M&M Media Group v. ACE Outdoor
Advertising
Filed 10/8/13 M&M Media Group v. ACE Outdoor
Advertising CA2/4
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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 FOUR
M&M
MEDIA GROUP, INC.,
Plaintiff, Cross-Defendant and
Respondent,
ACE
OUTDOOR ADVERTISING, LLC,
Cross-Defendant, Cross-
Complainant and Respondent,
v.
Regency Outdoor Advertising, Inc.,
Defendant, Cross-Complainant,
Cross-Defendant and Appellant.
B242772
(Los Angeles County
Super. Ct. No. BC411585)
APPEAL
from a judgment of the Superior Court of
County, Rita Miller, Judge.
Affirmed.
Manatt,
Phelps & Phillips, Ronald Turovsky; Russ August & Kabat, Steven M.
Goldberg; Horvitz & Levy, H. Thomas Watson and David M. Axelrad for
Defendant, Cross-Complainant, Cross-Defendant and Appellant.
Greenberg
Glusker Fields Claman & Machtinger, Lee A. Dresie and Megan F. Rivetti
for Respondents M&M Media Group, Inc. and Ace Outdoor Advertising, LLC.
introduction
Plaintiff M&M Media Group, Inc.
(M&M) owns a building on Sunset Boulevard in West Hollywood, California,
that houses the famed music venue “Whisky a Go Go†(the Whiskey). Atop the building is a billboard structure
that, as relevant here, M&M leased to defendant Regency Outdoor Advertising,
Inc. (Regency). When M&M terminated
the lease, and entered a new lease with cross-complainant Ace Outdoor
Advertising, Inc. (Ace), Regency initially refused to recognize the termination
of its lease, and later asserted ownership of horizontal beams affixing the
billboard structure to the roof of the Whiskey.
The dispute resulted in M&M (as plaintiff) and Ace (as a
cross-complainant) suing Regency for various causes of action, and Regency
cross-complaining against M&M and Ace.
In a court trial, M&M prevailed on its claims against Regency for breach
of a lease agreement and intentional interference with business advantage, and
Ace prevailed on its claims for interference with contract and prospective
business advantage. The trial court
awarded compensatory damages of $676,000 to M&M and $302,932.50 to Ace, and
punitive damages to M&M and Ace in the same amounts.
Regency appeals from the judgment,
contending that the trial court violated the litigation privilege (Civ. Code §
47, subd. (b))
title="">[1]
by finding Regency liable based on legal positions Regency asserted during the
parties’ dispute over ownership of the billboard structure. We disagree.
Regency’s liability was based not on its articulated legal positions,
but on its non-communicative conduct of wrongfully holding over after the termination of the
lease. Further, substantial evidence
supports the trial court’s finding that Regency held over. Finally, we find no error in the court’s
damages calculations.
factual and procedural background
The Regency Lease
Since at least the 1960s, a billboard
structure has been in place atop the Whiskey.
Eller Media Company, and then its successor Clear Channel, leased the
pre-existing billboard structure from M&M from February 1, 1997 to June 30,
2003. On September 25, 2000, M&M
signed an agreement to lease to Regency the rooftop of the Whiskey (the Regency
Lease), “for the sole purpose of erecting and maintaining one (1) outdoor
advertising structure†(the Structure).
The Regency Lease provided that “Regency shall at all times remain the
owner of the Structure and all advertising signs, supporting structures,
devices, illumination facilities, connections and improvements erected or made
by Regency, and . . . Regency shall have the right to remove said signs,
structures and improvements at the expiration of this Agreement.†The Regency Lease was to commence after the
expiration of the Clear Channel lease in June 2003 and remain in force until at
least December 31, 2008, and would continue for a successive term unless
M&M or Regency served written notice of termination 60 days prior to
December 31, 2008.
In May 2003, Regency and Clear Channel
entered into a letter agreement, to which M&M consented, providing that
Clear Channel would leave its sign structures, lights, supports and facings in
place on the rooftop, and those items would become Regency’s property.
On August 9, 2007, M&M sent a
notice to Regency terminating the Regency Lease effective December 31,
2008. On December 20, 2007, M&M
entered into a lease with Ace giving Ace the right to possession of M&M’s
rooftop for the purpose of billboard advertising, beginning on January 1,
2009. On October 29, 2008, M&M sent
another notice to Regency confirming its termination of the Regency Lease,
effective December 31, 2008.
The Parties’ Dispute and Regency’s
Refusal to Vacate
Regency challenged M&M’s notices
of termination as inadequate under the Regency Lease provisions because they
were provided more than 60 days prior
to the end of the lease term, rather than exactly
60 days before. Thus, Regency took the
position that its right to operate the billboards would not cease on December 31, 2008.
