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1 Louis A. Gonzalez, Jr., State Bar No. 157373
lgonzalez@weintraub.com
2 Zack S. Thompson, State Bar No. 317110
zthompson@weintraub.com 4/14/2021
3 weintraub tobin chediak coleman grodin
LAW CORPORATION
4 400 Capitol Mall, 11th Floor
Sacramento, CA 95814
5 Tel: (916) 558-6000
Fax: (916) 446-1611
6
Attorneys for Plaintiffs Erik Benik,
7 Wishbone Ranch, LLC and James Heath
8
SUPERIOR COURT OF CALIFORNIA
9
IN AND FOR THE COUNTY OF BUTTE
10
11 ERIK BENIK, an individual; WISHBONE Case No. 18CV03508
RANCH, LLC, a California limited liability
weintraub tobin chediak coleman grodin
12 company; and JAMES HEATH, an PLAINTIFFS’ OPPOSITION TO DEFENDANT
individual, KATHRYN EGAN’S MOTION IN LIMINE #1
13 [TO EXCLUDE PAROL EVIDENCE]
Plaintiffs,
14
vs.
15
13290 CONTRACTORS LANE, LLC, a
California limited liability company; Trial Date: April 19, 2021
16 Dept: 1
RICHARD BRINGGOLD, an individual;
LAW CORPORATION
and DOES 1 through 25, inclusive, Time: 8:00 a.m.
17 Judge: Hon. Tamara L. Mosbarger
18 Defendants.
Complaint Filed: October 23, 2018
19
FAC Filed: March 15, 2019
20 SAC Filed: August 7, 2020
21
22
23
24
25
26
27
28
Plaintiffs’ Opposition to Defendants’ Motion in Limine
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1 TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................... 2
2
TABLE OF AUTHORITIES ................................................................................................. 3
3
I. INTRODUCTION ..................................................................................................... 4
4
II. RELEVANT FACTS ................................................................................................. 5
5
A. The Parties’ Initial Lease and Purchase Option ............................................................... 5
6
B. Defendants Breach the First Lease by Purporting to “Cancel” It, in Violation of Its Terms ......... 6
7
C. Defendants Pressure Benik to Sign the Second Lease to Avoid Being Evicted ........................ 7
8
9 D. The Third Lease, which the Parties Intended to Change Only the Name of the Lessee............. 8
10 E. The Parties Course of Performance ............................................................................. 8
11 F. Bringgold Learns the Property Has Increased in Value and Changes His Mind About the
Purchase Option ........................................................................................................... 9
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12
G. Plaintiffs Exercise the Purchase Option, but Defendants’ Deny Its Existence .......................... 9
13
III. ARGUMENT ....................................................................................................... 10
14
A. The parol evidence rule does not apply to the terms of the purchase option. ...................... 11
15
B. Even under the parol evidence rule, evidence of the purchase option is admissible. ............. 12
16
1. Evidence of the purchase option is admissible to explain or supplement the terms of the
LAW CORPORATION
17 parties’ leases with consistent additional terms. ............................................................... 12
18 2. Evidence of the purchase option is admissible to explain or supplement the parties’ leases
by proof of the parties’ course of performance of the terms of the purchase option even after
19 the later leases were signed. ....................................................................................... 13
20 3. Evidence of the purchase option is admissible to prove a mistake or imperfection in the
parties’ leases. ......................................................................................................... 14
21
4. Evidence of the purchase option is admissible to prove the circumstances under which the
22 parties’ agreements were made and to which they relate. .................................................. 14
23 5. Evidence of the purchase option is admissible to establish the invalidity of the parties’
24 leases due to duress, fraudulent inducement, and false promise. ........................................ 15
25 C. Evidence of the purchase option is admissible to prove Egan’s negligence and breach of
fiduciary duty and to prove Bringgold’s Contractors Lane’s breach of the covenant of good faith
26 and fair dealing........................................................................................................... 16
27 IV. CONCLUSION ................................................................................................... 16
28
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 2 No. 1
1 TABLE OF AUTHORITIES
2 Cases
3 C. Robert Nattress & Assocs. v. Cidco (1986) 184 Cal.App.3d 55 ...................................... 11
4 City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375................ 13
5 Civil Code section 1625 .................................................................................................. 4
6 Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866 ........................ 15
7 Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384 ..................................................... 12
8 Edwards v. Centex Real Estate Corp. (1997) 53 C.A.4th 15 ............................................... 15
9 Green v. Sprague Ranches (1959) 170 Cal.App.2d 687 ............................................. 12, 13
10 Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 ................................................................ 14
11 Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441 ........................... 13
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12 Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33 .................... 14
13 Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375 ................................................ 15
14 Ripani v. Liberty Loan Corp. (1979) 95 Cal.App.3d 603 .................................................... 11
15 Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013)
16 55 Cal.4th 1169 ...................................................................................................... 15
LAW CORPORATION
17 Rollins v. Stokes (1981) 123 Cal.App.3d 701 .................................................................. 11
18 Thomson v. Canyon (2011) 198 Cal.App.4th 594 ............................................................ 16
19 Warner Bros. Pictures, Inc. v. Brodel (1948) 31 Cal.2d 766 ............................................... 11
20 Wolf v. Superior Court (2004) 114 Cal.App.4th 1343....................................................... 13
21 Statutes
22 Civ. Code, § 1647 .................................................................................................... 4, 12
23 Code Civ. Proc., § 1856 ................................................................................ 4, 11, 12, 16
24 Code Civ. Proc., § 1860 ............................................................................................ 4, 12
25 Evid. Code, § 355 ......................................................................................................... 15
26
27
28
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 3 No. 1
1 I. INTRODUCTION
2 Defendants misconstrue the rule of Code of Civil Procedure section 1856 and Civil
3 Code section 1625, often called the parol evidence rule, to try to keep unfavorable evidence
4 from the jury. But, because the Plaintiffs’ purchase option is a separate, irrevocable written
5 contract and the terms of the parties’ leases do not address the matter of the purchase option,
6 the parol evidence rule does not apply to the terms of the purchase option.
