Opinion
2d Civil No. B223980
02-02-2012
JOHN MICHAEL ARRAMBIDE et al., Plaintiffs, Cross-defendants and Respondents, v. MARY MASTAGNI, as Trustee, etc., Defendants Cross-complainants and Appellants.
Brown, Brown & Klass, Delos E. Brown, Robert L. Kaufman, John J. Stumreiter for Defendants, Cross-complainants and Appellants. Morton Minikes, Castro & Associates, Joel B. Castro, J. Alan Warfield for Plaintiffs, Cross-defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. CV051067)
(San Luis Obispo County)
This is the third appeal arising from the destruction of the Acorn Building during the San Simeon earthquake. In this case, the lessees of a portion of the Acorn Building sued their lessors for personal injury and property damages. The lessors raised exculpatory clauses in the lease as a defense, and cross-complained for breach of the lease and other causes of action. The cross-complaint for breach of the lease was based in part on the lessees bringing their action in the face of the exculpatory clauses.
We conclude the trial court properly granted summary judgment in favor of lessees on lessors' cause of action for breach of contract. The causes of action in lessees' complaint were outside the scope of the exculpatory clauses. We also conclude that if the trial court erred in sustaining lessees' demurrers to other causes of action in the cross-complaint, the error is harmless. Finally, we conclude the trial court did not err in awarding attorney fees to lessees under an attorney fee clause in the lease. We affirm.
FACTS
Mary and Armand Mastagni purchased the Acorn Building in 1973. The Acorn Building has an unreinforced masonry structure in downtown Paso Robles (hereafter "city"). The building contains units that are leased for retail sales. Mary and Armand transferred their interest in the building into trusts. Armand died in 1997. Thereafter, Mary managed the building as trustee. (The building's owners are hereafter collectively "Mastagni.")
In 1992, the city enacted an ordinance requiring owners of unreinforced masonry buildings to retrofit them to comply with earthquake safety standards. In November 1993, the city notified Mastagni of the retrofit requirement. In 1998, the city and Mastagni entered into an agreement with a structural engineer to prepare a seismic structural design study for the building. The report identified various seismic deficiencies, and contained plans to retrofit the building. Nevertheless, nothing was done to complete the seismic retrofitting.
In January 2000, John and Karen Arrambide entered into a written lease for a retail space in the Acorn Building. They used the space to operate a bakery business known as the "House of Bread."
Under the terms of the lease, Mastagni was obligated to maintain the roof, structural walls and exterior of the premises.
Paragraph 8 of the lease was headed "Indemnity," and provided in part: "Lessee, as a material part of the consideration to be rendered to Lessor, hereby waives all claim[s] against Lessor for damages to goods, wares and equipment in or about said premises and for injuries to Lessee, his agents, or third persons in or about said premises for any cause arising at any time; and Lessee shall indemnify and hold Lessor exempt and harmless from any damage or injury to any person or to the property, goods, wares or merchandise of any person arising from the use of the premises by Lessee, his agents, employees or invitees. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the premises or from the conduct of Lessee's business or any activity from any negligence [of] the Lessee, Lessee's agents, contractors, or employees."
Paragraph 9 of the lease required the Arrambides to obtain a policy of liability insurance in an amount not less than $1 million for injury or death to persons on the leased premises and $200,000 for property damage. The lessor was to be named an additional insured. The paragraph states, "Lessee hereby waives any right of recovery against Lessor for each claim, expense, liability or business interruption."
The lease also contained an attorney fees clause: "In the event suit be instituted for the enforcement of any condition or provision herein contained, or for the payment of any rental, the prevailing party shall be entitled to recover, as a part of any Judgment, reasonable attorney's fees and costs."
On December 22, 2003, the San Simeon earthquake struck. The earthquake damaged the portion of the unreinforced masonry building occupied by the Arrambides' bakery, and injured Karen Arrambide.
