property that is missing in Exhibit 10, contains tenant initials under the arbitration clause that are also not present on Exhibit 10, and contains handwriting in paragraph 39 spelling out “10 YEAR” instead of the abbreviated “10 YR” reference found in Exhibit 10. Moreover, a document with the same characteristics as Exhibit 2 (except that it contains additional fax information), Exhibit 70, was attached to Lateef’s third unlawful detainer complaint and alleged to be “[a] copy of the written agreement.”
Finally, the trial court did not find any of the parties’ explanations for the different versions of the lease to be credible and, as it noted, the broker, Chand, did not testify.
Thus, contrary to Lateef’s contention that “no contrary evidence was offered to rebut” his showing that Exhibit 10 was the true lease, at least two versions of the form lease, Exhibits 201 and 2, both of which were materially different from Exhibit 10, were proffered at the trial, and the court did not find Lateef’s testimony as to why his proffered version was the true lease to be credible. The trial court was entitled to consider the documentary evidence and the testimony, assess the credibility of the latter, and conclude that Lateef had not convincingly established that Exhibit 10 was the written lease to which the parties agreed. Therefore, Lateef has not met his burden to show there was “ ‘uncontradicted and unimpeached’ ” evidence that Exhibit 10 reflected the parties’ actual lease that was “ ‘ “ ‘of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.’ ” ’ ” (Murray Dental, supra, 19 Cal.App.5th at p. 270.)
C. The “Triple Net” Language in the Different Versions of the Lease Did Not Compel a Finding That the Parties Agreed the Tenant Would Be
D.
Responsible for All Maintenance.
Lateef’s second argument, which appears to be an alternative argument, is that all versions of the lease, including Dutt and Sekhon’s Exhibit 201, contained handwritten “triple net” language in paragraph 39, which he contends proves “there was ‘a meeting of the minds’ on this term.” He further argues “there was no conflict in the extrinsic evidence concerning whether the ‘triple net’ and Section 17A provisions [regarding maintenance] were completed before signing.” He argues that the trial court was left with the purely legal question of interpreting these provisions and that as a matter of law they could only be interpreted to impose all maintenance responsibilities on the tenant. We disagree.
Although Lateef does not acknowledge it, there was much evidence at trial that conflicted with his premise that there was a “meeting of the minds” on the maintenance provisions of the lease. Thus, far from a pure legal question about the meaning of undisputed lease terms, the trial court was engaged in a fact-finding effort to determine which terms the parties actually agreed on. As will be seen, the evidence did show that all versions of the lease proffered by the parties contained handwritten “triple net” language. The trial court did not find otherwise. But that provision—given the meaning Lateef’s own expert ascribed to it—conflicted with other lease provisions that were also contained in the leases offered by the parties, including Exhibit 10. This created an ambiguity about the meaning of the lease terms regarding maintenance and there was evidence supporting different interpretations of these terms.
To begin with, the parties proffered at least five different versions of the lease and disputed which among them was their actual agreement. All of these versions contained the same “triple net” language handwritten in paragraph 39. However, they differed in other significant respects, including, as we will further explain, regarding which boxes were checked in paragraph 17—a provision that had a direct bearing on the parties’ respective maintenance obligations. By leaning so heavily on the “triple net” language, Lateef would have us ignore or dismiss the conflict between that language and the hand-checked boxes on paragraph 17 of the form lease, to which we shall now turn.
All the versions of the lease the parties proffered were the same printed form California Association of Realtors lease, but they varied in the handwritten notations that filled out the form. Lateef testified the handwritten marks and language were filled in by Chand at the meeting where the parties negotiated and signed the lease and contends Dutt did not contradict this testimony. Besides paragraph 39, which contained the “triple net” language handwritten by Chand, paragraph 17 contained two parts dealing with maintenance reflected by two boxes, Box A and Box B.
If Box A was not checked, the tenant was agreeing “to professionally maintain the Premises, including heating, air conditioning, electrical, plumbing and water systems, if any, and keep glass, windows and doors in operable and safe condition.” If the tenant failed to maintain under this provision, the landlord could “contract for or perform such maintenance, and charge Tenant for Landlord’s cost.” If Box A was checked, the landlord was agreeing to undertake those maintenance responsibilities.
