Blairmont v. Horowitz




Filed 5/3/12 Blairmont v. Horowitz CA2/2





NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO

BLAIRMONT, LLC et al., Plaintiffs and Appellants, v. DAVID HOROWITZ, as Trustee, etc., et al., Defendants and Appellants.

B221704 (Los Angeles County Super. Ct. No. NC036830)

APPEAL from a judgment of the Superior Court of Los Angeles County. Patrick T. Madden, Judge. Affirmed in part and reversed in part.

Law Offices of Michael Leight, Michael Leight and John Gloger for Plaintiffs and Appellants.

Garrett & Tully, Ryan C. Squire, Robert Garrett, and Alia S. Haddad for Defendants and Appellants.



This case concerns a 99-year lease executed in 1948 (the lease) encumbering a commercial property at 4918 E. Second Street, Long Beach, California (the property).
Blairmont LLC (Blairmont); Fourth Church of Christ, Scientist (Fourth Church); Frank C. Blair and Ruth C. Blair (the Blairs, and collectively referred to as the Blairmont parties) appeal from a final judgment entered after a bench trial on their claims of declaratory relief concerning the lease. David Horowitz (Horowitz) and Arlene Horowitz, Trustees of the Horowitz Trust (the Horowitzes), and Bernard R. Kaufman (Kaufman) and Judith L. Kaufman, Trustees of the Bernard and Judith Kaufman Trust (the Kaufmans, and collectively referred to as the trustees) cross-appeal from the trial court’s rulings disposing of the trustees’ cross-complaint against the Blairmont parties.
We affirm in part and reverse in part. We affirm the trial court’s decision that the defense of laches bars the Blairmont parties’ challenges to the lease and the assignments of the lease. However, we reverse the trial court’s finding that a nine-year reduction in the term of the lease is required due to a violation of Civil Code section 718 (section 718).^[1] As to the trustees’ cross-complaint, we affirm the trial court’s summary adjudication of the trustees’ claim for intentional interference with contractual relations against the Blairmont parties. However, we reverse the trial court’s decisions disposing of the trustees’ claims for quiet title, breach of implied covenant of good faith and fair dealing, implied indemnity, and breach of implied covenant of quiet enjoyment against Fourth Church at the pleading stage.
THE BLAIRMONT PARTIES’ CONTENTIONS
The Blairmont parties make the following contentions:
1. While the trial court correctly determined that the lease violates section 718, the trial court erred in reducing the lease term by nine years rather than voiding the lease in its entirety;
2. The 1977 assignment of the lease from Mann Theatres Corporation (Mann Theatres) to South Bay Properties (South Bay) was contrary to public policy and illegal due to breaches of fiduciary duty on the part of Kaufman to his client, Mann Theatres;
3. Because of the purported breaches of fiduciary duty on the part of Kaufman to his client, Mann Theatres, the trustees come to court with unclean hands and may not rely on the defense of laches;
4. The trial court erred in determining that the challenges to the assignments of the lease were barred by laches; and
5. The lease is unconscionable, therefore unenforceable.
THE TRUSTEES’ CONTENTIONS
In response to the Blairmont parties’ appeal, the trustees argue:
1. Blairmont may not attack the lease or South Bay’s conveyance to its partners because Fourth Church has affirmed the lease and acknowledged that the trustees are the lessees;
2. The trial court’s determination that laches bars the Blairmont parties’ claims is supported by substantial evidence, and should have led the court to reject the Blairmont parties’ claim that the lease is illegal under section 718;
3. The trial court correctly found that the lease is not void under section 718, but the court erred as a matter of law when it reduced the lease term by nine years;
4. Because the probate court approved the lease in 1948, the Blairmont parties are estopped from challenging the lease by judicial estoppel, collateral estoppel, and res judicata;
5. Substantial evidence supports the trial court’s ruling that the lease was not unconscionable;
6. The Blairmont parties have no standing to argue that South Bay’s conveyance to its partners was invalid;
7. South Bay’s leasehold estate was validly conveyed to the trustees, and the trial court’s ruling that the assignment was ineffective is incorrect;
8. The trial court correctly ruled that Kaufman’s status as in-house attorney for Mann Theaters did not render the assignment to South Bay illegal, and the trustees did not have unclean hands; and
9. Blairmont has no standing to attack the assignment of the lease from Mann Theaters to South Bay or to invade Kaufman’s attorney-client relationship with Mann Theaters.
As to their cross-complaint, the trustees argue:
1. The trial court erred by granting the Blairmont parties’ motion for judgment on the pleadings as to the trustees’ causes of action for (1) quiet title, (2) breach of the implied covenant of good faith and fair dealing against Fourth Church, and (3) implied indemnity against Fourth Church;
2. The trial court erred by granting summary judgment in favor of Blairmont and the Blairs on the trustees’ claim for interference with contract; and
3. The trial court erred by sustaining the Blairmont parties’ demurrer to the trustees’ claim for breach of the covenant of quiet enjoyment.
FACTUAL BACKGROUND^[2]
1. The lease
On March 16, 1939, Rose Carson Heedwohl leased the property to West Coast Long Beach Theatre Corporation (West Coast) (the 1939 lease). The term of the lease was 10 years, beginning April 1, 1939, and ending March 31, 1949. Ms. Heedwohl died on or about July 8, 1947.
On May 3, 1948, before the expiration of the term of the 10-year lease, L.J. Heedwohl (Mr. Heedwohl or petitioner), a testamentary trustee under the last will and testament of Rose Carson Heedwohl, petitioned the superior court for, and was granted, authority to execute a 99-year lease on the property. In his petition to the superior court, Mr. Heedwohl indicated that the property was “in need of repairs and rehabilitation.” The petitioner explained that he had been able to negotiate a lease for a period of 99 years with West Coast at a net rental of $1,000 per month, and that the lessee would pay “all taxes, all repairs, and . . . complete and pay for the repair and rehabilitation of said property,” according to plans and specifications approved by the petitioner. The petitioner further attested that the proposed lease was “to the best interests of the estate and all of the beneficiaries interested therein,” including “Mother Church, First Church of Christ Scientist” and “Fourth Church, Christ Scientist.” A copy of the proposed lease was attached to the petition. By signing the lease, the “Landlord and Tenant . . . agreed to terminate” the lease of March 16, 1939, “concurrently with the commencement of the term of this Lease.”
The superior court granted the petition. The court found that “all of the allegations of [the] petition are true; and that it is for the advantage of said estate to Lease the real property.” The court “authorized, empowered and directed” petitioner to “execute, and acknowledge and deliver” the 99-year lease “beginning May 1, 1948 and ending April 30, 2047.” The lease was recorded with the county recorder in 1948.
