AHZ Co. v. Sharp Healthcare CA4/1 ( 2020 )

Filed 12/29/20 AHZ Co. v. Sharp Healthcare CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
AHZ CO., INC., D075975
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2016-00044635-
CU-OR-CTL)
SHARP HEALTHCARE,
Defendant and Appellant.
AHZ CO., INC., D076362
Plaintiff and Appellant,
v.
SHARP HEALTHCARE,
Defendant and Respondent.
APPEALS from a judgment and order of the Superior Court of
San Diego County, Ronald L. Styn, Judge. Affirmed.
Higgs Fletcher & Mack, John Morris and Rachel Moffitt Garrard for
Defendant and Appellant.
Hamilton & Associates, Ben-Thomas Hamilton, Michaele M. Gonzalez,
and Michael W. Ibach for Plaintiff and Appellant.
This case involves a dispute between corporate neighbors over a
coveted and finite resource: parking spaces. In 2016, Sharp Healthcare
(Sharp) purchased a property it had previously leased for more than a
decade, believing an easement created in 1990 entitled it to exclusive use of
two parking areas attached to the neighboring property. Sharp’s neighbor,
AHZ. Co., Inc. (AHZ), thought otherwise. Tensions mounted over this
difference of opinion—“no parking” signs appeared, security guards were
deployed to the parking lots, and cease-and-desist letters were sent. The
conflict culminated in a bench trial, where the court found that AHZ and
Sharp had to share the parking areas. Sharp appeals the ruling, arguing
that the court’s interpretation of the easement agreement was flawed. AHZ
filed its own appeal taking issue with the court’s decision not to award any
attorney’s fees and costs. We consider these cases together and affirm the
trial court’s conclusions on both issues.
FACTUAL AND PROCEDURAL BACKGROUND
The conflict in this case was seeded by the confusing terms of an
easement agreement written long before either party owned their respective
properties. To understand this context, we provide the relevant history of the
buildings.
In the late 1980’s, Donald Sammis was a major commercial property
developer in the San Diego area. He purchased a lot on Activity Road and
erected four buildings through his partnership entities. The developers
referred to these buildings as sites A, B, C, and D. The C building was
initially owned by Miramar Park Phase One Limited (Miramar) while the
neighboring B building directly to the east was owned by LMIP. Both were
Sammis partnerships. The C building was leased to Sharp in 1990. A year
2
later Miramar sold it to Carson Property Company, LP (Carson), which
remained Sharp’s landlord until Sharp bought the building in 2016.
In November 1990, Sammis created an easement agreement (referred
to here as “the agreement” or “the easement agreement”) between Miramar
and LMIP that established two different easements between the B and C
buildings—one for access, called the “reciprocal easement,” and one for
parking, called the “parking easement.”1 Under the reciprocal easement, the
site owners granted to each other “a mutually reciprocal, appurtenant, non-
exclusive” easement “for vehicular and pedestrian access” along the west side
of the B building (italics added in first quote). This easement apparently
runs through part of the C site property as well, though it is not eminently
clear from the associated diagrams. The reciprocal easement did not involve
any parking. The “parking easement,” on the other hand, was a unilateral
grant from LMIP to Miramar of “an appurtenant, exclusive, permanent
easement for the purposes of parking” on the north and south side lots on the
B site (italics added). Sammis apparently created several easements between
the four properties in the complex around this time, but the controversy in
this case concerns only the meaning of the November 1990 agreement.
The following picture shows the B and C sites and approximate
locations of the parking and reciprocal easements. As depicted, the reciprocal
easement runs between the two buildings, along the B site’s western side,
while the parking easement covers two lots on the north and the south sides
of the B building.
1 Strangely enough, Sammis seems to have brokered the terms of the
agreement with himself. Sammis was the general partner and signatory for
both LMIP and Miramar.
3
In 2005, the B site changed hands when Zabihullah Abdullah, the
owner of AHZ, bought the property. There were signs of a budding conflict
over the parking as early as 2012 when AHZ sent a letter to Carson
complaining about Sharp’s excessive use of the shared parking areas. But
the controversy did not mature until Sharp bought the C site in 2016. Sharp
was apparently convinced prior to its purchase that the parking easement
granted the C site exclusive use of the north and south lots on the B property.
At some point during Sharp’s escrow period, Abdullah placed “no parking”
signs in the parking easement area. Sharp responded by posting security
guards on the north and south lots to turn away any cars that were
unaffiliated with Sharp. AHZ then sent a cease-and-desist letter and
initiated litigation.