Box B of paragraph 17 addressed additional maintenance responsibilities. If Box B was not checked, the landlord was agreeing to “maintain the roof, foundation, exterior walls, [and] common areas.” If Box B was checked, the tenant was agreeing to perform such maintenance.
On three of the four versions of the lease proffered by Lateef, Exhibits 2, 5 and 10, neither Box A nor Box B of paragraph 17 was checked, thus allocating maintenance responsibility in part to the tenant (Dutt) (in Box A) but also in part to the landlord (Lateef) (in Box B). On the lease proffered by Dutt, Exhibit 201, Box A was checked, but Box B was not, thus imposing no responsibility for maintenance on Dutt and all responsibility for maintenance to Lateef.
Paragraph 39 of the lease, on which Lateef relies, was labelled “other terms and conditions/supplements.” There, in handwriting the parties testified was Chand’s, all copies of the lease admitted in evidence contained the words “10 YR [or 10 YEAR] TRIPLE NET LEASE WITH 5 YEAR OPTION.” The expert witness proffered by Lateef testified that “triple net” as commonly used in the real estate industry means the tenant is obligated to pay for taxes, insurance and “all the maintenance” of the property and the landlord does “not have to deal with the property at all [except] to just collect his base rent amount.” However, the expert also agreed it would be “a conflict between the terminology of the lease if it provided for being both triple net and require[ed] the landlord to take care of any part of the maintenance.”
Such a conflict exists here between paragraphs 17 and 39 in every proffered version of the lease save one (see fn. 11, ante), including the exhibit Lateef contended was the actual original lease (Exhibit 10). Each imposed at least some responsibility for maintenance on Lateef as the landlord. Exhibits 2, 5 and 10 required Lateef, as landlord, to maintain the roof, foundation, exterior walls and common areas. Exhibit 201, as we have already noted, in which Box A of paragraph 17 was checked, placed those and all other maintenance responsibilities (i.e., to “professionally maintain the Premises, including heating, air conditioning, electrical, plumbing and water systems, if any, and keep glass, windows and doors in operable and safe condition”) on the landlord. Nowhere does Lateef explain how his expert’s explanation of “triple net” as meaning the landlord has no maintenance responsibility can be reconciled with the imposition of at least some maintenance responsibilities on the landlord even in the version of the form lease he proffered as the true lease.
Furthermore, besides these different versions of the written lease, there was considerable parol evidence relating to the issue of maintenance, some of it in conflict. “The trial court’s resolution of an ambiguity is . . . a question of law if no parol evidence is admitted or if the parol evidence is not in conflict. However, where the parol evidence is in conflict, the trial court’s resolution of that conflict is a question of fact and must be upheld if supported by substantial evidence.” (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1210.)
The parol evidence included the parties’ testimony about how they entered into and executed the lease. Lateef testified about his meeting with Dutt and their joint agent, Chand. The meeting came about after Chand approached Lateef and told him he was a realtor for Century 21 and had a buyer for the business if Lateef was interested in selling it. After that, on August 27, 2002, Lateef met with Dutt for the first time and they and Chand discussed and negotiated the sale of the business. All of the negotiations concerning the sale and the terms of the lease took place at this meeting, at which the parties signed the Business Purchase Agreement and a form lease for the property. However, as both Lateef and Dutt testified, not all the terms of the lease they signed were filled out at the meeting. Instead, Chand told Lateef and Dutt he would fill out the terms.
Regarding the discussions during the meeting pertaining to the sale, Lateef testified he understood he was selling the entire business to Dutt. Dutt testified to the same effect. They agreed on the price of $190,000 and that Dutt was buying the equipment and the fixtures. Dutt testified (and the sale documents reflected) that he bought those things and “all the stuff,” including the office, the chairs, the TV, the computer, the lift, oil reels and tanks; there was no discussion about Dutt having to return any of it to Lateef; and none of the equipment was leased to him.
