Court Opinion

ID: 6327529
Source: CourtListenerOpinion
Date Created: 2022-03-28 22:01:46.200853+00
Date Added: 2024-06-11T09:22:26.350259
License: Public Domain

Filed 3/28/22 Kwuan v. NorCal Research Development CA1/5
               NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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

                                 FIRST APPELLATE DISTRICT

                                            DIVISION FIVE

 EDWARD KWUAN,
          Plaintiff and Appellant,
                                                               A161330
 v.
 NORCAL RESEARCH                                               (Alameda County
 DEVELOPMENT, LLC,                                             Super. Ct. No. RG-19-018877)
          Defendant and Respondent.

        Plaintiff and appellant Edward Kwuan (appellant) appeals from the
trial court’s judgment in favor of defendant and respondent NorCal Research
Development, LLC (respondent) in appellant’s commercial unlawful detainer
action. Appellant alleges respondent violated the parties’ lease agreement for
a warehouse by growing marijuana without the required permits from the
City of Oakland. Following a bench trial, the trial court found that
respondent was unable to obtain the permits because there was no fire
sprinkler system in the warehouse, and that appellant could not evict
respondent because the lease agreement obligated appellant to provide a
functioning sprinkler system. We conclude the court erred in interpreting the
lease and reverse.

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                                 BACKGROUND
      Appellant is the owner of a warehouse on 5th Street in Oakland
(Property). The parties entered into a five-year lease agreement, beginning
in September 2017 (Lease). Respondent uses the Property as an indoor
cannabis cultivation facility.
      On May 7, 2019, appellant served respondent with a “Three Day Notice
to Cure or Quit” (Notice). The Notice alleged, in relevant part, that
respondent breached the Lease by failing to obtain the required permits for
its business (the grow operation). The Notice required respondent to cure the
alleged breach by completing the work required to obtain the permits
(installing fire sprinklers) and obtaining the permits, or to deliver possession
of the Property to appellant.
      On May 14, 2019, appellant filed the present unlawful detainer action.
In its trial briefs, respondent admitted it had operated without the required
permits, but it explained it could not obtain the permits because the Property
lacked a fire sprinkler system and argued it was appellant’s obligation to
provide the system under the Lease.
      Following a bench trial, the trial court concluded the “plain language of
the Lease obligated [appellant] to provide and maintain the fire sprinkler
system at the Property.” The court found that appellant’s “failure to provide
a working fire sprinkler system prevented [respondent] from completing the
work necessary to obtain the permits required to legally operate.” The court
held that, “[b]ecause the only cure options [appellant] would accept . . .
required [respondent] to obtain the necessary permits and complete the work
on the fire sprinkler system,” appellant’s “responsibility for and failure to
provide a working fire sprinkler system at the start of the Lease is a defense
to this action.”

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      The trial court entered judgment in favor of respondent and this appeal
followed.
                                  DISCUSSION
I.    The Lease
      The Lease is a modified form lease prepared by “AIR Commercial Real
Estate Association” and captioned “Standard Industrial/Commercial Multi-
Tenant Lease – Net.” Appellant signed the Lease as managing member of an
investment company; the company is identified as “Lessor” on the Lease.
Respondent is named as “Lessee.” Paragraph 1.8 of the Lease authorizes
“[a]ny legal use” of the Property but specifies, “Lessee shall obtain and
maintain in good standing any requisite license and permit necessary for its
business operation . . . .”
      Paragraph 2.2 of the Lease, captioned “Condition,” is the critical
disputed provision. It states in relevant part that “Lessor . . . warrants that
the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating
and air conditioning systems (‘HVAC’), loading doors, sump pumps, if any,
and all other such elements in the Unit, other than those constructed by
Lessee, shall be in good operating condition . . . .”
      Paragraph 7.2 of the Lease, captioned “Lessor’s Obligations,” states in
relevant part, “Subject to the provisions of Paragraphs 2.2 (Condition), …
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in
good order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants,
parking lots, walkways, parkways, driveways, landscaping, fences, signs and
utility systems serving the Common Areas and all parts thereof . . . .”

