This appeal involves a neighborhood shopping center in the Kern County community of Taft. The anchor position at the center was occupied for many years by a Safeway supermarket in which the various defendants (identified collectively as Safeway) have held an interest at some point. Safeway leased the building from a series of owners, none of which is still a party to this action. Ownership of the remainder of the center, consisting of numerous smaller stores, also passed through several hands before being acquired by the plaintiff, a partnership known as Westside Center Associates (WCA). Thus the shopping center was “fragmented” in that parts of it were owned by different entities; significantly, WCA never owned the Safeway building. It was in this configuration that the present dispute arose.
Citing a loss of profitability, Safeway closed the supermarket in 1987 with about 15 months left on its 20-year lease. Business at the rest of the center suffered as a result. About a year later, Safeway removed all the store fixtures. Soon after that, although it had no plans to reopen the supermarket and the parties had been unable to find a suitable replacement tenant, Safeway executed its option to renew the lease for an additional five years.
The anchor position remained vacant. Faced with foreclosure, WCA sold its interest in the center in 1989 at what it claims was a loss of more than $2 million. It subsequently sued Safeway for damages alleging breach of an implied covenant to remain in operation throughout the lease period, and for tortious interference with prospective economic advantage. WCA contended the Safeway defendants had conspired to close the supermarket and keep the building vacant in order to drive down the value of the center. They then hoped, according to WCA, to buy the property at an artificially low price, bring in a new anchor tenant, and profit from the center’s resulting recovery.
The trial court granted judgment in favor of Safeway on all causes of action following lengthy pretrial proceedings in which the court was called upon to decide various questions of law based upon stipulated facts and offers of proof. WCA challenges several of the court’s rulings on appeal. We affirm the judgment.
I. Factual Background
The shopping center site was purchased in 1964 by Westside Center, a joint venture consisting of Ernest W. Hahn, Inc., a large shopping center developer, and Lester Causey and Don Rook, two commercial real estate
The anchor tenant at a neighborhood shopping center is commonly regarded within the industry as an important if not crucial element in the center’s success. It attracts shoppers who also can be expected to patronize the satellite stores which, if things go as planned, generate much of the owner’s profit by filling the remaining space and paying rents based on the added business drawn by the anchor. Given its importance, the anchor tenant is typically able to acquire space in the center on more favorable terms than the other tenants. That was true at the Taft center.
Westside Center signed two 20-year leases with Safeway in 1964, to be effective when Safeway took possession of the completed buildings (in mid-1966). The leases required Safeway to pay a minimum base rent increasing to $75,588 per year by the fifth year and remaining constant thereafter, plus an additional amount based on a percentage of the stores’ gross sales. 1 Safeway also reserved the option of renewing the leases on the same terms for up to four additional five-year periods, 2 effectively locking in the favorable rental rates for up to forty years. Moreover, unlike some other tenants, Safeway’s leases did not expressly require it to remain in operation throughout the lease period nor restrict its use of the buildings to certain purposes.
Safeway’s preeminent role as the anchor tenant was further reflected in a second related agreement signed the same day between it and Westside Center entitled a “Grant of Easements and Declaration of Restrictions” (CC&Rs). Anticipating the possibility that ownership of the center might be
In 1971, Westside Center sold its interest in the Safeway and Super S buildings to the Alameda Amusement Company which, in turn, sold the property to the Osugi family some two years later for $966,000. In 1974, Safeway removed the common wall between the two stores and consolidated their operation into a single expanded supermarket. Safeway and the Osugis modified the lease accordingly and in the process also extended it to June 30, 1988. Safeway’s base rent, $75,588 per year, stayed the same; Safeway also remained liable for percentage rent although the amount was determined by a somewhat different formula than before. Later that same year, the Osugis transferred the store property to a trust administered first by the Bank of America and later by Wells Fargo Bank.
In 1982, Ernest W. Hahn, Inc., which had since become the sole owner of Westside Center, sold its remaining interest in the center (i.e., that portion exclusive of the Safeway building) to Ralph Wegis and Wayne Stewart for $750,000. They transferred it in 1984 to the plaintiff, WCA, a partnership made up of Wegis, Don Rook (who had been a partner in the original Westside Center), and Leonard Gentieu.
