Northridge Hospital Foundation v. Pic ' Save No. 9 Inc.

• Decision Date: 11 December 1986
• Court: California Court of Appeals Court of Appeals
• Parties: NORTHRIDGE HOSPITAL FOUNDATION, a Corporation, Plaintiff, Cross-Defendant, Respondent and Cross-Appellant, v. PIC 'N' SAVE NO. 9, INC., et al., Defendants, Cross-Complainants, Appellants and Cross-Respondents. B008766.

Page 329

232 Cal.Rptr. 329

187 Cal.App.3d 1088

NORTHRIDGE HOSPITAL FOUNDATION, a Corporation, Plaintiff, Cross-Defendant, Respondent and Cross-Appellant, v. PIC 'N' SAVE NO. 9, INC., et al., Defendants, Cross-Complainants, Appellants and Cross-Respondents.

B008766.

Court of Appeal, Second District, Division 4, California.

Dec. 11, 1986.

Review Denied March 11, 1987.

Musick, Peeler & Garrett, Richard D. Dear, P.C., Cheryl S. Nakazawa, Moneymaker & Kelley and Thomas J. Kelley, Los Angeles, for plaintiff, cross-defendant, respondent and cross-appellant.

Caditz & Grant, Allan M. Caditz, Paul R. Torre, Beverly Hills, McKenna, Conner & Cuneo, and Aaron M. Peck, Los Angeles, for defendants, cross-complainants, appellants and cross-respondents.

KINGSLEY, Acting Presiding Justice.

This is an appeal from a final judgment in favor of plaintiff and cross-defendant Northridge Hospital Foundation ("N.H.F.") and from an interlocutory order denying the sublessee leave to file an amended cross-complaint against the plaintiff for intentional interference with an advantageous contractual relationship and injury to property based upon the sublessor's termination of the overlease.

Donald and Miriam Shandeling, owners of the subject property, leased space to W.T. Grant & Co., (Grant) by a lease that expired July 31, 1981, but which could be extended for two successive 10-year terms. Under the lease, Grant also could sublease with the owners' consent. Grant, with consent of the Shandelings' successor-in-interest, Shorr, subleased the premises to Pick 'N' Save (P.N.S.). The sublease was drafted by the subleasor, Grant, and provided that the original term of the sublease was to end one day prior to the initial term of the master lease, and that P.N.S. had the option to extend the sublease for two successive terms by giving notice to Grant 180 days or more prior to the expiration of the then existing term. The sublease said that the sublease was subject to the master lease, and that in the event the "overlease shall terminate for any reason whatsoever, then this lease shall also terminate simultaneously therewith and neither party hereunder shall acquire any right or cause of action against the other by reason of such termination. ¹ " The lease also called for payment of rent.

N.H.F. planned to purchase the property from "Shorr," but it disapproved of the options of the tenants to extend the leases beyond 1981, so the close of escrow was extended. However, the amendments to the outstanding leases, including the sublease, were not obtained. N.H.F. refused to proceed with the purchase unless the sublease was amended to provide for mutual cancellation on six months notice and to provide for the reduction and relocation of property. N.H.F. submitted to Pic 'N' Save an agreement providing for the above, but Pic 'N' Save refused to sign the draft consent agreement. P.N.S. submitted a "modified consent agreement" eliminating the provision permitting either party to terminate the sublease on 180 days' notice, and instead submitted a statement that the lessee can continue the lease and its extension. N.H.F. did not sign the modified consent agreement, and it reduced and relocated the parking.

N.H.F. and Grant entered into an agreement which stated that the master lease was terminated, that the sublease is not extended, and that N.H.F. would indemnify and hold harmless Grant from claims by P.N.S. N.H.F. informed P.N.S. that the termination of the master lease terminated the sublease under paragraph # 14, and P.N.S. protested the termination by letter from its counsel.

P.N.S. and N.H.F. entered into an agreement designed to preserve the status quo pending the litigation and to discuss the dispute, pending instituting litigation. N.H.F. waived its rights to file for summary proceedings under sections 1159 to 1179a of the Code Civ.Proc. (to obtain possession of the premises) until a final judicial determination, stating that "it is the intention of the parties that such judicial determination shall be on the merits, unrestricted by the limitation of an unlawful detainer proceeding." N.H.F. agreed not to "institute an unlawful detainer proceeding until its rights to possession of the property had been established in a separate prior action," and stating that nothing herein shall prevent N.H.F. from filing an unlawful detainer action. P.N.S. preserved its claim against Grant and agreed to perform all the conditions of the sublease during the pendency of any action. The parties met and conferred following the execution of the status quo agreement, but discussions were broken off in October 1972.