On December 21, 2005, the Arrambides filed the instant complaint against Mastagni for negligence, nuisance and fraud. The complaint alleged that Mastagni knew the building was unsafe; had the financial ability to retrofit the building, but made the conscious and willful decision not to do so; and at the time of the execution of the lease falsely represented to John Arrambide that the building was safe. The complaint further alleged that Mastagni's failure to retrofit the building was "done with a conscious disregard or callous indifference for the life, health and safety of the tenants."
Mastagni answered and cross-complained. Her cross-complaint alleged causes of action for breach of the lease, breach of the covenant of good faith and fair dealing, and fraud. The breach of lease causes of action were based on the Arrambides' bringing the instant action in violation of the waiver provisions of paragraphs 8 and 9, and their failure to obtain liability insurance as required by paragraph 9.
The Arrambides successfully demurred to the causes of action alleging breach of the covenant of good faith and fair dealing and fraud.
The causes of action alleged in the Arrambides' complaint went to a jury trial. The jury found Mastagni was negligent, but that the negligence was not active negligence. The jury also found that Mastagni made false representations and intentionally failed to disclose important facts at the time the Arrambides entered into the lease. The jury found, however, that Mastagni did not know the representations were false, and that the concealing of facts was not done with the intent to deceive the Arrambides.
Because the jury found Mastagni's negligence was passive, the judgment in favor of the Arrambides was nullified under the waiver provisions of paragraphs 8 and 9.
Following the jury's verdict, the Arrambides moved for summary judgment on the remaining cause of action for breach of lease alleged in Mastagni's cross-complaint. The trial court granted the motion.
The Arrambides made a motion for attorney fees as the prevailing parties in Mastagni's cause of action for breach of the lease. The trial court granted the motion and awarded the Arrambides $40,000 in fees.
DISCUSSION
I
Mastagni contends the trial court erred in granting summary judgment on her cause of action for breach of the lease. She believes the Arrambides breached the waiver provisions in paragraphs 8 and 9 of the lease by filing their complaint.
Summary judgment is granted only if all papers submitted show there is no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) The court must draw all reasonable inferences from the evidence set forth in the papers except where such inferences are contradicted by other inferences or evidence that raise a triable issue of fact. (Ibid.) In examining the supporting and opposing papers, the moving party's affidavits or declarations are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of granting the motion should be resolved in favor of the party opposing the motion. (Szadolci v. Hollywood Park Operating Co. (1993) 14 Cal.App.4th 16, 19.)
The moving party has the initial burden of showing that one or more elements of a cause of action cannot be established. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) Where the moving party has carried that burden, the burden shifts to the opposing party to show a triable issue of material fact. (Ibid.) Our review of the trial court's grant of the motion is de novo. (Id. at p. 767.)
Mastagni argues the trial court erred in failing to treat the waiver clause in paragraph 8 as a covenant not to sue. Mastagni claims such a covenant not only protects her from liability, but constitutes an affirmative promise for which a breach of lease action will lie.
Neither party cites a California case on the question whether filing a lawsuit in the face of an exculpatory clause constitutes a breach of the lease. We need not decide that question here. The lawsuit the Arrambides filed is outside the scope of the exculpatory clause.
Where there is no admissible extrinsic evidence to interpret the lease, the interpretation is a matter of law. (Parsons v. Bristol Dev. Co. (1965) 62 Cal.2d 861, 866.) Mastagni claims here the lease interpretation is not a matter of law. She points to extrinsic evidence that the Arrambides read the lease and understood its terms. But the evidence says nothing about what the Arrambides understood. The evidence is of no help in interpreting the lease. Under the circumstances, the lease interpretation is a matter of law.
We considered a similar exculpatory clause in Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057. There, lessees of a retail space filed an action against their lessor alleging premises liability, general negligence, breach of contract, negligent maintenance of premises, negligent maintenance of a nuisance, intentional infliction of emotional distress and conversion. The complaint alleged that lessees noticed excessive moisture on the premises and the growth of mildew and mold. They repeatedly notified the lessors of this dangerous condition and requested that lessor repair it. Lessor refused to do so. As a result, the lessees, suffered physical and emotional injuries, and were unable to conduct their business.
