Kohner Properties, Inc. v. Latasha Johnson

Latasha Johnson appeals a judgment entered in favor of Kohner Properties, Inc., in a rent-and-possession action. She argues the circuit court erroneously barred her from asserting the implied warranty of habitability as an affirmative defense and counterclaim because she remained in possession of the premises without depositing her unpaid rent to the circuit court in custodia legis, which is “traditionally used in reference to property taken into the court’s charge during pending litigation over it.” Black’s Law Dictionary 885 (10th ed. 2014). The circuit court’s judgment is affirmed.

Factual and Procedural History

Johnson entered into a written lease agreement with Kohner to rent an apartment. The lease required Johnson to pay monthly rent. During her tenancy, the ceiling above Opinion issued July 3, 2018

2

the shower in the bathroom collapsed as a result of a water leak in the unit above

Johnson’s apartment. Kohner attempted to repair the leak and placed a tarp or trash bag

over the hole in the ceiling, but the leak persisted. As a result of the damage, Johnson

stayed at a hotel at her own expense to use the shower. The circuit court found the

parties offered conflicting testimony as to whether Johnson allowed Kohner access to the

premises to repair the ceiling and broken floor tiles. Johnson withheld two months-worth

of rent.

Kohner filed an action against Johnson seeking unpaid rent and possession of the

apartment. Johnson filed an answer and raised an affirmative defense and counterclaim

alleging Kohner had breached the implied warranty of habitability. At trial, and prior to

opening statements, Kohner verbally moved to bar Johnson’s affirmative defense and

counterclaim because she remained in possession of the apartment but had failed to

deposit her unpaid rent to the circuit court in custodia legis. After hearing argument, the

circuit court overruled Kohner’s motion, explaining:

Inasmuch as the Court has not received any evidence at this juncture as to

what the circumstances are regarding this tenancy and has no information at

this time as to the status of the tenant in her claim, so at this point the Court

finds -- I’m sorry -- the Court is going to overrule [Kohner]’s objection and

does not consider whatever position [Kohner] has at this juncture. A bar to

[Johnson] defending this claim and will take up whether or not the elements

of any defense she might have have been substantiated during this trial.

At trial, the parties were permitted to introduce evidence regarding whether

Kohner breached the implied warranty of habitability. After trial, the circuit court, upon

“careful consideration of the evidence[,]” entered judgment in favor of Kohner. The

circuit court found the hole in the ceiling remained covered by plastic and had not been

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repaired, and water continued to drip from the hole and plastic covering the ceiling into

the bath tub below. Nonetheless, the circuit court barred Johnson from asserting her

affirmative defense and counterclaim based on the implied warranty of habitability

because she “failed to either vacate the premises or tender her rent to the Court in

custodia legis as required by” King v. Moorehead, 495 S.W.2d 65, 77 (Mo. App. 1973).

However, the circuit court also found, while Johnson was barred from asserting

her affirmative defense and counterclaim, Kohner breached its promise to make repairs

under the maintenance clause of the lease agreement and awarded Johnson a set-off for

hotel expenses. Accordingly, the circuit court awarded Kohner possession of the

apartment along with rent, late fees, attorney fees, and court costs. Johnson appealed,

and the court of appeals, after opinion, transferred the case to this Court. Mo. Const. art.

V, sec. 10.

Analysis

“On review of a court-tried case, [this C]ourt will affirm the circuit court’s

judgment unless there is no substantial evidence to support it, it is against the weight of

the evidence, or it erroneously declares or applies the law.” Sun Aviation v. L-3

Commc’ns Avionics Sys., 533 S.W.3d 720, 727 (Mo. banc 2017) (citation omitted). Legal

questions are reviewed de novo. See, e.g., Blanchette v. Blanchette, 476 S.W.3d 273,

277-78 (Mo. banc 2015).1

1 It is unclear whether Johnson is claiming the circuit court erroneously declared the law or

erroneously applied the law. “[A]llegations of error not briefed or not properly briefed shall not

be considered in any civil appeal.” Rule 84.13(a). Nowhere in her substitute brief does Johnson

expressly say the circuit court erroneously declared or applied the law. This alone suggests

Johnson’s contention against the in custodia legis procedure is “technically deficient” and thus

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I.

