Perez v. Public Storage CA2/2 ( 2022 )


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  • Filed 1/27/22 Perez v. Public Storage CA2/2
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
    California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
    not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
    has not been certified for publication or ordered published for purposes of rule 8.1115.
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION TWO
    CAROLINA PEREZ et al.,                                       B305611
    Plaintiffs and Appellants,                          (Los Angeles County
    Super. Ct. No. BC611584)
    v.
    PUBLIC STORAGE, a
    Maryland Real Estate
    Investment Trust,
    Defendant and
    Respondent.
    APPEAL from a judgment of the Superior Court of Los
    Angeles County. Carolyn B. Kuhl, Judge. Affirmed.
    Milstein Jackson Fairchild & Wade, Gillian L. Wade, Mayo
    L. Makarczyk; Baker Burton & Lundy, Brad N. Baker, and Albro
    L. Lundy for Plaintiffs and Appellants.
    Willkie Farr & Gallagher, Simona A. Agnolucci, and
    Eduardo E. Santacana for Defendant and Respondent.
    ******
    Consumers who rented self-storage space also purchased
    policies to insure their stored goods from loss or damage. On
    behalf of a class, they have now sued the storage company for
    violating California’s unfair competition law (Bus. & Prof. Code, §
    17200 et seq.) on the ground that the rental contracts repeatedly
    and expressly requiring them to have insurance did not mean
    what they said, such that the consumers were duped into buying
    insurance that was not required by their contracts. The trial
    court rejected their claims as without merit. So do we.
    Accordingly, we affirm the judgment for the storage company.
    FACTS AND PROCEDURAL BACKGROUND
    I.     Facts
    As its name implies, Public Storage rents self-storage units
    to the public.
    When a person rents a storage unit from Public Storage, he
    is confronted with two documents, as pertinent here. The first is
    the Insurance Addendum (Addendum). The Addendum states
    two times that the renter “is obligated . . . to insure his own
    goods” and must “maintain insurance that covers loss or damage
    for the personal property” stored in the unit. The Addendum also
    requires the renter to sign an acknowledgment in which Public
    Storage explains the consequence of not complying with this
    2
    obligation—namely, that “if [the renter] do[es] not have
    insurance . . . [he is] personally responsible for any loss or
    damage to [his] goods,” and those goods are deemed to be stored
    “at [his] sole risk.”1 The second document is the Lease/Rental
    Agreement (Lease). Section six of the Lease mirrors the
    Addendum. Like the Addendum, it states that the renter is
    “obligated under the terms of [the Lease] to insure his own
    goods.” Also like the Addendum, the Lease explains the
    consequence of not complying with this obligation—namely, that
    if the renter “does not obtain insurance coverage for the full value
    of [his] personal property stored in the [storage unit], [the renter]
    1     In full, the insurance disclosure section of the Addendum
    provides:
    “[A]ll personal property is stored by Occupant
    at occupant’s sole risk. Occupant is solely responsible
    for insuring his own goods and understands that
    Owner will not insure Occupant’s personal property
    and that Occupant is obligated under the terms of
    this lease/rental agreement to insure his own goods.
    “I acknowledge that I understand and agree to
    the provisions of the above paragraph and that I
    understand I am solely responsible to insure my
    stored property. I acknowledge that the Lease/Rental
    Agreement requires me to maintain Insurance that
    covers loss or damage for the personal property that I
    intend to store at this facility. . . . I understand that
    if I do not have Insurance, or if my Insurance lapses,
    I am personally responsible for any loss or damage to
    my goods. I personally assume all risk of loss and
    Owner is not responsible no matter how the loss or
    damage occurred.”
    3
    agrees [he] will personally assume all risk of loss.”2 The Lease
    also provides that the “entire agreement” between Public Storage
    and the renter consists solely of the Lease and the Addendum
    (which is “executed at the same time as th[e] Lease[]”).
