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Procedural Posture

Appellant lessor challenged a ruling of the Superior Court from the City and County of San Francisco (California), which entered a judgment in favor of respondent, the lessee's assignee, and held that the lease provision providing for the forfeiture of the lessee's security deposit for nonpayment of rent or nonperformance of a lease covenant was void. The assignee had filed an action against the lessor seeking to recover the security deposit.

Overview: covenant of good faith and fair dealing california

A lessor and a lessee executed a lease for certain premises, which, although was constructed as a lodging house, the lessor knew and consented to the lessee's intended use as a prostitution house. Under the lease, the lessee would be released from rent payment if the building was not ready for occupancy on a certain date and that the lessee would pay a deposit to guarantee rent. The lessee would forfeit the deposit in the event that he failed to pay rent. The building was not completed, and the lessee refused to make rent payment. The lessor obtained a judgment against the lessee in an unlawful detainer action. The lessee's assignee then sought to recover the deposit. The superior court held in favor of the assignee that the agreement was not void because the lessee had abandoned the intended purpose. On appeal, the court affirmed the judgment and held that: (1) the forfeiture clause was void because it constituted either a penalty or liquidated damages; (2) in filing a detainer action instead of applying the deposit to the rent, the lessor repudiated and waived his right to retain the deposit; and (3) as such, he held the deposit as bailee for the lessee's use, due on demand.

Outcome

The court affirmed the superior court's judgment, which entered a judgment in favor of the lessee and held that the lease provision providing for the forfeiture of the lessee's security deposit for nonpayment of rent or nonperformance of a lease covenant was void, in the action of the lessee's assignee against the lessor to recover the security deposit.

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Topic revision: r15 - 2021-06-23 - AnneTyner
 
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