Lawrence Barker, Inc. v. Briggs

CARTER, J.

Plaintiff, Lawrence Barker, Inc., recovered judgment entitling it to immediate possession of certain real property leased by it to defendant, Walter M. Briggs. The judgment provided that defendant was not entitled to take anything by reason of his counterclaim and that he was not entitled to a declaratory judgment by reason of his cross-complaint. Plaintiff recovered costs and attorney’s fees. The lease involved in the controversy was entered into on January 1, 1945, for a 10-year term by Lawrence Barker, Inc., as lessor, and Walter M. Briggs, as lessee. The lease covered premises consisting of one lot located on Spring Street in the city of Los Angeles, which was to be used by the lessee as a parking lot. Pursuant to the lease, Briggs entered into possession and operated thereon an automobile parking lot or station. Subsequent to the execution of this lease, defendant Briggs, who operated approximately 70 other such lots in the vicinity of Los Angeles, entered into another parking lot lease with another lessor. This subsequent lease covered premises located on Main Street adjacent to the premises in question but separated by a 20-foot public alley. The premises in question will hereinafter be referred to as the Spring Street lot and the Main Street lot. The provisions of the lease involved here are as follows:

“Second: The Lessee covenants and agrees to pay to the Lessor as a monthly rental for the demised premises the sum of One Thousand Two Hundred and Fifty ($1,250.00) Dollars per month, payable in advance upon the 1st day of each month of said term. In addition to the monthly rental payments, Lessee covenants and agrees annually to pay to the Lessor the amount, if any, by which sixty (60%) per cent of the gross income or receipts of the Lessee, derived in any manner, directly or indirectly, from or by the use or occupancy of said demised premises in any one calendar year, exceeds the sum of Fifteen Thousand ($15,000.00) Dollars. Lessee agrees annually to furnish to Lessor a report or statement, prepared and certified by a reputable Certified Public Accountant, showing said gross income or receipts of Lessee from said demised premises, as aforesaid, during the preceding calendar year, paying at the same time any such additional rent shown by said report or statement to be due the Lessor from the Lessee. Said report or statement shall be furnished, and said payment of additional rent, if any be due, shall be made, within a reasonable time after the close of each calendar year of the term of this lease, and in no event later than sixty (60) days after said close of said calendar year. The expense of said report or statement shall be borne by the Lessee.”

‘‘ Third : The Lessee has deposited with Lessor concurrently with the execution of this Lease certain stocks and securities. . . . Said stocks and securities . . . are deposited for the purpose of, and shall be held as, security to the Lessor for the performance by the Lessee of all the terms, agreements, covenants and conditions of this lease. . . . Title to said stocks and securities, originally constituting said ‘deposit’, has been transferred or shall be transferred to the name of Lessor, and Lessor may continue to hold said ‘deposit’ in its own name. ... In the event that Lessee, shall be in default under any of the terms, agreements, covenants, or conditions of this lease, other than the covenants for the payment of rent, and said default shall continue for the period of thirty (30) days, after notice by Lessor to Lessee, or if default be made in the payment of rent, when the same is due and payable, and said default in the payment of rent shall continue for a period of thirty (30) days, no notice of default in the payment of rent being necessary, Lessor may sell, at public or private sale, with or without notice, any or all of the stock or securities. . . . Upon the expiration of . . . this lease, provided Lessee be not in default at said time, or upon its earlier termination by the mutual consent of Lessor and Lessee, the ‘deposit’ shall be delivered by Lessor to Lessee and all rights of Lessor in and to said deposit shall thereupon cease and terminate. However, should Lessee, at said expiration of said stated term, the lease having not been terminated earlier by mutual consent, be in default under any of the terms, agreements, covenants and conditions of this lease, said ‘deposit’ shall continue to be held by Lessor until all such defaults of Lessee are cured, Lessor having during said period of default all of its original rights therein, as if the term of this lease had not expired. ...”