M&M responded by asserting that the notice was proper, and alerting
Regency to the fact that it had made other business arrangements for lease of
the billboards to commence January 1, 2009.
Regency subsequently asserted that it
owned horizontal wood beams that were embedded in the roof, and to which the
billboard structure was attached, and stated it would not remove any of its
property from the Whiskey rooftop unless it was also allowed to remove the
beams. M&M would not give Regency
permission to remove the beams because doing so would damage the roof and
possibly compromise the structural integrity of the building, and because
M&M did not believe Regency had the right to remove the beams. Because Regency refused to remove any of its
property and threatened to sue if M&M removed it, Ace was unable to install
billboard advertising pursuant to its lease.
In April 2009, M&M contracted with Ace to dismantle and remove all
parts of the billboard structure that Regency claimed to own, except the
horizontal beams, and Regency subsequently picked up the parts after their
removal from the roof.
Ensuing Lawsuits
M&M filed two successive unlawful
detainer actions against Regency, but after multiple demurrers and iterations
of the complaints, ultimately dropped the unlawful detainer cause of cause and
added claims for breach of lease, trespass, intentional interference with
business advantage, and declaratory relief.
Regency filed a cross-complaint alleging causes of action for
declaratory relief, breach of contract, forcible entry and forcible detainer,
trespass, conversion, unjust enrichment, imposition of constructive trust,
claim and delivery, violations of Business and Professions Code section 17200,
and specific performance. Ace filed a
cross-complaint against Regency alleging interference with contract and
prospective business advantage.
The Trial – Phase I
The bench trial was conducted in two
phases. Phase I, starting on September
28, 2010 and ending October 8, 2010, determined issues of liability and
compensatory damages. Phase II, which
was held on January 24, 2011, concerned the amount of punitive damages.
During Phase I, considerable evidence
was introduced concerning communications between M&M and Regency and their
respective counsel leading up to and during the litigation proceedings between
the parties. Regency did not object
during trial to the admission of such evidence,
and stipulated to the admissibility of, and relied upon, numerous
communications between the parties relating to the prospective or actual
litigation.
Evidence was thus admitted
demonstrating Regency’s consistent assertion that it owned the entire billboard
structure as well as the underlying horizontal wood beams and would not remove
any of its property from the Whiskey rooftop unless it was also allowed to
remove the beams, even though such action could jeopardize the structural
integrity of the building. The evidence
of communications included the following:
(1) a December 29, 2008 letter from Regency’s counsel to M&M’s
counsel denying that Regency had stated that it intended to vacate the premises
on or before December 31, 2008, and indicating that “Regency was considering
the alternative of removing its property†but “wanted [M&M’s] unequivocal
acknowledgement that Regency owned the billboard structures located on the roof
of the subject premisesâ€; (2) Regency’s February 2009 pleading filed in
the unlawful detainer action asserting that it owned the entire billboard
structure, including the supporting structures, and accusing M&M of seeking
to “convert†the billboards; (3) statements in another pleading filed by
Regency in April 2009 that “Regency owns the horizontal beams which support the
billboards, and plaintiffs cannot ‘acquire’ them by interfering with Regency’s
removal efforts and then suing in unlawful detainer to secure Regency’s
propertyâ€; (4) an April 22, 2009 letter from Regency’s counsel to M&M’s
counsel asserting that M&M had illegally dismantled and removed Regency’s
billboards, and that Regency had a remedy against M&M in tort for M&M’s
allegedly illegal self-help; (5) an April 27, 2009 letter from Regency’s
counsel to M&M’s counsel asserting that M&M had converted Regency’s
property by prohibiting Regency from removing the horizontal beams and by
illegally removing the signs; (6) a May 1, 2009 letter from Regency’s counsel
to M&M’s counsel asserting that Regency owned the entirety of the sign
structures and the horizontal beams and accusing M&M of seeking “to convert
and control Regency’s beamsâ€; and (7) testimony by Regency’s Chief Executive
Officer Brian Kennedy that he insisted on removing the horizontal beams from
the roof and would not remove anything else unless he was permitted to do so.
In addition, Kennedy’s testimony left
little doubt that the insistence on removing the beams was intended to
interfere with the lease between M&M and Ace. Kennedy testified that he knew that Regency
had neither erected nor made the horizontal beams (the lease gave Regency the
right to remove only items “erected or made by Regencyâ€). He knew that removal of the beams – which he
estimated would cost $50,000 or more -- would cost more than the beams were
worth. Further, Regency had no plans to
use the beams after their removal.
According to Kennedy, M&M offered to supply Regency with brand-new
horizontal beams in lieu of the ones on the rooftop, but Kennedy refused the
offer because he had no use for the beams.