7 Even ignoring that the purchase option is a separate contract and the parties’ leases do
8 not invoke the parol evidence rule, evidence of the purchase option would still be admissible
9 under the parol evidence rule to: 1) explain or supplement the terms of the parties’ leases with
10 consistent additional terms; 2) explain or supplement the parties’ leases by proof of the parties’
11 course of performance of the terms of the purchase option even after the later leases were
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12 signed; 3) prove a mistake or imperfection in the parties’ leases; 4) prove the circumstances
13 under which the parties’ agreements were made and to which they relate, (see Code Civ.
14 Proc., § 1860; Civ. Code, § 1647); and 5) to establish the invalidity of the parties’ leases, for
15 example due to duress, fraudulent inducement, and false promise.
16 Given the plentiful justifications for admitting evidence of the parties’ agreements
LAW CORPORATION
17 regarding Plaintiffs’ purchase option, including in the text of the parol evidence rule itself,
18 Defendants assertion that the parol evidence rule should hide evidence of their wrongdoing
19 from the jury is frivolous, even with regards to Plaintiffs’ contract claims. But even if none of
20 these justifications applied, evidence of the terms and negotiation of Plaintiffs’ purchase option
21 would still be admissible to prove Egan’s negligence and breach of fiduciary duty in
22 negotiating and preparing the terms of the parties’ agreements and to prove Bringgold’s and
23 13290 Contractors Lane, LLC’s (“Contractors Lane”) breach of the covenant of good faith and
24 fair dealing.
25 In short, the parol evidence rule does not permit Defendants to hide their conduct in
26 negotiating the terms of the purchase option and inducing Plaintiffs’ acceptance of the leases
27 between the parties by promising the purchase option.
28
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 4 No. 1
1 II. RELEVANT FACTS
2 A. The Parties’ Initial Lease and Purchase Option
3 In September 2016, Benik began negotiating with Bringgold, a manager of Contractors
4 Lane, and his agent, Egan, to move his business from the Highway 70 Industrial Park at 4801
5 Feather River Blvd. Ste #6 in Oroville, California, to industrial space at 13290 Contractors
6 Drive in Chico, California (the “Property”). (See Compendium of Evid. in Opp. to Defs.’ Mots.
7 in Limine (“Pls. Opp. Compend.”), Exh. 5 [Benik Decl. in Support of Pls.’ Mot. for Prelim. Inj.]
8 (“Benik Decl.”) at 2:11–13.) Egan proposed to Bringgold that he try to offer a purchase option
9 with a lease to get the first tenant into the Property, telling him “that if we do a lease purchase
10 option, she would get somebody interested in leasing it.” (See Pls. Opp. Compend., Exh. 2
11 (“Bringgold Depo.”) at 85:1–3.) Because Benik would have to expend tens of thousands of
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12 dollars to move his laser fabrication equipment to the Property, Benik was very interested in the
13 purchase option, which he could exercise so that he would not have to move again. (Bringgold
14 Depo. at 81:18–23.)
15 Egan went back and forth between Bringgold and Benik negotiating the terms of the
16 lease and purchase option. (Bringgold Depo. at 74:3–12.) From Bringgold’s perspective, Egan
LAW CORPORATION
17 represented both him, (id. at 65:17–66:4; 149:1–5), and Benik, (id. at 89:7–15), and she was
18 in charge of negotiating the terms of the leases, (id. at 74:3–12, 74:20–75:2), and preparing
19 the leases, (id. at 88:10–13, 21–24, 142:23–24, 168:5–18). Egan was also Bringgold’s
20 property manager for the Property, “from the start.” (Id. at 131:14–22.) Bringgold paid Egan
21 for securing Benik’s lease, (id. at 159:15–20), signed a standard agreement with Egan, and
22 planned to pay her commission on the purchase price for Benik’s exercise of the purchase
23 option, (id. at 86:21–25).
24 Defendants also agreed to allow Benik to sublease the other space in the industrial
25 warehouse he was not using at the property and to credit the rent Benik and his subtenants
26 paid towards the down payment for the purchase option. (Bringgold Depo. at 85:24–86:4;
27 164:17–25; see also Pls.’ Opp. Compend., Exh. 1 at p. 2, ¶ 3.) Egan prepared those
28 subleases for Benik and Bringgold approved them for Contractors Lane. (Bringgold Depo. at
Plaintiffs’ Opposition to Defendants’ Motion in Limine
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1 87:18–88:9.)
2 B. Defendants Breach the First Lease by Purporting to “Cancel” It, in Violation of Its Terms
3 The Landlord Defendants’ purported to cancel the First Lease on December 5, 2016.
4 (Bringgold Depo. at 115:25–117:4; see Pls. Opp. Compendium, Exh. 12.) The cancellation
5 message does not state that it is cancelling the purchase option; in fact, it says the opposite:
6 “We are not trying to take away the purchase or the lease from you . . . .” (Bringgold Depo. at
7 126:14–17; see Pls. Opp. Compendium, Exh. 12.) Defendants purported justification for the
8 “cancellation” was Benik’s failure to make the first rent payment on time. (Bringgold Depo. at
9 130:15–17.) But the first lease clearly requires (and California law requires in any event) that
10 the notice requirements of California law be met and that the lessee has a chance to cure any
11 default. (See Pls. Opp. Compendium, Exh. 4 at p. 11, § 13.1(b).)