“Ninth: It is expressly covenanted and agreed by and between the parties hereto that in case at any time default shall be made by the Lessee in the payment of any rent herein provided for upon the day when the same shall become due or payable, and such default shall continue for ten (10) days, or in case default shall be made by the Lessee in the performance of any of the other terms, conditions or covenants of said lease by said Lessee to be performed, other than the covenant for the payment of rent, and said default shall continue for a period of thirty (30) days after the service of written notice of such default by the Lessor on the Lessee (no notice of default in the payment of rent being necessary), . . . then and in any of such eases, the Lessor may enter into and upon the demised premises or any part thereof and repossess the same, with or without terminating this lease, amd without prejudice to any of its remedies for rent or breach of covenant, and in any such event may, at its option, terminate said lease hy giving written notice of its election so' to do, or may, at its option, let the premises or any part thereof as the agent of the Lessee, or otherwise. . . . The foregoing rights and remedies hereinabove given to the Lessor are, and shall be deemed to be, cumulative, and the exercise of one shall not be deemed to be an election, excluding the exercise by the Lessor at any other or different time of a different or inconsistent remedy, and shall be deemed to be given to said Lessor in addition to any other and further rights given or granted to said Lessor by the terms of paragraph ‘third’ herein, or by law, and the failure upon the part of the Lessor at any time to exercise any right or remedy hereby given to it shall not he deemed to operate as a waiver hy it of its right to exercise such right or remedy at any other or future time.”

Beginning in 1948, and after defendant had entered into the second lease covering the Main Street lot, when the Spring Street lot was filled with cars, defendant would move the “overflow” cars from Spring Street across the alley to the Main Street lot. He kept records of the number of cars so moved, but kept no records as to how much rental he received per car. For example, he could not tell whether he had received 25 cents, 50 cents or $1.00 or more for each of the cars moved. In accounting to the plaintiff-lessor, he allowed 25 per cent of the gross receipts on overflow cars parked on the Main Street lot. At about this time, he operated both lots at night with an attendant stationed on the Main Street lot. This attendant serviced cars entering on the Spring Street lot but issued Main Street parking tickets to them. During 1948, and until July, 1949, no records were kept of gross receipts for night parking on the Spring Street lot, although defendant allocated a portion of the Main Street night gross receipts to the Spring Street lot. Defendant continued to use the Spring Street lot as a feeder and driveway for the Main Street lot up until the time plaintiff discovered that method of operation and told him to desist. On July 27th, subsequent to notice given by plaintiff, defendant started to keep a record of night receipts derived from cars entering and parked on the Spring Street lot.

Prior to the commencement of this action, defendant submitted annual reports or statements as required by the lease, although they were not certified, and the reports he did furnish were, with one exception, not furnished within the 60-day period from the close of the calendar year as required by the lease. Plaintiff, prior to 1949, made no objection to the belated and inadequate reports. The 1949 report was submitted within the time provided for in the lease agreement.

Plaintiff', on July 22, 1949, served on defendant written notice of default in which it claimed the right to repossess the premises without terminating the lease and without prejudice to any other rights provided for in the lease. Defendant claimed that he was not in default under the terms of the lease and refused to surrender possession. Plaintiff then brought this action for recovery of possession of the premises, defendant counterclaimed for damages for breach, by the plaintiff, of a covenant in the lease pertaining to a party wall. Defendant also filed' a cross-complaint seeking declaratory relief, alleging that the terms and provisions of the lease were uncertain and ambiguous, and seeking an adjudication of the respective parties’ rights thereunder.

In the cross-complaint it was alleged that defendant had paid the minimum rent up until, and including, June 1, 1949; that commencing July 1, 1949, he has tendered to plaintiff the minimum rent per month plus the sum of $3,707.50 which represented additional rent for the calendar year of 1949 “in accordance with paragraph Second of said lease” but that plaintiff has refused to accept such tender; that the money is now on deposit in a special bank account. It is also alleged that an actual controversy exists between the parties as to the interpretation of the lease in that defendant claims that he is entitled to allocate gross income or receipts to the parking lot actually used to park the particular ear, whereas plaintiff claims that, under the lease, if the cars enter the Spring Street lot but are parked in the Main Street lot, the receipts for those cars should be credited to the Spring Street lot. Defendant further alleges that his “method of allocating gross income or receipts as between the demised premises and other parking lots operated as a unit with the demised premises constitutes a fair and reasonable method of allocation and that cross-defendant received its just, fair and proportional share of the gross income or receipts attributable to the use or occupancy of the demised premises. ’ ’ Defendant alleges that plaintiff had waived strict compliance with the terms of the lease pertaining to statements or reports. The trial court was requested, if any money was found due and owing to plaintiff, to give defendant a reasonable opportunity to pay the same, to relieve him from default and from any cancellation or the forfeiture of any of his rights.

