A California appellate court has upheld a significant judgment in favor of a commercial real estate company, underscoring the importance of clear contractual agreements and good faith dealings. On June 25, 2024, Pacifica Commercial Central Coast, Inc. filed a complaint against 1599 West, LLC in the Court of Appeal of the State of California, Second Appellate District.
The case revolves around a breach of a commission agreement related to a commercial lease in Santa Maria. In 2012, 1599 West leased their building to SA Recycling LLC for a term of 20 years with various contingencies and options for termination or extension. The commission agreement stipulated that Pacifica and Rincon Corporation would receive specific commissions based on the lease's terms and conditions. When the lessee did not terminate the lease at the end of its contingency period but continued occupancy into the 61st month, Pacifica and Rincon expected to be paid $139,023 as per their agreement.
However, as the lease approached its fifth year, it was amended without notifying Pacifica or Rincon. This amendment allowed for new termination options every three years and established a new fee schedule while waiving the lessee's option to purchase. Despite these changes, appellants refused to pay the owed commission when invoiced by respondents.
Pacifica and Rincon subsequently filed suit for breach of contract and breach of implied covenant of good faith and fair dealing. The trial court found in favor of respondents, stating that despite amendments to the lease, it had not been terminated; thus, under the original commission agreement terms, respondents were owed their commission. Furthermore, it was determined that appellants acted in bad faith by amending the lease unilaterally to evade paying commissions.
The trial court awarded $139,023 in damages for breach of contract and an additional $112,000 in attorney fees based on provisions within the original lease agreement that incorporated broker fees into its terms. Appellants argued that this award was erroneous due to alleged ambiguities in the commission agreement and lack of an explicit attorney fee provision within it.
Upon review, the appellate court affirmed these findings. It concluded that there was no ambiguity within the commission agreement regarding payment obligations once certain conditions were met. Additionally, appellants' actions breached both express contractual terms and implied covenants meant to ensure fair dealings between parties.
Representing Pacifica Commercial Central Coast were attorneys from Kirk & Simas including Anthony J. Principe, Diana H. Alcala, and Kelly A. Stone while Mark Henry Shafron represented 1599 West LLC along with Steven Zaritsky who appealed against this judgment unsuccessfully before Judges Yegan (Acting P.J.), Baltodano (J.), Cody (J.), under Case ID B323429.