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Thrifty Payless, Inc. v. Americana at Brand, LLC

California Court of Appeals, Second District, First Division

July 19, 2013

THRIFTY PAYLESS, INC., Plaintiff and Appellant,
v.
THE AMERICANA AT BRAND, LLC, Defendant and Respondent.

Pub. order 8/14/13 (see end of opn.)

APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BC468465 Malcolm H. Mackey, Judge.

Snell & Wilmer, Mary-Christine Sungaila; Corfield Feld, Richard G. Feld and Michael A. Corfield for Plaintiff and Appellant.

Gordon & Rees, Theresa A. Kirstovich, Eleanor M. Welke and Joel M. Moskowitz for Defendant and Respondent.

JOHNSON, J.

Plaintiff Thrifty/Payless, Inc. (Thrifty) dba Rite Aid, is a tenant of defendant Americana at Brand’s (Americana) eponymous shopping center in Glendale. Negotiations held through letters of intent before the execution of Thrifty’s lease contained Americana’s per square foot estimates concerning Thrifty’s probable pro rata share of property taxes, insurance, and common area maintenance (CAM). The final lease stated that Thrifty would pay its pro rata share of such expenses and did not contain any formulas, figures or percentages regarding Thrifty’s share of such expenses. After Thrifty moved into the shopping center, its share of these expenses substantially exceeded Americana’s estimates and Thrifty sued for fraud, rescission based mutual mistake and mistake of fact, and breach of lease and breach of the implied covenant of good faith and fair dealing. The trial court granted Americana’s demurrer without leave to amend, finding that the prior negotiations constituted estimates and could not be statements of fact upon which a claim of fraud could be based, and Thrifty failed to allege facts establishing innocent misrepresentation, mistake, breach of lease, and breach of the implied covenant of good faith and fair dealing. We reverse.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY[1]

Thrifty is a tenant of Americana’s shopping center known as the “Americana at Brand” located in Glendale. In September 2004, before the development of the shopping center, Thrifty and Americana entered into negotiations for Thrifty to lease retail space at the shopping center. James Ashton of AFC Commercial Real Estate Group, Americana’s agent, submitted a letter of intent (LOI) dated February 17, 2004 to Thrifty. The LOI detailed the specific terms and conditions of the proposed lease. Three salient items are Thrifty’s share of real property taxes, insurance, and common area expenses. Those were estimated as follows:

1. Annual real property taxes at $3 per square foot;

2. Annual insurance premiums for the first year of the lease at 80 cents per square foot;

3. Annual common area maintenance for the first year of the lease term at $14.50 per square foot.

On May 13, 2004, Tracy Verastegui, Real Estate Director for Thrifty, made changes to the LOI by interlineations and returned it to Ashton. Verastegui requested a breakdown of the common area maintenance obligations for the first year, writing “[p]lease provide [a] budget which justifies the $14.50 estimate as I am not agreeing to this amount [without] seeing the line items.”

On May 17, 2004, Ashton returned a revised LOI (final LOI) to Verastegui, providing that Thrifty would pay its pro rata share of CAM, with no caps, estimated at $14.50 per square foot annually. Thrifty crossed out the estimate, and Verastegui wrote in, “Budget to be provided to Tenant prior to lease execution.”

On or about September 1, 2004, Howard Durchslag, the Vice President of Leasing and Acquisitions of Americana’s parent company, provided Verastegui with a detailed breakdown of the CAM. Durchslag’s letter stated, “I have... attached our preliminary CAM budget for your eyes only, so that you may be armed with necessary explanations as to CAM costs. Please remember that the costs reflected are purely estimated values.” The breakdown provided that the total square footage of the shopping center participating in sharing of CAM would be 450, 000 square feet of gross leasable area. Thrifty’s proportionate share, based upon its square footage, was 2.2 percent of the total CAM, estimated to be $14.35 per square foot.

On or about February 22, 2005, Thrifty and Americana executed a written lease.[2] The minimum rent commencement date as set forth in the Lease was May 2, 2008. On or about November 6, 2008, Americana and Thrifty executed an amendment to the lease.

The first full year in which Thrifty was obligated to pay its share of taxes, insurance, and CAM was 2009. In 2009, Americana charged Thrifty $169, 686 in taxes, instead of the $43, 836 that would have been due under the rate specified in the final LOI; Americana charged $28, 110 insurance, instead of the $11, 689.60 that would have been due under the rate specified in the final LOI; and Americana charged $412, 307 for CAM, instead of the $211, 874 that would have been due under the rate specified in the final LOI. Despite the LOIs and the breakdown ...


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