Reno Realty & Inv. Co. v. Hornstein
| Decision Date | 16 July 1956 |
| Docket Number | No. 3926,3926 |
| Parties | RENO REALTY AND INVESTMENT CO., a Corporation, Appellant, v. Joseph HORNSTEIN, Respondent. |
| Court | Nevada Supreme Court |
Springmeyer & Thompson, Reno, for appellant.
Sinai & Sinai, Reno, for respondent.
This is an action for declaratory relief brought by appellant-lessor to establish his right to refuse to extend the term of respondent's lease. The trial court, sitting without jury, held for the lessee, and lessor has taken this appeal.
The premises are located in the city of Reno. The lease was executed in 1950 for a term of five years from January, 1951. The lessee was granted the right to extend the term for an additional five years 'in consideration for the full, faithful, and complete performance by lessee of each, every and all of the terms and provisions of this lease agreement by said lessee to be kept and performed.'
Among the lease provisions was the following: 'Lessee further agrees that he will not violate nor permit any person to violate any city ordinance of the city of Reno or any county, state or federal law on the said premises whereby said premises may or might be subject to abatement nor to conduct on said premises any business which is forbidden or prohibited by the ordinances of the city of Reno or prohibited by the laws of the state of Nevada or the United States of America.'
Upon the premises lessee, under the name of Nevada Turf Club, conducted a gambling business in the course of which he took bets on horse races and other sports events. The business was licensed and regulated under the authority of the Nevada Gambling Control Act, N.C.L.1931-1941 Supp. § 3302 et seq., and under the supervision of the Nevada Tax Commission.
In 1952 the tax commission adopted a regulation governing the conduct of such gambling transactions which provided in part,
During October, November and December, 1954, an investigator of the Nevada Tax Commission under an assumed name, from San Francisco, engaged in an interstate course of betting on football pools with the Nevada Truf Club contrary to regulation. On six occasions by mail he received from the club cards by means of which bets could be placed. On six occasions he placed bets by money order through the mail, which sums were duly deposited by the Nevada Turf Club in its Reno bank account. On two occasions successful bets were paid by the Nevada Turf Club by money order through the mail. It does not appear that any bets offered by the investigator were rejected by the club.
Lessor became aware of the tax commission investigation through a news article published in February, 1955. Later that month lessee voluntarily abandoned his gambling license and confined himself to a bar business. No further proceedings were taken by the tax commission. This action was brought the following month. In the interim, rent for March, 1955 had been accepted by the lessor. Lessor by its action did not seek forfeiture of the lease for its remaining eight months but sought to establish its right to refuse to renew the lease for the extended five-year term upon the ground that lessee had failed to make full, faithful and complete performance of the lease provisions.
The trial court decreed that lessee's right to renew the lease had not been lost. Upon three grounds lessee supports the trial court's action.
First. The trial court in its conclusions of law held that the unlawful acts were 'trivial, technical, and in no way prejudicial to plaintiff or to said demised premises.' Lessee contends that those acts may not, therefore, be asserted to demonstrate lack of full and faithful performance. Without deciding the point, we may concede that lessee's position would be well taken were the court's holding to be permitted to stand. In Title Insurance & Guarantee Co. v. Hart, 9 Cir., 160 F.2d 961, 969, 970, the court, in holding certain violations to be 'relatively minor infractions', stated, Realistically it may be the fact that isolated and technical instances of violation of the regulations of the tax commission can hardly be avoided in an operation of any magnitude. Such was not the case here. While the proof of violation was through a very few improper transactions as against many thousands of unexamined and unquestioned transactions, still those few were sufficient to establish beyond coincidence that the establishment was actually engaged in an unlawful operation. Had lessee not voluntarily surrendered his gaming license on the premises abatement may well have resulted.
Lessee contends that the tax commission has itself demonstrated that it regarded the incident as trivial. It did not proceed further against the lessee. Instead it has granted him a gaming license at another location and thus appears to have placed its stamp of approval upon him. We have no way of knowing the considerations which moved the tax commission in taking its action or of judging the significance of such action, and do not propose to speculate upon such matters. With due regard to the public interest we cannot hold as law that operation contrary to such a regulation as the one here involved is but a trivial or technical violation. Without a more unequivocal expression of intent we are not willing to construe the action of the tax commission as a ruling to that effect. Under the proof the court's conclusion that the violation was trivial and technical must be held to be error. The violation amounted to a substantial breach of the lease.
Second. The court found (and apparently regarded as significant) that lessee had not personally committed the acts which constituted breach of the lease and had no actual knowledge of their commission. Lessee contends that this establishes as matter of law that he was not guilty of breach.
This might well be the case had the unlawful acts been committed by a stranger: one for whose conduct, unknown to lessee, he was not responsible. Here the acts could only have been committed by some one in authority on behalf of and for the benefit of the lessee's business operation. Lessee testified that four persons were authorized to open mail and two or three were authorized to make bank deposits. At least one was apparently authorized to purchase money orders for the payment of bets. One may not entrust to others the operation of his business and the fulfillment of his contractual obligations without accepting civil responsibility for their acts in his behalf. Lessee cannot escape responsibility for breach of lease by a simple denial of actual personal knowledge that such breach had been committed by those for whose conduct he was answerable.
Third. The trial court concluded that any right of refusal to extend the term of the lease had been waived by appellant by the acceptance of rent after knowledge of the breach. Acceptance of rent after knowledge of breach is well recognized to constitute a waiver of the lessor's right to terminate the lease. Sharp v. Twin Lakes Corporation, 71 Nev. ----, 283 P.2d 611. Where the lease grants an unconditional right to the lessee at his election to renew the lease upon completion of its original term, such a waiver attaches to the extended term. The right of renewal is regarded as part of the term of the lease itself. Kaliterna v. Wright, 94 Cal.App.2d 926, 212 P.2d 32; Saxeney v. Panis, 239 Mass. 207, 131 N.E. 331; Hotel Allen Co. v. Allen's Estate, 117 Minn. 333, 135 N.W. 812; Selden v....
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