The minimum rental of $1,250 per month was the only rent paid by defendant and is not an issue in this case. Percentage rental for the calendar years 1945, 1946 and 1947 is not in issue. The dispute centers around the percentage rental for the calendar years 1948 and 1949.

Defendant’s Counterclaim,

Defendant’s counterclaim was based on paragraph twelfth of the lease which reads as follows: “The demised premises as accepted by Lessee are subject to a party wall agreement with respect to the southern wall of the building adjoining the demised premises on the north. Pursuant to the terms of said agreement, Lessor has certain maintenance obligations with respect to said party wall. Lessor shall not be relieved of its said maintenance obligations with respect to said party wall and said obligations are not assumed by Lessee, except that should Lessee in some manner avail himself of the rights of Lessor in and to said party wall, and use said party wall in connection with said Lessee’s use and occupation of the demised premises, then and in such event, Lessee shall be deemed to have assumed and thereafter shall perform all obligations of Lessor with respect to the maintenance of said party wall.”

Defendant alleged that during the period from approximately August 15, 1946, until October 15, 1946, through the negligence and carelessness of the plaintiff he was deprived of the use of the premises by reason of the party wall becoming a hazard to anyone using the premises, as a result of which the wall was condemned by the Building and Safety Department of the City of Los Angeles. It was alleged that he had not availed himself of the rights of the lessor in and to the party wall and that he had not used it in connection with the use of the premises. He prayed for damages in the sum of $3,731.20. Plaintiff objected to the introduction of evidence under the counterclaim on the ground that it was barred by section 339, subdivision 1 of the Code of Civil Procedure (liability not founded upon a writing) and that the counterclaim did not tend to diminish or defeat plaintiff’s recovery. Defendant thereupon made an offer of proof to show that the city of Los Angeles had, on or about August 25, 1946, served defendant with a written notice which required him to immediately vacate and give up the use and occupancy of the auto parking lot because of the dangerous condition of the premises and that as a result of this notice he was compelled to shut down the parking lot to his damage in the sum of $3,731.20. It is defendant’s contention that the applicable statute of limitation is found in section 337 of the Code of Civil Procedure (action founded upon a written instrument) and that the counterclaim was filed on October 3, 1949, less than four years from the date of the alleged breach by plaintiff of the provision contained in the lease. This would appear to be the correct statute of limitation. In Tagus Ranch Co. v. Hughes, 64 Cal.App.2d 128 [148 P.2d 79], the court held that all obligations and promises which the words of the writing necessarily import must be regarded as included in the terms of the writing, under section 337, Code of Civil Procedure. The cause of action here for damages did not arise until plaintiff breached the terms and provisions of the contract.

Aside from the merits of the counterclaim, whether or not defendant may counterclaim depends on the type of plaintiff’s action and whether or not it will “tend to diminish or defeat the plaintiff’s recovery” (Code Civ. Proc., § 438). Plaintiff maintains that its action is not one of ejectment, but that it was brought under section 793 of the Civil Code which reads as follows: “An action for the possession of real property leased or granted, with a right of re-entry, may be maintained at any time, after the right to re-enter has accrued, without the notice prescribed in section seven hundred and ninety-one.” (See Code Civ. Proc., § 1159 et seq.) Inasmuch as plaintiff did not comply with the statutory notice requirements for unlawful detainer, it would appear that this is not such an action.

If the action is one in ejectment as it appears to be and which is proper in such a situation (Roffinella v. Roffinella, 191 Cal. 753 [218 P. 397] ; B. & B. Sulphur Co. v. Kelley, 61 Cal.App.2d 3 [141 P.2d 908]), then the question arises whether the defendant’s claim will tend to diminish or defeat plaintiff’s recovery. Plaintiff seeks no money damages other than attorney’s fees, as provided for in the lease, but such fees would seem to be a sufficient prayer for damages to entitle defendant to counterclaim for damages suffered by him because of plaintiff’s alleged breach of the twelfth paragraph of the lease which pertains to maintenance of the party wall.