During the next two years, WCA remodeled the center (including the Safeway building) with a $3.1 million loan from the Torrey Pines Bank. Among other things, WCA added a Payless drug store in 1985, a change which required WCA, Safeway, and the Osugi trust to modify the CC&Rs to remove the restriction on sales in competition with Safeway. An appraisal done in 1986 in connection with the loan put the value of WCA’s property at $5,250,000.
The remodeling was spurred in part by the anticipated development of a second shopping center nearby to be anchored by a Lucky’s supermarket. The Lucky’s center opened in 1986. Coincidentally the local economy declined in Taft, a community closely tied to the oil industry. Sales at the Safeway supermarket declined significantly over the rest of the year. Citing its losses, Safeway closed the Taft store in March of 1987 along with several others in its Southern California region.
The role taken by Safeway in the search for a new anchor tenant was generally unremarkable in the first year following closure of the supermarket. Safeway transferred its leasehold interest to its nonoperating properties division, which listed the store with a commercial real estate broker. Safeway’s primary options at that point were to sublet or assign its lease to another grocery chain 4 or simply to allow the lease to expire as scheduled on June 30, 1988. By the end of 1987, however, Safeway’s actions took what WCA perceived to be a decidedly more sinister turn.
According to WCA, Safeway made the decision to close the supermarket shortly after Safeway was acquired in a leveraged corporate buyout in 1986. The new owner allegedly decided to shift the company’s focus in part from operating retail grocery stores to speculating in real estate by exploiting the value of its long-term leaseholds. It took what WCA claims was a first step in that direction by creating a separate subsidiary, the defendant Property Development Associates (PDA), to manage its many vacant stores, including the one in Taft. And it hired Joseph Bryne as the president of PDA in February 1988.
Bryne previously had been the president of Glickman, Bryne & Associates, a firm which developed and managed shopping centers in the western United States. Upon his move to PDA, Bryne was replaced by Kris Hoffman who had been an executive with Save Mart. By WCA’s reckoning, Bryne and Hoffman soon devised the following scheme to take over the Taft center: Bryne would use his control of the Safeway leasehold to frustrate any
Byrne and Hoffman, in deposition testimony, confirmed having had some discussions about how they might attract Save Mart to the center. They acknowledged Hoffman would have the incentive to put together such a deal only if he stood to profit from the appreciated value of the surrounding center which the deal could be expected to create. This was particularly true, they explained, in light of all the financial inducements Hoffman would have to offer Save Mart to convince it to accept what it had already concluded was a marginal business opportunity.
WCA found additional support for its conspiracy theory in events which occurred after Bryne’s arrival at PDA. One in particular was Safeway’s decision to remove the fixtures from the vacant store in March of 1988. 5 There is little dispute the cost of buying and installing new fixtures made the building less attractive to the sort of grocery chain considered likely to replace Safeway. Indeed, Bryne said he had directed the fixtures be retained to avoid that very problem, but his order was not conveyed to the division within Safeway responsible for removing them. He described the miscommunication as “significant and bewildering.” And, ironically, Kris Hoffman stated it was Safeway’s removal of the fixtures that ultimately caused him to abandon his efforts to put together a deal for the store.
In March and April of 1988, WCA negotiated with the Osugi trust to buy the Safeway property. It offered to pay $750,000 if Safeway exercised its option to renew the lease (due to expire at the end of June) and $500,000 if it did not. The trust countered with an offer to sell the property for $750,000 irrespective of Safeway’s decision. WCA accepted the counteroffer. Safeway, which had been made aware of the negotiations by WCA, exercised its
Joseph Bryne testified he exercised the option because he thought the leasehold still had value, which he put at about $200,000, attributable to the below-market rental rates. The base rent represented a charge of $1.50 per square foot for space Bryne felt would fetch $4. He believed a new anchor still could be found and so hoped to exploit the difference by retaining control of the building.
