One of four lessees, who was not a defendant in the action below, signed and delivered to the lessor, with the lessor's approval, a writing exercising an option to extend a lease after the expiration of the period to exercise that option. We hold that defendants, the three other colessees, were not bound by that purported exercise of the option. We also hold that the increased rental provision for holding over did not apply when one lessee did so with the consent of the lessor. We therefore affirm the judgment.
On February 17, 2004, lessor Jeffrey Kavin, Inc. (lessor),
The lease contained the following relevant provisions: "Surrender/ Restoration. Lessee shall surrender the Premises by the end of the last day of the Lease term .... [¶] No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration ... of this Lease. In the event that Lessee holds over in violation of this Paragraph ... then the Base Rent payable from and after the time of the expiration ... of this Lease shall be increased to two hundred percent (200%) of the Base Rent applicable during the month immediately preceding such expiration .... Nothing contained herein shall be construed as a consent by Lessor to any holding over by Lessee; [¶] Option to extend: Lessor herby grants Lessee the option to extend the term of this lease for 1 additional 36 month period commencing when the initial term expires upon each and all of the following terms and conditions: [¶] (i) Lessee give to Lessor, and Lessor actually receives on a date which is prior to the date that the option period would commence (if exercised) by at least 6 months, a written notice of the exercise of the option to extend th[i]s Lease for said additional term, time being of [the] essence. If said notice of the exercise of the option is not so given and received, the option shall automatically expire.... [¶] Multiple Parties.... [I]f more than one person ... is named herein as ... Lessee, the obligations of such multiple parties shall be the joint and several responsibility of all persons ... named herein as such ... Lessee.... [¶] Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any
Lessor entered into a lease with Andrea and defendants, the original term of which ended on April 30, 2007. Prior to the parties entering into the lease, Kavin was concerned that if Andrea and Karabuykov were the only lessees and they defaulted on the lease, they would have no assets for lessor to pursue to satisfy the default. Kavin therefore required that Harold and Morgan also execute the lease as lessees.
As quoted above, the lease provided for the ability of lessees to exercise an option to extend the lease for 36 months by a written notice six months before the expiration of the lease term, and if lessees did not give the notice, the option automatically expired. Kavin inserted into the lease this automatic expiration language clause because he believed that it was for lessor's benefit.
At the leased premises, Andrea and Karabuykov opened a dress shop called Brunette Boutique. Kavin went to the leased premises one to two weeks after the option period had expired and told Andrea that they were late in exercising the option to extend the term of the lease; he therefore asked Andrea whether "they" were going to exercise the option. Andrea told Kavin that "we want to do that," and "we want to exercise the option." Andrea inquired of Kavin what she should write, and Kavin told her what to write. Kavin believed he told Andrea not to date the document. Andrea wrote in part, "We hereby exercise our option to extend our lease for another 36 month lease."
Andrea, Morgan, and Harold did not request the return of their security deposit until lessor filed this lawsuit. Harold paid the rent on one occasion after the original term of the lease had expired.
Andrea and Karabuykov were partners in a business called Brunette Boutique at the leased premises. In approximately 2005, Karabuykov had a baby, and thereafter Karabuykov "pretty much gave [Andrea] the store." Thus, Andrea considered Brunette Boutique to be her business from and after that time.
Karabuykov and Andrea did not have a written agreement regarding Brunette Boutique. From November 18, 2005, through January 2006, Karabuykov left the business and was on maternity leave. She thereafter continued to work at the store until approximately November 2006, when she gave all of her interest in Brunette Boutique to Andrea because Karabuykov decided she could no longer work at the store in view of her responsibilities as a parent. Because Andrea was Karabuykov's friend, however, Karabuykov remained involved in the business, including remaining on the joint bank account for Brunette Boutique, going on buying trips, performing some bookkeeping tasks, and "look[ing] into ... some rent issues." Prior to November 2006, Karabuykov did not authorize anyone to sign an extension of the lease on her behalf. Karabuykov had a second child in July 2007, and shortly thereafter, Andrea called her about the notice Andrea signed purporting to exercise the option to extend the term of the lease.
Morgan was a signatory to the lease, which he had read before signing. He understood that to exercise the option to extend the term of the lease, a written notice exercising the option needed to be given to lessor six months prior to the expiration of the lease or the option would automatically expire. He did not authorize anyone to exercise the option on his behalf. He told Karabuykov specifically that he did not want to exercise the option to extend the lease. He first learned in 2010 that an extension of the lease had ostensibly been made by Andrea's notice. He knew Andrea was still running the store, but he thought any extension was between her and the lessor. He never issued any checks to lessor, and he never participated in the operations of Brunette Boutique.
