Opinion
H046950 H047674
01-27-2022
LONGS DRUG STORES CALIFORNIA, LLC, Plaintiff and Respondent, v. DS WESTGATE LP, Defendant and Appellant.
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. 16CV304555
ELIA, J.This appeal arises from a commercial lease dispute at the Westgate West shopping center. Respondent Longs Drug Stores California, LLC (Longs) formerly operated a CVS drugstore at the Westgate West shopping center, where Longs has a 25-year master lease. After moving the CVS drugstore to a different location, Longs subleased the former drugstore space to Goodwill of Silicon Valley (Goodwill SV). The new owner of the Westgate West shopping center, appellant DS Westgate, claimed that Longs had not received consent from the former landlord for the Goodwill SV sublease and refused Longs's formal request for consent.
Longs then brought the instant action against DS Westgate alleging that DS Westgate had unreasonably withheld consent to the Goodwill SV sublease. The first amended complaint (complaint) states causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and injunctive relief enjoining DS Westgate from transferring possession of the subleased premises to a gym. The matter proceeded to a court trial, where the trial court ruled in a statement of decision that DS Westgate had unreasonably withheld consent to the Goodwill SV sublease and found in Longs's favor on all causes of action.
In case No. H046950 the judgment entered on May 6, 2019, provides that Longs is awarded money damages of $338,744.23. On appeal, DS Westgate contends that the trial court erred because its refusal to consent to the Goodwill SV sublease was commercially reasonable, consenting to the Goodwill SV sublease would breach the lease of co-tenant Ethan Allen, and the trial court committed evidentiary error. For the reasons stated below, we find no merit in DS Westgate's contentions and we will affirm the judgment.
In case No. H047674, the trial court granted Longs's postjudgment motion for contractual attorney's fees and in the November 20, 2019 order awarded Longs attorney's fees in the amount of $924,934. Having affirmed the judgment, and in the absence of any argument on the merits of the attorney's fees award, we will also affirm the attorney's fees order.
On the court's own motion the appeals in case Nos. H046950 and H047674 are considered together for purposes of briefing, oral argument, and disposition.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Pleadings
In its complaint, Longs asserted that DS Westgate, a subsidiary of Donahue Schriber Realty, L.P. (Donahue Schriber) was the owner of the Westgate West shopping center. Longs further asserted that its predecessor in interest had entered into a 25-year master lease with DS Westgate's predecessor in interest for 62, 400 square feet in the Westgate West shopping center to operate a drug store. The master lease included two five-year option terms. Longs exercised the first option term and the second option, if exercised, will expire in 2024.
In 2000, Longs allegedly operated a CVS drugstore in a 37, 100 square feet portion of its master lease premises in the Westgate West shopping center and subleased the remaining portion to Smart & Final Store Corporation (Smart & Final). Under the terms of its sublease, Smart & Final's sublease will likely expire in 2024.
Longs asserted that it planned to operate a CVS drugstore in the Westgate West shopping center until construction of a new CVS store was completed in 2017. In 2015, Longs entered into negotiations with Goodwill SV to lease the former CVS drugstore space. According to Longs, the then-owner of the Westgate West shopping center, Grosvenor Americas (Grosvenor) agreed through various correspondence to the Goodwill SV sublease. In 2016, Longs and Goodwill SV entered into a sublease for the CVS drugstore space through the end of Longs's master lease in 2024.
Longs allegedly learned in 2016 that the Westgate West shopping center had been sold to Donahue Schriber. A dispute then arose regarding the Goodwill SV sublease. DS Westgate asserted that Longs had not received consent from the former landlord for the Goodwill SV sublease and refused Longs's formal request for consent.
Paragraph No. 23 of Longs's master lease, which is attached to the complaint, states: "Tenant may assign this Lease or sublet the whole or any part of the Leased Premises with Landlord's consent, which consent shall not be unreasonably withheld." Longs asserted that DS Westgate did not have valid grounds for refusing consent to the Goodwill SV sublease, and that DS Westgate, in turn, had violated Longs's master lease by subleasing to a gym, which is a use prohibited under the master lease.
Based on these and other allegations, Longs stated causes of action for breach of contract (unreasonable refusal to consent to the Goodwill SV lease), breach of the implied covenant of good faith and fair dealing, declaratory relief, and injunctive relief enjoining DS Westgate from transferring possession of the subleased premises to the gym.
