From May 1992 through January 1993 plaintiff Bed, Bath & Beyond negotiated with defendant La Jolla Village Square Venture Partners (“La Jolla”) for a lease of retail space in La Jolla Village Square, a shopping center La Jolla was then in the process of building. In February 1993 La Jolla's legal representative in the negotiations presented plaintiff with four copies of a proposed written lease agreement and guaranty agreement to be executed by plaintiff and its guarantor, plaintiff's parent corporation. The cover letter accompanying these documents requested they be executed by plaintiff and its guarantor and returned to La Jolla's legal representative for "execution by the Landlord." Plaintiff signed the lease and its parent corporation signed the guaranty. The documents were then returned to defendant for execution. Defendant never executed the lease. In late March 1993 defendant informed plaintiff that it intended to lease the subject premises to Linens 'N Things, plaintiff's competitor. Prior to that communication plaintiff was unaware that La Jolla had been negotiating with Linens 'N Things. Plaintiff sued defendant for specific performance, breach of contract, and fraud and asked the court to enjoin defendant from proceeding with the Linens ‘N Things lease. Defendant moved for summary adjudication on plaintiff's claims and injunctive relief. The factual predicate to each of the causes of action is a valid, enforceable lease. The court granted defendant’s motion and plaintiff appealed. Issue: Was the lease between plaintiff and defendant subject to the statute of frauds? Holding: Judgment for defendant affirmed. Excerpts from the court’s opinion: Three different "statutes of fraud" apply to bar enforcement of the alleged lease agreement in this case. Civil Code section 1624, subdivision (d) specifies, as a type of contract which is invalid unless it is in writing and subscribed by the party to be charged, "[a]n agreement . . . to lease real estate for a longer period than one year . . .." Civil Code section 1091 provides: "An estate in real property, other than an estate at will or for a term not exceeding one year, can be transferred only by operation of law, or by an instrument in writing, subscribed by the party disposing of the same, or by his agent thereunto authorized by writing." Similarly, Code of Civil Procedure section 1971 provides, in pertinent part: "No estate or interest in real property, other than for leases for a term not exceeding one year, . . . can be created, granted, assigned, surrendered, or declared, otherwise than by operation of law, or a conveyance or other instrument in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same, or by the party's lawful agent thereunto authorized by writing." Plaintiff contends the lease agreement is not subject to the statute of frauds because it possibly could have been performed within one year from the date of its making. Plaintiff's argument rests on two provisions in the unexecuted written lease. The first provided the tenant could terminate the lease before the rental term commenced if the landlord failed to begin certain preparatory work on the leased premises by June 1, 1993, or substantially complete that work by December 31, 1993. The second gave the landlord the right to terminate the lease before commencement of the rental term if the landlord was unable to obtain the various governmental permits and approvals required for construction of the premises despite exercising diligence and good faith in attempting to do so. The provisions of Civil Code section 1624, subdivision (d), along with Civil Code section 1091 and Code of Civil Procedure section 1971, render the alleged lease unenforceable despite its pre-commencement termination provisions because the actual term of the lease exceeds one year. We hold that an agreement to lease real property for a term exceeding one year is within the statute of frauds of Civil Code section 1624, subdivision (d) regardless whether such agreement provides that it may be canceled or terminated within one year of the date of its making and prior to commencement of the lease term. Required: What did the court look at to determine the one-year period?
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