While the negotiations between WCA and the Osugi trust were still underway, Kris Hoffman offered to buy WCA’s interest in the shopping center for $3,250,000, or about $150,000 more than WCA’s loan. The offer was subject to several conditions, including that Hoffman receive a written commitment from a supermarket to occupy the Safeway building; that he receive a written commitment from Safeway to convey its leasehold to him; 7 and that WCA obtain an assignable option to purchase the building from the Osugi trust for no more than $750,000. Nothing came of the offer because, among other reasons, WCA was unwilling to sell at Hoffman’s price and because Save Mart lost interest in the store when it learned the fixtures had been removed. Moreover, as noted, the Osugi trust subsequently elected not to sell the store building after Safeway renewed its lease.
Others beside Hoffman also expressed some interest in buying the shopping center but likewise were unwilling to make a deal without an anchor tenant or at least without ownership or control of the entire property.
WCA had by this time fallen behind in its loan payments to Torrey Pines Bank, which instituted foreclosure proceedings in early 1987. WCA eventually reached an agreement with the bank by which WCA, in November of 1989, sold its interest in the shopping center to a group unrelated to any of the Safeway defendants for $2,990,000, an amount equal to the loan balance less a deficiency payment.
II. The Proceedings Below
WCA initiated the present action in 1990 by filing a complaint for damages against Safeway Stores, Inc., and Wells Fargo Bank (directly and
The second amended complaint, filed December 3, 1991, asserted five causes of action: breach by all defendants of an implied covenant in the CC&Rs to operate a supermarket in the Safeway building for the entire term of the lease; 8 breach by Wells Fargo of an implied promise in the CC&Rs to take all steps necessary to enforce Safeway’s duty to operate a supermarket; breach by all defendants of an implied covenant of continued operation in the lease (to which WCA claimed to be a third party beneficiary); conspiracy by all defendants to interfere with WCA’s prospective economic advantage; and negligent interference with prospective economic advantage by all defendants. Inasmuch as WCA challenges the trial court’s rulings only with respect to the first, third, and fourth causes of action, we need not address the other two in the discussion which follows.
After extensive discovery, Safeway moved for summary judgment or summary adjudication of issues. An exhaustive exchange of pleadings followed whereupon the court (Judge Westra) denied the motion. This court denied Safeway’s petition for a writ of mandate directing the lower court to grant the motion. Safeway then filed a motion for judgment on the pleadings, which also was denied.
The parties next agreed to a procedure whereby the trial court (Judge McGillivray) would decide certain disputed issues of law based upon stipulated facts relating to the circumstances under which the original lease and CC&Rs were signed, as well as WCA’s offer of proof setting out expected expert testimony about the industry understanding of an anchor tenant’s role in a neighborhood shopping center. This procedure produced a series of hearings and rulings dealing first with the contract and then with the tort causes of action.
On the question of whether the 1964 lease and CC&Rs contained an implied covenant of continued operation, the court considered the two
The court then took up the subject of use restrictions, i.e., whether statutory or common law imposed on Safeway a requirement to use the store building in a reasonable manner (and specifically to remain in business) irrespective of any express or implied covenant. The court concluded that, absent a specific provision in the lease, Civil Code section 1997.210, subdivision (b), 10 limits a tenant to reasonable uses of property but does not require the tenant to put the property to some use. That is, the law did not prevent Safeway from putting the store building to no use at all by closing the business.
Still on the subject of use restrictions, the court next considered the lease provisions granting Safeway the right to remove the store fixtures and to renew the lease. It was asked to decide whether Safeway had impliedly agreed, consistent with the custom and practice within the shopping center industry, to exercise these rights in a reasonable manner, or whether such a duty was imposed on it by the implied covenant of good faith and fair dealing. The court decided the lease granted Safeway the unrestricted right to deal with the fixtures in whatever manner it wished, but obliged it to exercise the renewal clause in good faith.
It remained to be determined, however, whether WCA had standing as a third party beneficiary of the lease to enforce this obligation. The court held
At this point the focus of the proceedings shifted to WCA’s fourth and fifth causes of action for intentional and negligent interference with prospective economic advantage. The court concluded the circumstances did not give rise to a duty of care sufficient to support WCA’s negligence claim. But it held Safeway was obliged, absent some recognized privilege or justification, to refrain from intentionally disrupting WCA’s business relationships.
