Horvitz & Levy persuaded the trial court to grant our client a new trial in breach of contract case in which the opposing party claimed the contract was unenforceable due to a mutual mistake of fact.
Our client, Washington 111, is the landlord of Washington Park Shopping Center in La Quinta, California. Washington 111 and Dr. Kelsey (a dentist) executed a lease for two suites in Washington Park for Dr. Kelsey’s dental practice. After the parties executed the lease, Dr. Kelsey submitted build-out plans to the City of La Quinta. As a condition of issuing Dr. Kelsey his permits, the City required our client to make ADA improvements to common areas. Our client eventually resolved the issue with the City, and the City eventually issued Dr. Kelsey his permits. But there was a period of delay during which Dr. Kelsey was unsure whether he would obtain his permits because he was unsure whether our client would comply with the City’s requirement. During that time, Dr. Kelsey found a different space for his practice, refused to pay rent for his suites at Washington Park, and refused to take possession of the suites.
Our client sued Dr. Kelsey for breach of lease. Dr. Kelsey invoked the affirmative defense of mutual mistake of fact, arguing that the parties were mistaken as to whether Dr. Kelsey could obtain his permits without the City conditioning issuance of those permits on our client making improvements to common areas (over which Dr. Kelsey had no control). The jury found for Dr. Kelsey on the affirmative defense of mutual mistake of fact.
Washington 111 retained Horvitz & Levy after the verdict to prepare a motion for new trial. In our motion, we argued that, under California law, a mistake of fact is a mistake as to a fact that exists when parties execute a contract or some point before then. If parties are mistaken as to a future event, then they have made an “error in judgment,” not a mistake of fact. We argued that there was insufficient evidence that the parties made a mistake of fact as defined under California law because the evidence established that the parties were mistaken, if at all, as to a future event—whether the City would require Washington 111, at some point in the future, to make common area improvements before issuing tenant permits.
The trial court agreed and granted our motion.