AHZ sued for several forms of relief, including (1) termination of all the
easements based on Sharp’s monopolization of the parking areas, (2) an
injunction to prevent Sharp from stationing security guards on the B site,
(3) damages for a variety of tort claims, and (4) a declaration as to the scope
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of the easements. Sharp cross-complained, asking for a declaration of its
right to exclusive use of the north and south parking and an injunction to
prevent AHZ from continued interference.
The case proceeded to a bench trial. By that time, AHZ’s position had
evolved. It still argued the parking easement should be dissolved and it was
entitled to damages, but it also advanced a theory that the parking easement
violated zoning laws. A significant part of the trial was dedicated to this
point, with experts proffered by both sides. Sharp rebutted the zoning
argument, but it focused on the language in the easement agreement and
framed the controversy as a case of buyer’s remorse (because Abdullah had
rushed the purchase and did not understand the easements).
After considering all the evidence, including a deposition of Sammis,
the court described the litigation as a “lose-lose case,” saying that no matter
what it decided, one of the parties—or perhaps both—would be unhappy. It
then found that the parking easement was not exclusive to Sharp alone.
Although the language lent itself to more than one viable interpretation, the
court noted ambiguity in the terms and the history of shared use, which only
changed in 2016 when Sharp tried to assert exclusivity. It further concluded
the parking easement did not violate zoning laws and that Sharp’s actions
did not merit termination or constitute the torts that AHZ had claimed.
Lastly, it found that neither party had prevailed and declined to award
attorney’s fees and costs.
In this appeal, Sharp contests the judgment that it must share the
parking easement with AHZ while AHZ argues it was entitled to attorney’s
fees and costs.
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DISCUSSION
1. Interpreting the Parking Easement
Easements are interpreted using the same general principles that
govern contract interpretation. (Hill v. San Jose Family Housing Partners,
LLC (2011) 198 Cal.App.4th 764, 777; Civ. Code, § 1066.) The primary goal is
to determine the parties’ intent. (Hill, supra, at p. 777; Mosier v. Mead
(1955) 45 Cal.2d 629, 633.) This is not always apparent from the language of
the contract itself, and courts “must ascertain and give effect to th[e]
intention by determining what the parties meant by the words they used.”
(Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33,
38 (Pacific Gas).)
Unless the foundational extrinsic evidence presents a conflict that
requires factual findings by the trial court, the interpretation of a contract is
a question of law. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861,
865–866; Maryland Casualty Co. v. Nationwide Ins. Co. (1998) 65
Cal.App.4th 21, 29.) Here, the parties draw different significance from the
extrinsic facts but do not dispute the evidence itself. (See Medical Operations
Management, Inc. v. National Health Laboratories, Inc. (1986) 176
Cal.App.3d 886, 892.) We thus “review the [a]greement in the context of the
extrinsic evidence presented and make our own independent determination of
the meaning.” (Ibid.) The trial court did make limited factual findings based
on the evidence submitted at trial, and we accordingly defer to the trial
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court’s judgment on those points.2 (See Stratton v. First Nat. Life Ins. Co.
(1989) 210 Cal.App.3d 1071, 1084.)
Our independent review accords with the trial court’s conclusions. The
most reasonable reading of the parking easement is that the parties intended
to create a shared parking area for the B and C sites on the B site’s north and
south sides. (See Aozora Bank, Ltd. v. 1333 North California Boulevard
(2004) 119 Cal.App.4th 1291, 1296.) “Exclusive” thus meant that the
building C owners could exclude third parties, but not the owners or tenants
of the B site.
Before we proceed, we address Sharp’s claim that the court improperly
considered extrinsic evidence because it mistakenly believed the terms of the
easement agreement were ambiguous. It is indeed the case that in other
jurisdictions, trial courts must make a threshold finding of ambiguity in a
contract before considering extrinsic evidence to construe its meaning. But
the parol evidence rule works differently in California. (See Pacific Gas,
supra, 69 Cal.2d 33; Wilson Arlington Co. v. Prudential Ins. Co. of America
(9th Cir. 1990) 912 F.2d 366, 370‒372; Zenger-Miller, Inc. v. Training Team,
GmbH (N.D. Cal. 1991) 757 F.Supp. 1062, 1067.) A court interpreting a
contract in this state is tasked with discerning the intent of the parties, which
is not always illuminated by the “magic words” in the document. (Pacific
Gas, supra, at p. 38.) In search of intent, courts are permitted—and even
encouraged—to look to evidence outside of the contract “ ‘to explain the
2 For example, the trial court made a factual finding that the parking in
the parking easement area was “shared until very recently, until the guards
were there” and that this had been the arrangement for “years and years.”
