Giddens v. Krogh

Plaintiff sought to recover the sum of $1,000 deposited by his assignors with defendants as lessors

The lease, executed on May 1, 1926, by defendants and Michael McGuinn and Robert W. Lawton, plaintiff’s assignors, was for a term of five years commencing July 1, 1926. It covered a garage and service station and provided for a monthly rental of $250. It further contained' the ■following provision: “Mr. Michael McGuinn has deposited with the lessors the sum of One thousand ($1,000) dollars, the receipt of which is hereby acknowledged. Said money is not deemed any part of the rental herein reserved, but,is a flat consideration and compensation to the lessors for entering into this lease, but said lessors agree that if the lessees shall well and truly perform all of the covenants and conditions herein contained, and continuously occupy the said premises for the period herein reserved, then said money shall be returned to said Michael McGuinn at the termination of this lease, whether said termination be by the expiration of the lease term or by mutual agreement of the parties hereto, whether by assignment or otherwise, as long as the lessee shall not be in default in the performance of the covenants herein created. The lessors will pay the said Michael Guinn six per cent per annum payable monthly, on the first day of each and every month, on said deposit.”

On July 1, 1927, the lease was assigned to plaintiff with the consent of defendants. Shortly thereafter plaintiff refused to pay the $250 per month as rental and stated that “he would walk out” if the rent was not reduced. The parties then orally agreed upon a reduction of the rent from $250 to $200. The latter amount was paid by plaintiff up to March 11, 1929. Shortly prior to that date plaintiff told defendants that if the rent was not reduced to $150 per month “he would have to walk out, he could not make it”. Defendants refused to make a further reduction but it was finally agreed that the lease should be terminated and that defendants would purchase certain equipment from plaintiff. The parties entered into a written agreement on March 11, 1929, the pertinent portion of the agreement reading as follows: “The above lease on Southgate Garage & "Service Station, is hereby mutually and agreeably terminated this date, and the Lessor, H.

It appears to have been conceded in the trial court that any rights which appellant’s assignors had with respect to the deposit passed to appellant on the assignment of the lease. It was further conceded that appellant and his assignors had performed all of the conditions of the lease up to the time of the agreement of March 11th, despite the fact that for some time prior thereto, appellant had paid a smaller rental than that provided in the written lease under an oral agreement between the parties. In the trial court and on this appeal appellant had contended that the agreement of March 11, 1929, constituted a termination within the meaning of the original lease entitling him to the return of the $1,000 deposited with respondents. The record discloses that the trial court construed the agreement' with reference to the surrounding circumstances and the course of dealing between the parties and concluded and found that the agreement was understood and intended to be a termination of all further rights and liabilities of the parties under the lease including the provision above quoted. In our opinion the trial court properly construed the agreement.

Appellant argues that the language of that agreement is clear and free from doubt and “there therefore was

The evidence shows that on the second occasion when appellant threatened to abandon the lease and “walk out” he was refused a second reduction in the rental. At that time the lease had twenty-six months to run and appellant’s business was not a paying enterprise even with the rental at the reduced figure theretofore orally agreed to by respondents. He sought to terminate the lease and to sell his equipment to respondents and after several days had elapsed respondents consented and signed the agreement of March 11th. Appellant testified that before respondents had signed the agreement Mr. Krogh stated that “he would go down and get the money and bring it back and pay me and relieve me”, but as Mr. Krogh was unable to get the money an installment note for $500 was finally accepted. Appellant vacated the premises and ceased paying rent. Respondents ceased paying interest on the $1,000. In speaking of the

Appellant further contends that the provision of the lease relating to the $1,000 deposit is invalid and that he is entitled to recover regardless of any failure to comply with the conditions of the lease and without reliance upon the termination agreement. He cites and relies upon Green v. Frahm, 176 Cal. 259 [ 168 Pac. 114 ]; Knight v. Marks, 183 Cal. 354 [ 191 Pac. 531 ]; Redmon v. Graham, 211 Cal. 491 [ 295 Pac. 1031 ], Each of these cases involved a clause providing for a deposit as security and further providing for a forfeiture of the deposit in case of breach. These cases are authority for the proposition that the portion of the clause providing for a forfeiture is invalid; but as pointed out in Green v. Frahm, supra, at page 262, that portion of the clause providing for a deposit as security is valid. Even if the clause in the present lease is construed as one providing for a deposit as security for the lease and not as a “flat consideration and compensation to the lessors for entering into this lease”, the clause is nevertheless valid to that

The judgment is affirmed.

Nourse, P. J., and Sturtevant, J., concurred.