Up to this point, there is no conflict in the parol evidence. Regarding discussion of the lease, however, the parties’ testimony diverged. Lateef testified that the parties discussed maintenance at the meeting, and that he said he did not want “any responsibility of doing anything over here,” was selling the business “cheap” and “want[ed] all the maintenance to be done.” He testified that Dutt agreed to “take care of the property” and “do everything,” and that Chand said that “triple net means everything.” Lateef expected Chand to fill in all blanks to reflect the parties’ agreement. Lateef also testified that after the transaction closed and before the sale and assignment to Sekhon, Dutt painted the building on both the outside and inside and otherwise maintained the business premises.
Dutt, on the other hand, testified he did not remember discussing “triple net” at the meeting other than that he would be paying property tax, insurance and rent. He understood he had to repair anything “in the property” but that Lateef was “responsible to repair the building part, all structural, anything outside.” Lateef was responsible for plumbing, the roof and anything structural, while Dutt was responsible for “[a]nything to do with your day-to-day operation, your equipment, anything, I’m not going to be calling him for that. That’s because I bought it. So that was my responsibility. That’s what I understood.” Dutt agreed to paint the outside of the building on one occasion but did that because he was buying the business and wanted a fresh look.
Both parties indicated the handwritten “triple net” language was written in paragraph 39 of the lease by Chand. This raised the questions of when Chand handwrote this language, whether the parties ever discussed and agreed on that language and what the language meant. As we have indicated, there were differences among the proffered versions of the lease as to which boxes in paragraph 17 had been checked. This raised similar questions of whether the parties or Chand checked either of the boxes at the meeting, discussed and agreed on them prior to signing the lease or discussed the meaning of the “triple net” provision in conjunction with paragraph 17.
Lateef testified that the “triple net” language was filled in by Chand at the meeting. He contends that because Dutt did not refute his testimony on this point and it was “uncontroverted,” the court erred in finding that the triple net term was written in after the meeting. Lateef also testified that at the time of trial he had never seen a copy of the lease that had a check mark on paragraph 17, Box A, and he proffered expert testimony on the meaning of “triple net” in the real estate industry. He contends that meaning ascribed by his expert must be given to the language.
Lateef’s understanding both of the trial court’s role and our own is, to be charitable, misguided. The trial court, sitting as the trier of fact, was faced with significant factual disputes. Contrary to Lateef’s assumption, it was not required to accept Lateef’s or his expert’s testimony on these or any other points, even if uncontradicted. Again, the court could reject any testimony the judge found not credible. “As a general rule, ‘(p)rovided the trier of the facts does not act arbitrarily, [it] may reject in toto the testimony of a witness, even though the witness is uncontradicted.’ ” (Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 890.) As Division One of this appellate district said more than a half century ago, “It has . . . been established by . . . a long line of decisions that the trier of fact, as the exclusive judge of the credit and weight to be given to the testimony of a witness, may reject such testimony even though uncontradicted and unimpeached when he does not act arbitrarily but does so upon sound and relevant considerations such as those enumerated above. [Citations.] As it is said in Huth v. Katz [(1947) 30 Cal.2d 605, 608-609]: ‘The trial court . . . was not required to believe that their testimony was true and accurate in every particular. In passing on the credibility of witnesses and the weight to be given their testimony, the trier of fact is entitled to consider their interest in the result of the case, their motives, the manner in which they testify, and the contradictions appearing in the evidence.’ ” (Camp v. Ortega (1962) 209 Cal.App.2d 275, 283.) On appellate review, we do not second guess the trial court’s credibility decisions, again even as to uncontradicted testimony. “The finding or conclusion of the trial court denying credence to such testimony cannot be controlled by this court ‘unless it appears that there are no matters or circumstances which at all impair its accuracy.’ ” (Ibid.)
As we have already noted, the trial court “found much of the testimony of the parties to be questionable and frequently non-credible.” This included the testimony of Lateef in general, and both his and Dutt’s testimony “regarding disputed Lease terms involving property maintenance and use of the term ‘triple net’, which was not added to the Lease by any party.” (Italics added.) The court found that testimony to be “self serving and not adequately supported by documentary evidence.” It specifically found that “Chand assumed responsibility for filling out key terms of the Lease after the Plaintiff and Dutt affixed their signatures, such as section 17, the rental amount, and the insertion of any reference to ‘triple net.’ ” The court also noted the failure of any of the parties to offer any testimony from Chand “about what the understanding of the parties was on this point.”
