Freeman v. Arnke
| Decision Date | 28 March 1957 |
| Citation | 149 Cal.App.2d 509,308 P.2d 897 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Merlin FREEMAN and Lillian Freeman, his wife, Plaintiffs, Appellants and Respondents, v. Theresa ARNKE and Robert Trost, as Executors of the Last Will and Testament of Theresia Trost, Deceased, Defendants, Respondents and Appellants. Civ. 17397. |
Joseph A. Garry, Chas. A. Sweigert, San Francisco, for defendants-appellants.
Hilary H. Crawford, Hilary H. Crawford, Jr., San Francisco, for plaintiffs-respondents.
In order that the situation may be more readily understandable, we begin with a statement of the facts of the case rather than referring first to what is being appealed.
By a written lease, dated August 18, 1954, plaintiffs leased the three upper floors of the Trost Apartments from defendant for eleven years and two months. By its terms, plaintiffs were required to pay a minimum monthly rental of $750; and agreed to pay additional rent in an amount equal to 40% 'of the amount by which the gross monthly rentals received by the lessee for the herein demised premises are in excess of Fifteen Hundred ($1500.00) Dollars during each monthly period during the term.' The lessees were also required to 'deliver to the lessor on or before the 10th day of each succeeding month during the term of this lease, a statement showing the lessee's gross monthly rentals received by the lessee during the preceding month, for the demised premises.'
The demised premises contain 42 apartments and a penthouse. Except for stoves, built-in refrigerators, linoleum, wall beds and stairs and hall carpets, the plaintiffs (lessees) are the owners of all household furniture, furniture and equipment in the leased premises, which as found by the trial court is worth in excess of $16,500. The plaintiffs had occupied the premises, as assignees under a similar previous lease, for about four years before the lease was signed on August 18, 1954. Very soon after this last date, the lessees started making separate charges to the tenants for rent and for utilities, and then reporting as gross rental only the rent, leaving out the amount collected for utilities. By April 1, 1955, the amount collected for utilities was omitted from statement of gross rent as to all of the apartments. The amount collected from the tenants for utilities was the exact amount charged to the lessees, so that plaintiffs made no profit by this arrangement. These charges amounted to $4 per apartment for electricity and water, and $2.43 per apartment for gas boiler, hot water and heat.
The lessees have the absolute right, as admitted by the lessor, to charge whatever rent they pleased as long as the minimum rent of $750 is paid. The lessor believed that rents in the apartment house had been reduced when the monthly statements showed a smaller return. When the lessor found out what was going on, she called the matter to lessees' attention, and thereafter, pursuant to demand, they paid under protest 40% of the amount they received as reimbursement from tenants for utility expenses. About the same time lessor demanded in writing that the lessees supply her with a monthly statement in much greater detail than had previously been given. Mrs. Theresia Trost, the original lessor died April 11, 1955; the named defendants taking over thereafter in their capacity as executors of her will. There were other disputes of a monor nature, which need not be related here at length, for the parties to this action have agreed on their complete settlement.
On or about November 1, 1950, Mrs. Trost leased the same apartment building to another, which lease was assigned to Mr. and Mrs. Freeman very soon thereafter, and they then took over possession and operation of the place. They have been there ever since. The furniture, which belongs to the Freemans, was acquired, along with the lease, from the original lessee. From time to time since then, the present lessees have replaced and added to the furniture. All of it, with additions and replacements, remains in the apartment house under chattel mortgage to the lessor as security for payment of the rent reserved. Apparently, there were no disagreements between the parties for the remaining four years of the lease and up until the time lessor found out in January 1955 that lessees were first reimbursing themselves for utility expense, claiming the same to be no part of gross rental.
The record discloses no difference in the terms of the two leases except in matters that can have no bearing in determining a correct result here. For example, the minimum rent was $700 per month, instead of $750; and the additional rent began when gross rentals reached a figure of $1,500 instead of $1,400 per month. The second lease refers to 'demised' premises in the place of a simple reference to premises.
It is admitted by all parties that at least until the second lease was put into effect, for a period of about four years, the lessees paid to the lessors as gross rental an amount based on receipts by lessees from individual tenants without deduction for public utilities, or rent for their furniture. The lessees do not admit that this testimony is relevant. At all these times the lessees deducted, with lessor's understanding, whatever was paid the utility company for cooking gas. Originally, the latter amount was paid directly by each tenant through individual meters. This deduction continued, and was allowed when the meters were replaced by one central meter; which cooking gas theretofore had been charged to the lessees. In their monthly settlements, no distinction was made between utility bills for electricity and water, and 'gas for boilers for hot water and heat'; neither being deducted. In so far as use of an apartment by an assistant manager without rent is concerned, the parties never agreed either expressly or impliedly on their respective rights and obligations under the lease.
The first time any deduction was made by the lessee was in October 1955 (not accounted for in statement given lessor November 8, 1954) for a few apartments. By April 1, 1955 they made deductions for all of the apartments, following the practice begun after the new lease was signed, of giving each tenant two receipts, one for rent and the other for expense of utilities. Prior to this time lessees gave their tenants but one receipt and made no reference to them of a separation of rent from utility expense.
As Mr. Freeman explains it in the transcript of testimony:
'Q. I say, you considered for four years under the old lease and for several months under the new lease, until you started--A. I paid percentage on everything I collected.
Q. Yes. And you considered that they were the gross rentals? A. I never gave much thought until I found out I was losing several thousands a year and I couldn't figure out what was happening to me.'
The seventh paragraph of the lease provides, 'That the lessee will pay for all water, heat, light and power supplied to said premises.'
The lessees filed an action for declaratory relief to resolve their differences, interpret some provisions of the lease and to recover judgment for claimed overpayment.
The judgment, as modified on defendants' motion for new trial, and only in so far as either party is dissatisfied with its terms, provides (1) that lessees have a right to make an arrangement with each of their tenants to pay the rent for each apartment and the utility charge incurred for the apartment separately, not including however gas for boilers for hot water and heating; (2) the plaintiffs are entitled to have their assistant manager occupy an apartment in said premises rent free and are not thereby required to fix a rental therefor or to pay any percentage thereon to defendants; (3) plaintiffs are bound to furnish defendants monthly a statement of gross rentals which statement shall show numbers of the respective apatements, name of tenant, amount of rent received (excluding utilities as defined), date rent is paid, and date to which rent of apartment is paid; (4) plaintiffs are not entitled to deduct any amount from the gross rental of each apartment as rent for plaintiffs' furniture and (5) plaintiffs to recover $500 plus interest. Other than the provision allowing pl...
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