Defendant’s Cross-Complaint for Declaratory Belief

The defendant contends that the trial court abused its discretion in denying declaratory relief under the cross-complaint. The trial court found that in view of the findings made, there was no occasion to enter any declaratory judgment; that plaintiff was entitled to be placed in immediate possession of the leased premises but made no finding as to whether or not plaintiff was entitled to repossession of the premises without terminating the lease. More specifically the trial court found that the reports furnished to plaintiff, with one exception, although prepared and signed by a member of a firm of certified public accountants, were not certified and were not furnished within the 60-day period and that they did not correctly reflect the gross income attributable to the use and occupation of the leased premises. It was also found that the gross revenue attributable to the leased premises for the year 1949 should have been $35,485.60 instead of $31,179.17, as reported by defendant; that the sum of $3,707.50 tendered by defendant to, and refused by, plaintiff, should have been the sum of $6,291.36. It was further found that plaintiff had not waived “these defaults” and had not led the defendant to believe that strict compliance with the terms of the lease would be waived in the future.

Other than the specific references made, and the use of the words “these defaults,” the trial court made no attempt to construe the lease. No finding was made as to whether plaintiff’s interpretation of the terms of the lease is the correct one, and although it may be inferred that defendant was in default because of his interpretation of the lease, no finding is made thereon. The findings as to the incorrect gross receipts report could, moreover, refer either to the overflow and night parking receipts or to the gross receipts on cars actually parked on the Spring Street lot.

The percentage rental plaintiff was to receive over and above the minimum monthly rental was to be the amount by which 60 per cent of the gross receipts exceeded the sum of $15,000, and was to be based on gross income “derived in any manner, directly or indirectly, from or by the use or occupancy of said demised premises.” No finding other than by implication from the judgment was made as to whether this provision of the lease applied to the manner in which defendant operated the two lots (parking cars entering Spring Street in the Main Street lot) so as to entitle plaintiff to the revenue received in thus placing defendant in default for failing to account therefore other than on a percentage basis.

In Judd v. Board of Education, 278 N.Y. 200 [15 N.E.2d 576, 118 A.L.R 789], the court said: “The two words (directly or indirectly) must have been used with some definite intent and purpose; otherwise why were they used at all? Aid furnished ‘directly’ would be that furnished in a direct line, both literally and figuratively, to the school itself, unmistakably earmarked, and without circumlocution or ambiguity. Aid furnished ‘indirectly’ clearly embraces any contribution, to whomsoever made, circuitously, collaterally, disguised, or otherwise not in a straight, open and direct course for the open and avowed aid of the school, that may be to the benefit of the institution or promotional of its interests and purposes. How could the people have expressed their purpose in the fundamental law in more apt, simple and all-embracing language?” (See, also, Nelson v. Johnson, 38 Minn. 255 [36 N.W. 868]; Kirkpatrick v. State, 177 Ark. 1124 [9 S.W.2d 574].) In Goodman v. Global Industries, 80 Cal.App.2d 583, 587 [182 P.2d 300], the court, in construing section 342 of the Civil Code had this to say concerning the legislative use of the words “directly or indirectly”: “The words ‘directly or indirectly’ indicate the intention to comprehend and include all types of repurchases however devised, and when the section is read in its entiréty it is clear . . . that it was designed to prohibit any purchase by a corporation of its own shares except under conditions prescribed within the section’s own four corners.”

The words “directly or indirectly” and “from or by the use or occupancy” of the premises could be construed in accordance with plaintiff’s theory or, as defendant contends that they should be construed, namely, that he, defendant, was to account to plaintiff for only a percentage of the revenue received for cars entering the Spring Street lot but actually parked on the Main Street lot and for cars entering the Main Street lot at night and thereafter parked on the Spring Street lot. If, as defendant contends, plaintiff is entitled only to a percentage of the revenue, rather than the entire revenue, from cars so parked, then the determination of the amount of that percentage is a question for the trial court. It is clear, therefore, that defendant stated a cause of action for declaratory relief and that the trial court erred in finding that “there is no occasion to enter any declaratory judgment.”

Termination of the Lease

Defendant contends that plaintiff cannot maintain an action in ejectment without terminating the lease, and that he is entitled to relief from forfeiture.