Thus, the trial court was left not only without any authentic version of the lease but with a conflict between paragraphs 17 and 39 on the subject of maintenance in the versions of the lease proffered by the parties. The parties’ testimony about their negotiations on the subject was in conflict and, the trial court found, not credible. Even Lateef’s own expert testified that the “triple net” language would conflict with a provision that placed any maintenance responsibility on the landlord, which almost all of the lease exhibits contained. Far from there being undisputed evidence that compelled a finding in Lateef’s favor, the evidence was conflicting and supported the trial court’s conclusion that Lateef failed to meet his burden of proving an agreement that Dutt, as tenant, would be responsible for all maintenance.
Lateef also fails to grapple with a related finding by the trial court that bears on his claim for breach of the tenant’s purported maintenance obligation. The damages Lateef sought for that alleged breach consisted not only of work addressed by paragraphs 17, Box A and 17, Box B of the form lease, it also included costs he claimed to have incurred to repair damage to, and to replace, fixtures, equipment and signage used in Speedee. The trial court found, based on testimony and the business sale documents executed contemporaneously with the lease, that Lateef had sold “all assets of the Business” to Dutt, including, among other things, “trade fixtures and equipment, . . . sign(s), [and] leasehold improvements,” in exchange for $190,000 and no longer had any interest in them. Thus, the trial court held Lateef was not entitled to recover for repair or replacement of these items. Lateef does not even address this finding, much less take issue with it.
For all of these reasons, Lateef has failed to show the evidence compelled a ruling in his favor on his claim that the parties agreed that Dutt would be responsible for all maintenance and that he was entitled to damages for Dutt’s and Sekhon’s alleged breach of that obligation.
E. Lateef’s Argument That the Trial Court Erred in Focusing on Subjective
F.
Intent Lacks Merit.
Finally, Lateef contends the trial court wrongly imposed on him a burden to prove Dutt and Sekhon understood the meaning of the lease that was assigned to him. Having concluded there was no error in the trial court’s determination that Lateef did not meet his burden to prove an agreement that Dutt would be responsible for all maintenance of the leased premises, we need not reach this additional argument. Even if we interpreted the trial court decision as requiring Lateef to prove Dutt’s and Sekhon’s subjective understanding and concluded it was in that respect erroneous (which we do not), Lateef’s failure to prove an agreement that the tenant would maintain the premises is alone fatal to his maintenance costs claim. Thus, if there were any such error, it would be harmless. (See F.P. v. Monier (2017) 3 Cal.5th 1099, 1079-1080 [reversal precluded for errors in civil cases absent prejudice]; Stellar v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 184 [trial court’s erroneous decision to exclude extrinsic evidence did not compel reversal where it was not reasonably probable a different result would have been obtained if error had not been made].)
G. Lateef’s Attorney Fee Arguments.
H.
In his cross-appeal, Lateef complains of delay in the trial court addressing his attorney fee motion and further challenges an assumed determination by the trial court that he was not the prevailing party for attorney fee purposes. The former argument is moot because the trial court did eventually rule on Lateef’s motion, and the latter argument was unripe when made. We will not address these arguments insofar as they are made in the cross-appeal. However, we address below Lateef’s separate appeal (consolidated with this appeal) from the trial court’s actual attorney fee ruling.
III.
Lateef’s Appeal from Attorney Fee Order
(A154350)
As we have already discussed, Lateef filed a motion for attorney fees after the judgment was entered, and the trial court denied that motion. Lateef then filed a separate appeal from that ruling (A154350), and we consolidated the two appeals. We here address Lateef’s appeal from the attorney fee ruling.
A. Background
In March 2017, Lateef filed a motion for contractual attorney fees under the lease, seeking $180,800 in attorney fees for the underlying case that we have just discussed (the damages case); $42,920 in fees for the third unlawful detainer action; and $4,000 in fees for litigating the fee motion. He sought these fees under paragraph 40 of the lease, which provides, “In any action or proceeding arising out of this agreement, the prevailing party between Landlord and Tenant shall be entitled to reasonable attorney fees and costs from the non-prevailing Landlord or Tenant, except as provided in paragraph 34A.”