Johnson argues the circuit court erroneously barred her from asserting the implied

warranty of habitability as an affirmative defense and counterclaim on the basis she failed

to either vacate the premises or tender her rent to the court in custodia legis.

The circuit court relied on King in barring her from asserting a breach of the

implied warranty of habitability. In King, a landlord sued a tenant for rent and

possession. 495 S.W.2d at 67. The tenant lost in the magistrate court and vacated the

premises before appealing to the circuit court. Id. The tenant asserted, as an affirmative

defense, that the landlord breached an implied covenant to provide premises in a safe,

sanitary, and habitable condition. Id. at 68. The circuit court determined the tenant failed

to state a valid defense. Id. The court of appeals reversed, holding the tenant stated a

valid defense because all residential leases include an implied warranty of habitability

obligating lessors to guarantee the “dwelling is habitable and fit for living at the inception

of the term and that it will remain so during the entire term.” Id. at 75.

Because a landlord is obligated to provide a habitable dwelling, a breach of the

warranty “justifies retention of possession by the tenant and withholding of rent until

habitability has been restored.” Id. at 77. The court of appeals in King concluded its

analysis of the implied warranty of habitability by stating, “A tenant who retains

possession . . . shall be required to deposit the rent as it becomes due, in custodia legis

not preserved for review in this Court. Wilkerson v. Prelutsky, 943 S.W.2d 643, 647 (Mo. banc

1997). But this Court may “treat the point as preserved for appellate review” if it “provides

sufficient notice to the parties and to this Court as to the issues presented on appeal.” Id. Here,

the Court is on notice of the issue presented on appeal and the briefing suggests Kohner is on

notice as well.

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pending the litigation.” Id. It explained, “This procedure assures the landlord that those

rents adjudicated for distribution to him will be available to correct the defects in

habitability, and will also encourage the landlord to minimize the tenant’s damages by

making tenantable repairs at the earliest time.” Id.

The court of appeals’ discussion of the in custodia legis procedure in King was

unnecessary to resolve the case. Because the tenant in King had already vacated the

premises, the in custodia legis procedure, which applies when a tenant retains possession

of the property, did not pertain to the tenant in King. Therefore, the discussion in King,

imposing the in custodia legis procedure in all rent and possession actions when the

tenant retains possession of the premises and alleges the landlord breached the implied

warranty of habitability, was not necessary to resolve King and could be accurately

characterized as dicta.

Even if King’s pronouncement of an in custodia legis procedure was dicta, it is

undisputed that the legal pronouncement in King has been dutifully followed by our

circuit courts for almost five decades in the absence of contrary guidance from this Court

or the Missouri General Assembly. See, e.g., 36 Jane Pansing Brown, Missouri Practice

Series: Landlord-Tenant Handbook §§ 1:1, 23:8 (2017); 18A Timothy J. Tryniecki,

Missouri Practice Series: Real Estate Law § 52:18 (3d ed. 2006). Moreover, since King,

the in custodia legis procedure has been discussed in at least two reported decisions by

the court of appeals: Tower Management, Inc. v. Henry, 687 S.W.2d 564 (Mo. App.

1984), and Wulff v. Washington, 631 S.W.2d 109 (Mo. App. 1982). As in King, however,

the tenant in Wulff vacated the premises, 631 S.W.2d at 109-10, and, therefore, any

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discussion of an in custodia legis procedure in Wulff is, likewise, dicta. And in Henry,

the tenants retained possession, but did not deposit their rent to the circuit court in

custodia legis. 687 S.W.2d at 565-66.2

Until now, this Court has never been required to examine King’s pronouncement

of an in custodia legis procedure in all rent and possession actions when the tenant

remains in possession. In Detling v. Edelbrock, in which this Court recognized an

implied warranty of habitability, most of the tenants had vacated the premises. 671

S.W.2d 265, 267, 270 (Mo. banc 1984), abrogated on other grounds by Heins Implement

Co. v. Mo. Highway & Transp. Comm’n, 859 S.W.2d 681, 684 n.2 (Mo. banc 1993).

Therefore, this Court did not address whether the tenants asserting a breach of the

implied warranty of habitability were required to deposit rent payments with the circuit

court.

II.

