## Facts

- Texaco leased a freeway service station to Edward W. Swords under a 10-year written lease for $500 per month.
- The leased premises included a large illuminated “TEXACO” sign mounted atop the building and visible from the freeway from a significant distance.
- A county building inspector found the sign lacked a permit, was improperly fastened, and created a hazard near gasoline tank vents; Texaco had the sign removed.
- Texaco provided a substitute: an old, dilapidated enamel billboard that was not visible from the freeway.
- Swords demanded a reasonably similar freeway-visible sign; when Texaco did not provide one, he refused to pay rent.
- Swords (and later a sublessee) occupied the station for about 11 months without paying rent; Texaco and Swords later canceled the lease by agreement and Swords vacated.
- Petroleum Collections, Inc., as Texaco’s assignee, sued Swords for $6,043.24 in back rent; the trial court entered judgment for Swords.

## Issues

1. Whether the freeway-visible illuminated sign was an integral part of the leased premises and the parties’ bargain.
2. Whether removal of the sign and failure to provide a reasonably comparable replacement constituted a material breach (or deprivation of the leased premises’ intended benefit) excusing the tenant’s obligation to pay rent during occupancy.
3. Whether an assignee of the landlord’s rent claim may recover rent when the landlord’s own performance would have defeated recovery.

## Decision

- The California Court of Appeal affirmed the judgment for Swords.
- The court accepted the trial court’s finding that the parties contemplated reliance on freeway-generated trade and that the large sign was an integral part of the leased premises.
- Texaco’s failure to provide a reasonably comparable freeway-visible sign supported the conclusion that Swords was excused from paying rent for the period at issue.
- Because Petroleum Collections stood in Texaco’s position as assignee, it could not recover rent that Texaco itself could not collect.

## Legal Principles

- In a commercial lease, a feature central to the contemplated use and value of the premises may be treated as part of the leased premises rather than a mere incidental amenity.
- A landlord’s failure to provide or maintain an integral aspect of the leased premises can constitute a material breach or comparable deprivation that excuses the tenant’s rent obligation for the affected period.
- An assignee of a contractual claim generally acquires no greater rights than the assignor and takes subject to defenses that would defeat the assignor’s recovery.

## Conclusion

The court held that the freeway-visible illuminated sign was a central element of the lease bargain; Texaco’s failure to replace it with a reasonably comparable sign materially deprived the tenant of the expected benefit and excused rent, defeating the assignee’s claim for back rent.


Petroleum Collections, Inc. v. Swords, 48 Cal. App. 3d 841 (Cal. Ct. App. 1975)