Facts

Casa Madrona Hotel & Spa is a 125-year-old hotel listed on the National Register of Historic Places. Poggio, a top-100 Bay area restaurant developed by the founder of Il Fornaio, has been operating in the Hotel since 2003 under a long-term lease. The plaintiff, part of a private equity firm in Newport Beach, bought the Hotel in February 2010 in a non-judicial foreclosure auction conducted by the FDIC and later retained MetWest Terra Hospitality to manage the property. The plaintiff brought an unlawful detainer against Poggio in July 2010 claiming non-payment of rent.

PLAINTIFF'S CONTENTIONS:
Casa Madrona alleged that Poggio had failed to pay rent due for four months in early 2010.

DEFENDANT'S CONTENTIONS:
Poggio claimed that it was excused from paying rent for the months in question because it had paid landlord obligations in excess of the rent otherwise due and was entitled to offsets. Poggio also asserted an unclean hands defense, alleging Casa Madrona was engaged in a campaign of harassment to force Poggio to either renegotiate its lease or leave the Hotel.

Result

The court ruled that Casa Madrona was equitably estopped from claiming rent due because it had led Poggio to believe that it could pay landlord obligations in lieu of rent. The court awarded Poggio $520,776 in attorney fees and costs as the prevailing party on Nov. 14, 2011.