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      In its decision, the trial court referenced evidence at trial that it would
cost over $38,000 to install a sprinkler system and an additional $100,000-
$150,000 to add the connections necessary to provide water to the system.
Regarding the Lease, the court concluded, “The plain language of the Lease
obligated [appellant] to provide and maintain the fire sprinkler system at the
Property. (Lease ¶¶ 2.2 & 7.2.) In [p]aragraph 2.2, [appellant] expressly
warranted that the fire sprinkler system would ‘be in good operating
condition’ at the start of the Lease.”
II.   The Trial Court Misinterpreted the Lease
      Because neither the trial court nor the parties rely on extrinsic
evidence, we review the trial court’s construction of the Lease “de novo.”
(California Nat’l Bank v. Woodbridge Plaza LLC (2008) 164 Cal.App.4th 137,
142.) In doing so, “We apply familiar rules: We interpret the lease to give
effect to the parties’ mutual intent at the time of contracting. (Civ. Code,
§ 1636.) We ascertain that intent from the lease terms alone if they are clear
and explicit. (Civ. Code, §§ 1638, 1639.) We give the terms their ordinary
and popular meaning unless the parties clearly intended to give them
technical or special meanings. (Civ. Code, § 1644.) And we construe the
lease as a whole to give effect to every part. (Civ. Code, § 1641.)” (Glovis
Am., Inc. v. Cty. of Ventura (2018) 28 Cal.App.5th 62, 68–69.)
      We conclude the trial court misinterpreted the Lease because the
court’s construction fails to give effect to certain language in paragraph 2.2.
As noted previously, under paragraph 2.2 appellant warranted the condition
of “the existing electrical, plumbing, fire sprinkler, lighting, heating,
ventilating and air conditioning systems (‘HVAC’), loading doors, sump
pumps, if any. . .” (Italics added.) Thus, paragraph 2.2 of the Lease only
required appellant to provide a sprinkler system if it was “existing” at the

                                         4
time of execution and the language of the paragraph specifically
contemplated the possibility that not all of the listed elements (e.g., sprinkler,
loading doors, sump pumps, etc.) would be present because it followed the list
with “if any.” The trial court’s construction effectively rendered meaningless
the words “existing” and “if any” in paragraph 2.2. (City of Atascadero v.
Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473
[“Courts must interpret contractual language in a manner which gives force
and effect to every provision, and not in a way which renders some clauses
nugatory, inoperative or meaningless.”].)
      Neither does paragraph 7.2 oblige appellant to provide a sprinkler
system. That paragraph describes appellant’s obligation to keep specified
elements in “good order, condition and repair.” Although the paragraph
references a “fire sprinkler system,” the paragraph expressly states that it is
“[s]ubject to” paragraph 2.2. Thus, the paragraph only obligates appellant to
maintain a fire sprinkler system if one exists. The paragraph cannot
reasonably be read to require appellant to install a fire sprinkler system, any
more than it can be read to require appellant to install a parking lot or
landscaping (other listed elements) if appellant is not required to provide
those by other language in the Lease.
      Respondent argues that the references to the sprinkler system in
paragraphs 2.2 and 7.2 “would have no meaning if [appellant] bore no
responsibility as to the fire sprinkler system.” We disagree. It does not
render any part of the paragraphs meaningless to recognize that the
language is from a form lease intended to cover any of the listed elements
that do exist at the property subject to the lease. As appellant argues,
paragraph 2.2, “as a standard boilerplate paragraph, seeks to address a wide
range of possible situations . . .” The inclusion of the words “existing” and “if

                                        5
any,” and the conditioning of the maintenance obligation of paragraph 7.2 on
paragraph 2.2, make it clear appellant’s obligations only extend to the listed
elements that are actually present. It is the trial court’s interpretation that
renders language in the Lease meaningless.
      Respondent also argues the trial court’s construction does not fail to
give effect to the term “existing” because the “purpose” of that term “is to
ensure that [appellant’s] warranty does not extend to features installed by”
respondent. However, that purpose is already accomplished by other
language in paragraph 2.2. To wit, the paragraph expressly excludes from
the lessor’s warranty those elements “constructed by Lessee.” It is
unreasonable to interpret “existing” (or, much less, “if any”) as accomplishing
no more than the same purpose as that express and direct language.
      Accordingly, the trial court erred in concluding that appellant’s failure
to install a sprinkler system was a defense to the unlawful detainer action.
                                DISPOSITION
      The trial court’s judgment is reversed. The matter is remanded with
directions to enter judgment in favor of appellant. Appellant is awarded his
costs on appeal.

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                     SIMONS, J.

We concur.

JACKSON, P. J.

NEEDHAM, J.

(A161330)

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