The lease permits the lessee to cancel the lease, but only after having rehabilitated the property. The lease also grants the lessee a right of first refusal, should the landlord decide to sell the fee.
2. The Heedwohl Trust
The Heedwohl Trust held title to the property for the next 40 years. From 1948 to 1970, the trustee of the Heedwohl Trust was Mr. Heedwohl. During this time, Mr. Heedwohl filed accountings with the superior court. In January 1971, upon the death of Mr. Heedwohl, the court appointed Security Pacific National Bank as successor trustee. The successor trustee also filed accountings with the court. In September 1989, the successor trustee conveyed its interest, as a gift, to beneficiaries First Church and Fourth Church.
There was no evidence that the required rehabilitation of the property was not timely performed. The property functioned as a movie theater through the early 1970’s. The Heedwohl Trust continued to accept rental payments in accordance with the lease from either South Bay, Kaufman, or Horowitz. There was no evidence of any breach or default under the lease.
3. The lessees
The successors of West Coast remained the lessee through 1973. In 1973, Mann Theatres acquired the leasehold via assignment from National General Theatres, Inc., one of West Coast’s successors.
In 1977, Horowitz, Kaufman, David Westley (Westley), and David Goodgame (Goodgame) formed South Bay, a general partnership, for the purpose of acquiring the leasehold. On September 6, 1977, South Bay acquired the leasehold from Mann Theatres for approximately $115,000- $125,000. Kaufman and Goodgame were employed by Mann Theatres at the time that South Bay was formed and at the time that South Bay acquired the leasehold. Both men were licensed attorneys at the time. South Bay paid rent of $1,000 per month to the Heedwohl Trust through 1988, and all of those payments were accepted by the successor trustee of the Heedwohl Trust. In 1984, the partnership agreement of South Bay was amended to include the wives of the original partners: Arlene Westley, Arlene Horowitz, Shari Goodgame, and Judith Kaufman.
On February 16, 1989, the Goodgames, Westleys, Kaufmans, and Horowitzes utilized a tax-deferred exchange to effectuate the purchase of the leasehold by the Kaufmans and Horowitzes from the Goodgames and Westleys. In consideration of the transfer, the Kaufman and Horowitz trustees paid the Westleys and Goodgames $960,000. Kaufman, not South Bay, started making the rental payments on behalf of the Kaufmans and Horowitzes. The Heedwohl Trust negotiated the payments without objection to the new assignees.
4. Condition of the property at the time of South Bay’s acquisition of the lease
Although the property had been improved after the lease was originally executed, it later fell into disrepair. At the time South Bay acquired the leasehold in 1977, the property was in a dilapidated condition. The interior of the building on the property was gutted, and homeless people lit bonfires in the middle of the building. The purchase of the property was a risky investment. Substantial time and resources would be required to upgrade the property. Potential use of the property was also restricted by the California Coastal Commission. No improvements to the property were made by any fee owner of the property, including the Heedwohl Trust, First Church, or Fourth Church.
5. 1978 sublease and the Heedwohl Trust’s acquiescence
In 1978, South Bay entered into a 30-year sublease with a five-year option with John Doyle (Doyle), who owns and operates the Belmont Athletic Club through its general partner B.A.C. Management. The trustees paid tens of thousands of dollars in broker fees to locate Doyle, and gave him major concessions to sublet the property, including foregoing rent while he built-out the property. The property was converted from a movie theater to an athletic club with other rental spaces. In 1979, Doyle entered into a similar sublease with South Bay for the upstairs portion of the property.
Doyle learned that the property was held in trust by Security Pacific National Bank (Security Pacific). At some time during the early 1980’s, Doyle visited Security Pacific and asked to speak with the person in charge of the Heedwohl Trust. Doyle explained that he had converted the theater into a racquetball and athletic club. He was interested in buying the property. The Security Pacific bank representative stated that the Heedwohl Trust did not need any more income and was not interested in selling anything.
Doyle never received a notice to quit the premises from Security Pacific. He never received any communication from them whatsoever. The Heedwohl trustee continued to negotiate the rental checks of $1,000 per month from South Bay without objection.
6. Fourth Church acquires the property, and First Church and Fourth Church acquiesce to the trustee’s leasehold
On August 11, 1989, Security Pacific, as trustee for the Heedwohl Trust, quitclaimed to First Church a 72.13 percent interest and to Fourth Church a 27.87 percent interest in the fee title to the property. First Church was aware that the property was encumbered by a ground lease at the time it acquired the fee interest.
From at least October 1989 to September 1993, First Church accepted rent payments from Kaufman in the amount of $1,000 per month pursuant to the terms of the lease. First Church accepted the checks without objection. There is no evidence that First Church ever questioned the trustee’s tenancy, which predated First Church’s (and Fourth Church’s) acquisition of the fee title, nor did it seek any judicial remedy as to the validity of the lease, its terms, or the status of the trustees as lessees under the lease.
In 1992, First Church sought to sell its interest in the property. Fourth Church made an offer.
First Church was aware of the right of first refusal in favor of the tenants under the lease. First Church engaged in arms length negotiations with Fourth Church, even though Fourth Church was a branch of First Church, the “Mother Church.” The right of first refusal to be offered the Kaufmans and Horowitzes was a subject of the negotiations between First Church and Fourth Church. For example, in a letter dated July 31, 1992, a representative of First Church referred to Kaufman as the “lessee” who expressed an interest in purchasing the property; the letter further indicates that First Church would accept an offer from Fourth Church “subject to the lessee right of first refusal.” In a letters dated November 4, 1992, and January 8, 1993, there is further reference to the lessee and right of first refusal.
Pursuant to article XXIII of the lease, the purchase and sale agreement contained the following language:
“B. The Property is subject to a long term Ground Lease (hereinafter referred to as the ‘Ground Lease’ executed on May 3, 1948 between L.J. Heedwohl, Trustee, and West Coast Long Beach Theater Corporation. The Ground Lease is attached hereto, labelled [sic] Exhibit B and made a part hereof.”

