B. Co. v. Schultz

• Decision Date: 20 May 1970
• Citation: 86 Cal.Rptr. 760,7 Cal.App.3d 786
• Parties: B.K.K. COMPANY, Plaintiff, Cross-Defendant and Respondent, v. Robert SCHULTZ, Defendant, Cross-Complainant and Appellant; Ben Kazarian, Jr., et al., Cross-Defendants and Respondents. Civ. 34218.
• Court: California Court of Appeals Court of Appeals

Page 760

86 Cal.Rptr. 760

7 Cal.App.3d 786

B.K.K. COMPANY, Plaintiff, Cross-Defendant and Respondent, v. Robert SCHULTZ, Defendant, Cross-Complainant and Appellant Ben Kazarian, Jr., et al., Cross-Defendants and Respondents.

Civ. 34218.

Court of Appeal, Second District, Division 4, California.

May 20, 1970.

Allen, Fasman & Janger and Jerome Janger, Beverly Hills, for defendant, cross-complaint and appellant.

Ball, Hunt, Hart & Brown and Stephen A. Cirillo, Long Beach, for plaintiff, cross-defendant and respondent.

FILES, Presiding Justice.

In January 1961 plaintiff leased to defendant Schultz a hog ranch, for a term expiring December 31, 1966. At the same time plaintiff sold to defendant, under a written sales contract, livestock and equipment for use on the ranch. In June 1964 defendant abandoned the ranch, taking with him all of the livestock and most of the equipment. On November 18, 1964, plaintiff commenced this action for damages for breach of the lease and sales agreement. The answer set forth several defenses and included a counterclaim for the value of a house trailer sold by defendant to plaintiff. Defendant also filed a cross-complaint against the plaintiff corporation, Ben K. Kazarian, Jr., ¹ and Ben K. Kazarian, Sr., seeking declaratory relief and an accounting with respect to a business, known as R & S Disposal Company, in which defendant allegedly had a one-third interest.

After a court trial, a judgment was entered June 3, 1968, in favor of plaintiff against defendant in the principal sum of $79,582 plus prejudgment interest amounting to $29,480. On the cross-complaint the court adjudged that defendant does not have any interest in the business and is not entitled to an accounting.

Defendant is appealing from that judgment.

The Measure of Damages on the Lease

The lease called for rent at the rate of $400 per month for the full term of six years. It was admitted that only $6,800 had been paid, leaving a difference of $22,000. Immediately after defendant vacated the premises in June 1964 plaintiff employed Jesse Gomez, a former employee of defendant, to stay at the ranch, protect it, clean it up and make repairs. There is substantial evidence that defendant had left the premises in a rundown condition. The property was in a remote canyon and suitable only for a hog ranch, under a use permit issued by the county. On August 10, 1964, plaintiff's attorney wrote to defendant advising that plaintiff intended to hold him for the entire term of the lease. Again on September 22, 1965, plaintiff's attorney notified defendant in writing that plaintiff continued to hold defendant responsible, but would attempt to mitigate damages by reletting the property. Plaintiff then moved some hogs onto the ranch so that the use permit would not be lost. However, the county took the position that the use permit had already been terminated because of nonuse, and ordered the hogs removed. Thereafter there was no possibility of leasing or using the ranch profitably.

It was defendant's contention at the trial, and here, that by keeping Gomez on the premises plaintiff accepted the surrender and thereby waived all installments or rent falling due thereafter. However, the law has long recognized that a landlord who is forced to take possession of abandoned property to preserve it does not necessarily acquiesce in the surrender and termination of the lease. (See Respini v. Porta (1891) 89 Cal. 464, 26 P. 967.) In the case at bench there is evidence which supports the finding of the trial court that 'Plaintiff did not accept the surrender of the leased premises by defendant.'

The applicable law is stated in De Hart v. Allen (1945) 26 Cal.2d 829, 832, 161 P.2d 453, 455:

'Where, as here, the premises have been abandoned the lessor may consider the lease as still in existence and sue for the unpaid installments of rent as they become due for the unexpired portion of the term, or he may retake possession for the lessee's account and relet the premises, holding the lessee for the difference between the rentals under the lease and what the lessor was able in good faith to procure by reletting.'

(Accord: Phillips-Hollman, Inc. v. Peerless Stages, Inc. (1930) 210 Cal. 253, 258, 291 P. 178.)

Since plaintiff was unable to relet the premises for any portion of the term, the entire balance of the rent became the measure of its damage. The factual question whether the plaintiff accepted the surrender, or whether it held possession for defendant's account was fully litigated in the trial court. The trial court found that plaintiff did not accept the surrender. This determination, based upon a reasonable view of the evidence, supports this portion of the judgment.

