Ethics A landlord leased a motel he owned to lessees for a ten-year period. The lessees had an option to extend the lease for an additional ten years.
To do so, they had to give written notice to the landlord three months before the first ten-year lease expired. The lease provided for forfeiture of all furniture, fixtures, and equipment installed by the lessees, free of any liens, upon termination of the lease.
For almost ten years, the lessees devoted most of their assets and a great deal of their energy to building up the business. During this time, they transformed a disheveled, unrated motel into a AAA three-star operation.
With the landlord's knowledge, the lessees made extensive long-term improvements that greatly increased the value of both the property and the business. The landlord knew that the lessees had obtained long-term financing for the improvements that would extend well beyond the first 10-year term of the lease. The landlord also knew that the only source of income the lessees had to pay for these improvements was the income generated from the motel business.
The lessees told the landlord orally in a conversation that they intended to extend the lease. The lessees had instructed their accountant to exercise the option on time.
Despite reminders from the lessees, the accountant failed to give the written notice within three months of the expiration of the lease. As soon as they discovered the mistake, the lessees personally delivered written notice of renewal of the option to the landlord, thirteen days too late.
The landlord rejected it as late and instituted a lawsuit for unlawful detainer to evict the lessees. The lessees asked the court to invoke the doctrine of equity and save them from their error. Romasanta v. Mitton, 189 Cal.App.3d 1026, 234 Cal.Rptr. 729, Web 1987 Cal.App. Lexis 1428 (Court of Appeal of California)
1. What does the doctrine of equity provide?
2. Did the landlord act unethically in this case?
3. Should the doctrine of equity be applied to save the lessees from their contractual error?