Superior Court of Sacramento County, No. 319785, Fred W. Marler, Jr., Judge.
Opinion by Blease, Acting P. J., with Sparks, J., and Smith (s. B.), J.,*fn* concurring.
William Jenkins and Nathalie Munk (landlords) appeal from an unfavorable judgment in an unlawful detainer action. The trial court gave judgment for the tenant, Tuneup Masters, on the ground that it had exercised an option to extend the lease. The notice of extension was lost in the mail. The landlords contend that the court erred because the notice was not mailed in the manner required by the lease and because there is insufficient evidence to support a finding that the notice was mailed at all. We disagree and will affirm the judgment.
In the published portion of this opinion we hold, among other things, that the risk of loss of a notice of extension of a lease, required under its provisions to be "sent by  certified United States Mail, return receipt requested," is upon the addressee once the notice reaches the custody of the United States Postal Service, notwithstanding that the notice is not deposited in an officially designated receptacle.*fn1
Tuneup Masters commenced its tenancy at 2820 P Street, Sacramento, under a written lease on January 15, 1979. The leasehold term expired five years from the first day of the calendar month following the date of commencement. The lease provides that the tenant has an option to extend the lease for an additional five years. To do so the tenant must give notice of its exercise of the option six months before the expiration of the lease, as follows: "36. Service of Notice : Notices hereunder shall be in writing signed by the party serving the same and shall be sent by registered or certified United States Mail, return receipt requested, postage prepaid and, [shall be addressed to the other party as provided]. Any notice so mailed shall be deemed to have been given as of the time said notice is deposited in the United States Mail."
At the outset of trial the parties acquiesced in the following theory of trial. "The Court: I think it would follow from prior discussions with the court that the sole and narrow issue before the court is whether or not prior to August 1, 1983, a notice of renewal was deposited in the United States Mail by the defendant by certified or registered mail, return receipt requested, and if I find by a preponderance of the evidence -- [ para. ] I'll put it this way: If I find by a preponderance of the evidence that it was, I find for the defense. [ para. ] In the absence of such a finding, I find for the plaintiff."
The principal evidence bearing on this issue was adduced from Larry Selditz, vice-president of Tuneup Masters. Selditz was responsible for exercising lease extension options. He testified about the manner of preparation and sending of the option. Selditz receives a computer report informing him of the date when the option must be exercised. He then prepares a letter exercising the option for transmittal to the landlord. Selditz dictates the letter; his secretary types it, appends the certified mail number, prepares the envelope, and affixes the certified mail sticker and the return receipt. In the normal course of business the correspondence is delivered to Selditz, prepared for mailing, so that he can be satisfied that the return receipt is affixed. He signs the correspondence and returns it to his secretary. No copies are made until Selditz signs the original. Selditz's secretary seals the envelope before it is mailed.
When an envelope has been sealed it is taken to the Office Services Group (O.S.G.) in another section of the corporate office. O.S.G. makes routine mail pickups within the office and sometimes Selditz's secretary drops outgoing mail off at the O.S.G. O.S.G. affixes the correct postage.
Selditz was asked to relate the usual practice of the office with respect to depositing mail. The plaintiff landlords objected on the ground that he was not competent to testify concerning such practices. In response, Selditz testified that the office is small and everyone observes what everyone else does. He had seen the procedure for mailing numerous times. There is a post office annex on the ground floor of the building, in the parking structure. Postal personnel occupy the annex only between the hours of 9 and 10 a.m. At the end of the day when Selditz goes to his car he has often seen O.S.G. personnel carrying mail to the post office annex. Office hours are 8 a.m. to 5 p.m.; at 5 p.m. O.S.G. takes the mail to the annex. There is outgoing mail every night. The bagged mail is left outside the annex with the mail of other tenants in the building. A small postal truck arrives everyday between 5 and 5:15 p.m. and picks up outgoing mail.
Selditz testified it is his invariable practice to have letters dated on the date they are sent. When Selditz sends a letter he maintains a copy in his chronological correspondence file. A copy of the notice of exercise of option to extend this lease was present in the appropriate chronological order. Selditz also sends a copy of lease extension letters to the chief executive officer, Mr. Granatelli. A copy of the lease extension letter, dated July 29, 1983, was located in Mr. Granatelli's correspondence file. Based upon his practice and the copy in Granatelli's file Selditz testified he sent the copy to Granatelli on July 29, 1983.
Selditz's present secretary was hired on or about July 7, 1983. In July and August of 1983 the Tuneup Masters office was in the process of moving
between floors in their office building. A search of Tuneup Masters's office did not uncover the original of the notice of exercise of option to extend this lease. There was no evidence that other mail, outgoing on July 29, 1983, had been lost.
Selditz has no specific recollection of the correspondence in this case. He exercised perhaps 75 such options in 1983. Tuneup Masters has invested a significant amount of money in equipment installation at this leasehold. It always exercises options to extend leases. This leasehold is a highly profitable one.
To send a letter by certified mail in July 1983 Tuneup Masters used Postal Service Form 3800. Part of the form is affixed to the envelope and part may be detached to provide a record for the mailing party. In July 1983 Tuneup Masters did not retain the record portion of the form. Selditz saw no reason to do so since the certified mail number was kept on the file copy of the correspondence. In July 1983 Tuneup Masters had no system for logging or filing the return receipt cards that are returned in the mail after delivery of certified mail.
Prior to February 1, 1984, the landlords received no notice from Tuneup Masters that it intended to extend this lease. When matter is sent by certified mail and the deposit is not at a post office, there is no record established at the post office of origin. Approximately 70 percent of certified mail sent by businesses is mailed in this fashion. Certified mail is handled the same as first class mail until it arrives at the post office of destination. A postal employee testified that he searched the records of the certified mail delivered by the landlords' post office and that there is no record of certified mail addressed to the landlords bearing the certified mail number on Tuneup Masters's copies of the lease option extension notice.
The landlords contend that the trial court erred in finding that notice of extension of the lease was given by Tuneup Masters as required by the lease. They first claim that the mailing procedure followed by Tuneup Masters does not comply with postal service requirements, which they view as an intrinsic part of the notice procedures.
The threshold question is -- what is the meaning of the lease provisions prescribing the manner for exercise of the option? (See generally, Annot., Sufficiency as to method of giving oral or written notice exercising option
to renew or extend lease (1984) 29 A.L.R.4th 903.) The lease provides that written notice must "be sent by registered or certified United States Mail" and that any notice "so mailed shall be deemed to have been given as of the time said notice is deposited in the United States Mail." The landlords invoke the rule that the exercise of an option to extend a lease must strictly follow the provisions of the lease prescribing the manner in which the option is to be exercised. (See Palo Alto Town & Country Village, Inc. v. BBTC Company (1974) 11 Cal. 3d 494, 498 [113 Cal. Rptr. 705, 521 P.2d 1097].) They implicitly derive from this rule that the lease provision for giving ...