Paragraph 34A of the lease, entitled “Mediation,” is part of a larger provision addressing “Dispute Resolution.” It states in relevant part, “Tenant and Landlord agree to mediate any dispute or claim arising between them out of this agreement, or any resulting transaction, before resorting to arbitration or court action, subject to paragraph 34B(2) below. Paragraphs 34B(2) and (3) apply whether or not the arbitration provision is initialed. . . . If for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED.” (Italics added.)
Paragraph 34B(2) concerns “Exclusions from Mediation and Arbitration.” It provides in relevant part, “The following matters are excluded from Mediation and Arbitration hereunder: . . . (ii) an unlawful detainer action . . . .” Paragraph 34B(3) pertains to brokers and is not pertinent here.
The above-quoted provisions are identical in all versions of the lease the parties proffered at trial. None of these provisions were required to be initialed and none were stricken from or otherwise altered in any of the versions.
Lateef argued in the trial court that he was entitled to attorney fees under paragraph 40 because the court had found he was the prevailing party and the parties had satisfied the mediation precondition when, after settling the unlawful detainer action, they participated in further voluntary settlement conferences with Judge Carvill in an effort to resolve their monetary disputes. Lateef submitted a declaration by his counsel, Terry J. Mollica, who stated that prior to this action, the parties were involved in an unlawful detainer action in Alameda County Superior Court that was assigned to Judge Carvill for trial on August 29, 2014, that on that date Sekhon agreed to vacate the premises rather than face an eviction trial, that Judge Carvill conducted voluntary settlement conferences on August 29, September 4 and September 28, 2014, and that this action was filed on October 2, 2014. The settlement conference on August 29 focused on the eviction and resulted in an agreement pursuant to which Sekhon would vacate the property by a specified date, the eviction trial would not go forward, and the parties would reserve their rights to assert “any claims or defenses they may have,” including claims for damages. After the parties reached this agreement regarding possession only, they and Judge Carvill continued with further voluntary settlement conferences on September 4 and September 28, 2014, during which the parties exchanged monetary figures and discussed back rent and maintenance damages, and Lateef submitted a damages analysis to defendants. However, no agreement was reached. Mollica further declared that he told Judge Carvill during the August 29 settlement conference that Lateef would participate in the further settlement conferences because of the mediation provision contained in section 34 of the lease.
As part of their opposition to the fee motion, Dutt and Sekhon submitted a declaration from their own counsel, Paul L. Gumina, who did not deny having participated in settlement conferences in an effort to resolve the monetary relief claims or contend they were mandatory rather than voluntary. He denied having received a request to mediate from Lateef or his counsel.
The trial court denied the fee motion in its entirety in a written order filed in March 2018. The court concluded that, while the motion was “made pursuant to paragraph 40 of the August 27, 2012 Lease Agreement,” it “must be denied because [Lateef] did not seek to resolve the parties’ dispute through mediation prior to filing this action on October 2, 2014.” The court acknowledged there was “some appeal” in Lateef’s “contention that the judicially-supervised settlement conferences that the parties had in the unlawful detainer case and in this case are functionally equivalent to a private mediation,” but concluded that the “plain meaning” of the lease required the court to nonetheless reject the contention. As to Lateef’s request for fees incurred in the unlawful detainer action, the court stated, “[Lateef] should have made his request for reimbursement of his reasonably incurred attorney’s fees at the conclusion of the unlawful detainer case. See Rule of Court 3.1702.” Lateef timely appealed.
B. Discussion
1. Principles Governing Review of an Attorney Fee Motion
“ ‘ “On review of an award of attorney fees after trial, the normal standard of review is abuse of discretion. However, de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees and costs in this context have been satisfied amounts to statutory construction and a question of law.” ’ [Citation.] In other words, ‘it is a discretionary trial court decision on the propriety or amount of statutory attorney fees to be awarded, but a determination of the legal basis for an attorney fee award is a question of law to be reviewed de novo.’ . . . [¶] . . . [¶]
“If such litigation does sound in contract, however, an agreement allocating attorney fees may be ‘within the scope of [Civil Code] section 1717’ and subject to its restrictions.[ ] [Citation.] ‘Before section 1717 comes into play, it is necessary to determine whether the parties entered an agreement for the payment of attorney fees, and if so, the scope of the attorney fee agreement.’ [Citation.] This determination requires us to apply traditional rules of contract interpretation.