Ultimately, after the sign structure (except for the horizontal beams)
was removed and returned to Regency, Regency sold the pieces for scrap.
Kennedy insisted on removing the
horizontal beams in part because they were a key part of the structure, without
which “you cannot have that sign.†Also,
it was Regency’s standard practice to remove every piece of the supporting
structure when it lost a lease because of “liability issues†and “so you don’t
have to revisit the situation.â€
Ace’s general manager, Andrew
Bilanzich, testified that he approached Kennedy and asked if there was a sum
that would resolve the dispute and give Ace access to the billboard
structure. According to Bilanzich,
Kennedy replied, “There is no amount of money and I’m going to make your life
miserable.â€
Tentative Statement of
Decision After Phase I
After Phase I of the trial, on October
26, 2010, the court issued a tentative decision concluding that Regency did not
have the right to remove the horizontal beams at the base of the billboard
structure, and finding that Regency’s insistence on removing those beams
constituted a breach of the lease. The
decision also found that Regency did not want to relinquish the rooftop to a
new billboard advertising competitor, Ace, and that Regency and its counsel
took “numerous untenable positions designed to delay Ace’s takeover of the
rooftop as long as possible and to make it as difficult and expensive as
possible for M&M and Ace.†The court
found that M&M had proved its claim for interference with business
advantage, and that Ace had proved its claims for interference with contract
and prospective business advantage.
On November 15, 2010, Regency
requested a statement of decision.
M&M drafted a proposed statement, to which Regency objected primarily
on the ground that it violated the litigation privilege (§ 47, subd. (b)) by
imposing tort liability based on Regency’s assertion of defenses, contentions,
and litigation positions, related to or in anticipation of litigation. In particular, Regency objected that its
litigation position concerning its rights to the horizontal beams was used as a
basis to impose liability.
The court invited M&M to submit a
revised proposed statement of decision.
M&M’s January 14, 2011 revision stated that Regency’s liability was
premised not on its litigation conduct, but rather on its conduct amounting to
a failure to surrender possession and a “wrongful holdover.†Regency objected to the revised proposed
statement, arguing that M&M’s complaint had not alleged a holdover and that
Regency’s liability continued to be predicated on its litigation
positions.
Phase II
Prior to the start of Phase II of the
trial on January 24, 2011, Regency filed a motion in limine under section 47,
subdivision (b) to exclude evidence or arguments regarding positions taken by
Regency in anticipation of or during litigation, for purposes of assessing the
punitive damages award. The only new
evidence sought to be admitted during Phase II were records demonstrating
Regency’s financial condition. However,
during the hearing, M&M’s counsel sought to rely on evidence demonstrating
Kennedy’s bad faith adduced during Phase I.
The court generally suggested that evidence of Regency’s statements
during the litigation, as opposed to conduct, was not admissible to prove
punitive damages, but postponed its ruling on the issue of punitive damages and
the applicability of the litigation privilege as to Phase I. The court requested briefing concerning the
applicability of the litigation privilege.
Post-Trial Submissions
and Rulings
The parties submitted briefing
regarding the applicability of the litigation privilege, and at a hearing on
the issue on May 5, 2011, the trial court requested additional briefing on the
question whether the litigation privilege can be waived, which the parties
provided.
The trial court issued a second
tentative decision on June 15, 2011, concluding that Regency had held over on
its lease, with the intent of making it impossible for M&M to give Ace
possession. The court found that the
holdover constituted a breach of the lease as well as an intentional
interference with the business relationship between M&M and Ace. The court further held that it did not need
to reach the issue whether Regency had waived the protections of section 47,
subdivision (b), because Regency’s liability was based on its conduct in
holding over, not on its litigation communications. Regency filed objections to the second
tentative decision, objecting that its liability was still premised on its litigation
conduct, and that the holdover theory was not pled in M&M’s complaint. M&M then submitted a proposed final
statement of decision on July 14, 2011, and Regency again asserted the same
objections.
On August 18, 2011, over Regency’s
objection, the court granted M&M’s motion to amend the complaint to conform
to proof at trial to include a cause of action for wrongful holdover, finding
that the cause of action was already inherent in the complaint and that the
substance of the claim had been litigated at trial. Thus, the complaint was amended to add the
following allegation: “Regency failed to
tender or surrender possession of the leased premises on December 31, 2008 when
the written lease period terminated.
