Opinion
NOT TO BE PUBLISHED
Appeals from a judgment and a postjudgment order of the Superior Court of Orange County, Super. Ct. No. 30-2008-00102182 Richard Luesebrink, Judge. (Retired judge of Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
Law Offices of Jennifer J. Hasso-Najm and Jennifer J. Hasso-Najm for Plaintiff and Appellant.
James C. Caviola, Jr., for Defendants and Respondents.
IKOLA, J.
Plaintiff Md7, LLC (Md7), appeals from a judgment for defendants Murray Irwin Seidner (Seidner) and Sue Seidner, as individuals and trustees of the Seidner Family Trust (collectively, defendants). Md7 sought to rescind a lease amendment on the ground of unilateral mistake, claiming the lease amendment wrongly increased the monthly rent instead of decreasing it. After a bench trial, the court found no mistake was made - the parties had negotiated to increase the rent in exchange for increasing the size of the leased area. The court later awarded attorney fees to defendants.
We affirm the judgment. Substantial evidence supports the court’s finding that no mistake occurred, and the increased rent was part of a bargained-for exchange. But we reverse the attorney fee order. The lease contained an indemnity clause, but did not contain an attorney fees clause.
FACTS
The Lease, the Amendment, and the Expansion of the Antenna Installation
In 2002, defendants leased roof space on their Huntington Beach office building to a wireless telephone company doing business as AT&T Wireless. The lease provided that AT&T Wireless would pay monthly rent of $1,000 plus yearly increases in exchange for leasing “a portion of the [building] consisting of (a) cabinet space of approximately two hundred (200) square feet and (b) space on the structure and such easements as are necessary for the antennas and initial installation... (collectively, ‘Premises’).” A “PERMITTED USE” provision gave AT&T Wireless “the right to modify, supplement, replace, upgrade, expand the equipment, increase the number of antennas or relocate the Communication Facility within the Premises at any time during the term of this Agreement.” The lease provided for a 10-year term followed by four automatic five-year renewal periods. AT&T Wireless installed antennas on the roof.
AT&T Wireless later became New Cingular Wireless PCS, LLC (Cingular). Cingular retained Md7 to negotiate rent reductions with the property owners from whom it leased antenna locations, including defendants. Twice in 2005, an Md7 representative contacted Seidner to ask if defendants would reduce the monthly rent. Defendants declined each time. Seidner told Md7 that other wireless telephone companies were interested in leasing space on the building, and that Cingular could terminate the lease if it was not happy with the rent.
An Md7 lease consultant contacted defendants again in May 2006. The lease consultant sent a letter to Seidner stating that Cingular “is asking for a rent and escalator reduction in exchange for a guaranteed commitment to keep your site for the long term.” The letter set forth three options: (1) “A revised rent of $1624 a month, ” to escalate 2 percent per year; (2) “A revised rent of $2000 a month, ” with no escalation, and (3) a large lump sum payment in exchange for a 15 year lease. Around the same time, Cingular (not Md7) contacted defendants to ask about increasing the size of its antenna installation.
Defendants decided to allow Cingular to expand its installation. Md7 drafted a lease amendment, which the parties signed. The amendment provided for a new 10-year term starting July 2006, with monthly rent of $2,000. Cingular guaranteed to pay the monthly rent for the entire term, even if it terminated the lease. The lease term would be followed by four automatic five-year lease extensions with annual 4 percent rent increases.
Cingular proceeded to expand its antenna installation. It hired a unit of Bechtel Corporation (Bechtel) to perform the work. Bechtel told the defendants’ property manager it was going to expand beyond Cingular’s existing area by adding “an additional cabinet and antenna” and “put[ting] stuff on the corners of the building that you could see from the street....” Bechtel’s work occurred “over several weeks, ” requiring use of a crane, and “Bechtel had to go in through [the fourth-floor tenant’s] kitchen, and... adhere the structural steel for them to do their work.” The workers “literally went into the girders, the steel girders in the building, and tied into the building.” Bechtel added “a parapet... and then they brought another line of cables, and then they added probably a 4 by... 15 [foot] screen wall on top of the building exterior, and then they mounted other cables.” “It wasn’t just like one cable. They ran - it looked like a racetrack of cables here on [the] whole front parapet.” Bechtel also “added more panel antennas and more antennas along [a] walkway.”
Md7 wrote to defendants in December 2006, asking them to rescind the lease amendment. Md7 claimed defendants knew the lease amendment wrongly increased the monthly rent instead of reducing it. Defendants’ counsel wrote back to Md7, asserting Md7 “negotiated and received approval to expand space on the building, which [has] already been done.”