The record reflects that DS Westgate filed a cross-complaint, which included causes of action against Longs for declaratory relief, breach of contract, and injunctive relief arising from DS Westgate's allegation that Longs did not obtain landlord consent to the Goodwill SV sublease. The cross-complaint was not included in the record on appeal.
B. Preliminary Injunction
In May 2017, the trial court granted DS Westgate's motion for a preliminary injunction and ordered that Longs was enjoined from (1) transferring possession of the Longs/CVS store premises to Goodwill SV; (2) modifying the premises in any significant way in preparation for Goodwill SV's subtenancy; (3) installing furniture or fixtures in the premises in preparation for Goodwill SV's tenancy; (4) placing any signage suggesting that Goodwill SV may in the future possess or use the premises; (5) allowing inventory of any kind to be moved into the premises in preparation for Goodwill SV's subtenancy; (6) allowing donation trucks, boxes, or personnel to be moved onto the premises; (7) allowing Goodwill SV's employees or contractors to enter the premises; and (8) allowing any marketing or advertising that Goodwill SV intends to conduct operations on the premises.
C. The Court Trial
The action proceeded to a court trial on Longs's first amended complaint and DS Westgate's cross-complaint, which the trial court consolidated with two unlawful detainer actions brought by DS Westgate as plaintiff against Longs. On appeal, no issues have been raised with respect to the unlawful detainer actions. The following is a summary of the pertinent evidence admitted at the court trial and included in the parties' stipulated facts.
In 1988, a 25-year master lease agreement for 62, 400 square feet of commercial space in the Westgate West shopping center was entered into between the parties' predecessors. The lease term was set to expire in 2014 with two five-year options to renew. In 2000, Longs, a wholly owned subsidiary of CVS Health, subleased a portion of its leased space to Smart & Final. Under the terms of the sublease, Smart & Final had the right to force Longs to exercise the second five-year option with the result that after the first five-year option was exercised, Smart & Final could remain as a subtenant until 2024. At the time of trial, the current landlord under the master lease agreement was DS Westgate and the current tenant was Longs.
In 2013, Longs decided to move its CVS store from the Westgate West shopping center to a different location. According to Stephen LaBonge, the regional director of real estate for CVS Health, Longs wanted to mitigate the rent that it would owe for the empty CVS store space until the master lease expired in 2024. After considering various options for the space that were unsuccessful, in part due to the short seven-year term of a potential sublease, LaBonge learned through Longs's real estate brokers that Goodwill SV was interested in subleasing the former CVS store space for a term of seven years.
LaBonge then began communicating with Tom Ohlson, a representative of the then-landlord, CP6WW, LLC (CP6WW), an entity managed by a Grosvenor company, regarding the possibility of a Goodwill SV sublease. Based on their communications, LaBonge believed in March 2016 that he had consent from CP6WW for the Goodwill SV sublease. Ohlson testified to the contrary that he did not understand from their communications that LaBonge was requesting consent to the Goodwill SV sublease, and he never gave landlord consent.
In April 2016, Longs entered into a sublease with Goodwill SV for the portion of the former CVS drugstore premises not subleased to Smart & Final. The Goodwill SV sublease will expire 30 days before the expiration of Longs's master lease in 2024. Michael Fox, the President and CEO of Goodwill SV, testified that the Goodwill store planned for the Westgate West shopping center would be the 19th Goodwill SV store. According to Fox, Goodwill SV is a profitable organization with a balance sheet of $29 million in addition to its real estate holdings. The profits go to Goodwill SV's mission services and its operations.
Fox further testified that the plan for the Westgate West Goodwill store included an 18, 000 square feet retail space and a 19, 000 square feet area used for processing and storing donations and shipping. The retail store would mostly carry donated merchandise. The sorting of donations, Fox explained, would be done inside, not out in the parking lot, and would not be visible to customers.
As to the Goodwill SV customers, Fox stated that Goodwill shoppers generally come from the neighborhoods surrounding the Goodwill stores. The Goodwill SV customer base includes women ages 30 to 50 years, seniors, treasure hunters, resellers, and eco-conscious millennials. Regarding Goodwill employees, Fox stated that persons in the Goodwill re-entry to society program do not work in the retail stores. The retail store in the Westgate West shopping center would employ persons with barriers to employment, such as a disability.
Concerning the appearance of the Goodwill SV store, Fox stated that Goodwill SV "sweeps" a store seven times a day to pick up clothing, straighten shelves, check the bathrooms, and clear the point-of-sale area. The plan for the interior of the Westgate West Goodwill store included a polished concrete floor, brushed steel fixtures, new paint, and a high-end cash register. Fox noted that Goodwill SV has a donation trailer located on a property adjacent to the Westgate West shopping center, and he has not heard any complaints about that trailer or that Goodwill attracts homeless people.
