Willet H. BROWN, et al., Plaintiffs and Respondents, v. Joseph GREEN, et al., Defendants and Appellants.
This appeal raises a question under the terms of a commercial lease: Is the removal of asbestos-containing fireproofing material and its replacement with a safe substance the responsibility of the landlord or the tenants? The trial court found that under the terms of the lease the obligation was the tenants'. We agree.
The material facts of the case are not in dispute.1
The property at issue was leased by appellants Joseph Green, Kim Green, Nghia Dinh, Chi Dinh and Steve Chern (hereinafter “tenants”) from Willet Brown (hereinafter “landlord”) in June of 1987. The parties did not discuss responsibility for asbestos abatement during the lease negotiations, and prior to the execution of the lease none of the parties knew that there was asbestos-containing material in the building. At the time the lease was executed, the tenants operated from ten to twenty retail furniture stores from leased premises.
Coldwell Banker represented the landlord in the lease transaction. In the course of that representation, in July and August of 1986 Coldwell Banker sent the landlord a document entitled “Notice to Owners, Buyers and Tenants Regarding Hazardous Wastes or Substances and Underground Storage Tanks.” The notice included the statement that “owners, buyers, and tenants are urged to consult legal counsel to determine their respective rights and liabilities with respect to the issues described in this notice,” including regulation of asbestos removal.
Joseph Green acted for the tenants during the lease negotiations. In May of 1987 he signed a Coldwell Banker form entitled “Proposal to Lease Industrial Space.” That form included boxed text at the bottom of the last page titled “Consult your Advisors.” The text included the statement “In any real estate transaction, it is recommended that you consult with a professional, such as a civil engineer, industrial hygienist or other person, with experience in evaluating the possible presence of asbestos, hazardous materials and underground storage tanks.” Green read and understood the proposal, and sent it to the landlord.
The lease was prepared by the landlord's attorney using a standard American Industrial Real Estate Association form. The rent was $28,500 per month, and the term was fifteen years. Green inspected the property before executing the lease.
The tenants initially operated a retail furniture store on the property, but in April of 1989, having suffered business problems, they subleased the property to tenants who also used the premises for a retail furniture store. The subtenants were to pay the rent to the landlord, although the tenants understood that they remained responsible for the rent.
In June of 1990, the property was inspected by the Los Angeles County Department of Health Services. The Department found that exposed structural beams were covered with a flaking and deteriorated material that probably contained asbestos, and that there was asbestos debris on furniture and carpet located under the beams and in a loft area. In July, the Department gave the subtenants written notice of the presence of asbestos and ordered them to remove and dispose of the debris, to take measures to prevent the further release of debris, and to conduct a sampling and inspection program to ensure that the abatement measures were completed. Later, the Department sent an identical letter to the landlords.
Shortly after receiving the Department's letter the subtenants stopped paying rent. Although the tenants knew that the subtenants were not paying, they did not themselves pay the rent. No rent was paid after June of 1990.
Experts commissioned by both the subtenants and the landlord confirmed that sprayed-on fireproofing material on various beams contained asbestos, and that in some locations the material was flaking. According to one report, damage to the fireproofing appeared to have been caused by frequent direct contact during movement of furniture, water damage, the installation of track lighting by the tenant, and vibration from roof parking.
After the presence of asbestos was confirmed the subtenants moved the furniture showroom to the rear of the property, converted the original showroom into a storage area, and continued to operate a furniture store on the property. Later, they subleased a small portion of the space.
Beginning in August 1990, the landlord and the tenants each demanded that the other remove the asbestos. In November 1990, the landlord sued the tenants for back rent, the cost of removing the asbestos-containing material, and the cost of replacing the fireproofing. The tenants filed a cross-complaint for rescission and declaratory relief.
The case was tried to the court, which found that asbestos removal and refireproofing were the tenants' obligation under the lease, and that the back rent was due. The court awarded the landlord $251,856 for removing and replacing the fireproofing material, $504,278.37 in back rent, and $60,252 in attorney fees. The cross-complaint was dismissed.
As of the time of trial, the County had taken no action to enforce the abatement letters, and no abatement work had been done.
On this appeal the tenants contend that under the lease the landlord was obligated to bear the cost of asbestos removal, that their cross-complaint was wrongly dismissed, and that the award of attorney fees was excessive. We affirm the judgment in all respects.