The Trial and the Attorney Fees Motion
Cingular filed a complaint against defendants in February 2008, asserting causes of action for rescission and declaratory relief. Cingular assigned its causes of action to Md7 and had no further involvement in the case.
The case proceeded to a two-day bench trial. Md7 called Seidner and defendants’ property manager, who testified about Md7’s prior attempts to negotiate rent reductions, Cingular’s request to expand its antenna installation, Md7’s offer to increase the rent, and Bechtel’s construction work. The property manager inspected the roof and thought to himself, “‘Shit, they did a lot of work.’ It wasn’t just like adding one or two antennas, they did a lot of work.” He concluded Cingular “went outside the area that they were to be in” and “added more cabling and more antennas” that “by far exceeds it, yes, by far. It is more than 200 square feet.”
Md7 also called its president to testify about its business model. It negotiates rent reductions for wireless telephone companies, and gets paid a percentage of any reduction. If no reduction results, Md7 does not get paid. The president explained that the lease consultant who negotiated the lease amendment for Md7 had since died.
Md7 also called the representative who had twice tried unsuccessfully to negotiate a reduced rent with defendants. He stated Cingular paid a commission to Md7 for the “reduction” and that Md7 paid a commission to the lease consultant. He later reviewed Md7’s records at Cingular’s request and discovered that a typographical error in a document had mistakenly indicated Cingular’s monthly lease payment under the original lease was $2,000 plus yearly increases - not $1,000 plus yearly increases.
The Md7 representative also testified about Cingular’s antenna installation. He explained that “Premises” is a defined lease term referred to the size of the leased space. “Permitted Use” is a defined lease term allowing the tenant to modify the ways in which it uses the leased space. He concluded Cingular’s new antenna installation was consistent with the lease’s “Permitted Use” provision, and did not constitute an expansion of the “Premises.” The new antenna installation did not extend beyond the leased space, in his opinion. In the wireless telephone industry, cables are not considered to consume space. The new, 15-foot “panel antenna” did not take up roof space because it hangs off the side of the building. And none of the new antennas took up any space because the lease allows Cingular to “supplement” its antennas. The addition of structural steel to the building may or may not be an expansion of the premises, in his view - it would depend on how the steel was attached.
The Md7 representative based his opinions upon the primary defense exhibit: Exhibit A. The exhibit was a set of engineering drawings entitled “Cingular Wireless ERGU PROJECT.” The drawings purported to be Bechtel’s construction drawings for the new antenna installation. The drawings are dated January 20, 2006, with as-built mark-ups dated October 2006. The “PHASE-3 NOTES” state, “3. EQUIPMENT LOCATION IS DIAGRAMMATIC EXACT LOCATION WILL BE FINALIZED AFTER SITE VISIT IS COMPLETE AND LEASE AMENDMENT OR NEW LEASE IS OBTAINED.” The Md7 representative, who studied mechanical engineering at Stanford University, testified the drawings showed the new antenna installation was confined to the leased space. But he repeatedly conceded he was “not an engineer, ” had not visited the building, and had never seen the installation.
The court entered judgment for defendants. It found “the amendment was executed, [Cingular] took over additional space on the roof and the rent increased....” Exhibit A showed Cingular “had plans to increase its equipment on Defendants’ roof. This was shortly after the Amendment was executed and the Court concluded [Cingular] was aware of its plans to expand on the Defendants’ roof and did so.” The court further found “despite [the Md7 representative’s] testimony that the expansions would not be considered an expansion under industry standards, there was no evidence that Defendants were informed of ‘industry standards’ and the Court rejects [Md7’s] position that [Cingular] received no consideration to support the rent increase.”
Defendants later moved to recover their attorney fees, relying upon a clause in the underlying lease. Defendants also noted that Cingular had prayed to recover attorney fees in the complaint. The court granted the motion and awarded $47,125 in reasonable attorney fees to defendants.
DISCUSSION
Substantial Evidence Supports the Judgment for Defendants
Md7 challenges the underlying judgment, contending “[t]he undisputed evidence compels the conclusion that as a matter of law, Md7 is entitled to rescission.” It asserts the lease consultant “erroneously proposed a rent increase” in his attempt to negotiate a rent reduction. It further claims Cingular “did not receive any consideration for the [lease amendment] in that the original Lease already had the expansion of use language and there was no admissible evidence of expansion of premises.”