DS Westgate was formed to acquire the Westgate West shopping center by Donahue Schriber, a retail real estate acquisitions, development, and management firm. In 2016, DS Westgate began negotiations to purchase the Westgate West shopping center. During the negotiations, Longs submitted a document known as an estoppel certificate to DS Westgate that did not disclose Longs's subleases with Smart & Final or Goodwill SV. In September 2016, DS Westgate acquired the Westgate West shopping center from CP6WW. According to Ryan Gillard, Donahue Schriber's vice-president of finance, Donahue Schriber's strategy for the Westgate West shopping center included a $20 million renovation to create a "first-class shopping center."
Heather Beal is employed by Donahue Schriber, which she stated owns and operates retail shopping centers in California and other Western states. Her responsibilities included finding tenants and leasing the shopping centers. Beal was involved with Ryan Gillard in Donahue Schriber's acquisition of the Westgate West shopping center. Beal knew that CVS was going to close its store in the Westgate West shopping center, and she assumed that if Longs did not agree to an early lease termination, the CVS store space would be dark for five to six years.
Beal discovered shortly after DS Westgate acquired the Westgate West shopping center that Longs had entered into a sublease with Goodwill SV. LaBonge told Beal that Longs had landlord consent to the Goodwill SV lease, but he did not produce a written consent. Donahue Schriber then denied CVS's formal request for consent to the Goodwill SV sublease. LaBonge received a tenant default notice and other notices from Donahue Schriber in its attempt to terminate Longs's lease at the Westgate West shopping center. According to LaBonge, Longs is seeking recovery of the amounts that Goodwill SV would have paid under its sublease of approximately $29,000 per month in triple net charges.
Regarding Donahue Schriber's reasons for denying consent to the Goodwill SV lease, Beal testified that it is difficult to lease a shopping center where Goodwill is a tenant because many retailers, such as Safeway, Target, and Kohl's, will refuse to lease space and other tenants will refuse to renew their leases due to the presence of a Goodwill store. However, Beal did not have any experience in leasing to Goodwill, with the exception of a donation center in Nevada, because Donahue Schriber will not put a Goodwill store in their shopping centers. She had not heard any complaints about the Goodwill SV subtenancy at the Westgate West shopping center from the other tenants except Ethan Allen. Richard Bloomfield, the president of San Jose Ethan Allen, a retail furniture and interior design business, testified that he had advised Beal that he "strenuously" objected to a Goodwill SV sublease. Bloomfield believed that Goodwill customers were not the same demographic as Ethan Allen customers or the customers of other tenants of the Westgate West shopping center, and he had observed Goodwill stores in other locations to be crowded and messy.
Beal further testified that her opinion that a Goodwill tenancy will a cause a downgrade in a shopping center from an A property to a C, D, or F was based upon her belief that Goodwill customers are persons of limited means who will not shop at the other stores in the Westgate West shopping center, such as Trader Joe's, Super Duper Burger, or Starbucks. She had personal experience shopping at a Goodwill store because her family was poor and could not afford to shop at Trader Joe's. Beal also stated that Goodwill stores have appearance issues. However, Beal had never been in a Goodwill SV store and had no knowledge as to whether Goodwill SV shoppers at the Westgate West shopping center would be able to afford to buy an eight-dollar Super Duper burger.
If CVS had approached Donahue Schriber regarding a sublease to Goodwill SV, Beal would have told CVS that a Goodwill subtenancy was "nonstarter" without doing any investigation into the operations of Goodwill SV. Donahue Schriber would rather lease around a dark space than a Goodwill store, according to Beal.
Gillard similarly testified that Donahue Schriber's unwillingness to lease to Goodwill was based on its concerns about bringing in new tenants, especially anchor tenants such as Raley's, Whole Foods, and Target, and retaining existing tenants. For example, he was concerned that Trader Joe's might not renew its lease, although Trader Joe's lease at the Westgate West shopping center (unlike its leases in other locations) did not prohibit leasing to secondhand stores. Gillard was also concerned that a Goodwill store would have issues with waste management, security, and homeless people. However, Gillard had no knowledge of either a homelessness problem at the Westgate West shopping center or any complaints about the Goodwill donation trailer on an adjacent property.