The court then made several preliminary rulings affecting the scope of the argument on this subject. It granted Safeway’s motion in limine to restrict the prospective testimony of WCA’s expert witnesses in certain areas. 11 And it decided various questions raised by the parties’ proposed jury instructions. 12 Most significantly, the court held a plaintiff asserting intentional interference with prospective economic advantage must prove the defendant acted with the intent to disrupt an existing relationship with a particular third party as opposed to a prospective relationship with an unknown class of potential buyers or investors. 13
As they had with the contract causes of action, the parties then asked the court to decide certain legal questions based upon agreed facts and offers of proof. WCA submitted an “offer of proof’ recounting its conspiracy theory outlined above; it asserted Safeway had intentionally interfered with WCA’s ability to sell its portion of the shopping center in three ways: by closing the supermarket, by removing the fixtures, and by exercising its option to renew the lease. Safeway countered with a trial brief and its own “offer of proof’ which likewise consisted more of arguments than of proposed facts. WCA
The question of what facts were properly before the court arose from a disagreement about the nature of the proceedings at that point. WCA interpreted Safeway’s trial brief as, in effect, a generic motion to dispose of the fourth cause of action. After some discussion about whether to characterize it as a motion in limine, a motion for nonsuit, or a motion for a directed verdict, the parties went forward on the basis that the appropriate test was the same in any case; whether the proffered facts, if proven at trial, would support a verdict for WCA, i.e., whether there was any substantial evidence to support WCA’s claim.
In light of the court’s previous ruling limiting WCA’s proof to a specific economic relationship, the ensuing argument focused on whether Safeway, by exercising its option to renew the lease, had intentionally interfered with the pending deal between WCA and Wells Fargo for the sale of the Safeway building and, if so, the type and extent of WCA’s resulting damages. The court held there was no substantial evidence Safeway had intentionally interfered with a particular economic relationship, or that its conduct had damaged WCA in any event. Assuming arguendo WCA had been harmed, the court also held WCA had failed to establish the nature and extent of its damages with sufficient certainty.
Having thus disposed of all WCA’s claims, the court granted Safeway’s “Motion for Nonsuit/Directed Verdict/Motion in Limine” with respect to the first, third, fourth, and fifth causes of action (the second cause of action against Wells Fargo already having been dismissed). Judgment in favor of Safeway was entered accordingly. WCA filed a timely notice of appeal. Safeway filed a notice purporting to cross-appeal from the denial of its motions for summary judgment, judgment on the pleadings, and nonsuit. 14
A. Intentional Interference With Prospective Economic Advantage
WCA challenges certain of the court’s rulings on both its tort and contract claims. With regard to its claim for intentional interference with prospective economic advantage, WCA contends the court erroneously limited its offer of proof to Safeway’s disruption of a particular relationship with a known third party. 15 WCA identified only one such relationship—its unsuccessful negotiations with the Osugi trust to purchase the Safeway building. Nevertheless, WCA argues Safeway was potentially liable for interfering with a broader range of prospective relationships—those involving the class of all possible but as yet unidentified tenants or buyers for WCA’s portion of the shopping center.
WCA also disputes the court’s rulings on the subject of the damages, if any, caused by the interference. It asserts the proffered facts were sufficient, at least for the purpose of overcoming Safeway’s motion, to establish both the fact and the extent of its injury. Although WCA would treat the matters separately, the need to prove interference with a particular relationship and the need to prove damages with reasonable certainty are interrelated, as we explain below.
(1) Prospective Economic Relationships
“[T]he common law on the tort of intentional interference with prospective economic advantage, both in American jurisdictions generally and in California specifically, is fast approaching incoherence.”
(Della Penna
v.
Toyota Motor Sales, U.S.A., Inc.