1. Asbestos Abatement
In Glenn R. Sewell Sheet Metal, Inc. v. Loverde (1969) 70 Cal.2d 666, 75 Cal.Rptr. 889, 451 P.2d 721, cited to us by both parties, the California Supreme Court considered the duties of a landlord and tenant under a lease substantially similar to the one before us here.2 In that case, Sewell operated a trailer park on property subleased from Loverde. After some difficulties with the septic system installed by Loverde when he began the trailer park use, Sewell was ordered by the local health department to connect the trailer park to the public sewer lines or to stop using the premises as a trailer park. He ultimately abandoned the property, stopped paying rent, and sued for the return of rent paid in advance. (Id. at pp. 670–671, 75 Cal.Rptr. 889, 451 P.2d 721.)
The Supreme Court concluded that under the lease, installing the sewer lines was Sewell's responsibility. In its analysis, the Court held first that although a property owner has a duty to comply with all laws governing the premises and their use, that duty may be assumed by a tenant through a lease. (Id. at p. 672, 75 Cal.Rptr. 889, 451 P.2d 721.) Sewell's lease, like the one at bar, included an agreement to comply with applicable state, federal, and local laws regulating the use of the property.3 The Court determined that such a clause, like a covenant to repair or maintain, only obligates the tenant to undertake curative actions that are not of a substantial nature. (Id. at p. 674, fn. 10, 75 Cal.Rptr. 889, 451 P.2d 721.) However, the Court also held that through other lease provisions Sewell had assumed the duty to undertake substantial curative action.4
Specifically, Sewell represented in the lease that he had examined the premises, that Loverde had made no representation as to its condition, and that Loverde was relieved of all obligations as to repair and maintenance. Again, the relevant clauses in the Sewell lease are substantially similar to those in the lease here.
The Court concluded that “[u]nder these circumstances the Loverdes' disclaimer of any obligation at all ․ can be given effect only by interpreting [it] to relieve the Loverdes of any duty to take those ‘substantial’ curative actions required by law that the language of [the tenant's agreement to comply with laws] alone would not cover. [Citation.]” (Id. at p. 675, 75 Cal.Rptr. 889, 451 P.2d 721.)
The Court also noted that Sewell, like the tenants here, had agreed to assume all risk of loss by reason of damage to person or property, and to indemnify Loverde for any expense or damage caused by their use of the premises. The Court found that it would be contradictory to hold the landlord responsible for substantial curative action, if the tenant had assumed all risk of loss for breach of that duty. The same is true here.
Under Sewell, the lease before us can only be read to transfer to the tenant the duty to abate the asbestos.5 Wolf v. 2539 Realty Corporation (1990) 161 A.D.2d 11, 560 N.Y.S.2d 24, cited by the tenants, does not compel any other result. In that case, the New York court considered a lease which required the tenant to keep the premises in good repair and to comply with governmental regulations, and determined that under the lease asbestos abatement was the landlord's responsibility. The opinion does not discuss the other provisions that are present in both the lease construed in Sewell and the one before us. Presumably, those critical clauses were not a part of the Wolf lease.
The tenants offered no evidence that the cost of performing the asbestos work was other than the $251,000.00 requested by the landlord. The trial court's award of that amount is thus affirmed.
The trial court's dismissal of the tenants' cross-complaint is similarly affirmed. The tenants contend that rescission of the lease should have been granted due to mutual or unilateral mistake of fact, failure of consideration (Civ.Code, § 1689(b)(2)), and, pursuant to Civil Code section 1689(b)(6), as a contract against the public interest.
The tenants have shown no ground for rescission. There was no failure of consideration, since the stipulated facts show that a sublessee continued to use the property. And we find nothing contrary to the public interest in a contract which transfers to the tenant the cost of compliance with relevant laws, since in Sewell our Supreme Court said that such a transfer is proper. We also note that our Legislature has provided that the removal of hazardous substances can become a tenant's obligation. (See Health & Saf.Code, § 25359.7 [tenant who knows of the release of hazardous substances on the property and fails to notify the landlord is in default on the lease, but the default may be cured if the tenant remedies the hazardous condition].) Similarly, the federal government apparently contemplates that asbestos removal may be a tenant's responsibility. (See 40 C.F.R. 61.141 et. seq.)
