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District Court of Appeal, First District, Division 2, California.


Civ. 13650.

Decided: July 21, 1948

Millard Smith of Vallejo, and Geo. Olshausen and Philander Brooks Beadle, both of San Francisco, for appellant. Hoge, Pelton & Gunther and Leo V. Killion, all of San Francisco, for respondent.

Plaintiff has appealed from a judgment entered in favor of defendants following the return of a verdict directed by the court. The action was one for damages for the alleged unlawful termination of a lease. The plaintiff was operating a jewelry store as lessee in premises in the city of Vallejo under a written lease executed by defendants as lessors for a term ending December 31, 1945. The lease contained the following provision:

‘Lessor may terminate this lease in the event that the existing improvements are to be torn down to make way for the erection of a new building on sixty (60) days written notice addressed to the lessee at 407 Georgia Street, Vallejo, California.’

On November 28, 1944, defendants gave the following written notice to plaintiff:

‘Arrangements have been made to tear down the building which you now occupy and a new building will be erected thereon as soon as you and other tenants have moved. All tenants have been notified. Therefore, I am now giving notice as required by the lease, for you to vacate the premises at 407 Georgia Street not later than January 31, 1945. I regret that you have to move at the present time, as I know the difficulties of finding a suitable location under the present conditions, but in order for me to make certain arrangements which I must do in Vallejo, I must erect this new building now. Hoping that this will not inconvenience you too much, I am, Very truly yours, Graeme MacDonald.’

At that time the United States was engaged in the prosecution of the recent war with Germany and Japan and no building could be done without a permit from the War Production Board. Defendants had disclosed to certain officials connected with the War Production Board their desire to obtain a permit and had received verbal assurances that led them to believe that such permit would be granted. However they had not made formal application for a permit and did not in fact formally apply for a permit to the War Production Board until January 4, 1945. On January 23, 1945, this application was denied and two subsequent applications were denied on April 2 and June 16, 1945. In the meantime on January 13, 1945, pursuant to the notice of November 28, 1944, plaintiff quit the premises. They were afterwards let temporarily to another jeweler, who occupied them till the middle of August, 1945, at which time the building was razed in preparation for the construction of a new building. This was only possible because with the surrender of Japan all building controls were relaxed.

It was the theory of the trial court in directing the verdict that despite the fact that defendants could not legally construct the projected building without a permit from the War Production Board they were entitled to terminate the lease if they in good faith intended and expected to erect a new building. We cannot agree with this construction of the quoted provision of the lease.

The lease was terminable upon the occurrence of a condition subsequent. Los Angeles Athletic Club v. Board of Harbor Com'rs., 130 Cal.App. 376, 387, 20 P.2d 130. The language defining this condition must be construed most strongly against the defendants. At least two rules of construction compel this result: 1. The evidence shows that the lease was drawn by defendants. ‘Any uncertainties existing in an agreement are to be interpreted most strongly against the one who prepared the instrument and caused the uncertainties to be present.’ 4 Cal.Jur. 10 Yr. Supp., 1943 Revision, p. 135 and cases collected in note 5; Pacific Lumber Co. v. Ind. Acc. Commission, 22 Cal.2d 410, 422, 139 P.2d 892. 2. ‘A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created.’ Civ.Code, sec. 1442; Los Angeles Athletic Club v. Board of Harbor Com'rs., supra, 130 Cal.App. 376, 388, 20 P.2d 130; 6 Cal.Jur. 310 and cases collected in note 17.

The condition in the lease, ‘in the event that the existing improvements are to be torn down to make way for the erection of a new building,’ must be construed as a whole and contemplates that the improvements are not to be torn down until the intended construction of the new building makes it necessary. The lease could certainly not be terminated to permit the razing of the existing building if the defendants intended to let the land lie idle for any extended period before commencing the erection of a new structure. In Southeastern Land Co. v. Clem, 239 Ky. 417, 39 S.W.2d 674, the court said of a similar provision, 39 S.W.2d at page 676: ‘He could not terminate the lease and let the lot lie idle.’ Cf. Donohue v. City of New York, 54 Misc. 415, 105 N.Y.S. 1069.

Until a permit for the construction of the proposed new building had been granted by the War Production Board defendants could not legally engage in its construction. This they recognized. Defendant Graeme MacDonald testified at the trial that he did not intend to build without a permit and did not intend to demolish the existing structure until a permit to erect a new one had been obtained. He further testified that he knew that the board had the legal power to deny the permit.

The question is thus squarely presented: Should the proviso of the lease ‘in the event that the existing improvements are to be torn down to make way for the erection of a new building’ be construed to require that defendants have the legal power to erect a new building before they could exercise the right reserved to them to terminate the lease? The language will reasonably bear that construction. Defendants could not truthfully say that a new building was to be erected before they had obtained the necessary permit. The only accurate notice that they could give in the absence of a permit would be: ‘The existing improvements are to be torn down to make way for the erection of a new building if we get a permit from the War Production Board.’ The proviso in the lease, however, is absolute, not conditional. That being so, construing it most strongly against the lessors, we must give it an unconditional construction.

The precise question seems to be one of first impression. Support for our conclusion is found by analogy in those cases authorizing the termination of a lease in the event of the sale of the demised premises. The case uniformly holds that the good faith expectation of making a sale does not justify the landlord's terminating the lease, nothing short of a binding contract of sale being sufficient to satisfy the condition. Bellone v. Kleinau, 54 Cal.App. 428, 201 P. 977; Diamond Cattle Co. v. Clark, 52 Wyo. 265, 74 P.2d 857, 866, 116 A.L.R. 912; Allen v. Marino, 133 Conn. 138, 48 A.2d 564; John Hancock Mut. Life Ins. Co. v. Behr, 229 Iowa 900, 295 N.W. 436.

Respondents rely on Woods v. Postal Telegraph Co., 205 Ala. 236, 87 So. 681, 27 A.L.R. 834; Southeastern Land Co. v. Clem, supra, 239 Ky. 417, 39 S.W.2d 674, and similar cases holding that like conditions in leases are satisfied by a good faith intention to proceed with the erection of a new building. None of these cases is in point since in no one of them does it appear that the legal power to build was conditioned upon the obtaining of a permit which might be denied in the discretion of the licensing authority. Upon the facts proved the plaintiff is entitled to such damages as the jury may legally assess.

Judgment reversed.

DOOLING, Justice.

NOURSE, P. J., and GOODELL, J., concur.