(1995)
Liability for interference with prospective advantage has evolved as a broader application of the principles underlying the tort of interference with contract. (Prosser & Keeton, The Law of Torts (5th ed. 1984) § 129, p. 981;
id.,
§ 130, p. 1005; 5 Witkin, Summary of Cal. Law (9th ed. 1990) Torts, § 652, p. 740.) That is, the “more inclusive” tort protects the
expectation
of an advantageous business relation even in the absence of an existing, legally
The elements of intentional interference with prospective economic advantage have been stated as follows: “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the
Where a contract exists, it identifies the particular interest with which the defendant has allegedly interfered and hence serves to establish both the fact and the amount of the plaintiff’s resulting damages. For similar reasons, the sort of “expectancies” the law typically protects are those of future contractual relations.
(Youst
v.
Longo, supra,
Nonetheless, the chance the expectancy otherwise would have occurred is necessarily a matter of some uncertainty. The law precludes recovery for overly speculative expectancies by initially requiring proof the business relationship contained “ ‘the
probability
of future economic benefit to the plaintiff.’ ”
(Youst
v.
Longo, supra,
WCA claims Safeway interfered in its relationship with the class of all potential buyers for its property and thereby reduced the property’s market value. Or in the language of two decisions upon which WCA relies, Safeway interfered not with a particular sale but with WCA’s “opportunity” to sell the property for its true value.
In
Gold
v.
Los Angeles Democratic League
(1975)
In
Smith
v.
Superior Court, supra,
The problem with this “lost opportunity” approach is that it allows recovery no matter how speculative the plaintiff’s expectancy. It assumes what normally must be proved, i.e., that it is reasonably probable the plaintiff would have received the expected benefit had it not been for the defendant’s interference. For this reason, the continued validity of this approach has been called into question by two subsequent decisions of our Supreme Court.
The plaintiff in
Blank
v.
Kirwan, supra,
The issue in
Youst
v.
Longo, supra,
These two decisions, Blank and Youst, support the view that the interference tort applies to interference with existing noncontractual relations which hold the promise of future economic advantage. In other words, it protects the expectation that the relationship eventually will yield the desired benefit, not necessarily the more speculative expectation that a potentially beneficial relationship will eventually arise. 18 Two other decisions appear to reach the same result from a somewhat different perspective.
The plaintiffs in
Rickards
v.
Canine Eye Registration Fdtn., Inc.
(9th Cir. 1983)
This view gains some additional support from the usual formulation of the elements of the tort itself requiring an economic relationship between the
On this same subject, the court in
Ramona Manor Convalescent Hospital
v.
Care Enterprises
(1986)
In summary, although these various authorities do not necessarily resolve the precise question before us, they suggest liability for intentional interference with prospective economic advantage does not extend as far as WCA would have it. WCA postulates an expansive view of the tort which protects WCA’s economic relationship with the entire market of all possible but as yet unidentified buyers for its property. Were it not for Safeway’s interference in the market, this view supposes a hypothetical buyer would have emerged at the appropriate time who was willing and able to pay the 1986 appraised (i.e., the preinterference) value of the property. Under this view, lost market value in effect becomes both the measure of injury and the injury itself.
WCA’s “interference with the market” theory is but a variation of the discredited “lost opportunity” theory discussed above. It likewise fails to provide any factual basis upon which to determine whether the plaintiff was likely to have actually received the expected benefit. Without an existing relationship with an identifiable buyer, WCA’s expectation of a future sale was “at most a hope for an economic relationship and a desire for future benefit.”
(Blank
v.
Kirwan, supra,
The situation in
Lowell
v.
Mother’s Cake & Cookie Co., supra,
Thus, we conclude WCA’s “interference with the market” theory of liability, by itself, is insufficient as a matter of law to show WCA had an economic relationship with a prospective buyer which was reasonably likely to produce a future beneficial sale of its property.
(3) WCA’s Relationship With the Osugi Trust
In light of the trial court’s earlier ruling limiting the proof to Safeway’s interference with a specific relationship, WCA confined its argument in
The trial court held there was insufficient evidence to show Safeway’s acts were intended to disrupt “a known economic relationship.” It also held the proof failed to show Safeway’s conduct caused harm to WCA or, assuming harm, failed to establish the nature and extent of WCA’s damages with reasonable certainty. WCA disputes only the latter two rulings. Its failure to address the threshold question of intent effectively concedes that issue and renders its remaining arguments moot. 21 The arguments are unpersuasive in any event.