This was a breach of the written lease and a holdover. In addition, it was an action taken for the
purpose of intentionally interfering with [the] advantageous business
relationships between M&M and Ace and potential lessees of the billboard
space. In addition, M&M seeks a
declaration that Regency held over by failing to tender or surrender possession
of the leased premises on December 31, 2008 when the written lease period
terminated. Regency’s holdover and
failure to tender and surrender possession of the leased premises caused
plaintiffs to incur damages.â€
name="_ftnref3" title="">[3]
Final Statement of Decision
In its final statement of decision,
filed on August 23, 2011, the court summarized its interpretation of the
Regency Lease, concluding that the agreement did not give Regency the right to
remove the horizontal beams from the rooftop, but gave it the right (not the
duty) at the termination of the lease to remove the parts that it had “erected
or made.†These parts included the
following small, non-structural items:
(1) plaques or nameplates on the front of the billboards bearing the
legend “Regency†that alerted potential advertisers to call Regency if they
wanted to advertise there; (2) wood slats or panels in the facings to which the
advertising was attached; (3) “possibly†some light fixtures; and (4) the actual
advertisements affixed to the facings.
The court ruled that Regency’s failure
to remove this property did not give rise to liability for trespass, given the
lack of any duty to remove it, but found that Regency had engaged in
affirmative conduct amounting to a wrongful holdover of the rooftop. The court relied on Regency’s failure to do
or say anything to tender possession of the leased premises to M&M after
the termination of the lease, and the fact that it left its property on
M&M’s rooftop with the intent to convey the message to M&M and Ace that
it was not going to vacate possession and intended to prevent Ace from taking
timely possession under its new lease.
The court relied on evidence that, after receiving the termination
notices from M&M, Regency signed a contract with a client for Whiskey
billboard advertisements to extend two weeks past the lease termination
date. Further, Regency failed to apply
for municipal removal permits prior to the lease termination date. The court
further found that the holdover constituted both a breach of the Regency Lease
and an interference with M&M’s relationship with Ace and Ace’s
relationships with potential and actual advertisers, because Regency’s holdover
made it impossible for M&M to give Ace possession of the rooftop that Ace
had leased. The court stated that
Regency’s liability was not based on Regency’s communications associated with
the litigation, but rather on Regency’s conduct amounting to a holdover. Because the litigation privilege therefore
did not apply, the court “need not reach the issue of waiver†of the
privilege. However, the court held,
“[e]ven if the litigation privilege were otherwise applicable, Regency waived .
. . the privilege†with respect to Phase I of the trial. The court also found that Regency was
estopped from raising the privilege because it had itself injected the
privileged communications into Phase I of the trial.
In addition, the court ruled that the
evidence demonstrated that Regency held over to prevent Ace, a new competitor,
from entering the billboard market, and that Regency had a malicious and
oppressive intent towards M&M and Ace.
The court concluded that, “[d]isregarding all of the communications by
Regency personnel that are outlined in this Statement of Decision, there was
sufficiently abundant clear and convincing evidence to support an award of
punitive damages based on Regency’s conduct alone. If the communications were admissible by
reason of a waiver of the litigation privilege or for some other reason, the
content of the communications certainly would have reinforced the findings of
malice, oppression and intent to cause harm to M&M and Ace and to interfere
with the relationships between M&M and Ace as well as Ace and potential
billboard advertisers. [¶] However, in an abundance of caution, the
court has disregarded all potentially privileged communications in reaching its
decision. . . . It has limited itself to
Regency’s non-communicative conduct and the circumstances that surrounded
it.â€
The court awarded M&M a total of
$676,000 in compensatory damages:
$420,000 for lost income during the first six months of 2009, and
$256,000 for expenses in removing and replacing the billboard structures that
Regency refused to remove but continued to claim as its property. Punitive damages of $676,000 were also
imposed. The court awarded Ace
$302,932.50 in compensatory damages based on a lost profits analysis, and the
same amount in punitive damages.
This timely appeal followed.
discussion
I.
Regency challenges the trial court’s
determination that it wrongfully held over by leaving its nameplates, wood
panels, light fixtures, and billboard advertisements in place for almost four
months after the expiration of its lease of the Whiskey’s rooftop.
hold over, as a matter of law, because it did not remain in possession of the
rooftop after expiration of the lease, and M&M was in exclusive control and
possession of the premises when the lease ended. However, a tenant’s failure to remove
equipment or other property from the leased premises at the end of the lease
“may constitute a holding over which deprives the landlord of his right to
possession. [Citation.]†(Cohen
v. Superior Court (1967) 248 Cal.App.2d 551, 554 [whether tenants’ failure
to remove a boiler, dryer, large counter, shelves and racks, and vapor return
tank effectively deprived petitioner of possession of the premises was issue
remaining to be resolved at trial].)
Here, there is no dispute that Regency left property on the rooftop that
it claimed to own. Thus, the question is
whether such conduct constituted a holdover in violation of the lease.
The parties disagree as to whether the
determination that a holdover occurred by virtue of Regency’s failure to remove
its property is a question of fact or law.