The “majority of the courts which permit rent withholding” leave the imposition of

an in custodia legis procedure to the sound discretion of the trial court. Restatement

(Second) of Prop.: Landlord & Tenant § 11.3, at 377 (Am. Law Inst. 1977); see also

Teller v. McCoy, 253 S.E.2d 114, 129 (W. Va. 1978) (“[S]everal courts have held that the

trial court, upon request, after determining that a fact questions [sic] exists as to a breach

of warranty of habitability, may, during the pendency of the action, require the tenant in

2 The dissenting opinion states there has been “only one case in which application of the in

custodia legis procedure discussed in King was necessary for the resolution of the case for

tenants remaining in possession of the rented property[,]” citing Henry. Although Henry is the

only reported Missouri appellate case to sanction King’s pronouncement of an in custodia legis

procedure, the dissenting opinion fails to account for the numerous circuit courts, like the circuit

court in this case, that have applied an in custodia legis procedure after King.

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possession to make future rent payments or part thereof unto the court as they become

due.”) (emphasis added); Robert S. Schoshinski, American Law of Landlord and Tenant

§ 6:15.10, at 507, 510-11 (Supp. 2018) (collecting numerous cases in which trial courts

“without statutory authorization” have the discretion to impose an in custodia legis

procedure).

For instance, the illustrious Judge J. Skelly Wright, writing for a unanimous court

in Javins v. First National Realty Corp., weighed in on the in custodia legis procedure:

Appellants in the present cases offered to pay rent into the registry of the

court during the present action. We think this is an excellent protective

procedure. If the tenant defends against an action for possession on the

basis of breach of the landlord’s warranty of habitability, the trial court

may require the tenant to make future rent payments into the registry of the

court as they become due; such a procedure would be appropriate only

while the tenant remains in possession. The escrowed money will,

however, represent rent for the period between the time the landlord files

suit and the time the case comes to trial. In the normal course of litigation,

the only factual question at trial would be the condition of the apartment

during the time the landlord alleged rent was due and not paid.

As a general rule, the escrowed money should be apportioned between the

landlord and the tenant after trial on the basis of the finding of rent actually

due for the period at issue in the suit. To insure fair apportionment,

however, we think either party should be permitted to amend its complaint

or answer at any time before trial, to allege a change in the condition of the

apartment. In this event, the finder of fact should make a separate finding

as to the condition of the apartment at the time at which the amendment

was filed. This new finding will have no effect upon the original action; it

will only affect the distribution of the escrowed rent paid after the filing of

the amendment.

428 F.2d 1071, 1083 n.67 (D.C. Cir. 1970) (emphasis added). Similarly, a California

court of appeal echoed Javins’ support for an in custodia legis procedure in some cases,

explaining:

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If the tenant claims that all or a part of the rent is not due because of defects

in the premises, the trial court may, during the pendency of the action and

at the request of either party, require the tenant to make the rental

payments at the contract rate into court as they become due for as long as

the tenant remains in possession. At the trial of the action the court can

then determine how the rent paid into court should be distributed.

Hinson v. Delis, 102 Cal. Rptr. 661, 666 (Ct. App. 1972), disapproved of on other

grounds by Knight v. Hallsthammar, 623 P.2d 268, 273 n.7 (Cal. 1981) (emphasis

added). The Supreme Court of California sanctioned Hinson’s in custodia legis

procedure, calling it “a fair means of protection of landlords from potential abuses of the

proposed warranty of habitability defense.” Green v. Superior Court, 517 P.2d 1168,

1182 (Cal. 1974). Moreover, this “sound procedural safeguard[] suffice[s] to protect the

landlord’s economic interests without depriving the tenant of a meaningful opportunity to

raise the breach of warranty issue.” Id. Notably, the court of appeals in King cited to

both Javins and Hinson in support of an in custodia legis procedure. King, 495 S.W.2d at

77.

Furthermore, the Supreme Court of Pennsylvania recognized a trial court is in the

best position to determine whether an in custodia legis procedure is appropriate in a given

case, explaining:

[T]he decision whether a tenant should deposit all or some of the unpaid

rents into escrow should lie in the sound discretion of the trial judge or

magistrate. The tenant may retain his rent, subject to the court’s

discretionary power to order him, following a hearing on the petition of the

landlord or tenant, to deposit all or some of the rent with the court or a

receiver appointed by the court.