“Accordingly, we first consider the mutual intention of the parties at the time the contract providing for attorney fees was formed. (Civ. Code, § 1636.) Our initial inquiry is confined to the writing alone. (Id., § 1639; see Santisas [v. Goodin (1998) 17 Cal.4th 599, 608].) ‘ “The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ ([Civ. Code], § 1644) controls judicial interpretation. (Id., § 1638.) Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.” [Citations.]’ [Citations.] At the same time, we also recognize the ‘interpretational principle that a contract must be understood with reference to the circumstances under which it was made and the matter to which it relates. (Civ. Code, § 1647.)’ ” (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751-752 (Mountain Air Enterprises).)
2. The Parties’ Contentions on Appeal
Lateef’s primary argument is that the trial court erred in interpreting the mediation clause to require the parties to engage in “private mediation,” since dictionaries define “mediate” to mean the attempt to reach an accord through the use of an intermediary and that no extrinsic evidence of a more specialized meaning was offered. He contends that the voluntary settlement conferences were “mediation” within the ordinary meaning of that term and thus satisfied the mediation precondition in the lease.
Dutt’s response is to assume, without much discussion, that “mediation” does not include a voluntary settlement conference. He invokes mediation provisions of the Evidence Code, which we will discuss. He also reprises arguments defendants made below that (1) the court did not identify the attorney fee clause as one of the lease terms agreed to by the parties and thus there was no attorney fee clause to enforce, and (2) that Lateef is not entitled to fees for the unlawful detainer action in any event, both because that action was voluntarily dismissed based on a settlement, in which circumstance there can be no prevailing party under Civil Code section 1717, and because Lateef did not file his fee motion within 60 days of the dismissal as required by rules 3.1702(b) and 8.104 of the California Rules of Court.
Before addressing the interpretation issue, we first address Dutt’s argument that there was no fee provision in the lease to enforce because the trial court did not identify the attorney fee clause as one of the lease terms to which the parties agreed in its statement of decision. Dutt’s argument boils down to the assertion that the trial court, in finding that none of the versions of the lease proffered by the parties represented the actual agreement between them and finding enforceable the provisions of the lease regarding rental amount (¶3), property taxes (¶14), interest (¶10) and leaving the property clean when vacating (¶24), also found that the parties did not agree to any of the other provisions in the written form lease, including those that were not disputed or raised at trial. We disagree. The court expressly found that Lateef had not met his burden of proof to demonstrate agreement on the disputed maintenance provisions, and in particular, the “triple net” provision of the lease. In so stating, the court was addressing the lease terms the parties raised at trial. In its statement of decision, it had no reason to decide and did not decide one way or the other that the parties agreed or did not agree to other provisions in the form lease.
Dutt’s argument is particularly puzzling because in the very next section of his brief, he admits that the court did not decide the question whether the attorney fee clause had been agreed on. He states, “In its Order Denying Plaintiff’s Motion for Attorney’s Fees, the Court answered the question that had been left open in the Statement of Decision and the Judgment, finding that the Attorney Fee provision of Section 40 of the Lease (modified expressly by the Mediation provision of Section 34A of the Lease) was agreed to by the parties, and therefore, those terms became part of the lease that existed between them.” (Italics added.) We agree. In ruling on the attorney fee motion, the court trial declined to award fees not because it found no agreement on the relevant provisions of the lease but instead because under its interpretation of the mediation provisions, Lateef had not satisfied a contractual condition precedent to recovery of fees: “Plaintiff’s Motion for Attorney’s Fees, pursuant to Civil Code § 1717, is made pursuant to paragraph 40 of the August 27, 2012 Lease Agreement. The motion must be denied because Plaintiff did not seek to resolve the parties’ dispute through mediation prior to filing this action on October 2, 2014. Paragraph 34A of the Agreement provides that a party failing to comply with the mediation clause is not entitled to recover his reasonably incurred attorney’s fees. Plaintiff’s contention that the judicially-supervised settlement conferences that the parties had in the unlawful detainer case and in this case are functionally equivalent to a private mediation has some appeal but cannot be accepted.”
