ABLETT v. CLAUSON

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

ABLETT et ux. v. CLAUSON et al. (two cases).*

CLAUSON et ux. v. GLENDALE ESCROW CO.

CLAUSON et ux. v. SPOT DRIVE IN, Inc., et al.

CLAUSON et ux. v. ABLETT et ux.

Civ. 19668, 19669.

Decided: November 24, 1953

Hiram T. Kellogg, Los Angeles, for appellants. Fizzolio & Fizzolio, Los Angeles, Carl B. Sturzenacker, Hollywood, and Walter Monarch, Los Angeles, for respondents Cyril L. and Kathleen M. Ablett.

One Clauson and his wife, appellants herein, were owners of lot 25, tract 1259, in the City of Burbank. They leased a portion thereof to M. A. Johnson and others in September 1946. The lessees established and operated a drive-in restaurant on the leased premises. They transferred their lease to a corporation, with the consent of appellants. The lease was for five years at a rental of six per cent of gross sales with a minimum of $150 monthly and contained a clause giving the lessees a ‘first right and prior option’ to renewal for a like period upon terms to be agreed upon. With two years and ten months of the original term remaining, the corporation transferred the lease and its entire interest in the business to Mr. and Mrs. Ablett, respondents, for $22,000—$12,000 in cash, the remainder to be paid at the rate of $300 per month on principal and interest.

The court found that appellants knew on the day of the sale—December 7, 1948—of the purchase of the lease for $22,000 and that respondents had made the purchase in reliance upon a right to renew the existing lease for an additional five years at a monthly rental of six per cent of the gross income, with a minimum rental of $150, and that respondents intended to operate a drive-in restaurant thereon. After gaining such knowledge, appellants did not advise respondents that (1) the use of the premises for a drive-in restaurant would be opposed; (2) there was no provision in the original lease for a renewal on the same terms or (3) they would consent to a sublease only. At the same time appellants informed respondents that they would not only consent to the transfer but would reduce the rental from six per cent to five per cent of the gross sales. Appellants not only knew of the payment by respondents of $12,000 on December 7, 1948, but consented to the assignment of the lease and accepted respondents as assignees of the rights and obligations of the lessees and knew of the payments by respondents of $300 monthly until August 15, 1950 and of $200 per month thereafter until the end of the term designated by the original lease.

Notwithstanding the facts that appellants (1) in divers ways had approved respondents as tenants and (2) had advised counsel for the corporation in possession that they had approved respondents as tenants, at the end of the lease's five-year period appellants refused to negotiate with respondents for a new lease. Thereupon, the latter commenced their action for declaratory relief according to the terms of the original lease. Appellants then filed their complaint in unlawful detainer to obtain possession. The two actions were consolidated for trial and the court adjudged that respondents were ‘entitled to a renewal of their lease for an additional five-year term’ and ‘to such parking facilities adjoining the demised premises as shall be practicable for the operation of a drive-in restaurant business * * * substantially the same as that enjoyed by plaintiffs and their predecessors.’

On appeal, appellants contend (1) that the evidence does not support the findings that the transfer to respondents was an assignment and that appellants consented to such assignment as required by the lease, and (2) that the judgment was contrary to law in granting specific performance of an agreement for the renewal of the lease, the terms of which were not certain.

The title given to a transaction, whether assignment of sub-lease, is not determinative of the character of the transfer. On the contrary, the actual terms and conditions of the transaction must be considered in making such determination. Jordan v. Scott, 38 Cal.App. 739, 745, 177 P. 504. A transfer of a lease is an assignment when the transferor alienates his entire interest in the premises for the remaining period of the lease. Jeffers v. Easton, Eldridge and Co., 113 Cal. 345, 352, 45 P. 680.

In the situation presented by this appeal, the transferor retained no interest in the lease. The original copy of the lease was held by the escrow agent as something in the nature of security for payment of the amount owed on the purchase price; but this does not constitute a reservation of any interest in the lease by the assignor. The transfer of the lease to respondents was an assignment.

In the letter consenting to the transfer appellants referred to respondents as sub-lessees and to the transfer as a subletting. Appellant now argues that this usage is conclusive on the question of lack of consent to the assignment. But there is substantial evidence to support the finding that appellants were actually consenting to the assignment of the entire interest of the lessees to respondents. The conversations between the parties relating to maintenance and improvement of the property; letters by appellants' attorney concerning a renewal of the lease in which he referred to respondents as ‘assignee’; the answer to the complaint for declaratory relief referring to the transfer as an assignment; that the notice to quit was sent to respondents and not to the original lessees; also, that the action in unlawful detainer was against respondents and not the original lessees—all these facts are evidence in support of the finding that appellant consented to the assignment. The indiscriminate use of the words ‘sub-lease’ and ‘assignment’ serves to indicate a disregard for, or a lack of knowledge of, their technical meanings and therefore the actual intent of the lessor should be determined from all his actions, not merely by one of them.