M&M cites California decisions holding that the determination
whether a tenant has abandoned or surrendered a rental property is a question
of fact, to which evidence of the tenant’s intent is highly relevant. (See Wiese
v. Steinauer (1962) 201 Cal.App.2d 651, 656 [“‘“Abandonment is a question
of intention, to be determined only upon an investigation of all the facts and
circumstances, and the trier of fact is ordinarily the exclusive judge of the
existence of the elements thereof, including the cardinal element of
intention.â€â€™â€]; Chacon v. Litke
(2010) 181 Cal.App.4th 1234, 1252 (Chacon)
[“‘Whether in any given case there has been a surrender of leased premises by a
lessee and an unqualified acceptance of possession by the lessor are primarily
the trial court from the whole transaction.
[Citations.]’ [Citations.].â€)
Regency counters that the terms
“abandonment†and “surrender,†as used in the cases relied upon by M&M,
concern the relinquishment of a leasehold prior to the end date of the lease,
rather than holding over beyond the expiration of the lease. We agree,
but the principles of analysis – examining all the circumstances, including the
tenant’s intent – are equally applicable to whether the tenant’s conduct after
the expiration of a lease constitutes a holdover in violation of the
lease. Indeed, although we have not
found any California authority directly on point, other jurisdictions have held
that whether a tenant’s failure to remove property or fixtures constitutes a
holdover is a question of fact judged by the surrounding circumstances. (See Niagara
Frontier Transp. Authority v. Euro-United Corp. (N.Y. 2003) 757 N.Y.S.2d
174, 177 [303 A.D.2d 920, 922], amended on other grounds on reargument, 763
N.Y.S.2d 786 [306 A.D.2d 952] (Niagara)
[Whether the leaving by the tenant of property on the leased premises after
expiration of the lease constitutes a holding over “‘is usually a question of
fact, to be determined by taking into consideration the nature of the property
leased, the amount paid as rent, the value of the real property, the value of
the personal property left on the leased premises, the intent with which it was
left, and all other facts and circumstances surrounding the transaction.’ [Citations.]â€]; Nehi
Bottling Co., Inc. v. All-American Bottling Corp. (4th Cir. 1993) 8 F.3d
157, 163 [whether tenant’s leaving equipment in building rose to the level of a
“holdover†was an issue of fact, not law]; Lordae
Realty Corp. v. Montefiore Med. Ctr. (N.Y. 1996) 648 N.Y.S.2d 598 [232
A.D.2d 338]; Canfield v. Harris & Co.
(1927) 225 N.Y.S. 709 [222 A.D. 326, 329]; Analogic
Corp. v. Rich (Mass. 2012) 2012 WL 192192; Beck v. Troiano (D.C. 1958) 138 A.2d 492, 493 [whether failure to
remove fixtures constituted a holding over by the tenant was a question of
fact]; see also 68 Am.Jur.3d Proof of Facts 1, Landlord’s Recovery of Damages
for Tenant’s Wrongful Holding Over of Leased Premises [“Whether a tenant’s act
of leaving property on the premises after expiration of the lease amounts to a
holdover tenancy is a question of fact to be decided in light of the
surrounding circumstances, including . . . the intent with which it
was left.â€].)
Because the question whether Regency
held over is a question of fact, we review the trial court’s finding for
substantial evidence. (
Managers, Inc. (2012) 202 Cal.App.4th 1509, 1519, fn. 12 [Where there is a
statement of decision containing factual findings and conclusions of law, “we
review the trial court’s conclusions of law independently and its findings of
fact for substantial evidence.â€].) “The
testimony of a single witness may be sufficient to constitute substantial
evidence.†(Lui v. City and County of San Francisco (2012) 211 Cal.App.4th 962,
969.) “The ultimate determination is
whether a reasonable trier of fact
could have found for the respondent based on the whole record.†(
(1994) 22 Cal.App.4th 1627, 1633 (Kuhn).) As we explain, substantial evidence supports
the trial court’s decision that Regency held over.
Regency first argues that its failure
to remove its property from the billboard structure did not interfere with
M&M and Ace’s lease. The
reason: M&M could have restored its
exclusive possession of the rooftop by dismantling Regency’s property and
storing it for Regency pursuant to sections 1993 et seq. The argument is disingenuous. Sections 1993 et seq. create an “
of property that remains on the premises after a tenancy of commercial real
property has terminated and the premises have been vacated by the tenant.†(§ 1993.02, subd. (a), italics
added.) The landlord is not required to
use that procedure. The reason M&M
did not pursue that option in the present case is obvious: Regency threatened to sue M&M if it
removed any of Regency’s property from the rooftop, and when M&M finally
removed it almost four months after the expiration of the lease and made it
available to Regency, Regency took the position that M&M had violated the
law. Having demanded that M&M leave
the property in place, Regency is hardly in a position to complain that M&M
should have removed and stored the property.
