Keating v. Preston

The above-entitled suits were consolidated for trial. Both actions involve the validity and construction of a lease of a portion of hotel property in Sierra Madre for the purpose of conducting a restaurant business. The first case is a suit to terminate the lease for alleged breach of an implied covenant not to violate section 337a of the Penal Code by accepting wagers from restaurant customers on horse races. The second suit sought to enjoin the lessor from demising or using space in the hotel for a competing restaurant business, and from closing the doorway communicating between the lessee's restaurant and the hotel lobby. The court adopted findings in both cases adverse to the lessor. From the judgments which were accordingly rendered separate notices of appeal were given. May 1, 1935, the Farmers & Merchants National Bank of Los Angeles executed its written lease to Deborah Preston of ""All the space . . . necessary to do the restaurant business"", together with the right to ""serve . . . liquors not only on the leased premises but also in any part of the hotel "" for the term of three years, in consideration of monthly rental ""to be paid on the 5th of the month for the previous calendar month"". The lease provides for the right of the lessor to re-enter the premises for failure to pay any installment of rent when due or ""if default shall be made in any of the covenants herein contained "". The restaurant occupied a portion of the ground floor of the Hotel Sierra Madre which was conducted by the appellant in the remaining portion of the two-story hotel building fronting on West Central Avenue in that city. At all the times involved in this litigation the appellant, Helen R. Keating, managed and operated the hotel business in that building. There was a doorway connecting the restaurant with the lobby of the hotel, which was commonly used by the lessee in providing the guests of the hotel with both food and liquor. The restaurant contained no adequate wash-room or toilet. By common consent, the hotel wash-room and toilet were frequently used by customers of the restaurant. The hotel property and lease of the restaurant were conveyed to the appellant, Helen R. Keating, January 29, 1937. Both the hotel and the restaurant were patronized by many persons who were interested directly and indirectly in horse racing. During much of the time involved in this litigation the appellant employed in her hotel a clerk by the name of Frank Fishback, who accepted money from both the appellant and from many of her hotel guests, to be delivered to the proper parties at the race track as wagers on horse races. It appears that Deborah Preston, the lessee of the restaurant property, also occasionally accepted money from her restaurant customers to be placed on horse races. The appellant first heard that the lessee accepted money for that purpose, as an accommodation to her customers, in November and December, 1936. The appellant had positive knowledge on February 19, 1937, that the lessee accepted money for that purpose. On March 4th, the appellant demanded and on the following day accepted rent for the restaurant for the month of February, which accrued on March 5, 1937. After the execution of the lease the appellant closed and barred the door intervening between the restaurant and her hotel, and threatened to lease to other individuals another portion of her hotel to be operated as a restaurant or cocktail room in competition with the respondent's restaurant. Mrs. Keating then brought suit to rescind the lease of the restaurant property on the ground of breach of covenant not to use the property for a purpose other than that of maintaining a restaurant, and that the violation of section 337a of the Penal Code, in accepting money to be wagered on horse races, constituted a forfeiture of the lease.