Finally, rescission for mistake of fact is not available. “Where parties are aware at the time a contract is entered into that a doubt exists in regard to a certain matter and contract on that assumption, the risk of the existence of the doubtful matter is assumed as an element of the bargain. [Citations.] Otherwise stated, the kind of mistake which renders a contract voidable does not include ‘mistakes as to matters which the contracting parties had in mind as possibilities and as to the existence of which they took the risk.’ [Citations.]” (Guthrie v. Times–Mirror Co. (1975) 51 Cal.App.3d 879, 885, 124 Cal.Rptr. 577.)
The tenants here had an opportunity to inspect the premises for the presence of asbestos or other hazards, and some warning that it would be wise to do so. As the trial court found, the tenants made a conscious decision not to inspect for those hazards, and may not now rescind the contract based on their failure to do so.
The tenants, through their subtenants, remained in possession of the property, and thus had the obligation to pay rent. (Petroleum Collections Inc. v. Swords (1975) 48 Cal.App.3d 841 at pp. 847–848, 122 Cal.Rptr. 114.) On this appeal the tenants make no argument that the award of back rent was incorrect, essentially abandoning any appeal from that portion of the court's order. We affirm the trial court's order in this regard.
3. Attorney Fees
Paragraph 31 of the lease provides that “if either party ․ brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action ․ shall be entitled to his reasonable attorney fees to be paid by the losing party as fixed by the court.” The tenants contend that under this language only attorney fees incurred after the lawsuit was filed may be awarded, since it is by filing that one “brings a lawsuit.” The tenants cite no authority for their interpretation of the lease term, and we find that the interpretation strains the common-sense reading of the lease.
“[I]n fixing the fees of attorneys, the court is vested with a wide discretion and the court's award of an amount for such fees will be disturbed only when it is manifest that there has been a palpable abuse of such discretion.” (Los Angeles v. Los Angeles–Inyo Farms Co. (1933) 134 Cal.App. 268, 274, 25 P.2d 224.) There is no such abuse of discretion here.
The judgment is affirmed.
APPENDIX—RELEVANT LEASE TERMS
“6.2 Compliance with Law.
“(b) ․ Lessee shall, at Lessee's expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements in effect during the term or any part of the term hereof, regulating the use by the Lessee of the Premises․
“6.3 Condition of Premises.
“Lessee hereby accepts the Premises in their condition existing as of the Lease commencement date or the date that Lessee takes possession of the Premises, ․ subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises․ Lessee acknowledges that neither Lessor or Lessor's agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Lessee's business.
“7.1 Lessee's Obligations.
“Lessee shall keep in good order, condition and repair the Premises and every part thereof, structural and nonstructural (whether or not such portion of the Premises requiring repair, or the means of repairing the same are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises) including, without limiting the generality of the foregoing, all plumbing, heating, air-conditioning.
“7.4 Lessor's Obligations.
“Except for the obligations of Lessor under paragraph 9, it is intended by the parties hereto that Lessor have no obligation in any manner whatsoever, to repair and maintain the Premises nor the building located thereon nor the equipment therein, whether structural or nonstructural, all of which obligations are intended to be that of the Lessee under Paragraph 7.1 hereof․
“Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the Premises, or from the conduct of the Lessee's business or from any activity, work or things done, permitted or suffered by Lessee in or about the Premises ․ and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any negligence of the Lessee․ Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises arising from any cause and Lessee hereby waives all claims in respect thereof against Lessor.”
1. Appellant's motion to augment the record with the “Appendix to Clerk's Record on Appeal” is granted.
2. The relevant terms of the lease at bar are set forth in the Appendix to this opinion. The Sewell lease is quoted in pertinent part at p. 674, fn. 9, 75 Cal.Rptr. 889, 451 P.2d 721 of that opinion.
3. Neither party disputes that the abatement of asbestos is such a law.
4. It was thus not necessary for the Court to determine whether installation of the sewer lines was a substantial curative action. It is similarly unnecessary for us to make that determination regarding the asbestos work required here.
5. We note that in Sewell, the Court had a second and independent basis for its finding that the tenant bore responsibility for the necessary curative action. The Court found that sewer facilities are one of the principal features of premises used for trailer parks, and that Sewell knew or should have known that public sewer connections would eventually be required. (Glenn R. Sewell Sheet Metal, Inc. v. Loverde, supra, 70 Cal.2d at pp. 675–676, 75 Cal.Rptr. 889, 451 P.2d 721.) Those facts are not analogous to those before us. Nevertheless, the primary ground for the Court's ruling mandates the result we reach here.
ARMSTRONG, Associate Justice.
GRIGNON, Acting P.J., and GODOY PEREZ, J., concur.