Pasadena Hudson, Inc. v. Maggiora

FOX, P. J. In 1952 plaintiff leased certain property in Pasadena from defendants for a term of 10 years at an annual rental of approximately $14,500. Plaintiff agreed in addition to reimburse defendants for the city and county real property taxes on the premises paid during the term of the lease. A deposit of $11,000 was paid by plaintiff to defendants as security for its performance of its obligations under the lease; defendants agreed to credit plaintiff with interest on this deposit at the rate of 5 per cent per annum. One year and three months after signing the lease plaintiff vacated the premises and ceased paying rent. Defendants gave plaintiff written notice, as required by the lease, of the breach thereof arising from the failure to pay rent due. Plaintiff then advised defendants in writing that it was unable to comply with the lease and expressly requested that defendants attempt to relet for its benefit. Defendants responded with a written notice to plaintiff that they elected t.o keep the lease in full force and to relet for plaintiff’s benefit; they stated further that they would hold plaintiff for any resulting loss or damages, as provided in the lease.

One month thereafter defendants relet the premises to Meadow Gold Dairies for a term of 10 years. The proposed lease was approved by plaintiff prior to its execution. The annual rent under this lease is $16,800; however, defendants are required to pay the annual taxes on the land up to a maximum of $2,881.87. Based upon 1954 and 1955, the net result is that the total yearly rental received under the new lease is less than that designated in the lease with plaintiff; the deficiency has been about $500 per year.

At the end of 1954 defendants submitted an accounting to plaintiff in which the latter was credited with interest on [726]the security deposit after deducting taxes and other items that defendants had paid. At the end of 1955 defendants again submitted an annual accounting to plaintiff. In this accounting defendants subtracted from the security deposit (1) the amounts which they had paid their attorneys for legal services resulting from plaintiff’s breach, and (2) the rental losses they had sustained (taking into account the taxes which were paid by defendants). They then tendered to plaintiff the sum of $387.61, representing the annual interest on the balance, which tender was refused by plaintiff.

Thereafter plaintiff instituted this action for declaratory 'relief, praying that the rights of the parties under the lease be determined. The trial court held: that the lease executed by plaintiff and defendants was in full force; that defendants are entitled to retain the money deposited with them by plaintiff as security until the expiration of the lease; that plaintiff wrongfully breached the lease; that defendants are entitled, as provided in the lease, to deduct from the security deposit damages and expenses incurred as a result of plaintiff’s breach; that plaintiff is not entitled to collect the rent from Meadow Gold Dairies; and that at the expiration of the lease plaintiff is entitled to an accounting from defendants as to the security deposit, and is entitled to any money remaining after deduction of damages and expenses incurred by defendants. Moreover, although the court found that defendants incurred and paid legal expenses and attorneys’ fees in the sum of $785 as a result of plaintiff’s breach, the court refused to find whether or not the fees were reasonable.