“A party may rescind a contract if his or her consent was given by mistake. [Citation.] A factual mistake by one party to a contract, or unilateral mistake, affords a ground for rescission in some circumstances. Civil Code section 1577 states in relevant part: ‘Mistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in: [¶] 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract....’” (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278 (Donovan), fn. omitted.)
All further statutory references are to the Civil Code unless otherwise stated.
Traditionally, “unilateral mistake did not render a contract voidable unless the other party knew of or caused the mistake.” (Donovan, supra, 26 Cal.4th at p. 280.) California has adopted “the rule in section 153, subdivision (a), of the Restatement Second of Contracts, authorizing rescission for unilateral mistake of fact where enforcement would be unconscionable.” (Id. at p. 281.) Now, “[w]here [one party] has no reason to know of and does not cause the [other’s] unilateral mistake of fact, the [rescinding party] must establish the following facts to obtain rescission of the contract: (1) the [rescinding party] made a mistake regarding a basic assumption upon which the defendant made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the [rescinding party]; (3) the [rescinding party] does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable.” (Id. at p. 282.)
In any event, the rescinding party - Md7 here - bears the burden of showing it was unconsciously ignorant or otherwise unilaterally mistaken. (Donovan, supra, 26 Cal.4th at p. 282.) “The determination of whether in a particular case one has acted under a mistake is for the trial court whose finding thereon, if supported by substantial evidence, will be conclusive on appeal.” (Walton v. Bank of California (1963) 218 Cal.App.2d 527, 543; accord Spurgeon v. Drumheller (1985) 174 Cal.App.3d 659, 663 [a finding that no mistake occurred is reviewed for substantial evidence “or more accurately, since appellant had the burden of proof on this issue, we look to see whether the state of the evidence compels the finding” a mistake was made].)
“Under the substantial evidence standard of review, we review the entire record to determine whether there is substantial evidence supporting the [trier of fact’s] factual determinations [citation], viewing the evidence and resolving all evidentiary conflicts in favor of the prevailing party and indulging all reasonable inferences to uphold the judgment [citation]. The issue is not whether there is evidence in the record to support a different finding, but whether there is some evidence that, if believed, would support the findings of the trier of fact. [Citation.] Credibility is an issue of fact for the trier of fact to resolve [citation], and the testimony of a single witness, even a party, is sufficient to provide substantial evidence to support a factual finding [citation].” (Fariba v. Dealer Services Corp. (2009) 178 Cal.App.4th 156, 170-171.)
Here, substantial evidence supports the court’s finding that Cingular knowingly agreed to pay a higher monthly rent in exchange for obtaining increased roof space to expand its antenna installation. The court impliedly credited the testimony of Seidner and the property manager, who testified that Cingular contacted defendants to ask to increase the size of its antenna installation. Seidner and the property manager also testified Cingular engaged in an extensive construction project that substantially expanded the footprint of its antenna installation. Moreover, exhibit A showed Cingular had plans to expand its antenna installation by January 2006, before the Md7 loan consultant contacted defendants about the lease amendment. In contrast, the court impliedly discredited the testimony of the Md7 representative about the unchanged size of the antenna installation, which he conceded he had never actually seen.
Based on these factual findings, the court properly found the extra roof space constituted bargained-for consideration for the increased monthly rent. While the lease allowed Cingular to “supplement... [or]... expand the equipment [and] increase the number of antennas, ” it confined any such additions to the area “within the Premises.” The evidence sufficiently showed the new antenna installation expanded beyond the leased “Premises” and were not merely an increase in the “Permitted Use.” And the court rightly refused to bind defendants to a purported custom in the wireless telephone industry that cables and hanging antennas do not occupy space. Md7 offered no substantial evidence showing defendants knew or should have known about the industry custom. (See Miller v. Stults (1956) 143 Cal.App.2d 592, 603-604.) When asked “How is Mr. Seidner supposed to know what industry standards are for cell phone antennas, ” the Md7 representative answered, “I agree. It’s a bit of a gray area.” “I mean, a lot of this, I think, is either intentionally or unintentionally fuzzy.”