About two months before the trial began, Gillard visited eight Goodwill SV stores in close proximity to Westgate West and took photographs. He observed that the donation areas of the Goodwill SV stores were messy, as was the merchandise, and the stores appeared to be incompatible with the retailers in a "first-class shopping center." However, Gillard acknowledged that none of the eight Goodwill SV properties that he visited were in locations comparable to the Westgate West shopping center. Gillard also acknowledged that he was aware of shopping centers that have both Goodwill and national retailers as tenants.
Longs's master lease includes a provision prohibiting the landlord from subleasing space in the Westgate West shopping center to a gym, which Longs had waived on a one-time basis for Cycle Bar. In November 2017, DS Westgate entered into a lease agreement with 24 Hour Fitness USA, Inc. (24 Hour Fitness) for approximately 40, 000 square feet of commercial space within the Westgate West shopping center. DS Westgate did not obtain Longs's consent to the lease agreement with 24 Hour Fitness. Beal believed that when she negotiated the 24 Hour Fitness lease Longs's master lease had been terminated. However, at the time of trial, 24 Hour Fitness had not yet begun to use the space as a gym.
Both parties presented expert witnesses. Longs's expert, John Machado, has been a commercial broker for 35 years and is currently employed by Colliers International as an executive vice president in charge of the retail properties division. Machado is familiar with the Westgate West shopping center and would rate it as a low B or C plus property overall. He was also involved with the ownership of the property adjacent to the Westgate West shopping center that allowed placement of the Goodwill SV donations trailer on their property. The only complaint Machado has received about the Goodwill SV donation trailer is that donations are dropped off after hours, which Goodwill SV picks up early in the morning.
As to his opinion as to whether Donahue Schriber's refusal to consent to the Goodwill SV subtenancy at Westgate West was reasonable, Machado concluded that the refusal was unreasonable. Although Machado acknowledged that Goodwill would not be his first choice of tenant for a new shopping center, his conclusion was based upon the circumstances, which included (1) the short sublease term, consisting of the remaining five to six years of Longs's master lease, which would eliminate 99 percent of potential tenants; (2) the amount of vacant retail space in the Westgate West shopping center, which is a negative due to security and appearance issues; (3) people shopping at Goodwill SV or making donations are likely to shop at the other stores in the Westgate West shopping center; and (4) a Goodwill SV store is better than vacant space, not only because it would generate shoppers and sales, but because of the benefit Goodwill SV provides to the community.
DS Westgate's expert, Matthew Kircher, is a commercial real estate agent specializing in retail shopping centers. Kircher was asked to provide an opinion as to whether Donahue Schriber was reasonable in refusing to consent to the Goodwill SV sublease in the Westgate West shopping center, which he would classify as a B minus property. Kircher's opinion was that the refusal was reasonable, based upon the following reasons: (1) a Goodwill store is not a cotenant that most shopping centers want; (2) the Goodwill customer demographic is not desirable with respect to maintaining tenants or attracting new tenants; (3) a Goodwill store sends a message that the local demographic cannot support a better store; (4) it is better to have a dark space than a Goodwill store; (5) a dark space is better than a Goodwill store because it looks like the shopping center is going to remodel; and (6) his belief that Goodwill's customers and employees might scare other people in the shopping center.
D. Statement of Decision and Judgment
In the May 6, 2018 final statement of decision, the trial court made several rulings. First, the trial court ruled that Longs did not obtain consent from CP6WW, the landlord, for the Goodwill SV sublease, based primarily on the court's finding that the words and conduct of Ohlson, the landlord's representative, during his communications with LaBonge, Longs's representative, did not manifest consent.
Second, the trial court determined that Longs did not breach the master lease by entering into the Goodwill SV sublease, because the sublease was not viable absent satisfaction of the condition precedent of landlord consent.
Third, the trial court ruled that DS Westgate had unreasonably withheld its consent to the Goodwill SV sublease. In so ruling, the court found that "Longs presented credible, persuasive, and compelling evidence that under the circumstances in this case, DS Westgate's refusal to consent to the Goodwill SV sublease was and is objectively unreasonable." The trial court was also persuaded by the analogous decision of the Washington state appellate court in Ernst Home Center v. Sato (1996) 80 Wn.App. 473, 485 that the landlord's personal distaste for a sublease to a thrift store was not an objectively reasonable basis for withholding consent to the sublease.