(See, e.g., Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th
1441, 1449 [“the conduct of the parties after the execution of the contract, and
before any controversy arose, may be considered in order to attempt to
ascertain the parties’ intention”].)
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meaning of a written contract . . . [if] the meaning urged is one to which the
written contract terms are reasonably susceptible.’ ” (Casa Herrera, Inc. v.
Beydoun (2004) 32 Cal.4th 336, 343; quoting BMW of North America, Inc. v.
New Motor Vehicle Bd. (1984) 162 Cal.App.3d 980, 990, fn. 4.) In fact, “ ‘[t]he
test of admissibility of extrinsic evidence to explain the meaning of a written
instrument is not whether it appears to the court to be plain and
unambiguous on its face, but whether the offered evidence is relevant to
prove a meaning to which the language of the instrument is reasonably
susceptible.’ ” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391;
quoting Pacific Gas, supra, at p. 37.)
In the contract before us, the meaning of exclusivity is unclear.
Although the reciprocal easement and the parking easement are respectively
described as “non-exclusive” and “exclusive,” the document does not define
these terms. As a result, it is reasonably susceptible to two interpretations:
that the parking easement gave the B and C site owners the right to exclude
third parties from the parking areas (AHZ’s position), or that it granted the
C site owner the sole right to park there and thus the right to exclude users
of the B site (Sharp’s position). Faced with this uncertainty, we turn to the
undisputed extrinsic evidence to clarify the parties’ intent. This includes the
surrounding circumstances, such as the parties’ relationship and the purpose
of the easement. (Civ. Code, §§ 1647, 1636; Christian v. Flora (2008) 164
Cal.App.4th 539, 550.)
As the sole signature on the easement agreement, the primary person
who could illuminate the parties’ intent at the time is Donald Sammis. If his
recollection had been clearer, his deposition would be a significant source to
draw from. Unfortunately, his memory did not reach back so far. In broad
strokes, he recalled that his partnerships created a series of easements
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between buildings A through D to ensure access and provide sufficient
parking that was generally shared—but he did not know whether the parking
easement from November 1990 was intended to convey exclusive parking to
the C site at the expense of the B site. Although Sammis recalled that he
was selling the C building to Carson around 1990 and it was generally
interested in the parking available for its tenants, he could not remember
specifics. The only thing clear about Sammis’s deposition is the fuzziness of
his recollection. We draw the same conclusion as the trial court—that he
“really didn’t remember.”
Apart from Sammis, few sources can shed light on the intended
meaning of the “exclusive” parking easement. But we glean some helpful,
albeit limited, indicators from the conduct of Carson. Although Carson was
not a party to the easement agreement, it bought the C site shortly after
Sammis created it, and he recalled some discussion with Carson regarding
the parking situation for the C site. If Sammis communicated the C site’s
entitlements under the new easement agreement, Carson might have been
aware of his intent as to the parking on the B site’s north and south lots.
And there are two indications in the record that Carson did not believe the
parking easement gave the C site an exclusive right to use those parking
areas.
A series of letters exchanged by counsel for AHZ and Carson (later
Sharp) came into evidence. In 2012, AHZ complained to Carson that their
tenant, Sharp, was abusing the parking easements by monopolizing the
spaces on the north, west, and south side of the B building.3 Carson’s
3 Though not at issue in this appeal, a later easement allowed the C site
to also park on the B site’s western side, in the same general area where the
reciprocal easement runs.
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response states it was not aware of any evidence of unreasonable use of the
parking easements but makes no mention of its exclusive right to use the
north and south lots. Although we are hesitant to draw too much from
counsel’s letters, which may be cautiously drafted for numerous reasons, it
would make little sense for Carson to allow an aggravated neighbor to persist
in a misunderstanding if it believed it’s tenant was entitled to the exclusive
use of the parking lots. A follow up letter in 2014 from Carson asserts that
the “easements plainly grant Sharp the right to park on the north, south, and
west sides of the [B site] property,” but again there is no mention of an
exclusive right as to any of those areas. The first assertion of an exclusive
right appears in a letter from April 2016, shortly before Sharp closed on its
purchase of the C site.
Aside from these letters, there is evidence that Carson was at least
reticent to assert Sharp’s understanding of the parking easement. During
their escrow period, Sharp asked their landlord to respond to AHZ’s “no
parking” signs by putting up Sharp signs in the north and south parking lots
or by painting the stalls to say “Sharp.” Carson declined to do either.
Little else helps clarify the original intent or purpose of the parking
easement. But the habitual use of the areas for decades tips our analysis
toward AHZ’s interpretation. As the trial court noted, the parking dispute
arose recently, but for many years the parking easement area was shared.