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12 But Defendants admit that they left blank the space on the lease for the address where
13 Benik was required to send rent. (Bringgold Depo. at 113:20–114:1; Pls. Opp. Compend.,
14 Exh. 2 (“Egan Depo.”) at 51:10–24; see Pls. Opp. Compendium, Exh. 4 at p. 4, § 4.3 and p.
15 17.) Bringgold even admitted that he did not provide a payment address in writing at any time,
16 as required by the first lease. (Bringgold Depo. at 107:21–108:14; see Pls. Opp.
LAW CORPORATION
17 Compendium, Exh. 4 at p. 4, § 4.3.) Bringgold blames Egan for this failure, saying he did not
18 notice the omission when he signed the first lease. (Bringgold Depo. at 114:19–115:21.) He
19 even suggested that she had left those areas blank because she was not yet a broker and her
20 supervising broker was not involved in the transaction. (Bringgold Depo at 156:18–159:14.)
21 And Bringgold states that Egan told him he could terminate the lease on December 5, 2016,
22 that it was her duty to provide a three-day Notice to Quit, and that he believes she did.
23 (Bringgold Depo. at 130:15–131:13.) Egan does not remember preparing a three-day notice
24 at that time, (Egan Depo. at 53:22–54:12), and says the termination was Bringgold’s idea, (id.
25 at 55:19–56:3). No three-day notice was issued purporting to terminate the lease. (Benik Decl.
26 at 4:1–6.)
27 For his part, Benik attempted to pay his first month’s rent and security deposit on
28 December 1, 2016 as scheduled, but discovered that Defendants had not provided the
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{3140460.DOCX;} 6 No. 1
1 address where he was required to pay rent. (Benik Decl. at 3:25–27.) Benik attempted to call
2 Egan on Thursday, December 1, 2016 and again on Friday, December 2, 2016, but he could
3 not reach her and she did not return his calls. (Id. at 3:27–4:2.) Bringgold confirms that Egan
4 told him about Benik’s attempts to reach her. (Bringgold Depo. at 134:9–19.) The purported
5 cancellation email came without notice and before Benik could get a hold of any of the
6 Defendants. (Benik Decl. at 4:1–6.)
7 C. Defendants Pressure Benik to Sign the Second Lease to Avoid Being Evicted
8 At the time of the purported “cancellation” of the first lease, Bringgold was aware that
9 Benik had spent a significant amount of money moving his industrial equipment to the
10 Property. (Bringgold Depo. at 132:22–133:4.) Nevertheless, Bringgold, in an attempt at
11 unlawful self-help, gave Benik three options: 1) move his equipment back out; 2) negotiate a
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12 new lease with Defendants; or 3) face eviction proceedings. (Bringgold Depo. at 134:20–
13 135:9.) Bringgold also promised Benik that the purchase option would remain valid and that
14 his and his subtenants’ rent would continue to be applied towards the purchase price. (Benik
15 Decl. at 4:13–15.)
16 Then, when Bringgold and Benik were negotiating the second version of the lease,
LAW CORPORATION
17 Bringgold explained to Benik that the right of first refusal Egan added to the second lease
18 would protect the purchase option if a third party made an offer to purchase the Property for
19 less than the option price, since Benik would be able to match the lower price rather than
20 paying the option price. (Pls.’ Opp. Compend., Exh. 13 at 2:17–21.) Egan had discussions
21 with both Benik and Bringgold about what to put in the second lease and never told Benik
22 anything about the purchase option going away or being replaced by the right of first refusal,
23 even though she was supposedly working to protect Benik’s interests. (Id. at 2:23–26.) Because
24 of Defendants’ repeated promises and because Benik trusted that they would inform him if
25 something was happening to the purchase option, since they knew it was the reason he had
26 moved to the Property, Benik signed the second lease, understanding that it included the
27 purchase option Egan had prepared. (Id. at 2:26–28.) Bringgold told Benik that the right of
28 first refusal “was to allow him first right to buy the building over anyone else.” (Bringgold Depo.
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1 at 151:16–152:1.) Egan does not recall having any discussions with anyone other than
2 Bringgold about his desire to terminate the purchase option and to replace it with a right of first
3 refusal and does not recall telling Benik about the purported removal of the purchase option or
4 what that meant. (Egan Depo. at 59:2–6; 80:6–20.)
5 D. The Third Lease, which the Parties Intended to Change Only the Name of the Lessee
6 Both Benik and Bringgold agree that the third lease between the parties was only
7 intended to replace Benik’s name with his LLC, Wishbone Ranch, LLC. (Bringgold Depo. at
8 168:5–169:1; Benik Decl. at 5:6–14.) Benik wanted to put the lease into his LLC name since
9 Bringgold had advised him that is how ownership of commercial property is held and Benik
10 was preparing to exercise the purchase option. (Bringgold Depo. at 112:1–113:9.) Bringgold
11 states that he gave no other instructions to Egan and he was upset that she created a whole
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12 new lease for an extended term instead of a one-line amendment. (Bringgold Decl. at 168:13–
13 169:1.) At one point, Bringgold even states that calling Egan’s work in preparing the leases
14 between the parties sloppy “would be an understatement.” (Bringgold Decl. at 156:9–12.)
15 Because the third lease was only intended to replace the name of the Lessee, no one told Benik
16 that it had any effect on the purchase option and he understood it did not. (Benik Decl. at
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17 5:11–12; Egan Depo. at 59:2–6.)
18 E. The Parties Course of Performance
19 Importantly, the only writing where the parties agreed to credit Benik’s and his
20 subtenants’ rent toward the purchase price is the purchase option. (See Pls.’ Opp. Compend.,
21 Exh. 1 at p. 2, § 3.) In February 2017, after the execution of the second lease, Bringgold
22 emailed Benik a spreadsheet, explaining that the spreadsheet was to track Benik’s “rent credit
23 down payment towards the future purchase of the building.” (Bringgold Depo. at 163:9–22.)
