Business Associations, Pages 121–124

Lane Mortg. Co. v. Crenshaw

Court of Appeal of California, 1928

Facts:

Hotel leased a lot for 99 years upon the condition that it build a building worth at least $250,000 upon it. Hotel agreed to give Lane a free lease on the second floor and to finance the construction with a $200,000 bond. Not paying rent or allowing the building to become uninsured, dilapidated or used for an unlawful purpose made the lease of Lane valueless. Lane had the sole power to manage the building to be built, while Hotel had the power to to collect rent and to provide insurance.

Procedural History:

Trial court denied the injunctive relief and declined to enter any declaratory judgment.

Issue:

Can defendants revoke the agreement with Lane?

Rule:

LexisNexis IconWestLaw LogoCasetext LogoPage 123

Concretely, a power is said to be coupled with an interest when the power forms part of a contract, and is a security for money or for the performance of any act which is deemed valuable, and is generally made irrevocable in terms, or, if not so, is deemed irrevocable in law.

Reasoning:

This is a perfect example of power given as security. Lane has a 20-year lease in the second floor of the building subject to the power. If it did not have this power, its interest would be subject to destruction if the terms were not complied with. The powers that it was granted are limited to what are necessary to preserve this interest. Because of this, not only do defendants not have the right to revoke the agency, but they do not even have the power to do so if they wanted to violate the contract.

Holding:

No, defendants cannot revoke the agency with Lane.


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