Andrea wanted Harold to be a part of the lease, because she did not have sufficient assets to support the lease. He made a note to himself that the lease was to expire as of April 2007. At no time did he authorize anyone to sign an extension of the lease on his behalf. He recalled vaguely that between November 1, 2006, and April 30, 2007, he had a conversation with Andrea advising her that he would not be part of renewing the lease, and he did not think she should renew it because the store was not doing well.
On March 28, 2007, prior to the expiration of the original term of the lease, and months before Andrea signed the document purporting to exercise the option, Harold sent a letter to Kavin stating that Harold did not want to be a party to a lease extension. Harold did not receive a response to this letter. He did not send a copy of the letter to Andrea, but he believed he told her he was sending it.
Harold believed that the lease ended at the expiration of the original term. He assumed Andrea and lessor had some kind of agreement because Andrea was on the premises for over one year after the expiration of the lease. When Andrea told Harold she was being pressured to sign a new lease, she made some reference to Kavin suggesting that Harold did not have to be a party to a new lease. Harold wrote a check for $4,500 in partial payment of a month's rent because Andrea, who did not have sufficient funds, asked him to do so. That was the only time he recalled that Andrea asked him to pay the rent.
Lessor filed a complaint against defendants seeking damages for breach of the lease. Lessor alleged that defendants exercised the option to renew the lease, thereby extending the lease term through April 30, 2010, and defendants remained in possession of the premises until vacating it on or about January 8, 2009.
After a bench trial, the trial court issued a statement of tentative decision that became a statement of final decision. The trial court made the following findings of fact that are not disputed by the parties. "Andrea ... and ... Karabuykov, as partners, operated a boutique dress shop called Brunette in the premises. Their fathers were not involved in the business. Plaintiff's principal, Jeffrey Kavin, initially refused to rent to Andrea ... [and] Karabuykov, believing them to be credit risks. Kavin agreed to the lease only because the fathers of Andrea ... and ... Karabuykov agreed to be colessees.
"Andrea ... wrote out and handed to Kavin a note ... reading: `Mr. Kavin, We hereby exercise our option to extend our lease for another 36 month lease. Thank you. Andrea....' The note is undated. [¶] Andrea ... and Kavin agree that he visited the store to request that [Andrea] give him a signed writing to extend the lease. Both agree that Kavin dictated the wording to [Andrea]. [¶] ... [¶] [T]he court concludes that the handwritten note was signed by Andrea in July or possibly in August, 2007.
"Harold ... testified that he sent a letter to Kavin on March 31, 2007. The letter read: `This is notice I will not be part of the above referenced lease after 4-30-07, due to Other [sic] pressing commitments. Thank you for your assistance to my daughter in the past.'"
The trial court also issued the following legal conclusions. Citing Schmitt v. Felix (1958) 157 Cal.App.2d 642 [321 P.2d 473] (Schmitt), the trial court stated, "The law provides that a colessee in possession ordinarily can bind a lessee out of possession (if an extension is offered in the lease) simply by holding over after the end of the lease term.... However, [Schmitt] does not apply to the present circumstances because this lease itself provides that it can be extended only if the lessee gives the lessor `a written notice of the exercise of the option.'"
The trial court also determined that Morgan and Harold would not have been bound by Andrea's written notice exercising the lease option, even if the notice had been timely. The trial court stated that a writing signed by one colessee does not bind other colessees who are not in possession, unless it is established that the lessee who signed the writing was authorized to bind the others, and Andrea had no authority to bind Morgan and Harold. The trial court added, "The obligations of the colessees were several—each, for instance, was individually liable for the rent—and the court cannot find from the lease language an authorization that any individual colessee could bind the others to a future lease term."
The trial court further decided that defendants were not liable for holdover rent because lessor "apparently agrees that by requesting, dictating and accepting [Andrea's] writing in late July [lessor] accepted a new rental arrangement and, thus, gave up any claim for additional hold-over rent under the original lease. The holdover section provides that the landlord is entitled to 200% of the base rent during any holdover period. [¶] The court's view, however, is that the colessees did surrender the premises. [Lessor] accepted rent payments from Andrea ... for the period May through July, 2007 without complaint or other notice that double rent was due for that holdover period. Lessor continued to accept rent payments from Andrea ... through December 2008 without any assertion that additional rents were due for the so-called holdover period. The court concludes that [lessor] was satisfied with the colessees' surrender of the premises, a surrender that left one of the original colessees in place and paying a monthly rent that [lessor] accepted."
"`In general, 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.]' (Estate of Young (2008) 160 Cal.App.4th 62, 75-76 [72 Cal.Rptr.3d 520].)" (Cuiellette v. City of Los Angeles (2011) 194 Cal.App.4th 757, 765 [123 Cal.Rptr.3d 562].)