“[¶] . . . [¶]

“2.02 Conditions of Purchase and Sale. Buyer’s obligation to purchase the Property is conditional upon the following:

“[¶] . . . [¶]

“(c) A complete release, or, in the alternative, a failure to exercise, by the Tenant, pursuant to the Ground Lease, and/or its successors and assigns, of any and all rights it may have, or may claim to have pursuant to the Article XXIII (“FIRST REFUSAL” of the Ground Lease, arising from the tender of an offer to purchase the Property by Buyer to Seller herein. . . .”

On March 4, 1993, counsel for First Church, G. Grant Gifford (Gifford), extended on behalf of First Church the right of first refusal to the Kaufmans and Horowitzes pursuant to article XXIII of the lease. Gifford referred to the trustees as the “tenant or tenant’s representative under the existing Ground Lease governing the various leasehold rights and obligations on said property.” Initially, Kaufman and Horowitz exercised their right of first refusal. However, they ultimately did not proceed to exercise their right and Fourth Church proceeded with the purchase of First Church’s interest in the property.
Kaufman is repeatedly referred to as the “lessee” in Fourth Church’s meeting minutes and correspondence. Fourth Church was aware that there was a 99-year lease on the property with 50 years still remaining. When it was first given the property from the successor Heedwohl trustee, Fourth Church was fully aware that it would collect $1,000 rent per month under the terms of the lease. Catherine Wetzell, who was designated by Fourth Church as the person most knowledgeable, was aware that Fourth Church was purchasing First Church’s interest in the property at a discounted price because of the lease.^[3] The membership of Fourth Church was informed.
One of the documents Fourth Church was required to sign in order to complete the acquisition of First Church’s interest in the property was an “assignment of leasehold interest.” The document provided that Fourth Church would acquire:
“All right, title and interest of the undersigned, as Lessor, in and under that certain Lease dated April 30, 1948 executed by and between L.J. Heedwohl, as testamentary trustee of the Estate of Rose Carson Heedwohl, deceased (Lessor) and West Coast Long Beach Theatre Corporation (Lessee) as subsequently assigned to David Horowitz and Arlene Horowitz, Trustees of the Horowitz Trust dated April 12, 1988 as to an undivided 50% interest and Bernard K. Kaufman and Judith L. Kaufman, Trustees of the Bernard and Judith Kaufman Trust as to an undivided 50% interest, Lessees.”

Fourth Church explicitly accepted the assignment.
On July 12, 1993, a grant deed conveying First Church’s fee interest to Fourth Church was executed by First Church and recorded.
For the next 11 years, Fourth Church’s conduct affirmed its explicit consent to the trustees’ leasehold estate, including but not limited to its acceptance of monthly rental payments in the amount of $1,000 per month from October 1993 through the filing of the litigation. Rita Joanne Garner, Fourth Church’s treasurer and clerk since 1987, testified that the trustees were timely in their monthly rental payment and Fourth Church never had any problems collecting the rent.
7. Negotiations between Fourth Church and Doyle
In November 1994, Doyle contacted Mr. Wetzell of Fourth Church. Mr. Wetzell indicated that he was involved with the board of Fourth Church. Doyle identified himself as the tenant at the Belmont Athletic Club. Doyle spoke with Mr. Wetzell four or five times regarding the possibility of Doyle purchasing the property. They also discussed the right of first refusal that ran in favor of the trustees.
In 1999, Mr. Wetzell contacted Doyle to inquire whether Doyle was interested in purchasing the property. Mr. Wetzell explained that Fourth Church was receiving a small amount of money compared to the price of the property and it was winding down its affairs. Doyle spoke with Mr. Wetzell on about three or four different occasions regarding the purchase of the property. Doyle explained to Mr. Wetzell that he would look into the feasibility of purchasing the property since the property was encumbered by the lease, which contained a right of first refusal. Doyle explained that he would also have to buy Kaufman and Horowitz out of their lease. Doyle and Mr. Wetzell discussed a purchase price of approximately $200,000 to $250,000.
In 2002, Doyle tried to contact Mr. Wetzell, but Mrs. Wetzell informed him that Mr. Wetzell had died the previous year. Mrs. Wetzell indicated that Fourth Church was interested in selling the property because it received so little money in rent. Doyle and Mrs. Wetzell discussed the value of the property and the fact that the value was affected by the ground lease which had another 40 years on it.
8. The trustees rely on the leasehold as collateral
In July 1998, the trustees entered into a loan agreement with Sumitomo Bank of California (the lender) for the amount of $685,000. The trustees executed two instruments that served as security for the loan in the event of a default.
The first was an “Assignment of Rents and Leases” which referred to the rents that the trustees collect under the subleases on the property. A description of the property was attached as exhibit A. The assignment allowed the lender to collect the rent from the subtenants “[u]pon the maturity of the Indebtedness or a default of the Indebtedness and during the continuance thereof.” Until the time of a maturity of the indebtedness or a default under the loan, the trustees were entitled to enforce the leases and collect rent. Kaufman signed the assignment because he understood that the bank wanted it as collateral security for the loan.
The second document was an “Assignment of Lessee’s Interest in Ground Lease” which assigned the trustees’ interest in the lease in the event of a default on the part of the trustees. Again this document was executed as collateral security for the $685,000 loan.
In preparation for the documentation of a second loan obtained by the trustees in November 2003, letters were executed by Kaufman, Horowitz, and their respective tenants for the bank. The leases referenced were the operative subleases, which became collateral for a loan from Citizens Bank.
Kenneth Coolidge, the deputy chief credit officer at Citizens Bank, testified that the trustees’ loan is current and is secured by a promissory note and deed of trust encumbering the trustees’ leasehold. Coolidge explained that when Citizens Bank makes a loan against real estate, it takes a deed of trust, along with an assignment of rent, as collateral. As a general rule, Citizens Bank does not collect rent on a property unless there has been a default or there is a receivership. The trustees have honored their obligations to Citizens Bank.
9. Blairmont’s offer to buy the property
On October 11, 2004, Mrs. Wetzell, as president of the executive board of Fourth Church, signed a listing agreement with a realtor to sell the property. The stated listing price was $2,500,000.
In 2005, Blairmont offered to buy the property for $1,200,000. On February 16, 2005, Mrs. Wetzell signed a counter offer, indicating that the purchase price would be $1,300,000 and stating: “Upon acceptance of this Counter Offer, Seller shall give the Lessee, now paying the Lease rent, notice as to comply with Lessee’s Right of First Refusal.” Blairmont’s counter offer, dated February 16, 2005, indicated a purchase price of $1,250,000 and stated:
“Upon acceptance of this Counter Offer Seller shall not give purported lessees which are now paying rent, any notice of the purported right of first refusal and Buyer shall indemnify and hold Seller harmless as a result. Buyer may, at its own expensive and in its sole discretion, select and pay for counsel to defend Seller if it is sued by the purported lessees.”

