Avalon Pacific-Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC
192 Cal. App. 4th 1183
| Cal. Ct. App. | 2011Background
- Avalon Pacific—Santa Ana, L.P. leased property to HD Supply to convert warehouses to a retail facility; renovations began but were halted amid economic downturn and the property fell into disrepair.
- HD Supply continued paying rent; Avalon did not terminate the lease, which runs into 2017 with three five-year renewal options.
- Avalon sued for breach of maintenance/repair covenants and for waste; Home Depot guaranteed HD Supply’s performance; jury awarded damages including treble waste, later challenged on appeal.
- Trial court instructed that waste could be proven by substantial or permanent depreciation in market value; Avalon sought cost-of-repairs damages despite lease still in effect.
- Court held Avalon cannot recover cost-of-repairs or waste damages while the lease is still in effect because the lessor’s remedy is injury to reversion, not pre-termination repairs, and Avalon presented no evidence of injury to its reversion.
- HD Supply has not abandoned or repudiated the lease; it retains possessory interest and continues to pay rent, with the lease term extending to at least 2017.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can Avalon recover cost of repair damages during the lease term? | Avalon argues for cost-of-repair damages as breach measure during term. | Lease does not permit cost-of-repair damages without termination and HD Supply has not abandoned. | No; cost-of-repair damages are not recoverable during the lease term. |
| May Avalon recover waste damages before lease termination? | Waste damages may accrue for injury to reversion even if term continues. | Waste requires injury to reversion; Avalon failed to prove such injury. | No; waste damages require injury to the reversion, which Avalon did not prove. |
| What is the proper measure of damages when the lease remains in effect? | Damage measured by cost of repairs or other remedies during term. | Damages during term are limited to diminution in reversion value, not cost of repairs. | Damages during term are limited to injury to reversion; cost-of-repairs not permitted. |
Key Cases Cited
- Gold Mining Co. v. Swinerton, 23 Cal.2d 19 (Cal. 1943) (landlord may recover cost of repairs after termination; during term, injury to reversion governs)
- Iverson v. Spang Industries, Inc., 45 Cal.App.3d 303 (Cal. Ct. App. 1975) (restoration/damage measures after lease expiration; cost-of-repair examples)
- Brown v. Green, 8 Cal.4th 812 (Cal. 1994) (abatement/remediation context; does not directly decide pre-expiration cost-of-repair rule)
- Strecker v. Barnard, 109 Cal.App.2d 149 (Cal. Ct. App. 1952) (notice/compliance with laws; relevance to maintenance/repair covenants)
- Rowe v. Wells Fargo Realty Services, Inc., 166 Cal.App.3d 310 (Cal. Ct. App. 1985) (waste recovery standards; diminution/permanent injury guidance)
- Smith v. Cap Concrete, Inc., 133 Cal.App.3d 769 (Cal. Ct. App. 1982) (waste defined by permanent diminution in market value)