24 Again, on June 2, 2017, just after the execution of the third lease, Bringgold continued
25 reaffirming the purchase option by emailing an updated spreadsheet showing that Benik’s and
26 his subtenants’ rent payments were still going towards the purchase option. (Bringgold Depo.
27 at 178:3–180:1.) Twice more, on August 8, 2017 and October 19, 2017, Bringgold emailed
28 Benik spreadsheets confirming that all of his and his subtenants’ rent payments were still going
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 8 No. 1
1 towards the purchase option. (Bringgold Depo. at 181:18–182:13, 190:13–20.)
2 F. Bringgold Learns the Property Has Increased in Value and Changes His Mind About the
3 Purchase Option
4 Bringgold and Contractors Lane set the purchase option price at $2,990,000, which he
5 describes as “just a number we picked for a reasonable return on our investment.” (Bringgold
6 Depo. at 205:20–24.) Contractors Lane originally bought the property for $1,250,000. (Id. at
7 206:12–14.) Then, sometime in or before April 2018, Bringgold and Contractors Lane began
8 refinancing the Property. (Id. at 206:15–20.) An initial appraisal in January 2018 showed the
9 Property valued at almost $5,000,000. (Id. at 216:4–6; Exh. 9.)
10 Around this time, Bringgold began referring to the right of first refusal instead of the
11 purchase option. (Exh. 5 at 5:23–6:6.) In an attempt to forestall further conflict, Benik made an
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12 offer to purchase the property for more than the option price, but Bringgold and Contractors
13 Lane rejected it, citing a newer appraisal that valued the Property at almost $6,000,000.
14 (Bringgold Depo. at 214:20–215:23.) In late April 2018, Bringgold had Egan request that
15 Benik and his subtenants’ sign estoppel certificates that omitted Benik’s purchase option and
16 Heath’s renewal option. (Bringgold Depo. at 206:15–20; 207:23–208:9; Egan Depo. at
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17 161:1–10.) In May 2018, Plaintiffs’ counsel wrote Defendants’ counsel explaining these
18 inaccuracies, but Defendants’ counsel responded claiming that the purchase option had been
19 extinguished, without citing any such provision in the parties’ agreements. (See Exh. 10.)
20 Plaintiffs’ counsel disputed this position in a responsive letter and provided an addendum to
21 the estoppel certificate that corrected the inaccuracies in Bringgold’s version. (See Exh. 11.)
22 Heath also signed a corrected estoppel certificate, rather than the incorrect version. (Exh. 6 at
23 2:12–16.)
24 G. Plaintiffs Exercise the Purchase Option, but Defendants’ Deny Its Existence
25 On September 24, 2018, prior to the expiration of the Purchase Option, counsel for
26 Plaintiffs sent counsel for Defendants a letter exercising the Purchase Option on behalf of
27 Plaintiff according to its terms. (See Pls.’ Opp. Compend., Exh. 14.) Plaintiffs’ counsel
28 requested that Defendants confirm the amount of rent that had been credited towards the
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 9 No. 1
1 Purchase Option’s down payment and requested that Defendants send proposed escrow
2 instructions as required under the terms of the Purchase Option. (See id., Exh. 14.) On
3 October 3, 2018, Defendants’ counsel responded stating that his “client’s position is that there
4 is no option to purchase.” (See id., Exh. 15.) Defendants neither confirmed the amount of the
5 down payment nor provided escrow instructions, thereby preventing Plaintiffs from exercising
6 the Purchase Option according to its terms. (See id., Exh. 15 and Exh. 1 at p. 1, § 3.)
7 Defendants’ counsel only responded with an offer to accept service of a complaint. (See id.,
8 Exh. 15.) Defendants’ counsel also did not suggest that Plaintiffs were in default in any way that
9 would prevent exercise of the option at that time. (See id., Exh. 15.)
10 III. ARGUMENT
11 In these circumstances, the parol evidence rule does not apply. First, the Plaintiffs’
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12 purchase option is a separate, irrevocable written contract and the terms of the parties’ leases
13 do not address the matter of the purchase option, the parol evidence rule does not apply to the
14 terms of the purchase option.
15 Second, even ignoring that the purchase option is a separate contract and the parties’
16 leases do not invoke the parol evidence rule, evidence of the purchase option would still be
LAW CORPORATION
17 admissible under the parol evidence rule to: 1) explain or supplement the terms of the parties’
18 leases with consistent additional terms; 2) explain or supplement the parties’ leases by proof of
19 the parties’ course of performance of the terms of the purchase option even after the later
20 leases were signed; 3) prove a mistake or imperfection in the parties’ leases; 4) prove the
21 circumstances under which the parties’ agreements were made and to which they relate, (see
22 Code Civ. Proc., § 1860; Civ. Code, § 1647); and 5) to establish the invalidity of the parties’
23 leases, for example due to duress, fraudulent inducement, and false promise.
24 Finally, even if none of these justifications applied, evidence of the terms and
25 negotiation of Plaintiffs’ purchase option would still be admissible to prove Egan’s negligence
26 and breach of fiduciary duty in negotiating and preparing the terms of the parties’ agreements
27 and to prove Bringgold’s and 13290 Contractors Lane, LLC’s (“Contractors Lane”) breach of
28 the covenant of good faith and fair dealing.