In any event, M&M’s decision not to use the optional procedure of
section 1993, et seq., does not immunize Regency from liability for its holdover
and interference with M&M’s lease with Ace.
Next, Regency argues that because the
Regency Lease gave it the right, but not the duty, to remove its property at
the end of the lease, the mere failure to remove the parts or to apply for a
removal permit prior to the expiration of the lease does not amount to a
holdover. Regency also notes that it was
entitled to a reasonable time after termination of the lease to remove its
property. (See Clark v. Talmadge (1937) 23 Cal.App.2d 703, 707 [“[A] tenant who
has an express agreement permitting him to remove fixtures has a larger right
as to the time within which they must be removed than is the case where no such
agreement exists, and . . . may remove them within a reasonable time
after the expiration of his term.â€]; United
Pacific Ins. Co. v. Cann (1954) 129 Cal.App.2d 272, 275 [Where the lease
gives a tenant the right to remove fixtures or property at the end of his lease
term, the tenant must exercise this right “within a reasonable time
thereafter.â€].)
True enough, but this does not mean
that Regency’s course of conduct in leaving its property on the rooftop did not
constitute a holdover, when done not with the intent to relinquish the property
to M&M or remove it within a reasonable time and allow M&M to lease the
structure to a new tenant, but rather with the intent to continue to occupy the
premises and with the effect of interfering with M&M’s right of possession
and Ace’s ability to begin installing billboards. (See Niagara,
supra, 757 N.Y.S.2d at p. 177 [303 A.D.2d at p. 922] [intent with which property
is left on the leased premises after the expiration of the lease, as well as
all the surrounding facts and circumstances, is relevant to determine whether a
holdover occurred].) As we now discuss,
considerable evidence was introduced at trial demonstrating Regency’s intent to
continue occupying the rooftop in order to interfere with M&M and Ace’s new
leasing arrangement.
A.
In finding a holdover, the trial court
relied on evidence that, after Regency had received notice that its lease would
be terminated effective December 31, 2008, Regency signed an advertising
contract with a customer for advertising on the Whiskey billboard through
January 14, 2009. Based on this
affirmative conduct, the court reasonably inferred that Regency planned to
leave its property in place, thereby retaining control over the use of the
premises, and to interfere with M&M’s right of possession and Ace’s ability
to begin installing billboards.
name="_ftnref6" title="">[6] This evidence in itself constitutes
substantial evidence of Regency’s intent to hold over.
Moreover, other undisputed evidence
introduced at trial, largely consisting of communications between M&M and
Regency before and after litigation began, demonstrates Regency’s intent to
hold over.
Regency acted with malice, M&M invited Regency to remove from the roof what
it had erected or made, and subsequently invited it to remove everything except
the horizontal beams, but Regency consistently refused to remove any of its
property unless M&M also agreed to let it remove the beams. However, Regency had no legitimate reason for
wanting to remove the beams, because they were merely large, weathered lengths
of wood with no real value or use once they were removed. Indeed, it would have been more costly for
Regency to detach and remove the beams from the roof than to replace them.
remove the beams to obviate unspecified “liability†issues, the court
specifically found that testimony not credible.
Further, when one of the Ace principals approached Kennedy and asked if
there was a sum that would resolve the dispute and give Ace access to the
billboard structure, Kennedy replied, “There is no amount of money and I’m
going to make your life miserable.†This
evidence, besides supporting the trial court’s finding that Regency acted with
malice and oppression, also demonstrated that Regency’s intent in not removing
its property was to hold over and prevent Ace from erecting advertising there.
B.
Regency argues that the trial court
could not lawfully rely on any of the above communications or testimony,
because to do so amounts to basing Regency’s liability on its assertion of legal
positions prior to and during the litigation with M&M and Ace, in violation
of the litigation privilege
(§ 47, subd. (b)). We
disagree. The trial court properly found
Regency liable based on its course of conduct in leaving its property in place
with the intent not to relinquish it, but with the intent to interfere with
M&M and Ace’s contractual arrangements.
As we discuss below, the litigation privilege does not bar consideration
of communications by Regency evidencing its intent to hold over for this
purpose, regardless whether the communications were related to litigation
between the parties.
“The interpretation of section 47,
subdivision (b) is a pure question of law which we review independently. [Citations.]â€
(Rothman v. Jackson (1996) 49
Cal.App.4th 1134, 1139-1140.) “The
litigation privilege is broadly applied [citation] and doubts are resolved in
favor of the privilege [citation].†(
Cal.App.4th 491, 500.)
