Simons v. Young

• Decision Date: 17 May 1979
• Citation: 93 Cal.App.3d 170,155 Cal.Rptr. 460
• Parties: Barry T. SIMONS, Plaintiff, Cross-Defendant, and Respondent, v. James L. YOUNG and Jack Eschbach, Defendants, Cross-Complainants and Appellants. Civ. 20074.
• Court: California Court of Appeals Court of Appeals

Page 460

155 Cal.Rptr. 460

93 Cal.App.3d 170

Barry T. SIMONS, Plaintiff, Cross-Defendant, and Respondent, v. James L. YOUNG and Jack Eschbach, Defendants, Cross-Complainants and Appellants.

Civ. 20074.

Court of Appeal, Fourth District, Division 2, California.

May 17, 1979.

Hearing Denied Aug. 15, 1979.

Wenke, Taylor, Schumacher & Evans and Raymond J. Ikola, Santa Ana, for defendants and appellants.

Barry T. Simons, in pro per., for plaintiff and respondent.

OPINION

KAUFMAN, Associate Justice.

Defendants (defendants or lessors) appeal from a declaratory judgment in favor of plaintiff (lessee) which, in effect, decreed specific performance of an option for renewal of the lease between the parties. The controlling question is whether the trial court erred in granting lessee equitable relief from his failure timely to exercise the option. We have concluded it did and that the judgment must be reversed.

Facts

The facts are not in serious dispute. On October 14, 1974, lessee entered into a lease for two apartments located in a building at 448 South Coast Highway, Laguna Beach, with the owner of those premises, Harry Howard Company, represented by Mr. Harry Howard. The lease provided for an initial term of two years commencing February 1, 1975, and terminating January 31, 1977. Paragraph 5 of the lease entitled "OPTION TO RENEW" granted lessee four "distinct options to renew the term of said lease for additional periods of two (2) years per renewal," commencing February 1, 1977, and at two-year intervals thereafter terminating January 31, 1985. Paragraph 5 specified: "In order to exercise said option to renew the term of this lease as herein provided, Lessee must serve upon Lessor in writing, notice of election to renew said lease not later than three (3) months from the termination of said lease or any renewal thereof. Provided Lessee does exercise said option to renew the term of this lease as aforesaid, . . . Lessor shall renew this lease for an additional two (2) year period, terminating two (2) years from the date of expiration of the foregoing term upon the same terms, provisions and conditions as prevail during the first two (2) year term of this lease so far as applicable."

Rent, originally set at $8,400 for two years, payable $350 a month, was subject to cost-of-living increases based on the Consumer Price Index during both the original term and any renewal term "if the options as set forth . . . are exercised. . ." All utility charges for water, gas and electricity were to be paid by the lessor. Lessee was given the right to make reasonable alterations, additions and modifications to the premises including some structural changes.

In the negotiations for the lease, lessee asked Mr. Howard if he could have a lease for 10 years, and Howard indicated he could. However, lessee then requested an original term of two years with four two-year options to give himself more flexibility and limit the responsibility he was undertaking. Mr. Howard furnished his "standard" form of lease, but lessee, who is an attorney, indicated he preferred to prepare the lease himself. He turned the lease form supplied by Mr. Howard over to his law clerk, John Vodonick, and instructed Mr. Vodonick to revise the proposed lease in a manner that would be as favorable and flexible to lessee as possible. It was his desire "not to be tied in for the full 10 years if (he) didn't want to be." The lease thus prepared by lessee was presented to Mr. Howard, who accepted it as drafted except for changes required in the provision for cost-of-living increases in rent and the inclusion of a provision relating to the posting of notices of nonresponsibility. The provisions of paragraph 5 granting lessee the four consecutive two-year options and specifying the time and manner for exercise thereof were never discussed by lessee and Mr. Howard.

At the time the lease was executed the demised premises were residential apartment units and were not in good condition. It was lessee's intention to remodel the apartments into law offices. Mr. Howard was aware of lessee's intention, and both parties realized that the conversion to law offices would entail extensive renovation, repair and remodeling. From November 1974 to February 1975 and from June 1975 to November 1975, lessee converted the apartments into law offices by extensive remodeling and refurbishing. ¹

Lessee personally put into the remodeling over 1,000 hours of his time; his out-of-pocket costs exceeded $11,089.39. In addition, in exchange for labor, lessee forgave debts amounting to $6,500 and gave two years' free rent to one of his sublessees. If made at the time of trial, the cost of the "improvements" made by lessee to the premises would exceed $27,000. The remodeling was done, of course, with the knowledge and consent of Mr. Howard.