Plaintiffs’ Opposition to Defendants’ Motion in Limine
{3140460.DOCX;} 10 No. 1
1 A. The parol evidence rule does not apply to the terms of the purchase option.
2 As an initial matter, the parol evidence rule only restricts “evidence of a prior agreement
3 or of a contemporaneous oral agreement” that “contradict” a writing the parties intended as
4 “as a final expression of their agreement with respect to the terms included therein.” (Code
5 Civ. Proc., § 1856.) Here, the purchase option
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1 Louis A. Gonzalez, Jr., State Bar No. 157373 lgonzalez@weintraub.com 2 Zack S. Thompson, State Bar No. 317110 zthompson@weintraub.com 4/14/2021 3 weintraub tobin chediak coleman grodin LAW CORPORATION 4 400 Capitol Mall, 11th Floor Sacramento, CA 95814 5 Tel: (916) 558-6000 Fax: (916) 446-1611 6 Attorneys for Plaintiffs Erik Benik, 7 Wishbone Ranch, LLC and James Heath 8 SUPERIOR COURT OF CALIFORNIA 9 IN AND FOR THE COUNTY OF BUTTE 10 11 ERIK BENIK, an individual; WISHBONE Case No. 18CV03508 RANCH, LLC, a California limited liability weintraub tobin chediak coleman grodin 12 company; and JAMES HEATH, an PLAINTIFFS’ OPPOSITION TO DEFENDANT individual, KATHRYN EGAN’S MOTION IN LIMINE #1 13 [TO EXCLUDE PAROL EVIDENCE] Plaintiffs, 14 vs. 15 13290 CONTRACTORS LANE, LLC, a California limited liability company; Trial Date: April 19, 2021 16 Dept: 1 RICHARD BRINGGOLD, an individual; LAW CORPORATION and DOES 1 through 25, inclusive, Time: 8:00 a.m. 17 Judge: Hon. Tamara L. Mosbarger 18 Defendants. Complaint Filed: October 23, 2018 19 FAC Filed: March 15, 2019 20 SAC Filed: August 7, 2020 21 22 23 24 25 26 27 28 Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 1 No. 1 1 TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................... 2 2 TABLE OF AUTHORITIES ................................................................................................. 3 3 I. INTRODUCTION ..................................................................................................... 4 4 II. RELEVANT FACTS ................................................................................................. 5 5 A. The Parties’ Initial Lease and Purchase Option ............................................................... 5 6 B. Defendants Breach the First Lease by Purporting to “Cancel” It, in Violation of Its Terms ......... 6 7 C. Defendants Pressure Benik to Sign the Second Lease to Avoid Being Evicted ........................ 7 8 9 D. The Third Lease, which the Parties Intended to Change Only the Name of the Lessee............. 8 10 E. The Parties Course of Performance ............................................................................. 8 11 F. Bringgold Learns the Property Has Increased in Value and Changes His Mind About the Purchase Option ........................................................................................................... 9 weintraub tobin chediak coleman grodin 12 G. Plaintiffs Exercise the Purchase Option, but Defendants’ Deny Its Existence .......................... 9 13 III. ARGUMENT ....................................................................................................... 10 14 A. The parol evidence rule does not apply to the terms of the purchase option. ...................... 11 15 B. Even under the parol evidence rule, evidence of the purchase option is admissible. ............. 12 16 1. Evidence of the purchase option is admissible to explain or supplement the terms of the LAW CORPORATION 17 parties’ leases with consistent additional terms. ............................................................... 12 18 2. Evidence of the purchase option is admissible to explain or supplement the parties’ leases by proof of the parties’ course of performance of the terms of the purchase option even after 19 the later leases were signed. ....................................................................................... 13 20 3. Evidence of the purchase option is admissible to prove a mistake or imperfection in the parties’ leases. ......................................................................................................... 14 21 4. Evidence of the purchase option is admissible to prove the circumstances under which the 22 parties’ agreements were made and to which they relate. .................................................. 14 23 5. Evidence of the purchase option is admissible to establish the invalidity of the parties’ 24 leases due to duress, fraudulent inducement, and false promise. ........................................ 15 25 C. Evidence of the purchase option is admissible to prove Egan’s negligence and breach of fiduciary duty and to prove Bringgold’s Contractors Lane’s breach of the covenant of good faith 26 and fair dealing........................................................................................................... 16 27 IV. CONCLUSION ................................................................................................... 16 28 Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 2 No. 1 1 TABLE OF AUTHORITIES 2 Cases 3 C. Robert Nattress & Assocs. v. Cidco (1986) 184 Cal.App.3d 55 ...................................... 11 4 City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375................ 13 5 Civil Code section 1625 .................................................................................................. 4 6 Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866 ........................ 15 7 Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384 ..................................................... 12 8 Edwards v. Centex Real Estate Corp. (1997) 53 C.A.4th 15 ............................................... 15 9 Green v. Sprague Ranches (1959) 170 Cal.App.2d 687 ............................................. 12, 13 10 Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 ................................................................ 14 11 Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441 ........................... 13 weintraub tobin chediak coleman grodin 12 Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33 .................... 14 13 Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375 ................................................ 15 14 Ripani v. Liberty Loan Corp. (1979) 95 Cal.App.3d 603 .................................................... 