Supreme Court Holds Tenants Jointly

Supreme Court Holds Tenants Jointly and Severally Liable for Rent Under Unpaid Lease

The California Supreme Court recently reversed a judgment of the court of appeal. The Court held that a landlord may recover against one of multiple tenants, so long as the rents owed remained unpaid. In DKN Holdings LLC v. Faerber, defendants leased certain commercial space from plaintiff. The tenants were jointly and severally liable on the lease. One of the tenants later sued plaintiff for fraud, breach of contract and a number of other claims and sought rescission. Plaintiff cross-complained for rent and other monies due. Plaintiff prevailed at trial and was awarded $2.8 million. Plaintiff then sued two other tenants for breach of the lease. One of those tenants demurred, arguing that plaintiff’s rights under the lease had been adjudicated in the first action and the suit was barred in the second action by the rule against splitting a cause of action. The trial court sustained the demurrer without leave to amend and entered judgment for the tenant. The court of appeal affirmed holding that regardless of whether joint and several liability attaches, once a final judgment on the merits has been rendered in one action against a joint and several obligor, res judicata barred the assertion of identical claims against the other joint and several obligors.

The California Supreme Court reversed holding that the court of appeals erred in concluding that the judgment against the tenant in the first action barred the landlord from obtaining judgments against the other two tenants. The court found that it well is established that parties who are jointly and severally liable may be sued in separate actions. The landlord retained the right to sue each of the multiple jointly and severally liable tenants until the obligation is fully satisfied.