The trial court also rejected DS Westgate's two contentions that contractual provisions in the leases showed that its withholding of consent to the Goodwill SV sublease was reasonable. First, the court determined that the plain language of the master lease did not require percentage rent to be paid by a tenant or subtenant once Longs vacates the entire leased premises. Second, the court ruled that the provision in the Ethan Allen lease prohibiting DS Westgate from leasing to other businesses selling home furnishings or accessories did not apply to the Longs master lease, since the Longs lease predated that Ethan Allen lease. However, the trial court rejected Longs's contention that DS Westgate breached Longs's master lease by leasing to 24 Hour Fitness, since 24 Hour Fitness was not yet operating in the Westgate West shopping center.
Having ruled that Longs met its burden to show by a preponderance of the evidence that DS Westgate had unreasonably withheld consent to the Goodwill SV sublease, the trial court further ruled that Longs was entitled to money damages in the amount of $338,744.23 (the total of monthly triple net damages of $28,870.25 from June 2018 to May 2019). The court also dissolved the preliminary injunction preventing transfer of the subleased premises to Goodwill SV.
The order dissolving the preliminary injunction was stayed to allow DS Westgate to file a petition for a writ of supersedeas in this court staying the order on appeal, which this court denied on May 31, 2019.
The judgment entered on May 6, 2019 provides that Longs is awarded money damages of $338,744.23 and that judgment is entered in Longs's favor as to all causes of action in the complaint (except the cause of action for breach of the covenant of good faith and fair dealing, which was dismissed as abandoned) and in Longs's favor as to all causes of action in the cross-complaint. The judgment also provides that Longs is the prevailing party for purposes of awarding costs under Code of Civil Procedure section 1032 and upon motion, contractual attorney's fees under Civil Code section1717.
All statutory references are to the Civil Code unless otherwise indicated.
II. DISCUSSION: Case No. H046950
A. DS Westgate's Withholding of Consent to Goodwill SV Sublease
DS Westgate contends that the trial court erred in finding that DS Westgate had unreasonably withheld consent to the Goodwill SV sublease, since Longs did not meet its "burden to show that DS Westgate had no reasonable basis for withholding consent to the Goodwill SV sublease-i.e., that none of DS Westgate's explanations was commercially reasonable."
We will begin our evaluation of DS Westgate's contention with an overview of the pertinent rules governing a landlord's consent to a sublease.
1. Landlord's Consent to Sublease
In Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488 (Kendall), the California Supreme Court considered "the effect of a provision in a commercial lease that the lessee may not assign the lease or sublet the premises without the lessor's prior written consent. The question we address is whether, in the absence of a provision that such consent will not be unreasonably withheld, a lessor may unreasonably and arbitrarily withhold his or her consent to an assignment." (Id. at p. 492, fns. omitted.)
Our Supreme Court concluded in Kendall that "both the policy against restraints on alienation and the implied contractual duty of good faith and fair dealing militate in favor of adoption of the rule that where a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignee or the proposed use." (Kendall, supra, 40 Cal.3d at pp. 506-507; Carma Developers (Cal.), Inc. v. Marathon Development California, Inc (1992) 2 Cal.4th 342, 355 (Carma Developers) [same].)
Therefore, under Kendall, as this court has noted, "a legitimate reason for a landlord to prevent subletting of the premises is 'to protect the lessor's interest in the preservation of the property and the performance of the lease covenants.' [Citation.]" (Pay 'N Pak Stores, Inc. v. Superior Court (1989) 210 Cal.App.3d 1404, 1410.) On the other hand, "[d]enying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable. [Citations.]" (Kendall, supra, 40 Cal.3d at p. 501.)
In 1989, the Legislature codified the rulings in Kendall by enacting sections 1995.210 et seq. regarding restrictions on the transfer of a tenant's interest in a lease. (Stats.1989, ch. 982, § 2; Carma Developers, supra, 2 Cal.4th 342, 366; Ilkhchooyi v. Best (1995) 37 Cal.App.4th 395, 405; see Cal. Law Revision Com. com., 10 West's Ann. Civ. Code (2010 ed.) foll. § 1995.240 [§ 1995.240 "codifies the statement in Kendall"]; Cal. Law Revision Com. com., 10 West's Ann. Civ. Code, supra, foll. § 1995.260 [§ 1995.260 "codifies the rule of Kendall"].)
Relevant here, section 1995.250, subdivision (a) provides in part: "A restriction on transfer of a tenant's interest in a lease may require the landlord's consent for transfer subject to any express standard or condition for giving or withholding consent, including, but not limited to, either of the following: [¶] (a) The landlord's consent may not be unreasonably withheld." Section 1995.260 provides in part: "Whether the landlord's consent has been unreasonably withheld in a particular case is a question of fact on which the tenant has the burden of proof."
