Orozco v. WPV San Jose, LLCAnnotate this Case
Orozco opened Pauly’s Famous Franks N Fries at San Jose's "The Plant" shopping center. Before signing a 10-year lease, he asked the leasing manager whether restaurants with competing concepts or products were being considered for the remaining space. The manager told him no, even as she was negotiating with Al’s Beef, a national franchise selling hot beef sandwiches, hot dogs, and french fries. Orozco signed the lease without knowledge that the Plant had leased space to Al’s and personally guaranteed rent payments. The lease, which Orozco did not fully read, contained statement that the landlord had not made any promises about products offered by other tenants or future tenants. Pauly’s had a successful debut, with steadily increasing revenue. Approximately six months after Pauly’s opened, Al’s opened two doors down. Pauly’s business declined and, within six months of the debut of Al’s, Pauly’s closed. A jury found intentional misrepresentation and concealment and awarded compensatory damages, primarily for Pauly’s lost profits. The court ruled that Orozco was not entitled to rescission of the guaranty. The court of appeal affirmed in part. Substantial evidence supports the finding of intentional misrepresentation and the award of lost profits. Orozco was entitled to rescission of the guaranty. Because Orozco prevailed in obtaining rescission of the guaranty, he is entitled to attorney’s fees under the lease.