11 15 Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 16 55 Cal.4th 1169 ...................................................................................................... 15 LAW CORPORATION 17 Rollins v. Stokes (1981) 123 Cal.App.3d 701 .................................................................. 11 18 Thomson v. Canyon (2011) 198 Cal.App.4th 594 ............................................................ 16 19 Warner Bros. Pictures, Inc. v. Brodel (1948) 31 Cal.2d 766 ............................................... 11 20 Wolf v. Superior Court (2004) 114 Cal.App.4th 1343....................................................... 13 21 Statutes 22 Civ. Code, § 1647 .................................................................................................... 4, 12 23 Code Civ. Proc., § 1856 ................................................................................ 4, 11, 12, 16 24 Code Civ. Proc., § 1860 ............................................................................................ 4, 12 25 Evid. Code, § 355 ......................................................................................................... 15 26 27 28 Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 3 No. 1 1 I. INTRODUCTION 2 Defendants misconstrue the rule of Code of Civil Procedure section 1856 and Civil 3 Code section 1625, often called the parol evidence rule, to try to keep unfavorable evidence 4 from the jury. But, because the Plaintiffs’ purchase option is a separate, irrevocable written 5 contract and the terms of the parties’ leases do not address the matter of the purchase option, 6 the parol evidence rule does not apply to the terms of the purchase option. 7 Even ignoring that the purchase option is a separate contract and the parties’ leases do 8 not invoke the parol evidence rule, evidence of the purchase option would still be admissible 9 under the parol evidence rule to: 1) explain or supplement the terms of the parties’ leases with 10 consistent additional terms; 2) explain or supplement the parties’ leases by proof of the parties’ 11 course of performance of the terms of the purchase option even after the later leases were weintraub tobin chediak coleman grodin 12 signed; 3) prove a mistake or imperfection in the parties’ leases; 4) prove the circumstances 13 under which the parties’ agreements were made and to which they relate, (see Code Civ. 14 Proc., § 1860; Civ. Code, § 1647); and 5) to establish the invalidity of the parties’ leases, for 15 example due to duress, fraudulent inducement, and false promise. 16 Given the plentiful justifications for admitting evidence of the parties’ agreements LAW CORPORATION 17 regarding Plaintiffs’ purchase option, including in the text of the parol evidence rule itself, 18 Defendants assertion that the parol evidence rule should hide evidence of their wrongdoing 19 from the jury is frivolous, even with regards to Plaintiffs’ contract claims. But even if none of 20 these justifications applied, evidence of the terms and negotiation of Plaintiffs’ purchase option 21 would still be admissible to prove Egan’s negligence and breach of fiduciary duty in 22 negotiating and preparing the terms of the parties’ agreements and to prove Bringgold’s and 23 13290 Contractors Lane, LLC’s (“Contractors Lane”) breach of the covenant of good faith and 24 fair dealing. 25 In short, the parol evidence rule does not permit Defendants to hide their conduct in 26 negotiating the terms of the purchase option and inducing Plaintiffs’ acceptance of the leases 27 between the parties by promising the purchase option. 28 Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 4 No. 1 1 II. RELEVANT FACTS 2 A. The Parties’ Initial Lease and Purchase Option 3 In September 2016, Benik began negotiating with Bringgold, a manager of Contractors 4 Lane, and his agent, Egan, to move his business from the Highway 70 Industrial Park at 4801 5 Feather River Blvd. Ste #6 in Oroville, California, to industrial space at 13290 Contractors 6 Drive in Chico, California (the “Property”). (See Compendium of Evid. in Opp. to Defs.’ Mots. 7 in Limine (“Pls. Opp. Compend.”), Exh. 5 [Benik Decl. in Support of Pls.’ Mot. for Prelim. Inj.] 8 (“Benik Decl.”) at 2:11–13.) Egan proposed to Bringgold that he try to offer a purchase option 9 with a lease to get the first tenant into the Property, telling him “that if we do a lease purchase 10 option, she would get somebody interested in leasing it.” (See Pls. Opp. Compend., Exh. 2 11 (“Bringgold Depo.”) at 85:1–3.) Because Benik would have to expend tens of thousands of weintraub tobin chediak coleman grodin 12 dollars to move his laser fabrication equipment to the Property, Benik was very interested in the 13 purchase option, which he could exercise so that he would not have to move again. (Bringgold 14 Depo. at 81:18–23.) 15 Egan went back and forth between Bringgold and Benik negotiating the terms of the 16 lease and purchase option. (Bringgold Depo. at 74:3–12.) From Bringgold’s perspective, Egan LAW CORPORATION 17 represented both him, (id. at 65:17–66:4; 149:1–5), and Benik, (id. at 89:7–15), and she was 18 in charge of negotiating the terms of the leases, (id. at 74:3–12, 74:20–75:2), and preparing 19 the leases, (id. at 88:10–13, 21–24, 142:23–24, 168:5–18). Egan was also Bringgold’s 20 property manager for the Property, “from the start.” (Id. at 131:14–22.) Bringgold paid Egan 21 for securing Benik’s lease, (id. at 159:15–20), signed a standard agreement with Egan, and 22 planned to pay her commission on the purchase price for Benik’s exercise of the purchase 23 option, (id. at 86:21–25). 24 Defendants also agreed to allow Benik to sublease the other space in the industrial 25 warehouse he was not using at the property and to credit the rent Benik and his subtenants 26 paid towards the down payment for the purchase option. (Bringgold Depo. at 85:24–86:4; 27 164:17–25; see also Pls.’ Opp. Compend., Exh. 1 at p. 2, ¶ 3.) Egan prepared those 28 subleases for Benik and Bringgold approved them for Contractors Lane. (Bringgold Depo. at Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 5 No. 1 1 87:18–88:9.) 2 B. Defendants Breach the First Lease by Purporting to “Cancel” It, in Violation of Its Terms 3 The Landlord Defendants’ purported to cancel the First Lease on December 5, 2016. 