Facts

On Feb. 20, 2002, plaintiff Image 2000 Multi Media Inc. entered into a five-year lease to rent commercial property located at 437 East Main Street in El Cajon, California from defendant Joseph Quin Family Trust (Trust). The lease agreement stated that "each option granted to Lessee in this Lease is personal to the original Lessee and cannot be assigned or exercised by anyone other than said original Lessee." Subsequently, El Cajon Grand Cocktail Lounge, Inc. (ECG) acquired the lease by assignment from Image 2000, believing that the lease agreement provided an assignable option to renew for an additional five years. The Trust rejected the exercise of the option. Image 2000 and El Cajon Grand sued the Trust for breach of contract. The Trust brought an unlawful detainer action against Jason Kreider and Alexander Kalogianis, who owned Image 2000 and El Cajon Grand, alleging that the tenant had violated the insurance provisions of the lease.

PLAINTIFFS/CROSS-DEFENDANTS' CONTENTIONS:
Plaintiffs contended that the Trust rented to Image 2000 on the specific understanding that Image 2000 would then establish ECG (a wholly-owned subsidiary), and assign the lease to it, and that Image and ECG would then both remain responsible for performance of the lease and would remain entitled to exercise the option to renew the ease. Plaintiffs contended that, afterwards, a dispute arose between the Trust and plaintiffs as to obligations owed under the ADA statutes. Only after this dispute, plaintiffs contended, did the Trust adopt the position that Image 2000 could not properly assign the lease to ECG. At trial, Image and ECG offered uncontradicted parol evidence on these points, which was received. Plaintiffs further contended that the operative language in the lease and the assignment were ambiguous and reasonably susceptible to the interpretation they urged.

DEFENDANT/CROSS-COMPLAINANT'S CONTENTIONS:
The Trust asserted that El Cajon Grand breached the lease and could not exercise the option because it was an assignee. In addition, the Trust contended that plaintiffs' continued occupation of the premises was unlawful.

Result

On plaintiffs' claim, the court ruled that Image 2000 had properly assigned the lease to ECG, which was entitled to exercise the option and properly did so, thereby renewing the term of the lease. The court gave declaratory relief to Image 2000 and ECG, finding that ECG had properly renewed the lease from 2007 to 2012. The court awarded attorney's fees of $35,000 and costs of suit. On the Trust's cross-claim, the court indicated that the landlord had failed to follow the prerequisite statutory procedure for giving notice of the claimed default and that ECG's insurance policy satisfied all of the requirements of the lease.

Other Information

The Trust's appeal of the judgment, with respect to both the lease option and the insurance issues, is pending. FILING DATE: Oct. 29, 2007.