Pugh v. Holmes, 405 A.2d 897, 907 (Pa. 1979). Likewise, the Supreme Court of

Minnesota explained:

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[O]nce the trial court has determined that a fact question exists as to the

breach of the covenants of habitability, that court will order the tenant to

pay the rent to be withheld from the landlord into court . . . and that until

final resolution on the merits, any future rent withheld shall also be paid

into court. The court under its inherent powers may order payment of

amounts out of this fund to enable the landlord to make repairs or meet his

obligations on the property or for other appropriate purposes. In the

majority of cases, final determination of the action will be made quickly

and this procedure will not have to be used. It is anticipated that the trial

court, in lieu of ordering the rent paid into court, in the exercise of its

discretion may order that it be deposited in escrow subject to appropriate

terms and conditions or, in lieu of the payment of rents, may require

adequate security therefor if such a procedure is more suitable under the

circumstances.

Fritz v. Warthen, 213 N.W.2d 339, 343 (Minn. 1973) (footnote omitted).

Consistent with the prevailing view of a majority of jurisdictions, this Court holds

circuit courts may exercise discretion on a case-by-case basis to determine whether an in

custodia legis procedure is appropriate in a particular case. See Unif. Residential

Landlord & Tenant Act § 4.105(a) (Unif. Law Comm’n 1972) (amended 1974) (revised

2015) (“[T]he court from time to time may order the tenant to pay into court all or part of

the rent accrued and thereafter accruing, and shall determine the amount due to each

party.”) (emphasis added). A circuit court is in the best position to assess the merits of

each case and the parties’ respective positions, and is in the best position to accommodate

“the competing interests of the parties in affording necessary and fair protection to both

parties.” Eli Haddad Corp. v. Cal Redmond Studio, 476 N.Y.S.2d 864, 865-66 (App.

Div. 1984); see also Unif. Residential Landlord & Tenant Act § 4.105 cmt. (“It is

anticipated that upon filing of the counterclaim the court will enter the order deemed

appropriate by him concerning the payment of rent in order to protect the interests of the

parties.”).

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This practice “is said to derive from a trial court’s general equitable powers to

protect a landlord from the potential loss of income from his property during a prolonged

period of litigation.” Schoshinski, supra, at 507; see also id. (noting trial courts may

impose an in custodia legis procedure “without statutory authorization”). The in custodia

legis procedure merely “preserves the status quo until a final judgment is rendered.”

MMB Assocs. v. Dayan, 564 N.Y.S.2d 146, 147 (App. Div. 1991). “The tenant pays rent

into escrow at the discretion of the court, which apportions the escrowed money between

the landlord and tenant after final judgment.” Restatement (Second) of Prop., supra, at

381. No one, including the trial court, may “invade escrow accounts before final

judgment without the consent of the parties.” Teller, 253 S.E.2d at 130.3 Without an in

custodia legis procedure available to the trial court,

the tenant remains in occupancy without making any payments for this

protracted period, with little or no assurance that any deficiencies will be

collected at the conclusion of the litigation should the landlord prevail on

the merits. Payments into court thus provide this assurance—if the rent or

any portion of it is finally determined to be due, the escrowed fund is

available for its payment.

Schoshinski, supra, at 508. Moreover,

if the tenant is withholding all the rent, the landlord runs the risk that the

tenant may ultimately be unwilling or unable to pay the amount found by

the court to be due and owing. Hence the court may, in appropriate cases,

enter a “protective order” requiring the tenant to pay all or part of the rent

3 Contrary to the dissenting opinion’s assertion that an in custodia legis procedure “places

landlords in a better position than they would be if tenants did not assert an implied warranty of

habitability defense[,]” permitting the circuit courts the discretion to implement or not implement

a procedure that merely “preserves the status quo until a final judgment is rendered[,]” Dayan,

564 N.Y.S.2d at 147, is not a windfall to landlords. Indeed, no one, including the circuit court,

may “invade escrow accounts before final judgment without the consent of the parties.” Teller,

253 S.E.2d at 130. This is consistent with the dissenting opinion’s own assertion that a landlord

is not “entitled to recover rent or possession prior to a favorable adjudication of the landlord’s

rent and possession claim.”