WCA seeks to recover the difference between what it received for its portion of the shopping center and the price it claims it could have received but for Safeway’s interference in its negotiations with the Osugi trust.
22
These negotiations concerned WCA’s purchase of the store building, not WCA’s prospective sale of the rest of the center. Thus WCA’s claim still relies on the existence of a future market for the center to show the negotiations eventually would have yielded the expected benefit. The claim therefore suffers from the same inherent uncertainties discussed in the previous section in that a relationship with the general market is not
WCA’s theory of damages is unduly speculative in other respects as well. WCA claims it would have purchased the store building from the Osugi trust if Safeway had not exercised its option to renew the store lease. And WCA’s ownership of the entire shopping center, along with its control of the leasehold, then would have improved its prospects of attracting a new anchor tenant. We review this claim independently to determine whether there is any substantial evidence to support it.
(Hinckley
v.
La Mesa R. V. Center,
Inc. (1984)
WCA’s offer of proof in this regard was limited to the opinions of its two expert witnesses who were prepared to testify that there was a “reasonable probability” an anchor tenant could have been found to occupy the store building if Safeway had allowed its lease to expire. Their opinions, in turn, were based in part on an inference that Bryne and Hoffman would not have pursued their alleged scheme if they had not also believed this to be true. In addition, WCA asserted without further explanation that it could have survived financially during the time it would have taken to install a new tenant and restore the shopping center to financial health.
These conclusory assertions lack any factual basis in the record. Rather, the proffered facts point to the opposite conclusion. They show, for instance, that the opening of a nearby Lucky’s store and a decline in the local economy made operation of a supermarket in the Safeway location at best a marginal business proposition; that the shopping center’s decline was attributable in large part to events which preceded Safeway’s exercise of its option; that no potential tenant other than Save Mart expressed what could be considered a serious interest in the vacant building; that removal of the store fixtures caused Save Mart to lose whatever interest it had in the building and led Hoffman to abandon his efforts to put together a deal for the center; that WCA was already behind in its loan payments and faced with foreclosure when it attempted to buy the store building; and, if its negotiations had been successful, that WCA would have assumed an additional $750,000 debt while losing the base rent paid by Safeway.
A plaintiff seeking to recover for a future loss must show with reasonable certainty that the loss actually would have accrued.
(S. C. Anderson, Inc.
v.
Bank of America
(1994)
“In determining whether a nonsuit was properly granted the reviewing court must resolve every conflict in testimony in favor of the plaintiff and at the same time indulge in every presumption and inference which could reasonably support the plaintiff’s case. [Citation.] The rules governing the granting of a nonsuit, however, do not relieve the plaintiff of the burden of establishing the elements of his case. The plaintiff must therefore produce evidence which supports a logical inference in his favor and which does more than merely permit speculation or conjecture. [Citation.] If a plaintiff produces no substantial evidence of liability or proximate cause then the granting of a nonsuit is proper. [Citation.]”
(Jones
v.
Ortho Pharmaceutical Corp.
(1985)
WCA theorizes, in essence, that its unified ownership of the shopping center would have improved the chances that a new anchor tenant could be found in time to restore the value of the center before WCA was forced to sell its interest. Simply to state the theory is to expose its inherent uncertainty. In any event, the proffered testimony of WCA’s experts, even if accepted at face value, fails to support the theory. We conclude, as did the trial court, there is no evidence sufficient to establish with reasonable certainty either the fact or the amount of WCA’s damages stemming from Safeway’s alleged interference in WCA’s negotiations with the Osugi trust. 23 (See S. C. Anderson, Inc. v. Bank of America, supra, 24 Cal.App.4th at pp. 536-538; California Shoppers, Inc. v. Royal Globe Ins. Co., supra, 175 Cal.App.3d at pp. 61-63.)