In December 1975, lessee approached Mr. Howard and submitted to him a proposed amendment to the lease by the terms of which he would be granted two additional five-year options in consideration of improvements theretofore made to the premises and to be made in the future. Mr. Howard refused to sign the proposed amendment. He slapped lessee on the back and stated: "Come on, you've got ten years already; what more do you want?" Mr. Howard had the impression that lessee was desirous of remaining as a tenant; he "didn't speak like a man that intended to move." However, Mr. Howard did not construe lessee's submission of the lease amendment as an election to exercise the option to renew; he construed it as an act of one who desired to improve his position. Lessee did not inform Mr. Howard that he intended to exercise his options, nor did Mr. Howard tell lessee that he would not require written notice of the exercise of the options as specified in the lease. In fact, no discussion ever took place between lessee and Mr. Howard in which lessee informed Mr. Howard that he intended to exercise any renewal option.

Thereafter, on April 1, 1976, Harry Howard Company agreed to sell and on May 27 conveyed the property to defendants, and as successor in interest to Harry Howard Company, defendants assumed the role of the lessor. When they purchased the property, defendants were aware that the lease granted lessee options to renew and expected that lessee would exercise the options.

Between their purchase of the property and November 1, 1976, one or more of defendants visited the leased premises several times. On one occasion the visit was simply for the purpose of meeting the tenants. The others were connected with ascertaining the suitability of an attic for remodeling as an apartment. During one visit defendant Young was taken on a tour of lessee's offices and lessee pointed out improvements that he had made and materials that were on the site for additional work. Lessee informed Young that he planned to install stained glass windows in the waiting room and asked Young about defendants' plans for remodeling the exterior of the building. Young informed lessee that the plans had not yet been developed, and lessee told Young that he wished to be notified of the plans so that his improvements would be designed consistently with the exterior improvements. At no time during any of these visits or at any other time prior to November 1, 1976, was the renewal of the lease discussed by lessee with Young or anyone else representing lessors.

The deadline for notice of exercise of the first renewal option, October 31, 1976, passed without lessee giving written notice of election to renew the lease. On November 18, 1976, lessors noted that the rent payment due on November 1 had not been received. In checking the lease to determine whether there had been a prepayment, lessors noticed that the period in which lessee could exercise the option in accordance with the lease had expired. Lessors went to lessee's law office in the leased premises to inquire about the overdue rent payment and were advised by a secretary that lessee was out of the country but was expected to return within a few days. Thereafter on November 22, lessors notified lessee by letter that inasmuch as he had failed to exercise his option to renew the lease, he would be expected to vacate the premises by January 31, 1977. Lessee returned to the United States on November 24 and was immediately informed by his secretary of lessor's letter of November 22. The next day was Thanksgiving Day. The following day, November 26, lessee telephoned lessors and orally expressed his intention to renew the lease. The same day he drafted and mailed to lessors by certified mail a letter constituting a notice of his election to renew the lease. Lessors refused delivery of this letter. Lessee then drafted and mailed to lessors an identical letter dated December 1, 1976, which was received by lessors in due course.

When lessors refused to recognize lessee's "renewal" of the lease, lessee filed this action for declaratory relief, specific performance, injunction, relief from forfeiture and alternatively, for recovery on the basis of unjust enrichment. Lessors cross-complained against lessee and his sublessees for unlawful detainer seeking both possession of the premises and damages for holding over. Pending the action, by stipulation of the parties, lessee continued to pay rent under the terms of the lease at the rate of $407.35 per month without prejudice to lessors' right to relief by way of the cross-complaint. Although lessors requested a finding on the fair rental value of the leased premises, the court made none. However, a qualified real estate appraiser testified that the fair rental value of the leased premises was in the range of 70 to 75 cents per square foot per month and that based upon a determination that the premises contained 1,705 square feet, the fair rental value amounted to between $1,193 to $1,279 per month. Lessee himself testified that, in addition to his own office, he had three subtenants in the...