Gordon v. Foote

SPENCE, J.

This action was brought by the receiver for the insolvent lessors under a twenty-year lease to recover unpaid rents from the lessee. The cause was tried by the court sitting without a jury and a judgment for costs was entered in favor of the defendant. Plaintiff made a motion under section 663 and section 663a of the Code of Civil Procedure for the setting aside and vacating of the judgment and for the entry of another and different judgment in his favor. The motion was denied and plaintiff appeals upon a bill of exceptions from the order denying the motion.

The findings of fact and conclusions of law cover 53 pages of the printed transcript, but a brief statement of

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the essential facts will suffice. We will hereinafter refer to the insolvent lessors under the twenty-year lease as the “lessors”.

The lessors held under a ninety-nine year lease with the owner of the property. They together with the owner had previously executed a deed of trust on the property in favor of a trustee to secure a bonded indebtedness of $240,000 and the lessors had agreed with the owner to pay all installments of principal and interest on said bonded indebtedness. It was further agreed that in case of their default in any of said payments the owner would be entitled to declare the ninety-nine year lease terminated. This deed of trust was executed and recorded prior to the execution of the twenty-year lease hereinafter referred to. In 1923 said lessors entered into a twenty-year lease with defendant and her husband covering the portion of the premises used for hotel purposes. This is the lease involved in the present action. Prior to the commencement of this action the named defendant had succeeded to all of the rights of her deceased husband under the lease. By the terms of said lease, the lessees agreed to pay a monthly rental of $2,640 commencing January 1, 1924, and to deposit $15,000 with the lessors “as a guarantee of the payment of rental under the lease”. The lease provided that the lessors should retain this sum during the first thirty months of the lease, paying interest thereon to the lessees quarterly at the rate of four per cent per annum and that commencing with the thirty-first month, in the event that the lessees had executed a chattel mortgage on the furnishings of the hotel, the lessors should return said deposit over a period of months by paying $357 per month to the lessees or by permitting the lessees to deduct this latter sum from the monthly rental. The twenty-year lease was made subject to “all the clauses and conditions contained in the ninety-nine year ground lease between the lessors of this hotel building and the owner of the ground itself”. All rental under the twenty-year lease was paid by the lessees up to June 1, 1926. Prior to that time and about April 1, 1926, both the lessors and the owners of the premises became and thereafter remained insolvent. The lessors defaulted in the payment of taxes for the fiscal year 1925-1926, defaulted in the payment due on the principal under the deed of trust on December 1, 1925, and