4 (Bringgold Depo. at 115:25–117:4; see Pls. Opp. Compendium, Exh. 12.) The cancellation 5 message does not state that it is cancelling the purchase option; in fact, it says the opposite: 6 “We are not trying to take away the purchase or the lease from you . . . .” (Bringgold Depo. at 7 126:14–17; see Pls. Opp. Compendium, Exh. 12.) Defendants purported justification for the 8 “cancellation” was Benik’s failure to make the first rent payment on time. (Bringgold Depo. at 9 130:15–17.) But the first lease clearly requires (and California law requires in any event) that 10 the notice requirements of California law be met and that the lessee has a chance to cure any 11 default. (See Pls. Opp. Compendium, Exh. 4 at p. 11, § 13.1(b).) weintraub tobin chediak coleman grodin 12 But Defendants admit that they left blank the space on the lease for the address where 13 Benik was required to send rent. (Bringgold Depo. at 113:20–114:1; Pls. Opp. Compend., 14 Exh. 2 (“Egan Depo.”) at 51:10–24; see Pls. Opp. Compendium, Exh. 4 at p. 4, § 4.3 and p. 15 17.) Bringgold even admitted that he did not provide a payment address in writing at any time, 16 as required by the first lease. (Bringgold Depo. at 107:21–108:14; see Pls. Opp. LAW CORPORATION 17 Compendium, Exh. 4 at p. 4, § 4.3.) Bringgold blames Egan for this failure, saying he did not 18 notice the omission when he signed the first lease. (Bringgold Depo. at 114:19–115:21.) He 19 even suggested that she had left those areas blank because she was not yet a broker and her 20 supervising broker was not involved in the transaction. (Bringgold Depo at 156:18–159:14.) 21 And Bringgold states that Egan told him he could terminate the lease on December 5, 2016, 22 that it was her duty to provide a three-day Notice to Quit, and that he believes she did. 23 (Bringgold Depo. at 130:15–131:13.) Egan does not remember preparing a three-day notice 24 at that time, (Egan Depo. at 53:22–54:12), and says the termination was Bringgold’s idea, (id. 25 at 55:19–56:3). No three-day notice was issued purporting to terminate the lease. (Benik Decl. 26 at 4:1–6.) 27 For his part, Benik attempted to pay his first month’s rent and security deposit on 28 December 1, 2016 as scheduled, but discovered that Defendants had not provided the Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 6 No. 1 1 address where he was required to pay rent. (Benik Decl. at 3:25–27.) Benik attempted to call 2 Egan on Thursday, December 1, 2016 and again on Friday, December 2, 2016, but he could 3 not reach her and she did not return his calls. (Id. at 3:27–4:2.) Bringgold confirms that Egan 4 told him about Benik’s attempts to reach her. (Bringgold Depo. at 134:9–19.) The purported 5 cancellation email came without notice and before Benik could get a hold of any of the 6 Defendants. (Benik Decl. at 4:1–6.) 7 C. Defendants Pressure Benik to Sign the Second Lease to Avoid Being Evicted 8 At the time of the purported “cancellation” of the first lease, Bringgold was aware that 9 Benik had spent a significant amount of money moving his industrial equipment to the 10 Property. (Bringgold Depo. at 132:22–133:4.) Nevertheless, Bringgold, in an attempt at 11 unlawful self-help, gave Benik three options: 1) move his equipment back out; 2) negotiate a weintraub tobin chediak coleman grodin 12 new lease with Defendants; or 3) face eviction proceedings. (Bringgold Depo. at 134:20– 13 135:9.) Bringgold also promised Benik that the purchase option would remain valid and that 14 his and his subtenants’ rent would continue to be applied towards the purchase price. (Benik 15 Decl. at 4:13–15.) 16 Then, when Bringgold and Benik were negotiating the second version of the lease, LAW CORPORATION 17 Bringgold explained to Benik that the right of first refusal Egan added to the second lease 18 would protect the purchase option if a third party made an offer to purchase the Property for 19 less than the option price, since Benik would be able to match the lower price rather than 20 paying the option price. (Pls.’ Opp. Compend., Exh. 13 at 2:17–21.) Egan had discussions 21 with both Benik and Bringgold about what to put in the second lease and never told Benik 22 anything about the purchase option going away or being replaced by the right of first refusal, 23 even though she was supposedly working to protect Benik’s interests. (Id. at 2:23–26.) Because 24 of Defendants’ repeated promises and because Benik trusted that they would inform him if 25 something was happening to the purchase option, since they knew it was the reason he had 26 moved to the Property, Benik signed the second lease, understanding that it included the 27 purchase option Egan had prepared. (Id. at 2:26–28.) Bringgold told Benik that the right of 28 first refusal “was to allow him first right to buy the building over anyone else.” (Bringgold Depo. Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 7 No. 1 1 at 151:16–152:1.) Egan does not recall having any discussions with anyone other than 2 Bringgold about his desire to terminate the purchase option and to replace it with a right of first 3 refusal and does not recall telling Benik about the purported removal of the purchase option or 4 what that meant. (Egan Depo. at 59:2–6; 80:6–20.) 5 D. The Third Lease, which the Parties Intended to Change Only the Name of the Lessee 6 Both Benik and Bringgold agree that the third lease between the parties was only 7 intended to replace Benik’s name with his LLC, Wishbone Ranch, LLC. (Bringgold Depo. at 8 168:5–169:1; Benik Decl. at 5:6–14.) Benik wanted to put the lease into his LLC name since 9 Bringgold had advised him that is how ownership of commercial property is held and Benik 10 was preparing to exercise the purchase option. (Bringgold Depo. at 112:1–113:9.) Bringgold 11 states that he gave no other instructions to Egan and he was upset that she created a whole weintraub tobin chediak coleman grodin 12 new lease for an extended term instead of a one-line amendment. (Bringgold Decl. at 168:13– 13 169:1.) At one point, Bringgold even states that calling Egan’s work in preparing the leases 14 between the parties sloppy “would be an understatement.” (Bringgold Decl. at 156:9–12.) 15 Because the third lease was only intended to replace the name of the Lessee, no one told Benik 16 that it had any effect on the purchase option and he understood it did not. (Benik Decl. at LAW CORPORATION 17 5:11–12; Egan Depo. at 59:2–6.) 