Lessor contends that the trial court erred in concluding that the option to renew the lease term had expired by the lapse of time, so that the option could not be exercised. The trial court found that the written notice purporting to exercise the option was signed by Andrea in July or August 2007, approximately nine months after the time provided for in the lease. Lessor argues that the option could be exercised because he can and did waive the time limit set forth in the lease for the giving of written notice of exercising the option to extend the lease.
The trial court found that Harold and Morgan were parties to the lease only because Kavin would not agree to the lease to Andrea and Karabuykov unless Harold and Morgan were also signatories to the lease. Under the circumstances, the requirement of a timely written notice of the exercise of the option was for the benefit of Harold and Morgan, as well as the benefit of lessor. Harold and Morgan would benefit from strict compliance with the terms of the option provision exposing them to a longer duration of liability. Lessor has not established that the requirement of a timely written notice of the exercise of the option was for its sole benefit such that it could unilaterally waive it.
Although lessor argues that the lease itself allows one lessee to bind the others in connection with an option to extend the lease, lessor does not contend that defendants otherwise gave Andrea authority to bind them to an option extending the lease term. The trial court found that Andrea had no authority to sign for Morgan and Harold to exercise the option to extend the term of the lease. Andrea and defendants testified at trial that defendants did not give Andrea authority to sign any document that would extend the lease. Harold also provided Kavin with notice, prior to the expiration of the original lease term, that he, Harold, would not be part of the lease after the expiration of the original term. Kavin, therefore, was specifically put on notice that Harold did not consent to an option to extend the lease term. (See Schmitt, supra, 157 Cal.App.2d at pp. 647-648 [a lessee is not liable for a month-to-month holdover by a colessee's continued possession of the property upon notifying the lessor that the lessee is no longer connected with his colessee and would not remain in possession after termination of the lease].)
Lessor contends that the trial court erred by finding that the option to extend the term of the lease cannot be exercised by the conduct of the parties so as to bind all of the lessees. But as the trial court noted, the lease provided that the option may be exercised only by timely written notice given six months prior to the termination of the lease.
In 1933, our Supreme Court held that an option to extend the term of the lease could be exercised by the conduct of the parties to the lease at and after the time of the expiration of the original lease term, without the lessee giving written notice as provided in the lease, when the lessor had waived the requirement of a written notice to exercise the option. (Tay-Holbrook, Inc. v. Tutt (1933) 218 Cal. 600 [24 P.2d 463] (Tay-Holbrook, Inc.).) In Tay-Holbrook, Inc., the plaintiff, the lessee of a lease entered into with the defendants, as lessors, appealed a judgment declaring that the term of the lease had been extended. The lease provided that the lessee could exercise an option to extend the lease by giving written notice of his election to extend the lease to the lessors within 60 days of the expiration of the original term of the lease. The lessee did not give written notice of his decision to exercise the option as set forth in the lease, but remained in possession of the premises, and paid the increased rent to be paid by him under the renewal of the lease, which payment was accepted by the lessor. (Id. at pp. 601-602.) The trial court found that the provision in the lease requiring written notice of the lessee's decision to exercise the option for a renewal of the lease had been waived by the parties, particularly the lessors for whose benefit the requirement of the written notice was inserted into the lease. (Id. at p. 603.)
The Supreme Court affirmed the judgment, holding that a written communication was not necessary in order to exercise the option because the lessor waived the requirement of a written notice, and the option was exercised based on the parties' conduct. (Tay-Holbrook, Inc., supra, 218 Cal. at pp. 603-607.) The court stated, "The evidence shows that at the expiration of the original term of five years, the [lessee] remained in possession of the leased premises and paid the increased rental provided for by the terms of the lease. The [lessors] after the expiration of the lease permitted [lessee] to remain in possession of the premises and accepted from it the increased rental which was to be paid only in case the lease was renewed. This course of business continued for a period of more than a year without either party questioning the rights of the other. Were we considering this case from the standpoint of the rights of the tenant, we would be disposed to hold that the landlords, by accepting the increased rental and by permitting the tenant to remain and enjoy the possession of the leased premises, had waived the formalities prescribed in the lease in order to effect its renewal. We can see
Unlike in Tay-Holbrook, Inc., supra, 218 Cal. 600, in the instant case lessor did not waive the requirement of a written notice to exercise the option or otherwise conduct himself as if written notice was not required. Kavin insisted that Andrea provide written notice. The trial court found, and lessor does not dispute, that Kavin went to Andrea and requested that she give him a signed writing to extend the lease term, and dictated the wording to Andrea. A written notice was required to exercise the option. Thus, Andrea's holding over did not, under these circumstances, constitute an exercise of the option binding on defendants.
