Facts

In 1993, William Knell leased a commercial space in Simi Valley from Douglas Miller. Knell used the property as a retail pet food warehouse. The lease ran through 2003, when Knell renewed it for another 10 years. In April 2008, Knell began looking for buyers to sell his business. Once Knell had a business proposal in place with a buyer, he approached Miller about a new lease with the buyer. In 2009, while escrow was in progress on the business, Miller decided to replace the roof of the building and install a new HVAC unit. Knell agreed to contribute to the HVAC costs if Miller consented to a new lease with the buyer and waived Knell's liability on the lease.

Before the escrow closed, Miller put a demand into the escrow for $156,041, requesting compensation for relieving Knell from his ongoing liabilities under the Lease Agreement and the granting of a new lease to the purchaser of Knell's business. Knell contacted the buyer and advised her that he was going to cancel the escrow in light of Miller's demand. Knell then claimed that the buyer threatened to sue him for breach of purchase agreement if they didn't close on the deal. Knell was left with no choice but to pay the amount to Miller under protest.

Knell then sued Miller, claiming that his actions constituted a breach of contract and a breach of duty of good faith and fair dealing. Knell argued that Miller's demand was unforeseen and constituted extortion. He also claimed that Miller was not entitled to recover a buyout fee.

Miller argued that Knell had agreed to pay a portion of the costs of replacing the HVAC unit and that Knell was required to pay a buyout fee.

Damages

Knell sought $156,041 in compensatory damages and $7,400 in damages for his security deposit.

Result

Knell was awarded $57,498 for the HVAC costs. However, the Court denied Knell's claim for the buyout fee.

Other Information

Both sides filed timely notice of appeal. The matter is currently before the Court of Appeals, Second Appellate District, Division 6.