Sharp disputes this finding by attacking Abdullah’s foundational knowledge
of who parked where, but it is well settled that it is the trial court is best
suited to resolve factual disputes and evaluate witness credibility. (Burch v.
Premier Homes, LLC (2011) 199 Cal.App.4th 730, 744‒745.)
Sharp’s final argument is that interpreting the parking easement as
shared between Sharp and AHZ leads to an absurd construction of the
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contract. In Sharp’s view, because the easement agreement “refers to the
exclusive nature of the parking easement consistently throughout the
document” in contrast to the nonexclusive language associated with the
reciprocal easement, it “strains credulity to insist that the parties intended to
create only non-exclusive easements but still drafted two separate easement
provisions.” We follow Sharp’s logic that creating two types of easements
within one contract is nonsensical if they bestow all the same privileges. But
that is not the case here.
Even as construed by the trial court, the two easements differ in two
respects. First, they vary in the type of use they allow. The reciprocal
easement did not involve parking; it was merely for pedestrians and vehicle
access in the area between the B and C sites. Perhaps the two easements
could have been called the “passage easement” and the “parking easement” to
more clearly highlight this distinction, but the different purposes are clear
enough and were never disputed by the parties. That distinction provides
one reason to create two separate easements. The second reason would be a
difference in degrees of exclusivity; regardless of the precise meaning of
“exclusive,” it is clear the contract meant to make the parking easement more
exclusive than the reciprocal easement.
It is far from absurd to conclude from these differences in the two
easements that the contract cannot sustain AHZ’s interpretation of
“exclusive.” This is actually a logical interpretation given the nature of the
corporate park; it would make sense for the B and C sites to grant each other
nonexclusive rights to cut through the road and parking area between their
buildings, without preventing each other from granting third parties similar
access. It would further make sense to create an exclusive parking
arrangement that entitled only Sharp and AHZ to park in certain lots on the
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B site, setting aside spaces to prevent third parties affiliated with the
neighboring buildings from parking there.
Regarding the language of the contract itself, we do not agree that this
interpretation results in absurdity. In fact, it gives coherence to more of the
contract than Sharp’s alternative construction. Under the headings
“Permitted Users,” and “Definition of Owners,” the agreement states as
follows:
“The Reciprocal Easements may be used, on a non-
exclusive basis, by each Owner and tenant of an Owner and
their respective officers, directors, employees . . . and by
service and emergency vehicles and personnel as shall be
necessary and appropriate to the lawful use of the Sharp
‘C’ site and the Building ‘B’ site. The Parking Easement
may be used on an exclusive basis, by each Owner and
tenant of an Owner and their respective officers, directors,
employees . . . and by service and emergency vehicles and
personnel as shall be necessary or appropriate to the lawful
use of the Sharp ‘C’ site.” [¶] . . . [¶]
“As used herein, an ‘Owner’ means the holder of fee title
to the Sharp ‘C’ Site (whether one or more persons or
entities) and the holder of fee title to the Building ‘B’ Site
(whether one or more persons or entities).”
Taking these sections together highlights the trouble with Sharp’s
interpretation. The “Permitted Users” section indicates the parking
easement can be used by each owner and the definition of owner includes the
entity that holds title to the B site. If the parking easement was always
meant to exclude the B site owner, why would the “Permitted Users” section
indicate it could be used by each owner in a general sense rather than the
owner(s) of the C site alone? None of these tensions are created by AHZ’s
interpretation. Rather, if “exclusive” means exclusive as to third parties, the
sections harmonize; both owners of the B and C sites can use the parking
easement but neither owner can permit third party use.
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Sharp seeks to downplay the problem with the “each Owner” reference
by focusing on the last clause of the “Permitted Users” provision, suggesting
that the closing phrase “as shall be necessary and appropriate to the lawful
use of the Sharp ‘C’ site” modifies the term “each owner” and narrows it to
the owner(s) of the C site. This strained reading tacitly admits that the
parking easement as written is not, at least in theory, completely exclusive to
Sharp. But moreover, there is a more natural reading available: the last
clause only modifies “service and emergency vehicles and personnel” to clarify
that these third parties providing important services are permitted to use the
easement areas when necessary. Indeed, if the parking easement is as
exclusive as Sharp argues, it is difficult to conceive of any situation in which
the B site owner’s use of the parking easement would be necessary and
appropriate to its use of the C site.
