Case About Tenant Not Knowing the Extent of Liability Under a Lease

In Chesapeake Industries, Inc. v. Togova Enterprises, 149 Cal. App. 3d 901, 906, 197 Cal. Rptr. 348, 351 (1983) the plaintiff leased property from the defendant. Chesapeake Industries, Inc., 149 Cal. App. 3d at 904, 197 Cal. Rptr. at 350. In the event of a breach of the lease, the defendant could terminate the lease or relet the premises and hold the plaintiff liable for any deficiency. The plaintiff vacated the premises on February 26, 1974, 3 1/2 years before the expiration of its 10-year lease. The defendant filed a lawsuit for possession and damages and was subsequently awarded possession and partial damages. Thereafter, the defendant relet the premises. Upon expiration of the lease term, the plaintiff brought an action for an accounting, seeking recovery of the excess sums that the defendant had received from reletting the premises. Chesapeake Industries, Inc., 149 Cal. App. 3d at 904, 197 Cal. Rptr. at 350. After concluding that the lawsuit was an action for an accounting from February 26, 1974 (when the plaintiff vacated the premises) to October 31, 1977 (the date the plaintiff's lease expired), the court entered judgment in favor of the defendant. The trial court also awarded the defendant prejudgment interest. Chesapeake Industries, Inc., 149 Cal. App. 3d at 904, 197 Cal. Rptr. at 350. The plaintiff appealed the issue of prejudgment interest and the court noted that the question before it was whether the plaintiff knew or could have ascertained its liability to the defendant. Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 354. The court first concluded that the plaintiff could have ascertained its liability to the defendant prior to vacating the premises. However, as to the period between vacating the premises and the expiration of the lease, the court concluded that the plaintiff could not reasonably have known the amount of its indebtedness to the defendant. Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 354. First, the defendant had sole discretion to relet the premises under terms of its choice. As such, the court found that the defendant "not only had sole control over the premises but also was the only party in possession of the data required to determine the extent of the plaintiff's liability under the lease." Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 354. Specifically, the court stated that "this is not a case where the debtor the plaintiff could keep complete records of the transaction from which it could calculate its indebtedness." Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 355. The court next found that the plaintiff also could not have calculated its liability from the date of its breach because "much of the critical data was in the sole possession of the defendant." Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 355. Accordingly, the court concluded that "the plaintiff could not have known from a mere reading of the lease whether a deficit was incurred during the three-year-eight-month duration of the lease or how much that deficit might be at any particular time." Chesapeake Industries, Inc., 149 Cal. App. 3d at 911, 197 Cal. Rptr. at 355