Zawtocki v. Black Angus Steakhouses CA4/2 (2016) · DecisionDepot
Zawtocki v. Black Angus Steakhouses CA4/2
California Court of Appeal Aug 11, 2016 No. E062969Unpublished
Filed 8/11/16 Zawtocki v. Black Angus Steakhouses CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
FOURTH APPELLATE DISTRICT
DIVISION TWO
ALLAN ZAWTOCKI, as Co-Trustee etc. et al., E062969 Plaintiffs and Appellants, (Super.Ct.No. RIC1409802) v. OPINION BLACK ANGUS STEAKHOUSES, LLC,
Defendant and Respondent.
APPEAL from the Superior Court of Riverside County. John W. Vineyard, Judge.
Affirmed.
Niddrie Addams and John S. Addams; Thomas P. Sayer for Plaintiffs and
Appellants.
Shoreline, Andrew S. Pauly, and Damon A. Thayer for Defendant and
Respondent.
The lease in this case provided that, if and when the lessee exercised its option to
extend the lease, the new minimum rent would be determined by so-called “final offer”
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or “baseball” arbitration. Specifically, the lessor would make an offer; the lessee would
be bound by the lessor’s offer, unless it made its own offer within 30 days; and then the
lessor would be bound by the lessee’s offer, unless it demanded arbitration within 15
days. If the lessor did demand arbitration, the arbitrator would have to adopt either the
lessor’s offer or the lessee’s offer — the arbitrator could not split the baby.
Here, the lessor1 offered $220,000 a year. The lessee2 offered $140,000 a year.
Rather than demand arbitration, the lessor protested that the lessee had not calculated its
offer in accordance with guidelines set forth in the lease; it waited to hear back from the
lessee, but meanwhile, its time to demand arbitration expired.
The trial court denied the lessor’s petition to compel arbitration, ruling that it had
failed to make a timely demand. As the lessor notes, ordinarily, the denial of an
arbitration petition allows the parties to carry on their dispute, albeit in a judicial forum;
in this case, however, the denial of the petition effectively resolves the dispute. The
arbitration petition is, so to speak, the whole ball game.
The lessor appeals, contending:
1. The lessee’s notice was ineffective because it did not comply with the lease.
1 The current lessor is a trust — namely, Allan Zawtocki, William Rhett Tabor, and William W. Paty, as trustees under the will and estate of Mark Alexander Robinson and as trustees under a deed of trust dated July 30, 1953 and executed by Mark Alexander Robinson and Mary Kapuahaulani Hart Robinson. We will refer to these trustees collectively as the Trust. 2 The current lessee is Black Angus Steakhouses, LLC (Black Angus).
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2. The lessor was entitled to relief from forfeiture under Civil Code section 3275.
3. The lessor’s forfeiture was excused by waiver or estoppel.
4. The trial court erred by failing to consider waiver, estoppel, and relief from
forfeiture.
We find no error. Hence, we will affirm.
I
FACTUAL BACKGROUND
The following facts are taken from the evidence introduced in support of and in
opposition to the petition to compel arbitration.
A. The Relevant Lease Provisions.
In 1994, the Trust’s predecessor in interest leased certain property in Temecula to
Black Angus’s predecessor in interest, for use as a restaurant. The initial lease term was
20 years. The lessee had the option to extend the lease for three successive five-year
terms. During the first extended term, the minimum rent would be set as follows:
“Within thirty (30) days following Lessor’s receipt of [Lessee’s] Notice of
Exercise, Lessor shall notify Lessee in writing of its opinion of Fair Market Rental . . . for
the Extended Term (‘Lessor’s Rental Notice’). If Lessee disagrees with Lessor’s opinion
of the Fair Market Rental, it shall so notify Lessor (‘Lessee’s Value Notice’) within thirty
(30) days after receipt of Lessor’s Rental Notice. Lessee shall be bound by the Fair
Market Rental stated in Lessor’s Rental Notice if Lessee does not deliver Lessee’s Value
Notice to Lessee [sic] within such thirty (30)-day period. If the parties are unable to
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resolve their differences within ten (10) days after Lessor’s receipt of Lessee’s Value
Notice, either party may apply for Arbitration . . . . If neither party applies for Arbitration
within fifteen (15) days after receipt by Lessor of Lessee’s Value Notice, Lessor shall be
bound to the Fair Market Rental stated in Lessee’s Value Notice.”
Once arbitration was demanded, the arbitrator was required to select either the
Lessor’s Fair Market Rental or the Lessee’s Fair Market Rental: “The arbitrator shall
have no right to propose a middle ground or any modification of either of the proposed
valuations.”
During the second and third extended term, the minimum rent was fixed at 110%
of the minimum rent for the preceding extended term. Thus, the procedure for
determining the rent for the first extended term effectively also determined the rent for
the second and third extended term.
The lease defined “Fair Market Rental” as “the Minimum Monthly Rent
chargeable for the Original Leased Premises, based on the following factors applicable to
the Original Leased Premises or any premises comparable to the Original Leased
Premises:
“[]1 Rental rates being charged for premises comparable to the Original Leased
Premises in the same geographical location and the relative locations of such comparable
premises.