Sharp marshals other clauses of the easement agreement to defend its
position, but none of them necessarily support Sharp’s construction of the
term “exclusive.” For example, it highlights the burdened and benefitted
property sections of the easement agreement. These specify that the
reciprocal easement runs through, and thus burdens and benefits, both
properties while the parking easement, which only runs though the
B property, burdens the B site and benefits the C site. But this is merely the
nature of an easement, and it holds true under either construction of the
exclusivity language; the parking easement would burden the B site even if it
retains its previous entitlement to use its own parking. The same analysis
applies to the “Purpose” section, which states the parking easement was
meant to give parking to the C site. That is its obvious purpose, but it does
not follow that extending additional parking to C necessarily means revoking
it from B.
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Sharp’s last point, and perhaps its strongest, is that the section
indicating the C site owners are responsible for all the parking easement’s
maintenance costs is consistent with their claim to exclusive use. We agree
this is one logical explanation for the maintenance section, but it is not the
only one. This arrangement could just as well be the C site’s compensation
for the benefit of using the B site’s parking, even if it remains shared.
In the end, the terms of the agreement are susceptible to both AHZ’s
and Sharp’s interpretations. Neither option is perfect, and both highlight
problems in the contract and render some words surplusage. But this is not
such a close case that both interpretations appear “equally proper.” (Moore v.
Wells Fargo Bank, N.A. (2019) 39 Cal.App.5th 280, 288.) After conducting a
close reading and taking “[t]he whole of [the] contract . . . together, so as to
give effect to every part, . . . each clause helping to interpret the other,” we
find more support for AHZ’s construction. (Civ. Code, § 1641.) The limited
extrinsic evidence also favors AHZ. We thus agree with the trial court’s
conclusion that the “exclusive” parking easement is most reasonably read to
exclude third parties. It does not privilege the C site to exclude the B site
from using the parking in its north and south lots.
2. Attorney’s Fees and Costs
After the court’s resolution of the issues at trial, both Sharp and AHZ
filed motions for recovery of attorney’s fees and costs. (Civ. Code, § 1717;
Code Civ. Proc., §§ 1032, subd. (a)(4), 1033.5.) The court found that neither
party entirely prevailed and declined to make any award. AHZ contests the
court’s finding, asserting that it prevailed on its primary litigation objective
and that the trial court abused its discretion in finding otherwise. As we
explain below, we disagree.
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Civil Code section 1717, subdivision (a) recognizes the ability of
contracting parties to provide for the recovery of reasonable attorney’s fees
and costs by the prevailing party in a dispute. At the same time, subdivision
(b)(1) extends discretion to trial courts to determine there is no prevailing
party when the results of the litigation are mixed. (See Hsu v. Abbara (1995)
9 Cal.4th 863, 876 (Hsu).) We review for abuse of discretion and leave the
court’s decision undisturbed unless it is unsupported by substantial evidence.
(Pellegrino v. Robert Half Internat., Inc. (2010) 182 Cal.App.4th 278, 288.)
Hsu, supra, 9 Cal.4th at page 876 established a blueprint for
determining if there is a prevailing party in a contract dispute: “[T]he trial
court is to compare the relief awarded on the contract claim or claims with
the parties’ demands on those same claims and their litigation objectives as
disclosed by the pleadings, trial briefs, opening statements, and similar
sources [to compare] ‘the extent to which each party ha[s] succeeded and
failed to succeed in its contentions.’ ” This is precisely what the trial court
did. It considered each of AHZ and Sharp’s litigation objectives and
determined that both parties failed to achieve their chief aims. “AHZ did not
obtain termination of Sharp’s easement rights and Sharp did not obtain the
right to exclusive use of the parking areas. . . . Although Sharp defeated the
majority of AHZ’s claims, AHZ prevailed in its efforts to enforce its easement
rights.”
In reviewing the record, we find the trial court’s determination well
supported, and there was no abuse of discretion here. AHZ sought to
terminate the parking easement, based on either a violation of zoning laws or
Sharp’s abuse of its privilege; it also brought multiple tort claims and sought
millions in damages. It succeeded only in vindicating its right to use the
parking easement area. Sharp’s action was more tailored, seeking a
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judgment that the parking easement was for its exclusive use and an
injunction to prevent AHZ’s interference. The court could reasonably
conclude that neither party prevailed. In the end, both parties are subject to
the existing parking easement, which they must share. In the court’s words,
this was a lose-lose case.
DISPOSITION
The judgment and order are affirmed. AHZ is entitled to costs on
appeal associated with case No. D075075, while Sharp is entitled to costs on
appeal associated with case No. D076362.
DATO, J.
WE CONCUR:
McCONNELL, P. J.
O’ROURKE, J.
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