    Pursuant to Insurance Code section 1758.7 et seq., Public
    Storage also presents prospective renters with the option to apply
    for a third party insurance policy offered at Public Storage
    facilities to insure the goods they store in its units from loss or
    damage, and thereby to comply with the insurance obligation set
    forth in the Lease and the Addendum. In discussing the
    insurance obligation, Public Storage employees are trained to
    follow a script approved by the California Department of
    Insurance that reiterates the insurance obligation of the Lease
    and the Addendum and introduces the offered insurance policy as
    2     In full, this section of the Lease addressing insurance
    provides:
    INSURANCE; RELEASE OF LIABILITY. ALL PERSONAL
    PROPERTY IS STORED BY OCCUPANT AT OCCUPANT’S
    SOLE RISK. INSURANCE IS OCCUPANT’S SOLE
    RESPONSIBILITY. OCCUPANT UNDERSTANDS THAT
    OWNER WILL NOT INSURE OCCUPANT’S PERSONAL
    PROPERTY AND THAT OCCUPANT IS OBLIGATED UNDER
    THE TERMS OF THIS LEASE/RENTAL AGREEMENT TO
    INSURE HIS OWN GOODS. To the extent Occupant’s
    insurance lapses or Occupant does not obtain
    insurance coverage for the full value of Occupant’s
    personal property stored in the Premises, Occupant
    agrees Occupant will personally assume all risk of
    loss. . . . [signed initials] Occupant acknowledges that
    he understands the provisions of this paragraph and
    agrees to these provisions and that insurance is
    Occupant’s sole responsibility.”
    4
    one option for prospective renters to satisfy that obligation.
    However, it is up to each renter whether to apply for the policy
    offered by Public Storage, or instead to rely on their homeowner’s
    insurance policy, renter’s insurance policy, or some other policy.3
    Nationwide, some 85 percent of first-time renters opt to
    purchase one of the third party policies offered by Public Storage.
    Public Storage does not verify to see whether those renters
    who do not purchase a Public Storage-offered policy have
    otherwise secured the insurance coverage required by the Lease
    and the Addendum. That is because the Insurance Code’s limited
    authorization for “self-service storage agents” like Public Storage
    to sell insurance does not empower them to “[a]dvertise,
    represent, or otherwise portray itself or its employees as licensed
    insurers, insurance agents, or insurance brokers” (Ins. Code, §
    1758.78, subd. (b)), and because “evaluat[ing]” whether some
    other policy is “adequa[te]” is something that only an “insurance
    agent” or “insurance broker” may do (Id., § 1758.76, subd. (b)(3)).
    Because it cannot verify whether its renters’ other policies
    are adequate, Public Storage does not cancel any rental contract
    due to the renter’s failure to obtain insurance.
    Between 2013 and 2016, Carolina Perez, Paulina Cardona,
    Guilliana Amico, and Richard Mojica (collectively, the named
    plaintiffs) all rented storage units at Public Storage locations in
    California and selected the insurance policy offered by Public
    Storage.
    3     The trial court found that Public Storage made “no uniform
    misleading statements” that would lead a “reasonable person to
    believe that they were required to purchase” insurance from
    Public Storage, and this finding has not been appealed. We
    accordingly accept it as established.
    5
    II.    Procedural Background
    On February 24, 2016, the named plaintiffs filed a putative
    class action lawsuit against Public Storage.4 In the operative
    fourth amended complaint, plaintiffs asserted claims for (1)
    breach of contract, (2) breach of the implied covenant of good
    faith and fair dealing, and (3) violations of the unfair competition
    law for engaging in business practices that are fraudulent,
    unlawful, and unfair.
    On May 3, 2018, the trial court certified a class
    (collectively, plaintiffs) on the theory that Public Storage made
    uniform misleading statements to prospective renters that
    induced them to believe that they were required to purchase a
    Public Storage-offered insurance policy.