B. Breach of an Implied Covenant *
The judgment is affirmed and defendants are awarded costs on appeal. Safeway’s cross-appeal is dismissed
Vartabedian, J., and Harris, J., concurred.
Notes
However, the leases also provided that “Lessee makes no representation or warranty as to the sales which it expects to make in the leased premises.”
The base rent typically covered little more than the developer’s loan payments; its profits were expected to come from the anchor tenant’s percentage rent as well as the rent paid by the satellite tenants. But there was some dispute about whether that was true in this case in light of evidence the base rent provided an additional profitable return on Westside Center’s investment.
Paragraph 16 of the lease provided: “Options for renewal. Lessee, at its option, may extend the term of this lease for four (4) separate and additional periods of five (5) years each on the same terms and conditions by notice to Lessor at least sixty (60) days before the expiration of the term or option term then in effect.”
The leases and CC&Rs were modified several times while the center was under development. The changes did not alter the provisions pertinent to the issues before us.
Paragraph 13 of the lease provided: “Assignment and subletting. Lessee shall not assign this lease nor sublet the leased premises without Lessor’s written consent, which shall not be unreasonably withheld, except that Lessee may, without Lessor’s consent, assign this lease or sublet the leased premises to any affiliated or successor company, or sublet portions of the leased premises to concessionaires. If Lessee assigns this lease, Lessee shall remain liable to Lessor for full performance of Lessee’s obligations.”
Paragraph 9 of the lease provided: “Lessee’s Fixtures. Lessee may install in the leased premises such fixtures and equipment as Lessee deems desirable and all of said items shall remain Lessee’s property whether or not affixed or attached to the leased premises. Lessee may remove said items from the leased premises at any time, but shall repair any damage caused by removal.”
Safeway’s right to exercise the option was set to expire about two weeks later in early May.
Hoffman had, at that point, received assurances from Safeway (i.e., from Bryne) that it would exercise its option to renew the lease. Thus, according to Hoffman, the one part of the deal he could be sure of was that he would be able to acquire Safeway’s leasehold interest.
WCA has described the duty purportedly created by the implied covenant in several different ways ranging from the specific to the general: a duty to operate a supermarket throughout the lease period; a duty to make a reasonable effort in that regard; a duty to make some reasonable use of the premises if not as a supermarket; a duty to cooperate with efforts to find a replacement tenant; and a duty to act in a commercially reasonable manner. According to WCA, this duty could be implied from the circumstances surrounding execution of the lease and CC&Rs. Alternatively, it claims a similar duty arose from the covenant of good faith and fair dealing implied by law in every contract. References in the ensuing discussion to an implied covenant of continued operation is intended to apply to all these various formulations unless indicated otherwise.
WCA later argued the operable agreement was not the 1964 Safeway lease with Westside Center but the 1974 lease modification with the Osugi family. It claimed the altered percentage rent provisions reflected a newly implied promise by Safeway to continue in operation. In support of this contention, WCA offered the Osugis’ declaration in which they stated they would not have purchased the store building or revised the lease but for their expectation that Safeway would operate continuously during the entire term of the lease. However, the court concluded the 1974 modification did not materially change the original lease and therefore did not create any new duties by implication.
Civil Code section 1997.210, which was enacted effective January 1, 1992, and purportedly reflects the preexisting common law rule, provides: “(a) Subject to the limitations of this chapter, a lease may include a restriction on use of leased property by a tenant. [ID (b) Unless the lease includes a restriction on use, a tenant’s rights under a lease include any reasonable use of the leased property.” A use restriction is defined to include provisions “limiting use to a specified purpose, mandating use for a specified purpose, prohibiting use for a specified purpose, limiting or prohibiting a change in use, or otherwise.” (Civ. Code, § 1997.020, subd. (c).)
The court limited expert testimony with respect to: Safeway’s alleged failure to give WCA adequate notice of its intention to close the store; WCA’s expenditure of $150,000 in 1985 to remodel the Safeway building; Joseph Bryne’s character for tough bargaining; and the leveraged buyout of Safeway. WCA made motions in limine to exclude evidence of the following: events which occurred after WCA sold its shopping center property in 1989; the adequacy of the base rent provided in the 1964 Safeway lease and the lessor’s return on investment; and the terms of the settlement between WCA and Wells Fargo. There is no indication in the record that the court ever actually ruled on these latter motions.