Having rejected Dutt’s threshold argument, we now turn to the primary issue—whether the court erred in its interpretation of the mediation provision of the lease, paragraph 34A, in which the parties agreed to mediate any dispute or claim (except an unlawful detainer claim) arising out of the lease before resorting to court action and further agreed that if either one commences an action without first attempting to resolve the matter through mediation, that party shall not be entitled to recover attorney fees. In short, this clause committed the parties to “mediate,” or “attempt[] to resolve the matter through mediation,” prior to “resorting to . . . court action,” on pain of losing their right under paragraph 40 to recover prevailing party attorney fees if they do not.
Lateef quotes Merriam-Webster’s online dictionary, which defines “mediate” to mean (as relevant here):
• “to bring accord out of by action as an intermediary,” as in “endeavored to mediate East-West differences on several important issues” – Collier’s Year Book”;
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• “to effect by action as an intermediary,” as in “mediated a settlement that was satisfactory to both sides”;
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• “to interpose between parties in order to reconcile . . . them” and
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• “to reconcile differences.”
•
(https://www.merriam-webster.com/dictionary/mediate [as of Dec. 31, 2019].) The same online dictionary defines “intermediary” as used in the above definitions to mean “Mediator” or “Go-Between.” (
• “intervention between conflicting parties to promote reconciliation, settlement or compromise,” as in “The town feud raged until April . . . when, with the mediation of William N. Byers the dispute was settled and the name of Denver selected for the settlement. – Thomas A. Martin”
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• “specifically: a means of resolving disputes outside of the judicial system by voluntary participation in negotiations structured by agreement of the parties and usually conducted under the guidance and supervision of a trained intermediary,” as in “More couples are considering mediation – or using a mediator to help them reach a compromise –rather than hiring two lawyers who fight it out for their clients. – Mary Rowland.”
•
(
These definitions, with the arguable exception of the second definition of “mediation” (which refers to it being “outside of the judicial system”), support Lateef’s position that the term mediation, as commonly understood, is broad enough to include an effort to settle a case through use of an intermediary who is a judge. (They are, of course, also consistent with use of a non-judicial person as the mediator.)
Even in the legal context, the definition is similarly broad. Black’s Law Dictionary defines “mediation” as “[a] method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution.” (Black’s Law Dict. (11th ed. 2019) p. 1176, col.1.) And the Second District observed in Saeta v. Superior Court (2004) 117 Cal.App.4th 261, 270, “Mediation takes many forms. ‘Mediation has been defined in many different ways. In essence, mediation is a process where a “neutral third party who has no authoritative decision-making power” intervenes in a dispute or negotiation “to assist disputing parties in voluntarily reaching their own mutually acceptable” agreement. Mediation involves moving parties from focusing on their individual bargaining positions to inventing options that will meet the primary needs of all parties. The concept of self-determination, which gives parties control over the resolution of their own dispute, is of major importance to the mediation process. It is thought that self-determination enhances commitment to the settlement terms because parties make decisions themselves instead of having a resolution imposed upon them by an authoritative third party.’ [Citation.] The function of the mediator, therefore, is to facilitate the parties to voluntarily reach their own agreement.” In our view, a voluntary settlement conference is one such form, where the judge serves as a neutral third party and assists the disputing parties in voluntarily reaching their own mutually acceptable agreement.
The mediation provisions of the Evidence Code Dutt cites do not aid his position. Evidence Code section 1115 defines “Mediation” to mean “a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement.” (Evid. Code, § 1115, subd. (a); see also Code Civ. Proc., § 1775.1, subd. (a) [same definition].) It defines “Mediator” to mean “a neutral person who conducts a mediation.” (Evid. Code, § 1115, subd. (b).) This broad definition supports Lateef’s position, not Dutt’s. Nor does Evidence Code section 1117, subdivision (b)(2), on which Dutt also relies, aid him. It excludes from the reach of the mediation confidentiality statute of which it is a part “[a] settlement conference pursuant to Rule 3.1380 of the California Rules of Court.” Rule 3.1380 addresses mandatory settlement conferences, not voluntary ones. The fact that the mediation confidentiality statute expressly excludes mandatory settlement conferences from its reach but does not mention voluntary settlement conferences again supports Lateef.
