Restaurant News & Reviews

Downtown developer exaggerated building size to charge bakery higher rent, jury decides

Estelle moved out from 901 K St. after the lease expired in August 2016, and opened a Downtown Commons store this spring.
Estelle moved out from 901 K St. after the lease expired in August 2016, and opened a Downtown Commons store this spring.

Editor's note (June 16): This story has been updated with a statement by Mohanna's legal adviser and to say that while the jury awarded $75,000, Mohanna plans to appeal and has not paid it.

A Sacramento jury this month awarded more than $75,000 to Estelle Bakery & Pâtisserie after determining longtime Sacramento developer Moe Mohanna had misrepresented a downtown building's size to charge the bakery owners a higher rental rate.

The lawsuit, filed in March 2015, pitted Estelle co-owners Carl Shin and Esther Son against Mohanna's Capital Plaza Partnership. The jury issued its decision on June 7.

Shin and Son contacted Mohanna in 2011 about a vacant property at 901 K St. listed at 3,500 square feet, according to Sacramento Superior Court records. Shin and Son alleged that Mohanna informed them it was closer to 3,000 square feet during a tour of the facility, and both sides agreed to a five-year lease at $4,500 a month — $1.50 per square foot — on Aug. 16, 2011.

When Shin and Son began planning to open a 5,000-square foot Arden Arcade store in 2014, the husband-and-wife team's architect checked out their K Street building to see how the bakery used its space. An independent contractor confirmed the architect's suspicion, Son said: their existing store was actually 2,056 square feet.

A prior tenant's lease listed the building at 2,100 square feet, according to court documents, and a jury determined Mohanna knew of the discrepancy when he leased the building. Mohanna did not respond to a request for comment Friday afternoon.

His legal adviser, Harvey Zall, issued the following statement late Saturday afternoon: "The square footage of the space was calculated by a dual-agent representing both Mrs. Son and Capitol Plaza Partnership-Mr. Mohanna. The space that was leased included both the patio space and the basement which tenant used for storage, which were not included in the '2,056 square feet.'

"Mrs. Son was also responsible under the lease terms for measuring the space herself if she wished to challenge the space calculation - something that is typically done before a lease is signed during due diligence. Instead, Mrs. Son waited until the end of the lease to become litigious and challenge the dual agent’s calculation."

Zall said Capitol Plaza Partnership plans to appeal the jury's decision and has not paid the $75,000 jury award.

Mohanna previously made headlines when the city of Sacramento, eager to spur downtown development, filed an eminent domain lawsuit over several of his properties on the 700 and 800 blocks of K Street in 2008. The two sides settled for $18 million eight months after the suit was filed, and Mohanna spent $5.8 million on three buildings one block over in July 2015.

"He's such a big fish in town, but my husband and I felt that if we had the means to do so, we needed to fight it," Son said.

The jury denied some other claims by Shin and Son such as their having no prior knowledge of a faulty oven, however, and determined an unnecessary 2012 pressure washing incident caused significant damage to the building's walls, floor and electrical units.

Shin and Son were awarded $63,798 in overpaid rent plus $25,000 in punitive damages. They were also forced to pay Capital Plaza Partnership $12,310 for damage to the building's interior, $4,500 of which came from the security deposit.

Estelle closed at 901 K St. when its lease expired in August 2016 and opened in Downtown Commons in late March 2018. The Arden Arcade store opened in January.

The Bee's Benjy Egel is launching a new effort to cover Sacramento's dining and beer scene. Please send tips and story ideas by email at begel@sacbee.com, on Twitter @BenjyEgel or by phone at (916) 321-1052.

Related stories from Sacramento Bee

  Comments