Md7 contends the court wrongly admitted exhibit A over its lack of foundation and hearsay objections. But Md7 has not shown any abuse of discretion. (Saxena v. Goffney (2008) 159 Cal.App.4th 316, 332 [standard of review].) “A writing may be authenticated by evidence that the writing refers to or states matters that are unlikely to be known to anyone other than the person who is claimed by the proponent of the evidence to be the author of the writing.” (Evid. Code, § 1421.) Exhibit A consists of construction drawings for the antenna installation on defendants’ building that were unlikely to have come from anyone else but Cingular or its contractor, Bechtel. These drawings would be authorized statements by Bechtel admissible against Cingular (Evid. Code, § 1222, subd. (a)), and thus admissible against Md7 as Cingular’s assignee in this case. (Evid. Code, § 1224.)
“Evidence of a statement offered against a party is not made inadmissible by the hearsay rule if: [¶] (a) The statement was made by a person authorized by the party to make a statement or statements for him concerning the subject matter of the statement; and [¶] (b) The evidence is offered either after admission of evidence sufficient to sustain a finding of such authority or, in the court’s discretion as to the order of proof, subject to the admission of such evidence.” (Evid. Code, § 1222.)
“When the liability... of a party to a civil action is based in whole or in part upon the liability... of the declarant... evidence of a statement made by the declarant is as admissible against the party as it would be if offered against the declarant in an action involving that liability....” (Evid. Code, § 1224.)
Moreover, any error in admitting exhibit A was harmless. Exhibit A tended to show Cingular intended to, and actually did, increase the size of the antenna installation. But the court impliedly credited the testimony of defendants’ witnesses on both accounts. And Md7 offered no witnesses from Cingular or Bechtel to contradict this testimony. No one from Cingular or Bechtel denied expanding the antenna installation. (See Evid. Code, §§ 412 [weak evidence suspect when stronger evidence available], 413 [failure to explain adverse evidence bolsters the evidence].) Moreover, Md7 itself relied upon exhibit A. The Md7 representative based his opinion about the new antenna installation solely upon his reading of exhibit A. If the court had excluded exhibit A, the only evidence of the installation’s size would have been the testimony of defendants’ witnesses - and their testimony would have been undisputed.
Md7 notes defendants failed to produce exhibit A at the pretrial conference, in apparent violation of The Superior Court of Orange County, Local Rules, former rule 450 [now rule 317, requiring pretrial exchange of exhibits]. But exclusion is not the per se remedy for this violation. Here, as noted, the document was self authenticated as having come from Md7’s assignor or its contractor Bechtel, and it concerned the very installation at issue. The document could not have surprised Md7.
The Lease Does Not Entitle Defendants to Recover Their Attorney Fees
Md7 contends the court erred by awarding attorney fees as costs to defendants pursuant to the lease. Md7 does not dispute defendants could recover attorney fees incurred in defending against this action if the lease contained an attorney fees clause. But it claims the lease contains no such clause.
“‘Unless authorized by either statute or agreement, attorney’s fees ordinarily are not recoverable as costs.’ [Citation.] Where a contract accords a right to attorney fees to one party but not the other, Civil Code section 1717 creates a statutory reciprocal right to attorney fees in all parties to the contract. [Citations.] Where a contract provides for attorney fees in an action to enforce the contract, the attorney fees provision is made applicable to the entire contract by operation of Civil Code section 1717.” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 968 (Myers).)
Section 1717, subdivision (a) (section 1717) provides: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. [¶] Where a contract provides for attorney’s fees, as set forth above, that provision shall be construed as applying to the entire contract....”
Defendants abandon on appeal their claim below that they may recover attorney fees simply because Cingular prayed to recover attorney fees in the complaint. The “mere allegation of a contractual right to attorney fees is not sufficient to create an estoppel where [a party] would not actually have been entitled to attorney fees under the contract if [that party] had prevailed.” (Myers, supra, 13 Cal.App.4th at p. 963, fn. 12.)
Defendants also abandon their claim they are entitled to recover attorney fees pursuant to section 8(a) of the lease. That section provides, “8. INDEMNIFICATION. (a) [Cingular] agrees to indemnify, defend and hold [defendants] harmless from and against any and all injury, loss, damage or liability (or any claims in respect of the foregoing), costs or expenses (including reasonable attorneys’ fees and court costs) arising directly from the installation, use, maintenance, repair or removal of the Communication Facility or [Cingular’s] breach of any provision of this Agreement....” Defendants concede this section “cover[s]” “indemnity for attorney’s fees incurred in defending against actions brought by third parties.”
Instead, defendants rely upon section 8(b) of the lease. That section provides: “(b) [Defendants] agree[] to indemnify, defend and hold [Cingular] harmless from and against any and all injury, loss, damage or liability (or any claims in respect of the foregoing), costs or expenses (including reasonable attorneys’ fees and court costs) arising directly from the actions or failure to act of [defendants] or [defendants’] breach of any provision of this Agreement....” Defendants assert this is an attorney fees clause made reciprocal by section 1717.