Defendant points out that the complaint was filed in November 1964 before most of the damage had accrued. He points to some older decisions such as Treff v. Gulko (1932) 214 Cal. 591, 598, 7 P.2d 697, holding that a complaint which is filed before the damage accrues is premature, and that no recovery may be had for installments of rent falling due after the date of the complaint. ² But this strict rule of procedure has now been abandoned. (See Golden State Mut. Life Ins. Co. v. Frankfurt (1962) 210 Cal.App.2d 223, 227, 26 Cal.Rptr. 444.)

Modern case law regards prematurity of the action as ground for abatement only, and if there is no timely motion to abate, the defense is waived. (See 2 Witkin, Cal. Procedure, Pleading, § 564, p. 1566.) Thus in Moore v. Fellner (1958) 50 Cal.2d 330, 343, 325 P.2d 857, 864, the Supreme Court said:

'However, the unfavored defense that the action was prematurely brought is simply matter of abatement which must be pleaded in proper time or it is waived. Further, if the defense has ceased to exist at the time defendant seeks to raise it, there is no occasion to consider whether it has been waived, as it may be disregarded.'

The trial of this case took place in 1968, after all installments had become due, so that the court could properly include all of them in the judgment.

Damages for Breach of the Sale Contract

The court allowed defendant an offset for the full amount claimed in his counterclaim for the value of a house trailer which he had sold to plaintiff. The correctness of this determination is not now challenged.

Defendant contends he did not receive proper credit for three items of personal property repossessed by plaintiff after the 1964 default. This calls for an examination of the contract and the conduct of plaintiff following the default.

The simple typewritten agreement declares that 'the seller does hereby agree to sell and conditionally convey' the described property. Despite the absence of much of the language usually found in a conditional sales contract, the parties appear to be in agreement that the seller contractually retained a security interest in the property. The price of the livestock was $42,655 and the price of each other item was separately stated, for a total of $67,000, payable on or before July 1, 1962, with interest at 6 percent from January 1, 1961. The buyer agreed not to convey or destroy any of the property, except livestock, without the consent of the seller. There was no statement of the remedies of the seller except this:

'a. Any breach of this agreement, in any respect, shall give the buyer the privilege of considering this agreement terminated, and seller may demand full payment of the balance due at time of breach.'

Although several of the items sold were motor vehicles, neither the parties nor the trial court ever suggested the applicability of Civil Code section 2981 et seq. For the purpose of review we therefore accept their assumption, without deciding, that these sections are inapplicable.

When defendant abandoned the ranch in June 1964 he left behind a 1960 Chevrolet truck, the contract price of which was $7,295, a 1949 International truck with a contract price of $2,500 and a garbage unloader with a contract price of $5,800.

No part of the $67,000 contract price, or any interest thereon, had been paid.

Ben K. Kazarian, Jr., one of the officers of plaintiff B.K.K. Company, testified that after the default, the two trucks were taken to plaintiff's equipment yard in Torrance.

The body of the Chevrolet truck was sold for $1,000 and a rubbish truck body was put on. Thereafter that truck was used in a rubbish collection business owned by Kazarian. The ultimate disposition of the garbage unloader was not shown.

There was conflicting evidence as to the value of each of the three items at the time of default. The trial court found that at the time of repossession the value of the International truck was $1,200 and the value of the garbage unloader was $3,500. No finding was made as to the value of the Chevrolet, but the court did find 'In 1966, plaintiff sold the body of the 1960 Chevrolet truck for the sum of $1,000.00.'

Upon these findings the court allowed defendant credits of $1,200, $3,500 and $1,000 respectively against the contract price.

The classic statement of the remedies of the unpaid seller is found in Johnson v. Kaeser (1925) 196 Cal. 686, 694, 239 P. 324, 327:

'It is settled by an unbroken line of decisions that, as to such a contract, it is optional with the seller, upon default by the purchaser in complying with any of the vital terms of the agreement, either to treat the contract as involving a conditional sale and retake possession of the property or ratify the contract as one involving an absolute sale of the property and so sue for the recovery of all moneys then payable thereunder. In other words, the seller in such case is vested with the right to exercise an election as between the two remedies suggested.'

The two remedies are inconsistent alternatives, so that an election to pursue one of them bars the other. (See, e.g., Smith v. Greenfield State Bank (1963) 222 Cal.App.2d 869, 35 Cal.Rptr. 579 (probate claim for money bars repossession); ...