Ota v. Macerich

Filed 11/30/05 Ota v. Macerich CM Village Ltd. Partnership CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

SADAHARU OTA, Plaintiff and Appellant, v. MACERICH CM VILLAGE LIMITED PARTNERSHIP, Defendant and Respondent.

A108374 (Marin County Super. Ct. No. 022526)

Plaintiff Sadaharu Ota, doing business as Sushi Island (Ota), leased restaurant space in the food court of a shopping mall later owned by defendant Macerich CM Village Limited Partnership (Macerich). Ota’s complaint alleged that Macerich breached the lease by unilaterally reducing the size of the food court and changing the manner in which the food court was promoted and maintained. Following a court trial, Ota appeals from the judgment entered in favor of Macerich, contending that the trial court erred in interpreting the terms of the lease to authorize Macerich to make these modifications in its sole discretion and in rejecting his argument that the scope of Macerich’s discretion was limited by the manner in which the prior owner operated the food court. We affirm.

Factual and Procedural Background

In October 1997, Sushi Island, a Japanese restaurant, opened in the food court of the Village of Corte Madera, an upscale shopping mall in Marin County. The food court is an enclosed “U” shaped area with restaurants along the outer perimeter and a common area in the center where customers sit and eat. Pursuant to a 10-year lease from JMB/CM Village Associates (JMB/CM), the former owner of the mall, Ota agreed to pay monthly rent plus a monthly fee for common area expenses prorated based upon the number of restaurants leasing space in the food court. When the lease was signed in 1997, there were nine restaurants in the food court.

In 1998, JMB/CM sold the mall to Macerich, which assumed the lease with Ota. That November, Ota advised Macerich in writing of promises made by JMB/CM to remodel the food court and to improve access to and the appearance of the common area. Thereafter, Macerich made some repairs to the common area bathrooms. As of 2001, however, Ota did not believe that the renovations were sufficient or that the common areas were being properly maintained. He complained to Macerich that the bathrooms were not cleaned regularly and that malodorous garbage was allowed to accumulate in the common area. He also complained that the number of tenants in the food court had declined, causing the common area fees to increase beyond his expectations. Finally, he questioned Macerich about its plan for future renovations. In a written response, Macerich assured Ota that the bathrooms and common areas were cleaned regularly, and advised him to contact the general manager of the mall should similar problems arise in the future. The letter also explained that final plans to renovate the food court had not been completed and that Ota would receive notice pursuant to the terms of his lease should a decision be made that would impact his status as a tenant. Macerich also stated that under the terms of the lease it had the right to lease space in the food court in its sole and absolute judgment.

In May 2002, Macerich finalized its renovation plans and began construction. The food court was reduced in size to accommodate only six restaurants and the adjacent retail store was expanded to fill the vacant spaces. Four restaurants, including Sushi Island, remained open during the six month construction project and two more opened shortly after the construction was completed in October 2002. In April 2003, Ota was evicted after failing to pay rent for three months. Shortly thereafter, Macerich completed the renovation, which included new flooring, seating, lights, paint and plants.

In the meantime, in September 2002, Ota filed his first amended complaint against Macerich alleging causes of action for breach of lease, breach of the express warranty of quiet enjoyment, breach of the covenant of good faith and fair dealing, and misrepresentation. In July 2003, Macerich filed a cross-complaint against Ota for breach of the lease. When the case went to trial in January 2004, only Ota’s breach of contract claims and Macerich’s cross-complaint remained. On September 10, 2004, the court entered judgment in favor of Macerich, providing that Ota take nothing on his complaint and awarding Macerich $53,273.54 on its cross-complaint. Ota filed a timely notice of appeal.

Discussion

Ota’s complaint alleges that Macerich breached the lease agreement by (1) reconfiguring and reducing the number of restaurant spaces in the food court, (2) failing to advertise and promote Sushi Island and the food court, and (3) failing to properly maintain the bathrooms and the common dining area of the food court. The trial court concluded that Macerich acted reasonably in reducing the size of the food court and in changing the manner in which it was promoted and maintained, and that Macerich was authorized under the express terms of the lease to make such decisions in its sole discretion. The court rejected Ota’s contention that Macerich was bound by Ota’s expectations based on the manner in which the prior owner had operated the food court. The court also found that Ota’s evidence “concerning deficiencies in housekeeping and maintenance [was] not persuasive or credible.” On appeal, Ota challenges the trial court’s interpretation of the scope of Macerich’s discretion to modify the design and operation of the food court.[1] We review independently the admissibility of Ota’s evidence of custom and usage—i.e., how the prior owner operated the food court—and the scope of Macerich’s discretion under the terms of the lease. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955.)

Section 8.1 of the lease provides, “Tenant shall, at Landlord’s option, either participate in a marketing fund (“Marketing Fund”) or merchants association (“Merchants Association”) which shall be organized to market the Shopping Center. Landlord shall control and administer the Marketing Fund, if established, with advice from an advisory group comprised of representatives of various Shopping Center tenants.” Section 25.2 provides, “Landlord shall have the absolute right to lease or permit the use or occupancy of space in the Shopping Center as Landlord shall determine in its sole and absolute judgment. Tenant does not rely on the fact, nor does Landlord represent, that there shall be any specific occupants or minimum occupancy level of space in the Shopping Center at any time.” Section 25.3 provides that “Tenant acknowledges that . . . Landlord reserves the right at any time to expand, reduce, remove, demolish, change, renovate or construct any existing or new improvements at the Shopping Center.”