Mrs. Wetzell also testified that, in response to her proposal that the trustees be given notice, Blairmont proposed that the trustees not be given notice, but instead, that Blairmont would indemnify and hold Fourth Church harmless in the event of a lawsuit.
Mrs. Wetzell testified that it was her understanding that the church agreed to accept $1,250,000 for the property, although this was less than the value of the property if it were not encumbered by the lease. The commercial property purchase agreement between Fourth Church and the Blairmont parties was executed on March 1 and March 2, 2005.
On April 14, 2005, after Blairmont had filed its complaint for declaratory relief, Fourth Church sent a letter to the trustees informing the trustees of Blairmont’s offer to purchase the property and purporting to comply with its obligation to offer the trustees a right of first refusal pursuant to the lease. On May 11, 2005, the trustees responded, stating their position that the lessor had not complied with the requirements of the lease. Specifically, the trustees stated, the lease requires that the lessor provide the right of first refusal when the offer on the property is received, and Fourth Church’s letter reflected that it already had a binding agreement to sell the property.
PROCEDURAL HISTORY
Blairmont filed its action for declaratory relief against the trustees on April 7, 2005. Blairmont asked the court to declare that the trustees did not succeed to the interest of the original tenant under the lease; that the trustees are not entitled to collect rent; and that the trustees had no valid or enforceable interest in the property. Blairmont further asked the court to declare the lease unconscionable and unenforceable.
The trustees cross-complained against the Blairmont parties for quiet title, breach of implied covenant of quiet enjoyment, breach of implied covenant of good faith and fair dealing, implied indemnity, and interference with contractual relations. The third amended cross-complaint was filed on January 27, 2006. Fourth Church filed a cross-complaint against Blairmont and the trustees, seeking a determination and declaration of the respective rights, duties and obligations of the parties.
Blairmont and Fourth Church demurred to the trustees’ cross-complaint. On April 4, 2006, the trial court sustained without leave to amend the demurrer to the trustees’ claim for breach of the covenant of quiet enjoyment implied in the lease, finding that Blairmont’s and Fourth Church’s conduct fell within the litigation privilege of Civil Code section 47.
On August 11, 2006, the Blairmont parties moved for summary judgment, or in the alternative, summary adjudication on the remaining causes of action in the trustees’ cross-complaint. The motion for summary judgment was denied, and the motion for summary adjudication was granted in part and denied in part. It was granted as to the trustees’ fifth cause of action for intentional interference with contractual relations, on the ground that the litigation privilege provided a complete defense to that tort. It was denied as to the remaining causes of action in the cross-complaint.
The Blairmont parties’ claims were tried to the court in May 2008. The court found:
“Blairmont’s claim challenging the validity of assignment is barred by laches. The Trustees and Fourth Church are both bound by the terms of the original lease. The reversionary rights in the sub-tenancy are deemed to belong to the Trustees, and South Bay Properties retains no interest in the leasehold. The sub-tenancy is between the trustees as sub-lessor and Mr. Doyle as sub-lessee. The first nine years of occupancy by the original lessee is deemed to be part of the ninety-nine year term, and the lease will expire on March 16, 2039. If Blairmont elects to purchase the Property, it will do so subject to the lease of the Trustees.”

