Iverson v. Spang Industries, Inc.

• Decision Date: 13 February 1975
• Citation: 45 Cal.App.3d 303,119 Cal.Rptr. 399
• Court: California Court of Appeals Court of Appeals
• Parties: Milton C. IVERSON, Plaintiff, Appellant and Respondent, v. SPANG INDUSTRIES, etc., Defendant, Cross-Complainant, Respondent and Appellant, Donald Conn and Paul Zebb et al., Cross-Defendants and Respondents. Civ. 34782.

Page 399

119 Cal.Rptr. 399

45 Cal.App.3d 303

Milton C. IVERSON, Plaintiff, Appellant and Respondent, v. SPANG INDUSTRIES, etc., Defendant, Cross-Complainant, Respondent and Appellant Donald Conn and Paul Zebb et al., Cross-Defendants and Respondents.

Civ. 34782.

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

Feb. 13, 1975.

Hearing Denied April 10, 1975.

Richard Lemmon, Redwood City, for Milton C. Iverson, plaintiff, appellant and respondent.

Willard R. Campbell, Campbell, Warburton, Britton, Fitzsimmons & Smith, San Jose, for Spang Indsutries, etc., defendant, cross-complainant, respondent and appellant.

Peter G. Samuelson, San Jose, for Donald Conn, cross-defendant and respondent.

Frank Burriesci, San Jose, for Paul Zebb, cross-defendant and respondent.

EMERSON, ^* Associate Justice.

From judgment in their favor, or partially so, plaintiff Iverson and defendant-cross-complainant Spang Industries, Inc. (Spang) take this appeal. Each claims inadequacy of its respective award and each makes other contentions which we shall discuss as we reach them. Spang has denominated its appeal a cross-appeal and for the sake of clarity we shall adopt that terminology.

Iverson sued Spang for damages for breach of a lease covenant which required Spang, the lessee, upon surrender of the premises to restore the building to its original condition, normal wear and tear excepted. Spang cross-complained against its sub-lessees Conn and Zebb asking for indemnification from them in the event that it (Spang) should be held liable.

The trial court determined that Iverson should be awarded damages in the amount of $2,711.45 plus attorney's fees and costs of suit, and that Spang was entitled to be indemnified by cross-defendant Zebb in the amount of $2,336.48 and by cross-defendant Conn in the sum of $259.61, but without costs of suit or attorneys' fees to Spang. Conn and Zebb are satisfied with the judgment but they resist Spang's contention that it is entitled to attorneys' fees on its cross-complaint.

FACTS

The original lessee of the subject property was one Graywood Corporation. During the term of its lease Graywood subleased the property, one-half to a partnership known as Kemetric and one-half to one Addington. Kemetric later subleased to Spang, then known as Magnetics, Inc. The Graywood lease and the subleases expired on August 31, 1968. It should be noted that Iverson chose not to sue Graywood, Kemetrics or Addington for damage to the property.

Effective August 31, 1968, the lease involved herein became operative. During its term Spang subleased different parts of the property to Conn and Zebb for different periods of time. We now discuss the points presented by plaintiff-appellant Iverson.

ADEQUACY OF THE TOTAL AWARD OF DAMAGES

Iverson contends that the trial court erred in that it failed to award damages for the entire loss occasioned by Spang's breach. His primary argument is that the trial court, in assessing the amount of damages, did not take into consideration the reduced rental value of the building.

The trial court found that on termination of the Spang (Magnetics) lease the partitions, changes and alterations then in existence were practically the same as those that were in existence at the commencement of said lease, and determined that the total amount of damages sustained by plaintiff was $5,422.90.

Plaintiff takes exception to these findings stating that he was required to pay $3,862.78 for repairs and restoration and that he sustained a loss of $10,700.00 as a result of the reduced rental value. ¹

The relief to be awarded a prevailing lessor for breach of a covenant to restore the premises may be based upon one of three possible measures: The cost of restoring the premises, the diminution in the market value of the premises, or specific performance of the covenant. (Comment, Breach of a Covenant to Restore (1966) 39 So.Cal.L.Rev. 309, 310.) In the majority of jurisdictions, including California, the restoration principle is employed; I.e., where an action is brought after expiration of a term for breach of a lessee's covenant to keep the premises in repair or to surrender them in good repair or in a specified condition, the measure of damages is the reasonable cost of putting the demised premises into the required state of repair or the condition contemplated by the covenant. (80 A.L.R.2d 983, 1001; 49 Am.Jur.2d, Landlord and Tenant, § 979, p. 951; Gold Min. & Water Co. v. Swinerton (1943) 23 Cal.2d 19, 38, 142 P.2d 22; see also Sprague v. Fauver (1945) 71 Cal.App.2d 333, 337, 162 P.2d 865.) An allowance may also be made for the loss of rental during the reasonable time required to make such repairs or restoration. (Worthington v. Kaiser Foundation Health Plan, Inc. (1970) 8 Cal.App.3d 435, 442, 87 Cal.Rptr. 272; cf. Linforth v. San Francisco Gas and Electric Co. (1909) 156 Cal. 58, 62, 103 P. 320; 49 Am.Jur.2d, Landlord and Tenant, § 958, p. 934.)