It is undisputed that the Longs master lease states: "Tenant may assign this Lease or sublet the whole or any part of the Leased Premises with Landlord's consent, which consent shall not be unreasonably withheld."
2. Standard of Review
Since the issue of whether a landlord has unreasonably withheld consent to a sublease is a question of fact, pursuant to section 1995.260, our standard of review is substantial evidence. (See Haworth v. Superior Court (2010) 50 Cal.4th 372, 384 [questions of fact reviewed under substantial evidence test].)
More specifically," 'in reviewing a judgment based upon a statement of decision following a bench trial, "any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]" [Citation.] In a substantial evidence challenge to a judgment, the appellate court will "consider all of the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference, and resolving conflicts in support of the [findings]. [Citations.]" [Citation.] We may not reweigh the evidence and are bound by the trial court's credibility determinations. [Citations.] Moreover, findings of fact are liberally construed to support the judgment. [Citation.]' [Citation.] The appellant has the burden of demonstrating that 'there is no substantial evidence to support the challenged findings.' [Citation.]" (Manson v. Shepherd (2010) 188 Cal.App.4th 1244, 1264 (Manson).)
In the present case, we must therefore determine whether substantial evidence supports the trial court's ruling that Longs met its burden to show that DS Westgate unreasonably withheld its consent to the Goodwill SV sublease. (See § 1995.260; Kendall, supra, 40 Cal.3d at pp. 506-507.)
3. Analysis
We understand DS Westgate to contend that the trial court erred in failing to properly frame the primary issue to be decided in the court trial. According to DS Westgate, the trial court should have decided that the undisputed evidence showed that DS Westgate had commercially reasonable grounds for withholding consent to the Goodwill SV sublease, and "Longs failed to present substantial evidence that no such grounds existed."
Longs responds that substantial evidence supports the trial court's findings that Goodwill SV was a viable tenant for the Westgate West shopping center and that DS Westgate refused consent to the Goodwill SV sublease due to bias or animus against Goodwill.
Having reviewed the record, we determine that substantial evidence supports the trial court's ruling that Longs met its burden to show that DS Westgate unreasonably withheld its consent to the Goodwill SV sublease. (See § 1995.260; Kendall, supra, 40 Cal.3d at pp. 506-507.) The evidence relied upon by the court in finding that DS Westgate had unreasonably withheld consent showed, as the court stated, that "Goodwill SV is a financially secure organization, its proposed use is workable and permitted by the Master Lease, it carefully selects new store locations by studying neighborhood demographics, it operates a successful store in an area with shared demographic characteristics nearby, and a number of Goodwill stores in the Bay Area are co-tenants in shopping centers that feature major national tenants like the ones in the [Westgate West] Center."
The trial court also accepted "the opinion of Longs'[s] expert that the presence of a well-presented and maintained Goodwill SV retail store would draw consumer traffic to the Center . . . thereby benefitting its other tenants [and] . . . the conclusion of Longs'[s] expert that, based on this state of affairs, even though a Goodwill store may not be the first choice of tenant in a brand new or higher-end shopping center, it would nonetheless be preferable and a better economic and synergistic choice through the Master Lease term ending in 2024 than having 'dark,' vacant anchor space for years that draws no retail traffic whatsoever and that attracts risks to property degradation, such as graffiti and vandalism."
In contrast, the trial court found that the evidence presented by DS Westgate's witnesses "consisted largely, if not exclusively, o[f] conclusions rooted in personal belief and perspective that was shown, when tested, to be unsupported by a factual or objective foundation." Specifically, the court found that DS Westgate's witnesses lacked any basis other than personal belief and perceptions for their testimony that only those who cannot shop elsewhere shop at Goodwill; that all Goodwill stores regardless of ownership are disorganized and messy; that it is difficult to lease around a Goodwill store; that tenants other shopping centers had lease restrictions precluding secondhand stores, which would impact lease renewals in the Westgate West shopping center; that national tenants would not locate in a shopping center with a Goodwill store; that a dark or empty space that draws no retail traffic is preferable to a Goodwill store; and that a Goodwill store lease was considered a "non-starter" without any information about Goodwill's financial strength, customer demographics, or Goodwill's planned operations at the Westgate West shopping center.