Lessor relies on Schmitt, supra, 157 Cal.App.2d 642, in which the plaintiffs, as lessors, entered into a lease with the three defendants, as lessees, for one year, and the lease granted the lessees the option to extend the lease for an additional year without stating how the option could be exercised. No notice of the exercise of the option was given, but one of the defendants remained in possession of the premises for the entire term provided by the option, and rent was paid during that period. The court, in holding that another defendant who never occupied the premises was bound by the option by the acts of the other defendant who remained on the premises and paid rent, stated, "A written exercise of an option ... is not necessary. Payment by the tenant of the rental provided in the lease and its acceptance by the landlord constitutes an exercise of the option. [Citation.] ... In California ... the exercise of the option is not considered to make a new agreement but merely the extension of the original term of the lease. `... where a lease gives an option to the lessee "to renew" the lease for a specified term without requiring the execution of a new lease, the extension is a continuation of the tenancy under the original lease. [Citations.]' [Citations.] [¶] `A colessee of real property is a tenant in common of the leasehold interest. The possession of one cotenant is possession for all. [Citations.]' [Citation.] ... [¶] Therefore, as an option to renew may be exercised by a tenant remaining in possession and paying the rent, as such renewal is merely an extension of the
Schmitt, supra, 157 Cal.App.2d 642 is distinguishable because in that case, although the lease provided that the lessees could exercise an option to extend the term of the lease, unlike in the instant case, it did not provide the manner in which it could be exercised or that it must be exercised by a timely, written notice by the lessee. In that case, holding over by one lessee would be deemed an extension of the lease binding on a lessee not in possession. Here, the question is whether the required written exercise of an option to extend the lease by one lessee would be binding on other lessees. There is a difference. In this case, the required writing only has the signature of one tenant. The "lessee" "parties" include Andrea and defendants, and the lease requires "lessee"—not a lessee—to give timely, written notice of the exercise of the option. By this requirement, all lessees must sign the exercise of the option or give other lessees the authority to do so.
The trial court found that defendants had surrendered the premises, but that Andrea remained in possession. Lessor contends that the trial court erred in finding that defendants were not liable for holdover rent of 200 percent of the base rent. The lease provides that the premises must be surrendered by the end of the last day of the lease term. It also provides, "Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration... of [the] Lease. [But i]n the event that Lessee holds over in violation of this Paragraph ... then the Base Rent payable from and after the time of the expiration ... of this Lease shall be increased to two hundred percent (200%) of the Base Rent applicable during the month immediately preceding such expiration .... Nothing contained herein shall be construed as a consent by Lessor to any holding over by Lessee ...." (Italics added.) Lessor argues that its acceptance of the base rent did not constitute a waiver of its right under the lease to the holdover rent, pointing to a provision in the lease that states, "Regardless of Lessor's knowledge of Default or Breach at the time of accepting rent, the acceptance of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of moneys or damages due Lessor ...."
Even if lessor did not waive its right to seek the full amount of the holdover rent from lessees,
The judgment is affirmed. Defendants shall recover their costs on appeal.
Kriegler, J., concurred.
I concur in the decision to affirm the judgment. Plaintiff, Jeffrey Kavin, Inc., presents complicated arguments in an effort to reverse the judgment. My sense of it is that we should reject plaintiff's sophisticated analysis on simpler grounds. In the case of an ambiguous contract, we review the issues for substantial evidence. (Bill Signs Trucking, LLC v. Signs Family Limited Partnership (2007) 157 Cal.App.4th 1515, 1521 [69 Cal.Rptr.3d 589]; ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1267-1268 & fn. 4 [35 Cal.Rptr.3d 343].) In my view, there is substantial evidence plaintiff entered into a lease extension only with Andrea Lynne Frye.
According to Ms. Frye: Jeffrey Kavin walked into her shop, the only business on the premises; he told her she needed to get a piece of paper; Mr. Kavin then dictated word for word what she needed to write which is what she did; she was told she "had" to sign the document; and she later said he "made" her sign the extension. The language "our" in the extension agreement is vague. There were only two people present, Mr. Kavin and Ms. Frye. The other signatories to the lease were not present. Only Ms. Frye's business remained on the premises when the undated agreement was executed. Because the extension agreement's vague language was selected exclusively by Mr. Kavin, it must be construed against plaintiff. (Civ. Code, § 1654; Schram Construction, Inc. v. Regents of University of California (2010) 187 Cal.App.4th 1040, 1060, fn. 14 [114 Cal.Rptr.3d 680].) This is an issue of contract creation and what was the substance of the parties' agreement. Substantial evidence supports the trial court's ruling the agreement extended only to Ms. Frye.