As our high court stated in Mountain Air Enterprises, “ ‘ “[t]he ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ ” ’ ” controls our interpretation absent a showing that the parties used the words “ ‘ “ ‘in a technical sense or a special meaning is given to them by usage.’ ” ’ ’’ (Mountain Air Enterprises, supra, 3 Cal.5th at p. 752.) No technical or other special usage was urged by the parties below or is urged here. The trial court erred in interpreting the lease provision narrowly to exclude voluntary settlement conferences conducted by a judge.
While we need not go beyond the agreement itself, we note that this interpretation is consistent with California’s strong public policy “favoring mediation as an alternative to litigation,” as a “simple, quick, and economical means of resolving disputes, and because it may also help reduce the court system’s backlog of cases.” (Doe 1 v. Superior Court (2005) 132 Cal.App.4th 1160, 1165.) It is also consistent with the purpose of the mediation clause in the form lease and the fee-denial enforcement mechanism. The purpose of the mediation precondition, to ensure the parties attempted to resolve the dispute by less costly, more efficient means before heading down the path of litigation, was fully served by the parties’ voluntary engagement in efforts with Judge Carvill to settle the monetary aspects of the case. The fact that the judge agreed to serve in that capacity during a time when he would otherwise have been trying the case saved the parties the cost of hiring a private mediator. That only made the process less costly and more efficient for the parties, a goal the mediation requirement was designed to accomplish.
Because we conclude that “mediation” as used in the lease encompasses the voluntary settlement conferences the parties engaged in with Judge Carvill prior to Lateef filing his damages case, we conclude the trial court erred in denying contractual attorney fees to Lateef for that case. In light of this conclusion, we need not reach Lateef’s other arguments. (See footnote 18, ante.)
However, we agree with Dutt that, despite our conclusions, Lateef is not entitled to the portion of attorney fees he incurred litigating the unlawful detainer action ($42,920) for two reasons. First, that action was voluntarily dismissed under section 1717, and there is no prevailing party in that circumstance. (Civ. Code, § 1717, subd. (b)(2).) Second, the fee motion was not filed within 60 days of the dismissal of that action as required by rules 3.1702(b) and 8.104 of the Rules of Court.
Lateef does not meaningfully address these issues, merely arguing that the partial settlement that resulted in dismissal of the unlawful detainer action, “reserved [the parties’] right to seek recover those fees [sic] by ‘reserving’ all other ‘claims and defenses.’ ” He neither cites nor discusses any authority, nor provides any cogent explanation, establishing that a settlement agreement’s general reservation of the right to assert unsettled claims and defenses suffices to circumvent section 1717’s unequivocal proviso that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” (Civ. Code, § 1717, subd. (b)(2).) Nor does he explain how such a reservation of rights overcomes the rule requiring a party moving for attorney fees “for services up to and including the rendition of judgment in the trial court” to serve and file the motion “within the time for filing a notice of appeal.” (Cal. Rules of Court, rule 3.1702(b)(1)(A), (b)(2)(A).) Even if Lateef could avoid the no-prevailing-party rule of section 1717 by the “reservation of rights” in the settlement agreement, which we doubt, that would not allow him to file an attorney fees motion beyond the time specified in the rule.
For the foregoing reasons, we reverse the trial court’s attorney fee decision except to the extent it denied Lateef attorney fees for the unlawful detainer litigation.
DISPOSITION
The judgment is affirmed. The order denying Lateef’s attorney fees is affirmed in part and reversed in part as stated above. The matter is remanded to the trial court for further proceedings on the attorney fee issue consistent with this opinion. The parties shall each bear their own costs on appeal in A150824. Lateef shall be entitled to recover costs on appeal in A154350.
STEWART, J.
We concur.
KLINE, P.J.
MILLER, J.
Lateef v. Dutt (A150824; A154350)
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