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Gourmet Lane, Inc. v. Keller

Court of Appeal of California
35 Cal. Rptr. 398 (1963)


Seven operators of food concessions (the tenants), including Clyde Keller (defendant), had leases with Kassis Building Corporation (the landlord) in a market concourse. Each lease provided that the tenants would enter into an association for the purpose of maintaining and operating the common area used by the tenants for dining, food preparation, and dishwashing. Each lease also provided that a decision by the majority of the tenants regarding the common area would be binding on all tenants. The tenants voluntarily operated together and later incorporated as Gourmet Lane, Inc. (Gourmet Lane) (plaintiff). Each tenant was a director of Gourmet Lane. A majority of the directors agreed to allocate the costs of operating the common area by charging each tenant a fixed minimum weekly amount, plus a certain ratio of each tenant’s taxable sales. An accountant hired by Gourmet Lane reported that other food purveyors in similar markets used the same method of cost allocation. Keller paid the minimum weekly amount for a time and then stopped. Gourmet Lane sued Keller for his share of the costs of operating the common area. The trial court found that Keller had agreed to pay his share according to the method adopted by a majority of Gourmet Lane’s directors and that Keller had an obligation to pay at that rate under a contract for a third-party beneficiary. Keller appealed.

Rule of Law


Holding and Reasoning (Pierce, J.)

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