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B. Michael Gould v. Corinthian Colleges

February 22, 2011

B. MICHAEL GOULD, PLAINTIFF AND APPELLANT,
v.
CORINTHIAN COLLEGES, INC., DEFENDANT AND RESPONDENT.



(Super. Ct. No. 56-2007- 00283586-CU-MC-SIM) (Ventura County)

The opinion of the court was delivered by: Gilbert, P.J.

CERTIFIED FOR PUBLICATION

A lease contains an antiwaiver provision. Yet, we conclude the lessor waived certain rights under the lease, even if the antiwaiver provision applies. There is a simple explanation for this seeming paradox. Lessor, the party arguing waiver, waived the clause prohibiting waiver.

This case arises from a commercial lease. The lease contains an early termination provision allowing the lessee to terminate the lease prior to the end of the term. Lessor seeks a declaration that lessee did not properly exercise its early termination right, and thus lessee's obligations under the lease continued.

We uphold the trial court's ruling that lessor waived defects in lessee's performance of the early termination provision; thus the lease had terminated. We conclude that the trial court erred, however, in refusing to allow lessor's evidence of damages relating to the condition of the premises. We remand for a trial limited to such damages.

FACTS

B. Michael Gould owns a commercial building. He leased the premises to his wholly-owned corporation, Learning Tree University, Inc. (Learning Tree).

Paragraph 5 of the lease provides for a security deposit of $24,165. The lease provides in part: "No part of this Security Deposit shall be considered . . . to be prepayment for any monies to be paid by Lessee under this lease."

On January 1, 2003, Learning Tree assigned the lease to Corinthian Colleges, Inc. (Corinthian). The transaction included a lease amendment providing that the lease will terminate on November 30, 2009. The amendment also granted Corinthian the right to terminate the lease four years early on November 30, 2005.

To exercise its right of early termination, Corinthian had to satisfy four conditions: (1) give Gould at least six months written notice prior to the early termination date; (2) terminate its operations on the premises on or before the early termination date; (3) pay Gould $136,500 "in cash or other immediately available funds" upon delivery of the termination notice; and (4) pay Gould $136,500 "in cash or immediately available funds" on or before the early termination date. It is the fourth condition of early termination that gives rise to the dispute. Corinthian paid $136,500 upon delivery of the early termination notice. It made its final payment by giving Gould a check for $120,057.10 and applying $16,442.90 of its security deposit, for a total of $136,500. Corinthian left the $7,722.10 balance of the security deposit to cover invoices, but disputed, common area maintenance charges.

Gould responded by letter, asserting that Corinthian breached the lease by applying a portion of the security deposit to the termination payment, and that Corinthian has not made the termination payment in full. He did not tender return of the early termination payments received.

Gould filed an action for declaratory relief. He sought a judgment declaring that Corinthian failed to exercise its right of early termination, and is bound by the lease for the balance of the term.

Trial was by the court. After Gould rested, Corinthian moved for judgment. The trial court granted the motion and gave declaratory judgment in Corinthian's favor. It refused to consider evidence of damages relating to the condition of the premises.

The trial court found that applying a portion of the security deposit satisfied the requirement that payment be made in "cash or immediately available funds"; that Corinthian substantially complied; and that Gould waived ...


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