Court Opinion

ID: 9405479
Source: CourtListenerOpinion
Date Created: 2023-06-28 17:04:48.051726+00
Date Added: 2024-06-11T17:20:22.390920
License: Public Domain

Filed 6/28/23 Benik v. 13290 Contractors Lane CA3
                                           NOT TO BE PUBLISHED
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 This opinion has not been certified for publication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
                                      THIRD APPELLATE DISTRICT
                                                         (Butte)
                                                            ----

 ERIK BENIK et al.,                                                                            C095469

                    Plaintiffs and Appellants,                                   (Super. Ct. No. 18CV03508)

           v.

 13290 CONTRACTORS LANE, LLC et al.,

                    Defendants and Respondents.

         Plaintiffs Erik Benik and Wishbone Ranch, LLC (Wishbone) and James Heath
(collectively plaintiffs) entered into three successive leases for a warehouse property in
Chico with defendant 13290 Contractors Lane, LLC (Contractors), managed by
defendant Richard Bringgold (collectively defendants). The first lease gave Benik an
option to purchase the property, but the two subsequent leases provided rights of first
refusal. After the parties had entered into the third lease, Benik attempted to exercise the
option to purchase the property and defendants refused to acknowledge the validity of the
option. Plaintiffs filed a complaint alleging numerous causes of action related to the

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alleged breach of the purchase option. After a court trial, the trial court ruled in favor of
defendants, finding the final lease had an integration clause superseding the purchase
option in favor of the right of first refusal.
       On appeal, plaintiffs contend the trial court erred, arguing the subsequent leases
did not supersede the purchase option. We affirm, finding the final lease was integrated
as to all matters mentioned within, including the purchase of the property. This bars
consideration of any prior agreement relating to the purchase of the property between the
parties.
                                       BACKGROUND
       The facts are uncontested. Benik entered a lease with Contractors for the premises
at 13290 Contractors Drive in Chico starting December 1, 2016, and ending
November 30, 2018. The lease included an option to purchase as an addendum. The
option permitted Benik to purchase the property for $2,990,000 if he exercised the option
by written notice between December 1, 2016, and November 30, 2018. The purchase
option also stated additional terms and conditions were provided in an additional
addendum. This addendum stated: “In the event that the Lessee is not in default of any
provisions of the lease, Lessee shall have Option to Purchase property at the twenty-
fourth (24th) month or sooner for the purchase price of $2,990,000.00. Lessee’s monthly
rent in its entirety shall be applied to the down payment.”
       The lease included an integration clause titled “No Prior or Other Agreements”
stating, “[t]his Lease contains all agreements between the Parties with respect to any
matter mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective.”
       On December 5, 2016, Bringgold emailed Benik stating he had not yet received
any of the money owed under the lease, was cancelling the contract, and stated it would
be in the interest of all parties to renegotiate.

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       Benik and Contractors entered a second lease for the same location starting
December 1, 2016 to November 30, 2021, with an option to renew for three five-year
periods. This lease did not include an option to purchase but it did include a “First Right
of Refusal.” This term stated that, “[s]hould Lessor receive a valid Offer to Purchase said
property, Lessee shall have thirty (30) days to meet or exceed said Offer to Purchase the
property.” All other material terms in this lease were the same as the first lease,
including the integration clause.
       Contractors entered into a third lease with Wishbone, an entity owned and run by
Benik and his wife. This lease was for the same location for the period from June 1, 2017
to May 31, 2022, with three options to renew for five years. This third lease also had the
same right of first refusal as the second lease without an option to purchase. Benik was a
personal guarantor of this lease. All other material terms, including the integration
clause, were the same as the first two leases.
       On September 24, 2018, Benik sent a letter to Contractors giving notice he was
exercising the purchase option and requesting confirmation on the remaining balance of
the purchase price. On October 3, 2018, Contractors responded there was no option to
purchase. On October 23, 2018, plaintiffs filed a complaint against defendants alleging
breach of contract and other causes of action related to defendant’s refusal to honor
Benik’s purchase option.
       After a five-day court trial, the trial court found Benik was not entitled to the
purchase option in the first lease and found in favor of defendants on all causes of action.
The court found the third lease superseded the first two leases, including the purchase
option in the first lease, because the third lease had an integration clause. The parol
evidence rule prohibited the introduction of the purchase agreement to vary, alter, or
augment the third lease. Thus, the trial court found defendants “established by sufficient
evidence that [the first lease] was superseded by” the second and third leases and the
third lease “contained all terms intended by the parties to be part of the respective leases.”