    In January 2019, the matter proceeded to a three-day
    bench trial on the unfair competition law claims on behalf of a
    class of approximately 700,000 renters.5 At trial, plaintiffs for
    the first time presented the theory that Public Storage had
    violated the unfair competition law by “telling its customers they
    were required to maintain some form of insurance on their stored
    goods despite the fact that there was no such requirement.” In
    support of this theory, plaintiffs relied on two categories of
    evidence. First, they introduced a discovery response verified by
    one of Public Storage’s executives, in which Public Storage
    4     Perez filed the original complaint; the other named
    plaintiffs were added in each amended iteration of the complaint.
    5     Plaintiffs’ contract-based claims were obviated by the trial
    court’s order denying class certification on plaintiff’s proffered
    theory that Public Storage failed to disclose that it stood to gain
    from the insurance transaction.
    6
    admitted that (1) “since August 2006, Public Storage’s Lease[]
    has required new [renters] to have some form of insurance
    coverage for the goods stored at Public Storage’s facilities,
    whether or not they choose to purchase the tenant insurance
    provided at Public Storage,” (2) renters “can satisfy this
    contractual requirement by having or obtaining various types of
    insurance, including but not limited to homeowners’ insurance,
    renters’ insurance, other self-storage insurance, or by bearing the
    risk of loss personally,” and (3) the renter “assumes all risk of
    loss” if insurance is not obtained or is inadequate. Second,
    plaintiffs pointed to Public Storage’s willingness to rent to people,
    even if they did not obtain or provide proof of insurance.
    In June 2019, the trial court issued a 16-page statement of
    decision denying plaintiffs relief. The court rejected plaintiffs’
    initially pled theory that Public Storage had misled prospective
    renters into believing that they had to buy a Public Storage-
    offered insurance policy. The court then turned to plaintiffs’
    newly articulated theory that Public Storage did not really
    require tenants to obtain insurance. The court found that this
    theory was within the scope of the class notice, but ruled that it
    lacked merit. Based on the plain language of the Lease and the
    Addendum as well as the consistent testimony of all four Public
    Storage representatives that plaintiffs called as witnesses at
    trial, the court found that “Public Storage requires its customers
    to insure their goods in storage.” The court rejected plaintiffs’
    argument that the insurance obligation in the Lease and the
    Addendum was “illusory.” The court reasoned that the discovery
    response could not modify the plain language of the insurance
    obligation set forth in the Lease and the Addendum; even if it
    could, the court viewed the response as explaining the
    7
    consequence “if a person failed to obtain insurance” rather than
    as a “statement that renters need not comply with the [insurance
    obligation set forth in the] Lease . . . .” The court next found
    Public Storage’s failure to verify renters’ compliance with the
    insurance obligation to be a function of the limitations placed on
    it by the Insurance Code; further, the court noted that Public
    Storage had “discretion in how to enforce” the insurance
    obligation. Because Public Storage did require its renters to
    obtain insurance, the court concluded, Public Storage did not act
    fraudulently, unlawfully, or unfairly—and hence did not violate
    the unfair competition law—in telling renters that insurance was
    required.
    After the named plaintiffs settled their individual claims
    and the trial court entered judgment, plaintiffs filed this timely
    appeal.
    DISCUSSION
    Plaintiffs argue that the trial court erred in concluding that
    their unfair competition law claims lacked merit.6 California’s
    unfair competition law defines “unfair competition” as a
    “business act or practice” that is (1) “fraudulent,” (2) “unlawful,”
    6     Plaintiffs also challenge the trial court’s ruling prohibiting
    their experts from calculating restitution in a manner that
    violates the filed rate doctrine. That doctrine insulates an entity
    from civil damages arising from claims challenging rates charged
    by the entity if those rates have been filed with and approved by
    the governing regulatory authority. (See, e.g., Day v. AT&T
    Corp. (1998) 
    63 Cal.App.4th 325
    , 334-335 [discussing doctrine as
    applied to telephone carrier].) This issue deals with damages,
    but we need not reach any remedy-related issues in light of our
    conclusion that there is no liability in the first place.