“[]2 Improvements . . . .
“[]3 Free rent periods or other rental concessions [and r]ental adjustments, if any.
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“[]4 Services and utilities provided or to be provided.
“[]5 Use limitations or restrictions.
“[]6 Lessor’s obligation to pay brokerage commissions.
“[]7 The period of vacancy prior to complete execution of a new lease for the
Leased Premises.
“[]8 Any other relevant Lease terms or conditions.”
B. The Parties’ Respective Notices.
On June 17, 2014,3 Black Angus exercised its option to renew for the first
extended term.
The Trust obtained a professional appraisal, which concluded that the fair market
rent was $208,833 per year. On August 1, 2014,4 the Trust gave Black Angus notice that
its opinion of fair market rent was $220,000 per year (the Trust’s notice).
3 Any date stated in this section is the date the letter or email in question was sent.
The lease provided that notices given by personal delivery were effective on the same day; notices given by “reputable courier service” were effective on the following business day; and notices given by mail were effective three days later. However, any time lapse between the date a notice was sent and the date it became effective is not material in this case. When the parties responded to notices, their responses were timely, even if we assume the shortest possible time; and when they failed to respond to notices, their responses were untimely, even if we assume the longest possible time. 4 This was more than 30 days after Black Angus exercised its option, and therefore late under the terms of the lease. However, Black Angus waived timely compliance with the 30-day requirement by responding with its own notice. (See part VI.B.1, post.) In any event, Black Angus does not claim that the Trust’s notice was ineffective.
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On August 8, 2014, Black Angus gave the Trust notice that its opinion of fair
market rent was $140,000 per year (Black Angus’s notice). Black Angus’s notice stated:
“ . . . Black Angus disputes the ‘Fair Market Value’ of $220,000/annum as there was no
back-up attached supporting your increase. The minimum rent has increased by an
average of 9% during each five-year period under the Lease. The current rent is
$125,970.96. A 10% increase over that would bring the annual rent to $138,568.05.”
On August 12, 2014, the Trust sent Black Angus a letter stating: “We
acknowledge receipt of your letter . . . offering a new minimum annual rent of $140,000.
. . . The . . . minimum annual rent is not based on a percentage rent increase. We
reinstate our proposal for a minimum annual Fair Market Rent of $220,000 . . . , as
supported by our . . . appraisal report.”
On August 25, 2014, the Trust emailed Black Angus, asking it to confirm receipt
of the Trust’s August 12 letter “reinstat[ing]” its offer.
On August 27, 2014, counsel for Black Angus sent the Trust a letter stating:
“Since the Lessor did not apply for arbitration by August 23, 2014, the Lessee’s Value
Notice prevails.”
On August 29, 2014, counsel for the Trust sent a demand for arbitration to counsel
for Black Angus.5
5 Black Angus complains that the demand for arbitration was sent “to one of Black Angus’s outside attorneys despite the lease’s requirement that such notices be sent to Black Angus.” However, it never actually argues that we should uphold the trial court’s ruling on this ground. In any event, sending the demand to Black Angus’s counsel would appear to be at least substantial compliance. (See generally Cline v. [footnote continued on next page]
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II
PROCEDURAL BACKGROUND
The Trust filed a petition to compel arbitration. In support of the petition, it
argued that: (1) Black Angus’s notice was ineffective because its $140,000 figure was
not based on the eight factors specified in the lease; and (2) the Trust should be relieved
of any forfeiture.
In opposition to the petition, Black Angus argued that: (1) Platt Pacific, Inc. v.
Andelson (1993) 6 Cal.4th 307, which held that the failure to make a timely demand for
arbitration results in forfeiture of the right to compel arbitration, was on point and
controlling; (2) Black Angus’s notice complied with the lease; and (3) the Trust was not
entitled to relief from forfeiture.
The trial court denied the petition. It ruled: “[T]he 15-day deadline to demand
arbitration [is] a condition precedent and I think the Platt case is controlling. . . . [¶]
Failure to demand arbitration within that deadline period is a forfeiture or leads t[o] a
forfeiture.”
[footnote continued from previous page] Yamaga (1979) 97 Cal.App.3d 239, 247-248; Pacific Allied v. Century Steel Products, Inc. (1958) 162 Cal.App.2d 70, 76-77.)
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III
STANDARD OF REVIEW
“Ordinarily, we review a denial of a petition to compel arbitration for abuse of
discretion. [Citation.] However, where the trial court’s denial of a petition to arbitrate
presents a pure question of law, we review the order de novo. [Citation.]” (California
Parking Services, Inc. v. Soboba Band of Luiseno Indians (2011) 197 Cal.App.4th 814,
817 [Fourth Dist., Div. Two].)
