Ellis v. Title Insurance & Trust Co.

COUGHLIN, J.—The plaintiffs respectively leased from the defendant, by an agreement in writing, certain premises that were part of a shopping center serviced by adjoining parking areas; by their leases, agreed to pay a “proportionate share of all the costs and expenses of maintaining and operating the parking areas ...”; brought this action in declaratory relief to determine whether they were liable for a proportionate share of the real estate taxes levied against the parking areas; and appeal from the judgment declaring they were liable therefor.

The plaintiffs contend that the determination of the trial court is erroneous because it is contrary to the general rule that, ordinarily, where a lease is silent as to who shall pay taxes upon leased property the law imposes the obligation to do so upon the lessor. (Los Angeles Land & Water Co. v. Consumers Rock & Gravel Co., 3 Cal.2d 77, 79 [43 P.2d 281]; Pacific Palisades Assn. v. Menninger, 219 Cal. 257, 265 [26 P.2d 303].) The defendant contends that the leases at hand are not silent upon the subject; that the obligation to pay costs and expenses of maintaining and operating the parking areas includes the obligation to pay taxes; and, for this reason, the judgment was proper.

There are many decisions holding that, under the circumstances presented by the particular case, the payment of taxes is included within the costs and expenses of maintaining and operating a particular business or property.1 Some of these decisions have involved a consideration of the provisions of a lease requiring payment by the lessee of expenses of operation. (City of Phoenix v. Tanner, 63 Ariz. 278 [161 P.2d 923, 924] ; City of Philadelphia v. N. Snellenburg & Co., 163 Pa. Super. 507 [63 A. 2d 480,484].)

[206]The issue for determination in the case at bar is whether, within the contemplation of the instant leases, the payment of taxes is an expense of maintaining and operating the subject parking areas. A formula to assist in determining this issue is supplied by other provisions in the leases wherein it is stated: “... Such operating and maintenance costs shall be computed under generally accepted accounting principles. ...” The court found that, “under generally accepted accounting principles such real property taxes are operating costs. ...” This finding is supported by substantial evidence and, under the formula supplied by the lease, of itself is sufficient to sustain the judgment.

In addition, there are other factors which also support the judgment.