Blairmont requested a statement of decision, which was filed on September 2, 2009.
The Blairmont parties brought a motion for judgment on the pleadings as to the remaining causes of action in the trustees’ cross-complaint: quiet title, breach of implied covenant of good faith and fair dealing, and implied indemnity. The motion was granted on November 19, 2009.
Judgment was entered on November 25, 2009.
Blairmont and Fourth Church filed their notice of appeal on January 11, 2010. The trustees filed their notice of cross-appeal on January 25, 2010.
DISCUSSION
I. The Blairmont parties’ appeal
In their direct appeal, the Blairmont parties argue that the lease is illegal and void; that the assignment of the leasehold from South Bay to the trustees was contrary to public policy and illegal; and that the trial court erred in determining that the doctrine of laches barred their challenge to the assignment.
In response, the trustees argue that all of the Blairmont parties’ challenges to both the lease and the assignment are barred. First, the trustees contend, Fourth Church has affirmed the lease and the trustees as lessees on numerous occasions. Because the Blairmont parties “stand in the shoes” of the prospective seller, they have no greater rights than Fourth Church. Fourth Church’s express validations of both the lease and the assignment constitute judicial admissions which are binding on the Blairmont parties, and the Blairmont parties may not take a contrary position.
Next, the trustees argue that the trial court’s finding of laches bars all of the Blairmont parties’ arguments as to both the lease and the assignment.
Finally, the trustees argue that, because the superior court approved the lease in 1948, the Blairmont parties are estopped from challenging it under the doctrines of judicial estoppels, collateral estoppels, and res judicata.
The trustees argue that because the Blairmont parties’ arguments are barred for the reasons set forth above, the trial court’s reduction of the lease by nine years should be reversed.
We begin the discussion of the Blairmont parties’ direct appeal by addressing the question of whether Blairmont’s challenges to the lease and the assignment are barred by the doctrines of laches.
A. Laches
Laches is a question of fact to be determined by the trial court. As the trial court noted:
“The affirmative defense of laches requires that there be unreasonable delay in bringing suit, plus either acquiescence in the act about which the plaintiff complains, or prejudice to the defendant resulting from the delay. Laches can bar a claim even if brought within the legal limitations period.” (Citing In re Marriage of Dancy (2000) 82 Cal.App.4th 1142, 1150.)

1. The trial court’s ruling
The equitable defense of laches was raised by the trustees as to the issues set forth in the Blairmont parties’ complaint for declaratory relief. The trial court made an express finding that “both First Church and Fourth Church, by their express agreement and conduct, from 1989 to the filing of this lawsuit, acquiesced to the validity of the Lease and the mesne assignments leading up to and including the Trustees.”
The trial court specifically held:
“Although Blairmont is the nominal plaintiff seeking declaratory relief, its interests are derivative of the Fourth Church’s interests; Blairmont ‘stands in the shoes’ of Fourth Church for the purposes of an equitable analysis. Blairmont is a stranger to the relationship between owner and tenant and sub-tenant, and its own interests are purely prospective. The Fourth Church has owned an interest in the Property since 1989, and has been the sole fee owner since 1993. There has never been any impediment to its discovery of the facts in this case. Nothing was concealed, and nothing prevented it from challenging the Lease when it first became part owner in 1989. Although Blairmont has not acquiesced to the present state of the tenancy, Fourth Church most certainly has. Fourth Church collected rent without complaint or question until Blairmont expressed interest in purchasing the property.

“The trustees have relied on the validity of the leasehold. The Lease represents a substantial portion of the Trustees’ retirement income, and the prejudice resulting from a declaration in plaintiff’s favor would manifest. They have managed the Property for 30 years, and invested significant time and money in improving the property. The Trustees are contractually bound to their sub-tenants.

“The Trustees spent almost one million dollars to buy out their partners’ interests, and are obligated to their bank to have the Property serve as collateral on their loan that is current, albeit not yet satisfied.

“The court finds that undue delay, coupled with both Fourth Church’s acquiescence to the tenancy and sub-tenancy and the serious financial prejudice to the Trustees bar a declaration in plaintiff’s favor. The legal defects in assignment and conveyance have not resulted in either damage or prejudice to the owner. At the end of Lease, Fourth Church will obtain a valuable piece of Property, without contributing anything to rehabilitation, repair, taxes, insurance, maintenance, etc. Fourth Church’s ownership was a gift, and it took the Property as it found it. Under these facts, defects in the form do not defeat the substance of the transactions.

“The public policy underlying the doctrine of laches is expressed as follows:

“[O]ne is not permitted to stand by while another develops property in which he claims an interest, and then if the property proves valuable, assert a claim thereto, and if it does not prove valuable, be willing that the losses incurred in the exploration be borne by the opposite party. This thought was expressed in one case by the following language: ‘If the property proves good, I want it; if it is valueless, you keep it.’ [Citations omitted.] (Lundgren v. Lundgren (1966) 245 Cal.App.2d 582, 592.)

“Here the value of the Property results from the investment, time, energy, and management by the Trustees.”

The court found that the Blairmont parties’ claim challenging the validity of the assignment was barred by laches, and that the trustees and Fourth Church are both “bound by the terms of the original lease.” Despite this finding, the trial court deemed the first nine years of occupancy by the original lessee to be “part of the ninety-nine year term,” and declared that the lease will expire on March 16, 2039.
2. Questions presented
The parties present several issues as a result of the trial court’s ruling on the issue of laches.
The trustees argue that the trial court’s ruling on laches bars the Blairmont parties from challenging the validity of the lease. Thus, the trustees argue, the trial court should not have reached the issue of whether the lease was invalid under section 718.
The Blairmont parties argue that the trial court erred in determining that laches applies at all. Specifically, the Blairmont parties argue that:
1. Laches is not applicable in declaratory relief actions seeking money judgments, such as this action;
2. Laches is not applicable where, as here, a lease is contrary to an express mandate of law or public policy;
3. The trustees’ unclean hands preclude them from raising the defense of laches; 4. Substantial evidence does not support the trial court’s finding that the trustees suffered prejudice from any inaction; and
5. Even if it did apply, the doctrine of laches can only bar claims by a plaintiff, it cannot create rights.
3. The trial court’s finding of laches is supported by the facts and the law
“‘The defense of laches requires unreasonable delay plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay.’ [Citation.]” (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68.) Laches turns on findings of fact and is therefore reviewed for substantial evidence. (Id. at p. 67). Where the facts are undisputed, we may review a finding of laches as a matter of law. (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 986.) As set forth below, we find that the trial court’s finding of laches is supported by the facts and the law.
a. unreasonable delay
First, the trial court found unreasonable delay in the filing of this action. The court noted that Fourth Church had an interest in the property beginning in 1989, and that it became the sole fee owner in 1993. The court found that nothing prevented Fourth Church from discovering the facts in this case. Nothing was concealed, and there was no reason Fourth Church could not have challenged the validity of the lease or the assignments at an earlier date. Under the doctrine of laches, delay is measured by the period from when the plaintiff knew, or should have known, of the alleged claim. (Magic Kitchen LLC v. Good Things Internat., Ltd. (2007) 153 Cal.App.4th 1144, 1157.) The Blairmont parties presented no evidence suggesting that Fourth Church was prevented from discovering the facts regarding its claims earlier, or that its failure to challenge the lease or assignments for so many years was excusable. The evidence presented to the trial court supported its finding of unreasonable delay.
The Blairmont parties argue that even if Fourth Church unreasonably delayed taking action, there was no delay on the part of Blairmont. However, as the trial court specifically found, Blairmont stands in the shoes of Fourth Church for the purposes of the laches analysis. We agree. G.R. Holcomb Estate Co. v. Burke (1935) 4 Cal.2d 289 (Holcomb), is instructive. Holcomb involved a series of land transfers which occurred “more than ten years, and some of them twenty years, prior to the present attack upon them.” (Id. at p. 299.) During that time, the predecessor of the plaintiff “undoubtedly had notice of these transactions.” (Ibid.) However, no action was taken. The Holcomb court concluded that the defense of laches was properly asserted against the plaintiffs:
“Those in control of the bank’s affairs are bound by the previous acts, or nonaction, of the former officials of the bank. If laches ran against the latter, and in our opinion, it did, the effect is the same as to their successors.” (Id. at p. 300.)