The litigation privilege “reflect[s] a
legislative determination that ‘witnesses should be free from the fear of
protracted and costly lawsuits which otherwise might cause them either to
distort their testimony or refuse to testify altogether. [Citations.]’ [Citation.]â€
(Moore v. Conliffe (1994) 7
Cal.4th 634, 642.) “A four-part test
determines whether a statement is within the litigation privilege. ‘To be privileged a statement must (1) be
made in a judicial proceeding, (2) by litigants or other authorized
participants, (3) aim to achieve the litigation’s objects, and (4) have
some logical connection or relation to the proceeding. [Citation.]’
[Citation.]†(
547, 555.) “The privilege extends to
‘any publication . . . that is required [citation] or permitted [citation] by
law in the course of a judicial
proceeding to achieve the objects of the litigation, even though the
publication is made outside the courtroom and no function of the court or its
officers is invoked.’ [Citation.]†(A.F.
Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137
Cal.App.4th 1118, 1126-1127.) “[T]he
protective mantle of the privilege embraces not only the courtroom testimony of
witnesses, but also protects prior preparatory activity leading to the
witnesses’ testimony.†(
587, 594.)
In determining whether the litigation
privilege bars liability, a key issue is “whether the alleged injury arises
from a communicative act or noncommunicative conduct.†(Action
Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232,
1248.) Our Supreme Court has “drawn ‘a
careful distinction between a cause of action based squarely on a privileged
communication, such as an action for defamation, and one based upon an
underlying course of conduct evidenced by the communication.’ [Citation.]
‘As a general rule, the privilege “‘applies only to communicative acts
and does not privilege tortious courses of conduct.’â€â€™ [Citations.]â€
(Id. at pp. 1248-1249; see
also Rusheen v. Cohen (2006) 37
Cal.4th 1048, 1058 (Rusheen) [“[T]he
key in determining whether the privilege applies is whether the injury
allegedly resulted from an act that was communicative in its essential
natureâ€]; White v. Western Title Ins. Co.
(1985) 40 Cal.3d 870, 888 [holding that “even if liability cannot be founded
upon a judicial communication, it can be proved by such a communication,†and
thus concluding that admission of a low settlement offer at trial was
permissible under § 47, subd. (b), to prove breach of covenant of good faith
and fair dealing and bad faith by insurance company], superseded by statute on
another ground as stated in Lee v.
Fidelity National Title Ins. Co. (2010) 188 Cal.App.4th 583, 596;
Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 914-915 [statements
made during a judicial proceeding may be used to prove the existence of bad
faith in an action against an insurer].)
In this case, the basis for Regency’s
liability was its “independent, non-communicative†conduct in leaving its
property in place on the roof, with the intent to interfere with M&M’s and
Ace’s ability to implement their lease agreement. (Rusheen,
supra, 37 Cal.4th at p. 1065; see Chacon,
supra, 181 Cal.App.4th at p. 1257 [holding that the litigation privilege
did not apply to landlord’s conduct in refusing to allow tenants to reoccupy
the apartment after their temporary eviction and an unlawful detainer action];
cf. Rubin v. Green (1993) 4 Cal.4th
1187, 1196 [where plaintiff’s claims were founded upon alleged
misrepresentations made by a law firm in the course of discussions with
potential clients over the possibility of being retained to prosecute a lawsuit
as well as upon the filing of pleadings in the subsequent lawsuit, acts “were
communicative in their essential nature and therefore within the privilege of
section 47(b).â€].) Section 47 does not
bar consideration of litigation-related communications to prove that Regency’s
intent in leaving its property on the Whiskey was to hold over for the purpose
of interfering with Ace’s ability to conduct its advertising business. “‘The privileges of Civil Code section 47,
by exclusion of evidence [citation], operate as limitations upon
liability.’ . . . [I]t is quite clear
that section 47(2) has never been thought to bar the evidentiary use of every ‘statement or publication’ made in the
course of a judicial proceeding. . . .’
Thus, while section 47(2) bars certain tort causes of action which are
predicated on a judicial statement or publication itself, the section does not
create an evidentiary privilege for such statements. Accordingly, when allegations of misconduct
properly put an individual’s intent at issue in a civil action, statements made
during the course of a judicial proceeding may be used for evidentiary purposes
in determining whether the individual acted with the requisite intent.†(Oren
Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc. (1986)
42 Cal.3d 1157, 1168.)
In sum, Regency’s liability was based
on its non-communicative conduct of failing to remove its property with the
intent of interfering with the lease between M&M and Ace, thus constituting
a holdover in violation of the lease.
determination, and the litigation privilege does not provide Regency with
immunity.
title="">[10]
II.
