Lee v. Placer Title Co.

Rule of Law:

In a commercial lease, a clause that expressly limits a tenant's remedies for a landlord's default to damages or an injunction and prohibits lease termination is enforceable, thereby precluding the tenant from vacating the premises and asserting a constructive eviction defense for nonpayment of rent.

Facts:

• Phillip and Judy Lee owned a shopping center and leased space to Placer Title Company's predecessor.
• The lease was assigned to Placer Title Company, which used the space for an escrow office.
• The lease contained a 'Default by Landlord' clause (Paragraph 24) stating that the tenant could not terminate the lease for the landlord's default and remedies were limited to damages and/or an injunction.
• The lease also contained a 'Quiet Possession' clause (Paragraph 33(viii)) which was explicitly 'subject to all the provisions of this Lease.'
• Placer Title Company claimed that noxious chemical odors from an adjoining dry cleaning business penetrated its premises, making the office unusable and endangering employee health.
• In June 1990, Placer Title Company stopped paying rent, vacated the premises, and moved its offices to another location.

Procedural Posture:

• Phillip and Judy Lee sued Placer Title Company in trial court for unpaid rent.
• Placer Title Company asserted the affirmative defense of constructive eviction.
• Before trial, the Lees filed a motion in limine to exclude any evidence related to the constructive eviction defense, arguing it was barred by the lease terms.
• The trial court granted the Lees' motion, ruling that Paragraph 24 of the lease precluded the defense.
• The parties then entered into a stipulated agreement for judgment in favor of the Lees, with Placer Title Company expressly preserving its right to appeal the trial court's ruling on the constructive eviction issue.
• The trial court entered the stipulated judgment, and Placer Title Company (appellant) appealed to the Court of Appeal.