(See also Sierra Canyon Co. v. California Coastal Com. (2004) 120 Cal.App.4th 663, 667 [prior property owner’s failure to pursue its judicial remedies is binding on present landowner]; San Joaquin & Kings River Canal & Irrigation Co. v. James J. Stevinson (Corp.) (1917) 175 Cal. 607, 613 [“failure on the part of plaintiff’s predecessor to examine Stevinson’s title amounted, under the circumstances, to laches”].)^[4]
The Blairmont parties do not point to any evidence undermining the trial court’s determination that Fourth Church’s failure to contest the trustees’ leasehold at any time between 1989 to the filing of this action in 2005 was unreasonable. Under the circumstances, Blairmont is bound by this inaction. We find no factual or legal error.
b. prejudice
The trial court found that the trustees have relied on the validity of the leasehold to their prejudice. Specifically, the trustees have managed the property for 30 years, invested significant time and money into improving the property, and entered into binding agreements with their subtenants. In addition, the trustees spent nearly $1 million to buy out their partners’ interest, and have used their interest in the property as collateral on a loan that is current, albeit not yet satisfied. This uncontested evidence supports the trial court’s finding that “serious financial prejudice” to the trustees bars a declaration in plaintiff’s favor.
The Blairmont parties argue that no action or inaction on the part of either Blairmont or Fourth Church caused prejudice to the trustees. They argue that the money the trustees spent to buy out their partners occurred before Fourth Church acquired any interest in the property. However, as set forth above, Blairmont stands in the shoes of Fourth Church, which expressly acknowledged and affirmed the leasehold when it executed the “Acceptance of Lease Assignment” at the time that it bought out First Church’s interest in the property in 1993. In addition, Fourth Church’s person most knowledgeable admitted that Fourth Church never questioned the trustees’ rights as tenants. The trial court found that the trustees relied on these affirmances of their rights as tenants. In addition, the trustees entered into its loans, using the leasehold as collateral, several years after Fourth Church became the sole fee owner. The trustees relied on Fourth Church’s acknowledgement of the tenancy, and Blairmont is bound by Fourth Church’s inaction.
The Blairmont parties further argue that rather than suffering prejudice from the passage of time, the trustees benefitted from it, because over the years they collected much more in rent from their subtenants than they paid to Fourth Church per month. The trial court did not adopt this interpretation of the facts. Instead, the court focused on the significant time and money that the trustees have invested in the property, and their reliance on the validity of their leasehold. The court’s finding that the trustees have relied on the leasehold to their detriment is amply supported by the record.
The trial court’s findings of undue delay and substantial prejudice are supported by the record. We find no error in the trial court’s decision that laches bars a declaration in favor of the Blairmont parties.
4. Laches is applicable in this declaratory relief action, and was properly raised as a defense
The Blairmont parties attack the trial court’s decision that laches bars a declaration in their favor by arguing that laches is not available as a defense in this proceeding. Laches is an equitable defense, the Blairmont parties argue, available only in equitable proceedings. Citing Gore v. Bingaman (1942) 20 Cal.2d 118, 120, the Blairmont parties point out that actions for declaratory judgments are considered “sui generis” rather than strictly legal or equitable. Because their complaint for declaratory judgment also contained an element seeking “damages,” the Blairmont parties argue that laches is not available as a defense. (See Abbott v. Los Angeles (1958) 50 Cal.2d 438, 462).
The paragraph which the Blairmont parties claim seeks “damages” reads as follows:
“b. [The trustees] are not entitled to collect, nor to have collected, ‘rent’ or other payments from persons and entities now occupying the Property, nor from persons and entities previously occupying the Property and that Blairmont, as successor to the Church, is entitled to all such rental payments.”

This paragraph does not seek “damages,” as the Blairmont parties insist. The concept of “damages” “requires there to be ‘compensation,’ in ‘money,’ ‘recovered’ by a party for ‘loss’ or ‘detriment’ it has suffered through the acts of another.” (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 826, fns. omitted (AIU).) Blairmont sets forth no specific loss or detriment it has suffered because of any acts of the trustees. There are no allegations that the trustees have breached their contract with Fourth Church or have otherwise engaged in any illegal acts causing harm to Fourth Church (or Blairmont as successor-in-interest).
Instead, the paragraph seeks restitution. In contrast to damages, restitution is a remedy that seeks specific relief to a thing to which the plaintiff is entitled. As the Supreme Court explained in AIU, supra, 51 Cal.3d at page 835, a claim for reimbursement of government response costs is a claim for restitution, not damages:
“‘Our cases have long recognized the distinction between an action at law for damages -- which are intended to provide a victim with monetary compensation for an injury to his person, property, or reputation -- and an equitable action for specific relief -- which may include an order providing . . . for “the recovery of specific property or monies . . . .”’ [Citations.]”