Black Angus asserts that waiver, estoppel, and forfeiture are all questions of fact,
which we must review under the substantial evidence standard. However, “[w]hen the
facts are not disputed, the effect or legal significance of those facts is a question of law,
and the appellate court is free to draw its own conclusions, independent of the ruling by
the trial court. [Citation.]” (Aghaian v. Minassian (2015) 234 Cal.App.4th 427, 434.)
For example, “[g]enerally, the determination of either waiver or estoppel is a question of
fact, and the trier of fact’s finding is binding on the appellate court. [Citations.] When,
however, the facts are undisputed and only one inference may reasonably be drawn, the
issue is one of law and the reviewing court is not bound by the trial court’s ruling.
[Citations.]” (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 319.) Here, the
underlying facts are undisputed; all of the parties’ various disputes are over the legal
effect of those facts. Thus, our review is de novo.
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IV
THE VALIDITY OF BLACK ANGUS’S NOTICE
The Trust contends that Black Angus’s notice was ineffective because it did not
comply with the lease. As mentioned, the lease defined “Fair Market Rental” as the rent
“chargeable” for the premises, “based on” eight specified factors. Black Angus’s notice
stated that it had calculated its $140,000 figure simply by increasing the existing rent by
10 percent. The Trust concludes that, because the notice was not based on the eight
specified factors, it was not a “Lessee’s Value Notice” within the meaning of the lease,
and therefore it did not start the 15-day time to demand arbitration running.
The Trust claims that “‘Value Notice’ is not defined in the [lease].” That is
incorrect. Actually, the lease provides, “If Lessee disagrees with Lessor’s opinion of the
Fair Market Rental, it shall so notify Lessor (‘Lessee’s Value Notice’) within thirty (30)
days after receipt of Lessor’s Rental Notice.” Thus, it defines “Lessee’s Value Notice” as
a notice that the Lessee disagrees with the Lessor’s opinion. Black Angus’s notice met
this definition.
The lease required each party to state its “opinion” regarding Fair Market Rental.
An opinion is inherently subjective. While the lease did define Fair Market Rental in
terms of eight factors, it did not expressly require the parties to consider those factors in
forming their opinions. Also, it did not require a party’s notice to explain how that party
had calculated its figures. Indeed, the Trust’s own notice did not explain how it had
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calculated its $220,000 figure; it did not mention the appraisal.6 We conclude that the
parties did not intend to require that the notices be based on the eight factors, because
they left any such requirement unenforceable.
The Trust suggests that it is not fair (or at least not the intent of the lease) for a
lessor to be bound by the lessee’s figure unless the lessee is required to “give a true Value
Notice based on the listed market factors . . . .” However, this overlooks the way baseball
arbitration works. If the lessee states an unrealistic figure, the lessor’s remedy is to
demand arbitration. Indeed, in that situation, the lessor should be delighted, because in
the ensuing arbitration, the lessee will be unable to support its figure with evidence and
the arbitrator will most likely accept the lessor’s own figure.
In a related argument, the Trust claims that Black Angus could not enforce the
lease because it failed to comply with a condition precedent by not basing its figure on
the eight factors. We reject this argument based on our holding, above, that the lease did
not require the parties to base their figures on the eight factors.
6 The Trust points out that, in other communications with Black Angus, it disclosed that its figure was based on an appraisal. This is beside the point. What is key is that the notice itself did not mention the appraisal. “[C]ontemporaneous construction of a contract by the parties provides persuasive evidence of what the parties intended when they made their bargain. [Citations.]” (Zalk v. General Exploration Co. (1980) 105 Cal.App.3d 786, 794.) Here, it confirms our conclusion that the lease did not require the parties’ notices to explain their respective calculations.
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V
RELIEF FROM FORFEITURE UNDER CIVIL CODE SECTION 3275
The Trust contends that it was entitled to relief from forfeiture under Civil Code
section 3275.
“[E]quity abhors a forfeiture. [Citations.]” (Peak-Las Positas Partners v. Bollag
We therefore presume that the trial court considered waiver, estoppel, and relief
from forfeiture, rejected them, and made all findings necessary to support its rejection.
VIII
DISPOSITION
The order appealed from is affirmed. Black Angus is awarded costs on appeal
against the Trust.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS RAMIREZ P. J.
We concur:
HOLLENHORST J.
MILLER J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that the lessor's failure to demand arbitration within the lease's specified 15-day window resulted in a binding forfeiture of the right to arbitrate, and that such a deadline is not subject to relief under Civil Code section 3275.
Issues
Whether a party's failure to demand arbitration within the time specified in a lease constitutes a forfeiture of the right to arbitrate.
Whether the trial court erred in denying relief from forfeiture under Civil Code section 3275 for a missed arbitration demand deadline.
Whether the lease required the parties' rental value notices to be based on specific market factors to be valid.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“The trial court denied the lessor’s petition to compel arbitration, ruling that it had failed to make a timely demand.”
“When, as here, the parties have agreed that a demand for arbitration must be made within a certain time, that demand is a condition precedent that must be performed before the contractual duty to submit the dispute to arbitration arises.”
“We therefore conclude that the trial court did not abuse its discretion by denying relief from forfeiture.”