The discussion about jury instructions was not recorded. However, a brief summary of the parties’ arguments and the court’s conclusions was subsequently entered in the record.
The other instructions concerned the extent of the disruption which must be proved, i.e., whether the interference must have prevented the formation or continuation of an economic relationship or merely made it more expensive or burdensome, and the defenses of privilege and justification.
Even were we to treat Safeway’s cross-appeal as having been taken from the judgment rather than from a nonappealable order (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, §§ 82, 87, pp. 104-105, 108-109), Safeway fails to show it was in any way aggrieved by a judgment entirely in its favor. (Code Civ. Proc., § 902;
Hensley
v.
Hensley
(1987)
In summarizing the previous unrecorded discussion about proposed jury instructions, the court described its ruling on this subject as follows: “The language that I think I used . . . was that I would find it appropriate to instruct in accordance with the defendant’s position ... as I understood it that plaintiff must show a specific intent to interfere with a specific prospective relationship not with a class of unknown investors or purchasers.”
In
Della Penna,
the court was asked to resolve a long-standing disagreement about the proper allocation of the burden of proof with respect to justification for interference with prospective relations. Justification, in turn, has been said to turn primarily on the motive behind the defendant’s interference and the means used to accomplish it. (See, e.g.,
Lowell
v.
Mother’s Cake & Cookie Co., supra,
79 Cal.App.3d at pp. 18-21.) The
Della Penna
court disapproved the view treating justification as an affirmative defense. In light of the particular importance of free competition in the area of noncontractual business relations, it held instead that “. . . a plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff’s expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.”
(Della Penna
v.
Toyota Motor Sales, U.S.A., Inc., supra,
Retroactive application of this rule
(Della Penna
v.
Toyota Motor Sales, U.S.A., Inc., supra,
The elements first appeared in this form in
Buckaloo
v.
Johnson, supra,
In holding a tort cause of action may lie for bad faith denial of the existence of a contract, the Supreme Court in
Seaman’s Direct Buying Service, Inc.
v.
Standard Oil Co., supra,
The Restatement Second of Torts, section 766B, would impose liability for intentional interference consisting of either “(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or [“jO (b) preventing the other from acquiring or continuing the prospective relation.” Comment c to this section explains this may include interference with “the opportunity of selling or buying land . . . .” (Rest.2d Torts, § 766B, com. c, p. 22.)
WCA cites several cases which it contends implicitly recognize the possibility that liability may be imposed for interference with the plaintiff’s prospective relationship with a class of as yet unidentified parties. All but one of these cases have been discussed above and fail to support WCA’s contention for the reasons explained.
(Blank
v.
Kirwan, supra,
In its reply brief, WCA attempts to recast its discussion of damages to incorporate an argument challenging the court’s ruling on the element of intent. As a general rule, points raised for the first time in the appellant’s reply brief will not be considered unless good reason is shown for failing to present them earlier. (9 Witkin, Cal. Procedure,
supra,
Appeal, § 496, p. 484;
Neighbours
v.
Buzz Oates Enterprises
(1990)
In
Mitchell
v.
Gonzales
(1991)
WCA contends
Mitchell
displaces the requirement for “but for” causation in intentional interference cases
(Youst
v.
Longo, supra,
In view of this conclusion, we need not discuss Safeway’s other arguments in support of the court’s rulings. Safeway also contends (1) WCA, as a successor to Westside Center’s interest in the original Safeway lease, effectively consented to the acts it now claims were tortious (closure of the store, removal of the fixtures, and renewal of the lease) because all the acts were expressly authorized by the lease; (2) all Safeway’s acts were justified for various business reasons; and (3) WCA suffered no damages because Ralph Wegis, one of the partners in WCA, also had an interest in the partnership which eventually bought the center from WCA.
See footnote, ante, page 507.