(Citing Bowen v. Massachusetts (1988) 487 U.S. 879, 893, original italics.)
Similarly, the Blairmont parties’ claim for reimbursement of the specific rental payments that the trustees have received constitutes a claim for restitution, not damages. (See also Coppinger v. Superior Court (1982) 134 Cal.App.3d 883, 891 [“Constructive trust is an equitable remedy to prevent unjust enrichment and enforce restitution, under which one who wrongfully acquires property of another holds it involuntarily as a constructive trustee”].)
Blairmont’s equitable request for restitution does not bar the defense of laches. (Carberry v. Trentham (1956) 143 Cal.App.2d 83, 90 [“insofar as equitable relief is sought, this defense [laches] is available”].)
The Blairmont parties further attack the trial court’s finding of laches by arguing that the trial court erroneously granted the trustees new rights that they did not previously possess. The Blairmont parties focus on the trial court’s decision that “the conveyance of the lease by grant deed was error.” The trial court further stated that, “[b]ecause the Trustees are not assignees under a purely legal analysis, they have no right to enforce covenants in the lease, and are not entitled to a right of first refusal before Fourth Church sells to Blairmont.”^[5]
The Blairmont parties argue that, since the trial court determined that the trustees are not legally assignees, the trial court’s decision to bar their challenges to the assignment under the doctrine of laches granted the trustees the rights of assignees. The Blairmont parties cite Lackner v. LaCroix (1979) 25 Cal.3d 747, 752 (Lackner) for the proposition that laches “‘can only be set up as a defense to a suit . . . and cannot be invoked affirmatively . . . as the foundation of a right.’ [Citation.]”
We find Lackner, and the principles of law expressed therein, to be inapplicable in this situation. In Lackner, the court determined “whether a successful statute of limitations defense constitutes a favorable termination of an underlying suit so as to support a subsequent action for malicious prosecution.” (Lackner, supra, 25 Cal.3d at p. 749.) The plaintiff had attempted to base his malicious prosecution action on a malpractice action brought against him which had been dismissed for limitations reasons. The court found that “plaintiff’s attempt to base his action for malicious prosecution on the malpractice action barred by the statute [of limitations] is in effect an attempt to use the statute as a ‘sword.’” (Id. at p. 752.) Thus, it did not constitute a “favorable termination” for the purposes of a subsequent malicious prosecution claim. (Ibid.)
The trustees raised laches as a defense to the Blairmont parties’ attempt to invalidate the lease and the assignment. The trial court properly found that the Blairmont parties’ challenges to the lease and the assignment are barred by laches. The trial court’s finding prevents the Blairmont parties from invalidating the lease and assignment; it does not create new rights. We reject the Blairmont parties’ arguments to the contrary.
5. The trial court’s finding that the trustees did not engage in unclean hands is supported by substantial evidence
The Blairmont parties next argue that the trustees are barred from asserting laches based on the doctrine of unclean hands. Their argument centers on the fact that Kaufman and Goodgame, two of the original partners of South Bay, were both employed as attorneys by Mann Theatres at the time that South Bay acquired the lease from Mann Theatres. The Blairmont parties suggest that Kaufman conspired with his colleagues, Horowitz, Goodgame and Westley, in order to “create South Bay as a stalking horse” and betray his client. The Blairmont parties argue that Kaufman did not give his client, Mann Theatres, the required disclosure, nor obtain the necessary consents, for his alleged conflict of interest. The Blairmont parties argue that Kaufman’s actions violated his fiduciary duties to his client as well as the California Rules of Professional Conduct. Thus, the Blairmont parties argue, the purported transfer of the leasehold from Mann Theatres to South Bay was illegal and void. (Citing Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 511.)
The trial court decided this factual issue against the Blairmont parties. Kaufman testified that his client was aware of and consented to the assignment of the lease to South Bay. The Blairmont parties attempted to suggest that Kaufman’s inability to recall specifics of the transaction meant that he was untruthful, but the trial court disagreed, stating: “Mr. Kaufman’s inability to recall the specifics of transactions that took place over thirty years ago does not mean he was untruthful; rather, with the passage of time, memories fade.” The court found both Kaufman and Horowitz to be credible, and pointed out that the Blairmont parties had produced no evidence that Mann Theatres attempted to void the transaction, or any other evidence of any wrongdoing.
The trial court’s factual finding that no ethical violation occurred is supported by substantial evidence. Horowitz testified that he first learned of the property from Goodgame, who mentioned that Mann Theatres was selling its “distressed properties.” Horowitz was interested in buying the property himself, but he could not afford it, so he sought investment partners. Kaufman testified that Horowitz approached him about it, but he could not recall the specifics of the conversation. Kaufman and Horowitz had acquired properties together previously as business partners. Kaufman testified that he did not personally handle the transaction between South Bay and Mann Theatres. Kaufman could not recall the details of the formation of the South Bay partnership. While Kaufman knew that at some point South Bay agreed to purchase the lease from Mann Theatres, he had nothing to do with the negotiations. Goodgame and Westley were the individuals responsible for running the day-to-day operations of the partnership.
The Blairmont parties argued to the trial court that the trustees acquired their interest through deception. They drew attention to the fact that the partnership agreement for South Bay was signed just four days before Mann Theatres transferred the leasehold to South Bay. They pointed out that Kaufman had testified that he did transactional work for Mann Theatres. They suggested that Kaufman knew the lease would be a “goldmine.” Thus, betraying his client, the Blairmont parties argued, Kaufman conspired with Horowitz, Goodgame and Westley to create a partnership to be used, four days later, to acquire the lease from Kaufman’s client.
The trial court’s rejection of this argument was not error. The Blairmont parties produced no actual evidence of wrongdoing. The court explicitly noted that it found both Kaufman and Horowitz to be credible. “‘[I]t is the exclusive province of the trial judge or jury to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends. [Citation.]’” (People v. Letner and Tobin (2010) 50 Cal.4th 99, 161-162.) “‘We resolve neither credibility issues nor evidentiary conflicts; we look for substantial evidence.’ [Citation.]” (Id. at p. 162.) Because substantial evidence supported the trial court’s factual determination, we find no error.