18 E. The Parties Course of Performance 19 Importantly, the only writing where the parties agreed to credit Benik’s and his 20 subtenants’ rent toward the purchase price is the purchase option. (See Pls.’ Opp. Compend., 21 Exh. 1 at p. 2, § 3.) In February 2017, after the execution of the second lease, Bringgold 22 emailed Benik a spreadsheet, explaining that the spreadsheet was to track Benik’s “rent credit 23 down payment towards the future purchase of the building.” (Bringgold Depo. at 163:9–22.) 24 Again, on June 2, 2017, just after the execution of the third lease, Bringgold continued 25 reaffirming the purchase option by emailing an updated spreadsheet showing that Benik’s and 26 his subtenants’ rent payments were still going towards the purchase option. (Bringgold Depo. 27 at 178:3–180:1.) Twice more, on August 8, 2017 and October 19, 2017, Bringgold emailed 28 Benik spreadsheets confirming that all of his and his subtenants’ rent payments were still going Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 8 No. 1 1 towards the purchase option. (Bringgold Depo. at 181:18–182:13, 190:13–20.) 2 F. Bringgold Learns the Property Has Increased in Value and Changes His Mind About the 3 Purchase Option 4 Bringgold and Contractors Lane set the purchase option price at $2,990,000, which he 5 describes as “just a number we picked for a reasonable return on our investment.” (Bringgold 6 Depo. at 205:20–24.) Contractors Lane originally bought the property for $1,250,000. (Id. at 7 206:12–14.) Then, sometime in or before April 2018, Bringgold and Contractors Lane began 8 refinancing the Property. (Id. at 206:15–20.) An initial appraisal in January 2018 showed the 9 Property valued at almost $5,000,000. (Id. at 216:4–6; Exh. 9.) 10 Around this time, Bringgold began referring to the right of first refusal instead of the 11 purchase option. (Exh. 5 at 5:23–6:6.) In an attempt to forestall further conflict, Benik made an weintraub tobin chediak coleman grodin 12 offer to purchase the property for more than the option price, but Bringgold and Contractors 13 Lane rejected it, citing a newer appraisal that valued the Property at almost $6,000,000. 14 (Bringgold Depo. at 214:20–215:23.) In late April 2018, Bringgold had Egan request that 15 Benik and his subtenants’ sign estoppel certificates that omitted Benik’s purchase option and 16 Heath’s renewal option. (Bringgold Depo. at 206:15–20; 207:23–208:9; Egan Depo. at LAW CORPORATION 17 161:1–10.) In May 2018, Plaintiffs’ counsel wrote Defendants’ counsel explaining these 18 inaccuracies, but Defendants’ counsel responded claiming that the purchase option had been 19 extinguished, without citing any such provision in the parties’ agreements. (See Exh. 10.) 20 Plaintiffs’ counsel disputed this position in a responsive letter and provided an addendum to 21 the estoppel certificate that corrected the inaccuracies in Bringgold’s version. (See Exh. 11.) 22 Heath also signed a corrected estoppel certificate, rather than the incorrect version. (Exh. 6 at 23 2:12–16.) 24 G. Plaintiffs Exercise the Purchase Option, but Defendants’ Deny Its Existence 25 On September 24, 2018, prior to the expiration of the Purchase Option, counsel for 26 Plaintiffs sent counsel for Defendants a letter exercising the Purchase Option on behalf of 27 Plaintiff according to its terms. (See Pls.’ Opp. Compend., Exh. 14.) Plaintiffs’ counsel 28 requested that Defendants confirm the amount of rent that had been credited towards the Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 9 No. 1 1 Purchase Option’s down payment and requested that Defendants send proposed escrow 2 instructions as required under the terms of the Purchase Option. (See id., Exh. 14.) On 3 October 3, 2018, Defendants’ counsel responded stating that his “client’s position is that there 4 is no option to purchase.” (See id., Exh. 15.) Defendants neither confirmed the amount of the 5 down payment nor provided escrow instructions, thereby preventing Plaintiffs from exercising 6 the Purchase Option according to its terms. (See id., Exh. 15 and Exh. 1 at p. 1, § 3.) 7 Defendants’ counsel only responded with an offer to accept service of a complaint. (See id., 8 Exh. 15.) Defendants’ counsel also did not suggest that Plaintiffs were in default in any way that 9 would prevent exercise of the option at that time. (See id., Exh. 15.) 10 III. ARGUMENT 11 In these circumstances, the parol evidence rule does not apply. First, the Plaintiffs’ weintraub tobin chediak coleman grodin 12 purchase option is a separate, irrevocable written contract and the terms of the parties’ leases 13 do not address the matter of the purchase option, the parol evidence rule does not apply to the 14 terms of the purchase option. 15 Second, even ignoring that the purchase option is a separate contract and the parties’ 16 leases do not invoke the parol evidence rule, evidence of the purchase option would still be LAW CORPORATION 17 admissible under the parol evidence rule to: 1) explain or supplement the terms of the parties’ 18 leases with consistent additional terms; 2) explain or supplement the parties’ leases by proof of 19 the parties’ course of performance of the terms of the purchase option even after the later 20 leases were signed; 3) prove a mistake or imperfection in the parties’ leases; 4) prove the 21 circumstances under which the parties’ agreements were made and to which they relate, (see 22 Code Civ. Proc., § 1860; Civ. Code, § 1647); and 5) to establish the invalidity of the parties’ 23 leases, for example due to duress, fraudulent inducement, and false promise. 24 Finally, even if none of these justifications applied, evidence of the terms and 25 negotiation of Plaintiffs’ purchase option would still be admissible to prove Egan’s negligence 26 and breach of fiduciary duty in negotiating and preparing the terms of the parties’ agreements 27 and to prove Bringgold’s and 13290 Contractors Lane, LLC’s (“Contractors Lane”) breach of 28 the covenant of good faith and fair dealing. Plaintiffs’ Opposition to Defendants’ Motion in Limine {3140460.DOCX;} 10 No. 1 1 A. The parol evidence rule does not apply to the terms of the purchase option. 2 As an initial matter, the parol evidence rule only restricts “evidence of a prior agreement 3 or of a contemporaneous oral agreement” that “contradict” a writing the parties intended as 4 “as a final expression of their agreement with respect to the terms included therein.” (Code 5 Civ. Proc., § 1856.) Here, the purchase option