    8
    or (3) “unfair.” (Bus. & Prof. Code, § 17200; see Cel-Tech
    Communications, Inc. v. Los Angeles Cellular Telephone Co.
    (1999) 
    20 Cal.4th 163
    , 180; see also Aryeh v. Canon Business
    Solutions, Inc. (2013) 
    55 Cal.4th 1185
    , 1196 [each ground is an
    independent basis for liability].) On appeal, plaintiffs assert that
    Public Storage has engaged in fraudulent, unlawful, and unfair
    business practices because (1) the Lease and the Addendum,
    despite their provisions requiring renters to obtain insurance, do
    not really require them to do so, and (2) even if the Lease and the
    Addendum do mean what they say, Public Storage still deceived
    renters by not telling them that they can breach this provision
    without consequence because Public Storage does not verify
    compliance with the insurance obligation and will still rent
    storage units despite noncompliance with this obligation.
    I.     Is Insurance Required Under the Lease and the
    Addendum?
    Plaintiffs’ first argument—that the Lease and the
    Addendum do not really obligate renters to obtain insurance and
    are merely “advisory” on whether to obtain insurance—requires
    us to interpret those contracts. Especially with integrated
    contracts like the Lease, our interpretation is limited to the face
    of the contract; however, we may consider parol (that is,
    extrinsic) evidence provisionally to assess whether the contract is
    “reasonably susceptible” to more than one interpretation and, if it
    is, use that parol evidence to determine the contract’s meaning.
    (Dore v. Arnold Worldwide, Inc. (2006) 
    39 Cal.4th 384
    , 391; Hot
    Rods, LLC v. Northrop Grumman Systems Corp. (2015) 
    242 Cal.App.4th 1166
    , 1175-1176.) We independently construe the
    meaning of contractual terms and whether a contract is
    “reasonably susceptible” to multiple interpretations, but review
    9
    the trial court’s resolution of any conflicts in the parol evidence
    for substantial evidence. (Winet v. Price (1992) 
    4 Cal.App.4th 1159
    , 1165-1166.)
    We independently agree with the trial court that the Lease
    and the Addendum obligate renters to obtain insurance.
    Together, those documents expressly state—no fewer than three
    times—that renters are “obligated . . . to insure [their] own
    goods” and to “maintain . . . insurance.” The text of a contract is
    the first place to look in interpreting its meaning; where, as here,
    the text is “clear and explicit,” it is also the last place. (Bank of
    the West v. Superior Court (1992) 
    2 Cal.4th 1254
    , 1264 (Bank of
    the West).)
    Plaintiffs respond with three contentions.
    First, plaintiffs contend that the plain language of the
    Lease and the Addendum are contradicted by (1) Public Storage’s
    discovery response, where it admitted that renters can “satisfy”
    their “contractual requirement” by “bear[ing] the risk of loss
    personally” and “assum[ing] all risk of loss” (that is, by not
    having insurance), (2) Public Storage’s failure to verify renters’
    compliance with the insurance obligation, and (3) Public
    Storage’s inability or failure to terminate rental contracts or to
    sue their renters for not complying with the insurance obligation.
    Even if we assume that one or all of these items of evidence
    render the Lease and the Addendum “reasonably susceptible” to a
    reading contrary to their plain text, we conclude that the better
    reading is the one consistent with their plain text.
    More generally, it is difficult to see how Public Storage’s
    extracontractual discovery response explaining the insurance
    obligation can negate that obligation when contracts in California
    are construed according to their objective meaning (e.g., Founding
    10
    Members of the Newport Beach Country Club v. Newport Beach
    Country Club, Inc. (2003) 
    109 Cal.App.4th 944
    , 956 [“[t]he
    parties’ undisclosed intent or understanding is irrelevant to
    contract interpretation”]; Pardee Construction Co. v. Insurance
    Co. of the West (2000) 
    77 Cal.App.4th 1340
    , 1360 [“a party’s
    subjective intent cannot be used to create an ambiguity in
    otherwise clear and explicit language”]), or how Public Storage’s
    postcontractual conduct in deciding whether and how to enforce a
    contractual provision can retroactively negate that provision
    when contracts are to be interpreted “as to give effect to the
    mutual intention of the parties as it existed at the time of
    contracting” (Civ. Code, § 1636, italics added; Brown v. Goldstein
    (2019) 
    34 Cal.App.5th 418
    , 437-438; Bank of the West, 
    supra,
     2
    Cal.4th at pp. 1264-1265).