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claimed into court until it is finally determined whether there is a breach of

the implied or statutory warranty and, if so, how large an abatement of rent

the court should grant.

Roger A. Cunningham et al., The Law of Property 340-41 (2d ed. 1993).

In sum, even though King’s pronouncement of an in custodia legis procedure in all

rent and possession actions when the tenant retains possession was dicta, the circuit

courts have the discretion to institute a suitable protective procedure upon either party’s

request and after notice and an opportunity to be heard by the opposing party. See Unif.

Residential Landlord & Tenant Act § 408(b) & cmt. (expanding upon § 4.105 and stating,

“[i]f a tenant is in possession of the dwelling unit when the landlord files an action based

on nonpayment of rent, either party may seek a court order directing the tenant to pay all

or part of the unpaid rent and all additional rent as it accrues into an escrow account with

the court”). It should be emphasized, however, that King’s pronouncement of an in

custodia legis procedure had been in place for almost five decades, and, therefore,

constituted the status quo in Missouri. For this reason, and given the absence of contrary

authority from this Court or contrary legislation from the General Assembly, the circuit

court in this case cannot be faulted for relying on King when it barred Johnson’s

affirmative defense and counterclaim.4

4 In resolving this case, this Court recognizes “the time-honored principle of separation of

powers and the recognition that policy decisions such as [those] presented in this case are within

the” province of the General Assembly. Goerlitz v. City of Maryville, 333 S.W.3d 450, 456

(Mo. banc 2011). Regardless of the outcome in this case, the General Assembly could enact

legislation codifying the approach taken in this case, i.e., allowing our circuit courts to exercise

their sound discretion to impose an in custodia legis procedure on a case-by-case basis. Or it

could enact legislation adopting King’s dicta imposing an in custodia legis procedure in all rent

and possession actions when the tenant remains in possession of the premises. This has been the

unchallenged and unquestioned process in place for almost five decades and constitutes the

status quo in Missouri. Or it could enact legislation adopting the dissenting opinion’s approach,

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Accordingly, it did not erroneously declare or apply the law at the time it entered

its judgment.5

Conclusion

The circuit court’s judgment is affirmed.

Fischer, C.J., Wilson and Russell, JJ., concur;

Breckenridge, J., dissents in separate opinion filed;

Stith, J., concurs in opinion of Breckenridge, J.

Draper and Powell, JJ., not participating.

which would prohibit an in custodia legis procedure in all cases. In any event, the General

Assembly is perfectly capable of enacting laws it perceives reflect sound policy that best serve

all Missourians.

5 To the extent Johnson argues upholding the circuit court’s imposition of an in custodia legis

procedure in this case violates article I, section 14, of the Missouri Constitution, she: failed to

raise an open courts violation before the circuit court even though she could have, Rule 78.07(b);

failed to file an after-trial motion raising such a violation, id.; and failed to raise a point relied on

regarding such a violation in her brief filed in the court of appeals. Accordingly, such a

contention is not preserved for review in this Court. See, e.g., J.A.R. v. D.G.R., 426 S.W.3d 624,

629 (Mo. banc 2014); Brown v. Brown, 423 S.W.3d 784, 788 & n.5 (Mo. banc 2014) (per

curiam); St. Louis Cty. v. Prestige Travel, 344 S.W.3d 708, 712-13 (Mo. banc 2011). Indeed,

this Court “will avoid deciding a constitutional question if the case can be resolved fully without

reaching it.” Lang v. Goldsworthy, 470 S.W.3d 748, 751 (Mo. banc 2015).

SUPREME COURT OF MISSOURI

en banc

KOHNER PROPERTIES, INC., )

)

Respondent, )

)

v. ) No. SC95944

)

LATASHA JOHNSON, )

)

Appellant. )

DISSENTING OPINION

I respectfully dissent. The circuit court relied on King v. Moorehead, 495 S.W.2d

65 (Mo. App. 1973), in barring Latasha Johnson from asserting a breach of the implied

warranty of habitability. But the in custodia legis procedure discussed in King was simply

dicta. The principal opinion reasons it is immaterial that the in custodia legis procedure in

King is dicta because such dicta has been “dutifully followed by our circuit courts for

almost five decades.” An examination of Missouri case law, however, reflects only one

case in which application of the in custodia legis procedure discussed in King was

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necessary for the resolution of the case for tenants remaining in possession of the rented

property.1 See Tower Mgmt. Inc. v. Henry, 687 S.W.2d 564, 565-66 (Mo. App. 1984).