DS Westgate argues that the trial court erred because it was commercially reasonable for it to withhold consent to the Goodwill SV sublease due to the unsuitability of a Goodwill tenancy in a premium retail anchor space; Goodwill's customer base is inconsistent with the customers of the other tenants at the Westgate West shopping center; a Goodwill tenancy will negatively impact the recruitment of new tenants; a Goodwill tenancy is incompatible with national retailers; Goodwill's messy and disorganized merchandising practices are inconsistent with DS Westgate's plan to improve the Westgate West shopping center to a premium A rated shopping center; and a vacant space is preferrable to the negative impact of a Goodwill tenancy.
We are not convinced by DS Westgate's argument. To begin with, DS Westgate has not disputed the trial court's findings that the evidence presented by DS Westgate's witnesses regarding the negative impact of a Goodwill SV subtenancy in the Westgate West shopping center "consisted largely, if not exclusively, o[f] conclusions rooted in personal belief and perspective that was shown, when tested, to be unsupported by a factual or objective foundation." As we have discussed, our Supreme Court in Kendall instructed that "[d]enying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable. [Citations.]" (Kendall, supra, 40 Cal.3d at p. 501.)
Moreover, although DS Westgate argues that its explanations for withholding consent to the Goodwill SV sublease were commercially reasonable and therefore should have been accepted by the trial court, that argument cannot prevail on appeal because it requires us to reweigh the evidence and re-evaluate the credibility of the parties' witnesses. We emphasize that under the substantial evidence standard of review, we may not reweigh the evidence and are bound by the trial court's credibility determinations. (See Manson, supra, 188 Cal.App.4th at p. 1264.)
And to the extent DS Westgate contends that the trial court improperly relied on the decision in Ernst, supra, 80 Wn.App. 473 that the landlord's personal distaste for a sublease to a thrift store was not an objectively reasonable basis for withholding consent to the sublease, we disagree. Although the decisions of our sister states are not controlling on matters of state law, they may be "instructive to the extent we find their analysis persuasive." (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 175.)
B. The Ethan Allen Lease
DS Westgate also contends that the trial court erred in finding that DS Westgate's consent to the Goodwill SV sublease would not breach Ethan Allen's lease in the Westgate West shopping center, which is another reason that DS Westgate argues that its withholding of consent to the Goodwill SV sublease was commercially reasonable.
It is undisputed that although Ethan Allen's lease includes an exclusive use provision barring the landlord from leasing to another business selling home furnishings, the lease also includes a grandfather clause that provides:" '[t]he foregoing exclusive use provision shall be deemed inapplicable to leases in force as of the Effective Date as to which no restriction on use by the tenant thereunder is contained in the lease with such tenant.'" It is also undisputed that the Longs 1988 master lease, which includes no such restriction on use, predates the 1991 Ethan Allen lease, and was therefore in force at the time of the effective date of the Ethan Allen lease.
The trial court ruled that "by its own terms, the restriction contained in [the exclusive use provision] of the Ethan Allen lease does not govern any tenants, subtenants, or assignees who derive their rights under the Master Lease." DS Westgate argues that the trial court's interpretation is erroneous, because the obvious intent of the grandfather clause was to exempt existing furniture stores, not to allow future subtenants to sell furniture. Longs disagrees, maintaining that the trial court's interpretation is correct because the exclusive use clause in Ethan Allen's lease cannot be read into Longs's master lease.
Our analysis is governed by the rules of contract interpretation. Where, as here, no extrinsic evidence was presented with regard to the interpretation of the contract, our standard of review is de novo. (Culligan v. State Comp. Ins. Fund (2000) 81 Cal.App.4th 429, 434.)
"The fundamental goal of contract interpretation is 'to give effect to the mutual intention of the parties as it existed at the time of contracting.' (Civ. Code, § 1636.) To interpret a contract, we look to its language (§ 1638) and ascertain the intent of the parties, if possible, based solely on the contract's written provisions (§ 1639). In doing so, we apply 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" [citation] . . . . Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.' [Citation.]" (Hewlett-Packard Co. v. Oracle Corp. (2021) 65 Cal.App.5th 506, 530-531, fn. omitted.) These rules of contract interpretation generally apply to lease agreements. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266.)
Here, the grandfather clause in the Ethan Allen lease plainly provides that the exclusive use provision barring the landlord from leasing to another business selling home furnishings does not apply to leases that were in existence when the Ethan Allen lease became effective. DS Westgate did not present any extrinsic evidence that would support a different interpretation. Since it is undisputed that the Longs master lease was in existence prior to the effective date of the Ethan Allen lease, we conclude that the trial court did not err in its plain language interpretation: that DS Westgate would not breach the Ethan Allen lease by consenting to the Goodwill SV sublease since the exclusive use provision in the Ethan Allen lease does not apply to the Longs master lease.