Eight years elapsed. N.H.F. accepted rent during that period. In 1979 N.H.F. wrote a letter to P.N.S. saying the sublease would terminate on July 30, 1981, and the sublease would not be renewed. P.N.S. informed N.H.F. that it had an option to renew, and thereafter, P.N.S. informed N.H.F. that it was giving notice to renew its option.

N.H.F. sued for declaratory relief, claiming that (1) P.N.S. was a tenant at sufferance since 1972 and was liable for reasonable rental value from that date and (2) that the effect of an N.H.F.-Grant agreement was to assign the sublease from Grant to N.H.F., and damage was in the amount of the difference between the fair rental value of the demised premises and the rental provided for under the sublease from the effective date of the alleged expiration of the sublease.

P.N.S. answered and claimed that the action was barred by Statute of Limitations and Laches, and also cross-complained for declaratory relief, damages and injunctive relief, claiming that there is a valid sublease and option to renew.

By stipulation the parties agreed to a bifurcated trial.

The trial court found that paragraph # 14 caused the sublease to terminate under its plain language and even if paragraph # 14 could not be given its literal meaning, Grant had no obligation to exercise its option to extend the overlease. P.N.S. sought to amend to state a cause of action by P.N.S. in tort for intentional interferance with P.N.S.'s rights under the sublease. ² P.N.S.'s motion to amend to add a cause of action for "tortious interference with Pic 'N' Save's sublease use" was denied.

In the second phase of the trial, the court issued its tentative decision for N.H.F. It also found that N.H.F. never signed or orally assented to the modified consent agreement, that N.H.F.'s claims were not barred by laches or the Statute of Limitations in that "N.H.F., in the Status Quo Agreement, waived its right to assert" that the sublease was terminated by virtue of the N.H.F.-Grant agreement, that the rental under the sublease agreement was the reasonable rental value and notwithstanding the status quo agreement the trial court has jurisdiction under Code Civ.Proc. section 1174 to provide relief. The court found P.N.S. liable for "treble damages for the period from the date of the notice of intended decision following the first phase of trial until the premises are vacated." The court found retention after August 10, 1982, was "malicious."

Appellant P.N.S. first argues that the voluntary surrender of the master lease by Grant to N.H.F. under the N.H.F.-Grant agreement could not, in and of itself, terminate the sublease. The general rule is that the rights of a subtenant cannot be affected by a voluntary surrender of the master lease. (Buttner v. Kasser (1912) 19 Cal.App. 755, 760-761, 127 P. 811; Herman v. Campbell (1948) 86 Cal.App.2d 762, 765, 195 P.2d 801.) However, in the case at bench, N.H.F. argues that this is not an ordinary voluntary termination, but a case where the parties contracted in the sublease (in paragraph # 14) that a termination of the master lease terminates the sublease. N.H.F. reasons persuasively that in a case where the master lease terminates the sublease, the general rule of the Buttner case is inapplicable. Therefore, the question before this court is whether paragraph # 14 permits the lessee to terminate the sublease by the voluntary termination of the master lease. ³

Although the statement in paragraph # 14 of the sublease that if the overlease should terminate "for any reason whatsoever," [the sublease will simultaneously terminate] appears to be straightforward, ⁴ and voluntary termination of the master lease can certainly be said "to be [for] any reason whatsoever," we must nevertheless analyze this phrase in the light of both existing case law discussing the use of similar phrases in leases, and in the light of rules developed to guide the courts in interpreting the language in contracts and in leases. We will read paragraph # 14 not only as a group of ordinary English sentences, but also as a group of sentences that are subject to rules on interpretation of leases, and subject to analysis set forth in cases interpreting similar or related phraseology in leases or contracts.

We note first that any uncertainty in a contract is construed against the drafting party (Gillespie v. Ormsby (1954) 126 Cal.App.2d 513, 514, 272 P.2d 949) and forfeitures are disfavored. (ABI, Inc. v. City of Los Angeles (1984) 153 Cal.App.3d 669, 682-683, 200 Cal.Rptr. 563.) The language of a contract must be read for the general intent of the parties (County Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 134 Cal.Rptr. 349) and harsh results and unfair results should be avoided. (Howe v. American Baptist Homes of the West, Inc. (1980) 112 Cal.App.3d 622, 626-627, 169 Cal.Rptr. 418.) The burden of establishing a forfeiture is on the party claiming the right. (Wagner v. Shapona (1954) 123 Cal.App.2d 451, 462, 267 P.2d 378 (overruled on another point in Neff v. Ernst (1957) 48 Cal.2d 628, 634, 311 P.2d 849.)

Appellant relies on Byrd v. Peterson (1947) 66 Ariz. 253, 186 P.2d 955. In the Byrd case, lessee of space in an office building, Butterfield, sublet the premises to the Byrd group. The sublease stated that "at the expiration ......