Facts

Plaintiff Tyfern LLC entered into a three-year lease agreement with Hollywood Organix, a corporation, for the lease of the premises in Los Angeles. The lease rent for the premises started at $6,000 a month commencing on July 1, 2010, increasing to $6,240 on Sept. 1, 2011 and then to $6,427 on Sept. 1, 2012. The lease expired on Aug. 31, 2013. Organix paid $18,000 security deposit. The lease provided for late fees in the amount of the greater of 10 percent of the late rent, or $100. The lease also included an attorney fee provision. Defendant Arsen Akopyan signed a personal guarantee on the lease.

Organix took possession of the premises on July 1, 2010 and used it for a dispensary business.

In June 2012, the City of Los Angeles raided the premises and sent a letter to the tenant ordering it to close down its business because according to a new law, the tenant was not authorized to conduct a dispensary business at the premises. Organix made no payments on rent in June 2012, and eventually, vacated the premises.

Plaintiff sued defendant for breach of lease agreement.

PLAINTIFF'S CONTENTIONS:
Plaintiff sued defendant for breach of lease agreement for the non-payment of rent in the sum of $83,879, and for waste in the sum of $4,133 for damages to the premises. Plaintiff argued that the lease remained in effect even though the city forced the business to be closed down, and therefore, Organix was liable for the payment of rent until the expiration of the lease term. Plaintiff also argued that it is entitled to retain portions of the deposit for damage to the premises for $4,133.

DEFENDANT'S CONTENTIONS:
Defendants argued that in light of the newly adopted ordinance, and the city's order to cease operation of the dispensary, the lease was terminated and unenforceable as a matter of law. Organix further argued that it had leased the premises were to conduct a dispensary business and the law no longer allows the operation of that business. Organix argued under the theories of illegality, frustration of purpose and impossibility. Therefore, Organix argued that defendants were relieved of their obligations to pay any further rent to plaintiff.

Result

As to the issue of non-payment rent, the court ruled in favor of Organix and all defendants. The court ruled that the lease was terminated and of no force or effect under the theories of illegality, impossibility and frustration of purpose and defendants had no liability to plaintiff for non-payment of rent. The court explained that the lease was unenforceable because its performance would be illegal and impossible and its principal purpose was substantially frustrated. The court held that the lease is cancelled in its entirety, and no part of $83,879 rent was due to plaintiff. The court further ruled that plaintiff was to collect its cost of repair. Judgment for defendants on its breach of lease agreement for non-payment of rent claim. Plaintiff was also granted damages to the property in the sum of $4,133.

Other Information

The court awarded attorney fees to plaintiff in a post-trial motion for $12,678.75.