C. Evidentiary Error
Finally, DS Westgate contends that the trial court prejudicially abused its discretion in admitting photographs taken by a Longs witness during the rebuttal phase of the trial.
The record reflects that during Longs's rebuttal, LaBonge testified that he had within the week taken photographs that showed Goodwill tenants in six different shopping centers that also had national retailers as tenants, such as Safeway and OfficeMax. DS Westgate had generally objected to LaBonge testifying with regard to his observations of Goodwill tenancies in shopping centers with national retailers as improper rebuttal. The trial court overruled the objection.
"We review a trial court's evidentiary rulings for abuse of discretion. [Citation.] . . . . Discretion is abused only when in its exercise, the trial court 'exceeds the bounds of reason, all of the circumstances before it being considered.' [Citation.] There must be a showing of a clear case of abuse and miscarriage of justice in order to warrant a reversal. [Citation.] A trial court will abuse its discretion by action that is arbitrary or' "that transgresses the confines of the applicable principles of law."' [Citations.] In appeals challenging discretionary trial court rulings, it is the appellant's burden to establish an abuse of discretion. [Citations.]" (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281.)
Further, "[a] judgment of the trial court may not be reversed for the erroneous admission or exclusion of evidence unless the error was prejudicial, resulting in a miscarriage of justice. [Citation; Cal. Const., art. VI, § 13; Evid. Code, §§ 353, 354.)" (Ajaxo, Inc. v. E*Trade Financial Corp. (2020) 48 Cal.App.5th 129, 185.) The California Supreme Court has instructed that" 'a "miscarriage of justice" should be declared only when the court, "after an examination of the entire cause, including the evidence," is of the "opinion" that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.' [Citation.]" (Cassim v. Allstate Insurance Co. (2004) 33 Cal.4th 780, 800 (Cassim).)
DS Westgate argues that the last minute admission of LaBonge's photographs of Goodwill tenants in shopping centers that also had national retailers as tenants was prejudicial because the trial court "relied heavily" on the photographs and DS Westgate did not have the opportunity to investigate the photographs. For those reasons, DS Westgate argues that it would have received a more favorable result if the photographs had been excluded.
Longs maintains that the photographs were properly admitted in rebuttal to the testimony of DS Westgate's expert that Goodwill was not a tenant in shopping centers with major retailers. Alternatively, Longs argues that the photographs were not prejudicial, even if erroneously admitted, in light of the other evidence supporting the judgment. We agree.
We have previously determined that the trial court's ruling that DS Westgate unreasonably withheld consent to the Goodwill SV sublease at the Westgate West shopping center is supported by substantial evidence, for the primary reason that DS Westgate's reasons for withholding consent were largely based on the witnesses' personal beliefs about the negative impact of a Goodwill SV sublease, which is not commercially reasonable. (See Kendall, supra, 40 Cal.3d at p. 501.) Accordingly, even if the admission of Longs's rebuttal evidence consisting of photographs of Goodwill tenants in the same shopping centers as national retailers was erroneous, it is not reasonably probable that a result more favorable to DS Westgate would have been reached if the photographs had been excluded. (See Cassim, supra, 33 Cal.4th at p. 800.) We therefore find no merit in DS Westgate's claim of evidentiary error.
III. DISCUSSION: Case No. H047674
The trial court's November 20, 2019 order granted Longs's postjudgment motion for contractual attorney fees under section 1717 and awarded attorney's fees in the amount of $924,934. On appeal, DS Westgate argues only that the order awarding attorney's fees and costs should be reversed along with the judgment, without any argument on the merits of the attorney's fees order. Longs responds that DS Westgate has therefore abandoned its appeal of the attorney's fees order.
As this court has previously stated, "[w]hen an issue is unsupported by pertinent or cognizable legal argument it may be deemed abandoned and discussion by the reviewing court is unnecessary. [Citations.]" (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700.) We will therefore affirm the November 20, 2019 order awarding attorney's fees in the amount of $924,934 to Longs without any further discussion.
IV. DISPOSITION
In case No. H046950 the judgment is affirmed. In case No. H047674 the postjudgment order awarding attorney's fees is affirmed. Costs on appeal are awarded to respondent.
WE CONCUR: GREENWOOD, P.J., DANNER, J.