Case Notes

The landlord appealed to the Court of Appeal of California, Fourth Appellate District, Division One, which affirmed the trial court's decision, stating: “Even if we assume the pool is an 'improvement made by or on behalf of Tenant' under section 10.1, that provision only requires Tenant to repair resulting damage, not ordinary wear and tear. Ordinary wear and tear falls under Landlord's maintenance and repair obligations in section 10.2. This is the only reasonable construction of the repair provisions in the lease.” The appeals court further observed that even though it could come to this conclusion based on the lease terms alone, another basis for finding in favor of the tenant existed in the course of conduct of the parties: As the landlord had always taken responsibility for roof repairs over the pool, it must have been the parties' intention that this be the case, despite the fact that the pool was installed as an improvement specifically for this tenant.

Attorney Fees Not Court-Ordered Cannot Be Recouped by Withholding Rent

A Pennsylvania appeals court has held that two parties' failure to appeal decisions in a previous action between them leaves each to live with those results, and the tenant's resort to self-help to redress an alleged unjust outcome will not be rewarded by the court with a stay of eviction in a subsequent action. Pizzella v. Auto Buddies, No. 522 MDA 2017 (6/12/18).

The lease between the landlord Carolyn Pizzella and tenant Auto Buddies, a car sales outfit, required the tenant to, among other things, pay all property taxes directly to the landlord. The lease was for a set term of years, with nine options for additional one-year terms. The document stated further that “[i]n the event that any action is filed in relation to this lease, the unsuccessful party in the action will pay to the successful party, in addition to all the sums that either party may be called upon to pay, a reasonable sum for the successful party's attorney fees.”

In February 2012 the county tax bureau issued a delinquency notice informing the parties that real estate tax payments were overdue, prompting Auto Buddies to pay the past-due taxes about a week later. Soon thereafter, however, the landlord said it was not going to extend the lease, even though Auto Buddies wanted to do so. In October 2012, the landlord went further by informing the tenant that it was terminating the lease.

Auto Buddies immediately sought and obtained a declaratory judgment that it was not materially in breach of the lease. But the court also ordered the tenant to reimburse the landlord for any property taxes and to pay her any outstanding rents. Auto Buddies did not file a fee petition with the court, but it did assert that because it was the successful party to the dispute, the landlord should pay it attorney fees in accordance with the terms of the lease. The landlord did not pay those fees.

Apparently because it felt badly used for not receiving any attorney fee award, Auto Buddies did not pay the landlord as ordered, prompting her to file a contempt petition in March of 2015. The tenant again asked the court to offset any attorney fees against the amounts owed under the prior court order, but the court refused to do this. It found Auto Buddies in contempt. Auto Buddies complied with the court's order and did not appeal.

This was not the end of the situation, however, because now that Auto Buddies had lost and had not been given attorney fees, it continued to protest by discontinuing rent payments from April 1, 2015, to Sept. 1, 2015, on which date the landlord made a demand for approximately $12,000 in rents, late fees and taxes. At a bench trial in the landlord's subsequent eviction action, Auto Buddies moved to stay the eviction, maintaining it had a right to a set-off of approximately $12,000 to cover the attorney fees it incurred in the previous action — this amount would have negated the $12,000 in back rent and taxes the landlord was now demanding. The landlord countered that neither party had been fully successful in the first action, so the right to attorney fees in accordance with the lease was not triggered.

The trial court ordered the landlord to pay Auto Buddies $12,000 in attorney fees incurred during the prior action but did not allow that amount to be treated as a set-off of the rents and taxes owed to the landlord. Thus, the court permitted the landlord to evict Auto Buddies, and also granted her $4,000 in counsel fees stemming from her successful contempt petition. Both parties were unhappy with these results.

On appeal, the court upheld the trial court's decisions, stating: “While our result is not an endorsement of the trial court's setoff analysis, we conclude that the appellant, after it failed to appeal from the contempt order, continued to defy the trial court at its own risk. The appellant's failure to refute the trial court's specific findings on the amount and materiality of its breach of the lease warrants affirmance of the judgment and renders its stay of eviction arguments moot. Regarding the appellee, she did not appeal, and therefore has failed to preserve any challenge to the trial court's award of attorney fees, including her argument that the appellant was not the successful party in the prior actions.”