    More specifically, none of the three items plaintiffs cite
    undermines the plain text of the Lease and the Addendum. The
    discovery response is not the smoking gun plaintiffs portray;
    instead, and as the trial court noted, the response largely parrots
    the text of the Lease and the Addendum—namely, that (1)
    insurance is required, but (2) the consequence of not complying
    with this requirement is personal liability for any loss. Thus, to
    the extent Public Storage’s discovery response was an
    “unequivocal concession of the truth of a matter”—which it likely
    was not—the evidence at trial was not contrary to that
    admission. (See Code Civ. Proc., § 2033.410 [“[a]ny matter
    admitted in response to a request for admission is conclusively
    established against the party making the admission”]; Myers v.
    Trendwest Resorts, Inc. (2009) 
    178 Cal.App.4th 735
    , 746 [fact
    established as judicial admission made by a response to request
    for admission is a conclusive concession of the truth of that
    11
    matter]; Monroy v. City of Los Angeles (2008) 
    164 Cal.App.4th 248
    , 260 [trial court may utilize parol evidence “to elucidate and
    explain an admission” so long as such evidence does not
    “contradict the plain meaning of” the response].)7 And even if the
    response could be read another way, substantial evidence
    supports the trial court’s reading. Public Storage’s failure to
    verify compliance is not evidence of a postcontractual
    abandonment of the insurance obligation because verification
    would require Public Storage to evaluate whether renters’
    alternative insurance policies were adequate to cover the goods in
    storage, and the Insurance Code precludes Public Storage from
    engaging in such evaluation. (See Ins. Code, § 1758.76, subd.
    (b)(3) [self-storage facility must disclose to renter that “self-
    service storage facility and its employees are not qualified or
    authorized to evaluate the adequacy of the purchaser’s existing
    insurance coverage”].) And Public Storage’s unwillingness to
    terminate rental agreements for failure to comply with the
    insurance obligation (even if the prospective tenant expresses an
    intent not to comply)—whether due to an inability to evaluate
    compliance or due to a conscious choice—does not somehow
    retroactively invalidate that obligation. Accepting plaintiffs’ logic
    means that a party’s decision not to enforce the breach of a
    contractual provision means that the provision was never a
    contractual obligation in the first place. This is nonsensical, and
    we may not construe contracts to lead to such absurdities. (Civ.
    Code, § 1638; Kashmiri v. Regents of University of California
    (2007) 
    156 Cal.App.4th 809
    , 831.)
    7    Thus, contrary to what plaintiffs assert, the fact that Public
    Storage did not seek relief from its admission is of no concern.
    12
    Second, plaintiffs argue that Public Storage’s failure to
    enforce the insurance obligation in the Lease and the Addendum
    renders that obligation “illusory.” This argument rests on a
    misunderstanding of the term “illusory.” A contract is illusory if
    “a party to a contract retains the unfettered right to terminate or
    modify the agreement”; in this situation, the party with the
    unfettered right has given no consideration, and the contract fails
    for lack of consideration. (Asmus v. Pacific Bell (2000) 
    23 Cal.4th 1
    , 15; Perdue v. Crocker National Bank (1985) 
    38 Cal.3d 913
    , 923
    [contract that is “illusory” is one “lacking in consideration”].)
