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Tin Tin Corp. v. Pacific Rim Park

February 2, 2009

TIN TIN CORPORATION, ET. AL., PLAINTIFFS AND APPELLANTS,
v.
PACIFIC RIM PARK, LLC, DEFENDANT AND APPELLANT.



(Santa Clara County Super. Ct. No. CV054216) Trial Judge: Hon. Gregory H. Ward.

The opinion of the court was delivered by: Elia, J.

CERTIFIED FOR PUBLICATION

In this action for breach of contract and related causes of action, 12 commercial tenants alleged that their landlord, Pacific Rim Park, LLC (PRP), had been unfairly charging them the cost of its LLC taxes and fees. Plaintiffs further alleged that PRP had failed to provide reasonably detailed annual statements of the expenses they were required to pay under their leases. In a cross-complaint PRP alleged that one of the tenants, Tin Tin Corporation (Tin Tin), had breached its lease by failing to remodel the premises it occupied. After a court trial, neither party recovered, and both appeal. We find merit in plaintiffs' first argument and reverse on that ground alone.

Background In November 2000 Steven Caserza formed PRP, a limited liability company, expressly to acquire and operate the Pacific Rim Park shopping center. The center was occupied by a number of business tenants anchored by Tin Tin Corporation, a grocery store. Each business rented the premises under a lease that differed in some respects from others, but they all included one term, the "Lessee's Share of Common Area Operating Expenses." These "CAM" expenses (or "CAMs") were defined in four of the leases as "all costs incurred by Lessor relating to the ownership and operation of the Project."*fn1 The other form of lease used for most tenancies was similar, although it referred to the"Industrial/Commercial/office/Shopping Center" rather than the "Project." In each case the definition of "Common Area Operating Expenses" was followed by a list of examples, such as maintenance and improvement costs, utilities, property management and other property services, "Real Property Taxes," and insurance premiums. Each tenant's share of these CAM expenses was based on the proportion of space the tenant occupied relative to the entire premises.

In 2003, 11 of the tenants in the shopping center sued PRP for breach of contract, breach of the covenant of good faith and fair dealing, and fraud. The plaintiffs alleged that PRP had inflated the amounts it had incurred for the CAMs and had failed to provide a reasonably detailed statement showing each tenant's actual share of the CAM charges for the prior year. The parties settled that action, with the tenants to pay a lower amount in accordance with a newer method of calculating the management, accounting, and administrative fees.

On December 9, 2005, 12 tenants commenced the instant action against PRP, asserting breach of contract, fraud, unfair business practices, and related causes of action. Plaintiffs again alleged that the CAM charges were excessive; this time they specifically sought restitution for the LLC fees collected by the Franchise Tax Board for 2001 through 2006, totaling $32,153.92. Plaintiffs further alleged that PRP had failed to provide a reasonably detailed statement showing each tenant's actual share of the CAMs for the preceding year. Plaintiffs requested damages, an accounting, injunctive relief, and a judicial declaration of each party's rights and duties under the leases.

PRP cross-complained for breach of the lease, declaratory relief, and related claims. PRP alleged that Tin Tin Corporation had failed to remodel its premises as required by its lease, and that another tenant, All Luck Enterprises, LLC (All Luck) had breached its lease by failing to maintain insurance policies for PRP's benefit. Because plaintiffs' new complaint contained the same claims as in the prior action, PRP further alleged that nine of the plaintiffs had breached the settlement agreement.

The matter was tried by the court in May 2007. Plaintiffs sought to prove that PRP had improperly included as a CAM expense its LLC fees and taxes. They further argued that the annual statement of CAMs did not provide details of the actual expenses incurred, and that PRP had not adequately complied with their requests for more information.

The court granted nonsuit on plaintiffs' causes of action for fraud, breach of fiduciary duty, and accounting. On October 11, 2007, after hearing testimony and considering the parties' post-trial briefs, the court found in PRP's favor on plaintiffs' complaint. The court specifically found that plaintiffs were properly charged the challenged LLC fees and taxes because those were "costs relating to the ownership and operation of the shopping center within the definition of Common Area Operating Expenses." In the court's view, LLC fees and expenses fell into the category of "Real Property Taxes," a term defined in the leases and included on the list of CAM expenses that could be passed on to the tenants. As to the second claim, the court ruled that plaintiffs had waived their right to a more detailed annual statement. They had received an annual letter in the same format for several years without complaining or asking for more detail; instead, they had only asked for more information. PRP had then provided a "detailed accounting of the CAM charges," and when plaintiffs requested invoices to support the accounting, they received those as well. Thus, the court found, PRP had "substantially complied with the contract requirement" and plaintiffs had demonstrated their "willingness to overlook any lack of detail in the annual letter in favor of access to the source material."

Addressing the cross-complaint, the court found in PRP's favor on the cause of action for declaratory relief, but against PRP on its claims against Tin Tin and All Luck for breach of contract. The court ruled that PRP's allegation that Tin Tin had breached its promise to remodel its premises before March 31, 2000 was barred by the statute of limitations, and the court rejected PRP's assertions of equitable tolling and estoppel. The court further ruled against PRP on its claim that All Luck had failed to maintain insurance, as PRP had suffered no damages as a result of that lapse.

Both sides have appealed. Plaintiffs contend that the leases did not permit the lessor to pass through its LLC fees to its tenants, and they renew their claim that PRP had failed to provide a "reasonably detailed statement" of the CAM charges as required by the leases. PRP challenges the court's ruling that its cross-complaint was barred by the statute of limitations.

Discussion

1. LLC Fees and Taxes as Common Area Maintenance Expenses

On appeal, plaintiffs contend that the court misinterpreted the CAM provisions to allow PRP to charge them with its LLC fees and taxes. These expenses, plaintiffs argue, "are voluntary costs of doing business solely for the personal benefit and protection of the landlord/owner to shield himself from liability... and unlike common area operational expenses ...


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