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The trial court also found defendants established the second lease was a novation of the
first lease.
                                        DISCUSSION
        Plaintiffs contend the purchase option was enforceable when Benik sought to
exercise it. They argue “neither the cancellation of [the first lease] nor the inclusion of
the First Right of Refusal” in the second and third leases could revoke the “independent”
purchase option. We disagree.
        The parol evidence rule generally prohibits the introduction of any extrinsic
evidence to vary or contradict the terms of an integrated written instrument, including
“evidence of a prior agreement.” (Code Civ. Proc., § 1856, subd. (a); Civ. Code, § 1625.)
“When the parties to a written contract have agreed to it as an ‘integration’—a complete
and final embodiment of the terms of an agreement—parol evidence cannot be used to
add to or vary its terms. . . . The crucial issue in determining whether there has been an
integration is whether the parties intended their writing to serve as the exclusive
embodiment of their agreement.” (Masterson v. Sine (1968) 68 Cal.2d 222, 225.)
“Generally, finality may be determined from the writing itself. If on its face the writing
purports to be a complete and final expression of the agreement, parol evidence is
excluded.” (Pollyanna Homes, Inc. v. Berney (1961) 56 Cal.2d 676, 679-680.) “An
integration may be partial rather than complete: The parties may intend that a writing
finally and completely express only certain terms of their agreement rather than the
agreement in its entirety. [Citation.] If the agreement is partially integrated, the parol
evidence rule applies to the integrated part.” (Founding Members of the Newport Beach
Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 953.)
        Interpretation of a contract, and its level of integration, is a question of law we
review de novo. (DVD Copy Control Ass., Inc. v. Kaleidescape, Inc. (2009)
176 Cal.App.4th 697, 713; EPA Real Estate Partnership v. Kang (1992) 12 Cal.App.4th

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171, 176.) “The language of a contract is to govern its interpretation, if the language is
clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.)
       The third lease contained an integration clause rendering ineffective any “prior
agreement” dealing with “any matter mentioned” in the lease. The second and third
leases included a right of first refusal, permitting plaintiffs to buy the property at or above
any offer defendants received. The purchase option plaintiffs contend is effective was
executed before the second and third leases and purports to permit them to purchase the
same property but at an agreed price of $2,990,000. The purchase option is therefore
prohibited by the integration clause because it deals with the same matter as the rights of
first refusal: purchase of the property.
       The purchase option and the right of first refusal are also inconsistent. If
Contractors received an offer for more than $2,9990,000, the rights of the parties would
be substantially different depending on which provision is applied.1 Thus, the parol
evidence rule is triggered as an evidentiary bar because the purchase option involves the
same matter as, and is also inconsistent with, the right of first refusal contained in the
subsequent integrated leases. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 344
[“terms contained in an integrated written agreement may not be contradicted by prior or
contemporaneous agreements. In doing so, the rule necessarily bars consideration of
extrinsic evidence of prior or contemporaneous negotiations or agreements at variance
with the written agreement”].)
       Plaintiffs contend the second and third leases “make no mention of the Purchase
Option” so the purchase option is not a matter “mentioned in Lease 2 or Lease 3.” They
argue this makes it a “partial integration clause.” It does not matter, however, whether
we conclude it is partial or fully integrated because the parol evidence rule applies to any

1      Though not determinative on this legal issue, there was testimony at trial the
property was appraised at close to $6,000,000 in 2018.