Lessor moved for judgment on the pleadings under a lease paragraph that stated in part, "'Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee . . . .'" (Burnett v. Chimney Sweep, supra, 123 Cal.App.4th at p. 1062.) The trial court granted the lessor's motion. We reversed.
In reversing, we stated the general rule for interpreting exculpatory clauses: "'[T]he law does not look with favor upon attempts to avoid liability or secure exemption for one's own negligence, and such provisions are strictly construed against the person relying upon them. . . .' [Citation.] The general rule is as follows: 'For an agreement to be construed as precluding liability for "active" or "affirmative" negligence, there must be express and unequivocal language in the agreement which precludes such liability. . . . An agreement which seeks to limit liability generally without mentioning negligence is construed to shield a party only for passive negligence, not for active negligence. . . .' [Citation.]" (Burnett v. Chimney Sweep, supra, 123 Cal.App.4th at p. 1066.)
Here the exculpatory clauses on which Mastagni relies seek to limit liability generally without specifically mentioning negligence. Thus we construe them as shielding Mastagni only for passive negligence, not for active negligence.
The passive-active dichotomy, however, is not wholly dispositive of the issue. (Burnett v. Chimney Sweep, supra, 123 Cal.App.4th at p. 1066.) It is the intent of the parties as expressed in the agreement that controls. (Ibid.) But here the parties point to no language in the lease or the circumstances of its making that convinces us they intended anything other than the general rule to apply. Thus the active-passive dichotomy controls. Mastagni is not shielded from active negligence.
Here the jury found Mastagni only passively negligent. Under such a finding the exculpatory clauses in the lease prevent recovery against Mastagni. But even if we were to construe the exculpatory clauses as an affirmative promise not to sue for passive negligence, the exculpatory clauses do not prevent bringing and maintaining an action for active negligence. Thus we must determine whether the Arrambides' complaint alleged active negligence.
In Butt v. Bertola (1952) 110 Cal.App.2d 128, 138, the court found as a matter of law the landlords had been actively negligent "in knowingly maintaining defective sewerage facilities and in taking patently inadequate measures for the repair of those facilities, with knowledge of the injuries to [tenant's] property which would ensue." The court said, "It comes very close to being wilful misconduct, for exemption from the consequences of which a person may not contract." (Ibid., citing Civ. Code, § 1668.)
The allegations of the Arrambides' complaint were that Mastagni knew the building was unsafe; had the financial means to retrofit it but made a conscious and wilful decision not to do so; and the decision not to retrofit was done with a conscious disregard or callous indifference for the life, health and safety of the tenants. The allegations are strikingly similar to the findings in Butt. We conclude the Arrambides' complaint alleged active negligence as a matter of law.
The trial court did not err in granting the Arrambides' motion for summary judgment. The Arrambides' complaint alleged active negligence and intentional torts. The jury was specifically requested to make a finding on whether the negligence was active or passive. The Arrambides' action was outside the waiver provisions of the lease. The Arrambides did not breach the lease.
II
Mastagni contends that as the prevailing party in the Arrambides' action, she is entitled to attorney fees.
The lease provides for an award of attorney fees to the prevailing party in an action "for the enforcement of any condition or provision" of the lease. The Arrambides' complaint alleged causes of action in tort. It did not seek to enforce any condition or provision of the lease.
Gil v. Mansano (2004) 121 Cal.App.4th 739, is on point. There, the parties entered into a business purchase agreement and a separate written release. The release contained an attorney fee provision applicable to an action to enforce the release. Plaintiffs sued for fraud and the defendant asserted the release as an affirmative defense. The defendant prevailed. The trial court awarded the defendant attorney fees under the release's attorney fee clause. The Court of Appeal reversed, concluding that a contractual defense to a tort action is not "'an action brought to enforce the contract.'" (Id. at p. 741.) Similarly, here a contractual defense to the Arrambides' tort action is not an action to enforce a condition or provision of the lease.
Mastagni points out that in addition to alleging a breach of general tort duties, the Arrambides' complaint alleges that she breached her duty under the lease to maintain the roof and walls. But a fair reading of the complaint as a whole discloses no cause of action based on breach of contract. All causes of action are based on tort.
