GIGI INC v. AMERICAN PHOENIX CORPORATION

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District Court of Appeal, Second District, Division 2, California.

GIGI, INC., a California corporation, Plaintiff and Respondent, v. AMERICAN PHOENIX CORPORATION, a Delaware corporation, Defendant and Appellant.

GIGI, INC., a California corporation, Plaintiff and Appellant, v. AMERICAN PHOENIX CORPORATION, a Delaware corporation, et al., Defendants and Respondents.

Civ. 29807.

Decided: July 11, 1966

Hillel Chodos, Beverly Hills, for plaintiff. Chandler & Armstrong and Joseph A. Armstrong, Anaheim, for defendants.

Both the plaintiff, Gigi, Inc., hereinafter referred to as “Lessee,” and the defendant, American Phoenix Corporation, hereinafter referred to as “Lessor,” have appealed from the judgment determining their respective rights under the provisions of a lease.

The following question presented by Lessor's appeal is determinative:  Did the trial court err in concluding that certain provisions of the lease relating to the commencement of the term of the leasehold are so inconsistent with subsequent modifying provisions that the latter must be disregarded as repugnant and ineffective?

We have concluded that this legal conclusion is erroneous.   We therefore do not reach the question presented by Lessee's appeal as to the proper measure of the damages to which it would have been entitled on the basis of the trial court's adjudication of the primary issue.

Lessor is the owner of a shopping center located in the City of Anaheim.   The portion of the premises that were the subject of the instant lease originally had been leased to five different mercantile establishments.   To effectuate the instant lease, it was necessary to terminate the leases of any prior tenants that were still occupying portions of the building area covered by the new lease and to perform relatively extensive modifications of the interior of the building.   The walls separating the five different units had to be removed and various other suitable alterations had to be made in the wiring, plumbing, etc. in order that the entire space would constitute one large unit rather than five smaller independent units.

To this end the parties on May 3, 1963, signed an extensive and comprehensive document of 25 pages that contained numerous modifications by way of interlineations made and initialed by the parties.   This agreement was augmented by several exhibits attached thereto detailing the type of work to be performed by the parties.   However, only the following quoted provisions of the lease are pertinent to the present controversy.   Paragraph 2 thereof provides as follows:

“The term of this lease shall be for a period of fifteen (15) years commencing—(a) upon the date Lessee opens for business, or (b) Forty-five (45) days after the demised premises have been turned over to Lessee for fixturizing, whichever shall be earlier except in no event shall lease commence prior to September 1, 1963, unless Lessee is open for business.   If the commencement date of the term of this lease shall be other than the first day of a calendar month, Lessee's rent for that portion of the first month of occupancy shall be prorated on a thirty (30) day basis, and shall be paid to Lessor on the first day of the next succeeding calendar month.   If the lease term shall not have commenced on or before October 15, 1963, this lease shall be null and void and all parties hereto shall be relieved of any and all liability hereunder.   Landlord covenants to commence remodeling provided herein immediately upon execution of this lease and to complete such remodeling as soon as possible.”   And paragraph 11 provides:

“If Lessor is unable to deliver possession of the leased premises to Tenant at the commencement of the term of this lease because of the retention of possession thereof by parties other than Lessor, or because Lessor is unable to get the premises ready for occupancy by Tenant by the commencement of the term of this lease, or other cause beyond Lessor's reasonable control, then Lessor shall not be liable to Lessee in damages and this lease shall not terminate;  PROVIDED, HOWEVER, that Lessee shall have no obligation to pay rent hereunder for the period occupancy is denied Lessee.”

In its memorandum opinion, the trial court expressed its reasoning on the fundamental issue in this case as follows:

“It is the duty of the court to consider the whole contract and to give effect to every part, if possible (C.C. 1641;  Moore v. Wood, 26 Cal.2d 621, 160 P.2d 772) and ‘repugnancy must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses * * *’ (C.C. 1652) but it is not possible to give effect to both the null and void and non-termination phrases [paragraph 2 and paragraph 11].”  It therefore gave no effect to the provisions of paragraph 11 referring to non-termination.

In the instant case it is necessary to look to the memorandum opinion of the trial court because otherwise it would be impossible to determine from the findings of fact made herein why the trial court concluded that the lease became “null and void” on September 1, 1963.   As stated in Ehrenreich v. Shelton, 213 Cal.App.2d 376, 378–379, 28 Cal.Rptr. 855, 856.

 “It is a general rule, of course, that the judgment of a trial court will not be disturbed even though in arriving at that judgment the trial court may rely upon erroneous reasoning.  [Citation.]  It is held in this state that although the reasons reflected in an opinion of the trial court are not ordinarily effective to disturb the final judgment, nevertheless the Appellate Court may inspect that opinion in order to determine the processes of reasoning by which the trial court arrived at the result.  (Citations.]  In a number of cases, however, it has been held that where the record reflects that in arriving at the result of which appellant complains, the trial court relied upon erroneous reasoning and except for that reliance would probably not have reached such result, then a judgment may properly be reversed.  [Citations.]”  (Cf. also, People v. Van Gorden, 226 Cal.App.2d 634, 638 et seq., 38 Cal.Rptr. 265.)