Regency asserts that M&M’s and
Ace’s claims for interference with contract and business advantage fail because
they are based on Regency’s assertion of “ownership rights to the billboards,â€
which, Regency contends, did not constitute a tort. (See Arntz
Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47
Cal.App.4th 464, 479 [“A contracting party’s . . . breach of contract . . .
cannot be transmuted into tort liability by claiming that the breach
detrimentally affected the promisee’s business.â€].)
However, the trial court found that
Regency had engaged in conduct amounting to a wrongful holdover, which
constitutes a tort. (See
151 Cal.App.4th 1063, 1075 (
possession of property by a . . . holdover tenant as a resulting trespasser . .
. then the right to recover possession of the property by way of the summary
and statutory procedure of unlawful detainer has its inception in
basis for a tortious interference claim.
(See Ramona Manor Convalescent
Hospital v. Care Enterprises (1986) 177 Cal.App.3d 1120, 1133 [“[A
tenant’s] decision to hold over beyond the termination of the lease under which
it had possession was made with the knowledge that such action would frustrate
the legitimate contractual expectations of a specific, albeit unnamed, new
lessee. That is all it was required to
know to incur liability [for tortious interference].â€].) As we have explained, the trial court’s
finding that Regency held over is supported by substantial evidence, and thus
Regency was properly held liable in tort.
III.
Regency contends that the trial court made
errors in calculating both M&M’s and Ace’s compensatory damage awards. The amount of damages to be awarded is a fact
question, and an award of damages will not be disturbed if it is supported by
substantial evidence. (
746, 753.)
First, Regency
complains that the trial court erred in awarding M&M $240,000 to compensate
it for the amount it paid Ace to dismantle and remove the existing billboard
structure and build a new one. The court
found as follows: “In its reasonable,
good faith efforts to mitigate its damages and to avert possible
liability to
Regency for trespass, forcible detainer, conversion and other causes of action,
M&M had to bear the cost of removing and rebuilding the billboard
structures that Regency was claiming to own.
This was financed through a rent reduction to Ace of $20,000 per month
for 12 months ($240,000). In exchange
Ace agreed to perform and pay for the removal and reconstruction of the
structures.â€
Regency argues that the $240,000 M&M
paid Ace was not a reasonable mitigation cost because it was unnecessary to
remove the entire structure. It argues
that instead M&M should have removed only the small non-structural parts
that Regency had erected or made and thus had the legal right to remove, and
then permitted Ace to use the existing structure. However, at that time (spring of 2009),
Regency claimed ownership of the entire structure (as well as the horizontal
beams) and had threatened M&M with a claim for conversion if M&M let
Ace use the existing structure. Regency
acknowledges that M&M’s decision to dismantle the whole billboard structure
and make it available for Regency to pick up was a reaction to Regency’s
litigation position. Regency contends
that the litigation privilege protects it from liability for damages “caused by
M&M’s response to Regency’s assertion of its legal positions.†However, Regency provides no authority for
its assertion that the litigation privilege would extend so far as to protect
Regency from all secondary effects of its litigation positions, including
mitigation efforts by M&M in response to litigation threats by
Regency. The trial court did not err in
awarding compensatory damages in the amount of $240,000 for the removal and
rebuilding costs.
Second, Regency
contends that the trial court failed to properly offset Ace’s damages award
with the amount Ace received in the form of a rent reduction from M&M. No such offset was warranted. As noted above, M&M reduced Ace’s rent by
$20,000 a month for the 12-month period from July 2009 through June 2010, as an
agreed-upon means to compensate Ace for its costs to remove the existing
billboard structure and construct a new one.
Regency misreads the court’s decision and states that the trial court
“accounted†for the rent reduction Ace received during the first six months of
the lease, July 1, 2009 through December 31, 2009, but failed to account for
the benefit Ace received from the continued rent reduction from January 1, 2010
through June 30, 2010. However, the
court did not apply an offset for the rent reduction Ace received for the
period from July 1, 2009 through December 31, 2009. Rather, the court subtracted from the damages
award the rent that Ace would have paid Regency from January through June 2009 (totaling $420,000), had Regency not held
over. Regency was not entitled to any
offset for the $20,000 a month rent reduction Ace received as fair compensation
for its work tearing down the billboard structure and building of a new one.
disposition
The judgment is
affirmed. Regency to bear costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
WILLHITE,
Acting P. J.
We concur:
MANELLA, J. SUZUKAWA, J.
name="_ftn1" title="">[1] All subsequent undesignated references to
code sections are to the Civil Code.
name="_ftn2" title="">[2] Regency’s answer to M&M’s complaint
invoked the litigation privilege as an affirmative defense to the claims for
trespass and intentional interference with business advantage, but not the
claim for breach of lease, and Regency did not assert the litigation privilege as an affirmative
defense in its answer to Ace’s cross-complaint.