Iverson argues that not only is he entitled to damages based upon the cost of restoring the premises in question, but he is also entitled to recover damages based upon the reduced rental value of the property. He asserts that the reduced rental losses should be computed over the entire three-year term of the present lease.

This contention is based upon a mitigation of damages theory; I.e., that by renting the premises at less than market value on a negotiated basis Iverson was attempting to mitigate the damages incurred as a result of Spang's breach.

No California case has been found which sanctions a double recovery of this nature. Reduced rental value has on occasion been applied in other jurisdictions as a measure of damages for breach of a covenant to restore, but only under exceptional circumstances. (80 A.L.R.2d 983, 1019; see, E.g., Brown Land Co. v. Lehman (1907) 134 Iowa 712, 112 N.W. 185.) In the Brown Land Co. case the lessor was permitted to recover the difference between the reasonable rental value of the premises in the condition in which defendant lessee returned them and what would have been the reasonable rental value had they been in the condition in which the defendant, under his contract, should have surrendered them. Such difference was estimated for the length of time as the jury should find under the evidence would be required to put the premises in the proper condition. (Compare plaintiff's position that he should be entitled to recover reduced rental losses for the entire three-year term of the current lease.)

It would appear from the foregoing analysis that the trial court in this case applied the proper measure of damages; I.e., the cost of putting the subject premises into the required state of repair. It found that such costs totalled $5,422.90. There is nothing in the record to support plaintiff's contention that the trial court failed to consider the costs of removal and restoration in making its award. The court in its findings of fact specifically referred to '(t)he total amount of damages in excess of reasonable wear & tear . . ..' (Emphasis added.) The court had before it evidence of the changes and alterations made during the term of the Spang lease, of the condition of the premises at the termination of the lease, and of the character, nature, and cost of repairs. It must therefore be concluded that the trial court in making its determination of the amount of damages sustained by plaintiff took all of this evidence into consideration. The reviewing court '. . . must assume that the trial court has considered all the evidence before it, determined which witnesses asre to be believed, explained all discrepancies and inaccuracies to its own satisfaction, and that the findings express the facts.' (Bennett v. Phelps (1955) 136 Cal.App.2d 645, 652, 289 P.2d 36, 40.)

The evidence shows that some $8,309.31 was expended for repair and restoration of the premises. More than half of this sum was spent by the new and present lessee, Concept Manufacturing Co. Concept received an allegedly low monthly rental and a month's free rent in exchange for this payment.

It also appears that some of the items of repair resulted from normal wear and tear and were therefore chargeable to Iverson. The evidence viewed as a whole substantially supports the trial court's finding that the sum total of plaintiff's damages was the sum of $5,422.90.

APPORTIONMENT OF DAMAGES

With respect to the issue of inadequate damages, Iverson further argues that the trial court erred in apportioning the amount of damages it did find on the basis of fifty percent to the prior lessee of the premises and fifty percent to Spang. The court found that the total amount of the damages in excess of reasonable wear and tear caused to the demised premises for the period September 1, 1963, to September 1, 1971, was the sum of $5,422.90 with fifty percent thereof chargeable to the Graywood Corporation under its said lease and fifty percent thereof chargeable to defendant Spang under its said lease, or in the sum of $2,711.45.

Plaintiff argues that it was error for the court to apportion this sum between Graywood (who was not a party to this action) and defendant Spang. This argument is apparently based upon the following provision contained in the subject lease: 'ELEVENTH: By entry hereunder, the lessee acknowledges that the said premises, and every part thereof, and all window glass or other glazing, electric and gas globes, plumbing, heating and lighting fixtures and plants, locks, bolts, elevators, boilers, heating system, and other fixtures including sewer system, in and about the said premises are at the date of such entry complete and in good order, condition and repair; and that on the last day of the said term or other sooner termination of this lease, the lessee will peaceably and quietly leave, surrender and yield up to the lessor all and singular the said premises, with the said appurtenances and fixtures in good order, condition and...