Despite these unambiguous provisions in the lease, Ota contends that the scope of Macerich’s discretion to make changes to the food court was limited by the condition of the food court as it existed when the lease was signed and by Ota’s expectation that the food court would continue to be maintained and operated as it was under the prior owner. Likewise, Ota asserts that Macerich was required to consult with the food court tenants as the prior owner had done, and to advertise separately on their behalf. The manner in which JMB/CM operated the food court, however, cannot imply a limitation on Macerich’s discretion that conflicts with the express terms of the lease. To the contrary, where a written contract states a term clearly and unambiguously, usage or custom that would vary or contradict the term is not admissible. (Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 890; Peiser v. Mettler (1958) 50 Cal.2d 594, 610.) Accordingly, the trial court properly concluded that Ota’s evidence of the manner in which the former owner operated the food court was “irrelevant and inadmissible extrinsic evidence offered under the guise of custom and practice in a purported need to ascertain the intent of the parties in order to vary the clear and unambiguous provisions of the lease.”

Contrary to Ota’s suggestion, the discretion afforded Macerich to make these decisions does not render the lease illusory. In Badie v. Bank of America (1998) 67 Cal.App.4th 779 (Badie), cited by Ota, the court recognized that the fact that one party to a contract “ ‘reserves the power of varying the price or other performance is not fatal [i.e., does not render the contract illusory and unenforceable] if the exercise of this power is subject to prescribed or implied limitations, as that the variation must be in proportion to some objectively determined base or must be reasonable.’ ” (Id. at p. 797.) The trial court properly measured Macerich’s exercise of discretion against an objective standard of reasonableness, finding that “it can hardly be said that the decision of Macerich to accommodate the needs of a highly desirable national tenant . . . to expand its business is unreasonable.” Likewise, there is no basis to conclude that Macerich’s advertising decisions were not also reasonable. While JMC/CM chose to hold monthly marketing association meetings with food court tenants and promote the restaurants independently from the other stores in the mall, Macerich held annual merchant meetings to which all merchants were invited to discuss advertising, among other things, and marketed all of its tenants collectively.

Similarly, the quiet enjoyment provision found in Article 21 does not restrict Macerich’s rights under sections 25.2 and 25.3. Article 21 provides, “Landlord agrees that Tenant, upon paying the rent and performing the terms, covenants, and conditions of the Lease, may quietly have, hold and enjoy the Premises from and after Landlord’s delivery of the Premises to Tenant and until the end of the Lease Term.” Ota suggests that this provision “carved out an interest at the Village for ten (10) years, which interest included Ota’s leasehold, and an undivided interest in the food court and bathrooms” and that after signing the lease, “Macerich no longer had the right to dictate the use of those areas so long as Sushi Island paid its rent and otherwise complied with the lease provisions.” Ota’s reading of the quiet enjoyment provision is unsupportable. The provision protects Ota’s right to operate his restaurant without interference from Macerich, subject to Macerich’s express rights under the lease, including the right to modify the food court and to relocate Ota’s restaurant to another comparable space in the food court. The trial court found that the food court continued to be operational before, during, and after the construction of the addition and that Macerich did not wrongfully interfere with the basic right of Ota to operate his restaurant under the lease. Substantial evidence supports that finding.

Finally, Macerich’s decisions to reconfigure the food court and to change the way the restaurants were promoted did not violate the implied covenant of good faith and fair dealing. “The essence of the good faith covenant is objectively reasonable conduct.” (Lazar v. Hertz Corp. (1983) 143 Cal.App.3d 128, 141.) In Badie, the court adopted a commentator’s suggestion “that good faith performance of the discretionary power to affect the other party’s rights requires the party holding such power to exercise it ‘for any purpose within the reasonable contemplation of the parties at the time of [contract] formation—to capture opportunities that were preserved upon entering the contract, interpreted objectively,’ and that, conversely, breach of the covenant occurs when the discretionary power is used to ‘recapture opportunities foregone’ when the contract was entered into.” (Badie, supra, 67 Cal.App.4th at p. 796.) Here, the lease expressly contemplates the renovation and alteration of the food court and sections 25.3 and 25.4 reserve Macerich’s right to make such decisions in its sole discretion. The implied covenant of good faith and fair dealing cannot be read to alter these express provisions of the lease. (Carma Developers, Inc. v. Marathon Dev. Calif., Inc. (1992) 2 Cal.4th 342, 374.) Ota’s assertion that “Macerich is attempting to recapture foregone opportunities since the food court was well established when Ota entered into his lease in 1997 and it must be assumed that the parties assumed that the food court would continue at least substantially [in] the form in which it operated during the previous 10 years” lacks any basis in law or the terms of the lease.

Disposition

The judgment is affirmed. Macerich shall recover its costs on appeal.

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Pollak, J.

We concur:

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Corrigan, Acting P. J.

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Parrilli, J.

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[1] In the section of his opening brief discussing the standard of review, Ota asserts that “the court is being asked to review the refusal to allow the deposition [testimony] of [Franco de] Simone to be read into the record, such refusal being an abuse of discretion standard because Simone, who moved from the area without the knowledge [of] Ota in October 2003, who was deposed in Washington under the court’s order when Mr. Ota sought to use him as a witness in December 2002, who became available for rebuttal after Mr. Ota’s case-in-chief was completed (whose testimony was then substantially limited even though he was called to rebut testimony of Macerich witnesses that claimed everything was great in the food court from 2000-2002), who was an independent third party witness, and who would have provided valuable evidence at the trial.” Ota has waived this argument by failing to address this issue any further in the discussion section of his opening brief or provide proper legal authority in support of the asserted error. (Associated Builders & Contractors, Inc. v. San Francisco Airports Com. (1999) 21 Cal.4th 352, 366, fn. 2.) Likewise, although Ota continues to assert in a conclusory manner that the common area of the food court was not properly maintained after Macerich purchased the mall, his failure to challenge the sufficiency of the evidence in support of the trial court’s factual finding that the common area of the food court was properly maintained waives any claim to the contrary. (Ibid.)