    Here, it is undisputed that the Lease and the Addendum as a
    whole are supported by consideration—namely, Public Storage
    rents a self-storage unit and renters pay for it. Thus, the Lease
    and the Addendum are not illusory. Notwithstanding the
    validity of the Lease and the Addendum as a whole, plaintiffs
    urge us to find that the insurance obligation specifically is
    unsupported by consideration and hence illusory. But “it is not
    necessary that each separate promise or covenant [in a contract]
    should have a distinct consideration.” (Brawley v. Crosby
    Research Foundation, Inc. (1946) 
    73 Cal.App.2d 103
    , 118-119;
    Tennant v. Wilde (1929) 
    98 Cal.App. 437
    , 442.) Accordingly, we
    decline plaintiffs’ invitation to shoehorn the facts of this case into
    the “illusory contract” doctrine.
    Third, plaintiffs argue that Public Storage drafted the
    Lease and the Addendum, and that these contracts should be
    construed against them. (Victoria v. Superior Court (1985) 
    40 Cal.3d 734
    , 739.) This canon of contractual interpretation does
    not apply, however, where, as here, the plain text of the Lease
    and the Addendum is clear and unambiguous. (Ibid.)
    13
    II.    Even If Insurance Is Required, Must Public Storage
    Inform Renters Whether It Intends to Enforce That
    Requirement?
    Plaintiffs’ second argument—that, even if the Lease and
    the Addendum require renters to obtain insurance, Public
    Storage violated the unfair competition law by not telling renters
    that it would not (or could not) enforce that requirement—turns
    on the application of the law to undisputed facts. Our review is
    accordingly de novo. (Martinez v. Brownco Construction Co.
    (2013) 
    56 Cal.4th 1014
    , 1018.)
    To accept plaintiffs’ argument, we would have to hold that
    a party to a contract commits an unfair business practice if it
    does not disclose, at the time it signs a contract, which of the
    contract’s provisions it does not intend to enforce. Plaintiffs
    provide no legal support for this argument, nor have we found
    any. This is not surprising. People and businesses generally
    have the right to enter into a contract, and to decide not to sue
    for a subsequent breach of that contract. (See Alder v. Drudis
    (1947) 
    30 Cal.2d 372
    , 381-382 [“one who has been injured by a
    breach of contract” has three options, including “keep[ing] the
    contract alive, for the benefit of both parties”]; Akin v. Certain
    Underwriters at Lloyd’s London (2006) 
    140 Cal.App.4th 291
    , 296
    [party injured by a breach may treat the contract as rescinded or
    repudiated and recover damages if he “lacks the ability or the
    desire to keep the contract alive”].) As a consequence, we see no
    basis for requiring a party to a contract—on pains of incurring
    liability under the unfair competition law—to either enforce
    every provision of a contract or disclose their intention not to do
    so. This would constitute a vast—and, in our view, unwise—
    intrusion into the discretion parties to a contract historically and
    14
    typically enjoy regarding whether and how to seek remedies for a
    breach.
    *     *      *
    For these reasons, the trial court properly rejected
    plaintiffs’ unfair competition law claims. Because the Lease and
    the Addendum obligated renters to obtain insurance, Public
    Storage did not act in a fraudulent, unlawful, or unfair way in
    telling prospective renters that those contracts contained that
    obligation. (See Ins. Code, § 1758.76, subd. (b)(1) [self-service
    storage employees may advise renter that the “facility’s rental
    agreement may contain provisions requiring the renter to provide
    insurance on [that renter’s] property in the storage unit”].) And
    because there is no legal duty to disclose to contracting partners
    one’s intention not to enforce certain provisions of that contract,
    Public Storage did not act in a fraudulent, unlawful, or unfair
    way in not telling prospective renters it was unable or unwilling
    to enforce the provision obligating them to obtain insurance.
    15
    DISPOSITION
    The judgment is affirmed. Public Storage is entitled to its
    costs on appeal.
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
    ______________________, J.
    HOFFSTADT
    We concur:
    _________________________, P. J.
    LUI
    _________________________, J.
    ASHMANN-GERST
    16
    

Document Info

Docket Number: B305611

Filed Date: 1/27/2022

Precedential Status: Non-Precedential

Modified Date: 1/27/2022