Three Sixty Five Club v. Shostak

AGEE, J. pro tem.

On August 29, 1941, the then owner, Bligh, of the four-story building located at the southeast corner of Market and Fremont Streets in San Francisco leased the second, third and fourth floors thereof to plaintiff’s predecessors in interest for the purpose of conducting a night club. Clause 3 of the lease provided: ‘1 The Lessees hereby grant to the Lessor the option of leasing the second floor of said premises at any time during the term mentioned herein at a monthly rental that will not be in excess of one-third of the entire rental being paid by Lessees at the time said option is exercised.” In June or July, 1943, the plaintiff went to Bligh and told him that it would like to construct six dressing rooms and a corridor along the westerly wall of the second floor, including the installation of a magnesite floor and ventilation equipment, but would not do so unless Bligh would waive his right to recapture the westerly half of the second floor. Bligh orally agreed to do so and plaintiff went ahead with the improvements, which cost approximately $10,000. For some reason not disclosed by the record, plaintiff caused the lease to be rcorded on July 8, 1944. Nothing on the record disclosed- the waiver. In July, 1945, defendant Shostak bought the build

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ing. He dealt with Bligh’s agent, Bligh being in Europe with our military forces. Shostak did not know of the oral waiver. He relied upon the record title as disclosed by the title search ordered by him, the terms of the lease, a copy of which he read, and an examination of the premises. Shostak did not lmow who had caused the lease to be recorded. There is no showing that he relied upon, the time of recordation. He observed that the entire third floor was occupied by the night club, the fourth floor was almost entirely vacant, and the second floor contained the 1943 improvements mentioned above, together with a rehearsal room and playroom, liquor storage space, a carpentry shop, small rooms for use in creating the “girl in a fishbowl” illusion, and incidental storage space. The expense required to move these facilities to the fourth floor would be substantial in amount. The only means of ingress and egress provided for in the lease was by means of elevators giving access to the Market Street entrance. In the latter part of 1942 and early part of 1943 there was constructed a stairway leading from the leased premises to Fremont Street. This was done to comply with fire regulations, the fire marshal having ordered the premises closed because of the lack of such additional exit. The cost of construction was shared by the plaintiff and Bligh. Shostak made no inquiry of the plaintiff or of Bligh’s agent or anyone else concerning the rights of the plaintiff. On November 30, 1945, Shostak gave written notice of his election to recapture the second floor and demanded that plaintiff vacate. Thereupon plaintiff commenced this action against Shostak to have the- rights of the parties declared. Shostak appeals from an adverse judgment which held that he was bound by the oral partial waiver of the recapture clause.