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integrated portion. Here, the subsequent leases are integrated as to all matters mentioned
within them. And plaintiffs’ asserted interpretation of this language requires adding a
modifier limiting it to only agreements that deal with the same matters in the same way.
Both the purchase option and the right of first refusal dealt with buying the property.
That they were different methods, right to purchase at a fixed price versus at or above an
offered amount, makes no difference under the language of the integration clause
covering all matters in the lease.
       Plaintiffs assert Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015)
243 Cal.App.4th 1 (Jenks), requires a different result; we disagree. In Jenks, an
employee sued in superior court based on terms in a termination agreement. The
employer petitioned to compel arbitration based on an arbitration provision in the
employee’s offer letter. (Id. at pp. 5-6.) The termination agreement did not have a
dispute resolution provision but did have an integration clause stating: “ ‘This
Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior negotiations and agreements.’ ” (Id. at
p. 15.) The appellate court found this integration clause did not supersede the arbitration
provision in the offer letter because the termination agreement did not “mention
arbitration at all, and contains no provisions regarding dispute resolution. Consequently,
the identified forum for dispute resolution remains arbitration based on the original Offer
Letter.” (Id. at pp. 15-16.)
       Jenks supports our conclusion the purchase option is barred because it is a
different method on the same matter as the right of first refusal. The integration clause in
the Jenks plaintiff’s subsequent termination agreement had a similar integration clause to
those in the leases here, disclaiming prior agreements on the same “subject matter.”
(Jenks, supra, 243 Cal.App.4th at p. 15.) But the termination agreement was silent on the
subject matter of dispute resolution generally and did not mention arbitration or any other
forum as a specific method for dispute resolution. (Id. at pp. 5, 15-16.) The Jenks court

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implied that a provision describing any method for dispute resolution in the termination
agreement would have superseded the arbitration provision in the offer letter because it
found the letter “contains no provisions regarding dispute resolution.” (Id. at pp.15-16.)
Had the subsequent termination agreement specified a method for addressing the matter
of dispute resolution, such would likely have superseded the arbitration provision in the
offer letter by operation of the integration clause. The Jenks court found support in Cione
v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, which similarly found a
prior agreement with an arbitration provision (the method) was not superseded by a
subsequent agreement without a dispute resolution provision (the matter). (Jenks, at
pp. 16, 19-20 [“Since the written employment agreement was silent on the forum for
dispute resolution, Cione’s . . . arbitration agreement with NASD was probative and
admissible as not inconsistent with the terms of such employment agreement” (emphasis
added)].) Jenks and its supporting cases are consistent with our finding here that two
provisions regarding the purchase of the property cover the same matter even if they are
different methods for dealing with that matter.
       Plaintiffs also argue purchase options are distinct agreements reflecting an
irrevocable offer that once made and accepted, cannot be revoked by the offeror. Here,
the purchase agreement could be terminated only in a few specific circumstances and
plaintiffs argue none were present when Benik sought to exercise the option. This
argument relies on law that “[a]n option contained in a lease is itself a contract, distinct
from the lease to which the option relates.” (Ripani v. Liberty Loan Corp. (1979)
95 Cal.App.3d 603, 609.) Plaintiffs do not discuss the limits of this rule, as options are
not always severable from their underlying leases. (Prichard v. Kimball (1923) 190 Cal.
757, 764 [“The option thus formed a part of the lease, and was dependent on it.”]; Gatley
v. Shockley (1932) 215 Cal. 604, 611 [“It is clear that the lease and option constituted but
one contract, the provisions of which were interdependent”]; Wallace v. Imbertson (1961)

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197 Cal.App.2d 392, 396 [“The existence of the option therefore depended on existence
of the lease. If the lease fell, the option fell with it.”].)
       But more fundamentally, even assuming the purchase option here was an
irrevocable offer severable from the first lease, it would still be a contract. (Steiner v.
Thexton (2010) 48 Cal.4th 411, 420 [“ ‘Manifestly, then, an irrevocable option based on
consideration is a contract’ ”]; Rollins v. Stokes (1981) 123 Cal.App.3d 701, 711 [finding
an option, from the lessor’s point of view, is “a contract to sell the property during the
lease term”].) And contracts can be rescinded, abandoned, terminated, and superseded by
mutual assent. (See Civ. Code, § 1689, subd. (a) [“A contract may be rescinded if all the
parties thereto consent.”]; Kane v. Sklar (1954) 122 Cal.App.2d 480. 482 [“ ‘An
executory contract may be rescinded, abandoned, or terminated, either wholly or in part,
by the mutual consent of the respective parties at any stage of their performance.’ ”].)
Plaintiffs provide no law, and we are not aware of any, establishing an option is uniquely
immune to all future agreements between the same parties. Nor should there be, as this
would impede the parties’ freedom to contract, a core tenant of contract law. (VL
Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708, 713 [“Freedom of contract is
an important principle”].) Thus, like any other agreement, an option is subject to mutual
abandonment, rescission, novation, or other mutual modification between the parties.2