In Yates v. Reid, 36 Cal.2d 383 [224 P.2d 8], although the facts differ from the case under consideration, the lease contained a provision that in the event of abandonment or vacation of the premises by the tenant, the lessor could reenter and take possession and might ‘ ‘ at his option, either terminate this lease and recover from the Lessee all damages caused by the breach hereof of the Lessee .... No re-entry of said property by the Lessor, as herein provided, shall be construed as an election on his part to terminate this lease, unless written notice to that effect is delivered to the Lessee. ...” This court held that the retaking of possession by the plaintiff as landlord and his reletting of the premises were entirely consistent with the rights of the tenants under the lease; that the plaintiff did no more than exercise the rights accorded to him; that the provision in the lease was valid and controlling (Burke v. Norton, 42 Cal.App. 705 [184 P. 45] ; Brown v. Lane, 102 Cal.App. 350 [283 P. 78]; Security Realty Co. v. Kost, 96 Cal.App. 626 [274 P. 608]).

In Burke v. Norton, supra, 42 Cal.App. 705, again the same provision was involved and plaintiff-lessor brought an action to recover rent, attorney’s fees, damages and restoration of the premises. There, the court, quoting from Grommes V. St. Paul Trust Co., 147 Ill. 634 [35 N.E. 820, 37 Am.St.Rep. 248], said: “ ‘There is nothing illegal or improper in an agreement that the obligation of the tenant to pay all the rent to the end of the term shall remain, notwithstanding there has been a re-entry for default; and if the parties choose to make such an agreement, we see no reason why it should not be held valid as against both the tenant and his sureties. ’ We think this language is applicable to the case at bar. To hold otherwise, it seems to us, would be to place a lessee in a position to retain the premises without the payment of rent, and to compel the lessor to rely wholly upon the financial responsibility of the lessee and seek Ms rent from month to month by action, or to wholly terminate the lease, either of which would be less advantageous to the landlord than the right to re-enter and, if necessary, to relet the premises, looking to the lessee for only that portion of the rental reserved which represents the difference between what the landlord could obtain from any person upon such reletting and the total monthly rental. We do not hesitate to say that a construction which would thus permit a lessee to determine his own liability is, as we understand them, repugnant to the decisions of this state [citing many eases]. From what we have said, it follows that the court erred in declaring a forfeiture of the lease. ’ ’ It would follow from the above quoted decision that so far as the reentry and repossession of the premises by plaintiff was concerned, defendant suffered no forfeiture.

Paragraph third of the lease heretofore quoted contains provisions relating to the deposit which was intended by the parties as security for the faithful performance of the terms, conditions and covenants of the lease. It was specifically provided that plaintiff could hold or sell the securities so deposited, upon defendant’s default, either during, or at the end of, the term of the lease. It would appear that the retention of this sum by plaintiff does not constitute a forfeiture. Moreover, defendant does not request that it be returned to him. It is difficult to see where there is any forfeiture involved here.

Defendant does pray that if the court finds that any sum is owed by him to plaintiff he be given a reasonable time within which to pay it. Plaintiff does not request any damages, nor any money whatever except for attorney’s fees and costs. The trial court did find, as heretofore set forth, that defendant had not tendered the correct amount to plaintiff as percentage rental for the calendar year 1949. It would appear that any finding as to the amount of percentage rental owing by defendant (under plaintiff’s construction of the lease) would be pure speculation in the absence of any records as to the revenue collected in the daytime for cars entering the Spring Street lot but parked in the Main Street lot, and the number of cars either parked in, or which entered, the Spring Street lot during the nighttime parking hours.

In the absence of any findings on material issues presented (wherein lay defendant’s default, other than the belated and uncertified annual reports; whether or not the second paragraph of the lease is to be interpreted according to the theory advanced by plaintiff or defendant; whether plaintiff has the right to possession without terminating the lease; whether plaintiff has the right to retain the security deposit) the ease must be reversed. As this court said in Dabney v. Philleo, 38 Cal.2d 60, 69-70 [237 P.2d 648]: “It is apparent that there was a justiciable controversy between plaintiffs and Clifford’s assignees. The trial court should have expressly declared their rights. (Essick v. City of Los Angeles, 34 Cal.2d 614, 624 [213 P.2d 492].) ”

Another error warranting reversal is found in the trial court’s refusal to allow the introduction of evidence on defendant’s counterclaim inasmuch as the action was not barred by the applicable statute of limitations (Code Civ. Proc., § 337), appears to be one of ejectment, and the claim would tend to diminish or defeat plaintiff’s recovery.

Judgment reversed.

Gibson, C. J., Shenk, J., Sehauer, J., and Spence, J., concurred.