The Blairmont parties next argue that the transaction between South Bay and Mann Theatres was presumptively invalid, and that the trial court erroneously placed the burden of proving a breach of fiduciary duty on the Blairmont parties, rather than requiring the trustees to prove that they provided full disclosures and obtained written consent regarding Kaufman’s alleged conflict.
We reject this argument. First, as the trial court noted, a transaction between an attorney and a client is not automatically invalid, but is voidable at the election of the client. (BGJ Associates v. Wilson (2003) 113 Cal.App.4th 1217, 1229.)^[6] There is no evidence that Mann Theatres ever attempted to void the transaction. The Blairmont parties’ argument that unclean hands prevent application of the doctrine of laches fails.
6. The trial court’s finding of laches bars the Blairmont parties’ challenges to the validity of the lease as illegal and against public policy
Having determined that the trial court’s ruling of laches will be affirmed, we turn to the Blairmont parties’ arguments that the lease is illegal and void. Specifically, the Blairmont parties argue that the lease was illegal under section 718 and was unconscionable. As set forth below, we conclude that these arguments are barred.
a. the lease is not automatically void due to a violation of law or public policy
The Blairmont parties argue that the doctrine of laches is not applicable where, as here, a lease is contrary to an express mandate of law or public policy. Where a contract is contrary to a law or public policy, the Blairmont parties argue, it must be deemed automatically void.
In support of this argument, the Blairmont parties cite Colby v. Title Ins. & Trust Co. (1911) 160 Cal. 632, 644 (Colby). In Colby, the appellant claimed that she consented to sign an agreement, deed, and trust declaration under duress and under threat that her daughter would be criminally prosecuted if she did not sign the documents in question. The court identified the key issue as “whether the instruments were executed for an illegal consideration.” (Id. at p. 646.) If it was found that they were, appellant “would have been entitled absolutely to a decree awarding her the full relief prayed for.” (Ibid.) Colby is distinguishable, as the matter before us does not involve illegal consideration. In fact, the lease was explicitly authorized by the court, which “directed” L.J. Heedwohl to “execute, and acknowledge and deliver” the 99-year lease “beginning May 1, 1948 and ending April 30, 2047.” There is no question of duress or illegal consideration.
The Blairmont parties also cite Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 511 (Downey). The case involved an insurance contract which expressly purported to cover malicious prosecution actions. The contract violated section 533 of the Insurance Code, which precludes insurance coverage for willful acts of the insured. The insured claimed that the insurance company was bound to provide coverage on the grounds of estoppel. The court disagreed, stating that wrongdoers cannot avoid the public policy set forth in Insurance Code section 533 by invoking the doctrine of estoppel. (Downey, at p. 511.) In addition, the court noted that requiring indemnification would amount to enforcement of an illegal contract. The court stated: “It is clear that estoppel cannot be relied upon to defeat the operation of a policy protecting the public. [Citation.]” (Ibid., fn. omitted.)
Downey is also distinguishable as there, the express terms of the contract violated Insurance Code section 533. In the matter before us, the express terms of the contract do not violate Civil Code section 718 or any other provision of law. The lease’s 99-year term is not void on its face.
Further, the Supreme Court has recognized that the rule requiring that a contract made in violation of a statute be declared void “‘is not an inflexible one to be applied in its fullest rigor under any and all circumstances.’” (Asdourian v. Araj (1985) 38 Cal.3d 276, 291.) Specifically, the high court recognized that “illegal contracts will be enforced to avoid unjust enrichment.” (Ibid.) Here, as the trial court previously determined, the trustees would suffer “serious financial prejudice” resulting from their reliance on the validity of the leasehold. Under the circumstances of this case, even if the lease were illegal, a declaration voiding the lease would impose a disproportionately harsh penalty upon the trustees. (See Southfield v. Barrett (1970) 13 Cal.App.3d 290, 294 [where the transaction has already been completed, “no serious moral turpitude is involved . . . and defendant would be unjustly enriched at the expense of plaintiff if the rule were applied, the general rule [voiding illegal contracts] should not be applied”].)
We find that under the circumstances of this case, the lease, which has been in effect for over 60 years, is not automatically void but is “voidable depending on the factual context and the public policies involved.” (Asdourian v. Araj, supra, 38 Cal.3d at p. 293, italics omitted.) We consider the Blairmont parties’ arguments regarding illegality and unconscionability below, and conclude that neither argument should prevail.
b. laches bars the Blairmont parties’ claim that the lease is illegal under section 718
The Blairmont parties argue that the lease is illegal under section 718.^[7]
The lease does not exceed 99 years, therefore it does not violate section 718 on its face. However, the Blairmont parties cited Reynolds v. McEwen (1952) 111 Cal.App.2d 540 (Reynolds), for the proposition that, when a tenant is in possession of a premises, and a new lease is executed before expiration of the original term, the law regards the original lease as for a term expiring at the end of the renewal lease. Thus, the Blairmont parties argue, because the original 10-year lease between Rose Carson Heedwohl and West Coast beginning April 1, 1939, had not expired at the time that the new 99-year lease was executed, the effect of the two leases was to tie up the property for a period of more than 99 years.
The trial court agreed that “the net effect of the original occupancy and subsequent 99 years [sic] lease was to tie up real property for a term greater than is allowed by law.” However, citing Harter v. San Jose (1904) 141 Cal. 659, 667 (Harter), the trial court determined that “a term exceeding the period allowed by law is void only as to excess.” The court concluded that “although the first nine years of tenancy count towards the ninety-nine year term, it does not render the 1948 lease void ab initio.” Instead, the court reduced the term of the lease by nine years, hold