But section 8(b) is an indemnity clause just like section 8(a), not an attorney fees clause. “A clause which contains the words ‘indemnify’ and ‘hold harmless’ is an indemnity clause which generally obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee becomes obligated to pay third persons. [Citation.] Indemnification agreements ordinarily relate to third party claims.” (Myers, supra, 13 Cal.App.4th at p. 969.)
Myers held similar contract language to be an indemnity clause that did not award attorney fees to the party who prevailed in litigation on the contract. The contract there provided: “‘Contractor shall indemnify, hold free and harmless, assume legal liability for, and defend Owner... from any and all loss... including but not limited to, attorney’s fees... which Owner... may pay, or become obligated to pay, on account of any, all, and every demand or claim... arising or alleged to arise out of Contractor’s use of Owner’s premises, the performance of this Agreement, the operation of Contractor’s business, or any act or omission of Contractor....’” (Myers, supra, 13 Cal.App.4th at pp. 965-966, italics added.) Myers acknowledged this provision “is not limited to bodily injury or property damage, and embraces ‘any, all, and every claim’ which arises out of ‘the performance of the contract.’ However, giving consideration to the ordinary meaning of the words used [citation] together with the subject matter heading and giving effect to the entire provision [citation], we conclude that the provision was intended to deal only with third party claims.” (Id. at p. 974.)
The same conclusion follows here. The plain language of section 8(b) sets forth an indemnity provision requiring defendants to pay attorney fees and other losses incurred by Cingular against third parties. Defendants cannot turn this requirement to indemnify Cingular against third-party claims into a requirement to pay Cingular’s attorney fees if it prevails in litigation on the lease, and then rely upon section 1717 to make that obligation reciprocal. “The very essence of an indemnity agreement is that one party hold the other harmless from losses resulting from certain specified circumstances. The provisions of Civil Code section 1717 were never intended to inflict upon the indemnitee the obligation to indemnify his indemnitor in similar circumstances. Indemnification agreements are intended to be unilateral agreements.” (Myers, supra, 13 Cal.App.4th at p. 973.)
Defendants’ cited cases address substantially different contract language. In Baldwin Builders v. Coast Plastering Corp. (2005) 125 Cal.App.4th 1339, an indemnity agreement contained an express attorney fees clause obligating one party to pay to the other “‘all costs, including attorney’s fees, incurred in enforcing this indemnity agreement.’” (Id. at p. 1345.)
And in Continental Heller Corp. v. Amtech Mechanical Services, Inc. (1997) 53 Cal.App.4th 500, a contract provision had to be construed as an attorney fees clause to be more than surplusage. In that case, section 11 of the contract set forth seven subparagraphs, with a standard indemnity clause in subparagraph (b). (Id. at p. 508.) But the contract also contained “an additional provision on attorney fees” “[f]ollowing the last subparagraph” of section 11. (Ibid.) This separate clause provided: “‘And the Subcontractor shall indemnify the Contractor, and save it harmless from any and all loss... and attorney’s fees suffered or incurred on account of any breach of the aforesaid obligations and covenants, and any other provision or covenant of this Subcontract.’” (Id. at pp. 508-509.) The court held: “It is clear this concluding paragraph is not referring to indemnity for attorney fees incurred in defending actions brought against Continental. That indemnity is covered in subparagraph (b) of the section. Rather, the quoted language is intended to entitle Continental to attorney fees in any action it brings against Amtech for breach of any provision of the contract including, but not limited to, breach of the indemnity provisions of subparagraph (b).” (Id. at p. 509.)
The contract language here stands in stark contrast to these cases. The obligation to pay attorney fees arising from a “breach of any provision of this Agreement” does not expressly refer to fees incurred in enforcing the agreement between the parties. Nor must it be construed as such in order to be meaningful. Instead it extends the scope of the duty to reimburse costs incurred in defending against third party claims arising from conduct that breached the lease. It is an integral part of the indemnity clause.
DISPOSITION
The judgment is affirmed. The postjudgment order awarding attorney fees is reversed, and the matter is remanded to the court with directions to vacate its order granting defendants’ motion to recover attorney fees and enter a new order denying the motion. In the interests of justice, each party shall bear its own costs on appeal.
WE CONCUR: ARONSON, ACTING P. J., FYBEL, J.