Since respondents are assignees of the lease, they are entitled to all the rights that the original lessees had in respect to a renewal of the lease. The assignment conveyed to them full ownership of ‘the first right and a prior option to secure a lease upon said premises before the same are offered to any other person, firm or corporation for lease or rental and that said option shall contemplate a lease for a period of five (5) years upon terms to be then agreed upon.’ The evidence discloses that at the termination of the original five-year term, appellants intended to use the premises under lease as part of the parking facilities for a super-market which they had erected on adjacent property and leased to others. This avowed intent to lease to another was contrary to the ‘first right and prior option’ that the present lessee had under the renewal clause.

Appellants contend that the language of the option is so uncertain as effectually to convey no right at all. Merely because a new lease, or an extension of the existing lease is not set out in haec verba as an exhibit to the original lease is no reason for depriving a lessee or his assigns of a right which by the original writing was clearly granted to the lessee. The interpretation of a contract like all other facts to be found should be achieved with an eye to doing justice between the parties to the controversy. Such was the concept of Mr. Justice Drapeau in Chaney v. Schneider, 92 Cal.App.2d 88, 206 P.2d 669. There the lease was for five years and the lessor agreed ‘to give Lessee first refusal for an additional term of lease, at rentals and terms to be mutually agreed upon at that time * * *.’ In affirming judgment that the lessee should have ‘an additional five years upon the same terms and conditions as the original lease but at an increased rental’, the court said, 92 Cal.App.2d at page 89, 206 P.2d at page 669:

‘Leases which left anything for future agreement of the parties were for a long time generally held to be void for uncertainty. The modern trend of decisions would seem to be in relaxation of the strictness of the rule, particularly when the amount of rental is left to future agreement. If there is in the writing a sufficient definite standard or method for the determination of the rental, and if the amount thereof is the only thing to be determined, courts of equity will hold that the parties agreed upon a reasonable rental for the extension, and will declare it if they do not agree.’

If the court may fix a ‘reasonable rental’ where the covenant is for a renewal of the lease for a rental to be determined by arbitration, after the arbitrators failed to agree Streicher v. Heimburge, 205 Cal. 675, 272 P. 290, the court may fix rentals or determine any other fact required by the option clause to do justice. The omission of details from an option for renewal of a lease does not destroy or defeat the power of equity to establish such details nor does it nullify the force of the clause giving the right of renewal. If a lease provides for the absolute right to its extension or renewal and the details are such as a court may determine, it should not be held that the contract is incomplete but should establish the right and settle the details. Joy v. City of St. Louis, 138 U.S. 1, 43, 11 S.Ct. 243, 34 L.Ed. 843, 856; Central Trust Co. v. Wabash, St. L. & P. R. Co., 8 Cir., 29 F. 546, 557; see Kauffmann v. Liggett, 209 Pa. 87, 58 A. 129, 67 L.R.A. 353. Appellants forget that the genius of the law does not encourage stagnation. On the contrary, it demands expansion; in every field of endeavor it provides new rules and new remedies to meet new situations. The lone and forlorn cry that ‘it's never been done before’ is not sufficient to reverse a new, wholesome trend. The thesis of the Chaney decision is that where a party to a lease has a right to an extension of the term of the original lease or to a new term, such right will not be defeated by the absence of some of the essential provisions of a new lease. If, perchance, the parties do not agree on the rental or other provisions for the new lease, the court itself will fix them in consonance with the spirit and language of the agreement for a renewal despite the plea that the court is making a contract in contravention of its powers.1

The application of the doctrine declared in Chaney v. Schneider, supra, to the lease here involved was not error. The fact that the rent was not changed although the value of the property has increased during the period of the first lease does not defeat this conclusion, since the rent is a percentage of the gross income from the lessee's business. The value of the property increases because the amount of potentially available business on the location increases, and the rent under this lease (6 per cent of gross sales) increases when the amount of business increases.

The judgments are affirmed.

FOOTNOTES

1.  See also Note, 24 Southern CaliforniaLaw Review 91.

MOORE, Presiding Justice.

McCOMB and FOX, JJ., concur.

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