2       The trial court found the second lease was a novation of the first lease, which
requires a factual inquiry into the circumstances of the agreements. (Alexander v. Angel
(1951) 37 Cal.2d 856, 860 [“the evidence in support of a novation must be ‘clear and
convincing’, [citation], the ‘whole question is one of fact and depends upon all the facts
and circumstances of the particular case’ ”].) But it ultimately does not matter whether
the subsequent leases constituted a novation, mutual recission, mutual abandonment, or
any other means to withdraw a prior agreement and reengage in a new one. What matters
is that whatever the parties discussed and agreed to was incorporated into an integrated
written contract, disallowing consideration of any prior inconsistent agreements.

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(Lohn v. Fletcher Oil Co. (1940) 38 Cal.App.2d 26, 32 [affirming a “trial court’s
conclusion that the option agreement was mutually abandoned”].)
          This point is further highlighted by addressing plaintiffs’ final argument that
“California law confirms that the First Right of Refusal ‘has no effect whatever’ on the
Purchase Option and that the subsequent granting of the First Right of Refusal leaves
‘unimpaired’ Benik’s pre-existing right to exercise the Purchase Option.” Plaintiffs cite
Green v. Sprague Ranches (1959) 170 Cal.App.2d 687 for this proposition, which
analyzed a lease that was modified to include a right of first refusal and then modified
again to include a purchase option. (Id. at pp. 688-689.) The court found “the intention
of the parties would more reasonably appear to have been to create an independent and
separate right [to purchase] not extinguishable by the exercise by plaintiffs of the first
refusal clause.” (Id. at p. 691.) This is readily distinguishable from the present case
because it dealt with modifications to the same agreement, whereas at issue here is a
subsequent agreement. (See 12 Witkin, Summary of Cal. Law (2023) (11th ed. 2023)
Real Property, § 556(2)(b) [citing to Green for the proposition both purchase options and
rights of first refusal “may be contained in the same agreement”].) Green did not bestow
special powers on the option, but merely interpreted it as any other contractual term. Nor
was the option being introduced to vary the terms of a subsequent agreement. And Green
noted similar cases have “been decided under the peculiar facts there present with slight
differences in the wording in each instrument construed.” (Green, at p. 691.) So instead
of announcing any broad rule that options can never be superseded by rights of first
refusal, the ruling in Green was based “[u]nder the peculiar facts of the case at bar.”
(Ibid.)
          The parties constructed the contract at issue here to contain the entire agreement
for the lease and purchase of the property, and any prior agreement on the matters was
ineffective. Defendants did not unilaterally “cancel[]” the purchase option, as plaintiffs
contend, but the parties together entered into entirely new agreements concerning the

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same matters. As the Supreme Court said many years ago: “ ‘If the claimants had any
objection to the provisions of the contract they signed, they should have refused to make
it. Having made it and executed it, their mouths are closed against any denial that it
superseded all previous arrangements.’ ” (United States ex rel. International Contracting
Co. v. Lamont (1894) 155 U.S. 303, 310.) Therefore, the trial court correctly concluded
the purchase option for the property was ineffective.
                                      DISPOSITION
       The judgment is affirmed. Costs are awarded to defendants. (Cal. Rules of Court,
rule 8.278(a).)

                                                     \s\                      ,
                                                 McADAM, J.*

       We concur:

          \s\           ,
       MAURO, Acting P. J.

           \s\              ,
       DUARTE, J.

*       Judge of the Yolo County Superior Court, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.

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