On the factual questions to be determined, relating mainly to the reasons and the responsibility for delay in completing alterations, the testimony presented by the respective parties was diametrically conflicting.   Lessor introduced evidence tending to prove that by September 1, 1963, the remodeling required on its part had been sufficiently completed to permit the premises to be turned over to the Lessee for fixturizing, and, to the extent that its obligations were not fully completed, it was due to the fact that Lessee had not provided it with the “fixture layout” required to permit final disposition of the electrical wiring, replacement of tile, etc.   Officers of the Lessee, however, testified that such “fixture layout” had been prepared and made available to Lessor and in general asserted that although the bulk of the remodeling had been completed by September 1, 1963, in their opinion the premises were not sufficiently completed to permit their acceptance thereof for fixturizing.

Appellant Lessor argues strenuously and persuasively that in view of the substantial rental payments, the length of the lease here involved, 15 years with two five-year extension options, and the other evidence relating to the conduct of the parties hereto which we need not recite in detail, the findings of the trial court are wholly unsupportable as a matter of law.

However, we do not reach this question because we have concluded that the judgment must be reversed for the reason that the trial court failed to make the findings of fact necessarily required in order to give effect to the provisions of paragraph 11 of the lease.   This conclusion follows from our holding that the provisions of this paragraph are not irreconcilably repugnant to those of paragraph 2.   In other words, we hold that the trial court erred in its legal conclusion that the provisions of paragraph 11 should be disregarded.

 The interpretation of a written instrument is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect.   (Parsons v. Bristol Development Co., 62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839.)  Section 1652 of the Civil Code provides that “Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.”   And as stated in Mattal v. American Trust Co., 208 Cal.App.2d 645, 649, 25 Cal.Rptr. 517, 520:

 “The rule is well established that a lease must be construed as a whole and in such a manner as to give effect to every provision, if reasonably possible.  (Goodman v. Jonas (1956), 142 Cal.App.2d 775, 790, 299 P.2d 424.)   An interpretation which will give effect and purpose to a provision is more reasonable than one which fails to do so.  (Chapin Lumber Co. v. Lumber Bargains, Inc. (1961), 189 Cal.App.2d 613, 620, 11 Cal.Rptr. 634, 637, 638.)”

In the instant case, no extrinsic evidence was received to aid in the interpretation of these provisions of the lease of such nature as to introduce any factual element into the process of interpreting their relatively clear language.   As stated in Mattal v. American Trust Co., supra, 208 Cal.App.2d at p. 650, 25 Cal.Rptr. at p. 520:

 “Where a trial court construes a lease without the aid of extrinsic evidence, the construction of the lease presents a question of law, and a reviewing court is not bound by the trial court's interpretation.   (Livingston Rock & Gravel Co. v. De Salvo (1955) 136 Cal.App.2d 156, 159–160, 288 P.2d 317, 318–319.)”

The lease provided two alternative methods for establishing the effective commencement of the term thereof, i.e., (1) the date Lessee opened for business, or (2) 45 days after the premises were turned over to the Lessee for fixturizing.   Manifestly these dates were unknown and indeterminate at the time the lease was signed.   In order to establish more definite limits upon the period in which these events might occur, the parties agreed in paragraph 2 that regardless of how quickly the premises were turned over to the Lessee in suitable condition for fixturizing, its rental payments would not commence until September 1, 1963.   This established the earliest date for the commencement of the term of the lease.   The parties also agreed in paragraph 2 that the latest target date for the commencement of the term would be October 15, 1963, which would require that possession of the property in a suitable condition for fixturizing be delivered to the Lessee on September 1, 1963, i.e., 45 days prior thereto.1

Both of these limitations clearly were primarily for the benefit and assurance of the Lessee.   Its rental could not begin until a sufficient time had elapsed in which it could complete its necessary preparations even though the premises might be delivered to it more than 45 days before September 1, 1963.   On the other hand, it would not be required to wait indefinitely for the Lessor to complete its remodeling obligations.

However, it is equally clear that in view of the indicated necessity to terminate the occupancy of prior tenants and to perform extensive alterations in the building to conform it to Lessee's needs, Lessor quite reasonably would desire and require some provision to be placed in the lease which would serve to avoid a forfeiture thereof if, by reason of circumstances beyond its control, it had not fully completed its remodeling operations on a specified date.   Such protection was supplied by paragraph 11.

 As above stated, we find no irreconcilable repugnancy in paragraphs 2 and 11.   Both serve reasonable and logical purposes and both may be given effect.   Construed together they provide that if the term of the lease has not commenced prior to October 15, 1963, the lease shall terminate unless there has been a delay attributable to one of the causes “beyond Lessor's reasonable control” as set forth in paragraph 11 which has operated to prevent delivery of the premises to Lessee in suitable condition by September 1, 1963.   Since no finding was made upon the issue of fact necessarily involved in deciding the effect to be given to the language of this paragraph, the judgment entered herein must be reversed.2

The judgment is reversed and the cause is remanded for a new trial on all issues.   American Phoenix Corporation will recover its costs on appeal.

HERNDON, Justice.

ROTH, P.J., and FLEMING, J., concur.