More importantly, an examination of the in custodia legis procedure espoused in

King reveals its origin is not rooted in application of common law principles. Rather, the

recognition of an implied warranty of habitability marked a change from Missouri’s

previous application of caveat emptor. King, 495 S.W.2d at 69. In recognizing the implied

warranty of habitability, Missouri courts acknowledged a shift in the common law from a

landlord’s unfettered right to rent and possession toward recognition of a bilateral contract

in which the tenant’s obligation to pay rent is dependent on the landlord’s performance of

the obligation to provide a habitable dwelling. Id. It is not surprising, therefore, that, in

the course of that transition, the court of appeals discussed the in custodia legis procedure,

which undoubtedly reserved some remnants of protection for the landlord. But the fact

remains such a procedure had no basis in present property law or contract principles.

1 The principal opinion states “numerous circuit courts” have applied the in custodia legis

procedure under “appropriate circumstances.” The only authority supporting such

conclusion is secondary authority that, once again, relies on the dicta in King. See 36 Jane

Pansing Brown, Missouri Practice Series: Landlord-Tenant Handbook §§ 1:1, 23:8

(2017); 18A Timothy J. Tryniecki, Missouri Practice Series: Real Estate Law § 52:18 (3d

ed. 2006). Those secondary sources do not establish circuit courts have been dutifully

applying in custodia legis procedures or whether such procedures have been applied under

the appropriate circumstances. Furthermore, even if circuit courts have been relying on the

dicta in King and these secondary sources, they state application of the in custodia legis

procedure is mandatory for tenants remaining in possession of the property. See King, 495

S.W.2d at 77; 36 Jane Pansing Brown, Missouri Practice Series: Landlord-Tenant

Handbook §§ 1:1, 23:8 (2017). This differs significantly from the discretionary approach

the principal opinion adopts going forward.

3

Furthermore, despite the principal opinion’s finding to the contrary, the in custodia

legis procedure is not necessary to safeguard landlords’ property interests when a tenant

asserts a breach of the implied warranty of habitability. A landlord suffers no detriment

from assertion of the defense in the absence of an in custodia legis requirement because a

landlord is not otherwise entitled to recover rent or possession prior to a favorable

adjudication of the landlord’s rent and possession claim. Therefore, requiring tenants to

deposit with the court the rent as it becomes due places landlords in a better position than

they would be if tenants did not assert an implied warranty of habitability defense.

The principal opinion finds the in custodia legis procedure “preserves the status

quo” and “is not a windfall to landlords.” But requiring a tenant to deposit rent as it comes

due prior to adjudication of a landlord’s claim for rent and possession is a financial

prerequisite to a tenant’s access to the courts to present a claim or defense of a breach of

the implied warranty of habitability. And the principal opinion cannot cite to any other

action – based in either property or contract –requiring the disputed amount to be paid into

the court as a precondition to asserting a defense or raising a claim.

Moreover, such findings ignore the disparity between tenants and landlords that

often exists in situations in which the implied warranty of habitability is being asserted and

overlook the likelihood that requiring payment of rent as it becomes due acts as a deterrent

to tenants wishing to assert the defense. Therefore, in practice, the in custodia legis

procedure revives the constructive eviction doctrine the implied warranty of habitability

was designed to replace. Accordingly, I am not persuaded that an in custodia legis

requirement is a necessary procedural safeguard in rent and possession actions.

4

Finally, even if I agreed the discretionary in custodia legis procedure adopted by the

principal opinion were appropriate, that would not justify affirming the circuit court’s

judgment in this case. Rather, the record makes clear the circuit court perceived the in

custodia legis procedure to be mandatory, not discretionary, when it barred Ms. Johnson

from asserting a breach of the implied warranty of habitability. Ms. Johnson should be

afforded the same opportunity for the circuit court to exercise its discretion in this case as

tenants in rent and possession cases will have going forward. Accordingly, I would reverse

the circuit court’s judgment.

_____________________________

PATRICIA BRECKENRIDGE, JUDGE

Affirmed