Mastagni cites Turner v. Schultz (2009) 175 Cal.App.4th 974, 980, for the proposition that she is entitled to an award of fees because she prevailed on a lease provision raised defensively. In Turner, an agreement provided that any controversy arising out of the agreement would be settled by arbitration. The agreement also provided for an award of attorney fees in the event an action or arbitration is commended to enforce the provisions of the agreement. Plaintiff brought an action to enjoin arbitration of a dispute. The defendant prevailed, and the court awarded attorney fees to the defendant.
But Turner is distinguishable. It did not involve a tort action. Instead, the action was to avoid the contract, and thus qualified as an action "'on the contract.'" (Turner v. Schultz, supra, 175 Cal.App.4th at p. 980.) Moreover, the only question in Turner was whether the trial court was premature in awarding attorney fees before the entire dispute was resolved. The court did not discuss whether an award of fees is appropriate where a defendant raises a waiver defense to a tort action. A case is not authority for matters not discussed therein. (Contra Costa Water Dist. v. Bar-C Properties (1992) 5 Cal.App.4th 652, 660.)
III
Mastagni contends the trial court erroneously sustained the Arrambides' demurrer to her cause of action alleging fraud.
The fraud cause of action was based on the Arrambides' alleged false promises not to sue and to obtain liability insurance. The trial court sustained the demurrer based on the statute of limitations. The court reasoned that the statute began to run at the time the lease was executed. But Mastagni points out that the statute did not begin to run until she suffered damages. (Citing City of Vista v. Robert Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 886.)
Assuming the trial court was wrong about the statute of limitations, Mastagni shows no prejudice from sustaining the demurrer. First, we have concluded the action the Arrambides brought did not breach the waiver provision of the lease.
Second, the insurance provision of the lease requires the Arrambides to provide liability insurance for bodily injury and property damage, naming Mastagni as an additional insured. But Mastagni fails to mention any theory under which the Arrambides could possibly be liable for the damages that resulted from Mastagni's failure to retrofit the building. Thus Mastagni has suffered no damages. Under the circumstances, the trial court's error in sustaining the demurrer based on the statute of limitations was harmless.
IV
Mastagni contends the trial court erred in sustaining the Arrambides' demurrer to her cause of action alleging breach of the covenant of good faith and fair dealing.
The trial court sustained the demurrer on the ground that, absent a special relationship such as an insurer, breach of the covenant of good faith is not a tort. (See Applied Equipment Corp. v. Litton Saudia Arabia, Ltd. (1994) 7 Cal.4th 503, 516.) The court also determined that if the cause of action sounds in contract, it is duplicative of Mastagni's cause of action for breach of contract.
Mastagni replies only that a duplicative cause of action is not grounds for sustaining a demurrer to one of the causes of action. (Citing Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 890.) Mastagni fails to explain how the dismissal of a duplicative cause of action could possibly prejudice her.
V
Finally, Mastagni contends the court erred in awarding the Arrambides attorney fees.
Mastagni claims that by successfully raising the waiver provision of the lease as a defense, she was the prevailing party in an action on the contract. But Gil v. Mansano, supra, 121 Cal.App.4th, page 721, makes it clear that raising a contractual defense to a tort action is not an action brought to enforce the contract.
Mastagni's cross-complaint, however, was an action to enforce the lease. The Arrambides prevailed on the cross-complaint. Thus the trial court properly concluded the Arrambides were the prevailing parties in an action to enforce the provisions of the lease. The award of attorney fees was proper.
The judgment is affirmed. Costs on appeal are awarded to the Arrambides.
NOT TO BE PUBLISHED.
GILBERT, P.J.
We concur:
YEGAN, J.
PERREN, J.
Teresa Estrada-Mullaney, Judge
Superior Court County of San Luis Obispo
Brown, Brown & Klass, Delos E. Brown, Robert L. Kaufman, John J. Stumreiter for Defendants, Cross-complainants and Appellants.
Morton Minikes, Castro & Associates, Joel B. Castro, J. Alan Warfield for Plaintiffs, Cross-defendants and Respondents.